ROHAS-EUCO INDUSTRIES BHD. · GROUP FINANCIAL HIGHLIGHTS GROUP STRUCTURE ... Wisma Sime Darby Jalan Raja Laut 50350 Kuala Lumpur Tel : 603 – 2693 1077 Fax : 603 – 2693 0997

NOTICE OF ANNUAL GENERAL MEETING

STATEMENT ACCOMPANYING NOTICE OF FORTY-SEVENTH ANNUAL GENERAL MEETING

CORPORATE INFORMATION

PROFILE OF DIRECTORS

VALUE ADDED STATEMENT

GROUP FINANCIAL HIGHLIGHTS

GROUP STRUCTURE

CHAIRMAN’S STATEMENT

MANAGING DIRECTOR’S REVIEW OF OPERATIONS

STATEMENT ON CORPORATE GOVERNANCE

21

22

23

25

28

79

81

82

84

85

Enclosed

2

4

5

6

9

10

11

12

14

15

DIRECTORS’ RESPONSIBILITY STATEMENT

OTHER COMPLIANCE INFORMATION

STATEMENT ON INTERNAL CONTROL

AUDIT COMMITTEE REPORT

DIRECTORS’ REPORT AND STATUTORY FINANCIAL STATEMENTS

PROPERTIES OF THE GROUP

ANALYSIS OF SHAREHOLDINGS

TOP 30 SHAREHOLDERS

LIST OF SUBSTANTIAL SHAREHOLDERS

DIRECTORS’ SHAREHOLDINGS

FORM OF PROXY

CONTENTS

Annual Report 2006

ROHAS-EUCO INDUSTRIES BHD.

ROHAS-EUCO INDUSTRIES BHD. (4129-H)

Annual Report 2006

2

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Forty-Seventh (47th) Annual General Meeting of the Company will be held at Dewan Berjaya, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Wednesday, 13 June 2007 at 2.30 p.m. for the following purposes:-

ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the financial year ended 31 December 2006 and the Reports of the Directors and Auditors thereon.

2. To re-elect Mustafa bin Mohamed Najimudin who retires pursuant to Article 80 of the Company’s Articles of Association.

3. To re-elect Datuk Oh Chong Peng who retires pursuant to Article 87 of the Company’s Articles

of Association. 4. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise

the Board of Directors to fix their remuneration.

SPECIAL BUSINESS

To consider and if thought fit, to pass the following resolutions, with or without modifications, as Ordinary Resolutions:-

5. RE-APPOINTMENT OF DIRECTOR OVER SEVENTY (70) YEARS OF AGE “THAT pursuant to Section 129 of the Companies Act, 1965, Mr Chan Hua Eng who is over

seventy (70) years of age be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting.”

6. DIRECTORS’ FEES

“THAT the payment of Directors’ fees of RM177,500/- in respect of the financial year ended 31 December 2006 be and is hereby approved.”

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

RESOLUTION 1

RESOLUTION 2

RESOLUTION 3

RESOLUTION 4

RESOLUTION 5

RESOLUTION 6

By Order of the Board

CHEONG KEE YOONG (MIA 12292)TEE LEE LENG (MAICSA 7044742)Company Secretaries

Kuala Lumpur17 May 2007


Annual Report 2006

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NOTICE OF ANNUAL GENERAL MEETING cont’d

Notes:-

(i) A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his stead. 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.

(ii) Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportion of his holdings to be represented by each proxy.

(iii) In the case of a corporate member, the instrument appointing a proxy shall be under its Common Seal or under the hand of an officer or attorney duly authorised.

(iv) The instrument appointing a proxy must be deposited at the Registered Office of the Company at Rumah Rohas, 2nd Floor, No. 61, Jalan Raja Abdullah, Kampung Baru, 50300 Kuala Lumpur not less than 48 hours before the time appointed for holding the Meeting or at any adjournment thereof.

Explanatory Notes on Special Business:

(i) Ordinary Resolution 5, if passed, Mr Chan Hua Eng will be re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting.

(ii) Ordinary Resolution 6, if passed, will authorise the payment of Directors’ fees to the Directors of the Company for their services as Directors during the financial year ended 31 December 2006.


Annual Report 2006

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Pursuant to Paragraph 8.28(2) of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”).

1. Place, date and time of the Forty-Seventh Annual General Meeting (“AGM”) Place : Dewan Berjaya, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara,

60000 Kuala Lumpur Date : 13th June 2007 Time : 2.30 p.m.

2. Directors who are standing for re-election are as follows:- Pursuant to Article 80 of the Company’s Articles of Association

• Mustafa bin Mohamed Najimudin

Pursuant to Article 87 of the Company’s Articles of Association • Datuk Oh Chong Peng

Director who is standing for re-appointment is as follows:-

Pursuant to Section 129 of the Companies Act, 1965 • Chan Hua Eng

3. Attendance at Board Meetings

During the last financial year ended 31 December 2006, there were five (5) Board Meetings held. The details of attendance of each Director are as follow:-

* Tengku Yunus Kamaruddin retired from the Board of Directors on 12 February 2007.** Datuk Oh Chong Peng appointed to the Board of Directors on 22 March 2007.

4. Place, date and time of Board Meetings held during the financial year ended 31 December 2006.

STATEMENT ACCOMPANYINGNOTICE OF FORTY-SEVENTH ANNUAL GENERAL MEETING

Name No. of meetings attended

Chan Hua Eng 5/5

Sia Bun Chun 5/5

Mustafa bin Mohamed Najimudin 5/5

Dr. W Mohamed @ Nik Azam bin Wan Hamzah 5/5

Dato’ Lim Say Chong 5/5

Tengku Yunus Kamaruddin * 5/5

Datuk Oh Chong Peng ** N/A

Date Time Venue

17/2/2006 9.00 a.m. Rumah Rohas, 4th Floor, No. 61, Jalan Raja Abdullah, Kampung Baru, 50300 Kuala Lumpur

12/4/2006 2.00 p.m. Rumah Rohas, 4th Floor, No. 61, Jalan Raja Abdullah, Kampung Baru, 50300 Kuala Lumpur



29/11/2006 9.00 a.m. Rumah Rohas, 4th Floor, No. 61, Jalan Raja Abdullah, Kampung Baru, 50300 Kuala Lumpur


Annual Report 2006

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AUDIT COMMITTEE

TENGKU YUNUS KAMARUDDIN (Chairman) Independent Non-Executive Director(Retired w.e.f 12 February 2007)

DATUK OH CHONG PENG (Chairman) Independent Non-Executive Director(Appointed w.e.f 22 March 2007)

DATO’ LIM SAY CHONGIndependent Non-Executive Director SIA BUN CHUNManaging Director

NOMINATION COMMITTEE

CHAN HUA ENG (Chairman)Non-Independent Non-Executive Director

DATO’ LIM SAY CHONGIndependent Non-Executive Director

TENGKU YUNUS KAMARUDDINIndependent Non-Executive Director(Retired w.e.f 12 February 2007)

DATUK OH CHONG PENG Independent Non-Executive Director(Appointed w.e.f 22 March 2007)

REMUNERATION COMMITTEE

DR. W MOHAMED @ NIK AZAM BIN WAN HAMZAH (Chairman)Non-Independent Non-Executive Director



DATUK OH CHONG PENG Independent Non-Executive Director(Appointed w.e.f 22 March 2007)

COMPANY SECRETARIES

CHEONG KEE YOONG (MIA 12292)TEE LEE LENG (MAICSA 7044742)

REGISTERED OFFICE

Rumah Rohas, 2nd FloorNo. 61, Jalan Raja AbdullahKampung Baru50300 Kuala LumpurTel : 603 – 2697 3900Fax : 603 – 2697 4900Email : [email protected]

AUDITORS

PricewaterhouseCoopersChartered Accountants11th Floor, Wisma Sime DarbyJalan Raja Laut50350 Kuala LumpurTel : 603 – 2693 1077Fax : 603 – 2693 0997

SHARE REGISTRAR

Insurban Corporate Services Sdn. Bhd.No. 149B, Jalan Aminuddin BakiTaman Tun Dr. Ismail60000 Kuala LumpurTel : 603 – 7729 5529Fax : 603 – 7728 5948

PRINCIPAL BANKERS

HSBC Bank Malaysia BerhadHead Office, 2 Leboh Ampang50100 Kuala Lumpur

Citibank BerhadNo. 165, Jalan Ampang50450 Kuala Lumpur

Standard Chartered Bank Malaysia BerhadMenara Standard Chartered No. 30, Jalan Sultan Ismail50250 Kuala Lumpur

Malayan Banking BerhadGround Floor, Wisma IJMJalan Yong Shook Lin46200 Petaling JayaSelangor Darul Ehsan

Arab-Malaysian Bank BerhadLevel 18, Menara DionJalan Sultan Ismail50250 Kuala Lumpur

LISTING OF SHARES

Main Board of Bursa Malaysia Securities Berhad(Industrial Products Sector)



DATUK OH CHONG PENGIndependent Non-Executive Director (Appointed w.e.f 22 March 2007)

ROHAS-EUCO INDUSTRIES BHD.Company No.: 4129-H

BOARD OF DIRECTORSCHAN HUA ENG (Chairman)Non-Independent Non-Executive Director

SIA BUN CHUNManaging Director

MUSTAFA BIN MOHAMED NAJIMUDINExecutive Director

DR. W MOHAMED @ NIK AZAM BIN WAN HAMZAHNon-Independent Non-Executive Director


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PROFILE OF DIRECTORS

CHAN HUA ENG (Chairman, Non-Independent Non-Executive Director)

79, a Malaysian, holds a Bachelor of Law (Hons.) degree from University of Bristol and a Barrister at Law of Middle Temple, England. He is also an Associate Member of the Institute of Taxation, United Kingdom. He was a partner of a leading law firm in Kuala Lumpur since 1960 and retired as senior partner in 1987. He has been a Non-Executive member of the Board of Rohas-Euco Industries Bhd. since 1979 and was subsequently appointed as Chairman of the Company and its Nomination Committee on 28 May 2002. He also sits on the board of various public listed companies, namely, Lafarge Malayan Cement Berhad, Lingui Development Berhad, Pacific & Orient Berhad and Glenealy Plantations (Malaya) Berhad.

SIA BUN CHUN(Managing Director)

60, a Singaporean, is an Electrical Engineer by profession and began his career in New Zealand in the microwave equipment installation division of a broadcasting company and later, a power transformer manufacturing concern. Prior to joining Rohas-Euco Industries Bhd. in 1974, he gained some experience as logging camp engineer in Indonesia. He was appointed to the Board of Rohas-Euco Industries Bhd. as Managing Director in 1976. He also sits on the Board of all subsidiaries and associated companies of Rohas-Euco Industries Bhd. He has been a member of its Audit Committee since 1996.

MUSTAFA BIN MOHAMED NAJIMUDIN(Executive Director)

58, a Malaysian, obtained a Bachelor of Social Science (Political Science) degree from Universiti Sains Malaysia and a Master of Arts in Political Economy from the New School for Social Research in New York. He began his career as Research Fellow in the Centre for Policy Research in Universiti Sains Malaysia, Penang, and thereafter as Research Analyst and Fellow for 10 years with the Institute of Strategic and International Studies, Kuala Lumpur. Subsequently, he was appointed as the Secretary General (1992-1995) and Executive Director (1992-2004) of the Malay Chamber of Commerce Malaysia. He was appointed as Executive Director of Rohas-Euco Industries Bhd. on 1 October 2004.


Annual Report 2006

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PROFILE OF DIRECTORS cont’d

DR. W. MOHAMED @ NIK AZAM BIN WAN HAMZAH (Non-Independent Non-Executive Director)

60, a Malaysian, is a medical practitioner. He obtained his Bachelor of Medicine and Bachelor of Surgery, M.B.B.S. in 1972 from University of Nagpur, India and Diploma in Dermatological Sciences from College of Medicine, University of Wales in 1996. After serving three years with the Ministry of Health, he began practicing since 1975 as a private medical practitioner in his private clinic in Kelantan which is now a group practice. He has been a Non-Executive member of the Board of Rohas-Euco Industries Bhd. since 1993 and Chairman of its Remuneration Committee since 2001.

DATO’ LIM SAY CHONG(Independent Non-Executive Director)

67, a Malaysian, obtained a Bachelor of Arts degree with honours in Economics from the University of Malaya and a Master degree in Business Administration from the University of British Columbia, Canada. He also completed an Advanced Management Programme at the Harvard Business School, Boston, USA. Dato’ Lim worked with the Imperial Chemical Industries (ICI) Plc’s group of companies in Malaysia and abroad for 30 years, during which he served on the boards of several companies within the Group. He was Managing Director of the ICI (Malaysia) group for 5 years and the Group Managing Director of Chemical Company of Malaysia Berhad from 1989 to 2004. Dato’ Lim is also a director of Standard Chartered Bank Malaysia Berhad and Opus International Group Public Limited Company and the Chairman of Carlsberg Brewery Malaysia Berhad. He joined the Board of Rohas-Euco Industries Bhd. as an Independent Non-Executive Director on 1 November 2004 and was appointed a member of its Audit Committee on 19 November 2004.


Annual Report 2006

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PROFILE OF DIRECTORS cont’d

DATUK OH CHONG PENG(Independent Non-Executive Director)

62, a Malaysian, was appointed to the Board on 22 March 2007. He had undertaken his accountancy training in London from 1964 and qualified as a Chartered Accountant in 1969. He is a Fellow of the Institute of Chartered Accountants in England and Wales as well as a member of the Malaysian Institute of Certified Public Accountants (MICPA) and the Malaysian Institute of Accountants. Datuk Oh joined Coopers & Lybrand (now known as PricewaterhouseCoopers) in London in 1969 and in Malaysia in 1971. He was a partner of Coopers & Lybrand Malaysia from 1974 until his retirement as Senior Partner in 1997. He then joined the Rashid Hussain Berhad Group of Companies from 1998 until 2003. Datuk Oh is a Government appointed member of the Labuan Offshore Financial Services Authority and the Malaysian Accounting Standards Board. He is also a trustee of the Huaren Education Foundation and the UTAR Education Foundation, and a council member of University Tunku Abdul Rahman. Datuk Oh is currently the Non-Executive Chairman of Malaysian Plantations Berhad and Land & General Berhad respectively. He also sits on the Board of British American Tobacco (M) Berhad, IJM Corporation Berhad, IJM Plantations Berhad and Star Publications (M) Berhad.


Annual Report 2006

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VALUE ADDED STATEMENT

2002 2003 2004 2005 2006

RM ‘ 000 RM ‘ 000 RM ‘ 000 RM ‘ 000 RM ‘ 000

Turnover 192,529 105,093 170,841 152,323 182,828

Cost of material, supplies, services bought and depreciation set aside (178,594) (81,177) (139,809) (115,835) (136,484)

Value added from operations 13,935 23,916 31,032

36,488 46,344

Other Income 884 708 83 2,782 3,533

Financing Interests (181) (184) (405) (1,015) (1,518)

Share of after tax profit/ (loss) of an associate a jointly controlled entity

180 -

288(7)

273676

(13)332

159(53)

Total Value Added 14,818 24,721 31,659 38,574 48,465

Distribution:To employees as salaries, training, welfare and development

10,182 69% 12,375 50% 14,358 45%

16,317 42% 15,643 32%

To Government as corporate & other taxes

3,366 23% 3,759 15% 6,498 21%

4,139 11% 7,719 16%

To banks and other financial institutions as financing costs and charges 181 1% 184 1% 405 1%

1,015 3% 1,518 3%

To minorities shareholders 1,812 12% (307) -1% 2,239 7% 2,061 5% 917 2%

To shareholders - 0% 2,462 10% 2,462 8% 2,462 6% 5,880 12%

Retained in the Group (723) -5% 6,248 25% 5,697 18% 12,580 33% 16,788 35%

Total Distribution 14,818 100% 24,721 100% 31,659 100% 38,574 100% 48,465 100%

Retained inthe Group

16,020 (28%)

To shareholders7,565 (13%)

To employees as salaries,training, welfare and

development23,163 (41%)

To Government asCorporate & other

taxes7,719 (14%)

To banks & otherfinancial institutions

as financing costsand charges1,518 (3%)

To minorityshareholders

917 (2%)


Annual Report 2006

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GROUP FINANCIAL HIGHLIGHTS

2002 2003 2004 2005 2006

Turnover(RM ‘ 000)

192,529 105,093 170,841 152,323 182,828

Profit from Operations(RM ‘ 000)

3,379 13,876 16,468 21,627 32,227

Profit Before Taxation(RM ‘ 000)

3,624 14,260 17,495 21,242 31,304

Profit Attributable to Shareholders (RM ‘ 000)

(723) 8,710 8,159 15,042 22,668

Weighted Average Number of Shares(’000)

65,693 66,621 68,377 68,377 68,377

Basic Earnings Per Share(Sen)

(1) 13 12 22 33

Shareholders’ Funds(RM ‘ 000)

81,812 90,167 95,937 108,626 125,423

Issued & Paid-up Share Capital(‘000)

66,180 68,377 68,377 68,377 68,377

Net Tangible Assets Per Share(Sen)

124 131 139 157 183


Annual Report 2006

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GROUP STRUCTURE

ROHAS-EUCO INDUSTRIES BHD.4129-H

Design and fabrication of steel structures for high-tension transmission towers, microwave towers and substation structures, manufacture of pressesd steel water tank panels and

provision of other fabrication and installation works.

Galvanising Engineering And Services Sdn Bhd129235-UOperation of a hot- dip galvanizing plant.(100%)

SPBA Engineering Sdn Bhd317252-KFabrication of general steel structures.(100%)

REI-Biwater Consortium Sdn Bhd390782-WContractor in the implementation of potable and water treatment projects.(74%)

E M Maju Sdn Bhd153950-HGeneral Contractor.(100%)

REI Resources Sdn Bhd322634-DProject management and general contracting.(100%)

Asiacom-Plus Pacific Inc.A200003139General construction and other allied business. Subsidiary of REI Resources Sdn Bhd(97.6%)

Great Sphere Limited(Incorporated in British Virgin Islands)

(IBC 333550)Dormant.(100%)

Rei Komposit Sdn Bhd16142-K

Dormant.(100%)

Bridgestone Rei Komposit Sdn Bhd401271-A

Manufacture of sheet moulding compound, fibreglass reinforced plastic and high

strength moulding compound.(28%)

APL Tech Battery Industry Sdn Bhd176413-V

Manufacture and marketing of polymer lithium ion cells and batteries.

