Contentslibapps2.nus.edu.sg/nus_hl/golsta2005.pdf · Contents Notice Of Annual General Meeting 2 Statement Accompanying Notice Of Annual General Meeting 4 Group Structure 5 Corporate

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Annual Report 2005(Co. No. 484964-H)

ContentsNotice Of Annual General Meeting 2

Statement Accompanying Notice Of Annual General Meeting 4

Group Structure 5

Corporate Information 6

Directors’ Profile 7

Audit Committee Report 10

Chairman’s Statement 13

Corporate Governance 14

Statement On Internal Controls 17

Other Information 18

Directors’ Responsibilities In Respect Of Financial Statements 20

Directors’ Report 21

Statement By Directors 25

Statutory Declaration 25

Report Of The Auditors 26

Income Statements 27

Balance Sheets 28

Statements Of Changes In Equity 29

Cash Flow Statements 30

Notes To The Financial Statements 32

Particulars Of Properties 59

Analysis Of Shareholdings 60

Form Of Proxy Enclosed

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Notice Of Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Seventh Annual General Meeting of the Company will be held at 11, Jalan TTC30, Taman Teknologi Cheng, 75260 Melaka on Monday, 26 June 2006 at 11.00 a.m. for the following purposes:-

A G E N D A

1. To receive and adopt the audited financial statements for the financial year ended 31December 2005 and the Reports of the Directors and the Auditors thereon.

2. (a) To re-appoint Puan Sri Datin Minuira Sabki who is retiring in accordance with Section129(6) of the Companies Act, 1965.

(b) To re-elect Encik Azra Bin Kamarudin who is retiring in accordance with Article 83of the Company’s Articles of Association.

(c) To re-elect Mr. Liow Teck Eng who is retiring in accordance with Article 83 of theCompany’s Articles of Association.

3. To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorize theDirectors to fix their remuneration.

Special Businesses :-To consider and, if thought fit, to pass the following resolutions as Ordinary Resolutions:-

4. Proposed Resolution pursuant to Section 132D of the Companies Act, 1965

“THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and arehereby authorised to issue shares in the Company at any time until the conclusion of thenext Annual General Meeting upon such terms and conditions and for such purposes asthe Directors may, in their absolute discretion, deem fit, provided that the aggregate numberof shares to be issued does not exceed 10 per centum of the issued share capital of theCompany for the time being, subject always to the approval of all relevant regulatory bodiesbeing obtained for such allotment and issue and FURTHER THAT the Directors be and arealso empowered to obtain the approval for the listing of and quotation for the additionalshares so issued on the Bursa Malaysia Securities Berhad.”

5. Proposed Resolution pursuant to Section 132E of the Companies Act, 1965

“THAT in accordance with Section 132E of the Companies Act, 1965, authority be and ishereby given to the Directors of the Company and each of its subsidiaries to enter intoarrangements or transactions from time to time with the Company or its related corporationswhereby such Directors or persons connected with such Directors may acquire from ordispose to the Company or its related corporations, products, services or any other non-cash assets of the Company or its related corporations provided that such acquisitions ordisposals are in the normal course of business of both the Company and its relatedcorporations and on normal commercial terms AND THAT for the avoidance of doubt, anysuch transactions entered into by the Company or its subsidiaries with the Directors orconnected persons prior to the date of this Resolution be and are hereby approved andratified.”

(Resolution 1)

(Resolution 2)

(Resolution 3)

(Resolution 4)

(Resolution 5)

(Resolution 6)

(Resolution 7)

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Notice Of Annual General Meeting (cont’d)

6. To transact any other ordinary business of which due notice shall have been given.

BY ORDER OF THE BOARD

YEO PENG SUEE (MIA 9964)Secretary

Dated : 2 June 2006Melaka

NOTES :1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead.

A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965shall not apply to the Company.

2. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportion ofhis shareholdings to be represented by each proxy.

3. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised inwriting or, if the appointer is a corporation, either under its Common Seal or signed by an officer or attorney so authorised.

4. This proxy form must be deposited at the registered office of the Company at 11, Jalan TTC 30, Taman Teknologi Cheng, 75260Melaka not less than 48 hours before the time set for holding the meeting or any adjournment thereof.

Explanatory Notes on Special Businesses

1. Proposed Resolution pursuant to Section 132D of the Companies Act, 1965

The Ordinary Resolution proposed under Agenda 4, if duly passed, will empower the Directors to allot and issue shares notexceeding 10% of the issued share capital of the Company for such purposes as the Directors consider would be in theinterest of the Company. This authority, unless revoked or varied by the Company in general meeting, will expire at the nextAnnual General Meeting of the Company.

2. Proposed Resolution pursuant to Section 132E of the Companies Act, 1965

The Ordinary Resolution proposed under Agenda 5, if duly passed, will authorise the Company and each of its subsidiaries toacquire from or dispose of to its Directors or connected persons, products, services or any other non-cash assets which mayfall within the definition of “requisite value”, provided that such acquisitions or disposals are on normal commercial terms.According to the Companies Act, 1965, a non-cash asset is considered to be of the “requisite value” if, at the time of thearrangement or transaction, its value is greater than RM250,000 or 10% of the Company’s net assets, subject to a minimumof RM10,000.

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Statement Accompanying Notice OfAnnual General Meeting

1. Names of individuals who are standing for re-election

(a) Director retires in accordance with Section 129 (6) of the Companies Act, 1965:Puan Sri Datin Minuira Sabki

(b) Directors retire by rotation in accordance with Article 83 of the Company’s Articles of Association:-

(i) En. Azra Bin Kamarudin(ii) Mr. Liow Teck Eng

2. Details of attendance of Directors at Board Meetings

There were four (4) Board Meetings held during the financial year ended 31 December 2005. Details of attendanceof the Directors are set out in the Directors’ Profile’ of the Annual Report.

3. Date, Time and Place of the Seventh Annual General Meeting

The Seventh Annual General Meeting of the Company will be held at 11, Jalan TTC 30, Taman Teknologi Cheng,75260 Melaka on Monday, 26 June 2006 at 11.00 a.m..

4. Further details of Directors who are standing for re-election:-

Details of Directors who are standing for re-election are set out in the Directors’ Profile of the AnnualReport.

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Group Structure

GOLSTA SYNERGY BERHAD484964-H

GOLSTA SDN. BHD.(130958-H)

Design, fabrication and installationof industrial plant and process

engineering and related components

Incorporated in Malaysia

Incorporated in Hong Kong, SAR

Incorporated in the Peoples’ Republic Of China (PRC)

Incorporated in Indonesia

100%FOUNDRY ENGINEERINGCORPORATION SDN. BHD.

(43257-M)

Design, fabrication andconstruction of

plant equipment for foodmanufacturing

and related industrial products

100%GOLSTA RESOURCES

SDN. BHD.(138735-M)

Engineering consultancy, projectmanagement

and related maintenance services

51%

100%

51%

100%MELIAN RUBBER

INDUSTRIES LIMITED

Investment holding and provisionof management services

HYOXEN SDN. BHD.(640843-T)

Conversion of organic waste torenewable fuel gas and

electrical energy

GEMSIA SDN. BHD.(470924-W)

Advanced technologydevelopment,

project advisory and relatedengineering works

GOTHIC ASSETSSDN. BHD.(615527-U))

Investment holding, plantationand provision of management

services

YANGPU FUSHEN RUBBERINDUSTRIAL CO. LTD.

Rubber processing and trading ofrubber related products

100%

PT. BAKTI TANINUSANTARA

Cultivation and marketing ofoil palm seeds and seedlings

70%

100%

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Corporate Information

Board of Directors

Puan Sri Datin Minuira SabkiIndependent Non-ExecutiveChairperson

Teng Swee EngManaging Director

Dai Kuang YenExecutive Director

Liow Teck EngExecutive Director

Azra Bin KamarudinNon-Executive Director

Tong Kai MunIndependent Non-Executive Director

Ang Kwee TengIndependent Non-Executive Director

Raymond Koh Yew Hock(Alternate to Puan Sri Datin Minuira Sabki)

Company Secretary

Yeo Peng Suee (MIA 9964)

Registered Office and Principal Place of Business

11, Jalan TTC 30, Taman Teknologi Cheng,75260 MelakaTel : 06-3352153Fax : 06-3352151e-mail : [email protected]

Share Registrar

Sectrars Services Sdn. Bhd. (92781-X)28-1, Jalan Tun Sambanthan 3, Brickfields50470 Kuala LumpurTel : 03-22746133Fax : 03-22741016

Principal Bankers

Ammerchant Bank Berhad (23742-V)Malayan Banking Berhad (3813-K)United Overseas Bank (Malaysia) Berhad (271809-K)Public Bank Berhad (6463-H)

Auditors

Ernst & YoungChartered AccountantsLot 1, 6th Floor, Menara Pertam,Jalan BBP2, Taman Batu Berendam Putra,Batu Berendam,75350 MelakaTel : 06-336 2399Fax : 06-336 2899

Stock Exchange

Second Board of the Bursa Malaysia Securities Berhad

Stock Code

7105

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Directors’ Profile

Puan Sri Datin Minuira Sabki, a Malaysian, aged 74, was appointed as an Independent Non-ExecutiveChairperson to the Board of Golsta Synergy Berhad (“Golsta”) on 28 May 2003. She is a Diploma holder in SocialStudies from the University of Singapore, Public Relations from the Malaysian Institute of Public Relations andPersonnel Management from Institute Tadbiran Awam Negara. After 18 years in the public service, she joinedPhillips Malaysia Sdn Bhd in 1974 as its Public Relations Manager and was promoted to Consultant from 1984 to1989. She is actively involving in voluntary and welfare services and is the Chairman of Wanita Perkim, Kuala LumpurUtara, Vice-Chairman of Perkim and the Malaysia Film Censors Appeal Board.

Currently, she also holds directorships in Nam Fatt Corporation Berhad and Englotechs Holding Berhad.

Puan Sri Datin Minuira Sabki attended all four Board meetings of Golsta held during the financial year ended 31December 2005.

Puan Sri Datin Minuira Sabki holds 6,000 shares in Golsta and she also has an indirect interest of 4,000 shares inGolsta. She has no family relationship with other directors or major shareholders of Golsta. She has no conflict ofinterest with Golsta and has no convictions for offences within the past ten years.

Teng Swee Eng, a Malaysian, aged 54, was appointed to the Board as the Managing Director of the Group on 31May 2000. He is one of the founders of the Group and was appointed the Managing Director of Golsta Sdn. Bhd.(“GSB”) in 1984. He attended Industrial Technical Training Courses in Alor Gajah Vocational Institute, Melaka in1968/1969. He completed his Advanced Diploma in Mechanical Engineering (Business Administration) from YelexInstitute of Management, Kuala Lumpur and obtained his Bachelor of Mechanical Engineering Degree major inmanagement from the Clayton University (formerly known as Open University) Missouri, USA in March 1999. Hehas more than 31 years of “hands-on” working experience and possesses invaluable experience, knowledge andexposure in the Machinery and Engineering industry. He is the driving force behind the Group’s successful structuraltransformation from a backyard operation to a modern manufacturing plant.

