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SYF RESOURCES BERHAD (364372-H)

Kawasan Perindustrian Sungai Lalang, Lot 971, Jalan Vill, Mukim Semenyih, Jalan Sungai Lalang, 43500 Semenyih, Selangor Darul Ehsan.• Tel : 603 8723 4535• Fax : 603 8723 3500 • Website : www.syfresources.com

annual repor t 2007

LOCAL RESOURCES, GLOBAL PRESENCE

CONTENTSCONTENTS2 Notice of Annual General Meeting5 Statement Accompanying Notice of Annual General Meeting6 Corporate Information 7 Corporate Structure8 Profi le of Directors 10 Chairman’s Statement12 Corporate Governance Statement18 Statement on Internal Control 19 Audit Committee Report22 Analysis of Shareholdings and Warrantholdings28 List of Properties 29 Financial Statements Proxy Form

CONTENTS

2

NOTICE OF ANNUAL GENERAL MEETINGNOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Twelfth Annual General Meeting of SYF Resources Berhad (“the Company”) will be held at Metro 1 Room, Prescott Metro Inn, Wisma Metro Kajang, Jalan Semenyih, 43000 Kajang, Selangor Darul Ehsan on Friday, 11 January 2008 at 10.30 a.m. in order :-

NOTICE OF ANNUAL GENERAL MEETING

1. To receive the Audited Financial Statements for the year ended 31 July 2007 and the Directors’ and Auditors’ Reports thereon.

2. To approve the Directors’ fees for the fi nancial year ended 31 July 2007.

3. To re-elect the following Director retiring pursuant to the Company’s Articles of Association:-

- Chan Keng Yew

4. To re-appoint Messrs KPMG as Auditors of the Company and authorise the Directors to fi x their remuneration.

5. As special business, to consider and, if thought fi t, pass the following ordinary resolutions :-

(Resolution 1)

(Resolution 2)

(Resolution 3)

(Resolution 4)

i) Ordinary Resolution-Authority to Issue Shares Pursuant to Section 132D of the Companies Act, 1965 “THAT pursuant to Section 132D of the Companies Act, 1965 (“Act”), the Directors be and are hereby empowered to issue shares in the Company, at any time and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fi t, provided that the aggregate number of shares issued pursuant to this resolution in any one fi nancial year does not exceed 10% of the issued capital of the Company for the time being and that the Directors be and are also empowered to obtain approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad (“Bursa”) and that such authority shall continue in force until the conclusion of the next Annual General Meeting (“AGM”) of the Company.”

ii) Ordinary Resolution-Proposed Renewal of the Authority to Purchase Its Own Shares

“THAT subject always to the Act, the provisions of the Memorandum and Articles of Association of the Company, the Listing Requirements of Bursa and the approvals of all relevant governmental and/or regulatory authorities, the Company be authorised, to the extent permitted by the law, to buy-back such amount of ordinary shares of RM1.00 each in the Company as may be determined by the Directors of the Company from time to time through Bursa upon such terms and conditions as the Directors deem fi t and expedient in the interest of the Company provided that:- (i) The aggregate number of shares bought-back does not exceed 10% of the total issued and paid-up share capital of the Company at any point in time;

(ii) The maximum amount of funds to be allocated for the share buy-back shall not exceed the aggregate of the retained profi ts and/or share premium of the Company; and

(iii) The shares purchased are to be treated in any of the following manner:- (a) cancel the purchased ordinary shares; or (b) retain the purchased ordinary shares as treasury shares held by the Company; or (c) retain part of the purchased ordinary shares as treasury shares and cancel the remainder.

(Resolution 5)

3

NOTICE OF ANNUAL GENERAL MEETING (con’t)NOTICE OF ANNUAL GENERAL MEETING (con’t)NOTICE OF ANNUAL GENERAL MEETING (con’t)

The treasury shares may be distributed as dividends to the shareholders and/or resold on Bursa and/or subsequently cancelled;

AND THAT the authority conferred by this resolution shall commence upon the passing of this resolution until:- (i) the conclusion of the next AGM of the Company, unless by ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions; or

(ii) the expiration of the period within which the next AGM required by law to be held;

(iii) revoked or varied by ordinary resolution passed by shareholders of the Company at a general meeting of the Company,

whichever occurs fi rst;

AND THAT authority be and is hereby unconditionally and generally given to the Directors of the Company to take all such steps as are necessary or expedient (including without limitation, the opening and maintaining of central depositor account(s) under the Securities Industry (Central Depositories) Act, 1991, and the entering into of all agreements, arrangements and guarantees with any party or parties) to implement, fi nalise and give full effect to the share buy-back with full powers to assent to any conditions, modifi cations, revaluations, variations and/or amendments (if any) as may be imposed by the relevant authorities and with full power to do all such acts and things thereafter (including without limitation, the cancellation or retention as treasury shares of all or any part of the shares bought- back) in accordance with the Act, the provisions of the Memorandum and Articles of Association of the Company, the Listing Requirements of Bursa, and all other relevant governmental and/or regulatory authorities.”

6. To propose amendments to the Articles of Association.

“That the deletions, alterations, modifi cations, variations and additions to the Articles of Association of the Company as set out in the circular of the Company be and are hereby approved.”

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

By Order of the Board

CHEONG YEE KIONG(MIA 23347)Company Secretary

Selangor Darul Ehsan19 December 2007

(Special Resolution)

4

NOTICE OF ANNUAL GENERAL MEETING (con’t)NOTICE OF ANNUAL GENERAL MEETING (con’t)NOTICE OF ANNUAL GENERAL MEETING (con’t)

Notes:

1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy may but need not be a member of the Company. A member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company. If the appointor is a corporation, this form must be executed under its Common Seal or under the hand of its Attorney.

2. The instrument appointing a proxy must be deposited at the Registered Offi ce at Kawasan Perindustrian Sungai Lalang, Lot 971, Jalan Vill, Mukim Semenyih, Jalan Sungai Lalang, 43500 Semenyih, Selangor Darul Ehsan, not less than 48 hours before the time appointed for holding the Meeting or adjourned meeting.

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

Explanatory Note to Special Business Ordinary Resolution-Authority to Issue Shares Pursuant to Section 132D of the Companies Act, 1965

The proposed Ordinary Resolution under item no. 5(i), if passed, will give the Directors of the Company the power to issue shares of the Company up to an amount not exceeding in total 10% of the issued share capital of the Company for the time being, for such purposes as the Directors consider would be in the interest of the Company. This would avoid any delay and cost involved in convening a general meeting to specifi cally approve such an issue of shares. This authority, unless revoked or varied at a general meeting, will expire at the next AGM of the Company. Ordinary Resolution-Proposed Renewal of the Authority to Purchase Its Own Shares

The proposed Ordinary Resolution under item no. 5(ii), if passed, will empower the Directors to buy-back and/or hold up to a maximum of 10% of the Company’s issued and paid-up share capital at any point of time, subject to the Act, Listing Requirements of Bursa, any prevailing laws, orders, requirements, rules, regulations and guidelines issued by the relevant authorities at the time of purchase. These authorities, unless revoked or varied by the Company in a general meeting, will expire at the conclusion of the next AGM of the Company, or the expiration of period within which the next AGM is required by law to be held, whichever earlier.

Explanatory Note to Special Resolution

Special Resolution- To Propose Amendments to the Articles of Association

The proposed Special Resolution under item no. 6, if passed, will render the Articles of Association of the Company to be consistent with the new requirements under Chapter 7 of the Listing Requirements of Bursa.

5

STATEMENT ACCOMPANYINGSTATEMENT ACCOMPANYINGNOTICE OF ANNUAL GENERAL MEETINGNOTICE OF ANNUAL GENERAL MEETINGSTATEMENT ACCOMPANYINGNOTICE OF ANNUAL GENERAL MEETING

1. Director standing for re-election at the Twelfth Annual General Meeting of the Company

In accordance with Article 93 of the Company’s Articles of Association

- Chan Keng Yew

2. Details of attendance of Directors at Board Meetings

There were fi ve (5) Board meetings held during the fi nancial year ended 31 July 2007. Details of attendance of the Directors are set out in the Corporate Governance Statement appearing on pages 12 to 17 of the Annual Report.

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

Place : Metro 1 Room, Prescott Metro Inn, Wisma Metro Kajang Jalan Semenyih, 43000 Kajang, Selangor Darul Ehsan Date : Friday, 11 January 2008 Time : 10.30 a.m.

4. Further details of Director standing for re-election

The details of the Director standing for re-election at the forthcoming Twelfth Annual General Meeting is set out in the Profi le of Directors appearing on pages 8 to 9 of the Annual Report.

6

CORPORATE INFORMATIONCORPORATE INFORMATIONCORPORATE INFORMATION

BOARD OF DIRECTORS Ng Ah Chai Executive Chairman And Chief Executive Offi cer

Lim Pang Kiam Executive Director

Datuk Chee Hong Leong Independent Non-Executive Director

Chan Keng Yew (Appointed on 21/03/2007) Independent Non-Executive Director

Lee Teik Yang (Resigned on 21/03/2007) Independent Non-Executive Director

COMPANY SECRETARY Cheong Yee Kiong (MIA 23347)

REGISTRAR PFA Registration Services Sdn Bhd Level 13, Uptown 1, No.1 Jalan SS21/58 Damansara Uptown, 47400 Petaling Jaya Selangor Darul Ehsan Tel : 03-7718 6000 Fax : 03-7722 2311

REGISTERED OFFICE Kawasan Perindustrian Sungai Lalang Lot 971, Jalan Vill, Mukim Semenyih Jalan Sungai Lalang, 43500 Semenyih Selangor Darul Ehsan Tel : 03-8723 4535 Fax : 03-8723 3500

AUDITORS

KPMG Wisma KPMG, Jalan Dungun Damansara Heights 50490 Kuala Lumpur

PRINCIPAL BANKERS Public Bank Berhad Alliance Bank Malaysia Berhad Malayan Banking Berhad

STOCK EXCHANGE LISTING

Bursa Malaysia Securities Berhad Second Board

7

CORPORATE STRUCTURECORPORATE STRUCTURECORPORATE STRUCTURE

100%Seng Yip

Furniture Sdn Bhd

100%Tomisho Sdn Bhd

100%SYF Venture Sdn Bhd

100%SYF Trading Sdn Bhd

51%Wira Cheras

Development Sdn Bhd

51%Twenty-One SJ Sdn Bhd

51%C&L Lumber Sdn Bhd

51%Furniwood Industries

(M) Sdn Bhd

MANUFACTURING TRADING PROPERTYDEVELOPMENT

- ACTIVE COMPANIES ONLY- AS AT 8 DECEMBER 2007

8

PROFILE OF DIRECTORSPROFILE OF DIRECTORSPROFILE OF DIRECTORS

NG AH CHAIExecutive Chairman & Chief Executive Offi cerNon-Independent/ExecutiveMalaysian

Mr. Ng Ah Chai, aged 45, was appointed to the Board on 1 February 2001 and assumed the post of Group Managing Director of the Company on 4 August 2003. On 28 September 2005, he was re-designated to Executive Chairman & Chief Executive Offi cer.

His involvement in the timber trade began in 1985 when he started a saw milling business on a partnership basis. In 1991, he expanded his business into manufacturing tropical wood furniture for the local market. Ceasing the saw milling business in 1993, he co-founded Seng Yip Furniture Sdn Bhd (“Seng Yip”) which started as a kiln drying and timber processing business. With his vast experience and leadership skill, Seng Yip expanded into manufacturing furniture components and semi-fi nished parts in 1995. Subsequently, in 1998, he further ventured into fi nished rubber-wood furniture.

He is the Chairman of the Nominating Committee, Remuneration Committee, ESOS Committee and Risk Management Committee of the Company.

He is also a substantial shareholder of the Company with a direct shareholding of 25,711,600 ordinary shares of RM1.00 each in the Company together with 12,945,200 warrants. He has no interest in the shares of the subsidiaries of the Company.

He has no family relationship with any other director and/or major shareholder of the Company, neither has he entered into any transaction which has a confl ict of interest with the Company nor any convictions for offences within the past ten years.

LIM PANG KIAMExecutive DirectorNon-Independent/ExecutiveMalaysian

Mr. Lim Pang Kiam, aged 44, was appointed to the Board on 2 June 2004. Presently, he is a Chartered Member and Certifi ed Risk Professional (CRP) under the Bank Administration Institute Centre for certifi cation, USA, a Certifi ed Financial Planner (CFP) from the Federation of Financial Planners Malaysia and is also an associate of the Institute Bank Bank Malaysia (IBBM).

He has served in several senior positions in fi nancial institutions in Malaysia and headed the Corporate Banking Division of a local anchor bank before joining the Company as its Executive Director.

Actively involved in the furniture industry, he is the immediate past Honorary Secretary General of the Malaysian Furniture Industry Council (MFIC), Board member of the Malaysian Furniture Promotion Council (MFPC) and Board member of the Malaysian Timber Council (MTC).

Presently, he is a member of the Audit Committee, ESOS Committee and Risk Management Committee of the Company.

He is also a shareholder of the Company with a direct shareholding of 210,100 ordinary shares of RM1.00 each. He has no interest in the shares of the subsidiaries of the Company.


9

DATUK CHEE HONG LEONGDirectorIndependent/Non-ExecutiveMalaysian

Datuk Chee Hong Leong, aged 43, was appointed to the Board on 13 March 2003. He graduated with a Bachelor of Engineering (Computer) in 1987 and a Master of Business Administration in 1989 both from McMaster University, Hamilton, Ontario, Canada. He began his career in 1990 coordinating the development in corporate and annual strategic plans for Leisure Holidays Group of Companies. In 1992, he ventured into various businesses which involved designing and building individual bungalows for landowners at various housing projects in the Klang Valley as well as building and operating a 100,000 sq. ft. Information Technology Incubation Centre in University Putra Malaysia. Subsequently, he joined Tanco Resort Berhad from 1998-2002 where he held various positions from General Manager to Executive Director/Chief Operating Offi cer. Currently, he manages a software house that focuses on Customer Relationship Management and Membership Services.

Presently, he is a member of the Audit Committee, Nominating Committee and Remuneration Committee of the Company.

He does not have any interest in the shares of the Company nor its subsidiaries.


CHAN KENG YEWDirectorIndependent/Non-ExecutiveMalaysian

Mr. Chan Keng Yew, aged 48, has been a member of the Malaysian Association of Certifi ed Public Accountants and the Malaysian Institute of Accountants since 1984 and 1988 respectively. He is also a Fellow of CPA Australia Ltd. He has vast experience working in both, professional fi rm and commercial organizations. His experience with the professional fi rm was gained during his articled years with one of the major accounting fi rms. Since leaving the profession, he has worked with two public listed companies with diverse business interests on the main board of Bursa as their Group Financial Controller and in his last posting also as its Company Secretary. His working experiences have made him adept in the fi eld of fi nancial planning and management, particularly in crisis management.

Presently, he is the Chairman of the Audit Committee, a member of Nominating Committee, Remuneration Committee and ESOS Committee of the Company.

He does not have any interest in the shares of the Company nor its subsidiaries.


PROFILE OF DIRECTORS (con’t)PROFILE OF DIRECTORS (con’t)PROFILE OF DIRECTORS (con’t)

10

Dear Shareholders,

On behalf of the Board of Directors, I present the Annual Report and Financial Statements of the Group and the Company for the year ended 31 July 2007.

2007 remained an extremely challenging year for the industry and the Group as a whole. It’s a year where oil price reached unprecedented highs and operating conditions continued to be trying with escalating raw material cost as well as the weakening of the United States Dollar (“USD”) against the local currency. At the same time, the emergence of furniture manufacturers from new emerging markets added new competition whilst the sub-prime woes affecting the US economy did little to make the furniture industry a vibrant one.

At Group level, the two fi re incidents during the fi nancial year were a major setback. It disrupted and severely reduced the effi ciency of operations. Much effort was expended to reinstate the affected facilities in the shortest time possible. As a result, the negative impact of the fi re incidents was inevitable. Our fl agship subsidiary, Seng Yip Furniture Sdn Bhd posted an operational loss for the fi rst time since incorporation.

During the fi nancial year under review, the carrying value of all assets were reviewed which resulted in substantial adjustments, provisions and write-downs.

Apart from the effects of the above, most active subsidiaries performed satisfactorily.

FINANCIAL RESULTS

Despite the fi re incidents, the Group continued to register encouraging growth as revenue grew by 42.5% to RM246.1 million over the RM172.7 million recorded in the previous year. The growth was achieved with the maiden consolidation of the three recently acquired subsidiaries on a full year basis; a result of our quest to grow organically and also via strategic acquisitions of businesses which are synergistic to our core business.

As mentioned earlier, as a result of the operational losses and the Group-wide assets review carried out during the fi nancial year, the Group posted a loss after tax of RM44.1 million as compared to the profi t after tax of RM1.2 million previously. Despite the exceptional loss, we are optimistic that the Group should return to profi tability in the next fi nancial year.

The loss was due to higher production cost arising from raw material price increases and higher overheads on the back of the phenomenal increase in the oil price. At the same time, the Group’s exports, all of which are denominated in USD, were affected by the signifi cant appreciation in the local currency against the USD. At the previous fi nancial year end, the local currency was at 3.67 to 1 unit of USD as compared to 3.44 at the current fi nancial year end, a loss of 6.6% which resulted in the reduction of net export proceeds and hence affected the bottom line negatively.

With the completion of the timber complex to cater for the upstream expansion program at the end of the last fi nancial year, interest expenses were higher during the current fi nancial year due to the full utilization of borrowings catered for the expansion.

The year end adjustments, mostly non-cash items were made in respect of impairment and write-off of goodwill; impairment loss on investment properties; loss on disposal, write-off and impairment losses of property, plant and equipment; write-off of obsolete inventories; provision for doubtful debt; bad debts written off upon cessation of an overseas subsidiary’s operations; and provision for corporate guarantee default which is contingent in nature, extended to a past subsidiary which was disposed of in 2003.