(97%)

Potaglas Tank Sdn Bhd160072-M

Manufacture and sale of fibreglass water tank panels and installation of

water tanks.(100%)

PG Tank (Singapore) Pte. Ltd.200500571-H

Wholly-owned subsidiary of Potaglas Tank Sdn Bhd

(100%)


Annual Report 2006

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On behalf of the Board of Directors of your company, I am pleased to present our Annual Report and Audited Financial Statements for the financial year ended 31 December 2006, and of its affairs as of that date.

Our mission is to be a regional leader in the manufacture of telecommunication and transmission-line towers. To achieve this, we constantly make improvements to our products and service to meet our customers’ fast changing demands and needs globally.

Our company recorded an increase of 20% in revenue for the financial year 2006 and enjoyed an effective tax rate of 25% for the period. These are primarily the results of our efforts in geographical market expansion and sales of our core products.

RESULTSOver the financial year 2006, we have announced total revenue of RM182.8 million representing an increase of 20% as compared to the preceding year. Despite the upward trend of the raw material prices, our company recorded an increase in profit before taxation of 47%, from 21.2 million in the year 2005 to RM31.3 million in the year 2006.

We recorded a consolidated profit of RM23.6 million for the year 2006 being an increase of 38% (2005: RM17.1 million). This was mainly attributed to the increase in our exports and the tax incentives enjoyed in relation thereto. Basic earnings per share also increased by 51% to 33.15 sen per share (2005: 21.99 sen per share). Shareholders’ equity improved to RM125.4 million (2005: RM108.6 million) representing an increase of 16%.

Our company’s cash flow position remains healthy with an increase of 62% in cash reserves to RM54.2 million (2005: RM33.4 million) while maintaining a low gearing level.

DIVIDENDThe Board had, on 29 September 2006, announced an interim dividend of 5 sen per RM1.00 ordinary share less income tax of 28 percent and a special tax exempt dividend of 5 sen per RM1.00 ordinary share in respect of the financial period ended 31 December 2006 that were paid to entitled shareholders on 23 October 2006. It is not intended to declare any further dividend in respect of the year under review.

12

CHAIRMAN’S STATEMENT


Annual Report 2006


Annual Report 2006

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CHAIRMAN’S STATEMENT CHAIRMAN’S STATEMENT cont’d

TRENDS & PROSPECTSIn the coming year, while we remain focused on our core business and continue to explore and build up new export markets, we will pursue all avenues to manage risks and capitalize on opportunities, in particular the global infrastructure industry, whether power, hydro or tele-communication.

In line with the above, our company, having obtained favourable outcome from the preliminary feasibility studies, is moving into higher gear by undertaking comprehensive feasibility studies for the Nam Sane 3 Hydropower Project in Lao P.D.R.

To streamline our business, the Board and the management, in respect of APL Tech Battery Industry Sendirian Berhad (“APL”), decided to make a final provision of impairment of plant and equipment in the sum of RM5.4 million in 2006. There will be no further impairment of assets in this respect in the future. We will downsize APL’s operations to concentrate solely on the marketing and sales of the products as cost optimization measures. The products will be contract manufactured in more costs effective countries. We hope that APL, after the initial costs involved in the downsizing exercise, will eventually achieve profitability with these efforts.

With an established foundation and well planned strategies, we will continue to mitigate the risks of fluctuating raw material prices and the strengthening of Ringgit against US Dollar, and strive to maintain similar credible results in the coming financial year. We will continue to diversify our business globally and capture new markets for our core products.

SHARE BUY-BACKThere was no buy-back of shares during the year under review. No renewal of the shareholders’ approval for Share Buy-Back will be sought at the forthcoming 47th Annual General Meeting.

VOLUNTARY GENERAL OFFEROn 23 April 2007, the Board received a notice of voluntary general offer by Temasek Team Sdn Bhd to acquire the entire voting shares of our company comprising 68,377,306 ordinary shares of RM1.00 each (“REI Shares”) for a cash consideration of RM1.80 per share (“Take-Over Offer”). The Board is not seeking any alternative person to make a take-over offer for the REI Shares.

The Board has on 27 April 2007 appointed Public Investment Bank Berhad, subject to the approval of Securities Commission, as the independent adviser to advise the minority shareholders in respect of the Take-Over Offer.

CHANGES IN THE BOARDSince the last Annual General Meeting, Tengku Yunus Kamaruddin has retired from the Board. The Board wishes to record its heartfelt appreciation to Tengku Yunus Kamaruddin for his invaluable contributions and guidance to the Board from the year 1997 until his retirement in February 2007.

The Board is pleased to announce the appointment of and welcome Datuk Oh Chong Peng as a member and Chairman of the Audit Committee as of 22 March 2007.

APPRECIATIONWe would also like to take this opportunity to extend our sincere thanks to our shareholders, business associates, customers, financiers and other stakeholders for their confidence in us. We look forward to their continued support.

Equally important, your company would like to stress that it is only with the support and commitment of all employees at all levels that we have been and are able to continue the growth of REI. In thanking them all for their invaluable efforts in overcoming formidable challenges in 2006 and achieving the highest recorded profits in our company history of 45 years, we look forward to their continued dedicated service and loyalty.

CHAN HUA ENGChairman

13

ROHAS-EUCO INDUSTRIES BERHAD (4129-H)

Annual Report 2006


Annual Report 2006

14

MANAGING DIRECTOR’S REVIEW OF OPERATIONS

OVERALL BUSINESS PERFORMANCE

During the financial year under review, there was substantial fluctuation in ferrous and non-ferrous metal prices. One of the metals most affected was zinc which increased by more than 300%, from USD1,000 per MT to USD4,500 per MT. Despite the challenging and competitive environment, our Company, through the efforts of the management team, achieved exceptional performance and highest profits in our history.

For the financial year under review, consolidated net profit before tax increased to RM31.3 million (2005: RM21.2 million) with a total group revenue of RM182.8 million (2005: RM152.3 million). The Group registered a net profit after taxation and minority interests of RM22.7 million (2005: RM15.0 million). This was mainly attributed to a surge in the sales and export of our core products which contributed about RM19.0 million.

Group cash flow position remained healthy. In view of instability in metal prices, we have strategically increased our inventory to RM72.5 million to mitigate further potential increase in prices in the metal market.

In the fiberglass tank segment, the continued effort of the management team had enabled the Company to increase export of the products. Through the continuous efforts of the management team, this segment has been revived and improving gradually but steadily since year 2004, resulting in contributing profits to the Group in year 2006. The management team continues to strive to expand its sales internationally to enhance its contribution to the Group profits in year 2007.

PROSPECTS & STRATEGIES

Our Company’s strategy is to enhance its opportunities to explore the export market for the sales of its core products, namely transmission towers, microwave towers and water tank. For year 2006, export and sales in these segments increased in value by 49%.

In respect of the Nam Sane 3 Hydropower Project of which our Company has entered into a Memorandum of Understanding with the Government of Lao P.D.R, we have undertaken and completed preliminary studies on the viability of the project as a matter of caution. The preliminary studies concluded and confirmed that the project is viable. We have, therefore, proceeded with the full scale feasibility studies which are expected to be completed in 12 to 18 months. Meanwhile, our Company continues to seek various infrastructure related projects in the region.

The strengthening of Ringgit against US Dollar will create pressure on our export efforts and cost an impact on our profitability. In this regard, the management is actively developing and deploying new strategies to mitigate the impact. In certain export region, we have in fact converted some of the trading currency from US Dollar to EURO. We have also forward purchased or sold currency to soften the impact.

While we continue to aggressively expand the export market segment for our core products and services, the management team is constantly and actively seeking new profitable platforms and business opportunities, especially in sectors related to infrastructure, with some synergy to our existing core business for diversification of the Group.

Sia Bun ChunManaging Director


Annual Report 2006

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STATEMENT ON CORPORATE GOVERNANCE

The Board of Directors (“Board”) is committed to ensure that the highest standards of Corporate Governance are practised throughout the Group as a fundamental part of discharging its duties and responsibilities to protect and enhance shareholders’ value and support the Group’s continued growth and success. The Board commits to observe and practise towards ensuring full application of the principles of corporate governance as set out in Part 1 of the Malaysian Code on Corporate Governance (“the Code”) and has, to their best ability, complied with the best practices as set out in Part 2 of the Code.

DIRECTORS

Board responsibilitiesThe Board plays a vital role in the stewardship of the strategic directions of the Group’s business, and ultimately the enhancement of long-term shareholders’ value. This role includes establishing goals for management and monitoring the achievement of these goals.

The Board has a schedule of matters reserved specifically for its decision which includes, among others, strategic planning, annual budget, business plans, major investments in business ventures, acquisition and disposal of assets (capital expenditure), review of financial and operational performance of the Group, decisions on accounting policies and treatments, disclosure of financial statements and consideration of significant financial matters.

The Group established a framework to identify training plans for staff, based on competency profiling, that are reviewed annually to continuously train and develop management and staff to increase their level of competency, skill, efficiency and productivity.

Board compositionThe Board consists of six (6) members namely two (2) Executive Directors, two (2) Independent Non-Executive Directors and two (2) Non-Independent Non-Executive Directors. One third (1/3) of the Board comprises Independent Non-Executive Directors. The composition of the Board fairly reflects a balance between Executive and Non-Executive Directors. This is to ensure that the interests of the Group as well as the stakeholders and the public in general are represented in all business strategies formulation and adoption.

The Board comprises of highly reputable and professional persons of caliber, credibility and has the necessary skills and experience to arrive at an independent judgment. With their combined experience and knowledge, they provide sound advice and impartial judgment for the benefits of the Company, its shareholders and stakeholders.

The Board had taken an alternative view to the best practice requiring the Company to identify in its annual report a Senior Independent Non-Executive Director to whom concerns may be conveyed (Part 2 AA. VII of Malaysian Code on Corporate Governance). The Board does not consider it necessary to make such an appointment based on the fact that directors and shareholders already have fundamental rights to direct any areas of concern to any members of the Board, each of whom has the duty to provide unbiased views, advice and judgment.


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Duties and responsibilities of the BoardThe Board takes full responsibility for the performance of the Group. The Board’s duties and responsibilities include formulation of the Group’s overall strategic plans, periodic review of business and financial performance, the adoption of practical risk management and internal controls for the Group.

There is a clear division of roles and responsibilities between the Chairman (Non-Executive) and the Managing Director (Executive capacity), thus ensuring a balance of power and authority. The Non-Executive Chairman is primarily responsible for matters pertaining to the Board and overall conduct of the Group. The Managing Director oversees the business operations of the Group and implementation of the Board’s decision and policies.

Appointments to the Board In order to comply with good practice for the appointment of new directors through a formal and transparent procedure, the Board has set up a Nomination Committee to evaluate and recommend candidates for directorships to the Board. The Nomination Committee comprises Non-Executive Directors solely.

Re-election of DirectorsArticle 87 of the Articles of Association of the Company (“the Articles”) provides that new Directors appointed during the year shall hold office only until the next following Annual General Meeting (AGM) and shall be eligible for re-election by shareholders thereat. Article 80 of the Articles provides that at least one third (1/3) of the other Directors shall be subject to retirement by rotation and may offer themselves for re-election each year at the AGM provided always that all Directors including the Managing Director should retire from office at least once in each three (3) years.

A Director over seventy (70) years of age is required to submit himself for re-appointment annually in accordance with Section 129(6) of the Companies Act 1965.

Board meetings and supply of information to the BoardThe Board meets at least four (4) times during the financial year. The agenda for the Board Meetings, together with appropriate reports and information on the Company’s business operations, and proposal papers for the Board’s consideration are circulated to all the Directors prior to the meetings giving sufficient time to do proper review and preparation to ensure smooth proceeding of each meeting.

The proceedings and resolutions reached at each Board Meeting are documented in the minutes and signed by Chairman of the next Board Meeting. Besides Board Meetings, the Board exercises control on matters that require Board’s approval through circulation of Directors’ Resolutions. These minutes are kept at the registered office.

All directors have access to all information within the Company as well as advice and services of the company secretaries whether as a full Board or in their individual capacity to assist them in their decision making. Where necessary, the directors may engage independent professionals at the Company’s expense on specialized issues to enable the directors to discharge their duties with adequate knowledge on the matters being deliberated.

STATEMENT ON CORPORATE GOVERNANCE cont’d


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17


The Board held five (5) meetings during the financial year ended 31 December 2006 and the attendance at the meetings were as follows:-

Meeting dates

Name of Directors 17/2/2006 12/4/2006 26/5/2006 25/8/2006 29/11/2006 Attendance

1. Chan Hua Eng • • • • • 100%

2. Sia Bun Chun • • • • • 100%

3. Mustafa bin Mohamed Najimudin • • • • • 100%

4. Dr. W Mohamed @ Nik Azam bin Wan Hamzah

• • • • • 100%

5. Tengku Yunus Kamaruddin * • • • • • 100%

6. Dato’ Lim Say Chong • • • • • 100%

7. Datuk Oh Chong Peng ** N/A N/A N/A N/A N/A N/A

* Tengku Yunus Kamaruddin retired from the Board of Directors on 12 February 2007.** Datuk Oh Chong Peng was appointed to the Board of Directors on 22 March 2007.

Training of DirectorsAll the directors have attended the Mandatory Accreditation Programme (MAP) prescribed by Bursa Malaysia Securities Berhad. The Directors will continue to enhance their skills and knowledge to aid them in discharging their duties as Directors of the Company via various trainings.

BOARD COMMITTEESTo ensure effective and professional discharge of duties, three (3) sub-committees were formed, namely the Audit Committee, Nomination Committee and Remuneration Committee. Each committee has clearly defined terms of references. The details of these committees are set below. These committees are empowered to examine specific issues under their respective purview and to henceforth, make recommendations to the Board accordingly. However, the ultimate responsibilities and final decisions rest with the Board.

(a) Audit Committee The Audit Committee assists the Board to meet its responsibilities regarding financial reporting and strengthens the independence of external auditors through the ability to communicate with Non-Executive Directors. Its role also includes monitoring the works of the internal audit division.

The Audit Committee comprises two (2) Independent Non-Executive Directors and one (1) Managing Director. The composition of the Committee is as follows:

• Tengku Yunus Kamaruddin * - Chairman (Independent Non-Executive Director) • Datuk Oh Chong Peng ** - Chairman (Independent Non-Executive Director) • Dato’ Lim Say Chong (Independent Non-Executive Director) • Sia Bun Chun (Managing Director) The Report of the Audit Committee for the financial year is set out in pages 25 to 27.


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18

(b) Nomination Committee The Nomination Committee comprises three (3) members of the Board, all of whom are Non-Executive Directors. The composition of the committee is as follows:

• Chan Hua Eng – Chairman (Non-Independent Non-Executive Director) • Dato’ Lim Say Chong (Independent Non-Executive Director) • Tengku Yunus Kamaruddin * (Independent Non-Executive Director) • Datuk Oh Chong Peng ** (Independent Non-Executive Director)

The main responsibilities of this Committee are to propose and recommend new candidates to the Board on an ongoing basis, if necessary, and to annually review the skills and experience and other qualities, including core competencies which the Non-Executive Directors should bring to the Board.

(c) Remuneration Committee The Remuneration Committee comprises three (3) members of the Board, all of whom are Non-Executive Directors. The composition of the committee is as follows:

• Dr. W Mohamed @ Nik Azam bin Wan Hamzah Chairman (Non-Independent Non-Executive Director) • Dato’ Lim Say Chong (Independent Non-Executive Director) • Tengku Yunus Kamaruddin * (Independent Non-Executive Director) • Datuk Oh Chong Peng ** (Independent Non-Executive Director)

The main responsibility of this Committee is to assess the remuneration packages of the Executive Directors. For the Non-Executive Directors, the remuneration will commensurate with their contribution, experience and level of responsibilities undertaken. The respective Executive Directors would abstain from participating in decisions regarding their respective remuneration package.

DIRECTORS’ REMUNERATION

The aggregate remuneration of the Directors of the Company for the financial year under review is as follows:-

Executive Director RM

Non-Executive DirectorRM

TotalRM

Salaries and other emoluments 676,800 - 676,800

Directors’ fees 50,000 127,500 177,500

Bonus and benefits-in-kind 548,302 - -

Total 1,275,102 127,500 1,402,602



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The number of Directors whose remuneration falls within the respective bands is as follows:-

Number of Executive Directors

Number of Non-Executive Directors

RM50,000 and below - 4

RM50,001 - RM100,000 - -

RM100,001 - RM150,000 - -

RM150,001 - RM200,000 - -

RM200,001 - RM250,000 - -

RM250,001 - RM300,000 - -

RM300,001 - RM350,000 - -

RM350,001 - RM400,000 - -

RM400,001 - RM450,000 - -

RM450,001 - RM500,000 1 -

RM500,001 - RM550,000 - -

RM550,001 - RM600,000 - -

RM600,001 - RM650,000 - -

RM650,001 - RM700,000 1 -

Total - -

The Remuneration Committee recommends to the Board:

• Remuneration package of Executive Directors which are linked to corporate and individual performance.

• Level of remuneration of Non-Executive Directors which commensurate with their contribution, experience and responsibilities. It is a policy that the Director whose remuneration package is the subject of review shall abstain from participation at meeting(s) to deliberate on those issues.

SHAREHOLDERS

(a) Relationship with shareholders The Board recognizes the need for transparency and accountability to the Company’s shareholders, stakeholders and investors through regular communication on the performance and major developments in the Company. The Company ensures timely release of the quarterly financial results, press releases and corporate announcements which are clear, unambiguous, succinct and accurate to its shareholders and investors. This is to ensure sufficient and relevant information reaches shareholders and investors in order for them to make informed investment decisions.

(b) Annual General Meeting (AGM) The AGM is the principal forum for dialogue with shareholders. At the Company’s AGM, shareholders participation is always encouraged and welcomed. It is a useful opportunity for the directors to communicate in person with the shareholders and present the Company’s business operations, performance and future plans. The directors are prepared to answer queries and receive feedback from the shareholders. The external auditors are also present to provide their professional and independent clarification on issues of concern raised by the shareholders, if any.