Mr. Teng does not hold directorships in any other public companies.

Mr. Teng attended two out of the four Board meetings of Golsta held during the financial year ended 31 December2005.

Mr. Teng holds 538,000 shares in Golsta and he also has an indirect interest of 18,691,000 shares in Golsta by virtueof his interest in GS Capital Sdn. Bhd., a substantial shareholder of Golsta. He has no family relationship with otherdirectors of Golsta. He has no conflict of interest with Golsta and has no convictions for offences within the past tenyears.

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Dai Kuang Yen, a Malaysian, aged 51, was appointed to the Board as Executive Director on 31 May 2000. He isone of the founders of the Group and was appointed Executive Director of GSB in 1984. He completed his AdvancedDiploma in Business Administration from the Society of Business Practitioners, United Kingdom and obtained hisBachelor of Mechanical Engineering Degree major in management from the Clayton University, Missouri, USA inMarch 1999. He has about 28 years of management and technical design experience in setting up the entire industrialprocessing plants for a wide spectrum of user industries. He is responsible for technical matters and engineeringdesign of all major industrial machinery and equipment projects and oversees and ensures a smooth operation ofthe factory operation and site works.

Mr. Dai does not hold directorships in any other public companies.

Mr. Dai attended two out of the four Board meetings of Golsta held during the financial year ended 31 December2005.

Mr. Dai holds 515,000 shares in Golsta and he also has an indirect interest of 18,691,000 shares in Golsta by virtue ofhis interest in GS Capital Sdn. Bhd., a substantial shareholder of Golsta. He has no family relationship with otherdirectors of Golsta. He has no conflict of interest with Golsta and has no convictions for offences within the past tenyears.

Liow Teck Eng, a Malaysian, aged 56, was appointed to the Board as Executive Director on 31 May 2000. He isone of the founders of the Group and was appointed Executive Director of GSB in 1984. He possesses over 37 yearsof relevant working experience in the engineering industry. He started his career with Hup Heng Engineering,Melaka as factory supervisor and in 1976 joined Golden Star Engineering Works as one of the founders of theGroup. Currently, he is responsible for the factory production, quality assurance and site project management.

Mr. Liow does not hold directorships in any other public companies.

Mr. Liow attended all four Board meetings of Golsta held during the financial year ended 31 December 2005.

Mr. Liow holds 518,000 shares in Golsta and he also has an indirect interest of 18,691,000 shares in Golsta by virtueof his interest in GS Capital Sdn. Bhd., a substantial shareholder of Golsta. He has no family relationship with otherdirectors of Golsta. He has no conflict of interest with Golsta and has no convictions for offences within the past tenyears.

Azra Bin Kamarudin, a Malaysian, aged 34, was appointed to the Board as Non-Executive Director on 31 May2000. He holds a Bachelor of Laws degree (LLB) from the International Islamic University, Malaysia and was calledto the Malaysian Bar in 1997. He also holds a Master of Business Administration degree specialising in InternationalBusiness Management from University Putra Malaysia.

Currently, Encik Azra is a partner in Messrs. Azra & Associates, a legal firm which he co-founded in September2000. Encik Azra does not hold directorships in any other public companies.

Encik Azra attended two out of the four Board meetings of Golsta held during the financial year ended 31 December2005.

Encik Azra holds 956,000 shares in Golsta and he has no family relationship with other directors or major shareholdersof Golsta. He has no conflict of interest with Golsta and has no convictions for offences within the past ten years.

Directors’ Profile (cont’d)

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Tong Kai Mun, a Malaysian, aged 49, was appointed as an Independent Non-Executive Director to the Board on18 March 2002. He graduated from Kolej Tunku Abdul Rahman and obtained a Diploma in Accountancy in 1980. Heis a fellow member of the Chartered Certified Accountants, United Kingdom since 1987. He was trained as an AuditSenior with Messrs. Razak & Co., Chartered Accountants from 1982 to 1984. He was employed as FinancialAccountant/Controller with various reputable large size corporations from 1985 to 1998 taking charge of accountingfunctions, computerisation for information systems and raising funds for business expansion and diversification.Since 1988, he becomes financial and corporate adviser for various large corporations including listed concerns inMalaysia and Singapore, which involved in retails, information technology and waste management.

Mr. Tong does not hold directorships in any other public companies.

Mr. Tong attended three out of the four Board meetings of Golsta held during the financial year ended 31 December2005.

Mr. Tong does not hold any shares in Golsta and its subsidiaries. He has no family relationship with other directorsor major shareholders of Golsta. He has no conflict of interest with Golsta and has no convictions for offenceswithin the past ten years.

Ang Kwee Teng, a Malaysian, aged 56, was appointed as an Independent Non-Executive Director to the Boardon 12 August 2004. He works as a manager in a legal firm and he has more than 30 years experience in the areas ofcivil litigation, banking law and other commercial law matters. Currently, Mr. Ang holds directorship in OrnapaperBerhad.

Mr. Ang attended all four Board meetings of Golsta held during the financial year ended 31 December 2005.

Mr. Ang does not hold any share in Golsta and its subsidiaries. He has no family relationship with other directors ormajor shareholders of Golsta. He has no conflict of interest with Golsta and has no convictions for offences withinthe past ten years.

Raymond Koh Yew Hock, a Malaysian, aged 38, was appointed to the Board as an Alternate Director to PuanSri Datin Minuira Sabki on 28 June 2000. He joined Messrs. Allen Gledhill & Ball as a legal executive from 1986 to1989 and then with Messrs. Nordin & Phua from 1989 to 1996. Since 1997, he is attaching with Messrs. Yap KoonRoy & Associates till to-date. He has vast working experience in the areas of civil litigation, banking law and othercommercial law matters.

Mr. Raymond Koh does not hold directorships in any other public companies.

Mr. Raymond Koh does not hold any shares in Golsta and its subsidiaries. He has no family relationship with otherdirectors or major shareholders of Golsta. He has no conflict of interest with Golsta and has no convictions foroffences within the past ten years.

Directors’ Profile (cont’d)

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Audit Committee Report

1. COMPOSITION

ChairpersonPUAN SRI DATIN MINUIRA SABKI - Independent Non-Executive Director

MembersTENG SWEE ENG - Managing DirectorTONG KAI MUN - Independent Non-Executive Director and a member of MIAANG KWEE TENG - Independent Non-Executive Director

2. TERMS OF REFERENCE

2.1. Membership

2.1.1 The Committee shall be appointed by the Board of Directors from amongst the Directors of theCompany which fulfils the following requirements:-

(a) the audit committee must be composed of no fewer than three (3) members;(b) a majority of the audit committee must be Independent Directors; and(c) at least one member of the audit committee :-

(i) must be a member of the Malaysian Institute of Accountants; or(ii) if he is not a member of the Malaysian Institute of Accountants, he must have at

least 3 years’ working experience and :-

(aa) he must have passed the examinations specified in Part I of the 1st Scheduleof the Accountants Act 1967; or

(bb) he must be a member of one of the associations of accountants specified inPart II of the 1st Schedule of the Accountants Act 1967.

(iii) (aa) he must possess a degree/master/doctorate in accounting or finance andat least 3 years’ post qualification experience in accounting or finance ; or

(bb) he must has at least 7 years’ experience being a chief financial officer of acorporation or having the function of being primarily responsible for themanagement of the financial affairs of a corporation.

2.1.2 No Alternate Director shall be appointed as a member of the Committee.

2.1.3 The members of the Committee shall elect a Chairman from amongst their number who shall bean Independent Director.

2.1.4 If a member of the Committee resigns, dies or for any reason ceases to be a member with theresult that the number of members is reduced below three (3), the Board shall, within three (3)months appoint such number of new members as may be required to make up the minimum ofthree (3) members.

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Audit Committee Report (cont’d)

2. TERMS OF REFERENCE (cont’d)

2.2. Authority

The Audit Committee is authorized by the Board to investigate any activity within its terms ofreference. It is authorized to seek any information it requires from any employee and all employees aredirected to co-operate with any request made by the Committee.

The Audit Committee is also authorized by the Board to obtain outside legal or other independentprofessional advice and to secure the attendance of outsiders with relevant experience and expertise ifit considers this necessary.

2.3. Duties

The duties of the Committee shall be :-

(i) to consider the appointment of the External Auditors, the Audit fee, and any questions ofresignation or dismissal.

(ii) to discuss with the External Auditors before the audit commences, the nature and scope of theaudit, and ensure co-ordination where more than one audit firm is involved.

(iii) to review the quarterly results and annual financial statements of the Company and of the Groupfor recommendation to the Board for approval, focusing particularly on :

- any changes in accounting policies and practices- major judgemental areas- significant adjustments arising from the audit- the going concern assumption- compliance with accounting standards- compliance with stock exchange and legal requirements

(iv) to review any related party transactions that may arise within the Company or the Group.

(v) to review with the External Auditors :-

- their Audit Report- their evaluation of the system of internal control procedures- the assistance given to the External Auditors by the officers of the Company or any related

corporation.

(vi) to discuss problems and reservation arising from the interim and final audits, and any matters theAuditors may wish to discuss (in the absence of Executive Directors where necessary)

(vii) to keep under review the effectiveness of internal control systems, and in particular review theExternal Auditors’ management letters and management’s responses.

(viii) to consider other topics, such as health and safety issues etc as may be agreed to by the Committeeor the Board of Directors.

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Audit Committee Report (cont’d)

2. TERMS OF REFERENCE (cont’d)

2.4. Summary of activities of the Committee

During the financial year, the Audit Committee reviewed the unaudited quarterly report and annualfinancial statements of the Company and of the Group prior to such quarterly reports and annual financialstatements being presented to the Board for approval. The Committee had also discussed the natureand scope of audit, reviewed the audit report before recommending for the Board of Directors’ approval,considered any significant changes in accounting and auditing issues.

2.5. Procedures

The Audit Committee may regulate its own procedures and in particular, the calling of the meetings, thenotice given of such meetings, the voting and the proceedings thereat, the keeping of minutes and thecustody, production and inspection of such minutes. The Secretary shall circulate the minutes of themeeting of the Committee to all members of the Board.

2.6. Attendance at Meetings

The quorum of the Audit Committee shall be at least two (2) members, the majority present must beIndependent Directors.

The Head of Finance shall normally attend meetings of the Committee. The External Auditors shall havethe right to appear and be heard at any meeting of the Audit Committee and shall appear before theCommittee when required to do so by the Committee.

The Company Secretary shall be the secretary of the Committee.

2.7. Frequency of Meetings

Meetings shall be held not less than four (4) times a year. The External Auditors may request ameeting if they consider that one is necessary, to consider any matter the External Auditorswish to bring to the attention of the directors or shareholders of the Company.

2.8. Audit Committee Meetings held for the financial year ended 31 December 2005

1/2005 2/2005 3/2005 4/200525-02-2005 24-05-2005 23-08-2005 30-11-2005

Puan Sri Datin Minuira Sabki � � � �

Teng Swee Eng � - � -Tong Kai Mun - � � �

Ang Kwee Teng � � � �

2.9. Internal Audit Function

The Committee has also recommended that the Company initiate the setting up of an internal auditfunction or outsource internal audit services to further expand and streamline the systems of internalcontrols within the Company and the Group.

