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Wisma BBN, PT 7454Jalan BBN 1/1APutra Point Phase 1Putra Nilai, 71800 NilaiNegeri Sembilan Darul Khusus

Tel : 06 850 1888Fax : 06 850 2492Email : [email protected]

PK RESOURCES BERHAD(17654-P)

A n n u a l

R e p o r t

2 0 0 5

1

Annual Report 2005

CONTENTS

Notice of 32nd Annual General Meeting 2

Notice of Book Closure for Payment of Dividends 4

Statement Accompanying Notice of 32nd Annual General Meeting 5

Corporate Information 6

Corporate Structure 7

Directors’ Profile 8

Audit Committee Report 13

Statement on Corporate Governance 16

Statement of Directors’ Responsibility 22

Statement on Internal Control 23

Chairman’s Statement 25

Management Review 28

Group Financial Highlights 31

Financial Statements 33

Analysis of Shareholdings 82

List of Properties 85

Proxy Form (Enclosed)

1Contents

Annual Report 2005

2

PK Resources Berhad (17654-P)

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Thirty Second Annual General Meeting of the Companywill be held at Nilai Springs Golf & Country Club, Putra Nilai, 71800 Nilai, Negeri SembilanDarul Khusus, on Tuesday, 27 June 2006 at 11.30 a.m. for the following purposes:-

AGENDA

Resolution 1

To receive and adopt the Audited Accounts for the financial year ended 31 December 2005 and the Reports of the Directorsand Auditors thereon.

Resolution 2

To approve payment of a first and final dividend of 3% per RM1.00 ordinary share less 28% tax in respect of the financialyear ended 31 December 2005.

Resolution 3

To re-elect Datuk Alladin Hashim who shall retire pursuant to Article 77 of the Company’s Articles of Association.

Resolution 4

To re-elect Mr Ooi Soon Kiam who shall retire pursuant to Article 77 of the Company’s Articles of Association.

Resolution 5

To re-elect Mr Gan Eng Hong who shall retire pursuant to Article 77 of the Company’s Articles of Association.

Resolution 6

To re-elect Tuan Haji Mohamad Haslah Bin Mohamad Amin who shall retire pursuant to Article 82 of the Company’s Articlesof Association.

Resolution 7

To approve payment of Directors’ fee.

Resolution 8

To re-appoint Messrs. Ernst & Young as auditors and authorise the Directors to fix their remuneration.

Notice of 32nd Annual General Meeting

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Annual Report 2005

SPECIAL BUSINESS

To consider and if thought fit, to pass the following Ordinary Resolution:

Resolution 9

Authority to Issue Shares Pursuant to Section 132D of the Companies Act, 1965 (See note 2.1)

“THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby empowered to issue andallot shares in the Company, at any time and upon such terms and conditions and for such purposes as the Directors may,in their absolute discretion deem fit, provided that the aggregate number of shares issued pursuant to this resolution doesnot exceed 10% of the issued capital of the Company for the time being and that the Directors be and are also empoweredto obtain the approval for the listing of and quotation for the additional shares so issued on the Bursa Malaysia SecuritiesBerhad and that authority shall continue in force until the conclusion of the Next Annual General Meeting of the Company.”

To transact any other ordinary business for which due notice has been given.

Notice of Annual General Meeting (cont’d)

Notice of 32nd Annual General Meeting

4


NOTICE IS ALSO HEREBY GIVEN THAT the First and Final Dividend of 3% per RM1.00ordinary share less 28% tax for the financial year ended 31 December 2005, if approved bythe shareholders in the Annual General Meeting, will be payable on 31 July 2006 to Depositorsregistered in the Records of Depositors at the close of business on 12 July 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 12 July 2006 in respect of transfers;and

(b) Shares bought on the Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of theBursa Malaysia Securities Berhad.

BY ORDER OF THE BOARD

Irene Wong Sook Ping (MAICSA 0761491)Paul Yong Pow Choy (MIA 9105)Company Secretaries

NilaiNegeri Sembilan Darul KhususDate : 5 June 2006

Notes:-

1. Appointment Of Proxy

(a) A member of the Company entitled to attend and vote is entitled to appoint one or more proxies to vote in his stead. A proxyneed not be a member of the Company and the provisions of Section 149 (1) of the Companies Act, 1965 shall not apply tothe Company.

(b) The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writingor if the appointer is a corporation, either under seal or under the hand of an officer or attorney duly authorised.

(c) The instrument appointing a proxy shall be deposited at the Registered Office at Wisma BBN, PT 7454, Jalan BBN 1/1A,Putra Point Phase 1, Putra Nilai, 71800 Nilai, Negeri Sembilan Darul Khusus not less than 48 hours before the time appointedfor holding the meeting and at any adjournment thereof.

2. Explanatory Note On Special Business:

2.1 Authority to Issue Shares Pursuant to Section 132D of Companies Act, 1965

The proposed Resolution 9, if passed, will give the Directors authority to allot and issue new ordinary shares up to an amountnot exceeding 10% of the issued share capital of the Company for such purposes as the Directors consider would be in theinterest of the Company. This authority will commence from the date of this Annual General Meeting and unless revoked orvaried by the Company at a General Meeting, will expire at the next Annual General Meeting.

Notice of Annual General Meeting (cont’d)

Notice of Book Closure for Payment of Dividends

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Annual Report 2005

1. Names of Directors who are standing for re-election

a) Datuk Alladin Hashimb) Mr Ooi Soon Kiamc) Mr Gan Eng Hongd) Tuan Haji Mohamad Haslah Bin Mohamad Amin

2. Details of the attendance of Directors at Board Meetings

There were five (5) Board Meetings held during the financial year ended 31 December 2005. Details of attendance ofDirectors are set out in Statement on Corporate Governance appearing on page 17 of the Annual Report.

3. Date, Time and Venue of the 31st Annual General Meeting of PK Resources Berhad

Date Time Venue

21.06.2005 10.30 am Nilai Springs Golf & Country Club,Putra Nilai, 71800 Nilai,Negeri Sembilan Darul Khusus

4. Details of Directors seeking for re-election

Details of Directors seeking for re-election at the 32nd Annual General Meeting are set out in the Directors’ Profile onpages 8 to 12 of the Annual Report.

Statement Accompanying Notice of 32nd Annual General Meeting(pursuant to paragraph 8.28(2) of the Listing Requirements of the Bursa Malaysia Securities Berhad)

Statement Accompanying Notice of 32nd Annual General Meeting

6


Corporate Information

Board Of Directors

Tan Sri Dato’ Dr Gan Kong SengExecutive Chairman

Dato’ Gan Kong HiokGroup Managing Director

YM Prof. Emeritus Tengku Dato’ Shamsul BahrinExecutive Director

Gan Eng HongExecutive Director

Chor Eng ChoonExecutive Director

Datuk Alladin HashimIndependent Non-Executive Director

Dato’ Prof. Zainuddin Bin MuhammadIndependent Non-Executive Director

Ooi Soon KiamIndependent Non-Executive Director

Tuan Haji Mohamad Haslah Bin Mohamad AminNon-Independent Non-Executive Director

Secretaries

Irene Wong Sook PingPaul Yong Pow Choy

Registered Office

Wisma BBN, PT 7454, Jalan BBN 1/1APutra Point Phase 1, Putra Nilai71800 Nilai, Negeri Sembilan Darul KhususTel : 06-850-1888Fax : 06-850-2492E-mail : [email protected]

Auditors

Ernst & YoungLevel 23A, Menara MileniumJalan DamanlelaPusat Bandar DamansaraDamansara Heights50490 Kuala Lumpur

Registrar

Symphony Share Registrars Sdn BhdLevel 26, Menara Multi PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala LumpurTel : 03-2721-2222Fax : 03-2721-2530/2721-2531

Solicitors

Lee Hishammuddin Allen & GledhillLevel 16, Menara Asia LifeNo. 189, Jalan Tun Razak50400 Kuala Lumpur

Raja Eleena Siew Ang & AssociatesNo. 8, Jalan DelimaOff Jalan Inai55100 Kuala Lumpur

Bankers

AmBank BerhadAmMerchant Bank BerhadBumiputra-Commerce Bank BerhadEON Bank BerhadHong Leong Bank BerhadMalayan Banking BerhadOCBC Bank Malaysia BerhadRHB Bank Berhad

Listing

Bursa Malaysia Securities BerhadMain Board

Corporate Information

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Annual Report 2005

Corporate Structure

Corporate Structure

Directors’ Profile

TAN SRI DATO’ DR GAN KONG SENGExecutive Chairman/Non-Independent Director

Tan Sri Dato’ Dr Gan Kong Seng, aged 63, a Malaysian, was appointed to the Board of PK Resources Berhad (“PKRB”) on3 June 1991 and has been the Chairman of the Company since 26 February 1992. He holds a degree in Bachelor ofMedicine and Bachelor of Surgery from the University of Malaya. He was conferred an Honorary Doctorate Degree inPhilosophy (Education) by Oxford Brookes University, United Kingdom in 1998.

Tan Sri served as a medical doctor with the Ministry of Defence from 1970 to 1973 before entering private medical practicefrom 1973 to 1982.

From 1981 to 1982, he was a Senator of Malaysia Senate and from 1982 to 1985, he was a State Executive Councilor ofNegeri Sembilan State Government.

After 1985, he ventured into the world of business of his own until 1991 when he was appointed as a Director of PKRB. Heis currently also the Chairman of the Executive Committee and the Option Committee of PKRB.

Tan Sri is the brother of Dato’ Gan Kong Hiok, the Managing Director of PKRB. He is deemed a major shareholder of PKRBand its subsidiaries by virtue of his interest in PKRB as disclosed on page 35 of the Directors’ Report.

Tan Sri Dato’ Dr Gan Kong Seng attended all five Board Meetings of PKRB held during the financial year ended 31December 2005.

DATO’ GAN KONG HIOKGroup Managing Director/Non-Independent Director

Dato’ Gan Kong Hiok, aged 55, a Malaysian, was appointed to the Board of PKRB on 3 June 1991. He was the ExecutiveDirector of the Company from the date of appointment until 27 April 2001 when he assumed the post of Managing Director.He holds a Bachelor’s Degree (Hons) in Chemical Engineering from the University of Aston and a Master of Philosophyfrom the University of Oxford. He worked as an Investment Manager in the city of London for five years before joiningBumiputra Merchant Bankers Bhd. In 1982, he joined Multi-Purpose Holdings Bhd as their Corporate Planning Managerand in 1984, he was appointed the Group General Manager and Director of Magnum Corporation Bhd.

Dato’ Gan is a member of the Executive Committee, Audit Committee, Remuneration Committee and Option Committee.

Dato’ Gan is the brother of Tan Sri Dato’ Dr Gan Kong Seng, the Chairman of PKRB. He is deemed a major shareholder ofPKRB and its subsidiaries by virtue of his interest in PKRB as disclosed on page 35 of the Directors’ Report.

Dato’ Gan Kong Hiok attended four out of five Audit Committee Meetings as noted on page 13 of the Audit CommitteeReport and four out of five Board Meetings of PKRB held during the financial year ended 31 December 2005.

Directors’ Profile8


Directors’ Profile (cont’d)


YM PROF. EMERITUS TENGKU DATO’ SHAMSUL BAHRINNon-Independent Executive Director

Prof. Emeritus Tengku Dato’ Shamsul Bahrin, aged 67, a Malaysian, was appointed to the Board of PKRB on 25 May 2001.He holds a Bachelor’s Degree in Geography from the University of Malaya and a Master’s Degree in Geography from theUniversity of Sheffield. He started work with the University of Malaya in 1964 and was the Professor in Southeast AsiaGeography at the University of Malaya from 1976 to 1998. From 1978 to 1985, he held various positions in the University ofMalaya including Dean, Senate and Council Member. In 1998, he was appointed as a Director of PK Education Sdn Bhdand President to Nilai International College. He is currently the President of The Malaysian Association of Private Colleges& Universities and a member of the National Higher Education Council. He was conferred the Professor Emeritus by theUniversity of Malaya in 2005.

Tengku is a member of the Executive Committee and Audit Committee. He is also the Chairman of Industronics Bhd.

Tengku has no family relationship with any of the other directors or major shareholders of PKRB and he has no shareholdingsin PKRB.

Prof. Emeritus Tengku Dato’ Shamsul Bahrin attended three out of five Audit Committee Meetings as noted on page 13 ofthe Audit Committee Report and four out of five Board Meetings of PKRB held during the financial year ended 31 December2005.

GAN ENG HONGNon-Independent Executive Director

Mr Gan Eng Hong, aged 35, a Malaysian, was appointed to the Board of PKRB on 26 August 2003. He holds a GraduateDiploma in Legal Practice, Bachelor of Laws and Bachelor of Arts (Asian Studies) from the Australian National University.He is a Barrister of the High Court and Federal Courts of Australia and a Barrister and Solicitor of the Supreme Court of theAustralian Capital Territory. He is also an Advocate & Solicitor of the Malaysian High Court and practised law with MessrsAllen & Gledhill on his return to Malaysia in 1995. From 1997 to 1999, he worked with KPMG Management Consulting andsubsequently KPMG Corporate Services, as a consultant before he joined Nilai International College as Vice-President(Administration) in September 1999.

Mr Gan is a member of the Executive Committee.

Mr Gan is the son of Tan Sri Dato’ Dr Gan Kong Seng, the Chairman of PKRB. He is deemed a major shareholder of PKRBand its subsidiaries by virtue of his interest in PKRB as disclosed on page 35 of the Directors’ Report.

Mr Gan Eng Hong attended all five Board Meetings of PKRB held during the financial year ended 31 December 2005.

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Annual Report 2005



CHOR ENG CHOONNon-Independent Executive Director

Mr Chor Eng Choon, aged 47, a Malaysian, was appointed to the Board of PKRB on 24 February 2005. He holds aBachelor in Accounting (Honor 1st Class) from the University of Malaya and is a member of Malaysian Institute of Accountantsand Malaysian Association of Certified Public Accountants.

Mr Chor joined KPMG Peat Marwick, Kuala Lumpur in 1984 and was seconded to its London office in 1988. He left theinternational accounting firm in 1991 to join Marshall Cavendish Ltd, a global publishing company as its Financial Controllerbased in its London office for 4½ years. He was the General Manager of BBN Development Sdn Bhd, the property developmentarm of PKRB after he returned to Malaysia in 1996. In 2000, he joined Hua Yang Berhad as its Executive Director and wasappointed the Chief Executive Officer of the Group in May 2002. He successfully brought about the listing of Hua YangBerhad on the Main Board of Bursa Malaysia Securities Berhad on 29 November 2002. He rejoined PKRB as its GroupGeneral Manager in July 2004.

Mr Chor is a member of the Executive Committee and Option Committee.

Mr Chor has no family relationship with any of the other directors or major shareholders of PKRB and he has no shareholdingsin PKRB.

Mr Chor Eng Choon attended all five Board Meetings of PKRB held during the financial year ended 31 December 2005.

DATUK ALLADIN HASHIMSenior Independent Non-Executive Director

Datuk Alladin Hashim, aged 67, a Malaysian, was appointed as a Director of PKRB on 6 February 1980. He obtained hisBachelor of Agricultural Science from the University of Malaya and a Master of Science in Agricultural Economics from theUniversity of Massachusetts, USA. Datuk Alladin began his career in the Federal Land Development Authority (FELDA) in1964 and was its Director General from 1979 until 1989. He attended the executive development program of the HarvardBusiness School. He is also a Fellow of the Academy of Sciences Malaysia. He served as the Chairman of the MalaysianRubber Board (MRB).

Datuk Alladin is a member of the Audit Committee, the Nomination Committee and the Remuneration Committee of PKRB.He sits on the Boards of UAC Berhad, Timberwell Bhd, Kumpulan Guthrie Bhd and Guthrie Ropel Berhad. He is also theChairman of FPG Oleochemicals Sdn Bhd.

Datuk Alladin has no family relationship with any of the other directors or major shareholders of PKRB. His securitiesholdings were disclosed on page 35 of the Directors’ Report.

Datuk Alladin Hashim attended all five Audit Committee Meetings and Board Meetings of PKRB held during the financialyear ended 31 December 2005.

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DATO’ PROF. ZAINUDDIN BIN MUHAMMADIndependent Non-Executive Director

Dato’ Prof. Zainuddin Bin Muhammad, aged 61, a Malaysian, was appointed to the Board of PKRB on 24 February 2005.He had his early education at the Royal Military College before furthering his studies at the University of Melbourne,Australia. He also holds a Master Degree in Regional and Community Planning from Kansas State University, USA andCertificate in Urban Management from Harvard University, USA and Postgraduate Diploma in Housing Planning and Buildingfrom Bouwcentrum International Education, Rotterdam, Holland.

Dato’ Prof. Zainuddin held many posts in various states of Malaysia before being promoted to the post of Director Generalof the Malaysian Federal Department of Town and Country Planning, which he held from 1993 to 2001. In recognition of hisoutstanding achievement and contribution to planning, he was conferred the title of Adjunct Professor of Planning by theUniversity Technology Malaysia in 1996. He was also named Planner of the Year in 1995 by the Malaysian Institute ofPlanners and was named the Paul Harris Fellow in 1995 by the Rotary Club International. He was conferred Alumni Fellowin 1997 by Kansas State University, USA and Fellow of the Institute for Environment and Development (LESTARI), UniversityKebangsaan Malaysia and Fellow of the Malaysian Institute of Planners. He was the former Chairman of Putrajaya HoldingsSdn Bhd.