In addition to these asset losses, the fi re incidents caused business disruption, lower effi ciency and increased cost of production arising from reliance on outsourced timber and components during the downtime in the facilities affected. The fi nancial losses were mitigated to the extent of the insurance compensation.

CHAIRMAN’S STATEMENTCHAIRMAN’S STATEMENTCHAIRMAN’S STATEMENT

11

CHAIRMAN’S STATEMENT (con’t)CHAIRMAN’S STATEMENT (con’t)CHAIRMAN’S STATEMENT (con’t)

REVIEW OF OPERATIONS

Towards the end of fi nancial year 2006, the upstream expansion had been completed to enable the Group to increase output and achieve better cost effi ciency in its manufacturing operations in fi nancial year 2007. The expansion facilities had been progressing smoothly until the fi re in November 2006 which disrupted the operation, and resulting from this, the Group was unable to reap the benefi ts of the said expansion during the current fi nancial year.

Having reinstated the affected facilities by March 2007, the second fi re occurred which destroyed the administrative offi ce and its adjoining fi nished goods warehouse. Although it did not affect any production facilities, this second setback was equally disruptive as it destroyed records pertaining to marketing, human resources, accounting, fi nance and secretarial. The loss of the fi nished goods warehouse resulted in the inability to fulfi ll our highly successful mixed container program leading to lower sales and profi tability. In addition, the expended effort towards the disaster recovery impaired the Group from fulfi lling many new orders received during the March 2007 Malaysian International Furniture Fair, both from new customers and existing customers.

Subsequent to the fi nancial year end, the facilities destroyed in the second fi re were reinstated in September 2007. To safeguard against future recurrence, improvements are being made to the fi re protection system in consultation with the professional risk reviewer appointed by the insurers.

Apart from the manufacturing division, the trading division was enhanced by the recent acquisition of a new subsidiary while the new property development subsidiary commenced operations on a project.

PROSPECTS AND FUTURE OUTLOOK

Having overcome the unfortunate incidents of the current year, the Group will strive to return to profi tability in the coming year although the conditions of the industry globally will continue to remain challenging. We will continue to adopt tough measures and the discipline required at all times to ensure the Group remains relevant and competitive in the business. The Group will also be constantly exploring potential tie-ups with strategic partners in new markets, acquisitions that will provide synergistic effect to us and to continue to reinvent ourselves to face the demands of the very globalized world and the uncertainty it brings.

BOARD CHANGES

The resignation of Mr Lee Teik Yang during the year was accepted with regret and accorded appreciation in view of his contribution during his tenure. The Board extends a warm welcome to Mr Chan Keng Yew whose experience will be invaluable to the Group.

DIVIDEND

No dividend has been proposed due to the losses incurred by the Group during the fi nancial year.

CONCLUSION

On behalf of the Board, I would like to thank the shareholders, statutory and government bodies, customers, suppliers, fi nanciers, professional consultants and advisers for their continued support and assistance during the year.

I would also like to record my appreciation for the support of the Board and the undivided loyalty and dedication of the staff in overcoming the unusual challenges during the year. Your effort and high spirit lifted the Group to overcome the trying times during this diffi cult year and I am sure this trait will enable us to forge ahead as a dynamic company of the future.

Thank you.

For and On Behalf of the Board

Ng Ah ChaiExecutive Chairman & Chief Executive Offi cer

12

CORPORATE GOVERNANCE STATEMENTCORPORATE GOVERNANCE STATEMENT

INTRODUCTION

The Board of SYF RESOURCES BERHAD acknowledges the importance of maintaining a high standard of corporate governance and ensuring that the Group is in compliance with the principles and best practices as outlined in the Malaysian Code on Corporate Governance.

THE BOARD OF DIRECTORS (“BOARD”)

Composition of the Board

The Board consists of four (4) members comprising an Executive Chairman & Chief Executive Offi cer, an Executive Director and two (2) Independent/Non-Executive Directors. This composition refl ects a balance of executive directors and non-executive directors such that no individual or group of individuals dominates the Board’s decision making.

The Board, with their different background and specialization, collectively bring with them a wide range of experience and expertise required to carry out the Board’s duties and responsibilities effectively.

The executive directors are responsible for the implementation of the Board’s policies and decisions, monitoring the operations, managing the development and implementation of business and corporate strategies, as well as the running of the daily businesses. The non-executive directors are independent of management and free from any business relationship, which could materially interfere with their independent judgment. Their role is to provide independent view, advice and judgment to ensure a balanced and an unbiased decision making process as well as to safeguard the interest of public shareholders.

Board Responsibilities

The Board provides stewardship and direction to the Group’s strategy and operations so as to ultimately enhance long term shareholders’ value. The Board is primarily responsible for:-

1. Adopting and monitoring the progress of the Company’s strategies, plans and policies.2. Overseeing the conduct of the company’s business to evaluate whether the business is being properly managed.3. Considering management’s recommendations on key issues including acquisitions and divestment, restructuring, funding and signifi cant capital expenditure.4. Identifying principal risks and ensuring the implementation of appropriate systems to manage these risks, and5. Reviewing the adequacy and the integrity of the Company’s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

The Board has delegated certain authorities and responsibilities to several Board committees, i.e. the Audit Committee, Nominating Committee, Remuneration Committee, ESOS Committee and Risk Management Committee that operate within clearly defi ned terms of reference.

Directors’ Training

All relevant Directors have attended the Mandatory Accreditation Program and the Continuing Education Programs pursuant to the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa”). The Company will arrange for further training of the directors whenever necessary, to update and enhance their skills and knowledge that are important for carrying out their role effectively pursuant to the latest requirements effective 1 January 2005.

CORPORATE GOVERNANCE STATEMENT

13

Board Meetings

The Board normally convenes meetings four (4) times annually on a quarterly basis, with additional meetings being called whenever necessary to deliberate on important matters.

All Directors have full and timely access to information concerning the Group. Each Board member is provided with an agenda together with the full set of written reports and supporting information, including operating results, review and analysis, board paper in relation to corporate proposals (if any), at least one week ahead of each Board meeting. This is issued in suffi cient time to enable the Directors to obtain further explanations, where necessary in order to be briefed properly before the meeting. In furtherance of their duties, the Directors also have direct access to the advice and services of the Company Secretary and may seek professional independent advice if deemed reasonable and necessary, at the expense of the Company.

At each regularly scheduled meeting, there is a full fi nancial and business review with discussion, on operational performance. During the fi nancial year under review, fi ve (5) meetings were convened, with details on the attendance of Directors listed below:-

Number of Meetings Director Attended by Directors

Ng Ah Chai` 5/5

Lim Pang Kiam 5/5

Datuk Chee Hong Leong 5/5

Chan Keng Yew (appointed on 21/03/07) 2/2

Lee Teik Yang(resigned on 21/03/07) 3/3

Appointment of the Board and Re-Election

In accordance with the Company’s Articles of Association, at the First Annual General Meeting (“AGM”), all Directors shall retire from offi ce. At subsequent AGMs, all Directors shall retire from offi ce at least once in every three (3) years by rotation. The Directors retiring from offi ce shall be eligible for re-election. The Director standing for re-election at the forthcoming AGM will be Chan Keng Yew.

Board Committees

Apart from the Audit Committee, there are four (4) other committees established to assist the Board in executing its responsibilities. The committees are as follows:-

(i) Audit Committee(ii) Nominating Committee(iii) Remuneration Committee(iv) Employees’ Share Option Scheme (“ESOS”) Committee(v) Risk Management Committee

(i) Audit Committee (“AC”)

The report of the AC is set out on pages 19 to 21 of this annual report.

CORPORATE GOVERNANCE STATEMENT (con’t)CORPORATE GOVERNANCE STATEMENT (con’t)CORPORATE GOVERNANCE STATEMENT (con’t)

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(ii) Nominating Committee (“NC”)

The NC comprises three (3) members as follows:-

1. Ng Ah Chai - Chairman, Executive Chairman & Chief Executive Offi cer 2. Chan Keng Yew - Member, Independent/Non-Executive Director 3. Datuk Chee Hong Leong - Member, Independent/Non-Executive Director

The terms of reference of the NC are as follows:-

1. Annual review of the required mix of skills and experience and other qualities, including core competencies which non-executive and executive directors should have. 2. Assessment on an annual basis, the effectiveness of the Board as a whole, the committees of the Board and the contribution of each individual director. 3. Identifi cation and nomination of suitable candidates to fi ll vacancies on the Board and formulation of succession plans where and when appropriate. 4. Review of the Board structure, size and composition with appropriate recommendations to the Board.

(iii) Remuneration Committee (“RC”)

The RC consists of three (3) members as follows:-

1. Ng Ah Chai - Chairman, Executive Chairman & Chief Executive Offi cer 2. Chan Keng Yew - Member, Independent/Non-Executive Director 3. Datuk Chee Hong Leong - Member, Independent/Non-Executive Director

Under the terms of reference, the RC shall:-

1. Review, assess and recommend to the Board remuneration packages of the executive directors and to secure formal and informal consultations from independent consultants, if necessary, to ensure that the remuneration policies of the Company are competitive. 2. Review the directors’ performance in line with the corporate objectives.

(iv) ESOS Committee

This committee oversees the implementation and administration of the ESOS in accordance with the objectives and regulations as stated in the ESOS Bye-Laws. There are three (3) members as follows:-

1. Ng Ah Chai - Chairman, Executive Chairman & Chief Executive Offi cer 2. Lim Pang Kiam - Member, Executive Director 3. Chan Keng Yew - Member, Independent/Non-Executive Director

CORPORATE GOVERNANCE STATEMENT (con’t)CORPORATE GOVERNANCE STATEMENT (con’t)CORPORATE GOVERNANCE STATEMENT (con’t)CORPORATE GOVERNANCE STATEMENT (con’t)

15

(v) Risk Management Committee (“RMC”)

The RMC was set up to ensure that a risk management structure is embedded throughout the Group and risk management policies consistently adopted. The RMC reports direct to the AC and comprises the following members:-

1. Ng Ah Chai - Chairman, Executive Chairman & Chief Executive Offi cer 2. Lim Pang Kiam - Member, Executive Director 3. Cheong Yee Kiong - Member, Group Company Secretary 4. Lim Kok Seong - Member, Factory Manager 5. Tseu Chin Foo - Member, Senior Production Manager 6. Tan Thean Ting - Member, Senior Production Manager 7. Lim Siew Mei - Member, Head of Human Resources

DIRECTORS’ REMUNERATION

The details of the remuneration of the Directors of the Company for the fi nancial year under review are as follows:-

1. Aggregate remuneration of the Directors categorized into appropriate components:

Fees

(RM)

Salaries and Other Emoluments

(RM)

Benefi ts-in-kind

(RM)

Total

(RM)

Executive Directors - 1,256,178 47,900 1,304,078

Non-Executive Directors 40,000 - - 40,000

2. The number of directors whose total remuneration fall within the following bands:

Range of RemunerationNumber of Directors

Executive Non-Executive

Below RM50,000 3

RM50,001 to RM100,000

RM100,001 to RM150,000

RM150,001 to RM200,000

RM200,001 to RM250,000

RM250,001 to RM300,000

RM300,001 to RM350,000

RM350,001 to RM400,000

RM400,001 to RM450,000

RM450,001 to RM500,000 1

RM800,001 to RM850,000 1


16

ACCOUNTABILITY AND AUDIT

Financial Reporting

In presenting the annual audited fi nancial statements and quarterly announcements of results to shareholders, the Directors take responsibilities to present a balanced and meaningful assessment of the Group’s position and prospect and to ensure that the fi nancial statements are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable accounting standards in Malaysia. The AC assists the Board in scrutinizing information disclosed to ensure accuracy and completeness. The statement of directors’ responsibilities in respect of the audited fi nancial statements pursuant to the Listing Requirements of Bursa is set out in the ensuing pages of this annual report.

Internal Control

The Statement on Internal Control is set out in the ensuing pages of this annual report.

Relationship with Auditors

The role of the AC in relation to the external and internal auditors is explained in the AC Report as set out in this annual report.

SHAREHOLDERS

Relationship with Shareholders and Investors

The Company recognizes the importance of transparency and accountability in disclosure of the Group’s business activities to its shareholders. The Board has maintained an effective communication policy that enables the Board to convey information with regard to the group’s performance, corporate strategy and other matters that affect shareholders’ interests.

Annual General Meeting (AGM)

The AGM represents the principal forum for dialogue with shareholders. Besides the usual agenda for the AGM, the Board encourages shareholders to participate through questions on the business activities of the Group. The directors and external auditors are available to respond to questions from the shareholders during the meeting.

A full explanatory statement of the effects of the proposed resolutions will accompany each item of special business as mentioned in the notice of meeting.

OTHER INFORMATION REQUIRED BY THE LISTING REQUIREMENTS OF BURSA

Share Buy-Back

The Company had at its Eleventh AGM held on 12 January 2007, obtained the approval from its shareholders in relation to the renewal of share buy-back scheme whereby the directors are authorized to purchase and/or hold at any point in time up to ten percent (10%) of the issued and paid up capital of the Company for the time being as quoted on the Bursa.


17

For the fi nancial year under review, the Company had purchased a total of 10,000 shares, all of which are retained as treasury shares. None of the shares purchased has been sold or cancelled. Details of the shares purchased are as follows:-

Month No of Ordinary

Shares

Buy Back Price Per Share(RM)

Average Cost Per Share

RM

Total Cost

RMLowest Highest

January 07 10,000 0.93 0.93 0.93 9,300.00

Options, Warrants or Convertible Securities

There were no options, warrants or convertible securities exercised in respect of the fi nancial year under review.

Non-Audit Fees

There were no non-audit fees paid to the Company’s external auditors during the fi nancial year under review.

Material Contracts

There were no material contracts entered into by the Company and its subsidiary companies involving directors’ and major shareholders’ interests still subsisting at the end of the fi nancial year or entered into since the end of the previous fi nancial year except for the following two tenancy agreements with the Executive Chairman & Chief Executive Offi cer :-

1. Rental of factory land known as Lot 1226, Mukim Semenyih, with a land area of 1.2899 hectares at a monthly rental of RM13,800/-. This tenancy is for a three year period expiring on 30 June 2010 with an option for another three years renewal.

2. Rental of factory land and building known as Lot 1085, Mukim Semenyih, with a land area of 2.1195 hectares and built-up area of 62,400 sf. The monthly rental is RM30,000/- for a period of three years expiring on 30 June 2010 with an option for a three-year renewal.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE AUDITED FINANCIAL STATEMENTS

The Board is responsible for ensuring that the fi nancial statements of the Group give a true and fair view of the state of affairs of the Group and of the Company as at the end of the accounting period and of their profi t and loss and cash fl ows for the period then ended. In preparing the fi nancial statements, the Directors have ensured that applicable approved accounting standards in Malaysia and the provision of the Companies Act, 1965 have been applied.

In preparing the fi nancial statements, the Directors have adopted and consistently applied suitable accounting policies and made reasonable and prudent judgements.

The Directors also have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

DEVIATION FROM BEST PRACTICES

The Executive Chairman, Ng Ah Chai has also assumed the role of Chief Executive Offi cer. The dual role is counterbalanced by the strong independent element on the Board to ensure a balance of power and authority.


18

STATEMENT ON INTERNAL CONTROLSTATEMENT ON INTERNAL CONTROLSTATEMENT ON INTERNAL CONTROL

The Board is pleased to include a statement on the state of the Group’s internal controls in accordance with the Listing Requirements of Bursa Malaysia Securities Berhad

Responsibilities

The Board affi rms its responsibilities in establishing the Group’s internal controls and risk management, and for reviewing the adequacy and integrity of its internal control system. However, due to the limitations that are inherent in any system of internal control, the system is designed to manage rather than eliminate the risks that may impede the achievement of the Group’s business objectives. The system, by its nature, can only provide reasonable and not absolute assurance against material misstatement or loss.

Risk Management Framework

During the fi nancial year under review, the Board and Senior Management have put in place a continuous process for identifying, evaluating and managing the signifi cant risks faced by the Group. Risk Management Committee comprises senior management who will meet regularly to discuss and deal with the risk issues identifi ed. The Group’s risk management principles are documented and communicated to all the senior employees, setting out the Board’s appetite to risks in the achievement of the business objectives, with the corresponding internal controls to manage these risks.

The Group has established a risk management framework where signifi cant risks of the Group were identifi ed and corresponding internal controls implemented. The system of internal controls involves the management of risk inherent in each major operating division in the Group.

The key processes that the Directors have established in reviewing the adequacy and integrity of the system of internal control are as follows:-

1. The Group’s internal audit function reports to the Audit Committee. The Audit Committee, on behalf of the Board, reviews and holds discussions with Management on the action taken on internal control issues identifi ed in reports prepared by the internal auditor, the external auditors and the Management.

2. An accounting system which ensures that all fi nancial transactions are recorded, collated and consolidated into the monthly and quarterly management fi nancial statements, allowing Management to focus on areas of material change.

3. Investment decisions are governed by a procedure covering the acquisition or disposal of business operations, acceptance of projects, application of capital expenditure and approval on borrowings. Post implementation reviews are conducted and reported to the Board.

4. Staff recruitment goes through a process and there is a performance appraisal system as well as training and development programs in place to achieve the objective of ensuring staffs are competent to carry out their duties and responsibilities.

The Board of Directors and Management recognised that, during the fi nancial year, there were interruptions in the fi nancial reporting process and internal controls, and losses of Group’s assets as a result of the two separate fi re incidents on 10 November 2006 and 22 March 2007. The Board and Management are conscious on the need to strengthen the supervisory controls to improve compliance with control procedures and safeguarding assets and records of the Group.

The Group, in consultation with the insurance company, are also in the process of implementing measures to improve the fi re protection system and procedures in order to safeguard the Group’s assets against future recurrence.