Annual Report 2006

20

Notice of the AGM and Annual Report are sent out with sufficient notice prior to the meeting. The Statement Accompanying the Notice of the AGM and explanatory notes on the proposed resolutions under Special Business are provided to help the shareholders to decide on their vote on the resolutions.

Where Extraordinary General Meetings are held to obtain shareholders’ approval on certain business or corporate proposals, comprehensive circulars to shareholders would be sent within prescribed deadlines in accordance with regulatory and statutory provisions.

ACCOUNTABILITY & AUDIT

(a) Financial Reporting The Group’s financial statements were prepared in accordance to the Companies Act, 1965 with the approved accounting standards to give a true and fair view of the state of affairs of the Group at the end of the financial year. In preparation of the financial statements, the Directors aim to present a balanced and accurate assessment of the Group’s financial position and prospects. The Group’s financial statements and quarterly announcements are reviewed, deliberated and adopted by the Audit Committee prior to its recommendation for adoption by the Board. The Audit Committee Chairman will brief the Board of any significant matters including material changes that need to be made to the financial statements and quarterly announcements.

(b) Internal Control The Board recognizes the importance of maintaining a sound system of internal controls which covers risk management, financial, organizational, operational and compliance controls. The Board acknowledges its responsibility and accountability for the Group’s system of internal controls and for reviewing the effectiveness, adequacy and integrity of this system.

Information on the Group’s internal control is presented in the Statement on Internal Control in pages 23 to 24 of this Annual Report.

(c) Relationship with auditors The Board and the Audit Committee have always maintained a professional and transparent relationship with the Company’s auditors, who have continued to report to the shareholders of the Company on their findings as part of the Company’s financial reports with respect to each financial year.

The roles of the Audit Committee, the internal and external auditors of the Company are described in the Audit Committee Report as set out in pages 25 to 27 of this Annual Report.

This Corporate Governance Statement has been approved and signed by the Board of Directors in accordance with the resolution dated 26 April 2007.



Annual Report 2006

21

DIRECTORS’ RESPONSIBILITY STATEMENT IN RELATION TO THE FINANCIAL STATEMENTS

This statement is prepared as required by the Listing Requirements.

The Directors are required to prepare financial statements which give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year and of the results and the cash flows of the Group and the Company for that year ended.

The Directors consider that in preparing the financial statements:-

- the Group and the Company have used appropriate accounting policies and are consistently applied;- reasonable and prudent judgements and estimates were made; and- all applicable approved accounting standards in Malaysia have been followed.

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

The Directors have general responsibilities for taking such steps that appropriate systems are reasonably available to them to safeguard the assets of the Group and the Company, and to prevent and detect fraud and other irregularities and material misstatements. Such systems, by their nature, can only provide reasonable and not absolute assurance against material misstatement, loss or fraud.

The Statement of Directors pursuant to Section 169(15) of the Companies Act, 1965 is set out on Page 77.


Annual Report 2006

22

OTHER COMPLIANCE INFORMATION

Share Buy BackThere were no share buy back of the Company’s shares during the financial year.

Options, Warrants or Convertible SecuritiesThere were no options, warrants or convertible securities exercised during the financial year as the Company has not issued any options, warrants or convertible securities.

American Depository Receipts (“ADR”) and Global Depository Receipts (“GDR”)The Company did not sponsor any ADR and GDR during the financial year.

Imposition of sanctions and/or penaltiesThere were no public sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by the relevant regulatory bodies during the financial year under review.

Non-audit fees paid to external auditorsThere were no non-audit fees paid to the external auditors for the financial year ended 31 December 2006.

Profit estimate, forecast or projection or unaudited resultsThe Company did not issue any profit estimate, forecast or projection for the financial year.

Profit guaranteeThere were no profit guarantees given by the Company during the financial year under review.

Material contracts or loansThere were no material contracts or loans entered into by the Company and its subsidiaries involving Directors’ and major shareholders.

Revaluation policy on landed propertiesThe Company does not have a policy of regular revaluation of landed properties.


Annual Report 2006

23

STATEMENT ON INTERNAL CONTROL

BOARD RESPONSIBILITY

It is the Board’s view that the Group’s objectives, its internal organization and the environment in which it operates continuously evolve and as a result, the risks that it faces also change. A sound system of internal control therefore depends on a thorough and regular evaluation of the nature and extent of these risks, which may threaten the Group’s continuous growth and financial viability.

The Board further believes that the Group’s system of internal control and risk management practices are vital to good corporate governance. The internal controls, financial or otherwise should provide reasonable assurance regarding the achievement of the Group’s objectives in:

• Effectiveness and efficiency of operations • Reliability and transparency of financial information • Compliance with laws and regulations • Safeguarding of the Group’s assets • Realising the Group’s strategic objectives • Optimising the returns to and protecting the interest of stakeholders (including shareholders, customers and staff)

The Board acknowledges its responsibility for maintaining a sound system of internal control. However, it recognises that reviewing the Group’s system of internal control is a continuous process, designed to manage rather than eliminate the risk of failure to achieve business objectives. Accordingly, the Board is also of the view that the Group’s system of internal control can only provide reasonable, but not absolute assurance against material misstatement or loss. The concept of reasonable assurance also recognizes that the cost of control procedures should not exceed the expected benefits.

RISK MANAGEMENT FRAMEWORK

Major business risks, their possible impact and likelihood of crystallization are evaluated by the key executives, reviewed and endorsed by senior management and subsequently by the Board of Directors. Key risks and management actions to mitigate these risks are reviewed at Audit Committee and Board Meetings.

The Group implements a structured risk management framework whereby the Risk Management Review Committee reviews the risks identified. However, acknowledging the dynamism of the business environment in which the Group’s businesses operate, the risk database profiled is subject to continuous review, moderation and updating for quarterly reporting to the Audit Committee and Board. Management also reinforces the tone of risk awareness and control consciousness on an on-going basis.

The Group’s risk management framework facilitates and enhances the ability of the Board and management to manage risks. Continuous effort is made to improve the policies, processes, people and structures within the Group. Besides improving the management of existing risks, it also manages potential risks.

AUDIT COMMITTEE & INTERNAL AUDIT

The Group has in place an Internal Audit Division, which provides support to the Audit Committee in discharging its duties with respect to the adequacy and integrity of the system of internal controls within the Group. During the financial year under review, Internal Audit carried out audits based on the internal audit plan approved by the Audit Committee. The Audit Committee, on behalf of the Board, reviews internal control issues identified and recommendations from reports prepared by the internal auditors on a quarterly basis.

The Audit Committee ensures that the Internal Audit Division is sufficiently resourced to maintain its independence, objectivity, competence and integrity. It also reviews the reports issued by the Risk Management Review Committee and monitors progress and status of management actions in addressing risk and control issues.

The Audit Committee meets with the external auditors to discuss reports and findings in respect of internal controls, identified during the statutory audit, and recommended management actions.


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STATEMENT ON INTERNAL CONTROL cont’d

OTHER KEY ELEMENTS OF INTERNAL CONTROL

The Group also has in place the following key elements of internal control:

1. Organizational Structure The Group has in place an organizational structure that is aligned to business and operational requirements, with clearly defined lines of accountability and delegated authority. The Board has control over the Group and monitors Management.

2. Management Reviews Periodic management meetings comprising the Executive Directors and senior management are held to identify, discuss and resolve business risks and operational deficiencies.

3. Financial Reporting Quarterly and annual financial results are reviewed and recommended by the Audit Committee and approved by the Board before release to Bursa Malaysia.

4. Quality Assurance & Quality Control Internal and External Quality Audits are conducted twice annually to ensure operational processes are in accordance and in compliance with the ISO 9001 Quality Management System. The Quality Assurance Department conducts ongoing monitoring on the operations to uphold the quality of goods and services.

5. Safety The Board of Directors is committed to provide a safe and healthy work environment for the employees of the Group. The Safety & Health Officer reviews safety, health and environmental issues of the employees and general public at the work sites and factories in accordance with the statutory requirements.

EXCLUSIONS

The Board of Directors wish to highlight that the following entities are excluded from the scope of Internal Audit and REI Group’s risk management framework due to the following:

i. REI-Biwater Consortium Sdn Bhd is a single-purpose company set up with Biwater (Malaysia) Sdn Bhd (previously known as Biwater Shellabear (Malaysia) Sdn Bhd) to implement the contract works of the Sungai Selangor Phase 3 water treatment plant; and ii. Bridgestone REI Komposit Sdn Bhd is an associate that has implemented the group policies of Bridgestone Corporation, Japan. iii. The 50% shareholding in Downer REI Sdn Bhd was reduced to 2.5% in December 2006.

Management has identified minor internal control weaknesses during the year; each of which has been or is being addressed. No major internal control weaknesses were identified nor have any of the reported weaknesses resulted in material losses or contingencies requiring disclosure in the Group’s Annual Report. Management continues to take measures to strengthen the control environment.

This statement is made in accordance with a resolution of the Board of Directors dated 26 April 2007.


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25

AUDIT COMMITTEE REPORT

COMPOSITION AND MEETINGS

The Audit Committee comprises of three (3) members. Two (2) members of the Committee are Independent Non-Executive Directors and one (1) is a Managing Director.

The members of the Committee are:-(i) Tengku Yunus Kamaruddin * – Chairman (Independent Non-Executive Director)(ii) Datuk Oh Chong Peng ** – Chairman (Independent Non-Executive Director)(iii) Dato’ Lim Say Chong (Independent Non-Executive Director)(iv) Sia Bun Chun (Managing Director)

The members of the Audit Committee, attendance at each Audit Committee Meeting during the financial year ended 31 December 2006 are as follows:-

Five (5) meetings were held during the financial year ended 31 December 2006 as follows:-

During the financial year, the Committee discharged its duties in accordance with its terms of reference.

The terms of reference of the Audit Committee are set out below:

COMPOSITIONThe Committee shall consist of:

• not less than three members;• majority of Committee members must be independent directors as defined under the Listing Requirements of Bursa Malaysia Securities Berhad (BMSB);• at least one Committee member: 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 years’ working experience and: (a) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or (b) he must be a member of one of the associations of accountants specified in Part III of the 1st Schedule of the Accountants Act 1967.

The members of the Committee shall select a Chairman from amongst their number, who fulfils the criteria of an independent director as defined under the Listing Requirements of BMSB.

If a member of the Committee resigns, dies or for any other reason, ceases to be a member resulting in the number of members reduced to below three, the Board shall, within three months of occurrence of that event, appoint such number of new members as may be required, that fulfils the related criteria, to make up the minimum number of three members.

QUORUMA quorum shall be two members and the majority of members present must be Independent Directors.

Meeting Schedule

Name of Directors 15 Feb 12 Apr 23 May 25 August 23 November Attendance

Tengku Yunus Kamaruddin * • • • • • 100%

Dato’ Lim Say Chong • • • • • 100%

Sia Bun Chun • • • • • 100%

Datuk Oh Chong Peng ** N/A N/A N/A N/A N/A N/A

* Tengku Yunus Kamaruddin retired from the Board of Directors on 12 February 2007.** Datuk Oh Chong Peng was appointed to the Board of Directors on 22 March 2007.


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26

AUDIT COMMITTEE REPORT cont’d

AUTHORITY The Committee is authorized by the Board:

• to investigate any matters within the its terms of reference;• to have access to resources required to perform its duties;• to have full and unrestricted access to any information pertaining to the Group;• to have direct communication channels with the external auditors and Internal Audit Department of the Group;• to obtain external and/or independent professional advice as necessary; and • to convene meetings with external parties with relevant experience and expertise, excluding the attendance of the executive members of the Committee, whenever deemed necessary.

DUTIES/FUNCTIONSThe duties/functions of the Committee shall be:

• to review the external auditors the audit plan before the audit commences;• to review the external auditors management letter and management response;• to review the external auditors audit report; • to discuss problems and reservations arising from the external auditors may wish to discuss;• to approve the audit fee and advise on resignation or dismissal of external auditors;• to recommend the appointment/re-appointment of external auditors to the Board for approval;• to review the internal audit plan;• to review any appraisal and approve any appointment or termination of senior staff members of the Internal Audit

Division;• to be informed of the resignations of internal audit staff;• to review the quarterly results and year-end financial statements, prior to the approval by the Board;• to review any related party transaction and conflicts of interest situation that may arise within the Group including

any transaction, procedure or course of conduct that raises questions of management integrity and to ensure that the internal control procedures with regards to such transactions are sufficient;

• to obtain assurance that principal risks have been identified and appropriately managed;• to review the adequacy and integrity of the internal control framework;• to consider the major findings of internal investigations and management’s response; and• to perform any other functions as may be agreed to by the Committee and the Board.

SUMMARY OF ACTIVITIESThe main activities of the Audit Committee in discharging its functions and duties during the financial year under review were as follows:

• Review of the internal auditors’ scope of work and their audit plan.• Review with the external and internal auditors, the results of their audit, the audit report and internal control

recommendations in respect of control weaknesses noted in the course of audit.• Review of the quarterly unaudited financial results announcements and annual financial statements prior to

recommending the same for the approval of the Board.• Review the performance of the internal audit function.• Review of the Company’s compliance with the Listing Requirements of BMSB, the applicable approved accounting

standards issued by the Malaysian Accounting Standards Board and other relevant legal and regulatory requirements.


Annual Report 2006

27

AUDIT COMMITTEE REPORT cont’d

INTERNAL AUDIT DIVISIONAn Internal Audit Division shall be established within the organization structure of the Group, as an extension of the authority and duties/functions of the Audit Committee. The mission of the Internal Audit Department is to provide independent and objective assurance and consulting services designed to add value and improve the Group’s operational efficiency. It helps the Group accomplish its objectives by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, controls and governance processes.

The scope of works of the Internal Audit Division is to determine whether the Group’s network of risk management, controls and governance processes, as designed and represented by management, is adequate and functioning in a manner to ensure:

• Risks are appropriately identified and managed.• Necessary interaction exists with the various governance groups.• Significant financial, managerial, and operating information is accurate, reliable, and timely.• Employees’ actions are in compliance with policies, standards, procedures and applicable laws and regulations. • Resources are acquired economically, used efficiently, and adequately protected. • Programmes, plans and objectives are achieved. • Quality and continuous improvement are fostered in the Group’s control processes. • Significant legislative or regulatory issues impacting the Group are recognized and addressed appropriately.

RISK MANAGEMENTIn line with the Malaysian Code on Corporate Governance and the requirements of the Listing Requirements of the BMSB, a risk management framework is implemented to identify, measure, control and monitor risks in accordance with the Risk Management Policy that is adopted by the Board. The Risk Management Policy sets out the purpose and responsibilities of the management and employees in relation to risk management.


DIRECTORS’ REPORT AND STATUTORY FINANCIAL STATEMENTS

DIRECTORS’ REPORT

FINANCIAL STATEMENTS INCOME STATEMENTS BALANCE SHEETS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY COMPANY STATEMENT OF CHANGES IN EQUITY CASH FLOW STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

STATEMENT BY DIRECTORS

STATUTORY DECLARATION

REPORT OF THE AUDITORS

29

3233 34363739

77

77

78


Annual Report 2006

29

DIRECTORS’ REPORT

The Directors are pleased to submit their annual report to the members together with the audited financial statements of the Group and Company for the financial year ended 31 December 2006.

PRINCIPAL ACTIVITIES

The principal activities of the Company consist of design and fabrication of steel structures for high tension transmission towers, microwave towers and substation structures, manufacture of pressed steel sectional water tank panels and provision of other fabrication and installation works. The principal activities of the subsidiaries are as set out in Note 18 to the financial statements.

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

FINANCIAL RESULTS Group Company RM RM

Profit attributable to equity holders of the Company 22,667,882 19,053,896Minority interests 917,240 0 Net profit for the financial year 23,585,122 19,053,896

DIVIDEND

The dividend declared and paid since the end of the previous financial year was as follows:

RM

In respect of the financial year ended 31 December 2006 on 68,377,306 ordinary shares: - an interim gross dividend of 5 sen per share, less income tax of 28%, paid on 23 October 2006 2,461,584 - a special tax exempt dividend of 5 sen per share, paid on 23 October 2006 3,418,865 5,880,449 The Directors do not recommend the payment of any final dividend for the financial year ended 31 December 2006.

RESERVES AND PROVISIONS

All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.

DIRECTORS

The Directors who have held office during the period since the date of the last report are as follows:

Chan Hua EngSia Bun ChunMustafa bin Mohamed NajimudinDr. W. Mohamed @ Nik Azam bin Wan HamzahDato’ Lim Say ChongDatuk Oh Chong Peng (appointed on 22 March 2007)Tengku Yunus Kamaruddin (retired on 12 February 2007)

In accordance with Article 80 of the Company’s Articles of Association, Mustafa bin Mohamed Najimudin retires at the forthcoming Annual General Meeting and being eligible, offers himself for re-election.

In accordance with Article 87 of the Company’s Articles of Association, Datuk Oh Chong Peng retires at the forthcoming Annual General Meeting and being eligible, offers himself for re-election.

Under Section 129 of the Companies Act, 1965, Chan Hua Eng retires at the forthcoming Annual General Meeting and being eligible, offers himself for re-election.


Annual Report 2006

30

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than disclosed in Note 12 to the financial statements and significant related party transactions disclosed in Note 39 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

DIRECTORS’ INTERESTS IN SHARES

According to the register of Directors’ shareholdings, particulars of interests of Directors who held office at the end of the financial year in shares and options over shares in the Company and its related corporations are as follows:

Number of ordinary shares of RM1.00 each in the Company At At 1.1.2006 Bought Sold 31.12.2006Direct interest

Chan Hua Eng 70,000 0 0 70,000Sia Bun Chun 3,121,000 0 0 3,121,000Mustafa bin Mohamed Najimudin 226,670 0 0 226,670Dr. W. Mohamed @ Nik Azam bin Wan Hamzah 686,670 0 0 686,670

Number of ordinary shares of RM1.00 each in the Company At At 1.1.2006 Bought Sold 31.12.2006Indirect interest*

Chan Hua Eng 9,502,663 0 0 9,502,663Sia Bun Chun 6,750,500 0 0 6,750,500Dr. W. Mohamed @ Nik Azam bin Wan Hamzah 21,525,300 0 0 21,525,300

* Includes shares held by other persons or body corporate in which the Directors are deemed to have an interest.