In the absence of a formalised internal audit department, the Committee, in discharging its duties duringthe financial year, held regular discussion with key management employees and were given access to allnecessary information and reports.

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On behalf of the Board of Directors, I have the pleasure to present herewith the annual report together with theaudited financial statements of the Group and of the Company for the financial year ended 31 December 2005.

During the financial year under review, Malaysia’s economy registered an annual growth at 5.3%. However, this favorableupsurge in performance had been eclipsed by the escalating costs in interest rates, oil and fuel, steel and relatedcommodities.

Due to the strong demands in rubber and related commodities, the orders for our rubber processing equipment hadimproved significantly in the financial year under review with an increased turnover of RM19.7 million as compared toRM15.8 million last year. The above improved performance had accordingly reduced the current year’s loss after taxationto RM 0.82 million as compare to RM1.31 million in the preceding year.

On behalf of the Board of Directors, I would like to extend my sincere appreciation to our fellow Directors, theManagement and staff for their continuous dedication and commitment in our endeavors which enabled us to moveforward as a dynamic Group in delivering better results in the forthcoming years.

Last but not least, I wish to express my heartfelt thanks and appreciation to all our valued shareholders, esteemedcustomers, business associates and regulatory authorities which we have been dealing with over the years for theirunwavering and invaluable supports.

PUAN SRI DATIN MINUIRA SABKIChairperson

2 June 2006Melaka.

Chairperson’s Statement

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Corporate Governance

INTRODUCTION

The Malaysian Code on Corporate Governance essentially aims to set out principles and best practices on structuresand processes used to direct and manage the business and affairs of the Group towards enhancing business performanceand corporate accountability with the ultimate objective of realising long-term shareholders’ value.

The manner in which the Corporate Governance framework is applied is summarised as follows:-

A. DIRECTORS

(i) Board Balance

The Board of Directors comprises seven (7) Directors, four (4) of whom are non-executive. Of the non-executive directors, three (3) are independent. The profiles of the members of the Board are provided inthe Annual Report.

The Board is of the view that the current Board composition fairly reflects the investment of shareholdersin the Company.

The Board met four (4) times during the financial year ended 31 December 2005.

(ii) Supply of Information

The Directors are provided with quarterly financial results and report for discussion at the board meeting.Among others, the report provides information on financial, operational and corporate issues and theBoard is being informed of all the latest development of the Group’s businesses and direction.

To fulfil their responsibilities, all Directors have access to the advice and services of the Secretary as wellas to independent professional advice, including the External Auditors.

(iii) Appointments to the Board/Procedure

The Company does not have a Nominating Committee as all new nominations received are assessedand approved by the entire Board in line with its policy of ensuring nominees are persons of sufficientcalibre and experience. The process of assessing the Directors is an on-going responsibility of the entireBoard. Nonetheless, the present composition of the Board members consist of the required mix of skillsand experience.

(iv) Re-election

All Directors are required to submit themselves for re-election every three years. The details of theretiring Directors are set out in the Annual Report.

B. DIRECTORS’ REMUNERATION

(i) The level and make-up of remuneration/Procedure

The Company does not have a Remuneration Committee. The Group’s remuneration scheme for executivedirectors is linked to performance, service seniority, experience and scope of responsibility. For non-executive directors, the level of remuneration reflects the level of responsibilities undertaken by them.

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Corporate Governance (cont’d)

B. DIRECTORS’ REMUNERATION (Cont’d)

(ii) Disclosure

Details of remuneration of Directors of the Company for the financial year ended 31 December 2005 areas follows:-

1. Aggregate remuneration categorised into appropriate components:-

Salaries Pension costs-& other defined

Fees emoluments contribution plan Benefit-in-kind TotalRM’000 RM’000 RM’000 RM 000 RM’000

ExecutiveDirectors - 196 23 - 219Non-ExecutiveDirectors - 27 - 2 29

2. The number of Directors of the Company whose remuneration falls within the respective bandsis as follows:-

Range of remuneration Number of DirectorsExecutive Non-Executive

RM50,000 and below - 5RM50,001 – RM100,000 - -RM100,001 – RM150,000 - -RM150,001 – RM200,000 - -RM200,001 – RM250,000 3 -RM250,001 – RM300,000 - -

C. SHAREHOLDERS

(i) Communication between the Company and shareholders

The Company reaches out to its shareholders through the issuance of Annual Reports, Circular, quarterlyresults and various announcements made throughout the year. Shareholders and investors could alsogenerate information through the Bursa Malaysia Securities Berhad website.

General meetings are the principal forum for dialogues with the shareholders and investors. At eachgeneral meeting, the Board presents the progress and performance of the Group and shareholders areencouraged to participate in the question and answer sessions.

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Corporate Governance (cont’d)

C. SHAREHOLDERS (Cont’d)

(ii) Annual General Meeting

The Annual General Meeting (“AGM”) is the principal forum for dialogue with shareholders. The AGMgives all shareholders, whatsoever size of shareholdings, direct access to the Board, to enquire andcomment on matters relating to the Group’s business. The Board also provides reasonable time fordiscussion at the Meeting and where appropriate, the Chairman or the Directors will provide a writtenanswer to any significant questions, which cannot be answered on the spot.

D. ACCOUNTABILITY AND AUDIT

The financial reporting and internal control system of the Group is overseen by the Audit Committee (“AC”),which comprises three (3) Independent Non-Executive Directors and one Executive Director. The primaryresponsibilities of the AC are set out in the Annual Report.

(i) Financial Reporting

The Board is responsible for ensuring the proper maintenance of accounting records of the Group. TheBoard received the recommendation to adopt the financial statements of the Group from the AC, whichreviews the said statements with the assistance of the External Auditors.

(ii) Internal Controls

The Board has overall responsibility for maintaining a system of internal controls, which providesreasonable assessment of effective and efficient operations, internal controls and compliance with lawsand regulations.

(iii) Relationship with External Auditors

The appointment of the External Auditors is recommended by the AC and the Board shall determinesthe remuneration of the External Auditors. The External Auditors meet with the AC for reviewing theresults of audit as well as management letters after the conclusion of the audit work.

E. BOARD COMMITTEES

Audit Committee

The primary objective of the Audit Committee is to assist the Board in the auditing of all aspects of the Group’soperations. The Audit Committee comprises of four (4) Directors, of whom three (3) are Independent Non-Executive Directors.The term of reference are set out in the Annual Report.

F. COMPLIANCE STATEMENT

The Company acknowledges that in order to conform with the best practices in corporate governance, theestablishment of an Internal Audit Division is essential in providing sufficient assurance of regular review and/or appraisal of the effectiveness of the system of internal controls within the Group, to evaluate and identify thekey risk areas for reporting to the Audit Committee and the Board members where appropriate actions will betaken to manage and to safeguard against any material misstatement or losses.

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The Board is aware of the importance of maintaining a sound internal control system in the Company and its subsidiariesto achieve the corporate objectives within an acceptable risk environment and is responsible for reviewing its adequacyand integrity.

RISK MANAGEMENT

The Group’s system of internal controls is designed to manage the principal business risks that may impede the Groupfrom achieving its corporate objectives. The Group’s financial risk management policy is not to engage in speculativetransactions and seeks to ensure that adequate financial resources are available for the development of the Group’sbusinesses whilst managing its interest rate, foreign exchange exposure, liquidity and credit risks. Notwithstanding,due to the limitations that are inherent in any system of internal controls, the Group’s internal control system cannoteliminate the risk of failure to achieve corporate objectives. As such, the system can only provide reasonable but notabsolute assurance against material misstatement or loss.

KEY ELEMENTS OF INTERNAL CONTROL

Whilst the Board maintains full control and direction over appropriate strategic, financial, organisational and complianceissues, it has delegated to executive management the implementation of the systems of internal control within anestablished framework.

The main elements in the internal control framework include:-

- An organisational structure with formally defined lines of responsibility and delegation of authority;

- Established procedures for planning, capital expenditure, information and reporting systems, and formonitoring the Group’s businesses and their performances;

- Review by operating divisions of their annual operating budgets and capital plans with the relevantexecutive directors prior to submission to the Board for approval;

- Quarterly comparison of operating divisions’ financial performance against budget;

- Regular reporting of accounting and legal developments to the Board;

- Operating policies and procedures which are subject to regular review and improvement;

The Company is contemplating to set up an Internal Audit Division to facilitate the discharge of the board’s responsibilityin reviewing the adequacy and the integrity of the Company’s internal control systems for compliance with applicablelaws, regulations, rules, directives and guidelines.

Statement On Internal Controls

18


1. UTILIZATION OF PROCEEDS FROM CORPORATE EXERCISE

The Company did not undertake any corporate exercise during the financial year and no proceeds were raisedtherefrom.

2 . SHARE BUY-BACKS

There were no share buy-back arrangements during the financial year.

3 . OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES EXERCISED

The Company has not issued any options, warrants or convertible securities in respect of the financial yearended 31 December 2005.

4. AMERICAN DEPOSITORY RECEIPT (ADR) OR GLOBAL DEPOSITORY RECEIPT (GDR)

The Company did not sponsor any ADR or GDR programme during the financial year ended 31 December 2005.

5 . SANCTIONS AND/OR PENALTIES IMPOSED

There were no public imposition of sanctions or penalties imposed on the Company and its subsidiaries, directorsor management by the regulatory bodies during the financial year.

6 . NON-AUDIT FEES

There was no such payment made to the external auditors during the financial year.

7. PROFIT ESTIMATE, FORECAST OR PROJECTION OR UNAUDITED RESULTS ANNOUNCED

The audited results of the Company deviate from the unaudited results previously announced by the Companyas follows:

DESCRIPTION GROUP

Unaudited profit after taxation and minority RM,000interest as previously announced 199

Add/(less)Under provision of deferred tax (964)Other audit adjustment (57)

Audited loss after taxation and minority interest (822)

The deviation is mainly due to the additional deferred tax provision made to accounts for the unutilizedreinvestment allowance and capital allowance confirmed by the authority in the year under review.

The Company did not provide any profit estimate, forecast or projection for the financial year ended 31 December2005.

8 . PROFIT GUARANTEE

The Company did not provide any form of profit guarantee to any party during the financial year.

Other Information

19


9. MATERIAL CONTRACTS

Other than those disclosed in the financial statements, there were no material contracts including contractsrelating to a loan entered into by the Company and its subsidiaries involving Directors’ and major shareholders’interests.

10. RECURRENT RELATED PARTY TRANSACTIONS OF REVENUE NATURE

Significant Related Party Transactions of the Group for the financial year ended 31 December 2005 are disclosedin Note 24 to the Financial Statement. The Note also set out the aggregate value of transactions condectedduring the financial year and rhe Directors opinion thereof.

