TRC SYNERGY BERHAD ( D)

Transcription

1 TRC SYNERGY BERHAD ( D) WISMA TRC 217 & 218, JALAN NEGARA 2 TAMAN MELAWATI ULU KLANG SELANGOR DARUL EHSAN TEL FAX TRC SYNERGY BERHAD ( D) ANNUAL REPORT 2005 TRC SYNERGY BERHAD ANNUAL REPORT 2005

2 Rail Link to West Port, Pulau Indah Pedestrian Bridge at Taman Seri Empangan, Putrajaya

3 TABLE OF CONTENTS Corporate Profile Chairman s Statement Board Of Director s Profile Corporate Information Corporate Structure Statement On Corporate Governance Statement On Internal Control Audit Committee Report Financial Statements List Of Properties Analysis Of Shareholdings Notice Of 9th Annual General Meeting Statement Accompanying Notice Of Annual General Meeting Proxy Form

4 02 CORPORATE PROFILE TRC Synergy Berhad was initially incorporated as a private limited company in Malaysia under the Companies Act, 1965 on 11 December 1996 under the name TRC Synergy Sdn Bhd. On 8 January 1997, the company changed its status from a private limited company to a public company and assumed the name TRC Synergy Berhad (TRCS). TRCS was listed on the Main Board of the Bursa Malaysia Securities Berhad on 6 August 2002, where it offered Public Issue and Offer For Sale of 16,000,000 and 3,500,000 ordinary shares respectively. TRCS is principally an investment holding company while the principal activity of its subsidiary companies are construction, manufacturing of construction materials and property development. The TRCS group of companies employs over 450 personnel of which more than 15% are in the sub-professional and professional group. TRCS not only has the ability to undertake common projects like roads and building construction, but also specialized mega projects like airports, railway trackworks, stadium, hospitals and large property development ventures. The company s motto As one with the nation sums up the company s aspiration to progress in tandem with the nation s vision.

5 03 Labuan Airport, Labuan Control Tower, Kota Bharu Airport

6 04 CHAIAN S STATEMENT DEAR SHAREHOLDERS, ON BEHALF OF THE BOARD OF DIRECTORS, I AM PLEASED TO PRESENT THE ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS OF TRC SYNERGY BERHAD FOR THE FINANCIAL YEAR ENDED 31 DECEMBER REVIEW OF OPERATIONS The year 2005 has been another challenging year for the Group. It was another year of contraction for the construction industry. The continuous rise in oil prices has invariably resulted in a simultaneous rise in prices of other construction related products like diesel and bitumen. Projects from both government and private sector continue to be scarce. These unfavourable factors have negatively impacted the Group s performance. CONSTRUCTION For the period under review, construction activity remains the main revenue contributor for the Group. Despite the contraction in the construction industry for 2005, the Group managed to secure the Design and Build Contract to construct the new Prison Complex in Bentong, Pahang. The contract value was 238 million. With the implementation of the Ninth Malaysia Plan (9MP), we are confident that the prospect for the Group s construction division would be better in the coming years. PROPERTY DIVISION The Group through its wholly owned subsidiary, TRC Land Sdn Bhd, is currently developing part of a piece of land measuring 163 acres in the Plentong region, next to Permas Jaya, in Johor Bahru. It has, to date, completed Phase A comprising of 352 units of Medium Cost Apartments. Two blocks out of the five blocks of Medium Cost Apartments in Phase B comprising 356 units are currently being developed. So far, the sales for Phase B have been satisfactory despite the soft property market in Johor. We are currently re-strategising the development of the remaining land bank to be more in line with the prevailing market trend and demand of properties in Johor and to tap its potential. In the Klang Valley, we have recently purchased a piece of land in Ulu Klang measuring 8.68 acres for 7.5 million for future development.

7 05 Dato Sufri Bin Hj Mohd Zin (Executive Chairman) MANUFACTURING DIVISION Due to the slowdown in construction activity, the performance of this division was below expectation. However, we expect this division to perform better in the coming years following the revival of the construction industry. FINANCIAL PERFOANCE The Group recorded a turnover of million and a loss of 5.4 million for the financial year ended 31 December The less than satisfactory performance is largely due to the slowdown in the construction industry during the period in question and the rise in construction material prices. CHANGES IN THE COMPOSITION OF THE GROUP The Company s wholly owned subsidiary, Trans Resources Corporation Sdn Bhd (TRC) had, on 19 May 2005, acquired 300,002 shares in its former associated company, Andaman Budi Sdn Bhd (ABSB) for a cash consideration of Through the acquisition, ABSB became a wholly owned subsidiary of TRC. The name of ABSB was subsequently changed to TRC Land Sdn Bhd on 7 May The above acquisition will enable the Group to tap on the future potential of the property market in Johor and this is in line with the Group s vision of strengthening its property division.

8 06 Road Package RII at Putrajaya Main Road to Empagan Bakun

9 07 ECONOMIC OUTLOOK The construction sector after a two years contraction will receive a major boost under the Ninth Malaysia Plan (9MP). Over the next five years, the construction sector is expected to grow an average of 3.5% per annum with impetus coming from infrastructure projects and property development. The announcement of the implementation of the Private Finance Initiative (PFI) by the Government will help to increase opportunities for the private sectors to participate in larger infrastructure and utilities developments. Going forward, we envisage that the Group will benefit from the implementation of the 9MP. DIVIDEND The Board of Directors does not recommend the payment of any dividend for the financial year ended 31 December The Board of Directors, however, have approved to establish a Company s Dividend Policy commencing from the year 2006 whereby at least 25% of the Company s Profit After Tax will be reserved for dividend payment. The payment however, will be dependent on, amongst other, the Group s cashflow position and the availability of tax credit. ACKNOWLEDGEMENT AND APPRECIATION On behalf of the Board of Directors, I would like to extend our sincere appreciation to all our valued clients, bankers and business associates for their undivided support. I would also like to put on record my gratitude to the management and staff of the Group for their effort and hard work in spite of the challenging business environment in the preceding year. Finally, we acknowledge and appreciate the continuing support of our shareholders and we hope that the prospect for the coming years will be better for the Group.