On April 2007, the Board outsourced its internal audit and risk management functions to Audex Governance Sdn Bhd (“Audex”) to carry out the following :-

• Facilitate the identifi cation and assessment of the key business risks of the Group that affect the achievement of the Group’s strategic objectives;• Co-develop prioritized action plans to mitigate and manage the identifi ed risks, and• Recommend a common framework for managing risks across the Group and sharing an enterprise-wide risk matrix that is appropriate given the existing risk management processes and infrastructure of the Group, which will assist the Group in meeting the regulatory requirements.

Audex assists the Board in the review and evaluation of the adequacy and integrity of the system of internal control, and the Group’s risk coverage. Audex reviews the Group’s internal control system on systematic and cyclic basis and reports to the Audit Committee on a quarterly basis.

Since its appointment, Audex had conducted risk assessment and internal audit exercises for its major operating subsidiaries. Where weaknesses are identifi ed, recommended procedures have been or are being put in place to strengthen controls.

There were no material losses incurred during the fi nancial year under review as a result of weaknesses in internal control, except for the Group’s write off of property, plant and equipment and inventories, totaling RM1.9 million, after deducting insurance claims of RM19.9 million, arising the abovementioned fi re incidents, as disclosed in the fi nancial statements. The Board and Management are committed to continually renew the internal controls to strengthen and enhance the control environment.

19

AUDIT COMMITTEE REPORTAUDIT COMMITTEE REPORTAUDIT COMMITTEE REPORT

Members

The Audit Committee (“AC”) consists of the following members whose attendance record at the four (4) AC meetings held during the fi nancial year under review is as follows:-

Number of meetings attendedChairman

Chan Keng Yew (appointed 21/03/07) 2/2

Lee Teik Yang (resigned on 21/03/07) 2/2

Members

Lim Pang Kiam 4/4

Datuk Chee Hong Leong 4/4

Summary of Activities of the AC

The AC undertook the following activities during the fi nancial year under review:

1. Review of the unaudited quarterly report on the consolidated results of the Group prior to submission to the Board for its approval before the quarterly announcement to the Bursa Malaysia Securities Berhad (“Bursa”) is made.2. Review of the audit plan proposed by the external auditors, in terms of the nature of the audit procedures, signifi cant accounting and audit issues, impact of new or proposed changes in the accounting standards and any other regulatory requirements.3. Review of the audit plan of the internal auditor’s programs and plans for the fi nancial year under review.4. Review of the year-end fi nancial statements together with external auditors’ report in relation to their audit fi ndings and the accounting issues arising from the audit of the Company’s and Group’s annual fi nancial results before submitting its recommendation to the Board for approval.5. Review of pertinent issues prepared by the internal auditor. 6. Review of the terms of related party transactions entered into by the Group.

Summary of Activities of the Internal Audit Function

The internal audit function has been outsourced to Audex Governance Sdn Bhd (“Audex”) in April 2007 and it is independent of the operations of the Group and provides reasonable assurance that the Group’s system of internal control is satisfactory and is operating effi ciently. The internal auditor adopts a risk-based approach towards the planning and conduct of audits that were consistent with the Group’s framework in designing, implementing and monitoring of its internal control system.

Upon completion of the audits, the internal auditor is to closely monitor the implementation progress of the recommendations made in order to assure that Management has duly addressed all major risks and control issues. All audit reports on the results of work undertaken together with the recommended action plans and the implementation status were presented to the Management and the Committee. A number of minor internal control weaknesses were identifi ed during the fi nancial year, all of which have been appropriately addressed. None of the weaknesses have resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group’s annual report.

During the fi nancial year under review, Audex had conducted risk assessment and internal audit exercises for the group of companies.

20

TERMS OF REFERENCE OF THE AC

Composition of Members

The Board shall elect the AC members from amongst themselves, comprising no fewer than three (3) directors, the majority of which shall be independent directors. Each member of the AC shall serve for a term of two (2) years and may be re-nominated and re-appointed by the Board. An alternate director shall not be appointed as a member of the AC.

In this respect, the Board adopts the defi nition of ‘independent director’ as defi ned under Bursa’s Listing Requirements, whereby,

At least one (1) member of the AC must be:-

a. A member of the Malaysia Institute of Accountant (MIA); b. If he is not a member of MIA, he must have at least three (3) years of working experience and:- i. He must have passed the examinations specifi ed in Part I of the First Schedule of the Accountants Act 1967; or ii. He must be a member of one of the associations of the accountants specifi ed in Part II of the First Schedule of the Accounts Act 1967; orc. Fulfi ll such other requirements as prescribed by Bursa.

If a member of the AC resigns, dies, or for any reason ceases to be a member with the result that the number of members is reduced to below three (3), the Board shall within three (3) months of the event appoint such number of new members as may be required to fi ll the vacancy.

The Chairman of the AC, elected from amongst the AC members shall be an independent director. The Board of Directors shall approve the appointment of Chairman of the AC.

The secretary of the AC shall be the Company Secretary.

Meetings

The AC normally meets four (4) times annually on quarterly basis with the Company Secretary in attendance. Additional meetings may be called at any time whenever necessary. Representatives from the internal auditor and external auditors (if required) will normally attend the meetings. Other Board members may attend the meeting upon invitation of the AC.

Each AC member receives written reports and supporting information, including operating results, comprehensive review and analysis, at least one week ahead of the AC meeting. Prior to each meeting, the members are provided with an agenda and a full set of AC papers for each agenda item to be discussed at the meeting. This is issued in suffi cient time to enable the members to obtain further explanations, where necessary, in order to be briefed properly before the meeting.

The quorum shall consist of a majority of members present being independent non-executive directors.

AUDIT COMMITTEE REPORT (con’t)AUDIT COMMITTEE REPORT (con’t)AUDIT COMMITTEE REPORT (con’t)

21

AUDIT COMMITTEE REPORT (con’t)AUDIT COMMITTEE REPORT (con’t)AUDIT COMMITTEE REPORT (con’t)

Authority

The AC shall:-

1. have the authority to investigate any matter within the terms of reference;2. have and be able to mobilise the required resources to perform its duties;3. have full & unrestricted access to any information within the Group;4. have direct communication channels with the external auditors and person(s) carrying out internal audit function or activity (if any);5. be able to obtain independent professional or other advice; and6. be able to convene meetings with the external auditors, excluding the attendance of the executive members of the Committee, whenever deemed necessary.

Duties and Responsibilities

The duties and responsibilities of the AC are:-

1. To do the following in relation to the external audit function:- i. Consider the appointment of external auditors, the audit fee and any questions of resignation or dismissal; ii. Discuss with external auditors before the audit commences, the nature and scope of audit, and ensure coordination where more than one (1) audit fi rm is involved iii. Discuss problems and reservations arising from the interim and fi nal audit, and any matter the auditors may wish to discuss (in the absence of the management, where necessary) and; iv. Review external auditors’ management letters and management’s response.

2. To do the following in respect of the internal audit function:- i. Review the adequacy of the scope, functions and resources of the internal auditors, and that it has necessary authority to carry out its work; and ii. Review the internal audit program and results of the internal audit process and where necessary ensure that appropriate action is taken on the recommendations of the internal auditors.

3. To review the quarterly and year end fi nancial statements of the Group and the Company, focusing particularly on any changes in or implementation of major accounting policies and procedures, signifi cant adjustments arising from the audit, the going concern assumption and compliance with applicable approved accounting standards and other legal and regulatory requirements.

4. To consider any related party transactions and confl ict of interest situation that may arise within the Group, including any transaction, procedure or course of conduct that raises questions of management integrity.

5. To review the ESOS allocation to ensure that it is in compliance with the criteria as approved by the ESOS Committee and the Bye-Laws.

6. To consider the major fi ndings of internal investigation and the management’s response.

7. To consider any other topics and issues as directed by the Board.

22

ANALYSIS OF SHAREHOLDINGS AS AT 20 NOVEMBER 2007

Shareholdings Statistics

Authorised Share Capital : RM200,000,000.00Issued and Fully Paid-Up Share Capital : RM84,029,603.00 (excluding 40,000 shares bought back)Class of Shares : Ordinary shares of RM1.00 eachTotal No. of Shareholders : 3,856Voting Rights - On Show of Hand : One vote - On a Poll : One vote for each share held

DISTRIBUTION SCHEDULE OF SHAREHOLDINGS

Size of Holdings No. of Holders No. of Shares % of Shares

Less than 100 6 233 0.00100 to 1,000 1,278 1,254,298 1.491,001 to 10,000 1,904 8,946,712 10.6510,001 to 100,000 602 16,290,960 19.39100,001 to less than 5% of issued shares 64 45,083,100 53.655% and above of issued shares 2 12,454,300 14.82

Total 3,856 84,029,603 100.00

SUBSTANTIAL SHAREHOLDER

According to the register required to be kept under Section 69L of the Companies Act, 1965, the following is the substantial shareholder (excluding bare trustees) of the Company:-

Name Direct Shareholdings Indirect Shareholdings No. of Shares % of Shares No. of Shares % of Shares

1. Ng Ah Chai 25,711,600 30.60 - -

ANALYSIS OF SHAREHOLDINGS ANALYSIS OF SHAREHOLDINGS AND WARRANTHOLDINGSAND WARRANTHOLDINGSANALYSIS OF SHAREHOLDINGS AND WARRANTHOLDINGSAND

23

THIRTY LARGEST SHAREHOLDERS

Name No. of Shares % of Shares

1 Bank Kerjasama Rakyat Malaysia Berhad 8,000,000 9.52 Pledged Securities Account For Ng Ah Chai

2. JF Apex Nominees (Tempatan) Sdn Bhd 4,454,300 5.30 Pledged Securities Account For Ng Ah Chai

3. EB Nominees (Tempatan) Sendirian Berhad 4,187,600 4.98 Pledged Securities Account For Ng Ah Chai

4. Mayban Nominees (Tempatan) Sdn Bhd 3,555,500 4.23 Exempt An For Intrinsic Capital Management Sdn Bhd

5. OSK Nominees (Tempatan) Sdn Bhd 3,512,700 4.18 Pledged Securities Account For Ng Ah Chai

6. Cimsec Nominees (Tempatan) Sdn Bhd 3,242,000 3.86 CIMB Bank For Ng Ah Chai 7. M.I.T. Nominees (Tempatan) Sdn Bhd 2,569,000 3.06 Pledged Securities Account For Lau Hock Lee 8. Yong Ah Pee 2,006,000 2.39

9. Alliancegroup Nominees (Tempatan) Sdn Bhd 1,800,000 2.14 Pledged Securities Account For Ng Ah Chai 10. RHB Capital Nominees (Tempatan) Sdn Bhd 1,650,000 1.96 Lee Leong Lai 11. Yong Ah Pee 1,450,000 1.73

12. EB Nominees (Tempatan) Sendirian Berhad 1,029,200 1.22 Pledged Securities Account For Chee Chik Keng 13. Yeoh Kean Hua 1,020,000 1.21

14. RHB Capital Nominees (Tempatan) Sdn Bhd 1,000,000 1.19 Chong Vun Kon 15. Lau Hock Lee 980,000 1.17 16. EB Nominees (Tempatan) Sendirian Berhad 933,200 1.11 Pledged Securities Account For Ng Aik Hooi 17. RHB Capital Nominees (Tempatan) Sdn Bhd 781,100 0.93 Pledged Securities Account For Lim Bee Eng 18. Kenanga Nominees (Tempatan) Sdn Bhd 756,700 0.90 Pledged Securities Account For Yap Choong

ANALYSIS OF SHAREHOLDINGS ANALYSIS OF SHAREHOLDINGS AND WARRANTHOLDINGS (con’t)AND WARRANTHOLDINGS (con’t)ANALYSIS OF SHAREHOLDINGS AND WARRANTHOLDINGS (con’t) AND

24

THIRTY LARGEST SHAREHOLDERS (cont’d)

Name No. of Shares % of Shares

19. Kenanga Nominees (Tempatan) Sdn Bhd 703,000 0.84 Pledged Securities Account For Lim Keang Hong 20. Lee Shee 700,000 0.83

21. JF Apex Nominees (Tempatan) Sdn Bhd 694,700 0.83 Pledged Securities Account For Chee Chik Eng 22. TCL Nominees (Tempatan) Sdn Bhd 671,800 0.80 Pledged Securities Account For Yap Choong 23. Alliancegroup Nominees (Tempatan) Sdn Bhd 666,900 0.79 Pledged Securities Account For Chee Chik Keng 24. Ng Aik Hooi 627,000 0.75

25. Lee Kim Song 543,000 0.65

26. Amsec Nominees (Asing) Sdn Bhd 521,000 0.62 Amfraser Securities Pte Ltd For Ramesh S/O Pritamdas Chandiramani 27. PM Nominees (Tempatan) Sdn Bhd 515,000 0.61 Pledged Securities Account For Ng Ah Chai 28. Alliancegroup Nominees (Tempatan) Sdn Bhd 500,900 0.60 Pledged Securities Account For Lim Hock Ho 29. HLG Nominees (Tempatan) Sdn Bhd 500,000 0.60 Pledged Securities Account For Yap Choong 30. Tan Geok Swee @ Tan Chin Huat 500,000 0.60


25

ANALYSIS OF 2003/2013 WARRANTHOLDINGS AS AT 20 NOVEMBER 2007

Warrantholdings Statistics

No. of Warrants Issued : 36,290,700No. of Warrants Converted Into Ordinary Shares : 1,806,400No. of Warrants Outstanding : 34,484,300No. of Warrantholders : 951Voting Rights - On Show of Hand : One vote - On a Poll : One vote for each warrant held

DISTRIBUTION SCHEDULE OF WARRANTHOLDINGS

Size of Holdings No. of Holders No. of Warrants % of Warrants

Less than 100 0 0 0.00100 to 1,000 90 85,800 0.251,001 to 10,000 491 3,006,700 8.7210,001 to 100,000 343 11,292,900 32.75100,001 to less than 5% of issued warrants 26 7,153,700 20.745% and above of issued warrants 1 12,945,200 37.54

Total 951 34,484,300 100.00

SUBSTANTIAL WARRANTHOLDER

The following is the substantial warrantholder (excluding bare trustees) of the Company:-

Name Direct Warrantholdings Indirect Warrantholdings No. of Warrants % of Warrants No. of Warrants % of Warrants

1. Ng Ah Chai 12,945,200 37.54 - -


26

THIRTY LARGEST WARRANTHOLDERS

Name No. of Warrants % of Warrants

1. Ng Ah Chai 12,945,200 37.54

2. Cimsec Nominees (Asing) Sdn Bhd 1,310,000 3.80 Exempt An For CIMB-GK Securities Pte Ltd 3. JF Apex Nominees (Tempatan) Sdn Bhd 1,020,200 2.96 Pledged Securities Account For Chee Chik Eng 4. Amsec Nominees (Asing) Sdn Bhd 699,900 2.03 Amfraser Securities Pte Ltd For Ramesh S/O Pritamdas Chandiramani 5. Ng Choi 319,500 0.93

6. RHB Capital Nominees (Tempatan) Sdn Bhd 300,000 0.87 Lee Leong Lai 7. Mayban Nominees (Tempatan) Sdn Bhd 288,500 0.84 Pledged Securities Account For Ting Tie Hau 8. Cimsec Nominees (Tempatan) Sdn Bhd 285,000 0.83 Exempt An For CIMB-GK Securities Pte Ltd 9. Mayban Nominees (Tempatan) Sdn Bhd 218,900 0.63 Pledged Securities Account For Kong Ah Then 10. Amsec Nominees (Tempatan) Sdn Bhd 211,000 0.61 Pledged Securities Account For Ng Aik Hooi 11. Ng Yoke Lan 210,000 0.61

12. JF Apex Nominees (Tempatan) Sdn Bhd 200,000 0.58 EON Finance Berhad For Lim Kok Seong 13. Pang Yeo Fook 200,000 0.58

14. AIBB Nominees (Tempatan) Sdn Bhd 185,000 0.54 Pledged Securities Account For Ng Aik Hooi 15. Lim See Teok 185,000 0.54

16. Tham Ah Kiew 154,900 0.45

17. Yong Kok Pew 150,000 0.43

18. Mayban Securities Nominees (Tempatan) Sdn Bhd 148,000 0.43 Pledged Securities Account For Diong Gew Koong 19. Lee Soo Seng 137,000 0.40

20. Soo Kun Ching 135,000 0.39

21. Ho Wee Keong 121,000 0.35


27

THIRTY LARGEST WARRANTHOLDERS (cont’d)

Name No. of Warrants % of Warrants

22. Tan Lee Chin 121,000 0.35

23. Ngoo Ah Choo @ Ngoo Kay Choo 120,500 0.35

24. Public Nominees (Tempatan) Sdn Bhd 117,300 0.34 Pledged Securities Account For Ng Nyuk Yong 25. HDM Nominees (Tempatan) Sdn Bhd 110,000 0.32 Pledged Securities Account For Goh Bon Kian 26. Mayban Securities Nominees (Tempatan) Sdn Bhd 105,000 0.30 Pledged Securities Account For Lai Yook Kheng 27. Tan Thean Ting 101,000 0.29

28. Chew Chin Swee 100,000 0.29

29. Dang Chin Ang 100,000 0.29

30. Inter-Pacifi c Equity Nominees (Tempatan) Sdn Bhd 100,000 0.29 Pledged Securities Account For Lai Ee Fong

STATEMENT ON DIRECTORS’ INTERESTS IN THE SECURITIES OF THE COMPANY AS AT 20 NOVEMBER 2007

DIRECTORS’ SHAREHOLDINGS Name Direct Shareholdings Indirect Shareholdings No. of Shares % of Shares No. of Shares % of Shares

1. Ng Ah Chai 25,711,600 30.60 - -2. Lim Pang Kiam 210,100 0.25 - -3. Datuk Chee Hong Leong - - - -4. Chan Keng Yew - - - -

DIRECTORS’ WARRANTHOLDINGS Name Direct Warrantholdings Indirect Warrantholdings No. of Warrants % of Warrants No. of Warrants % of Warrants

1. Ng Ah Chai 12,945,200 37.54 - -2. Lim Pang Kiam - - - -3. Datuk Chee Hong Leong - - - -4. Chan Keng Yew - - - -


28

LIST OF PROPERTIES LIST OF PROPERTIES LIST OF PROPERTIES

Year of Approx. Age Description/ Size NBV @ 31.07.07 Acquisition/Owner, Title/Location Tenure (years) Existing Use (Sq ft.) RM’000 Revaluation*

Seng Yip Furniture Sdn Bhd Freehold 11 Land, offi ce, 413,820 21,225 2007*Lot 971, Mukim Semenyih factory andJalan Sungai Lalang warehouse43500 SemenyihSelangor

Seng Yip Furniture Sdn Bhd Freehold 11 Land, 120,473 4,800 2007*Lot 1224, Mukim Semenyih factory andJalan Sungai Lalang warehouse43500 SemenyihSelangor

Seng Yip Furniture Sdn Bhd Freehold 7 Land, 120,516 5,325 2000Lot 1225, Mukim Semenyih factory andJalan Sungai Lalang warehouse43500 SemenyihSelangor



SYF Trading Sdn Bhd Freehold 9 Retail 36,361 9,000 1998No.S2.140B, 2nd FloorThe Summit Subang USJSubang Jaya, Selangor

Tomisho Sdn BhdLot CS-10, 10th Floor, Freehold 9 Offi ce 13,993 2,425 1998Menara Summit,The Summit Subang USJSubang Jaya, Selangor

Tomisho Sdn Bhd Freehold 3 Land, offi ce, 98,131 9,929 2005PT34269, Mukim Kapar factory andJalan Kapar, 42200 Klang. warehouseSelangor

Furniwood Industries (M) S/B Leasehold 11 Offi ce 2,117 391 19967-3, 7th Floor, Menara KLH,Pusat Perdagangan KLH,Bandar Puchong Jaya,47100 Puchong, Selangor.