Presently, Dato’ Prof. Zainuddin is the Technical Adviser to the State Government of Johore for planning and developmentof the new State Administrative Centre at Nusajaya, Johore. He also sits on the Boards of UDA Holdings Berhad, IOIProperties Berhad, Pembinaan Jayabumi Berhad, Pelangi Berhad and Pulai Springs Bhd.

Dato’ Prof. Zainuddin is a member of the Audit Committee of PKRB.

Dato’ Prof. Zainuddin has no family relationship with any of the other directors or major shareholders of PKRB and he hasno shareholdings in PKRB.

Dato’ Prof. Zainuddin Bin Muhammad attended three out of four Audit Committee Meetings as noted on page 13 of the AuditCommittee Report and three out of four Board Meetings of PKRB held during his tenure as Director for the financial yearended 31 December 2005.

OOI SOON KIAMIndependent Non-Executive Director

Mr Ooi Soon Kiam, aged 62, a Malaysian, was appointed to the Board of PKRB on 22 January 2002. He holds a B.A. (Hons)in Economics from the University of Malaya and a Degree in Accounting from the University of British Columbia. He is amember of the Malaysian Institute of Accountants and the Institute of Chartered Accountants of British Columbia, Canada.

Mr Ooi is the former Technical Director of the Malaysian Accounting Standards Board. He has many years of workingexperience as an educator in both public universities and private education institutions and as an economic and financialconsultant to local governments, public enterprises and international agencies. He had also been appointed GeneralManager and Finance Director in various companies.

Mr Ooi is a member of the Audit Committee, Option Committee, Nomination Committee and Remuneration Committee. Heis also a Director of Industronics Bhd.

Mr Ooi has no family relationship with any of the other directors or major shareholders of PKRB and he has no shareholdingsin PKRB.

Mr Ooi Soon Kiam attended all five Audit Committee Meetings and Board Meetings of PKRB held during the financial yearended 31 December 2005.

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Annual Report 2005



TUAN HAJI MOHAMAD HASLAH BIN MOHAMAD AMINNon-Independent Non-Executive Director

Tuan Haji Mohamad Haslah Bin Mohamad Amin, aged 53, a Malaysian, was appointed to the Board of PKRB on 21September 2005. He holds a Diploma in Banking from the Institute of Bankers and a Certified Diploma in Marketing fromthe Institute of Marketing, Birmingham.

Tuan Haji Mohamad Haslah has over 20 years experience in both the domestic and the international financial industry andis well-versed in fixed income investment, corporate restructuring including mergers and acquisitions. He served as PresidentDirector of PT Maybank Nusa International, a joint venture commercial bank in Jakarta and was an Executive Director ofPeregrine Fixed Income Limited, an international investment bank based in Hong Kong and Singapore responsible for Asiaex Japan capital markets.

Presently, Tuan Haji Mohamad Haslah is the Corporate Advisor to MBI Incorporation, a Negeri Sembilan State ownedentity. He also sits on the Boards of numerous private companies.

Tuan Haji Mohamad Haslah is a member of the Nomination Committee of PKRB.

Tuan Haji Mohamad Haslah has no family relationship with any of the other directors or major shareholders of PKRB andhe has no shareholdings in PKRB.

Tuan Haji Mohamad Haslah Bin Mohamad Amin attended one out of one Board Meeting of PKRB held during his tenure asDirector for the financial year ended 31 December 2005.

Note: All Directors have no conflict of interest with PKRB and has no conviction for offences (other than traffic offences)within the past ten years.

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13

Annual Report 2005

Audit Committee Report

The Board of PK Resources Berhad is pleased to present the report of the Audit Committee for the financial year ended 31December 2005.

MEMBERS AND MEETINGS

During the financial year, the Committee held five (5) meetings. The membership status and attendance record of each ofthe members during the year are as follows:

Name Attendance %

Datuk Alladin Hashim 5 of 5 meetings 100(Chairman & Independent Non-Executive Director)

Ooi Soon Kiam 5 of 5 meetings 100(Independent Non-Executive Director)

Dato’ Prof Zainuddin Bin Muhammad 3 of 4 meetings 75(Independent Non-Executive Director – Appointed wef 24.2.05)

Prof. Emeritus Tengku Dato’ Shamsul Bahrin 3 of 5 meetings 60(Executive Director)

Dato’ Gan Kong Hiok 4 of 5 meetings 80(Group Managing Director)

TERMS OF REFERENCE OF THE AUDIT COMMITTEE

COMPOSITION

The Committee shall be appointed by the Board from amongst the Directors of the Company and shall not be less thanthree (3) members, the majority of which shall be independent Directors.

The Board shall at all times ensure that at least one (1) member of the Committee shall be a member of the MalaysianInstitute of Accountants or fulfils such other requirements as prescribed by the Bursa Securities.

The members of the Committee shall select a Chairman from among their members who is not an Executive Director oremployee of the Company or any related corporation.

If the number of members is less than three (3), the Board shall within three months, appoint such number of new membersas may be required to make up the minimum number of three (3) members.

The term of office of the Committee members should be reviewed by the Board at least once every three years.

The Audit Committee has no authority to act on behalf of the Board but shall have authority to examine all the issues athand and report back to the Board with recommendations. The Audit Committee shall be governed by the following termsof reference which has been approved by the Board of Directors and which may be amended by the Board from time to timeby resolution.

QUORUM AND COMMITTEE’S PROCEDURES

Meetings shall be held not less than three (3) times annually, each meeting planned to coincide with key dates in theCompany’s financial reporting cycle, or more frequently as circumstances dictate.

In order to form a quorum for the meeting, the majority of the members present must be independent non-executiveDirectors. In the absence of the Chairman, the members present shall elect a Chairman for the meeting from amongst themembers present.


14


Audit Committee Report (cont’d)

The Company Secretary shall be the Secretary of the Committee.

The Head of Finance and the Head of Internal Audit shall attend all meetings of the Committee. The Chief Executive Officer(CEO) and other officers of the company shall attend by invitation. At least once a year the Committee shall meet with theExternal Auditors, without the presence of executive board members.

AUTHORITY

The Committee is authorised by the Board to investigate any activities within its terms of reference. It is authorised to seekany information it requires from any employees and all employees are directed to co-operate with any request made by theCommittee.

The Committee will seek approval from the Board to obtain outside legal or other independent professional advice and tosecure the attendance of outsiders with relevant experience if it considers this necessary.

RESPONSIBILITIES & DUTIES

In fulfilling its primary objectives, the Audit Committee shall undertake the following responsibilities and duties:

Risk management and internal control

• Review the adequacy and effectiveness of risk management, internal control and governance systems.

• Review and recommend to the Board of Directors the Statement on Internal Control in relation to internal control andthe management of risk included in the annual report.

Financial reporting

• to review the quarterly results and year end financial statements, prior to the approval by the Board of Directorsfocusing particularly on:

i. any change in accounting policies and practices;ii. significant adjustments arising from the audit;iii. the going concern assumption; andiv. compliance with accounting standards and other legal requirements

Audit process

• to recommend to the Board the appointment of the external auditors, the audit fee, and any other matters of resignationor dismissal of external auditor.

• to discuss with the external auditors before the audit commences, the nature and scope of the audit.

• to discuss problems and reservations arising from the audit and any matters the external auditors may wish todiscuss.

• to review the external auditors’ letter to management and management’s response.

• to review the adequacy of the scope, functions and resources of the internal audit function and that it has thenecessary authority to carry out its work.

• to review the internal audit programme, the results of the internal audit processes or investigation undertaken andwhether or not appropriate action is taken on the recommendations of the internal audit function.

• to review any appraisal or assessment of the performance of the members of the internal audit function.


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Annual Report 2005

Audit Committee Report (cont’d)

Other responsibilities and duties

• to review any related party transaction and conflict of interest situation that may arise within the group including anytransaction, procedure or course of conduct that raises questions of management’s integrity.

• to consider other topics, as defined by the Board.

SUMMARY OF ACTIVITIES DURING THE FINANCIAL YEAR

For the financial year, the main activities undertaken by the Committee were as follows:

Risks and Controls

• Reviewed the effectiveness of the risk management system, the risk assessment reports and the risk profile of theGroup.

• Evaluated the overall effectiveness of the system of internal controls through the review of work performed by externalauditors and discussion with key senior management.

Financial Results

• Reviewed the quarterly and year-to-date unaudited financial results and the annual audited financial statementsbefore recommending them to the Board for approval.

• In respect of the quarterly and year end financial statements, reviewed the Company’s compliance with the ListingRequirements of the Bursa Malaysia, MASB and other relevant legal and regulatory requirements. These werediscussed in the presence of the external auditors together with their report, comments and advice.

External Audit

• Reviewed the external auditors’ scope of work and audit plan for the year.

Internal Audit

• Reviewed the internal audit department’s resource requirements, programmes and plans for the financial year underreview.

Related Party Transactions

• Reviewed the related party transactions entered into by the Group.

INTERNAL AUDIT FUNCTION

In the discharge of its duties, the Audit Committee is supported by the Internal Audit Department that adopts a risk-basedaudit methodology, which is aligned with the risks of the Group to ensure that relevant controls addressing those risks arereviewed on a rotational basis. The internal audit function is independent of operational activities.

During the financial year, the internal audit team was assigned for a major portion of the year to manage the accountingfunctions of a subsidiary unit. As such, the audit activities for 2005 were not carried out as planned. Nonetheless, theGroup’s internal controls were assessed via a risk review of the assessment carried out by management of the respectivekey business units.

REPORTS/MINUTES

Minutes of the meeting of the Audit Committee are circulated to all members of the Board, and significant issues arediscussed at Board Meetings.


16


Statement on Corporate Governance

The Board of Directors (“Board”) of PK Resources Berhad is committed to ensuring that the highest standards of corporategovernance is practiced throughout the Group as a fundamental part of discharging its responsibilities to protect andenhance shareholder’s value and the financial performance of the Group.

The Board supports the Malaysian Code on Corporate Governance (“Code”) and is pleased to report to the shareholdersa statement as set out below, outlining the main corporate governance practices of the Group and the manner in which theyhave been applied throughout the twelve months ended 31 December 2005.

THE BOARD OF DIRECTORS

The Board of Directors has the overall responsibility for the performance of the Group by maintaining full effective controlover strategic, financial, operational, compliance and governance issues. The following are specific areas of responsibilitiesof the Board:-

• Strategic planning of the Group• Overseeing the conduct and management of the Company’s business• Identification of risks and ensuring appropriate systems of risk management• Internal control system• Investor relations programme and shareholder communications policy• Succession planning for senior management

BOARD BALANCE

The Board currently has nine (9) members, comprising five (5) Executive Directors and four (4) Non-Executive Directors.Three (3) of the Non-Executive Directors are Independent. The Board composition is in compliance with the ListingRequirements of the Bursa Malaysia Securities Berhad (Bursa Securities) as well as the Code, which requires a minimumof 1/3 of the Board to be Independent Directors.

The Board is currently made up of professionals with skills and experiences in various fields including medicine, engineering,agriculture, education, business, accounting, law and regional and community planning. With their intimate knowledge ofthe Group’s business, the Executive Directors take on the primary responsibilities for the conduct of the Group’s businessoperations.

The profile of each Director is set out on pages 8 to 12 of the Annual Report.

The roles of the Chairman and Group Chief Executive Officer are combined. He has overall responsibilities over theoperating units, organizational effectiveness and implementation of Board policies and decisions.

The three Independent Directors who are individuals of caliber, credibility and having the necessary skills and experiencesbring independent judgment to bear on the issues of strategy, performance, resources and standards of conduct.

On the recommendation of the Nomination Committee, the Board has reaffirmed Datuk Alladin Hashim to continue as theSenior Independent Non-Executive Director of the Board to whom shareholders’ concerns may be conveyed.

The Board meets at least five times a year, with additional meetings convened as and when necessary.


17

Annual Report 2005

During the financial year ended 31st December 2005, five (5) Board Meetings were held. The attendance record of eachDirector during the financial year is as follows:

Total Numbernumber of of meetings

meetings held attended

Executive Directors

Tan Sri Dato’ Dr Gan Kong Seng 5 5Dato’ Gan Kong Hiok 5 4YM Prof. Emeritus Tengku Dato’ Shamsul Bahrin 5 4Mr Gan Eng Hong 5 5Mr Chor Eng Choon (appointed wef 24.2.2005) 5 5

Non-Executive Directors

Datuk Alladin Hashim 5 5Encik Ahmad Bin Mohd Ali (resigned wef 1.6.2005) 3 3Mr Ooi Soon Kiam 5 5Dato’ Prof. Zainuddin Bin Muhammad (appointed wef 24.2.2005) 4 3Tuan Haji Mohamad Haslah Bin Mohamad Amin (appointed wef 21.9.2005) 1 1

SUPPLY OF INFORMATION

All Directors are provided with an agenda and a set of Board papers one week prior to Board Meetings to enable them toobtain further explanations, where necessary, and in order to be briefed properly before the meeting. The Board papersincludes, amongst others, the following details:-

• Quarterly financial results• Performance report of the Group• Business plans and budgets• Major operational and financial matters• Risk assessment of the Group• Updates on statutory regulations and requirements affecting the Company

In addition, there is a schedule of matters reserved specifically for the Board’s decision, including the approval of businessplans and budgets, material acquisitions and disposals of assets, financial results, dividend recommendations and boardappointments.

The Board Policy Manual has been drawn up with the aim to assist Board Members in discharging their duties andresponsibilities.

The Directors have full access to all information within the Company whether as a board member or in their individualcapacity. Where necessary the Directors may obtain independent professional advice in furtherance of their duties, at theCompany’s expense.

All Directors have access to the advice and services of the Company Secretaries in carrying out their duties.

APPOINTMENTS TO THE BOARD

The Nomination Committee is responsible for making recommendation for appointments to the Board. Any new nominationreceived is put to the Board for assessment and endorsement.

The Board has the services of the Company Secretaries who ensure that all appointments are properly made, all necessaryinformation is obtained from the directors, both for the Company’s records and for the purposes of meeting statutoryrequirements as well as obligations arising from the Listing Requirements or other regulatory requirements.

Statement on Corporate Governance (cont’d)


18


RE-ELECTION OF DIRECTORS

In accordance with the Company’s Articles of Association, all Directors who are appointed to the Board are subject to re-election by shareholders at the next Annual General Meeting after their appointment. The Articles also provides that at leastone-third of the Board, including the Managing Director, be subjected to re-election at regular intervals and at least onceevery three years.

BOARD COMMITTEES

The following Board Committees have been established to assist the Board in the execution of its responsibilities:-

(a) Executive Committee

The Executive Committee is responsible for implementing the decisions and policies of the Board as well as thecoordination of activities necessary to ensure the successful implementation of the Group’s business plan.

The members of the Executive Committee are as follows:-

Tan Sri Dato’ Dr Gan Kong Seng (Executive Chairman)Dato’ Gan Kong Hiok (Managing Director)YM Prof. Emeritus Tengku Dato’ Shamsul Bahrin (Executive Director)Mr Gan Eng Hong (Executive Director)Mr Chor Eng Choon (Executive Director)

(b) Audit Committee

The primary objective of the Audit Committee is to assist the Board of Directors in fulfilling their responsibilitiesrelating to the accounting and reporting practices of the Holding Company and each of its subsidiaries. Furtherdetails on the terms and reference of the Audit Committee are set out in pages 13 to 15.

The composition of the Audit Committee meets the Listing Requirements of the Bursa Securities in respect of itsmajority being independent directors and one of its members being a member of the Malaysian Institute of Accountants.

The members of the Audit Committee are as follows:-

Datuk Alladin Hashim (Chairman/Independent Director)Dato’ Gan Kong Hiok (Managing Director)YM Prof. Emeritus Tengku Dato’ Shamsul Bahrin (Executive Director)Mr Ooi Soon Kiam (Independent Director)Dato’ Prof. Zainuddin Bin Muhammad (Independent Director)

(c) Nomination Committee

The Nomination Committee comprises exclusively of non-executive directors, a majority of whom are independent,has the responsibility for proposing new nominees to the Board as well as assessing Directors performance on anon-going basis. The actual decision as to who shall be nominated is the responsibility of the full Board.

The Board through the Nomination Committee reviews annually its required mix of skills and experience and otherqualities, including core competencies which Non-Executive Directors should bring to the Board.

The Committee has implemented a process to assess the effectiveness of the Board as a whole and the Committeesof the Board and the contribution of each individual Director.

All the Directors of the Company have attended the mandatory Accreditation Programme (MAP). Pursuant to theamendments to the Listing Requirement in relation to the Continuing Education Programme (CEP) which came intoeffect on 1 January 2005, the Directors have decided that they shall continue to attend relevant training programmesconducted by external experts. During the financial period under review, the Directors have attended appropriatetraining programmes conducted by external experts to equip themselves with knowledge to discharge their dutiesmore effectively and to keep abreast of developments in the marketplace.