10 08 BOARD OF DIRECTORS PROFILE Dato Sufri Bin Hj Mohd Zin (Executive Chairman) Dato Sufri Bin Hj Mohd Zin, Malaysian, aged 50, was appointed as the Managing Director of TRC Synergy Berhad ( TRC or the Company ) on 29 March 2002 and presently he is the Executive Chairman of the Company and the Managing Director of its subsidiary Companies. He graduated from Institute of Teknologi MARA ( ITM ) in 1982 with a Diploma in Business Studies. He started his career as a banker with Bank Bumiputera Malaysia Bhd in His inherent perseverance and unique business acumen led him into the building and construction industry in YBhg Dato Sufri is a member of the Audit Committee. During the Financial year ended 31 December 2005, he attended all of the four (4) Board Meetings. Dato Abdul Aziz Bin Mohamad (Executive Director) Dato Abdul Aziz Bin Mohamad, Malaysian, aged 47, was appointed as an Executive Director of the Company on 29 March He joined TRC Group as a Senior Contract Executive in 1994 and was later promoted to Deputy General Manager (Contracts) in He graduated from Trent Polytechnic in Nottingham, England in He is a Quantity Surveyor by profession and a member of the Institution of Surveyors, Malaysia. He started his career as an Assistant Quantity Surveyor in England with Rider Hunt and Partners in He later joined Jabatan Kerja Raya (JKR) Kuala Lumpur in 1983 as a Quantity Surveyor where he administered the contractual aspects of projects. YBhg Dato Aziz attended all of the four (4) Board Meetings held during the financial year ended 31 December NOTE Save as disclosed, 1) none of the Directors have:- i) any family relationship with any director and/or substantial shareholder of the Company; ii) any conflict of interest with the Company; and iii) any conviction for offences (other than traffic offences) within the past ten (10) years. 2) none of the Directors holds directorship in other public companies.

11 Encik Noor Zilan Bin Mohamed Noor (Independent, Non Executive Director) Encik Noor Zilan Bin Mohamed Noor, Malaysian, aged 46, was appointed as a Director of the Company on 13 May He graduated from ITM in 1983 with a Diploma in Law. He then joined United Malayan Banking Corporation as a Trainee Executive Officer before pursuing his further studies in the United Kingdom in 1984 and graduated from City of London Polytechnics with LLB (Hons) majoring in Business Law in Subsequently, he went on to read Law at Lincoln s Inn and was called to the English Bar in 1988 and upon returning to Malaysia he was then called and admitted to the Malaysian Bar in 1989 as an Advocate & Solicitor. He then worked as a Legal Assistant before starting his own law firm in 1991 and is now a Senior Partner with an established law firm in Kuala Lumpur specializing in the area of Corporate Law, Banking, Building and Construction Law apart from civil & criminal litigation. En. Noor Zilan is the Chairman to the Audit Committee, Nomination Committee and Remuneration Committee. He attended three (3) out of four (4) Board Meeting held during the financial year ended 31 December En. Rahman Bin Ali (Independent, Non Executive Director) En. Rahman Bin Ali, Malaysian, aged 49, was appointed as a Director of the Company on 13 May He graduated from University of Malaya in 1982 with a Degree in Accounting. He is currently a Chartered Accountant of the Malaysian Institute of Accountants. He started his career as a credit officer with Bank Bumiputera Malaysia Berhad in He left the bank in 1986 to set up his own management consultancy company under the name of Advance Management Services in 1986 before becoming a Branch Manager with a public accounting firm, Sahir and Co. in In 1994, he set up his own accounting firm by the name A. Rahman & Associates and later became a partner of Omar Arif, A.Rahman & Associates in En. Rahman is a member of the Audit Committee, Nomination Committee and Remuneration Committee. He attended all the four (4) Board Meeting held during the financial year ended 31 December General (R) Dato Seri Mohd Shahrom Bin Dato Hj Nordin (Non-Independent, Non-Executive Director) General (R) Dato Seri Mohd Shahrom Bin Dato Hj Nordin, aged 59, was appointed as a Director of the Company on 25 March After his secondary education, he was selected for Officer Cadet training at the Royal Military College, Sungai Besi in 1966 before being commissioned as a Second Lieutenant into the Royal Malay Regiment in 1968 and assigned as a Platoon Commander with the 2nd Battalion, Royal Malay Regiment. General (R) Dato Seri Mohd Shahrom has served in various appointments at command, staff, training and the diplomatic services levels and he was the Chief of the Malaysia Army from 1st January 2003 to 15 September Prior to that appointment he was the Chief of staff at the Armed Forces Headquarters. Currently he is the Senior Vice President Defence of the National Aerospace & Defence Industries Sdn Bhd (NADI). He is also the Chairman of SME Aerospace Sdn Bhd (SMEA) and Director of SME Ordnance Sdn Bhd (SMEO). Both SMEA and SMEO are subsidiary companies of the NADI Group of Companies. General (R) Dato Seri Mohd Shahrom attended all Board Meetings held during the financial year ended 31 December 2005.