11. REVALUATION OF LANDED PROPERTIES

The Groups policy is to revalue its landed properties every five years by an independent valuer on an openmarket value basis and at shorter intervals whenever the fair value of the revalued assets is expected to differmaterially from their carrying value.

Other Information (cont’d)

20


The Directors are required to prepare the financial statements which give a true and fair view of the state of affairs ofthe Company and of the Group at the end of each financial year and of the results and cash flow for that year. Thefinancial statements must be prepared in compliance with the Companies Act, 1965 and with applicable approvedaccounting standards.

The Directors considered the following in preparing the financial statements :-

- select suitable accounting policies and apply them consistently;- make judgements and estimates that are reasonable and prudent;- state whether applicable approved accounting standards have been followed.

The Directors are of the opinion that the financial statements comply with the above requirements. The Directors arealso responsible for ensuring the maintenance of adequate accounting records to ensure that the financial statementscomply with the requirements of the Companies Act, 1965.

Directors’ ResponsibilitiesIn Respect Of Financial Statements

21


Directors’ Report

The directors have pleasure in presenting their report together with the audited financial statements of the Group andof the Company for the financial year ended 31 December 2005.

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and provision of management services.

The principal activities of the subsidiaries are described in Note 10 to the financial statements.

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

RESULTS

Group CompanyRM’000 RM’000

Net loss after taxation (848) (8)Minority interests 26 -

Net loss for the year (822) (8)

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed inthe statements of changes in equity.

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial yearwere not substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDEND

No dividend has been paid or declared by the Company since the end of the previous financial year. The directors donot recommend the payment of any dividend for the current financial year.

22


Directors’ Report (cont’d)

DIRECTORS

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

Ang Kwee TengAzra bin KamarudinDai Kuang YenLiow Teck EngPuan Sri Datin Minuira SabkiRaymond Koh Yew Hock (alternate to Puan Sri Datin Minuira Sabki)Teng Swee EngTong Kai Mun

DIRECTORS’ BENEFITS

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to whichthe Company was a party, whereby the directors might acquire benefits by means of acquisition of shares in ordebentures 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 (otherthan benefits included in the aggregate amount of emoluments received or due and receivable by the directors asshown in Note 6 to the financial statements or the fixed salary of a full-time employee of the Company) by reason of acontract made by the Company or a related corporation with any director or with a firm of which he is a member, orwith a company in which he has a substantial financial interest.

23


DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial yearin shares in the Company and its related corporations during the financial year were as follows:

Number of Ordinary Shares of RM1 Each1.1.2005 Bought Sold 31.12.2005

Direct interest -

Ang Kwee Teng 15,000 - - 15,000Azra bin Kamarudin 956,000 - - 956,000Dai Kuang Yen 515,000 - - 515,000Liow Teck Eng 518,000 - - 518,000Puan Sri Datin Minuira Sabki 6,000 - - 6,000Teng Swee Eng 538,000 - - 538,000

Number of Ordinary Shares of RM1 Each1.1.2005 Bought Sold 31.12.2005

Indirect interest -

Dai Kuang Yen 18,691,000 - - 18,691,000Liow Teck Eng 18,691,000 - - 18,691,000Puan Sri Datin Minuira Sabki 4,000 - - 4,000Teng Swee Eng 18,691,000 - - 18,691,000

Teng Swee Eng, Dai Kuang Yen and Liow Teck Eng by virtue of their interests in shares in the Company, are alsodeemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest.

None of the other directors in office at the end of the financial year had any interest in shares in the Company or itsrelated 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 directorstook reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the makingof provision for doubtful debts and satisfied themselves that there were no known bad debts and thatadequate 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 the accountingrecords in the ordinary course of business had been written down to an amount which they might beexpected 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 in the financialstatements of the Group and of the Company inadequate to any substantial extent; and

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


24



OTHER STATUTORY INFORMATION (CONT’D)

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

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in thisreport or financial statements of the Group and of the Company which would render any amount stated in thefinancial 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 the financialyear which secures the liabilities of any other person; or

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

(f ) In the opinion of the directors:

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

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

SIGNIFICANT EVENT

On 30 June 2005, the Group subscribed 70% equity interest in PT. Bakti Tani Nusantara (“BTN”), a company incorporatedin Indonesia, for a cash consideration of USD210,000. The principal activities of BTN are cultivation and marketing ofoil palm seeds and seedlings.

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

TENG SWEE ENG

LIOW TECK ENG

Melaka, MalaysiaDate: 12 April 2006

25


Statement By DirectorsPURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965

We, TENG SWEE ENG and LIOW TECK ENG, being two of the directors of GOLSTA SYNERGY BERHAD, do herebystate that, in the opinion of the directors, the accompanying financial statements set out on pages 27 to 58 are drawnup in accordance with applicable MASB Approved Accounting Standards in Malaysia and the provisions of the CompaniesAct, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December2005 and of the results and the cash flows of the Group and of the Company for the year then ended.

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

TENG SWEE ENG

LIOW TECK ENG


Statutory DeclarationPURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965

I, TENG SWEE ENG, being the Director primarily responsible for the financial management of GOLSTA SYNERGYBERHAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 27 to 58 arein my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtueof the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemn declared by the )abovenamed TENG SWEE ENG )at Melaka in the State of Melaka )on 12 April 2006 ) TENG SWEE ENG

Before me:

CHOO YONG CHUAN

26


Ernst & Young (AF: 0039)Chartered Accountants

Lot 1, 6th Floor, Menara Pertam, Jalan BBP2, Taman Batu Berendam Putra,

Batu Berendam, 75350 Melaka

Tel: 06-336 2399 Fax: 06-336 2899

We have audited the accompanying financial statements set out on pages 27 to 58. These financial statements are theresponsibility of the Company’s directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to reportour opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose.We do not assume responsibility to any other person for the content of this report.

We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used and significantestimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believethat our audit provides a reasonable basis for our opinion.

In our opinion:

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

(i) the financial position of the Group and of the Company as at 31 December 2005 and of the results andthe 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 Company and by itssubsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions ofthe Act.

We have considered the financial statements and the auditors’ report thereon of the subsidiaries of which we have notacted as auditors, as indicated in Note 10 to the financial statements, being financial statements that have beenincluded in the consolidated financial statements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statementsof the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidatedfinancial statements and we have received satisfactory information and explanations required by us for those purposes.

The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification material to theconsolidated financial statements and did not include any comment required to be made under Section 174(3) of the Act.

ERNST & YOUNGAF: 0039Chartered Accountants

LEE AH TOONo. 2187/09/07(J)Partner


Report Of The AuditorsTo The Members of Golsta Synergy Berhad (Incorporated in Malaysia)

27


Group CompanyNote 2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Revenue 3 19,746 15,871 378 378Cost of sales (15,742) (13,852) - -

Gross profit 4,004 2,019 378 378Other operating income 179 403 - -Administrative and general expenses (2,998) (2,706) (386) (350)Selling and marketing expenses (553) (745) - -

Profit/(loss) from operations 4 632 (1,029) (8) 28Interest income 45 77 - -Interest expense (587) (575) - -

Profit/(loss) before taxation 90 (1,527) (8) 28Taxation 7 (938) 204 - 13

Net (loss)/profit after taxation (848) (1,323) (8) 41Minority interests 26 15 - -

Net (loss)/profit for the year (822) (1,308) (8) 41

Loss per share (sen) 8 (1.96) (3.11)

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

Income StatementsFor The Year Ended 31 December 2005

28


Balance SheetsAs At 31 December 2005

Group CompanyNote 2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

NON-CURRENT ASSETS

Property, plant and equipment 9 36,006 37,447 - -Investment in subsidiaries 10 - - 22,059 22,059Goodwill on consolidation 11 1,316 1,394 - -

37,322 38,841 22,059 22,059

CURRENT ASSETS

Inventories 12 8,842 4,527 - -Trade receivables 13 12,405 13,821 - -Other receivables 14 9,397 9,721 31,239 31,271Tax recoverable 1,388 766 222 201Cash and bank balances 15 5,058 3,639 5 1

37,090 32,474 31,466 31,473

CURRENT LIABILITIES

Short term borrowings 16 11,084 9,377 - -Trade payables 18 3,236 2,433 - -Other payables 1,777 1,498 34 33

16,097 13,308 34 33

NET CURRENT ASSETS 20,993 19,166 31,432 31,440

58,315 58,007 53,491 53,499

FINANCED BY :

Share capital 19 42,000 42,000 42,000 42,000Reserves 12,455 13,286 11,491 11,499

Shareholders’ equity 54,455 55,286 53,491 53,499Minority interests 378 63 - -

54,833 55,349 53,491 53,499

Hire purchase payables 17 257 397 - -Deferred taxation 21 3,225 2,261 - -

Non-current liabilities 3,482 2,658 - -

58,315 58,007 53,491 53,499


29


Non-distributable Distributable Foreign

Share Share Revaluation exchange Retainedcapital premium reserves reserve profits Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

At 1 January 2004 42,000 11,175 - 7 1,357 54,539Revaluation surplus - - 2,588 - - 2,588Realisation of revaluation surplus - - (33) - 33 -Transfer to deferred tax (Note 21) - - (533) - - (533)Net loss for the year - - - - (1,308) (1,308)

At 31 December 2004 42,000 11,175 2,022 7 82 55,286Foreign exchange differences, representing net income not recognised in in the income statement - - - (9) - (9)Net loss for the year - - - - (822) (822)

At 31 December 2005 42,000 11,175 2,022 (2) (740) 54,455

Company

At 1 January 2004 42,000 11,175 - - 283 53,458Net profit for the year - - - - 41 41

At 31 December 2004 42,000 11,175 - - 324 53,499Net loss for the year - - - - (8) (8)

At 31 December 2005 42,000 11,175 - - 316 53,491


Statements Of Changes In EquityFor The Year Ended 31 December 2005

30


Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit/(loss) before taxation 90 (1,527) (8) 28Adjustments for :Gross dividend - - (300) (300)Amortisation for goodwill on consolidation 78 78 - -Bad and doubtful debts 200 58 - -Depreciation 2,453 2,460 - -Gain on disposal of property, plant and equipment - (104) - -Interest expense 587 575 - -Interest income (45) (77) - -

Operating profit/(loss) before working capital changes 3,363 1,463 (308) (272)Decrease/(increase) in receivables 1,540 (1,348) 32 31Increase in inventories (4,315) (193) - -Increase/(decrease) in payables 1,082 (423) 1 (4)

Cash generated from/(used in) operations 1,670 (501) (275) (245)Tax paid (773) (363) (21) -Tax recovered 177 5 71 -Interest paid (587) (575) - -

Net cash generated from/(used in) operating activities 487 (1,434) (225) (245)

Cash Flow StatementsFor The Year Ended 31 December 2005

31


Cash Flow StatementsFor The Year Ended 31 December 2005 (cont’d)

Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 45 77 - -Dividend received - - 229 229Proceeds from disposal of property, plant and equipment - 217 - -Purchase of property, plant and equipment (945) (222) - -Issuance of shares to minority interest 342 - - -

Net cash (used in)/generated from investing activities (558) 72 229 229

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of hire purchase payables (87) (44) - -Short term borrowings 1,692 1,108 - -

Net cash generated from financing activities 1,605 1,064 - -

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,534 (298) 4 (16)EFFECTS OF EXCHANGE RATE CHANGES (9) - - -CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (1,207) (909) 1 17

CASH AND CASH EQUIVALENTS AT END OF YEAR (NOTE 15) 318 (1,207) 5 1


32


Notes To The Financial Statements31 December 2005

1. CORPORATE INFORMATION

The principal activities of the Company are investment holding and provision of management services. Theprincipal activities of the subsidiaries are described in Note 10. There have been no significant changes in thenature of the principal activities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on theSecond Board of Bursa Malaysia Securities Berhad. The principal place of business is located at 11, Jalan TTC30, Taman Teknologi Cheng, 75260 Melaka.

