CONTENTS. Notice of Annual General Meeting. Appendix I : Notice of Nomination of Auditors. Statement Accompanying Notice of Annual General Meeting

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2 CONTENTS Notice of Annual General Meeting Appendix I : Notice of Nomination of Auditors Statement Accompanying Notice of Annual General Meeting Corporate Information Directors Profile Chairman s Statement Statement on Corporate Governance Additional Compliance Information Statement on Internal Control Report of the Audit Committee Directors Report and Financial Statements List of Properties Analysis of Shareholdings Analysis of Warrantholdings Form of Proxy

3 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Thirteenth (13th) Annual General Meeting of the Company will be held at Room Teratai 1, Taiping Golf Resort, Jalan Bukit Jana, Kamunting, Perak Darul Ridzuan on Friday, 6 June 2008, at a.m. for the following purposes:- AGENDA As Ordinary Business 1. To receive and adopt the Audited Financial Statements for the financial year ended 31 December 2007 and the Reports of the Directors and Auditors thereon. 2. To approve the payment of Directors Fees for the financial year ended 31 December (Resolution 1) (Resolution 2) 3. To re-elect Low Bok Tek who retires by rotation pursuant to Article 101 of the Company s Articles of Association. (Resolution 3) 4. To re-elect Tang Yuet Mun who retires by rotation pursuant to Article 108 of the Company s Articles of Association. (Resolution 4) 5. To appoint Auditors and to authorise the Directors to fix their remuneration. (Resolution 5) Notice of Nomination pursuant to Section 172(11) of the Companies Act, 1965, a copy of which is set out in Appendix I has been received by the Company for the nomination of Messrs. STYL Associates, who have given their consent to act, for appointment as Auditors of the Company and to propose the following Ordinary Resolution: THAT Messrs. STYL Associates be and are hereby appointed as Auditors of the Company in place of the retiring Auditors, Messrs. Siva Tan & Co. and to hold office until the conclusion of the next Annual General Meeting at a remuneration to be determined by the Directors. As Special Business To consider and if thought fit, to pass the following resolutions:- Ordinary Resolutions 6. Authority to Issue Shares Pursuant to Section 132D of the Companies Act, 1965 (Resolution 6) That pursuant to Section 132D of the Companies Act, 1965, and subject to the approvals of all the relevant government/regulatory authorities, the Directors be and are hereby empowered to issue new shares in the Company at any time, 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 new shares to be issued does not exceed 10% of the total issued share capital of the Company for the time being, and such authority shall continue to be in force until the conclusion of the next annual general meeting of the Company. GUNUNG CAPITAL BERHAD ( P) 2

4 Notice of Annual General Meeting (cont d) 7. Proposed Renewal of Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature ( Proposed Renewal of Shareholders Mandate ) (Resolution 7) That pursuant to Paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company s subsidiary, Gunung Resources Sdn Bhd ( GRSB ) to enter into recurrent related party transactions of a revenue or trading nature as set out in Section 2.4 of the Circular to Shareholders dated 15 May 2008, which are necessary for the day-to-day operations of GRSB, in the ordinary course of business and on normal commercial terms that are not more favourable to the related party than those generally available to the public and are not detrimental to the minority shareholders of the Company. And That such approval is subject to annual renewal shall continue to be in force until: (i) the conclusion of the next Annual General Meeting ( AGM ) of the Company, at which time the mandate will lapse, unless authority is renewed by a resolution passed at the next AGM the mandate is again renewed; (ii) the expiration of the period within which the next AGM is required to be held pursuant to Section 143(1) of the Companies Act, 1965; ( the Act ) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or (iii) revoked or varied by a resolution passed by the shareholders in general meeting, whichever is earlier. That the Directors of the Company be and are hereby authorised to do all such acts and things (including executing any relevant documents) as they may consider expedient or necessary or give effect to the Proposed Renewal of Shareholders Mandate. 8. To transact any other business for which due notice has been given. By Order of the Board Jesslyn Ong Bee Fang Perak Darul Ridzuan (MAICSA ) 15 May 2008 Company Secretary Notes: 1 A member of the Company, eligible to attend and vote at the meeting, is entitled to appoint a proxy or proxies to vote in his/her stead. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act 1965 shall not apply to the Company. 2. Where a member appoints two (2) or more proxies, the appointment shall be invalid unless he/she specifies the proportion of his/her shareholdings to be represented by each proxy. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 3. The Form of Proxy shall be in writing under the hand of the appointor or his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised. 4. All Forms of Proxy must be deposited at the Company's Registered Office at Lot 5911, Jalan Perusahaan Satu, Kamunting Industrial Estate, Kamunting, Taiping, Perak Darul Ridzuan not less than 48 hours before the time set for holding the meeting or at any adjournment thereof. Explanatory Notes on Special Business: Ordinary Resolution 6-Authority to Issue Shares Pursuant Section 132D of the Companies Act, 1965 This resolution, if passed, will give the Directors of the Company authority to issue shares for such purposes as the Directors in their absolute discretion consider to be in the interest of the Company, without having to convene a general meeting. This authority unless revoked or varied at a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company. Ordinary Resolution 7-Proposed Renewal of Shareholders Mandate This resolution, if passed, will enable the Company s subsidiary to enter into recurrent related party transactions which are necessary for its subsidiary day-to-day operations, in the ordinary course of business and on normal commercial terms that are not more favourable to the related party than those generally available to the public and are not detrimental to the minority shareholders of the Company. ANNUAL REPORT