19

Annual Report 2005

The members of the Nomination Committee are as follows:-

Datuk Alladin Hashim (Chairman/Independent Director)Mr Ooi Soon Kiam (Independent Director)Tuan Haji Mohamad Haslah Bin Mohamad Amin (Non-Executive Director)

(d) Remuneration Committee

The Remuneration Committee comprising two (2) Non-Executive Directors and one (1) Executive Director is responsiblefor recommending to the Board the remuneration of the Executive Directors. Executive Directors play no part indecisions on their own remuneration.

The members of the Remuneration Committee are as follows:-

Mr Ooi Soon Kiam (Chairman/Independent Director)Datuk Alladin Hashim (Independent Director)Dato’ Gan Kong Hiok (Managing Director)

(e) Option Committee

The Option Committee is responsible for administering the Employee Share Option Scheme in accordance with theBy-Laws.

The members of the Option Committee are as follows:-

Tan Sri Dato’ Dr Gan Kong SengDato’ Gan Kong HiokMr Ooi Soon KiamMr Chor Eng Choon

DIRECTORS’ REMUNERATION

The remuneration of Executive Directors, based on the recommendations of the Remuneration Committee, takes intoaccount the individual responsibility, contributions and performance. The level of remuneration for the Non-Executive Directorsreflects the experience and level of responsibilities undertaken by the particular Non-Executive Director concerned.

The fees of Directors, including Non-Executive Directors, are endorsed by the Board for approval by the shareholders of theCompany at the Annual General Meeting.

The details of the remuneration of Directors of the Company comprising remuneration received from the Company andsubsidiary companies during the financial year ended 31 December 2005 are as follows:-

1. Aggregate remuneration of Directors categorised into appropriate components:

Executive Non-ExecutiveDirectors Directors

RM RM

Fees 84,456 111,554Salaries 1,683,660 0Bonus 472,490 0Benefit-in-kind 81,652 0Others 340,406 60,500

TOTAL 2,662,664 172,054



20


2. Number of Directors whose remuneration fall into the following bands:

Number of DirectorsRange of Remuneration (RM) Executive Non-Executive

RM50,000 and below – 4RM50,001 – RM100,000 – 1RM100,001 – RM500,000 2 –RM500,001 – RM1,000,000 3 –

RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS

The Board acknowledges the need for shareholders to be informed of all material business matters affecting the Company.In addition to various announcements made from time to time during the year, the timely release of financial results on aquarterly basis provides shareholders with an overview of the Group’s performance and operations.

At each Annual General Meeting, the Board presents the progress and performance of the business. The Annual GeneralMeeting is the principal forum for dialogue with the shareholders and the Board encourages shareholders participation. Ithas always been the practice for the Chairman to provide ample time for participation at the Annual General Meeting.

ACCOUNTABILITY AND AUDIT

(a) Financial reporting

In its financial reporting to shareholders and other interested parties by means of annual financial statements andquarterly results announcements, the Board aims to present a balanced and understandable assessment of theGroup’s financial position and prospects.

(b) Internal Control

The information on the Group’s internal controls is presented in the Statement on Internal Control as set out onpages 23 to 24 of the Annual Report.

(c) Relationship with Auditors

The Company, through the Audit Committee, has established a transparent relationship with the auditors in seekingprofessional advice and ensuring compliance with the accounting standards of Malaysia. An Audit Committee Reportand the terms of reference are set out on pages 13 to 15 of the Annual Report.

ADDITIONAL COMPLIANCE INFORMATION

To comply with the Listing Requirements of the Bursa Malaysia Securities Berhad, the following additional information isprovided:-

(i) Share buybacks

During the financial year, there were no share buybacks by the Company.

(ii) Options, warrants or convertible securities

The Company has obtained approval from the Securities Commission to implement an Employees Shares OptionScheme which was first implemented on 1 March 2004.

Both Warrants 1995/2005 and Warrants 2000/2005 have expired on 28 May 2005.

The Company did not issue any convertible securities.



21

Annual Report 2005

(iii) American Depository Receipt (ADR) or Global Depository Receipt (GDR) Programme

During the financial year, the Company did not sponsor any ADR or GDR programme.

(iv) Imposition of sanctions/penalties

There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or managementby the relevant regulatory bodies.

(v) Non-audit fees

There were no non-audit fees payable to the external auditors for the financial year.

(vi) Profit guarantee

No profit guarantee was given by the Company in respect of the financial year.

(vii) Material contracts

Save as disclosed below, there were no other material contracts entered into by the Company and its subsidiarycompanies which involved Directors’ and major shareholders’ interest either still subsisting at the end of the financialyear ended 31 December 2005 or entered into since the end of the previous financial year.

(a) On 13 August 1998, PK Resources Berhad (“PKR”) entered into a Sales and Purchase Agreement with AkarmasSdn Bhd (“Akarmas”) to purchase 350,000 ordinary shares in Arus Ikhlas Sdn Bhd (“Arus Ikhlas”) at a totalcash consideration of RM144,291,276.00. A balance sum of RM4,789,907.12 is still to be paid to Akarmas.

Akarmas is a major shareholder of PKR which holds 5.58% of the issued share capital of PKR.

(b) On 21 February 1995, Arus Ikhlas, a subsidiary of the Company, entered into a Sales and Purchase Agreementwith Pristine Acres Sdn Bhd (“Pristine”) to dispose several pieces and parcels of vacant land at a total cashconsideration of RM7,442,191.87. A balance sum of RM6,483,861.45 is still outstanding.

Pristine is a major shareholder of PKR which holds 7.02% of the issued share capital of PKR.

(viii) Profit estimate, forecast, projection or unaudited results announced

The Company did not make or release any profit estimate, forecast or projections for the financial year.

(ix) Revaluation policy

The Company does not have a revaluation policy on landed properties.

(x) Recurrent related party transactions of a revenue nature

Recurrent related party transactions of a revenue nature of PK Resources Group for the financial year ended 31December 2005 were disclosed in Note 29 of the audited financial statement.



22


Statement of Directors’ Responsibilityin relation to preparation of the Financial Statements

The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year, which givea true and fair view of the Company and the Group’s state of affairs. Following discussions with the external auditors, theDirectors consider that the Company uses appropriate accounting policies that are consistently applied and supported byreasonable as well as prudent judgments and estimates, and that all accounting standards which they consider applicablehave been followed during the preparation of the financial statements.

The Directors are responsible for ensuring that the Company keeps the accounting records and that they are disclosed withreasonable accuracy which enables them to ensure that the financial statements comply with the Companies Act, 1965.

The Directors have the general responsibility for taking such steps to safeguard the assets of the Group, and to detect andprevent fraud as well as other irregularities.

Statement of Directors’ Responsibility

23

Annual Report 2005

Statement on Internal Control

The Malaysian Code on Corporate Governance stipulates that the board of directors of listed companies should maintaina sound system of internal control to safeguard shareholder’s investments and Group assets. The Board of Directorsrecognises the importance of sound internal control to good corporate governance and is taking appropriate initiatives tofurther strengthen the transparency, accountability and efficiency of operations.

BOARD RESPONSIBILITY

The Board of Directors affirms its responsibility for the Group’s approach to assessing risks and the systems of internalcontrol, and for reviewing its effectiveness, adequacy and integrity. It should be noted, however, that such systems aredesigned to manage, rather than eliminate, the risk of failure to achieve corporate objectives. Accordingly, it can onlyprovide reasonable but not absolute assurance against material misstatement or loss.

Nonetheless, the Board remains committed towards operating a sound system of internal control and has recognised thatthe system must continuously evolve to support the type of business and size of operations of the Group. The Board, instriving for continuous improvement will put in place appropriate action plans, when necessary, to further enhance theGroup’s system of internal control.

The system of internal control covers, inter alia, financial, operational and compliance controls and risk managementprocedures.

THE SYSTEMS OF INTERNAL CONTROL

The Board maintains full control and direction over appropriate strategic, financial, organisational and compliance issues.It has delegated to executive management the implementation of the systems of internal control within an establishedframework.

The key features of this framework are:

i. an organizational structure with formally defined lines of responsibility;ii. clearly defined authorization limits at appropriate levels;iii. yearly budgets approved at operating unit level and ultimately by the Board;iv. regular and comprehensive management reports covering financial performance and key business indicators, which

include monitoring of significant variances against budgets and plans;v. quarterly meeting for Audit Committee and Board of Directors held to discuss on internal audit reports and periodic

financial statements;vi. setting up formalised standard operating manuals; andvii. independent internal audit function.

RISK MANAGEMENT FRAMEWORK

The Group has in place an on-going process for identifying, evaluating and managing significant risks faced by the Group.As an integral part of planning and review, management from each business area identify their risks, the probability of thoserisks occurring, the impact if they do occur and the actions being taken to manage those risks to the desired level.

This process has been in place throughout the year and up to the date of approval of the annual report and financialstatements. Internal audit independently reviews the risk identification procedures implemented by the Management andreport to the Audit Committee.


24


ASSURANCE MECHANISM

The Board, through the Audit Committee examines the effectiveness of the Group’s system of internal control. The activitiesundertaken by the Audit Committee in this respect include:

i. assessment of risk by reviewing evidence of risk assessment activity;ii. agreeing the scope of the internal audit programme;iii. reviews of the interim and annual financial statements; andiv. review of the scope of the external audit and the external auditors’ plans.

ASSOCIATED COMPANIES

The scope of this statement does not extend to the associated companies, as their internal control is not within the Group’sframework.

Statement on Internal Control (cont’d)


Chairman’s Statement

Dear Shareholders,

On behalf of the Board of Directors of PK Resources Berhad, I am pleased to present theAnnual Report and Audited Accounts of the Group and the Company for the financial yearended 31 December 2005.

FINANCIAL PERFORMANCE

In line with the strategy of the Group to streamline and focus on

its core activities which give better margins, the fertilizer andagrochemical business which previously contributed the bulk ofthe Group’s revenue was disposed after shareholders’ approval

in April 2005. Following the disposal, the Group achieved a turnoverof RM 311.2 million during the year, compared to RM 452.7 millionin 2004.

The Group registered a profit after tax of RM 7.8 million comparedto RM 8.5 million in 2004.

The Group’s total assets as at 31 December 2005 stood atRM 837.6 million, a decrease of 17% from the previous year,pr imar i ly ref lect ing the ef fect of the disposal whi lst

shareholders’ fund was at RM 429.0 million. The net gearingratio improved to 0.3 against 0.58 in the previous year.

GROUP PERFORMANCE

For the financial year under review, the Group’s performancewas primarily driven by its property development in Putra Nilai

contributing 57% of the total revenue generated excluding thatof the disposed fertilizer and agrochemical business. Turnoverfrom the property development business improved by 10.8% to

RM 99.4 million for the year as the sale of its commercialproperties launched in the previous year continued to performwell while demand for residential properties remain stable.

The State Government’s designation of Nilai as the regional centre for education as well as information and communicationtechnology (“ICT”) for Negeri Sembilan has helped to generate interest in properties in Putra Nilai.

Approximately 360 acres of land in Putra Nilai have been earmarked for the development of a Biotech Park, which will caterto companies engaged in the business of pharmaceutical and medical technology. The first plant that has established itself

in the park is a biopharmaceutical plant belonging to the Government of Malaysia. This plant is expected to be operationalby July 2006. We envisage more such plants to be located in this park in the near future.

25Chairman’s Statement

Annual Report 2005

26


Nilai International College performed creditably with a turnover of RM 30.1 million, though profitability dipped to 16% asagainst 19% in the previous year. The College continues to expand its collaborations with universities overseas and alsointroduce new courses.

The Group’s hotels, Allson Klana Resort Seremban registered a slight improvement in turnover of RM 15.3 million withmarginal increases both in food and beverage and room revenue whilst Allson Klana Putra Nilai performed significantly

better by registering an increase in revenue of 19% with occupancy at 58% as compared to 47% in 2004.

DIVIDEND

Your Board of Directors has recommended a first and final dividend of 3% less 28% tax in respect of the financial yearended 31 December 2005.

OUTLOOK FOR YEAR 2006

Going forward, with the Malaysian economy projected to grow at between 5% to 6% in 2006, we remain confident that theresidential properties will continue to be in demand.

With this in mind, the Group will continue to offer an extensive choice of housing products ranging from the affordable to themid and high end markets in Putra Nilai. We are confident that the property development business will perform better in2006. We also target to streamline our operations by containing cost and improving profit margins.

Chairman’s Statement (cont’d)


27

Annual Report 2005

Chairman’s Statement (cont’d)

DIRECTORATE

In June 2005, Encik Ahmad Bin Mohd Ali retired from the Board. On behalf of the Board, I wish to express my deepest

appreciation for his services to the Group.

At the same time, we are pleased to welcome Tuan Haji Mohamad Haslah Bin Muhamad Amin as a Non-Executive Director

to the Board on September 2005.

ACKNOWLEDGEMENT

On behalf of the Board, I would like to express my appreciation to the management and staff for their commitment anddedication. I would also like to thank our shareholders, valued customers, business associates and government authoritiesfor their continued confidence, support and patronage for the Group.

Tan Sri Dato’ Dr. Gan Kong SengExecutive ChairmanApril 2006


28


Management Review

1) PROPERTY

a) Property Development

The Group’s property development businessin Putra Nilai continued to perform well in

the commercial sector with its ‘Nilai Square’commercial shop lots which was launchedduring the second half year 2004. For the

financial year 2005, sales of commercialproperties accounted for 59% of the totalproperty sales which helped increase profit

margins.

The residential sector of single and double

storey terrace houses remained active andachieved good take-up rates in particular theDesa Indah and Seri Inai projects.

b) Quarrying

Turnover from the Group’s quarry operations dropped by 4% to RM 8.7 million as the industry remain competitive

whilst profit was relatively unchanged.

c) Landscaping

In line with the improved performance of the Group’s property development, the Group’s landscaping businessregistered a turnover of RM 9.5 million, an increase of 13% over the previous year. However, profitability dipped

as margins were affected in a tougher operating environment.

Management Review

29

Annual Report 2005

Management Review (cont’d)

2) EDUCATION

Nilai International College’s performance improved

further with revenue increasing to RM 30.1 milliondespite the challenges that affect the privateeducation industry. New academic collaborations

were concluded with Les Roches School of HotelManagement, Switzerland, one of the tophospitality schools in the world, which provides its

Diploma in Hotel Management students theadvantage of obtaining their degrees with LesRoches.

Another area of development is the formation ofindustrial linkage with Gribbles Pathology, one of

the largest private laboratory provider in Malaysia,to provide our Diploma in Medical Laboratorystudents the opportunity towards industrial

attachment that will equip them with marketableskills.

In its ongoing effort to spur growth through increasing its programmes, the College’s latest courses to be offered are

the Diplomas in Automotive Engineering, Mechatronics Engineering and Biotechnology which are in increasingdemand.

The College has opened a new marketing office for education consultation in Bandar Sunway, Petaling Jaya to havea wider reach to prospective students.

Management Review

30


Management Review (cont’d)

3) HOTELLING & HOSPITALITY

a) Hotelling

Amidst stiff competition, Allson Klana ResortSeremban managed to achieve a higher

turnover of RM 15.3 million. Room occupancydipped slightly while average room rateimproved by 9%. Several projects to refresh

certain facilities were undertaken in the currentyear to broaden and strengthen its productoffering. The continuing enhancement

programme for its guestrooms and meetingrooms will add further opportunities for growthin 2006. In addition, the resort will strengthen

its outdoor facilities to capitalize on its growingdemand to boost the resort’s competitiveness.

Allson Klana Putra Nilai registered an improved revenue of RM 6.0 million following the refurbishment of itsrooms to meet the expectations of customers. This enabled the hotel to grow its occupancy from 47% to 58%whilst average room rate was maintained.

b) Hospitality

Nilai Springs Golf & Country Club’s turnover remained relatively unchanged. Despite this, the club has continued

to improve its golf course conditions and purchase additional buggies for the benefit of its members.

Management Review

31

Annual Report 2005

Group Financial Highlights31.12.2005

Restated2001 2002 2003 2004 2005

RM’000 RM’000 RM’000 RM’000 RM’000

PERFORMANCEREVENUE 376,308 273,004 330,430 452,704 311,375PROFIT/(LOSS)

BEFORE TAXATION 9,203 (9,934) (8,970) 9,792 4,428PROFIT/(LOSS)

ATTRIBUTABLE TOSHAREHOLDERS 2,294 (8,951) (12,078) 7,262 2,393

ASSETS EMPLOYEDPROPERTY, PLANT

& EQUIPMENT 279,992 267,458 273,569 268,515 236,575GOODWILL 1,121 1,051 982 959 887LAND HELD FOR

DEVELOPMENT 160,531 157,500 164,161 165,268 125,309CURRENT ASSETS 562,227 537,681 527,753 573,987 463,534DEFERRED TAX ASSETS – 3,272 3,133 3,901 7,718ASSOCIATED COMPANY 7,313 6,735 6,179 847 1,061OTHER INVESTMENT – – – 4,330 2,518

TOTAL ASSETS EMPLOYED 1,011,184 973,697 975,777 1,017,807 837,602

FUNDS EMPLOYEDSHAREHOLDERS’ FUND 444,416 439,003 424,586 429,589 429,002MINORITY INTEREST 125,656 124,068 124,536 125,553 130,787DEFERRED TAX LIABILITIES 37,038 36,518 36,984 37,420 37,811CURRENT LIABILITIES 296,467 268,415 308,144 326,320 186,222LONG TERM LOAN 107,607 105,693 81,527 98,925 53,780

TOTAL FUNDS EMPLOYED 1,011,184 973,697 975,777 1,017,807 837,602

PER ORDINARY SHAREON RM1.00 EACH

GROSS DIVIDEND (%) 3 3 3 3 3NET EARNINGS (sen) 2.01 (7.85) (10.59) 6.37 2.10NET TANGIBLE ASSETS (sen) 389 381 369 372 369

Group Financial Highlights

32


Group Financial Highlights (cont’d)31.12.2005

Group Financial Highlights

33Financial Statements

Annual Report 2005

FINANCIAL STATEMENTS

Directors’ Report 34

Statement by Directors 38

Statutory Declaration 38

Report of the Auditors 39

Balance Sheets 40

Income Statements 41

Statement of Changes in Equity 42

Cash Flow Statements 44

Notes to the Financial Statements 47

34


Directors’ Report

The directors present their report and the audited financial statements of the Group and of the Company for the year ended31 December 2005.

