CONTENTS

CORPORATE INFORMATION 2

NOTICE OF ANNUAL GENERAL MEETING 3

STATEMENT ACCOMPANYING NOTICE OFANNUAL GENERAL MEETING 5

DIRECTORS’ PROFILE 6

CHAIRMAN’S STATEMENT 8

STATEMENT ON CORPORATE GOVERNANCE 10

STATEMENT OF DIRECTORS’ RESPONSIBILITIES 16

AUDIT COMMITTEE REPORT 17

OTHER INFORMATION 22

LIST OF PROPERTIES 56

ANALYSIS OF SHAREHOLDINGS 78

FORM OF PROXY

BOARD OF DIRECTORS

Chairman (Independent Non-Executive Director) Datuk Phang Miow SinGroup CEO and Executive Director Muk Sai TatNon-independent Non-Executive Director Peter WongIndependent Non-Executive Director Ganesan a/l SundarajIndependent Non-Executive Director Tunku Makhlad bin Tunku Mohamed Jamil

AUDIT COMMITTEES

Chairman Ganesan a/l Sundaraj Member Muk Sai TatMember Tunku Makhlad bin Tunku Mohamed Jamil

COMPANY SECRETARIES REGISTERED OFFICE

Lim Phooi Kee (MIA 2759) Suite 19.06 19th Floor, Menara MAANuruluyun Binti Abdul Jabar (MIA 9113) No. 12 Jalan Dewan Bahasa

50460 Kuala LumpurWilayah Persekutuan

Tel: +603-2145 1880Fax: +603-2143 1880

AUDITORS PRINCIPAL BANKERS

PKF Alliance Bank Malaysia Berhad(Chartered Accountants) Arab Malaysian Finance Berhad9th Floor, MCB Plaza,No. 6 Changkat Raja Chulan,50200 Kuala Lumpur

SHARE REGISTRARS SOLICITORS

Symphony Share Registrars Sdn Bhd Ravi, Beltran & Co.Level 26, Menara Multi-PurposeCapital SquareNo. 8 Jalan Munshi Abdullah 50100 Kuala Lumpur Tel: +603-2721 2222Fax: +603-2721 2530 / +603-2721 2531

STOCK EXCHANGE LISTINGSecond Board of the Bursa Malaysia Securities Berhad

2

CORPORATE INFORMATION“Acacia Mangium sawlogs ready for processing

at sawmill”

NOTICE IS HEREBY GIVEN THAT the Ninth Annual General Meeting of the Company will be held at The Auditorium,Podium 1, Menara MAA, No.12 Jalan Dewan Bahasa, 50460 Kuala Lumpur on Wednesday, 29 June 2005 at 3.30 p.mfor the following purposes:

AGENDA

ORDINARY BUSINESS

1) To receive the Audited Financial Statements for the year ended 31 December 2004 together with the Directors’ and Auditors’ Reports thereon. Resolution 1

2) To approve the payment of Directors’ fees for the year ended 31 December 2004. Resolution 23) To re-elect the following Directors who are retiring in accordance with Article 80

of the Company’s Articles of Association:(a) Ganesan A/L Sundaraj Resolution 3(b) Tunku Makhlad bin Tunku Mohamed Jamil Resolution 4

4) To re-appoint Messrs. PKF, the retiring Auditors, and to authorise the Board of Directorsto fix their remuneration. Resolution 5

SPECIAL BUSINESS

5) To consider and, if thought fit, to pass with or without modifications, the followingresolution as an Ordinary Resolution:-

Ordinary ResolutionAuthority for Directors to Allot and Issue Shares

“THAT subject always to the approvals of the relevant authorities, the Directors be and are hereby authorisedpursuant to Section 132D of the Companies Act, 1965, to allot and issue shares in the Company at any time andupon such terms and conditions and for such purposes as the Directors may deem fit, provided that theaggregate number of shares to be issued pursuant to this resolution does not exceed ten per centum (10%) of the total issued capital of the Company at the time of issue and that such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company.”

Resolution 6

ANY OTHER BUSINESS

6) To transact any other ordinary business of the Company of which due notice shall have been given in accordance with the Company’s Articles of Association and the Companies Act, 1965.

By Order Of The BoardMANGIUM INDUSTRIES BHD.

Lim Phooi Kee (MIA 2759)Nuruluyun Binti Abdul Jabar (MIA 9113)Company Secretaries

Dated: 7 June 2005

3

NOTICE OF NINTH ANNUALGENERAL MEETING

•

4

Notes:

* A member entitled to attend and vote at the Meeting is entitled to appoint a Proxy or Proxies to attend andvote on his (her) instead. A Proxy may but need not be a member of the Company and the provisions ofSection 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

* Where a member appoints two (2) or more Proxies to attend and vote at the same Meeting, such appointment shall be invalid unless the member specifies the proportions of his (her) shareholdings to berepresented by each Proxy.

* Where a member of the Company is an Authorised Nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

* The instrument appointing a proxy shall be in writing under the hand of the appointor or his/her attorney duly authorised in writing or if the appointor is a corporation/company, either under its common seal or under the hand of an officer or attorney duly authorised.

* The instrument appointing a Proxy must be deposited at the Registered Office of the Company at Suite 19.06, 19th Floor, Menara MAA, No. 12 Jalan Dewan Bahasa, 50460 Kuala Lumpur, not less than forty-eight (48) hours before the time set for the Meeting or any adjournment thereof.

Explanatory Note on Special Business

Resolution pursuant to Authority for Directors to Allot and Issue Shares

The proposed Resolution 6 under item 5 above, if passed, will empower the Directors of the Company, from the date ofthe above Annual General Meeting, authority to allot and issue shares in the Company up to an amount not exceedingin total 10% of the issued capital of the Company for such purposes as the Directors consider would be in the bestinterest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the next AnnualGeneral Meeting.

“Bandsaw blade at sawmill in Mempakad”

1. The place, date and hour of the Ninth Annual General Meeting:

Date of Meeting Time of Meeting Place of Meeting

29 June 2005 3.30 p.m The Auditorium, Podium 1, Menara MAA, No.12, Jalan Dewan Bahasa, 50460 Kuala Lumpur.

2. The names of individuals who are standing for re-election:

To re-elect the following Directors who are retiring in accordance with Article 80 of the Company’s Articles of Association:

1. Ganesan A/L Sundaraj 2. Tunku Makhlad bin Tunku Mohamed Jamil

3. The details of attendance of Directors at Board Meetings:

PARTICULARS OF MEETINGS

Place: Board Room, Suite 19.06, 19th Floor, Menara MAA, No. 12 Jalan Dewan Bahasa, 50460 Kuala Lumpur.

DIRECTORS REMARKS29th Board 30th Board 31st Board 32nd Board 33rd Board

Meeting Meeting Meeting Meeting Meeting19.02.2004 26.04.2004 21.05.2004 23.08.2004 25.11.2004

1. Datuk Phang - √ √ √ √ 4/4Miow Sin (appointed w.e.f.

22.03.2004)

2. Muk Sai Tat - √ √ √ √ 4/4(appointed w.e.f.

02.04.2004)

3. Peter Wong - √ √ √ √ 4/4(appointed w.e.f.

02.04.2004)

4. Ganesan a/l Sundaraj √ √ √ √ √ 5/5

5. Tunku Makhlad bin √ √ √ √ X 4/5Tunku Mohamed Jamil

6. Mohd Silahuddin bin √ - - - - 1/5Jamaluddin (resigned w.e.f.

22.03.2004)

7. Chin Kam Bin @ √ - - - - 1/5Cheng Kam Meng (resigned w.e.f.

02.04.2004)

8. Tengku Ahmad Fuad X - - - - 0/1bin Tengku Ahmad (resigned w.e.fBurhanuddin 02.04.2004)

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

Please refer to the Directors’ Profile appearing on pages 6 to 7.

5

STATEMENT ACCOMPANYING NOTICEOF ANNUAL GENERAL MEETING

6

DIRECTORS’ PROFILE

Name Datuk Phang Muk Sai Tat Peter Wong Ganesan a/l Tunku Makhlad bin Miow Sin Sundaraj Tunku Mohamed Jamil

Age 66 42 63 43 60

Nationality Malaysian Malaysian Malaysian Malaysian Malaysian

Qualification Primary and Master in Business Management Chartered Diploma in automobileSecondary School Administration Development Accountant (CA) engineering in associationat Victoria Institute, (General Programme from of the Malaysian with the institute of RoadSingapore from Management) Asian Institute of Institute of Transport Engineers and1946 to 1956 University of Bath, Management Accountants and Post Diploma in Transport

U.K. , Chartered Associate Member Management fromAccountant (CA) of the Chartered Willesdon College of

Institute of Technology, LondonManagement Accountants (CIMA)

Position on the Board Independent Group CEO and Non-Independent Independent Independent Non-Executive Executive Director Non-Executive Non-Executive Non-Executive DirectorChairman Director Director

Date appointed to the Board 22.03.2004 02.04.2004 02.04.2004 25.02.2002 04.09.2003

Working experience General Fleet & occupation Manager of Cycle &

Carriage, 1965 to1972. Self employed in import/export trading, construction, property development and timber businesses in Malaysia, China and Canada from 1972 to 1988. Chairman of P & I Properties Sdn Bhd from 1998 till present. Sits on the board of several private limited corporations in Malaysia.

TransportAdministrator forMalaysia AirlineBerhad from 1981to 1994. TransportController forMalaysia AirlineBerhad from 1994to 2000.

SeniorManagementExecutive ofIntegrated TimberComplex from1972 to 1983.Senior BusinessDevelopmentExecutive from1983 till present.Sits on the boardof several privatelimited companiesin Malaysia, including severalsubsidiaries ofMangiumIndustries Bhd.

Corporate &RestructuringServicesConsultant, Ernst &Young in Malaysia,1981 to 1990. Sitson the Board ofseveral public andprivate limitedcompanies inMalaysia.

His career startedin audit with PriceWaterhouse (1983-1990) andthereafter withOgilvy & Mather(M) Sdn. Bhd. asAccountant (1990-1991), EvereadyBattery Co. (M)Sdn. Bhd. asAccountingManager (1991-1996), EmersonElectric (M) SdnBhd. as FinancialController - SouthAsia Region (1996-1999), Pernas OtisElevator Sdn. Bhd.as Chief FinancialOfficer/FinancialController (1999-2000), SkylineConcept Sdn Bhd.as Vice President-General Manager(2000 - 2001) andGroup CEO ofConcino Sdn. Bhd.(2001 - 2004)

“Workers at sawmill in Mempakad”

7

As disclosed in page 25 of the Annual Report

As disclosed in page 25 of the Annual Report

As disclosed in page 25 of the Annual Report

As disclosed in page 25 of the Annual Report

As disclosed in page 25 of the Annual Report

before assuminghis presentposition. Sits onthe board ofseveral private limited companiesin Malaysia, including all subsidiaries ofMangiumIndustries Bhd(“MIB”).

Name Datuk Phang Muk Sai Tat Peter Wong Ganesan a/l Tunku Makhlad bin Miow Sin Sundaraj Tunku Mohamed Jamil

Working experience& occupation

Membership of Board • Remuneration • Audit Committee None • Audit Committee • Audit CommitteeCommittees Committee • Remuneration • Remuneration

• Nomination Committee CommitteeCommittee • Nomination • Nomination

Committee Committee

Directorships of other None None None • Pan Pacific NonePublic Companies Asia Bhd

• Promto Berhad• CHG Industries

Berhad• Bukit Katil

Resources Berhad

Securities holdings in theCompany and its subsidiaries

Family relationship with None None None None Noneany Director and/or majorshareholder

Conflict of interest with None None None None Nonethe Company

List of convictions for None None None None Noneoffences within the past 10years other than trafficoffences

“Workers at Line 1 of production process atsawmill in Mempakad”

8

CHAIRMAN’S STATEMENT

Dear Shareholders

2004 was indeed an eventful year. The Malaysian economy is expected to be on target to achieve a 7 percent growthfor 2004 with an outstanding 8 per cent growth in the first half of 2004 and a 6.8 percent growth in the third quarter.This was despite a more trying worldwide and regional environment with the surge in oil prices, the re-emergence ofSARS and the tsunami devastation in the third and final quarter of 2004.

For 2005, the Malaysian economy is expected to remain resilient despite a slow down in the world economy due to thehigh oil prices, inflationary pressures and potential interest rate hikes. The outlook for the timber industry is however,expected to improve with increasing demand for plantation wood as a result of worldwide pressures championingsustainable forest management practices. This coupled with the consumption trends for raw wood based productsfrom the region, notably China and Japan, is anticipated to fuel the positive outlook of the MIB Group.