5 Appendix I : Notice of Nomination of Auditors BT CAPITAL SDN BHD ( H) NO. 400, JALAN KAMUNTING BT 2 TAMAN SAUJANA KAMUNTING PERAK DARUL RIDZUAN Date : 22 April 2008 The Board of Directors GUNUNG CAPITAL BERHAD Lot 5911, Jalan Perusahaan 1 Kamunting Industrial Estate Kamunting, Taiping Perak Darul Ridzuan Dear Sirs, NOTICE OF NOMINATION OF AUDITORS We, BT CAPITAL SDN BHD, being a member of GUNUNG CAPITAL BERHAD hereby give notice pursuant to Section 172(11) of the Companies Act, 1965 of our nomination of Messrs. STYL Associates for appointment as new Auditors of the Company in place of the retiring Auditors, Messrs. Siva Tan & Co. at the forthcoming Annual General Meeting of the Company. Therefore, we propose that the following resolution be considered at the forthcoming Annual General Meeting of the Company: PROPOSED CHANGE OF COMPANY S AUDITORS THAT Messrs. STYL Associates be and are hereby appointed as Auditors of the Company in place of the retiring Auditors, Messrs. Siva Tan & Co. and to hold office until the conclusion of the next Annual General Meeting at a remuneration to be determined by the Directors. Yours faithfully, For and on behalf of BT CAPITAL SDN BHD.. Low Bok Tek Director GUNUNG CAPITAL BERHAD ( P) 4

6 Statement Accompanying Notice of Annual General Meeting Directors who are standing for re-election at the Thirteenth (13th) Annual General Meeting of Gunung Capital Berhad are as follows: i) Low Bok Tek (Article 101 of the Company s Articles of Association); and ii) Tang Yuet Mun (Article 108 of the Company s Articles of Association) Pursuant to paragraph 8.28(2) of the Listing Requirements of Bursa Malaysia Securities Berhad, the details of the above Directors who are seeking re-election are set out in their respective profiles which appear in the Profile of Directors on pages 7 to 8 of this Annual Report. The details of the Directors securities holdings in the Company are set out in the Analysis of Shareholdings and Warrantholdings which appear on pages 61 to 66 of this Annual Report. ANNUAL REPORT

7 Corporate Information BOARD OF DIRECTORS Low Bok Tek Chairman, Non-Independent & Non-Executive Director Gan Chong Shyan Executive Director Peter Wong Hoy Kim Senior Independent & Non-Executive Director Datuk Ahmad Shalimin bin Ahmad Shaffie, DMSM Independent & Non-Executive Director Tang Yuet Mun, PPT Independent & Non-Executive Director AUDIT COMMITTEE SHARE REGISTRAR Insurban Corporate Services Sdn Bhd 149, Jalan Aminuddin Baki Taman Tun Dr. Ismail Kuala Lumpur, Malaysia Tel : (603) Fax : (603) REGISTERED OFFICE Lot 5911, Jalan Perusahaan Satu Kamunting Industrial Estate Kamunting, Taiping Perak Darul Ridzuan, Malaysia Tel : (605) Fax : (605) Website : Datuk Ahmad Shalimin bin Ahmad Shaffie, DMSM (Chairman) Peter Wong Hoy Kim Tang Yuet Mun, PPT PRINCIPAL BANKER Malayan Banking Berhad NOMINATION COMMITTEE Datuk Ahmad Shalimin bin Ahmad Shaffie, DMSM (Chairman) Peter Wong Hoy Kim AUDITORS Siva Tan & Co. (AF 0785) No. 400A, Jalan Kamunting Batu Kamunting Perak Darul Ridzuan, Malaysia REMUNERATION COMMITTEE Datuk Ahmad Shalimin bin Ahmad Shaffie, DMSM (Chairman) Gan Chong Shyan Peter Wong Hoy Kim STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad COMPANY SECRETARY Jesslyn Ong Bee Fang (MAICSA ) GUNUNG CAPITAL BERHAD ( P) 6

