Scaling New Horizons - Envictus · Scaling New Horizons ... Malaysian domestic milk industry under ... Standard ISO 22000:2005 by Lloyd’s Register Quality Assurance Ltd

ETIKA INTERNATIONAL HOLDINGS LIMITEDannual report 2006

Scaling New Horizons

ETIK

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ETIKA INTERNATIONAL HOLDINGS LIMITED3 Church Street, #08-01 Samsung Hub, Singapore 049483

t: (65) 6536 5355f: (65) 6536 1360

02 CorporateProfile

04 MessagefromtheChairman

07 ReviewofOperations

14 FinancialHighlights

16 BoardofDirectors

19 SeniorManagement

20 CorporateInformation

22 CorporateGovernanceReport

31 FinancialStatements

77 StatisticsofShareholdings

79 NoticeofAnnualGeneralMeeting

82 NoticeofBooksClosure

ProxyForm

Contents

ETIKA INTERNATIONAL HOLDINGS LIMITED annual report 200602

representsourgoaltoconductbusinessinthemostethical

manner by upholding a strong code of conduct, principles

and procedures; supporting the morals and beliefs of our

customers and stakeholders; undertaking to protect the

environment; and observing the legal obligations of the

relevantlaws.

“Etika”a Malay translation of the word

“Ethics”

03ETIKA INTERNATIONAL HOLDINGS LIMITED annual report 2006

CorporateProfileEtika International Holdings Limited (“Etika”) was incorporated on 23 December 2003 in the Republic of Singapore.

Through a restructuring exercise carried out on 8 November 2004, the Company acquired the entire share capital

of Etika Dairies Sdn. Bhd. (“EDSB”), a Malaysian company involved in the manufacturing and distribution of dairy

products. Etika was listed on the SGX-SESDAQ on 23 December 2004. From a humble beginning as a manufacturer

and distributor of dairy products, the Group has since transformed into a regional Food and Beverage Group after it

acquired one of Malaysia’s leading frozen food and premium food wholesaler Pok Brothers Sdn. Bhd. (“PBSB”) and

its subsidiaries (“PB Group”) on 8 February 2006. The Group’s activities are divided into 3 divisions, namely the Dairies

Division, Frozen Foods (Wholesales and Distribution) Division (“Frozen Foods Division”) and Butchery and Bakery

Division (“Butchery & Bakery Division”), all carried out through the subsidiaries of Etika.

DAIRIES DIVISIONEDSB commenced operations in 1997and has in a relatively short periodgrown to be a major player in theMalaysian domestic milk industry underitsownbrand “DAIRY CHAMP”. EDSBmanufactures sweetened condensedmilk and evaporated milk for domesticandexportmarkets. Italsorepacksanddistributescomplementaryproductssuchasfullcreamandinstanthighcalciumnon-fat milk powder, instant coffee powderandteadust.Itsbrand“DAIRY CHAMP”has become a well regarded brand andwas awarded “Superbrand” status bythe Malaysian Superbrands Council fortwoconsecutiveyearsin2003/2004and2004/2005.

Today, the Group’s products can befound in ASEAN, East and West Africa,CentralandSouthAmerica,MiddleEast,and other Asia-Pacific countries. Apartfrom products exported under Etika’sown“DAIRY CHAMP” trademarkbrand,it also exports various other productsmanufactured by Etika under OEMarrangements.ThestrengthoftheGrouplies with its experienced managementteamthathasawiderangeofexpertiseinstrategicplanning,businessdevelopmentandin-depthoperationalandproductionexpertise specific to the milk productindustry.

FROZEN FOODS DIVISIONPBSBstartedasageneralstorebusinessinPetalingJaya,Malaysia,in1963.Asapremiumfoodwholesaler,PBSBimportsand distributes food products, both inrawandprocessed form,withparticularemphasis on servicing the hospitalityand consumer-based food industry. Itsmajorclientsincludemajor5-starhotels,airlines,cruiseships,hyper/supermarkets,bakeries, butcheries, fast-food chains,grocery stores, food processors andotherwholesalers.

PBGroupdeploysoneofthelargestfleetsoftrucks(includingrefrigeratedtrucks)inMalaysia for servicing its customers. Ithasstrategicallylocatedregionalcentresin Penang, Shah Alam, Johor Bahru,LangkawiandKuantanthatareequippedwithcoldstoragefacilities.

Most of the supplies are sourcedinternationally from the United States,Europe, Australia and New Zealand.Among others, its products includechilled and frozen beef, lamb, venison,turkey, canned fruits, seafoodanddairyproducts (cheese, cream and ultra-heattreated milk), french fries and relatedpotatoproducts, freshfruit juices,herbs&spicesandetc.InMalaysia,PBGroupis also a pioneer in supplying locallygrownhydroponicvegetableswhichwerepreviouslyavailableasimports.

BUTCHERY & BAKERY DIVISIONDe-luxe Food Services Sdn. Bhd.(“DFSSB”), which is a wholly-ownedsubsidiary of PBSB, is involved in themanufacturingofvalue-addedfrozenfoodproductslikeassortmentsofbeef,chickenand turkey cold-cuts and sausages,breakfastbeef,smokedsalmonandtroutaswellasbakery/confectioneryproductssuch as baguette, croissants, dinnerrolls and varieties of other pastries tocomplementthelinesoffreshproducts.

DFSSB has an added advantage ofmanufacturing products according tothe customer’s exact specifications. Asa testament to emphasis on quality,health and safety, DFSSB achieved ISO9001:2000(QualityManagementSystem)certificationandHACCP(HazardAnalysisCriticalControlPoint)systemrecognitionin 2004. On 5 July 2006, DFSSB wasawarded the Food Safety ManagementSystem Standard ISO 22000:2005 byLloyd’s Register Quality Assurance Ltd.DFSSB has also recently ventured intothe export market and has successfullysecured customers (via intermediaries)for Singapore, Japan, Australia, Chinaand Middle East markets for its value-addedfrozenfoodproducts.


Message fromthe Chairman

Dear valued shareholders,

Scaling New Horizons, the theme for this year’s

annual report is reflective of the actions and

initiatives the Group has undertaken to position

itself for growth in the years ahead.

0�ETIKA INTERNATIONAL HOLDINGS LIMITED annual report 2006

ThepastfinancialyearhasprovedtobeachallengingyearfortheGroupwhichwascharacterisedbyrisinginputandoperatingcosts,disruptioncausedbyimportbanoncertainsupplychainsandanoverallhighlycompetitivebusinessenvironment.However,inspiteofthesetoughbusinessconditions,theGrouphasremainedfocusandsteadfastinitseffortstoforgeaheadwithitsrationalisationandgrowthstrategiesinordertopositionitselfasaleadingregionalFoodandBeverage(“F&B”)Groupwithglobalreach.

FINANCIAL REVIEW

Fortheyearended30September2006,theGrouprecordedhigherrevenueofRM233.2million,animpressiveincreaseof55.4%comparedtoRM150.0millionreportedinthepreviousfinancialyear.TheincreasewasprimarilyattributedtotheconsolidationofPokBrothersSdn.Bhd.anditssubsidiaries(“PBGroup”)followingthecompletionoftheacquisitionon8February2006andhigherexportsalesofsweetenedcondensedmilkbyEtikaDairiesSdn.Bhd.

Notwithstandingthehigherrevenue,theGroup’sprofitafterincometaxwasRM5.0million,adecreaseof52.3%overthepreviousfinancialyear,attributedmainlybytheexceptionalincomerelatingtotheaccreditationofnegativegoodwillofRM3.1millionarisingfromtheacquisitionofEtikaDairiesSdn.Bhd.whichwasrecognisedlastyear.Excludingthisexceptionalincome,theGroup’sprofitafterincometaxdeclinedby32.1%duetohigheradministrativeexpenses,financingcostandincometaxincurred.

CORPORATE DEVELOPMENT

TheCompanyhas through itswholly-ownedsubsidiary,Etika (NZ)Limited,entered intoasaleandpurchaseagreementwithFonterra Brands Investments (NZ) Limited for the proposed acquisition of 2,398,000 ordinary shares in the share capital ofNaturalacNutritionLimited foracashconsiderationofNZ$7.8million.The transaction,which issubject to theshareholders’approvalatanextraordinarygeneralmeeting,ispendingcompletionasatthedateofthefinancialyearend.

FUTURE OUTLOOK AND PROSPECTS

Overthelast12months,theGrouphasbeenactivelystrategisingandimplementingwaystoexpandthebusinessandderivegreatersynergiesfromitsdifferentoperatingdivisions.TheseedsoftheseplanshavebeenplantedandIbelievethatovertime,thepoolingtogetherofresourcesandknowledgebetweendivisionswhilestreamliningfinancialfacilitiesandtheincreaseincross-sellingandco-brandingofproductswillenableustorealiseourvisionofbecomingawellrecognisedFoodandBeverage(“F&B”)player,withregionalfacilitieshavingaglobalreach.Whilewecontinued to record impressive revenuegrowthdue toourgrowingdairiesbusinessandcontribution fromournewlyacquired subsidiary, PB Group, I believe that the full benefit from the ongoing proposed acquisitions will be felt from FY2008onwards.Overthenextoneyear,theGroupwillcontinuetoexpandorganicallyandbyacquisitions.

OurstrategicpartnershipwithYHSandtheacquisitionofNaturalacNutritionLimitedwhichownsthe“Horleys”,awellrecognisedbrandnameforfoodnutritionandhealthsupplementswithsignificantpresenceintheNewZealandandAustralia,arejustexamplesofnewstepswehavetakeninourterritorialandproductexpansionstrategytopenetratetomoreregionsandcreatemorevalueforourshareholders.Overtime,ouraimisfortheEtikanametobesynonymouswithafoodgroupthathasleadingbrandsineachofthefoodsegmentsitoperatesin.


Despiteoperatinginanenvironmentwithcontinuedchallenges,wecontinuetostrivefor improvements inoperationalefficiencies.Wearepleasedwith theprogress thatwehavemadesofarandlookingahead,weareconfidentofgrowingourbusinessasaresultofourenhancedabilitytooffermoredepthanddiversityinourproductsandservicesinexpandedterritoriestofulfillourcustomers’expectations.Tothisend,wewillcontinuetofurthersharpenourcompetitiveedgeandharnessourcapabilitiesto meet these challenges and capitalize on untapped market opportunities. TheManagement will continue to drive growth and create greater shareholders’ valuethroughtoplineandbottomlinegrowth,consistentdividendsandconsistentreturnonshareholders’equity.

DIVIDEND

Wearepleasedtoannounceataxexempt(one-tier)finaldividendpaymentof0.20Singaporecentspershareforthefinancialyearended30September2006.Togetherwiththeinterimdividendof0.20Singaporecentspersharepaidon8June2006,totaldividendforthefullyearworksouttobe0.40Singaporecentspershare.

APPRECIATION

Wearegrateful toyou,ourvaluedshareholders, for investing inEtikaand foryourcommitmenttopartnerusinbuildingsustainablelong-termshareholders’value.

Aboveall, theBoardiskeenlyawarethatthefuturesuccessoftheGroupamongstotherfactors,restsalsouponitsentireteam.ForandonbehalfoftheBoard,IextendmypersonalgratitudetoourstafffortheirtotalcommitmenttotheGroup.

Finally,myappreciationisalsoextendedtoourBoardofDirectors,ourbankersandbusinesspartners locallyandaroundtheregionfor theircontinuedconfidenceandsupport.

Dato’ Jaya J B TanChairman



Review ofOperations

TheGroup’sstrategicbusinessunitsarecurrentlyidentifiedalongthelinesofrevenuestreamsandcanbesegregatedunderthefollowingcoredivisions:

• DairiesDivision• FrozenFoodsDivision• Butchery&BakeryDivision

TheDairiesDivisionremainedtheGroup’smaincontributorintermsofrevenueandearningsfortheforeseeablefuture,whileeffortsareunderwaytogrowthetwonewdivisions.

GROUP FINANCIAL RESULTS

Group revenue increased significantly by RM83.1 million or 55.4% over the previous financial year. This increase was mainlycontributedbyPokBrothersSdn.Bhd.anditssubsidiaries(“PBGroup”),comprisingFrozenFoodsDivisionandButchery&BakeryDivision,amountingtoapproximatelyRM54.4millionor23.3%oftheGrouprevenue.

RevenuegeneratedfromDairiesDivisionalsoshowedanincrease,albeit,byalowerrateof19.1%whencomparedtoFY2005,mainlycontributedbyhigherexportsalesofsweetenedcondensedmilkinthe390gmand1kgpacksizetakingintoaccountthefact that theDairiesDivision forFY2005wasonly for11monthspursuant to thecompletionof theacquisitionofEtikaDairiesSdn.Bhd.(“EDSB”)asat8November2004.

Notwithstandingthehigherrevenue,theGroup’sprofitafterincometaxforFY2006wasRM5.0million,adecreaseof52.3%overthepreviousfinancialyear.ThesignificantdecreasewasmainlyattributedbytheexceptionalincomerecognisedlastyearrelatingtotheaccreditationofnegativegoodwillofRM3.1million,whicharoseasaresultoftheacquisitionofEDSB.Excludingthisexceptionalincome,theGroup’sprofitafterincometaxhaddeclinedby32.1%.Thiswasduetothehigheradministrativeexpenses,financingcostsandincometaxincurredduringtheyearnotwithstandingtheprofitcontributionfromPBGroup.

TheGroup’sadministrativeexpensesincreasedbyRM7.4millionor172.6%.Ofthis,RM4.9millionwasincurredbyPBGroupasadministrativeexpensesforeightmonths.TheremainingincreaseofRM2.5millionwasmainlyduetodirectors’feeandremuneration,professionalfeeforincreasedbankingfacilities,increaseinrentalchargesandhigherstaffcosts,includingprofessionalfeeincuredinobtainingloantofinancetheacquisitionofPBGroup.

Inaddition,theGroup’smarketinganddistributioncostshadincreasedbyRM2.2millionor30.8%.IncreaseinexpensesincurredbyEDSBwasduetohigherfreightandtransportchargesasaresultofhighersalestoexportmarketandincreaseinfuelpricesandhigherstaffcosts.Thiswas,however,partiallyoffsetbylowerrentalincurredonthestorageduetothecompletionofthefactoryextensionandlowerdepreciationchargeasaresultoffullydepreciatedproperty,plantandequipment.

FinancecostshavealsoincreasedsignificantlybyRM2.3millionor260.9%asaresultofincreasedbankingfacilitiesobtainedfortheacquisitionofPBGroupandforadditionalworkingcapitalpurposes.

TheGroup’sincometaxexpenseincreasedbyRM1.1millionor74.7%mainlyduetoincometaxexpensecontributedfromPBGroup.Theeffectivetaxratewas33.2%ascomparedwith11.9%previousyearmainlyduetotheeliminationofdividendincomereceivedfromsubsidiariesofRM6.31millionattheGrouplevel.

EarningsperShare(“EPS”)basedonweightedaverageordinarynumberofsharesonafullydilutedbasisdeclined59.6%to2.86RMsenpershare.


SEGMENTAL REVIEW BY BUSINESS DIVISIONS

DairiesDivisioncontributedamajorityoftheGroup’srevenueat76.7%whileFrozenFoodsDivisioncontributed20.9%andthebalancecontributedbyButchery&BakeryDivision.

EventhoughtheButchery&BakeryDivisionisnotrequiredtobesegmentalisedforreportingpurposesinceitcontributedlessthan10%totheGrouprevenueandprofitaftertax,theBoardofDirectors(“Board”)isoftheviewthatitismoremeaningfultopresentitsresultsseparatelyinviewofitsdistinctivebusinessandproductofferings.

Dairies Division

DairiesDivisionperformedsatisfactorilylastyear,amidstkeenercompetitionwithoperatingrevenuerising19.1%toRM178.8millionfromRM150.0millioninFY2005.Thisincreasewasmainlycontributedbyhigherexportsalesofsweetenedcondensedmilkinthe390gmand1kgpack-size.Exportsalesratio(representedbynon-Malaysiansales)increasedto40.5%forFY2006ascomparedto32.4%inFY2005.Salesto“Other”marketsremainedverystrongespeciallyfortheDivision’skeyAfricanmarket,whilesaleswithin“ASEAN”countrieshavebegunshowingresultswiththepenetrationofSingaporemarketviaitsdistributionarrangementwiththesalesarmofYeoHiapSengGroup,YHS(Sales)PteLtd(“YHS”)andincreasingdemandfromKalimantanregioninIndonesia.

RevenueintheMalaysianmarketwouldhavebeenbetter ifnotbecauseoftheHariRayafestivalswhichwerecelebratedtwiceduringthefinancialyearascomparedtoonceinthepreviousfinancialyear.Thedoublefestiveholidayshadresultedinlowersalesasmostofthecustomershadclosedforbusinessduringthefestivities.TheDivisiondoesnotexpectthisscenariotorepeatanytimesooninfuture.

Asaresultoftheincreasedbusinessvolumeandhighersalestoexportmarkets,theDivisionalsoincurredhighersellingexpensesduetohigherfreightandtransportchargesaswellashigherfuelprices.Thiswas,however,partiallyoffsetbylowerrentalincurredonthestorageduetothecompletionofthefactoryextensionandlowerdepreciationchargeasaresultoffullydepreciatedproperty,plantandequipment.

Lookingahead,demandofdairyingredientslikeskimmedmilkpowderandsweetwheypowderintheworldmarketisexpectedtocontinuetosurgeinviewoftheimprovingeconomicconditionsinthedevelopingcountriesandThePeople’sRepublicofChina(“PRC”).Duetoacurrentreductioninsupplyofmilk,thepriceofskimmedmilkpowderisexpectedtotrendhigherinthenearfuture.ThoughtheDivisionhashedgedwithforwardbuyingatpricesbelowthecurrentquote,theDivisionwillexperiencehighercostsofmilkpowderinFY2007ifthesituationdoesnotimprove.Inaddition,crudepalmoilpricehassurgedhigheroflateinthecommoditymarketwithforwardpositionremainingbullishintandemwiththesoyaoilmarket.Thistrendisexpectedtopersistintheforeseeablefuture.

TheMalaysianmarketwill remainthebackboneoftheGroup’sDairiesDivisionandtheDivisionshallcontinuewith itseffortstoincreasemarketsharebyleveragingontheDivision’swellreceivedandrecognized“DAIRY CHAMP”brandname,notwithstanding,thekeencompetitionexperiencedduringthepastyear.

Forthe“Asean”market,theDivisionhadenteredintoadistributorshiparrangementwithYHSforthesalesanddistributionofitsproductsintheSingaporemarketinMay2006.Further,theDivision’spasteffortstolaythegroundworktodistributeitsproductsinIndonesiahavealsostartedtobearfruits.TheDivisionisnowreadytopushitsdistributioninEastandWestJava.

Inthe“Other”exportmarkets,theDairiesDivisionhasenteredintonewnon-traditionalmarketsintheCentralAmericanandAfricanregionincountrieslikeCuba,TrinidadandTobago,Suriname,MaliandAngola.TheDivisionwillcontinuetoworkdiligentlywithits

Review of OperationsReview of Operations (cont’d)


Review of Operations (cont’d)

partnerstoexpanditspresenceinthesemarkets.DemandforitsproductsfromtheseAfricanmarketshasbeensostrongduringthefinancialyearthattheDivisionwasnotabletocatertoallordersduetocapacityconstraintsforits1kgpacksize.TheDivisionisalsosteppingupitseffortstoestablishastrongerpresenceinthePRCandHongKong.ThesetwomarketsareveryimportantfortheDivisionandtheneedtoaccelerateitsentryintothesetwomarketsisrecognised.

Inviewof thestrongdemand for theDivision’s1kgpacksizesweetenedcondensedmilk, theDivisionhasaddedanewhigh-speedproductionlinetocatertothispacksizetargetedprimarilyfortheAfricanmarkets.Installationofthisnewproductionlinewascompletedduringthefinancialyearandcommercialproductionhascommenced inOctober2006.Withthenewly installedproductioncapacity,theDivisionwillbeabletoloweritsunitcostonoverheadandpositivecontributionfromthisaddedcapacitycanbeexpectedinFY2007.Inaddition,theDivisionhascompletedthepurchaseofanadditional4acresoffreeholdlandadjacenttoitsexistingfactoryon8acresfreeholdland.

TheDivisionisworkingcloselywithitspackagingsuppliers(bothtincansandcartons)toreducematerialcostsbyworkingonanewprofileofpackagingaswellasdifferenttypesandthicknessofmaterials.Thiseffortisforitsproposed2-pieceevaporatedmilktincanandthinnergaugematerialsfortincansandcartons.Inaddition,theDivisionisalsointheprocessofinstallinganotherpackinglinetoproduceevaporatedmilkandflavouredmilkbeveragesin170gmpacksize.

TheDivisionhasrationalisedandre-groupeditsDairiesDivisionintothreeseparatelegalentitiesinaccordancewiththeirrespectivefunctionalactivitiesasgivenbelow:

• EtikaDairiesSdn.Bhd.whichwillbeinvolvedinmanufacturingoperations• EtikaFoodsMarketingSdn.Bhd.whichwillbeinvolvedinthesalesanddistributionwithintheMalaysianmarket• EtikaGlobalResourcesSdn.Bhd.whichisanapprovedinternationalprocurementcenterandwillhandlealloftheDivision’s

dairyproductsexportedoutofMalaysia

This rationalisationexercisewhich tookeffect from1October2006 isexpected tobringmore focus to theDivision’sbusinessactivitiesleadingtoamoreefficientandeffectivemanagementoftheDivision.

Frozen Foods Division

TherearenocomparativenumberssincethisisanewdivisionundertheGroupresultedfromtheacquisitionofPBGroup.Fortheeightmonths’periodfromFebruarytoSeptember2006,thisdivisioncontributedRM52.8millionor22.6%totheGrouprevenue.Amajorpartofthisrevenuewascontributedbythesalesoffrozenmeat,ofwhichbeefproductsmadeupthebulkoftherevenuefortheDivision.

ThebanonNewZealandbeefimportsintoMalaysiaiscurrentlystillinforceandhadaffectedtheDivision’sfinancialperformanceforFY2006.Inaddition,asonlythreebeefplantsfromAustraliaareapprovedbyMalaysia,beefsupplieshavebeeninconsistent,leadingtohighprices.However, there is encouragingnews that the relevant authorities inMalaysia are re-assessing theNewZealandsituationandthatmoreAustralianbeefplantswillbeapprovedinthenearfuture.ThoughthebanofU.S.beefhasbeenlifted,thishasnothadthedesiredeffectofimprovingsales.Tocountersomeofthesefactorsandtoimprovesales,theDivision’smarketingeffortswillbeconcentratedongrain-fedbeefandWagyu-gradebeeffromAustraliaandcertifiedBlackAngusbeeffromUruguay.

Competitionforthemeatsectorwillcomemainlyfromthelocalpackersthatimportlivecattleandslaughterthemlocally.Althoughpricingwillbean important factor,qualityconsistencyand taste factorof importedmeatareelements thatwillensure that theDivisionmaintains itsexistingcustomerbase.Tocater toanexpectedhigherbusinessvolume, theDivision isalsoplanning to



expandthecapacitiesofitsfreezersandchillers.Besidesbeef,newproductlineshavebeenaddedtocomplementtheexistingrangeaswellasdiversifyingtheDivision’srevenuestreams.ThepresentrangeofpremiumpastaproductsfromItalyismainlyforthecateringindustryandanewrangeofpastaproductsfromAustraliaisnowmarketedfortheend-consumers.AnewlineofSwissyoghurthasalsobeenaddedtocomplementtheexistinglineofAustralianyoghurt.

