CONTENTS PAGE. Corporate Structure Year Group Financial Highlights 03. Corporate Information Directors Profile 08-09

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2 CONTENTS PAGE Corporate Structure 02 5-Year Group Financial Highlights 03 Corporate Information Directors Profile Management Team Corporate Statement Corporate Governance Statement Audit Committee Report Statement of Internal Control Additional Disclosures Directors Report Statement by Directors and Statutory Declaration 39 Auditors Report 40 Income Statements 41 Balance Sheets 42 Statements of Changes in Equity Cash Flow Statements 45 Notes to the Financial Statements Analysis of Shareholdings List of Properties 87 Notice of Annual General Meeting Form of Proxy r U B Y Q U E S T B E r H A D

3 CORPORATE STRUCTURE

4 5-YEAR GROUP FINANCIAL HIGHLIGHTS FY2002 FY2003 FY2004 FY2005 FY2006 RM RM RM RM RM Sales Revenue 8,187 8,773 14,730 26,847 27,499 Profit Before Taxation (163) 1,285 1,692 2,272 1,925 Net Profit For the Year (225) 1,030 1,421 1,716 1,432 28,000 26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 (2,000) Sales Revenue Profit Before Taxation Net Profit for the Year r U B Y Q U E S T B E r H A D

5 CORPORATE INFORMATION Board of Directors Directors Tan Sri Dato Mohamed Noordin bin Hassan Chairman/ Non-Executive Director Sim Keng Siong Managing Director Lim Foo Seng Executive Director Shinichi Yamamoto Independent Non-Executive Director Looi Kem Loong Independent Non-Executive Director Wong Peng Yew Non-Independent Non-Executive Director Md Hilmi bin Datuk Hj Md Noor Independent Non-Executive Director (Resigned on 23 February 2007) Koay Ben Ree Independent Non-Executive Director (Appointed with effect from 23 February 2007) AUDIT COMMITTEE Name Designation Directorship Md Hilmi bin Datuk Hj Md Noor Chairman Independent Non-Executive Director (Resigned on 23 February 2007) Koay Ben Ree Chairman Independent Non-Executive Director (Appointed with effect from 23 February 2007) Looi Kem Loong Member Independent Non-Executive Director Shinichi Yamamoto Member Independent Non-Executive Director Lim Foo Seng Member Executive Director

6 CORPORATE INFORMATION (Cont d) COMPANY SECRETARIES Lim Foo Seng (MIA 12191) Wong Wei Fong (MAICSA ) HEAD OFFICE AND No.6, Jalan Salung 33/26, REGISTERED OFFICE Shah Alam Technology Park, Section 33, Shah Alam, Selangor. Telephone No. : Facsimile No. : address : rubyquest@po.jaring.my Website : AUDITORS Yong & Leonard PRINCIPAL BANKERS Public Bank Berhad CIMB Bank Berhad AmBank (M) Berhad RHB Bank Berhad EON Bank Berhad SHARE REGISTRAR Bina Management (M) Sdn Bhd Lot 10, The Highway Centre Jalan 51/ Petaling Jaya Selangor Darul Ehsan Telephone No : Facsimile No : SPONSOR Kenanga Investment Bank Berhad (formerly known as K & N Kenanga Berhad (Company No: H) 801, 8 th Floor, Kenanga International Jalan Sultan Ismail Kuala Lumpur Telephone No : Facsimile No : STOCK EXCHANGE MESDAQ Market of Bursa Malaysia Securities Berhad (Bursa Securities)

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8 board of directors... Your satisfaction is our pride...

