Naluri Corporation Berhad 2005 Annual Report

MENARA NALURI AT 161B, JALAN AMPANG, 50450 KUALA LUMPUR

DFZ CAPITAL BERHAD HEADOFFICE AT 418, LEBUH CHULIA,10200 PULAU PINANG

THE ZON ALL SUITES RESIDENCES ON THE PARK AT 161D, JALAN AMPANG, 50450 KUALA LUMPUR

THE MANUFACTURING PLANT FOR UNITED INDUSTRIES HOLDINGS BERHAD AT 5 1/2 MILES, JALAN MERU, 41050 KLANG, SELANGOR DARUL

Corporate Information

Profile of Directors

Corporate Structure

Message from the Executive Chairman/Penyata Pengerusi Eksekutif

Statement on Corporate Governance

Audit Committee Report

Statement on Internal Control

Financial Statements

Statistics on Shareholdings

Substantial Shareholders

Statement of Director’s Interest in the Company and Related Corporations

Properties Held by the Group

Notice of Annual General Meeting

Form of Proxy

Contents 2

3 - 7

8 - 9

10 - 15

16 - 24

25 - 28

29

31 - 116

117 - 118

119

120

121 - 125

126 - 130

NaluriCorporationBerhad(76466-X)

2

Dato’ Sri Adam Sani bin AbdullahExecutive ChairmanExecutive Director

Tan Sri Saw Huat LyeExecutive Director

Jeneral (B) Dato’ Sri Abdullah bin Ahmad @ Dollah bin AmadIndependent Non-Executive Director

Tengku Azman Ibni Almarhum Sultan Abu BakarIndependent Non-Executive Director

Dato’ Khalid bin Mohamad JiwaNon-Independent Non-Executive Director

Lee Sze SiangExecutive Director

Kan Weng HinExecutive Director

Wong Peng YewNon-Independent Non-Executive Director

Haji Mohd Radzuan bin AbdullahIndependent Non-Executive Director

Peter MadhavanIndependent Non-Executive Director

BOARD OF DIRECTORS

AUDIT COMMITTEE

Haji Mohd Radzuan bin Abdullah(Chairman)

Lee Sze Siang

Peter Madhavan

REMUNERATION COMMITTEE

Haji Mohd Radzuan bin Abdullah (Chairman)

Dato’ Sri Adam Sani bin Abdullah

Peter Madhavan

NOMINATION COMMITTEE

Peter Madhavan (Chairman)

Haji Mohd Radzuan bin Abdullah

Wong Peng Yew

COMPANY SECRETARIES

Tai Yit Chan (MAICSA 7009143)

Liew Irene (MAICSA 7022609)

DATE OF INCORPORATION

1 October 1981

REGISTERED OFFICE

16th Floor, Menara Naluri161B Jalan Ampang50450 Kuala LumpurTel. No. 603 2179 2000Fax No. 603 2179 2179

SHARE REGISTRAR

Securities Services (Holdings) Sdn Bhd (36869-T)Level 7 Menara MileniumJalan DamanlelaPusat Bandar DamansaraDamansara Heights50490 Kuala LumpurTel. No. 603 2084 9000Fax No. 603 2094 9940 603 2095 0292

PRINCIPAL BANKER

Malayan Banking Berhad (3813-K)Lot 1.01, Ampang Park Shopping ComplexJalan Ampang50450 Kuala Lumpur

AUDITORS

Ernst & Young (AF 0039)Level 23A Menara MileniumJalan DamanlelaPusat Bandar DamansaraDamansara Heights50490 Kuala LumpurTel. No. 603 7495 8000Fax No. 603 2095 5332 (Main) 603 2095 9078 (Audit)

STOCK EXCHANGE LISTING

The Main Board ofBursa Malaysia Securities Berhad (635998-W)Date : 30 November 1989Name/Code : Naluri/4693Stock Sector : Trading & Services

Corporate Information


3

DATO ̓SRI ADAM SANI BIN ABDULLAH(Formerly Dato’ Sri Maung Ng We)Executive ChairmanExecutive Director

Dato’ Sri Adam Sani bin Abdullah (formerly Dato’ Sri Maung Ng We), Malaysian, aged 50, was appointed as the Executive Chairman and Executive Director of the Company on 7 December 2004. He has embraced Islam and hence has adopted the name of Dato’ Sri Adam Sani bin Abdullah.

Dato’ Sri Adam is a self-made entrepreneur. He received his primary education in Malaysia and secondary education in the United Kingdom. He has been involved in plantation, insurance, property investment and property management for more than 20 years.

Dato’ Sri Adam serves as a member of the Remuneration Committee of the Company. Dato’ Sri Adam is also the Chairman and Non-Executive Director of Atlan Holdings Bhd.

Dato’ Sri Adam is indirectly interested in 220,965,222 ordinary shares of RM1.00 each, representing 35.56% of equity interest in the Company via Atlan Properties Sdn Bhd by virtue of his deemed substantial shareholding in Atlan Holdings Bhd. Atlan Properties Sdn Bhd is a wholly-owned subsidiary of Atlan Holdings Bhd. Save as aforesaid, he has no family relationship with any other director and/or major shareholder of the Company. He does not have any conflict of interest with the Company or any convictions for offences within the past ten (10) years other than traffic offences, if any.

TAN SRI SAW HUAT LYEExecutive Director

Tan Sri Saw Huat Lye, Malaysian, aged 71, holds a Bachelor of Arts (Hons) in Economics from University of Malaya and graduated from Harvard Business School, United States of America with the Advanced Management Program. He is also a Fellow of the Chartered Institute of Transport.

He was appointed as a Director of Naluri on 1 October 1981. He joined the public sector and held various positions with the Malayan Home and Foreign Services from 1958 to 1971, which include Assistant District Officer, Kinta South and Assistant State Secretary, Perak.

He was the first General Manager and Chief Executive of Malaysian Airline System Berhad (“MAS”), which he helped to set up in 1971. He left MAS in 1982. His other work experience includes the Chairman for Taiping Town Council, Assistant Federal Commissioner of Lands and Deputy Secretary General for the Ministry of Transport.

Tan Sri Saw Huat Lye is also the Chairman of Guinness Anchor Berhad, and a Director on the Board of Shell Refining Company (Federal of Malaya) Berhad and Edaran Otomobil Nasional Berhad, all listed on the Bursa Malaysia Securities Berhad.

Tan Sri Saw Huat Lye is also a shareholder of Naluri by virtue of his direct interest in the securities of Naluri as disclosed in the Director’s Report set out on page 33 of the Annual Report.

He has no family relationship with any other director and/or major shareholder of the Company. He does not have any conflict of interest with the Company or any convictions for offences within the past ten (10) years other than traffic offences, if any.



4

JENERAL (B) DATO ̓ SRI ABDULLAH BIN AHMAD @ DOLLAH BIN AMADIndependent Non-Executive Director

Jeneral (B) Dato’ Sri Abdullah bin Ahmad @ Dollah bin Amad, Malaysian, aged 58, was appointed as an Independent Non-Executive Director of the Company on 4 January 2005. He graduated from the Royal Air Force Staff College in Bracknell, United Kingdom in 1982 and later pursued his tertiary education at the University of Lancaster, United Kingdom in 1986 where he graduated with a Masters degree in International Relations and Strategic Studies. He joined the Royal Malaysian Air Force (“RMAF”) in 1968 as a cadet officer and had been serving the Air Force for 36 years before retiring as the Chief of Air Force in 2004 with his last rank as General.

Currently, Jeneral (B) Dato’ Sri Abdullah is the Chief Executive Officer of Langkawi Aerospace Training Centre (“LATC”). He is also a Director of Halim Mazmin Berhad.

Jeneral (B) Dato’ Sri Abdullah does not have any family relationship with any director and/or major shareholder of the Company. He does not have any conflict of interest with the Company or any convictions for offences within the past ten (10) years other than traffic offences, if any.

TENGKU AZMAN IBNI ALMARHUM SULTAN ABU BAKARIndependent Non-Executive Director

Tengku Azman Ibni Almarhum Sultan Abu Bakar, Malaysian, aged 54, was appointed as an Independent Non-Executive Director of the Company on 6 May 2005.

Tengku Azman had his early education in the United Kingdom. He started off his career with the Hongkong & Shanghai Banking Corporation in 1973 as regional officer trainee. After completing the training period in Hongkong Head Quarters and the Institute of Banking (Part 1), he then returned to Malaysia and continued working with Hongkong & Shanghai Banking Corporation before setting up his own business Jomalina Sdn Bhd, a company involved in palm oil refining in 1976. From then onwards, Tengku Azman continued his career path by assuming management positions in several other private limited companies. In the period from 1985 to 2001, Tengku Azman held the position of a Director of Aetna Universal Insurance Berhad and Ralco Corporation Berhad, companies involved in multi-line insurance and manufacturing and trading of plastic materials, respectively. Currently, Tengku Azman is the Chairman of several private companies including Oakwell Industries Sdn Bhd and Nationwide Oil & Gas Sdn Bhd, licensed companies by Petronas specializing in the oil and gas industry.

Tengku Azman does not hold directorship in any other public companies. He has no family relationship with any other director and/or major shareholder of the Company.

He does not have any conflict of interest with the Company or any convictions for offences within the past ten (10) years other than traffic offences, if any.



5

DATO ̓KHALID BIN MOHAMAD JIWANon-Independent Non-Executive Director

Dato’ Khalid bin Mohamad Jiwa, Malaysian, aged 47, was appointed as a Non-Independent Non-Executive Director of the Company on 4 January 2005.

Dato’ Khalid began his impressive career in the financial sector when he joined Bank Bumiputera Malaysia Berhad (“BBMB”) (now known as Bumiputra-Commerce Bank Berhad) in 1981. He is a business graduate from Universiti Technologi MARA and during his tenure with BBMB, he has gathered vast knowledge and experience in financial business activities. At the same time, he has contributed significantly in the company’s operations and business development especially when he was the Head of Credit at one of its Selangor branches, responsible for analysing and managing credit portfolio.

His tremendous experience in the financial sector has led to his involvement in corporate ventures. Being an aggressive entrepreneur, he began making inroads into the corporate world when he was appointed as a Director of PASDEC Holdings Berhad, a public listed company on the Main Board of Bursa Malaysia Securities Berhad.

Dato’ Khalid is also a Director of DFZ Capital Berhad, Asian Composites Manufacturing Sdn Bhd and United Industries Holdings Sdn Bhd.

He is the Executive Chairman of Ace Global Ventures Sdn Bhd and its group of companies, involve in TV media services, supply of TV programmes, events management, supply of broadcast and other specialised equipment, property, construction and engineering works.

He is currently the Patron of Pertubuhan Seni Silat Ikatan Kalam Utama Malaysia (“PIKUM”), with a vision to position Seni Silat Kalam at a greater height in the society. He is also the Advisor to the Committee of several community associations.

Dato’ Khalid does not have any family relationship

with any director and/or major shareholder of the Company. He does not have any conflict of interest with the Company. He has had no convictions for any offences within the past ten (10) years other than traffic offences, if any.

LEE SZE SIANGExecutive Director

Lee Sze Siang, Malaysian, aged 36, was appointed as an Executive Director of the Company on 7 December 2004. He holds a professional qualification from the Australian Society of Certified Practising Accountants. He is also a member of the Malaysian Institute of Accountants. Previously, he was with KPMG, a firm of public accountants.

Lee Sze Siang sits in the Audit Committee of the Company and he is also a Director of Atlan Holdings Bhd.

He does not have any family relationship with any director and/or major shareholder of the Company. He does not have any conflict of interest with the Company or any convictions for offences within the past ten (10) years other than traffic offences, if any.



6

KAN WENG HINExecutive Director

Kan Weng Hin, Malaysian, aged 44, is a law graduate from the University of Canterbury, New Zealand. He was admitted to the Law Society of New Zealand in 1985.

Subsequently, he was admitted to the Bar Council of Malaysia in 1986. He has over 20 years in the legal practice and has extensive experience in banking, commercial and corporate litigation and in the restructuring exercise of public listed companies. He was appointed as an Executive Director of the Company on 4 January 2005.

He does not hold directorship in any other public companies. He does not have any family relationship with any director and/or major shareholder of the Company. He does not have any conflict of interest with the Company or any convictions for offences within the past ten (10) years other than traffic offences, if any.

WONG PENG YEWNon-Independent Non-Executive Director

Wong Peng Yew, Malaysian, aged 40, was appointed as a Non-Independent Non-Executive Director of the Company on 29 December 2004.

He graduated from Monash University, Australia in 1993 holding a Bachelor of Economics (Accounting) and a Graduate Diploma in Business Information System. He started his career with PricewaterhouseCoopers in year 1993 and later joined Ban Hin Lee Bank Berhad as a senior CIS audit supervisor/analyst programmer from 1993 to 1994. He was in DFZ Group of Companies from 1994 to 2000. During this period, he held various senior positions as Chief Internal Auditor, Chief Business Engineering Officer, General Manager-Business Development and Director-Corporate Affairs. He ventured into consultancy business in 2000 to 2002.

Wong Peng Yew serves as a member of the Nomination Committee of the Company. He also sits on the board of DFZ Capital Berhad, a company listed on Bursa Malaysia Securities Berhad as well as several private limited companies.

He does not have any family relationship with any director and/or major shareholder of the Company. He does not have any conflict of interest with the Company or any convictions for offences within the past ten (10) years other than traffic offences, if any.



7

HAJI MOHD RADZUAN BIN ABDULLAHIndependent Non-Executive Director

Haji Mohd Radzuan bin Abdullah, Malaysian, aged 40, was appointed as an Independent Non-Executive Director of the Company on 22 December 2003. He holds a Bachelor of Arts (Hons) in Islamic Studies from the University Kebangsaan Malaysia and a Masters degree in Islamic Studies from the Graduate School of Islamic and Social Sciences in Virginia, United States of America.

He is the Chairman of the Audit Committee and Remuneration Committee and also serves as a member in the Nomination Committee of the Company. He does not hold directorship in any other public companies.


PETER MADHAVANIndependent Non-Executive Director

Peter Madhavan, Singaporean, aged 51, is a law graduate from the National University of Singapore. He was appointed as an Independent Non-Executive Director of the Company on 20 September 2004.

Peter is a practicing lawyer and is the Managing Partner of Madhavan Partnership, which he owns and formed in 1983. He has an extensive knowledge in legal practice relating to banking and financial sectors, insurance, corporate and commercial litigation. Peter is the Honorary Consul of the Republic of Uruguay in Singapore.

Peter is the Chairman of the Nomination Committee and also serves as a member in the Audit Committee and Remuneration Committee of the Company. He does not hold directorship in any other public companies.




8

Corporate Structureas at 10 May 2006

100% Naluri Properties Sdn Bhd (formerly known as Technologies Resources Properties Sdn Bhd)

100% United Industries Holdings Sdn Bhd (formerly known as Bellinzone Corporation Sdn Bhd)

64.69 % DFZ Capital Berhad (formerly known as Sriwani Holdings Berhad)

100% MHS Airline Management Sendirian Berhad

51% MHS Land Sdn Bhd

100% Trifiniti Networks Sdn Bhd

100% MHS Shipping Management Sendirian Berhad

100% MHS Shipping Line Sendirian Berhad

100% MHS Capital Sdn Bhd

100% Ocean Pride Sdn Bhd

100% Darul Metro Sdn Bhd

100% Zon Hospitality Services Sdn Bhd (formerly known as Timepoint Sdn Bhd)

100% Tegapasti Sdn Bhd

100% RZ Equities Sdn Bhd

100% International Aviation Consultants Sdn Bhd

100% Timeless Image Sdn Bhd

100% Blossom Time Sdn Bhd

100% Tenggara Senandung Sdn Bhd

100% Naluri Properties Pte Ltd

25%

Scandinavian Avionics (Malaysia) Sdn Bhd

25%

Asian Composites Manufacturing Sdn Bhd

100% Belia Karisma Sdn Bhd

100% United Industries Sdn Bhd

70% United Sanoh Industries Sdn Bhd

100% Orchard Boulevard Sdn Bhd

100% Sriwani Trading Sdn Bhd

100% Selasih Ekslusif Sdn Bhd

100% Winner Prompt Sdn Bhd

75% Duty Free People Pty Ltd

100% Naluri International Limited

70% Gardenia Success Sdn Bhd

50%

93% United Filter Sdn Bhd

100% Danco Marketing Sdn Bhd

100% Freighter Industries (M) Sdn Bhd

100% UEW Plastic Industries Sdn Bhd

100% United Vehicle Industries Sdn Bhd 100% Kadar Prisma Sdn Bhd

100% UVI Advance Technology Sdn Bhd

100% Peri-Asia Sdn Bhd

100% Pacific Pleasures Limited

100% TRIM Capital Management (M) Sdn Bhd

85.30% Kelana Megah Sdn Bhd

100% Radiant Ranch Sdn Bhd

100% Cergasjaya Properties Sdn Bhd

100% Cerah Menang (M) Sdn Bhd

100% Black Forest Golf And Country Club Sdn Bhd

100% Gold Vale Development Sdn Bhd

100% Cergasjaya Sdn Bhd

51% Melaka Duty Free Sdn Bhd

100% Sriwani Duty Free Supplies Sdn Bhd

100% Jasa Duty Free Sdn Bhd

100% Sriwani Tax-Free Emporium Sdn Bhd

100% Syarikat Sriwani (M) Sdn Bhd

75% Wealthouse Sdn Bhd

100% Jelita Duty Free Supplies Sdn Bhd

100% Sriwani Duty Free Centre (Langkawi) Sdn Bhd

100% Media Zone Sdn Bhd

100% Sriwani (Mongolia) Co Ltd

100% Sriwani Tours & Travel Sdn Bhd 100% Fleet Car Hire & Tours Sdn Bhd

50%

81%19%

28%

65%

(formerly known as Naluri Berhad)

Listed Company

Associate Company


9

100% Naluri Properties Sdn Bhd (formerly known as Technologies Resources Properties Sdn Bhd)

100% United Industries Holdings Sdn Bhd (formerly known as Bellinzone Corporation Sdn Bhd)

64.69 % DFZ Capital Berhad (formerly known as Sriwani Holdings Berhad)

100% MHS Airline Management Sendirian Berhad

51% MHS Land Sdn Bhd

100% Trifiniti Networks Sdn Bhd

100% MHS Shipping Management Sendirian Berhad

100% MHS Shipping Line Sendirian Berhad

100% MHS Capital Sdn Bhd

100% Ocean Pride Sdn Bhd

100% Darul Metro Sdn Bhd

100% Zon Hospitality Services Sdn Bhd (formerly known as Timepoint Sdn Bhd)

100% Tegapasti Sdn Bhd

100% RZ Equities Sdn Bhd

100% International Aviation Consultants Sdn Bhd

100% Timeless Image Sdn Bhd

100% Blossom Time Sdn Bhd

100% Tenggara Senandung Sdn Bhd

100% Naluri Properties Pte Ltd

25%

Scandinavian Avionics (Malaysia) Sdn Bhd

25%

Asian Composites Manufacturing Sdn Bhd

100% Belia Karisma Sdn Bhd

100% United Industries Sdn Bhd

70% United Sanoh Industries Sdn Bhd

100% Orchard Boulevard Sdn Bhd

100% Sriwani Trading Sdn Bhd

100% Selasih Ekslusif Sdn Bhd

100% Winner Prompt Sdn Bhd

75% Duty Free People Pty Ltd

100% Naluri International Limited

70% Gardenia Success Sdn Bhd

50%

93% United Filter Sdn Bhd

100% Danco Marketing Sdn Bhd

100% Freighter Industries (M) Sdn Bhd

100% UEW Plastic Industries Sdn Bhd

100% United Vehicle Industries Sdn Bhd 100% Kadar Prisma Sdn Bhd

100% UVI Advance Technology Sdn Bhd

100% Peri-Asia Sdn Bhd

100% Pacific Pleasures Limited

100% TRIM Capital Management (M) Sdn Bhd

85.30% Kelana Megah Sdn Bhd

100% Radiant Ranch Sdn Bhd

100% Cergasjaya Properties Sdn Bhd

100% Cerah Menang (M) Sdn Bhd

100% Black Forest Golf And Country Club Sdn Bhd

100% Gold Vale Development Sdn Bhd

100% Cergasjaya Sdn Bhd

51% Melaka Duty Free Sdn Bhd

100% Sriwani Duty Free Supplies Sdn Bhd

100% Jasa Duty Free Sdn Bhd

100% Sriwani Tax-Free Emporium Sdn Bhd

100% Syarikat Sriwani (M) Sdn Bhd

75% Wealthouse Sdn Bhd

100% Jelita Duty Free Supplies Sdn Bhd

100% Sriwani Duty Free Centre (Langkawi) Sdn Bhd

100% Media Zone Sdn Bhd

100% Sriwani (Mongolia) Co Ltd

100% Sriwani Tours & Travel Sdn Bhd 100% Fleet Car Hire & Tours Sdn Bhd

50%

81%19%

28%

65%

(formerly known as Naluri Berhad)

Listed Company

Associate Company


10

FINANCIAL HIGHLIGHTS

With the full year contribution from our subsidiaries, DFZ Capital Berhad (“DFZ”) and United Industries Holdings Sdn Bhd (“UI”), the revenue of Naluri Group rose to RM466.11 million for the year under review, as compared to RM80.65 million in the preceding year. DFZ Group recorded a revenue of RM252.27 million in 2005, an increase of 51% from RM167.34 million in 2004 while UI Group recorded a revenue of RM176.93 million in 2005, the first full year the group accounts were prepared.

In 2005, Naluri was able to realize its investment in World Air Holdings, Inc. This has allowed Naluri to recognize an exceptional gain of RM45.98 million. Together with the operating profit, Naluri Group achieved a profit before taxation of RM77.71 million, representing an increase of 4.3 times the corresponding figure of RM18.25 million in 2004. After taxation and minority interests, the net profit attributable to shareholders is RM60.04 million. This is 7.4 times the 2004 figure of RM8.13 million.

At the company level, Naluri achieved a revenue of RM23.47 million, which is 34% lower than RM35.55 million recorded in 2004. The net profit is much higher at RM35.37 million, against RM13.17 million in 2004, an increase of 2.7 times. The much higher net profit is mainly due to the dividend received from DFZ and Tenggara Senandung Sdn Bhd in addition to the exceptional gain recorded.

BUSINESS DEVELOPMENT

Naluri is completing the refurbishment of Menara Naluri. We are seeing good response in securing tenants. On 25 April 2006, we launched our 400-room hotel in Johor Bahru, The ZON Regency Hotel by the sea, co-branding it with our 185-room/suite hotel, The ZON All Suites Residences on the park, which was launched on 12 January 2006, as well as The ZON duty-free outlets of our subsidiary, DFZ. We are progressively refurbishing the hotel rooms and facilities with the aim of creating a bright friendly Malaysian ambience. With the better products, we will be able to intensify our marketing efforts and take advantage of our excellent location in the vicinity of the Kuala Lumpur City Centre, better known as KLCC.

Our Jalan Ampang land where our Menara Naluri and The ZON All Suites Residences on the park are located, has space for further development and we are working earnestly to germinate the most optimum plan to derive the best value-added to our company.

Assalamualaikum warahmatullahi wabarakatuh

On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of Naluri Corporation Berhad (“Naluri”) for the financial year ended 31 December 2005.

We have finalised the development plan for our Batu Ferringhi land known as The Residences @ Ferringhi Park. The project will consist of luxury bungalows and link houses by the sea, hillside bungalows and semi-detached houses, and shop houses. We have launched the first phase of 54 units of semi-detached houses and 3 units of bungalows on 12 May 2006, which have received an over-whelming response. We aim to use the best available building materials for all the residential units, so as to create an icon in the Penang high-end property scene.

Our listed subsidiary has adopted a new name, DFZ Capital Berhad, with effect from 25 July 2005 to reflect the new lease of life it has attained since 2005. The duty-free business of DFZ has done well with its enhanced marketing effort, capitalizing on its strong financial position and the improved tourist arrivals. The DFZ Group will continue its effort to create a warm shopping environment at its outlets.

The Group has commenced the refurbishment of the facilities of The ZON Regency Hotel by the sea, The ZON Mall shopping complex and The ZON Department Store. This will be part of a continual effort to make The ZON Johor Bahru the place for entertainment and shopping.

UI Group achieved a respectable profit after tax of RM7.39 million. The performance was affected by the price increase of raw materials, notably steel. The competitive automotives market in Malaysia and elsewhere also did not help in the UI Group performance.

Message From The Executive Chairman


11

SHARE BUY-BACK

On 20 December 2005, we obtained the shareholders’ mandate to buy-back Naluri shares. We have, between 26 January to 23 February 2006, purchased 69,051,700 Naluri shares at a total cost of RM43,155,107 and cancelled them on 16 March 2006.

We are proposing to seek a fresh shareholders’ mandate to purchase another 10% of Naluri shares at the forthcoming Annual General Meeting.

We believe the share buy-back is beneficial to both Naluri and the shareholders.

OUTLOOK

We are optimistic about the planned development of our project, The Residences @ Ferringhi Park.

We expect the performance of DFZ to be in line with the expected increase of tourist arrivals to Malaysia with the continued promotion of Malaysia in the international tourism markets and the opening of the Low Cost Carriers (“LCC”) Terminal at the Kuala Lumpur International Airport (“KLIA”) on 23 March 2006. We believe that the efforts of KLIA to get more airlines to use the Main Terminal will bear fruit and reduce the short-term impact of the diversion of some traffic from the Main Terminal to the LCC Terminal of KLIA. We are hopeful that our ZON duty-free outlet at the arrival hall of the Main Terminal of KLIA, one of DFZ’s main contributors, will continue to do well.

UI Group, although continues to operate in a competitive market, will ensure all best efforts are undertaken to continue to do well.

In addition, we are seeking opportunities to create value to our assets, particularly our Jalan Ampang land.

ACKNOWLEDGEMENTS

On behalf of the Board, I would like to express my utmost appreciation to the Government and regulatory authorities for providing us with a stable and conducive business environment.

To our shareholders, valued customers, tenants, bankers, government officers and business associates, I thank you for your support and confidence in our Group.

Last but not least, I would like to thank the management and staff of the Group for their loyalty, commitment and hard work.

As for myself, I remain your loyal and obedient servant.