ThisdivisionusedtooperateunderfoursubsidiarycompanieswithinthePBGroup,ofwhichthreearewholly-owned.InordertoimprovetheGroup’soperatingefficiencyandeffectiveness,theDivisionhasundertakenaconversionexercisetoturnallwholly-ownedsubsidiaries’operationintobranchoperationsunderitsholdingcompany,PokBrothersSdn.Bhd.Thisexercisewascarriedoutwitheffectfrom1October2006.

Withthecoming“VisitMalaysiaYear2007”coupledwiththestronggovernmentpromotionandincentivesgiventothehospitalitysector,theDivisionexpectstoseizeontheseopportunitieswiththeaimofregisteringbettersales.

Butchery & Bakery Division

ThisisalsoanewlyacquireddivisionfortheGroupasaresultoftheacquisitionofPBGroup.Revenuefromthisdivisionfortheeightmonths’periodwasrelativelysmallatRM1.6millionor0.68%oftotalGrouprevenue.

Thoughthisdivisionhasbeenoperatingundercapacityconstraintsthroughouttheyear,bothofitssub-divisionshaveperformedwelllastyear.Inparticular,theGroupisstronglyencouragedbythefavourableresponsetosomeoftheDivision’sbakeryproductsundercontract-manufacturetoaninternationalfood-chaincustomerlocatedinSingapore.Infact,theDivisionmaybeawardednewcontractsforsuchsimilarsuppliestothecustomer’soutletsinotherAseancountries,affirmingonceagain,theGroup’sstrategicgoalofofferingqualityproductbrandstoallitscustomers.

Inaddition,researchanddevelopmenteffortswillbefocusedonnewproductdevelopment,theimprovementoftastesofproductsaswellasproductpackaging.WhiletheDivision’ssausagesandcold-cutsaretraditionallymanufacturedfreshandkeptchilled,theDivision’snewproductionmethodshavecreatednewfreezableproductsthatcatertocustomers’demand.Newproductsthatareexpectedtobelaunchedincludeturkeyandchickencoldcutswithlocalisedtastes.

Sellingpricesandgrossmarginsareexpectedtobesimilarasinpreviousyears.Competitionisexpectedfromtheusualsmallandspecializeddelioutletswhichproducetheirownsausagesandcold-cuts.

Looking ahead, the Group is optimistic that sales from both of the sub-divisions will see improvements with the coming “VisitMalaysiaYear2007”nextyear,whenbetteropportunitiesareexpectedtobepresented.

ACQUISITIONS AND POSITIONING

TheGroupwillcontinue tochart its regional footprint throughorganicaswellasviamergerandacquisitionactivitieswheneversuitableopportunitiesarepresented.However,priorityshallalwaysbegiventoorganicexpansionsoastofurtherstrengthentheGroup’sfootholdinitsexistingcorebusinesses.Nevertheless,theGrouprecognisedtheneedtofactorotherconsiderationssuchasgestationperiod,positioninmarket,productandindustryrisks,andinvestmentreturnswhenevertheGroupisfacedwithachoiceofgrowththroughorganicmeansorviaacquisition.



Inthisregard,tofurtherexpanditsbusinessanddiversifyitsproductofferings,theGrouphasannouncedthatitswholly-ownedsubsidiary,Etika(NZ)Limited,hasenteredintoaSaleandPurchaseAgreementwithFonterraBrandsInvestments(NZ)Limited,awholly-ownedsubsidiaryofFonterraCo-operativeGroupLtd(“FCL”)toacquire100%ofNaturalacNutritionLimited(“Horleys”)inSeptember2006.ThispresentsanexcellentopportunityfortheGrouptoenteranichemarketinthehighgrowthandhighmarginsectorthatHorleysiscurrentlyin.Furthermore,theGroupwillbeabletoexpandgeographicallyinmoredevelopedmarketslikeAustraliaandNewZealandwheretheGrouphaslimitedpresencecurrently.ThisproposedacquisitionwillalsoallowtheGrouptofocusinthedevelopmentandownershipofintellectualpropertyliketrademarks.

SCALING NEW HORIZONS

MuchhasbeenachievedinspiteoftheGroupexperiencingaverychallengingpastyear.Lookingahead,theGroupwillcontinuetobuildonitsmomentumastheGroupseesopportunitieswhereitcanincrementallyimprovetheperformanceofitsvariousbusinessdivisions.TheGroupwillendeavourtodrivegrowthandenhanceshareholders’valuebyitsgrowthstrategy.Initsdrivetoderivesynergies from its variousbusinessdivisions, theGroupwill continue tostrive forpoolingof resourcesandknowledgesharingamongstkeymanagementstaffofthevariousdivisions.Inaddition,theGroupwillcontinuewithitson-goingeffortstooptimiseitsequityanddebtstructure.TheBoardisnonetheless,confidentthatwiththestepsthatitistakingandthevariousstrategiesthatarecurrentlybeingpursuedwillputtheGroupinabetterpositiontoscalenewhorizons.




Financial Highlights

REVENUE (RM’000) PROFIT AFTER TAX (RM’000)

20062005200420032002

6

4

2

0

20062005200420032002

120

80

40

0

240

200

160

12

10

8

71,12176.993

116.483

150,049

233,170

1,289

4,007

7,272

10,510

5,010

FY2002 FY2003 FY2004 FY2005 FY2006 Proforma Proforma Proforma Actual Actual

KEY FINANCIAL INFORMATION

1.Revenue(RM’000) 71,121 76,993 116,483 150,049 233,170

2.Profitaftertax(RM’000) 1,289 4,007 7,272 10,510 5,010

3.Shareholders’equity-openingbalance 7,319(1) 8,606 12,614 33,731(1) 45,564

4.Totalequity 8,606 12,614 19,877 45,564 50,564

5.Weightedaveragenumberofshares 128,630,152 128,630,152 128,630,152 148,460,443 171,630,152

6.Weightedaveragenumberofdays(revenue) 365 365 365 334 336

KEY FINANCIAL RATIO

1.Earningspershare(EPS)(RMsen) 1.00 3.12 5.65 7.08 2.86

2.Returnonequity(%) 17.61 46.56 57.65 31.16 10.99

3.Dividendpershare(RMsen) N/A N/A N/A 0.89 0.95

4.Netassetvaluepershare(RMsen) 8.52 11.91 15.45 26.55 29.51

5.Inventoryturnover(days) 31 52 44 54 40

6.Receivablesturnover(days) 90 91 81 73 86

7.Payablesturnover(days) 108 108 95 82 51

8.Workingcapitalcycle(days) 13 35 30 45 75

9.Netgearingratio(times) 2.20 1.49 1.02 0.40 1.40

(1) adjustedfornewsharesissuedduringthefinancialyear


EARNINGS PER SHARE (EPS) (RM sen)

20062005200420032002

4

2

1

0

7

6

5

1.00

3.12

5.65

7.08

2.86

RETURN ON EQUITY (%)

20062005200420032002

30

20

10

0

60

50

40

17.61

46.56

57.65

31.16

10.99

Financial Highlights (cont’d)

20062005200420032002

DIVIDEND PER SHARE (RM sen)

N/A N/A N/A

0.890.95

0.6

0.4

0.2

0

1.2

1.0

0.8

NET ASSET VALUE PER SHARE(RM sen)

20062005200420032002

15

10

5

0

30

25

20

8.52

11.91

20.06

26.5529.51

WORKING CAPITAL CYCLE (days) NET GEARING RATIO (times)

20062005200420032002 20062005200420032002

1.5

1.0

0.5

0

3.0

2.5

2.0

13

35 37

54

792.20

1.491.26

0.56

1.4160

40

20

0

120

100

80


DATO’ JAYA J B TANNon-Executive ChairmanMember of Audit CommitteeMember of Remuneration CommitteeMember of Nominating Committee

KAMAL Y P TANExecutive Director

Board ofDirectors

Dato’JayaistheNon-ExecutiveChairmanof the Company and was appointed tothe Board since 23 December 2003.He graduated from the University ofArizona and is a Mechanical Engineerbytraining.Hehasextensiveexperiencein forestry, property development, foodretail operations, trading and financialservices. Previously, he has served asChairman of several companies quotedonthestockexchangesofMalaysia,theUK,Singapore,AustraliaandIndia.

Heisinvolvedingaming,hospitalityandleisurebusinessesinPapuaNewGuineaandGhanaandactsastheViceChairmanofParkHyattSaigon,a259-room5-starhotelinHoChiMinhCity,Vietnam.

ApartfromthepresentdirectorshipoftheCompany,Dato’JayaisalsotheExecutiveChairmanof another company listedontheSingaporeStockExchangeknownasLasseters InternationalHoldingsLimitedas well as being the Chairman of twolisted companies in Australia, namely,Lasseters Corporation Limited andCypressLakesGroupLimited.

Dato’ Jaya was re-elected at the lastAnnualGeneralMeetingheld inJanuary2006.

Dato’JayaisthebrotherofMrKamalYPTan,brother-in-lawofMsTanYetMenganduncleofMrTanSanChuan.

Mr Kamal is the Executive Director oftheCompanyandwasappointedto theBoard on 23 December 2003. He is anEconomics graduate from the LondonSchoolofEconomicsandhasheldboardpositions with companies listed on thestockexchangesinMalaysia,Singapore,Australia,UnitedKingdomandIndia.

Heisinvolvedingaming,hospitalityandleisurebusinessesinPapuaNewGuineaandGhanaandactsasaBoardmemberofParkHyattSaigon,a259-room5-starhotelinHoChiMinhCity,Vietnam.

Apart from the present directorship oftheCompany,MrKamalisalsotheNon-Executive Director of another companylistedontheSingaporeStockExchange,namely Lasseters International HoldingsLimited and companies listed on theAustralian Stock Exchange, LassetersCorporation Limited and Cypress LakesGroupLimited.

Mr Kamal was re-elected at the lastAnnualGeneralMeetingheld inJanuary2006.

MrKamalisthebrotherofDato’JayaJBTan, brother-in-law of Ms Tan Yet MenganduncleofMrTanSanChuan.


JOHN LYN HIAN WOONIndependent DirectorChairman of Audit CommitteeMember of Remuneration CommitteeMember of Nominating Committee

MAH WENG CHOONGNon-Executive Director

TEO CHEE SENGIndependent DirectorChairman of Remuneration CommitteeChairman of Nominating CommitteeMember of Audit Committee

Mr Teo Chee Seng was appointedIndependentDirectoroftheCompanyon3 August 2004. He holds a Bachelor ofLaw(Hons)degreefromtheUniversityofSingaporeandisalawyerintheSingaporeprivatepracticeformorethan23years.

HeisalsoaCommissionerofOathsanda Notary Public. He acts as the legalconsultant to Tzu Chi Foundation,Taiwan’sbiggestcharityorganisationwith5millionmembersworldwide.Presently,hesitsontheAdvisoryBoardofRafflesTownClub.

ApartfromthepresentdirectorshipoftheCompany,MrTeoisalsoanIndependentDirector of another company listed onthe Singapore Stock Exchange, namelyLassetersInternationalHoldingsLimited.

MrTeoisdueforre-electionasadirectoroftheCompanyattheforthcomingAnnualGeneralMeetingoftheCompany.

MrJohnLynHianWoonwasappointedIndependentDirectoron3August2004.He holds a BSc degree in MechanicalEngineeringfromtheUniversityofLeeds,UKandanMBAfromWashingtonStateUniversity.

HeispresentlytheChiefExecutiveOfficerofColonialInvestmentPte.Ltd.,whereheisresponsibleformanagement,strategicplanning, investment and corporaterestructuring. Prior to that, he was aninvestmentbankerwithvariousfinancialinstitutions such as Chase ManhattanBank,Citibank,SchrodersSecuritiesandHSBC James Capel with a total of 15yearsofexperience.

Apart from the directorship of theCompany, Mr John Lyn does nothold directorship in any other listedcompanies.

Mr Mah Weng Choong is a Non-Executive Director of the Company andwasappointedtotheBoardon3August2004. He is a graduate in Science fromthe University of Malaya. Having spent34 years in the Malaysian dairy divisionof a group listed on the SGX-ST, hehas gained extensive experience in themanufacture of sweetened condensedmilkandevaporatedmilk.HehasworkedinmilkplantsinMalaysiaandSingaporethat produces sweetened condensedmilk, evaporated milk, ice-cream, UHTbeverages, milk powder packing andotherdairy-relatedproducts.

He was appointed Managing Directorof Etika Dairies Sdn. Bhd. (“EDSB”),a wholly-owned subsidiary of theCompany in 1996 and has successfullyset up our current factory located inMeru, Klang, in Malaysia. His primaryresponsibilities include the formulationand implementation of the EDSB’sbusiness strategies and policies andchartingitsgrowth.

Apart from the directorship of theCompany, Mr Mah does not holddirectorship in any other listedcompanies.

MrMahisdueforre-electionasadirectoroftheCompanyattheforthcomingAnnualGeneralMeetingoftheCompany.

Board of Directors (cont’d)


TAN YET MENGNon-Executive Director

KHOR SIN KOKAlternate Director to Mah Weng Choong

TAN SAN CHUANAlternate Director to Tan Yet Meng

MsTanYetMengwasappointedasNon-ExecutiveDirectoroftheCompanyon15September2005.SheholdsaSecretarialDiploma and has previous workingexperience in advertising, bakery andconfectioneryaswellasretailandtradinginfrozenfoodandfreshjuices.

She sits on the board of a few privatecompanies which are involved ininvestmentholding,propertydevelopmentandleisurebusiness.

Apart from the directorship of theCompany, Ms Tan does not holddirectorship in any other listedcompanies.

MsTanwasre-electedatthelastAnnualGeneralMeetingheldinJanuary2006.

Ms Tan is the mother of Mr Tan SanChuanandsister-in-lawofDato’JayaJBTanandMrKamalYPTan.

Mr Khor Sin Kok was appointed asAlternate Director to Mr Mah WengChoong on 3 August 2004. He holds adegree in Mechanical Engineering fromtheUniversityofLeeds,UKandaMasterdegree in Business AdministrationmajoringinFinancefromMichiganStateUniversity, USA. He has worked in aMalaysiandairydivisionofagrouplistedon the SGX-ST in 1985 as AssistantProject Development Manager. Duringhis 12 years tenure with the company,he was involved in market researchactivities, project feasibility studies andimplementation and manufacturingoperations of various product lines likesweetened condensed milk, evaporatedmilk, milk powder packing, ice-cream,UHTbeverages,sterilizedandpasteurizedproducts inplasticbottle andgable-toppaper carton and can making plant. Hejoined EDSB in 1996 as its ExecutiveDirector. He oversees the day-to-daymanagementandoperationsofEDSBaswell as strategic planning and businessdevelopmentofthesaidcompany.

Apart from the directorship of theCompany, Mr Khor does not holddirectorship in any other listedcompanies.

Mr Tan San Chuan was appointed asAlternate Director to Ms Tan Yet Mengon 15 September 2005. Mr Tan is anAccounting and Finance graduate fromthe London School of Economics. Priorto joining the Group, he was employedbyKPMGandhasgainedexperience inauditing. Mr Tan has also worked in amerchant bank in Malaysia in which hegained some experience in corporatefinance through his involvement inmergers andacquisitionsandcorporaterestructuringexercises.

He is a Board member of Park HyattSaigon,a259-room5-starhotelinHoChiMinhCity,Vietnam.

Apart from the present directorship ofthe Company, Mr Tan is also the Non-Executive Director of another companylistedontheSingaporeStockExchange,namely Lasseters International HoldingsLimited and companies listed on theAustralian Stock Exchange, LassetersCorporation Limited and Cypress LakesGroupLimited.

MrTanisthesonofMsTanYetMengandnephew of Dato’ Jaya J B Tan and MrKamalYPTan.

Board of Directors (cont’d)


THONG COOI SEONGChief Financial Officer

MrThongCooiSeongisaholderofaMICPA(MalaysianInstituteofCertifiedPublicAccountant)qualificationandhasmorethan20yearsof experience ingroupaccountsand reporting, jointventurestart-upbusinesses,companymergersandacquisitions,costandbudgetarycontrolprocesses,andstrategicbusinessplanning.Hestartedhiscareerin1985wherehespentaninitialsevenyearsinpublicaccountingfirmsincludingErnst&Young.Hesubsequentlyheldseniorfinanceandaccountingpositionsin several private, public-listed and multinational corporationsinvolvedinmanufacturing,constructionandplantationindustriespriortojoiningtheGroupinJune2004.

SeniorManagement

KWONG YUEN SENGExecutive Director, Sales and MarketingEtika Dairies Sdn Bhd

MrKwongYuenSenghasoverallresponsibilityforEDSB’ssalesand marketing activities. Prior to joining EDSB, he had morethan 34 years experience in the Malaysian dairy division of agrouplistedontheSGX-ST.Hebeganhiscareerattheageof23andasasalesrepresentativesinadairycompanybasedinMalacca.Duringthistime,hewaspartofateamofpioneerswhoadvanced the sale of sweetened condensed milk in Malaysiaandhadovertheyears,gainedconsiderableexperienceinthedomesticmilkproductindustry,havingworkedinbothEastandWestMalaysia.HewasappointedasExecutiveDirector,SalesandMarketingofEDSBin1999andisprimarilyresponsiblefordevelopingmarketingstrategiesandexpandingitsmarketshareinMalaysiaandoverseas.

CHUNG CHEE FOOKExecutive Director, Technical and ProductionEtika Dairies Sdn Bhd

Mr Chung Chee Fook has overall responsibility of EDSB’stechnical and production departments. Prior to joining EDSB,Mr Chung was actively involved in the fields of research anddevelopment, product development, and quality assurance inthedairyproduct industry.MrChunghasworked in thedairyproductindustrysince1966,holdsaTechnicalDiplomainMilkProcessingandControlfromLondonandaCertificateonLowAcidCanFoodfromtheFoodandDrugAdministration,U.S.A.HeisalsoaqualifiedLeadAssessorforISO9000Certification.Duringthemid-80s,heassistedtheNewZealandDairyBoardintheirresearchconcerningtheinter-laboratorytestingofheatstability of milk powders. He was also the Quality AssuranceManager of a dairy company and was in charge of productdevelopmentandqualityassurance,inparticular,monitoringthequality standards of products such as sweetened condensedmilk, evaporated milk, milk powder packing, ice-cream, dairybeveragesandfruitjuices.HewasappointedExecutiveDirector,Technical and Production of EDSB in 1997 and is primarilyresponsibleforproductionandqualityassurance.

POK YORK KEAWManaging DirectorPok Brothers Sdn Bhd

MrPokYorkKeawhasextensiveexperience in thehotel andrestaurantindustry.HeistheManagingDirectorofPokBrothersSdnBhdandhasbeenwiththecompanysincethemid1960’s.He joined Pok Brothers after his secondary school educationandwasinstrumentalinbuildingupthecompanyfromamini-markettradertoanimporterofqualityfoodsandadistributorofarangeofinternationalbrandedproducts.BesideshisdutiesastheManagingDirector,heisalsoresponsibleforpurchasing.Asatestamenttohisleadershipinthehotelandrestaurantindustry,MrPokwasmadeanhonorarymemberoftheMalaysianChef’sAssociation.


BOARD OF DIRECTORS

Dato’JayaJBTanNon-Executive Chairman

KamalYPTanExecutive Director

MahWengChoongNon-Executive Director

JohnLynHianWoonIndependent Director

TeoCheeSengIndependent Director

TanYetMengNon-Executive Director

KhorSinKok(Alternate Director to Mah Weng Choong)

TanSanChuan(Alternate Director to Tan Yet Meng)

COMPANY SECRETARIES

JulieKohNginJoo,ACISKokMorKeat,ACIS

REGISTERED OFFICE

3ChurchStreet#08-01SamsungHubSingapore049483Telephone : (65)65365355Facsimile : (65)65361360

SHARE REGISTRAR ANDSHARE TRANSFER OFFICE

LimAssociates(Pte)Ltd3ChurchStreet#08-01SamsungHubSingapore049483

AUDITORS

BDORafflesCertifiedPublicAccountants5ShentonWay#07-01UICBuildingSingapore068808Partner-in-charge:LeeJooHai(Appointedsincethefinancialyearended30September2005)

PRINCIPAL BANKERS

EONBankBerhad1stFloorMenaraEONBank288JalanRajaLaut50350KualaLumpur

HSBCBankMalaysiaBerhadHeadOffice,2LebuhAmpang50100KualaLumpur

MalayanBankingBerhadMaybanTower2BatteryRoadSingapore049907

MalayanBankingBerhad50-52JalanSultanPetalingJaya46200Selangor

UnitedOverseasBank(Malaysia)BerhadKualaLumpurMainBranchLevel2MenaraUOBJalanRajaLaut50350KualaLumpur

SOLICITORS

StamfordLawCorporation9RafflesPlace#32-00RepublicPlazaSingapore048619

CorporateInformation



CorporateGovernance

EtikaInternationalHoldingsLimited(“Etika”)iscommittedtomaintainingahighstandardofcorporategovernancebycomplyingwiththebenchmarksetbytheCodeofCorporateGovernance(the“Code”)asreviewedbytheSingaporeCouncilonCorporateDisclosureandGovernancewhoserecommendationstorevisetheCodehavebeenacceptedbytheGovernmentinJuly2005(“therevisedCode”)andtheBestPracticeGuideissuedbytheSingaporeExchangeSecuritiesTradingLimited(“SGX-ST”)withregardstodealingsinsecurities.Etikabelievesithasputinplaceeffectiveself-regulatorycorporatepracticestoprotectitsshareholders’interestsandenhancelong-termshareholders’value.ThisreportoutlinesEtika’scorporategovernanceframeworkinplacethroughoutthefinancialyearended30September2006(“FY2006”).

BOARD MATTERS

Board’s Conduct of its AffairsPrinciple 1 : Effective Board to lead and control the CompanyTheprimary functionsof theBoardare toprovidestewardship forEtikaand its subsidiaries (the “Group”)and toenhanceandprotect long-term returns and value for its shareholders. Besides carrying out its statutory responsibilities, the Board overseestheformulationof theGroup’s long-termstrategicobjectivesanddirections,reviewsandapprovestheGroup’sannualbudgets,businessandstrategicplansandmonitorstheachievementoftheGroup’scorporateobjectives.ItalsooverseesthemanagementoftheGroup’sbusinessaffairsandconductperiodicreviewsoftheGroup’sfinancialperformanceandimplementingpoliciesrelatingtofinancialmatters,whichincluderiskmanagementandinternalcontrolandcompliance.

TheBoard’sapproval isalso required inmatterssuchasmajor fundingproposals, investmentanddivestmentproposals,majoracquisitionsanddisposals,corporateorfinancialrestructuring,mergersandacquisitions,shareissuanceanddividendsandmajorcorporate policies on key areas of operations, the release of the Group’s half-year and full-year results and interested persontransactionsofamaterialnature.TheBoardensuresthatincomingnewDirectorsarefamiliarizedwiththeGroup’sbusinessesandcorporategovernancepracticesupontheirappointmenttofacilitatetheeffectivedischargeoftheirduties.

Goingforward,theBoardproposedtomeetonaquarterlybasistooverseethebusinessaffairsoftheGroup,andtoapprove,ifapplicable,anyfinancialandbusinessobjectivesandstrategies.Ad-hocmeetingswillbeheldwhencircumstancesrequire.Etika’sArticlesofAssociationalsoprovidefortelephoneconferenceandvideoconferencingmeetings.