By virtue of Sia Bun Chun holding more than 5% of the issued and fully-paid up share capital of the Company, he is deemed to have an interest in all the Company’s subsidiaries to the extent that the Company has an interest.

Other than as disclosed above, according to the register of Directors’ shareholdings, none of the other Directors held any interest in shares in the Company and its related corporations during the financial year.

SIGNIFICANT EVENTS

On 1 December 2006, the Company entered into a sale of shares agreement with Downer Engineering (M) Sdn. Bhd. ("DREI"), for the disposal of 118,750 units of the Company's ordinary shares of RM1.00 each fully paid in DREI for a cash consideration of RM2,606,834 based on the net assets of DREI as at 30 November 2006. These shares disposal represents 47.5% of the issued and fully paid-up share capital of DREI, comprising 250,000 unit ordinary shares of RM1.00 per each which have been issued and fully paid up. Upon such disposal, REI will maintain 6,250 units of ordinary shares of RM1.00 fully paid up in DREI, representing 2.5% of the issued and fully paid-up share capital of DREI.

DIRECTORS’ REPORT cont’d


Annual Report 2006

31

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the income statements and balance sheets were made out, the Directors took reasonable steps:

(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance 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 of business their values as shown in the accounting records of the Group and Company had 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 the allowance for doubtful debts in the financial statements of the Group and Company inadequate to any substantial extent; or

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

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

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group or the Company to meet their obligations when they fall due.

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

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

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

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.

In the opinion of the Directors:

(a) the results of the Group’s and Company’s operations 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 Group or Company for the financial year in which this report is made.


The number of employees at the end of the financial year amounted to 415 (2005: 452) employees in the Group and 279 (2005: 244) employees in the Company.

The address of the registered office and principal place of business of the Company is Rumah Rohas, 2nd Floor, No. 61, Jalan Raja Abdullah, Kampung Baru, 50300 Kuala Lumpur, Malaysia.

AUDITORS

The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

Signed on behalf of the Board of Directors in accordance with their resolution dated 27 April 2007.

SIA BUN CHUN MUSTAFA BIN MOHAMED NAJIMUDINDIRECTOR DIRECTOR

DIRECTORS’ REPORT cont’d


Annual Report 2006

32

Group Company Note 2006 2005 2006 2005 RM RM RM RM

REVENUE 7 182,827,511 152,322,755 166,615,717 106,407,737

COST OF SALES 8 (123,892,684) (114,785,125) (120,235,325) (83,053,091) GROSS PROFIT 58,934,827 37,537,630 46,380,392 23,354,646

OTHER OPERATING INCOME 9 3,533,460 3,023,329 10,887,585 9,356,198

SELLING AND DISTRIBUTION COSTS (12,440,588) (7,172,367) (11,820,201) (6,523,097)

ADMINISTRATIVE EXPENSES (17,800,772) (11,761,885) (19,698,132) (14,772,472)

FINANCE COSTS – INTEREST EXPENSES (1,029,337) (703,842) (890,863) (650,840)

SHARE OF RESULTS OF AN ASSOCIATE 19 159,172 (12,927) 0 0

SHARE OF RESULTS OF A JOINTLY CONTROLLED ENTITY 20 (52,862) 331,957 0 0 PROFIT BEFORE TAXATION 10 31,303,900 21,241,895 24,858,781 10,764,435

TAXATIONCompany and subsidiaries 13 (7,718,778) (4,138,591) (5,804,885) (1,703,965) PROFIT AFTER TAXATION 23,585,122 17,103,304 19,053,896 9,060,470

ATTRIBUTABLE TO:

EQUITY HOLDERS OF THE COMPANY 22,667,882 15,042,203 19,053,896 9,060,470

MINORITY INTEREST 917,240 2,061,101 0 0 NET PROFIT FOR THE FINANCIAL YEAR 23,585,122 17,103,304 19,053,896 9,060,470

DIVIDENDS PER SHARE (sen) 14 10.00 5.00 10.00 5.00 EARNINGS PER SHARE (sen) 15 Basic 33.151 21.999

The notes to the financial statements on pages 39 to 76 form an integral part of these financial statements.

INCOME STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006


Annual Report 2006

33

Group Company Note 2006 2005 2006 2005 RM RM RM RM

EQUITY

Share capital 30 68,377,306 68,377,306 68,377,306 68,377,306Share premium 31 5,409,923 5,409,923 5,409,923 5,409,923Retained earnings 29 51,051,694 34,108,984 29,668,158 16,494,711Other reserves 32 584,567 729,664 0 0 TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY 125,423,490 108,625,877 103,455,387 90,281,940

MINORITY INTERESTS 4,222,840 4,990,400 0 0 TOTAL EQUITY 129,646,330 113,616,277 103,455,387 90,281,940

NON-CURRENT LIABILITIES

Trade and other payables 27 1,728,339 1,848,435 1,380,408 1,311,197Deferred tax liabilities 22 480,456 675,775 732,960 847,729 TOTAL NON-CURRENT LIABILITIES 2,208,795 2,524,210 2,113,368 2,158,926 CURRENT LIABILITIES

Trade and other payables 27 40,215,738 52,701,615 31,037,051 25,754,061Short term borrowings 28 28,981,406 11,239,013 28,981,406 11,239,013Taxation 7,769,062 5,897,192 6,933,054 5,249,730 TOTAL CURRENT LIABILITIES 76,966,206 69,837,820 66,951,511 42,242,804 TOTAL LIABILITIES 79,175,001 72,362,030 69,064,879 44,401,730 TOTAL EQUITY AND LIABILITIES 208,821,331 185,978,307 172,520,266 134,683,670

NON-CURRENT ASSETS

Property, plant and equipment 16 22,128,469 27,828,729 19,201,403 16,443,856Intangible assets 17 0 748,225 0 0Investment in subsidiary companies 18 0 0 4,207,824 13,600,322Interest in associate company 19 2,895,153 2,735,981 1,750,000 1,750,000Interest in jointly controlled entity 20 0 1,125,822 0 125,000Other investments 21 662,828 435,540 615,430 435,540 TOTAL NON-CURRENT ASSETS 25,686,450 32,874,297 25,774,657 32,354,718 CURRENT ASSETS

Inventories 23 72,540,970 65,906,499 67,814,641 59,255,785Receivables, deposits and prepayments 24 54,670,377 53,773,468 48,247,319 36,349,359Deposits, bank and cash balances 25 54,174,198 33,424,043 30,683,649 6,723,808Non current assets held for sale 26 1,749,336 0 0 0 TOTAL CURRENT ASSETS 183,134,881 153,104,010 146,745,609 102,328,952 TOTAL ASSETS 208,821,331 185,978,307 172,520,266 134,683,670


BALANCE SHEETS AS AT 31 DECEMBER 2006


Annual Report 2006

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Annual Report 2006

37

Group Company 2006 2005 2006 2005 RM RM RM RM

OPERATING ACTIVITIES

Net profit for the financial year 23,585,122 17,103,304 19,053,896 9,060,470

Adjustments for non-cash items: Taxation 7,718,778 4,138,591 5,804,885 1,703,965 Share of results of an associate (159,172) 12,927 0 0 Share of results of a jointly controlled entity 52,862 (331,957) 0 0 Loss on waiver of debts 0 0 0 860 Gain on disposal of joint venture (1,587,522) 0 (2,488,084) 0 Property, plant and equipment: - depreciation 3,337,459 3,479,780 1,781,596 1,719,464 - net (gain)/loss on disposals (54,278) 21,422 (49,193) 0 - write off 56,435 59,597 0 23,587 - impairment loss 5,127,092 795,159 0 0 Amortisation of intangible asset 429,287 429,287 0 0 Impairment losses on intangible assets 318,938 91,409 0 0 Interest expense 1,029,337 703,842 890,863 650,840 Bad debts written off 0 319,315 0 319,315 Impairment loss of investment in subsidiary company 0 0 17,892,498 0 (Reversal)/impairment losses in other investment (173,640) 154,690 (173,640) 154,690 (Write back)/allowance for doubtful debts (113,173) 139,764 (7,276,054) 7,248,061 Net loss/(gain) in foreign exchange 778,882 210,236 726,956 (166,726) Interest income (1,389,033) (802,964) (865,111) (524,789) Dividend income 0 0 (6,660,000) (7,400,000) Allowance for obsolete stock 1,791,627 0 760,000 0

40,749,001 26,524,402 29,398,612 12,789,737Changes in working capital: Inventories (8,426,005) (20,441,605) (9,318,856) (18,576,752) Receivables, deposits and prepayments 44,913 27,931,913 (22,378,063) 11,424,963 Trade and other payables (13,336,164) (19,482,020) 6,701,179 871,419 Net amounts due from subsidiaries 0 0 5,351,565 5,438,673 Net amounts due from/(to) jointly controlled entity 0 0 2,476,586 (311,908)

19,031,745 14,532,690 12,231,023 11,636,132

Taxation paid (6,054,132) (2,972,622) (4,236,330) (208,440)Dividends paid (7,565,249) (6,795,167) (5,880,449) (4,923,167)

Net cash inflow from operating activities 5,412,364 4,764,901 2,114,244 6,504,525

CASH FLOW STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006


Annual Report 2006

38

Group Company Note 2006 2005 2006 2005 RM RM RM RMINVESTING ACTIVITIES

Purchase of property, plant and equipment 16 (4,746,685) (1,124,500) (4,540,951) (1,610,350) Proceeds from disposal of property, plant and equipment 230,946 39,463 51,001 0 Proceeds from disposal of investment in joint venture 1,800,000 0 1,800,000 0 Proceeds from capital reduction of investment in quoted shares 0 0 0 0 Investment in a jointly controlled entity 0 (50,000) 0 (50,000) Acquisition of additional shares in subsidiary 0 0 0 (4,000,000) Acquisition of technical and license cost 0 (211,388) 0 0 Interest received 1,389,033, 822,535 865,111 501,315 Dividends received 0 0 6,660,000 5,328,000

Net cash (outflows)/inflows from investing activities (1,326,706) (523,890) 4,835,161 168,965

FINANCING ACTIVITIES

Interest paid (1,029,337) (575,920) (890,863) (650,840) (Withdrawal)/placement of performance bond deposit 499,088 (729,220) 0 0 Drawdown/(repayment) of hire purchase creditors (49,664) (552,336) 158,907 (327,394) Drawdown/(repayment) in bank borrowings 17,742,393 (6,887,327) 17,742,393 (6,272,987)

Net cash inflows/(outflows) from financing activities 17,162,480 (8,744,803) 17,010,437 (7,251,221)

NET CHANGE IN CASH AND CASH EQUIVALENTS 21,248,138 (4,503,792) 23,959,842 (577,731)

CASH AND CASH EQUIVALENTS BALANCE AT THE BEGINNING OF THE FINANCIAL YEAR 27,358,149 31,804,581 6,723,807 7,301,538

FOREIGN EXCHANGE DIFFERENCES ARISING ON OPENING BALANCE 1,105 57,360 0 0

CASH AND CASH EQUIVALENTS BALANCE AT THE END OF THE FINANCIAL YEAR 33 48,607,392 27,358,149 30,683,649 6,723,807


CASH FLOW STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 cont’d


Annual Report 2006

39

1 GENERAL INFORMATION

The principal activities of the Company consist of design and fabrication of steel structures for high tension transmission towers, microwave towers and substation structures, manufacture of pressed steel sectional water tank panels and provision of other fabrication and installation works. The principal activities of the subsidiaries are set out in Note 18 of the financial statements.

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

The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Board of the Bursa Malaysia Securities Berhad.

2 BASIS OF PREPARATION

The financial statements of the Company have been prepared under the historical cost convention unless otherwise indicated in the individual policy statements in Note 3 to the financial statements.

The financial statements have been prepared in accordance with the provisions of the Companies’ Act 1965 and Financial Reporting Standards, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.

(i) The new and revised MASB approved accounting standards effective 1 January 2006 in these financial statements are as follows:

• FRS 1 First-time Adoption of Financial Reporting Standards • FRS 2 Share-based Payment • FRS 3 Business Combinations • FRS 5 Non-current Assets Held for Sale and Presentation of Discontinued Operations • FRS 101 Presentation of Financial Statements • FRS 102 Inventories • FRS 108 Accounting Policies, Changes in Accounting Estimates and Errors • FRS 110 Events After the Balance Sheet Date • FRS 116 Property, Plant and Equipment • FRS 121 The Effect of Changes in Foreign Exchange Rates • FRS 127 Consolidated and Separate Financial Statements • FRS 128 Investments in Associates • FRS 131 Interests in Joint Ventures • FRS 132 Financial Instruments: Disclosure and Presentation • FRS 133 Earnings Per Share • FRS 136 Impairment of Assets • FRS 138 Intangible Assets • FRS 140 Investment Property • Amendment to FRS 1192004 Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures – in

relation to the “asset ceiling” test • IC 107 Introduction of the Euro • IC 110 Government Assistance - No Specific Relation to Operating Activities • IC 112 Consolidation – Special Purpose Entities • IC 113 Jointly Controlled Entities – Non-Monetary Contributions by Venturers • IC 115 Operating Leases – Incentives • IC 121 Income Taxes – Recovery of Revalued Non-Depreciable Assets • IC 125 Income Taxes – Changes in the Tax Status of an Entity or its Shareholders • IC 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease • IC 129 Disclosure – Service Concession Arrangements • IC 131 Revenue – Barter Transactions Involving Advertising Services • IC 132 Intangible Assets – Web Site Costs

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2006


Annual Report 2006

40

2 BASIS OF PREPARATION cont’d

(i) The new and revised MASB approved accounting standards effective 1 January 2006 in these financial statements are as follows: (cont’d)

The adoption of the above FRS and amendment to FRS 119 and IC Interpretations (other than IC 112) did not have

a significant financial impact on the Group and Company and did not result in substantial changes in the Group and Company’s policies. The principal effects of the changes in accounting policies resulting from the adoption of the other new and revised FRS are discussed below:

(a) FRS 3: Business Combinations

Under FRS 3, any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost of acquisition (previously referred to as “negative goodwill”), after reassessment, is now recognised immediately in income statement. Prior to 1 January 2006, negative goodwill was recognised as “Reserve on Consolidation” and no amortisation was done. In such cases, it was recognised in income statement as if those excepted losses had been incurred. In accordance with the transitional provision of FRS 3, the negative goodwill of RM 155,277 as at 1 January 2006 was transferred to retained earning.

(b) FRS 5: Non-Current Assets Held For Sale and Discontinued Operations

The Group has applied FRS 5 prospectively and it requires a component of an entity to be classified as discontinued when the criteria to be classified as held for sale have been met or it has been disposed of.

An item is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For assets and liabilities of a discontinued operation that are classified as held for sale, the carrying amounts of all the assets and liabilities is measured in accordance with applicable FRSs. On initial classification as held for sale, the non current assets is recognised at the lower of carrying amount and fair value less costs to sell.

(c) FRS 101: Presentation of Financial Statements

The adoption of the revised FRS 101 requires changes in the presentation of the minority interests, share of net after-tax results of associates and other disclosures in the income statement.

FRS 101 also requires disclosure, on the face of the statement of changes in equity, the amounts attributable to equity holders of the parent and to minority interests.

The current financial year’s presentation of the Group’s consolidated financial statements is based on the revised requirements of FRS 101 with the comparatives restated to conform with the current period’s presentation.

(d) FRS 121: The Effects of Changes in Foreign Exchange Rates

Translation using spot rates

Previously, the Group translated foreign currency transactions and monetary items at contracted rates if those amounts are hedged by forward foreign exchange contracts. FRS 121 only allows exchange rates at date of transactions to be used in translating foreign currency transactions and exchange rates as at balance sheet date for translation of monetary items. There were no effects on the Company’s separate financial statements.

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2006 cont’d


Annual Report 2006

41


(i) The new and revised MASB approved accounting standards effective 1 January 2006 in these financial statements are as follows: (cont’d)

Comparatives

The effects on the comparatives to the Group on adoption of FRS 101 are as follows:

As Effects on previously adoption of As reported FRSs restated

Group RM RM RM

Financial year ended 31 December 2005

Share of results of an associate 30,824 (43,751) (12,927) Taxation (43,751) 43,751 0 Share of results of jointly controlled entities 459,799 (127,842) 331,957 Taxation (127,842) 127,842 0

(ii) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have not been early adopted.

The new standards and amendment that are mandatory for the Company’s financial periods beginning on 1 January 2007 or later periods, but which the Company has not early adopted, are as follows:

(a) FRS 117 Leases (effective for accounting periods beginning on or after 1 October 2006). This standard requires the classification of leasehold land as prepaid lease payments. The Company will apply this standard from financial periods beginning on 1 January 2007.

(b) FRS 124 Related Party Disclosures (effective for accounting periods beginning on or after 1 October 2006). This standard will affect the identification of related parties and some other related party disclosures. The Company will apply this standard from financial periods beginning 1 January 2007.

(c) FRS 139 Financial Instruments: Recognition and Measurement (effective date yet to be determined by Malaysian Accounting Standards Board). This new standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Hedge accounting is permitted only under strict circumstances. The Company will apply this standard when effective.

(d) Amendment to FRS 121 The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operations (effective for accounting periods beginning on or after 1 July 2007). This amendment requires exchange differences on monetary items that form part of the net investment in a foreign operation to be recognised in equity instead of in profit or loss regardless of the currency in which these items are denominated in. The Group will apply this amendment from financial periods beginning on 1 January 2008.

(iii) Standards, amendments to standards and interpretations to existing standards that are not relevant for the Company’s operations.

(a) Amendment to FRS 1192004 Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures (effective for accounting periods beginning on or after 1 January 2007).

(b) FRS 6 Exploration for and Evaluation of Mineral Resources (effective for accounting periods beginning on or after 1 January 2007).

(c) IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities (effective for accounting periods beginning on or after 1 July 2007).



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(iii) Standards, amendments to standards and interpretations to existing standards that are not relevant for the Company’s operations. (cont’d)

(d) IC Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments (effective for accounting periods beginning on or after 1 July 2007).

(e) IC Interpretation 5 Rights to Interests arising from Decommission, Restoration and Environmental Rehabilitation Funds (effective for accounting periods beginning on or after 1 July 2007).