8 Directors Profile LOW BOK TEK (Aged 50, Malaysian) Chairman, Non-Independent Non-Executive Director Mr Low Bok Tek has been the Chairman of the Company since 13 September He has assumed the position of Chief Executive Officer of the Company from 20 July 2001 to 28 June He is the Chairman of the Option Committee of the Company. He has more than 20 years of entrepreneurship experience in the motor vehicles industry, public transport industry and rubber latex gloves industry. He is also presently the Executive Chairman and Chief Executive Officer of Latexx Partners Berhad. He is a Director of several subsidiaries of Gunung Capital Group and sits on the Boards of several private limited companies. He is deemed interested in related party transactions as disclosed on page 17 of the Annual Report. He has a deemed interest in 13,599,129 ordinary shares in the Company held by BT Capital Sdn Bhd, a substantial shareholder of the Company. GAN CHONG SHYAN (Aged 50, Malaysian) Executive Director Mr Gan Chong Shyan was appointed to the Board on 30 August 2004 as Non-Executive Director and subsequently redesignated as an Executive Director on 1 September He is a member of the Remuneration Committee and the Option Committee of the Company. He is a member of the Malaysian Institute of Accountants and a fellow member of the Malaysian Institute of Taxation and was trained as an auditor with one of the top international accounting firm. He has over 13 years of extensive experience in financial management and planning, corporate and legal affairs. He is currently overseeing the operation management, financial management and corporate affairs of the Group. His directorship in other public companies is in Latexx Partners Berhad. He is also a Director of several subsidiaries of Gunung Capital Group. He does not hold any shares in the Company or in any of its subsidiaries. Y. Bhg. DATUK AHMAD SHALIMIN BIN AHMAD SHAFFIE, DMSM (Aged 39, Malaysian) Independent Non-Executive Director Y.Bhg Datuk Ahmad Shalimin Bin Ahmad Shaffie, DMSM was appointed to the Board on 7 November He is the Chairman of the Audit Committee, the Nomination Committee and the Remuneration Committee and also a member of the Option Committee of the Company. He graduated from the School of Public Administration & Law, University Teknologi Mara in His experience ranges from securities dealings, services, retailing to logistics. He is the President of Association of Malaysian Haulers, a member of the Malaysia Indonesia Business Council and Malaysia Entrepreneurs Council. His directorship in other public companies is in Mexter Technology Berhad. He was conferred with the DMSM award which carries the title of Datuk by the Yang Di-Pertua Negeri Melaka on 6 November He does not hold any shares in the Company or in any of its subsidiaries. ANNUAL REPORT

9 Directors Profile (cont d) PETER WONG HOY KIM (Aged 67, Malaysian) Senior Independent Non-Executive Director Mr Peter Wong Hoy Kim was appointed to the Board on 7 November He is a member of the Audit Committee, the Nomination Committee and the Remuneration Committee of the Company. He is an ex-banker who was previously with HSBC Bank Malaysia Berhad for 33 years until his retirement in 1996 from the Bank s Ipoh Branch where he was the Manager. He underwent numerous training overseas in Hong Kong, U.S.A. and United Kingdom and has served in various other capacities in the Bank including, amongst others, Deputy Manager Credit Control and Manager Regional Credit, Peninsula North. His directorship in other public companies is in Latexx Partners Berhad and he sits on the board of several private limited companies. He does not hold any shares in the Company or in any of its subsidiaries. TANG YUET MUN, PPT (Aged 52, Malaysian) Independent Non-Executive Director Mr Tang Yuet Mun, PPT was appointed to the Board on 16 November 2007 as an Independent Non-Executive Director and is a member of the Audit Committee of the Company. He is a member of the Malaysian Institute of Accountants and an accredited Certified Financial Planner by the Financial Planning Association of Malaysia. He is also a member of the Institute of Chartered Accountants, New Zealand. He was qualified as a Chartered Accountant in New Zealand in He has worked in chartered accountancy, industrial manufacturing, commercial sector and retail industries both in New Zealand and Malaysia and currently he is a Chartered Accountant in public practice. He does not hold any shares in the Company or in any of its subsidiaries. Other Information Save as disclosed, none of the Directors has: Any family relationship with any other Director and/or substantial shareholder of the Company. Any conflict of interest with the Company. Any convictions for offences within the past 10 years other than traffic offences. GUNUNG CAPITAL BERHAD ( P) 8

10 Chairman s Statement On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of the Company and the Group for the financial year ended 31 December FINANCIAL REVIEW For the year 2007, the Group suffered a loss of RM2.46 million over the turnover of RM76.3 million. As mentioned last year, the Group has diversified into trading of latex concentrate and this has shown positively with the growth of turnover from last year of RM19.8 million to RM76.3 million this year, which marks an increase of 285%. The latex trading has actually brought in a positive result of achieving a gross profit of RM2.1 million this year as compared to RM0.8 million achieved last year. Latex prices remain highly volatile for the year, with prices ranging between RM4.33/kg to RM5.66/kg. Such price volatility will have an impact on the overall performance of the Group. The Group had actually achieved a net profit of RM0.47 million for the year from the latex trading business. However, this profit was being eroded with the recognition of some one-off adjustments arising from events that have materialized during the year which amounted to RM2.7 million. These events included the bad debts, deposits, loss on disposal of property, real property gain tax and sales tax. The recognition of these adjustments is on the prudent accounting basis. The Board foresees that the year 2008 will remain profitable in this latex trading business. This is the first step forward in the positive direction embarked by the Group. DIVIDEND No dividend was paid during the year and the Board does not recommend any dividend payment for the financial year under review. FUTURE OUTLOOK The Board is putting further efforts in identifying opportunities that offer promise for growth and profitability and which will deliver value to the shareholders. The Group will continue to seek more profitable businesses in 2008 to achieve long term sustainable growth. CORPORATE SOCIAL RESPONSIBILTY ( CSR ) No CSR activity was carried out in However, looking to the community at large, the Group will commit time and effort on realising its corporate social responsibility. We shall look into some meaningful CSR activities for the year ANNUAL REPORT