Thank you.

Wassalam.

Adam Sani bin AbdullahExecutive Chairman

Message From The Executive Chairman


12

KAJIAN KEWANGAN

Sumbangan setahun secara keseluruhan dari anak-anak syarikat, DFZ Capital Berhad (“DFZ”) dan United Industries Holdings Sdn Bhd (“UI”), perolehan Kumpulan Naluri meningkat ke RM466.11 juta untuk tahun ini berbanding RM80.65 juta pada tahun lepas. Kumpulan DFZ mencatatkan perolehan sebanyak RM252.27 juta pada tahun 2005, iaitu peningkatan sebanyak 51% dari RM167.34 juta pada tahun 2004, manakala Kumpulan UI telah mencatatkan perolehan sebanyak RM176.93 juta pada tahun 2005 bagi tahun penuh akaun kumpulan disediakan.

Dalam tahun 2005, Naluri telah merealisasikan pelaburannya di dalam World Air Holdings, Inc. Ini membolehkan Naluri mencapai keuntungan luarbiasa sebanyak RM45.98 juta. Berserta dengan keuntungan operasi, Kumpulan Naluri berjaya memperolehi keuntungan sebelum cukai sebanyak RM77.71 juta, iaitu pencapaian sebanyak 4.3 kali berbanding dengan RM18.25 juta pada tahun 2004. Setelah ditolak cukai dan kepentingan minoriti, keuntungan bersih yang boleh diagihkan kepada pemegang saham adalah sebanyak RM60.04 juta. Ini adalah 7.4 kali jumlahnya berbanding RM8.13 juta pada tahun 2004. Di peringkat syarikat, perolehan Naluri adalah sebanyak RM23.47 juta, iaitu 34% kurang dari RM35.55 juta yang telah dicatatkan pada tahun 2004. Keuntungan bersih adalah lebih tinggi, sebanyak RM35.37 juta, berbanding dengan RM13.17 juta pada tahun 2004, iaitu pertambahan sebanyak 2.7 kali. Keuntungan bersih yang lebih tinggi ini adalah disebabkan oleh dividen yang diterima daripada DFZ dan Tenggara Senandung Sdn Bhd sebagai tambahan kepada keuntungan luarbiasa yang dicatatkan.

PEMBANGUNAN PERNIAGAAN

Naluri kini di dalam proses pengubahsuaian Menara Naluri. Usaha ini telah menerima maklumbalas yang baik untuk menarik para penyewa. Pada 25 April 2006, kami telah merasmikan hotel 400 bilik di Johor Bahru, iaitu The ZON Regency Hotel by the sea, memposisikannya bersama-sama dengan hotel 185 bilik/suite kami iaitu The ZON All Suites Residences on the park yang telah dirasmikan pembukaannya pada 12 Januari 2006, dan juga The ZON kedai bebas-cukai yang dimiliki oleh anak syarikat kami, DFZ. Kami sedang menjalankan pengubahsuaian bilik-bilik hotel dan semua kemudahan secara progresif dengan objektif mewujudkan suasana mesra Malaysia. Dengan adanya pengubahsuaian ini, kami akan berupaya melipatgandakan usaha pemasaran dan menggunakan kedudukan lokasi strategik kami yang berada di dalam lingkungan kawasan Kuala Lumpur City Centre atau lebih dikenali sebagai KLCC.

Tanah kami di Jalan Ampang yang menempatkan Menara Naluri dan The ZON All Suites Residences on the park masih mempunyai kawasan yang boleh digunakan untuk pembangunan dan kami sedang berusaha menghasilkan pelan yang optimum untuk menjana nilai yang terbaik bagi syarikat.


Bagi pihak Lembaga Pengarah, saya dengan sukacitanya membentangkan Laporan Tahunan dan Penyata Kewangan yang telah diaudit bagi Naluri Corporation Berhad (“Naluri’) bagi tahun berakhir 31 Disember 2005.

Kami telah menyiapkan pelan pembangunan bagi tanah kami di Batu Ferringhi, yang dikenali sebagai The Residences @ Ferringhi Park. Projek ini merangkumi kediaman banglo dan rumah teres di tepi laut, banglo dan rumah berkembar di tepi bukit berserta rumah-rumah kedai. Fasa pertama yang merangkumi 54 unit rumah berkembar dan 3 unit banglo yang dilancarkan pada 12 Mei 2006, telah menerima sambutan hangat. Bagi mencipta satu ikon persekitaran hartanah yang bernilai tinggi, kami akan menggunakan bahan-bahan binaan yang terbaik dan bermutu yang sedia ada untuk semua unit kediaman ini.

Anak syarikat kami yang tersenarai di Bursa Malaysia Securities Berhad telah menukar nama kepada DFZ Capital Berhad berkuatkuasa dari 25 Julai 2005 bagi mencerminkan perubahan baru yang telah diperkenalkan sejak 2005. Perniagaan bebas cukai yang dijalankan oleh DFZ telah menunjukkan peningkatan yang cemerlang melalui peningkatan usaha pemasaran, mengambil kesempatan di atas kedudukan kewangan yang kukuh dan peningkatan kedatangan pelancong. Kumpulan DFZ akan terus berusaha untuk menghasilkan satu suasana membeli-belah yang mesra di kedai-kedai mereka. DFZ telah memulakan kerja-kerja pengubahsuaian kemudahan di The ZON Regency Hotel by the sea, kompleks membeli-belah The ZON Mall dan The ZON Department Store. Ini adalah satu usaha berterusan untuk menjadikan The ZON Johor Bahru sebagai sebuah tempat hiburan dan membeli-belah yang terpilih.

Walaupun Kumpulan UI berjaya memperolehi keuntungan selepas cukai sebanyak RM7.39 juta, namun prestasi Kumpulan ini terjejas akibat peningkatan harga bahan mentah, khususnya besi waja. Persaingan hebat di dalam pasaran automotif Malaysia dan dunia juga tidak membantu meningkatkan prestasi Kumpulan.

Penyata PengerusiEksekutif


13

PEMBELIAN-BALIK SAHAM

Pada 20 Disember 2005, kami mendapat mandat daripada pemegang saham untuk membeli balik saham Naluri. Kami telah membeli 69,051,700 saham Naluri yang bernilai RM43,155,107 dari 26 Januari hingga 23 Februari 2006 dan pembatalan telah dibuat pada 16 Mac 2006.

Kami bercadang untuk mendapatkan mandat baru daripada pemegang saham untuk membeli balik 10% lagi saham Naluri pada mesyuarat agung tahunan yang akan datang.

Kami percaya pembelian balik saham ini akan menguntungkan kedua-dua pihak Naluri dan para pemegang saham.

HARAPAN

Kami berkeyakinan tinggi dengan pelan pembangunan projek kami, The Residences @ Ferringhi Park.

Kami menjangkakan prestasi DFZ sejajar dengan pertambahan kedatangan pelancong ke Malaysia dengan promosi secara berterusan Malaysia di pasaran pelancongan antarabangsa, dan dengan pembukaan Terminal Tambang Rendah (“LCC”) di Lapangan Terbang Antarabangsa Kuala Lumpur (“KLIA”) pada 23 Mac 2006. Kami percaya, segala usaha KLIA untuk menarik lebih banyak syarikat penerbangan menggunakan Terminal Utama akan membuahkan hasil dan mengurangkan kesan jangka pendek pembahagian trafik dari Terminal Utama kepada Terminal LCC di KLIA. Dengan ini kami berharap kedai The ZON bebas-cukai kami yang terletak di balai ketibaan Terminal Utama KLIA, salah satu dari penyumbang utama Syarikat, akan memberi sumbangan berterusan.

Kumpulan UI, walaupun beroperasi di dalam pasaran yang kompetitif, akan memastikan segala usaha yang perlu, untuk menambah prestasi mereka.

Kami sentiasa mencari peluang untuk menambah nilai kepada aset Syarikat, terutamanya di tanah kami yang terletak di Jalan Ampang.

PENGHARGAAN

Bagi pihak Lembaga Pengarah, saya ingin menyampaikan penghargaan yang tidak terhingga kepada Kerajaan dan badan-badan berkanun yang telah mewujudkan keadaan persekitaran perniagaan yang stabil dan terurus.

Kepada pemegang-pemegang saham, pelanggan yang dihargai, para penyewa, pihak bank, kakitangan kerajaan dan sekutu perniagaan, saya mengucapkan ribuan terima kasih di atas sokongan serta kepercayaan anda terhadap Kumpulan kami.

Tidak lupa juga, saya ingin mengucapkan terima kasih kepada pihak pengurusan dan kakitangan Kumpulan di atas ketaatan, komitmen dan kerja keras anda.

Bagi diri saya, saya sentiasa setia dan sedia berkhidmat untuk anda.

Terima kasih.

Wassalam.

Adam Sani bin AbdullahPengerusi Eksekutif

Penyata PengerusiEksekutif


14

财务重点

总结一整年的营业额,包括子公司 DFZ Capital Berhad (以下简称“DFZ”)以及United Industries Holdings Sdn Bhd(以下简称“UI”)一整年的贡献,Naluri集团在上述财政年度的总营业额与前年的80.65百万令吉相比,增加到了466.11百万令吉。DFZ 集团在2005年的营业额,比2004年的167.34百万令吉增长了51%,达到252.27百万令吉。UI集团则在2005年达到了176.93百万令吉的营业额;这也是该集团第一次得以预备一整年的财政决算。

在2005年,Naluri成功出售了World Air Holdings,Inc.的股权;这使得Naluri在2005年额外获得了45.98百万令吉的利润。加上公司本身的营业利润,Naluri集团共达到77.71百万令吉的税前利润,比2004年的18.25百万令吉增长了4.3倍。在缴税及少数股权分红之后,可分发予各股东的净利是60.04百万令吉。这比2004年的8.13百万令吉增长了7.4倍。

公司本身达到了23.47百万令吉的营业额,比2004年所记录的35.55百万令吉减少了34%。净利则提高到35.37百万令吉,比2004年的13.17百万令吉,增长了2.7倍。这增长乃是因为在上述额外利润以外,还加上了从DFZ以及Tenggara Senandung Sdn Bhd获得的股息。

企业发展

Naluri即将完成纳鲁里大厦(Menara Naluri)的重新装潢。在征求租户方面,获得了很好的反应。在2006年4月25日,我们在柔佛新山正式推介了设有400间房间的The ZON Regency Hotel by the sea;其命名乃是为了配合推介于2006年1月12日、设有185间房间/套房的 The ZON All Suites Residences on the park,以及我们子公司DFZ经营的一系列The ZON免税商店,以达到品牌上的一致性。我们正在渐进性的重新装潢酒店的房间以及提升其各类设施,以营造一份明亮、友善、马来西亚风味的气氛。有了这些更好的产品,我们就能够加强我们的行销活动,更加有效地发挥我们在地点上处于吉隆坡市中心(KLCC)的这份优势。

我们位于安邦路的地段,也就是现有纳鲁里大厦以及The ZON All Suites Residences on the park的所在地,仍然有可以发展的空间。我们现今正在致力于开发出一份能够叫公司获益最大的发展企划案。

我们已经为Batu Ferringhi地段的发展计划作出最后的定案,并命名为The Residences @ Ferringhi Park。该项发展计划将会包括豪华海滨别墅及排屋、山丘别墅及半独立豪宅、以及商店。我们已经在2006年5月12日推介了54单位的半独立豪宅以及3单位的别墅,并且获得了良好反应。我们计划使用市场上能够找到最优质建材来建造上述住宅单位,在槟城的高档房产市场中建立起高素质的形象。


我欣然代表全体董事,向各位呈报 (Nalur i Corporation Berhad 以下简称“Naluri”) 在截于2005年12月31日的财政年度之年度报告及稽查账目报表。

我们的上市子公司从2005年7月25日起,易名为DFZ,以反映该公司从2005年开始被注入的崭新生命力。透过更积极的行销活动,并且善加利用其稳健的财务地位以及我国成长中的游客人次,DFZ的免税商品营业成功地取得良好的成绩。DFZ集团将会继续致力于在旗下的商行营造出具有亲和力的购物环境。

本集团已经开始提升The ZON Regency Hotel by the sea、The ZON Mall购物广场以及The ZON 超市的各项设施。这是一项持续性努力中的一部份,以便把The Johor Bahru ZON塑造成为娱乐与购物的首选。

UI集团成功达到了7.39百万令吉的税后净利。其表现受到原料价格上涨的影响,尤其是钢铁的价格。国内外汽车市场的激烈竞争也带来了负面的影响。

股权回购

在2005年12月20日,我们获得各股东授权,回购Naluri股权。我们在1月26日至2月23日之间,以43.16百万令吉回购了69,051,700只Naluri股票,并且于2006年3月16日注销了有关股权。

我们正在建议向各股东寻求再一次的授权,以便在来临的年度股东大会上回购另外10%的Naluri股权。

我们相信股权回购对Naluri及其股东都是有利的。

主席献词


15

展望

我们对于计划中的The Residences @ Ferringhi Park发展企划抱着非常乐观的信心。

因着政府在国际旅游市场上为我国旅游业持续进行宣传,再加上吉隆坡国际机场(KLIA)在2006年3月23日开始启用其廉价航班终站(LCCT),预料中涌入我国的游客人次将会增加;因此我们相信DFZ的营业表现也会同步提升。我们相信,KLIA在寻求更多航空公司使用其主要机场终站上所付出的努力,将会成功地收取成果,抗衡在短期内由于部分航空交通量从主要终站转移至廉价航班终站为我们带来的负面冲击。我们期望,作为DFZ的主要营业额来源之一,位于KLIA主要终站入境大厅的The ZON免税商店,能够继续获得良好的业绩。

UI集团虽处于一个竞争性非常高的市场环境之中,我们将会尽一切的努力来确保该集团能够继续获得良好的业绩。

此外,我们正在继续为我们现有的产业寻求增值的机会,尤其是位于安邦路的地段。

鸣谢

我谨代表全体董事,向政府以及相关管理机构致以最高的感谢,因为他们的努力,为我们提供了一个稳定、良好的营业大环境。

对于我们的众股东、尊贵的客户、租户、银行、政府官员以及商业伙伴,我由衷感激您们所给予本集团的支持与信任。

末了,我也要感谢集团的管理层以及全体员工所付出的忠诚、委身以及努力。

至于在下本身,依然会继续地为大家尽忠职守。

谢谢。

Wassalam.

Adam Sani bin Abdullah执行主席

主席献词


16

STATEMENT OF COMPLIANCE

The Malaysian Code on Corporate Governance (“the Code”) essentially sets out principles and best practices on structures and processes that corporations may use in their operations towards achieving the optimal governance framework.

The Board of Directors is committed to ensure that corporate governance is observed and practised by the Company so that the affairs of the Company are conducted with integrity, full transparency and professionalism with the main objective of safeguarding the interest of stakeholders.

Accordingly, the Company is continuously taking all required actions and steps to ensure compliance with the Principles and Best Practices of Corporate Governance and the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”).

BOARD OF DIRECTORS

Composition and Responsibilities of the Board of Directors

The Board of Directors of the Company consists of ten (10) members comprising:- One (1) Executive Chairman - Three (3) Executive Directors- Four (4) Independent Non-Executive Directors- Two (2) Non-Independent Non-Executive Directors

The current composition of the Board is in compliance with the Code and Listing Requirements of Bursa Securities.

The Board consists of members from a wide range of professions; are persons of high calibre and credibility and possess the necessary skills and experience to effectively discharge the Board’s responsibilities for the Company’s stewardship and for driving the Group’s growth and future direction.

The profile of each director is set out on pages 3 to 7 of the Annual Report.

The Board recognises its ultimate responsibility and accountability for the Group’s operations and retains full and effective control of the Group. The Board assumes responsibilities for determining the Company’s overall strategic direction as well as development and control of the Group.

An Executive Committee comprising key management personnel assists the Board in the day-to-day operations of the Group. The Executive Committee deals with a wide range of matters, including review of monthly financial results, proposal for capital expenditure and major operating issues. The Committee also reviews acquisitions, disposals and budgets before they are submitted to the Board.

Statement onCorporate Governance


17

BOARD OF DIRECTORS (contd.)

Board Meetings

The Board meets at least once every quarter with additional meetings convened as and when required. During the financial year ended 31 December 2005, the Company convened a total of five (5) meetings and the respective director’s attendance is as follows:

No. Director DescriptionNo. of Meetings

attended %

1. Dato’ Sri Adam Sani bin Abdullah Executive Chairman 5/5 100

2. Tan Sri Saw Huat Lye Executive Director 5/5 100

3. Jeneral (B) Dato’ Sri Abdullah bin Ahmad @ Dollah Bin Amad (Appointed on 4 January 2005)

Independent Non-Executive Director

3/5 60

4. Tengku Azman Ibni Almarhum Sultan Abu Bakar (Appointed on 6 May 2005)


2/3 67

5. Dato’ Khalid bin Mohamad Jiwa (Appointed on 4 January 2005)

Non-Independent Non-Executive Director

5/5 100

6. Lee Sze Siang Executive Director 5/5 100

7. Kan Weng Hin(Appointed on 4 January 2005)

Executive Director 5/5 100

8. Wong Peng Yew Non-Independent Non-Executive Director

5/5 100

9. Haji Mohd Radzuan bin Abdullah


5/5 100

10 Peter Madhavan Independent Non-Executive Director

4/5 80

11. Tan Sri Dato’ Tajudin bin Ramli(Retired on 23 June 2005)

Non-Independent Non-Executive Director

0/3 0

The roles of Chairman and Chief Executive Officer are currently assumed by Dato’ Sri Adam Sani bin Abdullah (“DSAS”) in recognition of DSAS’s entrepreneurial leadership. He has overall responsibility for the Group’s business operations, organizational effectiveness and the implementation of the policies and decisions. Nevertheless, all major matters and issues are referred to the Board for consideration and approval, and the ultimate responsibility for the final decision on all matters lies with the Board of Directors. The roles and contributions of Independent Directors also provide an element of objectivity and independent judgement to the Board.



18

SUPPLY OF INFORMATION AND ACCESS TO ADVICE

The Board of Directors is responsible for carrying out the day-to-day administrative functions of the Company and of the Group. All Directors have full and timely access to information through the Board papers distributed in advance of meetings.

Prior to the Board meetings, all Directors are provided with performance and progress reports. Papers on specific subjects are circulated in advance to ensure that the Directors are informed before the meetings and they are able to obtain further information and clarifications. The Board papers provide, among others, periodic financial information, annual budget, operational and corporate issues, investment proposals and management proposals that require Board’s approval.

Senior management staff may be invited to attend Board meetings to provide the Board detailed explanations and clarifications on certain matters that are tabled to the Board.

All Directors have access to all information within the Company and the Group, can seek services and advice of the Company Secretary and may obtain independent professional advice at the Company’s expenses, if necessary, in furtherance of their duties.

APPOINTMENT AND RE-ELECTION OF DIRECTORS

Appointments to the Board are made based on the recommendation of the Nomination Committee.

In accordance with Article 112 of the Articles of Association of the Company, one-third of the Directors shall retire from office at every annual general meeting but shall be eligible for re-election and each Director shall retire at least once each three years but shall be eligible for re-election. In accordance with Article 86 of the Company’s Articles of Association, Directors appointed during the year by the Board shall hold office until the next annual general meeting and shall then be eligible for re-election.

A retiring Director is eligible for re-election. The election of each Director is voted separately. To assist shareholders in their decision, sufficient information such as personal profile, meeting attendance and the shareholdings in the Group of each retiring Director are furnished in separate statements in the Annual Report.

Directors over seventy (70) years of age are subject to annual re-appointment in accordance with Section 129 of the Companies Act, 1965.



19

DIRECTORS’ TRAINING

All the Directors have completed the Mandatory Accreditation programme pursuant to the requirements of Bursa Securities.

The Directors are mindful that they should receive appropriate continuous training and they have attended seminars and briefings during the financial year in order to broaden their perspectives and to keep abreast with developments in the market place and with new statutory and regulatory requirements.

During the financial year, all the Directors have attended training programmes in the area of corporate governance, finance, taxation and risk management organized by the Company. The Directors continue to undergo other relevant training programmes as appropriate, to further enhance their skills and knowledge.

BOARD COMMITTEES

The Board has delegated specific responsibilities to the Board Committees whose functions and authorities are spelt out in their respective terms of reference to assist the Board in the efficient and effective discharge of its duties.

(a) AUDIT COMMITTEE

A full Audit Committee report enumerating its membership, its role and its activities during the year is set out on pages 25 to page 28 of the Annual Report.

(b) NOMINATION COMMITTEE

The Nomination Committee comprising mainly non-executive directors, majority of whom are independent and its composition is as follows:

1. Peter Madhavan (Appointed as Chairman on 26 August 2005)2. Haji Mohd Radzuan bin Abdullah 3. Wong Peng Yew (Appointed on 26 August 2005)4. Dato’ Sri Adam Sani bin Abdullah (Resigned as Chairman and member on 26 August 2005)

The duties and functions of the Nomination Committee are as follows:· Identifying and recommending new nominees for the Board and Board Committees.· Assessing the performance of the Directors of the Company on an on-going basis.· Reviewing annually the Board structure, size and composition.

The decision as to who shall be nominated shall be the responsibility of the full Board after considering the recommendations of the Nomination Committee.

During the year under review, the Committee met a total of two (2) times to carry out its responsibilities.



20

BOARD COMMITTEES (contd.)

(c) REMUNERATION COMMITTEE

The Remuneration Committee comprising mainly non-executive directors are as follows:

1. Haji Mohd Radzuan bin Abdullah (Chairman)2. Dato’ Sri Adam Sani bin Abdullah 3. Peter Madhavan

The Committee is primarily responsible for recommending the policy and framework of Directors’ remuneration, including the terms and remuneration of the Executive Directors, to the Board.

During the year under review, the Committee met once to carry out its responsibilities

DIRECTORS REMUNERATION

The Board believes that remuneration should be sufficient to attract, retain and motivate directors of the necessary calibre and experience to ensure success for the Company. In line with this philosophy, remuneration for Executive Directors is tailored to align rewards to individual and corporate performance. For Non-Executive Directors, the fees would commensurate with the level of experience and responsibilities shouldered by the respective Directors.

The Remuneration Committee recommends the policy framework and is responsible for assessing all the components and terms of the compensation package for the Executive Directors, including the bonus and salary increments. The Board as a whole determines remuneration for Non-Executive Directors. Individual Directors do not participate in determining their remuneration package.

Directors’ fees, if any, are paid to Directors and are to be approved by the shareholders at the Annual General Meeting.

The aggregate remuneration of the Directors of the Company with categorization into appropriate components during the financial year is as follows:

Directors of the CompanyGroup

RM’000Company

RM’000

Executive:

Salaries and other emoluments 3,046 3,046

Benefits-in-kind 20 20

3,066 3,066



21

DIRECTORS REMUNERATION (contd.)

GroupRM’000

CompanyRM’000

Non-Executive:

Salaries and other emolumentsFees

Directors of the SubsidiariesExecutive:Salaries and other emolumentsBenefits-in-kind

Non-Executive:Other emoluments

Aggregate Remuneration

89148

9394,005

5,08274

5,156

4505,606

9,611

-4848

3,114

---

--

3,114

The number of Directors whose total remuneration falls within the following bands is as follows:

Remuneration rangeNo. of Executive

Directors

No. of Non-Executive

Directors

Below RM50,000RM400,001 – RM450,000RM450,001 – RM500,000RM550,001 – RM600,000RM650,001 – RM700,000RM1,350,001 – RM1,400,000

-1-111

411---



22

ACCOUNTABILITY AND AUDIT

Financial Reporting

In presenting the annual financial statements and quarterly announcements to the shareholders, investors and regulatory authorities, the Directors aim at presenting a balanced and understandable assessment of the position and prospects of the Company. The Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965 is set out on page 36 of the Annual Report.

Relationship with External Auditors

The Company has established a professional and transparent relationship with the external auditors. The external auditors are given access to books and records of the Company at all times.


The Statement on Internal Control provides an overview of the internal control within the Group and is set out on page 29 of the Annual Report.

Statement of Directors’ responsibilities in respect of the Audited Financial Statements

The Companies Act, 1965 requires the Directors to prepare financial statements, which give a true and fair view of the state of affairs of the Group and of the Company at the end of each financial year and of their results and cash flows for the financial year.

In exercising the functions of the Board of Directors, the Directors have considered the following in preparing the financial statements:

i) The Company has used appropriate accounting policies, which are consistently applied;ii) Reasonable and prudent judgements and estimates were made; andiii) All applicable approved accounting standards in Malaysia have been followed.

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

The Directors have overall responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Company and to prevent and detect, if any, fraud and other irregularities.



23

INVESTOR RELATIONS AND SHAREHOLDERS COMMUNICATION

Dialogue between the Company and Investors

The Board acknowledges the importance of transparency and accountability to its shareholders, both institutional and private investors. The Board ensures proper communication is maintained through timely dissemination of information on performance and strategic decisions via the distribution of the Annual Report, circulars to shareholders, quarterly financial results, announcements to Bursa Securities and press releases.

The Board has also nominated Haji Mohd Radzuan bin Abdullah, Chairman of the Audit Committee and Remuneration Committee as the contact person for shareholders and investors to convey any queries or concerns they may have on the Group. Haji Mohd Radzuan bin Abdullah can be contacted at Naluri office and via Telephone No. 03 – 2179 2000, Fax No. 03 – 2179 2324 or email: [email protected].

Annual and Extraordinary General Meetings

The Company’s Notice of the Annual General Meeting and Extraordinary General Meeting and the Annual Report are sent to the shareholders in accordance with the time period prescribed by the Company’s Articles of Association and the Listing Requirements of Bursa Securities.

The shareholders are encouraged to attend the Annual General Meeting as it serves as an important avenue for the shareholders to communicate with the members of the Board of Directors. The Chairman will allocate sufficient time for a question and answer session for each item in the agenda, whereby shareholders have the opportunity to raise questions and seek clarifications on business and performance of the Company. The Board of Directors will respond to any questions raised during the meeting, to the best of their abilities and knowledge to do so.

This statement is made with a resolution of the Board of Directors dated 27 April 2006.



24

ADDITIONAL COMPLIANCE STATEMENT

Share Buy-Back

The Company did not purchase any of its own shares during the financial year ended 31 December 2005.