(f) IC Interpretation 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment (effective for accounting periods beginning on or after 1 July 2007).

(g) IC Interpretation 7 Applying the Restatement Approach under FRS 1292004 Financial Reporting in Hyperinflationary Economies (effective for accounting periods beginning on or after 1 July 2007).

(h) IC Interpretation 8 Scope of FRS 2 (effective for accounting periods beginning on or after 1 July 2007).

The preparation of the above financial statement requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 5.

3 SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Basis of consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiary companies made up to the end of the year. Subsidiary companies are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

The results of subsidiary companies acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated, unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiary companies to ensure consistency with the policies adopted by the Group.

The purchase method of accounting is used to account for the acquisition of subsidiary companies by the Group. Under the purchase method of accounting, the cost of an acquisition is measured as the fair value of the assets given up, equity instruments issued and liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of the minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets of the subsidiary acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the consolidated income statement.

Minority interest represents that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiary companies, by the parent. It is measured at the minorities’ share of the fair value of the subsidiary companies’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiary companies’ equity since that date.

The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group’s share of its net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary is recognised in the consolidated income statement.



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3 SIGNIFICANT ACCOUNTING POLICIES cont’d

(b) Associates

Associates are those corporations, partnerships or other entities in which the Group exercises significant influences, but which it does not control generally accompanying a shareholding of between 20% and 50% of the voting right. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not the power to exercise control over those policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

Equity accounting is discontinued when the Group ceases to have significant influence over the entity.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Where necessary, in applying the equity method, appropriate adjustments are made to the associates’ financial statements to ensure consistency with the Group’s accounting policies.

(c) Jointly controlled entities

Jointly controlled entities are all those corporations, partnerships or other entities over which there is contractually agreed sharing of control by the Group with one or more parties where the strategic financial and operating decisions relating to the entities require unanimous consent of the parties sharing control. The Group’s interest in the joint venture is accounted for in the consolidated financial statements by the equity method of accounting.

Equity accounting is discontinued when the Group ceases to have joint control over the jointly controlled entity.

Equity accounting involves recognising the Group’s share of the post acquisition results of joint ventures in the income statement and its share of post acquisition movements within reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment.

The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint controlled entities that is attributable to the other venturers. The Group does not recognise its share of profits or losses from the joint ventures that result from the purchase of assets by the Group from the joint ventures until it resells the assets to an independent party. However, if a loss on the transaction provides evidence of a reduction in the net realisable value of current assets or an impairment loss, the loss is recognised immediately.

Where necessary, in applying the equity method, appropriate adjustments are made to the joint ventures’ financial statements to ensure consistency with the Group’s accounting policies.

(d) Investments

Investments in subsidiary companies, associated companies and joint venture are shown at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount.

Long term investments are shown at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in the value of such investments. Where there has been a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the period in which the decline is identified.



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3 SIGNIFICANT ACCOUNTING POLICIES cont’d (d) Investments cont’d

Short term investments (within current assets) are carried at the lower of cost and market value, determined on an aggregate portfolio basis by category of investment. Cost is derived at on the weighted average basis. Market value is calculated by reference to stock exchange quoted selling prices at the close of business on the balance sheet date. Increases/decreases in the carrying amount of marketable securities are credited/charged to the income statement.

On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged/credited to the income statement.

(e) Property, plant and equipment

Property, plant and equipment are stated at historical cost or valuation less accumulated depreciation and impairment losses. Historical cost includes their purchase cost and any incidental expenditure that is directly attributable to the acquisition of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the Group and the costs of the item can be measured reliably. All other repairs and maintenance are charged to the income statements during the financial period in which they are incurred.

As allowed by the transitional provisions of Financial Reporting Standard (‘FRS’) 116 “Property, Plant and Equipment” the valuation of the previously revalued assets have not been updated and these assets shall continue to be stated at their carrying amounts less accumulated depreciation and impairment loss.

Surpluses arising on revaluation are credited to revaluation reserve. Any deficit arising from revaluation is charged against the revaluation reserve to the extent of a previous surplus held in the revaluation reserve for the same asset. In all other cases, a decrease in carrying amount is charged to income statement.

Freehold land is not depreciated as it has an infinite life. All other property, plant and equipment are depreciated on a straight line basis to write off the cost of each asset to their residual values over their estimated useful lives summarised as follows:

Property, plant and equipment Estimated useful lives (years)

Leasehold land Over the periods of respective leases Buildings 2% Plant and equipments 10% - 20% Furniture and office equipment 7½ - 20% Motor vehicles 20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

Depreciation on property, plant and equipment ceases at the earlier of derecognition and classification as held for sale. Depreciation on assets under construction commences when the assets are ready for their intended use.

At each balance sheet date, the Group assess whether there is any indication of impairment. If such an indication exists, an asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. See significant accounting policies note 3(i) on impairment of assets. Gains and losses on disposals are determined by comparing proceeds with the carrying amount of the assets and are included in the income statement.

(f) Non current assets (or disposal groups) held for sale

Non current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through a continuing use.



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(g) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average.

The cost of finished goods and work-in-progress comprises of raw materials cost, direct labour, other direct costs and related production overhead (based on normal operating capacity). Cost of raw materials includes purchase costs and cost of bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

(h) Receivables

Receivables are carried at anticipated realizable value. Bad debts are written off in the year in which they are identified. An estimate is made for doubtful debts based on review of all outstanding accounts at the year end. The allowance is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the allowance is the difference between the carrying amount and the recoverable amount. The amount of allowance is recognised in the income statement.

(i) Impairment of assets

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or when events or circumstances occur indicating that impairment may exist. Property, plant and equipment and other non-current assets, including intangible assets with definite useful life, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The impairment loss is charged to the income statement. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Impaired assets are reviewed for possible reversal of the impairment at each reporting date.

(j) Research and development expenses

All expenses relating to research and development are charged to the income statement as and when incurred. Development expenses in respect of a project are only capitalised as intangible assets when the following conditions are met:

- the product or process is clearly defined and the costs attributable to the product or process can be separately identified and measured reliably;

- the technical feasibility of the product or process can be demonstrated; - the Company intends to produce and market, or use, the product or process; - the existence of a market for the product or process or, if it is to be used internally rather than sold, its usefulness to

the enterprise, can be demonstrated; and - adequate resources exists or their availability can be demonstrated, to complete the project and to market or use the

product or process.

Development expenses that have been capitalised are amortised from the commencement of commercial production of the product to which they relate on the straight line basis over the period of its expected benefit.

The useful life and amortisation of capitalised development expenses are assessed annually.

(k) Income taxes

Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and include all taxes based upon the taxable profits, including withholding taxes payable by a foreign subsidiary company, associated company or joint venture on distributions of retained earnings to companies in the Group.

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements.



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(k) Income taxes cont’d

Deferred tax assets are recognised 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.

Deferred tax is recognised on temporary differences arising on investments in subsidiary companies, associated companies and joint venture except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax.

(l) Construction contracts

Contracts costs are recognised when incurred. When the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised over the period of the contract as revenue and expenses respectively. The Group uses the percentage of completion method to determine the appropriate amount of revenue and costs to recognise in a given period. The stage of completion is measured by reference to the proportion that contract costs incurred for work performed to date bear to the estimated total costs for the contract.

When the outcome of construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable; contract costs are recognised when incurred.

When it is probable that contract costs will exceed total contract revenue the expected loss is recognised as an expense immediately.

The aggregate of the costs incurred and the profit/loss recognised on each contract is compared against the progress billings up to the period end. Where costs incurred and recognised profits (less recognised losses) exceed progress billings, the balance is shown as amounts due from customers on construction contracts under trade receivables. Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is shown as amounts due to customers on construction contracts under trade, other payables and accruals.

(m) Foreign currencies

Functional and presentation currency

Items included in the financial statement of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The financial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into RM using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Group Companies

The results and financial position of all group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

(iii) all resulting exchange differences are recognised as a separate component of equity.



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(m) Foreign currencies cont’d

On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of borrowings are taken to shareholders’ equity. When a foreign operation is sold, such exchanges differences are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and translated at the closing rate.

(n) Revenue recognition

Revenue comprises the invoiced value for the sale of goods and services, net of sales taxes, rebates and discounts and after eliminating sales within the Group.

Revenue from sale of goods are recognised upon the delivery of goods, when significant risks and rewards of ownership of the goods are transferred to the buyer.

Sales of services are recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Dividend income are recognised when the shareholders’ right to receive is established and interest income from short term deposits and dividend from investment in quoted securities are recognised as income based on the accrual concept.

(o) Dividend distribution

Dividends on ordinary shares are recognised as liabilities when proposed or declared before the balance sheet date. A dividend proposed or declared after the balance sheet date, but before the financial statements are authorised for issue, is not recognised as a liability at the balance sheet date.

(p) Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(q) Operating leases

Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on the straight line basis over the period of the lease period.

When operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

(r) Finance leases

Leases of assets where the Group assumes substantially all benefits and risks of ownership are classified as finance leases.

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



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(r) Finance leases cont’d

Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised as an expense in the income statement over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period

(s) Employee benefits

(a) Short term employee benefits

Wages, salaries, social security contributions, paid annual leave, sick leave, bonuses and non monetary benefits are accrued in the period in which associated services are rendered by employees of the Group.

(b) Post-employment benefits

The Group’s contributions to defined contribution plans are charged to the income statement in the period to which they relate. Once the contributions have been paid, the Group has no further payment obligations.

(t) Borrowings

Borrowings are stated at cost.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(u) Share capital

(a) Classification

Ordinary shares and special share with discretionary dividends are classified as equity.

(b) Share issue costs

Incremental external costs directly attributable to the issue of new shares are shown as a deduction, net of tax, in equity from the proceeds.

(v) Financial instruments

(i) Description

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.

A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise.

A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial statements with another enterprise under conditions that are potentially unfavourable.

(ii) Financial instruments recognised on the balance sheet

The particular recognition and measurement method adopted for financial instruments recognised on the balance sheet is disclosed in the individual policy statements associated with each item.



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(v) Financial instruments cont’d

(iii) Financial instruments not recognised on the balance sheet

The Group is a party to financial instruments that comprise foreign currency forward contracts and commodity futures contracts. These instruments are not recognised in the financial statements on inception.

The Group enters into foreign currency forward contracts to protect the Group from movements in exchange rates by establishing the rate at which a foreign currency asset or liability will be settled.

Exchange gains and losses arising on contracts entered into as hedges of anticipated future transactions are deferred until the date of such transaction, at which time they are included in the measurement of such transactions.

(iv) Fair value estimation for disclosure purposes

The fair value of quoted long and short term investments is based on quoted market prices as at balance sheet date.

The fair values of unquoted long term investments are determined using estimated discounted values of future cash flows.

The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.

The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar financial instruments.

The face values, less any estimated credit adjustments, for financial assets and liabilities with maturity of less than one year are assumed to approximate their fair values.

4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s activities expose it to a variety of financial risks, including foreign currency exchange risk, interest rate risk, market risk, credit risk, liquidity and cash flow risk. The Group’s overall financial risk management objective is to ensure that the Group creates value for its shareholders. The Group focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Financial risk management is carried out through risk reviews and internal control systems with approval from the Board of Directors.

The Group uses derivative financial instruments such as foreign exchange contracts to hedge certain exposures. It does not trade in financial instruments.

Foreign currency exchange risk

The Group is exposed to currency risk as a result of the foreign currency transactions entered into by subsidiaries in currencies other than their functional currency. These companies enter into forward foreign currency exchange contracts to limit their exposure on foreign currency receivables and payables, and on cash flows generated from anticipated transactions denominated in foreign currencies.

Interest rate risk

The Group’s income and operating cash flows are substantially independent of changes in market interest rates. Interest rate exposure arises from the Group’s borrowings and deposits, and is managed through the use of fixed and floating rate debt.

Market risk

For key product purchases, the Group establishes floating and fixed priced levels that the Group considers acceptable and enters physical supply agreements, where necessary, to achieve these levels. The Group does not face significant exposure from the risk from changes in debt and equity prices.



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4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES cont’d

Credit risk

Credit risk arises when sales are made on deferred credit terms. The Group seeks to invest cash assets safely and profitably. It also seeks to control credit risk by setting counterparty limits and ensuring that sales of products and services are made to customers upon careful evaluation of the customer credit history.

Liquidity and cash flow risk

The Group maintains sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group aims at maintaining flexibility in funding by keeping committed credit lines available.

5 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated by the Directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Estimated impairment of investment in subsidiary company and its property, plant and equipment

The Group tests investments in subsidiary companies and its property, plant and equipment for impairment if there are any indicators of impairment. The recoverable amounts of the investment and fixed assets are determined based on the Directors’ assessment of the future plans for, and estimated value in use of, the underlying fixed assets or investments. In 2006, the Directors adopted a plan to cease certain operations, the equipment for which will become idle. The related business has incurred losses for the past 2 years. Based on the plans for the business and the related value in use assessment, the Directors have written both the Company’s investment in subsidiary and the Group’s investment in fixed and current assets to RM nil. This resulted in an impairment charge of RM17,892,498 (Company) and RM6,545,122 (Group). No sensitivity analysis is performed because the operations are to be ceased in full. Refer to Note 18 for further details.

(b) Construction contracts

The Group recognises contract revenue based on percentage of completion method. The stage of completion is measured by reference to the contract costs incurred to date to the estimated total costs for the contract. Significant judgment is required in determining the stage of completion, the extent of the contract costs incurred, the estimated total contract revenue (for contracts other than fixed price contracts) and contract costs, as well as the recoverability of the contracts. Total contract revenue also includes an estimation of the recoverable variation works that are recoverable from the customers. In making the judgments, the Group relied on past experience and work of specialists.

6 SEGMENTAL REPORTING

The Group is organised into four main business segments:

• Industrial products - manufacture of water tank panels, design and fabrication of steel structures for high tension transmission towers, microwave towers and substation structures and provision of other fabrication and installation works.

• Consumer products - manufacture of composite-based materials and polymer lithium ion cells and batteries. • Water treatment - implementation of potable water treatment projects. • Rental - rental of plant and equipment.

Inter-segment sales comprise the sales of plant and equipment on an arms length basis.



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6 SEGMENTAL REPORTING cont’d

(a) Primary reporting format - business segments

Industrial Consumer Water products products treatment Rental Group RM RM RM RM RM2006

RevenueExternal sales 173,330,786 1,632,873 7,283,052 580,800 182,827,511

ResultsSegment result 40,999,132 (9,468,819) 5,699,523 284,548 37,514,384Unallocated corporate expenses (5,287,457) Profit from operations 32,226,927Finance costs (994,434) (34,903) 0 0 (1,029,337)Share of results of an associate 159,172 0 0 0 159,172Share of results of a jointly controlled entity (52,862) 0 0 0 (52,862) Profit before taxation 31,303,900Taxation (7,718,778) Net profit for the year 23,585,122 Other InformationSegment assets 174,915,020 493,598 29,342,741 1,174,819 205,926,178Associate 2,895,153 0 0 0 2,895,153

Total assets 177,810,173 493,598 29,342,741 1,174,819 208,821,331

Segment liabilities 54,598,460 756,291 15,553,407 17,325 70,925,483Unallocated liabilities 8,249,518 Total liabilities 79,175,001

Capital expenditure 4,716,385 30,299 0 0 4,746,684

Impairment of intangible assets 0 318,938 0 0 318,938

Allowance for diminution in value: - other investments (173,640) 0 0 0 (173,640)

Allowance for doubtful debts (107,003) (6,170) 0 0 (113,173)

Provision for obsolete stock 760,000 1,031,627 0 0 1,791,627 Property, plant and equipment:- depreciation: - charge for the financial year 2,062,694 1,023,776 3,255 247,734 3,337,459- impairment loss for the financial year 0 5,127,092 0 0 5,127,092

Foreign exchange loss 767,515 11,367 0 0 778,882



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(a) Primary reporting format - business segments

Industrial Consumer Water products products treatment Rental Group RM RM RM RM RM2005

RevenueExternal sales 112,273,267 6,029,172 33,439,516 580,800 152,322,755

ResultsSegment result 18,286,862 (3,328,177) 11,412,266 267,573 26,638,524Unallocated corporate expenses (5,011,817) Profit from operations 21,626,707Finance costs (663,390) (40,452) 0 0 (703,842)Share of results of an associate (12,927) 0 0 0 (12,927)Share of results of a jointly controlled entity 331,957 0 0 0 331,957 Profit before taxation 21,241,895Taxation (4,138,591) Profit after taxation 17,103,304Minority interests (2,061,101) Net profit for the financial year 15,042,203

Other InformationSegment assets 127,960,935 9,386,649 43,384,983 1,383,937 182,116,504Associate 2,735,981 0 0 0 2,735,981

Jointly controlled entity 1,125,822 0 0 0 1,125,822 Total assets 185,978,307 Segment liabilities 38,085,015 1,154,903 26,528,843 20,302 65,789,063Unallocated liabilities 6,572,967 Total liabilities 72,362,030

Capital expenditure 3,653,380 69,089 14,591 0 3,737,060

Bad debts written off 319,315 0 0 0 319,315

Impairment loss of intangible assets 0 91,409 0 0 91,409

Allowance for diminution in value:- other investments 154,690 0 0 0 154,690

Allowance for doubtful debts (309,230) 448,994 0 0 139,764

Property, plant and equipment:- depreciation: - charge for the financial year 2,049,564 933,818 248,664 247,734 3,479,780- impairment loss for the financial year 0 795,159 0 0 795,159Foreign exchange loss 148,766 9,920 0 0 158,686

Segment assets consist primarily of property, plant and equipment, inventories, receivables and cash, net of allowances but exclude income tax assets. Segment liabilities comprise all operating liabilities such as trade and other payables, accrued liabilities and wages, but exclude income tax liabilities.

Capital expenditure represents additions to property, plant and equipment during the financial year.



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(b) Secondary reporting format - geographical segments

The Group’s business segments operate in two main geographical areas:

• Malaysia* - all business activities carried out by the four business segments. • Other ASEAN countries - mainly installation works for industrial products.