PRINCIPAL ACTIVITIES

The principal activities of the Company are in the business of provision of management services and investment holding.The principal activities of the subsidiaries and associates are set out in Notes 5 and 6 to the financial statements.

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

RESULTS

GROUP COMPANYRM RM

Profit/(loss) after taxation 7,829,365 (3,109,129)Minority interests (5,436,743) –

Net profit/(loss) for the year 2,392,622 (3,109,129)

There were no material transfers to or from reserves or provisions during the year, other than as disclosed in the statementsof 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 havenot been substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS

During the year, the Company paid a final dividend of 3% net of tax, amounting to RM2,463,167 representing the dividendfor the financial year ended 2004, as proposed in the Directors' Report in respect of the previous year.

At the forthcoming Annual General Meeting, a final dividend of 3% net of tax, amounting to RM2,463,167 in respect of thefinancial year ended 31 December 2005 will be proposed for shareholders' approval. The financial statements for thefinancial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted forin shareholders' equity as an appropriation of retained profits in the financial year ending 31 December 2006.

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:

Tan Sri Dato’ Dr Gan Kong Seng (Chairman)Datuk Alladin bin HashimDato’ Gan Kong HiokYM Prof. Emeritus Tengku Dato’ Shamsul BahrinOoi Soon KiamGan Eng HongChor Eng ChoonDato’ Prof. Zainuddin Bin MuhammadTuan Haji Mohamad Haslah Bin Mohamad Amin (Appointed with effect from 21 September 2005)Ahmad Bin Mohd. Ali (Resigned with effect from 1 June 2005)

Financial Statements

35

Annual Report 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 theCompany was a party, whereby directors might acquire benefits by means of the acquisition of shares in or debentures ofthe Company or any other body corporate other than by virtue of warrants held and from the share options granted underthe Employee Share Options Scheme, as disclosed below.

Since the end of the previous financial year, other than as disclosed in Note 29 to the financial statements, no director hasreceived or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emolumentsand fees received or due and receivable by the directors shown in the financial statements or the fixed salary of a full-timeemployee of the Company) by reason of a contract made by the Company or a related corporation with any director or witha firm of which the director is a member or with a company in which the director has a substantial financial interest, asrequired to be disclosed by Section 169(8) of the Companies Act 1965.

DIRECTORS’ INTERESTS

According to the register of directors' shareholdings, the interests of directors in office at the end of the financial year inshares, warrants and options over shares in the Company during the financial year were as follows:

Ordinary shares of RM1 each in the CompanyAs at As at

Name of Directors 1.1.2005 Bought Sold 31.12.2005

Direct interest:

Tan Sri Dato’ Dr Gan Kong Seng 1,821,000 – – 1,821,000Datuk Alladin bin Hashim 13,000 – – 13,000Dato’ Gan Kong Hiok 1,641,500 – – 1,641,500Gan Eng Hong 900,000 – – 900,000

Indirect interest:

Tan Sri Dato’ Dr Gan Kong Seng 35,750,434 857,500 – 36,607,934Datuk Alladin bin Hashim 93,000 – – 93,000Dato’ Gan Kong Hiok 16,805,382 1,142,500 2,000,000 15,947,882Gan Eng Hong 35,029,934 – – 35,029,934

Number of Warrantsin the Company

As at As atName of Directors 1.1.2005 Expired 31.12.2005

Direct interest:

Tan Sri Dato’ Dr Gan Kong Seng 620,000 (620,000) –Datuk Alladin bin Hashim 6,000 (6,000) –Dato’ Gan Kong Hiok 417,000 (417,000) –Gan Eng Hong 300,000 (300,000) –

Indirect interest:

Tan Sri Dato’ Dr Gan Kong Seng 11,411,978 (11,411,978) –Datuk Alladin bin Hashim 35,000 (35,000) –Dato’ Gan Kong Hiok 8,377,294 (8,377,294) –Gan Eng Hong 11,314,978 (11,314,978) –

Directors’ Report (cont’d)


36


Number of Options Over Ordinary Sharesof RM1 each in the Company

As at As atName of Directors 1.1.2005 Granted Exercised 31.12.2005

Tan Sri Dato’ Dr Gan Kong Seng 400,000 – – 400,000Dato’ Gan Kong Hiok 400,000 – – 400,000Gan Eng Hong 200,000 – – 200,000YM Prof. Emeritus Tengku

Dato’ Shamsul Bahrin 250,000 – – 250,000

None of the other directors in office at the end of the financial year had any interest in shares in the Company during thefinancial year.

EMPLOYEE SHARE OPTIONS SCHEME

The Employee Share Options Scheme ("ESOS") is governed by the by-laws approved by the shareholders at an ExtraordinaryGeneral Meeting held on 30 July 2002. The ESOS is to be in force for a period of 10 years from the date of implementation,1 March 2004. The salient features and other terms of the ESOS are disclosed in Note 18 to the financial statements.

OTHER STATUTORY INFORMATION

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

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

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

(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 allowance for doubtful debts in the financial statementsof the Group and of the Company inadequate to any substantial extent; and

(ii) the values attributed to 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 renderadherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading orinappropriate.

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

(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 yearwhich 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.



37

Annual Report 2005

(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 oftwelve months after the end of the financial year which will or may affect the ability of the Group or of theCompany 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 thefinancial year and the date of this report which is likely to affect substantially the results of the operations of theGroup or of the Company for the financial year in which this report is made.

SIGNIFICANT EVENTS DURING THE YEAR

On 5 January 2005, the Company announced that its subsidiary, BBN Development Sdn. Bhd. ("BBN"), had successfullycompleted its initial issuance of Commercial Papers ("CPs") and primary notes for Medium Term Notes ("MTN") pursuantto the proposed issue, offer for subscription, or purchase of, or invitation to subscribe for or purchase of, a 7-year BankGuaranteed Murabahah Notes Issuance Facility of up to RM86.0 million ("MUNIF"). Further details of the said issue aredisclosed in Note 21 to the financial statements.

On 23 February 2005, BBN entered into a transaction with Akarmas Sdn. Bhd., a company in which certain directors havefinancial interests, for the sale of a piece of commercial land in Putra Nilai to Akarmas Sdn. Bhd., for a total cash considerationof RM4,399,977.

On 15 March 2005, BBN acquired 174,000 ordinary shares of RM1.00 each in Chartz Development Sdn. Bhd., for a cashconsideration of RM174,000. On 1 June 2005, BBN subscribed for additional 51,000 ordinary shares in Chartz DevelopmentSdn. Bhd., of RM1.00 each at par. Following the subscription, the Company owns 30% equity interest in Chartz DevelopmentSdn. Bhd.

On 29 April 2005, the Company obtained shareholders' approval for the disposal of 30,000,000 ordinary shares of RM1.00each in PK Fertilizers Sdn. Bhd., ("PKF") representing 100% equity interest in PKF together with its wholly owned subsidiary,Serba Kimia Sdn. Bhd., to Pristine Acres Sdn. Bhd., for a cash consideration of RM31.30 million. The loss arising from thedisposal was RM7.50 million.

On 16 December 2005, the Company disposed 100% of the issued and paid-up capital of LancetBio Sdn. Bhd., comprising2 ordinary shares of RM1.00 each for a cash consideration of RM2.00.

AUDITORS

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

Signed on behalf of the Boardin accordance with a resolutionof the directors.

TAN SRI DATO’ DR GAN KONG SENG

DATO’ GAN KONG HIOK

Nilai, Malaysia25 April 2006



38


Statement by DirectorsPursuant to Section 169 (15) of the Companies Act, 1965

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

We, TAN SRI DATO' DR GAN KONG SENG and DATO' GAN KONG HIOK, being two of the directors of PK RESOURCESBERHAD, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 40to 81 are drawn up in accordance with applicable MASB Approved Accounting Standards in Malaysia and the provisions ofthe Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at31 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 Boardin accordance with a resolutionof the directors

TAN SRI DATO’ DR GAN KONG SENG

DATO’ GAN KONG HIOK

Nilai, Malaysia25 April 2006

I, LOW OOI LENG, being the Officer primarily responsible for the financial management of PK RESOURCES BERHAD, dosolemnly and sincerely declare that the accompanying financial statements set out on pages 40 to 81 are in my opinioncorrect, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions ofthe Statutory Declarations Act, 1960.

Subscribed and solemnly declared by theabovenamed LOW OOI LENG at Nilai in NegeriSembilan Darul Khusus on 25 April 2006.

LOW OOI LENG

Before me,

R. NANDAN @ SITHAMBARAM AMN, PIS, PPN (N 034)Commissioner for Oaths

Nilai, Malaysia


39

Annual Report 2005

Report of the Auditorsto the Members of PK Resources Berhad

We have audited the accompanying financial statements set out on pages 40 to 81. These financial statements are theresponsibility 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 ouropinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do notassume 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 standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles used and significant estimates madeby the directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit providesa 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 1965and 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 cashflows of the Group and of the Company for the year then ended;

(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 its subsidiariesfor which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statementsof the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidatedfinancial 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 theconsolidated financial statements and did not include any comment required to be made under Section 174(3) of theCompanies Act 1965.

ERNST & YOUNGAF: 0039Chartered Accountants

LEE SENG HUATNo. 2518/12/07(J)Partner

Kuala Lumpur, Malaysia25 April 2006


40


Balance Sheetsas at 31 December 2005

GROUP COMPANYNote 2005 2004 2005 2004

RM RM RM RM

NON CURRENT ASSETS

Property, plant and equipment 3 236,575,290 268,514,988 114,792 14,039Land held for property development 4 125,309,259 165,267,863 – –Investments in subsidiaries 5 – – 278,008,481 308,008,483Investments in associates 6 1,061,365 846,422 – –Other investment 7 2,517,874 4,329,527 2,517,874 4,329,527Deferred tax assets 20 7,718,060 3,901,261 – –Goodwill arising on consolidation 8 887,626 959,126 – –

374,069,474 443,819,187 280,641,147 312,352,049

CURRENT ASSETS

Property development costs 9 278,461,893 221,199,733 – –Inventories 10 80,764,151 181,776,678 – –Trade receivables 11 78,906,838 132,695,005 – –Other receivables 12 5,384,013 7,049,894 146,049 143,063Amounts due from subsidiaries 5 – – 120,817,599 111,308,467Amount due from an associate 6 533,798 533,643 – –Tax recoverable 9,573,692 15,642,141 6,431,141 5,102,491Deposits with licensed banks 13 2,346,364 2,054,325 – 42,518Cash and bank balances 14 7,562,412 13,035,741 77,723 459,325

463,533,161 573,987,160 127,472,512 117,055,864

CURRENT LIABILITIES

Trade payables 15 57,549,161 106,326,333 – –Other payables 16 51,076,710 67,158,169 18,874,355 27,811,883Amount due to an associate 6 225,000 – – –Amounts due to subsidiaries 5 – – 62,178,892 75,589,173Bank borrowings 17 77,011,247 152,208,280 32,256 44,589Tax payable 359,755 627,624 – –

186,221,873 326,320,406 81,085,503 103,445,645

Net Current Assets 277,311,288 247,666,754 46,387,009 13,610,219

651,380,762 691,485,941 327,028,156 325,962,268

Financed By:

Share capital 18 114,035,500 114,035,500 114,035,500 114,035,500Reserves 19 314,966,937 315,553,259 141,787,795 147,360,091

Shareholders’ equity 429,002,437 429,588,759 255,823,295 261,395,591

Minority interests 130,786,896 125,552,581 – –Deferred tax liabilities 20 37,810,837 37,419,566 – –Long term amount due to subsidiary 5 – – 71,153,242 64,566,677Other long term liabilities 21 53,780,592 98,925,035 51,619 –

651,380,762 691,485,941 327,028,156 325,962,268

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


41

Annual Report 2005

Income Statementsfor the year ended 31 December 2005


RM RM RM RM

Revenue 22 311,201,887 452,703,799 4,572,000 5,300,000Cost of sales 22 (206,649,216) (352,116,766) – –

Gross profit 104,552,671 100,587,033 4,572,000 5,300,000Other operating income 5,553,293 10,721,800 2,955,599 7,483,386Administration expenses (78,418,323) (65,631,537) (3,888,495) (4,028,270)Selling and distribution expenses (4,964,858) (5,355,916) – –Other operating expenses (9,918,523) (12,432,919) – –

Profit from operations 23 16,804,260 27,888,461 3,639,104 8,755,116Finance costs 24 (12,366,129) (18,111,111) (6,748,233) (10,026,280)

4,438,131 9,777,350 (3,109,129) (1,271,164)Share of (loss)/profit of associates (10,057) 15,043 – –

Profit/(loss) before taxation 4,428,074 9,792,393 (3,109,129) (1,271,164)Taxation 26 3,401,291 (1,312,539) – –

Profit/(loss) after taxation 7,829,365 8,479,854 (3,109,129) (1,271,164)Minority interests (5,436,743) (1,217,364) – –

Profit/(loss) attributable to shareholders 2,392,622 7,262,490 (3,109,129) (1,271,164)

Net profit per share (sen)- basic and fully diluted 27 2.10 6.37

Net dividends per share (sen) 28 2.16 2.16



42


Statements of Changes in Equityfor the year ended 31 December 2005

Financial StatementsC

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114,

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113,

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114,

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113,

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972,

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357,

311

180,

292,

393

429,

588,

759

43

Annual Report 2005

Statements of Changes in Equityfor the year ended 31 December 2005 (cont’d)

Financial StatementsC

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31 D

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2004

––

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At 3

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114,

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44


Cash Flow Statementsfor the year ended 31 December 2005

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

CASH FLOWS FROMOPERATING ACTIVITIES

Profit/(loss) before taxation 4,428,074 9,792,393 (3,109,129) (1,271,164)Adjustments for:

Depreciation of property, plant and equipment 10,779,670 12,494,173 23,350 3,510Property, plant and equipment written off 13,451 78,137 – –Dividend income (173,181) (173,181) (4,745,181) (5,473,181)Interest income (670,782) (760,240) (17,524) (1,682,571)Interest expense 12,366,129 18,111,111 6,748,233 10,026,280Goodwill amortised 71,500 71,498 – –Gain on disposal of property, plant and equipment (51,530) (62,716) – –Gain on disposal of an associate – (7,352,456) – (4,365,265)Loss/(gain) on disposal of subsidiaries- discontinued operations 7,502,853 – (1,300,000) –Gain on disposal of subsidiaries (471,787) (29,841) – –Impairment of investment 914,216 2,020,445 914,216 2,020,445Allowance/(write back) of doubtful debts 791,880 (369,523) – –Bad debts written off 496,515 1,574,404 472,557 –Bad debts recovered (52,950) (15,507) – –Write down of inventories 585,406 1,358,335 – –Unrealised foreign exchange (gain)/loss (41,236) (21,213) (24,435) 12,146Loss/(profit) retained in associates 10,057 (15,043) – –

Operating profit/(loss) before working capitalchanges 36,498,285 36,700,776 (1,037,913) (729,800)

Changes in working capital:Property development expenditure (17,303,556) 16,889,103 – –Inventories (36,067,787) (52,778,620) – –Receivables (44,799,041) (9,966,315) (2,986) (3,063)Payables 51,826,729 49,495,172 (4,328,593) 2,810,038Associates (155) (170) – –Subsidiaries – – (7,511,707) 107,353,157

Cash (used in)/generated from operations (9,845,525) 40,339,946 (12,881,199) 109,430,332Dividend received 124,690 124,690 3,416,531 3,940,690Interest paid (11,271,894) (16,335,850) (1,095,690) (8,448,617)Tax refund/(paid) 5,653,692 (6,398,721) – (1,255,490)

Net cash flows (used in)/generated from operatingactivities (15,339,037) 17,730,065 (10,560,358) 103,666,915


45

Annual Report 2005

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposal of property, plant andequipment 59,512 219,291 – –

Purchase of property, plant and equipment (3,835,987) (6,883,319) (17,507) (17,549)Proceeds from disposal of other investments 897,437 – 897,437 –Sales proceed from disposal of an associate – 6,349,972 – 6,349,972Acquisition of subsidiaries, net of cash acquired – – – (2)Proceeds from disposal of subsidiaries