9 DIRECTORS PROFILE Tan Sri Dato Mohamed Noordin bin Hassan, a Malaysian aged 67, was appointed to the Board on 10 January 2005 and is the Chairman and Non-Executive Director of the Ruby Quest Berhad. He has more than 40 years of working experience with the Malaysian Government and corporate sectors. Whilst with the Government, he served in various Government Departments at District, States and Federal levels as Secretary General of the Ministry of Education, Ministry of Science, Technology and Environment and Deputy-Secretary General of the Ministry of International Trade & Industry and others. Upon his retirement, he joined Petroliam Nasional Berhad ( Petronas ) as Vice President Human Resource Management and subsequently, as Vice President Education. After he left Petronas, he continued to serve as a member of the Board of a few Petronas subsidiaries. Currently, he is also Chairman of DNP Holdings Berhad, a public listed company and sits on the board of a number of its subsidiaries. He also sits on the board of UMW Holdings Berhad as an Independent Non-Executive Director. Sim Keng Siong, a Malaysian aged 35, was appointed to the Board on 28 January 2005 and is the Group Managing Director. He joined the Group in He has designed and successfully implemented various sizeable cleanroom projects throughout Malaysia. He has more than 10 years experience in the air filtration system and cleanroom industry. Mr. Sim graduated from Tunku Abdul Rahman College majoring in Mechanical Engineering. He has been the driving force in the growth, development and success of Envair Technology Sdn Bhd ( ETSB ) and Envair Mecs Engineering Sdn Bhd ( EMECS ), two of the wholly owned subsidiaries of Ruby Quest Berhad. Both ETSB and EMECS are involved in the cleanroom technological services which represent the main drivers for the Group s business activities. Lim Foo Seng, a Malaysian aged 37, was appointed to the Board on 28 January 2005 and is the Executive Director of Ruby Quest Berhad. He has 15 years experience in professional and commercial exposures. He is a member of the Malaysian Institute of Certified Public Accountants, a Chartered Accountant (Malaysia) and a member of the Malaysian Institute of Accountants. He has served in one of the international accounting firms, Deloitte Kassim Chan, based in Kuala Lumpur, from 1989 to It was then he acquired considerable knowledge, experience and exposure in management consultancy, taxation and accounting and auditing standards. He left the accounting firm in 1995 to join Arab-Malaysian Corporation Berhad Group ( Amcorp Group ) and was involved in business planning, venture capital activities, corporate restructuring and monitoring of portfolio companies in his capacity as Associate Director. He has also served as a board member of various portfolio companies of Amcorp Group. His last position with Amcorp Group was Chief Financial Officer of MCM Technologies Berhad, a subsidiary of Amcorp which is listed on MESDAQ Market. At present, he is the Corporate Affair Director of the Group. Wong Peng Yew, aged 56, was appointed to the Board on 1 February He was re-designated from Executive Vice Chairman to Non-Independent Non-Executive Director of Ruby Quest Berhad in 25 August He was based in the United Kingdom from 1978 until 1994 when he returned to Malaysia in 1995 to join Quest s Group of Companies. During his working career in the United Kingdom, he was the Finance Director of ARM Holdings Plc from 1990 to From 1986 to 1990, he was the Finance Director of European Silicon Structures Ltd. He worked at Procter and Gamble International Division based in the United Kingdom and report directly to the European Head Office in Geneva. Prior to that, he was the European Finance Manager for CPG Group, a division of General Mills Inc. He has been a member of the Institute of Directors (UK) since 1992.