Options, Warrants or Convertible Securities

No options, warrants or convertible securities were issued during the financial year ended 31 December 2005.

American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) Programme

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

Imposition of Sanctions and Penalties

There were no sanctions and penalties by relevant regulatory authorities during the financial year ended 31 December 2005.

Non-Audit Fees

The amount of non-audit fees paid to the external auditors by the Group for the financial year ended 31 December 2005 amounted to RM23,000 as disclosed in Note 7 to the Financial Statements.

Variation in Results, Profit Estimate, Forecast or Projection

There were no material variance between the results for the financial year and the unaudited results for the quarter ended 31 December 2005 of the Group announced on 27 February 2006.

There were no profit estimate, forecast and projection that have been previously announced by the Company during the financial year ended 31 December 2005.

Profit Guarantee

There were no profit guarantees given by the Company during the financial year ended 31 December 2005.

Significant Related Party Transactions

Other than those disclosed in Note 39 to the Financial Statements, there were no material contracts entered into by the Company or its subsidiaries involving Directors’ and major shareholders’ interests, either subsisting at the end of the financial year ended 31 December 2005 or which were entered into since the end of the previous financial year.

Revaluation Policy on landed Properties

The Group has not adopted a policy of regular revaluation of such assets as permitted under the transitional provisions.



25

As at 31 December 2005, the Audit Committee comprises the following Directors:

Chairman of Audit Committee

Haji Mohd Radzuan bin Abdullah - Independent Non-Executive Director

Members

Peter Madhavan - Independent Non-Executive DirectorLee Sze Siang - Executive Director

A. TERMS OF REFERENCE

Size and Composition of the Audit Committee

Adhering to the criteria set out in Paragraph 15.10 of the Listing Requirements of Bursa Securities, the Audit Committee shall be appointed by the Board of Directors, which shall fulfill the following requirements:

• the Audit Committee must at all times consist of at least three (3) members;• a majority of the Audit Committee must be independent non-executive directors;• the members of the Audit Committee shall elect a Chairman from among themselves who shall be an independent non-executive director;• at least one (1) member of the Audit Committee.

i. shall be a member of the Malaysian Institute of Accountants (“MIA”) or ii. if he is not a member of the MIA, he shall have at least three (3) years’ working experience and fulfills the following criteria:

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

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

• No alternate director shall be appointed as a member of the Audit Committee.



26

Quorum and Meetings

The majority of members present must be independent directors to form a quorum.

Other directors, management staff, employees and the external auditors of the Company shall attend meetings at the invitation of the Audit Committee.

A dialogue session between the independent committee members with the external auditors has been held in compliance with the best practices of the Code

Authority and Access

The Audit Committee is authorized by the Board of Directors to:• have the authority to investigate any matter within its terms of reference;• have the resources, which are required to perform its duties;• have full and unrestricted access to any information pertaining to the Company;• have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any);• be able to obtain independent professional advice or other advice, wherever deemed necessary; and• be able to convene meetings with the external auditors, excluding the attendance of the executive members of the Audit Committee, whenever deem necessary.

B. FUNCTIONS OF THE AUDIT COMMITTEE

The functions of the Audit Committee are as follows:

i. To consider the appointment of the External Auditors, the audit fee and any questions of resignation or dismissal and whether there is any reason (supported by grounds) to believe that the External Auditors are not suitable for re-appointment.

ii. To review with the External Auditors:

• their audit plans; • its evaluation of the system of internal controls; • its audit report; • the assistance given by the employees of the Company to the External Auditors; and • the External Auditors’ management letter and the management’s response thereto.

iii. To recommend the nomination of a person or persons as the External Auditors;



27

B. FUNCTIONS OF THE AUDIT COMMITTEE (contd.)

iv. To do the following where an internal audit function exists:

• review the adequacy of the scope, functions and resources of the internal audit functions and that it has all the necessary authority to carry out its work; • review the internal audit programme and the results of the internal audit process or investigation undertaken; • to consider the major findings and whether or not appropriate action is taken on the recommendations of the internal audit function and management’s response thereto; • review any appraisal or assessment of the performance of members of the internal audit function; • to consider the appointment or resignation of senior staff members of the internal audit function (and provide the resigning staff member an opportunity to submit his/her reasons for resigning, if necessary); and • to support, as deem necessary, the internal audit activities.

v. To review the quarterly results and year end financial statements, prior to the approval by the Board of Directors, focusing particularly on:

• any changes in or implementation of major accounting policies and practices; • significant adjustments arising from the audit and any other significant and unusual events; • compliance with accounting standards and other legal requirements; and • any related party transaction and conflict of interest situation that may arise within the Company including any transaction, procedure or course of conduct that raises questions of the management’s integrity.

vi. To consider and examine any other matters as defined by the Board of Directors from time to time.

C. ATTENDANCE

The Audit Committee met four times during the financial year ended 31 December 2005 and the attendance by each member of the committee meetings during the year is as follows:

Name Attendance

Haji Mohd Radzuan bin Abdullah 4/4

Peter Madhavan 4/4

Lee Sze Siang 4/4



28

D. SUMMARY OF THE ACTIVITIES OF THE AUDIT COMMITTEE

During the financial year 2005, the Audit Committee carried out the following activities in the discharge of its functions and duties:

• Reviewed and discussed the nomination for the re-election of the external auditors of the Company before tabling to the shareholders for approval at the Annual General Meeting;• Reviewed with the external auditors their audit plan, audit approach and reporting requirements before the commencement of the audit;• Reviewed the quarterly and annual consolidated financial statements of the Group before submission to the Board for approval;• Reviewed any related party transactions that may arise within the Group or Company;• Reviewed with the external auditors their audit findings and approved for adoption their recommendations; and• Reviewed the internal audit programme, considered the major findings of the internal audit programme and management’s response and ensured appropriate action is taken.

E. SUMMARY OF ACTIVITIES OF THE INTERNAL AUDIT FUNCTION

The internal audit function is independent of the auditable areas in the organization and reports to the Audit Committee. The responsibilities include reviewing the adequacy of the system of internal controls and evaluating the various financial and operational risks faced by the organization.

The internal audit activities are specified in the annual audit plan, which is submitted to the Audit Committee for approval. Internal audit reports with findings and recommendations are forwarded to the Audit Committee for their review.



29

The Board assumes the responsibilities for the Group’s system of internal control and for reviewing its adequacy and integrity. Such system is designed to manage the risk of failure to achieve business objectives, and provide reasonable and not absolute assurance against material misstatement or loss.

In compliance with the Listing Requirements of the Bursa Malaysia Securities Berhad (“Bursa Securities”) in the annual reports and the publication of guidance for directors on internal control “Statement on Internal Control: Guidance for Directors of Public Listed Companies”, the Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group and this has been in place for the financial year and up to the date of approval of the annual report and financial statements.

The Board further confirms that this process is regularly reviewed by the Board and accords with the guidance.

The Group’s system of internal control is maintained to achieve the following objectives:

1. Safeguard the shareholders’ interest and assets of the Group.2. Ensure the achievement of financial and operational objectives.3. Ensure compliance with regulatory requirements.4. Identify and manage risks affecting the Group.

Salient features of the internal framework of internal control system of the Group are as follows:

1. The management and organisation structure are well defined, with clear line of responsibilities and delegation of authorities.2. Key responsibilities are properly segregated in achieving a proper check and balance review and approval process.3. Executive Directors and head of divisions meet regularly to discuss operational, corporate, financial and key management issues. 4. The Board continuously assesses the key business risks with the help of the Audit Committee and external professionals.5. Financial results are reviewed quarterly by the Board and the Audit Committee. 6. Internal control policies and procedures are properly documented and communicated to all staff members.7. Through the internal audit process, the effectiveness of internal control policies and procedures are subject to continuous assessments, reviews and improvements.8. Effective reporting system to ensure timely generation of financial information for management review.

The Directors are of the opinion that the existing system of internal control is adequate in achieving the above objectives.

This statement made in accordance with a resolution of the Board of Directors dated 27 April 2006.

The External Auditors have reviewed the Statement on Internal Control as required by Paragraph 15.24 of the Listing Requirements of Bursa Securities. Their review was performed in accordance with the Recommended Practice Guide 5 (“RPG”) issued by the Malaysian Institute of Accountants.


THE ZON AT 88, JALAN IBRAHIM SULTAN, STULANG LAUT, 80720 JOHOR BAHRU

1. THE ZON REGENCY HOTEL BY THE SEA2. THE ZON MALL3. THE ZON FERRY TERMINAL

Directors’ Report

Statement By Directors

Statutory Declaration

Report of the Auditors

Income Statements

Balance Sheets

Consolidated Statement of Changes in Equity

Company Statement of Changes in Equity

Cash Flow Statements

Notes to the Financial Statements

Financial Statements

32 - 35

36

36

37

38

39 - 40

41

42

43 - 45

46 - 116


32

Directors ̓Report

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

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and letting of property. The principal activities of the subsidiaries are described in Note 43 to the financial statements.

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

CHANGE OF COMPANY’S NAME

The Company changed its name to Naluri Corporation Berhad during the financial year.

RESULTS

Group Company RM’000 RM’000

Profit after taxation 70,333 35,374

Minority interests (10,296) -

Net profit for the year 60,037 35,374

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

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

DIVIDEND

The amount of dividend paid by the Company since 31 December 2004 was as follows:

RM’000

Interim dividend of 1.5% tax exempt, on 690,517,520 ordinary shares, declared on 29 November 2005 and paid on 23 December 2005 10,358

At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 December 2005, of 1.0% tax exempt on ordinary shares in issue on the date of entitlement, will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 December 2006.


33

Directors ̓Report

DIRECTORS

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

Dato’ Sri Adam Sani bin AbdullahTan Sri Saw Huat LyeJeneral (B) Dato’ Sri Abdullah bin Ahmad @ Dollah bin AmadTengku Azman Ibni Almarhum Sultan Abu Bakar (appointed on 6 May 2005)Dato’ Khalid bin Mohamad JiwaLee Sze SiangKan Weng HinWong Peng YewHaji Mohd Radzuan bin AbdullahPeter MadhavanTan Sri Dato’ Tajudin bin Ramli (retired on 23 June 2005)

DIRECTORS’ BENEFITS

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note 6 to the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

DIRECTORS’ INTERESTS

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

Number of Ordinary Shares of RM1 Each

1 January 31 December

2005 Bought Sold 2005

The Company

Direct Interest

Tan Sri Saw Huat Lye 139,000 - - 139,000

Indirect Interest

Dato’ Sri Adam Sani bin Abdullah 220,965,222 - - 220,965,222

Dato’ Sri Adam Sani bin Abdullah by virtue of his interest in shares in the Company is also deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest.

None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.


34

Directors ̓Report

ISSUE OF SHARES

During the financial year, the Company increased its issued and paid-up ordinary share capital from RM690,516,320 to RM690,517,520 by way of the issuance of 1,200 ordinary shares of RM1 each arising from the conversion of 2000/2005 Warrants at an exercise price of RM2 per ordinary share for cash.

The new ordinary shares issued during the financial year rank pari passu in all respects with the existing ordinary shares of the Company.

WARRANTS

The Company, under a Trust Deed dated 8 June 1995 and a Deed Poll dated 8 June 1995, issued RM600,000,000 nominal amount of 5-year 2% Redeemable Bank Guaranteed Bonds 1995/2000 with 138,084,272 Detachable Warrants (“warrants”) to the primary subscriber on a bought deal basis at the nominal amount in 1995. The rights to allotment of the warrants were offered for sale by the primary subscriber at an offer price of RM1.169 per warrant on the basis of one warrant for every five ordinary shares held in the Company.

Pursuant to the Deed Poll dated 8 June 1995, as amended by the first supplemental deed poll dated 15 October 1997 and second supplemental deed poll dated 1 July 1999, constituting the unexercised warrants in issue and expiring on 11 June 2005, the adjustment to the exercise price of the 2000/2005 Warrants from RM4.50 to RM2.00 per ordinary share of RM1.00 each took effect from 1 December 2004, being the commencement of the day following the entitlement date for capital repayment.

As at 11 June 2005, only 1,200 warrants were exercised while the remaining 138,077,112 warrants unexercised were cancelled upon expiry.

OTHER STATUTORY INFORMATION

(a) Before the income statements and balance sheets of the Group and of the Company were made out, the Directors took reasonable steps:

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

(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the Directors are not aware of any circumstances which would render:

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

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

(c) At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

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


35

Directors ̓Report

OTHER STATUTORY INFORMATION (contd.)

(e) As at the date of this report, there does not exist:

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

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

(f) In the opinion of the Directors:

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

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

SIGNIFICANT AND SUBSEQUENT EVENTS

The significant and subsequent events are as disclosed in Note 42 to the financial statements.

AUDITORS

The auditors, Messrs Ernst & Young, have expressed their willingness to continue in office.

Tan Sri Saw Huat Lye Lee Sze Siang

Kuala Lumpur, Malaysia

27 April 2006


36

Pursuant to Section 169(15) of the Companies Act, 1965

Statement By Directors

Pursuant to Section 169(16) of the Companies Act, 1965

Statutory Declaration

We, Tan Sri Saw Huat Lye and Lee Sze Siang, being two of the directors of Naluri Corporation Berhad (formerly known as Naluri Berhad), do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 38 to 116 are drawn up in accordance with applicable MASB Approved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2005 and of the results and the cash flows of the Group and of the Company for the year then ended.

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

Tan Sri Saw Huat Lye Lee Sze Siang

Kuala Lumpur, Malaysia27 April 2006

I, Lee Sze Siang, being the Director primarily responsible for the financial management of Naluri Corporation Berhad (formerly known as Naluri Berhad), do solemnly and sincerely declare that the accompanying financial statements set out on pages 38 to 116 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed Lee Sze Siang at Kuala Lumpur in Wilayah Persekutuan on 27 April 2006 Lee Sze Siang

Before me,

Ahmad bin Laya (W259) Commissioner for Oaths


37

Report of the Auditors to the Members of Naluri Corporation Berhad(Formerly known as Naluri Berhad) (Incorporated in Malaysia)

We have audited the financial statements set out on pages 38 to 116. These financial statements are the responsibility of the Company’s directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial 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 applicable Approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

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

(i) the financial position of the Group and of the Company as at 31 December 2005 and of the results and the cash flows of the Group and of the Company for the year then ended; and

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

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

We have considered the financial statements and the auditors’ reports thereon of the subsidiaries of which we have not acted as auditors, as indicated in Note 43 to the financial statements, being financial statements that have been included in the consolidated financial statements.

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

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

Ernst & Young George KoshyAF: 0039 No. 1846/07/07(J)Chartered Accountants Partner

Kuala Lumpur, Malaysia27 April 2006


38

Group Company Note 2005 2004 2005 2004 RM’000 RM’000 RM’000 RM’000

Revenue 3 466,106 80,648 23,470 35,552

Other income 4 86,079 2,832 47,796 19

Raw material and consumables used (285,199) (14,335) - -

Changes in finished goods 4,801 1,659 - -

Staff costs 5 (66,548) (9,033) (5,974) (2,006)

Depreciation 12 (20,620) (7,301) (306) (277)

Other operating expenses 7 (106,823) (36,139) (25,391) (10,655)

Profit from operations 77,796 18,331 39,595 22,633

Finance costs 8 (2,079) (146) - -

Share of results of associates 1,989 68 - -

Profit before taxation 77,706 18,253 39,595 22,633

Taxation 9 (7,373) (10,012) (4,221) (9,463)

Profit after taxation 70,333 8,241 35,374 13,170

Minority interests 33 (10,296) (116) - -

Net profit for the year 60,037 8,125 35,374 13,170

Earnings per share (sen) 10 8.69 1.18

Net dividend per ordinary share in respect of the year (sen) 11 1.50 -

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

for the year ended 31 December 2005

Income Statements


39


NON-CURRENT ASSETS

Property, plant and equipment 12 486,342 450,324 14,895 9,842

Land held for property development 13 82,706 76,601 43,516 36,177

Investment properties 14 - - 140,368 134,284

Investments in subsidiaries 15 - - 203,359 141,361

Investments in associates 16 13,485 10,673 24,187 24,187

Other long term investments 17 132 155 11 34

Due from subsidiaries 18 - - 348,344 297,947

Other non-current assets 19 1,011 405 - -

Goodwill on consolidation 20 58,693 49,958 - -

642,369 588,116 774,680 643,832

CURRENT ASSETS

Property development costs 21 1,700 - - -

Inventories 22 63,452 54,358 - -

Trade receivables 23 55,493 37,376 8,333 833

Other receivables 24 110,647 73,884 50,418 31,922

Marketable securities 25 1,443 1,691 - 1,691

Cash and bank balances 26 100,741 207,512 31,540 161,057

333,476 374,821 90,291 195,503

Balance Sheetsas at 31 December 2005


40


CURRENT LIABILITIES

Trade payables 27 34,228 33,348 - -

Other payables 28 89,555 106,837 20,034 19,498

Provision for liabilities 29 597 578 - -

Borrowings 30 11,891 33,447 - -

Tax payable 2,615 5,520 123 1,376

138,886 179,730 20,157 20,874

NET CURRENT ASSETS 194,590 195,091 70,134 174,629

836,959 783,207 844,814 818,461

FINANCED BY:

Share capital 32 690,518 690,516 690,518 690,516

Reserves 98,354 47,545 122,192 97,174

Shareholders’ equity 788,872 738,061 812,710 787,690

Minority interests 33 22,403 8,221 - -

811,275 746,282 812,710 787,690

Borrowings 30 5,504 10,800 - -

Retirement benefit obligations 34 1,002 667 - -

Deferred payables 35 750 1,500 - -

Due to subsidiaries 36 - - 21,394 21,467

Contribution from joint venture members 37 - 6,870 - -

Deferred tax liabilities 38 18,428 17,088 10,710 9,304

Non-current liabilities 25,684 36,925 32,104 30,771

836,959 783,207 844,814 818,461


Balance Sheets (contd.)as at 31 December 2005


41

(Accumulated Non-Distributable Losses)/ Foreign Distributable Share Share Exchange Other Retained Note Capital Premium Reserve Reserve Profits Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2004 690,516 1,265,592 - - (673,761) 1,282,347

Foreign exchange differences, representing net gains not recognised in income statement - - 3 - - 3

Capital repayment 32 (552,414) - - - - (552,414)

Utilisation of share premium 32 552,414 (1,168,418) - - 616,004 -

Net profit for the year - - - - 8,125 8,125

At 31 December 2004 690,516 97,174 3 - (49,632) 738,061

At 1 January 2005 690,516 97,174 3 - (49,632) 738,061

Foreign exchange differences, representing net losses not recognised in income statement - - (6) - - (6)

Reserve arising from dilution of Group’s equity interest in a subsidiary - - - 1,134 - 1,134

Issuance of ordinary shares pursuant to conversion of warrants 32 2 2 - - - 4

Net profit for the year - - - - 60,037 60,037

Dividend 11 - - - - (10,358) (10,358)

At 31 December 2005 690,518 97,176 (3) 1,134 47 788,872


Consolidated Statementof Changes in Equityfor the year ended 31 December 2005


42

(Accumulated Non- Losses)/ Distributable Distributable Share Share Retained Note Capital Premium Profits Total RM’000 RM’000 RM’000 RM’000

At 1 January 2004 690,516 1,265,592 (629,174) 1,326,934

Capital repayment 32 (552,414) - - (552,414)

Utilisation of share premium 32 552,414 (1,168,418) 616,004 -

Net profit for the year - - 13,170 13,170

At 31 December 2004 690,516 97,174 - 787,690

At 1 January 2005 690,516 97,174 - 787,690

Issuance of ordinary shares pursuant to conversion of warrants 32 2 2 - 4

Net profit for the year - - 35,374 35,374

Dividend 11 - - (10,358) (10,358)

At 31 December 2005 690,518 97,176 25,016 812,710


Company Statementof Changes in Equityfor the year ended 31 December 2005


43

Group Company 2005 2004 2005 2004 RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 77,706 18,253 39,595 22,633

Adjustment for:

Bad debts written off 2,325 - - -

Depreciation 20,620 7,301 306 277

Dividend income (162) (2) (5,420) (2)

Gain on disposal of long term investments (7,793) - (33) -

Gain on disposal of marketable securities (2,105) - (607) -

Gain on disposal of property, plant and equipment (1,525) (21) - -

Impairment losses

- land held for property development 185 15 185 15

- marketable securities 540 (542) - (542)

Interest expense 2,079 146 - -

Interest income (3,524) (30,005) (8,050) (34,717)

Inventories written down 101 - - -

Inventories written off 317 - - -

Liquidated damages payable 35 - - -

Loss/(gain) on disposal of investment in an associate 9 - (550) -

Net unrealised foreign exchange gain (291) - - -

Negative goodwill recognised (3,321) - - -

Property, plant and equipment written off 71 18 29 -

Provision for doubtful debts 1,013 8,263 948 105

Balance carried forward 86,280 3,426 26,403 (12,231)

Cash Flow Statementsfor the year ended 31 December 2005


44


CASH FLOWS FROM OPERATING ACTIVITIES (contd.)

Balance brought forward 86,280 3,426 26,403 (12,231)

Adjustment for:

Provision for retirement benefit obligations 432 162 - -

Reversal of overprovision for warranty claims - (348) - -

Reversal of share of losses in a joint venture - (559) - -

Waiver of debts (131) - - -

Write back of impairment losses (38,221) - - -

Write back of provision for doubtful debts (5,247) (666) (46,229) -

Write back of contribution from venture members (8,870) - - -

Share of results in associates (1,989) (68) - -

Operating profit/(loss) before working capital changes 32,254 1,947 (19,826) (12,231)

Increase in inventories (1,914) (1,336) - -

Increase in receivables (8,456) (8,721) (26,517) (4,275)

(Decrease)/increase in payables (31,890) 1,206 536 3,772

Decrease in subsidiary balances - - 805 20,448

Increase in property development costs (437) - - -

Decrease in retirement benefit obligations (97) (11) - -

Cash (used in)/generated from operations (10,540) (6,915) (45,002) 7,714

Interest received 3,364 33,160 2,577 32,579

Taxes paid (11,344) (8,165) (2,550) (7,523)

Net cash (used in)/generated from operating activities (18,520) 18,080 (44,975) 32,770

Cash Flow Statements (contd.)for the year ended 31 December 2005


45


CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposal of investment in associate 550 - 550 -

Proceeds from disposal of property, plant and equipment 5,336 80 - -

Proceeds from disposal of long term investments 46,037 559 56 -

Proceeds from disposal of marketable securities 7,231 - 2,298 -

Purchase of marketable securities (37,391) - - -

Dividends received 117 1 3,902 1

Purchase of property, plant and equipment (53,460) (136,574) (5,388) (2)

Purchase of investment properties - - (6,084) (134,284)

Purchase of land held for property development - (35,892) - (35,892)

Payment of land and development costs (7,553) - (7,524) -

Payment to stakeholders for purchase of land held for property development - (27,481) - (27,481)

Capital repayment - (552,414) - (552,414)

Acquisition of subsidiaries (Note 43(ii)) (9,129) (180,897) (16,248) (222,441)

Acquisition of additional equity interest in a subsidiary - - (45,750) -

Net cash used in investing activities (48,262) (932,618) (74,188) (972,513)

CASH FLOWS FROM

FINANCING ACTIVITIES

Dividend paid (10,358) - (10,358) -

Repayment of bank borrowings - (11,387) - -

Repayment of hire purchase and lease financing (462) (250) - -

Repayment of bank borrowings (23,957) - - -

Drawdown of bank borrowings - 5,010 - -

Proceeds from issuance of ordinary shares 4 - 4 -

Interest paid (2,079) (106) - -

Net cash used in financing activities (36,852) (6,733) (10,354) -

NET DECREASE IN CASH AND CASH EQUIVALENTS (103,634) (921,271) (129,517) (939,743)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 201,974 1,123,245 161,057 1,100,800

CASH AND CASH EQUIVALENTS AT END OF YEAR (NOTE 26) 98,340 201,974 31,540 161,057


Cash Flow Statements (contd.)for the year ended 31 December 2005


46

1. CORPORATE INFORMATION

The principal activities of the Company are investment holding and letting of property. The principal activities of the subsidiaries are described in Note 43 to the financial statements. There have been no significant changes in the nature of the principal activities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Board of Bursa Malaysia Securities Berhad (“Bursa Securities”). The registered office of the Company is located at 16th Floor, Menara Naluri, 161B Jalan Ampang, 50450 Kuala Lumpur.

The Company changed its name to Naluri Corporation Berhad during the financial year.

The number of employees in the Group and in the Company at the end of the financial year were 2,726 (2004: 2,044) and 57 (2004: 27) respectively.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 27 April 2006.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The financial statements of the Group and of the Company have been prepared under the historical cost convention unless otherwise indicated in the accounting policies below and comply with the provisions of the Companies Act, 1965 and applicable MASB Approved Accounting Standards in Malaysia.

(b) Basis of Consolidation

(i) Subsidiaries

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

Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of during the financial year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. The assets and liabilities of the subsidiaries are measured at their fair values at the date of acquisition. The difference between the cost of an acquisition and the fair value of the Group’s share of the net assets of the acquired subsidiary at the date of acquisition is included in the consolidated balance sheet as goodwill or negative goodwill arising on consolidation.

Intragroup transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidated financial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costs cannot be recovered.

The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group’s share of its net assets together with any unamortised balance of goodwill and exchange differences.

Minority interests in the consolidated balance sheet consist of the minorities’ share of the fair value of the identifiable assets and liabilities of the acquiree as at acquisition date and the minorities’ share of movements in the acquiree’s equity since then.

Notes to the Financial Statements31 December 2005


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2. SIGNIFICANT ACCOUNTING POLICIES (contd.)

(b) Basis of Consolidation (contd.)

(ii) Associates

Associates are those entities in which the Group it exercises significant influence but not control, through participation in the financial and operating policy decisions of the entities.

Investments in associates are accounted for in the consolidated financial statements by the equity method of accounting based on the audited or management financial statements of the associates. Under the equity method of accounting, the Group’s share of profits less losses of associates during the financial year is included in the consolidated income statement. The Group’s interest in associates is carried in the consolidated balance sheet at cost plus the Group’s share of post-acquisition retained profits or accumulated losses and other reserves.