Twenty-One SJ Sdn Bhd Freehold 1 Land, offi ce, 59,395 3,011 2007PT8638 & 8639, Mukim Semenyih factoryJalan Sungai Lalang and warehouse43500 SemenyihSelangor

AS AT 31 JULY 2007

30 Directors’ Report35 Statement by Directors 35 Statutory Declaration36 Report of the Auditors 38 Balance Sheets 39 Income Statements40 Statements of Changes in Equity 42 Cash Flow Statements45 Notes to the Financial Statements

FINANCIAL STATEMENTSFINANCIAL STATEMENTSFINANCIAL STATEMENTS

30

DIRECTORS’ REPORTFOR THE YEAR ENDED 31 JULY 2007

The Directors hereby submit their report and the audited fi nancial statements of the Group and of the Company for the year ended 31 July 2007.

PRINCIPAL ACTIVITIES

The Company is principally engaged in investment holding, whilst the principal activities of the subsidiaries are stated in Note 5 to the fi nancial statements. There has been no signifi cant change in the nature of these activities during the fi nancial year.

RESULTS

Group Company RM’000 RM’000 Loss for the year (44,117) (2,709)

RESERVES AND PROVISIONS

There were no material transfers to or from reserves and provisions during the year under review, except as disclosed in the fi nancial statements.

DIVIDEND

No dividend was paid during the year and the Directors do not recommend any dividend to be paid for the fi nancial year under review.

DIRECTORS OF THE COMPANY

Directors who served since the date of the last report are:

Ng Ah Chai Lim Pang Kiam Datuk Chee Hong LeongChan Keng Yew (appointed on 21 March 2007)Lee Teik Yang (resigned on 21 March 2007)

31

DIRECTORS’ INTERESTS

The holdings and deemed holdings in the ordinary shares and warrants of the Company and of its related corporations (other than wholly-owned subsidiaries) of those who were Directors at year end as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM1.00 each At At 1.8.2006 Bought Sold 31.7.2007

Direct interest: Ng Ah Chai 18,012,700 7,698,900 - 25,711,600 Lim Pang Kiam 856,800 2,183,300 2,830,000 210,100

Number of warrants At At 1.8.2006 Bought Sold 31.7.2007

Ng Ah Chai 12,945,200 - - 12,945,200

Number of options over ordinary shares of RM1.00 each At At 1.8.2006 Granted Exercise 31.7.2007

Ng Ah Chai 780,000 - - 780,000Lim Pang Kiam 380,000 - - 380,000

By virtue of their interests in the shares of the Company, Ng Ah Chai and Lim Pang Kiam are also deemed interested in the shares of the subsidiaries during the fi nancial year to the extent that the Company has an interest.

None of the other Directors holding offi ce at 31 July 2007 had any interest in the ordinary shares of the Company and of its related corporations during the fi nancial year.

DIRECTORS’ BENEFITS

Since the end of the previous fi nancial year, no Director of the Company has received nor become entitled to receive any benefi t (other than a benefi t included in the aggregate amount of emoluments and rental received or due and receivable by Directors as shown in the fi nancial statements) by reason of a contract made by the Company or a related corporation with the Director or with a fi rm of which the Director is a member, or with a company in which the Director has a substantial fi nancial interest.

There were no arrangements during and at the end of the fi nancial year which had the object of enabling Directors of the Company to acquire benefi ts by means of the acquisition of shares in, or debentures of, the Company or any other body corporate apart from the Company’s Employees’ Share Option Scheme (“ESOS”).

DIRECTORS’ REPORT (cont’d)FOR THE YEAR ENDED 31 JULY 2007

32

ISSUE OF SHARES

There were no changes in the issued and paid-up capital of the Company during the fi nancial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the year apart from the issue of options pursuant to the ESOS.

At an extraordinary general meeting held on 23 May 2003, the Company’s shareholders approved the establishment of an ESOS of not more than 10% of the issued share capital of the Company to eligible Directors and employees of the Group.

The salient features of the ESOS scheme are, inter alia, as follows:

i) Eligible employees are those who have been confi rmed in writing as employees of the Group.

ii) The option is personal to the grantee and is non-assignable.

iii) The option price shall be at a discount of not more than ten percent from the weighted average of the market price of the Company’s ordinary shares as shown in the daily offi cial list issued by the Bursa Malaysia Securities Berhad for the fi ve trading days preceding the respective dates of the offer in writing to the grantee or at the par value of the ordinary shares of the Company, whichever is higher.

iv) The options granted may be exercised by the grantee by notice in writing to the Company in the prescribed form from time to time during the option period in respect of all or any part of the new Company’s shares comprised in the option, provided that where an option is exercised in respect of a part of the new ordinary shares comprised therein, the number of the new Company’s shares of which such option may be exercised shall not be less than one hundred and shall be in multiples of one hundred.

The options offered to take up unissued ordinary shares of RM1 each and the exercise prices are as follows:

Number of options over ordinary shares of RM1 eachDate of Exercise At Atoffer price 1.8.2006 Granted Exercised Forfeited 31.7.2007

31.12.2004 RM1.00 3,096,800 - - (287,600) 2,809,20011.12.2005 RM1.00 26,000 - - - 26,00020.12.2005 RM1.00 206,000 - - (25,000) 181,00026.05.2006 RM1.00 1,060,000 - - (80,000) 980,00030.06.2006 RM1.00 228,000 - - (50,000) 178,000

4,616,800 - - (442,600) 4,174,200


33

OTHER STATUTORY INFORMATION

Before the balance sheets and income statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

i) all known bad debts have been written off and adequate provision made for doubtful debts, and

ii) all current assets have been stated at the lower of cost and net realisable value.

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

i) that would render the amount written off for bad debts, or the amount of provision for doubtful debts, in the Group and in the Company inadequate to any substantial extent, or

ii) that would render the value attributed to the current assets in the fi nancial statements of the Group and of the Company misleading, or

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

iv) not otherwise dealt with in this report or the fi nancial statements, that would render any amount stated in the fi nancial statements of the Group and of the Company misleading.

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

i) any charge on the assets of the Group or of the Company that has arisen since the end of the fi nancial year and which secures the liabilities of any other person, or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the fi nancial year.

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

In the opinion of the Directors, except for the Group’s write off on property, plant and equipment, inventories, goodwill and bad debts, the Group’s impairment losses on property, plant and equipment, inventories and goodwill and the Company’s provision for corporate guarantee (as disclosed in Note 19 to the fi nancial statements), the results of the operations of the Group and of the Company for the fi nancial year ended 31 July 2007 have not been substantially affected by any item, transaction or event of a material and unusual nature, nor has any such item, transaction or event occurred in the interval between the end of that fi nancial year and the date of this report.


34

SIGNIFICANT EVENTS

(a) On 10 November 2006, part of the Group’s timber processing facilities comprising a timber processing warehouse, certain fi nger-jointing facilities and kiln-drying equipment, located at Lot 974, Mukim Semenyih, with carrying amount of RM12.4 million, were destroyed by fi re. Subsequently, on 22 March 2007, the Group’s 2-storey head offi ce building and an adjoining fi nished goods warehouse, with carrying amount of RM9.4 million, were destroyed by another fi re.

The Group incurred total asset losses of RM21.8 million and received insurance compensation of RM19.9 million for the asset losses. The Group also received a consequential loss compensation of RM5.3 million for loss of earnings, and

(b) On 2 March 2007, the Group acquired a 51% equity interest in Midas Menang Sdn. Bhd. (“MMSB”) for a cash consideration of RM153,000 with the intention to purchase and develop a piece of land located at Pekan Baru Subang, Daerah Petaling, Selangor. On 8 June 2007, the Group disposed of the abovementioned 51% equity interest to a related party at the same cash consideration of RM153,000, with no gain or loss to the Group.

AUDITORS

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Ng Ah Chai

Lim Pang Kiam

Selangor Darul Ehsan,

Date: 28 November 2007


35

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

In the opinion of the Directors, the fi nancial statements set out on pages 38 to 87 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards for entities, other than private entities, issued by the Malaysian Accounting Standards Board so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 July 2007 and of the results of their operations and cash fl ows for the year ended on that date.

Signed in accordance with a resolution of the Directors:

Ng Ah Chai

Lim Pang Kiam

Selangor Darul Ehsan,


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

I, Cheong Yee Kiong, the offi cer primarily responsible for the fi nancial management of SYF Resources Berhad, do solemnly and sincerely declare that the fi nancial statements set out on pages 38 to 87 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named in Kuala Lumpur on 28 November 2007

Cheong Yee Kiong

Before me:

Raman Kunyapu (No W476) Commissioner for Oaths

36

REPORT OF THE AUDITORS TO THE MEMBERS OF SYF RESOURCES BERHAD

REPORT OF THE AUDITORS TO THE MEMBERS OF SYF RESOURCES BERHAD(Company No. 364372-H)(Incorporated in Malaysia)

We have audited the fi nancial statements set out on pages 38 to 87. The preparation of the fi nancial statements is the responsibility of the Company’s Directors.

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

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

As mentioned in Note 30 to the fi nancial statements, on 22 March 2007, a fi re occurred at the Group’s 2-storey head offi ce. The fi re destroyed the accounting and other records of the Company and a subsidiary, Seng Yip Furniture Sdn. Bhd. (“Seng Yip”), for the 8-month period from August 2006 to March 2007. The fi re also destroyed the registers of all companies in the Group. The Group successfully retrieved and restored the electronic version of the accounts and records for the abovementioned period but the original physical documents were burnt. We have performed alternative auditing procedures and have satisfi ed ourselves on the true and fairness of the amounts recorded in the accounting records for the 8-month period from August 2006 to March 2007.

(a) In our opinion, the fi nancial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards for entities, other than private entities, issued by the Malaysian Accounting Standards Board so as to give a true and fair view of:

(i) the state of affairs of the Group and of the Company at 31 July 2007 and the results of their operations and cash fl ows for the year ended on that date; and

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

(b) In our opinion,

(i) the accounting and other records of the Company and of Seng Yip have not been properly kept in accordance with the provisions of the Companies Act, 1965 as the physical documents for the period from August 2006 to March 2007 have been destroyed in the fi re, and

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

(c) In our opinion, the registers of the Company and the subsidiaries (of which we have acted as auditors) have not been properly kept in accordance with the provisions of the Companies Act, 1965 as the registers were destroyed in a fi re at the Company’s offi ce on 22 March 2007. Subsequent to March 2007, the Company and the subsidiaries reconstructed the registers based on available information.

37

REPORT OF THE AUDITORS TO THE MEMBERS OF SYF RESOURCES BERHAD (cont’d)

The subsidiaries in respect of which we have not acted as auditors are identifi ed in Note 5 to the fi nancial statements and we have considered their fi nancial statements and the auditors’ reports thereon.

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

The audit reports on the fi nancial statements of the subsidiaries were not subject to any qualifi cation and did not include any comment made under subsection (3) of Section 174 of the Act except for the statement that the registers of the subsidiaries have not been properly kept in accordance with the provisions of the Companies Act, 1965 as the registers were destroyed in a fi re at the Company’s offi ce on 22 March 2007.

KPMG Foong Mun KongFirm Number: AF 0758 PartnerChartered Accountants Approval Number: 2613/12/08(J)

Kuala Lumpur,


REPORT OF THE AUDITORS (cont’d)TO THE MEMBERS OF SYF RESOURCES BERHAD

38

BALANCE SHEETS AT 31 JULY 2007

Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 restated

Assets Property, plant and equipment 3 109,193 105,921 - 12 Investment properties 4 11,425 15,730 - - Investments in subsidiaries 5 - - 75,515 66,915 Other investments 6 4,744 3,500 4,744 3,500 Goodwill on consolidation 7 13,621 15,468 - - Land held for property development 8 200 - - - Deferred tax assets 17 936 936 - -

Total non-current assets 140,119 141,555 80,259 70,427

Property development costs 9 3,638 - - - Inventories 10 32,237 50,705 - - Receivables, deposits and prepayments 11 29,591 31,173 75,723 66,200 Tax recoverable 863 466 1,615 1,335 Cash and cash equivalents 12 2,703 3,495 114 199

Total current assets 69,032 85,839 77,452 67,734

Total assets 209,151 227,394 157,711 138,161

Equity Share capital 13 84,070 84,070 84,070 84,070 Reserves 13 (16,415) 16,266 14,909 17,618 Treasury shares 13 (39) (30) (39) (30)

Total equity attributable to shareholders of the Company 67,616 100,306 98,940 101,658Minority interests 14 2,655 1,668 - -

Total equity 70,271 101,974 98,940 101,658

Liabilities Loans and borrowings 15 58,940 42,439 55,000 35,000 Deferred tax liabilities 17 4,871 6,978 - -

Total non current liabilities 63,811 49,417 55,000 35,000

Payables and accruals 16 33,274 26,110 3,182 1,442 Loans and borrowings 15 40,696 49,330 - - Taxation 1,099 563 589 61

Total current liabilities 75,069 76,003 3,771 1,503

Total liabilities 138,880 125,420 58,771 36,503

Total equity and liabilities 209,151 227,394 157,711 138,161

The notes on pages 45 to 87 are an integral part of these fi nancial statements.

39

INCOME STATEMENTS FOR THE YEAR ENDED 31 JULY 2007

Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Revenue 246,150 172,766 9,039 15,432Cost of sales (244,896) (150,713) - -

Gross profi t 18 1,254 22,053 9,039 15,732

Distribution costs (2,676) (2,243) - - Administrative expenses (36,105) (11,586) (6,942) (10,811)Other operating expenses (6,151) (1,575) - - Other operating income 3,859 1,769 80 160

Operating (loss)/profi t 19 (39,819) 8,418 2,177 4,781Finance costs 20 (7,343) (5,751) (4,503) (3,081) Interest income 94 81 80 22

(Loss)/Profi t before tax (47,068) 2,748 (2,246) 1,722Tax credit/(expense) 21 2,695 (1,684) (463) (45)

(Loss)/Profi t for the year (44,373) 1,064 (2,709) 1,677

Attributable to: Shareholders of the Company (44,117) 1,152 (2,709) 1,677 Minority interests (256) (88) - -

(Loss)/Profi t for the year (44,373) 1,064 (2,709) 1,677

Basic (loss)/earnings per ordinary share (sen) 22 (52.5) 1.4


40

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2007

Attributable to shareholders of the Company Non-distributable Distributable Accumulated Share Treasury Share Revaluation Translation Negative profi t/ Minority Total capital shares premium reserve reserve goodwill (loss) Total interests equityGroup Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 restated restated restated

At 1 August 2005 79,866 - 15,374 - 199 - (165) 95,274 766 96,040Exchange differences on translation of the fi nancial statements of foreign subsidiaries - - - - 2 - - 2 - 2Net profi t recognised directly in equity - - - - 2 - - 2 - 2Profi t/ (loss) for the year - - - - - - 1,152 1,152 (88) 1,064Total recognised income and expense for the year - - - - 2 - 1,152 1,154 (88) 1,066Acquisition of subsidiaries - - - - - 2,545 - 2,545 990 3,535Issuance of shares 4,204 - - - - - - 4,204 - 4,204Treasury shares acquired 13 - (30) - - - - - (30) - (30)Dividends paid 23 - - - - - - (2,841) (2,841) - (2,841)

At 31 July 2006/ 1 August 2006As previously reported 84,070 (30) 15,374 - 201 2,545 (1,854) 100,306 1,668 101,974Effect of adopting FRS 3 - - - - - (2,545) 2,545 - - -

At 31 July 2006/ 1 August 2006, restated 84,070 (30) 15,374 - 201 - 691 100,306 1,668 101,974Exchange differences on translation of the fi nancial statements of foreign subsidiary - - - - (135) - - (135) - (135)Net loss recognised directly in equity - - - - (135) - - (135) - (135)Revaluation of property, net of tax 3 - - - 11,571 - - - 11,571 - 11,571Loss for the year - - - - - - (44,117) (44,117) (256) (44,373)Total recognised income and expense for the year - - - 11,571 (135) - (44,117) (32,681) (256) (32,937)Acquisition of a subsidiary - - - - - - - - 1,243 1,243Treasury shares acquired 13 - (9) - - - - - (9) - (9)