TheattendanceofthedirectorsatmeetingsoftheBoardandBoardcommitteesisasfollows:-

Board Audit Remuneration Nominating Committee Committee Committee

No.ofmeetingsheldinFY2006 4 4 2 1 Name of Directors Dato’JayaJBTan 4 4 2 1KamalYPTan 4 - - -TanYetMeng(AlternateDirector:TanSanChuan) 3 - - -MahWengChoong(AlternateDirector:KhorSinKok) 4 - - -TeoCheeSeng 4 4 2 1JohnLynHianWoon 4 4 2 1


Board Composition and BalancePrinciple 2 : Strong and independent element on the Board

Presently,theBoardofDirectors(“theBoard”)ofEtikacomprises1executivedirector,3non-executivedirectorsand2independentdirectors,namely:-Executive DirectorKamalYPTan

Non-Executive DirectorsDato’JayaJBTan(Chairman)MahWengChoongTanYetMengKhorSinKok(AlternatetoMahWengChoong)TanSanChuan(AlternatetoTanYetMeng)

Independent Non-Executive DirectorsTeoCheeSengJohnLynHianWoon

Thereisagoodbalancebetweentheexecutiveandnon-executivedirectorsandastrongandindependentelementontheBoard.Keyinformationondirectorscanbefoundinthe“BoardofDirectors”sectionoftheannualreport.

TheBoard, throughthedelegationof itsauthority to theNominatingCommittee (“NC”),hasused itsbestefforts toensure thatDirectorsappointedtotheBoardpossesstherelevantbackground,experienceandknowledgeintechnology,business,financeandmanagementskillscriticaltotheGroup’sbusinesstoenabletheBoardtomakesoundandwell-considereddecisions.

TheindependenceofeachdirectorisreviewedannuallybytheNC.TheBoardconsidersan“independent”directorasonewhohasnorelationshipwithEtika,itsrelatedcompaniesoritsofficersthatcouldinterfere,orbereasonablyperceivedtointerfere,withtheexerciseofthedirector’sindependentbusinessjudgmentoftheconductoftheGroup’saffairs.

ThecompositionoftheBoardisreviewedonanannualbasisbyNCtoensurethattheBoardhastheappropriatemixofexpertiseandexperience,andcollectivelypossessesthenecessarycorecompetenceforinformeddecision-makingandeffectivefunctioning.

Chairman and Executive DirectorPrinciple 3 : Clear division of responsibilities at the top of the Company TheChairman’sprimaryfunctionistomanagethebusinessoftheBoardandtheBoardcommittees,andtopromoteharmoniousrelationswith theshareholders. In respectof theChairman’srolewithregardtoBoardproceedings, theChairmanbeinganon-executiveDirector:

• schedules meetings that enable the Board to perform its duties responsibly while not interfering with the flow of Etika’soperations;

• preparesmeetingagenda;• exercisescontroloverquality,quantityandtimelinessoftheflowofinformationbetweenmanagementandtheBoard;and• assistsinensuringcompliancewithEtika’sguidelinesoncorporategovernance.

Corporate Governance (cont’d)


ThereisacleardivisionofresponsibilitiesatthetopmanagementwithclearlydefinedlinesofresponsibilitybetweentheBoardandexecutivefunctionsofthemanagementofEtika’sbusiness.TheBoardsetsbroadbusinessguidelines,approvesfinancialobjectivesandbusinessstrategiesandmonitorsthestandardsofexecutivemanagementperformanceonaperiodicbasis.

TheroleoftheChairmanandExecutiveDirectorareseparate.Dato’JayaJBTan,thenon-executiveChairman,isconsultedontheGroup’sstrategicdirectionandformulationofpolicies.Theday-to-dayoperationoftheGroupisentrustedtotheExecutiveDirector,MrKamalYPTan,whoisassistedbyanexperiencedandqualifiedteamofexecutiveofficersoftheGroup.Dato’JayaandMrKamalarebrothers.

Access to information Principle 6 : Board members to have complete, adequate and timely information Principle 10 : Accountability of the Board and management

TheBoardisprovidedwithadequateinformation,managementaccounts,financialandcorporatereportsinatimelymannerbythemanagementtotheDirectorsonmatterstobedeliberated,thusfacilitatinginformeddecision-making.DirectorsarealsoupdatedoninitiativesanddevelopmentsfortheGroup’sbusinesswheneverpossibleonanon-goingbasis.

TheBoardhasseparateandindependentaccesstoEtika’sseniormanagementandtheCompanySecretaries.AtleastoneoftheCompanySecretariesattendstheBoardandBoardcommitteemeetingsandisresponsibleforensuringthatboardproceduresarefollowedinaccordancewiththeMemorandumandArticlesofAssociationofEtika,andthatapplicablerulesandregulationsarecompliedwith.

Managementwill,upondirectionbytheBoard,assisttheDirectors,eitherindividuallyorasagroup,togetindependentprofessionaladviceinfurtheranceoftheirduties,atEtika’sexpense.

TheBoardisaccountabletoshareholdersforthestewardshipoftheGroup.TheBoardupdatesshareholdersontheoperationsandfinancialpositionofEtikathroughhalf-yearandfull-yearresultsannouncementsaswellastimelyannouncementsofothermattersasprescribedbytherelevantrulesandregulations.TheManagementisaccountabletotheBoardbyprovidingtheBoardwiththenecessaryfinancialinformationforthedischargeofitsduties.

Presently,theManagementpresentstotheACthehalf-yearandfull-yearresultsandtheACreportsontheresultstotheBoardforreviewandapprovalbeforereleasingtheresultstotheSGX-STandpublicviaSGXNET.Board Committees

ToassisttheBoardinthedischargeofitsresponsibilities,theBoardhasestablishedthreeBoardCommittees,namelytheAuditCommittee(“AC”),NominatingCommittee(“NC”)andRemunerationCommittee(“RC”).Thesecommitteesfunctionwithinclearlydefinedtermsofreferenceandoperatingprocedures,whicharereviewedonaregularbasis.

Thecompositionofeachofthecommitteesisasfollows:-

Directors Audit Committee Remuneration Committee Nominating Committee

TeoCheeSeng Member Chairman ChairmanJohnLynHianWoon Chairman Member MemberDato’JayaJBTan1 Member Member Member

1 Dato’ Jaya J B Tan was appointed as a member of the Audit Committee with effect from 19 October 2005.



Nominating CommitteePrinciple 4 : Formal and transparent process for appointment of new directorsPrinciple 5 : Formal assessment of the effectiveness of the Board and contributions of each director

TheNominatingCommittee (“NC”) comprisesonenon-executivedirectorand two independentnon-executivedirectors,oneofwhomisalsotheChairmanoftheCommittee,namely:-

TeoCheeSeng(Chairman) Non-Executive,IndependentJohnLynHianWoon(Member) Non-Executive,IndependentDato’JayaJBTan(Member) Non-Executive

TheNCdecideshowtheBoardshouldbeevaluatedandselectsasetofperformancecriteriathatislinkedtolong-termshareholders’value,tobeusedforperformanceevaluationoftheBoard.

TheNCperformsthefollowingprincipalfunctions:-

• reviewsthestructure,sizeandcompositionoftheBoardandmakerecommendationstotheBoard;• identifiescandidatesandreviewsallnominationfortheappointmentandre-appointmentofmembersoftheBoard;• makeplansforsuccession,inparticularfortheChairmanandChiefExecutive;• determinesannuallywhetherornotaDirectorisindependentinaccordancewiththeguidelinesoftheCode;• decideswhetherornotaDirectorisabletoandhasbeenadequatelycarryingouthis/herdutiesasaDirectoroftheCompany;

and• assessestheeffectivenessoftheBoardasawhole,aswellasthecontributionbyeachmemberoftheBoard.

TheBoardhaspowerfromtimetotimeandatanytimetoappointapersonasaDirectortofillacasualvacancyorasanadditiontotheBoard.AnynewDirectorsappointedduringtheyearshallonlyholdofficeuntilthenextAnnualGeneralMeeting(“AGM”)andsubmitthemselvesforre-electionandshallnotbetakenintoaccountindeterminingtheDirectorswhoaretoretirebyrotationatthatmeeting.

Article91ofEtika’sArticlesofAssociationrequiresonethirdoftheBoardtoretirebyrotationateveryAGM.TheDirectorsmustpresentthemselvesforre-nominationandre-electionatregularintervalsofatleastonceeverythreeyears.

Inreviewingthenominationoftheretiringdirectors,theNCconsideredtheperformanceandcontributionofeachoftheretiringdirectors,havingregardnotonlytotheirattendanceandparticipationatBoardandBoardCommitteemeetingsbutalsothetimeandeffortsdevotedtotheGroup’sbusinessandaffairs,especiallytheoperationalandtechnicalcontributions.

Inconsideringtheappointmentofanynewdirector,theNCensuresthatthenewdirectorpossessesthenecessaryskills,knowledgeandexperiencethatcouldfacilitatetheBoardinthemakingofsoundandwell-considereddecisions.Forre-appointments,NCtakesintoaccounttheindividualdirector’spastcontributionsandperformance.

TheNChasrecommendedthenominationofDirectorsretiringbyrotationundertheCompany’sArticlesofAssociation,namelyMrMahWengChoongandMrTeoCheeSengforre-electionattheforthcomingAGM.BothMrMahandMrTeoareretiringunderArticle91oftheCompany’sArticlesofAssociation.

MrMahWengChoong,anon-executiveandnon-independentDirectorwasappointedtotheBoardon3August2004.

MrTeoCheeSeng,anindependentDirectorwasappointedtotheBoardon3August2004.HeisthechairmanoftheRemunerationandNominatingCommitteesandamemberof theAuditCommittee. Uponhisre-electionasaDirectorof theCompanyat theforthcoming AGM, he will remain the chairman of the Remuneration and Nominating Committees and a member of the AuditCommittee.HewillbeconsideredindependentforthepurposesofRule704(8)oftheListingManualoftheSingaporeExchangeSecuritiesTradingLimited.

MrTeoCheeSenghadabstainedfrommakingarecommendationonhisownnomination.



Remuneration CommitteePrinciple 7 : Formal and transparent procedure for fixing remuneration packages of directorsPrinciple 8 : Remuneration of directors should be adequate but not excessivePrinciple 9 : Remuneration policy, level and mix of remuneration and procedure for setting remuneration

TheRemunerationCommittee(“RC”)comprisesonenon-executivedirectorandtwoindependentnon-executivedirectors,oneofwhomisalsotheChairmanoftheCommittee,namely:-

TeoCheeSeng(Chairman) Non-Executive,IndependentJohnLynHianWoon(Member) Non-Executive,IndependentDato’JayaJBTan(Member) Non-Executive

The role of the RC is to review and recommend remuneration policies and packages for directors and key executives and todisseminateproper informationon transparencyandaccountability to shareholderson issuesof remunerationof the executivedirectorsoftheGroupandemployeesrelatedtotheexecutivedirectorsandcontrollingshareholdersoftheGroup.

RC’sreviewcoversallaspectofremuneration,includingbutnotlimitedtodirectors’fees,salaries,allowances,bonuses,options,long-term incentive schemes, including share schemes and benefits in kind. Recommendations are made in consultation withthe Chairman of the Board and submitted for endorsement by the entire Board. No director is involved in deciding his ownremuneration.

PrimaryfunctionstobeperformedbyRC:-

• reviewsandrecommendstotheBoard,aframeworkofremunerationfortheBoardandkeyexecutives;• reviewsthelevelofremunerationthatareappropriatetoattract,retainandmotivatethedirectorsandkeyexecutives;• ensuresadequatedisclosureonDirectors’remuneration;• reviewsandadministerstheEtikaEmployeeShareOptionScheme(the“Scheme”)adoptedbytheGroupanddecidesonthe

allocationsandgrantsofoptionstoeligibleparticipantsundertheScheme;and• recommendstotheBoard,theExecutiveShareOptionSchemesoranylong-termincentiveschemeswhichmaybesetupfrom

timetotimeanddoesallactsnecessaryinconnectiontherewith.

DIRECTORS’ REMUNERATION

a)Numberofdirectorsinremunerationbands:-

23/12/2004to 1/10/2005to 30/9/2005 30/9/2006

BelowS$250,000 7 7S$250,000toS$499,999 - -S$500,000andabove - - 7 7



b) Abreakdown,showingthelevelandmixofeachindividualdirector’sremunerationandfeesofEtikaforFY2006isasfollows:

Remuneration Bands Salary* Directors’ Performance- Total& Names of Directors Fees related income/ Remuneration Bonus** % % % %

Below S$250,000

KamalYPTan 90.1 - 9.9 100.0

Dato’JayaJBTan - 100.0 - 100.0

MahWengChoong 77.4 12.4 10.2 100.0

TeoCheeSeng - 100.0 - 100.0

JohnLynHianWoon - 100.0 - 100.0

TanYetMeng - 100.0 - 100.0

KhorSinKok 90.0 - 10.0 100.0

TanSanChuan - - - -* Inclusive of benefits–in-kind, allowances and provident fund.

** On receipt basis during FY2006.

Thebreakdown,showingthelevelandmixofeachkeyexecutive’sremunerationforFY2006,isasfollows:-

Remuneration Bands Salary* Directors’ Performance- Total& Names of Executive Officers Fees related income/ Remuneration Bonus** % % % %

Below S$250,000

PokYorkKeaw 72.2 0.6 27.2 100.0

KwongYuenSeng 90.5 0.0 9.5 100.0

PokYokeKung 76.4 0.3 23.3 100.0

PokYokeKeng 76.0 0.3 23.7 100.0

ThongCooiSeong 86.8 - 13.2 100.0* Inclusive of benefits-in-kind, allowances and provident fund.

** On receipt basis during FY2006.

Immediate family members of DirectorsTherearenoimmediatefamilymembersofDirectorsinemploymentwithEtikaandwhoseremunerationexceedsS$150,000duringtheFY2006.



Audit CommitteePrincipal 11 : Establishment of audit committee with written terms of reference

TheAuditCommittee(“AC”)comprisesonenon-executivedirectorandtwoindependentnon-executivedirectors,oneofwhomisalsotheChairmanoftheCommittee.ThemembersoftheACasatthedateofthisreportareasfollows:-

JohnLynHianWoon(Chairman) Non-Executive,IndependentTeoCheeSeng(Member) Non-Executive,IndependentDato’JayaJBTan1(Member) Non-Executive 1Dato’ Jaya was appointed as the AC member with effect from 19 October 2005.

TheprincipalresponsibilityoftheACistoassist theBoard inmaintainingahighstandardofcorporategovernance,particularlybyprovidinganindependentreviewofthegroup’smaterialinternalcontrols,includingfinancial,operational,complianceandriskmanagementcontrolsatleastonceannually,tosafeguardEtika’sassetsandmaintainadequateaccountingrecords,withtheoverallobjectiveofensuringthatthemanagementcreatesandmaintainsaneffectivecontrolenvironmentintheGroup.

TheAChasauthoritytoinvestigateanymatterwithinitstermsofreference,gainfullaccesstoandco-operationbymanagement,exercisefulldiscretiontoinviteanyDirectororexecutiveofficertoattenditsmeetings,andgainreasonableaccesstoresourcestoenableittodischargeitsfunctionproperly.

TheACwillmeetwiththeexternalauditorswithoutthepresenceofthemanagementatleastonceayeartoreviewthescopeandresultsoftheauditanditscosteffectiveness,aswellastheindependenceandobjectivityoftheexternalauditors.

Ithasundertakenareviewofallnon-auditservicesprovidedbytheexternalauditorsandisoftheopinionthattheprovisionofsuchserviceswouldnotaffecttheindependenceoftheauditors.

Inperformingthosefunctions,theACreviews:-

• withtheexternalauditorstheauditplan,theirevaluationofthesystemofinternalaccountingcontrols,theirlettertomanagementandthemanagement’sresponse;

• thefinancialstatementsofEtikaandtheconsolidatedfinancialstatementsofthegroupbeforetheirsubmissiontotheBoardofDirectors;

• anddiscusswiththeexternalauditorsanysuspectedfraudorirregularity,orsuspectedinfringementofanyrelevantlaws,rulesorregulations;

• potentialconflictsofinterest(ifany);• theadequacyoftheinternalauditfunctionandtheeffectivenessofEtika’smaterialinternalcontrols;• independenceoftheexternalauditors;• interestedpersontransactions;• theinternalcontrolproceduresandensureco-operationgivenbythemanagementtotheexternalauditors;• theappointmentandre-appointmentofexternalandinternalauditorsofEtika’sandtheauditfees;and• andundertakesuchotherfunctionsanddutiesasrequestedbytheBoardandasrequiredbystatuteorListingManual.

TheexternalauditorshavefullaccesstotheACwhohastheexpresspowertoconductorauthorizeinvestigationsintoanymatterswithinitstermsofreference.MinutesoftheACmeetingswillberegularlysubmittedtotheBoardforitsinformation.

TheAChasreviewedtheGroup’sriskassessment,andbasedontheauditreportsandmanagementcontrolsinplace,issatisfiedthatthereareadequateinternalcontrolsintheGroup.

Havingreviewedallnon-auditservicesprovidedbytheexternalauditors,BDORaffles,theACisoftheviewthatsuchservicesdonotaffectBDORaffles’independenceandobjectivityandhasrecommendedtheirre-appointmenttotheBoard.




Internal Controls and Internal AuditPrinciple 12 : Sound system of internal controlsPrinciple 13 : Setting up independent audit function

The Board is cognizant of its responsibility for maintaining a sound system of internal controls to safeguard the shareholders’investmentandtheGroup’sassetsandbusiness.Etika’sauditors,BDORaffles,carryout, in thecourseof theirstatutoryaudit,areviewoftheeffectivenessofEtika’smaterialinternalcontrols,annuallytotheextentoftheirscopelaidoutintheirauditplan.Materialnon-complianceandinternalcontrolweaknessesnotedduringtheirauditandtheauditors’recommendations,arereportedtotheACmembers.ForFY2006,theBoardisoftheviewthatbasedonthereportsfromtheauditors,thesystemofinternalcontrolsthathasbeenmaintainedbyEtika’smanagementthroughoutthefinancialyearisadequatetomeettheneedsofEtika.TheBoardshallconsiderexpandingitsinternalauditresourcesasandwhentheneedarises.

Communication with ShareholdersPrinciple 14 : Regular, effective and fair communication with shareholdersPrinciple 15 : Shareholder participation at AGM

EtikaiscommittedtotimelydisseminationofinformationandpropertransparencyanddisclosureofrelevantinformationtoSGX-ST,shareholders,analysts,thepublicanditsemployees.

Informationiscommunicatedtoshareholdersandthepublicthroughthefollowingchannels:

• noticeofAnnualGeneralMeeting(“AGM”)andAnnualReportsthatareissuedtoallshareholders.TheBoardstrivestoensurethatthesereportsincludeallrelevantinformationontheGroup,includingcurrentdevelopments,strategicplansanddisclosuresrequiredundertheCompaniesAct,SingaporeFinancialReportingStandards,ListingManualoftheSGX-STandotherrelevantstatutoryandregulatoryrequirements;

• pricesensitiveannouncementofhalf-yearandfull-yearresultsreleasedthroughSGXNET;• disclosuresontheSGXNET;• pressreleases;• pressandanalysts’briefingsasmaybeappropriate;and• theGroup’swebsite(www.etikadairies.com.my)atwhichshareholdersandthepublicmayaccessinformationontheGroup.

All shareholders are welcome to attend the AGM. The Board of Directors, AC members and other committee members, chieffinancialofficer,auditorsandtheCompanySecretary/SecretarieswillbepresentandareavailabletoaddressanyquestionsfromshareholdersregardingtheGroupanditsbusinesses.

Material Contracts

NomaterialcontractswereenteredintobetweenEtikaoranyofitssubsidiariesinvolvingtheinterestsofanydirectororcontrollingshareholder,whichareeithersubsistingattheendofthefinancialyearor,ifnotthensubsisting,enteredintosincetheendofthepreviousfinancialyearexceptforrelatedpartytransactionsanddirector’sremunerationasdisclosedinthefinancialstatements.


Interested Person Transactions

EtikahasestablishedprocedurestoensurethatalltransactionswithinterestedpersonsarereportedonatimelymannertotheACandthatthetransactionsareatarm’s lengthbasis.All interestedpersontransactionsaresubjecttoreviewbytheACtoensurecompliancewiththeestablishedprocedures.

Theaggregatevalueofinterestedpersontransactionsenteredintoduringtheyearwereasfollows:-

Name of Interested Person Aggregate value of all interested Aggregate value of all person transactions during the interested person financial year under review transactions conducted (excluding transactions less under shareholders’ than S$100,000 and mandate pursuant to Rule transactions conducted under 920 of the SGX Listing Manual shareholders’ mandate pursuant (excluding transactions to Rule 920 of the SGX Listing Manual) less than S$100,000) RM RMPerinsu(BrokerInsurans)Sdn.Bhd. 675,749 --Insurancepremium (orapproximatelyS$290,933) LifeMedicalsBerhad 1,007,463 --Purchaseofpackingmaterials (orapproximatelyS$433,747) Based on exchange rate as at 30 September 2006 of S$1 = RM2.3227

Risk Management

TheGroupregularlyreviewsandimprovesitsbusinessandoperationalactivitiestoidentifyareasofsignificantbusinessrisksaswellastakingappropriatemeasurestocontrolandmitigatetheserisks.TheGroupreviewsallsignificantcontrolpoliciesandproceduresandhighlightsallsignificantmatterstotheACandtheBoard.Thefinancialriskmanagementobjectivesandpoliciesareoutlinedinthefinancialstatements.

Dealings in Securities

FollowingtheintroductionofBestPracticeGuidebySGX-ST(“theCode”),thecompanyhasbroughttotheattentionofitsemployeestheimplicationsofinsidertradingandrecommendationsoftheBestPracticeGuide.

Etika has adopted and implemented an internal compliance of the Code which prohibits securities dealings by directors andemployeeswhileinpossessionofunpublishedprice-sensitiveinformation.

Directors,executivesandanyotheremployeeswhohaveaccesstomaterialprice-sensitiveinformationareprohibitedfromdealinginsecuritiesofEtikapriortotheannouncementofamatterthatinvolvesmaterialunpublishedprice-sensitiveinformation.TheyarerequiredtoreportonalltheirdealingsinEtikasecuritiestoEtika.TheyarealsoprohibitedfromdealinginEtika’ssecuritiesduringtheperiodcommencingonemonthbeforetheannouncementofEtika’shalf-yearorfull-yearresultsandendingonthedayaftertheannouncementofthehalf-yearandfull-yearresults.

TheGrouphascompliedwiththeBestPracticesGuideonSecuritiesTransactionsissuedbytheSingaporeExchange.


32 ReportoftheDirectors

34 StatementbyDirectors

35 Auditors’ReporttotheMembers

36 BalanceSheets

37 ConsolidatedProfitandLossAccount

38 StatementsofChangesinEquity

40 ConsolidatedCashFlowStatement

42 NotestotheFinancialStatements

FinancialStatements


Report of the Directors

TheDirectorsoftheCompanypresenttheirreporttothememberstogetherwiththeauditedconsolidatedfinancialstatementsoftheGroupandthebalancesheetandstatementofchangesinequityoftheCompanyforthefinancialyearended30September2006.

1. Directors

TheDirectorsoftheCompanyinofficeatthedateofthisreportare:

Dato’ Jaya J B Tan Kamal Y P Tan Mah Weng Choong John Lyn Hian Woon Teo Chee Seng Tan Yet Meng Khor Sin Kok Tan San Chuan

2. ArrangementstoenableDirectorstoacquiresharesordebentures

NeitherattheendofnoratanytimeduringthefinancialyearwastheCompanyapartytoanyarrangementwhoseobjectistoenabletheDirectorsoftheCompanytoacquirebenefitsbymeansoftheacquisitionofsharesinordebenturesoftheCompanyoranyotherbodycorporate.