- discontinued operations (Note 25) 22,557,515 – 19,097,598 –Proceeds from disposal of subsidiaries (Page 20) 2 10,000 2 –Interest received 670,782 760,240 17,524 1,682,571Payment towards outstanding consideration on

acquisition of subsidiary in previous years (7,338,935) (27,673,869) (7,338,935) (27,673,869)

Net cash flows generated from/(used in) investingactivities 13,010,326 (27,217,685) 12,656,119 (19,658,877)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of shares to minorityinterests 20,000 490,000 – –

Proceeds from issuance of shares in subsidiaries tominority interest 5 – – –

Dividend paid to shareholders of the Company (2,463,167) (2,463,167) (2,463,167) (2,463,167)Dividend paid to minority shareholders in subsidiaries (207,360) (432,000) – –Drawdown of term loans – 125,189,221 – –Repayment of term loans (21,176,597) (113,199,863) – (81,384,863)Repayment of hire purchase creditors (202,553) (42,857) (12,125) –Bankers acceptances and revolving credits 27,306,194 6,453,559 – –

Net cash flows generated from/(used in) financingactivities 3,276,522 15,994,893 (2,475,292) (83,848,030)

NET INCREASE/(DECREASE) IN CASH ANDCASH EQUIVALENTS 947,811 6,507,273 (379,531) 160,008

CASH AND CASH EQUIVALENTS AT BEGINNINGOF YEAR 2,768,978 (3,738,295) 457,254 297,246

CASH AND CASH EQUIVALENTS AT END OF YEAR 3,716,789 2,768,978 77,723 457,254

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Cash and cash equivalents comprise the following:

Deposits with licensed banks 2,346,364 2,054,325 – 42,518Cash and bank balances 7,562,412 13,035,741 77,723 459,325Bank overdrafts (Note 17) (6,191,987) (12,321,088) – (44,589)

3,716,789 2,768,978 77,723 457,254

Cash Flow Statementsfor the year ended 31 December 2005 (cont’d)


46


(a) The assets and liabilities arising from the disposal of LancetBio Sdn. Bhd., were as follows:

GROUP2005

RM

Property, plant and equipment 538Other payables (1,400)Amount due to related companies (470,923)

Share of net liabilities disposed (471,785)Minority interests –Total disposal proceeds 2

Gain on disposal to the Group 471,787

Satisfied by:Cash 2Less: Cash and cash equivalent disposed –

Net cash inflow of the Group 2

The assets and liabilities arising from the disposal of Nostalgia Asal Sdn. Bhd., were as follows:

GROUP2004

RM

Payables (26,648)

Share of net liabilities disposed (26,648)Minority interests 6,807Gain on disposal to the Group 29,841

Total disposal proceeds 10,000

Satisfied by:Cash 10,000Less: Cash and cash equivalent disposed –

Net cash inflow of the Group 10,000


Cash Flow Statementsfor the year ended 31 December 2005 (cont’d)


47

Annual Report 2005

Notes to the Financial Statements31 December 2005

1. CORPORATE INFORMATION

The Company is a public limited liability company which is incorporated and domiciled in Malaysia.

The registered office of the Company and the principal place at which business is carried on is located at WismaBBN, PT 7454, Jalan BBN 1/1A, Putra Point Phase 1, Putra Nilai, 71800 Nilai, Negeri Sembilan Darul Khusus.

The principal activities of the Company are in the business of provision of management services and investmentholding. The principal activities of the subsidiaries and associates are set out in Notes 5 and 6 to the financialstatements.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of thedirectors dated 25 April 2006.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

Unless otherwise indicated in the significant accounting policies, the financial statements of the Group and ofthe Company have been prepared in compliance with applicable MASB Approved Accounting Standards inMalaysia and the provisions of the Companies Act, 1965.

(b) Basis of Consolidation

(i) Subsidiaries

The consolidated financial statements include the audited financial statements of the Company and allits subsidiaries. Subsidiaries are those companies in which the Group has a long term equity interest andwhere it has power to exercise control over the financial and operating policies so as to obtain benefitstherefrom.

Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition methodof accounting, the results of subsidiaries acquired or disposed of during the year are included in theconsolidated 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 dateof acquisition. The difference between the cost of an acquisition and the fair value of the Group's share ofthe net assets of the acquired subsidiary at the date of acquisition is included in the consolidated balancesheet as goodwill or negative goodwill arising on consolidation.

Goodwill arising on consolidation is systematically amortised over a period not exceeding twenty fiveyears during which the benefits are expected to arise.

Intra-group transactions, balances and the resulting unrealised profits are eliminated on consolidationand the consolidated financial statements reflect external transactions only. Unrealised losses resultingfrom intra-group transactions are also eliminated unless costs cannot be recovered.

The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and theGroup's share of its net assets together with any unamortised balance of goodwill and exchange differenceswhich were not previously recognised in the consolidated income statement.

Minority interest in the consolidated balance sheet consist of the minorities' share of the fair values of theidentifiable assets and liabilities of the acquiree as at acquisition date and the minorities' share ofmovements in the acquiree's equity since then.


48


Dividends from subsidiaries are included in the income statement of the Company when the shareholders'right to receive payment is established and no significant uncertainty exists with regard to its receipt.

(ii) Associates

Associates are those companies in which the Group has a long term equity interest and where it exercisessignificant influence over the financial and operating policies.

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

Unrealised gains on transactions between the Group and the associates are eliminated to the extent ofthe Group's interest in the associates. Unrealised losses are eliminated unless costs cannot be recovered.

Dividends from associates are recognised in the income statement of the Company when the shareholders'right to receive payment is established and no significant uncertainty exists with regard to its receipt.

(c) Investment in Subsidiaries and Associates

The Company's investments in subsidiaries and associates are stated at cost less impairment losses. Thepolicy for the recognition and measurement of impairment losses is in accordance with Note 2(k).

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

(d) Property, Plant and Equipment, and Depreciation

All property, plant and equipment are stated at cost or valuation less accumulated depreciation and impairmentlosses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(k).

Certain land and building were stated on the basis of their previous revaluation (subject to continuity indepreciation and the requirement to write assets down to their recoverable amounts) as allowed by the transitionalprovision of the accounting standard on property, plant and equipment.

Freehold land is not amortised. Depreciation on other property, plant and equipment is calculated to write offtheir cost or valuation over their estimated useful lives by the straight line method.

The principal annual rates used are as follows:

Leasehold land over the lease periods of 28 to 99 yearsClub house 2%Golf course 2%Buildings 1 2/3 % to 20%Plant and equipment, others 5% to 25%

Assets of a value below RM500 are written off in the year of purchase.

Upon the disposal of an item of property, plant and equipment, the difference between the net disposal proceedsand the carrying amount is taken to the income statement.

Notes to the Financial Statements31 December 2005 (cont’d)


49

Annual Report 2005

(e) Property Development Expenditure

(i) Land held for property development

Land held for property development consists of land where no development activities have been carriedout 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 impairmentlosses. The policy for the recognition and measurement of impairment losses is in accordance with Note2(k).

Land held for property development is reclassified as property development costs at the point whendevelopment activities have commenced and where it can be demonstrated that the development activitiescan be completed within the normal operating cycle.

(ii) Property Development Costs

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

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

Where the financial outcome of a development activity cannot be reliably estimated, property developmentrevenue is recognised only to the extent of property development costs incurred that is probable will berecoverable, and property development costs on properties sold are recognised as an expense in theperiod in which they are incurred.

Any expected loss on a development project, including costs to be incurred over the defects liabilityperiod, is recognised as an expense immediately.

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

The excess of revenue recognised in the income statement over billings to purchasers is classified asamount due from customers within trade receivables and the excess of billings to purchasers over revenuerecognised in the income statement is classified as amount due to customers within trade payables.

(f) Inventories

Trading inventories are stated at the lower of cost and net realisable value. Cost is determined on the weightedaverage basis and comprises all incidentals incurred in bringing the inventories to their existing condition andlocation. Cost of finished goods includes material, direct labour and production overhead costs.

Inventories of unsold completed building units are stated at the lower of cost and net realisable value.

The cost of commercial land comprises land cost and development expenditure.

(g) Income Tax

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



50


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

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

(h) Revenue Recognition

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

(i) Sale of goods and services

Revenue from the sale of goods and services is recognised when the risks and rewards of the transactionsare transferred to the buyer.

(ii) Property development and long term contracts

Revenue from property development and long term contracts is recognised on the percentage of completionmethod by reference to the percentage of actual construction work completed. Provision is made in fullfor anticipated losses, if any.

(iii) Interest

Interest income, including interest or profit derived from holding of bonds, is recognised on an accrualbasis. Where recoverability is uncertain, interest income will be recognised on a receipt basis.

(iv) Dividend

Dividend income from investments in subsidiaries, associates and other investments are included in theincome statement when the shareholders' right to receive payment is established and no significantuncertainty exists with regard to its receipt.

(i) Foreign Currencies

Transactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchange ruling at thedate of the transaction. At each balance sheet date, foreign currency monetary items are translated into RinggitMalaysia 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 date of acquisition and non-monetary items which are carried at fair value are translated using the exchange rate that existed when thevalues were determined. All exchange rate differences are taken to the income statement.



51

Annual Report 2005

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

2005 2004RM RM

1 US Dollar 3.78 3.801 Singapore Dollar 2.27 2.33

(j) Cash and Cash Equivalents

The cash flow statements classify changes in cash and cash equivalents according to operating, investing andfinancing activities. For the purposes of the cash flow statements, cash and cash equivalents comprise cash inhand, short term deposits and balances with banks and financial institutions, net of bank overdrafts, if any. Thecash flow statements are prepared using the indirect method.

(k) Impairment of Assets

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether thereis any indication of impairment. If any such indication exists, impairment is measured by comparing the carryingvalues of the assets with their recoverable amounts. Recoverable amount is the higher of net selling price andvalue 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, unless the asset iscarried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to theextent of any unutilised previously recognised revaluation surplus for the same asset. Reversal of impairmentlosses recognised in prior years is recorded when the impairment losses recognised for the asset no longerexist or have decreased.

(l) Leases

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewardsincident to ownership.

(i) Finance leases

Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower oftheir fair values and the present value of the minimum lease payments at the inception of the leases, lessaccumulated depreciation and impairment losses. The corresponding liability is included in the balancesheet as borrowings. In calculation of the present value of the minimum lease payments, the discountfactor used in the interest rate implicit in the lease, when it is practicable to determine; otherwise, theCompany's incremental borrowing rate is used.

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 valueof the assets acquired, are recognised as an expense in the income statement over the term of therelevant lease so as to produce a constant periodic rate of charge on the remaining balance of theobligations for each accounting period.

The depreciation policy for leased assets is in accordance with that for depreciable property, plant andequipment as described in Note 2(d).

(ii) Operating leases

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



52


(m) Employee Benefits

(i) Short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year inwhich the associated services are rendered by employees of the Group. Short term accumulatingcompensated absences such as paid annual leave are recognised when services are rendered byemployees that increase their entitlement to future compensated absences, and 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 state pension scheme, the EmployeesProvident Fund ("EPF"). Such contributions are recognised as an expense in the income statement asincurred.

(iii) Equity compensation benefits

The Employee Share Options Scheme ("ESOS") allows the Group's employees to acquire ordinary sharesof the Company. No compensation cost or obligation is recognised. When the options are exercised,equity is increased by the amount of the proceeds received.

(n) Financial Instruments

Compound financial instruments are classified into their liabilities or equity components in accordance with thesubstance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrumentclassified as a liability, are reported as expense or income. Financial instruments are offset when the Grouphas a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset andsettle the liability simultaneously.

(i) Receivables

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

(ii) Payables

Payables are stated at cost which is the fair value of the consideration to be paid in the future for goodsand services received, whether or not billed to the Group.

(iii) Interest-Bearing Borrowings

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

Borrowing costs directly attributable to the acquisition and construction of development properties andproperty, plant and equipment are capitalised as part of the cost of those assets, until such time as theassets are ready for their intended use or sale. All other borrowing costs are charged to the incomestatement as an expense in the period in which they are incurred.

(iv) Equity Instruments

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



53

Annual Report 2005

3.P

RO

PE

RT

Y, P

LA

NT

AN

D E

QU

IPM

EN

T Lan

dP

lan

tF

urn

itu

rean

dan

dM

oto

rO

ffic

ean

dC

om

pu

ter

GR

OU

Pbu

ildin

gs

mac

hin

ery

veh

icle

seq

uip

men

tfi

ttin

gs

equ

ipm

ent

Tota

lR

MR

MR

MR

MR

MR

MR

M

Co

st o

r V

alu

atio

n

At

1 Ja

nuar

y 20

0528

7,30

3,96

747

,892

,801

7,72

6,76

414

,090

,286

17,4

11,3

602,

551,

548

376,

976,

726

Add

ition

s38

3,04

51,

040,

004

716,

869

704,

354

810,

202

454,

513

4,10

8,98

7D

ispo

sals

–(1

27,0

99)

(560

,395

)(2

7,59

8)–

(10,

700)

(725

,792

)D

ispo

sal o

f su

bsid

iarie

s(2

6,53

5,85

7)(4

83,6

08)

(923

,276

)(9

3,69

2)(8

2,15

1)(3

71,7

32)

(28,

490,

316)

Writ

e of

f–

(48,

134)

–(2

4,66

2)–

–(7

2,79

6)Tr

ansf

er(8

40,0

00)

(83,

472)

–(8

2,64

9)92

,868

11,5

52(9

01,7

01)

Rec

lass

ifica

tion

451,

737

(451

,737

)–

––

––

At 3

1 D

ecem

ber

2005

260,

762,

892

47,7

38,7

556,

959,

962

14,5

66,0

3918

,232

,279

2,63

5,18

135

0,89

5,10

8

Acc

um

ula

ted

Dep

reci

atio

n

At

1 Ja

nuar

y 20

0540

,221

,963

36,9

36,0

645,

987,

735

9,24

3,43

514

,004

,255

2,06

8,28

610

8,46

1,73

8C

harg

e fo

r th

e ye

ar4,

112,

130

3,05

4,77

173

5,81

01,

344,

728

1,29

5,98

323

6,24

810

,779

,670

Dis

posa

ls–

(119

,707

)(4

89,0

23)

(19,

996)

–(1

0,70

0)(6

39,4

26)

Dis

posa

l of

subs

idia

ries

(3,1

54,3

58)

(241

,542

)(5

09,7

55)

(59,

921)

(37,

624)

(179

,059

)(4

,182

,259

)W

rite

off

–(5

1,71

7)–

(7,6

28)

––

(59,

345)

Tran

sfer

–(4

0,56

0)–

(9,6

80)

6,40

73,

273

(40,

560)

At 3

1 D

ecem

ber

2005

41,1

79,7

3539

,537

,309

5,72

4,76

710

,490

,938

15,2

69,0

212,

118,

048

114,

319,

818

Net

Bo

ok

Val

ue

At 3

1 D

ecem

ber

2005

219,

583,

157

8,20

1,44

61,

235,

195

4,07

5,10

12,

963,

258

517,

133

236,

575,

290

At 3

1 D

ecem

ber

2004

247,

082,

004

10,9

56,7

371,

739,

029

4,84

6,85

13,

407,

105

483,

262

268,

514,

988

Det

ails

at

1 Ja

nu

ary

2004

Cos

t or

Val

uatio

n28

4,93

5,46

546

,625

,850

6,11

2,09

412

,907

,575

17,5

84,8

402,

095,

394

370,

261,

218

Acc

umul

ated

Dep

reci

atio

n35

,571

,266

33,5

18,8

615,

246,

293

8,09

7,65

512

,510

,056

1,74

8,41

196

,692

,542

Dep

reci

atio

n c

har

ge

for

2004

4,65

0,69

73,

497,

260

775,

842

1,27

0,55

12,

100,

688

199,

135

12,4

94,1

73



54



Financial Statements3.