* Company’s home country

Sales Total assets Capital expenditure 2006 2005 2006 2005 2006 2005 RM RM RM RM RM RM

Malaysia 182,557,271 151,579,485 203,295,508 179,231,512 4,743,356 3,734,846Other ASEAN Countries 270,240 743,270 2,630,670 2,884,992 3,328 2,214

182,827,511 152,322,755 205,926,178 182,116,504 4,746,684 3,737,060

Associate 2,895,153 2,735,981Jointly controlled entity 0 1,125,822

Total assets 208,821,331 185,978,307

In determining the geographical segments of the Group, sales are based on the country in which the external customer is located. Total assets and capital expenditure are determined based on where the assets are located.

7 REVENUE Group Company 2006 2005 2006 2005 RM RM RM RM

Sale of goods 158,145,395 99,629,040 150,431,334 91,267,672Contract revenue 24,101,316 52,112,915 16,184,383 15,140,065Rental of plant and equipment 580,800 580,800 0 0

182,827,511 152,322,755 166,615,717 106,407,737

8 COST OF SALES Group Company 2006 2005 2006 2005 RM RM RM RM

Cost of inventories sold 110,448,770 78,146,186 109,546,196 72,396,576Contract costs 13,443,914 36,638,939 10,689,129 10,656,515

123,892,684 114,785,125 120,235,325 83,053,091



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9 OTHER OPERATING INCOME Group Company 2006 2005 2006 2005 RM RM RM RM

Interest income - bank 1,389,033 802,964 539,837 105,852- subsidiary companies 0 0 325,274 418,937Management fee 0 0 316,000 456,000Rental income 86,194 55,200 176,194 145,200Dividend income - subsidiary company 0 0 6,660,000 7,400,000VAT liabilities overprovided in prior years 0 1,106,331 0 0Insurance claims received 67,461 350,957 57,019 338,309Income from shares settlement agreement 100,000 400,000 100,000 400,000Gain on disposal of jointly controlled entity 1,587,522 0 2,488,084 0Others 303,250 307,877 225,177 91,900

3,533,460 3,023,329 10,887,585 9,356,198

10 PROFIT BEFORE TAXATION Group Company 2006 2005 2006 2005 RM RM RM RM

Profit before taxation is arrived at after charging/(crediting):

Auditors’ remuneration: - audit fees 132,363 108,868 53,200 45,000 - non audit fees 96,468 16,894 17,220 2,625Staff costs (include Directors’ remuneration) (Note 11) 15,734,039 18,051,798 12,108,210 10,333,411Rental expenses 794,012 927,593 541,393 445,168Amortisation of intangible asset 429,287 429,287 0 0Property, plant and equipment: - depreciation 3,337,459 3,479,780 1,781,596 1,719,464 - impairment 5,127,092 795,159 0 0 - net (gain)/loss on disposals (54,278) 21,422 (49,193) 0 - write off 56,435 59,597 0 23,587(Reversal)/impairment losses in other investments (173,640) 154,690 (173,640) 154,690Impairment loss on subsidiary (Note 18) 0 0 17,892,498 0(Write back)/allowance of doubtful debts (113,173) 139,764 (7,276,054) 7,148,061Waiver of debts 0 0 0 860Bad debts written off 0 319,315 0 319,315Allowance for stock obsolescence 1,791,627 0 760,000 0Impairment loss on intangible assets 318,938 91,409 0 0Net foreign exchange loss/(gain) 778,882 158,686 726,956 (166,726)



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11 STAFF COSTS Group Company 2006 2005 2006 2005 RM RM RM RM

Wages, salaries and bonus 14,007,706 16,160,371 10,731,277 9,157,683Defined contribution plan 1,526,316 1,737,034 1,200,777 1,024,490Provision for staff leave entitlement 20,391 13,694 30,287 40,298Allowance for gratuity 70,981 28,218 50,000 28,218Other employment benefit 108,645 112,481 95,869 82,722

15,734,039 18,051,798 12,108,210 10,333,411

12 DIRECTORS’ REMUNERATION

The Directors of the Company in office during the financial year were as follows:

Non-executive DirectorsChan Hua EngDr. W. Mohamed @ Nik Azam bin Wan HamzahDato’ Lim Say ChongDatuk Oh Chong Peng (appointed on 22 March 2007)Tengku Yunus Kamaruddin (retired on 12 February 2007)

Executive DirectorsSia Bun ChunMustafa bin Mohamed Najimudin

The aggregate amount of emoluments receivable by Directors of the Company during the year was as follows:

Group/Company 2006 2005 RM RM

Non-executive Directors:- fees 127,500 127,500

Executive Directors:- fees 50,000 57,500- salaries and bonus 1,015,200 725,000- estimated money value of benefits-in-kind 41,746 19,500- defined contribution plan 168,156 119,228- other employee benefits 14,400 14,400

1,417,002 1,063,128



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13 TAX EXPENSE Group Company 2006 2005 2006 2005 RM RM RM RM

Current tax:- Malaysian tax 7,926,002 3,894,087 5,919,654 1,857,909- Foreign tax 0 23,463 0 0Deferred tax (Note 22) (207,224) 221,041 (114,769) (153,944)

7,718,778 4,138,591 5,804,885 1,703,965

Current taxCurrent year 8,098,696 5,577,408 6,124,886 3,483,212Over accrual in prior years (net) - Malaysian tax (172,694) (1,659,858) (205,232) (1,625,303)

7,926,002 3,917,550 5,919,654 1,857,909Deferred taxOrigination and reversal of temporary differences (207,224) 221,041 (114,769) (153,944)

7,718,778 4,138,591 5,804,885 1,703,965

The explanation of the relationship between tax expense and profit before tax is as follows:

Group Company 2006 2005 2006 2005 % % % %Numerical reconciliation between the average effective tax rate and the Malaysian tax rate

Malaysian tax rate 28 28 28 28Tax effects of:- expenses not deductible for tax purposes 2 5 13 22- income not subject to tax (2) 0 (3) 0- under/(over)-accrual in prior years (1) (8) (1) (15)- current year’s losses not recognised 9 3 0 0- current year’s deductible temporary differences not recognised 0 2 0 0- tax incentive (11) (10) (14) (19)

Average effective tax rate 25 20 23 16

Included in income tax expense of the Group is tax saving amounting to RM nil (2005: RM95,483) from utilisation of current year tax losses.

Group 2006 2005 RM RMTax losses

Tax losses for which the related tax credit has not been recognised in the financial statements 2,209,768 1,644,405

These tax losses have not been recognised in the financial statements as there is no taxable profit against which the unused tax losses can be utilised.



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14 DIVIDENDS

Dividends declared or paid since the end of the previous financial year are as follows:

2006 2005 Gross Gross dividend Amount of dividend Amount of per share dividends per share dividends sen RM sen RM

Interim dividends, net of tax of 28% paid on 23 October 2006 5.00 2,461,584 5.00 2,461,584

Special tax exempt dividends, paid on 23 October 2006 5.00 3,418,865 0.00 0

10.00 5,880,449 5.00 2,461,584

The Directors do not recommend the payment of a final dividend for the financial year ended 31 March 2006.

15 EARNINGS PER SHARE

Basic earnings per share

Basic earnings per share of the Group is calculated by dividing the profit attributable to ordinary equity holders of the Company for the financial year by the weighted average number of ordinary shares in issue during the financial year.

Group 2006 2005

Profit attributable to ordinary equity holders of the Company (RM) 22,667,882 15,042,203Weighted average number of ordinary shares in issue 68,377,306 68,377,306Basic earnings per share (sen) 33.151 21.999

There are no instruments which diluted the earnings per share of the Group during the financial year.



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16 PROPERTY, PLANT AND EQUIPMENT

Furniture Leasehold Plant and and office Motor land Buildings equipment equipment vehicles Total

RM RM RM RM RM RMGroup

2006

COST/VALUATIONAt 1.1.2006- at valuation 760,000 840,000 0 0 0 1,600,000- at cost 5,022,494 9,832,245 25,515,116 4,372,336 2,170,956 46,913,147Additions 2,869,326 39,816 833,123 695,533 308,887 4,746,685Disposals 0 0 (33,262) (210,380) (963,997) (1,207,639)Write offs 0 0 (5,154) (202,407) 0 (207,561)Transfer to non-current assets held for sale (Note 26) 0 0 (3,852,425) 0 0 (3,852,425)Currency translation differences 0 0 (4,365) 348 148 (3,869) At 31.12.2006 8,651,820 10,712,061 22,453,033 4,655,430 1,515,994 47,988,338 - at valuation 760,000 840,000 0 0 0 1,600,000- at cost 7,891,820 9,872,061 22,453,033 4,655,430 1,515,994 46,388,338 ACCUMULATED DEPRECIATION AND IMPAIRMENTAt 1.1.2006 1,069,734 1,942,529 13,319,850 2,589,217 1,763,088 20,684,418Charge for the financial year 149,392 214,911 2,151,818 664,622 156,716 3,337,459Disposals 0 0 (29,410) (195,489) (806,072) (1,030,971)Write offs 0 0 (1,145) (149,981) 0 (151,126)Impairment loss 0 0 4,768,712 358,380 0 5,127,092Transfer to non-current assets held for sale (Note 26) 0 0 (2,103,089) 0 0 (2,103,089)Currency translation differences 0 0 (4,373) 325 134 (3,914)

At 31.12.2006 1,219,126 2,157,440 18,102,363 3,267,074 1,113,866 25,859,869

NET BOOK VALUEAt 31.12.2006 - at valuation 537,846 520,800 0 0 0 1,058,646 - at cost 6,894,848 8,033,821 4,350,670 1,388,356 402,128 21,069,823

7,432,694 8,554,621 4,350,670 1,388,356 402,128 22,128,469

At 31.12.2005 - at valuation 549,538 537,600 0 0 0 1,087,138 - at cost 4,163,222 8,192,116 12,195,266 1,783,119 407,868 26,741,591

4,712,760 8,729,716 12,195,266 1,783,119 407,868 27,828,729

In view of the net losses incurred by a subsidiary in the current and previous financial years, the Group carried out an impairment review of assets for the subsidiary. Based on the impairment review, the Group recognised impairment loss of RM5,446,030 (2005: RM886,569) during the financial year in respect of the subsidiary, of which RM5,127,092 (2005: RM795,159) is in respect of property, plant and equipment and RM318,938 (2005:RM91,410) is in respect of intangible assets (Note 17).



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16 PROPERTY, PLANT AND EQUIPMENT cont’d

Furniture Leasehold Plant and and office Motor land Buildings equipment equipment vehicles Total RM RM RM RM RM RM

Company

COST/VALUATIONAt 1.1.2006- at valuation 760,000 840,000 0 0 0 1,600,000- at cost 3,579,391 7,994,506 11,381,210 2,896,366 1,534,798 27,386,271Additions 2,869,327 39,816 637,437 685,483 308,888 4,540,951Disposal 0 0 0 (1,950) (395,832) (397,782)

At 31.12.2006 7,208,718 8,874,322 12,018,647 3,579,899 1,447,854 33,129,440

- at valuation 760,000 840,000 0 0 0 1,600,000- at cost 6,448,718 8,034,322 12,018,647 3,579,899 1,447,854 31,529,440

ACCUMULATED DEPRECIATIONAt 1.1.2006 795,296 1,540,134 7,190,251 1,710,698 1,306,036 12,542,415Charge for the financial year 125,769 177,828 820,792 507,388 149,819 1,781,596Disposal 0 0 0 (146) (395,828) (395,974)

At 31.12.2006 921,065 1,717,962 8,011,043 2,217,940 1,060,027 13,928,037

NET BOOK VALUEAt 31.12.2006 - at valuation 537,846 520,800 0 0 0 1,058,646 - at cost 5,749,807 6,635,560 4,007,604 1,361,959 387,827 18,142,757

6,287,653 7,156,360 4,007,604 1,361,959 387,827 19,201,403

At 31.12.2005 - at valuation 549,538 537,600 0 0 0 1,087,138 - at cost 2,994,557 6,756,772 4,190,959 1,185,668 228,762 15,356,718

3,544,095 7,294,372 4,190,959 1,185,668 228,762 16,443,856



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16 PROPERTY, PLANT AND EQUIPMENT cont’d

Net book value of buildings is analysed as follows:


Freehold building 781,610 801,090 781,610 801,090Long term leasehold buildings 7,773,011 7,928,626 6,374,750 6,493,282

8,554,621 8,729,716 7,156,360 7,294,372

The Company’s long term leasehold land and buildings were revalued in 1988 based on independent professional valuation on an existing use basis. As allowed by transitional provisions of Financial Reporting Standard (‘FRS’) 116 “Property, Plant and Equipment” as adopted by MASB, the valuation of previously revalued assets have not been updated and these assets shall continue to be stated at their carrying amounts less accumulated depreciation and impairment loss. The net book value of these revalued land and buildings, had these assets been carried at cost less accumulated depreciation, are as follows:


Long term leasehold land 538,908 550,419Buildings 221,895 229,526

760,803 779,945

Assets under hire purchase agreements are analysed as follows:


Plant and equipment:- additions during the financial year 402,390 2,612,560 402,390 1,813,360

- net book value at financial year end 2,540,199 1,794,151 1,900,839 1,794,151

Motor vehicles:- additions during the financial year 326,586 0 326,586 0

- net book value at financial year end 388,377 993,094 344,177 124,362



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17 INTANGIBLE ASSETS

Acquired technology Development and license fee cost Total RM RM RM

Group

At 1 January 2006 703,220 45,005 748,225Amortisation charge (384,282) (45,005) (429,287)Impairment loss (Note 10) (318,938) 0 (318,938) At 31 December 2006 0 0 0

At 1 January 2005 956,525 101,007 1,057,532Additions 211,389 0 211,389Amortisation charge (378,783) (50,504) (429,287)Impairment loss (Note 10) (85,911) (5,498) (91,409)

At 31 December 2005 703,220 45,005 748,225

The amortisation charge was included in administrative expenses in income statement line items.

18 SUBSIDIARIES Company 2006 2005 RM RM

Unquoted shares, at cost 22,100,322 13,600,322Accumulated impairment losses (17,892,498) 0

4,207,824 13,600,322

During the financial year, the Company had subscribed for an additional 8,500,000 shares of RM1 each in APL Tech Battery Industry Sendirian Berhad (‘APL’) by capitalising a sum of RM8,500,000 amount owing by APL to the Company. This exercise increased the Company’s equity interest. A bad debt allowance of RM7,165,443 was reversed upon capitalisation of these advances and an impairment loss was recorded in respect of the company’s investment, as described in Note 5(a).

During the financial year, the Company changed its accounting policy for measurement of its investments in subsidiary companies from valuation based on net tangible assets of the subsidiaries to the historical cost basis.

This change in accounting policy had been applied retrospectively. The effect of the change in accounting policy is shown in Note 41 to the financial statements.



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18 SUBSIDIARIES cont’d

Details of the subsidiaries, all of which are incorporated in Malaysia, except for Asia-com Plus Pacific, Inc., Great Sphere Limited and P.G Tank (S) Pte Ltd, which are incorporated in the Republic of Philippines, British Virgin Islands and Singapore respectively, are as follows:

Name of company Group’s effective interest Principal activities 2006 2005

Galvanising Engineering and 100% 100% Hot-dip galvanising Services Sdn. Bhd. (129235-U)*

Potaglas Tank Sdn. Bhd. (160072-M)* 100% 100% Manufacture and sale of glassfibre-reinforced polyester (GRP/FRP) water tank panels and installation of water tanks.

E M Maju Sdn. Bhd. (153950-H)* 100% 100% General contractor. Build and rent plant and equipment on a long term basis.

APL Tech Battery Industry Sendirian Berhad. 97% 94% Manufacture and (176413-V)* marketing of polymer lithium ion cells and batteries.

REI Komposit Sdn. Bhd. (16142-K)* 100% 100% Manufacture of composite - based materials. The Company remained dormant during the financial year.

REI Resources Sdn. Bhd. (322634-D)* 100% 100% Project management and general contracting. The Company remained dormant during the financial year.

Great Sphere Limited (IBC 333550)* 100% 100% Dormant.

SPBA Engineering Sdn. Bhd. 100% 100% Fabrication of (317252-K)* general steel structures.

REI-Biwater Consortium Sdn. Bhd. (390782-W)* 74% 74% Contractor in the implementation of potable and water treatment projects.



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18 SUBSIDIARIES cont’d

Name of company Group’s effective interest Principal activities 2006 2005

Asia-com Plus Pacific, Inc. ** 97.6% 97.6% General contractor, (S.E.C. Reg. No. A200003139) primarily tower, general construction and other allied business, construction for communication facilities and in other allied businesses except the construction and repair of locally funded public works.

PG Tank (S) Pte Ltd*** 100% 100% Dormant.

* Shares held directly by the Company and audited by PricewaterhouseCoopers, Malaysia.** Shares held indirectly by a subsidiary, REI Resources Sdn. Bhd. and not audited by PricewaterhouseCoopers,

Malaysia. Even though equity interest is only 40%, being the majority participant in the profit distribution (at 97.6%), REI Resources Sdn. Bhd. is deemed the majority stakeholder of shareholders’ equity with a controlling interest.

*** Shares held indirectly by a subsidiary, Potaglas Tank Sdn. Bhd. and not audited by PricewaterhouseCoopers, Malaysia.

19 INTEREST IN ASSOCIATE COMPANY

2006 2005 RM RM

Group:Share of net assets of associate 2,895,153 2,735,981 Company:Unquoted shares, at cost 1,750,000 1,750,000

The Group’s share of the assets and liabilities of the associate is as follows:

2006 2005 RM RM

Property, plant and equipment 889,145 831,299Current assets 3,576,955 3,399,453Current liabilities (1,526,127) (1,409,371)Non-current liabilities (44,800) (85,400) Net assets 2,895,153 2,735,981



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19 INTEREST IN ASSOCIATE COMPANY cont’d The Group’s share of the revenue and results of the associate is as follows:

2006 2005 RM RM

Revenue 4,409,747 4,208,151

Profit before taxation 217,972 30,824Taxation (58,800) (43,751) Profit/(loss) after taxation 159,172 (12,927)

The details of the associate, which is incorporated in Malaysia, are as follows:

Group’sName of company effective interest Principal activities

2006 2005

Bridgestone REI Komposit Sdn. Bhd.* 28% 28% Manufacturing of moulding compound for sectional water tank, bathtub and machinery, and high strength composites thermo set moulding polymers for the aerospace, electrical and electronics and automotive business.

*Shares held directly by the Company.