On behalf of the Board, I am pleased to present this Annual Report and Financial Statements of Mangium Industries Bhdfor the financial year ended 31 December 2004.

YEAR 2004 SUMMARY AND HIGHLIGHTS

Despite the good fundamentals, the industry remains challenging. The Group recorded a turnover of RM41.9 millionand a pre-tax loss of RM9.9 million for the year under review compared to a turnover of RM25.1 million and a pre-taxloss of RM13.7 million in 2003.

The year witnessed an increase in demand for plantation grown timber, more so for operators who subscribe tosustainable forest management best practices as worldwide pressure mounts for users to be more responsible to theenvironment. The Group’s timber division recorded a turnover increase by 149% while its loss before tax shrunk by31% compared to the immediate preceding year.

It was also a year where our non-timber sector operated in an unprecedented taxing environment governed by rawmaterial price increases, the introduction of new government policies and taxes impacting liquor products, employmentof foreign workers as well as a general shrinking expenditure in advertising and printing in the local market. Despitethe unforgiving economic situation, the non-timber sector of the Group managed to pull in a modest profit. Thedistribution and blending of alcoholic beverages division’s turnover declined marginally by 6% from 2003 while profitbefore tax dropped by 5% compared to the earlier year. The printing division, however, charted a clear improvement,with turnover and profit before tax increasing by 17% and 222% respectively over 2003.

I am also pleased to report that the Group’s ongoing Corporate Restructuring Scheme has received the approval fromthe Securities Commission on 4 March 2005, rewarding the tremendous efforts put in by all parties who have toiledtirelessly till this point. As the Group now embarks on the implementation of the Scheme, we can look forward to abrighter future with an organization unimpeded by the shadow of its earlier financial obligations.

I am also happy to announce that our Joint Venture with Telaga Chipmill Sdn Bhd to build and operate a wood chip millin Telaga, Pitas is progressing smoothly, thereby securing the majority of sales of our plantation logs. With the currentincrease in both demand and prices for quality wood chips from international buyers, I am confident that Telaga ChipmillSdn Bhd will increase their off-take of logs from the Group once they commence commercial production. Thismutually beneficial joint venture will also result in the Group participating by way of profit sharing from the sales of

“Acacia Hybrid at SAFODA nursery in Telaga”

9

wood chips and shall contribute positively to the Group’s bottom line in the years to come. Another note worthy ofmention is that this wood chip mill project shall also directly and indirectly contribute to the development of the localsocio-economic status of the people in the area.

DIVIDENDSAfter taking into consideration of the Company’s financial position, the Board does not recommend the payment ofdividends for the financial year ended 31 December 2004.

GOING FORWARDThe MIB Group’s core emphasis will remain focused on the consolidation of existing businesses, coupled with ongoingplanning for the future. In addition to the existing plantation division, the Group’s niche businesses in printing,blending and distribution of alcoholic beverages, as well as media and content development are expected to form thekey engine of growth in the next few years.

In the meantime, to fuel growth and enhance profitability, efforts are ongoing within the Group to target markets andproducts with higher margins. 2005 will also see the Group increasing its focus on customer service and adopting moreproactive approaches in Group costs savings to negate the ever rising production costs.

The outlook for the coming financial year is one of vigilance amid concerns and hinges upon trends in world oil prices,the costs of raw materials and other global macroeconomic factors, the successful sourcing and retention of suitablekey staff, kind weather and operating conditions at our plantation among other factors.

In our effort to enhance internal controls and correspondingly, corporate governance of the Group, the Board ofDirectors has appointed a firm to carry out internal audit reviews of companies in the Group. The internal auditors shallreport their findings and recommendations to the Audit Committee after conducting their audits to assist thecommittee in formulating strategies and plans to further enhance and improve internal controls and operatingefficiencies of the Group.

OUR HEARTFELT THANKS On behalf of the Board, I wish to express our appreciation to the management and staff of the Group for their hard workand dedication. Our thanks also go towards the Malaysian government, the regulatory authorities, the media, ourcustomers, shareholders, bankers, advisors and business associates for their incalculable support and assistance. On9 August 2004, Mr. Peter Wong has been designated Non Independent and Non-Executive Director. Besides that, therewere no other changes to the Board composition during the year. Having worked closely together during the past yearhas given me the added assurance that each Board member is fully committed to working towards bringing the Groupto profitability and growth in the coming years. Finally, I wish to also record my appreciation to my fellow Directors fortheir solid contribution and support during the year.

Thank you.

DATUK PHANG MIOW SIN CHAIRMAN

“Acacia Mangium bark”

The Board of Mangium Industries Bhd. (“the Company” or “MIB”) is pleased to report to the shareholders on themanner the Group has applied the Principles, and the extent of compliance with the Best Practices of good corporategovernance as set out in Part 1 and Part 2 respectively of the Malaysian Code on Corporate Governance (the Code)pursuant to Paragraph 15.26 of the Listing Requirements of the Bursa Malaysia Securities Berhad (“Bursa Securities”).The Group recognises that the implementation of the Best Practices set out in the Code is an on-going process, thusthe Company strives to ensure that the areas of the Code which have yet to be implemented are given due attention.

A. THE BOARD OF DIRECTORS

1. The Board and its ResponsibilitiesThe Board consists of five (5) members comprising the Chairman (Independent Non-Executive), the Group CEO and Executive Director (the Group CEO), one (1) Non-Independent Non-Executive Director and two (2) Independent Non-Executive Directors. The present Board composition complies with the Listing Requirements of the Bursa Securities.

The role of the Chairman is to ensure a balance of power and authority. The Board has within it, professionalsdrawn from various backgrounds, contributed in-depth and diversity in experience, expertise and perspectives to the Group’s business operations.

The Group CEO is responsible for making and implementing operational decisions and running the Group’s day today business. The Non-Executive Directors support the skills and experience of the Group CEO by reviewing and approving strategy and policy based on their knowledge and experience of similar and other business fields.

The Board has identified Mr Ganesan a/l Sundaraj, a Senior Independent Non-Executive Director to whomconcerns may be conveyed.

The profiles of the Directors are set out on pages 6 to 7 in this Annual Report.

2. Supply of InformationThe Board meets at least four (4) times a year and has a formal schedule of matters reserved to members for decision. The Board members are supplied with full and timely information to enable them to discharge their duties.

All Directors have full and complete access to the information and are entitled to obtain full disclosure by themanagement. In addition, they also have access to the advice and services of the Company Secretary who isresponsible for ensuring that Board Meeting procedures are followed and that applicable rules and regulationsare complied with. Independent professional advice is also available to them in appropriate circumstances at the Company’s expenses.

STATEMENT ONCORPORATE GORVERNANCE

10

“Mid stream loading to barge of Acacia Mangiumpulp logs”

3. Appointment to the BoardIn the past, the appointments of the Directors were solely made by the Board. In adopting the Best Practice of the Code, the Nomination Committee was established on 23 May 2002. Currently, the present members of the Nomination Committee are as follows:

a. Datuk Phang Miow Sin (Chairman) (appointed w.e.f. 22.04.2004)b. Mr. Ganesan a/l Sundaraj c. Tunku Makhlad bin Tunku Mohamed Jamil (appointed w.e.f. 22.04.2004)

The Nomination Committee serves to ensure that the Company has an effective Board comprising Directors of therequired mix of skill, experience and other qualities including core competencies. This Committee shall be responsible for identifying, recruiting and recommending suitable candidates for directorship as well as to annually assess the effectiveness of the Board as a whole.

4. Re-electionOne-third (1/3) of the Directors shall retire by rotation each financial year in accordance with the Company’s Articles of Association and being eligible, offer themselves for re-election at the Annual General Meeting. An election of the Directors of the Company shall take place every year and all the Directors of the Company shall retire from office once at least in each three (3) years but shall be eligible for re-election. Directors appointed bythe Board to fill vacancies are subject to retirement and election by the shareholders at the next Annual GeneralMeeting following their appointments.

5. Directors’ Training“All Directors of the Company have completed the Mandatory Accreditation Programme (MAP) and are now undergoing the Continuing Education Programme (CEP) as prescribed by the Bursa Malaysia Securities Berhad.”

6. Relationship of the Board to ManagementThe Management maintains a very close relationship with the Board of Directors in order to implement the objectives, policies and decisions made by the Board during the Board of Directors’ meetings in the financial year.

11

“Sorting of Acacia Mangium logs atTelaga logyard”

B. DIRECTORS’ REMUNERATION

1. The Level and Make-upThe remuneration policy of the Company for the Group CEO and the Executive Director is such as to secure and retain the skills and experience required to meet the challenges of the Group and shall be structured to link rewards to corporate and individual performance. For Non-Executive Directors, the level of remuneration shall reflect the experience and level of responsibilities undertaken by the particular Non-Executive Director concerned.

2. Remuneration Committee and ProcedureThe remuneration policy of the Company for the Group CEO and the Executive Director shall be fixed and determined by the Board as a whole with the Directors concerned abstaining from deliberations and voting on decisions in respect of their individual remuneration. The fees payable to the Independent Non-Executive Directors shall from time to time be determined by an ordinary resolution of the Company in general meeting.

In compliance with the Code, the Remuneration Committee was established on 23 May 2002. However, the present members of the Nomination Committee are as follows :

a. Datuk Phang Miow Sin (Chairman) (appointed w.e.f. 22.04.2004)b. Mr. Ganesan a/l Sundarajc. Tunku Makhlad bin Tunku Mohamed Jamil (appointed w.e.f. 22.04.2004)

This Committee shall be responsible to access the appropriate remuneration level and to ensure that the remuneration of each of the Board member reflects the level of performance and responsibility taken.

3. DisclosureThe details of the Directors’ remuneration for the financial year ended 31 December 2004 are as follows: -

Amount Annually Executive Non-Executive

RM 50,000 & below 1 5RM 50,001 to RM 100,000 2 -

The aggregate remuneration of the Directors is categorised below:

Salaries & Allowances (RM) Fees (RM) Total(RM)

Executives 234,673 1,500 236,173Non-Executives - 87,000 87,000

*Note: This is subject to shareholder’s approval at the forthcoming Annual General Meeting.

12

“Acacia Mangium pulp log loading at logyard inTalaga”

C. RELATIONSHIP WITH SHAREHOLDERS

The Board maintains an effective communications policy that enables both the Board and the management to communicate effectively with its shareholders and the public. The policy effectively interprets the operations of the Company and the Group to the shareholders and accommodates feedback from shareholders, which arefactored into the Group’s business decision.

The Board communicates information on the operations, activities and performance of the Group to theshareholders, stakeholders and the public through the following:

(i) The Annual Report, which contains the financial and operational review of the Company and the Group’s business, corporate information, financial statements and information on Audit Committee and Board of Directors; and

(ii) Various announcements made to the Bursa Securities, which includes announcements on quarterly results.

The Annual General Meeting serves as an important means for shareholders communication. Notice of the AnnualGeneral Meeting and Annual Reports are sent to shareholders twenty one (21) days prior to the meeting. At eachAnnual General Meeting, the Board presents the performance and progress of the Company and the Group and provides shareholders with the opportunity to raise questions pertaining to the Group. The Chairman and the Board will respond to the questions raised by the shareholders during the Annual General Meeting.

The Board has ensured each item of special business included in the notice will be accompanied by an explanatory statement on the effects of the proposed resolution.

D. ACCOUNTABILITY AND AUDIT

The Board aims to present a balanced and understandable assessment of the Company and the Group’s positionand prospect through the annual financial statements and quarterly announcements of results to the Bursa Securities. The Directors are responsible to ensure the annual financial statements are prepared in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia.

1. Financial ReportingThe Directors consider that in preparing the financial statements which are set out in this Annual Report inseparate statement, the Company has adopted appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates and all applicable approved accounting standards have been followed in order to present a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss for the year.

The Directors in preparation of the financial statements have requested the Auditors to take whatever steps and to undertake whatever inspections they consider to be appropriate to enable them to render their audit report.

13

“Mature Acacia Mangium trees ready forharvesting at Bengkoka concession”

2. Audit CommitteeThe Audit Committee consists of two (2) Independent Non-Executive Directors (One (1) of whom is the Chairman of the Audit Committee) and one (1) Executive Director.

The current composition of the Audit Committee is in compliance with the requirement of Paragraph 15.10 (b) ofthe Listing Requirements i.e. a majority of the members should be Independent Non-Executive Directors.

The Audit Committee Report is set out on pages 17 to 21 in this Annual Report.

3. Relationship with AuditorsThe Audit Committee always maintains a transparent and professional relationship with the external Auditors. The external Auditors attended most of the Audit Committee Meetings of the Company. From time to time, theyhighlight to the Audit Committee and the Board on matters that require their attention.