PR

OP

ER

TY

, PL

AN

T A

ND

EQ

UIP

ME

NT

(co

nt’

d)

Lan

d a

nd

bu

ildin

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Lo

ng

Fre

eho

ldle

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old

Clu

bG

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GR

OU

Pla

nd

lan

dh

ou

seco

urs

eB

uild

ing

sTo

tal

RM

RM

RM

RM

RM

RM

Co

st/V

alu

atio

n

At

1 Ja

nuar

y 20

0560

,053

,566

30,9

76,5

7020

,215

,205

16,7

44,5

1515

9,31

4,11

128

7,30

3,96

7A

dditi

ons

––

57,8

4518

,416

306,

784

383,

045

Tran

sfer

––

––

(840

,000

)(8

40,0

00)

Dis

posa

l of

subs

idia

ries

–(1

3,41

9,41

3)–

–(1

3,11

6,44

4)(2

6,53

5,85

7)R

ecla

ssifi

catio

n–

––

–45

1,73

745

1,73

7

At 3

1 D

ecem

ber

2005

60,0

53,5

6617

,557

,157

20,2

73,0

5016

,762

,931

146,

116,

188

260,

762,

892

Acc

um

ula

ted

Dep

reci

atio

n

At 1

Jan

uary

200

5–

5,74

1,63

13,

100,

652

2,63

5,24

028

,744

,440

40,2

21,9

63C

harg

e fo

r th

e ye

ar–

327,

964

412,

402

335,

259

3,03

6,50

54,

112,

130

Dis

posa

l of

subs

idia

ries

–(1

,379

,192

)–

–(1

,775

,166

)(3

,154

,358

)

At 3

1 D

ecem

ber

2005

–4,

690,

403

3,51

3,05

42,

970,

499

30,0

05,7

7941

,179

,735

Net

Bo

ok

Val

ue

At 3

1 D

ecem

ber

2005

60,0

53,5

6612

,866

,754

16,7

59,9

9613

,792

,432

116,

110,

409

219,

583,

157

At 3

1 D

ecem

ber

2004

60,0

53,5

6625

,234

,939

17,1

14,5

5314

,109

,275

130,

569,

671

247,

082,

004

Det

ails

at

1 Ja

nu

ary

2004

Cos

t/Val

uatio

n60

,053

,566

30,9

76,5

7020

,215

,205

16,7

44,5

1515

6,94

5,60

928

4,93

5,46

5A

ccum

ulat

ed D

epre

ciat

ion

–5,

193,

196

2,69

6,34

82,

300,

350

25,3

81,3

7235

,571

,266

Dep

reci

atio

n c

har

ge

for

2004

–54

8,43

540

4,30

433

4,89

03,

363,

068

4,65

0,69

7

55

Annual Report 2005

Motor Computer OfficeCOMPANY vehicles equipment equipment Total

RM RM RM RM

Costs

At 1 January 2005 – 15,749 1,800 17,549Addition 108,937 1,300 3,270 113,507Transfer – 11,552 3,039 14,591

At 31 December 2005 108,937 28,601 8,109 145,647

Accumulated Depreciation

At 1 January 2005 – 3,150 360 3,510Charge for the year 17,619 4,606 1,125 23,350Transfer – 3,273 722 3,995

At 31 December 2005 17,619 11,029 2,207 30,855

Net Book Value

At 31 December 2005 91,318 17,572 5,902 114,792

At 31 December 2004 – 12,599 1,440 14,039

Depreciation charge for 2004 – 3,150 360 3,510

Land and buildings include long leasehold properties, a portion of which are stated at valuation. The analysis of netbook value of long leasehold land between the valuation and cost portions is as follows:

GROUP2005 2004

RM RM

At valuationLong leasehold land- at 1991 valuation – 9,038,518- at 1993 valuation 4,834,403 4,890,511Buildings - at 1991 valuation – 2,759,551

4,834,403 16,688,580

At costLong leasehold land 8,032,351 11,305,910Buildings 116,110,409 127,810,120

124,142,760 139,116,030

Total 128,977,163 155,804,610



56


All other categories of property, plant and equipment are stated at cost less accumulated depreciation.

The net book value of long leasehold land and buildings stated at valuation, had they been carried at cost lessaccumulated depreciation and impairment losses, would have been:

GROUP2005 2004

RM RM

Long leasehold land 2,346,512 5,722,306Buildings – 890,543

2,346,512 6,612,849

The valuation of long leasehold land and buildings in 1991 and 1993 were based on independent professionalvaluations carried out on the open market basis. As allowed by the transitional provisions of International AccountingStandard 16 (Revised), Property, Plant and Equipment, adopted by the MASB, these assets have continued to bestated on the basis of their 1991 and 1993 valuations.

Included in property, plant and equipment of the Group are land and buildings of subsidiaries, with an aggregate netbook value of RM86,663,673 (2004: RM97,672,449) which are charged to financial institutions for financial facilitiesextended to those subsidiaries.

During the financial year, the Group and the Company acquired property, plant and equipment at aggregate costs ofRM4,108,987 (2004: RM7,668,319) and RM113,507 (2004: RM17,549) respectively of which RM273,000 (2004:RM785,000) and RM96,000 (2004: Nil) respectively was acquired by means of hire purchase. Net book value ofmotor vehicles held under hire purchase in the Group and the Company is RM754,465 (2004: RM731,595) andRM91,318 (2004: Nil) respectively.

4. LAND HELD FOR PROPERTY DEVELOPMENT

GROUP2005 2004

RM RM

Freehold land, at costAt 1 January 165,267,863 164,160,729Additions 1,543,236 –Reversal of sales in prior years 1,609,810 1,107,134Transfer to property development costs (43,111,650) –

At 31 December 125,309,259 165,267,863

Certain land held for property development are being charged for borrowings taken by the subsidiaries.

5. INVESTMENTS IN SUBSIDIARIES

COMPANY2005 2004

RM RM

Unquoted shares, at cost 308,008,483 308,008,481Disposal of subsidiaries (30,000,002) 2

278,008,481 308,008,483



57

Annual Report 2005

The amounts due to subsidiaries arose primarily from payments on the Company's behalf. Included in the amountdue to subsidiaries was an amount of RM83,194,816 (2004: RM91,236,486) which bore interest rates of 5.0% to9.0% (2004: 5.0% to 9.0%) per annum. The amount due to subsidiaries are unsecured and have no fixed terms ofrepayments.

The amounts due from subsidiaries are unsecured, have no fixed terms of repayment and interest-free (2004: 9% perannum).

The effect of disposal from the beginning of the financial year to the date of disposal on the Group's financial resultsarising from LancetBio Sdn. Bhd. is as follows:

2005RM

Revenue –Net operating expenses (222,810)

Loss after taxation (222,810)

The effect of disposal from the beginning of the financial year to the date of disposal on the Group's financial resultsarising from Nostalgia Asal Sdn. Bhd. is as follows:

2004RM

Revenue –Net operating expenses (306)

Loss after taxation (306)

The assets and liabilities disposed is disclosed in the cash flow statements.

Details of the subsidiaries are as follows:

Principal Country of Effective EquityCompany Activities Incorporation Interest

2005 2004% %

BBN Development Sdn. Bhd. Property development Malaysia 75.38 75.38

PK Properties Sdn. Bhd. Property development Malaysia 100.00 100.00

NS Township Development Property development Malaysia 70.00 70.00Sdn. Bhd.

Arus Ikhlas Sdn. Bhd. Property development Malaysia 70.00 70.00

PK Education Sdn. Bhd. Provision of educational services Malaysia 70.00 70.00

Advance Point (M) Hotelling and property development Malaysia 70.00 70.00Sdn. Bhd.



58


Principal Country of Effective EquityCompany Activities Incorporation Interest

2005 2004% %

PK Hotels & Leisure Hotelling Malaysia 100.00 100.00Sdn. Bhd.

Nilai Springs Bhd. Operation and management Malaysia 75.38 75.38of golf and country club

Romila Jaya Sdn. Bhd. Quarry operations Malaysia 91.05 91.05

Nilai Landscape Sdn. Bhd. Nursery and landscaping Malaysia 100.00 100.00

Advance Point Management Provision of building Malaysia 70.00 70.00Sdn. Bhd. management services

PK Fertilizers Sdn. Bhd. Manufacturing and merchandising Malaysia – 100.00of fertilizers

Serba Kimia Sdn. Bhd. Manufacturing and merchandising Malaysia – 100.00chemicals and chemical products

Healthcom Pharma Distribution of pharmaceutical Malaysia 35.70 35.70Sdn. Bhd. and related products

Healthcom Sdn. Bhd. Dormant Malaysia 51.00 51.00

PK Trade & Services Dormant Malaysia 100.00 100.00Sdn. Bhd.

LancetBio Sdn. Bhd. Dormant Malaysia – 100.00

Nilai Hills Sdn. Bhd. Dormant Malaysia 100.00 100.00

PK Academy Sdn. Bhd. Dormant Malaysia 70.00 70.00

Awan Cermat Sdn. Bhd. Dormant Malaysia 91.05 91.05

PK Healthcare Services Dormant Malaysia 100.00 100.00Sdn. Bhd.

PK Innovations Sdn. Bhd. Management Services Malaysia 70.00 75.38

PK Mall Management Management Services Malaysia 60.00 75.38Sdn. Bhd. (formerly known

as Ekspres Nilai Sdn. Bhd.)

Peladang Chemicals (S) Dormant Singapore 100.00 100.00Pte. Ltd.



59

Annual Report 2005

6. INVESTMENTS IN ASSOCIATES

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Unquoted shares, at cost 1,089,000 1,089,000 – –Acquisition 225,000 – – –Share of post-acquisition losses (252,635) (242,578) – –

1,061,365 846,422 – –

Share of net assets 1,061,365 846,422 – –

The amounts due from/to associates are unsecured, interest-free, and have no fixed terms of repayment.

Details of the associates are as follows:

Principal Country of Effective EquityActivities Incorporation Interest

2005 2004% %

Golden Plateau Sdn. Bhd. Dormant Malaysia 50.00 50.00Chartz Development Sdn. Bhd. Dormant Malaysia 30.00 –

7. OTHER INVESTMENTS

GROUP/COMPANY2005 2004

RM RM

Quoted shares, at cost 6,349,972 6,349,972Quoted shares disposed (897,437) –Less: Accumulated impairment losses (2,934,661) (2,020,445)

2,517,874 4,329,527

Market value as at 31 December 2,517,874 4,329,527

8. GOODWILL ARISING ON CONSOLIDATION

GROUP2005 2004

RM RM

At cost 1,787,586 1,787,586Less: Accumulated amortisation (899,960) (828,460)

At 31 December 887,626 959,126



60


9. PROPERTY DEVELOPMENT COSTS

GROUP2005 2004

RM RM

At 1 JanuaryFreehold land 90,087,902 93,986,142Development costs 346,269,349 311,345,401

436,357,251 405,331,543

Cost incurred during the year:Development costs 89,307,590 39,681,664

Cost recognised in income statementAt 1 January (215,157,518) (167,242,707)Recognised during the year (60,742,374) (47,914,811)

At 31 December (275,899,892) (215,157,518)

Transfers:From land held for property development 43,111,650 –To inventories (14,414,706) (8,655,956)

28,696,944 (8,655,956)

Property development costs at 31 December 278,461,893 221,199,733

Certain pieces of land under property development costs are being charged for borrowings taken by the subsidiaries.

10. INVENTORIES

GROUP2005 2004

RM RM

At cost:

Trading inventories 2,209,041 117,250,297Unsold completed building units 33,038,742 18,096,721Commercial land 43,839,775 40,493,416Work in progress 514,845 769,543Hotel supplies and consumables 375,177 736,352Consumables 287,555 220,349

80,265,135 177,566,678

At net realisable value:

Unsold completed building units 499,016 4,210,000

80,764,151 181,776,678



61

Annual Report 2005

11. TRADE RECEIVABLES

GROUP2005 2004

RM RM

Trade receivables 82,195,254 137,343,455Less: Allowance for doubtful debts (3,288,416) (4,648,450)

78,906,838 132,695,005

Included in trade receivables of the Group are balances totalling RM40,108,415 (2004: RM45,463,001) from threeentities, of which RM6,483,861 (2004: RM9,495,425) are amounts due from a company in which a director hasfinancial interests. In determining the extent of allowance for doubtful debts, the Directors have given due considerationto the current economic conditions and other information available to assess the likelihood of bad debts arising.Although uncertainty generally exists with regard to the recovery of debts under the current economic conditions, theDirectors are of the opinion that the allowance made for doubtful debts is adequate. It is not possible, however, for theallowance to anticipate any possible future deterioration in credit conditions in respect of debtor parties.

The Group's normal trade credit term ranges from 21 working days to 90 working days. Other credit terms areassessed on a case-by-case basis.

12. OTHER RECEIVABLES

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Deposits 1,756,031 2,156,701 142,567 140,000Prepayments 706,268 3,764,511 2,710 –Sundry receivables 2,921,714 1,128,682 771 3,063

5,384,013 7,049,894 146,048 143,063

13. DEPOSITS WITH LICENSED BANKS

The weighted average interest rate during the financial year and the average maturity of deposits with licensed banksas at 31 December were as follows:

GROUP GROUPWeighted Average Average Maturity

Interest Rate Days2005 2004 2005 2004

% %

Fixed deposits 3.1 3.0 137 92



62


14. CASH AND BANK BALANCES

Included in cash and bank balances of the Group are amounts totalling RM1,939,256 (2004: RM5,523,427) placed intrust for purchasers of residential houses and apartments in accordance with the Housing Developers (Control andLicensing) Act 1966.

Included in cash and bank balances are amounts of RM82,750 (2004: RM190,910) in respect of share applicationmonies received for shares in a subsidiary which are held in trust on behalf of the applicants and the related otherpayables are disclosed in Note 16. These application monies had been placed in trust as at 31 December 2005.

15. TRADE PAYABLES

The normal trade credit terms granted to the Group range from 30 to 90 days.

16. OTHER PAYABLES

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Balance of consideration on acquisitionof a subsidiary (Note 21) 4,789,907 12,128,842 4,789,907 12,128,842

Partial payment for disposal ofPK Fertilizers Sdn. Bhd. – 2,730,000 – 2,730,000

Sundry payables 18,764,737 21,484,186 13,682,659 12,588,423Deposits 4,852,194 5,536,834 – –Accruals 16,615,090 19,679,824 401,789 364,618Provision 3,148,801 4,285,174 – –Deferred income 2,823,231 1,122,399 – –Amounts held in trust 82,750 190,910 – –

51,076,710 67,158,169 18,874,355 27,811,883

Provision is in respect of liquidated ascertained damages.

Details of amounts held in trust are disclosed in Note 14.

17. BANK BORROWINGS

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Unsecured:Bankers’ acceptances – 89,914,174 – –Bank overdrafts 546,160 7,077,997 – 44,589

Secured:Bank overdrafts 5,645,827 5,243,091 – –

Current portion of long term liabilities(Note 21)- Commercial Papers 30,450,002 30,500,390 – –- Hire purchase creditors 210,898 140,113 32,256 –- Term loans 40,158,360 19,332,515 – –

77,011,247 152,208,280 32,256 44,589



63

Annual Report 2005

Interest on the bank borrowings during the year ranged from 3.0% to 9.0% (2004: 3.0% to 7.9%) per annum.

The bank overdrafts are secured by a fixed charge over certain landed properties of subsidiaries as stated in Note 3.

The security over the long term loan and commercial papers is disclosed in Note 21.

18. SHARE CAPITAL

GROUP/COMPANY2005 2004

RM RM

Authorised:250,000,000 ordinary shares of RM1 each 250,000,000 250,000,000

Issued and fully paid up:114,035,500 ordinary shares of RM1 each 114,035,500 114,035,500

(a) Warrants

On 29 May 1995, the Company issued RM150 million of bonds with 39 million detachable warrants uponobtaining approvals from the relevant authorities. The detachable warrants (“Existing Warrants”) were offeredfor sale to the then entitled shareholders at an offer price of 82 sen per warrant.

The bonds expired on 28 May 2000 and were subsequently converted into a term loan. The term loan wasrepaid in the previous year with the proceeds from the issuance of Medium Term Notes and CommercialPapers as detailed in Note 21.

On 27 August 1999, the Company extended the expiry period of all Existing Warrants from 28 November 1999to 28 May 2005 (“Existing Extended Warrants”). Subsequently, the Company, vide its prospectus dated 20November 2000, offered 38,994,500 Replacement Warrants to the then Existing Extended Warrant holders, onthe basis of one (1) Replacement Warrant for every one (1) Existing Extended Warrant held. The ReplacementWarrants have the same expiry date as the Existing Extended Warrants of 28 May 2005.

A total number of 36,645,850 Replacement Warrants were issued to replace the Existing Extended Warrants.

At the expiry date of 28 May 2005, none of the 36,645,850 Replacement Warrants and 2,348,650 ExistingExtended Warrants had been exercised.

(b) ESOS

ESOS is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held 30July 2002. The ESOS is to be in force for a period of 10 years from the date of implementation, 1 March 2004.

The salient features of the ESOS are as follows:

(i) The Options Committee appointed by the Board of Directors to administer the ESOS, may from time totime grant options to eligible employees of the Group to subscribe for new ordinary shares of RM1 eachin the Company.



64


(ii) Subject to the discretion of the Options Committee, any employee whose employment is more than one(1) year and any executive directors holding office in a full-time executive capacity of the Group, shall beeligible to participate in the ESOS.

(iii) The total number of shares to be issued under the ESOS shall not exceed in aggregate 10% of theissued share capital of the Company at any point of time during the tenure of the ESOS and out of whichnot more than 50% of the shares shall be allocated, in aggregate, to directors and senior management.In addition, not more than 10% of the shares available under the ESOS shall be allocated to any individualdirector or employee who, either singly or collectively through his/her associates, holds 20% or more inthe issued and paid-up capital of the Company.

(iv) The option price for each share shall be the weighted average of the market price as quoted in the dailyofficial list issued by Bursa Malaysia Securities Berhad for the 5 market days immediately preceding thedate on which the option is granted less, if the Options Committee shall so determine at their discretionfrom time to time, a discount of not more than 10% or the par value of the shares of the Company of RM1.

(v) The options shall become exercisable only during the employees lifetime provided the employee hasbeen in continuous service with the Group throughout the period.

(vi) All new ordinary shares issued upon exercise of the options granted under the ESOS will rank pari passuin all respects with the existing ordinary shares of the Company other than as may be specified in aresolution approving the distribution of dividends prior to their exercise dates.

(vii) The persons to whom the options have been granted have no right to participate by virtue of the options,in any share issue of any other company.