12 10 CORPORATE INFOATION BOARD OF DIRECTORS Dato Sufri bin Hj Mohd Zin (Executive Chairman) Dato Abdul Aziz bin Mohamad (Executive Director) Rahman bin Ali (Independent Non-Executive Director) Noor Zilan bin Mohamed Noor (Independent Non-Executive Director) General (R) Dato Seri Mohd Shahrom Bin Dato Hj Nordin (Non-Independent, Non-Executive Director) AUDITORS Kumpulan Naga (AF-0024) Suit 1, 1st Floor, Wisma Leopad No. 5, Jalan Tun Sambanthan Kuala Lumpur COMPANY SECRETARY Abdul Aziz bin Mohamed (LS ) REGISTERED OFFICE / PRINCIPAL PLACE OF BUSINESS Wisma TRC, No. 217 & 218 Jalan Negara 2, Taman Melawati Ulu Klang, Selangor Tel : / Fax. : trc@tm.net.my BRANCH OFFICE Lot 3626, Block 16, KCLD Taman Timberland, Lorong Rock Kuching, Sarawak Tel : Fax : WEBSITE SHARE REGISTRAR Symphony Share Registrars Sdn Bhd Level 26, Menara Multi Purpose Capital Square 8, Jalan Munshi Abdullah Kuala Lumpur Tel : Fax : / PRINCIPAL BANKERS EON Bank Berhad Malayan Banking Berhad Arab-Malaysian Merchant Bank Berhad Affin Bank Berhad SOLICITORS Messrs Noorzilan & Partners Messrs C.C. Choo & Co. STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad (Main Board) (Stock No. : 5054)

13 CORPORATE STRUCTURE 11 TRANS RESOURCES CORPORATION SDN BHD (100%) P TRC INFRA SDN BHD (90%) P TRC SYNERGY BERHAD D TRC CONSTRUCTION INDIA PTE LTD (100%) U45203KL2004PTC TRC INTERNATIONAL PTE LTD (100%) LL04510 GOMEX SDN BHD (45%) D TRC DEVELOPMENT SDN BHD (100%) U TRC CONSTRUCTION (SARAWAK) SDN BHD (100%) W TRC CONCRETE INDUSTRIES SDN BHD (100%) V TRC-PDI JV SDN BHD (100%) K TRC LAND SDN BHD (formerly known as Andaman Budi Sdn Bhd) (100%) W

14 12 STATEMENT ON CORPORATE GOVERNANCE Putrajaya Landmark The Board of Directors of TRC Synergy Berhad ( the Board ) is committed to ensure that high standards of corporate governance as set out in the Malaysian Code on Corporate Governance ( The Code ) are practiced throughout the Group. These have been recognized by the Board as the Group s key responsibilities in order to protect and enhance long term shareholder value and to safeguard the Group assets. The Board will continuously evaluate the Group s corporate governance practices and procedures, and where appropriate will adopt and implement the best practices as enshrined in the Code. In accordance with paragraph of the Bursa Malaysia s Listing Requirements ( Listing Requirements ), the Board is pleased to provide the following statement detailing the manner the Group has applied the Principles and the extent of compliance with the Best Practices.

15 1. DIRECTORS a) The Board The Group is led and controlled by an effective Board of Directors headed by the Executive Chairman who has detailed knowledge and vast experience in the construction industry. The rest of the Board members possess a wide range of skill and experiences ranging from construction, finance, legal and general management discipline suitable for managing the Group businesses. The Board of Directors has overall responsibility for the performance of the Group inclusive of corporate governance, strategic planning and maintaining effective control over financial and operational matters. b) Board Composition and Balance The Board consists of five (5) members comprising two Executive Directors, two (2) Independent Non-Executive Directors and one (1) Non Independent Non Executive Director. The Company complies with the criteria of having at least onethird of the Board Members as Independent Non-Executive Directors. The profiles of the Directors are presented in this Annual Report on pages eight (8) and nine (9). Two (2) of the Board members are Independent Non-Executive Directors who provide broad, unbiased and balanced assessment on proposals initiated by the Executive Directors and the senior management of the Group. The Non-Executive Directors also include a representative of Lembaga Tabung Angkatan Tentera, one of the substantial shareholders of the Company, who brings independent judgment that safeguards the interest of overall shareholders of the Company. In view of this composition, the present members of the Board are considered sufficient in addressing the issues affecting the Group and the Board has not considered it necessary to examine its size. c) Board Meeting During the financial year ended 31 December 2005, four (4) board meetings were held. In the meetings, the Board deliberated and considered matters relating to the Group s financial performance, key business and operational issues and business plans. Details of attendance at the meeting are as follows:- 13 NAME NO. OF MEETINGS ATTENDED Dato Sufri bin Hj Mohd Zin 4/4 Dato Abdul Aziz bin Mohamad 4/4 Noor Zilan Bin Mohamed Noor 3/4 Rahman bin Ali 4/4 Jen (B) Dato Seri Mohd Shahrom bin Dato Hj Nordin 4/4 The Board has agreed to meet at least four times a year with additional matters addressed by way of circular resolutions and additional meeting to be held as and when the need arises. d) Supply of Information to the Board All Directors have unfettered access to all information within the Group as a full Board or in their individual capacity in carrying out their duties and responsibilities. They also have direct access to the advice and services of the Company Secretary, internal and external auditors and other independent professional at all times. As for the Board meeting, the agenda and Board papers are distributed to the Board in advance before the meeting to ensure the Directors have sufficient time to appreciate the issues deliberated at the meetings. Senior officers of the Group are invited to clarify and explain the relevant matters tabled to the Board.