At 31 July 2007 84,070 (39) 15,374 11,571 66 - (43,426) 67,616 2,655 70,271

Note 13 Note 13

41

STATEMENTS OF CHANGES IN EQUITY (cont’d) FOR THE YEAR ENDED 31 JULY 2007

Non-distributable Distributable Share Treasury Share Accumulated capital shares premium profi t/(loss) TotalCompany Note RM’000 RM’000 RM’000 RM’000 RM’000

At 1 August 2005 79,866 - 15,374 3,408 98,648Issuance of shares 4,204 - - - 4,204Profi t for the year - - - 1,677 1,677Dividends paid 23 - - - (2,841) (2,841)Treasury shares acquired - (30) - - (30)

At 31 July 2006 84,070 (30) 15,374 2,244 101,658Loss for the year - - - (2,709) (2,709)Treasury shares acquired - (9) - - (9)

At 31 July 2007 84,070 (39) 15,374 (465) 98,940

Note 13 Note 13


42

CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 JULY 2007

Group Company 2007 2006 2007 2006 Note RM’000 RM’000 RM’000 RM’000

Cash fl ows from operating activities (Loss)/Profi t before tax (47,068) 2,748 (2,246) 1,722 Adjustments for: Allowance for diminution in value of - investment in subsidiaries - - 2,100 4,700 - other investment 756 - 756 - Allowance for doubtful debts on - third party debts 695 1,366 - 3,412 - amount due from a former director of the Company 1,021 - 786 - Bad debts written off 1,171 - - - Deposits written off 21 - - - Dividend income - - (4,500) (13,000) Finance costs 7,343 5,751 4,503 3,081 Goodwill - Amortisation - 767 - - - Impairment 1,283 - - - - Written off 758 - - - Interest income (94) (81) (80) (22) Inventories written off (net of insurance claim of RM9,060,000) 2,440 - - - Obsolete inventories written off 6,031 - - - Investment properties - Depreciation 327 361 - - - Impairment losses 3,978 1,573 - - - Reversal of impairment loss - (767) - - Property, plant and equipment - Depreciation 7,942 7,086 1 1 - Impairment losses 3,242 - - - - Loss on disposal 2,113 1,048 - - - Writte off (net of insurance claims of RM10,865,000) (590) - - - - Write off, obsolescence 7,316 - 19 - Provision for corporate guarantee default 1,272 - - - Realised (gain)/loss on foreign exchange (175) 21 - -

Operating (loss)/profi t before working capital changes (218) 19,873 1,339 (106)

43


Cash fl ows from operating activities (continued)(Increase)/Decrease in working capital: Property development cost (3,078) - - - Inventories 937 (8,676) - - Trade and other receivables (481) (4,220) (10,309) (40,060) Trade and other payables 5,834 (6,190) 1,740 (2,337)

Cash generated from/(used in) operations 2,994 787 (7,230) (42,503) Insurance claims received for inventories destroyed in fi re 9,060 - - - Tax paid (806) (397) - - Income taxes refund - 783 - -

Net cash generated from/(used in) operating activities 11,248 1,173 (7,230) (42,503)

Cash fl ows from investing activities Interest received 94 81 80 22 Acquisition of a subsidiary, net of cash acquired (Note 32) (509) (2,391) - - Other investment (2,000) (3,500) (2,000) (3,500) Purchase of property, plant and equipment (i) (25,609) (25,074) (8) - Proceeds from disposal of property, plant and equipment 4,699 1,310 - - Proceeds from disposal of a subsidiary to another subsidiary - - 4,300 - (Increase)/Decrease in deposits pledged with licensed banks (54) 481 - - Dividend received - - 4,285 13,000 Insurance claims received for property, plant and equipment written off 10,865 - - - Investment in subsidiary - - (15,000) (100)

Net cash (used in)/generated from investing activities (12,514) (29,093) (8,343) 9,422

CASH FLOW STATEMENTS (cont’d) FOR THE YEAR ENDED 31 JULY 2007

44

CASH FLOW STATEMENTS (cont’d) FOR THE YEAR ENDED 31 JULY 2007


Cash fl ows from fi nancing activities Interest paid (7,343) (5,751) (4,503) (3,081) Dividend paid - (2,841) - (2,841) Proceeds from issue of shares - 4,204 - 4,204 Proceeds from loans and other borrowings 23,195 35,000 20,000 35,000 Repayment of loans and other borrowings (7,641) (2,857) - - Repayment of hire purchase liabilities (1,820) (2,333) - - Share buy back (9) (30) (9) (30)

Net cash generated from fi nancing activities 6,382 25,392 15,488 33,252

Net increase/(decrease) in cash and cash equivalents 5,116 (2,528) (85) 171Cash and cash equivalents at beginning of year (ii) (4,516) (1,988) 199 28

Cash and cash equivalents at end of year (ii) 600 (4,516) 114 199

(i) Purchase of property, plant and equipment

During the year, the Group acquired property, plant and equipment with an aggregate cost of RM25,704,000 (2006 - RM25,816,000) of which RM95,000 (2006 - RM742,000) was acquired by means of hire purchases.

(ii) Cash and cash equivalents

Cash and cash equivalents included in the cash fl ow statements comprise the following balance sheet amounts:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Cash and bank balances (Note 12) 1,617 2,463 114 199Bank overdrafts (Note 15) (1,017) (6,979) - -

600 (4,516) 114 199


45

NOTES TO THE FINANCIAL STATEMENTS

SYF Resources Berhad is a public limited liability company incorporated and domiciled in Malaysia and is listed on the Second Board of Bursa Malaysia Securities Berhad. The address of its registered offi ce and principal place of business is as follows:

Registered offi ce and principal place of businessKawasan Perindustrian Sungai LalangLot 971, Jalan VillMukim SemenyihJalan Sungai Lalang43500 Selangor Darul Ehsan

The consolidated fi nancial statements as at and for the year ended 31 July 2007, comprise of the Company and its subsidiaries (together referred to as the Group). The fi nancial statements of the Company as at and for the year ended 31 July 2007 do not include other entities.

The Company is principally engaged in investment holding whilst the principal activities of the subsidiaries are stated in Note 5 to the fi nancial statements. There has been no signifi cant change in the nature of these activities during the fi nancial year.

1. BASIS OF PREPARATION

(a) Statement of compliance

The fi nancial statements of the Group and of the Company have been prepared in accordance with applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board (MASB), accounting principles generally accepted in Malaysia and the provisions of the Companies Act, 1965.

The MASB has issued the following FRSs and Interpretations that are effective for annual periods beginning on or after 1 January 2006, and that have not been applied in preparing these fi nancial statements:

FRSs/Interpretations Effective date

FRS 117, Leases 1 October 2006

FRS 124, Related Party Disclosures 1 October 2006 FRS 139, Financial Instruments: Recognition and Measurement To be announced

Amendment to FRS 1192004, Employee Benefi ts – Actuarial Gains and Losses, Group Plans and Disclosures 1 January 2007

FRS 6, Exploration for and Evaluation of Mineral Resources 1 January 2007

Amendment to FRS 121, The Effects of Changes in Foreign Exchange Rates – Net Investment in a Foreign Operation 1 July 2007

IC Interpretation 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities 1 July 2007

IC Interpretation 2, Members’ Shares in Co-operative Entities and Similar Instruments 1 July 2007

IC Interpretation 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds 1 July 2007

IC Interpretation 6, Liabilities arising from Participating in a Specifi c Market – Waste Electrical and Electronic Equipment 1 July 2007

IC Interpretation 7, Applying the Restatement Approach under FRS 1292004 Financial Reporting in Hyperinfl ationary Economies 1 July 2007

46

NOTES TO THE FINANCIAL STATEMENTS (cont’d)

1. BASIS OF PREPARATION (cont’d)

(a) Statement of compliance (cont’d)

FRSs/Interpretations Effective date

IC Interpretation 8, Scope of FRS 2, Share Based Payments 1 July 2007

FRS 107, Cash Flow Statements 1 July 2007

FRS 111, Construction Contracts 1 July 2007

FRS 112, Income Taxes 1 July 2007

FRS 118, Revenue 1 July 2007

FRS 120, Accounting for Government Grants and Disclosure of Government Assistance 1 July 2007

FRS 134, Interim Financial Reporting 1 July 2007

FRS 137, Provisions, Contingent Liabilities and Contingent Assets 1 July 2007

The Group and the Company plan to apply FRS 117, FRS 124, the Amendment to FRS 1192004 and the rest of the above-mentioned FRSs (except for FRS 6 as explained below and FRS 139 which its effective date has yet to be announced) and Interpretations for the annual period beginning 1 August 2007.

The impact of applying FRS 117 and FRS 124 on the fi nancial statements upon fi rst adoption of these standards as required by paragraph 30(b) of FRS 108, Accounting Policies, Changes in Accounting Estimates and Errors is not disclosed by virtue of the exemptions given in the respective standards.

FRS 6 and the Amendment to FRS 1192004 are not applicable to the Group and the Company. Hence, no further disclosure is warranted.

The initial application of the other standards and interpretations are not expected to have any material impact on the fi nancial statements of the Group and Company.

The fi nancial statements were approved by the Board of Directors on 28 November 2007.

(b) Basis of measurement

The fi nancial statements have been prepared on the historical cost basis except for property, plant and equipment as explained in the accounting policy notes.

At 31 July 2007, the Group’s current liabilities exceeded its current assets by approximately RM6.3milion. Subsequent to year end, the Group secured new term loan facilities of RM14.0million, which was drawn down in September 2007, to part settle RM12.7million of short term loans and borrowings.

At 31 July 2007, the Group has unutilised bank overdraft facilities of RM6.9million. The Group also secured another bank overdraft facility subsequent to year end of approximately RM2.0million.

The Directors are of the opinion that the Group has suffi cient funds to meet the Group’s funding needs in the foreseeable future. Accordingly, the Directors believe that it is appropriate for the fi nancial statements of the Group to be prepared on a going concern basis. The fi nancial statements do not include any adjustments relating to the recoverability and classifi cation of recorded asset amounts and classifi cation of liabilities that would be required should the going concern basis prove to be invalid.

47


1. BASIS OF PREPARATION (cont’d)

(c) Functional and presentation currency

These fi nancial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency. All fi nancial information presented in RM has been rounded to the nearest thousand, unless otherwise stated.

(d) Use of estimates and judgements

The preparation of fi nancial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these fi nancial statements, and have been applied consistently by Group entities, unless otherwise stated.

Certain comparative amounts have been restated to take into account the effect of the change in accounting policy and the adoption of FRS 3, Business Combination, as disclosed in Notes 33 and 34. In addition, certain comparative amounts have been reclassifi ed to conform to the current year’s presentation.

a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities, including unincorporated entities, controlled by the Group. Control exists when the Group has the ability to exercise its power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

The fi nancial statements of subsidiaries are included in the consolidated fi nancial statements from the date that control commences until the date that control ceases.

Investments in subsidiaries are stated in the Company’s balance sheet at cost less impairment losses, unless the investment is classifi ed as held for sale.

(ii) Minority interests

Minority interests at the balance sheet date are the portion of the net assets of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries.

In prior years, minority interests were presented in the consolidated balance sheet separately from liabilities and as deduction from net assets. Minority interests in the results of the Group for the year were also presented separately on the face of the consolidated income statement as a deduction before arriving at the profi t attributable to shareholders.

With effect from 1 August 2006, minority interests are presented in the consolidated balance sheet and statement of changes in equity within equity, separately from equity attributable to the equity shareholders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profi t or loss for the year between minority interests and the equity shareholders of the Company.

This reclassifi cation of minority interests in the consolidated balance sheet, income statements and statement of changes in equity has been accounted for retrospectively.

48


2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

a) Basis of consolidation (cont’d)

(ii) Minority interests (cont’d)

Where losses applicable to the minority exceed the minority’s interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profi ts, the Group’s interest is allocated all such profi ts until the minority’s share of losses previously absorbed by the Group has been recovered.

(iii) Changes in Group composition

When a group purchases a subsidiary’s equity shares from minority interests for cash consideration and the purchase price has been established at fair value, the accretion of the Group’s interests in the subsidiary is accounted for as a purchase of equity interest for which the acquisition accounting method of accounting is applied.

The Group treats all other changes in group composition as equity transactions between the Group and its minority shareholders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

(iv) Transactions eliminated on consolidation

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing consolidated fi nancial statements.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates prevailing at the dates of the transaction.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the exchange rate prevailing at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate prevailing at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in the income statement.

(ii) Net investment in foreign operations

Exchange differences arising from monetary items that in substance form part of the Company’s net investment in foreign operations, are recognised in the Company’s income statement. Deferred exchange differences are released to the income statement upon disposal of the investment.

(c) Derivative fi nancial instruments

The Group holds derivative fi nancial instruments to hedge its foreign currency risk exposure. The underlying foreign currency assets/liabilities are translated at their respective hedge exchange rates. Hedging costs are recognised in the income statements as and when incurred.

49



(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are stated at cost/valuation less accumulated depreciation and impairment losses, if any.

During the fi nancial year, the Group adopted the revaluation policy and revalued certain freehold land and buildings using the open market value method. The Group will revalue the revalued properties, comprising land and buildings, every 5 years and at shorter intervals whenever the fair value of the revalued assets is expected to differ materially from their carrying value.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour.

Surpluses arising from revaluation are dealt with in the revaluation reserve account. Any defi cit arising is offset against the revaluation reserve to the extent of a previous increase for the same property. In all other cases, a decrease in carrying amount is charged to the income statement.

The cost of property, plant and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar items.

When signifi cant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

(ii) Reclassifi cation to investment property

Investment properties are properties which are owned or held under a leasehold interest to earn rental income or for capital appreciation or for both. These include land held for a currently undetermined future use. Properties that are occupied by the companies in the Group are accounted for as owner-occupied rather than as investment properties. Investment properties are stated at cost less accumulated depreciation and impairment losses.

In the previous years, all investment properties were included in property, plant and equipment. Following the adoption of FRS 140, Investment Property, these investment properties are now classifi ed separately. Depreciation is charged to the income statement on a straight-line basis over the estimated useful life of fi fty (50) years for buildings.

This reclassifi cation has been accounted for retrospectively and comparative fi gures have been restated as disclosed in Note 34.

(iii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefi ts embodied within the part will fl ow to the Group and its cost can be measured reliably. The carrying amount of those parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.

50



(d) Property, plant and equipment (cont’d)

(iv) Depreciation

Freehold land and work in progress are not depreciated. For all other assets, depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use

The estimated useful lives for the current and comparative periods are as follows:

Buildings 50 years Leasehold improvement 10 years Furniture, fi ttings and offi ce equipment 5 – 20 years Tools and machinery 10 – 12.5 years Renovation and electrical upgrade 5 – 50 years Motor vehicles 5 years

The depreciable amount is determined after deducting the residual value. Depreciation methods, useful lives and residual values are reassessed at the reporting date.

(e) Investments in debt securities

Investments in debt securities are recognised initially at fair value plus attributable transaction costs.

Subsequent to initial recognition, investments in debt securities are stated at amotised cost using the effective interest method less allowance for diminution in value.

Where in the opinion of the Directors, there is a decline other than temporary in the value of debt securities other than investment in subsidiaries, the allowance for diminution in value is recognised as an expense in the fi nancial year in which the decline is identifi ed.

On disposal of an investment, the difference between net disposal proceeds and its carrying amount is recognised in the income statement.

All investments in debt securities are accounted for using settlement date accounting. Settlement date accounting refers to:

a) the recognition of an asset on the day it is received by the entity, andb) the derecognition on an asset and recognition of any gain or loss on disposal on the date it is delivered.

(f) Intangible assets

(i) Goodwill

Goodwill/(negative goodwill) arises on the acquisition of subsidiaries/ businesses.

For acquisitions prior to 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the fair values of the net identifi able assets and liabilities.

With the adoption of FRS 3 beginning 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities of the acquiree.

51



(f) Intangible assets (cont’d)

(i) Goodwill (cont’d)

Goodwill is allocated to cash-generating units and is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired.

In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment. The entire carrying amount of the investment is tested for impairment when there is objective evidence of impairment.

Before adoption of FRS 3, goodwill was measured at cost less accumulated amortisation and impairment losses. Impairment tests on goodwill were performed when there were indications of impairment. Negative goodwill, not exceeding the fair values of the non-monetary assets acquired, was recognised in the income statement over the weighted average useful life of those assets that were depreciable/amortisable. Negative goodwill in excess of the fair values of the non-monetary assets acquired was recognised immediately in the income statement.

To the extent that negative goodwill related to expectation of future losses and expenses that were identifi ed in the plan of acquisition and could be measured reliably, but which were not identifi able liabilities at the date of acquisition, that portion of negative goodwill was recognised in the income statement when the future losses and expenses were recognised. Goodwill / negative goodwill was amortised from the date of initial recognition over its estimated useful life of not more than 25 years.

Amortised goodwill and negative goodwill

Following the adoption of FRS 3, the Group changed its accounting policy on the treatment of goodwill and negative goodwill. Goodwill is no longer amortised but tested for impairment at least annually or more frequently when there is objective evidence of impairment. When the excess is negative (negative goodwill), the carrying amount at 1 August 2006 is derecognised with a corresponding adjustment to the opening balance of retained earnings.

The effect of this change in accounting policies is explained in Notes 33 and 34.

Acquisition of minority interest

Goodwill arising on the acquisition of a minority interest in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the net assets acquired at the date of exchange.

(g) Land held for property development

Land held for property development consist of land or such portions thereof on which no development activities have been carried out or where development activities are not expected to be completed within the Group’s normal operating cycle of 2 to 3 years. Such land is classifi ed as non-current asset and is stated at cost less accumulated impairment losses.

Land held for property development is reclassifi ed as property development costs at the point when development activities have commenced and where it can be demonstrated that the development activities can be completed within the Group’s operating cycle of 2 to 3 years.

Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties, commission, conversion fees and other relevant levies.

52



(h) Property development costs

Property development costs comprise costs associated with the acquisition of land and all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities.

Property development costs not recognised as an expense is recognised as an asset and is stated at the lower of cost and net realisable value.

The excess of revenue recognised in the income statement over billings to purchasers is shown as accrued billings under receivables, deposits and prepayments and the excess of billings to purchasers over revenue recognised in the income statement is shown as progress billings under payables and accruals.

(i) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the fi rst-in fi rst-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

In the case of work-in-progress and manufactured inventories, cost consists of raw materials, direct labour and an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(j) Receivables

Receivables are initially recognised at their cost when the contractual right to receive cash or another fi nancial asset from another entity is established.

Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts.

Receivables are not held for the purpose of trading.

(k) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignifi cant risk of changes in value. For the purpose of the cash fl ow statement, cash and cash equivalents are presented net of bank overdrafts and pledged deposits, if any.

(l) Impairment of assets

The carrying amounts of assets, except for inventories and fi nancial assets (other than investments in subsidiaries), are reviewed at each reporting date to determine whether there is any indication of impairment.

If any such indication exists then the asset’s recoverable amount is estimated. For goodwill that have indefi nite useful live, recoverable amount is estimated at each reporting date.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount unless the asset is carried at a revalued amount, in which case the impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. A cash-generating unit is the smallest identifi able asset group that generates cash fl ows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated fi rst to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset.

53



(l) Impairment of assets (cont’d)

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised, unless it reverses an impairment loss on a revalued asset, in which case it is credited directly to revaluation surplus. Where an impairment loss on the same revalued asset was previously recognised in the income statement, a reversal of that impairment loss is also recognised in the income statement.

(m) Share capital

(i) Shares issue expenses

Incremental costs directly attributable to issue of shares and share options classifi ed as equity are recognised as a deduction from equity.

(ii) Repurchase of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares that are not subsequently cancelled are classifi ed as treasury shares and are presented as a deduction from total equity.

(n) Loans and borrowings

Loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the loans and borrowings using the effective interest method.

All interest and other costs incurred in connection with borrowings are expensed as incurred.

Accounting for hire purchase

Property, plant and equipment held under hire purchase are capitalised and depreciated over their estimated useful lives, and the corresponding obligation relating to the remaining capital payments are treated as liability.

(o) Employee benefi ts

Short term employee benefi ts

Short-term employee benefi t obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profi t-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

The Company’s and Group’s contributions to the Employees’ Provident Fund are charged to the income statements in the year to which they relate. Once the contributions have been paid, the Group has no further payment obligations.

54



(p) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. Provisions are determined by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the time value of money and the risks specifi c to the liability.

Contingent liabilities

Where it is not probable that an outfl ow of economic benefi ts will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outfl ow of economic benefi ts is remote. Possible obligations, whose existence will only be confi rmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outfl ow of economic benefi ts is remote.

Where the Company enters into fi nancial guarantee contracts to guarantee the indebtedness of other companies within its group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.

(q) Payables

Payables are measured initially and subsequently at cost. Payables are recognised when there is a contractual obligation to deliver cash or another fi nancial asset to another entity.

(r) Revenue

(i) Goods sold

Revenue from sale of goods is measured at fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the signifi cant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

(ii) Revenue from property development

Revenue from property development is recognised based on the stage of completion i.e. the percentage of completion method, measured by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs.

Where the fi nancial outcome of a property development activity cannot be reliably estimated, property development revenue is recognised only to the extent of property development costs incurred that is probable will be recoverable, and property development costs on the developments units sold are recognised as an expense in the period in which they are incurred.

Any expected loss on a development project, including costs to be incurred over the defects liability period, is recognised immediately to the income statement.

(iii) Dividend income

Dividend income is recognised when the right to receive payment is established.

(iv) Rental income

Rental income is recognised in the income statement as it accrues.

55



(s) Interest income and borrowing costs

Interest income is recognised as it accrues, using the effective interest method.

All borrowing costs are recognised in the income statement using the effective interest method, in the period in which they are incurred.

(t) Lease payments

Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under fi nance leases are apportioned between the fi nance expense and the reduction of the outstanding liability. The fi nance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confi rmed.

(u) Tax expense

Tax expense comprises current and deferred tax. Tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profi t (tax loss).

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax liability is recognised for all taxable temporary differences.

A deferred tax asset is recognised to the extent that it is probable that future taxable profi ts will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefi t will be realised.

Additional taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

(v) Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profi t or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profi t or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

56



(w) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

3. PROPERTY, PLANT AND EQUIPMENT

Furniture, Renovation fi ttings and Group Freehold Leasehold and offi ce electrical Tools and Motor Work-in- land Buildings improvement equipment upgrade machinery vehicles progress Total Cost/Valuation RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 restated restated At 1 August 2005 As previously reported 8,548 70,233 182 7,901 3,103 64,564 1,645 - 156,176 Effect of adopting FRS 140 (Note 4) - (23,316) - - - - - - (23,316)

At 1 August 2005, restated 8,548 46,917 182 7,901 3,103 64,564 1,645 - 132,860 Acquisition of subsidiaries - 350 396 244 220 2,524 651 - 4,385 Additions 5,200 7,516 - 314 10 10,298 1,125 1,353 25,816 Disposals - (2,529) - (14) - (233) (262) - (3,038)

At 31 July 2006/ 1 August 2006, restated 13,748 52,254 578 8,445 3,333 77,153 3,159 1,353 160,023 Offset of accumulated depreciation on revaluation surplus - (1,610) - - - - - - (1,610) Revaluation of owner-occupied properties 7,098 6,045 - - - - - - 13,143 Acquisition of a subsidiary (Note 32) - - - 6 7 - - - 13 Additions 2,637 7,774 - 853 164 9,142 136 4,998 25,704 Disposals - (298) - (14) - (23,865) (291) - (24,468) Write off - (11,965) (183) (3,175) (2,981) (13,438) - - (31,742) Reclassifi cation - 3,203 - (37) 219 1,448 - (4,833) - Reclassifi cation in a subsidiary - 206 13 437 620 4,835 620 - 6,731

At 31 July 2007 23,483 55,609 408 6,515 1,362 55,275 3,624 1,518 147,794

57


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

Furniture, Renovation fi ttings and Group Freehold Leasehold and offi ce electrical Tools and Motor Work-in- land Buildings improvement equipment upgrade machinery vehicles progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 restated restated Cost/Valuation (cont’d) Representing items at: Cost 5,158 39,339 408 6,515 1,362 55,275 3,624 1,518 113,199 At valuation - 2007 18,325 16,270 - - - - - - 34,595

23,483 55,609 408 6,515 1,362 55,275 3,624 1,518 147,794

Accumulated depreciation and accumulated impairment losses

Accumulated depreciation - 7,365 92 4,840 1,335 32,725 984 - 47,341 Accumulated impairment losses - 3,592 - - - 3,182 - - 6,774

At 1 August 2005 As previously reported - 10,957 92 4,840 1,335 35,907 984 - 54,115 Effect of adopting FRS 140 (Note 4)

Accumulated depreciation - 2,827 - - - - - - 2,827 Accumulated impairment losses - 3,592 - - - - - - 3,592 - (6,419) - - - - - - (6,419)

At 1 August 2005, restated Accumulated depreciation - 4,538 92 4,840 1,335 32,725 984 - 44,514 Accumulated impairment losses - - - - - 3,182 - - 3,182 - 4,538 92 4,840 1,335 35,907 984 - 47,696

58



Furniture, Renovation fi ttings and Group Freehold Leasehold and offi ce electrical Tools and Motor Work-in- land Buildings improvement equipment upgrade machinery vehicles progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 restated restated Accumulated depreciation and accumulated impairment losses (cont’d) Depreciation charge for the year As previously reported - 1,287 18 521 119 5,196 306 - 7,447 Effect of adopting FRS 140 (Note 4) - (361) - - - - - - (361) - 926 18 521 119 5,196 306 - 7,086 Disposals - (455) - (1) - (101) (123) - (680) Reversal of impairment losses As previously reported - (767) - - - - - - (767) Effect of adopting FRS 140 (Note 4) - 767 - - - - - - 767 - - - - - - - - - Impairment losses for the year As previously reported - 1,573 - - - - - - 1,573 Effect of adopting FRS 140 (Note 4) - (1,573) - - - - - - (1,573) - - - - - - - - -

Accumulated depreciation - 5,009 110 5,360 1,454 37,820 1,167 - 50,920 Accumulated impairment losses - - - - - 3,182 - - 3,182 At 31 July 2006/ 1 August 2006, restated - 5,009 110 5,360 1,454 41,002 1,167 - 54,102

59



Furniture, Renovation fi ttings and Group Freehold Leasehold and offi ce electrical Tools and Motor Work-in- land Buildings improvement equipment upgrade machinery vehicles progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 restated restated Accumulated depreciation and accumulated impairment losses (cont’d) Offset of accumulated depreciation on revaluation surplus - (1,610) - - - - - - (1,610) Acquisition of a subsidiary (Note 32) - - - 1 - - - - 1 Depreciation charge for the year - 995 4 450 165 5,738 590 - 7,942 Disposals - (37) - (10) - (17,370) (239) - (17,656) Write off - (1,356) (110) (1,754) (1,619) (9,312) - - (14,151) Impairment losses during the year 898 844 - - - 1,500 - - 3,242 Reclassifi cation - (97) - (18) 115 - - - - Reclassifi cation in a subsidiary - 206 13 437 620 4,835 620 - 6,731

Accumulated depreciation - 3,110 17 4,466 735 24,893 2,138 - 35,359 Accumulated impairment losses 898 844 - - - 1,500 - - 3,242

At 31 July 2007 898 3,954 17 4,466 735 26,393 2,138 - 38,601

Carrying amounts At 1 August 2005, restated 8,548 42,379 90 3,061 1,768 28,657 661 - 85,164

At 31 July 2006, restated 13,748 47,245 468 3,085 1,879 36,151 1,992 1,353 105,921

At 31 July 2007 22,585 51,655 391 2,049 627 28,882 1,486 1,518 109,193

60



Company Furniture, fi ttings and offi ce equipment

2007 2006 RM’000 RM’000

CostAt 1 August 547 547Addition 8 -Written off (555) -

At 31 July - 547

Accumulated depreciationAt 1 August 535 534Depreciation charge for the year 1 1Written off (536) -

At 31 July - 535

Net book value At 1 August 12 13

At 31 July - 12

Revaluation

During the current fi nancial year, certain freehold land and buildings of a subsidiary were revalued by independent professional qualifi ed valuers using the open market value method. The surplus arising on the valuation of certain freehold land and buildings, net of tax, amounting to approximately RM11,571,000 has been credited to revaluation reserve whilst the defi cit arising on the valuation of the other freehold land and buildings amounting to approximately RM1,742,000, has been refl ected as impairment loss.

Security

Certain freehold land, buildings and tools and machinery of the Group with net carrying value of RM28,823,815 (2006 - RM33,627,689) are pledged as security for borrowings (Note 15).

Assets under hire purchase and leases

Included in property, plant and equipment of the Group are plant and machinery acquired under hire purchase agreements with net carrying value of RM3,585,970 (2006 - RM8,136,000).

61


4. INVESTMENT PROPERTIES

Group Note 2007 2006 RM’000 RM’000

restated

CostAt 1 August 23,316 - Effect of adopting FRS 140 3 - 23,316

At 31 July 23,316 23,316

Accumulated depreciation and accumulated impairment lossesAt 1 August 7,586 - Effect of adopting FRS 140

Accumulated depreciation 3 - 2,827Accumulated impairment losses 3 - 3,592

- 6,419Depreciation charge for the year 327 361Reversal of impairment loss - (767)Impairment loss for the year 3,978 1,573

Accumulated depreciation 3,515 3,188Accumulated impairment losses 8,376 4,398

At 31 July 11,891 7,586 Carrying amountAt 1 August 15,730 -

At 31 July 11,425 15,730

Included in the above are:Offi ce lot 2,425 3,000Retail shoplot 9,000 12,730

11,425 15,730

Market value: Offi ce lot 2,500 3,000Retail shoplot 9,000 12,730

The market value of the offi ce lot was estimated by the Directors based on their knowledge of the asset’s market value whilst the retail shoplot’s market value was assessed by an independent professional valuer using the open market method.

The investment properties of the Group with net carrying amount of RM11,425,111 (2006 - RM15,729,999) are pledged as security for borrowings (Note 15).

62


5. INVESTMENTS IN SUBSIDIARIES

Company 2007 2006

RM’000 RM’000

Unquoted shares - at cost 77,770 72,830Less: Accumulated impairment losses (2,255) (5,915)

75,515 66,915

Details of the subsidiaries are as follows:

Effective ownership Name of subsidiary Country of Principal interest

incorporation activities 2007 2006 % %

Seng Yip Furniture Sdn. Bhd. * Malaysia Manufacture and export of 100 100 moulded timber, furniture products and timber treatment processing

Tomisho Sdn. Bhd. ** Malaysia Manufacture and export of 100 100 furniture and component parts

SYF Venture Sdn. Bhd. * Malaysia Investment holding 100 100

SYF Properties Sdn. Bhd. * Malaysia Dormant 100 100

All Star Wood Products Malaysia Investment holding 100 100 Sdn. Bhd. **

SYF Wood Tech Sdn. Bhd. Malaysia Dormant 100 100 (formerly known as Tomisho Wood Tech Sdn. Bhd.)**

Apota Furnishing Sdn. Bhd.* Malaysia Dormant 100 100

Subsidiary of Tomisho Sdn. Bhd. Shinawood International Malaysia Dormant 60 60 Sdn. Bhd. **

Subsidiaries of SYF Venture Sdn. Bhd. C&L Lumber Sdn. Bhd.* Malaysia Processing and trading of 51 51 rubber woods

Twenty-One SJ Sdn. Bhd. ** Malaysia Manufacture and export of 51 51 wooden furniture products

Furniwood Industries (M) Malaysia Trading of domestic, 51 51 Sdn. Bhd. * commercial and industrial furniture

SYF Trading Sdn. Bhd. ** Malaysia General trading 100 100

Wira Cheras Development Malaysia Property development and 51 - Sdn. Bhd. ** management and construction

63


5. INVESTMENTS IN SUBSIDIARIES (cont’d)

Effective ownership Name of subsidiary Country of Principal interest

incorporation activities 2007 2006 % %

Subsidiary of SYF Trading Sdn. Bhd. Sleep Secrets Sdn. Bhd. * Malaysia Dormant 100 100

Subsidiary of All Star Wood Products Sdn. Bhd. Envirowood Furniture Pte. People’s Dormant 100 100 Limited ** Republic of China

* Audited by KPMG** Audited by fi rms other than KPMG

6. OTHER INVESTMENTS

Group and Company 2007 2006

RM’000 RM’000

Unquoted bonds, at cost 5,500 3,500Less: Allowance for diminution in value (756) -

4,744 3,500

7. GOODWILL ON CONSOLIDATION

Group 2007 2006

RM’000 RM’000

CostAt 1 August 21,169 19,183Effect of adopting FRS 3 (5,701) - Acquisition of subsidiaries (Note 32) 194 1,986Write-off (758) -

At 31 July 14,904 21,169

Accumulated amortization and accumulated impairment lossesAt 1 August 5,701 4,934Effect of adopting FRS 3 (5,701) - Amortisation for the year - 767Impairment loss for the year (1,283) -

Accumulated amortisation - 5,701Accumulated impairment losses 1,283 -

At 31 July 1,283 5,701

Carrying amountAt 31 July 13,621 15,468

64


7. GOODWILL ON CONSOLIDATION (cont’d)

FRS 3, Business Combinations

The adoption of FRS 3 has resulted in a change in the accounting policy for goodwill. The change in accounting policy is made in accordance with the transitional provisions.

Goodwill is stated at cost less accumulated impairment losses and is no longer amortised. Instead, goodwill impairment is tested annually, or when circumstances change, indicating that goodwill might be impaired.

Impairment testing for cash-generating unit containing goodwill

The carrying amounts of goodwill allocated to the Group’s cash-generating units (“CGU”) are as follows:

Group 2007 2006 RM’000 RM’000

Carrying amount:

Rubberwood furniture 13,435 15,464General trading - 4Property development 186 -

13,621 15,468

For the purpose of impairment testing, goodwill is allocated to the business units acquired, at which the goodwill is monitored for internal management purposes. The goodwill impairment test was based on value in use and was determined by the management.

The value in use was determined by discounting the future cash fl ows generated from the business units and was based on certain assumptions. The values assigned to the assumptions represent management’s assessment of future trends in the business units’ principal activities and are based on internal sources.

8. LAND HELD FOR PROPERTY DEVELOPMENT

Group 2007 2006

RM’000 RM’000

At 1 August - - Acquisition of a subsidiary (Note 32) 196 - Additions during the year 4

At 31 July 200 -

65


9. PROPERTY DEVELOPMENT COSTS

Group 2007 2006

RM’000 RM’000

At 1 August - - Acquisition of a subsidiary

Freehold land - - Development costs 560 -

Additions during the year

Freehold land 5,280 - Development costs 4,216 -

10,056 - Costs charged to income statements (6,418) -

At 31 July 3,638 -

Additions to development costs during the fi nancial year include:

Group 2007 2006

RM’000 RM’000

Interest expense 143 -

The freehold land of the Group is pledged as security for borrowings (Note 15).

10. INVENTORIES

Group 2007 2006

RM’000 RM’000

Raw materials 14,242 26,300Work-in-progress 13,803 17,448Manufactured inventories 4,192 6,957

32,237 50,705

Management reviews inventories for excess inventory and obsolescence and records an allowance on the inventory balance based on obsolete or slow-moving historical experiences. This review involves management’s judgement and estimate on future demand for their products. An allowance for inventories is made if inventories are deemed to be obsolete or slow-moving.