19. RESERVES

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Distributable:Retained profits 181,343,757 180,292,393 25,278,124 29,222,096

Non-distributable:Share premium 113,537,671 113,537,671 113,537,671 113,537,671Capital reserve 16,780,633 18,393,884 – 1,628,324Capital redemption reserve 2,972,000 2,972,000 2,972,000 2,972,000Exchange reserve 332,876 357,311 – –

314,966,937 315,553,259 141,787,795 147,360,091

Movements in reserves are shown in the respective statements of changes in equity.

Based on estimated tax credits and the tax exempt account balance available as at balance sheet date, subject to theagreement of the Inland Revenue Board, the entire retained profits of the Company is available for distribution by wayof dividends without incurring additional tax liability.



65

Annual Report 2005

The nature and purpose of each category of reserve are as follows:

(a) Share Premium

This amount arose from premium on the issue of ordinary shares above par value.

(b) Capital Reserve

Capital reserve of the Group amounting to RM16,604,531 (2004: RM16,589,458) arose from premium onshares issued to non-participating minority interests in a subsidiary.

Capital reserve of RM Nil (2004: RM1,628,324) in the Group and the Company arose from proceeds from theissue of replacement warrants less related expenses. Following the expiry of the warrants during the financialyear, the amount has been transfered to retained profits.

(c) Capital redemption reserve

This amount arose from the nominal value of shares repurchased and cancelled. The amount was transferredfrom retained profits under Section 67A of the Companies Act 1965.

(d) Foreign Exchange Reserve

The foreign exchange reserve comprises all foreign exchange differences arising from the translation of thefinancial statements of a foreign subsidiary.

20. DEFERRED TAX LIABILITIES AND ASSETS

GROUP2005 2004

RM RM

At 1 January 33,518,306 33,850,868Recognised in the income statement (3,871,842) (332,562)Disposal of subsidiaries 446,313 –

At 31 December 30,092,777 33,518,306

Presented after appropriate offsetting as follows:

Deferred tax assets: (7,718,060) (3,901,261)Deferred tax liabilities: 37,810,837 37,419,567

30,092,777 33,518,306



66


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

Deferred tax liabilities of the Group:

Accelerated Revaluation Propertycapital of leasehold development

allowance land expenditure TotalRM RM RM RM

At 1 January 2005 18,232,515 1,374,952 28,941,180 48,548,647Recognised in the income statement 1,941,535 – (970,600) 970,935Disposal of subsidiaries 35,327 – – 35,327

At 31 December 2005 20,209,377 1,374,952 27,970,580 49,554,909

At 1 January 2004 15,157,081 1,374,952 29,809,689 46,341,722Recognised in the income statement 3,075,434 – (868,509) 2,206,925

At 31 December 2004 18,232,515 1,374,952 28,941,180 48,548,647

Deferred tax assets of the Group:

Tax losses andunabsorbed

Provisions allowances Others TotalRM RM RM RM

At 1 January 2005 (2,535,727) (12,476,573) (18,041) (15,030,341)Recognised in the income statement 213,852 (4,771,945) (284,684) (4,842,777)Disposal of subsidiaries 410,986 – – 410,986

At 31 December 2005 (1,910,889) (17,248,518) (302,725) (19,462,132)

At 1 January 2004 (3,723,230) (8,681,564) (86,060) (12,490,854)Recognised in the income statement 1,187,503 (3,795,009) 68,019 (2,539,487)

At 31 December 2004 (2,535,727) (12,476,573) (18,041) (15,030,341)

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

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Arising from:Unused tax losses 30,047,997 76,525,748 310,111 –Unabsorbed allowances 32,442,700 27,805,761 29,834 66,517Other temporary differences 17,364 292,905 17,364 –

The unused tax losses and unabsorbed allowances are subject to the agreement of the Inland Revenue Board.Deferred tax assets have not been recognised for certain subsidiaries as it is not probable that sufficient taxable profitof the subsidiaries will be available against which the above deductible temporary differences can be utilised.



67

Annual Report 2005

21. OTHER LONG TERM LIABILITIES

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Balance of consideration onacquisition of a subsidiary (a) 4,789,907 12,128,842 4,789,907 12,128,842

Term loans (b) 45,783,360 70,622,158 – –Medium Term Notes (c) 47,565,847 47,033,362 – –Commercial Papers (c) 30,450,002 30,500,390 – –Hire purchase creditors (d) 800,643 742,143 83,875 –

129,389,759 161,026,895 4,873,782 12,128,842Less: Current portion of:

balance of consideration onacquisition of a subsidiary(Note 16) (4,789,907) (12,128,842) (4,789,907) (12,128,842)- Commercial Papers (30,450,002) (30,500,390) – –- Hire purchase creditors (210,898) (140,113) (32,256) –- Term loans (40,158,360) (19,332,515) – –

53,780,592 98,925,035 51,619 –

(a) The balance of consideration on acquisition of a subsidiary represents the remaining 45% of the considerationfor the acquisition of the 70% equity interest in Arus Ikhlas Sdn Bhd ("AISB"). The outstanding balance waspayable to the vendor of AISB on or before the expiry of the 36 month period from the date of completion of theacquisition, i.e. by December 2001. Until that date, the amount owing was non-interest bearing. However,interest at 10% per annum is chargeable on the balance outstanding after the 36 month period until full settlementof the balance.

(b) Term Loans

Term loans comprise four loans which are secured by fixed and floating charges on certain freehold and longleasehold land and buildings of certain subsidiaries. Interest was charged during the year at 7.56% to 9.0%(2004: 5.09% to 9.0%) per annum.

The term loans are repayable as follows:

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Financial year ended/ending:

31 December 2005 – 19,865,000 – –31 December 2006 40,158,360 43,501,830 – –31 December 2007 5,625,000 6,225,000 – –31 December 2008 – 600,000 – –31 December 2009 – 430,328 – –

45,783,360 70,622,158 – –



68


(c) Medium Term Notes and Commercial Papers

On 31 December 2004, BBN Development Sdn. Bhd.("BBN"), a subsidiary of the Company issued RM31,000,000of Commercial Papers ("CPs") and RM50,000,000 of Medium Term Notes ("MTN") under the Murabahah NotesIssuance Facility ("MUNIF") to repay the outstanding bank borrowings of the Company and a fellow subsidiary.

The MUNIF is available up to seven (7) years from the date of first issuance with the issuance of CPs withmaturities ranging from one (1) to twelve (12) months and MTN with maturities ranging from one (1) to seven(7) years.

The MUNIF Programme is subject to the Facility Limit Reduction Schedule set out as follows:-

RevisedFrom the date of Reduction Facilityfirst issuance Amount Limit

(RM’million) (RM’million)

Fifth year 20 66Sixth year 34 32Seventh year 32 –

The limit for issuance of CPs is RM56 million or the Revised Facility Limit above, whichever is lower.

The MUNIF is secured by a bank guarantee issued under the Kafalah Facilty of up to RM89 million. TheKafalah Facility is secured against certain land being developed and held for future development of BBN asdetailed in Note 4 and 9 respectively and corporate guarantee by the Company.

During the year, the Company redeemed and renewed the RM31,000,000 CPs. The net proceeds received netof discount is as follows:

Face Value Discount Net ProceedsRM RM RM

CPs 31,000,000 (549,998) 30,450,002

CPs are subject to profits ranging from 3.30% to 6.00% per annum and repayable within the next twelve (12)months.

The Medium Term Notes has profits rates and maturity dates as stated below.

Aggregate Face Value Profit Rate Maturity Date

RM20 million 5.0% 31 December 2009RM30 million 5.5% 31 December 2010



69

Annual Report 2005

(d) Hire purchase creditors

GROUP2005 2004

RM RM

Minimum lease paymentsWithin one year 249,204 182,100Between one to five years 669,312 679,542

918,516 861,642Less: Future finance charges (117,873) (119,499)

Present value of finance lease liabilities 800,643 742,143

Analysed as:Due within 12 months 210,898 140,113Due after 12 months 589,745 602,030

800,643 742,143

The hire purchase creditors bear flat interest rate ranging from 2.85% to 3.75% (2004: 2.85% to 3.75%).

22. REVENUE AND COST OF SALES

Revenue comprise:

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Sales of fertilizers 142,910,126 280,952,378 – –Sales of industrial land, houses and

shoplots 91,863,661 83,396,556 – –Sales of agrochemical products 4,542,162 14,162,409 – –Sales of food, beverage and

room rentals 25,606,928 20,512,293 – –Education 29,635,674 28,803,229 – –Dividend income – – 4,572,000 5,300,000Others 16,643,336 24,876,934 – –

311,201,887 452,703,799 4,572,000 5,300,000

Sales of industrial land, houses and shoplots represent a proportion of contract revenue determined by reference tothe stage of completion of industrial lands, houses and shoplots sold, net of discounts.

Cost of sales comprise:

GROUP2005 2004

RM RM

Sales of fertilizers 133,268,167 259,753,744Sales of industrial land, houses and shoplots 54,939,021 58,389,628Sales of agrochemical products 4,805,122 16,215,169Sales of food, beverage and room rentals 3,616,474 4,715,471Others 10,020,432 13,042,754

206,649,216 352,116,766



70


23. PROFIT FROM OPERATIONS


RM RM RM RM

Profit from operations is statedafter charging/(crediting):

Directors’ remuneration (a)- Fees 267,115 270,345 145,094 112,500- Emoluments 2,299,531 2,661,970 682,571 480,990- Benefits-in-kind 80,863 91,779 – 9,300Auditors’ remuneration- Current year 148,200 147,200 21,000 20,000- Overprovision in prior years (1,400) (12,000) – (2,000)Depreciation of property, plant

and equipment 3 10,779,670 12,494,173 23,350 3,510Property, plant and equipment

written off 13,451 78,137 – –Allowance/(Write back) of

doubtful debts 791,880 (369,523) – –Bad debts written off 496,515 1,574,404 472,557 –Bad debts recovered (52,950) (15,507) – –Impairment of investment 914,216 2,020,445 914,216 2,020,445Rental of premises 527,422 1,825,043 – –Goodwill amortised 71,500 71,498 – –Staff costs- wages, salaries and allowances 23,764,556 23,832,725 1,002,537 797,985- statutory contribution to EPF and

social security 3,656,310 2,770,948 141,408 108,223Write down of inventories 585,406 1,358,335 – –Royalty 843,600 553,014 – –Lease rental 72,411 4,171 3,336 556Hire of plant and machinery 41,860 37,862 – –Unrealised foreign exchange

(gain)/loss (41,236) (21,213) (24,435) 12,146Dividend income- subsidiaries – – (4,572,000) (5,300,000)- others (173,181) (173,181) (173,181) (173,181)Interest income- subsidiaries – – – (1,675,356)- others (670,782) (760,240) (17,524) (7,215)Gain on disposal of property, plant

and equipment (51,530) (62,716) – –Loss/(gain) on disposal of

subsidiaries- discontinued operations 25 7,502,853 – (1,300,000) –Gain on disposal of subsidiaries (471,787) (29,841) – –Gain on disposal of an associate – (7,352,456) – (4,365,265)Rental income- others (723,364) (1,242,891) – –



71

Annual Report 2005


RM RM RM RM

(a) Directors’ remuneration

Executive directors- Salaries and other emoluments 2,233,531 2,583,470 661,571 456,990- Fees 112,760 170,845 24,585 25,000- Benefits-in-kind 80,863 91,779 – 9,300

2,427,154 2,846,094 686,156 491,290

Non-executive directors- Fees 154,355 99,500 120,509 87,500- Other emoluments 66,000 78,500 21,000 24,000

220,355 178,000 141,509 111,500

Total 2,647,509 3,024,094 827,665 602,790

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

2005 2004

Executive directorsRM100,001 - RM500,000 3 3RM500,001 - RM1,000,000 2 2

Non executive directorsRM50,000 and below 4 3RM50,001 - RM100,000 1 1

10 9

24. FINANCE COSTS

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Interest expense:- Overdraft 677,148 860,732 – –- Term loan 6,982,397 8,669,670 – 5,777,182- Bankers acceptance 1,650,291 3,500,591 – –- Revolving credit 1,868,130 2,296,108 – –- Hire purchase 33,101 5,310 – –- Subsidiaries – – 5,652,543 1,582,115Interest on balance of consideration

on acquisition of a subsidiary 1,094,235 2,666,142 1,094,235 2,666,142Others 60,827 112,558 1,455 841

12,366,129 18,111,111 6,748,233 10,026,280



72


25. DISCONTINUING OPERATIONS

On 29 April 2005, the Company disposed of its investment in fertilizers and agrochemicals segement, PK FertilizersSdn Bhd, a wholly owned subsidiary and its wholly owned subsidiary, Serba Kimia Sdn. Bhd., for a cash considerationof RM31,300,000.

The revenue and results of the subsidiaries included in the consolidated financial statements were as follows:

2005 2004RM RM

Revenue 148,881,443 300,879,549Operating expenses (144,291,145) (292,290,203)

Profit from operations 4,590,298 8,589,346Finance costs (1,981,247) (4,308,927)

Profit before taxation 2,609,051 4,280,419Taxation (724,265) (1,075,867)

Net profit for the year 1,884,786 3,204,552

The assets and liabilities of the subsidiaries disposed were as follows:

2005 2004RM RM

Property, plant and equipment 24,308,057 24,528,660Deferred taxation 446,313 446,313Inventories 137,433,897 116,732,104Trade receivables 78,748,582 48,348,474Other receivables 1,704,453 1,456,964Tax recoverable – 771,474Amount due from related companies 18,564,609 14,739,474Cash and bank balances 2,328,451 929,001Trade payables (80,657,616) (61,883,656)Other payables (7,999,089) (3,540,855)Amount due to related companies (7,122,317) (3,333,325)Bank borrowings (120,412,497) (93,729,571)Bank overdraft (5,788,368) (6,238,895)Tax payable (721,579) (278,055)

Share of net assets disposed 40,832,896 38,948,107

Negative goodwill on consolidation (2,168,396)Total diposal proceeds (31,300,000)Disposal expenses 138,353

Loss on disposal to the Group 7,502,853

Disposal proceeds settled by:Cash 19,097,598Inter company settlement 12,202,402

31,300,000

Cash inflow arising on disposal:Cash consideration, representing cash inflow of the Company 19,097,598Cash and cash equivalents of subsidiaries disposed 3,459,917

Net cash inflow of the Group 22,557,515



73

Annual Report 2005

There was no tax charge or credit arising from the disposal.

The disposal of the subsidiaries had the following effect on the financial results of the Company:

2005 2004RM RM

Total disposal proceeds 31,300,000 –Less: Cost of investment in subsidiaries (30,000,000) –

Gain on disposal of subsidiary 1,300,000 –

26. TAXATION

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Malaysian income tax 772,071 1,506,708 – –Deferred taxation 6,466,263 43,314 – –(Over)/under provision in prior years

- current (301,520) 138,393 – –- deferred (10,338,105) (375,876) – –

(3,401,291) 1,312,539 – –

Domestic income tax is calculated at the Malaysian statutory tax rate of 28% (2004: 28%) of the estimated assessableprofit for the year.

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

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Profit/(loss) before taxation 4,428,074 9,792,393 (3,109,129) (1,271,164)

Taxation at Malaysian statutorytax rate of 28% (2004: 28%) 1,239,861 2,741,870 (870,556) (355,926)

Effect of tax savings in small andmedium scale companies (37,422) (137,516) – –

Income not subject to tax (3,148,108) (2,032,097) (364,000) (1,222,274)Expenses not deductible for

tax purposes 7,512,896 2,725,771 1,098,770 1,364,878Utilisation of previously unrecognised

tax losses – (4,541,830) – –Utilisation of previously unrecognised

unabsorbed capital allowances 522,841 (84,613) – –Deferred tax assets not recognised

during the year 1,148,266 2,878,437 135,786 213,322(Over)/under provision in prior years- current taxation (301,520) 138,393 – –- deferred taxation (10,338,105) (375,876) – –

Tax expense for the year (3,401,291) 1,312,539 – –



74


27. NET PROFIT PER SHARE

(a) Basic

The calculation of net profit per share is based on the consolidated profit/(loss) after taxation and minorityinterest of RM2,392,622 (2004: RM7,262,490) and the number of ordinary shares in issue during the year of114,035,500 (2004: 114,035,500).

(b) Diluted

For the current year, the outstanding ESOS have been excluded from the computation of fully diluted profit pershare as their conversion to ordinary shares would be anti-dilutive in nature. Accordingly, the basic and fullydiluted profit per share are the same.

28. DIVIDENDS

Net Dividends perAmount Ordinary Share

2005 2004 2005 2004RM RM RM RM

3% (2004: 3%) less 28% taxation on114,035,500 ordinary shares 2,463,167 2,463,167 2.16 2.16

29. SIGNIFICANT RELATED PARTY TRANSACTIONS

GROUPTransaction value Outstanding balance

2005 2004 2005 2004RM RM RM RM

Rental paid to a company in whichcertain directors have financial interests- G.O. Construction Sdn. Bhd. 135,448 135,448 – –

Sales of fertilizers to a substantialshareholder of PK Resources Berhad- FELDA 16,942,774 18,382,261 – 1,018,655

Sale of subsidiaries to a Company inwhich a director has financial interests- Pristine Acres Sdn Bhd 31,300,000 – – –

The directors of the Company are of the opinion that the above transactions were in the normal course of businessand had been established under terms mutually agreed between the companies.