3. Directors’interestsinsharesordebentures

AccordingtotheregisteroftheDirectors’shareholdingskeptbytheCompanyforthepurposesofSection164oftheSingaporeCompaniesAct,Chapter50(“Act”),noneoftheDirectorswhoheldofficeattheendofthefinancialyearhadanyinterestinthesharesordebenturesoftheCompanyanditsrelatedcorporationsexceptasfollows:

Directinterest Deemedinterest

1.10.2005 30.9.2006 21.10.2006 1.10.2005 30.9.2006 21.10.2006TheCompany Number of ordinary shares

Dato’ Jaya J B Tan 29,618,789*1 29,618,789*2 29,618,789*2 59,237,577 59,237,577 59,237,577Kamal Y P Tan 29,618,789*3 29,618,789*4 29,618,789*4 59,237,577 59,237,577 59,237,577Mah Weng Choong 4,536,846 4,636,846 4,636,846 - - -John Lyn Hian Woon 200,000 200,000 200,000 - - -Teo Chee Seng 50,000 50,000 50,000 - - -Tan Yet Meng - - 19,745,858 - - 69,110,508Khor Sin Kok 4,577,846 4,577,846 4,577,846 - - -Tan San Chuan - - 4,936,465 - - -

*1 Includesdirectinterestin8,500,000ordinarysharesheldthroughnominees.




ByvirtueofSection7oftheAct,Dato’JayaJBTanandKamalYPTanaredeemedtohaveinterestsinthesharesofallthewholly-ownedsubsidiariesheldbytheCompany,asatthebeginningandendofthefinancialyear.

4. Directors’contractualbenefits

Sincetheendofthepreviousfinancialyear,noDirectoroftheCompanyhasreceivedorbecomeentitledtoreceiveabenefitbyreasonofacontractmadebytheCompanyorarelatedcorporationwiththeDirectororwithafirmofwhichheisamember,orwithacompanyinwhichhehasasubstantialfinancialinterest,exceptasdisclosedinthefinancialstatements.


5. Shareoptions

TherewerenoshareoptionsgrantedbytheCompanyoritssubsidiariesduringthefinancialyear.

TherewerenosharesissuedduringthefinancialyearbyvirtueoftheexerciseofoptionstotakeupunissuedsharesoftheCompanyoritssubsidiaries.

TherewerenounissuedsharesunderoptionintheCompanyoritssubsidiariesasattheendofthefinancialyear.

TheCompanyhasimplementedashareoptionschemeknownasthe“EtikaEmployeeShareOptionScheme”(“ESOS”).TheESOSwasapprovedandadoptedbytheShareholdersatanExtraordinaryGeneralMeetingoftheCompanyheldon8November2004.NoshareoptionshavebeengrantedundertheESOS.

6. Auditcommittee

TheAuditCommitteeduringthefinancialyearandatthedateofthisreportcomprisesthefollowingmembers,allofwhomarenon-executiveDirectorsandamajorityofwhom,includingtheChairman,areindependentDirectors:

JohnLynHianWoon (Chairman)TeoCheeSengDato’JayaJBTan (appointedasmemberon19October2005)

TheAuditCommitteeperformsthefunctionsspecifiedinSection201B(5)oftheSingaporeCompaniesAct,Chapter50.

Inperformingthosefunctions,theAuditCommitteereviewedtheauditplansandtheoverallscopeofexaminationbytheexternalauditorsoftheGroupandoftheCompany.TheAuditCommitteealsoreviewedtheindependenceoftheexternalauditorsoftheCompanyandthenatureandextentofthenon-auditservicesprovidedbytheexternalauditors.

TheAuditCommitteealsoreviewedtheassistanceprovidedbytheCompany’sofficerstotheexternalauditorsandtheconsolidatedfinancialstatementsoftheGroupandthebalancesheetandstatementofchangesinequityoftheCompanyaswellastheAuditors’ReportthereonpriortotheirsubmissiontotheDirectorsoftheCompanyforadoption.InterestedpersontransactionsoftheGroupduringthefinancialyearhavealsobeenreviewedbytheAuditCommittee.

TheAuditCommitteehasrecommendedtotheBoardofDirectorsthenominationofBDORaffles,forre-appointmentasauditorsoftheCompanyattheforthcomingAnnualGeneralMeeting.

7. Auditors

Theauditors,BDORaffles,haveexpressedtheirwillingnesstoacceptre-appointment.

OnbehalfoftheBoardofDirectors

DATO’JAYAJBTAN KAMALYPTAN

Singapore28December2006

Report of the Directors (cont’d)


Statement by Directors

Westatethat,intheopinionoftheDirectorsofEtikaInternationalHoldingsLimited,

(a) theaccompanyingfinancialstatementscomprisingthebalancesheetsoftheGroupandoftheCompany,consolidatedprofitandlossaccount,statementofchangesinequityoftheGroupandoftheCompanyandconsolidatedcashflowstatementtogetherwiththenotesthereonaredrawnupsoastogiveatrueandfairviewofthestateofaffairsoftheGroupandoftheCompanyasat30September2006andoftheresults,changesinequityandcashflowsoftheGroupandchangesinequityoftheCompanyforthefinancialyearendedonthatdate,and

(b) atthedateofthisstatement,therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhentheyfalldue.

OnbehalfoftheBoardofDirectors

DATO’JAYAJBTAN KAMALYPTAN



Auditors’ Report to the Members of Etika International Holdings Limited

WehaveauditedtheaccompanyingfinancialstatementsofEtikaInternationalHoldingsLimitedandoftheGroupcomprisingthebalancesheetsoftheGroupandoftheCompanyasat30September2006,consolidatedprofitandlossaccount,statementsofchangesinequityoftheGroupandoftheCompanyandconsolidatedcashflowstatementoftheGroupforthefinancialyearthenendedsetoutonpages36to76.ThesefinancialstatementsaretheresponsibilityoftheCompany’sDirectors.Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.

WeconductedourauditinaccordancewithSingaporeStandardsonAuditing.ThoseStandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreeofanymaterialmisstatement.Anauditincludesexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements.AnauditalsoincludesassessingtheaccountingprinciplesusedandsignificantestimatesmadebytheDirectors,aswellasevaluatingtheoverallfinancialstatementpresentation.Webelievethatourauditprovidesareasonablebasisforouropinion.

Inouropinion,

(a) theaccompanyingconsolidatedfinancialstatementsoftheGroupandthebalancesheetandstatementofchangesinequityoftheCompanyareproperlydrawnupinaccordancewiththeprovisionsoftheSingaporeCompaniesAct,Chapter50(“Act”)andSingaporeFinancialReportingStandardssoastogiveatrueandfairviewofthestateofaffairsoftheGroupandoftheCompanyasat30September2006andoftheresults,changesinequityandcashflowsoftheGroupandchangesinequityoftheCompanyforthefinancialyearendedonthatdate;and

(b) theaccountingandotherrecordsrequiredbytheActtobekeptbytheCompanyandbythesubsidiaryincorporatedinSingaporeofwhichwearetheauditorshavebeenproperlykeptinaccordancewiththeprovisionsoftheAct.

BDORafflesCertifiedPublicAccountants



Group Company Note 2006 2005 2006 2005 RM RM RM RMNon-currentassetsProperty,plantandequipment 4 82,482,106 46,759,578 - -Investmentsinsubsidiaries 5 - - 18,133,685 17,542,583Associate 6 - - - -Available-for-salefinancialassets 7 444,324 - - -Deferredtaxassets 8 73,737 - - -Intangibleassets 9 4,428,369 - - -

87,428,536 46,759,578 18,133,685 17,542,583

CurrentassetsInventories 10 29,518,779 20,635,835 - -Tradeandotherreceivables 11 66,791,104 36,092,497 20,106,716 9,350,515Dividendsreceivable - - - 2,198,572Fixeddeposits 12 387,926 7,273,386 - 7,273,386Cashandbankbalances 2,160,481 290,091 674,082 151,435

98,858,290 64,291,809 20,780,798 18,973,908

Less: Currentliabilities Tradeandotherpayables 14 49,540,285 37,369,027 415,567 270,073Bankborrowings 15 44,315,408 19,741,718 - -Financeleases 16 1,038,054 473,211 - -Currentincometaxpayable 5,522 13,120 5,522 13,120

94,899,269 57,597,076 421,089 283,193

Netcurrentassets 3,959,021 6,694,733 20,359,709 18,690,715

Less: Non-currentliabilities Deferredtaxliabilities 8 4,620,049 2,354,982 - -Otherpayable 14 7,980,000 - - -Bankborrowings 15 26,521,365 4,907,928 - -Financeleases 16 1,612,440 627,174 - -

40,733,854 7,890,084 - - 50,653,703 45,564,227 38,493,394 36,233,298 Capitalandreserves Sharecapital 17 35,461,830 23,471,420 35,461,830 23,471,420Sharepremium 18 - 11,990,410 - 11,990,410Foreigncurrencytranslationreserve/(account) 19 204,066 (390,141) 317,339 (730,688)Fairvaluereserve 20 47,172 - - -Accumulatedprofits 13,247,765 10,492,538 2,714,225 1,502,156

AttributabletoequityholdersoftheCompany 48,960,833 45,564,227 38,493,394 36,233,298Minorityinterests 1,692,870 - - -

50,653,703 45,564,227 38,493,394 36,233,298

Theaccompanyingnotesformanintegralpartofthefinancialstatements.

Balance Sheetsas at 30 September 2006


Consolidated Profit and Loss Accountfor the financial year ended 30 September 2006

2006 2005 Note RM RM Revenue 21 233,170,383 150,048,872 Costofsales (200,515,217) (128,130,664) Grossprofit 32,655,166 21,918,208 Otheroperatingincome 22 574,841 314,878 Administrativeexpenses (11,654,743) (4,275,028) Marketinganddistributionexpenses (9,204,766) (7,034,703) Otheroperatingexpenses (1,679,191) (1,231,017) Exceptionalitem-Accreditationofnegativegoodwillarisingonacquisitionofasubsidiary 5(c) - 3,128,816 Financecosts 23 (3,183,771) (881,959) Profitbeforeincometax 24 7,507,536 11,939,195 Incometax 26 (2,497,457) (1,428,947) Profitafterincometaxattributabletoshareholders 5,010,079 10,510,248 Attributableto:

EquityholdersoftheCompany 4,913,133 10,510,248

Minorityinterests 96,946 - 5,010,079 10,510,248

Earningspershare 27

Basic/Diluted -includingexceptionalincome 2.86sen 7.08sen

-excludingexceptionalincome 2.86sen 4.97sen



Statements of Changes in Equityfor the financial year ended 30 September 2006

Total

Foreign attributable

currency toequity

Share Share translation Fairvalue Accumulated holdersofthe Minority

capital premium reserve reserve profits Company interests Total

Group Note RM RM RM RM RM RM RM RM

Balanceat1October2005 23,471,420 11,990,410 (390,141) - 10,492,538 45,564,227 - 45,564,227

EffectofCompanies

(Amendment)Act2005 17,18 11,990,410 (11,990,410) - - - - - -

Acquisitionofsubsidiaries - - - - - - 1,595,924 1,595,924

Netfairvaluechangeson

available-for-sale

financialassets 7 - - - 47,172 - 47,172 - 47,172

Netprofitfor

thefinancialyear - - - - 4,913,133 4,913,133 96,946 5,010,079

Dividendspaid 28 - - - - (2,157,906) (2,157,906) - (2,157,906)

Translationadjustment - - 594,207 - - 594,207 - 594,207

Balanceat30September2006 35,461,830 - 204,066 47,172 13,247,765 48,960,833 1,692,870 50,653,703

Foreign

currency

Share Share translation Accumulated

capital premium account profits Total

Group Note RM RM RM RM RM

Balanceat1October2004 7 - - (17,710) (17,703)

Issueofsharesarisingfrom

acquisitionofasubsidiary 17 17,542,573 - - - 17,542,573

Issueofsharesinconnectionwith

theCompany’sinitialpublicoffering 17,18 5,928,840 14,822,100 - - 20,750,940

Listingexpenses 18 - (2,831,690) - - (2,831,690)

Netprofitforthefinancialyear - - - 10,510,248 10,510,248

Translationadjustment - - (390,141) - (390,141)

Balanceat30September2005 23,471,420 11,990,410 (390,141) 10,492,538 45,564,227



Statements of Changes in Equityfor the financial year ended 30 September 2006 (cont’d)

Foreign currency translation Share Share reserve/ Accumulated capital premium (account) profits TotalCompany Note RM RM RM RM RM Balanceat1October2005 23,471,420 11,990,410 (730,688) 1,502,156 36,233,298

EffectofCompanies(Amendment)Act2005 17,18 11,990,410 (11,990,410) - - -

Netprofitforthefinancialyear - - - 3,369,975 3,369,975

Dividendspaid 28 - - - (2,157,906) (2,157,906)

Translationadjustment - - 1,048,027 - 1,048,027

Balanceat30September2006 35,461,830 - 317,339 2,714,225 38,493,394

Balanceat1October2004 7 - - (17,710) (17,703)Issueofsharesarisingfromacquisitionofasubsidiary 17 17,542,573 - - - 17,542,573

IssueofsharesinconnectionwiththeCompany’sinitialpublicoffering 17,18 5,928,840 14,822,100 - - 20,750,940

Listingexpenses 18 - (2,831,690) - - (2,831,690)

Netprofitforfinancialyear - - - 1,519,866 1,519,866

Translationadjustment - - (730,688) - (730,688)

Balanceat30September2005 23,471,420 11,990,410 (730,688) 1,502,156 36,233,298



Consolidated Cash Flow Statementfor the financial year ended 30 September 2006

2006 2005 RM RMCashflowsfromoperatingactivities Profitbeforeincometax 7,507,536 11,939,195Adjustmentsfor:

Allowancefordoubtfultradereceivables 136,904 206,147Allowancefordoubtfultradereceivablesnolongerrequired,nowwrittenback (99,344) (34,970)Badtradereceivableswrittenoff 3,114 -Depreciationofproperty,plantandequipment 3,641,382 2,283,042Gainondisposalofplantandequipment (35,134) -Interestincome (145,919) (157,685)Interestexpense 3,183,771 881,959Inventorieswrittenoff 104,465 -Plantandequipmentwrittenoff 67,644 -Appropriationofproperty,plantandequipment - 114,337Exceptionalitemarisingfromacquisitionofasubsidiary - (3,128,816)

Operatingprofitbeforeworkingcapitalchanges 14,364,419 12,103,209Workingcapitalchanges:

Inventories 5,190,898 (8,274,636)Tradeandotherreceivables (9,761,165) (9,401,584)Tradeandotherpayables (2,303,408) 3,840,804

Cashgeneratedfrom/(usedin)operations 7,490,744 (1,732,207)Interestpaid (444,980) (66,001)Incometaxpaid (270,411) -

Netcashgeneratedfrom/(usedin)operatingactivities 6,775,353 (1,798,208) Cashflowsfrominvestingactivities

Purchaseofproperty,plantandequipment(NoteA) (19,451,994) (14,714,782)Netcashoutflowfromacquisitionofsubsidiaries(Note5(c)) (21,453,734) (86,264)Acquisitionofsharesinasubsidiary(Note5(d)) (555,533) -Purchaseofintangibleassets (6,521) -Proceedsfromdisposalofplantandequipment 39,902 -Interestincomereceived 145,919 157,685

Netcashusedininvestingactivities (41,281,961) (14,643,361)

Cashflowsfromfinancingactivities Dividendspaidtoshareholders (2,157,906) -Proceedsfromissueofshares,netoflistingexpenses - 17,919,251Increaseinfixeddeposits (387,926) -Interestpaid (2,738,791) (815,958)Proceedsfrombankborrowings 29,449,116 6,001,554Repaymentoffinanceleaseobligations (1,059,784) (527,955)

Netcashgeneratedfromfinancingactivities 23,104,709 22,576,892 Netchangeincashandcashequivalents (11,401,899) 6,135,323Cashandcashequivalentsatbeginningoffinancialyear 5,750,021 11,060Effectofexchangeratechanges 594,207 (396,362)

Cashandcashequivalentsatendoffinancialyear(Note13) (5,057,671) 5,750,021



Consolidated Cash Flow Statementfor the financial year ended 30 September 2006 (cont’d)

NotetoConsolidatedCashFlowStatement

A. Purchaseofproperty,plantandequipment

Duringthefinancialyear,theGroupacquiredproperty,plantandequipmentasfollows:

2006 2005 RM RM Additionsofproperty,plantandequipment 19,921,455 16,257,475Acquiredunderfinanceleaseagreements (469,461) (325,610)Amountowingtoacontractoroffreeholdbuilding - (1,217,083)

Cashpaymentsmadetoacquireproperty,plantandequipment 19,451,994 14,714,782

Theaccompanyingnotesfromanintegralpartofthefinancialstatements.


Notes to the Financial Statements for the financial year ended 30 September 2006

Thesenotesformanintegralpartofandshouldbereadinconjunctionwiththefinancialstatements.

1. Generalcorporateinformation

ThebalancesheetandstatementofchangesinequityofEtikaInternationalHoldingsLimited(“Company”)andtheconsolidatedfinancialstatementsoftheCompanyanditssubsidiaries(“Group”)forthefinancialyearended30September2006wereauthorisedforissueinaccordancewithaDirectors’resolutiondated28December2006.

TheCompanyisapubliclimitedliabilitycompany,incorporatedanddomiciledinSingaporewithitsregisteredofficeat3ChurchStreet,#08-01SamsungHub,Singapore049483andprincipalplaceofbusinessat20MaxwellRoad,#12-05,MaxwellHouse,Singapore069113.TheCompany’sregistrationnumberis200313131Z.

On10November2004,theCompanywasconvertedtoapubliclimitedcompanyandchangeditsnamefromEtikaInternationalHoldingsPrivateLimitedtoEtikaInternationalHoldingsLimited.TheCompanywasadmittedtotheofficiallistoftheStockExchangeofSingaporeDealingandAutomatedQuotationSystem(“SGX-SESDAQ”)on23December2004.TheprincipalactivityoftheCompanyisthatofaninvestmentholdingcompany.

TheprincipalactivitiesofthesubsidiariesaresetoutinNote5tothefinancialstatements.

2. Significantaccountingpolicies

(a) Basisofpreparationoffinancialstatements

ThefinancialstatementshavebeenpreparedinaccordancewiththeprovisionsoftheSingaporeCompaniesAct,Chapter50(“Act”)andSingaporeFinancialReportingStandards(“FRS”)includingrelatedInterpretationsofFinancialReportingStandards(“INTFRS”).

ThepreparationoffinancialstatementsinconformitywithFRSrequiresmanagementtoexercisejudgementintheprocessofapplyingtheGroup’sandtheCompany’saccountingpoliciesandrequirestheuseofaccountingestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetandliabilitiesatthebalancesheetdateandthereportedamountsofrevenueandexpensesduringthereportingperiod.Althoughtheseestimatesarebasedonmanagement’sbestknowledgeofcurrenteventsandactions,actualresultsmaydifferfromthoseestimates.

TheconsolidatedfinancialstatementsoftheGroupandthebalancesheetandstatementofchangesinequityoftheCompanyarepreparedinaccordancewiththehistoricalcostconventionexceptasdisclosedintheaccountingpoliciesbelow.

On1October2005,theGroupadoptedallthenewandrevisedFRSsandINTFRSissuedbytheCouncilonCorporateandDisclosureandGovernancethatarerelevanttoitsoperationsandeffectiveforannualperiodsbeginningonorafter1January2005:

FRS1(revised) : PresentationofFinancialStatementsFRS2(revised) : InventoriesFRS8(revised) : AccountingPolicies,ChangesinAccountingEstimatesandErrorsFRS10(revised) : EventsaftertheBalanceSheetDateFRS14(revised) : SegmentReportingFRS16(revised) : Property,PlantandEquipmentFRS17(revised) : LeasesFRS19(revised) : EmployeeBenefitsFRS21(revised) : TheEffectsofChangesinForeignExchangeRatesFRS24(revised) : RelatedPartyDisclosuresFRS27(revised) : ConsolidatedandSeparateFinancialStatementsFRS32(revised) : FinancialInstruments:DisclosureandPresentationFRS33(revised) : EarningsPerShareFRS36(revised) : ImpairmentofAssetsFRS38(revised) : IntangibleAssetsFRS39 : FinancialInstruments:RecognitionandMeasurementFR102 : Share-basedPaymentFRS103 : BusinessCombinations

Theadoptionofthesenew/revisedFRSsandINTFRSshasnomaterialeffectonthefinancialstatements.


Notes to the Financial Statementsfor the financial year ended 30 September 2006 (cont’d)

2. Significantaccountingpolicies(cont’d)

(a) Basisofpreparationoffinancialstatements(cont’d)

FRS and INT FRS issued but not yet effective

TheGrouphasnotadoptedthefollowingFRSandINTFRSthathavebeenissuedbutnotyeteffective:

Effectivedate (Annualperiods beginningonorafter) FRS40 InvestmentProperty 1January2007FRS106 ExplorationforandEvaluationofMineralResources 1January2006FRS107 FinancialInstruments:Disclosures 1January2007INTFRS104 DeterminingwhetheranArrangementContainsaLease 1January2006INTFRS105 RightstoInterestsarisingfromDecommissioning,Restoration, andEnvironmentalRehabilitationFunds 1January2006INTFRS106 LiabilitiesArisingfromParticipatinginaSpecificMarket –WasteElectricalandElectronicEquipment 1December2005INTFRS107 ApplyingtheRestatementApproachunderFRS29FinancialReporting inHyperinflationaryEconomies 1March2006INTFRS108 ScopeofFRS102 1May2006INTFRS109 ReassessmentofEmbeddedDerivatives 1June2006INTFRS110 InterimFinancialReportingandImpairment 1November2006

TheGroupexpectsthattheadoptionoftheabovepronouncements,ifapplicable,willhavenomaterialimpactonthefinancialstatementsintheperiodofinitialapplication.

(b) Basisofconsolidation

Thepurchasemethodofaccountingisusedtoaccountfortheacquisitionofsubsidiaries.Thecostofanacquisitionismeasuredatthefairvalueoftheassetsgiven,equityinstrumentsissuedorliabilitiesincurredorassumedatthedateofexchange,pluscostsdirectlyattributable to theacquisition. Identifiableassetsacquiredand liabilitiesandcontingent liabilitiesassumed inabusinesscombinationaremeasuredinitiallyattheirfairvaluesonthedateofacquisition, irrespectiveoftheextentofanyminorityinterest.

Costsdirectlyattributabletoanacquisitionareincludedaspartofthecostofacquisition.

SubsidiariesareconsolidatedfromthedateonwhichcontrolistransferredtotheGrouptothedateonwhichthatcontrolceases.Inpreparingtheconsolidatedfinancialstatements,inter-companytransactions,balancesandunrealisedgainsontransactionsbetweengroupcompaniesareeliminated.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceofanimpairmentoftheassettransferred.Wherenecessary,adjustmentsaremadetothefinancialstatementsofsubsidiariestoensureconsistencyofaccountingpolicieswiththoseoftheGroup.AnyexcessofthecostofbusinesscombinationovertheGroup’sinterestinthenetfairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesrepresentsgoodwill.GoodwillisaccountedforinaccordancewiththeaccountingpolicyforgoodwillstatedinNote2(e)(i)tothefinancialstatements.



(b) Basisofconsolidation(cont’d)

MinorityinterestisthatpartofthenetresultsofoperationsandofnetassetsofasubsidiaryattributabletointerestswhicharenotowneddirectlyorindirectlybytheGroup.Itismeasuredattheminorities’shareofthefairvalueofthesubsidiaries’identifiableassets,liabilitiesandcontingentliabilitiesatthedateofacquisitionbytheGroupandtheminorities’shareofchangesinequitysincethedateofacquisition,exceptwhenthelossesapplicabletotheminorityinasubsidiaryexceedtheminorityinterestintheequityofthatsubsidiary.Insuchcase,theexcessandfurtherlossesapplicabletotheminorityareattributedtotheequityholdersof theCompany,unlesstheminorityhasabindingobligationto,and isableto,makegoodthe losses. Whenthatsubsidiarysubsequentlyreportsprofits,theprofitsapplicabletotheminorityareattributedtotheequityholdersoftheCompanyuntiltheminority’sshareoflossespreviouslyabsorbedbytheequityholdersoftheCompanyhasbeenrecovered.