16 e) Appointment and Re-election of the Board The Company has a formal and transparent procedure for the appointment of new Directors and re-election of Directors. These aspects are spelt out clearly in the Company s Articles of Association. Besides, The Nomination Committee, comprising of two (2) Independent Non-Executive Directors, reviews and recommends any proposed appointments before the appointment are approved by the Board. All the newly appointed Directors are subject to election by shareholders at the Annual General Meeting subsequent to their appointment. As for the re-election of Directors, the Articles of Association of the Company provides at least one-third of the Directors are required to retire by rotation at each financial year and are eligible to offer themselves for reelection at the Annual General Meting. All Directors shall retire from office once at least in each three years. 14 f) Directors Training All the Directors have attended and successfully completed the Mandatory Accreditation Program ( MAP ) and the Continuous Education Programme ( CEP ) as prescribed by the Bursa Malaysia Listing Requirements. Commencing from the year 2005 the Board will evaluate the training needs for Directors and they have principally agreed to attend at least one training every year. The Board will identify the relevant training programmes for all Directors to ensure that they are updated with appropriate professional training to enhance their knowledge and professionalism in discharging their duties to the Group. g) Board Committees As recommended by the Code, the Board has established the following committees to assist the Board in discharging its duties:- i) Audit Committee ii) Nomination Committee iii) Remuneration Committee iv) Employees and Directors Share Option Scheme (ESOS) Committee Each of this committee has its own functions and responsibilities and they report to the Board. 2. DIRECTORS REMUNERATION The Group has adopted the principle recommended by the Code whereby the level or remuneration of the Directors and senior management should reflect the level of responsibility and contributions toward the successful and efficient running of the Group s activities. Procedure To assist the Board in the discharge of its duties, the Board has established a Remuneration Committee. As at the date of the Annual Report, the composition of the Remuneration Committee is as follows:- i) Noor Zilan Bin Mohamed Noor ii) Rahman bin Ali The Committee will review and recommend to the Board the remuneration package of the executive directors and senior management of the Group with the main aim of providing level of remuneration sufficient to attract and retain competent executives who can manage the Group effectively. The Committee did not hold any meeting during the financial year as there were no appointments to the Board as well as the senior management of the Group. Disclosure The aggregate remuneration of the Directors received and receivable from the Company and its subsidiaries during the financial year are as follows:-

17 CATEGORY FEES () SALARIES () EPF & SOCSO () Executive Directors 120, , , Non-Executive Director 84, Total 204, , , The remuneration paid to the Directors, analysed into the following bands, is as follows:- RANGE OF REMUNERATION NUMBER OF EXECUTIVE DIRECTORS NUMBER OF NON-EXECUTIVE DIRECTORS Less than 50, , ,000* , , , ,000* , , * No Directors within this range of remuneration 3. RELATIONSHIP WITH INVESTORS AND SHAREHOLDER COMMUNICATION The Board acknowledges the important of communication and proper dissemination of all important issues and major development concerning the Company. In addition to the various announcements made during the year, the timely release of financial results on a quarterly basis provides shareholders with an overview of the Group s performance and operations. During the financial year ended 31 December 2005, there were a number of dialogues and analysts briefings organised by the Company. These sessions were held either at the request of the analysts or initiated by the Company. During the discussions which were attended by the Executive Directors and Senior Management staff, relevant information pertaining to the Group was disseminated to the public. The Company also has a cordial relationship with reporters who have been playing a very effective role in conveying the Group s information to the public, shareholders and investors. Press releases are also occasionally organized to clarify on certain matters related to the Company and its operating unit. Besides, shareholders, investors and members of the public may also obtain updated information on the Group by accessing to the Company s website at The company uses the Annual General Meeting as the primary channel of communication with its shareholders. Shareholders who are unable to attend to the meeting can appoint their proxies who can vote on their behalf. Board of directors, senior management as well as the Company s Auditors are present to answer any relevant questions raised at the meeting 4. ACCOUNTABILITY AND AUDIT i. Financial Reporting In presenting the Company s financial statements and quarterly results to shareholders and other interested parties, the Board aims to present a balanced and understandable assessment of the Group s financial position and prospects. The financial statements of the Company and of the Group are prepared in accordance with the requirements of the applicable Approved Accounting Standards in Malaysia and the provisions of the Companies Act, The Group s annual financial statements and quarterly results are reviewed by the Audit Committee and approved by the Board before announcement to Bursa Malaysia for public release.

18 The Statement explaining the Directors responsibilities for preparing the annual audited financial statements pursuant to paragraph 15.27(a) of the Listing Requirements is set out on page 17 of the Annual Report. ii. Internal Control The Board acknowledges and placed strong emphasis in maintaining a sound system of internal control which is necessary to safeguard the Group s assets and shareholders interest. Details of the Group s internal control system is presented in the Statement on Internal Control and Audit Committee Report set out on pages 18 to 20 and pages 22 to 24 respectively. 16 iii. Relationship with External Auditors Through the Audit Committee, the Group has established a transparent and appropriate relationship with the Group s external auditors in seeking their advice and towards ensuring compliance with the applicable Approved Accounting Standards. The external auditors are invited to attend the Audit Committee meeting and to the Board meeting on a need basis as and when deemed appropriate. STATEMENT OF COMPLIANCE WITH THE BEST PRACTICE OF THE MALAYSIAN CODE ON CORPORATE GOVERNANCE (THE CODE) Save as disclosed below, the group has substantially complied with the Best Practices in Corporate Governance set out in Part 2 of the Code:- PROVISION OF THE CODE DETAILS EXPLANATION Part 2, AA II Chairman and Chief Executive The Company is headed by an Executive Chairman and therefore, the roles of the Chairman and the Chief Executive Officer are not separate. The Board is of the opinion that the check and balance of power is undertaken by the strong presence of Independent Non-Executive Directors in the Board. Furthermore, the Chairman encourages all Directors to participate actively in all deliberation of issues that concern the Group. Hence, the Board maintains the view that this combined arrangement will not hamper the Board from making fair decisions for the best interest of the Group. Part 2, AA VII Senior Independent Non-Executive Director to whom concerns may be conveyed Presently all Board Members are accessible by the shareholders and public investors where they can relay their concerns over company matters. Therefore, the appointment of Senior Independent Non-Executive Director to assume such responsibilities is not timely necessary. ADDITIONAL CORPORATE INFOATION In compliance with the Listing Requirements, the following information is provided:- i. Utilization of Proceeds No proceed were raised by the Company for any corporate exercise during the financial year ended 31 December ii. Share Buybacks The Company has not undertaken any share buyback exercise during the financial year ended 31 December 2005.