The external Auditors also present at the Company’s Annual General Meeting and they work closely with the Board in attending to questions raised by shareholders, specifically in relation to the financial reports of the Company.

4. Internal ControlThe Directors acknowledge their responsibilities for maintaining a sound system of internal control to safeguardshareholders’ investment and the Group’s assets. The internal control system covers not only financial controls but operational and compliance controls, and risk management. The internal control system is designed to enablethe Company and the Group to manage the risk of failure to achieve business objectives. The internal controlsystem is designed to provide reasonable and not absolute assurance against material misstatement and losses. The Group is continuously looking into the adequacy and integrity of its systems of internal control.

The Directors are currently taking steps to enhance the Group’s overall control system which include:

• Clearly established policies and procedures;• Regular review and update of policies and procedures to meet business needs;• Clearly defined job responsibilities and appropriate segregation of duties;

Processes shall also be established for identifying, evaluating and managing the significant risks facing the Group in accordance with the guidance “Statement of Internal Control: Guidance for Directors of Public Listed Companies” issued by the Bursa Securities.

14

“Sunset at logyard in Telaga”

D. STATEMENT OF INTERNAL CONTROLThe Malaysian Code on Corporate Governance sets out as a principal that the Board of Directors of a listed company should maintain a sound system of internal control to safeguard shareholders’ investment and the Group’s assets. The Board is committed to maintaining a sound system of the internal controls in the Group and is pleased to provide the following statement in accordance with the Listing Requirements.

1. Key ProcessesThe Board has the overall responsibility for the Group’s system of internal control and for reviewing itseffectiveness. However, the system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide reasonable and not absolute assurance against material misstatement and losses. The internal control system covers not only financial controls but operational and compliance controls, and risk management.

The Board and management are responsible for the ongoing identification, evaluation and managing of significant risks.

During the financial year ended 31 December 2004 and prior to signing of the published financial statements, the Board has continued its ongoing process of identifying, evaluating and managing of key financial, operational and compliance risks facing the business. Details are as follows:

• The Board receives and reviews regular reports from management on the business’ performances updates of the Group and on current regulatory matters. The Board adopts and approves appropriate policies or amendments to the Group’s policies and procedures;

• The Audit Committee, on behalf of the Board, reviews and holds discussions with management on the actions on internal control issues identified by both the management and by the external Auditors;

• There is an organisation structure with clearly defined authority lines;• Management holds weekly meetings to review operational matters which include sales and marketing,

production, debtors’ collection and cashflow. Detailed minutes are recorded during these meetings;• The Audit Committee reviews and approves the quarterly financial results. The Audit Committee reports the

quarterly financial results to the Board for their adoption and approval; and• The Board holds periodic meetings to review operations of the Company.

2. Weaknesses in Internal Control Resulting in Material LossesThere were no material losses incurred during the current financial year as a result of weaknesses in internalcontrol. The management of the Company continues to take measures to strengthen the internal controlenvironment.

3. SummaryThe Board is pleased to disclose that the Group’s internal control systems are adequate in line with the Code given the current level of activities of the Group.

15

“MR Print Office in Kepong”

STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR PREPARING THE ANNUAL AUDITED FINANCIAL STATEMENTS

In accordance with the requirements in Paragraph 15.27 (a) of the Listing Requirements of Bursa Securities, the Boardof Directors are required to issue a statement explaining their responsibility for preparing the annual audited financialstatements.

The Directors are responsible for the preparation of the financial statements for each financial year which give a trueand fair view of the state of affairs of the Company and of the Group as at the financial year end and of the results andcashflows of the Company and of the Group for the financial year then ended.

In ensuring the preparation of these financial statements, the Directors have:

• Adopted suitable accounting policies and apply them consistently;• Made judgements and estimates that are reasonable and prudent;• Ensures that applicable approved accounting standards have been complied with and confirm that the financial

statements have been prepared on a going concern basis.

The Directors are accountable for ensuring that proper accounting and other records are kept which disclose withreasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensurethat the financial statements comply with approved accounting standards and the provisions of the Companies Act,1965.

The Directors are also responsible to safeguard the assets of the Company and of the Group and to prevent and detectfraud and other irregularities.

STATEMENT OFDIRECTORS’ RESPONSIBILITIES

16

“Printers configuring equipment for next printrun at MR Print”

MEMBERS OF THE AUDIT COMMITTEE

Ganesan a/l Sundaraj Independent Non-Executive Director (Chairman)

Muk Sai Tat Group CEO and Executive Director

Tunku Makhlad bin Tunku Mohamed Jamil Independent Non-Executive Director

ROLE OF AUDIT COMMITTEE

1. Assisting the Board of Directors in the discharge of their statutory duties and responsibilities in the following area:

a. Preparation of quarterly financial reports and annual financial statements that give a true and fair view of the Group’s affairs and results.

b. Manage the Group’s affairs in compliance with laws and regulations and proper standards of conduct.c. Establishment and maintenance of internal controls for areas of risks to provide reasonable and reliable

financial information.d. Review of the quality and performance of the internal and external audit function.

2. Provide, by the way of regular meetings, a line of communication between the Board and the internal andexternal Auditors.

3. Enhance the perception held by other interested parties (shareholders, regulators, creditors, etc) of the credibility and objectivity of the financial reports.

TERMS OF REFERENCE

1. Primary Objectives:

The Committee shall:

1.1 Provide assistance to the Board in fulfilling its fiduciary responsibilities relating to corporate accounting and reporting practices for the Company and all its subsidiaries (“Group”).

1.2 Improve the Group’s business efficiency, the quality of the accounting and audit function and strengthen the confidence of the public in the Group’s reported results.

1.3 Maintain, through regularly scheduled meetings, a direct line of communication between the Board and theinternal and external Auditors.

1.4 Enhance the independence of both the external and internal audit functions through active participation in the audit process.

1.5 Strengthen the role of the Non-Executive Directors by giving them a greater depth of knowledge as to the operations of the Group through their participation in the Committee.

1.6 Create a climate of discipline and control which will reduce the opportunity for fraud.

1.7 Provide a framework within which the external Auditors can assert their independence in the event of a dispute with management.

17

AUDIT COMMITTEE REPORT

2. Appointment/Composition:

2.1 The members of the Committee shall be appointed by the Board and their period of appointment shall be concurrent with their tenure in the Board.

2.2 The Audit Committee shall consist of not less than three (3) members of whom:

a) a majority shall be Independent Directors;b) at least one (1) member of the 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 three (3)

years’ working experience; and

• he must have passed the examinations specified in Part I of the First Schedule of the Accountants Act, 1967; or

• he must be a member of one (1) of the associations of accountants specified in Part II ofthe First Schedule of the Accountants Act, 1967; or

(iii) fulfils such other requirements as prescribed the Exchange.c) he must have a degree/masters/doctorate in accounting or finance and at least 3 years’ post

qualification experience in accounting or finance; ord) he must have at least 7 years’ experience being a chief financial officer of a corporation or having the

function of being primarily responsible for the management of the financial affairs of a corporation.

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

2.4 A quorum shall be two (2) members and composed of a majority of Independent Directors.

2.5 The Chairman of the Committee shall be appointed by the members of the Committee among their number who is an Independent Director.

2.6 The Board must review the term of office and performance of the Committee and each of its members at least once every three (3) years to determine whether such Committee and members have carried out their duties in accordance with their terms of reference.

2.7 The Board shall, within three (3) months of a vacancy occurring in the Audit Committee which result in the number of members reduced to below three (3), appoint such number of new members as may be required to make up the minimum number of three (3) members.

3. Meetings:

3.1 Meetings shall be held not less than four (4) times in a year. In addition, the Chairman may call a meeting of the Committee if a request is made by any Committee members, the Company’s Executive Chairman/CEO or the internal or external Auditors if they consider it necessary.

3.2 Meeting will be attended by the members of the Committee and the Company Secretary who shall act as the Secretary, or any representative of the Secretary.

3.3 Participants may be invited from time to time to attend the meeting depending on the nature of the subject under review. These participants may include the Directors, General Managers, Division Heads,representatives from the Finance and Internal Audit Departments and external Auditors.

18

“Workers regularly check and maintainequipment at MR Print”

4. Authority:

4.1 The Committee is authorised by the Board to carry out the duties mentioned below and the Board and Management shall give all assistance that is necessary to enable the Committee to discharge its duties.

4.2 The Committee shall, whenever necessary and reasonable for the performance of its duties and in accordance with a procedure to be determined by the Board and at the Company’s cost:

(a) have authority to investigate any matter within its terms of reference;(b) have the resources which are required to perform its duties;(c) have full and unrestricted access to any information pertaining to the Company;(d) have direct communication channels with the external Auditors and person(s) carrying out the

internal audit function or activity (if any);(e) be able to obtain independent professional or other advice; and(f) be able to convene meetings with the external Auditors, excluding the attendance of the executive

members of the Committee, whenever deemed necessary.

5. Functions and Responsibilities:

The functions and responsibilities of the Committee shall include the following:

(a) to discuss and liaise with the external Auditors to ensure the smooth implementation of the audit plan, review and forward the evaluation of the system of internal controls and audit report to the Board;

(b) to review the assistance given by employees of the Group to the external Auditors;

(c) to assist in the development of an environment in which controls can operate effectively and to keep under review of the effectiveness of internal control systems and the findings of the internal Auditors, if available;

(d) to review quarterly report and annual financial statements prior to the approval of the Board, focusing particularly on:

(i) changes in or implementation of major accounting policy changes;(ii) significant and unusual events; and(iii) compliance with accounting standards and other legal requirements;

(e) to review any related party transactions and conflict of interest situation that may rise within the Company and the Group including any transaction, procedure or course of conduct that raise questions of management integrity;

(f) to review and report the same to the Board any letter of resignation from the external Auditors of the Company as well as whether there is any reason (supported by grounds) to believe that the Company’s external Auditors are not suitable for re-appointment;

(g) to make recommendations concerning the appointment of the external Auditors and their remuneration to the Board;

(h) to review major and extraordinary transactions which have a material impact on the Group; and

(i) to perform any other such functions as may be agreed by the Committee and the Board.

The reports of the Committee and the external and internal Auditors and corrective action taken shall be tabled fordiscussion by the Board of Directors.

19

“Capping process at Duncan Gilbey”

6. Minutes:

The Secretary shall maintain minutes of the proceedings of the meetings and circulate such minutes to all members of the Committee.

7. Audit Committee Report:

The Committee shall ensure that an audit committee report is prepared at the end of each financial year thatcomplies with subparagraph (7.1) and (7.2) below:

7.1 The audit committee report shall be clearly set out in the Annual Report of the Company;

7.2 The audit committee report shall include the following:

(a) the composition of the Committee, including the name, designation (indicating the chairman) and directorship of the members (indicating whether the Directors are independent or otherwise);

(b) the terms of reference of the Committee;(c) the number of Committee meetings held during the financial year end and details of attendance of each

member;(d) a summary of activities of the Committee in the discharge of its functions and duties for that financial

year of the Company; and(e) the existence of an internal audit function or activity and where there is such a function or activity, a

summary of the activities of the function or activity. Where such a function or activity does not exist, an explanation of the mechanism that exist to enable the Committee to discharge its functions effectively.

8. Internal Audit Function :

The Group will focus on risk-based approach to the implementation and monitoring of internal controls. Themonitoring process also forms the basis for continually improving the risk management process in the context of the Group’s overall goals.

To assist the Board of Directors in monitoring and managing risks and internal controls, the Group appointed Messrs CGRM Infocomm Sdn Bhd to provide internal audit services.

9. Reporting of Breaches To The Exchange:

Where the Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the Bursa Securities’s Listing Requirements, the Committee shall promptly report such matter to the Exchange.

20

“Bottling process at Duncan Gilbey”

ATTENDANCE AT MEETINGS

The majority of members present in order to form a quorum necessary for the transaction of business of the AuditCommittee shall be the independent non-executive directors, and in any case shall be two (2) members and composedof a majority of Independent Directors.

The number of Audit Committee meetings held during the financial year and the attendance of each Audit Committeemembers are as follows:

Meetings of The Audit Committee (“ACM”) For The Year 2004

PARTICULARS OF MEETINGS

Place: Board Room, Suite 19.06, 19th Floor, Menara MAA, No. 12 Jalan Dewan Bahasa, 50460 Kuala Lumpur.