20 INTEREST IN JOINTLY CONTROLLED ENTITY

2006 2005 RM RM

Group:Share of net assets of the jointly controlled entity 0 1,125,822

Company:Unquoted shares at cost 0 125,000

As at 31 December 2006, the Group has a nil (2005: 50%) interest in a Malaysian incorporated jointly controlled entity, Downer REI Sdn Bhd (‘DREI’), which is in the construction industry.



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20 INTEREST IN JOINTLY CONTROLLED ENTITY cont’d

On 1 December 2006, the Company had disposed off 47.5% of its interest in DREI to its joint venture partner for a cash consideration of RM2,606,834 resulting in a gain of RM2,488,084 and RM1,587,222 at Company and Group level respectively. Following the disposal, the Company’s 2.5% remaining interest in DREI had been reclassified to other investments (Note 21).

The Group’s share of the assets, liabilities and income and expenses of the jointly controlled entity are as follows as at, and for the 11months/year ended, 31 December 2006:

2006 2005 RM RM

Non-current assets 96,046 168,515Current assets 5,432,257 7,467,316Current liabilities (5,474,655) (6,510,009) Net assets 53,648 1,125,822

Revenue 9,428,385 19,780,939Expenses (9,529,396) (19,321,140) (Loss)/profit before tax (101,011) 459,799Taxation 48,100 (127,842) (Loss)/profit after tax (52,911) 331,957

21 OTHER INVESTMENTS Group Company 2006 2005 2006 2005 RM RM RM RM

Quoted investments in Malaysia, at cost 2,531,800 2,531,800 2,531,800 2,531,800Accumulated impairment losses (1,922,620) (2,096,260) (1,922,620) (2,096,260)

609,180 435,540 609,180 435,540

Unquoted investment, at cost 53,648 0 6,250 0 662,828 435,540 615,430 435,540

Market value of quoted shares 609,180 435,540 609,180 435,540

For unquoted investment for which there are no quoted market prices, it was not practicable within the constraints of timeliness and cost to estimate reliably their fair values. At the balance sheet date, the net tangible assets reported by this Company was RM5,421,716. Profit after tax for the financial year ended was reported as RM1,014,301.



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22 DEFERRED TAX

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the balance sheet:


Deferred tax liabilities (480,456) (675,775) (732,960) (847,729)

At start of year (675,775) (467,196) (847,729) (1,001,673)

(Charged)/credited to income statement (Note 13): - property, plant and equipment (3,632) (443,557) 128,566 (318,381) - deductible temporary differences 62,740 506,679 62,740 472,325 - tax loses and credit 155,176 0 0 0 - provisions (19,150) 0 (76,537) 0 - others 0 (284,163) 0 0 (480,641) (688,237) (732,960) (847,729)Foreign exchange differences arising on opening balances 185 12,462 0 0 At end of year (480,456) (675,775) (732,960) (847,729) Subject to income taxDeferred tax assets (before offsetting)Property, plant and equipment 1,199,577 25,101 84,105 70,861Provisions 416,531 0 282,596 0Tax losses 473,157 317,981 0 0Others 18,948 447,866 275,282 359,133 2,108,213 790,948 641,983 429,994Offsetting (2,108,213) (790,948) (641,983) (429,994) Deferred tax assets (after offsetting) 0 0 0 0

Deferred tax liabilities (before offsetting)Property, plant and equipment (2,402,339) (1,217,837) (1,235,223) (1,075,263)Others (186,330) (248,886) (139,720) (202,460) (2,588,669) (1,466,723) (1,374,943) (1,277,723)Offsetting 2,108,213 790,948 641,983 429,994 Deferred tax liabilities (after offsetting) (480,456) (675,775) (732,960) (847,729)

The amount of deductible temporary differences and unused tax losses (both of which have no expiry date) for which no deferred tax asset is recognised in the balance sheet are as follow:

Group 2006 2005 RM RM

Deductible temporary differences 1,021,633 1,100,414Tax losses 7,260,262 5,746,621



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23 INVENTORIES Group Company 2006 2005 2006 2005 RM RM RM RM

Raw materials 29,578,121 33,268,429 27,526,886 30,090,240Work-in-progress 5,108,899 2,022,575 5,102,753 1,430,008Finished goods 37,175,210 30,499,349 34,725,414 27,714,427Packing materials and consumables 678,740 116,146 459,588 21,110 72,540,970 65,906,499 67,814,641 59,255,785

Writedown of inventories included as expenses during the financial year amounted to RM1,791,627 (2005: RM nil) at Group and RM760,000 (2005: RM nil) at Company level respectively.

24 RECEIVABLES, DEPOSITS AND PREPAYMENTS


Trade receivables 47,935,385 40,513,933 39,968,536 20,999,061Less: Allowance for doubtful debts (839,558) (952,731) (254,314) (364,925)

47,095,827 39,561,202 39,714,222 20,634,136Amounts due from customers on contract (Note 35) 672,503 1,351,359 672,503 1,184,405Amount due from subsidiaries 0 0 2,161,473 10,631,212Less: Allowance for doubtful debts 0 0 (391,088) (7,556,531)Amount due from jointly controlled entity 0 10,512,937 0 10,093,253Amount due from related company 5,391,178 0 5,391,178 0Foreign value added tax benefit 355,697 183,132 200,946 183,132Amounts receivable from:- Staff 28,688 48,898 15,911 23,900- Others 9,158 410,686 340 9,487Deposits 277,312 213,759 204,063 113,828Prepayments 467,077 1,326,864 277,771 1,032,537Tax refund receivables 32,906 164,631 0 0Others 340,031 0 0 0 54,670,377 53,773,468 48,247,319 36,349,359



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24 RECEIVABLES, DEPOSITS AND PREPAYMENTS cont’d Group Company 2006 2005 2006 2005 RM RM RM RM

The currency exposure profile of trade receivables is as follows:- Ringgit Malaysia 15,047,931 35,365,024 7,831,276 16,629,059- Philippines Peso 93,927 3,427 0 0- US Dollar 12,818,695 4,192,751 12,747,672 4,005,077- Euro 19,135,274 0 19,135,274 0 47,095,827 39,561,202 39,714,222 20,634,136

Credit terms of trade receivables as at 31 December 2006 for the Group and Company vary from upon invoicing days to 120 days (2005: vary from upon invoicing days to 120 days).

Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large number of customers, cover a broad spectrum of manufacturing, water treatment and telecommunication and have a variety of end markets in which they sell. The Group’s historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group’s trade receivables.

The amount due from subsidiaries are unsecured, interest free and have no fixed terms of repayment, except for the amounts due from subsidiaries of RM391,088 (2005 : RM7,556,531) which is chargeable at an interest rate of 4% (2005 : 4%) per annum.

25 DEPOSITS, BANK AND CASH BALANCES


Deposits with licensed banks 22,513,420 25,625,378 5,073 1,549,920Bank and cash balances 31,660,778 7,798,665 30,678,576 5,173,888 54,174,198 33,424,043 30,683,649 6,723,808

Included in deposits with the Group are deposits amounting to RM5,566,806 (2005: RM6,065,894) which are used as security for bank guarantees.



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25 DEPOSITS, BANK AND CASH BALANCES cont’d


The currency exposure profile of deposits, bank and cash balances is as follows:

- Ringgit Malaysia 53,880,006 31,978,424 30,390,652 5,832,539- US Dollar 278,586 899,564 277,391 880,488- Euro 4,195 0 4,195 0- Sterling Pound 0 0 0 0- Japanese Yen 0 0 0 0- Singapore Dollar 447 437 447 437- Philippines Peso 0 535,274 0 0- Australian Dollar 10,964 10,344 10,964 10,344 54,174,198 33,424,043 30,683,649 6,723,808

The weighted average interest rates of deposits and bank balances as at 31 December 2006 were as follows:

Group Company 2006 2005 2006 2005 % % % %

Deposits with licensed banks 3.46 2.90 N/A 3.34Bank balances 1.60 0.06 1.65 0.06

The average maturity period of the deposits are as follows:

Deposits with licensed banks 99 days 113 days N/A 12 months

Bank balances are deposits held at call with banks.

26 NON CURRENT ASSET HELD FOR SALE

This amount has been reclassed from one of the subsidiary’s property, plant and equipment during the financial year.

During the financial year, the Board of Directors have approved for the sale of 10 towers in its subsidiary company, previously recorded as fixed assets use in an operating lease to a third party at a consideration of RM2,175,760 which is higher than the carrying value. Thus, the assets had been reclassified to non current assets held for sale (Note 16).



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70

27 TRADE AND OTHER PAYABLES Group Company 2006 2005 2006 2005 RM RM RM RM

Trade payables 20,494,797 18,325,802 9,837,925 8,725,935Amounts due to customers on contract (Note 35) 7,833,726 12,893,664 1,875,809 597,822Advance from customers 1,086,483 2,326,991 1,077,259 1,830,937Advances from corporate shareholder 480,000 480,000 0 480,000Payroll liabilities 424,105 663,376 319,198 518,621Duties and other taxes payable 85,920 63,657 46,538 63,657Accrued expenses 3,966,464 7,667,956 3,469,212 991,195Foreign value added tax liabilities 254,844 119,911 253,254 119,599Hire purchase creditors 2,445,120 2,494,784 1,907,882 1,748,975Amount due to subsidiaries 0 0 9,237,795 3,855,969Amount due to jointly controlled entity 0 7,616,667 0 7,616,667Amount due to related company 3,733,223 0 3,733,223 0Staff leave entitlement 163,151 109,016 139,297 109,016Other payables 976,244 1,788,226 520,067 406,865 41,944,077 54,550,050 32,417,459 27,065,258

Less: Amount due after 12 months (1,728,339) (1,848,435) (1,380,408) (1,311,197) Amount due within 12 months 40,215,738 52,701,615 31,037,051 25,754,061

The currency exposure profile of trade payables are as follows:- Ringgit Malaysia 18,766,504 17,202,129 8,109,632 8,072,382- US Dollar 745,985 1,024,292 745,985 653,553- Euro 43,667 0 43,667 0- Australia Dollar 0 60,316 0 0- Philippines Peso 938,641 39,065 938,641 0 20,494,797 18,325,802 9,837,925 8,725,935

The details of the hire purchase creditors are as follows:


Hire purchase creditors 2,725,213 2,841,545 2,136,397 2,001,285Less: Interest in suspense (280,093) (346,761) (228,515) (252,310)

2,445,120 2,494,784 1,907,882 1,748,975

Amount due within 12 months (716,781) (646,349) (527,474) (437,778) Amount due between 1 to 2 years 1,728,339 1,848,435 1,380,408 1,311,197

Credit terms of trade payables as at 31 December 2006 granted to the Group and Company vary from 14 days to 90 days (2005: 14 days to 90 days). The amounts due to subsidiaries and corporate shareholder of a subsidiary are unsecured, interest free and have no fixed terms of repayment.



Annual Report 2006

71

28 SHORT TERM BORROWINGS


Unsecured

Trade loan 14,260,406 0Banker’s acceptances 14,721,000 11,239,013 28,981,406 11,239,013

The weighted average interest rates as at 31 December 2006 was as follows:

Group/Company 2006 2005 % %

Banker’s acceptances 4.7 3.4

The range of contractual interest rates charged as at balance sheet date are as follows:

Group/Company 2006 2005 % %

Trade loan 4.2 - 4.7 0

The banker’s acceptance facilities of the Company are unsecured borrowings. The banker’s acceptances facility granted to subsidiary company is secured by way of corporate guarantee from the holding company.

The currency exposure profile for the short term borrowings are as follows:


Trade loan

US Dollar 14,260,406 0

All banker’s acceptances balance is denominated in Ringgit Malaysia.

29 RETAINED EARNINGS

Based on the estimated existing tax credit and the current tax rate on dividend after taking into account the existing tax exempt income, subject to the agreement of the tax authorities, the Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 to frank the payment of dividends out of all its retained profits as at 31 December 2006.

Subject to the agreement of the tax authorities, the Company has the following tax exempt account to declare as tax exempt dividends:

Company 2006 2005 RM RM

Tax exempt account 41,922,985 33,375,477



Annual Report 2006

72

30 SHARE CAPITAL Company 2006 2005 RM RM

Authorised 100,000,000 ordinary shares of RM1 each 100,000,000 100,000,000

Issued and fully paid ordinary shares of RM1 each 68,377,306 68,377,306

31 SHARE PREMIUM

Share premium is not available for distribution as cash dividends.

32 OTHER RESERVES

(a) Capital reserve

The capital reserve arose from acquisition of foreign subsidiary which is non distributable.

(b) Revaluation

The revaluation reserve represents surplus arising from the revaluation of the investment in subsidiaries.

During the financial year, the Company had changed its accounting policy in respect of the revaluation of subsidiaries where all subsidiaries are measured on cost basis.

The effect of the changes in the accounting policy are shown in Note 41 to the financial statements.

33 CASH AND CASH EQUIVALENTS


Deposits, bank and cash balances (Note 25) 54,174,198 33,424,043 30,683,649 6,723,808Amount used as security for bank guarantees (Note 25) (5,566,806) (6,065,894) 0 0 Unrestricted amount 48,607,392 27,358,149 30,683,649 6,723,808



Annual Report 2006

73

34 NON-CASH TRANSACTIONS

The principal non-cash transactions during the financial year are the acquisitions of property, plant and equipments by means of hire purchase (Note 16).

35 CONSTRUCTION CONTRACTS Group Company 2006 2005 2006 2005 RM RM RM RM

Aggregate costs incurred to date 334,376,160 340,313,059 35,465,641 33,932,772Recognised profits less recognised losses to date 60,952,382 57,128,411 15,864,296 17,092,795 395,328,542 397,441,470 51,329,937 51,025,567

Less: Progress billings (402,489,765) (408,983,775) (52,533,243) (50,438,984) (7,161,223) (11,542,305) (1,203,306) 586,583

Amounts due from customers on contracts (Note 24) 672,503 1,351,359 672,503 1,184,405Amounts due to customers on contracts (Note 27) (7,833,726) (12,893,664) (1,875,809) (597,822) (7,161,223) (11,542,305) (1,203,306) 586,583

Retentions on contracts 8,336,227 6,561,719 1,834,558 215,377

36 CAPITAL COMMITMENTS Group/Company 2006 2005 RM RM

Capital expenditure not provided for in the financial statements are as follows:Authorised and contracted property, plant and equipment 107,950 440,845

37 OPERATING LEASE COMMITMENTS

Group/Company 2006 2005 RM RMRental of office: - within one year 0 451,086 - between 1 to 5 years 0 37,904 0 488,990



Annual Report 2006

74

38 CONTINGENT LIABILITIES Company 2006 2005 RM RM

Unsecured

Bank guarantees given to secure bank borrowings for subsidiaries 29,246,000 41,672,000

39 SIGNIFICANT RELATED PARTY DISCLOSURES

In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other related party transactions and balances. The related party transactions described below were carried out on terms and conditions obtainable in transactions with unrelated parties.

(a) Related party and relationship

Related Party Relationship

Tan Sri Wan Azmi bin Wan Hamzah Substantial shareholder Sia Bun Chun Director and substantial shareholder Rohas Sdn. Bhd. Company owned by Tan Sri Wan Azmi bin Wan Hamzah Downer REI Sdn Bhd Single investment Bridgestone REI Komposit Sdn Bhd Associate company Biwater Shellabear (M) Sdn. Bhd. Corporate shareholder of a subsidiary

(b) Related party transactions Group 2006 2005 RM RM Rental of office paid to: - Rohas Sdn. Bhd. 450,492 451,392 Purchase of raw materials and consumables from: -Bridgestone REI Komposit Sdn Bhd 1,427,331 1,344,602 Management fees paid to: - Rohas Sdn. Bhd. 0 12,000 Civil work charged by: - Downer REI Sdn Bhd 7,152,398 9,904,298 Tower charged to: - Downer REI Sdn Bhd 666,580 813,229 Rental of office charged to: - Downer REI Sdn Bhd 7,425 12,524 Rental of Motor vehicle charged to: - Downer REI Sdn Bhd 7,594 0 Rental of apartment paid to: - Rohas Sdn. Bhd. 3,600 16,200 Rental of office charged to -Bridgestone REI Komposit Sdn Bhd 26,400 26,400 Purchase of assets from Downer REI 0 26,067 Purchase of services and materials - Biwater Shellabear (M) Sdn. Bhd. 7,175,758 9,864,433

No mandate is required to be obtained from shareholders for transactions with these companies as these transactions falls under the mandate exclusion clause.



Annual Report 2006

75

40 FINANCIAL INSTRUMENTS

(a) Forward foreign exchange contracts

Forward foreign exchange contracts are entered into by a subsidiary in currencies other than their functional currency and manage exposure and fluctuations in foreign currency exchange rates on specific transactions.

As at 31 December 2006, the Group has the following foreign currency forward contract commitments:

Currency Currency to be to be RM Contractual received paid Equivalent rate USD USD

Hedged item

Future sales of goods 829,000 0 3,024,275 3.6481 Future purchases of raw materials 0 3,986,534 14,164,953 3.5532

(b) Credit risk

The Company has no significant concentrations of credit risk except that all deposits are placed with major financial institutions in Malaysia. The Group has no significant concentrations of credit risk other than as set out below:

(i) all of the Group’s deposits were placed with major financial institutions in Malaysia; and

(ii) 14% of trade receivables of the balance sheet date was due from a blue chip company listed in Bursa Malaysia.

(iii) 53% of trade receivables of the balance sheet date were due from reputable telecommunication companies in Africa and Asia. Majority of these receivables have been paid since the financial year end.

(c) Fair values

The carrying amounts of financial assets and liabilities of the Group and Company at the balance sheet date approximated their fair values except as set out below:

Company Carrying Fair Note amount value* RM RM

Unquoted investment in subsidiary companies 18 4,207,824 0

* it was not practicable within the constraints of timeliness and cost to estimate these fair values reliably.



Annual Report 2006

76

41 CHANGES IN ACCOUNTING POLICIES

(a) FRS 116 requires an annual review of assets useful life and residual values. The adoption of FRS 116 by the Group and Company has no material impact on the financial statements of the Group and Company based on management’s detailed assessment of fixed assets, particularly in respect of plant and machinery. The original estimates of residual values and useful lives continue to be valid under of the new standard.