10 DIRECTORS PROFILE (Cont d) Shinichi Yamamoto, a Japanese aged 61, was appointed to the Board on 28 January 2005 and is an Independent Non-Executive Director of Ruby Quest Berhad. He holds a Bachelor of Economics from Osaka University, Japan. He has 20 years of experience in environmental related business. In 1983 to 1995, he ventured into the business of building maintenance, refurbishment of water tanks and construction of elevated pressed steel water tanks and secured contracts from various local authorities and universities. At present, he is working as coordinator for some Japanese companies, involving in environmental related activities such as high tech waste disposal system, wastewater treatment plant and incinerator plant. He is also acting as a consultant for Ebara Corp. Co. Ltd. Looi Kem Loong, a Malaysian aged 31, was appointed to the Board on 12 January 2006 and is an Independent Non-Executive Director of Ruby Quest Berhad. Currently, he is the director of ALC Technology Group Sdn Bhd. Having completed his Bachelor in Accounting and Finance from University of Strathclyde (Scotland), Mr. Looi continued his articleship with an internationally affiliated audit firm. He is an Associate Member of the Institute of Chartered Accountants in England and Wales and also a member of the Malaysian Institute of Accountants. Having served as a manager in AmMerchant Bank Berhad and vice president in Newfields Advisors Sdn Bhd, Mr. Looi brings with him working experiences in audit, accountancy, corporate advisory and merchant banking. Koay Ben Ree, a Malaysian aged 35, was appointed to the Board on 23 February, 2007 and is an Independent Non-Executive Director of Ruby Quest Berhad. He also sits on the Board of I-Power Berhad as an Independent Non-Executive Director. He graduated from the University of Malaya with LLB (Honours) in 1995 and gained his admission as an Advocate & Solicitor to the High Court of Malaya in He later obtained his postgraduate qualification, LLM from the University of Warwick in Mr Koay worked in various legal firms before joining Messrs. Zul Rafique & Partners in He was made a Partner of Messrs. Zul Rafique & Partners in August Mr Koay s experience includes advisory on numerous IPO s, mergers and acquisitions, takeovers and debt restructurings, fund raisings and other corporate and commercial matters. Notes: 1. Family Relationship with Director and/or Major Shareholder None of the Directors has any family relationship with any director and/or major shareholder of the Company. 2. Conflict of Interest None of the Directors has any conflict of interest with the Company. 3. Conviction of Offences None of the Directors has been convicted of any offences in the past ten (10) years.

11 MANAGEMENT TEAM Aloysious Joachim A/L J.P. Pereira Executive Director of Quest Liquid Separation Sdn Bhd Low Siew Ping Executive Director of Vokes Air (M) Sdn Bhd Simon Loh Chi Yin Executive Director of Envair Mecs Engineering Sdn Bhd LEFT TO RIGHT (from top to bottom) Sim Keng Siong Group Managing Director Lim Foo Seng Executive Director of Ruby Quest Berhad Tan Joo Wee Executive Director of Envair Mecs Engineering (Penang) Sdn Bhd Koo Be How Executive Director of Quest Liquid Separation Sdn Bhd Lim Yin Leng Personal Assistant to Group Managing Director Chan Chee Seng General Manager of Envair Mecs Engineering (Penang) Sdn Bhd Tay Kok Seng General Manager of Envair Technology Sdn Bhd 10

12 MANAGEMENT TEAM (Cont d) LEFT TO RIGHT (from top to bottom) Pauline Chan Marketing Manager of Envair Mecs Engineering (Penang) Sdn Bhd Chew Keh Chyang Business Development Manager of Quest Technology Sdn Bhd Chan Sook Yin Finance Manager of Ruby Quest Berhad Cheong Chee On Project Manager of Envair Mecs Engineering (Penang) Sdn Bhd Ong Seng Joo Sales Technical Manager of Envair Mecs Engineering (Penang) Sdn Bhd Lee Guet Suan Sales and Marketing Manager of Quest Technology Sdn Bhd Lam Tuck Seong Assistant Manager (Facility & Warehouse) of Ruby Quest Berhad Tan Ai Guat Assistant Sales Manager of Quest Technology Sdn Bhd Praba Kiri Assistant Accounts Manager of Ruby Quest Berhad 11

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14 corporate statement... Realising our dream...

15 CORPORATE STATEMENT Dear Shareholders, On behalf of the Board of Directors, we are pleased to present the Corporate Statement of Ruby Quest Berhad ( Quest ) for the financial year ended 31 December FINANCIAL REVIEW For the financial year ended 31 December 2006, the Group recorded revenue of RM27.50 million, an increase of 2.4% over the prior year s revenue of RM26.85 million. The Group s pre-tax profit for the year under review was RM1.93 million, a decline of 15.0% as compared to prior year s pre-tax profit of RM2.27 million. After accounting for tax, the Group s profit after tax was RM1.43 million for the financial year ended 31 December 2006 compared to RM1.72 million for the financial year ended 31 December The lower profit was mainly due to expansion costs incurred during the financial year under review. These costs were mainly in relation to additional human resource expenses for its new business activities and one time relocation expenses for its new Head Office. The Group s net assets stood at RM21.88 million, an increase of RM1.43 million over the previous financial year of RM20.45 million. CORPORATE DEVELOPMENT In line with the Group s expansion plan, on 25 October 2005, Quest Filter Sdn Bhd ( QF ), a wholly owned subsidiary of Quest, has successfully bid in a public auction to acquire a corner three storey office block annexed to a one and a half warehouse building measuring approximately 66,232 square feet ( property ) located at Shah Alam Technology Park for purchase consideration of RM5.13 million. The acquisition was completed on 9 March 2006 and shareholders approval for the ratification for the acquisition was obtained in an Extraordinary General Meeting held on 21 June The new head office of Ruby Quest Berhad 14