MinorityinterestsarepresentedinthebalancesheetoftheGroupwithinequity,separatelyfromtheCompany’sequityholders,andareseparatelydisclosedintheprofitandlossaccountoftheGroup.

(c) Property,plantandequipment

Property,plantandequipmentarestatedatcostlessaccumulateddepreciationandimpairmentinvalue,ifany.

Thecostofproperty,plant andequipment includesexpenditure that isdirectly attributable to theacquisitionof the items.Dismantlement,removalorrestorationcostsareincludedaspartofthecostofproperty,plantandequipmentiftheobligationfordismantlement,removalorrestorationisincurredasaconsequenceofacquiringorusingtheproperty,plantandequipment. Depreciationiscalculatedonthestraight-linemethodsoastowriteoffthecostoftheproperty,plantandequipmentovertheirestimatedusefullivesasfollows:Factorybuildings 40to50yearsColdroomandfreezer 10yearsFurnitureandfittings 10yearsRenovation 10yearsMotorvehicles 5to6.25yearsOfficeandfactoryequipment 5to15yearsComputersystem 5years

Nodepreciationisprovidedonfreeholdland.Construction-in-progressarenotdepreciatedastheseassetsarenotavailableforuse.

Assetsheldunderfinanceleasearedepreciatedovertheirexpectedusefullivesonthesamebasisasownedassetsor,whereshorter,thetermoftherelevantlease.

The residual values, useful lives and depreciation method of property, plant and equipment are reviewed at each balancesheetdate toensure that the residualvalues,periodofdepreciationanddepreciationmethodareconsistentwithpreviousestimatesandtheexpectedpatternofconsumptionoffutureeconomicbenefitsembodiedinthetermsofproperty,plantandequipment.

Ondisposalofanitemofproperty,plantandequipment,thedifferencebetweenthenetdisposalproceedsanditscarryingamountistakentotheprofitandlossaccount.

(d) Subsidiaries

SubsidiariesareentitiesoverwhichtheGrouphaspowertogovernthefinancialandoperatingpolicies,generallyaccompanyingashareholdingofmorethanonehalfofthevotingrights.TheexistenceandeffectofpotentialvotingrightsthatarecurrentlyexercisableorconvertibleareconsideredwhenassessingwhethertheGroupcontrolsanotherentity.

InvestmentsinsubsidiariesarestatedatcostontheCompany’sbalancesheetlessimpairmentinvalue,ifany.




(e) Intangibleassets

(i) Goodwill

GoodwillacquiredinabusinesscombinationrepresentstheexcessofcostofthebusinesscombinationovertheGroup’sinterestinthenetfairvalueoftheidentifiableassets,liabilitiesandcontingentliabilities.Followinginitialrecognition,goodwillistestedforimpairmentonanannualbasisassetoutinNote2(f)tothefinancialstatements.

Goodwillacquiredinabusinesscombinationisincludedinintangibleassets.

Gainsandlossesonthedisposalofabusinesscombinationoranassociateincludethecarryingamountofgoodwillrelatingtotheentityorbusinesssold.

(ii) Product licences

Product licences represent product licences registered in Indonesia. Product licence is stated at cost less accumulatedamortisationandimpairmentinvalue,ifany.Theusefullifeoftheproductlicencesis5years,representingtheperiodthatbenefitsareexpectedtobereceived.

(f) Impairmentofnon-financialassets

Non-financial assets other than goodwillThe carrying amounts of non-financial assets are reviewed at each balance sheet date to determine whether there is anyindicationofimpairmentinvalueandwhethereventsorchangesincircumstancesindicatethatthecarryingamountsmaynotberecoverable.Ifanysuchindicationexists,theasset’srecoverableamountisestimated.

An impairment in value is recognised whenever the carrying amount of the asset or its cash-generating unit exceeds itsrecoverableamount.Impairmentinvalueisrecognisedintheprofitandlossaccount.

Therecoverableamountisthehigherofanasset’sfairvaluelesscosttosellandvalueinuse.Thefairvaluelesscosttosellistheamountobtainablefromthesaleofanassetinanarm’slengthtransaction.Valueinuseistheestimatedfuturecashflowsdiscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandrisksspecifictotheasset,expectedtoarisefromthecontinuinguseofanassetandfromitsdisposalattheendofitsusefullife.

Recoverableamountsareestimatedforindividualassetsor,ifitisnotpossible,forthecash-generatingunittowhichtheassetbelongs.

Animpairmentinvalueisreversediftherehasbeenachangeintheestimatesusedtodeterminetherecoverableamount.Animpairmentinvalueisreversedonlytotheextentthattheasset’scarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciation,ifnoimpairmentinvaluehasbeenrecognised.Reversalsofimpairmentinvaluearerecognisedintheprofitandlossaccount.

Goodwill

Goodwillistestedannuallyforimpairment,aswellaswhenthereisanyindicationthatthegoodwillmaybeimpaired.

Forthepurposesofimpairmenttestingofgoodwill,goodwillisallocatedtoeachoftheGroup’scash-generatingunitexpectedtobenefitfromsynergiesofthebusinesscombination.Iftherecoverableamountofthecash-generatingunitislessthanthecarryingamountoftheunitincludingthegoodwill,theimpairmentinvalueisrecognisedintheprofitandlossaccountandallocatedfirsttoreducethecarryingamountofanygoodwillallocatedtotheunitandthentotheotherassetsoftheunitonapro-ratabasisofthecarryingamountofeachassetintheunit.Impairmentinvalueongoodwillisnotreversedinasubsequentperiod.




(g) Inventories

Inventoriesarestatedatthelowerofcostandnetrealisablevalue.

Cost of raw materials and packing materials are determined on the “first-in, first-out” basis and comprise original cost ofpurchaseandothercostsincurredinbringingtheinventoriestotheirpresentlocationandcondition.Costoffinishedgoodsincludescostofrawmaterials,directlabourandmanufacturingoverheads.Netrealisablevalueistheestimatedsellingpriceatwhichtheinventoriescanberealisedinthenormalcourseofbusinessafterallowingforthecostsofrealisation.Allowanceismadeforobsolete,slow-movinganddefectiveinventories.

(h) Financialassets

TheGroupclassifiesitsfinancialassetsinthefollowingcategories,asapplicable:financialassetsatfairvaluethroughprofitorloss,loansandreceivables,held-to-maturityinvestmentsandavailable-for-salefinancialassets.Theclassificationdependsonthepurposeforwhichtheassetswereacquired.Managementdeterminestheclassificationofitsfinancialassetsatinitialrecognitionandre-evaluatesthisdesignationateveryreportingdate,withtheexceptionthatthedesignationoffinancialassetsatfairvaluethroughprofitorlossisnotrevocable.Asatthebalancesheetdate,theGroupdidnothaveanyfinancialassetsinthecategoryoffinancialassetsatfairvaluethroughprofitorlossorheld-to-maturityinvestments.

Available-for-sale financial assets

Theseassetsarenon-derivativefinancialassetsthatareeitherdesignatedinthiscategoryornotincludedinothercategoriesoffinancialassets,andcomprisetheGroup’sstrategicinvestmentsinentitiesnotqualifyingassubsidiaries,associatesorjointlycontrolledentities.Afterinitialrecognitionatfairvalue,thefinancialassetsaresubsequentlyre-measuredtofairvalueateachbalancesheetdatewithallfairvaluechanges,otherthanimpairmentinvalue,takentoequity.Whereadeclineinthefairvalueofanavailable-for-salefinancialassetconstitutesobjectiveevidenceofimpairment,theamountofthelossisremovedfromequityandrecognisedintheprofitandlossaccount.

(i) Quoted investments

Quotedinvestmentsarerecognisedandderecognisedonatradedatebasiswherethepurchaseorsaleofaninvestmentisunderacontractwhosetermsrequiredeliveryoftheinvestmentwithinthetimeframeestablishedbythemarketconcerned,andareinitiallymeasuredatfairvalue,plusdirectlyattributabletransactioncosts.

Loans and receivables

Loansandreceivablesof theGroupandof theCompanyarecarriedatamortisedcostusingtheeffective interestmethod.Gainsorlossesarerecognisedintheprofitandlossaccountwhentheloansandreceivablesarederecognisedorimpairedaswellasthroughtheamortisationprocess.

(i) Trade and other receivables

Tradeandotherreceivablesclassifiedandaccountedforasloansandreceivablesaremeasuredatinitialrecognitionatfairvalueandsubsequentlymeasuredatamortisedcost,whereapplicable,usingtheeffectiveinterestratemethod.

AnallowancefordoubtfulreceivablesisestablishedwhenthereisobjectiveevidencethattheGroupandtheCompanywillnotbeabletocollectallamountsdueaccordingtotheoriginaltermsofthereceivables.Theamountoftheallowanceisrecognisedintheprofitandlossaccount.

(ii) Cash and cash equivalents

Cashandcashequivalentsconsistofcashonhand,cashwithbanksandshort-termdeposits.Cashequivalentsareshort-term,highlyliquidinvestmentsthatarereadilyconvertibletoknownamountsofcashandaresubjecttoaninsignificantriskofchangesinvalue.

Forthepurposeoftheconsolidatedcashflowstatement,cashandcashequivalentsarepresentednetofbankoverdraftwhichisrepayableondemandandwhichformsanintegralpartoftheGroup’soperatingcashcycle.




(i) Financialliabilities

Theaccountingpolicyadoptedforspecificfinancialliabilityissetoutbelow:

Trade and other payables

Tradeandotherpayablesarecarriedatcostwhichrepresentsthefairvalueoftheconsiderationtobepaidinthefutureforgoodsandservicesreceivedandsubsequentlymeasuredatamortisedcost,whereapplicable,usingtheeffectiveinterestmethod.

Gainsand lossesarerecognised in theprofitand lossaccountwhenthe liabilitiesarederecognisedaswellasthroughtheamortisationprocess.

Finance leases

LeasesinwhichtheGroupandtheCompanyassumesubstantiallytherisksandrewardsofownershipareclassifiedasfinanceleases.Financeleasesarecapitalisedattheinceptionoftheleaseatthelowerofthefairvalueoftheleasedassetandthepresentvalueoftheminimumleasepayments.Anyinitialdirectcostsarealsoaddedtotheamountcapitalised.Financeleasepaymentsareapportionedbetweenthefinancechargesandreductionofthefinanceleaseliabilitysoastoachieveaconstantrateofinterestontheremainingbalanceofliability.Financechargesarechargedtotheprofitandlossaccount.

Capitalisedleasedassetsaredepreciatedovertheshorteroftheestimatedusefullifeoftheassetandtheleaseterm,ifthereisnoreasonablecertaintythattheGroupandtheCompanywillobtainownershipbytheendofthefinanceleaseterm.

Borrowings

Borrowingsarerecognisedinitiallyatfairvalue,netofanytransactioncostsincurredandaresubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.Anydifferencebetweentheproceeds(netoftransactioncosts)andtheredemptionvalueisrecognisedintheprofitandlossaccountovertheperiodoftheborrowingsusingtheeffectiveinterestmethod.

(j) Derecognitionoffinancialassetsandliabilities

Financial assets

Afinancialasset(or,whereapplicableapartofafinancialasset)isderecognisedwhenitissoldorsettled.

Financial liabilities

Afinancialliabilityisderecognisedwhenthecontractualobligationhasbeendischargedorcancelledorexpired.

(k) Provisions

ProvisionisrecognisedwhentheGroupandtheCompanyhaveapresentobligationasaresultofapastevent,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimatecanbemadeoftheamountoftheobligation.ProvisionsaremeasuredattheDirectors’bestestimateoftheexpenditurerequiredtosettletheobligationatthebalancesheetdate,andarediscountedtopresentvaluewheretheeffectismaterial.

(l) Sharecapital

Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissuanceofnewsharesareshowninequityasadeductionfromtheproceeds.




(m) Revenuerecognition

RevenueisrecognisedtotheextentthatitisprobablethattheeconomicbenefitswillflowtotheGroupandtherevenuecanbereliablymeasured.Sale of goods

Revenuefromsaleofproductsisrecognisedwhensignificantrisksandrewardsofownershipofgoodshavebeentransferredtothebuyeruponpassageoftitletothecustomers,whichgenerallycoincideswiththeirdeliveryandacceptance.

Interest income

Interestincomeisaccruedontime-apportionmentbasis,byreferencetotheprincipaloutstandingandattheeffectiveinterestrateapplicable,whichistheratethatexactlydiscountsestimatedfuturecashreceiptsthroughtheexpectedlifeofthefinancialassettothatasset’snetcarryingamount.

Rental income

Rentalincomeunderoperatingleasesisrecognisedintheprofitandlossaccountonastraight-linebasisoverthetermofthelease.

Dividend income

Dividendincomeisrecognisedwhentheshareholders’rightstoreceivepaymenthavebeenestablished.

(n) Employmentbenefits

Defined contribution plan

Contributionstodefinedcontributionplansarerecognisedasanexpenseintheprofitandlossaccountinthesamefinancialyearastheemploymentthatgivesrisetothecontributions.

Employee leave entitlement

Employeeentitlementstoannualleavearerecognisedwhentheyaccruetoemployees.Anaccrualismadefortheestimatedliabilityforunutilisedannualleaveasaresultofservicesrenderedbyemployeesuptothebalancesheetdate.

(o) Leases

Whenagroupcompanyisthelessee.

Operating lease

Leasesofassetsinwhichasignificantportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.Paymentsmadeunderoperatingleases(netofanyincentivesreceivedfromthelessor)aretakentotheprofitandlossaccountonastraight-linebasisovertheperiodofthelease.

Whenanoperatingleaseisterminatedbeforetheleaseperiodhasexpired,anypaymentrequiredtobemadetothelessorbywayofpenaltyisrecognisedasanexpenseintheperiodinwhichterminationtakesplace.




(p) Financecosts

Interest expense and similar charges are expensed to the profit and loss account in the financial year in which they areincurred.

(q) Incometax

Income tax for thefinancialyearcomprisescurrent taxanddeferred taxes. Income tax is recognised in theprofitand lossaccountexcepttotheextentthatitrelatestoitemsrecogniseddirectlyinequity,inwhichcasesuchincometaxisrecognisedinequity.

Currenttaxistheexpectedtaxpayableonthetaxableincomeforthefinancialyear,usingtaxratesenactedatthebalancesheetdate,andanyadjustmenttotaxpayableinrespectofpreviousfinancialyears.

Deferredtaxisprovidedusingtheliabilitymethod,providingfortemporarydifferencesatthebalancesheetdatebetweenthecarryingamountsandtaxbasesofassetsandliabilities inthefinancialstatements.Theamountofdeferredtax isprovidedbasedon theexpectedmannerof realisationor settlementof thecarryingamountofassetsand liabilities,using tax ratesenactedatthebalancesheetdate.

Adeferredtaxassetisrecognisedonlytotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheassetcanbeutilised.Deferredtaxassetsarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealised.

(r) Foreigncurrencies

Theindividualfinancialstatementsofeachgroupentityaremeasuredandpresentedinthecurrencyoftheprimaryeconomicenvironmentinwhichtheentityoperates(its“functionalcurrency”).

Functional and presentation currency

TheconsolidatedfinancialstatementsoftheGroupandthebalancesheetandstatementofchangesinequityoftheCompanyare presented in Ringgit Malaysia, which is the functional currency of the Company and the presentation currency for theconsolidatedfinancialstatements.

Transactions and balances

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functionalcurrency(“foreigncurrencies”)arerecordedattheratesofexchangeprevailingonthedateofthetransaction.Ateachbalancesheetdate,monetaryitemsdenominatedinforeigncurrenciesaretranslatedattheratesprevailingonthebalancesheetdate.Non-monetaryitemscarriedatfairvaluethataredenominatedinforeigncurrenciesaretranslatedattheratesprevailingonthedatewhenthefairvaluewasdetermined.Non-monetaryitemsthataremeasuredintermsofhistoricalcostinaforeigncurrencyarenotre-translated.

Exchangedifferencesarisingonthesettlementofmonetaryitemsandonre-translatingofmonetaryitemsareincludedintheprofitandlossaccountforthefinancialyear.Exchangedifferencesarisingonthetranslationofnon-monetaryitemscarriedatfairvalueareincludedintheprofitandlossaccountforthefinancialyearexceptfordifferencesarisingonthere-translationofnon-monetaryitemsinrespectofwhichgainsandlossesarerecogniseddirectlyinequity.Forsuchnon-monetaryitems,anyexchangecomponentofthatgainorlossisalsorecogniseddirectlyinequity.




(r) Foreigncurrencies(cont’d)

Translation of Group’s entities’ financial statements

Forthepurposesofpresentingconsolidatedfinancialstatements,theassetsandliabilitiesoftheGroup’sforeignoperationsareexpressedinRinggitMalaysiausingexchangeratesprevailingonthebalancesheetdate.Incomeandexpenseitemsaretranslatedattheaverageexchangeratesfortheperiod,unlessexchangeratesfluctuatedsignificantlyduringthatfinancialyear,inwhichcasetheexchangeratesofthedatesofthetransactionsareused.Exchangedifferencesarising,ifany,areclassifiedasequityandtransferredtotheGroup’sforeigncurrencytranslationreserve.Suchtranslationdifferencesarerecognisedinprofitandlossaccountinthefinancialyearinwhichtheforeignoperationisdisposedof.

Goodwillandfairvalueadjustmentsarisingonacquisitionofforeignoperationaretreatedasassetsandliabilitiesoftheforeignoperationarerecordedinthefunctionalcurrencyoftheforeignoperationandtranslatedattheclosingexchangerateatthebalancesheetdate.

(s) Dividends

Equitydividendsare recognisedwhen theybecome legallypayable. Interimdividendsare recorded in thefinancial year inwhichtheyaredeclaredpayable.Finaldividendsarerecordedinthefinancialyearinwhichthedividendsareapprovedbytheshareholders.Dividendsproposedordeclaredafterthebalancesheetdatearenotrecognisedasaliabilityatthebalancesheetdate.

(t) Exceptionalitems

Exceptional items are those, which are derived from ordinary activities of the business, which are of such size, nature orincidencethattheirdisclosureisrelevanttoexplaintheperformanceoftheGroupforthefinancialyear.

(u) Segmentreporting

Asegment isadistinguishablecomponentoftheGroup’sbusinessthat isengagedeither inprovidingproductsorservices(businesssegment),or inprovidingproductsorserviceswithinaparticulareconomicenvironment (geographical segment),whichissubjecttorisksandrewardsthataredifferentfromthoseofothersegments.

SegmentinformationispresentedinrespectoftheGroup’sbusinesssegmentsandgeographicalsegments.Theprimaryformat,businesssegments,isbasedontheGroup’smanagementandinternalreportingstructure.

Intra-segmentpricingisdeterminedonanarm’slengthbasis.

Segmentresults,assetsandliabilitiesincludeitemsdirectlyattributabletoasegmentaswellasthosethatcanbeallocatedonareasonablebasis.

Segmentcapitalexpenditureisthetotalcostincurredduringthefinancialyeartoacquiresegmentassetsthatareexpectedtobeusedformorethanonefinancialyear.

3. Significantaccountingestimatesandjudgements

Estimatesandassumptionsconcerningthefutureandjudgementsaremadeinthepreparationofthefinancialstatements.Theyaffect the application of the Group’s and of the Company’s accounting polices, reported amounts of assets, liabilities, incomeandexpensesanddisclosuresmade.Theyareassessedonanon-goingbasisandarebasedonexperienceandrelevantfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.

Key sources of estimation uncertainty

Thekeyassumptionsconcerningthefutureandotherkeysourcesofestimationuncertaintyatthebalancesheetdate,thathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancialyeararediscussedbelow.



3. Significantaccountingestimatesandjudgements(cont’d)

(i) Depreciation of property, plant and equipment

Property,plantandequipmentaredepreciatedonastraight-linebasisovertheirestimatedusefullives.Managementestimatestheusefullivesoftheseassetstobewithin5to50years.ThecarryingamountoftheGroup’sproperty,plantandequipmentasat30September2006wasRM82,482,106(2005:RM46,759,578).Changesintheexpectedlevelofusageandtechnologicaldevelopmentscouldimpacttheeconomicusefullivesandresidualvaluesoftheseassets.Therefore,futuredepreciationchargescouldberevised.

(ii) Income taxes

TheGrouphasexposure to income taxes inMalaysia andSingapore.Significant judgement is involved indetermining theGroup’sprovisionforincometaxes.

TheGrouprecognisedliabilitiesforexpectedtaxissuesbasedonestimatesofwhetheradditionaltaxeswillbedue.Wherethefinancialtaxoutcomeofthesemattersisdifferentfromtheamountsthatwereinitiallyrecognised,suchdifferenceswillimpacttheincometaxanddeferredtaxprovisioninthefinancialyearinwhichsuchdeterminationismade.ThecarryingamountoftheGroup’scurrentincometaxpayableanddeferredtaxliabilitiesasat30September2006wasRM5,522(2005:RM13,120)andRM4,620,049(2005:RM2,354,982)respectively.

(iii) Impairment of investments in subsidiaries and financial assets

TheDirectorsoftheCompanyfollowtheguidanceofFRS36andFRS39indeterminingwhetherinvestmentsinsubsidiariesorfinancialassetsareotherthantemporaryimpairedrequirestheassumptionmaderegardingthedurationandextenttowhichthefairvalueofaninvestmentorafinancialassetislessthanitscostsandthefinancialhealthofandnear-termbusinessoutlookfortheinvestmentorfinancialasset,includingfactorssuchasindustryandsectorperformance,changesintechnologyandoperationalandfinancingcashflow.

Management’sassessmentforimpairmentinvalueofinvestmentsinsubsidiariesisbasedontheestimationofvalueinuseofthecashgeneratingunitbyforecastingtheexpectedfuturecashflowsforaperiodof5years,usingasuitablediscountrateinordertocalculatethepresentvalueofthosecashflows.Thecarryingamountofinvestmentsinsubsidiariesat30September2006wasRM18,133,685(2005:RM17,542,583).

(iv) Impairment of goodwill

Themanagementdetermineswhethergoodwillisimpairedatleastonanannualbasisandasandwhenthereisanindicationthatgoodwillmaybeimpaired.Thisrequiresanestimationofthevalueinuseofthecashgeneratingunitstowhichthegoodwillisallocated.Inestimatingthevalueinuse,themanagementexercisejudgementinestimatingtheexpectedfuturecashflowsfromthecashgeneratingunitandusingasuitablediscountrateinordertocalculatethepresentvalueofthosecashflows.Thecarryingamountofgoodwillat30September2006wasRM4,421,848(2005:RMnil).

(v) Allowance for doubtful receivables

Themanagementestablishesallowancefordoubtfulreceivablesonacase-by-casebasiswhentheybelievethatpaymentofamountsowedisunlikelytooccur.Inestablishingtheseallowances,themanagementconsidersitshistoricalexperienceandchangestoitscustomers’financialposition.Ifthefinancialconditionsofreceivablesweretodeteriorate,resultinginimpairmentoftheirabilitytomaketherequiredpayments,additionalallowancesmayberequired.

(vi) Inventories and related allowance

Inventoriesarestatedatthelowerofcostandnetrealisablevalue.Themanagementprimarilydeterminescostofinventoriesusingthe“first-in,firstout”method.Themanagementestimatesthenetrealisablevalueofinventoriesbasedonassessmentofreceiptorcommittedsalespricesandprovideforexcessandobsoleteinventoriesbasedonhistoricalusage,estimatedfuturedemandandrelatedpricing.Indeterminingexcessquantities,themanagementconsidersrecentsalesactivities,relatedmarginandmarketpositioningofitsproducts.However,factorsbeyonditscontract,suchasdemandlevels,technologicaladvancesandpricingcompetition,couldchangefromperiodtoperiod.SuchfactorsmayrequiretheGrouptoreducethevalueofitsinventories.ThecarryingamountoftheGroup’sinventoriesat30September2006wasRM29,518,779(2005:20,635,835).