COMMITTEE REMARKSMEMBERS 23rd ACM 24th ACM 25th ACM 26th ACM 27th ACM

Date: Date: Date: Date: Date:19.02.2004 26.04.2004 21.05.2004 23.08.2004 25.11.2004

1. Ganesan a/l Sundaraj √ √ √ √ √ 5/5

2. Mohd Silahuddin bin √ - - - - 1/1Jamaluddin (resigned w.e.f.

22.03.2004)

3. Chin Kam Bin @ √ - - - - 1/1Cheng Kam Meng (resigned w.e.f.

02.04.2004)

4. Tunku Makhlad bin - √ √ √ X 3/4Tunku Mohamed Jamil (appointed w.e.f.

22.04.2004)

5. Muk Sai Tat - √ √ √ √ 4/4(appointed w.e.f.

22.04.2004)

ACTIVITIES OF THE AUDIT COMMITTEE DURING THE FINANCIAL YEAR

In line with the Terms of Reference of the Committee, the Committee carried out the following activities during thefinancial year ended 31 December 2004 in discharging its duties and functions:

1. Review the Group’s year end audited financial statements presented by the external Auditors and recommend the same to the Board for approval.

2. Review of the quarterly results of the Group for the financial quarters ended 31 December 2003, 31 March 2004, 30 June 2004 and 30 September 2004 prior to submission to the Board of Directors for consideration and approval.

3. Met with the external Auditors to discuss the audit plan and proposed audit fees.

21

“Anika Import & Duncan GilbeyOffice in Kepong”

MR PRINT SDN BHD

MANGIUM INDUSTRIES BHD

MS RESEARCH SDN BHD

DUNCAN GILBEY (M) SDN BHDANIKA IMPORT & EDAR SDN BHDFURNEFLEX MARKETING SDN BHD

OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTS OF THE BURSA SECURITIES

Utilisation of proceeds from corporate proposalThere were no proceeds raised from any corporate proposal during the financial year 2004.

Share buy-backThere was no share buy-back carried out during the financial year 2004.

Options/Warrants/Convertible SecuritiesThere were no options, warrants nor convertible securities issued by the Company during the year.

American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) ProgrammeDuring the financial year, the Company did not sponsor any ADR or GDR programme.

Imposition of sanctions and penaltiesThere were no sanctions or penalties imposed on the Company and its subsidiaries, Directors and management by therelevant regulatory bodies during the financial year.

Non-Audit FeesThere were no non-audit fees paid to external Auditors during the financial year 2004.

Profit GuaranteeFor the financial year ended 31 December 2002, the Group’s audited financial results showed a loss before taxationamounted to RM19,570,366. Based on the Profit Guarantee and stakeholder Agreement dated 9 December 1997 andsubsequent revised agreement dated 8 September 1998, the guarantors are liable to compensate the company for thedeficiency arising thereof, being the difference between the Group’s audited profit before taxation and the profitguarantee amount of RM8,500,000 for the financial year ended 31 December 2002.

The Company has on 5 March 2004, notified the Securities Commission of the breach of the Profit Guarantee andStakeholder Agreement dated 9 December 1997 and subsequently revised agreement dated 8 September 1998 inrespect of RM8,500,000 and the Company has on 22 March 2005 obtained judgement in default against the guarantorsconcerned. The income from the profit guarantee will only be recognized upon full receipt of the guaranteed sum.

Material Contracts Involving Directors’ and Major Shareholders’ InterestThere were no material contracts entered into by the Company and its subsidiaries involving the Directors’ and majorshareholders’ interests.

OTHER INFORMATION REQUIREDBY THE LISTING REQUIREMENTS OFTHE BURSA SECURITIES

22

MANGIUM SAWMILL SDN BHD

MANGIUM PLANTATION SDN BHD

ANIKA TIMBER SDN BHD

ANIKA PLANTATION SERVICESSDN BHD

DIRECTORS’ REPORT 24

FINANCIAL STATEMENTS

INCOME STATEMENTS 28

STATEMENT OF CHANGES IN EQUITY 29

BALANCE SHEETS 30

CASH FLOW STATEMENTS 31-32

NOTES TO THE FINANCIAL STATEMENTS 33-53

STATEMENT BY DIRECTORS 54

STATUTORY DECLARATION 54

AUDITORS’ REPORT 55

FINANCIAL STATEMENTS

Acacia Mangium concession at Pitas Sabah

The directors have pleasure in presenting their report and the audited financial statements of the Company and of theGroup for the financial year ended 31 December 2004.

PRINCIPAL ACTIVITIESThe principal activity of the Company is investment holding. The principal activities of its subsidiary companies aredescribed in Note 12 to the financial statements. There have been no significant changes in the nature of theseactivities during the financial year.

FINANCIAL RESULTS

GROUP COMPANYRM RM

Loss before taxation (9,971,658) (2,713,739)Taxation (502,723) -

Loss after taxation (10,474,381) (2,713,739)Minority interest (110,450) -

Loss after taxation and minority interest (10,584,831) (2,713,739)

DIVIDENDNo dividend has been paid or declared by the Company since the end of the previous financial year.

RESERVES AND PROVISIONSThere were no material transfers to or from reserves and provisions during the financial year except as disclosed in Note21 to the financial statements.

SHARE CAPITALDuring the financial year, there was no issue of shares.

DIRECTORSThe directors who have held office during the period since the date of the last report are:-

Ganesan A/L SundarajTunku Makhlad Bin Tunku Mohamed JamilDatuk Phang Miow SinPeter WongMuk Sai Tat

In accordance with Article 80 of the Company’s Articles of Association, Tunku Makhlad Bin Tunku Mohamed Jamil andGanesan A/L Sundaraj retire at the forthcoming Annual General Meeting and being eligible, offer themselves forre-election.

24

DIRECTORS REPORT

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•

DIRECTORS’ BENEFITSDuring and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the objector objects of enabling directors of the Company to acquire benefits by means of the acquisition of shares in ordebentures of the Company or any other body corporate.

Since the end of the previous financial year, no director of the Company has received or become entitled to receive anybenefit (other than the benefits disclosed as directors’ remuneration in Note 7 to the financial statements) by reason ofa contract made by the Company or a related corporation with the director or with a firm of which the director is amember or with a company in which the director has a substantial financial interest.

DIRECTORS’ INTEREST IN SHARESAccording to the register of directors’ shareholdings, the following persons who were directors of the Company at theend of the financial year have interest in shares of the Company and its subsidiary companies as set out below:-

INTEREST IN THE COMPANY

Number of ordinary shares of RM1.00 eachBalance Balance

At 01.01.2004 Acquired Disposed At 31.12.2004

Direct ShareholdingsGanesan A/L Sundaraj - - - -Muk Sai Tat - - - -Peter Wong - - - -Chin Kam Bin @ Cheng Kam Meng - - - -Tunku Makhlad Bin Tunku Mohamed Jamil - - - -Datuk Phang Miow Sin - - - -

Indirect ShareholdingsGanesan A/L Sundaraj - - - -Muk Sai Tat - 4,735,000 - 4,735,000Peter Wong - 4,735,000 - 4,735,000Tunku Makhlad Bin Tunku Mohamed Jamil - - - -Datuk Phang Miow Sin - 600 - 600

INTEREST IN SUBSIDIARY COMPANIESBy virtue of their interest in the Company, none of the directors except for Muk Sai Tat, Peter Wong and Datuk PhangMiow Sin are deemed interested in shares of all the subsidiary companies to the extend the Company has an interest.

SIGNIFICANT EVENTSOn 27 February 2004 the Company announced that its wholly owned subsidiary, Mangium Sawmill Sdn Bhd has notpaid, and is deemed to have defaulted in its repayments on facilities granted by two financial institutions which areunsecured amounting to RM11,028,329 as at 31 January 2005. Currently the Company is in active negotiations withthe financial institutions to normalise and regularise their banking facilities.

25

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EVENTS SUBSEQUENT TO BALANCE SHEET DATEOn 7 March 2005, the Company announced that the Securities Commission (“SC”) vide its letter dated 4 March 2005has approved the Company’s Restructuring Proposals in the following manner:-

(i) The proposed debt settlement between the Company and the secured and unsecured creditors amounting to RM58.52 million be made by way of a combination of new MIB shares, Irredeemable Convertible Unsecured LoanStocks (“ICULS”), Redeemable Convertible Secured Loan Stocks (“RCSLS”) and cash payment;

(ii) The proposed renounceable rights issue of RM16 million nominal value zero coupon 5-year ICULS together with 16 million free detachable Warrants attached on the basis of RM1.00 nominal value ICULS be made with one (1)free detachable Warrant attached for every two (2) existing MIB shares held together with an additional RM8million nominal value ICULS, which would serve as the up-front coupon of 10% per annum for the RM16 millionICULS for a period of five (5) years;

(iii) The proposed joint-venture between MIB and Telaga Chipmill Sdn Bhd (“TCSB”) be established;

(iv) The proposed employee share option scheme for executive directors and eligible employees of MIB and itssubsidiary companies be adopted; and

(v) The proposed increase in the authorized share capital of MIB from RM50million comprising 50 million MIB shares to RM200 million comprising 200 million MIB shares be made.

The net tangible assets at 31 December 2004 was RM758,184. The Company’s Restructuring Proposals when fully andsuccessfully implemented in total would maintain the Group’s net tangible assets at the current level if not increase it.

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTSBefore the income statements and balance sheets of the Company and of the Group were made out, the directors tookreasonable steps:-

(a) to ascertain that action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course ofbusiness their value as shown in the accounting records of the Company and of the Group have been written down to an amount which they might be expected so to realise.

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

(a) which would render the amounts written off for bad debts or the amount of provision for doubtful debts in the financial statements of the Company and of the Group inadequate to any substantial extent; or

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

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

26

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

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

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

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

OTHER STATUTORY INFORMATIONAt the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or thefinancial statements which would render any amount stated in the financial statements misleading.

In the opinion of the directors,

(a) the results of the operations of the Company and of the Group during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(b) there has not arisen in the interval between the end of the financial year and the date of this report any item,transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Company and of the Group for the financial year in which this report is made.

AUDITORSThe retiring auditors, PKF, have expressed their willingness to be re-appointed in accordance with Section 172 (2) ofthe Companies Act, 1965.

Signed on behalf of the Board of Directors in accordance with a Resolution of the Directors.

MUK SAI TAT DATUK PHANG MIOW SINDirector Director

KUALA LUMPUR.

Dated : 25 April 2005

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28

INCOME STATEMENTS

INCOME STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004

GROUP COMPANYNOTE 2004 2003 2004 2003

RM RM RM RM

Revenue 4 41,884,256 25,141,273 - -

Cost of sales (37,309,060) (21,322,095) - -

Gross profit 4,575,196 3,819,178 - -

Other operating income 5 270,321 624,009 1,542,909 1,466,745

Selling and distribution costs (3,437,024) (3,059,278) - -

Administrative expenses (5,794,219) (10,038,325) (1,689,320) (2,702,052)

Loss from operations (4,385,726) (8,654,416) (146,411) (1,235,307)

Finance costs 6 (5,585,932) (5,067,989) (2,567,328) (2,191,349)

Loss before taxation 7 (9,971,658) (13,722,405) (2,713,739) (3,426,656)

Taxation 8 (502,723) (523,012) - 30,725

Loss after taxation (10,474,381) (14,245,417) (2,713,739) (3,395,931)

Minority interest (110,450) (34,306) - -

Net loss after taxationfrom ordinary activities (10,584,831) (14,279,723) (2,713,739) (3,395,931)

Extraordinary items - - - -

Net loss for the year (10,584,831) (14,279,723) (2,713,739) (3,395,931)

Loss per share (sen) 10 (33) (45)

The notes on pages 33 to 53 form an integral part of these financial statements.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004

Non- Distributable Distributable

Share Share Revaluation Merger RetainedNOTE Capital Premium Reserve Reserve Profit Total

RM RM RM RM RM RM

GROUP2004Balance at 01.01.2004 32,000,000 583,668 8,190,790 (20,843,753) (8,587,690) 11,343,015

Net loss for the year - - - - (10,584,831) (10,584,831)

Balance at 31.12.2004 32,000,000 583,668 8,190,790 (20,843,753) (19,172,521) 758,184

2003Balance at 01.01.2003As previously reported 32,000,000 583,668 8,190,790 (20,843,753) 5,303,224 25,233,929Prior year adjustment 9 - - - - 388,809 388,809

As restated 32,000,000 583,668 8,190,790 (20,843,753) 5,692,033 25,622,738

Net loss for the year - - - - (14,279,723) (14,279,723)

Balance at 31.12.2003 32,000,000 583,668 8,190,790 (20,843,753) (8,587,690) 11,343,015

COMPANY2004Balance at 01.01.2004 32,000,000 583,668 - - 12,614,177 45,197,845

Net loss for the year - - - - (2,713,739) (2,713,739)

Balance at 31.12.2004 32,000,000 583,668 - - 9,900,438 42,484,106

2003Balance at 01.01.2003 32,000,000 583,668 - - 16,010,108 48,593,776

Net loss for the year - - - - (3,395,931) (3,395,931)

Balance at 31.12.2003 32,000,000 583,668 - - 12,614,177 45,197,845

The notes on pages 33 to 53 form an integral part of these financial statements.