16 CORPORATE STATEMENT (Cont d) Prior to this acquisition, Quest had been renting its head office cum factory in Shah Alam via one of its wholly owned subsidiary, Quest Technology Sdn. Bhd. ( QT ) and some of its subsidiaries operate in different locations in the Klang Valley as the previous head office is unable to accommodate all its staff due to limited space. The acquisition enabled Quest to house the entire Group s operations in Klang Valley at a single location.the relocation is expected to increase the Group s efficiency and reduce overheads in the long run. NEW PRODUCT DEVELOPMENT During the year under review, the Group via QF, has successfully developed its first water purifying unit for the household sector and submitted the Industrial Design for registration in nine Asian countries, including Malaysia. QF has also managed to obtain a conditional approval letter from the Malaysian Industrial Development Authority for its Pioneer Status application during the year under review. Additionally, QF is also manufacturing other water filtration products for external parties. The new production lines to manufacture a range of water filtration products for household sector were commissioned in the final quarter of the financial year ended 31 December This new business activity is synergistic with the Group s existing liquid engineering division due to the availability of the expertise and technical know-how in the areas of water treatment systems for industrial sector. QF had managed to register a profit before tax of RM0.040 million in its first year of operation and the business is expected to grow in the coming year. A range of water filtration products manufactured by Quest Filter Sdn. Bhd. PROSPECT In view of the continuous uncertainties in the global economic environment, the Board and the management are constantly reviewing the entire Group s operation, resources and commitments in order to improve the Group s performance. The Group will continue to embark on its products diversification strategies and overseas market penetration plan. During the year under review, the Group has successfully secured an overseas cleanroom project worth approximately RM0.72 million from Panasonic Communication Philippines Corporation in Manila, Philippines. This project was completed in October The successful implementation of this maiden overseas cleanroom project may pave the way for the Group to expand its core competency in the provision of design and integration of cleanroom system in the Philippines market in the near future. 15

17 CORPORATE STATEMENT (Cont d) The Group also benefited from its effort to diversify its products and services as its new high end flooring products under the brand name Gerflor, has registered revenue of RM2.135 million for financial year ended 31 December The exclusive rights to distribute Gerflor flooring products was successfully secured by the Group via QT from Gerflor SAS, a public company incorporated in France, in the final quarter of last financial year ended 31 December This range of products complements the Group s business activities for the cleanroom flooring system. Going forward, the Group expects the new production lines for the water filtration products for household sector which are mainly targeting end users in the overseas markets, to contribute positively to the Group in the near future. Barring unforeseen circumstances, the Group is expected to register a better performance for the financial year ending 31 December ACKNOWLEDGEMENT On behalf of the Board of Directors, we would like to thank all our employees for their untiring commitment, continuous effort, loyalty, dedication and contribution towards the growth of the Company. In addition, we would like to extend our heartfelt appreciation to our shareholders, customers, suppliers, business associates, bankers and regulatory authorities for their continuous support, co-operation and confidence in us. Lastly, we would also like to thank our fellow Board members for their assistance, advice and guidance. Tan Sri Dato Mohamed Noordin Bin Hassan Chairman / Non-Executive Director Sim Keng Siong Group Managing Director RUBY QUEST BERHAD Participation by the Group to promote Gerflor s flooring products in the 23 rd Malaysian International Building Exposition held on September 2006 at Kuala Lumpur Convention Centre. 16