19 iii. Option, Warrants or Convertible Securities No options, warrants or convertible securities were exercised by the Company during the financial year ended 31 December iv. American Depository Receipt (ADR) / Global Depository Receipt (GDR) The Company has not sponsored any ADR or GDR Programme. v. Sanctions and / or Penalties There were no sanction and/or penalty imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year ended 31 December vi. Non-Audit Fees The non-audit fees paid to external auditors amounting to 39, for the financial year ended 31 December vii. Variation of Results There was no material variation between the audited results for the financial year ended 31 December 2005 with the unaudited results announced. viii. Profit Guarantee There was no profit guarantee given by the Company during the financial year ended 31 December ix. Material Contracts There was no material contracts between the Company and its subsidiaries involving Directors and major shareholders interests during the financial year ended 31 December x. Revaluation of Landed Properties The Company does not adopt a policy of regular revaluation of its properties. xi. Recurrent Related Party Transaction The Company did not enter into any recurrent related party transaction which requires the shareholders mandate during the financial year ended 31 December STATEMENT OF DIRECTORS RESPONSIBILITY IN RELATION TO THE FINANCIAL STATEMENTS The Board is responsible to ensure that the financial statements are prepared in accordance with the provision of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to ensure a true and fair view of the state of affairs of the Group and the Company as at the end of each financial year and of their results and their cash flows for that financial year then ended. The Board is also responsible to maintain accounting records that disclose with reasonable accuracy the financial position of the Group and the Company, and which enable them to ensure that the financial statements comply with the Companies Act, The Directors have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group, and to prevent and detect fraud and other irregularities. The Directors are satisfied that in preparing the financial statements of the Group for the financial year ended 31 December 2005, the Group has adopted appropriate accounting policies and applied them prudently and consistently. They are also satisfied that reasonable and prudent judgments and estimates were made and all applicable Approved Accounting Standards in Malaysia have been followed accordingly.

20 18 STATEMENT ON INTERNAL CONTROL Palm Oil Bulking Facilities, at Bintulu Port The Board of Directors of TRC Synergy Berhad ( the Board ) is committed to maintaining a sound System of Internal Control in the Group and is pleased to provide the following statement that outlines the nature and scope of internal control of the Group during the financial year ended 31 December 2005 pursuant to paragraph 15.27(b) of the Bursa Malaysia s Listing Requirements.

21 1. BOARD RESPONSIBILITY The Board acknowledges the importance of sound internal controls and risk management practices within the Group to meet its business objectives. The Board affirms its overall responsibility for the effectiveness of the Group s systems of internal control and risk management, and for reviewing the adequacy and integrity of these systems. The internal control system involves the core business and its key management, including the Board, and is designed to meet the Group s particular needs and to manage the risks to which it is exposed. The system of Internal Control aims to:- i) ii) iii) safeguard shareholders interest and the assets of the Group; ensure that proper accounting records are maintained; and that the financial information used within the business and the publication to the public is reliable. The Board is fully aware that this system, by its nature, can only provide reasonable, and not absolute, assurance against material misstatement, loss and fraud. These systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives of the Group INTERNAL CONTROL The key elements of the Group s internal control system are described below:- a) Internal Audit Department The Internal Audit Department which was established on 20 August 2004 is to review the key business processes and controls to assists the Audit Committee in the discharge of its duties and responsibilities. Its role is to provide independent and objective reports on the organization, management, records, accounting policies and internal controls to the Audit Committee and the Board. b) Quality Policy There is clear and well documented Quality Policy in accordance with ISO 9001 : 2000 by a wholly-owned subsidiary of the Company which is undertaking the core business of the Group. This policy and the related procedures are communicated to the respective staff members. Amongst the salient features of the Quality Policy are as follows:- i) ii) iii) iv) v) Internal Quality Audits are conducted at planned intervals to determine whether the Quality Management System is effectively implemented and maintained and conforms to the established system requirements of Internal Standard, ISO 9001:2000. On an annual basis, an overall Internal Quality Audit Plan is devised encompassing every departments and projects, taking into consideration the status and importance of relevant process, areas to be audited as well as results of previous audits. Qualified Internal Quality Auditors will be assigned with audit works in accordance with the Internal Quality Audit Plan where the reports shall be examined and analyzed and reported to the management during Management Review Board Meeting. As part of the Quality Management System, the management shall meet on monthly basis to discuss and deliberate all issues relating to the business of the Group. The Audit Committee is accessible to the relevant reports produced in relation to the Quality Management and if the need arise, the matter shall be further discussed in the Board Meeting. c) Line of Reporting Clearly defined delegation of responsibilities to committees of the Board and to operating units, including authorisation levels for all aspects of the business. This also includes detailed job description and specification provided to each employee of the Group which is further reiterated through a well defined organizational structure. d) Dissemination of Information within the Group Regular and comprehensive information is provided to Management covering financial performance and key business indicators, key operating statistics/ indicators, key business risks, legal, environmental and regulatory matters. Key matters affecting the Group are brought to the attention of the Audit Committee and are reported to the Board on a regular basis.