Unrealised gains on transactions between the Group and the associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are eliminated unless cost cannot be recovered.

(c) Goodwill

Goodwill represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary or associate at the date of acquisition. Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary or associate at the date of acquisition over the cost of acquisition.

Goodwill is stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p). Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet while goodwill arising on the acquisition of associates is included within the carrying amounts of the investments.

Negative goodwill is recognised in the income statement immediately. Prior to 1 January 2005, negative goodwill, if any, was to be set-off against goodwill and presented in the balance sheet. As the Group had no negative goodwill prior to 1 January 2005, this change in accounting policy has no retrospective effect on the financial statements.

(d) Investments in Subsidiaries and Associates

The Company’s investment in subsidiaries and associates are stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p).

On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is recognised in the income statement.

(e) Property, Plant and Equipment and Depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p).

Freehold land and capital work-in-progress are not depreciated. Leasehold land and buildings and building under construction are depreciated over the period of the respective leases which range from 29 to 99 years.

Notes to the Financial Statements (contd.)31 December 2005


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(e) Property, Plant and Equipment and Depreciation (contd.)

Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, at the following annual rates:

Factory buildings 2.0% - 5.0%Renovation 5.0% - 20.0%Plant and machinery 7.5% - 33.3%Office equipment, furniture and fittings and motor vehicles 5.0% - 40.0% Electrical installations and air conditioner 5.0% - 20.0%

Upon the disposal of an item of property, plant or equipment, the difference between the net disposal proceeds and the net carrying amount is recognised in the income statement.

(f) Investment Properties

Investment properties consist of investments in land and buildings that are not substantially occupied for use by, or in the operations, of the Group.

Investment properties are treated as long term investments and are stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p).

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

(g) Land Held for Property Development and Property Development Costs

(i) Land held for property development

Land held for property development consists of land where no development activities have been carried out or where development activities are not expected to be completed within the normal operating cycle. Such land is classified within non-current assets and is stated at cost less any accumulated impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p).

Land held for property development is reclassified 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 normal operating cycle.

(ii) Property development costs

Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities.

When the financial outcome of a development activity can be reliably estimated, property development revenue and expenses are recognised in the income statement by using the stage of completion method. The stage of completion method is determined by the proportion that property development costs incurred for work performed to date bear to be the estimated total property development costs.



49


(g) Land Held for Property Development and Property Development Costs (contd.)

(ii) Property development costs (contd.)

Where the financial outcome of a 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 properties 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 as an expense immediately.

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

The excess of revenue recognised in the income statement over billings to purchasers is classified as accrued billings within trade receivables and the excess of billings to purchasers over revenue recognised in the income statement is classified as progress billings within trade payables.

(h) Inventories

Inventories are stated at the lower of cost and net realisable value.

Cost of raw materials, finished goods, trading inventories and consumables is determined using either the first-in, first-out method and cost of food, beverage and supplies is determined on a weighted average basis. The cost of raw materials comprises costs of purchase. The costs of finished goods and work-in-progress comprise raw materials, direct labour and appropriate proportions of production overheads. The cost of unsold properties comprises cost associated with the acquisition of land, direct costs and appropriate proportions of common costs.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(i) Cash and Cash Equivalents

For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank, deposits at call and short term highly liquid investments which have an insignificant risk of changes in value, net of outstanding bank overdrafts.

(j) Leases

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incident to ownership. All other leases are classified as operating leases.

(i) Finance leases

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



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(j) Leases (contd.)

(i) Finance leases (contd.)

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

The depreciation policy for lease assets is in accordance with that for depreciable property, plant and equipment as described in Note 2(e).

(ii) Operating leases

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the term of the relevant lease.

(k) Provisions for Liabilities

Provisions for liabilities are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

(l) Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax loses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill.



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(m) Employee Benefits

(i) Short term benefits

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

(ii) Defined contribution plans

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

(iii) Defined benefit plans

The Group’s net obligation in respect of a defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods and that benefit is discounted to determine the present value. The discount rate is the market yield at the balance sheet date on high quality corporate bonds or government bonds. The calculation is performed by an actuary using the projected unit credit method.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement.

In calculating the Group’s obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds ten percent of the present value of the defined benefit obligation, that portion is recognised in the income statement over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised.

Where the calculation results in a benefit to the Group, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

(n) Revenue Recognition

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably.

(i) Revenue from services

Revenue from the following services rendered is recognised net of discounts as and when the services are performed:

- rental, parking and related services- tour, travel and recreational activities



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(n) Revenue Recognition (contd.)

(ii) Revenue from hotel operations

Revenue from rental of hotel rooms, sale of food and beverage and other related income are recognised on an accrual basis.

(iii) Revenue from ferry terminal operations

Revenue from ferry terminal operations is recognised on an accrual basis.

(iv) Sale of goods and completed development properties

Revenue relating to sale of goods and completed development properties are recognised net of discounts upon the transfer of risks and rewards.

(v) Interest income

Interest is recognised on accrual basis and on a time proportion basis that reflects the effective yield on the asset.

(vi) Dividend income

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

(vii) Rental income

Rental income is recognised on an accrual basis.

(o) Foreign Currencies

(i) Foreign currency transactions

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

All exchange rate differences are taken to the income statement.

(ii) Foreign entities

Financial statements of foreign consolidated subsidiaries are translated at year-end exchange rates with respect to the assets and liabilities, and at exchange rates at the dates of the transactions with respect to the income statement. All resulting translation differences are recognised in equity.



53


(o) Foreign Currencies (contd.)

(ii) Foreign entities (contd.)

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

The principal exchange rates for each respective unit of foreign currency ruling at the balance sheet date are as follows:

2005 2004 RM RM

Australian Dollar 2.775 2.750Brunei Dollar 2.100 -Euro 4.510 5.046Japanese Yen 0.028 0.034Hong Kong Dollar 2.051 2.050New Taiwan Dollar 0.097 0.096Renminbi 0.425 0.419Singapore Dollar 2.272 2.237Sterling Pound 6.584 6.747Thai Baht 0.091 0.010United States Dollar 3.757 3.800

(p) Impairment of Assets

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication of impairment. If any such indication exists, impairment is measured by comparing the carrying values of the assets with their recoverable amounts. Recoverable amount is the higher of net selling price and value in use, which is measured by reference to discounted future cash flows.

An impairment loss is recognised as an expense in the income statement immediately.

(q) Affiliated Companies

Affiliated companies refer to companies owned by certain directors and/or parties related to the directors.

(r) Financial Instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instrument.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are recognised directly in equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.



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(r) Financial Instruments (contd.)

(i) Other non-current investments

Non-current investments other than investments in subsidiaries, associates and investment properties are stated at cost less impairment losses. On disposal of an investment, the difference between net disposal proceeds and its carrying amount is recognised in the income statement.

(ii) Marketable securities

Marketable securities are carried at the lower of cost and market value, determined on an aggregate basis. Cost is determined on the first-in, first-out basis while market value is determined based on quoted market values. Increases or decreases in the carrying amount of marketable securities are recognised in the income statement. On disposal of marketable securities, the difference between net disposal proceeds and the carrying amount is recognised in the income statement.

(iii) Receivables

Receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

(iv) Payables

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

(v) Interest-bearing borrowings

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

Borrowing costs directly attributable to the acquisition and construction of qualifying assets such as property, plant and equipment, land held for property development and development properties are capitalised as part of the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. The amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate which is the weighted average of the borrowing costs applicable to the Group’s borrowings that are outstanding during the financial year, other than borrowings made specifically for the purpose of acquiring another qualifying asset. For borrowings made specifically for the purpose of acquiring a qualifying asset, the amount of borrowing costs eligible for capitalisation is the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of funds drawndown from that borrowing facility.

All other borrowing costs are recognised as an expense in the income statement in the period in which they are incurred.



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(r) Financial Instruments (contd.)

(vi) Equity instruments

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

The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided.

3. REVENUE


Ferry terminal operations 16,666 - - -

Gross dividends

- subsidiaries - - 5,420 -

- quoted investments in Malaysia 162 2 - 2

Hotel operations 25,099 10,771 - -

Interest income

- subsidiaries - - 6,172 6,157

- fixed deposits 3,221 29,689 1,878 28,560

- others 303 316 - -

Rental, parking and related services 11,223 8,676 10,000 833

Sale of food and beverage 17,306 1,966 - -

Sale of goods 391,556 29,228 - -

Tour, travel and recreational activities 570 - - -

466,106 80,648 23,470 35,552



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4. OTHER INCOME

Included in other income are:


Bad debts recovered 98 60 - -

Gain on disposal of investment in an associate - - 550 -

Gain on disposal of long term investments 7,793 - 33 -

Gain on disposal of marketable securities 2,105 - 607 -

Gain on disposal of property, plant and equipment 1,525 21 - -

Net foreign exchange gain

- realised 141 43 - -

- unrealised 291 - - -

Negative goodwill recognised 3,321 - - -

Rental income

- advertisement space 2,273 175 - -

- building 1,421 141 - -

Reversal of overprovision for warranty claims - 348 - -

Reversal of share of losses in a joint venture - 559 - -

Waiver of debts arising from settlement of legal dispute with a creditor 131 - - -

Write back of contribution from venture members 8,870 - - -

Write back of impairment losses on long term investments 38,221 - - -

Write back of provision for doubtful debts

- subsidiaries (Note 18) - - 46,229 -

- trade receivables (Note 23) 4,660 666 - -

- other receivables (Note 24) 587 - - -



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5. STAFF COSTS

Group Company

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

Wages and salaries 56,551 7,504 5,216 1,736

Social security costs 649 43 17 7

Pension costs - defined contribution plan 5,309 661 529 147

- defined benefit plan 432 - - -

Other staff related expenses 3,607 825 212 116

66,548 9,033 5,974 2,006

Included in staff costs of the Group and of the Company are executive directors’ remuneration amounting to RM8,128,000 (2004: RM964,000) and RM3,046,000 (2004: RM520,000) respectively as further disclosed in Note 6.

6. DIRECTORS’ REMUNERATION


Directors of the Company

Executive: Salaries and other emoluments 3,046 520 3,046 520 Benefits-in-kind 20 22 20 22 3,066 542 3,066 542

Non-Executive: Salaries and other emoluments 891 34 - - Fees 48 - 48 - Benefits-in-kind - 219 - 1 939 253 48 1

4,005 795 3,114 543

Directors of the Subsidiaries

Executive: Salaries and other emoluments 5,082 444 - - Benefits-in-kind 74 - - - 5,156 444 - -

Non-Executive: Other emoluments 450 18 - -

5,606 462 - -

Total 9,611 1,257 3,114 543



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6. DIRECTORS’ REMUNERATION (contd.)


Analysis excluding benefits-in-kind:

Total executive directors’ remuneration excluding benefits-in-kind (Note 5) 8,128 964 3,046 520

Total non-executive directors’ remuneration excluding benefits-in-kind (Note 7) 1,389 52 48 -

Total directors’ remuneration excluding benefits-in-kind 9,517 1,016 3,094 520

The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below:

Number of Directors

2005 2004

Executive directors:

RM400,001 - RM450,000 1 -

RM500,001 - RM550,000 - 1

RM550,001 - RM600,000 1 -

RM650,001 - RM700,000 1 -

RM1,350,001 - RM1,400,000 1 -

Non-executive directors:

Below RM50,000 4 1

RM400,001 - RM450,000 1 -

RM450,001 - RM500,000 1 -

In the previous financial year, the other directors of the Company did not receive any remuneration.



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7. OTHER OPERATING EXPENSES

Included in other operating expenses are:


Auditors’ remuneration:

Statutory audits

- current year 594 119 60 35

- underprovision in prior year 87 - - -

Other services 23 106 23 104

Bad debts written off 2,325 - - -

Impairment losses on

- land held for property development 185 15 185 15

- marketable securities 540 (542) - (542)

Inventories written down 101 - - -

Inventories written off 317 - - -

Lease of land 120 120 - -

License fee paid to a hotel operator 34 194 - -

Liquidated damages payable (Note 29) 35 - - -

Loss on disposal of investment in an associate 9 - - -

Management fee paid to a hotel operator 26 317 - -

Net realised foreign exchange loss - - 515 -

Non-executive directors’ remuneration excluding benefits-in-kind (Note 6) 1,389 52 48 -

Property, plant and equipment written off 71 18 29 -

Provision for doubtful debts

- subsidiaries (Note 18) - - 521 105

- trade receivables (Note 23) 451 8,263 - -

- other receivables (Note 24) 562 - 427 -

Rental of equipment 36 - - -

Rental of premises paid to

- a subsidiary - - 420 420

- third parties 13,707 1,406 - -

Special Administrators’ fee - 5,145 - 5,145

Termination fee paid to a hotel operator 2,950 - - -



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8. FINANCE COSTS

Group 2005 2004 RM’000 RM’000

Interest expense on

- bankers’ acceptances 577 30

- bank overdrafts 417 13

- hire purchase 32 4

- term loans 503 86

- late payment of royalty 520 -

- others 30 13

2,079 146

9. TAXATION


Income tax:

Malaysian income tax

- current year provision 8,525 7,790 2,815 7,737

- (over)/underprovision in prior years (920) 219 - 91

7,605 8,009 2,815 7,828

Foreign income tax

- current year provision 130 - - -

7,735 8,009 2,815 7,828

Deferred tax (Note 38):

Relating to origination and reversal

of temporary differences 1,093 2,003 1,406 1,635

Overprovided in prior years (73) - - -

1,020 2,003 1,406 1,635

Share of taxation of an associate (1,382) - - -

7,373 10,012 4,221 9,463

Domestic income tax is calculated at the Malaysian statutory tax rate of 28% (2004: 28%) of the estimated assessable profit for the year except for the tax incentive of 8% (2004: 8%) exempted for the first RM500,000 (2004: RM500,000) taxable profit granted to certain subsidiaries by the Inland Revenue Board. Taxation for other subsidiaries is calculated at the rates prevailing in the respective jurisdictions.



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9. TAXATION (contd.)

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

2005 2004 RM’000 RM’000

Group

Profit before taxation 77,706 18,253

Taxation at Malaysian statutory tax rate of 28% (2004: 28%) 21,758 5,111

Effect of income subject to tax rate of 20% (2004: 20%) (182) (11)

Effect of different tax rates in other countries (13) -

Effect of income not subject to tax (20,596) (3,894)

Effect of expenses not deductible for tax purposes 11,798 11,697

Deferred tax assets not recognised in respect of current year’s tax losses and unabsorbed capital allowances 2,338 1,018

Effect of utilisation of previously unrecognised tax losses, unabsorbed capital allowances and other deductible temporary differences (3,360) (4,128)

Effect of utilisation of reinvestment allowances (3,377) -

(Over)/underprovision of income tax in prior years (920) 219

Overprovision of deferred tax in prior years (73) -

Tax expense for the year 7,373 10,012

Company

Profit before taxation 39,595 22,633

Taxation at Malaysian statutory tax rate of 28% (2004: 28%) 11,087 6,337

Effect of income not subject to tax (13,220) (225)

Effect of expenses not deductible for tax purposes 6,354 3,260

Underprovision of income tax in prior years - 91

Tax expense for the year 4,221 9,463



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9. TAXATION (contd.)

Group 2005 2004 RM’000 RM’000

Tax savings during the financial year arising from:

Utilisation of current year tax losses 686 658

Utilisation of previously unrecognised tax losses 424 916

As at 31 December 2005, the Company has tax exempt profits available for distribution of approximately RM38,596,000 (2004: RM48,953,000), subject to the agreement of the Inland Revenue Board. The Company has sufficient tax credit under Section 108 of the Income Tax Act, 1967 and the balance in the tax exempt income account to frank the payment of dividends out of its entire retained profits as at 31 December 2005.

10. EARNINGS PER SHARE

Basic earnings per share of the Group is calculated by dividing the net profit for the year attributable to shareholders of RM60,037,000 (2004: RM8,125,000) by the weighted average number of ordinary shares in issue during the financial year of 690,517,520 (2004: 690,516,320).

2005 2004 RM’000 RM’000


Weighted average number of ordinary shares in issue 690,518 690,516

Basic earnings per share (sen) 8.69 1.18

As at the end of the current financial year, the Company does not have any dilutive potential ordinary shares. Accordingly, the diluted earnings per share is not presented. In the previous financial year, the effect on the basic earnings per share arising from the assumed conversion of warrants was anti-dilutive. Accordingly, the diluted earnings per share in respect of the previous financial year is not presented.

11. DIVIDEND Net Dividend Amount per Ordinary Share 2005 2004 2005 2004 RM’000 RM’000 sen sen

Interim dividend of 1.5% tax exempt, on 690,517,520 ordinary shares, declared on 29 November 2005 and paid on 23 December 2005 10,358 - 1.50 -

At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 December 2005, of 1.0% tax exempt on ordinary shares in issue on the date of entitlement, will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 December 2006.



63

12. PROPERTY, PLANT AND EQUIPMENT

Freehold and Office Leasehold Equipment, Land, Furniture Buildings Building Plant and Fittings Capital and under and and Motor Work-in- Renovation* Construction Machinery Vehicles Progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

Cost/Valuation

At 1 January 2005 446,752 61,907 124,694 32,929 1,884 668,166

Acquisition of subsidiaries (Note 43(ii)) 6 - 1,176 6,561 - 7,743

Additions 23,947 - 6,492 4,594 19,134 54,167

Disposals (3,793) - (3) (435) - (4,231)

Write offs (16) - (35) (747) - (798)

Transfer - - 2,276 - (2,276) -

At 31 December 2005 466,896 61,907 134,600 42,902 18,742 725,047

Accumulated Depreciation and Impairment Losses

At 1 January 2005:

Accumulated depreciation 31,680 2,547 88,170 26,629 - 149,026

Accumulated impairment losses 37,905 30,905 - 6 - 68,816

69,585 33,452 88,170 26,635 - 217,842

Acquisition of subsidiaries (Note 43(ii)) 3 - 410 977 - 1,390

Depreciation charge for the year 6,501 849 10,158 3,112 - 20,620

Disposals (83) - (1) (336) - (420)

Write offs (16) - (23) (688) - (727)

At 31 December 2005 75,990 34,301 98,714 29,700 - 238,705

Analysed as:

Accumulated depreciation 38,085 3,396 98,714 29,694 - 169,889

Accumulated impairment losses 37,905 30,905 - 6 - 68,816

75,990 34,301 98,714 29,700 - 238,705



64

12. PROPERTY, PLANT AND EQUIPMENT (contd.)

Freehold and Office Leasehold Equipment, Land, Furniture Buildings Building Plant and Fittings Capital and under and and Motor Work-in- Renovation* Construction Machinery Vehicles Progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group (contd.)

Net Book Value

At 31 December 2005 390,906 27,606 35,886 13,202 18,742 486,342

At 31 December 2004 377,167 28,455 36,524 6,294 1,884 450,324

Details at 1 January 2004

Cost 202,971 61,907 4,154 5,918 - 274,950Accumulated depreciation 10,433 1,698 3,750 5,036 - 20,917Accumulated impairment losses 37,255 30,905 - - - 68,160

Depreciation charge for 2004 4,610 849 1,322 520 - 7,301

* Freehold and Leasehold Land, Buildings and Renovation of the Group:

Long Term Short Term Freehold Leasehold Leasehold Land Land Land Buildings Renovation Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

Cost/Valuation

At 1 January 2005 37,862 32,239 6,317 363,352 6,982 446,752Acquisition of subsidiaries - - - - 6 6Additions 916 2,705 - 14,823 5,503 23,947Disposals (3,445) - - (297) (51) (3,793)Write offs - - - - (16) (16)

At 31 December 2005 35,333 34,944 6,317 377,878 12,424 466,896



65


Long Term Short Term Freehold Leasehold Leasehold Land Land Land Buildings Renovation Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group (contd.)

Accumulated Depreciation and Impairment LossesAt 1 January 2005: Accumulated depreciation - 2,113 3,221 20,504 5,842 31,680 Accumulated impairment losses 592 58 - 37,255 - 37,905

592 2,171 3,221 57,759 5,842 69,585Acquisition of subsidiaries - - - - 3 3Depreciation charge for the year - 224 233 5,502 542 6,501Disposals - - - (74) (9) (83)Write offs - - - - (16) (16)

At 31 December 2005 592 2,395 3,454 63,187 6,362 75,990

Analysed as:Accumulated depreciation - 2,337 3,454 25,932 6,362 38,085Accumulated impairment losses 592 58 - 37,255 - 37,905

592 2,395 3,454 63,187 6,362 75,990

Net Book ValueAt 31 December 2005 34,741 32,549 2,863 314,691 6,062 390,906

At 31 December 2004 37,270 30,068 3,096 305,593 1,140 377,167

Details at 1 January 2004Cost - 11,364 - 191,209 398 202,971Accumulated depreciation - 1,644 - 8,392 397 10,433Accumulated impairment losses - - - 37,255 - 37,255

Depreciation charge for 2004 13 170 19 4,323 85 4,610



66


Office Equipment and Building Furniture Leasehold and Motor and Land Renovation Vehicles Fittings Total RM’000 RM’000 RM’000 RM’000 RM’000

Company

CostAt 1 January 2005 11,364 14,289 786 727 27,166Additions - 5,178 - 210 5,388Write offs - - - (74) (74)

At 31 December 2005 11,364 19,467 786 863 32,480

Accumulated Depreciation and Impairment LossesAt 1 January 2005 Accumulated depreciation 1,809 399 561 665 3,434 Accumulated impairment losses - 13,890 - - 13,890

1,809 14,289 561 665 17,324Depreciation charge for the year 165 - 71 70 306Write offs - - - (45) (45)

At 31 December 2005 1,974 14,289 632 690 17,585

Net Book ValueAt 31 December 2005 9,390 5,178 154 173 14,895

At 31 December 2004 9,555 - 225 62 9,842

Details at 1 January 2004Cost 11,364 14,289 786 725 27,164Accumulated depreciation 1,644 398 490 625 3,157Accumulated impairment losses - 13,890 - - 13,890

Depreciation charge for 2004 165 1 71 40 277

(a) Renovation of the Group and of the Company amounting to RM5,178,000 (2004: RM Nil) has not been depreciated as it was completed at the end of the financial year.

(b) During the financial year, the Group and the Company acquired property, plant and equipment at aggregate costs of RM54,167,000 (2004: RM2,320,000) and RM5,388,000 (2004: RM2,000) respectively. Property, plant and equipment of the Group costing RM707,000 (2004: RM Nil) were acquired by means of finance lease arrangements. The net book value of motor vehicles held under hire purchase and finance lease arrangements is RM1,170,000 (2004: RM199,000).



67


(c) The net book values of property, plant and equipment pledged for borrowings as disclosed in Note 30 are as follows:

Group 2005 2004 RM’000 RM’000

Freehold land 33,743 36,831

Long term leasehold land 1,949 783

Short term leasehold land 2,863 3,096

Buildings 44,534 42,741

Plant and machinery 32,984 35,357

Office equipment, furniture and fittings and motor vehicles 2,621 2,827

Capital work-in-progress 1,865 1,884

120,559 123,519

(d) Included in leasehold land of the Group is leasehold land of a subsidiary with net book value of RM473,000 (2004: RM479,000) of which the land title has yet to be transferred to the subsidiary as at the end of the financial year.

(e) Included in plant and machinery of the Group are staff costs and rental capitalised amounting to RM2,013,000 (2004: RM78,000) and RM181,000 (2004: RM15,000) respectively.

13. LAND HELD FOR PROPERTY DEVELOPMENT

Freehold Leasehold Development Land Land Costs Total RM’000 RM’000 RM’000 RM’000

Group

At 31 December 2005:

Cost

At 1 January 2005 34,947 43,077 926 78,950

Additions 6,819 705 29 7,553

Transfer to property development costs (1,263) - - (1,263)

At 31 December 2005 40,503 43,782 955 85,240



68

13. LAND HELD FOR PROPERTY DEVELOPMENT (contd.)


Group (contd.)

Accumulated Impairment Losses

At 1 January 2005 2,334 15 - 2,349

Impairment loss for the year - 185 - 185

At 31 December 2005 2,334 200 - 2,534

Carrying Amount at 31 December 2005 38,169 43,582 955 82,706


Cost

At 1 January 2004 - - - -

Additions 20,596 15,596 - 36,192

Disposals - - (304) (304)

Acquisition of subsidiaries (Note 43(ii)) 14,351 27,481 1,230 43,062

At 31 December 2004 34,947 43,077 926 78,950


At 1 January 2004 - - - -


Acquisition of subsidiaries (Note 43(ii)) 2,334 - - 2,334

At 31 December 2004 2,334 15 - 2,349

Carrying Amount at 31 December 2004 32,613 43,062 926 76,601



69

13. LAND HELD FOR PROPERTY DEVELOPMENT (contd.)


Company


Cost

At 1 January 2005 20,596 15,596 - 36,192

Additions 6,819 705 - 7,524

At 31 December 2005 27,415 16,301 - 43,716


At 1 January 2005 - 15 - 15


At 31 December 2005 - 200 - 200

Carrying Amount at 31 December 2005 27,415 16,101 - 43,516


Cost

Additions during the year and at 31 December 2004 20,596 15,596 - 36,192


Impairment loss for the year and at 31 December 2004 - 15 - 15

Carrying Amount at 31 December 2004 20,596 15,581 - 36,177



70

14. INVESTMENT PROPERTIES

Company 2005 2004 RM’000 RM’000

Cost

Leasehold land 16,445 15,715

Buildings 123,923 118,569

140,368 134,284

15. INVESTMENTS IN SUBSIDIARIES

Company 2005 2004 RM’000 RM’000

Unquoted shares, at cost

- in Malaysia 147,216 130,968

- outside Malaysia 3 3

147,219 130,971

Less: Accumulated impairment losses (64,875) (64,875)

82,344 66,096

Quoted shares in Malaysia, at cost 121,015 75,265

203,359 141,361

Market value of quoted shares in Malaysia 127,974 116,956

The quoted shares were not traded at the end of the previous financial year as the subsidiary, DFZ Capital Berhad (“DFZ”) was classified under Practice Note 4/2001 (“PN 4/2001”) of the listing requirements of Bursa Securities. During the current year, DFZ has regularised its financial condition and no longer triggers any of the criteria under paragraph 2.0 of PN 4/2001. Accordingly, DFZ is no longer classified as an “affected listed issuer” pursuant to PN 4/2001. The market value of DFZ’s quoted shares disclosed in the previous financial year was based on the closing price of the shares upon DFZ’s relisting on 28 January 2005.