(b) Reclassification of prior year comparatives

Previously, the Company had stated its investments in certain subsidiaries at revalued amount based on Director’s estimation on the respective net tangible assets of the subsidiaries as at year end. The surplus arising from the revaluation is transferred to a non distributable revaluation reserve. The Company has changed this accounting policy to recognised investments in subsidiaries at cost. The effect of this change in accounting policy on the Company’s balance sheet for the current and prior period are shown below:

Change in Previously accounting stated policy Restated RM RM RM At 31 December 2005

Investment in subsidiary companies (Note 18) 24,849,316 (11,248,994) 13,600,322 Revaluation reserve 11,248,994 (11,248,994) 0

42 SUBSEQUENT EVENTS

(i) In view of the losses incurred for one of its subsidiary company, APL Tech Battery Industry Sdn Bhd (‘APL’), on 14 February 2007, the Board of Directors had resolved to cease the manufacturing operations of APL in the financial year ending 2007.

(ii) On 23 April 2007, the Board of Directors of REI received a Notice of Voluntary General Offer from Temasek Team Sdn. Bhd. (“Temasek”) to acquire the entire voting shares of REI comprising 68,377,306 ordinary shares of RM1.00 each for a cash consideration of RM1.80 per share.

Sia Bun Chun, currently the major shareholder and executive Director of the Company is deemed interested in the offer by virtue of his directorship and substantial shareholdings, direct and indirect, in REI and Temasek.

43 APPROVAL OF FINANCIAL STATEMENTS

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 27 April 2007.



Annual Report 2006

77

We, Sia Bun Chun and Mustafa bin Mohamed Najimudin, two of the Directors of Rohas-Euco Industries Bhd., state that, in the opinion of the Directors, the financial statements set out on pages 32 to 76 are drawn up so as to give a true and fair view of the state of affairs of the Group and Company as at 31 December 2006 and of the results and cash flows of the Group and Company for the financial year ended on that date in accordance with the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the Companies Act, 1965.

Signed on behalf of the Board of Directors in accordance with their resolution dated 27 April 2007.

SIA BUN CHUN MUSTAFA BIN MOHAMED NAJIMUDINDIRECTOR DIRECTOR

I, Cheong Kee Yoong, the officer primarily responsible for the financial management of Rohas-Euco Industries Bhd., do solemnly and sincerely declare that the financial statements set out on pages 32 to 76 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

CHEONG KEE YOONG (MIA 12292)

Subscribed and solemnly declared by the abovenamed Cheong Kee Yoong,

At: Kuala Lumpur

On: 27 April 2007

Before me.

COMMISSIONER FOR OATHS

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

STATUTORY DECLARATIONPursuant To Section 169(16) Of The Companies Act, 1965


Annual Report 2006

78

TO THE MEMBERS OF ROHAS-EUCO INDUSTRIES BHD. (Company No.4129 H) (Incorporated in Malaysia)

We have audited the financial statements set out on pages 32 to 76. These financial statements are the responsibility of the Company’s Directors. It is our responsibility to form an independent opinion, based on our audit, on these financial statement s and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report.

We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities so as to give a true and fair view of:

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

(ii) the state of affairs of the Group and the Company as at 31 December 2006 and of the results and cash flows of the Group and the Company for the financial year ended on that date;

and

(b) the accounting and other records and the registers required by the Act 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 Act.

The name of the subsidiary of which we have not acted as auditors is indicated in note 18 to the financial statements. We have considered the financial statements of the subsidiary and the auditors’ report thereon.

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

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

PRICEWATERHOUSECOOPERS SHIRLEY GOH(No. AF: 1146) (No. 1778/08/08 (J))Chartered Accountants Partner of the firm

Kuala Lumpur27 April 2007

REPORT OF THE AUDITORS


Annual Report 2006

79

PROPERTIES OF THE GROUPAS AT 31 DECEMBER 2006

No.

Registered Owner and

Location

Description/Existing

Use

Land/Built-up

Area (sq ft)

Year ofAcquisition

orRevaluation

Tenure of Land/

Year Built(Age of

Building)

Net Book Value at

31.12.2006RM

1. Rohas-Euco Industries Bhd.

a. Lot No. 10, Kawasan Land and 217,800/ 1988 Leasehold 537,846Perindustrian Bentong building/ 48,420 (revaluation) expiring (land)Mukim of Bentong steel 22.3.2053/ 1,376,17828700 Bentong fabrication 1987 (building)Pahang Darul Makmur factory (19 years)PT 4488 HS(D) 4017 and office

b. Lot No. 11, Kawasan Land and 735,697/ 2006 Leasehold 2,807,269Perindustrian Bentong building/ (land) (acquisition) expiring (land)Mukim of Bentong vacant 8.4.205928700 BentongPahang Darul MakmurPT 11691 HS(D) 10958

c. Lot No. 16, Kawasan Land/ 59,388/ 2000 Leasehold 436,577Perindustrian Bentong Concrete area (land) (acquisition) expiring (land)Mukim of Bentong 25.1.2060/ 262,08028700 Bentong 2005 (Concrete area)Pahang Darul Makmur (1 year)PT 12184 HS(D) 8882

d. Lot No. 18, Kawasan Land and 219,909/ 1996 Leasehold 1,070,500Perindustrian Bentong building/ 33,823 (acquisition) expiring (land)Mukim of Bentong store 16.9.2053/ 1,746,31028700 Bentong 2001 (building)Pahang Darul Makmur (5 years)PT 4642 HS(D) 4231

e. Lot No. 20D, Kawasan Land and 130,680/ 1992 Leasehold 375,419Perindustrian Bentong building/ 45,200 (acquisition) expiring (land)Mukim of Bentong steel 25.1.2060/ 1,993,19428700 Bentong fabrication 1995 (building)Pahang Darul Makmur factory (11 years)PT 12346 HS(D) 8878 and office

f. Lot No. 57, Kawasan Land and 33,163/ 1988 Leasehold 269,846Perindustrian Bentong building/ 8,415 (acquisition) expiring (land)Mukim of Bentong store 25.1.2060/ 208,00128700 Bentong 1990 (building)Pahang Darul Makmur (16 years)PT 12185 HS(D) 8883

g. Lot No. 58, Kawasan Land and 42,883/ 1988 Leasehold 347,832Perindustrian Bentong building/ 10,600 (acquisition) expiring (land)Mukim of Bentong store 8.4.2059/ 218,61728700 Bentong 1990 (building)Pahang Darul Makmur (16 years)PT 12002 HS(D) 10966


Annual Report 2006

80

PROPERTIES OF THE GROUPAS AT 31 DECEMBER 2006 cont’d

No.

Registered Owner and

Location

Description/Existing

Use

Land/Built-up

Area (sq ft)

Year ofAcquisition

orRevaluation

Tenure of Land/

Year Built(Age of

Building)

Net Book Value at

31.12.2006RM

1. Rohas-Euco Industries Bhd. cont’d

h. Lot No. 59, Kawasan Land and 44,487/ 1996 Leasehold 230,301Perindustrian Bentong building/ 10,648 (acquisition) expiring (land)Mukim of Bentong vacant 22.3.2053/ 492,88228700 Bentong 1987 (building)Pahang Darul Makmur (19 years)PT 4510 HS(D) 4039

i. Units B3-11 to B3-14 8 units of 3,660/ 1993 Freehold 179,567Units B4-13 to B4-16 low cost (built-up) (acquisition) 1994 (building)Taman Benus Jaya flats/ (12 years)Kawasan Perindustrian staffBentong quarters28700 BentongPahang Darul MakmurLot No. 15239,GM 879/M2/3/99-102GM 879/M2/4/117-120

j. 27, Jalan Cempaka 3 storey 1,760/ 1998 Freehold 602,043SD 12/2 shop 4,471 (acquisition) 1995 (building)Bandar Sri Damansara office/ (11 years)52200 Kuala Lumpur officePT 21602 HS(D) 72764

2. Galvanising Engineering And Services Sdn. Bhd.

a. Lot No. 12, Kawasan Land and 30,680/ 1989 Leasehold 75,390Perindustrian Bentong building/ 10,100 (acquisition) expiring (land)Mukim of Bentong steel 8.4.2059/ 329,60128700 Bentong galvanising 1990 (building)Pahang Darul Makmur factory (16 years)PT 10074 HS(D) 4508

b. Lot No. 13, Kawasan Industrial 45,375 1993 Leasehold 110,697Perindustrian Bentong land/ (land) (acquisition) expiring (land)Mukim of Bentong store yard 8.4.205928700 BentongPahang Darul MakmurPT 10073 HS(D) 4509

c. Lot No. 14, Kawasan Industrial 45,703 1995 Leasehold 227,388Perindustrian Bentong land/ (land) (acquisition) expiring (land)Mukim of Bentong store yard 25.1.206028700 BentongPahang Darul MakmurPT 12366 HS(D) 8880

3. Potaglas Tank Sdn. Bhd.

a. Lot No. 8/9, Kawasan Land and 91,488/ 1994 Leasehold 268,499Perindustrian Bentong building/ 26,072 (acquisition) expiring (land)Mukim of Bentong water 22.3.2053/ 1,138,30728700 Bentong tanks 1996 (building)Pahang Darul Makmur factory (10 years)PT 4487 HS(D) 4016


Annual Report 2006

81

SHARE CAPITAL

Authorised Share Capital : RM100,000,000/-

Issued and Paid-up share capital : RM68,377,306/-

Class of shares : Ordinary shares of RM1.00 each

Voting rights : One vote per ordinary shares held

SIZE OF SHAREHOLDINGS

Number of Shareholders

% of Shareholders Number of Shares Held

% of Issued Capital

Less than 100 188 7.15 8,439 0.01

100-1,000 397 15.10 333,467 0.49

1,001-10,000 1,635 62.19 6,939,286 10.15

10,001-100,000 363 13.81 10,201,694 14.92

100,001 to less than 5% of issued shares 36 1.37 11,374,808 16.64

5% and above of issued shares 10 0.38 39,519,612 57.80

TOTAL 2,629 100.00 68,377,306 100.00

ANALYSIS OF SHAREHOLDINGSAS AT 24 APRIL 2007


Annual Report 2006

82

TOP 30 SHAREHOLDERSORDINARY SHARES OF RM1.00 EACH AS AT 24 APRIL 2007

Rank Shareholders’ Name Shareholdings % Of Issued Capital

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

Nik Anida binti Nik Manshor

Chan Liew Hoon

Nik Awang @ Wan Azmi bin Wan Hamzah

Sia Bun Chun

Cimsec Nominees (Tempatan) Sdn Bhd Beneficiary: CIMB Sharetech Sdn Bhd

Sia Bun Han @ Sia Boon Han

Chan Kok Tien Realty Sdn Bhd

Low Beng Choo

Alliancegroup Nominees (Tempatan) Sdn BhdBeneficiary: Pheim Asset Management Sdn Bhd forEmployees Provident Fund

Lathifah binti Che Wang

HSBC Nominees (Asing) Sdn BhdBeneficiary: CS Zurich for Cotopaxi Holdings Limited

ABB Nominee (Tempatan) Sdn Bhd Beneficiary: Pledged Securities Account for Tengku Uzir bin Tengku Ubaidillah

Tengku Uzir bin Tengku Ubaidillah

Mayban Nominees (Tempatan) Sdn BhdBeneficiary: Pledged Securities Account for Yoong Yet Onn

Cartaban Nominees (Asing) Sdn Bhd Beneficiary: Exempt An for Bank Sarasin-Rabo (Asia) Limited (AC Client FRGN)

W Mohamed @ Nik Azam bin Wan Hamzah

Toh May Fook

Mayban Nominees (Tempatan) Sdn BhdBeneficiary: Pledged Securities Account for Ng Sak Tun

Euco International Sdn Bhd

Ismail Harith Merican

Citigroup Nominees (Asing) Sdn Bhd Beneficiary: Citigroup GM Inc for SC Fundamental Value Fund LP

17,775,667

4,126,496

3,740,333

3,121,000

3,000,200

2,624,000

1,954,500

1,627,083

1,500,000

1,122,333

894,900

870,000

820,666

788,000

734,200

686,670

500,000

498,800

456,660

300,040

292,640

26.00

6.03

5.47

4.56

4.39

3.84

2.86

2.38

2.19

1.64

1.31

1.27

1.20

1.15

1.07

1.00

0.73

0.73

0.67

0.44

0.43


Annual Report 2006

83

TOP 30 SHAREHOLDERS cont’dORDINARY SHARES OF RM1.00 EACH AS AT 24 APRIL 2007

Rank Shareholders’ Name Shareholdings % Of Issued Capital

22.

23.

24.

25.

26.

27.

28.

29.

30.

Tan Jin Tuan

Sia Ping Hap

Marizan Nor bin Basirun

Mustafa bin Mohamed Najimudin

Chan Liew Choo

Tung Ah Kiong

Chan Kam Tong

Bimsec Nominees (Tempatan) Sdn Bhd Beneficiary: Syarikat Takaful Malaysia Berhad

Chew Siew Lan

291,000

285,667

228,666

226,670

225,000

201,400

200,000

198,668

190,400

0.43

0.42

0.33

0.33

0.33

0.29

0.29

0.29

0.28

TOTAL 49,481,659 72.35


Annual Report 2006

84

LIST OF SUBSTANTIAL SHAREHOLDERSAS AT 24 APRIL 2007

No. of Shares Held

Name Direct % Indirect %

1.

2.

3.

4.

Tan Sri Wan Azmi bin Wan Hamzah

Puan Sri Nik Anida binti Nik Manshor

Sia Bun Chun

Chan Liew Hoon

3,740,333

17,775,667

3,121,000

4,126,496

5.47%

25.99%

4.56%

6.03%

17,775,667 (a)

3,740,333 (b)

4,126,496 (c)

3,121,000 (d)

25.99%

5.47%

6.03%

4.56%

Notes :

(a) By virtue of his spouse, Puan Sri Nik Anida binti Nik Manshor (17,775,667 shares).

(b) By virtue of her spouse, Tan Sri Wan Azmi bin Wan Hamzah (3,740,333 shares).

(c) By virtue of his spouse, Chan Liew Hoon (4,126,496 shares).

(d) By virtue of her spouse, Sia Bun Chun (3,121,000 shares).


Annual Report 2006

85

DIRECTORS’ SHAREHOLDINGSORDINARY SHARES OF RM1.00 EACH AS AT 24 APRIL 2007

Directors Direct % Indirect %

1. Chan Hua Eng

2. Sia Bun Chun

3. Mustafa bin Mohamed Najimudin

4. Dr. W. Mohamed @ Nik Azam bin Wan Hamzah

5. Dato’ Lim Say Chong

6. Datuk Oh Chong Peng

70,000

3,121,000

226,670

686,670

-

-

0.10

4.56

0.33

1.00

-

-

1,981,1671

4,126,4962

-

-

-

-

2.90

6.03

-

-

-

-

TOTAL 4,104,340 5.99 6,107,663 8.93

Notes :

1. By virtue of his direct and indirect interest in Chan Kok Tien Realty Sdn. Bhd. (1,954,500 shares) and by virtue of his direct and indirect interest in Tysim Holdings Sdn. Bhd. (26,667 shares).

2. By virtue of his spouse, Chan Liew Hoon (4,126,496 shares).

notes

PROXY FORMFORTY-SEVENTH ANNUAL GENERAL MEETING

No. of Shares Held

I/We, ............……………………...............................................................(NRIC No ................................................................................... ) (FULL NAME IN BLOCK CAPITALS)

of ..............................................................................................................................................................................................................(FULL ADDRESS)

being a member(s) of ROHAS-EUCO INDUSTRIES BHD. (Company No. 4129-H), hereby appoint:-

............................................................................................................... (NRIC No .................................................................................. ) (FULL NAME)

of ....................................................................................................................... or ...................................................................................

failing him/her, ....................................................................................... (NRIC No .................................................................................. ) (FULL NAME IN BLOCK CAPITALS)

of ........................................................................................................................................................................................................... as(FULL ADDRESS)

or failing him/her the Chairman of the Meeting as my/our proxy/proxies to vote for me/us and on my/our behalf at the Forty-Seventh (47th) Annual General Meeting of the Company to be held at Dewan Berjaya, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Wednesday, 13 June 2007 at 2.30 p.m. or at any adjournment thereof.

Please indicate an “X” in the spaces provided below on how you wish your votes to be casted. If no specific instruction as to voting is given, the proxy/proxies will vote or abstain from voting at his/her discretion.

Resolutions For Against

Resolution 1 To receive the Audited Financial Statements of the Company for the financial year ended 31 December 2006 together with the Reports of the Directors and Auditors thereon.

Resolution 2 To re-elect Mustafa bin Mohamed Najimudin retiring pursuant to Article 80 of the Company’s Articles of Association.

Resolution 3 To re-elect Datuk Oh Chong Peng retiring pursuant to Article 87 of the Company’s Articles of Association.

Resolution 4 To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise the Board of Directors to fix their remuneration.

Resolution 5 Special Business No. 1To re-appoint Mr Chan Hua Eng who is over seventy (70) years of age as a Director of the Company in accordance with Section 129 of the Companies Act, 1965.

Resolution 6 Special Business No. 2To approve the payment of Directors’ fees of RM177,500/- in respect of the financial year ended 31 December 2006.

Signed on this ………....... day of ………………... 2007

………………......................................... Signature of Member(s)/Common Seal * Delete as appropriate Notes:(i) A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his

stead. 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.

(ii) Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportion of his holdings to be represented by each proxy.

(iii) In the case of a corporate member, the instrument appointing a proxy shall be under its Common Seal or under the hand of an officer or attorney duly authorised.

(iv) The instrument appointing a proxy must be deposited at the Registered Office of the Company at Rumah Rohas, 2nd Floor, No. 61, Jalan Raja Abdullah, Kampung Baru, 50300 Kuala Lumpur not less than 48 hours before the time appointed for holding the Meeting or at any adjournment thereof.

ROHAS-EUCO INDUSTRIES BERHAD (4129-H)

AFFIXSTAMP

1ST FOLD HERE

FOLD THIS FLAP FOR SEALING

THEN FOLD HERE

The SecretaryROHAS-EUCO INDUSTRIES BHD.Rumah Rohas, 2nd FloorNo. 61, Jalan Raja AbdullahKampung Baru50300 Kuala Lumpur

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