The number of employees in the Group at the end of the financial year was 287 (2004 : 174). The Companydoes not employ any full time employee. The accounting records of the Company are maintained by employeesof a subsidiary.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution ofthe directors on 12 April 2006.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The financial statements of the Group and of the Company have been prepared under the historical costconvention except for the revaluation of land and buildings included under property, plant and equipment.

The financial statements comply with the provisions of the Companies Act, 1965 and applicable MASBApproved Accounting Standards in Malaysia.

(b) Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and all itssubsidiaries. Subsidiaries are those entities in which the Group has power to exercise control over thefinancial and operating policies so as to obtain benefits from their activities.

Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition methodof accounting, the results of subsidiaries acquired or disposed of during the year 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. The difference between the cost of an acquisition and the fair value of the Group’sshare of the net assets of the acquired subsidiary at the date of acquisition is included in the consolidatedbalance sheet as goodwill or negative goodwill arising on consolidation.

Acquisition of subsidiaries that meets the conditions of a merger are accounted for using the mergermethod. Under the merger method of accounting, the results of subsidiaries are presented as if themerger had been effected throughout the current and previous years. In the consolidated financialstatements, the cost of the merger is cancelled with the nominal values of the shares received. Anyresulting credit difference is classified as equity and regarded as a non-distributable reserve. Any resultingdebit difference is adjusted against any suitable reserve.

33


Notes To The Financial Statements31 December 2005 (cont’d)

2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(b) Basis of Consolidation (cont’d)

As allowed for under the transitional provision of MASB 21 : Business Combination, the Group appliedthe requirements of the Standard prospectively. Accordingly, business combinations entered into priorto 1 July 2001, have not been restated to comply with the Standard.

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 company is the difference between net disposal proceedsand the Group’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 acquisition date and the minorities’ share ofmovements in the acquiree’s equity since then.

(c) Goodwill

Goodwill represents the excess of the cost of acquisition over the Group’s interest in the fair value of theidentifiable assets and liabilities of a subsidiary at the date of acquisition.

Goodwill is stated at cost less accumulated amortisation and impairment losses. The policy for therecognition and measurement of impairment losses is in accordance with Note 2(l). Goodwill arising onthe acquisition of subsidiaries is presented separately in the balance sheet.

Goodwill is amortised on a straight-line basis over its estimated useful life of not more than 25 years.

Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assetsand liabilities of a subsidiary at the date of acquisition over the cost of acquisition. Negative goodwill isnot amortised.

To the extent that negative goodwill relates to expectation of future losses and expenses that are identifiedin the plan of acquisition and can be measured reliably, but which are not identifiable liabilities at thedate of acquisition, that portion of negative goodwill is recognised in the income statement when thefuture losses and expenses are recognised.

(d) Investment in Subsidiaries

The Company’s investment in subsidiaries is stated at cost less impairment losses. The policy for therecognition and measurement of impairment losses is in accordance with Note 2(l).

On disposal of an investment, the difference between net disposal proceeds and their carrying amountis recognised in the income statement.

34



(e) Property, Plant and Equipment and Depreciation

Property, plant and equipment are stated at cost or valuation less accumulated depreciation andimpairment losses. The policy for the recognition and measurement of impairment losses is in accordancewith Note 2 (l).

Revaluations are made at least once in every five years based on a valuation by an independent valueron an open market value basis. Any revaluation increase is credited to equity as a revaluation surplus,except to the extent that it reverses a revaluation decrease for the same asset previously recognised asan expense, in which case the increase is recognised in the income statement to the extent of thedecrease previously recognised. A revaluation decrease is first offset against unutilised previouslyrecognised revaluation surplus in respect of the same asset and the balance is thereafter recognised asan expense. Upon the disposal of revalued assets, the attributable revaluation surplus remaining in therevaluation reserve is transferred to retained profits. Upon the disposal of revalued assets, the attributablerevaluation surplus remaining in the revaluation reserve is transferred to retained profits.

Freehold land and capital work-in-progress are not depreciated. Leasehold land is depreciated over theperiod of the respective leases which range from 50 years to 99 years. Depreciation of other property,plant and equipment is provided for on a straight line basis to write off the cost of each asset to itsresidual value over the estimated useful life at the following annual rates :

Factory buildings, condominium and shop offices 2%Motor vehicles 16% - 20%Plant and machinery, factory equipment, mould and electrical installation 10%Furniture and fittings, air conditioners and signboard 8% - 10%

Upon the disposal of an item of property, plant or equipment, the difference between the net disposalproceeds and the carrying amount is recognised in the income statement and the unutilised portion ofthe revaluation surplus on that item is taken directly to retained profits.

(f) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in,first-out method. The cost of raw materials comprises costs of purchase. The cost of finished goods andwork-in-progress comprise raw materials, direct labour, other direct costs and appropriate proportionsof production overheads. Net realisable value is the estimated selling price in the ordinary course ofbusiness less the estimated costs to completion and the estimated costs necessary to make the sale.

(g) Cash and Cash Equivalents

For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and atbank and deposits at call, net of outstanding bank overdrafts.


35



(h) Hire Purchase

Assets acquired by way of hire purchase are stated at an amount equal to the lower of their fair valuesand the present value of the minimum hire purchase payments at the inception of the hire purchase,less accumulated depreciation and impairment losses. The corresponding liability is included in thebalance sheet as borrowings. In calculating the present value of the minimum hire purchase payments,the discount factor used is the interest rate implicit in the hire purchase, when it is practicable todetermine; otherwise, the Company’s incremental borrowing rate is used.

Hire purchase payments are apportioned between the finance costs and the reduction of the outstandingliability. Finance costs, which represent the difference between the total hire purchase commitmentsand the fair value of the assets acquired, are recognised as an expense in the income statement over theterm of the relevant hire purchase so as to produce a constant periodic rate of charge on the remainingbalance of the obligations for each accounting period.

The depreciation policy for assets purchased under hire purchase is in accordance with that for depreciableproperty, plant and equipment as described in Note 2(e).

(i) 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 deferred taxassets are recognised for all deductible temporary differences, unused tax losses and unused tax creditsto the extent that it is probable that taxable profit will be available against which the deductible temporarydifferences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised ifthe temporary difference arises from goodwill or negative goodwill or from the initial recognition of anasset or liability in a transaction which is not a business combination and at the time of the transaction,affects neither accounting profit nor taxable profit.

Deferred tax is measured at 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.


36



(j) 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) Sale of goodsRevenue relating to sale of goods is recognised net of sales taxes and discounts upon the transferof risks and rewards.

(ii) Dividend incomeDividend income is recognised when the right to receive payment is established.

(iii) Revenue from servicesRevenue from engineering consultation, project management and services rendered is recognisednet of service taxes as and when the services are performed.

(k) Foreign Currencies

(i) Foreign currency transactions

Transactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchangeruling at the date of the transaction. At each balance sheet date, foreign currency monetaryitems are translated into Ringgit Malaysia at exchange rates ruling at that date. Non-monetaryitems initially denominated in foreign currencies, which are carried at historical cost are translatedusing the historical rate as of the date of acquisition and non-monetary items which are carriedat fair value are translated using the exchange rate that existed when the values were determined.All exchange rate differences are taken to the income statement.

(ii) Foreign entities

Financial statements of foreign consolidated subsidiaries are translated at year end exchangerates with respect to the assets and liabilities, and at exchange rates at the dates of the transactionswith respect to the income statement. All resulting translation differences are included in theforeign exchange reserve in shareholders’ equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated asassets and liabilities of the Company and translated at the exchange rate ruling at the date of thetransaction.

The principal exchange rates used for each respective unit of foreign currency ruling at balancesheet date are as follows:

2005 2004RM RM

China, Yuan Renminbi 0.46 0.46Euro 4.49 5.17Hong Kong Dollar 0.49 0.49United States Dollar 3.78 3.80


37



(l) 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.

(m) Employee Benefits

(i) Short term benefits

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

(ii) Defined contribution plans

As required by law, companies in Malaysia make contributions to the Employees Provident Fund(“EPF”). Such contributions are recognised as an expense in the income statement as incurred.


38



(n) 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 in accordance with the substance of thecontractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classifiedas a liability, are reported as expense or income. Distributions to holders of financial instruments classifiedas equity are recognised directly in equity. Financial instruments are offset when the Group has a legallyenforceable right to offset and intends to settle either on a net basis or to realise the asset and settle theliability simultaneously.

(i) Trade Receivables

Trade receivables are carried at anticipated realisable values. Bad debts are written off whenidentified. An estimate is made for doubtful debts based on a review of all outstanding amountsas at the balance sheet date.

(ii) Trade Payables

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

(iii) Interest-Bearing Borrowings

Interest-bearing bank loans and overdrafts are recorded at the amount of proceeds received, netof transaction costs.

Borrowing costs directly attributable to the acquisition and construction of property, plant andequipment are capitalised as part of the cost of those assets, until such time as the assets areready for their intended use or sale. All other borrowings costs are charged to the incomestatement as an expense in the period in which they are incurred.

(iv) Equity Instruments

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity inthe period in which they are declared.


39


3. REVENUE

Revenue of the Company represents dividend income and management fees receivable from a subsidiary.

Revenue of the subsidiaries comprise sales of goods net of trade discounts and returns.

4. PROFIT/(LOSS) FROM OPERATIONS

Profit/(Loss) from operations is stated after charging / (crediting):

Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Amortisation for goodwill on consolidation 78 78 - -Auditors remuneration 56 56 11 11Bad and doubtful debts 200 58 - -Depreciation 2,453 2,460 - -Directors’ fees 251 172 - -Non executive directors’ remuneration (Note 6) 27 15 27 15Rental of machinery 4 11 - -Rental of factory and premises 49 53 - -Staff costs (Note 5) 4,607 3,797 287 218Gain on disposal of property, plant and equipment - (104) - -Gain on foreign exchange – realised - (20) - -Loss on foreign exchange – realised 59 - - -Rental income (179) (205) - -

5. STAFF COSTS

Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Salaries, wages and bonus 3,467 2,830 255 194Pension costs - defined contribution plan 304 280 31 23Other staff related expenses 836 687 1 1

4,607 3,797 287 218

Included in staff costs of the Group and of the Company are executive directors’ remuneration amounting toRM600,000 (2004 : RM675,000) and RM219,000 (2004 : RM155,000) respectively as disclosed in Note 6.