Details of the subsidiaries are disclosed in Note 43.



71

16. INVESTMENTS IN ASSOCIATES


Unquoted shares in Malaysia, at cost 24,187 25,025 24,187 25,025

Share of post-acquisition reserves (10,702) (14,352) - -

13,485 10,673 24,187 25,025

Less: Accumulated impairment losses - - - (838)

13,485 10,673 24,187 24,187

Represented by:

Share of net tangible assets 13,485 10,670

Share of intangible assets - 3

13,485 10,673

Details of the associates are disclosed in Note 44.

17. OTHER LONG TERM INVESTMENTS


Corporate golf club membership, at cost 132 155 11 34

Unquoted shares, at cost

- in Malaysia 250 250 250 250

- outside Malaysia 3,688 41,909 - -

3,938 42,159 250 250

Less: Accumulated impairment losses (3,938) (42,159) (250) (250)

- - - -

132 155 11 34



72

18. DUE FROM SUBSIDIARIES

Company 2005 2004 RM’000 RM’000

Interest free amounts 256,977 240,566

Interest bearing amounts 156,926 168,648

413,903 409,214

Less: Provision for doubtful debts (65,559) (111,267)

348,344 297,947

The amounts due from subsidiaries are unsecured and have no fixed terms of repayment. The interest bearing amounts bear interest at rates ranging from 5.0% to 7.5% (2004: 5.0% to 7.5%) per annum.

The movement of provision for doubtful debts is as follows:

Company 2005 2004 RM’000 RM’000

At beginning of year 111,267 111,179

Recognised in income statement:

- provision (Note 7) 521 105

- write back (Note 4) (46,229) -

Write off against amounts receivable - (17)

At end of year 65,559 111,267

19. OTHER NON-CURRENT ASSETS

Group 2005 2004 RM’000 RM’000

Loans to employees:

Repayable within 1 year (Note 24) 545 515

Repayable after 1 year 1,011 405

1,556 920



73

20. GOODWILL ON CONSOLIDATION Group 2005 2004 RM’000 RM’000

At beginning of year 49,958 -

Acquisition of subsidiaries (Note 43(ii)) 15,170 49,958

Acquisition of additional equity interest in a subsidiary 18,602 -

Dilution of equity interest in a subsidiary (25,037) -

Profit guarantee from certain vendors of subsidiaries (Note 24(b)) (3,321) -

Recognised in income statement (Note 4) 3,321 -

At end of year 58,693 49,958

21. PROPERTY DEVELOPMENT COSTS Group 2005 2004 RM’000 RM’000

Development costs incurred during the year 437 -

Transfer from land held for property development

- freehold land 1,263 -

Property development costs at 31 December 1,700 -

22. INVENTORIES Group 2005 2004 RM’000 RM’000

Cost

Food and beverage 712 746

Completed development properties 763 763

Raw materials 27,519 30,350

Work-in-progress 4,647 5,636

Finished goods and trading inventories 29,287 16,491

Consumables 524 372

63,452 54,358

23. TRADE RECEIVABLES Group Company 2005 2004 2005 2004 RM’000 RM’000 RM’000 RM’000

Trade receivables 63,326 50,627 8,333 833

Less: Provision for doubtful debts (7,833) (13,251) - -

55,493 37,376 8,333 833



74

23. TRADE RECEIVABLES (contd.)

Included in trade receivables of the Group are amounts of RM5,055,000 (2004: RM720,000) due from Emas Kerajang Sdn Bhd (“EKSB”), a company in which its holding company, Atlan Holdings Bhd. is a corporate shareholder of the Company. The amounts are unsecured, interest free and have no fixed terms of repayment.

The Group’s normal trade credit term ranges from 30 to 150 days (2004: 30 to 150 days). Other credit terms are assessed and approved on a case-by-case basis.

As at the balance sheet date, the Company has a significant concentration of credit risk in the form of outstanding balances due from 2 (2004: Nil) customers representing approximately 27% (2004: Nil) of total trade receivables.



At beginning of year 13,251 602 - -

Acquisition of subsidiaries 261 5,112 - -


- provision (Note 7) 451 8,263 - -

- write back (Note 4) (4,660) (666) - -

Write off against trade receivables (1,470) (60) - -

At end of year 7,833 13,251 - -

24. OTHER RECEIVABLES


Advances for the acquisition of land (Note (d)) 55,791 55,791 - -

Acquisition of land (Note 42(i)(b))

- payment to stakeholder 27,481 27,481 27,481 27,481

- interest receivable from stakeholder 727 - 727 -

- interest capitalised 513 1,102 513 1,102

Deposits (Note (a)) 13,767 5,997 252 2,738

Due from a minority shareholder of a subsidiary in relation to a joint venture project (Note (d)) 3,000 3,000 - -

Due from affiliated companies (Note (d)) 240 533 - -

Interest receivable 366 206 29 121

Late delivery claims due from a contractor 3,519 3,519 - -

Loans to employees (Note 19) 545 515 - -



75

24. OTHER RECEIVABLES (contd.)


Proceeds receivable for the disposal of quoted shares 31,973 40,036 - 40,036

Profit guarantee receivable (Note (b)) 3,321 - 3,321 -

Tax recoverable 2,378 2,357 - -

Others (Note (c)) 35,218 41,767 19,052 1,010

178,839 182,304 51,375 72,488

Less: Provision for doubtful debts (68,192) (108,420) (957) (40,566)

110,647 73,884 50,418 31,922

(a) Included in deposits of the Group is refundable deposit for the purchase of inventories amounting to RM7,000,000 (2004: RM Nil) of which RM2,000,000 (2004: RM Nil) has been refunded subsequent to year end.

(b) Profit guarantee receivable relates to shortfall between the actual net profit of subsidiaries under United Industries Holdings Sdn Bhd (“UI Group”) for the financial year ended 31 December 2005 and the profit undertaking amount guaranteed by certain vendors of UI Group pursuant to share sales agreements between the Company and the said vendors in the previous financial year.

(c) Included in other receivables of the Group in the previous financial year was prepayment of RM20,000,000 which arose from the issuance of 18,181,818 new ordinary shares at an issue price of RM1.10 each for the acquisition of the entire equity interest in Winner Prompt Sdn Bhd and Selasih Ekslusif Sdn Bhd by DFZ as disclosed in Note 42(iv). The said shares have been issued upon completion of the acquisition during the current financial year.

(d) The advances and amounts receivable are unsecured, interest free and have no fixed terms of repayment.



At beginning of year 108,420 99,357 40,566 40,566

Acquisition of subsidiaries - 9,063 - -


- provision (Note 7) 562 - 427 -

- write back (Note 4) (587) - - -

Write off against other receivables (40,203) - (40,036) -

At end of year 68,192 108,420 957 40,566

The Group has no significant concentration of credit risk that may arise from exposures to a single debtor or to groups of debtors, other than as indicated above.



76

25. MARKETABLE SECURITIES


Quoted shares in Malaysia 1,983 15,593 - 15,593

Less: Accumulated impairment losses (540) (13,902) - (13,902)

1,443 1,691 - 1,691

Market value of quoted shares 1,443 1,691 - 1,691

26. CASH AND CASH EQUIVALENTS


Cash on hand and at banks 30,451 25,290 1,710 983

Fixed deposits with:

- licensed banks 70,290 122,600 29,830 100,452

- licensed finance companies - 24,887 - 24,887

- other financial institutions - 34,735 - 34,735

Cash and bank balances 100,741 207,512 31,540 161,057

Bank overdraft (Note 30) (2,401) (5,538) - -

Cash and cash equivalents 98,340 201,974 31,540 161,057

Included in cash at banks of the Group are amounts of RM39,000 (2004: RM120,000) held pursuant to Section 7A of the Housing Development (Control and Licensing) Act, 1966 and therefore restricted from use in other operations.

Fixed deposits of the Group amounting to RM7,576,000 (2004: RM10,197,000) are pledged to banks for credit facilities granted to certain subsidiaries as disclosed in Note 30.

The range of weighted average effective interest rates of fixed deposits at the balance sheet date were as follows:

Group Company 2005 2004 2005 2004 % % % %

Licensed banks 2.40 - 4.00 2.20 - 3.70 2.40 - 3.00 2.20 - 3.00

Licensed finance companies - 2.78 - 2.78

Other financial institutions - 2.72 - 2.72



77

26. CASH AND CASH EQUIVALENTS (contd.)

The range of maturities of fixed deposits as at the end of the financial year were as follows:

Group Company 2005 2004 2005 2004 Days Days Days Days

Licensed banks 4 - 365 3 - 365 4 - 181 3 - 92

Licensed finance companies - 31 - 31

Other financial institutions - 31 - 31

27. TRADE PAYABLES

Group 2005 2004 RM’000 RM’000

Trade payables 33,788 32,922

Retention sums 440 426

34,228 33,348

Included in trade payables of the Group are amounts of RM1,459,000 (2004: RM745,000) due from EKSB which are unsecured, interest free and have no fixed terms of repayment.

The normal trade credit terms granted to the Group range from 30 to 120 days (2004: 30 to 120 days).

28. OTHER PAYABLES


Deposits 1,298 3,077 2,500 2,500

Advisory fees payable in relation to a newly acquired subsidiary - 1,500 - 1,500

Deferred payables (Note 35) 3,139 3,230 - -

Rental payable 2,353 2,815 - -

Dividends payable (Note (a)) 2,814 2,818 - -

Royalties payable 5,823 5,917 - -

Acquisition of land (Note 42(i)(b)) 27,481 27,481 - -

Accruals 9,671 11,330 847 35

Sundry payables (Note (b)) 36,976 48,669 16,687 15,463

89,555 106,837 20,034 19,498

Notes to the Financial Statements (contd.) 31 December 2005


78

28. OTHER PAYABLES (contd.)

(a) Dividends payable of the Group comprise amounts payable to holders of Irredeemable Convertible Preference Shares (“ICPS”)-B1 and ICPS-B2 of DFZ.

(b) Included in sundry payables of the Group is investment commitment payable to Royal Air Cambodge Co Ltd of RM12,700,000 (2004: RM12,700,000).

29. PROVISION FOR LIABILITIES

Group 2005 2004 RM’000 RM’000

Liquidated Ascertained Damages

At beginning of year 578 -

Acquisition of a subsidiary (Note 43(ii)) - 972

Additional provision during the year (Note 7) 35 -

Utilisation of provision during the year (16) (394)

At end of year 597 578

Provision for liquidated ascertained damages is in respect of development projects undertaken by a subsidiary. The provision is recognised for expected claims of liquidated ascertained damages based on the terms of the applicable sale and purchase agreements.

30. BORROWINGS

Group 2005 2004 RM’000 RM’000

Short Term Borrowings

Secured:

Bank overdrafts 2,401 5,538

Bankers’ acceptances 4,443 8,445

Term loans 2,966 16,418

Hire purchase and finance lease payables (Note 31) 277 376

10,087 30,777

Unsecured:


11,891 33,447



79

30. BORROWINGS (contd.)

Group

2005 2004 RM’000 RM’000

Long Term Borrowings

Secured:

Term loans 4,970 10,610


5,504 10,800

Total Borrowings

Bank overdrafts 2,401 5,538


Term loans 7,936 27,028


17,395 44,247

Maturity of borrowings: (excluding hire purchase and finance lease):

Within one year 11,614 33,071

More than 1 year and less than 2 years - 8,730

More than 2 years and less than 5 years 4,970 1,880

16,584 43,681

The range of weighted average effective interest rates at the balance sheet date for borrowings, excluding hire purchase and finance lease payables, were as follows:

Group

2005 2004 % %

Bank overdrafts 7.00 - 8.75 4.50 - 8.50

Bankers’ acceptances 2.60 - 3.60 2.00 - 7.25

Term loans 4.00 - 7.30 4.50 - 7.40

The borrowings are secured by the following:

- a first legal charge over certain properties of the Group with a carrying amount of RM104,227,000 (2004: RM102,746,000);

- fixed charges on certain properties of the Group with a carrying amount of RM16,332,000 (2004: RM20,773,000);

- deposits with licensed banks of the Group amounting to RM7,576,000 (2004: RM10,197,000);

- fixed and floating charges over the other assets of certain subsidiaries; and

- joint and several guarantee by certain directors of certain subsidiaries.



80

31. HIRE PURCHASE AND FINANCE LEASE PAYABLES

Group

2005 2004 RM’000 RM’000

Minimum lease payments:

Not later than 1 year 313 383

Later than 1 year and not later than 2 years 291 117

Later than 2 years and not later than 5 years 284 101

Later than 5 years - 8

888 609

Less: Future finance charges (77) (43)

Present value of finance lease liabilities 811 566

Present value of finance lease liabilities:

Not later than 1 year 277 376

Later than 1 year and not later than 2 years 123 70

Later than 2 years and not later than 5 years 411 112

Later than 5 years - 8

811 566

Analysed as:

Due within 12 months (Note 30) 277 376

Due after 12 months (Note 30) 534 190

811 566

The hire purchase and finance lease payables attracted interest at the balance sheet date at rates between 2.50% to 5.90% (2004: 3.45% to 7.00%) per annum.

32. SHARE CAPITAL

Number of Ordinary Shares of RM1 Each Amount 2005 2004 2005 2004 ’000 ’000 RM’000 RM’000

Authorised

At beginning/end of year 2,000,000 2,000,000 2,000,000 2,000,000



81

32. SHARE CAPITAL (contd.)

Number of Ordinary Shares of RM1 Each Amount 2005 2004 2005 2004 ’000 ’000 RM’000 RM’000

Issued and fully paid


Issued during the year pursuant to conversion of warrants* 2 - 2 -

Capital repayment - - - (552,414)

Utilisation of share premium - - - 552,414

At end of year 690,518 690,516 690,518 690,516

* Warrants

The 2000/2005 Warrants issued by the Company were constituted by a Deed Poll dated 8 June 1995, amended by the first supplementary deed poll dated 15 October 1997 and second supplementary deed poll dated 1 July 1999.

During the current financial year, 1,200 warrants were converted into ordinary shares of RM1 each at an exercise price of RM2 per ordinary share for cash. The remaining 138,077,112 warrants unexercised had lapsed on expiry of the warrants on 11 June 2005 and were cancelled.

33. MINORITY INTERESTS

Group 2005 2004 RM’000 RM’000

At beginning of year 8,221 -

Recognised in income statement 10,296 116

Acquisition of subsidiaries (Note 43(ii)) - 8,105

Acquisition of additional equity interest in a subsidiary 29,733 -

Dilution of equity interest in a subsidiary (27,475) -

Dividend paid by a subsidiary (268) -

Issue of ICPS-A in a subsidiary 36,364 -

Conversion of ICPS-A in a subsidiary into ordinary shares of the subsidiary (34,468) -

At end of year 22,403 8,221



82

34. RETIREMENT BENEFIT OBLIGATIONS

Certain subsidiaries are members of an unfunded defined benefits plan which provides retirement and death benefits to eligible employees who are members of the National Union of Transport Equipment and Allied Industries Workers. Under the plan, eligible employees are entitled to retirement benefits of one (1) to four (4) weeks of their last drawn salary based on the length of service upon the retirement age of 55. Eligible employees also have the option to retire at the age of 50.

The amounts recognised in the balance sheet are determined as follows:

Group 2005 2004 RM’000 RM’000

Present value of unfunded obligations 1,464 1,359

Unrecognised net transition obligations (462) (692)

Net liability 1,002 667

Analysed as:

Non-current:

Later than 1 year but not later than 2 years 308 205

Later than 2 years but not later than 5 years 694 462

1,002 667

The actuarial valuation, which was performed during the current financial year, showed that there are unrecognised net transition obligations of RM462,000 (2004: RM692,000) as at the balance sheet date. In relation to this, the Group will recognise the net transition obligations over the next four (4) years.

Group 2005 2004 RM’000 RM’000

The amounts recognised in the income statement are as follows:

Current service cost 106 47

Interest cost 97 32

Net transition obligations 229 83

432 162



83

34. RETIREMENT BENEFIT OBLIGATIONS (contd.)

Group 2005 2004 RM’000 RM’000

The movement in the net liability is as follows:

At beginning of year 667 -

Arising from acquisition of subsidiaries (Note 43(ii)) - 516

Recognised in income statement 432 162

Contribution paid (97) (11)

At end of year 1,002 667

Group 2005 2004 % %

Principal actuarial assumptions used (expressed as weighted averages):

Discount rate 7.0 7.0

Expected rate of salary increases 6.5 6.5

Price inflation 3.5 3.5

35. DEFERRED PAYABLES

Group 2005 2004 RM’000 RM’000

Not later than 1 year (Note 28) 3,139 3,230

Later than 1 year but not later than 2 years 750 750

Later than 2 years but not later than 5 years - 750

750 1,500

Deferred payables represent amounts owing by a subsidiary for the acquisition of land which is payable over a period of ten (10) years upon commencement of the subsidiary’s business operations.

The subsidiary has not been able to meet its repayment obligations and is currently in negotiations to settle the outstanding amount. Late payment penalty has been accrued in the current financial year.



84

36. DUE TO SUBSIDIARIES

The amounts due to subsidiaries are unsecured, interest free and have no fixed terms of repayment.

37. CONTRIBUTION FROM JOINT VENTURE MEMBERS

Group 2005 2004 RM’000 RM’000

Contribution by:

- Malaysian Airlines Systems Berhad - 3,000

- Technology Resources Industries Berhad - 3,870

- 6,870

The contribution related to a proposed joint venture project to be set up in year 2000 between the abovementioned parties so as to collaborate in areas relating to information technology services, e-business solutions and customer contact services, whereby a subsidiary of the Company, Trifiniti Networks Sdn Bhd, was the sole outsourcing partner in providing such solutions and services. The contributions which were fully utilised were intended to be exchanged for allocated equities in the said subsidiary. However, the intended arrangement was not formalised and the said subsidiary has ceased operations. As such, the Directors during the year decided that the contributions previously recognised should be written back as the said subsidiary does not have any further obligations in respect of the joint venture.

38. DEFERRED TAX LIABILITIES



Recognised in income statement (Note 9) 1,020 2,003 1,406 1,635

Acquisition of subsidiaries (Note 43(ii)) 320 7,416 - -

At end of year 18,428 17,088 10,710 9,304

Presented after appropriate offsetting as follows:

Deferred tax liabilities 19,022 17,322 10,710 9,304

Deferred tax assets (594) (234) - -

18,428 17,088 10,710 9,304



85

38. DEFERRED TAX LIABILITIES (contd.)

The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:

Deferred Tax Liabilities of the Group:

Accelerated Capital Revaluation Allowances Receivables Surplus Total RM’000 RM’000 RM’000 RM’000

At 1 January 2005 2,558 9,349 5,415 17,322

Recognised in income statement (81) 1,407 346 1,672

Acquisition of subsidiaries 320 - - 320

At 31 December 2005 2,797 10,756 5,761 19,314

At 1 January 2004 47 7,669 - 7,716

Recognised in income statement 376 1,635 (6) 2,005

Acquisition of subsidiaries 2,135 45 5,421 7,601

At 31 December 2004 2,558 9,349 5,415 17,322

Deferred Tax Assets of the Group:

Tax Losses and Unabsorbed Capital Allowances Receivables Total RM’000 RM’000 RM’000

At 1 January 2005 (207) (27) (234)

Recognised in income statement 147 (799) (652)

At 31 December 2005 (60) (826) (886)

At 1 January 2004 (47) - (47)

Recognised in income statement 25 (27) (2)

Acquisition of subsidiaries (185) - (185)

At 31 December 2004 (207) (27) (234)



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38. DEFERRED TAX LIABILITIES (contd.)

Deferred Tax Liabilities of the Company:

Receivables RM’000

At 1 January 2005 9,304

Recognised in income statement 1,406

At 31 December 2005 10,710

At 1 January 2004 7,669

Recognised in income statement 1,635

At 31 December 2004 9,304

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

Group 2005 2004 RM’000 RM’000

Unused tax losses 158,352 153,746

Unabsorbed capital allowances 253,410 260,529

Other deductible temporary differences 966 2,105

412,728 416,380

The availability of the unused tax losses and unabsorbed capital allowances for offsetting against future taxable profits of the subsidiaries is subject to no substantial changes in shareholdings of the subsidiaries under Section 44(5A) and (5B) of the Income Tax Act, 1967.

39. SIGNIFICANT RELATED PARTY TRANSACTIONS


Advertisement space rental charged to EKSB (42) - - -

Advertisement space rental paid to EKSB 24 - - - Gross dividends from subsidiaries - Tenggara Senandung Sdn Bhd - - (1,100) -

- DFZ - - (4,320) -

Hotel related services charged to a former associate, Signforce Sdn Bhd (“Signforce”) (3) (16) - -



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39. SIGNIFICANT RELATED PARTY TRANSACTIONS (contd.)


Hotel licence fee and management fee paid to Signforce 60 511 - -

Interest income receivable from subsidiaries

- Naluri Properties Sdn Bhd (“NPSB”) - - (5,022) (5,841)

- Naluri International Limited - - (303) (316)

- Timeless Image Sdn Bhd - - (847) -

Purchases from director related companies of subsidiaries 5,954 - - -

Purchases from EKSB 13,182 - - -

Purchases from a minority shareholder of a subsidiary 18,005 - - -

Rental charged to a subsidiary, Kelana Megah Sdn Bhd - - (10,000) (833)

Rental expenses paid to NPSB - - 420 420

Sales to director related companies of subsidiaries (285) - - -

Sales to EKSB (6,980) - - -

The directors are of the opinion that all the transactions above have been entered into in the normal course of business.

40. COMMITMENTS

(a) Capital Commitments

Group 2005 2004 RM’000 RM’000

Capital expenditure

Approved and contracted for:

Property, plant and equipment 10,234 984

Subscription of new DFZ shares and new ICPS-A (Note 42(i)(a)) - 50,607

10,234 51,591



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40. COMMITMENTS (contd.)

(a) Capital Commitments (contd.)

Group 2005 2004 RM’000 RM’000

Approved but not contracted for

Property, plant and equipment 3,099 -

Others - 2,500

3,099 2,500

13,333 54,091

(b) Non-Cancellable Operating Lease Commitments - Group as Lessee

Group 2005 2004 RM’000 RM’000

Future minimum rentals payable:

Not later than 1 year 5,814 10,027

Later than 1 year and not later than 5 years 6,541 9,478

Later than 5 years 12,226 14,542

24,581 34,047

Operating lease payments represent rentals payable by the Group for use of land and buildings.

Included in operating lease commitments are commitments in respect of a non-cancellable operating lease of 60 years expiring in 2038 for a piece of short term leasehold land in NPSB.

NPSB has an option to renew the lease of this short term leasehold land for another 30 years after the end of the lease. Should the lease be renewed, the additional lease payments for the renewal period, which are not included in the above, would amount to RM7.2 million.



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41. CONTINGENT LIABILITIES


(a) Unsecured:

Guarantees extended in support of banking and other credit facilities granted to a former subsidiary of DFZ, Eden Enterprises (M) Berhad 10,000 10,000 - -

Guarantees to third parties in respect of credit facilities granted to: - an investment company, ACL Advanced Cargo Logistic GmbH * 13,981 15,887 6,765 7,944

- an associate, Scandinavian Avionics (Malaysia) Sdn Bhd 500 500 500 500

24,481 26,387 7,265 8,444

* These guarantees are denominated in Deutschemark which are equivalent to Euro 3.1 million (2004: Euro 3.1 million) and Euro 1.5 million (2004: Euro 1.5 million) in respect of the Group and the Company respectively.

(b) Litigation

(i) Third party proceedings by Perbadanan Kemajuan Negeri, Negeri Sembilan (“PKNNS”) against MHS Land Sdn Bhd (“MHSL”)

MHSL and PKNNS entered into a Joint Venture Agreement (“JVA”) on 8 November 1996 to jointly develop a piece of land known as Felda Sendayan (“the Land”).

Under the JVA, PKNNS was required to purchase and/or acquire the Land from the respective landowners while MHSL was required to provide the expertise and procure the financing for the purchase. MHSL has advanced to the joint venture an amount of approximately RM55,781,081 for the payment of deposit by PKNNS to the landowners.

PKNNS was subsequently not able to deliver the Land on time for further financing to be procured. Consequently, the development could not proceed as planned.

Two suits have been filed against PKNNS by 157 landowners and PKNNS has in turn issued Third Party Notices to MHSL seeking indemnities from MHSL against the landowners’ claims. Details of the suits are as follows:

(a) 89 of the landowners filed for Specific Performance against PKNNS under their respective Sale and Purchase Agreements.



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41. CONTINGENT LIABILITIES (contd.)

(b) Litigation (contd.)

(i) Third party proceedings by Perbadanan Kemajuan Negeri, Negeri Sembilan (“PKNNS”) against MHS Land Sdn Bhd (“MHSL”) (contd.)

MHSL applied to stay the proceedings pending arbitration (as provided in the JVA) but the application and the subsequent appeal were both dismissed.

PKNNS had then filed for Third Party Directions including a prayer for Summary Judgment on 7 August 2002.

(b) 68 of the landowners applied for a declaration that the Sale and Purchase Agreements between them and PKNNS are terminated, entitling them to forfeit the deposits. The landowners had also claimed for damages for the breach of the respective Sale and Purchase Agreements. PKNNS had filed for Third Party Directions including a prayer for Summary Judgment on 23 October 2002.

On 21 July 2003, the Summonses for Third Party Directions, including the prayers for Summary Judgment, for both suits (detailed in paragraphs (a) and (b) above) were heard together by the Court and decision was reserved by the Court until 31 July 2003.

On 31 July 2003, the Court dismissed PKNNS’s application for Summary Judgment with costs in the cause.

The following consequential orders on the Summonses for Third Party Directions were made for both suits:

(a) that PKNNS files and serves the Statement of Claim Against Third Party within 21 days;

(b) that MHSL files the Defence of the Third Party within 21 days from the date of the service of the Statement of Claim Against Third Party;

(c) that MHSL is at liberty to attend the trial of the main action and to participate in the trial as directed by the Judge and MHSL is bound by the decision at the trial; and

(d) that the issue of the Third Party’s liability to indemnify PKNNS is to be tried in the same trial but immediately after it.