29

STATEMENTS OF CHANGES IN EQUITY

30

BALANCE SHEETS

BALANCE SHEETS 31 DECEMBER 2004

GROUP COMPANYNOTE 2004 2003 2004 2003

RM RM RM RM

NON-CURRENT ASSETSProperty, plant and equipment 11 46,944,259 50,161,871 605,315 431,679Investment in subsidiary

companies 12 - - 33,493,755 33,493,753Goodwill on consolidation 13 2,788,346 2,952,367 - -

CURRENT ASSETSInventories 14 5,674,499 9,325,241 - -Trade and other receivables 15 17,958,479 15,151,635 124,457 143,906Amount due from subsidiary

companies 16 - - 37,661,125 35,880,954Deposit with a licensed bank - 19,000 - -Cash and bank balances 2,398,960 1,332,065 71,536 170,905

26,031,938 25,827,941 37,857,118 36,195,765

CURRENT LIABILITIESShort term borrowings 17 31,452,184 29,322,490 81,987 31,410Trade and other payables 18 14,864,427 12,168,821 4,599,310 2,797,742Taxation 2,627,145 2,704,035 - -

48,943,756 44,195,346 4,681,297 2,829,152

NET CURRENT (LIABILITIES)/

ASSETS (22,911,818) (18,367,405) 33,175,821 33,366,613

26,820,787 34,746,833 67,274,891 67,292,045

FINANCED BY :-SHARE CAPITAL 19 32,000,000 32,000,000 32,000,000 32,000,000RESERVES 21 (31,241,816) (20,656,985) 10,484,106 13,197,845

SHAREHOLDERS’ FUND 758,184 11,343,015 42,484,106 45,197,845MINORITY INTEREST 445,152 334,702 - -

NON-CURRENT LIABILITIESLong term borrowings 22 25,487,213 23,006,031 24,790,785 22,094,200Deferred taxation 23 130,238 63,085 - -

26,820,787 34,746,833 67,274,891 67,292,045

The notes on pages 33 to 53 form an integral part of these financial statements

31

CASH FLOW STATEMENTS

CASH FLOW STATEMENTS FOR THE YEAR ENDE 31 DECEMBER 2004

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

CASH FLOW FROM OPERATINGACTIVITIES

Net loss for the year (9,971,658) (13,722,405) (2,713,739) (3,426,656)Adjustment for:-Amortisation of goodwill 164,021 164,021 - -Bad debts 10,398 - - -Depreciation 3,793,065 3,763,165 90,114 77,005Property, plant and equipment written off 14,334 36,757 - -Interest income (8,089) (9,016) (1,182,443) (1,014,601)Hire purchase interest 137,114 127,506 10,856 7,850Gain on disposal of property, plant

and equipment (37,092) (291,474) - -Bankers’ acceptance interest 350,669 334,700 - -Bank overdraft interest 992,600 940,581 - -Lease interest 29,620 96,251 - -Interest 1,252,961 1,139,737 - 55Term loan interest 2,822,968 2,429,214 2,556,472 2,183,444Allowance for doubtful debts (75,796) 3,440,901 - -Loss on fire 162,676 - - -

OPERATING LOSS BEFORE WORKINGCAPITAL CHANGES (362,209) (1,550,062) (1,238,740) (2,172,903)

(Increase)/decrease in trade and other receivables (2,797,904) (127,491) 19,449 32,526

Increase in subsidiary company - - (1,780,171) (5,200,864)Increase in trade and other payables 2,695,606 3,349,334 1,801,568 2,194,597Decrease/(increase) use in inventories 3,650,742 (4,302,072) - -

Cash generated from/(used in) operations 3,186,235 (2,630,291) (1,197,894) (5,146,644)

Bankers’ acceptance interest (350,669) (334,700) - -Bank overdraft interest (992,600) (940,581) - -Lease interest (29,620) (96,251) - -Hire purchase interest (137,114) (127,506) (10,856) (7,850)Interest (1,252,961) (1,139,737) - (55)Term loan interest (2,822,968) (2,429,214) (2,556,472) (2,183,444)Taxation paid (456,001) (425,482) - -

Net cash used in from operating activities (2,855,698) (8,123,762) (3,765,222) (7,337,993)

32

CASH FLOW STATEMENTS

CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

CASH FLOWS FROM INVESTINGACTIVITIES

Interest income 8,089 9,016 1,182,443 1,014,601Proceeds from disposal of property, plant

and equipment 85,000 3,361,413 - -Purchase of property, plant and

equipment (352,472) (1,431,843) (38,750) (48,150)Acquisition of subsidiary company - (7,332) (2) -

Net cash (used in)/generated from investing activities (259,383) 1,931,254 (1,143,691) 966,451

CASH FLOWS FROM FINANCING ACTIVITIES

Payment of hire purchase creditors (498,314) (353,377) (34,300) (31,400)Proceeds from term loans 2,556,472 6,472,878 2,556,472 6,472,878

Net cash generated from financing activities 2,058,158 6,119,501 2,522,172 6,441,478

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,056,923) (73,007) (99,359) 69,936

CASH AND CASH EQUIVALENTSBROUGHT FORWARD (21,191,172) (21,118,165) 170,895 100,959

CASH AND CASH EQUIVALENTSCARRIED FORWARD (22,248,095) (21,191,172) 71,536 170,895

Cash and cash equivalents comprise:-Cash and bank balances 2,398,960 1,332,065 71,536 170,905Bank overdrafts (24,647,055) (22,542,237) - (10)Deposit with a licenced bank - 19,000 - -

(22,248,095) (21,191,172) 71,536 170,895

The notes on pages 33 to 53 form an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2004

1. PRINCIPAL ACTIVITIESThe principal activity of the Company is investment holding. The principal activities of its subsidiary companiesare described in Note 12 to the financial statements.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTSThe financial statements of the Company and of the Group have been prepared in accordance with the provisionsof the Companies Act, 1965 and applicable approved accounting standards in Malaysia.

3. SIGNIFICANT ACCOUNTING POLICIESAll significant accounting policies set out below are consistent with those applied in the previous financial year.

(a) Basis of AccountingThe financial statements are prepared under the historical cost convention modified by the revaluation of certain property, plant and equipment.

(b) Basis of ConsolidationThe consolidated financial statements incorporate the financial statements of the Company and itssubsidiary companies as mentioned in Note 12 to the financial statements made up to the end of thefinancial year. The subsidiary companies are consolidated on the acquisition method of accounting exceptMangium Sawmill Sdn Bhd. Mangium Plantations Sdn Bhd is consolidated on the merger method of accounting in accordance with the provisions of the Malaysian Accounting Standards Board No. 21.

Under the acquisition method of accounting, the results of the subsidiary companies acquired or disposedduring the financial year are included from the date of acquisition or up to the date of disposal. Thedifference between the acquisition cost and the fair value of the net assets of the subsidiary companies at the date of acquisition is reflected as goodwill or reserve on consolidation as appropriate.

Under the merger method of accounting, the results of the subsidiary companies are presented as if the merger had been effected throughout the current and previous financial years.

All significant inter-company transactions are eliminated on consolidation and the consolidated financialstatements reflect external transactions only.

(c) Property, Plant and EquipmentProperty, plant and equipment are stated at cost or valuation less accumulated depreciation, amortisation and impairment losses. The cost of other property, plant and equipment comprises their purchase cost andall incidental costs of acquisition. However, such assets acquired since the last valuation are maintained atcost.

The long leasehold land is amortised over the remaining leasehold periods of between 51 to 927 years. Nodepreciation is provided on infrastructure work in progress. Depreciation on other property, plant andequipment is charged on the straight line basis so as to write off the cost of the property, plant andequipment over their expected useful lives at the following rates:-

33

NOTES TO THE FINANCIAL STATEMENTS

(c) Property, Plant and Equipment (cont’d)(i) Buildings, log yard and infrastructure 5% - 10%(ii) Equipment, furniture and fittings 10%(iii) Plant, machinery and motor vehicles 10% - 20%(iv) Renovation 10%(v) Vessels 20%(vi) Signboard 10%

Revaluation of land and buildings is undertaken every 5 years. Surplus arising from revaluation is crediteddirectly to revaluation reserve. Deficit in excess of the revaluation reserve arising from previous revaluationis charged to the income statement. In all other cases, the deficit will be charged to the income statement.

In previous years, the depreciation rate on road included in Log Yard and Infrastructure was 5%. With effectfrom 1 January 2003 the Company changed its accounting policy in which the road is depreciated over the remaining concession period of 56 years to 58 years. The effects on the change in accounting policyare disclosed in Note 9 and Note 11 to the financial statements.

(d) Subsidiary CompaniesSubsidiary companies are companies controlled by the Company. Control exists when the Company haspower, directly or indirectly, to govern the financial and operating policies of the subsidiary companies soas to obtain benefits from their activities. The financial statements of the subsidiary companies areincluded in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases.

Investment in subsidiary companies is stated at cost except when directors are of the opinion that there is a permanent diminution in value of an investment. In such event, provision in diminution in value of the investment will be made.

(e) Impairment of assetsThe carrying amounts of the Group’s and Company’s assets and inventories are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated and an impairment loss is recognised whenever the recoverable amount is less than the carrying amount of the assets. The impairment loss is recognised in the income statement immediately except for the impairment on revalued assets where the impairment loss isrecognized directly against the revaluation surplus account to the extent of the surplus credited from theprevious revaluation for the same assets with the excess of the impairment loss charged to the incomestatement. All reversals of an impairment loss are recognised as income immediately in the incomestatement except for the reversal of impairment loss on revalued assets where the reversal of theimpairment loss is treated as a revaluation increase and credited to the revaluation surplus account of the same assets.

(f) Financial InstrumentsFinancial instruments are recognised in the balance sheet when the Group has become a party to thecontractual provisions of the instrument.

34

(f) Financial Instruments (cont’d)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 classified asa liability, are reported as expense or income. Distributions to holders of financial instruments classified asequity are charged directly to 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 ReceivablesTrade receivables are carried at anticipated realisable values. Bad debts are written off when identified.An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balancesheet date.

(ii) Trade PayablesTrade payables are stated at cost which is the fair value of the consideration to be paid in the futurefor goods and services received.

(iii) Interest-Bearing BorrowingsInterest-bearing bank borrowings are recorded at the amount of proceeds received, net of transactioncosts.

Borrowing costs directly attributable to the acquisition of property, plant and equipment are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use orsale. All other borrowing costs are charged to the income statement as an expense in the period in which they are incurred.

(iv) Equity InstrumentsOrdinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

(g) Provisions for LiabilitiesProvisions for liabilities are recognised when the Group has a present obligation as a result of a past eventand it is probable that an outflow of resources embodying economic benefits will be required to settle theobligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheetdate and adjusted to reflect the current best estimates. Where the effect of the time value of money ismaterial, the amount of a provision is the present value of the expenditure expected to be required to settlethe obligation.

(h) InventoriesInventories comprise logs, timber products, alcoholic beverages, concentrates, bottling, packing,advertising materials and printing materials. Inventories are valued at the lower of cost and net realisable value. Cost in respect of these inventories is stated on the weighted average cost basis. The cost offinished goods and work-in-progress includes the cost of materials and, where applicable, the cost of direct labour and appropriate overheads.

35

(i) Goodwill on ConsolidationThe difference between the purchase price and the value of the net assets of the subsidiary companies atthe date of acquisition is included in the consolidated balance sheet as goodwill or reserve arising onconsolidation. Goodwill is retained in consolidated balance sheet at cost and is amortised over a period of twenty years commencing from 12th December 2002.

(j) Cash and Cash EquivalentsCash and cash equivalents include cash and bank balances, bank overdrafts, deposits and other short-termhighly liquid investments which are readily convertible to cash and which are subject to insignificant risk of change in value.

(k) Hire Purchase and LeaseProperty, plant and equipment under finance lease and hire purchase that give rights approximating toownership are capitalised in the financial statements and the corresponding obligation treated as a liability.The total interest, being the difference between the total instalments payable and the capitalised amount, ischarged to the income statement over the period of the lease and hire purchase in proportion to the balanceof capital repayments outstanding.

(l) Income TaxIncome tax on the profit or loss for the year comprised current and deferred tax. Current tax is theexpected amount of income taxes payable in respect of the taxable profits for the year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax liabilities and assets are provided for under the liability method at the current tax rate in respect of all temporary differences between the carrying amount of an asset or liability in the balance sheet and itstax base including unused tax losses and capital allowances.

A deferred tax asset is recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences or unused tax losses can be utilised.