11 Chairman s Statement (cont d) ACKNOWLEDGEMENT On behalf of the Board, I would like to extend our sincere appreciation and thanks to our shareholders, bankers, valued customers, suppliers, business associates and the regulatory authorities for their continued confidence and support in us. I would also like to extend our heartfelt thanks and gratitude to the management team and staff of the Group for their unwavering dedication and commitment to the Group. LOW BOK TEK Chairman 30 April 2008 GUNUNG CAPITAL BERHAD ( P) 10

12 Statement on Corporate Governance The Board of Directors ( Board ) of Gunung Capital Berhad is pleased to disclose to the shareholders on the manner the Group has applied the Principles and extent of compliance with the Best Practices in Corporate Governance as set out in Malaysian Code on Corporate Governance (the Code ) pursuant to Paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad for the financial year ended 31 December 2007, unless otherwise stated. BOARD OF DIRECTORS Board Composition and Balance The Board currently comprises five (5) members of which three (3) are Independent & Non-Executive Directors, one (1) is Executive-Director and one (1) is Non-Independent & Non-Executive Director. A brief description on the background of each Director is set out in the Directors' Profile on pages 7 to 8 of this Annual Report. The Board's composition represents a mix of knowledge, skills and expertise relevant to the Company s operations. The Board recognizes that there should be a clear division of responsibilities in respect of the running of the Board and day to day management of the Group as this will ensure a balance of power and authority. Mr. Low Bok Tek has been holding the positions of Chairman and Chief Executive Officer of the Company since He continued to act in combined role all these years as he was the most appropriate to head the operations of the Group due to his background as the Founder Director and his vast experience in the core business of the Group. On 28 May 2007, he resigned as a Chief Executive Officer of the Company but remained as a Chairman of the Company. Generally, the Executive Director is responsible for making and implementing operational and corporate decisions. The Independent Directors also have the necessary skills and experience to bring an independent judgment to bear the issues of strategy, performance, resources including key appointments and standards of conduct. They provide a broader and unbiased view, independent assessment and opinions on management proposals to safeguard the interests of other parties such as minority shareholders, employees and business associates. They have ensured the practice of a balanced Board s decision making process. In addition, the Board has identified a senior independent non-executive director to whom concerns or issues affecting the Group may be conveyed. Board Responsibility The Board has the overall responsibility for leading and controlling the Group, focusing mainly on the Group s strategic business plans, financial performance, critical business issues, risks management, systems of internal control and overseeing the investments and operations of the Group. Generally, the Board must ensure that the Company is being managed and its business conducted in accordance with high standards of accountability and transparency. Supply of Information Notices, together with the agenda of meetings were given to the Board seven (7) days before the meeting whereas board papers, whenever possible, were given three (3) days prior to the meetings for the Directors to study and evaluate the matters to be discussed. All Directors have access to the advice and services of the Company Secretary and may take independent professional advice at the Company s expense, in furtherance of their duties, if so required. ANNUAL REPORT

13 Statement on Corporate Governance (cont d) Board Meetings Board meetings are held at least four (4) times a year at quarterly intervals with additional meetings convened when urgent decisions need to be taken between the scheduled meetings. During the financial year ended 31 December 2007, five (5) meetings were held, where it discussed a variety of matters including the Group s financial results, major investments, the business plan and directions of the Group. The attendances of the respective Directors are as follows:- Directors No. of Meetings Attended Percentage Low Bok Tek 5/5 100% Gan Chong Shyan 5/5 100% Datuk Ahmad Shalimin bin Ahmad Shaffie 5/5 100% Peter Wong Hoy Kim 5/5 100% Tang Yuet Mun (appointed on 16/11/2007) - - Board Committees The following committees have been established to assist the Board to discharge its duties and responsibilities. The Board has delegated certain powers and duties to these committees, which operate within the defined terms of reference. Audit Committee The details are set out on Pages 19 to 22 of this Annual Report. Nomination Committee The Nomination Committee, which consists wholly of Non-Executive Directors, and its primary function, is to propose new nominees for the Board and assess directors on an on-going basis. The final decision as to who shall be nominated should be the responsibility of the full Board after considering the recommendations of the Nomination Committee. The Nomination Committee comprises the following members: Datuk Ahmad Shalimin bin Ahmad Shaffie (Chairman / Independent & Non-Executive Director) Peter Wong Hoy Kim (Member / Senior Independent & Non-Executive Director) Remuneration Committee The Remuneration Committee, which consists mainly of Non-Executive Directors, is responsible for the implementation of remuneration policy and to make recommendation to the Board on the remuneration packages of the Executive Directors. The Executive Directors do not participate in discussion and decision of their own remuneration. The Non-Executive Directors are abstained from deliberations and voting on decision in respect of his individual remuneration package. The determination of the remuneration package for Non-Executive Directors is a matter for the Board as a whole and subject to the approval of shareholders at the Annual General Meeting. GUNUNG CAPITAL BERHAD ( P) 12