PKNNS had filed two (2) appeals to the Judge in Chambers against the decisions of the Court dated 31 July 2003.

Both suits commenced by the landowners have been consolidated to be tried together and both matters came up for trial on 15 October 2003. In the course of the trial, it became apparent that the issue of whether the landowners are entitled to claim general damages against PKNNS is an issue that had to be decided preliminarily. The Court fixed 6 January 2004 for the respective counsels to submit on this point. Upon hearing submissions on 6 January 2004, the Court had reserved its decision on this point to a date to be informed.

Meanwhile, both appeals had been fixed for mention on 9 February 2004 for PKNNS to confirm to the Court that they intend to proceed with the appeals with a view to obtaining judgments against MHSL even though the main actions between the landowners and PKNNS are currently partly heard.

On 9 February 2004, PKNNS withdrew both appeals with costs to be in the cause. Parties are now to comply with the consequential orders made on the Summonses for Third Party Directions, as stated above.

On 6 April 2004, the Court had delivered its decision on the preliminary issue that was argued on 6 January 2004. The Court held that:



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(i) Third party proceedings by Perbadanan Kemajuan Negeri, Negeri Sembilan (“PKNNS”) against MHS Land Sdn Bhd (“MHSL”) (contd.)

(a) the Court can only decide on the preliminary issue after the full trial of this matter;

(b) the trial is to be continued with all parties producing their witnesses; and

(c) the Plaintiffs’ claims at the trial be restricted to damages only.

The hearing of this matter scheduled on 1 and 2 February 2005 was adjourned pending disposal of the Plaintiff’s application to amend their Statement of Claim. On 22 March 2005, PKNNS served MHSL their Statement of Claim Against the Third Party. After a series of adjournments, the hearing date was fixed for continued hearing on 11 November 2005. On 11 November 2005, MHSL’s solicitors were informed that the matter was further adjourned to a date to be determined by the Court.

On 6 October 2005, MHSL’s solicitors were informed by PKNNS’s solicitors that all other Plaintiffs have accepted a settlement proposal offered by PKNNS but the settlement agreements have not been signed. MHSL’s solicitors have enquired PKNNS’s solicitors in relation to the terms of the proposed settlement, however PKNNS’s solicitors have not replied to such enquiry.

In view of the proposed settlement, the solicitors for PKNNS have agreed that the filing of MHSL’s Statement of Defence in Third Party proceedings be held in abeyance until such time that it is apparent that the proposed settlement has been aborted and that the parties will be proceeding with court action. The directors and solicitors of MHSL would only be in the position to assess the strength of the case upon filing the Statement of Defence.

(ii) Suit filed and arbitration proceedings by MHSL against PKNNS

On 19 November 2003, MHSL had filed a suit at the Seremban High Court against PKNNS for the return of the amount of RM55,781,081 paid to PKNNS by MHSL. The amount was paid on 12 June 1996 as deposit payment to the Felda Sendayan settlers for the purchase of the Felda Sendayan land as stipulated in the JVA.

The writ had been served on PKNNS and PKNNS had filed their appearance through their solicitors. However, PKNNS has yet to file its defence. On 6 July 2004, MHSL’s solicitors had given PKNNS notice to file their defence within 7 days. However, PKNNS’s solicitors had requested for 14 days to file its defence. This extension expired on 21 July 2004. MHSL had filed an application for Judgment in Default of Defence, as a result of PKNNS’s failure to file their Statement of Defence. However, PKNNS’s solicitors had filed an application to strike out MHSL’s suit on the basis that PKNNS had initiated third party proceedings against MHSL.

The application to strike out MHSL’s suit filed by PKNNS was heard in Court on 4 October 2004. After having read the affidavits filed and after having heard oral and written submissions of respective counsels, the Court had, on 25 November 2004 dismissed PKNNS’s application to strike out MHSL’s suit. PKNNS had on 30 November 2004, filed an appeal to Judge in Chambers against the above decision and the appeal had been fixed for hearing on 18 April 2005 but was vacated and fixed for mention on 1 August 2005.

In the meantime, MHSL’s solicitors had issued a notice to PKNNS’s solicitors to file their Statement of Defence but they had failed to do so. As a result of which, MHSL had, on 12 January 2005, filed the draft Judgment in Default of Defence against PKNNS.



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(ii) Suit filed and arbitration proceedings by MHSL against PKNNS (contd.)

On 29 April 2005, the PKNNS applied to set aside the Judgment in Default of Defence. On 11 August 2005, PKNNS had written to MHSL proposing to settle the above suit amicably. The parties are currently negotiating on the terms and conditions of the settlement agreement in relation to the above.

On 26 October 2005, the court had set aside the Judgment in Default of Defence against PKNNS and PKNNS appealed against the decision of the Deputy Registrar. The Judge had fixed 8 December 2005 for final mention and for MHSL to file Notice to Attend Pre Trial Case Management. On 8 December 2005, PKNNS withdrew the application to appeal against the decision of the Deputy Registrar. The Court has fixed 16 August 2006 for case management.

The solicitors for MHSL are of the opinion that MHSL would have a fair chance of success in the above matter.

(iii) Arbitration between the Company and Seloga Jaya Sdn Bhd (“Seloga Jaya”)

Arbitration proceedings have been brought against the Company by Seloga Jaya pursuant to the termination of the appointment of Seloga Jaya as main contractors on 19 April 1995. Seloga Jaya is claiming a sum of approximately RM8,428,444 in quantified damages, RM32,930,771 in special damages for the loss of profits and other damages to be decided by the arbitrator upon the award being made.

In the same proceedings, the Company has counter claimed for general damages, interest on all sums awarded and such other costs as deemed fit by the arbitrator on 25 August 1995. Both parties have filed their respective written submissions. However, the learned arbitrator passed away before making an award. A new arbitrator has been appointed and a second hearing of the case commenced in April 2001. Both parties have agreed to a “documents only” arbitration.

On 23 December 2002, Mohamed Raslan bin Abdul Rahman, Gan Ah Tee and Ooi Woon Chee of KPMG Corporate Services Sdn Bhd, were appointed as Special Administrators (“SAs”) over the Company by Danaharta. On 28 February 2003, Seloga Jaya’s solicitors applied to Danaharta for its consent to proceed with the arbitration. On 12 March 2003, Danaharta replied that until the SAs have had the opportunity to finalise details of a workout proposal of the Company, it is unable to consent to the request to proceed with the arbitration, or any proceedings related thereto against the Company. The claimant’s reply was heard on 11 November 2005. The next hearing date was fixed on 18 February 2006 for clarification, which was then vacated by the arbitrator to a date to be fixed.

In respect of the above, the solicitors for the Company are of the view that the arbitration is still at a preliminary stage, where the arbitrator has only heard submissions on the issue whether the termination by the Company is wrongful. With regard to this specific issue, the solicitors are of the view that the Company has a reasonably arguable defence.

(iv) Notice of Breach to the Company by the Ministry of Finance and Treasury of the Republic of Maldives in respect of Air Maldives Limited

In April 2001, the Ministry of Finance and Treasury of the Republic of Maldives issued a Notice of Breach to the Company for alleged breaches of its contractual obligations under the Shareholders’ Agreement dated 1 October 1994 (“the Agreement”). As stipulated under the Agreement, the Company was requested to remedy the breaches within thirty days. The remedy includes the payment of USD69.2 million to settle the liabilities of the joint venture company, Air Maldives Limited.



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(iv) Notice of Breach to the Company by the Ministry of Finance and Treasury of the Republic of Maldives in respect of Air Maldives Limited (contd.)

The Company had, on 11 May 2001, replied to the Notice detailing the grounds for its repudiating the alleged breaches of the Agreement. Subsequent to an exchange of letters, both parties met on 7 August 2001 to explore the possibility of settling the dispute and the options available to Air Maldives Limited and the parties.

There has not been any progress or further development since then.

(v) Claim filed by former employees of the Company pursuant to an Employees’ Share Option Scheme (“ESOS”)

In 1999, employees of the Company were offered to participate in an ESOS and the Company had arranged with Bank Islam Malaysia Berhad (“BIMB”) as financier for the participating employees to facilitate the employees’ purchase of the ESOS shares.

According to the claim filed by certain former employees of the Company, the ESOS was offered on the representations that it was for the benefit of and to reward these employees. Representations were purportedly made by the Company’s then senior executives that the employees would stand to profit from the scheme. These employees alleged that they had acted on such representations to participate in the scheme and had financed their acquisition of the ESOS with loans secured from BIMB. The subsequent decline in the Company’s share market prices served as the basis for the employees claims against the Company.

The said suit was filed by the former employees of the Company on 3 May 1999 against BIMB. The said suit was further amended on 23 October 2001 to include the Company as the First Defendant therein.

These former employees of the Company are claiming for the rescission of the ESOS agreement, the release of their loan obligations with BIMB of approximately RM6.8 million with interest and for the Company to refund approximately RM1.4 million, being the monies paid by these former employees of the Company to subscribe to the ESOS.

On 28 March 2003, the solicitors for these former employees were notified by the Company’s advisers that SAs had been appointed over the Company on 23 December 2002 and accordingly, a statutory moratorium of twelve (12) months, pursuant to Section 41 of the Pengurusan Danaharta Nasional Berhad Act (“Danaharta Act”) had been imposed on the Company.

On 22 December 2003, the Company announced via advertisement placed in the local media that pursuant to Section 41(3) of the Danaharta Act, Pengurusan Danaharta Nasional Berhad had extended the aforesaid statutory moratorium due to lapse on 22 December 2003, for a further twelve (12) months from 23 December 2003 to 22 December 2004. An announcement to this effect was also made on 23 December 2003.

Pursuant to the extension of the statutory moratorium for a further twelve (12) months, the Court granted an adjournment for case management on 5 February 2004 to 12 January 2005, which was later adjourned to 18 January 2006. On 18 January 2006, the Court adjourned the matter to 21 March 2006 for case management. On 21 March 2006, the Court adjourned the matter to 2 May 2006 to enable the Company to file an application to amend the Statement of Defence and Counter Claim and for the plaintiff to file the revised Analysis of Pleadings.

The solicitors for the Company are of the opinion that the Company has a fairly good defence for the above matter.



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(vi) Civil action by a shareholder of the Company against the Company

On 27 May 2004, the Company had been served with a Writ of Summons together with a Statement of Claim by the solicitors acting for a shareholder of the Company, Hazman bin Ahmad (“Hazman”). Along with the Company and the SAs, the other defendants named in the Writ of Summons and Statement of Claim are Atlan Holdings Bhd (“AHB”), Atlan Properties Sdn Bhd (“APSB”), Danaharta, Danaharta Urus Sdn Bhd and Danaharta Managers Sdn Bhd In the Statement of Claim, the Company has been named as a nominal defendant and Hazman seeks no order against the Company.

Along with the Company, on 26 May 2004, Hazman also had served on Gan Ah Tee, one of the SAs of the Company, and on 27 May 2004, he had also served on Mohamed Raslan bin Abdul Rahman and Ooi Woon Chee, who are the other two SAs of the Company, with the same Writ of Summons and Statement of Claims. Hazman is seeking the following orders against the SAs and the other defendants:

(a) that AHB and/or APSB be compelled to make a mandatory general offer to purchase the shares of Hazman and to offer to purchase the shares of all the other shareholders of the Company at a purchase price of RM1.98 per share;

(b) that the shares held directly and indirectly by Tan Sri Dato’ Tajudin bin Ramli amounting to approximately 309,648,000 representing 44.84% of the paid-up share capital of the Company, shall not be registered in the name of AHB and/or APSB or any of their nominees and that AHB/APSB shall not be entitled to appoint any members on the Board of Directors of the Company until implementation of the mandatory take over bid;

(c) that all the defendants other than the Company jointly and severally pay Hazman and/or the Company, damages for conspiracy;

(d) that all the defendants other than the Company jointly and severally pay Hazman and/or the Company, damages for misrepresentation;

(e) that all the defendants other than the Company jointly and severally pay Hazman and/or the Company, interest on damages assessed in the Statement of Claim at such rate for such period as determined by the Court;

(f) a declaration that the appointment of the SAs is invalid and a consequential order that all transactions entered into by the SAs purportedly for and on behalf of the Company are null and void;

(g) that all the defendants other than the Company jointly and severally pay Hazman the costs of and occasioned by this action; and

(h) such further and other orders as the Court deems fit.

As a consequence of the above, the Company and the SAs have filed in a Memorandum of Appearance on 3 June 2004. On 25 June 2004, the Company and the SAs filed and served their defence to the Statement of Claim.

Hazman’s application to show cause and case management is fixed for mention on 13 June 2006 to enable Naluri’s solicitors to file their application to strike out the suit, which is to be heard before the Senior Assistant Registrar. The matter was fixed for mention on 21 March 2006 to enable Naluri to file their application to strike out Hazman’s claim. On 21 March 2006, the matter had been adjourned to 31 May 2006. The matter is also fixed for case management on 30 June 2006 pending disposal of AHB’s application for striking out.



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(vii) Petition by a shareholder of the Company

On 7 October 2004, the Company and the SAs were served with a petition against the Company, the SAs, AHB, APSB, Danaharta, Danaharta Urus Sdn Bhd and Danaharta Managers Sdn Bhd by Adenan bin Ismail (“Plaintiff”), a shareholder of the Company, together with the other cause papers, seeking:

(a) the following orders:

(i) that AHB and/or APSB be

- compelled to make a mandatory general offer to purchase the shares of the Company;

- restrained and an injunction be granted restraining AHB and/or APSB:

- from appointing any director to the Board of Directors (“Board”) of the Company or exercising the voting rights attached to the voting shares of the Company which have been acquired from Danaharta until the provisions of the Malaysian Code on Take-overs and Mergers 1998 (“Code”) have been complied with;

- in the event that AHB and/or APSB have appointed any directors to the Board of the Company, AHB and/or APSB be restrained and an injunction be granted compelling AHB and/or APSB to ensure that the said directors do not hold themselves out and/or act as directors of the Company until the provisions of the Code have been complied with;

- from registering the shares of the Company acquired from Danaharta in the name of APSB or any of its nominees until the provisions of the Code have been complied with; and

- from charging, selling and/or dealing with the shares of the Company acquired from Danaharta until the provisions of the Code have been complied with.

(ii) that any resolutions passed by the shareholders and/or directors of the Company approving the related party transactions (“RPTs”) as set out in the petition be cancelled;

(iii) that the Listing Requirements in relation to the RPTs as set out in the petition be complied with by all respondents except the Company;

(iv) that DFZ pay to the Company the monies paid to the financial institutions who received monies pursuant to the RPTs as set out in the petition;

(v) that the Company be paid by all respondents damages resulting from the oppressive acts as set out in the petition; and

(vi) that all respondents except the Company, jointly and severally pay the Plaintiff costs.

(b) declarations that the transactions as set out in the petition are RPTs and that the respondents named therein are obliged to abstain from voting at the Company’s shareholders’ meeting; and

(c) any further or other reliefs as the Court deems fit.



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(vii) Petition by a shareholder of the Company (contd.)

On 21 October 2004, the Company had filed an application and an affidavit to strike out the petition and/or to oppose the petition and the petitioner’s injunction application. The hearing in relation to the petitioner’s injunction application which was fixed for 22 October 2004 was postponed to 23 November 2004. The Court had also fixed the Company’s striking out application to be heard on that date.

At the petitioner’s request to the Court, the hearing fixed for 23 November 2004 was brought forward to 10 November 2004. However, on 10 November 2004, the said hearing was adjourned back to 23 November 2004.

On 23 November 2004, at the hearing of the petitioner’s injunction application and the Company’s striking out application, the Court had directed all parties to file in written submissions in respect of the injuction and striking out applications by 16 December 2004 and the submissions in reply by 7 January 2005.

The matter was fixed for hearing/clarification by the Court on 12 April 2005 after a series of adjournments. On 12 April 2005, the learned Judge fixed the application for decision on 17 June 2005. On 17 April 2005, the High Court of Kuala Lumpur dismissed the petitioner’s application for injunction with costs and also allowed the application by the Company to strike out the petition. Subsequent to this, the petitioner had on 15 July 2005, filed an appeal to the Court of Appeal after the High Court decision. The Court of Appeal has yet to fix a date for hearing of the appeal.

In respect of the aforesaid petition where the same order was struck out by the court on 17 June 2005 and an appeal to the Court of Appeal was filed on 15 July 2005, the solicitors for the Company are of the view the appeal is unsustainable both in fact and in law and ought to be dismissed by the Court.

(viii) Petition by a shareholder of the Company against DFZ

On 9 October 2004, DFZ had been served with a petition together with a Summons in Chambers (Inter Parte) and an affidavit in support dated 6 October 2004 by the solicitors acting for Adenan bin Ismail, a shareholder of the Company, seeking, amongst others, the following orders:

(a) that any resolutions passed by the shareholders and/or directors of the Company approving the alleged RPTs set out in the petition to be cancelled; and

(b) that DFZ do pay to the Company the monies paid to DFZ and/or the financial institutions who received monies pursuant to the alleged RPTs as set out in the petition.

During the hearing on 17 June 2005, the learned High Court Judge delivered the following the decisions

(a) the Petitioner’s application for injunctive reliefs against AHB and APSB was dismissed with costs; and

(b) the five (5) applications by all the Respondents to strike out the Petition were allowed with costs.

The Petitioner has lodged an appeal to the Court of Appeal on 15 July 2005 against the decisions given by the learned High Court Judge on 17 June 2005 and the matter is currently still pending the fixing of an appeal date by the Court of Appeal.



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(ix) Zainal Azman bin Md. Zain (“ZAMZ”) against DFZ and six (6) others

On 8 August 1995, ZAMZ, the administrator of the estate of Wan Zainab binti M.A. Bakar, commenced legal proceedings against DFZ and six (6) of its directors at that point in time in the Penang High Court for the alleged:

(i) fraudulent and non-payment transfer of 36,666 units of shares in Syarikat Sriwani (M) Sdn Bhd (“SSSB”) to DFZ for the amount of RM36,666 which belonged to his mother, Wan Zainab binti M.A. Bakar;

(ii) fraudulent and underpayment of transfer of 5,000 units of shares in SSSB to DFZ which is valued at RM3.50 each totaling RM17,500 which also belonged to his mother, Wan Zainab binti M.A. Bakar; and

(iii) breach of trust by failing to give a full and frank disclosure of the said transfers of shares.

ZAMZ is claiming for the sum of RM13,901,268 being the value of the shares, general, aggravated and exemplary damages of RM30,000 together with interest and costs.

The solicitors noted that exposure to liability is RM36,666 if the Court finds that no consideration was given. The solicitors are also of the opinion that ZAMZ is unlikely to succeed in equitable tracing. Therefore, the claim of RM13,901,268 is farfetched but not impossible. The general, aggravated and exemplary damages if at all allowed will be minimal.

The Court has fixed the matter for continued hearing on 17, 18 and 19 May 2006.

(x) Nasturi Jaya Sdn Bhd (“NJSB”) claiming RM831,707 from Kelana Megah Sdn Bhd (“KMSB”)

NJSB instituted claims on KMSB for goods sold and delivered in respect of Eden Garden Hotel for the sum of RM831,707. The main contractor is Mancon Berhad (“Mancon”) whilst NJSB is the nominated subcontractor. The contract documents have specific provisions to state there is no privity of contract between NJSB with KMSB although KMSB has made some payments on behalf of the main contractor to NJSB directly. To-date, KMSB has filed a defence.

The solicitors have expressed their opinion that NJSB would have a difficult time to prove any privity of contract and consequently any liability on the part of KMSB.

The matter was fixed for decision on 17 May 2005 but was adjourned to 13 June 2005 for decision/clarification pending NJSB’s solicitors filing their Reply Submission.

During the hearing on 13 June 2005, the Learned Senior Assistant Registrar (“SAR”) had allowed NJSB’s Order 14A application. KMSB’s solicitor had filed the Notice of Appeal to the Judge in Chambers against the SAR’s decision on 15 June 2005. KMSB’s Appeal to the Judge in Chambers is now fixed for hearing on 11 October 2006.



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(xi) Eden Enterprises (M) Berhad (“EEB”) against Sriwani Duty Free Centre (Langkawi) Sdn Bhd (“SDFC”) and two (2) others

On 10 April 2004, SDFC filed a defence and affidavit to strike out the Statement of Claim filed by EEB against SDFC as the first defendant, Chuan Hooi Huat and Wong Soo Teong, Terry, who are the former directors of DFZ as the second and third defendant respectively, for tort of conspiracy in respect of a lease agreement entered into between EEB and SDFC on 20 August 2002 (“Lease Agreement”).

On 10 October 2005, the SAR allowed EEB’s application to amend the Writ of Summons and Statement of Claim.

EEB had on 4 August 2005 filed for an application to the High Court seeking for a mandatory injunction compelling SDFC to quit, vacate and deliver the aforesaid duty free outlet and staff living quarters in Langkawi. On 6 December 2005, the Learned High Court Judge dismissed EEB’s application for a mandatory injunction. EEB has subsequently appealed to the Court of Appeal on the said decision and the matter is currently still pending the fixing of an appeal date by the Court of Appeal.

(xii) Nilai Barisan Sdn Bhd (“NBSB”) against KMSB

An arbitration proceeding was initiated by NBSB against KMSB to review the interim certificates issued by KMSB’s architect regarding its contract as nominated sub contractor for the supply, delivery, installation, testing and commissioning of airconditioning and mechanical ventilation works for the construction of the Johor Bahru Duty Free Complex (“JBDFC”). The amount in dispute is approximately RM2,467,776. KMSB counter-claimed that the amount claimed by NBSB is excessive, inaccurate and inconsistent with the agreed rates. Furthermore, KMSB counter-claimed that it incurred damages due to NBSB’s defective works and it is estimated that the cost and expense to rectify the defective and/or incomplete works will be approximately RM1,908,898.

The arbitration is currently put in abeyance in view of the fact that NBSB was wound up on 8 August 2000. KMSB’s solicitor had on 21 January 2002 informed the Arbitrator of the status. However, the Arbitrator has yet to respond.

(xiii) LH Technology Sdn Bhd (“LHT”) against KMSB

On 30 December 1999, LH Technology Sdn Bhd (“LHT”) commenced legal proceedings against KMSB claiming a sum of RM1,025,855 on behalf of Mancon whereby KMSB has provided an undertaking to pay LHT.

LHT has filed a Notice of Appeal against the High Court’s decision to set aside the Summary Judgment against KMSB. The appeal is now pending the fixing of hearing before the Court of Appeal.

KMSB’s counsel is of the view that there is no privity of contract between KMSB and LHT and that LHT should instead be suing Mancon. Furthermore, the Group had completed the Debt Restructuring Arrangement on 1 December 2004. Thus, KMSB has no more obligation towards Mancon and LHT.



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42. SIGNIFICANT AND SUBSEQUENT EVENTS

(i) Pursuant to the Extraordinary General Meeting (“EGM”) held on 23 September 2004;

(a) the Company completed the subscription of new ordinary shares of RM1.00 each in DFZ (“DFZ Shares”) and ICPS-A pursuant to a Renunciation Agreement between the Company and Multi Esprit Sdn Bhd (“MESB”) and a Subscription Agreement between the Company and DFZ, both dated 12 December 2003.

The Company shall subscribe for 14,242,824 new DFZ Shares at RM1.00 per new share of DFZ and 272,732,763 new ICPS-A at RM0.10 per new ICPS-A for a total consideration of RM41,516,000 pursuant to the Renunciation Agreement and Subscription Agreement.

In additon, the Company shall subscribe for the remaining new DFZ Shares and new ICPS-A not subscribed by the shareholders of DFZ pursuant to a rights issue to be held by DFZ pursuant to DFZ’s debt restructuring scheme at the subscription price of RM1.00 per new DFZ share and RM0.10 per new ICPS-A.

The above exercise was completed on 10 January 2005 as disclosed in Note 42(iii).

(b) the acquisition of three pieces of leasehold land by the Company from Cergasjaya Properties Sdn Bhd (“CPSB”) for a cash consideration of RM27,480,689, pursuant to the terms and conditions as stipulated in the sale and purchase agreement (“SPA”) dated 12 December 2003 and the supplemental agreement dated 12 December 2004 between the Company and CPSB, remains pending as at the date of this report.

(ii) On 14 December 2004, a take-over offer was made by the Company to acquire the following:

(a) the remaining ordinary shares of RM1.00 each in DFZ (“DFZ Shares”) not already owned by the Company comprising up to 27,878,947 DFZ Shares (“offer shares”) at a cash offer price of RM1.00 per DFZ Share;

(b) up to 8,383,811 new DFZ Shares to be issued pursuant to the rights issue of DFZ (“DFZ rights shares”) at a cash offer price of RM1.00 per new DFZ rights share;

(c) up to 90,910,592 new ICPS-A of RM0.10 each in DFZ (“DFZ rights ICPS-A”) to be issued pursuant to the rights issue of DFZ at a cash offer price of RM0.10 per new DFZ rights ICPS-A; and

(d) the remaining DFZ ICPS-C not already owned by the Company comprising up to 13,792,794 DFZ ICPS-C (“offer DFZ ICPS-C”) at a cash offer price of RM0.28 per DFZ ICPS-C.

On 6 January 2005, the Company accepted the take-over offer to acquire the following:

(a) 44,734 DFZ Shares, and

(b) 390,600 new DFZ rights ICPS-A.

Payments were made for the above-mentioned valid acceptances of DFZ Shares and DFZ rights ICPS-A of RM44,734 and RM39,060 respectively.



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42. SIGNIFICANT AND SUBSEQUENT EVENTS (contd.)

(iii) On 10 January 2005, the Company successfully subscribed for its entitlement of 14,242,824 DFZ rights shares representing 62.95% of the total DFZ rights shares and 272,731,763 DFZ rights ICPS-A representing 75% of the total DFZ rights ICPS-A for a total cash consideration of RM41,516,000. Further, the Company received confirmation from DFZ that the rights issue of DFZ had been fully subscribed by the shareholders of DFZ.

In view of the full subscription of the rights issue of DFZ, the Company was not required to undertake any further subscription of DFZ rights shares and DFZ rights ICPS-A.