In prior years, deferred tax was provided for at the applicable current tax rates for all material timingdifferences where it was reasonable probable that such timing differences where it was reasonableprobable that such timing differences will not crystallize in the foreseeable future. In addition, deferred tax benefits were recognised only when there was reasonable assurance of their realisation.

(m) Employee Benefits(i) Short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the yearin which the associated services are rendered by employees of the Group.

(ii) Defined contribution planContributions to the Employees’ Provident Fund are charged to the income statement in the year towhich they relate.

36

37

(m) Employee Benefits (cont’d)(iii) Termination benefits

Employee termination benefits are payments due to employees as a result of redundant employmentand are recognised when the Group has a detailed formal plan for termination and has made adecision to offer the termination benefits and the employees have accepted voluntary redundancy inexchange for those benefits.

(n) Foreign TransactionsTransactions arising in foreign currencies during the financial year have been converted into RinggitMalaysia at the exchange rate ruling at the transaction dates. Assets and liabilities in foreign currencies at balance sheet date have been translated into Ringgit Malaysia at rates of exchange approximating thoseruling at that date. Exchange gains and losses have been taken to the income statement.

The principal closing rate used in translation of foreign currency amount is as follows:-

2004 2003RM RM

Foreign Currency1 US Dollar 3.80 3.80

(o) Revenue RecognitionRevenue from the sale of timber products, alcoholic beverages, general trading and printing services isrecognised at the point of invoicing and delivery of the products and services. Interest income and dividend income are recognised on the accrual basis.

4. REVENUE

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Revenue of the Company and the Group consists of :-

Sales of goods 782,789 1,252,619 - -Sales of alcoholic beverages 5,805,770 5,598,523 - -Sales of timber products 23,414,482 7,645,193 - -Provision of printing services 11,068,634 9,259,362 - -Sales of furniture 812,581 1,385,576 - -

41,884,256 25,141,273 - -

38

5. OTHER OPERATING INCOME

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Other operating income of the Company and the Group consists of :-

Gain on disposal of property, plantand equipment 37,092 295,527 - -

Interest income 8,089 9,016 1,182,443 1,014,601Others 225,140 319,466 360,466 452,144

270,321 624,009 1,542,909 1,466,745

6. FINANCE COSTS

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Interest on :-- bankers’ acceptance 350,669 334,700 - -- bank overdrafts 992,600 940,581 - -- term loan 2,822,968 2,429,214 2,556,472 2,183,444- hire purchase 137,114 127,506 10,856 7,850- lease 29,620 96,251 - -- others 1,252,961 1,139,737 - 55

5,585,932 5,067,989 2,567,328 2,191,349

39

7. LOSS BEFORE TAXATIONThe loss before taxation for the financial year is arrived at after charging the following items:-

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Allowance for doubtful debts - 3,440,901 - -Amortisation of goodwill 164,021 164,021 - -Auditors’ remuneration 59,700 71,200 10,000 10,000Bad debts 10,398 - - -Depreciation 3,793,065 3,763,165 90,114 77,005Directors’ remuneration- fee 88,500 58,000 88,500 58,000- salaries and allowances 663,430 407,436 166,500 -- others 9,250 - 9,250 -Hiring charges 279,536 180,674 743 -Loss on disposal of property, plant

and equipment - 4,053 - -Loss on fire 162,676 - - -Property, plant and equipment

written off 14,334 36,757 - -Rental - land and road 517,495 71,148 - -- office premises 376,049 524,635 194,497 203,040

And crediting:-Gain on disposal of property, plant

and equipment 37,092 295,527 - -Gain on foreign exchange 106 - - -Interest income 8,089 9,016 1,182,443 1,014,601Write back of doubtful debts 75,796 - - -

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8. TAXATIONGROUP COMPANY

2004 2003 2004 2003RM RM RM RM

In MalaysiaCurrent taxation 464,415 282,663 - -In respect of prior years (28,845) 251,289 - -

435,570 533,952 - -Deferred taxation 67,153 (10,940) - (30,725)

Total taxation charged toincome statement 502,723 523,012 - (30,725)

The Company has sufficient tax credit under Section 108 of the Income Tax Act, 1967 to frank the payment of netdividend amounting to RM343,000 out of the balance of its retained profit which is not tax exempted as at31 December 2004.

9. PRIOR YEAR ADJUSTMENTThe prior year adjustments of the Group were in respect of financial year ended 31 December 2003.

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Effects on retained profits:

At 1st January as previously stated - 5,303,224 - -

Effects of change in depreciationrate - 532,254 - -

Effects of taxation undertakenup - (143,445) - -

- 388,809 - -

At 1st January, as restated - 5,692,033 - -

41

9. PRIOR YEAR ADJUSTMENT (cont’d)

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Effects on net loss for the year:

Net loss before changes - (14,681,671) - -

Effects of change in depreciationrate - 401,948 - -

Effects of taxation undertakenup - - - -

- 401,948 - -

Net loss for the year - (14,279,723) - -

10. LOSS PER SHAREThe loss per share is computed based on the loss after taxation of RM10,584,831 (2003: loss after taxation ofRM14,279,723) and on the number of ordinary shares in issue during the financial year of 32,000,000 shares(2003: 32,000,000 shares).

11. PROPERTY, PLANT AND EQUIPMENT

AT REVALUATION AT COSTBuildings,

Long Log Yard Equipment, Infrastructure Long Plant, Machinery RenovationLeasehold And Furniture Work in Leasehold Motor Vehicle and

Buildings Land Infrastructure And Fittings Progress Land and Vessels Signboard TotalRM RM RM RM RM RM RM RM RM

Group

2004At Revaluation/CostAt 01.01.2004 16,894,631 2,783,666 19,942,858 1,825,551 5,576,000 4,850,994 28,349,052 262,324 80,485,076Additions - - 12,501 200,809 - - 584,954 2,108 800,372Disposals (324,734) - - (42,563) - - (159,616) (23,850) (550,763)Reclassification - - 5,576,000 - (5,576,000) - - - -

At 31.12.2004 16,569,897 2,783,666 25,531,359 1,983,797 - 4,850,994 28,774,390 240,582 80,734,685

AccumulatedDepreciationAt 01.01.2004 6,985,106 14,208 2,066,300 807,908 - 8,721 20,322,733 118,229 30,323,205Depreciation for the

year 871,383 4,736 663,315 199,569 - 2,907 2,016,138 35,017 3,793,065Disposals (162,058) - - (40,520) - - (110,283) (12,983) (325,844)

At 31.12.2004 7,694,431 18,944 2,729,615 966,957 - 11,628 22,228,588 140,263 33,790,426

Net Book ValueCost 4,702,445 1,813,378 22,801,744 1,016,840 - 4,839,366 6,545,802 100,319 41,819,894Revaluation 4,173,021 951,344 - - - - - - 5,124,365

Total 8,875,466 2,764,722 22,801,744 1,016,840 - 4,839,366 6,545,802 100,319 46,944,259

2003At Revaluation/CostAt 01.01.2003 16,894,631 2,783,666 19,895,340 1,625,956 5,576,000 7,860,538 27,189,837 348,741 82,174,709Additions - - 47,518 281,275 - - 1,242,765 17,285 1,588,843Disposals - - - (81,680) - (3,009,544) (83,550) (103,702) (3,278,476)

At 31.12.2003 16,894,631 2,783,666 19,942,858 1,825,551 5,576,000 4,850,994 28,349,052 262,324 80,485,076

AccumulatedDepreciationAt 01.01.2003 6,107,358 9,472 2,004,690 683,848 - 5,814 18,285,712 167,180 27,264,074

Prior year adjustment - - (532,254) - - - - - (532,254)

As restated 6,107,358 9,472 1,472,436 683,848 - 5,814 18,285,712 167,180 26,731,820Depreciation for the

year 877,748 4,736 593,864 182,037 - 2,907 2,061,503 40,370 3,763,165Disposals - - - (57,977) - - (24,482) (89,321) (171,780)

At 31.12.2003 6,985,106 14,208 2,066,300 807,908 - 8,721 20,322,733 118,229 30,323,205

Net Book ValueCost 5,349,179 1,816,756 17,876,558 1,017,643 5,576,000 4,842,273 8,026,319 144,095 44,648,813

Revaluation 4,560,346 952,702 - - - - - - 5,513,048

Total 9,909,525 2,769,458 17,876,558 1,017,643 5,576,000 4,842,273 8,026,319 144,095 50,161,871

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11. PROPERTY, PLANT AND EQUIPMENT (cont’d)

Equipment,Computer,

Furniture And MotorFittings Vehicles Renovation Signboard Total

RM RM RM RM RM

Company

2004At CostAt 01.01.2004 317,126 203,500 51,815 865 573,306Additions 6,910 254,732 2,108 - 263,750

At 31.12.2004 324,036 458,232 53,923 865 837,056

Accumulated DepreciationAt 01.01.2004 78,788 42,658 20,146 35 141,627Depreciation for the year 32,056 52,682 5,289 87 90,114

At 31.12.2004 110,844 95,340 25,435 122 231,741

Net Book Value 213,192 362,892 28,488 743 605,315

2003At CostAt 01.01.2003 292,841 23,500 51,815 - 368,156Additions 24,285 180,000 - 865 205,150

At 31.12.2003 317,126 203,500 51,815 865 573,306

Accumulated DepreciationAt 01.01.2003 47,699 1,958 14,965 - 64,622Depreciation for the year 31,089 40,700 5,181 35 77,005

At 31.12.2003 78,788 42,658 20,146 35 141,627

Net Book Value 238,338 160,842 31,669 830 431,679

The long leasehold land and buildings of a subsidiary company were revalued during the financial year ended 31December 1997 by an independent professional firm of valuers using the open market value based on the Comparison Method and Net Current Replacement Cost Approach respectively.

As at balance sheet date, plant and machinery and motor vehicles of the Group with net book value of RM2,897,260 (2003: RM2,864,144) and RM416,606 (2003:RM631,606) were acquired under hire purchase and lease arrangements respectively.

Details of bank borrowings for which there is a charge over certain property, plant and equipment are disclosed under Note 17 to the financial statements.

Leasehold land and buildings with net book value of RM13,628,742 (2003: RM14,810,706) are charged to banks for bank facilities granted to a subsidiary company.

43

44

12. INVESTMENT IN SUBSIDIARY COMPANIES

COMPANY2004 2003

RM RM

Unquoted shares, at cost 33,493,753 33,493,753Add: Additions 2 -

33,493,755 33,493,753

Country of EquityName of Companies Principal Activities Incorporation Holding

2004 2003% %

Mangium Sawmill Sdn BhdManufacturing and marketing Malaysia 100 100of timber and timber related products

Mangium Plantations Sdn Bhd Harvesting and marketing of Malaysia 100 100plantation timber andplantation timber relatedproducts

Furneflex Marketing Sdn Bhd * General trading Malaysia 100 100

Anika Impot & Edar Sdn Bhd * General trading Malaysia 100 100

Anika Plantation Services Sdn Bhd * Dormant Malaysia 100 -

Subsidiary of FurneflexMarketing Sdn BhdMR Print Sdn Bhd * Provision of printing services Malaysia 90 90 MS Reseach Sdn Bhd * Publisher, printers consultants Malaysia 100 -

and advertisers

Subsidiary of Anika Impot & Edar Sdn BhdDuncan Gilbey (M) Blending and distribution of Malaysia 100 100

Sdn Bhd * alcoholic beveragesAnika Timber Sdn Bhd * Marketing of timber products Malaysia 100 100

* Subsidiary companies not audited by PKF

45

13. GOODWILL ON CONSOLIDATION

GROUP2004 2003

RM RM

At the beginning of the year 3,280,023 3,272,691Arising from acquisition of subsidiary companies - 7,332

3,280,023 3,280,023Less: Accumulated amortisation (491,677) (327,656)

At the end of the year 2,788,346 2,952,367

14. INVENTORIESGROUP COMPANY

2004 2003 2004 2003RM RM RM RM

At CostFinger jointed timber 144,679 425,257 - -Sawn timber 2,391,685 4,594,961 - -Moulded timber 486,754 1,355,896 - -Concentrates, bottling, packing

and advertising materials 360,420 410,614 - -Printing materials- Raw materials 112,519 138,611 - -- Work-in-progress 21,446 23,699 - -Timber products 1,719,011 1,777,051 - -Finished goods- Printed materials - 70,928 - -- Alcohol beverages 437,985 528,224 - -

5,674,499 9,325,241 - -

46

15. TRADE AND OTHER RECEIVABLES

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Trade receivables 20,515,001 19,546,921 - -Less: Allowance for doubtful debts (15,610,612) (15,821,635) - -

4,904,389 3,725,286 - -

Other receivables 2,167,054 1,957,790 1,849 1,849Less: Allowance for doubtful debts (206,998) (206,998) - -

1,960,056 1,750,792 1,849 1,849Deposits paid to a government agency

for the supply of logs 9,434,863 8,484,639 - -Other deposits 675,656 658,765 115,785 134,585Prepayments 983,515 532,153 6,823 7,472

11,094,034 11,426,349 124,457 143,906

17,958,479 15,151,635 124,457 143,906

16. AMOUNT DUE FROM SUBSIDIARY COMPANIESThe amounts due from subsidiary companies represent advances and payments made on behalf which areunsecured and have no fixed term of repayment. Interest is charged at 11% (2003: 11%) per annum.