18 corporate governance statement audit committee report statement of internal control additional disclosures

19 CORPORATE GOVERNANCE STATEMENT The Board recognises the importance of corporate governance in discharging the Board s stewardship responsibilities and to protect and enhance the shareholders value. Premised on this, the Board is committed to ensure high standards of corporate governance are practiced throughout the Company and to apply the principles and best practices as governed by the Listing Requirements of the MESDAQ Market of Bursa Malaysia Securities Berhad and Guidance Note 2 on Corporate Governance. The Company continuously endeavours to comply with the Malaysian Code on Corporate Governance. The following statement sets out the Company s compliance with the principles of the Code. A) DIRECTORS i) The Board The Board is primarily responsible for the strategic directions of the Company. In addition, the Board also oversees the conduct of the Company s business, whereby it devises and puts in place adequate systems of control, focused primarily on mitigation of any foreseeable or potential risk besetting the Company. ii) Board Balance The Board comprises seven directors, of whom two are executive directors and five are non-executive directors. More than one-third (1/3) of the current Board is represented by Independent Non-Executive Directors who are independent of management and free from any business or other relationship which could interfere with the exercise of independent judgment on the Board s deliberations and decision making, each of whom, brings with him vast and varied experiences, exposure and expertise. The profile of each member of the current Board is set out on pages 8 to 9 of this Annual Report. iii) Board Meetings To ensure that the Quest Group is managed effectively and efficiently, the current Board is scheduled to meet at least four (4) times a year, with additional meetings being convened when necessary. Besides that, the Board also approves matters through the circulation of Directors Circular Resolution in accordance with the Articles of Association of the Company. 18

20 CORPORATE GOVERNANCE STATEMENT (Cont d) The details of the Director s attendances for the Board Meetings are set out below:- Name of Director No. of meetings attended % during the financial year Tan Sri Dato Mohamed Noordin Bin Hassan 5/5 100 Wong Peng Yew 5/5 100 Sim Keng Siong 5/5 100 Lim Foo Seng 5/5 100 Md Hilmi Bin Datuk Hj Md Noor 5/5 100 (resigned on 23 February 2007) Shinichi Yamamoto 5/5 100 Looi Kem Loong 5/5 100 Koay Ben Ree Not Applicable N/A (Appointed with effect from 23 February 2007) iv) Supply of Information and Access to Advice The Board shall be provided with comprehensive board papers on a timely manner prior to board meetings. This is to ensure and enable the members of the Board to discharge their duties and responsibilities competently in a well-informed manner. All members of the Board have unhindered access to the advice and services of the Company Secretaries, and where necessary, may seek independent professional advisers for advice for the purpose of discharging their statutory and fiduciary duties. Every Director also has unrestricted access to all information with regard to the activities of Quest Group. v) Directors Training All the Directors are provided with appropriate training and guidance as to their duties and responsibilities as Directors of a public listed company. The Directors had attended the Mandatory Accreditation Programme pursuant to Bursa Malaysia Securities Berhad guidelines on Training for Directors. The Directors will continue to undergo other relevant programmes to further enhance their skills and knowledge to assist them in discharging their duties as Directors. vi) Re-election of Directors In accordance with the Company s Articles of Association, one-third (1/3) of the directors (except the Managing Director) shall retire from office and be eligible for re-election at each Annual General Meeting and all directors shall retire from office at least once in each three (3) years but shall be eligible for re-election. Directors appointed during the year will be subject to retirement and re-election by shareholders in the Annual General Meeting. 19