4. Property,plantandequipment

Officeand

Freehold Factory Coldroom Furniture Motor Construction- factory Computer

Group land buildings andfreezer andfittings Renovation vehicles in-progress equipment system Total

RM RM RM RM RM RM RM RM RM RM

Cost

Balanceat

1October2005 7,500,000 12,896,677 - 307,906 250,008 1,894,112 - 26,193,917 - 49,042,620

Acquisitionofsubsidiaries 10,420,000 4,971,318 379,982 15,662 - 1,611,936 16,990 1,887,121 211,858 19,514,867

Reclassification - - - - - - (8,372,443) 8,372,443 - -

Additions 3,064,759 49,764 2,400 60,184 5,350 306,475 15,528,897 885,341 18,285 19,921,455

Disposals/writtenoff - - - - - (120,616) (66,990) (129,722) (13,448) (330,776)

Balanceat

30September2006 20,984,759 17,917,759 382,382 383,752 255,358 3,691,907 7,106,454 37,209,100 216,695 88,148,166

Accumulateddepreciation

Balanceat

1October2005 - 174,680 - 36,206 40,508 464,821 - 1,566,827 - 2,283,042

Chargedforthe

financialyear - 488,376 34,049 49,840 44,368 742,983 - 2,228,032 53,734 3,641,382

Disposals/writtenoff - - - - - (120,606) - (125,356) (12,402) (258,364)

Balanceat

30September2006 - 663,056 34,049 86,046 84,876 1,087,198 - 3,669,503 41,332 5,666,060

Netbookvalue

Balanceat

30September2006 20,984,759 17,254,703 348,333 297,706 170,482 2,604,709 7,106,454 33,539,597 175,363 82,482,106

Furniture Officeand Freehold Factory and Motor factoryGroup land buildings fittings Renovation vehicles equipment Total RM RM RM RM RM RM RM

Cost Balanceat1October2004 - - - - - - -Acquisitionofasubsidiary 7,500,000 6,000,000 231,433 250,008 1,371,111 17,546,930 32,899,482Additions - 6,896,677 76,473 - 523,001 8,761,324 16,257,475Approriation - - - - - (114,337) (114,337)

Balanceat30September2005 7,500,000 12,896,677 307,906 250,008 1,894,112 26,193,917 49,042,620

Accumulateddepreciation Balanceat1October2004 - - - - - - -Chargedforthefinancialyear - 174,680 36,206 40,508 464,821 1,566,827 2,283,042

Balanceat30September2005 - 174,680 36,206 40,508 464,821 1,566,827 2,283,042 Netbookvalue Balanceat30September2005 7,500,000 12,721,997 271,700 209,500 1,429,291 24,627,090 46,759,578ThelandtitledeedforthefreeholdlandandbuildingsoftheGroupwithanetbookvalueatthebalancesheetdateamountingtoRM27,265,409(2005:RM9,129,899)haveyettobeissuedbytherelevantauthorities.



4. Property,plantandequipment(cont’d)

As at the balance sheet date, the Group had property, plant and equipment with a net book value of RM76,480,694 (2005:RM44,641,574)chargedforbankingfacilitiesgrantedtocertainsubsidiaries.Inaddition,theGrouphadmotorvehiclesheldintrustbycertainemployeesoftheGroupwithanetbookvalueofRM503,494(2005:RM714,963).

Duringthefinancialyear,borrowingcostsamountingtoRM131,928hasbeencapitalisedasconstruction-in-progress.

Included in the net book value of the property, plant and equipment are the following assets acquired under finance leasearrangements:

Group 2006 2005 RM RM

Coldroomandfreezer 91,125 -Motorvehicles 2,340,162 1,122,025Officeandfactoryequipment 1,414,894 893,910Computersystem 77,799 -

3,923,980 2,015,935

Asat30September2006,informationrelatingtotheGroup’sfreeholdpropertiesareasfollows: Location Description Existinguse Grossland Grossfloor area(sqft) area(sqft)

LotLS-1PersiaranSatu,MeruIndustrialPark, Industrialland Factorybuilding 348,916 153,972PersiaranHamzahAlang,42200Klang,SelangorDarulEhsan,Malaysia LotLS-2PersiaranSatu,MeruIndustrialPark, Industrialland Vacant 174,458 -PersiaranHamzahAlang,42200Klang,SelangorDarulEhsan,Malaysia

Lot57,HicomGlenmarieIndustrialPark Industrialland Vacant 96,758 - Lot55,HicomGlenmarieIndustrialPark Warehouse Processingfactory 68,800 44,986 3JalanBertam6,TamanDaya, Industrialwarehouse Coldroom/Office - 2,40081100JohorBahru 1JalanBertam6,TamanDaya, Industrialwarehouse Coldroom - 4,69081100JohorBahru 7JalanBertam6,TamanDaya, Industrialwarehouse Coldroom - 2,40081100JohorBahru

HS(D):123790PTD25393 IndustrialLand Vacant 16,882 - 49,LorongWongAhJang,Kuantan,Pahang Shopoffice Office 1,660 2,832 Lot1-3-1SriKerjayaApartment,ShahAlam Apartment Staffquarters - 862 Lot1-3-3SriKerjayaApartment,ShahAlam Apartment Staffquarters - 855



5. Investmentsinsubsidiaries

(a) Investmentsinsubsidiariescomprise:

Company 2006 2005 RM RM

Unquotedequitysharesincorporations,atcost 18,133,685 17,542,583

(b) ParticularsofsubsidiariesNameofcompany(Countryofincorporation) Principalactivities Effectiveequity heldbytheGroup 2006 2005Held by the Company % % EtikaBrandsPteLtd(1) Dormant 100 *(Singapore)

EtikaDairiesSdn.Bhd.(2) Manufacturinganddistributionofdairyproducts 100 100(Malaysia) EtikaCapital(Labuan)Inc(2) Dormant 100 100(Malaysia)

EtikaGlobalResourcesSdn.Bhd.(2) Dormant 100 *(Malaysia)

EtikaFoodsMarketingSdn.Bhd.(2) Dormant 100 *(Malaysia)

EtikaFoods(M)Sdn.Bhd.(2) Dormant 100 100(Malaysia) PokBrothersSdn.Bhd.(2) Wholesalersoffoodstuff,provisionsandfrozenmeat 100 -(Malaysia) EurekaCapitalSdn.Bhd.(2) Dormant 100 *(Malaysia) PTEtikaMarketing(3) Dormant 100 *(Indonesia) Etika(NZ)Limited(4) Dormant 100 *(NewZealand)



5. Investmentsinsubsidiaries(cont’d)

(b) Particularsofsubsidiaries(cont’d)

Nameofcompany(Countryofincorporation) Principalactivities Effectiveequity heldbytheGroup 2006 2005Held by subsidiary % %- Pok Brothers Sdn. Bhd. PokBrothers(Selangor)Sdn.Bhd.(2) Wholesalersoffoodstuff,provision 100 -(Malaysia) andfrozenmeatPokBrothers(Pahang)Sdn.Bhd.(2) Wholesalersoffoodstuff,provision 100 -(Malaysia) andfrozenmeat

PokBrothers(Penang)Sdn.Bhd.(2) Wholesalersoffoodstuff,provision 100 -(Malaysia) andfrozenmeat

PokBrothers(Johor)Sdn.Bhd.(2) Wholesalersoffoodstuff,provision 60 -(Malaysia) andfrozenmeat De-luxeFoodServicesSdn.Bhd.(2) Manufacturingofconvenient 100 -(Malaysia) valueaddedfrozenfood

(1) AuditedbyBDORaffles,Singapore.(2) AuditedbyBDOBinder,Malaysia.(3) AuditedbyBDOTanubrata,Indonesia.(4) Newlyincorporated,nooperations.

* Incorporatedduringthefinancialyear.

(c) Acquisitionofsubsidiaries

2006

Pok Brothers Sdn. Bhd. and its subsidiaries

On8February2006,itswholly-ownedsubsidiary,EtikaFoods(M)Sdn.Bhd.(“Purchaser”)acquired100%equityinterestinPokBrothersSdn.Bhd.anditssubsidiaries(“PBGroup”)foracashconsiderationofRM21,453,734.Theacquisitionwasaccountedforusingthepurchasemethod.

PB Group contributed revenue of RM54,394,480 and net profit of RM2,868,072 to the Group for the financial year ended30September2006.Iftheacquisitionhadoccurredon1October2005,theGroup’srevenuewouldhavebeenRM179,960,111andnetprofitwouldhavebeenRM10,740,387.

PursuanttotheSale&PurchaseAgreementdated12October2005,theformershareholdersofPokBrothersSdn.Bhd.,namelyPokYockTin,PokYokeKoon,PokYokeKung,PokYokeWang,PakYokJoon,PokYorkKeaw,PokYorkKeng,TanKiamJong,TanMooiNgoh,KawSee@CheamTatMin,LaiMengKam,PokYokeCheng@PehYokeChengandPokFookSoon(collectivelyknownas“Vendors”)havejointlyandseverallywarrantedtoandundertakenwiththePurchaser,inter alia,that:

(i) theconsolidatedprofitafterincometaxforPBGroupshallnotbelessthanRM2.5millioninrespectofthefinancialyearended30June2006(“ProfitGuarantee”);and

(ii) ontheCompletionDate,i.e.8February2006,thenettangibleassetsofPBGroupshallnotbelessthanRM16.1million.




(c) Acquisitionofsubsidiaries(cont’d)

Pok Brothers Sdn. Bhd. and its subsidiaries (cont’d)

FollowingtheauditofthefinancialstatementsofPBGroupforthefinancialyearended30June2006wheretheProfitGuaranteehasbeenmet,asumofapproximatelyRM5.3millionworthoftradereceivableshasalsobeenidentifiedaslongoutstanding,ofwhichapproximately53%hasbeenoutstandingformorethan90days.

On26October2006,theVendorshaveunconditionallyandirrevocablyagreeandundertakethat:

(a) TheidentifiedlongoutstandingreceivablesshallbedulycollectedandtheVendorshaveagreedtokeepthePurchaserfullyindemnifiedagainstanyloss,claims,demandsorliabilitiesarisingoutofthesaidreceivables.Suchguaranteeshallbeinforceuntilthefullamounthasbeencollected,subjecttofurthertermsprovidedin(b)and(c)below.

(b) Out of the RM5.3 million, approximately RM4 million was undertaken by the Vendors that in the event that these arenotcollectedinfullwithin120daysfrom26October2006,theamountofuncollectedreceivableswillbeset-offagainstdividends that were declared to the Vendors, currently classified as part of other payables in Note 14 to the financialstatementsasfollows:

Group 2006Current: RMDividendsdeclared,payableon-30September2006 4,000,000-31January2007 1,545,000

5,545,000Non-current: Dividendsdeclared,payableon -31December2007 2,000,000-31January2008 1,591,000-30June2008 2,000,000-31December2008 750,000-31January2009 1,639,000

7,980,000

(c) FortheremainingbalanceofapproximatelyRM1.3millionwhichrelatestoonespecificcustomer,theundertakingisperpetualaslongasthecustomerconcernedcontinuestooperateitsrestaurantbusiness.NotwithstandingtheundertakingprovidedbytheVendors,themanagementoftheCompanyisconfidentoftherecoverabilityoftheoutstandingreceivablesandforaddedcreditcontrolmeasure,hasinitiatedacceptanceofnewordersbythiscustomeronlybasedon50%oftheamountcollectedforeachmonth.Fromthecollectionrecordsubsequenttoyearend,themanagementexpectsfullcollectionwithin12monthsfromthebalancesheetdatebasedona“first-in,first-out”basis.

Accordingly, the said receivableshavenotbeen includedasallowance fordoubtful receivables inNote11 to the financialstatements.





Pok Brothers Sdn. Bhd. and its subsidiaries (cont’d)

ThefairvalueoftheidentifiableassetsandliabilitiesofPBGroupasatthedateofacquisitionwere:

2006 Fairvalue Carrying recognisedon amountbefore acquisition combination RM RM Property,plantandequipment 19,514,867 18,563,193Investmentinassociate 27,691 27,691Available-for-salefinancialassets 397,152 397,152Deferredtaxassets 35,582 35,582Inventories 14,178,307 14,178,307Tradeandotherreceivables 21,845,196 21,845,195Cashandbankbalances 4,287,520 4,287,520Tradeandotherpayables (22,328,103) (22,328,103)Financeleases (2,140,432) (2,140,432)Bankborrowings (14,357,719) (14,357,719)Deferredtaxliabilities (936,206) (936,205)Minorityinterests (2,102,290) (2,102,290)

Netidentifiableassetsacquired 18,421,565 17,469,891Goodwillarisingonacquisition 4,421,848Totalpurchaseconsideration 22,843,413Less: Cash acquired -cashandbankbalances 4,287,520-bankoverdraftsincludedinbankborrowings (2,897,841) 1,389,679

Netcashoutflowonacquisition 21,453,734

2005

Etika Dairies Sdn. Bhd.

On8November2004,theGroupacquiredallthesharesinEtikaDairiesSdn.Bhd.forRM17,542,573,satisfiedinfullbytheissueof128,630,102newordinarysharesofS$0.06eachatpar.Theacquisitionwasaccountedforusingthepurchasemethod.

The acquired subsidiary, Etika Dairies Sdn. Bhd., contributed revenue of RM150,048,872 and profit from operations ofRM8,196,580totheGroupforthefinancialyearended30September2005.Thefairvalueofthesubsidiary’snetidentifiableassetsasatthedateofacquisitionwereRM20,671,389.



5. Investmentsinasubsidiary(cont’d)


Etika Dairies Sdn. Bhd. (cont’d)

Theeffectofacquisitionofsubsidiaryisasfollows: 2005 RMProperty,plantandequipment 32,899,482Inventories 12,361,199Tradeandotherreceivables 26,008,738Cashandbankbalances (86,264)Tradeandotherpayables (31,434,869)Bankborrowings (16,834,636)Financeleases (1,302,730)Deferredtaxliabilities (939,531)

Netidentifiableassetsacquired 20,671,389Negativegoodwillarisingonacquisition (3,128,816)

Considerationpayable 17,542,573Issueofsharesasconsideration (17,542,573)Cashacquired (86,264)

Netcashoutflowfromacquisition (86,264)

(d) Acquisitionofsharesinasubsidiary

De-luxe Food Services Sdn. Bhd. (“De-luxe”)

On24July2006,theGroupacquiredtheremaining11.91%equityinterestinDe-luxeforacashconsiderationofRM555,533,makingitawholly-ownedsubsidiary.

6. Associate Group

2006 2005 RM RM Acquisitionofsubsidiaries 27,691 -Reclassifiedtootherreceivablesuponliquidation (27,691) -

- -Representedby: Group’sshareofnetassets - -

Thedetailsoftheassociateareasfollows:

Nameofcompany/ Effectiveinterest(Countryofincorporation) 2006 2005 Principalactivities % %Held by subsidiary - Pok Brothers Sdn. Bhd. Ephraim(M)Sdn.Bhd. 40 - Supplyanddistributionoffrozenmeatandrelatedfoodprovisions(Malaysia) TheassociatehasbeenputintoMembers’VoluntaryLiquidationon16June2006.Theliquidationisstillinprogress.



7.Available-for-salefinancialassets Group 2006 2005

RM RM Balanceatbeginningoffinancialyear - -Acquisitionofsubsidiaries 397,152 -Fairvaluegainrecognisedinfairvaluereserve 47,172 -

Balanceatendoffinancialyear 444,324 -Available-for-salefinancialassetsdenominatedinRinggitMalaysiainclude: Group 2006 Atfairvalue RMListedsecurities: -equitysecurities-Malaysia 444,324

8. Deferredtaxassets/(liabilities) Group

2006 2005 RM RM

Deferredtaxassets

Balanceatbeginningoffinancialyear - -Acquisitionofsubsidiaries 35,582 -Recognisedinprofitandlossaccount 38,155 -

Balanceatendoffinancialyear 73,737 -

Deferredtaxassetsariseasaresultof:Plantandequipment 7,849 -Othertemporarydifferences 65,888 -

73,737 -

Deferredtaxliabilities

Balanceatbeginningoffinancialyear (2,354,982) -Acquisitionofsubsidiaries (936,206) (939,531)Recognisedinprofitandlossaccount (1,328,861) (1,415,451)

Balanceatendoffinancialyear (4,620,049) (2,354,982)

Deferredtaxassets/(liabilities)ariseasaresultof:Unutilisedtaxlosses 337,689 610,297Plantandequipment (4,101,405) (2,965,279)Othertemporarydifference (856,333) -

(4,620,049) (2,354,982)



8. Deferredtaxassets/(liabilities)(cont’d) Group

2006 2005 RM RM

Unrecogniseddeferredtaxassets

Balanceatbeginningoffinancialyear - -Unrecogniseddeferredtaxassetsduringthefinancialyear 534,777 -

Balanceatendoffinancialyear 534,777 -

Unrecogniseddeferredtaxassetsariseasaresultof:Unutilisedtaxlosses 193,201 -Unabsorbedcapitalallowances 341,576 - 534,777 -

Asatthebalancesheetdate,theGrouphadunutilisedtaxlossesandunabsorbedcapitalallowancesamountingtoapproximatelyRM1,896,000andRM1,220,000(2005:RM2,180,000andRMnil)respectivelywhichareavailableforset-offagainstfuturetaxableprofitssubjecttoagreementbytherelevantauthoritiesandwithprovisionsofthetaxlegislationoftherespectivecountriesinwhichtheGroupoperates.TherelateddeferredtaxassetshavenotbeenrecognisedbecauseitisuncertainthatfuturetaxableprofitswillbeavailableagainstwhichtheGroupcanutilisethebenefits.

9. Intangibleassets

Group Product Goodwill licences Total RM RM RM Balanceasatbeginningfinancialyear - - -Additions - 6,521 6,521Acquisitionofsubsidiaries 4,421,848 - 4,421,848

Balanceasatendoffinancialyear 4,421,848 6,521 4,428,369

Product licences

ProductlicencesfordairyproductsregisteredinIndonesiahavenotbeenamortisedduringthefinancialyearastheyareregisteredattheendofthefinancialyear.

Impairment testing of goodwill

GoodwillacquiredthroughbusinesscombinationhasbeenallocatedtotheGroup’scashgeneratingunits(“CGUs”)identified.Anannualtestiscarriedoutateachbalancesheetdatetoassessifthereareimpairmentinvalue.GoodwillandproductlicenceshavebeenallocatedtothefollowingGroup’sCGUs,whicharealsopartofthereportablesegments,forimpairmenttesting:

(a) FrozenFoods;and(b) Dairies. FrozenFoods Dairies Total RM RM RM

Goodwill 4,421,848 - 4,421,848Productlicences - 6,521 6,521 4,421,848 6,521 4,428,369



9. Intangibleassets(cont’d)

TherecoverableamountofaCGUisdeterminedbasedonvalueinusecalculations.Thesecalculationsusecashflowprojectionsbasedonfinancialbudgetsapprovedbymanagementforperiodscoveringa5yearperiod.Themanagementhasconsideredanddeterminedthefactorsappliedinthefinancialbudgetswhichincludebudgetedgrossmargins,pre-taxdiscountratesandaveragegrowthrates.Thebudgetedgrossmarginsarebasedonpastperformanceandtheaveragegrowthratesanddiscountratesusedarebasedonmanagement’sbestestimate.Keyassumptionsusedforvalueinusecalculationsareasfollows:

Dairies FrozenFoods Grossmargin(1) 12.00% 13.84%Growthrate(2) 27.60% 7.10%Discountrate(3) 7.75% 6.75%

(1) Budgetedgrossmargin(2) Weightedaveragegrowthrateusedtoextrapolatecashflowsforthe5yearperiod(3) Pre-taxdiscountrateappliedtothecashflowprojections

10. Inventories Group 2006 2005 RM RMAtcost Finishedgoods 20,313,503 3,960,454Rawmaterials 7,981,865 15,839,058Packagingmaterials 1,223,411 836,323

29,518,779 20,635,835

Thecostof inventories recognisedasanexpenseand included in “costsof sales” in theprofitand lossaccountamounted toRM194,939,101(2005:RM138,266,124).

TheGrouphaspledgedafloatingchargeoverinventorieswithacarryingamountofRM14,731,886(2005:RM20,635,834)assecurityforthebankingfacilitiesgrantedtoitssubsidiaries.

11. Tradeandotherreceivables

Group Company 2006 2005 2006 2005 RM RM RM RM Tradereceivables-within60to90days 46,788,831 32,165,386 - --morethan90days 13,181,945 2,919,733 - -

59,970,776 35,085,119 - -Allowancefordoubtfulreceivables (1,495,344) (680,506) - - 58,475,432 34,404,613 - -Otherreceivables 393,559 44,813 39,532 16,025Taxrecoverable 185,937 - - -Prepayments 540,115 298,496 101,933 47,427Deposits 286,184 112,700 4,369 -Advancepaymenttosupplier - 1,231,875 - -

Duefromsubsidiaries-non-trade - - 13,051,005 9,287,063

Otherassets 6,909,877 - 6,909,877 -

66,791,104 36,092,497 20,106,716 9,350,515



11. Tradeandotherreceivables(cont’d)

Thetradeamountsowingbythirdpartiesareusuallyrepayablewithinthenormaltradecredittermsof60daysto90days.IntheopinionoftheDirectors,basedonthereviewofthetradereceivables,includingbalancesthatareoutstandingformorethan90days,allowancefordoubtfulreceivablesatthebalancesheetdateisadequate.

Otherreceivablesowingbythirdpartiescomprisemainlystaffadvances.

Theamountduefromsubsidiariesisunsecured,interest-freeandrepayableondemand.

Otherassetscomprisethefollowing:

(a) anamountofNZ$0.78million(approximatelyRM1.83millionequivalent)comprisingrefundabledepositpaidinconnectionwiththeproposedacquisitionofNaturalacNutritionLimited(“NNL”).TheCompany,throughitswholly-ownedsubsidiary,Etika(NZ)Limited,hadentered intoaSaleandPurchaseAgreementwithFonterraBrands Investments (NZ)Limited for theproposedacquisitionof2,398,000ordinaryshares,representing100%equityinterestinthesharecapitalofNNL,foracashconsiderationof NZ$7.8 million (RM18,938,400 equivalent). The transaction is subject to the shareholders’ approval at an extraordinarygeneralmeeting.TheamountofNZ$7.8million(RM18,938,400equivalent)lessdepositpaidofNZ$0.78million(RM1,893,840equivalent)isdisclosedascapitalcommitmentinNote30(a)tothefinancialstatements.

(b) anamountofRM1millioncomprisingrefundabledepositpaidinconnectionwiththeproposedacquisitionofanequityinterestinacompanyincorporatedinMalaysia.Atthebalancesheetdate,thereisnodefinitiveagreemententeredastheDirectorsarestillinthemidstofnegotiationsandconductingduediligencereview.

(c) an amount of approximately RM3.37 million comprising advances made to Union Century Investment Limited (“UCIL”), acompanyincorporatedinHongKonginrespectoftheproposedacquisitionbyUCILintheequityinterestofacannedfoodanddrinksmanufactureranditsrelatedcompaniesinthePeople’sRepublicofChina.Shouldthetransactionbeaborted,UCILwillhavetorepayinfulltheadvance,at8%interestperannum.Atthebalancesheetdate,thereisnodefinitiveagreemententeredastheDirectorsarestillinthemidstofnegotiationsandconductingduediligencereview.

(d) anamountofapproximatelyRM0.71millioncomprisingdeferredexpensesstatedatcost,incurredinconnectionwiththeaboveproposedtransactions.

IntheopinionoftheDirectors,therefundabledepositsandadvancesarefullyrecoverable.