17. SHORT TERM BORROWINGS

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

UnsecuredBank borrowings- bank overdrafts - 10 - 10

Secured Bank borrowings- bank overdrafts 24,647,055 22,542,227 - -- bankers’ acceptance 3,300,000 3,300,000 - -- term loans 2,117,090 2,117,090 - -

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17. SHORT TERM BORROWINGS (cont’d)

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Hire purchase creditors 1,347,769 1,297,361 81,987 31,400Lease creditors 40,270 65,802 - -

31,452,184 29,322,480 81,987 31,400

31,452,184 29,322,490 81,987 31,410

The bank borrowings and term loans of the subsidiary companies are secured by way of a legal charge over asubsidiary company’s long leasehold land, a fixed and floating charge over the subsidiary companies’ entire assets, two shophouses belonging to two third parties, a corporate guarantee by the Company and a subsidiary company and a joint and several guarantee by three third parties.

Interest on bank overdrafts and term loans of the subsidiary companies is charged at 2.5% (2003: 2.5%) abovethe banks’ base lending rate.

Details of hire purchase and lease creditors are as follows:-

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Minimum hire purchase and lease payments:- not later than one year 1,679,103 1,650,973 106,252 39,252- later than one year but not later

than five years 1,188,574 1,297,489 305,503 117,746

2,867,677 2,948,462 411,755 156,998Less: Future interest charges (548,897) (579,268) (95,455) (31,398)Present value of hire purchase and

lease creditors 2,318,780 2,369,194 316,300 125,600

Current:- not later than one year 1,388,039 1,363,163 81,987 31,400Non-current:- later than one year but not later

than five years 930,741 1,006,031 234,313 94,2002,318,780 2,369,194 316,300 125,600

48

18. TRADE AND OTHER PAYABLES

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Trade payables 6,523,408 4,251,060 - -Other payables and accruals 8,272,219 7,899,263 4,530,510 2,779,244Amount due to directors 68,800 18,498 68,800 18,498

14,864,427 12,168,821 4,599,310 2,797,742

19. SHARE CAPITALGROUP COMPANY

2004 2003 2004 2003RM RM RM RM

AUTHORISEDOrdinary shares of RM1.00 eachAt the beginning and end of the

year 50,000,000 50,000,000 50,000,000 50,000,000

ISSUED AND FULLY PAIDOrdinary shares of RM1.00 eachAt the beginning and end of the

year 32,000,000 32,000,000 32,000,000 32,000,000

20. MERGER RESERVEPursuant to the relief given under Section 60(4) of the Companies Act, 1965 the Company has not recorded theshare premium arising from the issue of 21,093,753 ordinary shares of RM1.00 each for the acquisition of the subsidiary company. As such, the investment in the subsidiary company has been recorded in the Company’s book at the nominal value of shares issued of RM21,093,753.

The difference between the nominal value of shares of the Company issued as consideration and the nominal valueof the subsidiary company shares transferred to the Company has been classified as a merger reserve in the Group’s financial statements.

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21. RESERVES

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Distributable reserves:-Retained profitAt the beginning of the year (8,587,690) 5,303,224 12,614,177 16,010,108Prior year adjustment - 388,809 - -

As restated (8,587,690) 5,692,033 - -

Accumulated lossfor the year (10,584,831) (14,279,723) (2,713,739) (3,395,931)

At the end of the year (19,172,521) (8,587,690) 9,900,438 12,614,177

Non-distributable reserves:-Share premium 583,668 583,668 583,668 583,668

Revaluation surplus 8,190,790 8,190,790 - -

8,774,458 8,774,458 583,668 583,668

(10,398,063) 186,768 10,484,106 13,197,845Merger reserve (20,843,753) (20,843,753) - -

At the end of the year (31,241,816) (20,656,985) 10,484,106 13,197,845

As at 31 December 2004 the Company and its subsidiary companies have tax exempt income available fordistribution amounting to RM16,591,000 (2003: RM16,591,000) and RM10,180,000 (2004: RM10,180,000) respectively under the Promotion of Investments Act, 1986.

Due to the waiver of tax on income for the basis year 1999, the Company and its subsidiary companies have a special exempt income account of RM90,744 and RM2,886,000 respectively. These tax exempt income, ifconfirmed by Inland Revenue Board, will enable the Company and its subsidiary companies to distribute tax exempt dividends up to the same amount.

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22. LONG TERM BORROWINGS

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

UnsecuredTerm loan 24,556,472 22,000,000 24,556,472 22,000,000

SecuredHire purchase creditors 840,741 995,761 234,313 94,200Lease creditors 90,000 10,270 - -

930,741 1,006,031 234,313 94,200

25,487,213 23,006,031 24,790,785 22,094,200

Interest on term loan of the Company is charged at 11% (2003: 11%) monthly rest.

23. DEFERRED TAX ASSETS/LIABILITIES

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

At the beginning of the year 63,085 74,025 - 30,725Transfer (to)/from income statement 67,153 (10,940) - (30,725)

At the end of the year 130,238 63,085 - -

The unrecognised deferred tax assets are as follows:-

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Unabsorbed capital allowances 8,476,608 6,516,511 251,217 193,316Unutilised tax losses 42,640,754 35,589,335 1,908,390 1,042,987

51,117,362 42,105,846 2,159,607 1,236,303

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23. DEFERRED TAX ASSETS/LIABILITIES (cont’d)The unutilised tax losses and unabsorbed capital allowance are available indefinitely for offset against futuretaxable income of the Group in which those items arose. Deferred tax assets have not been recognised in respectof these items as the Group has a history of tax losses.

There are no timing differences for which deferred taxation has not been accounted for in the financial statements.

24. SIGNIFICANT RELATED PARTY TRANSACTIONSThe directors are of the opinion that the following transactions have been entered into the in normal course of business and have been established under terms that are no less favourable than those arranged with thirdparties:-

GROUP COMPANY2004 2003 2004 2003

RM RM RM RM

Transactions between the Company with subsidiary companies:-

Mangium Sawmill Sdn Bhd- Interest income - - 601,020 541,422- Management fee - - 180,000 180,000Mangium Plantations Sdn Bhd- Interest income - - 581,225 472,750- Management fee - - 180,000 180,000MR Print Sdn Bhd- Printing services - - 106,700 -

25. SEGMENTAL REPORTING

Loss Before Total AssetsRevenue Taxation Employed

RM RM RM

2004a) Analysis by Industries

- Timber manufacturing and marketing of timber and timberrelated products 24,227,063 (11,647,139) 62,607,577

- Provision of printing services 11,068,634 1,154,318 7,214,700- Trading in alcoholic beverages 5,805,770 511,242 5,903,558- General trading 782,789 9,921 38,708

41,884,256 (9,971,658) 75,764,543

b) Analysis by Geographical Location- Malaysia 41,884,256 (9,971,658) 75,764,543

25. SEGMENTAL REPORTING (cont’d)

2003a) Analysis by Industries

- Timber manufacturing and marketing of timber and timberrelated products 9,030,769 (14,294,406) 69,444,459

- Provision of printing services 9,259,362 477,855 6,472,121- Trading in alcoholic beverages 5,598,523 74,397 2,973,789- General trading 1,252,619 19,749 51,810

25,141,273 (13,722,405) 78,942,179

b) Analysis by Geographical Location- Malaysia 25,141,273 (13,722,405) 78,942,179

26. SIGNIFICANT EVENTSOn 27 February 2004 the Company announced that its wholly owned subsidiary, Mangium Sawmill Sdn Bhdhas not paid, and is deemed to have defaulted in its repayments on facilities granted by two financial institutionswhich are unsecured amounting to RM11,028,329 as at 31 January 2005. Currently the Company is in active negotiations with the financial institutions to normalize and regularize their banking facilities.

27. EVENTS SUBSEQUENT TO BALANCE SHEET DATEOn 7 March 2005, the Company announced that the Securities Commission (“SC”) vide its letter dated 4 March 2005 has approved the Company’s Restructuring Proposals in the following manner:-

(i) The proposed debt settlement between the Company and the secured and unsecured creditors amountingto RM58.52 million be made by way of an issue of a combination of new MIB shares, IrredeemableConvertible Unsecured Loan Stocks (“ICULS”), Redeemable Convertible Secured Loan Stocks (“RCSLS”) and a cash payment;

(ii) The proposed renounceable rights issue of RM16 million nominal value zero coupon 5-year ICULStogether with 16 million free detachable Warrants attached on the basis of RM1.00 nominal value ICULS bemade with one (1) free detachable Warrant attached for every two (2) existing MIB shares held together with an additional RM8 million nominal value ICULS, which would serve as the up-front coupon of 10%per annum for the RM16 million ICULS for a period of five (5) years;

(iii) The proposed joint-venture between MIB and Telaga Chipmill Sdn Bhd (“TCSB”) be established;

(iv) The proposed employee share option scheme for executive directors and eligible employees of MIB and itssubsidiary companies be adopted; and

(v) The proposed increase in the authorized share capital of MIB from RM50million comprising 50 million MIBshares to RM200 million comprising 200 million MIB shares be made.

The net tangible assets at 31 December 2004 was RM758,184. The Company’s Restructuring Proposals when fully andsuccessfully implemented in total would maintain the Group’s net tangible assets at the current level if not increase it.

52

28. FINANCIAL INSTRUMENTS(a) Financial, Interest Rate and Liquidity Risks

The Group’s interest rate and liquidity risks relate to its short term interest-bearing debts. However, the Group had defaulted on some of its borrowings and some of its credit facilities had been recalled.

(b) Foreign Exchange Risk The Group’s exposure to foreign exchange risk during the financial year is minimal as most transactionswere denominated in Ringgit Malaysia. The Group did not enter into any forward currency contracts duringthe financial year.

(c) Credit RiskCredit risk or the risk of counterparties defaulting, is controlled by the application of credit approvals, limitsand monitoring procedures. Trade receivables are monitored on an on going basis via Group managementreporting procedures.

(d) Fair valueThe carrying amounts of the financial assets and liabilities of the Group and the Company as at 31December 2004 approximate their fair value.

29. CONTINGENT LIABILITYA corporate guarantee given by the Company to a licensed bank for bank facilities granted to a subsidiarycompany amounting to approximately RM12,500,000.

30. STAFF COSTSGROUP COMPANY

2004 2003 2004 2003RM RM RM RM

Staff costs 4,239,078 4,126,556 396,471 716,764

Number of staff employed at the end of the year 250 321 11 24

Staff costs include salaries, commissions, allowances, wages, contributions to employees’ provident fund, andall other staff related expenses.

53

STATEMENT BY DIRECTORSPURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965

We, MUK SAI TAT and DATUK PHANG MIOW SIN, being two of the directors of MANGIUM INDUSTRIES BHD, dohereby state that, in the opinion of the directors, the financial statements and notes on pages 28 to 53 are drawn up soas to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2004 and ofthe results of the operations of the Company and of the Group, changes in cash flow position and changes in equity ofthe Company and of the Group for the financial year ended on that date, and are properly drawn up in accordance withapplicable approved accounting standards in Malaysia.

Signed on behalf of the Board of Directors in accordance with a Resolution of the Directors.

MUK SAI TAT DATUK PHANG MIOW SIN Director Director

KUALA LUMPUR.

Dated : 25 April 2005

STATUTORY DECLARATIONPURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965

I, MUK SAI TAT, being the officer primarily responsible for the financial management of MANGIUM INDUSTRIES BHD,do solemnly and sincerely declare that the financial statements and notes on pages 28 to 53 are to the best of myknowledge and belief, correct, and I make this solemn declaration conscientiously believing the same to be true and byvirtue of the provisions of the Statutory Declaration Act, 1960.