21 CORPORATE GOVERNANCE STATEMENT (Cont d) Directors over seventy (70) years of age are required to retire and submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, Presently, none of the directors is subject to such retirement and re-appointment. In accordance with the Company s Articles of Association, the Managing Director of the Company will not be subject to retirement by rotation and he shall, subject to the provisions of any contract between him and the Company be subject to the same provisions as to resignation and removal as the other Directors of the Company and if he ceases to hold the office of Director for any cause he shall immediately cease to be a Managing Director. vii) Board Committee The Board has set up several of the following Committees to assist the Board in discharging their duties and decision making:- (a) Audit Committee The Audit Committee comprises three (3) Independent Non-Executive Directors and one (1) Executive Director, as follows:- Chairman : Md Hilmi Bin Datuk Hj Md Noor (Independent Non-Executive Director) (Resigned on 23 February 2007) Koay Ben Ree (Independent Non-Executive Director) (Appointed with effect from 23 February 2007) Members : Shinichi Yamamoto (Independent Non-Executive Director) Looi Kem Loong (Independent Non-Executive Director) Lim Foo Seng (Executive Director) The Audit Committee Report is set out on pages 25 to 27 of this Annual Report. (b) Nomination Committee The Nomination Committee comprises the following members:- Chairman : Shinichi Yamamoto (Independent Non-Executive Director) Members : Tan Sri Dato Mohamed Noordin bin Hassan (Non-Executive Director) Md Hilmi Bin Datuk Hj Md Noor (Independent Non-Executive Director) (Resigned on 23 February 2007) 20

22 CORPORATE GOVERNANCE STATEMENT (Cont d) (b) Nomination Committee (Cont d) Koay Ben Ree (Independent Non-Executive Director) (Appointed with effect from 23 February 2007) The terms of reference of the Nomination Committee are as follows:- To regularly review the Board structure, size and composition. To recommend candidates for the approval of the Board to fill Board vacancies. To annually review the required mix of skills and experience and other qualities and competence which non-executive directors should bring to the Board. To annually assess the effectiveness of the Board as a whole, the committee of the Board and contributions of each individual director of the Board. (c) Remuneration Committee The Company has an established framework of principles to evaluate performance and reward for executive directors. Remuneration packages for the executive directors are formulated to be competitive and realistic, emphasis being placed on performance, with aims to attract, motivate and retain executive directors of caliber to the Group. For non-executive directors, the level of remuneration commensurates with the level of responsibilities undertaken by them for the Company. The Remuneration Committee comprises the following members:- Chairman : Tan Sri Dato Mohamed Noordin bin Hassan (Non-Executive Director) Members : Shinichi Yamamoto (Independent Non-Executive Director) Md Hilmi Bin Datuk Hj Md Noor (Independent Non-Executive Director) (Resigned on 23 February 2007) Koay Ben Ree (Independent Non-Executive Director) (Appointed with effect from 23 February 2007 The terms of reference of the Remuneration Committee are as follows:- To review and determine, at least once annually, adjustments to the remuneration package, including benefits in kind, of each executive director, taking into account the performance of the individual, the inflation price index, and where necessary, information from independent sources on remuneration packages for equivalent jobs in the industry. To review and determine the quantum of performance related bonuses, benefits-in-kind and Employee Share Options, if available, to be given to the executive directors. To consider and execute the renewal of the service contracts of executive directors as and when due, as well as the service contracts and remuneration package for newly appointed executive director(s) prior to their appointment. 21

23 CORPORATE GOVERNANCE STATEMENT (Cont d) B) DIRECTORS REMUNERATION The Directors are satisfied that the current level of remuneration is in line with the responsibilities expected. The aggregate Directors remuneration paid or payable to all Directors of the Company categorised into appropriate components for the financial year ended 31 December 2006 are as follows:- Remuneration RM 000 Non-Executive Directors Executive Directors Total Salaries Fees Bonuses Payroll based expenses- EPF Meeting allowances Housing Allowance Benefit-in-kind TOTAL Note: Mr Wong Peng Yew has been re-designated from the Executive Vice Chairman to the Non- Executive Director of Ruby Quest Berhad on 25 August The salaries for the Executive Directors included that of Mr Wong Peng Yew during his tenor as the Executive Director. Number of Directors Range of Remuneration Non-Executive Executive Total Directors Directors Below RM50, RM50,000 - RM100, RM100,000 - RM150, RM150,000 - RM200, RM200,000 - RM250,