14 Statement on Corporate Governance (cont d) Remuneration Committee (cont d) The Remuneration Committee comprises the following members: Datuk Ahmad Shalimin bin Ahmad Shaffie (Chairman / Independent & Non-Executive Director) Peter Wong Hoy Kim (Member / Senior Independent & Non-Executive Director) Gan Chong Shyan (Member / Executive Director) Directors Remuneration The details of the remuneration of the Directors of the Company for the financial year ended 31 December 2007 are as follows:- Salaries and Benefitsemoluments Fees in Kind Total (RM) (RM) (RM) (RM) Executive Directors 313,900-13, ,225 Non Executive Directors 14,000 12,000-26,000 The number of Directors whose remuneration falls into the following bands is as follows:- Number of Directors Range of Remuneration Executive Non-Executive Below RM50,000-2 RM100,001 RM150, RM200,001 RM250, Option Committee The Option Committee was established to administer the Company s Employees Share Option Scheme which was launched on 16 September The Option Committee comprises the following members:- Low Bok Tek (Chairman, Non-Independent & Non-Executive Director) Gan Chong Shyan (Executive Director) Datuk Ahmad Shalimin bin Ahmad Shaffie (Independent & Non-Executive Director) Appointment and Re-election of Directors In accordance with the Company s Articles of Association, all Directors who are appointed by the Board during the year are subject to re-election by shareholders at the following Annual General Meeting. The Company's Articles of Association also provide that at least one-third of the remaining Directors shall retire from office at the Annual General Meeting. All Directors shall retire from office at least once in every three (3) years but shall be eligible for re-election. ANNUAL REPORT

15 Statement on Corporate Governance (cont d) Directors Training All Directors have attended and completed the Mandatory Accreditation Programme ( MAP ) and the Continuing Education Programme ( CEP ) as prescribed by Bursa Securities Malaysia Berhad. Apart from attending the MAP and CEP, all Directors are encouraged to attend training programmes and seminars to further enhance their skills and to keep abreast with developments on a continuous basis in order to discharge their duties more efficiently. The Company also provides briefings for new recruits to the Board, to ensure they have a comprehensive understanding on the operations of the Group and the Company. SHAREHOLDERS The Board maintained an effective communication policy that enables both the Board and the management to communicate effectively with its shareholders, stakeholders and the public. The policy effectively interprets the operations of the Group to the shareholders and accommodates feedback from shareholders, which are factored into the Group s business decision. The Board communicates information on the operations, activities and performance of the Group to the shareholders, stakeholders and the public through the Annual Report, circulars to shareholders, various announcements made to Bursa Securities Malaysia Berhad, which includes announcement on quarterly results; and the Company website at The Annual General Meeting serves as an important mean for shareholders communication. Notice of the Annual General Meeting and Annual Reports are sent to shareholders prior to the meeting. At each Annual General Meeting, the Board presents the performance and progress of the Group and provides shareholders with the opportunity to raise questions pertaining to the Group. The Chairman and the Board will respond to the questions raised by the shareholders during the Annual General Meeting. The Board has ensured each item of special business included in the notice of meeting will be accompanied by an explanatory statement on the effects of the proposed resolution. ACCOUNTABILITY AND AUDIT The Board aims to present a balanced and understandable assessment of the Group s position and prospect through the annual financial statements and quarterly announcements of results to Bursa Securities Malaysia Berhad. The Directors are responsible to ensure the annual financial statements are prepared in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia. The Directors also have the responsibilities for taking steps as are reasonably available to them to safeguard the assets of the Group and prevent any fraud or irregularities. Internal Control and Risk Management The Board has overall responsibilities for corporate governance and the development of sound internal control system for the Group to achieve its objectives within the acceptable risk profile as well as safeguarding shareholders interest and the Group s assets. Information on the Group's internal control and risk management is presented in the Statement on Internal Control set out on page 18 of this Annual Report. GUNUNG CAPITAL BERHAD ( P) 14

16 Statement on Corporate Governance (cont d) Relationship with Auditors The Audit Committee supports the Board in its responsibility to oversee the financial reporting and the effectiveness of the internal control of the Group. The Group has always maintained a formal and transparent relationship with its external and internal auditors through the Audit Committee. The Audit Committee acts as an independent channel of communication for the auditors to convey its objective views and professional advice on the Group s financial and operational activities. Key features for the relationship of the Audit Committee with both the internal and external auditors are more particularly described in the Audit Committee Report set out on pages 19 to 22 of this Annual Report. STATEMENT OF DIRECTORS RESPONSIBILITIES IN PREPARING THE FINANCIAL STATEMENTS The Directors are responsible for the preparation of financial statements prepared for each financial year to give 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 the results and cash flow of the Group and the Company for the financial year then ended. In preparing the financial statements, the Directors have:- adopted suitable accounting policies and apply them consistently; made judgments and estimates that are reasonable and prudent; and ensured that applicable approved accounting standards have been complied with. The Directors are responsible for ensuring that proper accounting and other records are kept which disclose with reasonable accuracy at any time the financial position of the Group and the Company and that the underlying financial statements are prepared in compliance with the provisions of the Companies Act, ANNUAL REPORT