Tradeandotherreceivablesaredenominatedinthefollowingcurrencies: Group Company 2006 2005 2006 2005 RM RM RM RM RinggitMalaysia 53,945,862 36,029,045 6,325,611 9,203,609Singaporedollar 1,673,637 63,452 674,594 39,927UnitedStatesdollar 1,587 - 8,930,880 106,979HongKongdollar 9,221,968 - 2,227,581 -NewZealanddollar 1,948,050 - 1,948,050 -

66,791,104 36,092,497 20,106,716 9,350,515

Movementsinallowancefordoubtfultradereceivables: Group 2006 2005 RM RMBalanceatbeginningoffinancialyear 680,506 509,329Acquisitionofsubsidiaries 787,330 -Allowancemadeduringthefinancialyear 136,904 206,147Writtenbackofallowancenolongerrequired (99,344) (34,970)Badreceivableswrittenoffagainstallowance (10,052) -

Balanceatendoffinancialyear 1,495,344 680,506



12. Fixeddeposits

GroupandCompany

Fixeddepositsareplacedforaperiodof3months(2005:1dayto1month)andtheeffectiveinterestratesonthefixeddepositsapproximated3.30%(2005:1.125%to2.125%)perannum.

Fixed deposits of RM387,926 (2005: RMnil) of the Group have been pledged as security for the bank facilities granted to itssubsidiaries.

13. Cashandcashequivalents Group Company 2006 2005 2006 2005 RM RM RM RM Fixeddeposits(unpledged) - 7,273,386 - 7,273,386Cashandbankbalances 2,160,481 290,091 674,082 151,435Bankoverdrafts (7,218,152) (1,813,456) - -

(5,057,671) 5,750,021 674,082 7,424,821

Cashandcashequivalentsaredenominatedinthefollowingcurrencies: RinggitMalaysia (5,783,169) (1,764,414) 144,854 15,413Singaporedollar 529,228 7,409,408 529,228 7,409,408UnitedStatesdollar 196,270 105,027 - -

(5,057,671) 5,750,021 674,082 7,424,821

14. Tradeandotherpayables Group Company 2006 2005 2006 2005 RM RM RM RMCurrentliabilities Tradepayables 37,664,148 31,530,375 - -Otherpayables 9,703,773 4,033,022 63,490 9,962Customers’deposits 789,925 372,966 - -Accruals 1,382,439 1,432,664 352,077 260,111

49,540,285 37,369,027 415,567 270,073Non-currentliabilities Otherpayable 7,980,000 - - - 57,520,285 37,369,027 415,567 270,073

Thetradeamountsowingbythirdpartiesarerepayablewithinthenormaltradecredittermsof60daysto90days.

Currentportionofotherpayablescomprisemainly retentionsumandprogressbilling forconstructionof factorybuildings, loan

interestpayable,otheroperatingexpensespayableanddividendspayabletotheVendorsarisingfromtheacquisitionofPBGroup.

Non-currentportionofotherpayablecomprisedividendspayabletotheVendorsarisingfromacquisitionofPBGroupasmentioned

inNote5(c)tothefinancialstatements.



14. Tradeandotherpayables(cont’d)

Tradeandotherpayablesaredenominatedinthefollowingcurrencies:

Group Company

2006 2005 2006 2005

RM RM RM RM

RinggitMalaysia 55,069,349 37,100,559 11,051 -

Singaporedollar 464,250 267,671 351,573 270,073

UnitedStatesdollar 1,681,252 797 - -

HongKongdollar - - - -

Britishpound 145,428 - - -

Australiandollar 24,730 - - -

Euro 86,972 - - -

NewZealanddollar 48,304 - 52,943 -

57,520,285 37,369,027 415,567 270,073

15. Bankborrowings Group 2006 2005 RM RMCurrentliabilities Secured: Bankoverdrafts 7,215,015 1,739,757Banker’sacceptance 12,974,000 10,450,000Onshoreforeigncurrencyloan 10,219,685 -Shorttermrevolvingcredit 2,800,000 -Trustreceipts 737,995 -Termloans 2,954,576 1,419,262

36,901,271 13,609,019Unsecured: Bankoverdrafts 3,137 73,699Banker’sacceptance 7,411,000 6,059,000

7,414,137 6,132,699

44,315,408 19,741,718Non-currentliabilities Secured: Termloans 26,521,365 4,907,928



15. Bankborrowings(cont’d) Group 2006 2005 RM RM

Termloans TermloanIrepayableby120monthlyinstalmentsof RM73,999eachcommencing1July1999 585,411 1,401,888TermloanIIIrepaymentby60monthlyinstalmentsof RM65,114eachcommencing1February2005 2,254,270 2,813,178TermloanIVrepayableby96monthlyinstalmentsof RM56,717eachuponfulldrawdownofthecreditlimitofRM4,160,000 4,040,130 2,112,124TermloanVIrepayableby60monthlyinstalmentsofRM163,339 eachuponfulldrawdownofthecreditlimitofRM8,200,000 1,843,171 -Termloanrepayableby120monthlyinstalmentsof RM2,415eachcommencingJuly2002 132,082 -Termloanrepayableby60monthlyinstalmentsof RM9,418eachcommencingAugust2005 370,877 -Termloanrepayableby84monthlyinstalmentof RM310,600eachcommencing1March2006 20,250,000 - 29,475,941 6,327,190 Analysedinto:Current 2,954,576 1,419,262Non-current 26,521,365 4,907,928 29,475,941 6,327,190

Group 2006 2005Effectiveinterestrates % %

Bankoverdrafts 7.00-7.75 7.00-7.75Bankers’acceptance 4.25-5.27 2.62-2.90Onshoreforeigncurrencyloan 5.39-5.79 -Shorttermrevolvingcredit 4.95-5.60 -Trustreceipts 7.75-9.00 -Termloans 6.00-8.90 7.00-7.75

Non-currentbankborrowingsarerepayableasfollows: Group 2006 2005 RM RM Withinoneyear 9,567,386 4,907,928Twotofiveyears 5,582,644 -Afterfiveyears 11,371,335 -

26,521,365 4,907,928



15. Bankborrowings(cont’d)

2006

Thesecuredbankborrowingsaresecuredby:

(a) Supplementalloanagreementandassignmentoverlandandfactorybuilding,currentlybeingdevelopedintoanindustrialparkheldunderaMasterTitleNo.Geran24082,Lot7215MukimKapar,DaerahofKlang,SelangorDarulEhsan,Malaysia,ofEtikaDairiesSdn.Bhd.;

(b) First to eighth, debenture on Etika Dairies Sdn. Bhd.’s past, present, fixed and floating assets (excluding machineries andvehiclesunderfinanceleasecontracts).Subsequenttothebalancesheetdate,thesedebentureshavebeendischarged;

(c) Debentureonthefloatingassetsofasubsidiary,EtikaFoods(M)Sdn.Bhd.;

(d) DebentureofRM17.302milliononfixedandfleatingassetsofPokBrothersSdn.Bhd.;

(e) CertainfreeholdlandandbuildingsofPokBrothersSdn.Bhd.anditssubsidiaries(“PBGroup”)forbankingfacilitiesgrantedtoPBGroup;

(f) PledgedofunquotedsharesofPokBrothersSdn.Bhd.;and

(g) JointandseveralguaranteesbycertaindirectorsandformerdirectorsofPBGroup.

TheunsecuredbankborrowingsareguaranteedbytheCompany.

2005

Thesecuredbankborrowingsaresecuredby:

(a) Supplementalloanagreementandassignmentoverlandandfactorybuilding,currentlybeingdevelopedintoanindustrialparkheldunderaMasterTitleNo.Geran24082,Lot7215MukimKapar,DaerahofKlang,SelangorDarulEhsan,Malaysia,ofEtikaDairiesSdn.Bhd.;and

(b) First to eighth, debenture on Etika Dairies Sdn. Bhd.’s past, present, fixed and floating assets (excluding machineries andvehiclesunderfinanceleasecontracts).

TheunsecuredbankborrowingsareguaranteedbytheCompany.

AllbankborrowingsaredenominatedinRinggitMalaysia.

16. Financeleases

Group Minimumlease Futurefinance Present payments charges value RM RM RM2006Current-withinoneyear 1,193,389 (155,335) 1,038,054

Non-current -twotofiveyears 1,730,169 (143,930) 1,586,239-afterfiveyears 27,910 (1,709) 26,201

1,758,079 (145,639) 1,612,4402005 Current -withinoneyear 568,188 (94,977) 473,211 Non-current -twotofiveyears 711,451 (84,277) 627,174



16. Financeleases(cont’d)

Theeffectiveinterestratesrangefrom2.37%to11.52%(2005:4.37%to11.52%)perannum.

TheGroup’sobligationsunderfinanceleasesaresecuredbythelessors’titletotheleasedassets.

IncludedinleaseobligationsisanamountofRM38,865(2005:RM64,169)whichisguaranteedbytheCompany.

AllthefinanceleasesaredenominatedinRinggitMalaysia.

17. Sharecapital GroupandCompany

2006 2005 S$ RM S$ RMAuthorised: Balanceatbeginningoffinancialyear -800,000,000(2005:100,000)ordinarysharesofS$0.06(2005:S$1)each 48,000,000 107,855,150 100,000 223,850 Increasedinthepreviousfinancialyear -47,900,000ordinarysharesatS$1each - - 47,900,000 107,631,300 ConsolidationandsubdivisionoftheaboveordinarysharesofS$1eachinto800,000,000ordinarysharesofS$0.06eachinthepreviousfinancialyear - - - - EffectofCompanies(Amendment)Act2005 (48,000,000) (107,855,150) - - Balanceatendoffinancialyear -Nil(2005:800,000,000)ordinaryshares(2005:S$0.06each) - - 48,000,000 107,855,150

Issuedandfullypaid: Balanceatbeginningoffinancialyear -171,630,152(2005:3)ordinarysharesofS$0.06(2005:S$1)each 10,297,809 23,471,420 3 7 ConsolidationandsubdivisionoftheaboveordinarysharesofS$1.00eachinto50ordinarysharesofS$0.06eachinthepreviousfinancialyear - - - - Issueof128,630,102newordinarysharesofS$0.06eachpursuanttotheacquisitionofasubsidiaryinthepreviouslyfinancialyear - - 7,717,806 17,542,573



17. Sharecapital(cont’d)

GroupandCompany 2006 2005 S$ RM S$ RM

Issuedandfullypaid:(cont’d) Issueof43,000,000newordinarysharesofS$0.06eachpursuanttotheinitialpublicofferingexerciseinthepreviousfinancialyear: -2,000,000ordinarysharesofS$0.06eachissuedatS$0.21forcashtothepublic - - 120,000 275,760 -37,500,000ordinarysharesofS$0.06eachissuedatS$0.21pershareforcashbywayofplacementshares - - 2,250,000 5,170,500 -3,500,000ordinarysharesofS$0.06eachissuedatS$0.21pershareforcashbywayofplacement,reservedforindependentdirectors,employees,businessassociatesandotherswhohavecontributedtotheGroup - - 210,000 482,580 - - 2,580,000 5,928,840EffectofCompanies(Amendment) Act2005(Note18) 5,217,759 11,990,410 - - Balanceatendoffinancialyear -171,630,152ordinaryshares 15,515,568 35,461,830 10,297,809 23,471,420

TheCompanies(Amendment)Act2005cameintoeffecton30January2006.Amongotherthings,theCompaniesAct,Chapter50wasamendedtoabolishtheconceptsofparvalue,authorisedsharecapital,sharepremium,capitalredemptionreserveandsharediscounts.Asaresult,thebalanceofthesharepremiumaccountamountingtoRM11,990,410becamepartofthesharecapitalaccountasofthatdate.

From30January2006,sharecapitaldoesnothaveaparvalueandthereisnoauthorisedsharecapital.

18. Sharepremium GroupandCompany 2006 2005 S$ RM S$ RMNon-distributable Balanceatbeginningofthefinancialyear 5,217,759 11,990,410 - - Issueof43,000,000newordinarysharesofS$0.06eachatS$0.21pershareforcash,pursuanttotheinitialpublicoffering - - 6,450,000 14,822,100 Listingexpenses - - (1,232,241) (2,831,690) EffectofCompanies(Amendment)Act2005(Note17) (5,217,759) (11,990,410) - - Balanceatendoffinancialyear - - 5,217,759 11,990,410

Inthepreviousfinancialyear,includedinthelistingexpenseswerefeespaidtotheauditorsoftheCompanyforactingasreportingaccountants amounting to RM188,436 (S$82,000) and fees paid to auditors of subsidiary amounting to RM50,000 (S$21,758)in respectofprofessional services rendered in connectionwith theCompany’s initial publicoffering. TheAuditCommitteehasundertakenareviewofthenon-auditservicesprovidedbytheauditorsoftheCompanyandtheauditorsofit’ssubsidiariesandintheopinionoftheAuditCommittee,theseserviceswouldnotaffecttheindependenceoftheauditors.



19. Foreigncurrencytranslationreserve/(account)

GroupandCompany

The foreigncurrency translation reserve/(account)comprisesall foreignexchangedifferencesarising from the translationof thefinancial statements of the Company and certain of its subsidiaries from non-Ringgit Malaysia (functional currency) to RinggitMalaysia(presentationcurrency)andisnon-distributable.Movementsinthisaccountaresetoutinthestatementsofchangesinequity.

20. Fairvaluereserve

Fairvaluereserveincludesthecumulativechangeinthefairvalueofavailable-for-salefinancialassetsuntiltheyarederecognised.

21. Revenue

Revenuerepresentstheinvoicedvalueofgoodssoldlessreturnsandtradediscounts.

22. Otheroperatingincome Group 2006 2005 RM RM Allowancefordoubtfultradereceivablesnolongerrequired 99,344 34,970Badtradereceivablesrecovered - 106,489Gainondisposalofplantandequipment 35,134 -Insurancecompensation 206,597 -Interestincomefromfixeddeposits 145,919 157,685Gainonforeignexchange 59,604 10,204Rentalincome 6,246 -Sundryincome 21,997 5,530

574,841 314,878

23. Financecosts Group 2006 2005 RM RMInterestexpense -financeleases 195,479 122,749-bankoverdrafts 161,979 66,001-bankers’acceptance 842,380 380,988-termloans 1,489,667 312,221-onshoreforeigncurrencyloan 351,263 --revolvingcredits 128,891 --trustreceipts 14,112 -

3,183,771 881,959



24. Profitbeforeincometax Group 2006 2005 RM RMAftercharging: Allowancefordoubtfultradereceivables 136,904 206,147Auditors’remuneration -auditorsoftheCompany 96,600 45,056-otherauditors 162,400 16,800Non-auditfees -auditorsoftheCompany 4,600 --otherauditors 265,000 -Badtradereceivableswrittenoff 3,114 -Directors’remuneration -DirectorsoftheCompany 433,122 270,076-Directorsofthesubsidiaries 1,693,887 931,602Directors’fee -DirectorsoftheCompany-currentyear 288,036 220,012-overprovisioninpreviousyear (2,789) -Inventorieswrittenoff 104,465 -Lossonforeignexchange 48,475 -Operatingleases 613,841 178,164Plantandequipmentwrittenoff 67,644 -

25.Staffcosts Group 2006 2005 RM RM

Salaries,bonusesandallowances 11,089,949 7,684,700Employeecontributionstodefinedcontributionplans 1,174,470 744,311Othersocialexpenses 365,317 172,837

12,629,736 8,601,848

TheseincludetheamountsshownasDirectors’remunerationinNote29tothefinancialstatements.

26. Incometax Group 2006 2005 RM RMCurrentincometax -currentyear 1,187,902 13,496-underprovisioninpreviousyear 18,849 -

1,206,751 13,496Deferredtaxexpense -currentyear 1,404,837 1,415,451-overprovisioninpreviousyear (114,131) -

1,290,706 1,415,451

2,497,457 1,428,947



26. Incometax(cont’d) Group 2006 2005 RM RM

Reconciliationofeffectivetaxrate

Profitbeforeincometax 7,507,536 11,939,195

IncometaxcalculatedatSingaporestatutorytaxrateof20% 1,501,507 2,387,839Effectofdifferenttaxratesinothercountry 600,603 404,415Expensesnotdeductiblefortaxpurposes 1,223,376 274,938Incomenotsubjecttotax (40,053) (625,763)Singaporestatutorysteppedincomeexemption (8,013) (15,761)Deferredtaxassetsnotrecognised 124,077 -Utilisationofreinvestmentallowance (658,854) (999,925)Incometaxunderprovidedinpreviousyear 18,849 -Deferredtaxoverprovidedinpreviousyear (114,131) -Doubletaxdeductiononcertainexpenses (36,990) (14,327)Others (112,914) 17,531

2,497,457 1,428,947

27. Earningspershare

Thecalculationsforearningspersharearebasedon:

Group 2006 2005 RM RM Profitafterincometaxattributabletoordinaryshareholders 4,913,133 10,510,248

Actual(2005:Weightedaverage)numberofordinarysharesinissueduringthefinancialyear 171,630,152 148,460,443

Basic/Dilutedearningspershare-includingexceptionalincome 2.86sen 7.08sen

-excludingexceptionalincome 2.86sen 4.97sen Basic earnings per share is calculated by dividing the Group’s profit after income tax attributable to the equity holders of theCompanybytheactual(2005:weightedaverage)numberofordinarysharesinissueduringthefinancialyear.AstheGrouphasnodilutivepotentialordinaryshares,thedilutedearningspershareareequivalenttobasicearningspershare.

28. Dividends GroupandCompany 2006 2005 RM RMDividendspaid Finaltaxexempt1-tierdividendofS$0.0035persharepaidinrespectoffinancialyearended30September2005 1,322,752 - Interimtaxexempt1-tierdividendofS$0.002persharepaidinrespectofthefinancialyearended30September2006 835,154 -

2,157,906 -



28. Dividends(cont’d)

TheDirectorspropose thatafinal taxexempt1-tierdividendofS$0.002pershareamounting toRM803,573 tobepaid for thefinancialyearended30September2006subjecttotheapprovaloftheshareholdersattheAnnualGeneralMeeting.

Thesefinancialstatementsdonotreflectthisdividend,whichwillbeaccountedforintheshareholders’equityasanappropriationofretainedearningsinthefinancialyearending30September2007.

29. Significantrelatedpartytransactions

Forthepurposeofthesefinancialstatements,partiesareconsideredtoberelatedtotheGrouportheCompanyiftheGrouportheCompanyhavetheability,directlyorindirectly,tocontrolthepartyorexercisesignificantinfluenceoverthepartyinmakingfinancialandoperatingdecisions,orviceversa,orwheretheGrouportheCompanyandthepartyaresubjecttocommoncontrolorcommonsignificantinfluence.Relatedpartiesmaybeindividualsorotherentities.

Inadditiontoinformationdisclosedelsewhereinthefinancialstatements,significantrelatedpartytransactionsbetweentheGroupandtheCompanyanditsrelatedpartiesduringthefinancialyearwereasfollows: Group 2006 2005 RM RMWithrelatedparties -InsurancepremiumpaidtoPerinsu(BrokerInsurans)Sdn.Bhd. 675,749 500,513-RentalofpremisespaidtoMotifEtikaSdn.Bhd. 212,500 77,000-PurchaseofpackingmaterialsfromLifeMedicalsBhd. 1,007,463 715,000-Rentalofpremisespaidtoadirectorofthesubsidiary 18,000 18,000

WiththeDirectors Purchaseof12,398,810sharesinEtikaDairiesSdn.Bhd.fromDato’ JayaJBTan,KamalYPTan,TajuddinJoeHokTan(deceased), MahWengChoongandKhorSinKok - 13,355,694

TheremunerationofDirectorsandothermembersofkeymanagementoftheGroupandoftheCompanyareasfollows:

Group Company

2006 2005 2006 2005

RM RM RM RM

Short-termbenefits 2,393,078 1,317,818 666,620 270,076

Post-employmentbenefits 252,676 103,872 - -

2,645,754 1,421,690 666,620 270,076

Analysedinto: DirectorsoftheCompany 718,369 490,088 433,122 270,076Directorsofthesubsidiaries 1,693,887 931,602 - -Otherkeymanagementpersonnel 233,498 - 233,498 -

2,645,754 1,421,690 666,620 270,076



30. Contingentliabilitiesandcommitments(a) Capitalcommitments

Asatthebalancesheetdate,theGrouphadthefollowingcapitalcommitments:

Group 2006 2005 RM RM Purchaseofproperty,plantandequipment 8,160,475 18,500,490AcquisitionofNaturalacNutritionLimited(Note11(a)) 17,044,560 -

25,205,035 18,500,490

(b) Operatingleasecommitments

Asatthebalancesheetdate,therewereoperatingleasecommitmentsforrentalpayableinsubsequentaccountingperiodsasfollows:

Group 2006 2005 RM RM Withinoneyear 155,412 -

(c) Forwardforeignexchangecontracts

Asatthebalancesheetdate,theGrouphadenteredintothefollowingforwardforeignexchangecontractswhicharematuringwithinoneyear: Group Currency Contract RM amount Equivalent Salescontract USdollar 123,892 454,312

TheunrecognisedgainasatbalancesheetdateontheforwardforeignexchangecontractusedtohedgecommittedsaleswhichissubstantiallyexpectedtooccuramountedtoRM1,239(2005:RM5,710).Thisgainonderivativefinancialinstrumenthasnotbeenrecognisedinthefinancialstatementasamountisimmaterial.

(d) Contingentliabilities-unsecured

Company

TheCompanyhasundertakentoprovidefinancialsupporttoitssubsidiaries,namelyEtikaCapital(Labuan)Inc,EtikaFoods(M)Sdn.Bhd.,EurekaCapitalSdn.Bhd.andEtikaBrandsPteLtdtoenablethemtooperateasgoingconcernandtomeettheirobligationsforatleast12monthsfromthedateoftheirrespectivedirectors’reportrelatingtothefinancialstatementsforthefinancialyearended30September2006.IntheopinionoftheDirectors,nolossesareexpectedtoarise.

Asat thebalancesheetdate, therewerecontingent liabilities in respectofguaranteesgivenby theCompany tobanks inconnectionwithbanking facilitiesgranted tocertainof its subsidiariesamounting toRM83,364,157 (2005:RM42,780,000).The amount of banking facilities utilised by the subsidiaries as at 30 September 2006 amounted to RM70,836,773(2005:RM24,649,646).



31. Segmentreporting

Businesssegments

TheGroupisprincipallyengagedinthefollowingbusinesssegments:- Dairies;- FrozenFoods;and- Butchery&Bakery

Dairies Frozen Butchery Unallocated Total Foods &Bakery RM RM RM RM RM2006Revenue Externalrevenue 178,775,903 52,793,697 1,600,783 - 233,170,383 Results Segmentsresults 8,207,656 4,929,946 388,071 (2,980,285) 10,545,388Interestincome 15,050 56,165 - 74,704 145,919Financecosts (1,819,372) (1,320,296) (44,103) - (3,183,771) Profitbeforeincometax 7,507,536Incometax (2,497,457) Profitafterincometax 5,010,079 Segmentassets 97,595,561 60,076,098 154,139 28,201,356 186,027,154Unallocatedassets - 73,737 185,937 - 259,674

Totalassets 97,595,561 60,149,835 340,076 28,201,356 186,286,828 Segmentliabilities 75,826,173 47,556,584 1,592,488 6,032,307 131,007,552Unallocatedliabilities 3,703,956 914,839 1,254 5,522 4,625,571

Totalliabilities 79,530,129 48,471,423 1,593,742 6,037,829 135,633,123 OtherInformation Capitalexpenditure 19,067,199 169,457 684,799 - 19,921,455Depreciation 2,891,911 594,729 154,743 - 3,641,383

Inthepreviousfinancialyear, theGroup’sonlyprincipalbusinesssegment ismanufactureanddistributionofmilkproductsandrepacksanddistributionofcomplementaryproductsandtherefore,nobusinesssegmentinformationispresented.