Further, during the current financial year, the Company acquired a total of 2,884,000 DFZ Shares for a total cash consideration of RM4,151,000. As at 31 December 2005, the Company has 64.76% equity interest in DFZ.

(iv) Prior to the acquisition of DFZ by the Company in the previous financial year, DFZ had entered into share sales agreements to acquire the entire issued and paid-up share capital of Winner Prompt Sdn Bhd (“WPSB”) and Selasih Ekslusif Sdn Bhd (“SESB”), for consideration of RM8,000,000 and RM12,000,000 respectively. The purchase consideration was to be satisfied by the issuance of a total of 18,181,818 new ordinary shares at an issue price of RM1.10 each.

On 7 December 2004, DFZ issued the consideration shares to the vendors. The acquisition of WPSB and SESB was completed during the current financial year, upon the relisting of DFZ Shares on Bursa Securities.

(v) On 10 May 2005, the Company acquired 100% equity interest in Tenggara Senandung Sdn Bhd, a company incorporated in Malaysia for a total cash consideration of RM16,050,000.

(vi) On 7 July 2005, a subsidiary, NPSB entered into a Deed of Settlement with Signforce, a former associate of the Company, to mutually terminate and rescind the following agreements at a consideration of RM2,950,000 to be paid to Signforce:

(a) Hotel Management Agreement between NPSB and Signforce for the management and operation of the hotel of which NPSB is the legal and beneficial owner; and

(b) Hotel License Agreement between NPSB and Signforce granting NPSB a limited non-exclusive right to use of the intellectual property rights relating to the hotel subject to the terms of the Hotel Licence Agreement.

(vii) On 3 August 2005, the Company acquired 100% equity interest in Blossom Time Sdn Bhd, a company incorporated in Malaysia for a total cash consideration of RM150,000 from Orchard Boulevard Sdn Bhd, a wholly owned subsidiary of DFZ.

(viii) Naluri International Limited, a wholly owned subsidiary of the Company disposed 1,217,000 common stock of USD1.00 per share of World Air Holdings, Inc, a company incorporated in the State of Delaware, United States of America and listed on NASDAQ, United States of America, for a total net cash consideration of USD12,288,884 or equivalent of RM45,980,605 in the open market from 20 July 2005 to 7 September 2005, giving a rise to a gain on disposal of RM7,760,000.



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42. SIGNIFICANT AND SUBSEQUENT EVENTS (contd.)

(ix) On 8 August 2005, Commerce International Merchant Bankers Berhad (“CIMB”) on behalf of the Board of Directors of the Company announced that the Company proposed to seek authority from its shareholders to purchase its own ordinary shares of up to 10% of the issued and paid-up ordinary share capital of the Company (“Proposed Share Buy-Back”) and proposed to amend its Articles of Association to enable the Company to implement the Proposed Share Buy-Back. On 20 December 2005, CIMB on behalf o the Company announced that the shareholders had approved the Proposed Share Buy-Back.

Pursuant to this, the Company bought back 69,051,700 of its own ordinary shares of RM1.00 each from the open market from 26 January 2006 to 23 February 2006, at an average price of RM0.63 for approximately RM43,155,100 with internally generated funds. The shares bought back were initially held as treasury shares and were subsequently cancelled on 16 March 2006. The adjusted issued and fully paid ordinary share capital after cancellation is RM621,465,820 consisting of 621,465,820 ordinary shares.

43. SUBSIDIARIES

Details of the subsidiaries are as follows:

Equity Interest Held (%)

Name of Subsidiaries 2005 2004 Principal Activities

(a) Subsidiaries of Naluri Corporation Berhad

Naluri Properties Sdn Bhd 100 100 Property investment and construction

+ DFZ Capital Berhad 64.76 52.82 Investment holding

* United Industries Holdings Sdn Bhd 100 100 Investment holding

* Naluri International Limited 100 100 Investment holding

MHS Land Sdn Bhd 51 51 Investment holding

International Aviation Consultants Sdn Bhd 100 100 Ceased operations

RZ Equities Sdn Bhd 100 100 Ceased operations

Trifiniti Networks Sdn Bhd 100 100 Dormant

MHS Airline Management Sendirian Berhad 100 100 Dormant

MHS Shipping Management Sendirian Berhad 100 100 Dormant

MHS Shipping Line Sendirian Berhad 100 100 Dormant

MHS Capital Sdn Bhd 100 100 Dormant

Ocean Pride Sdn Bhd 100 100 Dormant

Darul Metro Sdn Bhd 100 100 Dormant

Zon Hospitality Services Sdn Bhd 100 100 Dormant

Tegapasti Sdn Bhd 100 100 Dormant

Naluri Properties Pte Ltd 100 - Investment holding

Blossom Time Sdn Bhd 100 - Property development

Timeless Image Sdn Bhd 100 - Investment holding

Tenggara Senandung Sdn Bhd 100 - Operator of ferry terminal and car park



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43. SUBSIDIARIES (contd.)



(b) Subsidiary of MHS Land Sdn Bhd

Gardenia Success Sdn Bhd 70 70 Dormant

(c) Subsidiaries of Naluri International Limited

Pacific Pleasures Limited 100 100 Dormant

TRIM Capital Management (M) Sdn Bhd 100 100 Ceased operations

(d) Subsidiary of Naluri Properties Sdn Bhd

Belia Karisma Sdn Bhd 100 100 Dormant

(e) Subsidiaries of DFZ Capital Berhad

Sriwani Trading Sdn Bhd 100 100 Investment holding, provision of computer related and management services

Orchard Boulevard Sdn Bhd 100 100 Investment holding and resort development

* Duty Free People Pty Ltd 75 75 Retailer of duty free and non-dutiable merchandise, temporarily ceased operations

* Selasih Ekslusif Sdn Bhd 100 - Retailing of duty free merchandise and operation of a supermarket and department store

* Winner Prompt Sdn Bhd 100 - Licensed distributor and wholesaler of duty free merchandise

(f) Subsidiaries of Sriwani Trading Sdn Bhd

Sriwani Duty Free Supplies Sdn Bhd 100 100 Wholesaler and distributor of duty free and non-dutiable merchandise



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(f) Subsidiaries of Sriwani Trading Sdn Bhd (contd.)

Cergasjaya Sdn Bhd 100 100 Wholesaler and retailer of duty free and non-dutiable merchandise

Jelita Duty Free Supplies Sdn Bhd 100 100 Wholesaler and distributor of duty free and non- dutiable merchandise

Jasa Duty Free Sdn Bhd 100 100 Retailer of duty free and non-dutiable merchandise

Syarikat Sriwani (M) Sdn Bhd 100 100 Retailer of duty free and non-dutiable merchandise

Sriwani Tax-Free Emporium Sdn Bhd 100 100 Retailer of duty free and non-dutiable merchandise

Sriwani Duty Free Centre (Langkawi) Sdn Bhd 100 100 Retailer of duty free and non-dutiable merchandise

Wealthouse Sdn Bhd 75 75 Retailer of duty free and non-dutiable merchandise

* Melaka Duty Free Sdn Bhd 51 51 Retailer of duty free and non-dutiable merchandise

Media Zone Sdn Bhd 100 100 Advertising and promotion activities and investment holding

Sriwani Tours & Travel Sdn Bhd 100 100 Investment holding, tours and travel activities

* Sriwani (Mongolia) Co Ltd 100 100 Dormant



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(g) Subsidiaries of Orchard Boulevard Sdn Bhd

Gold Vale Development Sdn Bhd 100 100 Property development

Radiant Ranch Sdn Bhd 100 100 Resort development

Cerah Menang (M) Sdn Bhd 100 100 Resort development

Black Forest Golf and Country Club Sdn Bhd 100 100 Golf and country club operator, temporarily ceased operations

Cergasjaya Properties Sdn Bhd 100 100 Resort development and properties management

Kelana Megah Sdn Bhd 85.3 85.3 Resort development and operating of duty free complex and hotel

Blossom Time Sdn Bhd - 100 Resort development

(h) Subsidiary of Sriwani Tours & Travel Sdn Bhd

Fleet Car Hire & Tours Sdn Bhd 100 100 Hire and drive services and tour activities

(i) Subsidiary of Gold Vale Development Sdn Bhd

Peri-Asia Sdn Bhd 100 100 Construction business, temporarily ceased operations

(j) Subsidiaries of United Industries Holdings Sdn Bhd

* United Industries Sdn Bhd 100 100 Manufacturing and marketing of exhaust systems and other automotive component parts



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(j) Subsidiaries of United Industries Holdings Sdn Bhd (contd.)

* United Sanoh Industries Sdn Bhd 70 70 Manufacturing and distribution of brake, fuel and clutch tubings and other automotive component parts

* United Vehicle Industries Sdn Bhd 100 100 Manufacturing and marketing of fuel tanks, other automotive component parts and wheelbarrows

(k) Subsidiaries of United Industries Sdn Bhd

* UEW Plastic Industries Sdn Bhd 100 100 Letting of properties

* Freighter Industries (M) Sdn Bhd 100 100 Letting of properties

* Danco Marketing Sdn Bhd 100 100 Distribution of automotive parts and hardware products

* United Filter Sdn Bhd 93 93 Manufacturing of filters

(l) Subsidiaries of United Vehicle Industries Sdn Bhd

* Kadar Prisma Sdn Bhd 100 - Property investment

* UVI Advance Technology Sdn Bhd 100 - Manufacturing of plastic fuel tank

* Not audited by Ernst & Young.

+ A company listed on Bursa Securities

(i) All the subsidiaries were incorporated in Malaysia except for the following:

- Naluri International Limited, which is incorporated in Hong Kong;- Naluri Properties Pte Ltd, which is incorporated in Singapore;- Pacific Pleasures Limited, which is incorporated in the British Virgin Islands;- Duty Free People Pty Ltd, which is incorporated in Australia; and- Sriwani (Mongolia) Co Ltd, which is incorporated in Mongolian People’s Republic.



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(ii) Acquisition of Subsidiaries

On 15 January 2005, the Group acquired 100% equity interests in WPSB and SESB, both companies incorporated in Malaysia, for a total consideration of RM20,000,000 which was satisfied through the issuance of 18,181,818 new ordinary shares of DFZ of RM1 each at an issue price of RM1.10 each. The shares were issued in the previous financial year.

On 10 May 2005, the Group acquired 100% equity interest in Tenggara Senandung Sdn Bhd, a company incorporated in Malaysia, for a total cash consideration of RM16,050,000.

On 1 December 2004, the Group acquired 100% equity interest in UI Group through a wholly-owned subsidiary, United Industries Holdings Sdn Bhd and 52.82% equity interest in DFZ.

The acquisitions had the following effects on the Group’s financial results for the year:

2005 2004 RM’000 RM’000

Revenue 87,327 33,114

Profit from operations 11,260 4,286


The acquisitions had the following effect on the financial position of the Group as at the end of the year:

2005 2004 RM’000 RM’000

Property, plant and equipment 9,867 162,362

Land held for property development - 12,942

Other long term investments - 121

Other non-current assets 103 405

Goodwill on consolidation (Note 20) 15,170 49,958

Inventories 11,390 54,272

Trade and other receivables 23,404 77,911

Cash and bank balances 4,773 41,931

Trade and other payables (6,686) (78,051)

Borrowings (25) (44,247)

Tax payable (556) (3,754)

Retirement benefit obligations - (667)

Deferred payables - (1,500)

Deferred tax liabilities (180) (7,783)

Minority interests - (8,221)

Group’s share of net assets 57,260 255,679



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(ii) Acquisition of Subsidiaries (contd.)

The fair value of the assets acquired and liabilities assumed from the acquisitions of the subsidiaries is as follows:

2005 2004 RM’000 RM’000

Property, plant and equipment (Note 12) 6,353 135,183

Land held for property development (Note 13) - 40,728

Other long term investments - 121

Inventories 7,598 52,945

Trade and other receivables 18,169 76,621

Cash and bank balances 6,969 41,544

Trade and other payables (17,113) (111,579)

Provision for liabilities (Note 29) - (972)

Borrowings - (42,198)

Tax payable (728) (3,873)

Retirement benefit obligations (Note 34) - (516)

Deferred tax liabilities (Note 38) (320) (7,416)

Fair value of total net assets 20,928 180,588

Less: Minority interests (Note 33) - (8,105)

Group’s share of net assets 20,928 172,483

Goodwill on acquisitions (Note 20) 15,170 49,958

Cost of acquisition 36,098 222,441

2005 2004 RM’000 RM’000

Purchase consideration of the Group satisfied by:

Cash 16,050 58,098

Capitalisation of advances to a subsidiary - 147,177

Ordinary shares issued by a subsidiary at fair value in the previous financial year (Note 42(iv)) 20,000 -

Total purchase consideration 36,050 205,275

Costs attributable to the acquisitions, paid in cash 48 17,166

Total costs of acquisition 36,098 222,441



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(ii) Acquisition of Subsidiaries (contd.)

2005 2004 RM’000 RM’000

Cash outflow arising on acquisitions:

Purchase consideration satisfied by cash 16,050 205,275

Cost attributable to the acquisitions, paid in cash 48 17,166

Total cash outflow of the Company 16,098 222,441

Cash and cash equivalents of subsidiaries acquired (6,969) (41,544)

Net cash outflow of the Group 9,129 180,897

Total cash outflow of the Company:

Acquisition of subsidiaries from third parties 16,098 222,441

Acquisition of a subsidiary, Blossom Time Sdn Bhd,

from a fellow subsidiary, Orchard Boulevard Sdn Bhd

(Note 42(vii)) 150 -

16,248 222,441

(iii) The auditors’ report on the financial statements of a subsidiary, Naluri International Limited for the financial year ended 31 December 2005 contained a fundamental uncertainty relating to the going concern of the subsidiary.

44. ASSOCIATES

Details of the associates are as follows:

EquityName of Country of Financial Interest Held (%)Associates Incorporation Year End 2005 2004 Principal Activities

Scandinavian Malaysia 31 December 25 25 Repair and overhaul Avionics of digital avionics (Malaysia) Sdn Bhd for general aviation

Asian Composites Malaysia 31 December 25 25 Manufacturing of Manufacturing composite aircraft Sdn Bhd parts

Signforce Sdn Bhd Malaysia 31 December - 33 Hospitality management and related services



109

45. FINANCIAL INSTRUMENTS

(a) Financial Risk Management Objectives and Policies

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks. The Group operates within clearly defined guidelines that are approved by the Board and the Group’s policy is not to engage in speculative transactions.

(b) Interest Rate Risk

The Group’s primary interest rate risk relates to interest-bearing debt. The investments in financial assets are mainly short term in nature and they are not held for speculative purposes but have been mostly placed in fixed deposits and marketable securities which yield better returns than cash at bank.

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

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

(c) Foreign Exchange Risk

The Group operates internationally and is exposed to various currencies, mainly United States Dollar, Euro, Australian Dollar, Japanese Yen, New Taiwan Dollar, Singapore Dollar, Sterling Pound, Renminbi, Thai Baht, Hong Kong Dollar and Brunei Dollar. Foreign currency denominated assets and liabilities together with expected cash flows from highly probable purchases and sales give rise to foreign exchange exposures.

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

The net unhedged financial assets and financial liabilities of the Group that are not denominated in their functional currencies are as follows:

Cash and Bank Trade Receivables Balances Payables Foreign Currency RM’000 RM’000 RM’000

2005

United States Dollar 219 173 1,233Euro 316 1 177Australian Dollar 7 3 66Japanese Yen - 1 4,127New Taiwan Dollar - 2 -Singapore Dollar 5 8,770 347Sterling Pound - 1 92Thai Baht - 191 22

Hong Kong Dollar 31 7 - Total 578 9,149 6,064



110

45. FINANCIAL INSTRUMENTS (contd.)

(c) Foreign Exchange Risk (contd.)

Cash and Bank Trade Receivables Balances Payables Foreign Currency RM’000 RM’000 RM’000

2004United States Dollar 110 43 4,492Euro 124 1 309Australian Dollar 2 2 -Japanese Yen - 4 5,180New Taiwan Dollar - 2 -Singapore Dollar - 16 411Sterling Pound - 2 (5)

Thai Baht - 37 23

Total 236 107 10,410

(d) Liquidity Risk

The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both capital markets and financial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness.

(e) Credit Risk

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

The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial instruments, other than as disclosed in Notes 23 and 24.



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(f) Fair Values

The carrying amounts of financial assets and liabilities of the Group and of the Company at the balance sheet date approximated their fair values except for the following:

Group Company Carrying Fair Carrying Fair Note Amount Value Amount Value RM’000 RM’000 RM’000 RM’000

Financial Assets


Investments in subsidiaries

- unquoted shares 15 - - 82,344 *

- quoted shares 15 - - 121,015 127,974

Investments in associates

- unquoted shares 16 13,485 * 24,187 *

Other long term investments 17 132 * 11 *

Due from - subsidiaries 18 - - 348,344 @

- affiliated companies 24 240 @ - -

Marketable securities 25 1,443 1,443 - -


Investment in subsidiaries

- unquoted shares 15 - - 66,096 *

- quoted shares 15 - - 75,265 116,956 #

Investments in associates

- unquoted shares 16 10,673 * 24,187 *

Other long term investments 17 155 * 34 *

Due from - subsidiaries 18 - - 297,947 @

- affiliated companies 24 533 @ - -

Marketable securities 25 1,691 1,691 1,691 1,691



112


(f) Fair Values (contd.)

Group Company Carrying Fair Carrying Fair Note Amount Value Amount Value RM’000 RM’000 RM’000 RM’000

Financial Liabilities


Term loans 30 7,936 7,936 - -

Hire purchase and finance lease payables 31 811 792 - -

Due to subsidiaries 36 - - 21,394 @


Term loans 30 27,028 13,095 - -

Hire purchase and finance lease payables 31 566 194 - -

Due to subsidiaries 36 - - 21,467 @

* It is not practical to estimate the fair value of non-current unquoted shares because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.

@ It is also not practical to estimate the fair values of amounts due from/to subsidiaries and affiliated companies due principally to a lack of fixed repayment terms entered by the parties involved and without incurring excessive costs.

# The quoted shares were not traded at 31 December 2004 as the subsidiary, DFZ was classified under PN 4/2001 of the listing requirements of Bursa Securities. The fair value disclosed is based on the closing price of the shares upon DFZ’s relisting on 28 January 2005.

The fair values of all other financial assets and financial liabilities approximate their carrying values.

The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments:

(i) Cash and Cash Equivalents, Trade and Other Receivables/Payables

The carrying amounts approximate fair values due to the relatively short term maturity of these financial instruments.



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(f) Fair Values (contd.)

(ii) Marketable Securities

The fair value of quoted shares is determined by reference to stock exchange quoted market bid prices at the close of the business on the balance sheet date.

(iii) Borrowings

The fair value of borrowings is estimated by discounting the expected future cash flows using the current incremental lending rates for similar types of lending and borrowing arrangements.

46. SEGMENT INFORMATION

Business Segments

The Group is organised into four major business segments:

(i) Investments;

(ii) Property and hospitality;

(iii) Trading of duty free goods and non-dutifiable merchandise; and

(iv) Automotive.

Other business segments mainly consist of provision of corporate services, dormant and inactive companies, none of which are of a sufficient size to be reported separately.

The directors are of opinion that all inter-segment transactions have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties.

The activities of the Group are carried out mainly in Malaysia and as such, segmental reporting by geographical locations is not presented.

Property and Duty Investments Hospitality Free Automotive Others Eliminations Consolidated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

31 December 2005

Revenue

External sales 2,610 71,948 214,622 176,926 - - 466,106

Inter-segment sales 11,592 13,322 - - - (24,914) -

Total revenue 14,202 85,270 214,622 176,926 - (24,914) 466,106



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46. SEGMENT INFORMATION (contd.)


31 December 2005 (contd.)

Results

Profit from operations 76,403 8,344 30,611 9,907 8,807 (56,276) 77,796

Finance costs (2,079)

Share of results of associates - 88 - - 1,901 - 1,989

Profit before taxation 77,706

Taxation (7,373)

Profit after taxation 70,333

Minority interests (10,296)

Net profit for the year 60,037

Assets

Segment assets 683,915 405,772 91,044 207,301 894 (426,566) 962,360

Investments in associates 13,485 - - - - - 13,485

Consolidated total assets 975,845

Liabilities

Segment liabilities 130,951 228,129 31,895 185,140 805 (412,350) 164,570

Unallocated corporate liabilities 22,403

Consolidated total liabilities 186,973

Other Information

Capital expenditure 13,900 21,388 6,032 12,847 - - 54,167

Depreciation 481 4,672 2,492 11,369 19 1,587 20,620

Impairment losses (37,681) 185 - - - - (37,496)

Non-cash income other than depreciation and impairment losses (188) (627) (972) (55) (8,870) - (10,712)



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31 December 2004

Revenue

External sales 28,878 21,413 15,895 14,462 - - 80,648

Inter-segment sales 6,990 1,253 4,966 - - (13,209) -

Total revenue 35,868 22,666 20,861 14,462 - (13,209) 80,648

Results

Profit/(loss) from operations 22,946 (1,231) 3,546 1,753 (502) (8,181) 18,331

Finance costs (146)

Exceptional items (105) - - - - 105 -

Share of results of associates - 295 - - (227) - 68

Profit before taxation 18,253

Taxation (10,012)

Profit after taxation 8,241

Minority interests (116)

Net profit for the year 8,125

Assets

Segment assets 747,142 263,995 46,936 205,591 34,980 (346,380) 952,264

Investments in associates 10,673 - - - - - 10,673

Consolidated total assets 962,937

Liabilities

Segment liabilities 142,078 197,052 35,439 196,671 86,693 (441,278) 216,655

Unallocated corporate liabilities 8,221

Consolidated total liabilities 224,876



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31 December 2004 (contd.)

Other Information

Capital expenditure 2 983 44 1,283 8 - 2,320

Depreciation 277 5,390 332 1,271 31 - 7,301

Impairment losses (542) 15 - - - - (527)

Non-cash expenses other than depreciation and impairment losses 105 3,336 33 24 (14) (155) 3,329

47. COMPARATIVES

The following comparative amounts as at 31 December 2004 have been reclassified to conform with current year’s presentation:

As Previously As Restated Adjustments Stated RM’000 RM’000 RM’000

Group

Revenue 80,648 (1,129) 79,519

Other income 2,832 1,129 3,961

Property, plant and equipment 450,324 (106,803) 343,521

Land held for property development 76,601 (27,481) 49,120

Investment properties - 134,284 134,284

Trade payables (33,348) (2,743) (36,091)

Other payables (106,837) 2,743 (104,094)



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STATEMENT OF SHAREHOLDINGS

Type of securities - Ordinary shares of RM1.00 each fully paid

Authorised share capital - RM2,000,000,000

Issued and paid-up share capital - RM621,465,820

Voting Rights - One vote per shareholder on a show of hands or one vote per ordinary share on a poll

Number of shareholders - 35,594

ANALYSIS OF SHAREHOLDINGS

Size of Holdings Number of Percentage Total Percentage Shareholders (%) Holdings (%)

1 – 99 115 0.32 2,885 0.00

100 – 1,000 11,564 32.49 10,896,112 1.75

1,001 – 10,000 20,782 58.39 82,303,082 13.24

10,001 – 100,000 2,868 8.06 75,967,147 12.22

100,001 – 31,073,290* 264 0.74 231,331,372 37.23

31,073,291 and above** 1 0.00 220,965,222 35.56

TOTAL 35,594 100.00 621,465,820 100.00

* Denotes less than 5% of issued shares** Denotes 5% and above of issued shares

LIST OF THIRTY (30) LARGEST SHAREHOLDERS

Name of Shareholders Shareholdings Percentage (%)

1. Atlan Properties Sdn Bhd 220,965,222 35.56

2. ABB Nominee (Tempatan) Sdn Bhd - Pledged securities account for Chen Siak Chan (SMF-CTL) 27,067,100 4.36

3. A.A. Anthony Securities Sdn Bhd [IVT (CI001)] 21,292,600 3.43

4. Amanah Raya Nominees (Tempatan) Sdn Bhd - Skim Amanah Saham Bumiputera Permodalan Nasional Berhad 12,136,332 1.95

5. HSBC Nominees (Asing) Sdn Bhd - AAB SG BR for Seymour Pacific Limited 11,500,000 1.85

6. Citigroup Nominees (Asing) Sdn Bhd - UBS AG Singapore for City Pioneer Limited 9,800,000 1.58

7. Mayban Nominees (Tempatan) Sdn Bhd - Pledged securities account for Siow Yoon Keong (101AB1032) 7,041,600 1.13

8. Citigroup Nominees (Asing) Sdn Bhd - UBS AG Singapore for Wong Sioe Lie 7,000,000 1.13

9. Citigroup Nominees (Asing) Sdn Bhd - UBS AG Singapore for Neo Age Seng 5,800,000 0.93

Statistic on Shareholdingsas at 10 May 2006


118

LIST OF THIRTY (30) LARGEST SHAREHOLDERS (contd.)