22 e) Detail Budgeting Process A detailed budgeting process where operating units prepare budgets for every project for discussion in the Management Meeting. A monthly monitoring of results against budget, with major variances being followed up and management action taken, where necessary. f) Risk Management Framework The Group has in place an on-going process for identifying, evaluating, monitoring and managing the significant risks affecting the achievement of its business objectives. This is an on-going process, subject to regular review by the Board, and accords with the Statement on Internal Control: Guidance for Directors of Public Listed Companies. 20 The Group adopts a decentralised approach to risk management by encouraging participation of all employees in such a manner that the employees take ownership and responsibility for risks at their respective levels. The process of risk management and treatment is overseen by the senior management and report to the Board through the Audit Committee. The risk management framework is also embodied in the Quality Policy in accordance with ISO 9001 : 2000 practised by a wholly-owned subsidiary of the Company. g) Audit Committee The Audit Committee, on behalf of the Board, regularly reviews and holds discussions with the management on the matters relating to internal control, the external auditors and the management. The Report on the Audit Committee set out on pages 22 to 24 of this Annual Report contains further details on the activities undertaken by the Audit Committee in h) Board The Board holds regular discussions with the Audit Committee, Management and external auditors and reads their reports on matters relating to internal controls and deliberates their recommendations for implementation. The Directors have taken the necessary steps, as are reasonably open to them, to ensure that appropriate systems are in place for the assets of the Group to be adequately safeguarded through the prevention and detection of fraud and other irregularities and material misstatements. The Directors believe that the system of internal control is considered appropriate to business operations, and that the risks taken are at an acceptable level within the context of the business environment of the Group. During the year, a number of improvements to internal controls were identified and addressed. There has been no significant weakness noted which would result in any material loss. This statement is made in accordance with a resolution of the Board of Directors dated 27 April 2006.

23 21 Apartments at Bayu Senibong, Johor Bahru Andaman Ukay, Ulu Klang

24 AUDIT COMMITTEE REPORT 1. COMPOSITION OF THE AUDIT COMMITTEE The Audit Committee comprises of the following two Independent Non-Executive Directors and one executive director:- Chairman: En Noor Zilan bin Mohamed Noor (Independent Non-Executive Director) 22 Member: i) YBhg. Dato Sufri Bin Hj Mohd Zin (Executive Chairman) Secretary: ii) En Rahman Bin Ali (Independent Non-Executive Director) (Member of the Malaysian Institute of Accountants) En. Abdul Aziz Bin Mohamed (Company Secretary) 2. TES OF REFERENCE i. Composition The Board of Directors shall elect an Audit Committee from amongst themselves (pursuant to a resolution of the Board of Directors) comprising not less than three (3) members where the majority of them shall be independent non-executive members of the Board. The members of the Audit Committee shall elect a Chairman from amongst themselves. All members of the Audit Committee, including the Chairman, will hold office only so long as they serve as Directors of the Company. Should any members of the Audit Committee cease to be a Director of the Company, his membership in the Audit Committee would cease forthwith. If the members of the Audit Committee for any reason be reduced to below three (3), the Board of Directors shall within three (3) months of that event, appoint such number of the new members as may be required to make up the minimum number of three (3) members. ii. Objectives The primary objectives of the Audit Committee are: a. b. c. To provide assistance to the Board in fulfilling its fiduciary responsibilities particularly relating to business ethics, policies and practices and financial management and control. To provide greater emphasis on the audit functions by increasing the objectivity and independence of external and internal auditors and providing a forum for discussion that is independent of the management. To maintain through regularly scheduled meetings a direct line of communication between the Board and the external auditors, internal auditors and management. iii. Duties and responsibilities The duties and responsibilities of the Audit Committee shall be: a. b. c. To consider the appointment of the external auditors, determination of audit fee and any questions of resignation or dismissal. To discuss with the external auditor before the audit commences the nature and scope of the audit, and ensure coordination where more than one audit firm is involved. To review the quarterly results and year end financial statements before submission to the board, focusing particularly on: i. ii. iii. iv. v. vi. Any changes in accounting policies and practices Major judgmental areas Significant adjustments resulting from the audit The going concern assumption Compliance with accounting standards Compliance with the stock exchange and legal requirements

25 d. e. f. g. h. To discuss problems and reservations arising from the interim and final audits, and any matters the auditors may wish to discuss (in the absence of management where necessary) To review the internal audit programme, consider the major findings of internal audit investigations and management s response, and ensure coordination between the internal and external auditors. To keep under review the effectiveness of the internal control system, and in particular review the external auditors management letter and management s response. To review any related party transactions and conflict of interest situations that may arise within the Group including any transactions, procedure or course of conduct that raises questions of management integrity. To carry out such other functions as may be agreed to by the Audit Committee and the Board of Directors. iv. Authority The Committee is authorized by the Board to investigate any activity within the terms of reference. It is authorized to seek any information it requires from any employees and all employees are directed to co-operate with any request made by the Committee. The Committee is empowered by the Board to retain persons having special competence as necessary to assist the Committee in fulfilling its responsibilities. v) Meeting and Minutes The Audit Committee shall not hold less than three (3) meetings a year and the quorum for each meeting shall be two (2) members. Minutes of each meeting shall be kept and distributed to each member of the Committee and also to the other members of the Board. The Committee Chairman shall report on each meeting to the Board. The Company Secretary shall act as the Secretary to the Audit Committee. 3. SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE During the financial year ended 31 December 2005, the Audit Committee met four (4) times. The details of the attendance of the members of the Audit Committee are as follows:- 23 NO. AUDIT COMMITTEE ATTENDANCE 1 En Noor Zilan bin Mohamed Noor 3/4 2 Dato Sufri Bin Hj Mohd Zin 4/4 3 En. Rahman Bin Ali 4/4 During the financial year, the Audit Committee carried out the following review: The quarterly management and annual audited financial statements to ensure compliance with statutory reporting requirements and appropriate resolution of all accounting and audit matters requiring significant judgment and where appropriate, made recommendations to the Board. The external auditor s audit plan and scope for the Company and the Group, the audit report, significant issues raised and management responses in relation thereto. The external auditors fees and to recommend their reappointment to the Board. Measures implemented by management with regard to risk management and internal control. The statement of Corporate Governance and Statement on Internal Controls which are prepared in accordance with the provisions set out under the Malaysian Code on Corporate Governance, the extent of compliance with the said Code and recommend to the Board action plan to address further compliance matters. 4. INTERNAL AUDIT FUNCTION The Group has established the Internal Audit Department in 2004 to assist the Audit Committee and the Management in discharging their duties and responsibilities. The principal objective of the Department is to ascertain that adequate internal control is maintained in order to safeguard the assets of the Group and the shareholders interest.