66


11. RECEIVABLES, DEPOSITS AND PREPAYMENTS

Group Company 2007 2006 2007 2006

Note RM’000 RM’000 RM’000 RM’000

TradeTrade receivables 21,333 22,843 - - Less: Allowance for doubtful debts a (2,873) (2,510) - -

18,460 20,333 - -

Non-trade

Other receivables 4,277 7,101 786 824Less: Allowance for doubtful debts (1,366) (64) (786) -

2,911 7,037 - 824Deposits 750 1,787 - - Prepayments 3,170 2,016 27 - Insurance claim receivable b 4,300 - - - Amount due from subsidiaries c - - 75,696 65,376

11,131 10,840 75,723 66,200

29,591 31,173 75,723 66,200

Note a Allowance for doubtful debts is based on the ongoing assessment of the recoverability and aging analysis of the

outstanding receivables and ongoing management’s estimate of the ultimate realisation of these receivables including creditworthiness and the past collection history of each customer. If the fi nancial conditions of customers of the Group were to deteriorate, resulting in impairment to their ability to make payments, additional allowance may be required.

Note b The insurance claim was received subsequent to year-end. Note c The amounts due from subsidiaries are non-trade in nature, unsecured, interest free, except for an amount of

RM48,325,000 (2006 - RM30,725,000) which bears interest of 10% (2006 - 9.5%) per annum, and have no fi xed terms of repayment.

The foreign currency profi le of receivables, deposits and prepayments is as follows:

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 23,352 18,960 75,723 66,200- US Dollar 6,236 8,116 - - - Japanese Yen 3 1,163 - - - Chinese Renminbi - 2,934 - -

29,591 31,173 75,723 66,200

67


12. CASH AND CASH EQUIVALENTS

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Cash and bank balances 1,617 2,463 114 199 Deposits placed with licensed banks 1,086 1,032 - -

2,703 3,495 114 199

The deposits placed with licensed banks are pledged for loans and borrowings granted to the Group (Note 15).

The foreign currency profi le of cash and cash equivalents is as follows:

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 2,686 3,346 114 199- US Dollar 16 22 - - - Japanese Yen 1 95 - - - Chinese Renminbi - 32 - -

2,703 3,495 114 199

13. CAPITAL AND RESERVES

Group and Company Number Number Amount of shares Amount of shares 2007 2007 2006 2006

RM’000 ’000 RM’000 ’000

Ordinary shares of RM1.00 each: Authorised 200,000 200,000 200,000 200,000

Issued and fully paid: At 1 August 84,070 84,070 79,866 79,866 Issued during the year - - 4,204 4,204

At 31 July 84,070 84,070 84,070 84,070

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

68


13. CAPITAL AND RESERVES (cont’d)

Reserves

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Non-distributable Share premium reserve 15,374 15,374 15,374 15,374 Translation reserve 66 201 - - Revaluation reserve 11,571 - - - Treasury shares (39) (30) (39) (30)

26,972 15,545 15,335 15,344

Distributable Accumulated profi ts/(loss) (43,426) 691 (465) 2,244

(16,454) 16,236 14,870 17,588

The movements in each category of the reserves are disclosed in the statements of changes in equity.

Share premium

This reserve comprises the premium paid on subscription of shares in the Company over and above the par value of the shares.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the fi nancial statements of foreign operations.

Revaluation reserve

The revaluation reserve relates to the revaluation of certain freehold land and building of a subsidiary during the year ended 31 July 2007.

Treasury shares

During the year, the Company repurchased 10,000 (2006 - 30,000) of its issued shares from the open market. The average price paid for the shares purchased was RM0.93 (2006 - RM0.97) per ordinary share. The repurchase transactions were fi nanced by internal funds. The repurchased shares are held as treasury shares and carried at cost. As at 31 July 2007, the Company held 40,000 (2006 – 30,000) of the Company’s shares.

The number of outstanding shares in issue after deducting treasury shares held is 84,030,000 (2006 - 84,040,000) ordinary shares of RM1 each. Treasury shares have no rights to voting, dividends and participation in other distribution.

14. MINORITY SHAREHOLDERS’ INTEREST

This consists of the minority shareholders’ proportion of share capital and reserve of subsidiaries, net of their share of subsidiaries’ goodwill on consolidation and amortization/impairment of goodwill charged to the minority shareholders.

69


15. LOANS AND BORROWINGS

This note provides information about the contractual terms of the Group and the Company’s interest-bearing loans and borrowings. For more information about the Group and the Company’s exposure to interest rate and foreign currency risk, see note 31.

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Non-current Term loans - secured 3,255 5,935 - - - unsecured 55,000 35,000 55,000 35,000 Hire purchase liabilities 685 1,504 - -

58,940 42,439 55,000 35,000

Current Term loans - secured 2,035 1,612 - - Bank overdrafts - secured 1,017 6,979 - - Bills payable - secured 36,719 39,003 - - Hire purchase liabilities 925 1,736 - -

40,696 49,330 - -

99,636 91,769 55,000 35,000

Terms and debt repayment schedule

The borrowings are subject to the following interest rates:

2007 2006 % per annum % per annum

Term loans: Company (fl at rates) 7.55 to 8.38 8.38 Subsidiaries (fl oating rate) 7.55 to 8.25 7.05 to 8.25Bills payable and bank overdrafts (fl oating rate) 4.63 to 8.75 3.50 to 8.25Hire purchase liabilities (fl at rate) 2.28 to 5.00 2.54 to 5.00

70


15. LOANS AND BORROWINGS (cont’d)

Year of Under 1 – 2 2 - 5 Over Group maturity Total 1 year years years 5 years 2007 RM’000 RM’000 RM’000 RM’000 RM’000

Secured term loans 2010 - 2013 5,290 2,035 1,171 1,970 114 Unsecured term loans 2010 - 2011 55,000 - - 55,000 - Secured bank overdrafts 2008 1,017 1,017 - - - Secured bills payable 2008 36,719 36,719 - - - Hire purchase 2008 -2013 1,610 925 331 337 17

99,636 40,696 1,502 57,307 131

2006

Secured term loans 2010 - 2013 7,547 1,612 2,580 2,517 838 Unsecured term loan 2010 35,000 - - 35,000 - Secured bank overdrafts 2007 6,979 6,979 - - - Secured bills payable 2007 39,003 39,003 - - - Hire purchase 2007 - 2011 3,240 1,736 1,088 416 -

91,769 49,330 3,668 37,933 838

Company 2007

Unsecured term loans 2010 - 2011 55,000 - - 55,000 -

2006

Unsecured term loans 2010 35,000 - - 35,000 -

The term loan, bills payables and bank overdraft facilities are secured by legal charges over certain property, plant and equipment (Note 3), investment properties (Note 4), property development costs (Note 9) and deposit placements of the Group (Note 12).

Subsequent to year end, the Group secured new term loan and bank overdraft facilities, totalling RM16.0million. These facilities are secured by legal charges over certain freehold buildings of the Group.

The term loan facility of RM10.0million is repayable by fi rst 12 monthly installments of RM290,813 (commencing October 2007), next 12 monthly installments of RM297,594 and the last 12 monthly installments of RM300,147. The other term loan facility of RM4.0million is repayable by fi rst 12 monthly installments of RM38,625 (commencing October 2007), next 12 monthly installments of RM42,500 and the last 96 monthly installments of RM45,094.

In September 2007, the Group drew down the loan facilities to part settle approximately RM12,716,000 of the short term loans and borrowings outstanding at year-end.

71


15. LOANS AND BORROWINGS (cont’d)

Hire purchase liabilities

Hire purchase liabilities are payable as follows:

Payments Interest Principal Payments Interest Principal 2007 2007 2007 2006 2006 2006 Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Less than one year 1,017 92 925 1,896 160 1,736 Between one and two years 364 33 331 1,001 90 911 Between two and fi ve years 348 11 337 647 54 593 More than 5 years 18 1 17 - - -

1,747 137 1,610 3,544 304 3,240

16. PAYABLES AND ACCRUALS

Group Company 2007 2006 2007 2006

Note RM’000 RM’000 RM’000 RM’000

TradeTrade payables 14,134 14,816 - - Progress billings 233 - - -

14,367 14,816 - - Non-tradeOther payables 12,064 5,830 209 162 Accrued expenses 4,250 4,233 1,658 1,232Deposits received from customers 1,321 1,231 - - Provision for corporate guarantee 1,272 - 1,272 - Amount due to subsidiaries a - - 43 48

18,907 11,294 3,182 1,442

33,274 26,110 3,182 1,442

Note a The amounts due to subsidiaries are non-trade in nature, unsecured, interest free and are repayable within the next

twelve months.

The foreign currency profi le of payables and accruals is as follows:

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 32,051 22,700 3,182 1,442- US Dollar 868 3,274 - - - Japanese Yen 56 129 - - - Euro Dollar 298 - - - - Singapore Dollar 1 - - - - Pound Sterling - 7 - -

33,274 26,110 3,182 1,442

72


17. DEFERRED TAX ASSETS AND LIABILITIES

Recognised deferred tax assets and liabilities

The recognised deferred tax assets and liabilities (before offsetting) are as follows: Group Company

2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Property, plant and equipment - capital allowances 4,310 7,987 - - - revaluation reserve 3,707 2,191 - - Provisions (301) (301) - - Unutilised tax losses and unabsorbed capital allowances (3,781) (3,835) - -

Net 3,935 6,042 - -

comprising:Deferred tax assets (936) (936) - - Deferred tax liabilities 4,871 6,978 - -

3,935 6,042 - -

Movement in temporary differences during the year

Group

Recognised Recognised in income in income Recognised At statement At statement in At 1.8.2005 (Note 21) 31.07.2006 (Note 21) equity 31.07.2007

Property, plant and equipment 6,914 1,073 7,987 (3,677) - 4,310 Property revaluation reserve 2,242 (51) 2,191 (55) 1,571 3,707 Provisions (300) (1) (301) - - (301) Unutilised tax losses and unabsorbed capital allowances (4,600) 765 (3,835) 54 - (3,781)

4,256 1,786 6,042 (3,678) 1,571 3,935

In recognising the deferred tax assets attributable to unutilised tax losses carry-forward and unabsorbed capital allowances, the Directors made an assumption that there will not be any substantial change (more than 50%) in the shareholders before these assets are utilised. If there is substantial change in the shareholders, unutilised tax losses carry-forward and unabsorbed capital allowances, amounting to approximately RM14,542,000 will not be available to the Group.

73


17. DEFERRED TAX ASSETS AND LIABILITIES (cont’d)

Unrecognised deferred tax assets

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

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Unutilised tax losses 33,375 10,034 3,233 2,545Unabsorbed capital allowances 15,520 26 15 7Taxable temporary differences (14,653) (5) - (5)Deductible temporary differences 4,678 - 5,068 -

38,920 10,055 8,316 2,547

The unutilised tax losses, unabsorbed capital allowances and deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profi t will be available against which the Group and the Company can utilise the benefi ts.

18. GROSS PROFIT

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Revenue Sale of goods - Manufactured products 211,810 143,870 - - - Trading products 27,058 28,591 - - Sale of property units 7,282 - - - Dividend income - - 4,500 13,000 Interest income - 305 4,539 2,432

246,150 172,766 9,039 15,432Cost of sales Cost of manufacturing products (213,468) (124,422) - - Cost of trading products (25,010) (26,291) - - Cost of property units sold (6,418) - - -

(244,896) (150,713) - -

Gross profi t 1,254 22,053 9,039 15,432

74


19. OPERATING (LOSS)/PROFIT

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Operating (loss)/profi t is arrived at after crediting: Gain on foreign exchange- realised 175 - - - Gross dividend income - subsidiaries - - 4,500 13,000 Insurance compensation on consequential loss 5,300 - - - Rental income from investment properties 355 975 - - Reversal of impairment of investment properties - 767 - -

and after charging: Allowance for doubtful debts on - third party debts 695 1,366 - 3,412 - amount due from a former director of the Company 1,021 - 786 - Allowance for diminution in value of - investment in subsidiaries - - 2,100 4,700 - other investment (Note 6) 756 - 756 - Auditors’ remuneration Holding company auditors - current year 102 61 35 28 - (over)/under provision in prior year 2 (1) 3 - Other auditors - current year 60 38 - - - overprovision in prior year (1) (3) - - Bad debts written off 1,171 - - - Deposits written off 21 - - - Directors’ remuneration - Remuneration 1,291 1,102 702 857 - Fees - Company’s Directors 40 52 40 52 - Subsidiaries’ Directors 780 12 - - - Benefi t-in-kind 48 29 48 29 - Employees’ Provident Funds 153 136 84 102 Goodwill - Written off (Note 7) 758 - - - - Impairment losses (Note 7) 1,283 - - - - Amortisation (Note 7) - 767 - - Investment properties - Impairment loss (Note 4) 3,978 1,573 - - - Depreciation (Note 4) 327 361 - - Loss on foreign exchange - realised - 21 - - Inventories written off (net of insurance claim of RM9,060,000) 2,440 - - - Obsolete inventories written off 6,031 - - - Rental of: - plant and machinery 34 51 - - - offi ce equipment 1 - - - - land and premises 1,517 1,751 72 70 Personnel expenses: - Wages, salaries and others 23,128 18,242 649 1,132 - Employees’ Provident Funds 595 506 70 127 Property, plant and equipment - Loss on disposal 2,113 1,048 - - - Write-off (net of insurance claim of RM10,865,000) (590) - - - - Written off, obsolete 7,316 - 19 - - Impairment losses (Note 3) 3,242 - - - - Depreciation (Note 3) 7,942 7,086 1 1 Provision for corporate guarantee default 1,272 - 1,272 -

75


20. FINANCE COSTS

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Interests on: - term loans 5,044 3,069 4,502 2,432 - bills payable 1,758 1,485 - - - overdraft 354 274 - - - hire purchase 186 260 - - - others 1 663 1 649

7,343 5,751 4,503 3,081

21. TAX EXPENSE

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Current tax expense Malaysia - Current 341 200 (31) - - Prior year 642 (302) 494 45

983 (102) 463 45

Deferred tax expense Origination and reversal of temporary differences (3,255) 1,925 - - Overprovision in prior year (423) (139) - -

(3,678) 1,786 - -

Total tax (credit)/expense (2,695) 1,684 463 45

Reconciliation of tax expense

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

(Loss)/Profi t before tax (47,068) 2,748 (2,246) 1,722

Income tax using Malaysian tax rate of 27% (2006 - 28%)* (12,709) 769 (606) 483Effect of lower tax rate** 46 - - - Non-deductible expenses 5,183 2,307 51 2,653Tax exempt income - (65) (999) (3,640)Tax incentives (68) (2,167) - - Deferred tax benefi ts recognised (3,084) - - - Deferred tax benefi ts not recognised 7,794 1,263 1,554 524Other items (76) 18 (31) (20)

(2,914) 2,125 (31) - Under/(Over) provision in prior years 219 (441) 494 45

Tax (credit)/expense (2,695) 1,684 463 45

76


21. TAX EXPENSE (cont’d)

* With effect from year of assessment 2007, corporate tax rate is at 27%. The Malaysian Budget 2007 also announced the reduction of corporate tax rate to 26% in 2008. Consequently deferred tax assets and liabilities are measured using these tax rates.

** With effect from year of assessment 2004, companies with paid-up capital of RM2.5million and below at the beginning of the basis period for a year of assessment are subject to corporate tax at 20% on chargeable income up to RM500,000.

22. (LOSS)/EARNINGS PER ORDINARY SHARE - GROUP

Basic (loss)/earnings per share

The calculation of basic (loss)/earnings per ordinary share is based on the Group loss after taxation of RM44,117,000 (2006 - profi t after taxation RM1,152,000) and the weighted average number of ordinary shares outstanding during the fi nancial year of 84,034,000 (2006 - 81,012,000).

Group 2007 2006

RM’000 RM’000

(Loss)/Profi t for the year attributable to ordinary shareholders (44,117) 1,152

Weighted average number of ordinary shares Group

2007 2006 ’000 ’000

Issued ordinary shares at beginning of the year 84,040 79,866Effect of shares issued during the year - 1,161Effect of treasury shares acquired during the year (6) (15)

Weighted average number of ordinary shares 84,034 81,012

Group

2007 2006 Sen Sen

Basic (loss)/earnings per share (52.50) 1.42

Diluted earnings per share

The outstanding warrants and options under the Company’s Employees’ Share Option Scheme (“ESOS”) do not have an impact on the diluted earnings per share as the exercise price of the warrants and the options exceed the average market price of the Company’s ordinary shares.

77


23. DIVIDENDS

Dividends recognised by the Company are as follow:

Sen Total per share amount Date of RM’000 payment

2006 Final 2005 ordinary, tax exempted 1.0 799 23 January 2006 Interim 2006 ordinary, tax exempted 2.5 2,042 24 April 2006

24. SEGMENTAL INFORMATION

Segment information is presented in respect of the Group’s business and geographical segments. The primary format, business segments, is based on the Group’s management and internal reporting structure. Inter-segment pricing is determined based on negotiated terms.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters) and head offi ce expenses, and tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the year to acquire segment assets (property, plant and

equipment) that are expected to be used for more than one year.

Business segments

The Group comprises the following main business segments:

Rubberwood furniture Manufacture and trading of rubberwood furniture and component parts

Genaral trading Sale of consumer products

Property development Development of residential and commercial properties

Others Rental of investment properties and investment holding

Geographical segments

In presenting information on basis of geographical segment, segment revenue is based on the geographical location of customers. Segment assets are also based on the geographical location of assets.