40


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 392 476 196 138Pension costs - defined contribution plan 47 54 23 17Fees 201 172 - -Benefits-in-kind 26 38 - -

666 740 219 155

Non-executive:Other emoluments 27 15 27 15Benefits-in-kind 2 - 2 -

29 15 29 15

Directors of subsidiarySalaries and other emoluments 146 132 - -Pension costs - defined contribution plan 15 13 - -Fees 50 - - -Benefits-in-kind 24 - - -

235 145 - -

Analysis excluding benefits-in-kind :Total executive directors’ remuneration excluding benefits-in-kind 851 847 219 155Total non executive directors’ remuneration excluding benefits-in-kind 27 15 27 15Total directors’ remuneration excluding benefits-in-kind 878 862 246 170


41


6. DIRECTORS’ REMUNERATION (CONT’D)

The number of directors of the Company whose total remuneration during the year fell within the followingbands is analyse below:

Number of Directors2005 2004

Executive directors:RM100,001- RM150,000 - 1RM150,001-RM200,000 - 2RM200,001- RM250,000 3 -RM250,001-RM300,000 - 1

Non-executive directors:Below RM50,000 5 4

7. TAXATION

Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Tax expense for the year: Malaysia income tax (26) (191) - - Overprovided in prior years - (13) - (13)

(26) (204) - (13)Deferred tax (Note 21): Relating to origination and reversal of temporary differences 538 - - - Underprovided in prior year 426 - - -

964 - - -

938 (204) - (13)

Domestic income tax is calculated at Malaysian statutory tax rate of 28% (2004 : 28%) of the estimated assessableprofit for the year. Taxation for other jurisdiction is calculated at the rates prevailing in the respective jurisdictions.During the financial year, the income tax rate applicable to the subsidiaries in Hong Kong and The People’sRepublic of China was 17.5 % and 15% respectively (2004 : 17.5% and 15% respectively).


42


7. TAXATION (CONT’D)

A reconciliation of income tax expense applicable to profit/(loss) before taxation at the statutory income taxrate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:

Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Profit/(loss) before taxation 90 (1,527) (8) 28

Taxation at Malaysian statutory tax rate of 28% (2004: 28%) 25 (428) (2) 8Effect of different tax rates in other countries 222 83 - -Effect of tax savings for small and medium scale companies 7 23 - -Effect of expenses not deductible for tax purposes 254 38 3 5Effect of income not subject to tax - (4) (13) (13)Effect of deferred tax asset not recognised on unabsorbed capital allowance 6 - 12 -Effect of deferred tax asset not recognised on unutilised business losses (2) 150 - -Effect of unabsorbed capital allowances brought forward where deferred tax assets previously unrecognised, now recognised - (53) - -Overprovision of tax expense in prior years - (13) - (13)Underprovision of deferred tax in prior years 426 - - -

Tax expense for the year 938 (204) - (13)

8. LOSS PER SHARE

The loss per share of the Group is calculated by dividing the net loss for the year of RM822,000 (2004 :RM1,308,000) by the number of ordinary shares in issue during the financial year of 42,000,000 (2004 :42,000,000).

There is no diluted loss per share as the Company does not have any dilutive potential ordinary shares as at theyear end.


43


9. PROPERTY, PLANT AND EQUIPMENT

Plant andmachinery,

factory Capital*Land and equipment ** Other work-in-

Group buildings and mould assets progress TotalRM’000 RM’000 RM’000 RM’000 RM’000

Cost/Valuation

At 1 January 2005 27,584 19,397 3,254 - 50,235Additions 4 881 128 - 1,013Disposals - - (1) - (1)Exchange differences (2) 42 (57) - (17)

At 31 December 2005 27,586 20,320 3,324 - 51,230

Representing :At cost - 20,320 3,324 - 23,644At valuation 27,586 - - - 27,586

27,586 20,320 3,324 - 51,230

Accumulated Depreciation

At 1 January 2005 410 10,598 1,780 - 12,788Charge for the year 446 1,644 363 - 2,453Disposals - - (1) - (1)Exchange differences (5) (9) (2) - (16)

At 31 December 2005 851 12,233 2,140 - 15,224

Net Book Value

At 31 December 2005At cost - 8,087 1,184 - 9,271At valuation 26,735 - - - 26,735

26,735 8,087 1,184 - 36,006

At 31 December 2004At cost - 8,799 1,474 - 10,273At valuation 27,174 - - - 27,174

27,174 8,799 1,474 - 37,447

Details at 1 January 2004Cost 3,902 19,370 3,013 2 26,287Valuation 22,930 - - - 22,930Accumulated Depreciation 1,851 8,911 1,723 - 12,485

Depreciation charge for 2004 453 1,687 320 - 2,460


44


9. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

* LAND AND BUILDINGS

CondominiumFreehold Leasehold Factory and shop

land land buildings offices TotalRM’000 RM’000 RM’000 RM’000 RM’000

Valuation

At 1 January 2005 1,785 9,656 15,628 515 27,584Additions - - 4 - 4Exchange differences - 13 (15) - (2)

At 31 December 2005 1,785 9,669 15,617 515 27,586

Accumulated Depreciation

At 1 January 2005 - 136 269 5 410Charge for the year - 107 329 10 446Exchange differences - (2) (3) - (5)

At 31 December 2005 - 241 595 15 851

Net Book Value

At 31 December 2005At valuation 1,785 9,428 15,022 500 26,735

At 31 December 2004At valuation 1,785 9,520 15,359 510 27,174

Details at 1 January 2004

Cost - 1,782 2,120 - 3,902Valuation 995 7,605 13,830 500 22,930Accumulated Depreciation - 432 1,362 57 1,851

Depreciation charge for 2004 - 106 337 10 453

** Other assets consist of motor vehicles, furniture and fittings, electrical installation, air conditioners and signboard.


45


9. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

(a) During the financial year, the Group acquired property, plant and equipment at aggregate costs ofRM1,013,000 (2004 : RM 700,000) of which RM68,000 (2004 : RM478,000) were acquired by means ofhire purchase arrangement. Net book value of property, plant and equipment held under hire purchasearrangements are as follows :

Group2005 2004

RM’000 RM’000

Motor vehicles 488 520

(b) The net book values of property, plant and equipment pledged to financial institutions for bank borrowingsas referred to in Notes 16 are as follows :

Group2005 2004

RM’000 RM’000

Land and buildings 23,745 24,116Plant and machinery 5,049 6,131Others 761 881

29,555 31,128

(c) Included in property, plant and equipment of the Group are fully depreciated assets which are still inuse costing RM2,530,000 (2004 : RM2,004,000).

(d) Details of independent professional valuation of properties owned by subsidiaries at 31 December 2005are as follows:

Year of Description of Valuationvaluation property amount Basis of valuation

RM’000

2004 Freehold land 1,830 Open market value2004 Leasehold land and

buildings 22,160 Open market value2004 Condominium 515 Open market value

24,505

Had the revalued land and buildings been carried at historical costs, the net book value of the land andbuildings that would have been included in the financial statements of the Group as at 31 December2005 would be approximately RM15,250,000 (2004 : RM15,448,000).


46


10. INVESTMENT IN SUBSIDIARIES

Company2005 2004

RM’000 RM’000

Unquoted shares, at cost 22,059 22,059

(a) Details of the subsidiaries are as follows :

Name of Country of Equitycompany incorporation interests held (%) Principal activities

2005 2004

Golsta Sdn. Bhd. Malaysia 100 100 Design, fabrication and (“GSB”) installation of industrial

plant and processengineering and relatedcomponents

Subsidiaries of GSB

Foundry Malaysia 100 100 Design, fabrication and Engineering construction of plant Corporation equipment for food Sdn. Bhd. manufacturing and related

industrial products

Golsta Resources Malaysia 100 100 Engineering consultancy, Sdn. Bhd. * project management and

related maintenanceservices

GEMSIA Malaysia 51 51 Advanced technology Sdn. Bhd. * development, project

advisory and relatedengineering works

Melian Rubber Hong Kong 100 100 Investment holding and Industries Limited provision of management (“Melian”) * services

Hyoxen Sdn. Bhd. * Malaysia 51 51 Business of conversion oforganic waste to renewalfuel gas and electricalenergy

Gothic Assets Malaysia 100 100 Investment holding andSdn. Bhd. * plantation(“Gothic”) *


47


10. INVESTMENT IN SUBSIDIARIES (CONT’D)

Name of Country of Equitycompany incorporation interests held (%) Principal activities

2005 2004

Subsidiary of Melian

Yangpu Fushen The People’s 100 100 Rubber processing and Rubber Industrial Republic trading of rubber related Co. Ltd. * of China products

Subsidiary of Gothic

PT. Bakti Indonesia 70 - Cultivation and marketing Tani Nusantara of oil palm seeds and

seedlings

* Audited by firms of auditors other than Ernst & Young.

On 30 June 2005, the Group subscribed 70% equity interest in PT. Bakti Tani Nusantara (“BTN”), acompany incorporated in Indonesia, for a cash consideration of USD210,000.

11. GOODWILL ON CONSOLIDATION

Group2005 2004

RM’000 RM’000

Goodwill 1,793 1,789Add : Acquisition of subsidiaries - 4Less: Accumulated amortisation (467) (389)

1,326 1,404Negative goodwill (10) (10)

1,316 1,394


48


12. INVENTORIES

Group2005 2004

RM’000 RM’000

At cost :Raw materials 1,196 1,144Work-in-progress 4,804 2,516Finished good 905 867Others 19 -Nursery stocks 1,918 -

8,842 4,527

Included in work-in-progress is an amount of RM132,000 (2004: RM Nil) in relation to directors’ remunerationwhich have been capitalised.

13. TRADE RECEIVABLES

Group2005 2004

RM’000 RM’000

Trade receivables 16,314 17,555Provision for doubtful debts (3,909) (3,734)

12,405 13,821

The normal trade credit term granted to the Group ranges from 90 to 120 days. Other credit terms are assessedand approved on a case-by-case basis.

The Group has no significant concentration of credit risk that may arise from exposures to a single debtor or togroups of debtors except due from six (2004 : five) debtors who accounted for 78% (2004 : 66%) of total nettrade receivables as at the balance sheet date.

Included in trade receivables are balances totalling RM7,172,000 (2004 : RM8,511,000) which have beenoutstanding for more than one year as at the financial year end. The directors are confident based on stepstaken and dealings with these debtors that the amounts, net of provisions made, will be recovered in full and assuch the provision for doubtful debts made in the financial statements is adequate.


49


16. OTHER RECEIVABLES

Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Due from a subsidiary - - 31,238 31,270Other receivables 9,251 9,611 - -Deposits and prepayments 146 110 1 1

9,397 9,721 31,239 31,271

The amount due from a subsidiary is interest free, unsecured and with no fixed terms of repayment.

The Group has no significant concentration of credit risk that may arise from exposures to a single debtor or togroups of debtors except due from two debtors amounting to RM6,503,000 (2004 : RM6,137,000).