17 Additional Compliance Information The information set out below is disclosed in compliance with the Listing Requirements of Bursa Malaysia Securities Berhad. 1. Utilisation of Proceeds The Company did not raise any funds through any corporate proposal during the financial year ended 31 December Options, Warrants and Convertible Securities No options in the Company were exercised during the financial year. As at the end of the financial year no warrants have been exercised. 3. Non-Audit Fees There is no non-audit fees paid to the external auditors for the financial year ended 31 December Material Contracts Involving Directors and Major Shareholders There were no material contracts subsisting as at 31 December 2007 or entered into since the end of the previous financial year, by the Company and its subsidiaries involving Directors' and major shareholders' interest other than those disclosed under notes to the account on Related Party Transactions of revenue in nature. 5. Contract Relating to Loans During the financial year, there were no contracts relating to loans entered into by the Company involving the interests of directors and/or major shareholders. 6. Shares Buy-Back The Company did not carry out any shares buy-back exercise during the financial year ended 31 December American Depository Receipt ("ADR")/Global Depository Receipt ("GDR") The Company did not sponsor any ADR or GDR programme during the financial year ended 31 December Sanctions and/or Penalties There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the regulatory bodies. 9. Profit Estimate, Forecast or Projection The Company and its subsidiaries did not release any profit estimate, forecast or projection and there was no variation in results by 10% or more between the audited and the unaudited results announced during the financial year ended 31 December Profit Guarantees During the financial year, there were no profit guarantees given by the Company. GUNUNG CAPITAL BERHAD ( P) 16

18 Additional Compliance Information (cont d) 11. Revaluation Policy on Landed Properties The revaluation policy on landed properties is as set out in the Financial Statements. 12. Recurrent Related Party Transactions ("RRPT") of a Revenue or Trading Nature The Company had at the 12th Annual General Meeting held on 29 June 2007 obtained shareholders mandate for the Company and/or its subsidiary companies to enter into recurrent transactions of a revenue or trading nature, which are necessary for its day to day operations and are in the ordinary course of business, with related parties. The said general mandate took effect from 29 June 2007 until the conclusion of the forthcoming Annual General Meeting of the Company. The Company intends to seek a renewal of the said general mandate for recurrent related party transactions at the forthcoming Annual General Meeting of the Company. The aggregate value of the recurrent transactions of a revenue or trading nature conducted during the financial year ended 31 December 2007 between the Company and/or its subsidiary companies with related parties are set out below:- Nature of Related Interested Aggregate transactions Party Party value (RM) Sales of latex concentrate by a Subsidiary of LPB Low Bok Tek ( LBT ), a 75,714,310 subsidiary of Gunung Capital Berhad Latexx Director of GCB Group and a ( GCB ) to a subsidiary of Manufacturing Major Shareholder of GCB Latexx Partners Berhad ( LPB ) Sdn Bhd LBT, a Director of LPB Group and a Major Shareholder of LPB BT Capital Sdn Bhd, a party connected to LBT which is also a Major Shareholder of both LPB and GCB. ANNUAL REPORT

19 Statement on Internal Control Directors Responsibilities The Board of Directors acknowledges its responsibility for establishing and maintaining a sound system of internal control, as well as continuously reviewing its adequacy and integrity so as to safeguard shareholders investment and the Group s assets. The system of internal contrrol is designed to manage and minimise risk but cannot eliminate the risk of failure to achieve business objectives and plans. Accordingly, it can only provide reasonable and not absolute assurance against material misstatement or loss. Key elements of the Group s internal control include:- Internal Control Environment Within the Group, there are organisational structures in place for each operating unit with clearly defined levels of authority. Management of each operating unit has clear responsibility for identifying risk affecting their unit and the overall Group s business as a whole. They are also charged with instituting adequate procedures and internal controls to mitigate and monitor such risks on an ongoing basis. Internal policies and procedures are documented to formalise the operations of the Group. Audit Committee The Board has empowered the Audit Committee with the duty of reviewing and monitoring the effectiveness of the Group s system of internal control. The Audit Committee reviews the Group s financial reports, internal and external audit reports and the internal control system. Its independence is assured by the current composition comprising all members who are nonexecutive Independent Directors. Internal Audit Functions During the financial year, the Group outsourced its internal audit function to an independent firm of consultants which resumed the following roles and scope of responsibilities:- Reviewing the internal controls to safeguard on the Group s remaining assets; and Overseeing the process of identifying, evaluating, monitoring and managing risks. The outsourced Internal Auditors had reviewed the Group s system of internal controls and had reported the internal audit activities carried out within the year to the Audit Committee on a quarterly basis. The internal audit focuses on determining whether the controls provide reasonable assurance of effective and efficient operations, as to reliability and integrity of financial data and reports, and compliance with established policies and procedures. At the onset, the audit programme will be presented to the Audit Committee for their perusal and agreement and findings will be presented to the Committee accordingly. The audit programme covers the examination and evaluation of the adequacy and effectiveness of internal control systems and the quality of compliance to the internal control systems which comprises key components of control environment, risk assessment process, operational control activities, information system and monitoring practices. REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS As required by Paragraph of the Listing Requirements of the Bursa Securities, the external auditors have reviewed this Statement of Internal Control. This review was performed in accordance with Recommended Practice Guide ( RPG ) 5 issued by the Malaysian Institute of Accountants. Based on their review, the external auditors have reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls. GUNUNG CAPITAL BERHAD ( P) 18