78


24. SEGMENTAL INFORMATION (cont’d)

Rubberwood General Property furniture trading development Others Elimination Consolidated 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Business segments Revenue from external customers 211,810 143,870 27,058 28,591 7,282 - - 305 - - 246,150 172,766 Inter-segment 70,216 36,053 - - - - 9,039 15,127 (79,255) (51,180) - -

Total revenue 282,026 179,923 27,058 28,591 7,282 - 9,039 15,432 (79,255) (51,180) 246,150 172,766

Segment result (26,572) 11,777 482 399 553 - (7,093) (2,221) (7,189) (1,537) (39,819) 8,418

Unallocated expenses - -

Operating (loss)/profi t (39,819) 8,418 Interest expense (6,943) (4,452) (436) (345) - - (4,503) (3,081) 4,539 2,127 (7,343) (5,751) Interest income 14 35 - 25 - - 80 21 - - 94 81

(Loss)/Profi t before tax (47,068) 2,748 Tax credit/ (expense) 2,695 (1,684)

(Loss)/Profi t for the year (44,373) 1,064


Segment assets 180,247 193,759 6,631 7,503 6,185 - 193,588 166,320 (196,090) (159,402) 190,561 208,180 Goodwill 13,435 15,464 - 4 - - 186 - - - 13,621 15,468 Other investment - - - - - - 4,744 3,500 - - 4,744 3,500 Unallocated assets 225 246

Total assets 209,151 227,394

Segment liabilities 143,353 147,174 14,565 15,164 3,169 - 38,102 15,791 (115,898) (87,771) 83,291 90,358 Unsecured term loan 55,000 35,000 - - - - - - - - 55,000 35,000 Unallocated liabilities 589 62

Total liabilities 138,880 125,420

79


24. SEGMENTAL INFORMATION (cont’d)


Capital expenditure 27,911 25,807 3 - 204 - 8 9 (2,422) - 25,704 25,816 Property, plant and equipment - Depreciation 7,863 6,631 39 53 38 - 2 402 - - 7,942 7,086 - Impairment losses 3,242 - - - - - - - - - 3,242 - Obsolete written off 7,224 - - - - - 92 - - - 7,316 - - Write off - net (590) - - - - - - - - - (590) - Investment properties - Depreciation - - - - - - 327 361 - - 327 361 - Impairment losses - - - - - - 3,978 1,573 - - 3,978 1,573 - Reversal of impairment loss - - - - - - - (767) - - - (767) Goodwill - Impairment loss 1,275 - - - 8 - - - - - 1,283 - - Write off 754 - 4 - - - - - - - 758 - - Amortisation - 767 - - - - - - - - - 767 Inventories - write off - net 2,440 - - - - - - - - - 2,440 - - obsolete written off 5,966 - - - - - 65 - - - 6,031 -

Asia Pacifi c and other Malaysia Asian countries Europe 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Geographical segments Revenue from external customers by location of customers 49,002 68,649 20,615 12,225 40,652 43,612 Segment assets by location of assets 209,151 223,609 - 3,785 - - Capital expenditures by location of assets 25,704 25,807 - 9 - -

The rest of North America the world Consolidated 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Geographical segments Revenue from external customers by location of customers 119,582 30,826 16,299 17,454 246,150 172,766 Segment assets by location of assets - - - - 209,151 227,394 Capital expenditures by location of assets - - - - 25,704 25,816

80


25. EMPLOYEE BENEFITS

Equity compensation benefi ts

Share option plan

The Group offers vested share options over ordinary shares to Directors and employees. Movements in the number of share options held by employees are as follows:

Group and Company 2007 2006

RM’000 RM’000

Outstanding at 1 August 4,617 7,150Granted - 1,801Issued - (2,397)Lapsed (443) (1,937)

Outstanding at 31 July 4,174 4,617

Group and Company

2007 2006 ’000 ‘000

Exercisable at end of year 4,174 4,617

The options outstanding at 31 July 2007 have an exercise price of RM1.00 and expire on 31 July 2008. No shares options were exercised during the fi nancial year.

26. CONTINGENT LIABILITIES (UNSECURED)

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Guarantee given for banking facilities granted to subsidiaries - - 45,673 53,661Guarantee given for banking facilities granted to a former subsidiary - 1,500 - 1,500

- 1,500 45,673 55,161

81


27. COMMITMENTS

Group Company 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

(a) Capital commitment

Property, plant and equipment: Approved and contracted for 1,988 2,929 - -

(b) Put Option commitment

In the previous fi nancial year, pursuant to the put option agreement dated 26 June 2006 entered into between the Group, via SYF Ventures Sdn Bhd, and a third party individual, who is the minority shareholder of Twenty-One SJ Sdn Bhd (‘Twenty-One SJ’), a subsidiary, the Group has granted the third party individual the put option in respect of the third party individual’s 49% equity interest in Twenty-One SJ, comprising 1,029,000 ordinary shares, for a period of 3 years commencing 25 July 2006. Consequently, in the event of the put option being exercised, the Group has commitment to purchase the said equity interest at the following option prices:

- RM1.05 per ordinary shares if exercised in the 1st year of the option period,- RM1.10 per ordinary shares if exercised in the 2nd year of the option period, and- RM1.15 per ordinary shares if exercised in the 3rd year of the option period.

Subsequent to year-end, the third party individual exercised the put option at the agreed option price of RM1.10 per ordinary share for a total cash consideration of RM1,131,900. Consequently, the Group’s shareholding in Twenty-One SJ increased from the existing 51% to 100%.

28. OPERATING LEASE

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

Group 2007 2006

RM’000 RM’000

Less than one year 1,338 1,693Between one and fi ve years 1,257 1,392More than fi ve years - 1,078

2,595 4,163

The Group leases factory facilities under operating leases. The leases typically run for an initial period ranging from two to three years, with an option to renew the lease after that date. None of the leases include contingent rentals.

82


29. RELATED PARTIES

Identity of related parties

For the purposes of these fi nancial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise signifi cant infl uence over the party in making fi nancial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common signifi cant infl uence. Related parties may be individuals or other entities.

Signifi cant transactions with related parties other than as disclosed elsewhere in the fi nancial statements are as follows:

2007 2006Group RM’000 RM’000

Transactions with Directors of the Company Rental expense 187 156

Transactions with Directors of the subsidiaries Management fees 48 -

CompanyTrade transactions Dividend income from subsidiaries: Seng Yip Furniture Sdn. Bhd. 4,500 11,000 Tomisho Sdn. Bhd. - 2,000

Non-trade transactions Management fee received/receivable from subsidiaries: Tomisho Sdn. Bhd. 30 60 Seng Yip Furniture Sdn. Bhd. 50 100

Rental paid to subsidiaries: Tomisho Sdn. Bhd. - 60 Seng Yip Furniture Sdn. Bhd. 72 10

Non-trade transactions Interest received/receivable from subsidiaries: Tomisho Sdn. Bhd. 1,121 670 Seng Yip Furniture Sdn. Bhd. 2,982 1,417 SYF Trading Sdn Bhd 436 345

These transactions have been entered into in the normal course of business and have been established under negotiated terms.

30. SIGNIFICANT EVENTS

(a) On 10 November 2006, part of the Group’s timber processing facilities, comprising a timber processing warehouse, certain fi nger-jointing facilities and kiln-drying equipment, located at Lot 974, Mukim Semenyih, with carrying amount of RM12.4 million, were destroyed by fi re. Subsequently, on 22 March 2007, the Group’s 2-storey head offi ce building and an adjoining fi nished goods warehouse, with carrying amount of RM9.4 million, were destroyed by another fi re.

The Group incurred total asset losses of RM21.8 million and received insurance compensation of RM19.9million for the asset losses. The Group also received a consequential loss of RM5.3 million for loss of earnings, and

(b) On 2 March 2007, the Group acquired a 51% equity interest in Midas Menang Sdn Bhd (‘MMSB’) for a cash consideration of RM153,000 with the intention to purchase and develop a piece of land located at Pekan Baru Subang, Daerah Petaling, Selangor. On 8 June 2007, the Group disposed of the abovementioned 51% equity interest to a related party at the same cash consideration of RM153,000, resulting in no gain or losses for the Group.

83


31. FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

Exposure to credit, liquidity, interest rate, and foreign currency risks arises in the normal course of the Group’s and Company’s businesses. The Board reviews and agrees policies for managing each of these risks and they are summarised below:

Credit risk

The Group’s and the Company’s exposure to credit risk arise through its receivables. Management has an informal credit policy in place and the exposure to credit risk is monitored on an ongoing basis through the review of receivables ageing.

At balance sheet date, there were no signifi cant concentrations of credit risk. The maximum exposures to credit risk for the Group and for the Company are represented by the carrying amount of the receivables presented in the balance sheet.

Liquidity risk

The Group and the Company monitor and maintain a level of cash and cash equivalents and bank facilities deemed adequate by management to fi nance the Group’s and the Company’s operations and to mitigate the effect of fl uctuations in cash fl ows.

Foreign currency risk

The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the functional currencies of the Group. The currency giving rise to this risk is primarily US Dollars.

The Group uses forward exchange contract to hedge its foreign currency risk. Most of the forward exchange contracts have maturities of less than one year after the balance sheet date. Where necessary, the forward exchange contracts are rolled over at maturity.

In respect of other monetary assets and liabilities held in currencies other than RM, the Group ensure that the net exposure is kept to an acceptable level by buying forward foreign exchange contracts.

As at the end of the fi nancial year, the Group has contracted to sell the following amount of forward contracts:

Average Contracted contract Equivalent

Currency Amount rate RM’000

31.7.2007Trade receivables USD’000 5,904 3.4065 20,112

31.7.2006Trade receivables USD’000 6,428 3.6271 23,315

Interest rate risk

Interest rate exposure mainly arises from the Group’s borrowings, and is managed through the use of fi xed and fl oating rate debts. The Group does not use derivative fi nancial instruments to hedge its debt obligations. Deposits are placed with licensed banks and fi nance companies.

84


31. FINANCIAL INSTRUMENTS (cont’d)

The following table shows information about the Group’s exposure to interest rate risk.

Effective interest rates and repricing analysis

In respect of interest-earning fi nancial assets and interest-bearing fi nancial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice or mature, whichever is earlier:

2007 2006 Effective More Effective More interest than interest than rate per Within 1 - 5 5 rate per Within 1 – 5 5 annum Total 1 year years years annum Total 1 year years years Group % RM’000 RM’000 RM’000 RM’000 % RM’000 RM’000 RM’000 RM’000

Financial assets Deposits placed with licensed banks 3.4 1,086 1,086 - - 3.5 1,032 1,032 - -

Financial liabilities Secured term loans 8.2 5,290 2,035 3,141 114 7.7 7,547 1,612 5,097 838 Unsecured term loans 8.1 55,000 - 55,000 - 8.4 35,000 - 35,000 - Secured bank overdrafts 7.8 1,017 1,017 - - 8.3 6,979 6,979 - - Secured bills payable 5.8 36,719 36,719 - - 5.8 39,003 39,003 - - Hire purchase 2.3 - 5.0 1,610 925 668 17 2.5 – 5.0 3,240 1,736 1,504 -

Company

Financial liabilities Unsecured term loans 8.1 55,000 - 55,000 - 8.4 35,000 - 35,000 -

Fair values

Recognised fi nancial instruments

In respect of cash and cash equivalents, trade and other receivables, trade and other payables and short term borrowings, the carrying amounts approximate their fair values due to the relatively short term nature of these fi nancial instruments.

The Company provides fi nancial guarantees to banks for credit facilities extended to certain subsidiaries. The fair value of such fi nancial guarantees is not expected to be material as the probability of the subsidiaries defaulting on the credit lines is remote.

The aggregate fair values of other fi nancial assets and liabilities carried on the balance sheet as at 31 July are shown below:

2007 2007 2006 2006 Carrying Fair Carrying Fair amount value amount valueGroup RM’000 RM’000 RM’000 RM’000

Financial assetUnquoted bonds 4,744 4,444 3,500 3,500

Financial liabilitiesSecured term loans 5,290 4,899 7,547 6,070Unsecured term loan 55,000 40,838 35,000 25,029Hire purchase liabilities 1,610 1,556 3,240 3,077

CompanyFinancial liabilityUnsecured term loan 55,000 40,838 35,000 25,029

85


31. FINANCIAL INSTRUMENTS (cont’d)

Fair values (cont’d)

Unrecognised fi nancial instruments

The valuation of fi nancial instruments not recognised in the balance sheet refl ects their current market rates at the balance sheet date.

The fair value of fi nancial instruments not recognised in the balance sheet at 31 July are as follows:

2007 2007 2006 2006 Carrying Fair Carrying Fair amount value amount valueGroup RM’000 RM’000 RM’000 RM’000

Forward foreign exchange contracts - (280) - (170)

32. ACQUISITION OF SUBSIDIARIES - GROUP

On 11 August 2006, the Group subscribed for 1,071,000 ordinary shares of RM1.00 each, which represents 51% equity interest in Wira Cheras Development Sdn. Bhd. for consideration of RM1,488,690 , at premium, satisfi ed by cash.

The acquisition was accounted for using the acquisition method of accounting.

The fair values of assets and liabilities assumed in the acquisition of the subsidiary and the cash fl ow effects are as follows:

Acquisition 2007

RM’000

Property, plant and equipment 12Land held for development 196Development expenditure 560Current assets 1,829Current liabilities (59)

Net assets 2,538Minority interest (1,243)Goodwill on acquisition 194

Purchase consideration, satisfi ed by cash 1,489Cash acquired (980)

Net cash outfl ow on acquisition, net of cash acquired 509

86


32. ACQUISITION OF SUBSIDIARIES - GROUP (cont’d)

Effect of acquisition

The acquisition of the subsidiary had the following effect on the Group’s operating results for the year ended 31 July 2007 and on the Group’s assets and liabilities as at 31 July 2007:

Year ended 31 July 2007

RM’000

Income statement: Revenue 7,282 Cost of development (6,418)

Gross profi t 864 Administrative expenses (311) Tax expense (75)

Profi t after taxation 478 Less: Minority interest (234)

Increase in the Group’s net profi t at the end of fi nancial year 244

2007

RM’000

Balance sheet: Property, plant and equipment 177 Land held for development 200 Current assets 5,808 Current liabilities (2,573) Long term liabilities (596)

Net assets acquired 3,016 Minority interest (1,478)

Increase in the Group’s net assets 1,538

87


33. CHANGES IN ACCOUNTING POLICY

The accounting policies set out in Note 2 have been applied in preparing the fi nancial statements for the year ended 31 July 2007.

The effect of the adoption of FRS 3, Business Combinations is summarised below.

FRS 3, Business Combinations

The adoption of FRS 3 has resulted in a change in the accounting policy for goodwill. The change in accounting policy is made in accordance with the transitional provisions.

Goodwill is stated at cost less accumulated impairment losses and is no longer amortised. Instead, goodwill impairment is tested annually, or when circumstances change, indicating that goodwill might be impaired. Negative goodwill is recognised immediately in the income statement. This has resulted in the derecognition of negative goodwill and an increase of retained earnings for the Group as at 31 July 2007 by RM2,545,000.

Had there not been a change in accounting policy, the net loss attributable to shareholders for the fi nancial year ended 31 July 2007 would reduce by RM102,000 being the negative goodwill that would have been amortised to the income statement.

This change in accounting policy has no material impact on earnings per share.

34. COMPARATIVE FIGURES

Certain comparative fi gures have been reclassifi ed as a result of change in accounting policy as stated in note 32 and to conform with the presentation requirements of FRS 101.

Group As previously As stated Adjustment restated RM RM RM

Balance sheet at 31 July 2006Property, plant and equipment 121,651 (15,730) 105,921Investment properties - 15,730 15,730Accumulated(loss)/profi t (1,854) 2,545 691Negative goodwill 2,545 (2,545) -

Following the adoption of FRS 3, Business Combinations, minority interests was reclassifi ed into equity, likewise in arriving at profi t/(loss) for the year, minority interests was not deducted.

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I/We of being a member(s) of SYF RESOURCES BERHAD hereby appoint

of or failing him/her, the Chairman of the meeting as my/our proxy to vote for me/us on my/our behalf at the Twelfth Annual General Meeting of the Company to be held at Metro 1 Room, Prescott Metro Inn, Wisma Metro Kajang, Jalan Semenyih, 43000 Kajang, Selangor Darul Ehsan on Friday, 11 January 2008 at 10.30 a.m. and at any adjournment thereof.

My/Our proxy is to vote either on a show of hands or on a poll as indicated below with an “X”:

NO. RESOLUTION FOR AGAINST

1. To receive the Audited Financial Statements for the year ended 31 July 2007 and the Directors’ and Auditors’ Reports thereon. 2. To approve the payment of Directors’ Fees 3. To re-elect the following Director retiring pursuant to the Company’s Articles of Association:- - Chan Keng Yew 4. To re-appoint Messrs KPMG as Auditors and authorise the Directors to fi x their remuneration. 5. As special business, to approve the following: (i) Ordinary resolution - Authority to Issue Shares Pursuant to Section 132D of the Companies Act, 1965 (ii) Ordinary resolution - Proposed Renewal of the Authority to Purchase its Own Shares 6. Special Resolution - To propose amendments to the Articles of Association of the Company.

Dated this day of

Signature of member(s)

Notes:1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy may

but need not be a member of the Company. A member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company. If the appointor is a corporation, this form must be executed under its Common Seal or under the hand of its Attorney.

2. The instrument appointing a proxy must be deposited at the Registered Offi ce at Kawasan Perindustrian Sungai Lalang, Lot 971, Jalan Vill, Mukim Semenyih, Jalan Sungai Lalang, 43500 Semenyih, Selangor Darul Ehsan, not less than 48 hours before the time appointed for holding the Meeting or adjourned meeting.

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

PROXY FORM

No. of shares


Kawasan Perindustrian Sungai Lalang

Lot 971, Jalan Vill, Mukim Semenyih,

Jalan Sungai Lalang, 43500 Semenyih,

Selangor Darul Ehsan.

Fold Here

Fold Here

STAMP

LOCAL RESOURCES,GLOBALPRESENCE

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2007S

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Kawasan Perindustrian Sungai Lalang, Lot 971, Jalan Vill, Mukim Semenyih, Jalan Sungai Lalang, 43500 Semenyih, Selangor Darul Ehsan.• Tel : 603 8723 4535• Fax : 603 8723 3500 • Website : www.syfresources.com

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