26 Throughout the financial year under review, the Internal Audit personnel have actively conducted several independent audits based on the approved Annual Audit Plan of the various operations and systems of control of the Group. Details of the activities performed by the Internal Audit Department during the financial year are as follows:- Verification of banker acceptance transactions to ensure administration and utilization of fund are proper, efficient and effective; Reviewed on the effectiveness of administration and management of fixed assets; Reviewed on the tendering procedures of sub-contact works for Bentong Prison Project which include the evaluation and appointment of sub-contractors; Reviewed on the procurement procedures to ensure that the construction materials purchased are the most reasonable cost and quality for all projects. To compliment with the Quality Management System in accordance with ISO 9001 : From the internal audit findings, the Internal Audit Department will prepare independent opinions and reports accordingly to the Audit Committee on risks areas, weaknesses identified and the relevant recommendations. All recommendations shall be reviewed and discussed accordingly at the Audit Committee Meetings and communicated to the management to rectify the identified weaknesses. The Department also established follow-up audit reviews to monitor and ensure that the recommendations agreed by the Audit Committee have been effectively implemented. Going forward the Internal Audit Department will strengthen its capacity and efficiency for better contribution to the Group pursuant to the Audit Charter and Internal Audit Plan which have been approved by the Audit Committee. 5. STATEMENT IN RELATION TO THE ALLOCATION OF SHARE OPTION SCHEME The Audit Committee noted that the Company had established Share Option Scheme for Employees and Directors ( The Scheme ) pursuant to the By-Laws which were approved by the shareholders at the Extraordinary General Meeting held on 30 April The Scheme shall remain in force for a duration of five (5) years commencing from 22 June The salient terms of the Scheme are as follows:- i. ii. iii. iv. the maximum number of the Company s new shares to be made available under the Scheme shall not exceed fifteen percent (15%) of the issued and paid up capital of the Company; not more than fifty percent (50%) of the Company s shares available under the Scheme shall be allocated to Directors and senior management; not more than ten percent (10%) of the Company s shares available under the Scheme shall be allocated to individual Director or eligible employees, who either singly or collectively through person connected to them holds twenty percent (20%) or more of the issued and paid up capital of the Company; The eligible participants shall include eligible employees and Directors who as at the offer date have satisfied the following criteria:- a. b. c. d. is a confirmed employee or appointed director within the Group; has attained at least age of eighteen (18); is employed full time and on the payroll of the Group; is under such category and of such criteria that the option committee may from time to time decide. v. vi. The Scheme shall remain in force for a duration of five (5) years from the effective date of the launch. The option price for each share shall be based on the weighted average market price (WAMP) of the Company s share traded on the Exchange for the five (5) trading days preceding the date of offer with a discount if any, that does not exceed ten percent (10%) from the five (5) day of the Company s shares. The option under the Scheme was offered to the eligible employees and Directors at an offer price of 1.70 per option share. During the financial year ended 31 December 2005 the Company have not offered any option to its eligible employees, Directors as well as the Non-Executive Directors.

27 CONTENTS OF THE FINANCIAL STATEMENTS 25 Directors Report Statement by Directors Statutory Declaration Auditors Report Balance Sheets Income Statements Statement of Changes in Equity - Group Statement of Changes in Equity - Company Cash Flow Statement - Group Cash Flow Statement - Company Notes to the Financial Statements

28 DIRECTORS REPORT for the year ended 31 December 2005 The directors hereby present their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES 26 The principal activities of the Company are that of providing corporate, administrative and financial support services to the subsidiaries, investment holding and general contractors supplying labour. The principal activities of the subsidiaries are construction, manufacturing and trading of construction materials, hiring and servicing of machineries and vehicles and property development. There have been no significant changes in the nature of these activities during the year. RESULTS GROUP COMPANY Loss after taxation (5,236,435) (2,449,542) Minority interest (504) - Net loss for the year (5,236,939) (2,449,542) There were no material transfers to or from reserves or provisions during the financial year. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. DIVIDENDS The amount of dividend paid by the Company since 31 December 2004 is as follows : In respect of the financial year ended 31 December 2004 as reported in the directors report of that year : Final dividend of 1.5% less 28% taxation on 92,400,000 ordinary shares (1.08 net per ordinary share), paid on 22 July ,920

29 DIRECTORS REPORT for the year ended 31 December 2005 DIRECTORS The names of the directors of the Company since the date of the last report and at the date of this report are:- Dato Sufri Bin Hj Mohd Zin Dato Abdul Aziz Bin Mohamad Rahman Bin Ali Noor Zilan Bin Mohamed Noor Gen. (R) Dato Seri Mohd Shahrom Bin Dato Hj Nordin 27 DIRECTORS BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full time employee of the Company) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, as required by Section 169 (8) of the Companies Act, DIRECTORS INTEREST According to the register of directors shareholding required to be kept under Section 134 of the Companies Act, 1965, the interest of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows:- NUMBER OF ORDINARY SHARES OF 1 EACH AT AT SHARES IN THE COMPANY BOUGHT SOLD Direct interest: Dato Sufri Bin Hj Mohd Zin Dato Abdul Aziz Bin Mohamad 12,690, , (71,000) - 12,619, ,000 Indirect interest: Dato Sufri Bin Hj Mohd Zin # 36,480, ,480,000 # Deemed interested by virtue of his substantial shareholdings in TRC Capital Sdn. Bhd. and Kolektif Aman Sdn. Bhd. By virtue of Dato Sufri Bin Hj Mohd Zin and Dato Abdul Aziz Bin Mohamad having interests in the Company, they are deemed to be interested in shares of the subsidiaries to the extent the Company has an interest.