Geographicalsegments

TheGroup’sbusinesssegmentsoperateinthreemaingeographicalareas.Revenueisbasedonthecountryinwhichthecustomerislocated.Segmentassetsconsistprimarilyofproperty,plantandequipment,inventories,receivables,fixeddeposits,cashandbankbalances.Capitalexpenditurecomprisesadditionstoproperty,plantandequipment.Segmentassetsandcapitalexpenditureareshownbygeographicalareainwhichtheassetsarelocated.



31. Segmentreporting(cont’d)

Geographicalsegments(cont’d)

Malaysia Asean Others Group2006 RM RM RM RM

Totalrevenuefromexternalcustomers 160,164,425 12,730,541 60,275,417 233,170,383 Segmentassets 177,558,593 1,474,174 6,994,387 186,027,154 Capitalexpenditure 19,921,455 - - 19,921,455 2005

Totalrevenuefromexternalcustomers 101,439,573 6,444,953 42,164,346 150,048,872 Segmentassets 106,211,670 1,886,192 2,953,525 111,051,387 Capitalexpenditure 16,257,475 - - 16,257,475

32.Financialriskmanagement

TheGroupisexposedtofinancialrisksarisinginthenormalcourseofbusiness.

(a) CreditriskThe credit risk is controlled by the application of credit approvals, limits and monitoring procedures. This is done throughreferencetopublishedcreditratingsbyprimefinancialinstitutions.Intheabsenceofpublishedratings,aninternalcreditreviewisconducted.PleaserefertoNote11tothefinancialstatementsfortheaginganalysisontradereceivables.

Themaximumexposuretocreditriskisrepresentedbythecarryingamountsofthefinancialassetsonthebalancesheets.

(b) Interestraterisk

TheGroupfinancesitsoperationsthroughamixtureofavailablecashandbankborrowings.TheGroupborrowsinlocalcurrenciesatbothfixedandfloatingratesofinteresttomanagetheGroup’sexposuretointerestratefluctuations.Theobjectivesforthemixbetweenfixedandfloatingrateborrowingsaresettoreducetheimpactofanupwardchangeininterestrateswhileenablingbenefitstobeachievedifinterestratesfall.

(c) Liquidityrisk

TheGroupseekstoachieveabalancebetweencertaintyoffunding,aflexible,cost-effectiveborrowingstructureandcontinuityof funding.This is toensure thatallprojectednetborrowingneedsarecoveredbycommitted facilities.Also, theobjectivefordebtmaturityistoensurethattheamountofdebtmaturityinanyoneyearisnotbeyondtheGroup’smeanstorepayandrefinance.

(d) Fairvalues

Financial instruments carried at fair value

TheGrouphascarrieditsquotedinvestmentsthatareclassifiedasavailable-for-salefinancialassetsattheirfairvalue.

Financial instruments whose carrying amount approximates fair valueManagementhasdeterminedthecarryingamountsofcashandcashequivalents,currenttradeandotherreceivables,bankborrowings(current),currenttradeandotherpayablesreasonablyapproximatetheirfairvaluesduetotheirshort-termnature.



32.Financialriskmanagement(cont’d)

(d) Fairvalues(cont’d)Financial instruments carried at other than fair valueGroup Discount Carrying Fair rate(1) amount value 2006 2006 2006 % RM RMFinancialliabilties: Bankborrowings(non-current) 8.13 26,521,365 26,456,513Otherpayable(non-current) 7.45 7,980,000 6,942,410

(1)Pre-taxdiscountrateappliedtothecashflowprojections.

(e) Foreigncurrencyrisk

TheGroupandtheCompanyincurforeigncurrencyriskontransactionsandbalancesthataredenominatedincurrenciesotherthantheCompany’sfunctionalcurrency.ThemaincurrenciesgivingrisetothisriskareprimarilyUnitedStatesdollar,Singaporedollar,HongKongdollarandNewZealanddollar.TheGroupwillmonitorchangesonanongoingbasis,theexchangerateriskand,whereappropriate,enterintoforwardcurrencycontracts.

33. Eventssubsequenttothebalancesheetdate

Subsequentto30September2006,thefollowingeventshavetakenplace:

(a) On2October2006,pursuanttointernalrestructuring,theboardofdirectorsofPokBrothersSdn.Bhd.hadapprovedtransferofassetsandliabilitiesofthreewholly-ownedsubsidiaries,namelyPokBrothers(Selangor)Sdn.Bhd.,PokBrothers(Pahang)Sdn.Bhd.andPokBrothers(Penang)Sdn.Bhd.basedonauditednetbookvalueasat30September2006toPokBrothersSdn.Bhd..Thetransferoftheassetsandliabilitieshasyettobecompleted.

(b) On 18 October 2006, the Company incorporated a wholly-owned subsidiary in Labuan, Malaysia, known as “Etika FoodsInternational Inc.” (“EFI”).EFI isan investmentholdingcompanywithanauthorizedsharecapitalofUS$10,000comprising10,000ordinarysharesofUS$1andapaid-upsharecapitalofUS$2comprising2ordinarysharesofUS$1eachfullypaid.

(c) On22November2006,theCompanyincreaseditsshareholdingsinitswholly-ownedsubsidiaries,namelyEtikaFoodsMarketingSdn.Bhd.andEtikaGlobalResourcesSdn.Bhd.,by99,998and499,998ordinarysharesrespectivelythroughtheallotmentofnewsharesarisingfromsubscriptionatanissuepriceofRM1each.

(d) On8December2006theCompany’ssubsidiary,EtikaDairiesSdn.Bhd.,hasenteredintoaSaleandPurchaseAgreementwithFabinaPropertiesSdn.Bhd.toacquireapieceofindustrialland,measuringapproximately3.97acres,knownasLotNo.LS-3,MeruIndustrialParkinKlang,SelangorDarulEhsan,foracashconsiderationofRM3,804,530.

34.Comparativefigures

Certaincomparativefigureshavebeenreclassifiedtoconformwithcurrentyear’spresentationasfollows:

Interestexpenseshavebeenreclassifiedtoclearlypresenttheseitemsinaccordancewiththeirnature.

Group 2005 2005 balanceas balanceas restated previouslyreported RM RMProfitandlossaccount Otheroperatingexpenses (1,231,017) (1,106,483)Financecosts (881,959) (1,006,493)



ETIKA INTERNATIONAL HOLDINGS LIMITEDCompany Registration No: 200313131Z

Statistics of Shareholdings as at 22 December 2006

Issuedandfullypaid-upcapital : S$10,297,809.12Numberofordinarysharesinissue : 171,630,152Classofshares : OrdinaryshareVotingrights : Onevotepershare

VOTINGRIGHTS

Shareholder’svotingrightsaresetoutinArticle65oftheCompany’sArticlesofAssociation.

Onashowofhands,eachMemberentitledtovotemayvoteinpersonorbyproxyorbyattorneyorinthecaseofacorporationbyarepresentativewhoshallhaveonevoteanduponapoll,everyMemberpresentinpersonorbyproxyshallhaveonevoteforeverysharewhichheholdsorrepresents.

SHAREHOLDINGSHELDINHANDSOFPUBLIC

Rule723oftheListingManualoftheSingaporeExchangeSecuritiesTradingLimited(“SGX-ST”)requiresthatatleast10%oftheequitysecurities(excludingpreferencesharesandconvertibleequitysecurities)ofalistedcompanyinaclassthatislistedareatallheldbythepublic.

BasedontheinformationprovidedandtothebestknowledgeoftheDirectors,approximately24.81%oftheissuedordinarysharesoftheCompanyareheldinthehandsofthepublicasat22December2006andthereforeRule723oftheListingManualoftheSGX-STiscompliedwith.

DISTRIBUTIONOFSHAREHOLDINGS

NO.OF NO.OFSIZEOFSHAREHOLDINGS SHAREHOLDERS % SHARES % 1-999 0 0.00 0 0.001,000–10,000 291 56.73 1,324,000 0.7710,001–1,000,000 197 38.40 22,608,000 13.171,000,001andabove 25 4.87 147,698,152 86.06

TOTAL 513 100.00 171,630,152 100.00


Statistics of Shareholdings (cont’d)

TWENTYLARGESTSHAREHOLDERS NO. NAME NO.OFSHARES % 1. TanYetMeng 19,745,858 11.502. MaybanNominees(S)PteLtd 17,000,000 9.913. SouthernNominees(S)SdnBhd 13,800,000 8.044. GYANomineesSdnBhd 10,406,708 6.065. JayaJBTan 9,218,789 5.376. SBSNomineesPteLtd 9,000,000 5.247. MasumaTradingCompanyLimited 8,500,000 4.958. HongLeongFinanceNomineesPteLtd 7,700,000 4.499. TanSanChuan 4,936,465 2.8810. TanSanLin 4,936,465 2.8811. MahWengChoong 4,636,846 2.7012. RafflesNomineesPteLtd 4,636,000 2.7013. KhorSinKok 4,577,846 2.6714. KwongYuenSeng 4,566,846 2.6615. HSBC(Singapore)NomineesPteLtd 4,200,000 2.4516. PokYorkKeaw 2,995,000 1.7517. PokYokeKung 2,687,000 1.5718. KamalYPTan 2,518,789 1.4719. KimEngSecuritiesPte.Ltd. 2,471,000 1.4420. ChungCheeFook 2,468,231 1.44 TOTAL 141,001,843 82.17

SUBSTANTIALSHAREHOLDERS(asrecordedintheRegisterofSubstantialShareholders)

Direct Deemed TotalName Interest % interest % Interest %

Dato’JayaJBTan(1)(2) 29,618,789 17.26 59,237,577 34.51 88,856,366 51.77KamalYPTan(1)(3) 29,618,789 17.26 59,237,577 34.51 88,856,366 51.77TanYetMeng(1) 19,745,858 11.50 69,110,508 40.27 88,856,366 51.77GYANomineesSdnBhd(4) 10,406,708 6.06 - - 10,406,708 6.06PokYockTin(5) 718,000 0.42 12,570,309 7.32 13,288,309 7.74PokYokeKoon(5) 1,407,000 0.82 11,881,309 6.92 13,288,309 7.74PokYokeKung(5) 2,687,000 1.57 10,601,309 6.18 13,288,309 7.74PokYokeWang(5) 1,868,000 1.09 11,420,309 6.65 13,288,309 7.74PakYokJoon(5) 200,000 0.12 13,088,309 7.63 13,288,309 7.74PokYorkKeaw(5) 2,995,000 1.74 10,293,309 6.00 13,288,309 7.74PokYorkKeng(5) 1,217,309 0.71 12,071,000 7.03 13,288,309 7.74TanKiamJong(5) 242,000 0.14 13,046,309 7.60 13,288,309 7.74TanMooiNgoh(5) 221,000 0.13 13,067,309 7.61 13,288,309 7.74KawSee@CheamTatMin(5) 110,000 0.06 13,178,309 7.68 13,288,309 7.74LaiMengKam(5) 295,000 0.17 12,993,309 7.57 13,288,309 7.74PokYokeCheng@PehYokeCheng(5) 610,000 0.36 12,678,309 7.38 13,288,309 7.74PokFookSoon(5) 718,000 0.42 12,570,309 7.32 13,288,309 7.74 Note :- (1) Deemed interested in each others shares through the shares held by Dato’ Jaya, Mr Kamal, Ms Tan Yet Meng and children. (2) Direct interest includes shares held through nominees.(3) Direct interest includes shares held through nominees.(4) Held in trust for Abd Hamid bin Mohamed. (5) Deemed interested in each others shares by virtue of relationship as spouse, siblings, cousins and cousin’s spouse.


NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of Etika International Holdings Limited will be held atSingaporeMarriottHotel,Ballroom1,Level3,320OrchardRoad,Singapore238865onWednesday,31January2007at11.00a.m.

totransactthefollowingbusiness:-

ASORDINARYBUSINESS

1. ToreceiveandadopttheDirectors’ReportandAuditedFinancialStatementsfortheyearended30September2006andtheAuditors’Reportthereon. (Resolution1)

2. Tore-electthefollowingDirectorsretiringpursuanttoArticle91oftheCompany’sArticlesofAssociation:-

(i) MrMahWengChoong (Resolution2)

(ii) MrTeoCheeSeng (Resolution3)

3. To approve the payment of Directors’ fees of S$136,000 for the financial year ended 30 September 2006. (FY 2005 :S$95,905.38) (Resolution4)

4. Todeclarethepaymentofataxexempt(one-tier)finaldividendof0.2Singaporecentspershareforthefinancialyearended30September2006. (Resolution5)

5. Tore-appointMessrsBDORafflesastheAuditorsoftheCompanyandtoauthorisetheDirectorstofixtheirremuneration. (Resolution6)

6. TotransactanyotherordinarybusinesswhichmayproperlybetransactedatanAnnualGeneralMeeting.

ASSPECIALBUSINESS

Toconsiderand,ifthoughtfit,topassthefollowingasOrdinaryResolutions,withorwithoutmodifications:-

7. OrdinaryResolution:GeneralMandatetoauthorizeDirectorstoallotandissuesharesandconvertiblesecurities (Resolution7)

THATpursuanttoSection161oftheCompaniesAct,Cap.50andtherulesoftheListingManualoftheSingaporeExchangeSecuritiesTradingLimited(the“ListingRules”),authoritybeandisherebygiventotheDirectorsoftheCompanytoallotandissue:-

(a) shares;or(b) convertiblesecurities;or(c) additionalsecuritiesissuedpursuanttoRule829oftheListingRules;or(d) sharesarisingfromtheconversionofthesecuritiesin(b)and(c)above,

in theCompany (whetherbywayof rights,bonusorotherwise) and/orgrantoffers, agreementsoroptions (collectively,“Instruments”)thatmightorwouldrequiresharestobeissued,includingbutnotlimitedtothecreationandissueofwarrants,debenturesorotherinstrumentsconvertibleorexchangeableintosharesatanytimetosuchpersonsanduponsuchtermsandconditionsandforsuchpurposesastheDirectorsmayintheirabsolutediscretiondeemfit,providedthattheaggregatenumber of shares and convertible securities to be issued pursuant to this Resolution (including shares to be issued inpursuanceofInstrumentsmadeorgrantedpursuanttothisResolutionbutexcludingshareswhichmaybeissuedpursuanttoanyadjustmenteffectedunderanyrelevantInstrument)mustbenotmorethanfiftypercent(50%)oftheissuedsharecapitaloftheCompanyofwhichtheaggregatenumberofsharesandconvertiblesecuritiestobeissuedotherthanonaproratabasistoexistingshareholdersoftheCompany(includingsharestobeissuedinpursuanceofInstrumentsmadeor

ETIKA INTERNATIONAL HOLDINGS LIMITEDCompany Registration No: 200313131Z

Notice of Annual General Meeting


grantedpursuanttothisResolutionbutexcludingshareswhichmaybeissuedpursuanttoanyadjustmentseffectedunderanyrelevantInstrument)mustbenotmorethantwentypercent(20%)oftheissuedsharecapitaloftheCompanyandthatsuchauthorityshallunlessrevokedorvariedbytheCompanyingeneralmeeting,continueinforceuntiltheconclusionofthenextAnnualGeneralMeetingoftheCompanyorthedatebywhichthenextAnnualGeneralMeetingoftheCompanyisrequiredbylawtobeheld,whicheveristheearlier.[SeeExplanatoryNote(a)]

8. OrdinaryResolution:AuthoritytoissuesharesunderEtikaEmployeeShareOptionScheme (Resolution8)

THATpursuanttoSection161oftheCompaniesAct,Cap50,theDirectorsoftheCompanybeandareherebyauthorizedandempoweredtoofferandgrantoptionsinaccordancewiththeEtikaEmployeeShareOptionScheme(“theScheme”)andtoallotandissuesharesinthecapitaloftheCompanytoalltheholdersofoptionsgrantedbytheCompanywhethergrantedduringthesubsistenceofthisauthorityorotherwise,undertheSchemeupontheexerciseofsuchoptionsandinaccordancewiththetermsandconditionsoftheScheme,providedalwaysthattheaggregatenumberofadditionalordinarysharestobeallottedandissuedpursuanttotheSchemeshallnotexceedfifteenpercent(15%)oftheissuedsharecapitaloftheCompanyfromtimetotime.[SeeExplanatoryNote(b)]

BYORDEROFTHEBOARD

JulieKohNginJooKokMorKeatCompanySecretaries

Singapore16January2007

Notice of Annual General Meeting (cont’d)


ExplanatoryNotesonSpecialBusinesstobetransacted

(a) OrdinaryResolution7proposedinitem7above,ifpassedwillempowertheDirectorstoallotandissuesharesandconvertiblesecuritiesinthecapitaloftheCompanyand/orinstruments(asdefinedabove)fromthedateoftheaboveMeetinguntilthedateof thenextAnnualGeneralMeetingof theCompany,or thedateofwhich thenextAnnualGeneralMeetingof theCompanyisrequiredbylawtobeheld,whicheverisearlier,unlessvariedorrevokedbytheCompanyingeneralmeeting.

Forthepurposeofthisresolution,theaggregatenumberofsharesandconvertiblesecuritiestobeissuedpursuanttothisResolution (including shares tobe issued inpursuanceof Instrumentsmadeorgrantedpursuant to thisResolutionbutexcludingshareswhichmaybeissuedpursuanttoanyadjustmentseffectedunderanyrelevantInstrument)shallnotexceed50percent. (50%)of the issuedsharecapitalof theCompany,withasub-limitof20percent. (20%) forshares issuedotherthanonapro-ratabasis(includingsharestobeissuedinpursuanceofInstrumentsmadeorgrantedpursuanttothisResolution,butexcludingshareswhichmaybeissuedpursuanttoanyadjustmentseffectedunderanyrelevantInstrument)totheshareholders.

Forthepurposeofdeterminingtheaggregatenumberofsharesthatmaybeissued,thepercentageofissuedsharecapitalwillbecalculatedbasedontheissuedsharecapitaloftheCompanyasatthedateofthepassingofthisResolutionafteradjustingfor:

(i) newsharesarisingfromtheconversionorexerciseofconvertiblesecuritiesandshareoptionsthathavebeenissued

pursuanttoanypreviousshareholderapprovalandwhichareoutstandingasatthedateofthepassingofthisResolution;and

(ii)anysubsequentconsolidationorsubdivisionofshares.

ThiscalculationisinaccordancewithRule806(3)oftheListingManualoftheSGX-ST.

(b) OrdinaryResolution8proposedinitem8above,ifpassed,willempowertheDirectorsoftheCompany,fromthedateoftheaboveMeetinguntilthenextAnnualGeneralMeeting,toofferandgrantoptionsundertheEtikaEmployeeShareOptionScheme(‘theScheme”)andtoallotandissuesharesintheCompanyofuptoanumbernotexceedingintotalfifteenpercent.(15%)oftheissuedsharecapitalofthecompanyfromtimetotimepursuanttotheexerciseoftheoptionsundertheScheme.

NOTES:-

1. AmemberoftheCompanyentitledtoattendandvoteattheAnnualGeneralMeetingisentitledtoappointnotmorethantwoproxiestoattendandvoteinhisstead.AproxyneednotbeamemberoftheCompanyandwheretherearetwoproxies,thenumberofsharestoberepresentedbyeachproxymustbestated.

2. If theappointor isacorporation, the instrumentappointingaproxymustbeexecutedundersealor thehandof itsdulyauthorizedofficerorattorney.

3. TheinstrumentappointingaproxymustbedepositedattheCompany’sRegisteredOfficeat3ChurchStreet,#08-01SamsungHub,Singapore049483notlessthanforty-eight(48)hoursbeforethetimeforholdingtheAnnualGeneralMeeting.

Notice of Annual General Meeting (cont’d)


NOTICEISHEREBYGIVENTHATtheShareTransferBooksandRegisterofMembersofEtikaInternationalHoldingsLimited(the“Company”)willbeclosedon9February2007forthepreparationofdividendwarrants.

Dulycompleted registrable transfers receivedby theCompany’sShareRegistrar, LimAssociates (Pte)Ltd,3ChurchStreet,#08-01SamsungHub,Singapore049483up to5.00p.m.on8February2007willbe registered todetermineshareholders’entitlementstothesaiddividend.MemberswhoseSecuritiesAccountswithTheCentralDepository(Pte)Limitedarecreditedwithsharesat5.00p.m.on8February2007willbeentitledtotheproposeddividend.

Paymentofthedividend,ifapprovedbythemembersattheAnnualGeneralMeetingtobeheldon31January2007,willbemadeon27February2007.

Notice of Books Closure

ETIKA INTERNATIONAL HOLDINGS LIMITED Company Registration No: 200313131Z (Incorporated in the Republic of Singapore)

I/We,______________________________________________________________________________________________________________________________

of ________________________________________________________________________________________________________________________________

being a member/members of ETIKA INTERNATIONAL HOLDINGS LIMITED (the “Company”), hereby appoint

Name Address NRIC/Passport Number Proportion of Shareholdings (%)

and/or (delete as appropriate)

Name Address NRIC/Passport Number Proportion of Shareholdings (%)

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary to demand a poll, at the Annual General Meeting (“AGM”) of the Company to be held on 31 January 2007 at 11.00 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the AGM as indicated hereunder. If no specific direction as to voting is given or in the event of any item arising not summarised below, the proxy/proxies will vote or abstain from voting at his/their discretion. If no person is named in the above boxes, the Chairman of the AGM shall be my/our proxy to vote, for or against the Resolutions to be proposed at the AGM as indicated hereunder for me/us and on my/our behalf at the AGM and at any adjournment thereof.

No. Resolutions Relating To: To be used on a To be used in the show of hands event of a Poll For * Against * Number of Number of Votes Votes For ** Against **1 Adoption of Directors’ Reports and Financial Statements for the year ended 30 September 2006 2 Re-election of Mr Mah Weng Choong as Director 3 Re-election of Mr Teo Chee Seng as Director 4 Approval of payment of Directors’ fees 5 Approval of payment of tax exempt (one-tier) final dividend 6 Re-appointment of Messrs BDO Raffles as auditors and authorize Directors to fix their Remuneration 7 Authority to allot and issue new shares 8 Authority to allot and issue shares under Etika Employee Share Option Scheme

*Please indicate your vote “For” or “Against” with a “X” within the box provided.** If you wish to exercise all your votes “For” or “Against”, please indicate with a “X” within the box provided. Alternatively, please indicate the number of votes as appropriate.

Dated this _______________________ day of ________________________ 2007.

Total Number of Shares held CDP Register Register of Members

Signature(s) of Member(s) or,Common Seal of Corporate Shareholder IMPORTANT: PLEASE READ NOTES OVERLEAF

PROXY FORM

IMPORTANT1. For investors who have used their CPF monies to buy shares of Etika

International Holdings Limited, the Annual Report 2006 is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF Investors who wish to attend the Annual General Meeting as an observer must submit their requests through their CPF Approved Nominees in accordance with their instructions within the timeframe specified.

4. CPF investors who wish to vote must submit their voting instructions to their CPF Approved Nominees to enable them to vote on their behalf.

Number of shares held

Notes :

1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Cap. 50 of Singapore), you should insert that number of shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote on his behalf. Such proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4. The instrument appointing a proxy or proxies must be deposited at the Company’s Registered Office at 3 Church Street, #08-01 Samsung Hub, Singapore 049483 not less than forty-eight (48) hours before the time appointed for the Annual General Meeting.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its Seal or under the hand of an officer or attorney duly authorised.

6. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney (or other authority) or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a member may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at the AGM, in accordance with Section 179 of the Companies Act, Cap.50.

General:

The Company shall be entitled to reject this instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of a member whose Shares are entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at forty-eight (48) hours before the time appointed for holding the Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.

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