15. CASH AND CASH EQUIVALENTS

Group Company2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Cash on hand and at banks 2,399 2,447 5 1Deposits with licensed banks 2,659 1,192 - -

Cash and bank balances 5,058 3,639 5 1Less : Bank overdrafts (Note 15) (4,740) (4,846) - -

Cash and cash equivalents 318 (1,207) 5 1

Included in the cash and bank balances of the Group is an amount of RM62,000 (2004 : RM116,000) which isregistered in the name of directors, and a former director, who held in trust on behalf of certain subsidiaries.

Included in the deposits with licensed banks of the Group is an amount of RM40,000 (2004 : RM39,000) whichis pledged to a bank for bank guarantee facility granted to a subsidiary.

The weighted average interest rates during the financial year and the average maturities of deposits with thelicensed banks at the balance sheet date were 3% (2004 : 4%) and 365 days (2004 : 365 days) respectively.


50



16. SHORT TERM BORROWINGS

Group2005 2004

RM’000 RM’000

Secured :Bank overdrafts (Note 15) 4,740 4,846Revolving credit 3,000 3,000Bankers’ acceptances 3,146 1,454Hire purchase payables (Note 17) 198 77

11,084 9,377

The weighted average interest rates during the financial year for short term borrowings were as follows :

Group2005 2004

% %

Bank overdrafts 7.75 7.75Bank’s acceptances 5.88 5.54Revolving credit 4.25 4.51

The above short term borrowings are secured by way of :-

(a) Loan agreement cum deed of assignment over certain land and buildings of certain subsidiaries withcarrying value amounting to RM23,745,000 (2004 : RM24,116,000).

(b) Debenture covering fixed and floating charges over assets of certain subsidiaries.

(c) Joint and several guarantee by certain directors of the Company.

(d) Corporate guarantee executed by the Company.

51



17. HIRE PURCHASE PAYABLES

Group2005 2004

RM’000 RM’000

Minimum hire purchase payments:Not later than 1 year 228 102Later than 1 year and not later than 2 years 167 95Later than 2 years and not later than 5 years 122 280Later than 5 years - 78

517 555Less : Future finance charges (62) (81)

Present value of hire purchase liabilities 455 474

Present value of hire purchase liabilities:Not later than 1 year 198 77Later than 1 year and not later than 2 years 147 75Later than 2 years and not later than 5 years 110 248Later than 5 years - 74

455 474

Representing hire purchase liabilities :Due within 12 months (Note 16) 198 77Due after 12 months 257 397

455 474

The hire purchase payables bore interest of rates between 4.50% to 6.75% (2004 : 4.50% to 6.75%) per annum.

18. TRADE PAYABLES

The normal trade credit terms granted to the Group range from 30 to 120 days.

52



19. SHARE CAPITAL

Number of OrdinaryShares of RM1 Each Amount

2005 2004 2005 2004’000 ’000 RM’000 RM’000

AuthorisedAt 1 January/at 31 December 50,000 50,000 50,000 50,000

Issued and fully paidAt 1 January/at 31 December 42,000 42,000 42,000 42,000

20. RETAINED PROFITS

As at 31 December 2005, subject to agreement with the Inland Revenue Board, the Company:

(i) has tax exempt profits available for distribution of approximately RM 510,000 (2004 : RM465,000).

(ii) The Company has sufficient tax credit under section 108 of the Income Tax Act 1967 and the balance inthe tax exempt income account to frank the payment of dividends out of its entire retained profits.

21. DEFERRED TAXATION

Group2005 2004

RM’000 RM’000

At 1 January 2,261 1,728Recognised in the income statements (Note 7) 964 -Recognised in equity - 533

At 31 December 3,225 2,261

Presented after appropriate offsetting as follows:Deferred tax assets (993) (2,070)Deferred tax liabilities 4,218 4,331

3,225 2,261

53


21. DEFERRED TAXATION (CONT’D)

The components and movements of deferred tax liabilities and assets during the financial year prior to offsettingare as follow :

Deferred Tax Liabilities of the Group :

Property,plant and

equipment TotalRM’000 RM’000

At 1 January 2004 3,748 3,748Recognised in the equity 533 533Recognised in the income statements 50 50

At 31 December 2004 4,331 4,331Recognised in the income statements (113) (113)

At 31 December 2005 4,218 4,218

Deferred Tax Assets of the Group :

Unabsorbed Unutilisedcapital Business

Provisions allowance Losses TotalRM’000 RM’000 RM’000 RM’000

At 1 January 2004 (56) (1,043) (921) (2,020)Recognised in the income statements - (17) (33) (50)

At 31 December 2004 (56) (1,060) (954) (2,070)Recognised in the income statements - 992 85 1,077

At 31 December 2005 (56) (68) (869) (993)


54


21. DEFERRED TAXATION (CONT’D)

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

Group2005 2004

RM’000 RM’000

Unabsorbed reinvestment allowances - 817Unabsorbed capital allowances - 1,112

- 1,929

The unabsorbed reinvestment allowances and unabsorbed capital allowance are available indefinitely for offsetagainst future taxable profits of the subsidiaries in which those items arose.

22. CONTINGENT LIABILITIES - UNSECURED

Company2005 2004

RM’000 RM’000

Corporate guarantee issued to financial institutions for credit facilities utilised by a subsidiary 9,886 8,300


55



23. SEGMENTAL INFORMATION

(a) Primary reporting segment - Geographical segments

The Group operates in two principal geographical areas of the world and is principally involved in thedesign, fabrication, installation of industrial machine, rubber processing and trading of rubber relatedproducts.

31 December 2005

People’sRepublic of

Malaysia* China** Others Eliminations GroupRM’000 RM’000 RM’000 RM’000 RM’000

REVENUES

External sales 19,608 138 - - 19,746Inter-segment sales 418 - - (418) -

Total revenue 20,026 138 - (418) 19,746

RESULTS

Profit/(loss) from operations 1,399 (652) (115) - 632Finance costs, net (544) 2 - - (542)

Profit/(loss) before taxation 855 (650) (115) - 90Taxation (938) - - - (938)

Loss after tax (83) (650) (115) - (848)Minority interests 26 - - - 26

Net loss for the year (57) (650) (115) - (822)

Segment assets 65,422 7,260 1,730 - 74,412

Segment liabilities 16,277 68 9 - 16,354Deferred taxation 3,225 - - - 3,225

19,502 68 9 - 19,579

Capital expenditure 162 851 - - 1,013Depreciation 2,145 308 - - 2,453Non-cash expenses other than depreciation and amortisation 200 - - - 200

56


23. SEGMENTAL INFORMATION (CONT’D)

31 December 2004

People’sRepublic of

Malaysia* China** Others Eliminations GroupRM’000 RM’000 RM’000 RM’000 RM’000

REVENUES

External sales 14,473 1,398 - - 15,871Inter-segment sales 304 - - (304) -

Total revenue 14,777 1,398 - (304) 15,871

RESULTS

Loss from operations (380) (621) (28) - (1,029)Finance costs, net (500) 2 - - (498)

Loss before taxation (880) (619) (28) - (1,527)Taxation 204 - - - 204

Loss after tax (676) (619) (28) - (1,323)Minority interests 15 - - - 15

Net loss for the year (661) (619) (28) - (1,308)

Segment assets 65,161 5,582 572 - 71,315

Segment liabilities 13,563 124 18 - 13,705Deferred taxation 2,261 - - - 2,261

15,824 124 18 - 15,966

Capital expenditure 549 151 - - 700Depreciation 2,200 260 - - 2,460Non-cash expenses other than depreciation and amortisation 58 - - - 58

Secondary reporting segment - Business segments

* the Group’s operations in Malaysia is principally involved in the design, fabrication, installation ofindustrial machine.

** the Group’s operations in People’s Republic of China is principally involved in the rubber processingand trading of rubber related products.


57



24. SIGNIFICANT RELATED PARTY TRANSACTIONS

Company2005 2004

RM’000 RM’000

Received from Golsta Sdn. Bhd., a subsidiary- Management fees 78 78- Dividend income 300 300

The directors are of the opinion that all the transactions above have been entered into in the normal course ofbusiness and are on negotiable basis.

25. FINANCIAL INSTRUMENTS

(a) Financial Risk Management Objectives and Policies

The Group’s financial risk management policy seeks to ensure that adequate financial resources areavailable for the development of the Group’s businesses whilst managing its interest rate, foreign exchange,liquidity and credit risks. The Group’s policy is to not engage in speculative transactions.

(b) Interest Rate Risk

The Group’s primary interest rate risk relates to interest-bearing debt, the Group had no substantiallong-term interest-bearing assets as at 31 December 2005.

The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings.The Group actively reviews its debt portfolio, taking into account the investment holding period andnature of its assets. This strategy allows it to capitalise on cheaper funding in a low interest rateenvironment and achieve a certain level of protection against rate hikes.

The information on maturity dates and effective interest rates of financial assets and liabilities are disclosedin their respective notes.

(c) Foreign Exchange Risk

The Group operates internationally and is exposed to various currencies, mainly China Yuan Renminbi,Hong Kong Dollar, Euro Dollar and United States Dollar. Foreign currency denominated assets andliabilities together with expected cash flows from highly probable purchases and sales give rise to foreignexchange exposures.

Foreign exchange exposures in transactional currencies other than functional currencies of the operatingentities are kept to an acceptable level.

58



25. FINANCIAL INSTRUMENTS (CONT’D)

(d) Liquidity Risk

The Group actively manages its debt maturity profile, operating cash flows and the availability of fundingso as to ensure that all refinancing, repayment and funding needs are met. As part of its overall liquiditymanagement, the Group maintains sufficient levels of cash or cash convertible investments to meet itsworking capital requirements. In addition, the Group strives to maintain available banking facilities of areasonable level to its overall debt position. As far as possible, the Group raises committed funding fromboth capital markets and financial institutions and balances its portfolio with some short term fundingso as to achieve overall cost effectiveness.

(e) Credit Risk

Credit risks, or the risk of counterparties defaulting, is controlled by the application of credit approvals,limits and monitoring procedures. Credit risks are minimised and monitored via strictly limiting theGroup’s associations to business partners with high creditworthiness. Trade receivables are monitoredon an ongoing basis via Group management reporting procedures.

The Group does not have any significant exposure to any individual customer or counterparty nor doesit have any major concentration of credit risk related to any financial instruments other as disclosed inNote 13 and 14.

(f) Fair Values

It is not practical to estimate the fair values of the Company’s investment in subsidiaries due to lack ofquoted market prices and the inability to estimate fair value without incurring excessive costs.

It is also not practical to estimate the fair values of the amount from a subsidiary as disclosed in Note 14due to lack of repayment terms entered into by the parties and the inability to estimate fair valueswithout incurring excessive costs.

The fair value of long term borrowings approximate their book values as these borrowings are pegged toand vary with the prevailing market rates.

There are no material differences between the book values and the fair values of the Group’s otherfinancial assets and liabilities due to their relatively short term maturity.