MUK SAI TAT

Before me,

54

STATEMENT BY DIRECTORS

Subscribed and solemnly declared by the)abovenamed MUK SAI TAT )at KUALA LUMPUR in the state of )WILAYAH PERSEKUTUAN )on this 25th day of April 2005 )

HARON HASHIM(W128)

COMMISSIONER OF OATHS

55

PKF(Chartered Accounts)9th Floor, MCB Plaza,No. 6, Changkat Raja Chulan,50200 Kuala Lumpur

REPORT OF THE AUDITORS

To the MEMBERS OF MANGIUM INDUSTRIES BHD AND ITS SUBSIDIARIES

We have audited the accompanying financial statements of MANGIUM INDUSTRIES BHD. These financial statementsare the responsibility of the Company’s Directors. Our responsibility is to express an opinion on the financialstatements based on our audit.

We conducted our audit in accordance with approved standards on auditing in Malaysia. These standards require thatwe plan and perform the audit to obtain all the information and explanations, which we considered necessary toprovide us with sufficient evidence to give reasonable assurance that the financial statements are free of materialmisstatements. An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in thefinancial statements. An audit also includes an assessment of the accounting principles used and significantestimates made by the Directors, as well as evaluating the overall adequacy of the presentation of information in the financial statements. We believe our audit provides a reasonable basis for our opinion.

In our opinion :-

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

(i) the state of affairs of the Group and of the Company as at 31 December 2004 and of the results of theiroperations and the cash flows of the Group and of the Company for the year ended on that date; and

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

and

b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company and by the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the said Act.

We have considered the financial statements and the auditor’s report thereon of the subsidiaries of which we have not acted as auditors, as indicated in Note 12 to the financial statements.

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

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

PKF ANTHONY JOSEPH SKELCHY(AF : 0911) 251/03/07 (J/PH) CHARTERED ACCOUNTANTS PARTNER

Kuala LumpurDated : 25 April 2005

REPORT OF THE AUDITORS

56

Proprietor Description Existing Use Tenure (years) Date of Land Built-Up Age of Net BooK/ Period from Acquisition / Area (ha.) Area Building Value as at

Revaluation(*) (sq. ft.) (years) 31 December2004

MSSB CL235082925 Kg. Sawmill, moulding factory, 999 / 12.02.1997* 8.42 47,506 8-11 RM700,373Mempakad, KM38 Jln finger-joint factory, 27.04.1918 Kota Marudu - Pitas, stacking area, timber to 26.04.2916 Sabah storage sheds, generator

shed, workshop, office building, guard house, sawdoctor room, pressurized impregnation treatment plant, general store, sundry shop, canteen and residential quarters

MSSB CL235017713 Kg. Vacant land 999 / 12.02.1997* 8.37 - - RM696,611Mempakad, KM38 Jln 04.12.1895 Kota Marudu - Pitas, to 03.12.2893Sabah

MSSB CL236078069 Kg. Furniture plant, sawmill 999 / 12.02.1997* 2.73 16,774 8-14 RM227,400Mempakad, KM38 Jln and sawdoctor room 22.04.1929 Kota Marudu - Pitas, to 21.04.2927Sabah

MSSB CL235157196 Kg. Furniture plant 999 / 12.02.1997* 2.39 35,200 8 RM199,361Mempakad, KM38 Jln 22.04.1929 Kota Marudu - Pitas, to 21.04.2927Sabah

MSSB CL235157187 Kg. Mini sawmill 999 / 12.02.1997* 1.38 31,200 8 RM114,988Mempakad, KM38 Jln 22.01.1932 Kota Marudu - Pitas, to 21.01.2930Sabah

MSSB CL235310602 Kg. Kiln dryer plant 99 / 12.02.1997* 1.87 45,900 8 RM139,306Mempakad, KM38 Jln 01.01.1997 Kota Marudu - Pitas, to 31.12.2095Sabah

MSSB CL235310611 Kg. Kiln dryer plant, 99 / 12.02.1997* 0.99 109,042 8 RM76,184Mempakad, KM38 Jln concrete apron and 01.01.1997 Kota Marudu - Pitas, boiler head to 31.12.2095Sabah

MSSB CL235310148 Kg. Vacant land 99 / 21.10.1996 10.37 - - RM75,734Mempakad, KM38 Jln 01.01.1964 Kota Marudu - Pitas, to 31.12.2062Sabah

MSSB CL235157212 Kg. Vacant land 99 / 23.10.1996 5.81 - - RM44,532Mempakad, KM38 Jln 01.01.1956 Kota Marudu - Pitas, to 31.12.2054Sabah

LIST OF PROPERTIES

57

Proprietor Description Existing Use Tenure (years) Date of Land Built-Up Age of Net BooK/ Period from Acquisition / Area (ha.) Area Building Value as at

Revaluation(*) (sq. ft.) (years) 31 December2004

MSSB CL235311172 Kg. Vacant land 999 / 12.02.1997* 2.63 - - RM204,583 Mempakad, KM38 Jln 04.12.1895 Kota Marudu - Pitas, to 03.12.2894Sabah

MSSB CL235311556 Kg. Vacant land 999 / 02.10.2000 16.25 - - RM632,102Mempakad, KM38 Jln 04.12.1895 Kota Marudu - Pitas, to 03.12.2894Sabah

MSSB Phase 3 on Lot 83 Vacant land - 19.12.2002 0.34 - - RM4,000,000comprising part & parcelof the project known asProposed Medium-Density Development forPhase 2 & Phase 3 on LotL.670, L.551, L.810 &L.10264 at 2 1/2 mile,Off Jln Tuaran, District ofKota Kinabalu, Sabah

Note: MSSB - Mangium Sawmill Sdn Bhd

58

ANALYSIS OF SHAREHOLDINGS AS AT 12 MAY 2005

ANALYSIS BY SIZE OF HOLDINGS

Class of Shares: Ordinary Share of RM1.00 eachVoting Rights: One (1) vote per ordinary share

Size of Holdings No. of Percentage No. of Percentage Shareholders (%) Shares (%)

Less than 100 2 0.06 69 0.00100 to 1,000 1,084 33.86 1,071,687 3.351,001 to 10,000 1,831 57.18 7,457,472 23.3010,001 to 100,000 259 8.09 7,152,823 22.35100,001 to less than 5% of issued shares 25 0.78 11,582,949 36.205% and above of issued shares 1 0.03 4,735,000 14.80Total 3,202 100.00 32,000,000 100.00

DIRECTORS’ SHAREHOLDINGS

Name Direct No. Percentage Indirect No. Percentage of Shares (%) of Shares (%)

1. Datuk Phang Miow Sin 600 0.002 - -2. Tunku Makhlad bin Tunku - - - -

Mohamed Jamil3. Ganesan a/l Sundaraj - - - - 4. Peter Wong - - 4,735,000(*) 14.805. Muk Sai Tat - - 4,735,000(*) 14.80Total 600 0.002

(*)This block of shares is indirectly held through M. K. Assets Sdn. Bhd.

SUBSTANTIAL SHAREHOLDERS

Name Direct No. Percentage Indirect No. Percentage of Shares (%) of Shares (%)

1. M. K. Assets Sdn. Bhd. 4,735,000 14.80 - -2. Peter Wong - - 4,735,000(*) 14.803. Muk Sai Tat - - 4,735,000(*) 14.804. Loh Hien Hua 2,016,000 6.30 - -Total 6,751,000 21.10

(*)This block of shares is indirectly held through M. K. Assets Sdn. Bhd.

ANALYSIS OF SHAREHOLDINGS

59

LIST OF TOP 30 SHAREHOLDERS AS AT 12 MAY 2005

No. Name/Company No. of ordinary shares Percentage ofof RM1.00 each issued capital (%)

1 M. K. Assets Sdn. Bhd. 4,735,000 14.802 Charming Vanguard Sdn. Bhd. 1,595,000 4.983 Dirihill Development Sdn. Bhd. 1,594,700 4.984 Malaysian Assurance Alliance Berhad 1,590,000 4.97

As Beneficial Owner5 HDM Nominees (Tempatan) Sdn. Bhd. 1,200,000 3.75

HDM Capital Sdn. Bhd. for Loh Hien Hua6 Kok Yen Chu 719,000 2.257 Prima Optra Sdn Bhd 715,000 2.238 Mak Soak Fong 500,000 1.569 Abdul Hamid Egoh 418,000 1.3110 Cimsec Nominees (Tempatan) Sdn. Bhd. 409,500 1.28

CIMB for Wuan Thong Lok11 Ong Kok Thye 350,000 1.0912 Skyline Yield Sdn Bhd 328,200 1.0313 Citicorp Nominees (Tempatan) Sdn. Bhd. 267,000 0.83

Pledged Securities Account for Sim Woi Sin14 TCL Nominees (Tempatan) Sdn. Bhd. 204,000 0.64

Pleadged Securities Account for Lee Sun Ming 15 Khor Kien Eow 200,000 0.6316 Ong Kok Thye 191,900 0.6017 Sandy Loi Pei Lee 177,749 0.5618 Amsec Nominees (Tempatan) Sdn. Bhd. 140,100 0.44

Pledged Securities Account for Chong Mee Fah @ Frederick Chong19 Tiong Ngee Min 139,800 0.4420 OSK Nominees (Tempatan) Sdn. Berhad 139,000 0.43

Pledged Securities Account For Loi Hien Khong 21 Cham Chee Khim 138,000 0.4322 Affin Nominees (Tempatan) Sdn Bhd 125,000 0.39

Pledged Securities Account for Ong Aik Lin23 Leong Ka Cheong 120,000 0.3824 Seah Peik Hock 110,000 0.3425 Goh Wak Kheng 108,000 0.3426 HLB Nominees (Tempatan) Sdn Bhd 103,000 0.32

Pledged Securities Account For Chantika Holdings Sdn Bhd 27 Siow Loo Chin 100,000 0.3128 Lee Saw Looi 100,000 0.3129 Affin Nominees (Tempatan) Sdn. Bhd. 100,000 0.31

Pledged Securities Account For How Kim Lian 30 Public Nominees (Tempatan) Sdn Bhd 100,000 0.31

Pledged Securities Account for Goh Chai Hong

Total 16,717,949 52.24

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MANGIUM INDUSTRIES BHD.(Company No. 356031-H)(Incorporated in Malaysia)

FORM OF PROXY

I/Weof being amember of MANGIUM INDUSTRIES BHD. hereby appoint * the Chairman of the meeting or

of

or failing whomofas my/our Proxy to vote for me/us and on my/our behalf at the Ninth Annual General Meeting of the Company to be held at TheAuditorium, Podium 1, Menara MAA, No.12, Jalan Dewan Bahasa, 50460 Kuala Lumpur on Wednesday, 29 June 2005 at 3.30p.m and at any adjournment thereof.

*My/*our Proxy(ies) is/are to vote as indicated below:-

No. Resolutions For Against

1. To receive the Audited Financial Statements for the year ended 31 December 2004together with the Directors’ and Auditors’ Reports thereon.

2. To approve the payment of Directors’ fees for the year ended 31 December 2004.3. To re-elect Mr. Ganesan A/L Sundaraj who is retiring in accordance with Article 80 of

the Company’s Articles of Association.4. To re-elect Tunku Makhlad bin Tunku Mohamed Jamil who is retiring in accordance with

Article 80 of the Company’s Articles of Association.5. To re-appoint Messrs. PKF, the retiring Auditors, and to authorise the Board of Directors

to fix their remuneration.6. The authority for Directors to allot and issue shares pursuant to Section 132D of the

Companies Act, 1965

[Please indicate with (X) in the spaces provided how you wish your vote to be casted. If no specific direction as to voting is given, the Proxy will vote or abstain athis(her) discretion]

Dated this day of 2005 Number ofshares held :

[Signature/Common Seal of Member][* Delete if not applicable]

NOTES:

• A member entitled to attend and vote at the Meeting is entitled to appoint a Proxy or Proxies to attend and vote on his (her) instead. A Proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

• Where a member appoints two (2) or more Proxies to attend and vote at the same Meeting, such appointment shall be invalid unless the memberspecifies the proportions of his (her) shareholdings to be represented by each Proxy.

• Where a member of the Company is an Authorised Nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

• The instrument appointing a proxy shall be in writing under the hand of the appointor or his/her attorney duly authorised in writing or if the appointor is a corporation/company, either under its common seal or under the hand of officer or attorney duly authorised.

• The instrument appointing a Proxy must be deposited at the Registered Office of the Company at Suite 19.06 19th Floor, Menara MAA, No. 12 Jalan Dewan Bahasa, 50460 Kuala Lumpur, not less than forty-Eight ( 48 hours) before the time set for the Meeting or any adjournment thereof.

NOTICENo door gift

will be distributedbut parking will

be provided

First Fold Here

Then Fold Here

Last Fold Here For Sealing

The Company SecretaryMANGIUM INDUSTRIES BHD

(Company No. 356031-H)(Incorporated in Malaysia)

SUITE 19.06, 19TH FLOOR, MENARA MAA,NO. 12, JALAN DEWAN BAHASA,

50460 KUALA LUMPUR

STAMP