20 Report of the Audit Committee COMPOSITION OF THE AUDIT COMMITTEE The Audit Committee of the Company comprises the following members: Datuk Ahmad Shalimin bin Ahmad Shaffie (Chairman / Independent & Non Executive Director) Peter Wong Hoy Kim (Member / Senior Independent & Non Executive Director) Tang Yuet Mun (Member / Independent & Non Executive Director) ATTENDANCE OF AUDIT COMMITTEE MEETINGS The details of attendance of each Audit Committee member in the Audit Committee meetings held during the financial year ended 31 December 2007 are as follows:- Name Attendance Datuk Ahmad Shalimin bin Ahmad Shaffie 5/5 Peter Wong Hoy Kim 5/5 Gan Chong Shyan (resigned on 16/11/2007) 5/5 Tang Yuet Mun (appointed on 16/11/2007) - TERMS OF REFERENCE OF AUDIT COMMITTEE Terms of Membership The Committee shall be appointed by the Board of Directors from amongst its members and must be composed of no fewer than three (3) members. All the Audit Committee members must be non-executive directors, with a majority are independent directors. The members of Audit Committee shall elect a chairman from among their number who shall be an independent director. At least one (1) member of Audit Committee must be a member of the Malaysian Institute of Accountants ("MIA"); or if he is not a member of the MIA, he must have at least 3 years' working experience and he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or fulfils such other requirements prescribed or approved by the Bursa Malaysia Securities Berhad. In the event of any vacancy in the Committee resulting in the non-compliance with Paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad, the Board shall appoint a new member within three (3) months. The Board of Directors shall review the term of office and the performance of the Audit Committee and each of its members at least once in every three (3) years. No alternate Director shall be appointed as a member of the Audit Committee. ANNUAL REPORT

21 Report of the Audit Committee (cont d) Meetings and Quorum of the Audit Committee The Committee shall meet at least four (4) times a year and the quorum shall be at least two (2) members, majority of whom must be Independent Directors. The Chairman of the Audit Committee shall be the chairman of the meeting. If at any meeting the chairman is not present, the members present shall elect a chairman from among their number who shall be an independent director. The Chairman shall call a meeting of the Audit Committee if a request is made by any committee member or the external auditors. Notice of a meeting of the Audit Committee shall be given to all members in writing via facsimile or by hand delivery or by courier. The decision of the Audit Committee shall be decided by a majority of votes, the Chairman of the meeting shall have a casting vote. The Company Secretary shall act as secretary of the Audit Committee and also be responsible for keeping the minutes of meeting of the Audit Committee and circulating to each member of the committee and to the other member of the board. All minutes of meetings shall be open to inspection by the Audit Committee and the Board of Directors. The Audit Committee may require the attendance of any management staff from the Finance/Accounts Department or other departments deemed necessary together with a representative or representatives from the external auditors. Functions of the Audit Committee The duties and responsibilities of the Audit Committee shall include the following:- (i) (ii) To review and discuss with the external auditor, the audit plan and the scope of the audit; To review and discuss with the external auditor, their evolution of the system of internal controls and their audit report; (iii) To review the assistance given by the employees of the Company to the external auditors; (iv) To review the external auditor s management letter and the management s response. (v) To report to the Board if there is reason (supported by grounds) to believe that the external auditor is not suitable for reappointment; (vi) To review the quarterly and year-end financial statements, prior to the approval by the Board of Directors, focusing particularly on: Changes in or implementation of major accounting policies and practices; Significant adjustments arising from the audit; The going concern assumption; Significant and unusual events; and Compliance with accounting standards and other legal requirements. GUNUNG CAPITAL BERHAD ( P) 20

22 Report of the Audit Committee (cont d) Functions of the Audit Committee (cont d) The duties and responsibilities of the Audit Committee shall include the following:- (cont d) (vii) To review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work; (viii) To review the internal audit programme and the results of the internal audit programme, processes investigation undertaken and whether or not that appropriate action is taken on the recommendations of the internal audit function; (ix) To review any related party transactions and conflict of interest situation that may arise within the Company or the Group including any transaction, procedure or course of conduct that raises questions of management integrity; (x) To consider the appointment, the audit fee and resignation or dismissal of the external auditors; and (xi) To recommend the nomination of a person as external auditors. Rights of the Audit Committee The Audit Committee has ensured that, wherever necessary and reasonable for the performance of its duties, in accordance with a procedure determined by the Board:- (i) (ii) have authority to investigate any matter within its terms of reference; have the resources which are required to perform its duties; (iii) have full and unrestricted access to any information pertaining to the Company; (iv) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; (v) be able to obtain independent professional or other advice; and (vi) be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary. SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE The activities of the Audit Committee during the financial year ended 31 December 2007 include the followings:- reviewed the quarterly financial result announcements and recommended to the Board for approval; reviewed the Group s annual audited financial statements and recommended to the Board for approval; assessed the Group s financial performance; reviewed related party transactions within the Group; reviewed the results of the risk assessment process and audit plan for internal audit; and reviewed and deliberated on issues raised in the audit reports by internal auditors in relation to weaknesses in internal controls. ANNUAL REPORT