59


Particulars Of Properties

Locat ion

1. Lot PT No. 4310,Mukim of Cheng,Melaka

2. Lot PT Nos.4224 and 4225,Mukim of Cheng,Melaka

3. Lot. No. 23,Pekan Paya Rumput,Melaka

4. Plot 2-48 and 2-49,Mukim of Bukit Katil,Melaka

5. Parcel No. KP-10-03 (B4),10th Floor,Riviera Bay ResortCondominiums on parentLot PT No. 37, PekanTanjung Kling, Seksyen III,Melaka

6. Parcel Unit No. 11-06,Sunshine Tower,Ocean Palmscondominium on ParentLot PT No. 146, PekanKlebang, Seksyen I,Melaka

7. Lot PT No. 512,Mukim of TanjungMinyak, Melaka

8. Lot No. 3198(PT Lama No. 2201),Mukim of Balai Panjang,Melaka

9. D12-W-1 & D12-W-2Yangpu IndustrialDevelopment area,Hainan, Peoples’sRepublic of China

TenureApproximate

Age ofBu i ld ing

Leasehold land 99 years,expiring on 14/08/2096 /

Building 11 years old

Leasehold land 99 years,expiring on 14/08/2096 /

Building 6 year old

Freehold

Leasehold land 99 years,expiring on 5/12/2090

Leasehold land 99 years,expiring 29/10/2090 /Building 10 years old

Freehold /Building 8 years old

Leasehold land 99 years ,expiring on 28/04/2094 /


Freehold /Building 10 years old

Leasehold land 63 years ,expiring on 16/12/2062 /


Existing Use / Description

- Industrial

A block of single-storey factorybuilding together with four- storeyoffice block annexe and a TNBsub-station

- Industrial

A block of large single-storeyfactory building, a four-storey officeblock, a canteen, a guard house, alocker room, a switch room, a toiletblock and a TNB sub-station

- Commercial cum Residential

A plot of vacant commercial cumresidential development land

- Residential

Two adjoining plots of vacantbungalow land.

- Residential

A 2-bedroom condominiumsituated on Level 10 of a 8-13storey condominium block

- Residential

A 3- bedroom condominium on11th Floor of a 30 storeycondominium block

- Industrial

A block of single-storey factorybuilding together with a doublestorey office block annexe and aguard house

- Residential

An intermediate double storeyterrace house

- Industrial

A block of single-storey factorybuilding and office building, a toiletblock, a treatment pond, anelectrical room and a MCCB boardsystem weight-bridge station

Land area /Gross

Built-up Area(sq.m)

4,737 / 3312.18

36,878 /13,241.93

20,521.61

2,000

118.17

136

9,746 / 5,753.58

111 / 162.57

20,000 /2,874

Net BookValue

RM’000

2,253

15,218

1,720

315

243

257

3,739

152

2,832

Date ofAcquisition /Revaluation

11.8.2004

11.8.2004

10.8.2004

22.6.2004

7.5.2004

6.5.2004

13.8.2004

18.8.2004

28.6.2001

60


Analysis Of ShareholdingsAs At 15 May 2006

Class of Share : RM1.00 Ordinary ShareVoting Rights : 1 Vote Per Ordinary Share

DISTRIBUTION OF SHAREHOLDERS

Range No. of No. ofShareholders % Shares %

Less than 100 1 0.05 10 0.00101 – 1,000 1,051 55.26 1,044,300 2.491,001 – 10,000 667 35.07 2,696,590 6.4210,001 to 100,000 152 7.99 4,599,000 10.95100,001 to less than 5% of issued shares 29 1.52 12,369,100 29.455% and above of issued shares 2 0.11 21,291,000 50.69

Total 1,902 100 42,000,000 100.00

SUBSTANTIAL SHAREHOLDERS

Direct IndirectNo. of No. of

Name shares % shares %

GS Capital Sdn. Bhd. (357078-M) 18,691,000 44.50 - -Lembaga Tabung Haji 2,600,000 6.19 - -Teng Swee Eng 538,000 1.28 18,691,000* 44.50Liow Teck Eng 518,000 1.23 18,691,000* 44.50Dai Kuang Yen 515,000 1.23 18,691,000* 44.50

Notes :

* Deemed Interest by virtue of their shareholdings in GS Capital Sdn. Bhd. (357078-M).

DIRECTORS’ SHAREHOLDINGS AS PER REGISTER MAINTAINED UNDER SECTION 134 OF THE COMPANIES ACT,1965

Direct IndirectNo. of No. of

Name shares % shares %

Teng Swee Eng 538,000 1.28 18,691,000* 44.50Liow Teck Eng 518,000 1.23 18,691,000* 44.50Dai Kuang Yen 515,000 1.23 18,691,000* 44.50Puan Sri Datin Minuira Sabki 6,000 0.01 4,000 0.01Azra bin Kamarudin 956,000 2.28 - -Ang Kwee Teng - - - -Tong Kai Mun - - - -Raymond Koh Yew Hock (Alternate to Puan Sri Datin Minuira Sabki) - - - -

Notes :

* Deemed Interest by virtue of their shareholdings in GS Capital Sdn. Bhd. (357078-M).

61


Analysis Of Shareholdings (cont’d)

As At 15 May 2006

THIRTY (30) LARGEST SHAREHOLDERS’ REPORT

Name No. of Shares %

1. UOBM Nominees (Tempatan) Sdn. Bhd. (15356-H)(Pledged securities account for GS Capital Sdn. Bhd.) 18,691,000 44.50

2. Lembaga Tabung Haji (ACT5351995) 2,600,000 6.19

3. Mayban Securities Nominees (Tempatan) Sdn. Bhd. (284597–P)(Pledged securities account for Lau Hock Lee) 1,399,000 3.33

4. A.A. Assets Nominees (Tempatan) Sdn. Bhd. (938-T)(for Malaysia Power (Asia) Sdn. Bhd.) 1,122,000 2.67

5. Rosli Bin Ismail 1,015,000 2.41

6. ABB Nominees (Tempatan) Sdn, Bhd. (37645-P)(Pledged securities account for Yeo Peng Suee) 1,000,000 2.38

7. Bumiputra-Commerce Nominees (Tempatan) Sdn. Bhd. (274740-T)(Pledged securities account for Azra bin Kamarudin) 956,000 2.27

8. A.A. Assets Nominees (Tempatan) Sdn. Bhd. (938-T)(for Mahat bin Mahamood) 693,000 1.65

9. Loke Whye Leng 539,000 1.28

10. Yong Koy 514,000 1.22

11. ABB Nominees (Tempatan) Sdn. Bhd. (37645-P)(Pledged securities account for Teng Swee Eng) 500,000 1.19

12. ABB Nominees (Tempatan) Sdn. Bhd. (37645-P)(Pledged securities account for Liow Teck Eng) 500,000 1.19

13. ABB Nominees (Tempatan) Sdn. Bhd. (37645-P)(Pledged securities account for Dai Kuang Yen) 500,000 1.19

14. Tai Hong Lim 394,500 0,93

15. Su Lee Soon Nee Yeo 362,000 0.86

16. Yong Yoke Eng 300,000 0.71

17. Yong Shyan Whay 300,000 0.71

18. Lau Chee Wen 299,500 0.71

62


Analysis Of Shareholdings (cont’d)

As At 15 May 2006

THIRTY (30) LARGEST SHAREHOLDERS’ REPORT (CONT’D)

Name No. of Shares %

19. Lim Soon Kim 268,000 0.63

20. Jeffery Poon Peh Gim 229,500 0.54

21. Lim Tau Lih 206,000 0.49

22. Yeo Peng Suee 171,000 0.40

23. Loke Wye Yin 151,000 0.35

24. HLB Nominees (Tempatan) Sdn. Bhd. (47697- U)(Pledged securities account for Tae Sew Tin) 145,000 0.34

25. Tew Chat Kau 139,000 0.33

26. RHB Capital Nominees (Tempatan) Sdn. Bhd. (24915-H)(Pledged securities account for Tae Sew Tin) 133,000 0.31

27. Mayban Securities Nominees (Tempatan) Sdn. Bhd. (284597–P)(Pledged securities account for Ng Boon Khang) 110,000 0.26

28. Chiew Shei Ling 109,100 0.25

29. A.A. Assets Nominees (Tempatan) Sdn. Bhd. (938-T)(for Zahridah binti Ismail) 105,000 0.25

30. Lim Kim Thiam 105,000 0.25

Total 33,556,600 79.79

Form Of Proxy(Company No. 484964-H)(Incorporate in Malaysia)

No. of shares held

I/We, NRIC No./Passport No./Company No.

(full name in block letters)

of

( fu l l

a d d r e s s )

being a member(s) of GOLSTA SYNERGY BERHAD (484964-H) hereby appoint

NRIC No./Passport No.

(full name in block letters)

of

(full address)

or failing him/her, the Chairman of the Meeting as my/our proxy to attend and vote for me/us and on my/our behalf at theSeventh Annual General Meeting of the Company to be held at 11, Jalan TTC 30, Taman Teknologi Cheng, 75260 Melaka onMonday, 26 June 2006 at 11.00 a.m. and at any adjournment thereof in the manner as indicated below:-

RESOLUTIONS FOR AGAINST

1. To receive and adopt the audited financial statements for the financial year ended31 December 2005 and the Reports of the Directors and the Auditors thereon.

2. To re-appoint Puan Sri Datin Minuira Sabki who is retiring in accordance with Section129(6) of the Companies Act, 1965.

3. To re-elect En. Azra Bin Kamarudin who is retiring in accordance with Article 83 ofthe Company’s Articles of Association.

4. To re-elect Mr. Liow Teck Eng who is retiring in accordance with Article 83 of theCompany’s Articles of Association.

5. To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorisethe Directors to fix their remuneration.

6. To authorise the Directors to allot and issue shares up to 10% of the share capitalof the Company pursuant to Section 132D of the Companies Act, 1965.

7. To empower Directors to enter into arrangements or transactions within the ambitof Section 132E of the Companies Act, 1965.

(Please indicate with an “�” in the space provided how you wish your vote to be cast. If no indication is given, the proxy mayvote or abstain from voting at his/her discretion)

Signed this day of 2006

Signature of shareholder(s)

NOTES:1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A

proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shallnot apply to the Company.

2. Where a member appoints more than one(1) proxy, the appointment shall be invalid unless he specifies the proportion of hisshareholdings to be represented by each proxy.

3. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writingor, if the appointer is a corporation, either under its Common Seal or signed by an officer or attorney so authorised.

4. This proxy form must be deposited at the Registered Office of the Company at 11, Jalan TTC 30, Taman Teknologi Cheng, 75260Melaka not less than 48 hours before the time set for holding the meeting or any adjournment thereof.

The Company SecretaryGOLSTA SYNERGY BERHAD (484964-H)

11, Jalan TTC 30Taman Teknologi Cheng75260, Melaka

AFFIXSTAMP

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Documents

Contentslibapps2.nus.edu.sg/nus_hl/golsta2005.pdf · Contents Notice Of Annual General Meeting 2 Statement Accompanying Notice Of Annual General Meeting 4 Group Structure 5 Corporate