30 DIRECTORS REPORT for the year ended 31 December 2005 EMPLOYEE SHARE OPTION SCHEME The Company has established a Share Option Scheme for Employees and Directors ( The Scheme ) pursuant to the By- Laws which was approved by the shareholders at the Extraordinary General Meeting held on 30 April The Scheme shall remain in force for a duration of five (5) years commencing from 22 June The option under the Scheme was offered to the eligible employees and Directors on 22 June 2004 and 1 September 2004 at an offer price of 1.70 per option share. The salient features and other terms of the Scheme are disclosed in Note 3 to the financial statements. During the financial year ended 31 December 2005 the Company did not offer any option to the Non-Executive Directors. OTHER STATUTORY INFOATION a) b) Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps:- i) ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business have been written down to an amount which they might be expected so to realise. At the date of this report, the directors are not aware of any circumstances which would render:- i) ii) the amount written off for bad debts or the amount of the provision for doubtful debts inadequate to any substantial extent; and the values attributed to current assets in the financial statements of the Group and of the Company misleading. c) d) e) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. At the date of this report, there does not exist:- i) ii) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or any contingent liability of the Group and of the Company which has arisen since the end of the financial year. f) In the opinion of the directors:- i) ii) no contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due; and no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.

31 DIRECTORS REPORT for the year ended 31 December 2005 SIGNIFICANT EVENTS The following represent the changes in the composition of the Group during the financial year ended 31 December 2005:- i) ii) iii) The Company had on 18 February 2005 acquired 45 shares of 1.00 each in Gomex Sdn. Bhd. for 45 representing 45% equity interest, resulting in Gomex Sdn. Bhd. becoming a new associated company of the Group. The Company s wholly owned subsidiary, Trans Resources Corporation Sdn. Bhd. ( TRC ), had on 19 May 2005 acquired additional 60% equity interest representing 300,002 ordniary shares of 1.00 each in its associated company, Andaman Budi Sdn. Bhd. ( ABSB ), resulting in ABSB becoming a wholly owned subsidiary of the Group. ABSB subsequently changed its name to TRC Land Sdn. Bhd. with effect from 5 July The Company s wholly owned subsidiary, Trans Resources Corporation Sdn. Bhd. (TRC), had on 25 August 2005 acquired 4 ordinary shares of 1.00 each of TRC-PDI JV Sdn. Bhd. (TRC-PDI) for a total consideration of 4, resulting in TRC-PDI becoming a wholly owned subsidiary of the Group. STATUS OF CORPORATE PROPOSAL On 20 May 2005, Malaysian International Merchant Bankers Berhad ( MIMB ), on behalf of the Board, announced to Bursa Securities that the Company proposed to undertake the following: a) proposed renounceable rights issue of:- - up to a maximum of 35,420,000 new Shares in the Company at an issue price to be determined later, and 29 - up to a maximum of 35,420,000 nominal value of 5% Irredeemable Convertible Unsecured Loan Stocks ( ICULS ) at 100% of the nominal value. together with up to a maximum of 35,420,000 free detachable warrants, on the basis of 1 Rights Share and 1.00 nominal value of ICULS together with 1 free Warrant attached for every 3 existing Company s Shares held by the registered shareholders of the Company whose names appear in the Record of Depositors of the Company as at the Entitlement Date ( Proposed Rights Issue ); b) c) proposed amendments to the Memorandum and Articles of Association of the Company; and proposed increase in the authorised share capital of the Company. The proposal are inter-conditional upon one another. Subsequently on 1 July 2005, MIMB on behalf of the Company announced to Bursa Malaysia on the revisions of the expiry date and the exercise period of the Warrants. On 14 September 2005, MIMB, on behalf of the Company, announced that the Company has received the approval from the Securities Commission ( SC ) for the Proposed Rights Issue. Subsequently on 29 September 2005, further announcement was made on the revisions of certain terms of the ICULS and Warrants. Pursuant to Chapter 18 of the SC s Policies on Issue/Offer of Securities on Implementation of Proposals, the Proposed Rights Issue is required to be fully implemented within 6 months from the date of the Approval Letter i.e. 1 March On 9 February 2006, MIMB on behalf of the Company, applied to the SC for a six months extension of time from the deadline up to 1 September 2006 for the Company to implement the Proposed Rights Issue. SC has approved the application via its letter dated 17 February 2006.

32 DIRECTOR S REPORT for the year ended 31 December 2005 Auditors The auditors, Kumpulan Naga, have expressed their willingness to continue in office. On behalf of the Board, DATO SUFRI BIN HJ MOHD ZIN Director DATO ABDUL AZIZ BIN MOHAMAD Director Kuala Lumpur, Malaysia Date: 27 APRIL 2006

33 STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, DATO SUFRI BIN HJ MOHD ZIN and DATO ABDUL AZIZ BIN MOHAMAD, being two of the directors of TRC SYNERGY BERHAD., do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 34 to 60 are drawn up in accordance with applicable MASB Approved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2005 and of the results and the cash flows of the Group and of the Company for the year then ended. On behalf of the Board, DATO SUFRI BIN HJ MOHD ZIN DATO ABDUL AZIZ BIN MOHAMAD Kuala Lumpur, Malaysia Date: 27 APRIL 2006

34 STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, I, DATO SUFRI BIN HJ MOHD ZIN, being the director primarily responsible for the financial management of TRC SYNERGY BERHAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 34 to 60 are, in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by the abovenamed, DATO SUFRI BIN HJ MOHD ZIN at Kuala Lumpur in the Federal Territory on 27 APRIL 2006 Before me, } DATO SUFRI BIN HJ MOHD ZIN Commissioner for Oaths