23 Report of the Audit Committee (cont d) SUMMARY OF ACTIVITIES OF THE INTERNAL AUDIT FUNCTION During the financial year, the Company outsourced its internal audit functions to a professional services firm, which is tasked with the aim of assisting the Audit Committee in assessing risks, recommend measures to mitigate risks, establish cost effective controls and assess proper governance process. The firm has conducted ongoing review of the adequacy and effectiveness of the system of internal control. The audit conducted including reviewing the extent of compliance with the established internal policies and procedures governing the operations of the Group. The firm also carried out audits on all operating units within the Group and audit findings were presented to the Audit Committee on a quarterly basis. Some internal weaknesses were identified during the financial year under review, all of which have been or are being addressed by the management. STATEMENT BY THE AUDIT COMMITTEE IN RELATION TO OPTIONS ALLOCATION The Company had implemented an Employee Share Option Scheme ( ESOS ) on 16 September 2003 for a period of five years. The Committee has reviewed the allocation of share options pursuant to the ESOS is in compliance with criteria as set out in the ESOS Bye-Laws. During the financial year, no allocation of share options was made by the Company pursuant to the ESOS and no share options were offered to and exercised by the non-executive directors under the ESOS. GUNUNG CAPITAL BERHAD ( P) 22

24 FINANCIAL STATEMENTS Directors' Report Statement by Directors Statutory Declaration Report of the Auditors Balance Sheets Income Statements Statements of Changes in Equity Statements of Cash Flows Notes to the Financial Statements

25 Directors Report for the year ended 31 December 2007 The directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The Company is an investment holding company and the principal activities of its subsidiary companies are listed in Note 8 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. FINANCIAL RESULTS Group RM Company RM Net loss for the year 2,458,378 1,290,797 DIVIDENDS Since the end of the previous financial year, there is no dividend proposed, declared or paid by the Company and the directors do not recommend any dividend for the financial year ended 31 December RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements. ISSUE OF SHARES The Company has not issued any new share or debenture during the financial year. SHARE OPTIONS No options were granted to any person to take up unissued shares of the Company during the year apart from the issue of options granted pursuant to the Employee Share Option Scheme. EMPLOYEE SHARE OPTION SCHEME ("ESOS") The Company implemented an ESOS on 16 September 2003 for a period of 5 years. The ESOS is governed by the bye-laws which were approved by the shareholders on 4 August Information with respect to the number of options granted under the ESOS is as follows:- No. of Share Option As at 1 January ,000 Less: Lapsed (228,000) As at 31 December ,000 GUNUNG CAPITAL BERHAD ( P) 24

26 Directors Report (cont d) for the year ended 31 December 2007 EMPLOYEE SHARE OPTION SCHEME ("ESOS") (CONT D) The main features of the ESOS are as follows:- (a) (b) (c) (d) The maximum number of new Shares to be offered and allotted under the Scheme shall not exceed in aggregate ten per centum (10%) of the issued ordinary share capital of the Company at any point of time during the duration of the Scheme. The eligibility of a director or employee of the Group to participate in the ESOS shall be at the discretion of the Option Committee, who shall take into consideration factors such as years of service and performance track record. The Subscription Price shall be at the higher of the par value of the Shares of the Company and a price set at a discount of not more than 10% from the five (5) days weighted average market price of the Shares of the Company prior to the Date of Offer by the Company. Not more than fifty per cent (50%) of the Shares available under the scheme would be allocated in aggregate, to the Directors and "Senior Management". In addition, not more than ten per cent (10%) of the Shares available under the Scheme would be allocated to any individual Eligible Employee who either singly or collectively through his or her associates holds twenty per cent (20%) or more in the issued and paid-up share capital of the Company. DIRECTORS The directors who served since the date of the last report are:- Low Bok Tek Ahmad Shalimin bin Ahmad Shaffie Peter Wong Hoy Kim Gan Chong Shyan Tang Yuet Mun (Appointed on ) In accordance with Article 101 of the Company's Articles of Association, Low Bok Tek retires from the board by rotation at the forthcoming annual general meeting and being eligible, offers himself for re-election. In accordance with Article 108 of the Company's Articles of Association, Tang Yuet Mun retires from the Board at the forthcoming annual general meeting and being eligible offers himself for re-election. DIRECTORS' BENEFITS Since the end of the previous financial year, no director of the Company has received or become entitled to receive any benefit (other than the directors' remuneration as disclosed in the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest except for the related party transactions as disclosed in Note 26 to the financial statements. Neither during nor at the end of the financial year, was the Company a party to any arrangements whose object is to enable the directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. ANNUAL REPORT