Name of Shareholders Shareholdings Percentage (%)

10. Ihsan Indah (M) Sdn Bhd 5,000,000 0.80

11. OSK Nominees (Tempatan) Sdn Berhad - Pledged securities account for Ngoi Ah Hock 3,958,200 0.64

12. Citigroup Nominees (Asing) Sdn Bhd - UBS AG Singapore for Red Cedar International Ltd 3,953,200 0.64

13. Majaharta Sdn Bhd 3,658,714 0.59

14. HLG Nominee (Asing) Sdn Bhd - Lim & Tan Securities Pte Ltd for Lim Poh Suan Eunice 3,476,000 0.56

15. HLG Nominee (Asing) Sdn Bhd - Lim & Tan Securities Pte Ltd for Terence Heng Jin Hui 3,454,600 0.56

16. Employees Provident Fund Board 3,347,000 0.54

17. TCL Nominees (Tempatan) Sdn Bhd - Pledged securities account for Siow Yoon Keong 3,226,600 0.52

18. Al Wakalah Nominees (Tempatan) Sdn Bhd - Exempted ESOS 2,537,000 0.41

19. Kenanga Nominees (Tempatan) Sdn Bhd - DMG & Partners Securities Pte Ltd for Kingplus Assets Management Ltd (6Q/63794) 2,500,000 0.40

20. Citigroup Nominees (Asing) Sdn Bhd - CBNY for DFA Emerging Markets Fund 2,430,100 0.39

21. Rego Multi-Trades Sdn Bhd 2,403,098 0.39

22. Tan Sri Dato’ Tajudin bin Ramli 2,371,500 0.38

23. Citigroup Nominees (Asing) Sdn Bhd - Exempt an for Merrill Lynch Pierce Fenner & Smith Incorporated (Foreign) 2,171,120 0.35

24. HSBC Nominees (Asing) Sdn Bhd - Exempt an for Morgan Stanley & Co. International Limited 2,010,000 0.32

25. Cheah See Han 1,965,000 0.32

26. Ann Joo Corporation Sdn Bhd 1,917,000 0.31

27. Polynamic Sdn Bhd 1,800,000 0.29

28. A.A. Anthony Nominees (Tempatan) Sdn Bhd - Pledged securities account for Saw Kheng Guan 1,777,900 0.29

29. A.A. Anthony Nominees (Asing) Sdn Bhd - Pledged securities account for Chew Soo Lin 1,733,000 0.28

30. DB (Malaysia) Nominee (Asing) Sdn Bhd - Exempt an for EFG Bank 1,655,600 0.27

TOTAL 379,948,486 61.17

Statistic on Shareholdings (contd.)as at 10 May 2006


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Direct Indirect Number of Percentage Number of Percentage Name of Substantial Shareholder Shares held (%) Shares held (%)

1. Atlan Properties Sdn Bhd 220,965,222 35.56 - -

2. Atlan Holdings Bhd - - 220,965,2221 35.56

3. Dato’ Sri Adam Sani bin - - 220,965,2221 35.56 Abdullah

4. Distinct Continent Sdn Bhd - - 220,965,2221 35.56

5. Sebastian Paul Lim Chin Foo - - 220,965,2221 35.56

6. Tan Sri Dato’ Tajudin bin Ramli 2,371,5002 0.38 91,6641&3 0.01

7. Arah Murni Sdn Bhd 91,6643 0.01 - -

Notes:

1. Deemed interest pursuant to Section 6A of the Companies Act, 1965.

2. Based on report from Bursa Malaysia Depository Sdn Bhd (“BMD Report”) dated 10 May 2006, Tan Sri Dato’ Tajudin bin Ramli held 2,371,500 shares in the Company. There is a difference in Tan Sri Dato’ Tajudin bin Ramli’s direct and indirect shareholdings based on the Register of Substantial Shareholders and the BMD Report. The Company had written to Tan Sri Dato’ Tajudin bin Ramli to seek confirmation and todate, had not received a reply.

3. Based on the BMD Report dated 10 May 2006, Arah Murni Sdn Bhd held 91,664 shares in the Company. There is a difference in Arah Murni Sdn Bhd’s shareholdings based on the Register of Substantial Shareholders and the BMD Report. The Company had written to Arah Murni Sdn Bhd to seek confirmation and todate, had not received a reply.

Substantial Shareholdersas at 10 May 2006


120

Direct IndirectName Number of Percentage Number of Percentage Shares (%) Shares (%)

Dato’ Sri Adam Sani bin Abdullah2 - - 220,965,2221 35.56

Tan Sri Saw Huat Lye 139,000 0.02 - -

Jeneral (B) Dato’ Sri Abdullah - - - - bin Ahmad @ Dollah bin Amad

Tengku Azman Ibni Almarhum - - - - Sultan Abu Bakar

Dato’ Khalid bin Mohamad Jiwa - - - -

Lee Sze Siang - - - -

Kan Weng Hin - - 5,5001 *

Wong Peng Yew - - - -

Haji Mohd Radzuan bin Abdullah - - - -

Peter Madhavan - - - -

Notes:

1. Deemed interests pursuant to Section 6A of the Companies Act, 1965.

2. By virtue of his substantial interest in the shares of the Company, Dato’ Sri Adam Sani bin Abdullah is deemed to have an interest in the shares of the related corporations to the extent that the Company has an interest.

* Negligible.

Statement of Directors ̓Interestin the Company and Related Corporations as at 10 May 2006


121

Net book value as Tenure at 31 Open Date of Existing /expiry Age of Approx. December market latest Location Description use date building areas 2005 value revaluation Years Sq. Metre RM’mil RM’mil

1 Lot 42, Section 13 Vacant Vacant Leasehold N/A 12,052.32 9.39 10.40 17 May 1999 Town and District industrial (99 years - of Petaling Jaya, land expiring Selangor Darul 2064) Ehsan

2 Lot No. 1, Office Registered Leasehold Office 18,701.20 164.73 185.00 10 July 2001 Section 63 building, office, (60 years – building Town of Kuala hotel office block expiring (21) Hotel Lumpur, apartment for rent 2038) apartment Wilayah building and and hotel renewable (10) Persekutuan building under apartments for a further construction for letting 30 years

3 i) Lot PTB 10707 Integrated Shopping i) Leasehold 8 86,237.22 156.67 206.50 30 November and 10710 Commercial complex, (99 years - 2003 ii) Lot PTB Duty Free hotel expiring 20006, 20380 & Complex - facilities, 2092) PTB 20438 & Duty Free carpark, ii) Leasehold PTD 146378 and Zone hotel, (30 years - PTD 148062, custom and expiring Town of Johor immigration 2027) Bahru and Mukim cum office Plentong, complex, Johor Bahru, jetty and Johor Darul restaurant Takzim & surface car parks

4 Lots 303 (Geran Vacant land Vacant Freehold N/A 11,267.00 9.20 11.50 3 November 46814) and 340 for land with 2003 (Geran 46821) development showhouse Seksyen 1, Mukim 17 Daerah Timur Laut, Bandar Batu Ferringhi, Daerah Timur Laut, Pulau Pinang

5 Lots 31 Vacant land Vacant land Freehold N/A 21,550.00 18.22 18.00 3 November (G.M 29), 478 for 2003 (Geran 16796) development and 479 (Geran 16797) Mukim 17 Daerah Timur Laut, Bandar Batu Ferringhi, Pulau Pinang

Properties Held by the Group


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6 Lots 2501, Vacant land, Rented out Leasehold 9 3,127,220.00 27.48 42.45 3 November 2502 and 2209 part of which is and partly (60 years - 2003 Bukit Kayu Hitam, Golf and vacant expiring Mukim Sungai Country Club 2053 and Laka, 2057) Daerah Kubang Pasu, Kedah Darul Aman

7 Lot No. 350, Single storey Rented Freehold 39 149.00 0.11 * * Seksyen 3, terrace house out Geran 11185, Bandar Jelutong, Daerah Timur Laut, Pulau Pinang

8 Geran No. 13240 Intermediate 4 Office Freehold 25 301.00 2.06 * * Lot 619, Geran storey and No. 10453 5 storey Lot 772 and terraced Geran No. 10454 shopoffice Lot 773 all in block Seksyen 19 Bandar Georgetown Daerah Timur Laut, Pulau Pinang

9 Lot 1071, Double storey Rented out Freehold 11 29,234.00 6.04 * * Mukim 11, warehouse Seberang Perai Tengah, Pulau Pinang

10 Lot PT 482 Double storey Staff Leasehold 19 297.00 0.14 * * HS(M) 19/1981 shophouse quarters (99 years - Mukim Sungai expiring Laka, 2080) Daerah Kubang Pasu, Kedah Darul Aman

11 Lot 2224 HS(M) A single Duty Free Leasehold 18 20,234.00 6.38 * * 1/1987, PT 1443, storey shopping (30 years - Bukit Kayu Hitam, warehouse complex expiring Mukim Sungai annexed to and 2017) Laka, a double warehouse Daerah Kubang storey Pasu, shopping Kedah Darul complex and Aman 30 units of single storey lock-up shops and ancillary building

Properties Held by the Group (contd.)


123



12 Lot 127-142 & 22 units Staff Leasehold 13 3,216 0.70 * * 169-174, single quarters (99 years - PT 1889-1904 & storey expiring 1931-1936, terrace 2088) HS(M) 135/1989- house 150/1989 & 177/1989- 182/1989, Bandar Baru Laka Temin, Mukim Sungai Laka, Daerah Kubang Pasu, Kedah Darul Aman

13 Lot 911, 913 & Vacant land Vacant Freehold N/A 213,413.00 3.44 * * 914, Mukim Sungai Laka, Daerah Kubang Pasu, Kedah Darul Aman

14 Lot 439, Vacant land Vacant Freehold N/A 69,125.00 12.47 * * Geran 23052 Mukim 17, Daerah Timur Laut, Pulau Pinang

15 Lot 475, Vacant land Vacant Freehold N/A 2,346.00 0.51 * * Seksyen 1, Bandar Batu Ferringhi, Daerah Timur Laut, Pulau Pinang

16 Lot 44 Premises 4 & 1/2 storey Business Leasehold 21 130.00 0.47 * * No. 142/1/2&3 shophouse and office (99 years - Kompleks Munshi premises expiring Abdullah, 2084) Jalan Munshi Abdullah, 75100 Melaka

17 Lot 970, 971, Shopping Duty Free Leasehold 11 2,548.00 2.13 * * 973 & 1556, complex Complex (30 years - Mukim expiring Kedawang, 2024) Daerah Langkawi, Kedah Darul Aman


124


18 Lot No. 4995, Industrial Factory Freehold 10 - 11 12,140.55 5.51 5.50 16 September Mukim Kapar, premises and office 2003 District of Klang, Selangor Darul Ehsan

19 Lot No. 4998 Industrial Factories, Freehold 2 - 21 24,154.64 13.31 14.00 15 September and 5017, premises office and 2003 Mukim Kapar, ancillary District of Klang, buildings Selangor Darul Ehsan

20 PT 1644, Vacant Vacant land Leasehold N/A 57,085.00 3.54 3.70 3 October 2003 Town of Hulu industrial (99 years – Bernam, land expiring District of Hulu 2096) Selangor, Selangor Darul Ehsan

21 Lot No. 5016, Vacant Vacant land Freehold N/A 12,140.17 2.48 2.60 15 September Mukim of Kapar, industrial land 2003 District of Klang, Selangor Darul Ehsan

22 Lot No. 5080, Industrial Warehouse Freehold 9 12,014.09 9.38 8.20 16 September Mukim of Kapar, premises and office 2003 District of Klang, building Selangor Darul Ehsan

23 Lot No. PT 548, Double storey Factory Freehold 7 557.40 0.73 0.73 16 September Mukim of semi-detached 2003 Damansara, factory District of Petaling, Selangor Darul Ehsan



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24 Lot No. PT 4857 Three-storey Shop/ Leasehold 21 268.57 0.65 0.70 16 September Mukim of Empang, corner terraced office/ (99 years - 2003 District of Hulu shop/ office/ apartment expiring Langat, apartment 2083) Selangor Darul Ehsan

25 Lot Nos. 4999, Industrial Factory Freehold 3 - 28 48,562.22 31.46 33.50 15 September 5000, 5018 premises 2003 and 5019, Mukim of Kapar, District of Klang, Selangor Darul Ehsan

26 Lot 56 Kawasan Industrial Factory Leasehold N/A 43,541,33 3.87 * * Perindustrian premises (under (60 years - Berat Gurun, construction) pending Mukim Gurun, issue of District of Kuala title) Muda, Kedah Darul Aman

* No valuation was made since the dates of purchase.


126

NOTICE IS HEREBY GIVEN THAT the Twenty Fourth Annual General Meeting of Naluri Corporation Berhad (formerly known as Naluri Berhad) (“Naluri” or “Company”) will be held at Perdana Grand Ballroom, Dewan Perdana Felda, Jalan Maktab, Off Jalan Semarak, 54000 Kuala Lumpur on Tuesday, 27 June 2006 at 10.00 a.m. to transact the following businesses:

AGENDA

As Ordinary Business

1. To receive and adopt the Audited Financial Statements of the Company for the financial year ended 31 December 2005 together with the Directors’ and Auditors’ Reports thereon.

2. To declare a tax exempt final dividend of 1.0% for the financial year ended 31 December 2005.

3. To approve the payment of Directors’ Fees of RM48,000 in respect of the financial year ended 31 December 2005.

4. To re-elect the following Directors retiring pursuant to Article 112 of the Company’s Articles of Association and who, being eligible, offer themselves for re-election:

(i) Lee Sze Siang

(ii) Haji Mohd Radzuan bin Abdullah

(iii) Peter Madhavan

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

As Special Business

To consider and, if thought fit, to pass the following resolutions:

6. Authority to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965

“THAT pursuant to Section 132D of the Companies Act, 1965 (“Act”) full authority be and is hereby given to the Directors to issue shares in the capital of the Company from time to time at such price upon such terms and conditions for such purposes and to such person or persons whomsoever as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued pursuant to this Resolution does not exceed 10% of the total issued share capital of the Company for the time being, subject to the Act, the Articles of Association of the Company and approval from Bursa Malaysia Securities Berhad and other relevant bodies where such approval is necessary AND THAT such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company.”

Ordinary Resolution 1










127

As Special Business (Contd.)

7. Proposed New Authority of Naluri to Purchase its own Shares of up to 10% of its issued and paid-up Share Capital (“Proposed New Authority”)

“THAT subject to the Act, rules, regulations and orders made pursuant to the Act, provisions of the Company’s Memorandum and Articles of Association and the requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and the passing of ordinary resolution 10 and any other relevant authority, the Directors of the Company be and are hereby unconditionally and generally authorised, to the extent permitted by the law, to make purchases of ordinary shares comprised in the Company’s issued and paid-up share capital, such purchases to be made through the Bursa Securities and to take all such steps as necessary (including opening and maintaining of a central depositories account under the Securities Industry (Central Depository) Act, 1991) and enter into any agreements, arrangements, and guarantees with any party or parties to implement, finalise and give full effect to the aforesaid purchase with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments (if any), as may be imposed by the relevant authorities from time to time subject further to the following:

(i) the maximum aggregate number of ordinary shares of RM1.00 each in the Company (“Naluri Shares”) which may be purchased and/or held by the Company shall not exceed ten per centum (10%) of the issued and paid-up share capital of the Company, subject to the provisions of the Listing Requirements of Bursa Securities (“Listing Requirements”) applicable to a company listed on the Main Board of the official list of Bursa Securities;

(ii) the maximum funds to be allocated by the Company for the purpose of purchasing the Naluri Shares under the Proposed New Authority shall not exceed the retained profits and/or share premium account of the Company for the time being. Based on the audited financial statements of Naluri for the financial year ended 31 December 2005, the audited share premium account and retained earnings of Naluri stood at approximately RM97.18 million and RM25.02 million respectively. Based on the unaudited quarterly results of Naluri for the three (3) months financial period ended 31 March 2006, the share premium account and retained earnings of Naluri stood at approximately RM54.02 million and RM25.03 million respectively;

(iii) the authority conferred by this resolution to facilitate the Proposed New Authority will commence immediately upon passing of this ordinary resolution and will continue to be in force until:

(a) the conclusion of the next annual general meeting (“AGM”) of the Company, following the general meeting at which this resolution was passed at which time it shall lapse unless by ordinary resolution passed at the meeting, the authority is renewed, either unconditionally or subject to conditions but not as to prejudice the completion of purchase by the Company before the aforesaid expiry date and, in any event, in accordance with the provisions of the Act, the rules and regulations made pursuant thereto and the guidelines issued by Bursa Securities and/or any other relevant authority;

(b) the expiration of the period within which the next AGM after that date is required by law to be held; or



128

(c) revoked or varied by ordinary resolution passed by the shareholders in general meeting,

whichever occurs first, but not so as to prejudice the completion of purchase(s) by the Company of the Naluri Shares before the aforesaid expiry date and, made in any event, in accordance with the provisions of the guidelines issued by the Bursa Securities and any prevailing laws, rules, regulations, orders, guidelines and requirements issued by any relevant authorities; and

(iv) upon the purchase(s) of the Naluri Shares by the Company, the Directors of the Company be and are hereby authorised to cancel up to all the Naluri Shares so purchased or to retain the Naluri Shares so purchased as treasury shares, of which may be distributed as dividends to shareholders, and/or resold on the Bursa Securities, and/or subsequently cancelled or to retain part of the Naluri Shares so purchased as treasury shares and cancel the remainder and in any other manner as prescribed by the Act, rules, regulations and orders made pursuant to the Act and the requirements of the Bursa Securities and any other relevant authority for the time being in force;

AND THAT the Directors of the Company be and are hereby authorised to take all such steps as are necessary or expedient to implement, finalise, complete or to effect the purchase(s) of the Naluri Shares by the Company with full powers to assent to any conditions, modifications, resolutions, variations and/or amendments (if any) as may be imposed by the relevant authorities and to do all such acts and things as the said Directors may deem fit and expedient in the best interest of the Company to give effect to and to complete the purchase of the Naluri Shares.”

8. Proposed Exemption to Atlan Properties Sdn Bhd (“APSB”) and Parties Acting in Concert with APSB (“PAC”) from the obligation to Undertake Mandatory Offers to acquire all the remaining Naluri Shares not already owned by APSB and PAC upon the purchase by Naluri of its own Shares pursuant to the Proposed New Authority Under Practice Note 2.9.10 of the Malaysian Code On Take-Overs and Mergers, 1998 (“Code”) (“Proposed Exemption”)

“THAT subject to the approvals being obtained from the Securities Commission (“SC”), the passing of ordinary resolution 9 and all other relevant authorities (if any), approval be and is hereby given for the shareholdings of APSB and PAC, namely Atlan Holdings Bhd, Distinct Continent Sdn Bhd, Dato’ Sri Adam Sani bin Abdullah, Sebastian Paul Lim Chin Foo, Dato’ Ong Kim Hoay, Dato’ Woo Hon Kong, Dato’ Wong Kam Fuat and Lee Sze Siang to increase, either collectively and/or individually, by more than 2% in any 6 month period as a result of a reduction of the voting shares of the Company arising from the purchase by the Company of its own shares under the Proposed New Authority without having to undertake any mandatory offers that could arise pursuant to the provisions of the Code to acquire the remaining Naluri Shares not already held by APSB and PAC in conjunction with an application by APSB and PAC to the SC under Practice Note 2.9.10 of the Code, as amended from time to time;

AND THAT the Directors of the Company be and are hereby authorised to take such steps to give full effect to the Proposed Exemption with full power to assent to any conditions, modifications, variations and/or amendments as may be imposed by the relevant authorities and/or to do all such acts and things as the Directors may deem fit and expedient in the best interest of the Company.”

9. To transact any other business of which due notice shall have been given in accordance with the Act.





129

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN THAT subject to the approval of shareholders at the Twenty Fourth Annual General Meeting of the Company, a tax exempt final dividend of 1.0% for the financial year ended 31 December 2005 will be paid on 20 September 2006 to shareholders registered at the close of business on 5 September 2006.

A Depositor shall qualify for entitlement to the dividend only in respect of:

(a) Shares transferred into the Depositor’s securities account before 4.00 p.m. on 5 September 2006 in respect of transfers.

(b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad.

By Order of the Board

TAI YIT CHAN (MAICSA 7009143)LIEW IRENE (MAICSA 7022609)Company Secretaries

Kuala LumpurDate: 5 June 2006

NOTES:

(A) APPOINTMENT OF PROXY

(i) A member entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two (2) proxies as his/her proxy or proxies to attend and vote in his/her stead. Where a member appoints two (2) proxies, the member shall specify the proportion of the member’s shareholding to be represented by each proxy and which proxy is entitled to vote on a show of hands. Only one (1) of the proxies is entitled to vote on a show of hands.

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

(iii) A proxy need not be a member of the Company and a member may appoint any person to be his/her proxy without limitation. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply.

(iv) The instrument appointing a proxy shall be in writing under the hand of the appointor or his/her attorney duly authorised in writing or, if such appointor is a corporation under its common seal, or the hand of its attorney or duly authorised officer or in some other manner approved by the Directors. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Registered Office of the Company at 16th Floor, Menara Naluri, 161B Jalan Ampang, 50450 Kuala Lumpur not less than forty-eight (48) hours before the time for holding of the meeting or any adjournment thereof.

(v) The signature to the instrument appointing the proxy executed outside Malaysia must be authenticated by a solicitor, notary public, commissioner for oaths or any Consular Officer of Malaysia.



130

(B) EXPLANATORY NOTES ON SPECIAL BUSINESS

(i) Ordinary Resolution 8, if passed, will give the Directors of the Company, from the date of the above Annual General Meeting (“AGM Date”), authority to issue and allot ordinary shares from the unissued share capital of the Company for such purposes as the Directors consider would be in the interest of the Company. This authority will, unless revoked or varied by the Company in general meeting, expire at the conclusion of the next Annual General Meeting of the Company.

(ii) Ordinary Resolution 9, if passed, will give the Directors of the Company, from the AGM Date, authority to take all such steps as are necessary or expedient to implement, finalise, complete and/or to effect the purchase(s) of the Naluri Shares by the Company as the Directors may deem fit and expedient in the best interest of the Company. The authority will, unless revoked or varied by the Company in general meeting, continue to be in force until the conclusion of the next Annual General Meeting of the Company or the expiry of the period within which the next Annual General Meeting of the Company after the AGM Date is required by law to be held.

(iii) Ordinary Resolution 10, if passed, will give the Directors of the Company, from the AGM Date, authority to take all such steps as are necessary or expedient to give full effect to the Proposed Exemption as the Directors may deem fit and expedient in the best interest of the Company.

(C) STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

(1) Directors who are standing for re-election at the Twenty Fourth Annual General Meeting

(a) Retiring pursuant to Article 112 of the Articles of Association of the Company

(i) Lee Sze Siang (ii) Haji Mohd Radzuan bin Abdullah(iii) Peter Madhavan

The details of the above Directors standing for re-election are set out in their respective profiles which appear on pages 3 to 7 of the Company’s 2005 Annual Report. Their holdings in the securities of the Company and its related corporations are set out on page 120 of the Company’s 2005 Annual Report

(b) Tan Sri Saw Huat Lye who is retiring pursuant to Section 129(6) of the Companies Act, 1965 at the forthcoming Twenty Fourth Annual General Meeting does not wish to seek re-appointment as Director. Accordingly, he will retire at the conclusion of the Twenty Fourth Annual General Meeting of the Company.

(2) Details of attendance of Directors at Board Meetings held during the financial year ended 31 December 2005

There were five (5) Board Meetings held during the financial year ended 31 December 2005. The record of attendance is set out on page 17 in the Corporate Governance Statement of the Company’s 2005 Annual Report.


FORM OF PROXY

I/We ______________________________________________________________________________________________________(Name in full)

NRIC or Company No. ________________________________________ CDS Account No. _______________________________

of ________________________________________________________________________________________________________(Address)

being a member of NALURI CORPORATION BERHAD (Formerly Known As NALURI BERHAD) hereby appoint: ________________

_____________________________________________________________________ NRIC No. ____________________________ (Name in full) (New and Old I.C. Nos.)

of ________________________________________________________________________________________________________(Address)

or failing him/her ___________________________________________________ NRIC No. ________________________________ (Name in full) (New and Old I.C. Nos.)

of ________________________________________________________________________________________________________(Address)

or failing him/her, *the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf, at the Twenty Fourth Annual General Meeting of the Company to be held at Perdana Grand Ballroom, Dewan Perdana Felda, Jalan Maktab, Off Jalan Semarak, 54000 Kuala Lumpur on Tuesday, 27 June 2006 at 10.00 a.m. or any adjournment thereof.

* Please delete the words “Chairman of the Meeting” if you wish to appoint some other person to be your proxy.

This proxy is to vote on the resolutions set out in the Notice of the Meeting as indicated with an “X” in the appropriate spaces. If no specific direction as to voting is given, the proxy will vote or abstain from voting at his/her discretion.

FOR AGAINST

ORDINARY To receive and adopt the Audited Financial Statements RESOLUTION 1

ORDINARY To declare a tax exempt final dividend of 1.0% RESOLUTION 2

ORDINARY To approve the payment of Directors’ Fees of RM48,000 RESOLUTION 3

ORDINARY To re-elect Lee Sze Siang as Director RESOLUTION 4

ORDINARY To re-elect Haji Mohd Radzuan bin Abdullah as Director RESOLUTION 5

ORDINARY To re-elect Peter Madhavan as Director RESOLUTION 6

ORDINARY To re-appoint Messrs Ernst & Young as the Company’s Auditors and to RESOLUTION 7 authorise the Directors to fix their remuneration

ORDINARY To approve authority to allot and issue shares pursuant to Section 132D RESOLUTION 8 of the Companies Act, 1965

ORDINARY To approve the Proposed New Authority RESOLUTION 9

ORDINARY To approve the Proposed Exemption RESOLUTION 10

In case of a vote by a show of hands, my proxy ________________________ (one name only) shall vote on my/our behalf.

____________________________________________Signature of Shareholder(s) or Common Seal

Signed this ______________ day of _______________ , 2006.

Notes:

(i) A member entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two (2) proxies as his/her proxy or proxies to attend and vote in his/her stead. Where a member appoints two (2) proxies, the member shall specify the proportion of the member’s shareholding to be represented by each proxy and which proxy is entitled to vote on a show of hands. Only one (1) of the proxies is entitled to vote on a show of hands.

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

(iii) A proxy need not be a member of the Company and a member may appoint any person to be his/her proxy without limitation. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply.

(iv) The instrument appointing a proxy shall be in writing under the hand of the appointor or his/her attorney duly authorised in writing or, if such appointor is a corporation under its common seal, or the hand of its attorney or duly authorised officer or in some other manner approved by the Directors. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Registered Office of the Company at 16th Floor, Menara Naluri, 161B Jalan Ampang, 50450 Kuala Lumpur not less than forty-eight (48) hours before the time for holding of the meeting or any adjournment thereof.

(v) The signature to the instrument appointing the proxy executed outside Malaysia must be authenticated by a solicitor, notary public, commissioner for oaths or any Consular Officer of Malaysia.

No. of Shares

Then fold here

NALURI CORPORATION BERHAD (76466-X) (formerly known as Naluri Berhad)

16th Floor, Menara Naluri 161B Jalan Ampang 50450 Kuala Lumpur

1st fold here

Stamp

Documents

Naluri Corporation Berhad 2005 Annual Report