75

Annual Report 2005

COMPANY2005 2004

RM RM

Management fees charged to subsidiaries 1,464,892 1,262,460Interest income from subsidiary,

- BBN Development Sdn Bhd – 1,675,356Motor vehicle purchased from subsidiary,

- Nilai Landscape Sdn Bhd, at net book value 70,875 –Interest charged by subsidiaries:

- BBN Development Sdn Bhd 4,920,666 –- PK Education Sdn Bhd 731,876 745,570- PK Fertilizers Sdn Bhd – 836,545

The directors of the Company are of the opinion that the above transactions were in the normal course of businessand had been established under terms mutually agreed between the companies.

30. CONTINGENT LIABILITIES (UNSECURED)

GROUP COMPANY2005 2004 2005 2004

RM RM RM RM

Corporate guarantee for facilities grantedto subsidiaries – – 91,000,000 274,850,000

Bank guarantee issued in favour ofthird parties – 1,398,940 – –

– 1,398,940 91,000,000 274,850,000

31. CAPITAL COMMITMENTS

GROUP2005 2004

RM RM

Approved and contracted for 83,748 180,000Approved and not contracted for 43,309 2,145,000

127,057 2,325,000



76



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77

Annual Report 2005


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78



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79

Annual Report 2005


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80


33. SIGNIFICANT EVENTS DURING THE YEAR

On 5 January 2005, the Company announced that its subsidiary, BBN Development Sdn. Bhd. ("BBN"), had successfullycompleted its initial issuance of Commercial Papers ("CPs") and primary notes for Medium Term Notes ("MTN")pursuant to the proposed issue, offer for subscription, or purchase of, or invitation to subscribe for or purchase of, a7-year Bank Guaranteed Murabahah Notes Issuance Facility of up to RM86.0 million ("MUNIF"). Further details ofthe said issue are disclosed in Note 21 to the financial statements.

On 23 February 2005, BBN entered into a transaction with Akarmas Sdn. Bhd., a company in which certain directorshave financial interests, for the sale of a piece of commercial land in Putra Nilai to Akarmas Sdn. Bhd., for a total cashconsideration of RM4,399,977.

On 15 March 2005, BBN acquired 174,000 ordinary shares of RM1.00 each in Chartz Development Sdn. Bhd., for acash consideration of RM174,000. On 1 June 2005, BBN subscribed for additional 51,000 ordinary shares in ChartzDevelopment Sdn. Bhd., of RM1.00 each at par. Following the subscription, the Company owns 30% equity interestin Chartz Development Sdn. Bhd.

On 29 April 2005, the Company obtained shareholders' approval for the disposal of 30,000,000 ordinary shares ofRM1.00 each in PK Fertilizers Sdn. Bhd., ("PKF") representing 100% equity interest in PKF together with its whollyowned subsidiary, Serba Kimia Sdn. Bhd., to Pristine Acres Sdn. Bhd., for a cash consideration of RM31.30 million.The loss arising from the disposal was RM7.50 million.

On 16 December 2005, the Company disposed 100% of the issued and paid-up capital of LancetBio Sdn. Bhd.,comprising 2 ordinary shares of RM1.00 each for a cash consideration of RM2.00.

34. FINANCIAL INSTRUMENTS

(a) Financial Risk Management Objectives and Policies

The Group’s financial risk management policy seeks to ensure that adequate financial resources are availablefor the Group’s businesses whilst managing its interest rate, liquidity and credit risks. The Group operateswithin clearly defined guidelines that are set by the Board and the Group’s policy is not to engage in speculativetransactions.

(b) Interest Rate Risk

The Group's primary interest rate risk relates to fixed interest-bearing debt, as the Group had no substantiallong-term interest-bearing assets as at 31 December 2005. The investments in financial assets are mainlyshort term in nature and they are not held for speculative purposes but have been mostly placed in fixeddeposits which yield better returns than cash at bank. The information on maturity days and effective interestrates of financial assets and liabilities are disclosed in their respective notes.

(c) Liquidity Risk

The Group endeavours to manage its operating cash flows and the availability of funding in order to meet itsrefinancing, repayment and funding needs. As part of its overall liquidity management, the Group maintainscash or cash convertible investments to meet its working capital requirements. In addition, the Group strives tomaintain an adequate amount of banking facilities.



81

Annual Report 2005

(d) Credit Risk

Credit risk, or the risk of counterparties defaulting, is controlled by the application of credit approvals, limits andmonitoring procedures. Credit risks are minimised and monitored by limiting the Group’s associations to businesspartners with creditworthiness. Trade receivables are monitored on an ongoing basis via the Group's managementreporting procedures. The Group's exposure to concentration of credit risk is disclosed in Note 11.

(e) Fair Values

The carrying amounts of financial assets and liabilities of the Group as at 31 December 2005 approximate theirfair values except for amounts due from/to associates and subsidiaries where it is not practical to estimate thefair values due principally to a lack of fixed repayment terms.



82


Analysis of Shareholdingsas at 25 April 2006

DIRECTORS SHAREHOLDINGS(In accordance with the register maintained under Section 134 of the Companies Act, 1965)

Name of Directors Direct % Indirect %

Tan Sri Dato’ Dr Gan Kong Seng 1,821,0001 1.60 36,607,9343 32.10Dato’ Gan Kong Hiok 2,499,0002 2.19 15,947,8824 13.98Gan Eng Hong 900,000 0.79 35,029,9345 30.72Datuk Alladin Hashim 13,000 0.01 93,0006 0.08Chor Eng Choon – – – –YM Prof. Emeritus Tengku Dato’ Shamsul Bahrin – – – –Dato’ Prof. Zainuddin Bin Muhammad – – – –Ooi Soon Kiam – – – –Tuan Haji Mohamad Haslah Bin Mohamad Amin – – – –

Notes to interest in shares:

1. Partly held through Mayban Nominees (Tempatan) Sdn Bhd.

2. Shares held through AllianceGroup Nominees (Tempatan) Sdn Bhd, United Overseas Nominees (Tempatan) SdnBhd and Southern Investment Bank Berhad.

3. Indirect shareholding includes the shares held by Ragan Jaya Sdn Bhd, Akarmas Sdn Bhd, his brother, Dato’ GanKong Hiok and his children, Mr Gan Eng Hong and Ms Gan Fei Fen.

4. Indirect shareholding includes the shares held by Pristine Acres Sdn Bhd, Esprijuta Sdn Bhd and his brother, Tan SriDato’ Dr Gan Kong Seng.

5. Indirect shareholding includes the shares held by Ragan Jaya Sdn Bhd, Akarmas Sdn Bhd, his father,Tan Sri Dato’ DrGan Kong Seng and his sister, Ms Gan Fei Fen.

6. Deemed interested through his spouse, Datin Hamidah Bte Ibrahim, shareholding in PK Resources Berhad.

Analysis of Shareholdings

83

Annual Report 2005

SHAREHOLDERS INFORMATION

Types of shares : Ordinary shares of RM1.00 eachVotings rights : One vote per shareholder on a show of hands

One vote per ordinary share on a pollNo. of shareholders : 2,568

DISTRIBUTION OF SHAREHOLDINGS

No. of Total % ofSize of holdings holders holdings Shares

1 – 999 141 58,404 0.051,000 – 10,000 2,123 5,897,818 5.1710,001 – 100,000 259 7,281,322 6.39100,001 – 5,701,774 39 31,488,585 27.615,701,775 – above 6 69,309,371 60.78

Total 2,568 114,035,500 100.00

LIST OF TOP 30 SHAREHOLDERS

Name No. of Shares %

1 Ragan Jaya Sdn Bhd 26,034,934 22.832 Mayban Nominees (Tempatan) Sdn Bhd 11,551,000 10.13

Qualifier: Amanahraya-JMF Asset Management Sdn Bhdfor Perbadanan Kemajuan Negeri, Negeri Sembilan

3 Minister of Finance 10,070,000 8.83Qualifier: Akaun Jaminan Pinjaman Kerajaan Persekutuan

4 AMMB Nominees (Tempatan) Sdn Bhd 8,000,000 7.02Qualifier: Pledged Securities Account for Pristine Acres Sdn Bhd

5 Lembaga Kemajuan Tanah Persekutuan (FELDA) 7,292,437 6.396 Akarmas Sdn Bhd 6,361,000 5.587 Esprijuta Sdn. Bhd. 4,593,294 4.038 Imapro Sdn Bhd 3,000,000 2.639 Low Mun Chong 2,750,000 2.4110 Employees Provident Fund Board 1,902,900 1.6711 Alliancegroup Nominees (Tempatan) Sdn Bhd 1,900,000 1.67

Qualifier: Pledged Securities Account for Dato’ Gan Kong Hiok12 Permodalan Nasional Berhad 1,772,000 1.5513 Esprijuta Sdn. Bhd. 1,533,588 1.3414 Tan Sri Dato’ Dr Gan Kong Seng 1,521,000 1.3315 Chan Kam Seng 1,455,000 1.2816 Ten Ah Man 1,333,000 1.1717 Dato’ Lee Pit Chern 1,278,000 1.1218 Menteri Besar Negeri Sembilan Incorporation 961,000 0.8419 Gan Eng Hong 900,000 0.7920 Gan Fei Fen 813,000 0.7121 Pertubuhan Peladang Kebangsaan 619,437 0.5422 Bukit Maju Developments Bhd 600,000 0.5323 Mary Foo @ Foo Liang Cheng 348,166 0.31

Analysis of Shareholdingsas at 25 April 2006 (cont’d)


84


Name No. of Shares %

24 Southern Investment Bank Berhad 340,000 0.30Qualifier: Employees Provident Fund

25 Ng Kim Teng 300,000 0.2626 Ng Kim Ling 300,000 0.2627 Mayban Nominees (Tempatan) Sdn Bhd 300,000 0.26

Qualifier: Pledged Securities Account for Tan Sri Dato’ Dr Gan Kong Seng28 Yong Kee Chong 271,300 0.2429 Siew Yan Fook @ Siew Yeow Fook 264,000 0.2330 United Overseas Nominees (Tempatan) Sdn Bhd 259,000 0.23

Qualifier: Pledged Securities Account for Dato’ Gan Kong Hiok

98,624,056 86.49

SUBSTANTIAL SHAREHOLDERS LIST

Direct Holdings Indirect HoldingsNames No. of No. of

Shares % Shares %

1 Ragan Jaya Sdn Bhd 26,034,934 22.83 – –2 Perbadanan Kemajuan Negeri,

Negeri Sembilan (PKNNS) 21,621,000 18.96 – –3 Pristine Acres Sdn Bhd 8,000,000 7.02 – –4 FELDA 7,292,437 6.39 – –5 Akarmas Sdn Bhd 6,361,000 5.58 – –6 Esprijuta Sdn Bhd 6,126,882 5.37 – –7 Tan Sri Dato’ Dr Gan Kong Seng 1,821,000 1.60 36,607,934 32.108 Dato’ Gan Kong Hiok 2,499,000 2.19 15,947,882 13.999 Gan Eng Hong 900,000 0.79 35,029,934 30.7210 Gan Fei Fen 813,000 0.71 35,116,934 30.7911 Siew Yeow Fook 325,000 0.28 6,475,048 5.6812 Loke Keng Hung – – 6,223,882 5.46

TOTAL 81,794,253 71.73

Analysis of Shareholdingsas at 25 April 2006 (cont’d)


85

Annual Report 2005

Approx. Net bookExpiry Unit/ age of value as at

Description/Location Tenure of Lease Acreage building 31.12.05

1. Industrial Land Leasehold Year 35.55 – 1,861,754Mukim Labu and Setul 2092 acresDistrict of Seremban

2. Mixed development of Freehold – 1,272.79 – 93,585,707commercial and residential acresin Mukim Labu and SetulDistrict of Seremban(For development andfuture sale)

3. Land & Building (Hotel) Leasehold Year 14.76 13 40,369,395Lot 12383 2092 acresJalan Penghulu Cantik70100 SerembanNegeri Sembilan

4. Condominium Development Leasehold Year 17 11 2,170,112PT 4591 2092 unitsJalan Penghulu Cantik70100 SerembanNegeri Sembilan

5. Golf Course land and Freehold – 240.7 9 46,558,978Clubhouse acresPT 4770, Putra Nilai71800 NilaiNegeri Sembilan

6. Building (Hotel) – – – 9 *8,303,607PT 7182, Jalan BBN 1/2EPutra Point Phase 1Putra Nilai71800 NilaiNegeri Sembilan

7. Bungalow Land Leasehold Year 5.66 – 2,183,476PT 5673 & 5674 2095 acresJalan Penghulu CantikTaman Tasik Seremban70100 SerembanNegeri Sembilan

8. Quarry Land, Mukim Labu Leasehold Year 30 – 2,084,55210th Mile Seremban 2054 30 2,600,000- KL Highway acres71907 LabuNegeri Sembilan

List of Properties

List of Propertiesowned by the group

86


Approx. Net bookExpiry Unit/ age of value as at

Description/Location Tenure of Lease Acreage building 31.12.05

9. Bungalow Land & Building Leasehold Year 1.1 24 1,625,911H.S (D) 1695 2080 acresPT 978, Mukim Tras49000 RaubPahang

10. Building – – 1 8 1,741,532PT 10844, Desa Cempaka unitPutra Nilai71800 NilaiNegeri Sembilan

11. Building – – 1 8 *3,109,516PT 6367, Jalan BBN 3/1 unitPutra Nilai71800 NilaiNegeri Sembilan

12. Land & Building (College) Freehold – 104.61 8 112,194,264PT 13106, Putra Nilai acres71800 NilaiNegeri Sembilan

13. Building – – – 8 *1,349,060PT 7454, Jalan BBN 1/1APutra Point Phase 1Putra Nilai71800 NilaiNegeri Sembilan

* The net book values of these properties do not include the value of the pieces of land where they occupy.

List of Properties

List of Propertiesowned by the group (cont’d)

✄

I/We

of

being a member/members of PK RESOURCES BERHAD, hereby appoint

of

to be my/our proxy/proxies to attend and to vote for me/us on my/our behalf at the THIRTY-SECOND ANNUAL GENERALMEETING of the Company to be held at Nilai Springs Golf & Country Club, Putra Nilai, 71800 Nilai, Negeri Sembilan DarulKhusus, on Tuesday, 27 June 2006 at 11.30 a.m.

My/Our proxy/proxies is/are to vote as indicated below:-

Resolutions For Against

1. To receive and adopt the Audited Accounts for the year ended 31 December2005 and the Reports of the Directors and Auditors therein.

2. To approve payment of a first and final dividend of 3% per RM1.00 ordinaryshare less 28% tax in respect of the year ended 31 December 2005.

3. To re-elect Datuk Alladin Hashim who shall retire pursuant to Article 77 of theCompany’s Articles of Association.

4. To re-elect Mr Ooi Soon Kiam who shall retire pursuant to Article 77 of theCompany’s Articles of Association.

5. To re-elect Mr Gan Eng Hong who shall retire pursuant to Article 77 of theCompany’s Articles of Association.

6. To re-elect Tuan Haji Mohamad Haslah Bin Mohamad Amin who shall retirepursuant to Article 82 of the Company’s Articles of Association.

7. To approve payment of directors’ fees.

8. To re-appoint Messrs. Ernst & Young as auditors and authorise the Directors tofix their remuneration.

9. Special BusinessTo authorise the Directors to issue shares under Section 132D, CompaniesAct, 1965.

Please indicate with an “X” in the appropriate spaces where you wish your votes to be cast. In the absence of specificdirections, your proxy will vote or abstain from voting at his discretion.

Date Signature No. of Shares Held

Notes:-

1. Appointment Of Proxy

(a) A member of the Company entitled to attend and vote is entitled to appoint one or more proxies to vote in his stead. A proxyneed not be a member of the Company and the provisions of Section 149 (1) of the Companies Act, 1965 shall not apply tothe Company.

(b) The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writingor if the appointer is a corporation, either under seal or under the hand of an officer or attorney duly authorised.

(c) The instrument appointing a proxy shall be deposited at the Registered Office at Wisma BBN, PT 7454, Jalan BBN 1/1A,Putra Point Phase 1, Putra Nilai, 71800 Nilai, Negeri Sembilan Darul Khusus not less than 48 hours before the time appointedfor holding the meeting and at any adjournment thereof.

2. Explanatory Note On Special Business:

2.1 Authority to Issue Shares Pursuant to Section 132D of Companies Act, 1965

The proposed Resolution 9, if passed, will give the Directors authority to allot and issue new ordinary shares up to an amountnot exceeding 10% of the issued share capital of the Company for such purposes as the Directors consider would be in theinterest of the Company. This authority will commence from the date of this Annual General Meeting and unless revoked orvaried by the Company at a General Meeting, will expire at the next Annual General Meeting.

PK RESOURCES BERHAD(17654-P)

Proxy Form

The Company SecretaryPK RESOURCES BERHAD (17654-P)

Wisma BBN, PT 7454Jalan BBN 1/1A, Putra Point Phase 1Putra Nilai, 71800 NilaiNegeri Sembilan Darul Khusus

Stamp

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