24 CORPORATE GOVERNANCE STATEMENT (Cont d) C) RELATIONS WITH SHAREHOLDERS The Company recognises the importance of timely and regular dissemination of information to shareholders of the Company via the Annual Report to shareholders, quarterly financial reports and the various announcements made during the year. These will enable the shareholders and members of the public to have an overview of the Group s performance and operations. The Annual General Meeting also provides an opportunity for the shareholders to seek and clarify any issues relevant to the Company. Shareholders are encouraged to meet and communicate with the Board at Annual General Meeting and to vote on all resolutions. D) Accountability and Audit i) Financial Reporting The Directors aim to provide a balanced and meaningful assessment of the Company s financial performance and prospects, primarily through the Annual Report and quarterly financial statements. The Directors are also responsible for ensuring that the annual financial statements are prepared in accordance with the provision of the Companies Act, 1965 and the applicable Approved Accounting Standards in Malaysia. A statement by the Directors of their responsibilities in the preparation of financial statements is set out in the ensuring section. ii) Statement of Directors Responsibilities in respect of the Financial Statements The Malaysian Company Law requires the Directors to prepare financial statements for each financial year, which give true and fair view of the state of affairs of the Company and of the results and cash flow of the Company for that period. In preparing those financial statements, the Directors are required to:- a) select suitable accounting policies and then apply them consistently; b) state whether applicable accounting standards have been followed; c) make judgments and estimates that are reasonable and prudent; and d) prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the Company. The Directors are also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and irregularities. The Directors have prepared the annual financial statements in compliance with the Companies Act,

25 CORPORATE GOVERNANCE STATEMENT (Cont d) iii) Internal Control The Board acknowledges its responsibility for maintaining a sound system of internal control, which provides reasonable assessment of effective operations, internal controls and compliance with the laws and regulations as well as with internal procedures and guidelines. A statement on internal control of the Company is set out on pages 28 to 29 of this Annual Report. iv) Relationship with the Auditors Through the Audit Committee, the Company shall establish a transparent and appropriate relationship with the Company s auditors, which enable the auditors to highlight to the Audit Committee and the Board, matters that require the Board s attention. 24

26 AUDIT COMMITTEE REPORT 1. COMPOSITION AND DESIGNATION OF AUDIT COMMITTEE The Audit Committee currently comprises the following members:- Chairman : Md Hilmi Bin Datuk Hj Md Noor (Independent Non-Executive Director) (Resigned on 23 February 2007) Koay Ben Ree (Independent Non-Executive Director) (Appointed with effect from 23 February 2007) Members : Shinichi Yamamoto (Independent Non-Executive Director) Looi Kem Loong (Independent Non-Executive Director) Lim Foo Seng (Executive Director) 2. TERMS OF REFERENCE a) Composition of Audit Committee The Committee shall be appointed from amongst the Board of Directors and shall comprise at least three (3) members whereby at least one member of the Committee:- i) must be a member of the Malaysian Institute of Accountants; or ii) if he/she is not a member of the Malaysian Institute of Accountants, he/she must have at least three years working experience and:- a) he must have passed the examinations specified in Part I of the 1 st Schedule of the Accountants Act 1967; or b) he must be a member of one of the associations of accountants specified in Part II of the 1 st Schedule of the Accountants Act iii) fulfills such other requirements as may be prescribed by the Bursa Securities. The majority of the Committee members must be Independent Directors and in the event of any vacancy with the result that the number of members is reduced to below three (3), the vacancy must be filled within three (3) months. b) Chairman The Chairman, who shall be elected by the Audit Committee, must be an independent director. 25

27 AUDIT COMMITTEE REPORT (Cont d) c) Secretary The Company Secretary shall be the Secretary of the Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and circulating it prior to each meeting. The Secretary shall also be responsible for keeping the minutes of meetings of the Committee and circulating them to the Committee Members. d) Meetings The quorum for a meeting shall be two (2) members, provided that the majority of the members present at the meeting shall be independent directors. The external auditors have the right to appear at any meeting of the Audit Committee and shall appear before the Committee when required to do so by the Committee. The external auditors may also request a meeting if they consider it necessary. e) Rights The Audit Committee shall: i) have explicit authority to investigate any matter within its terms of reference; ii) have the resources which it needs to perform its duties; iii) have full and unrestricted access to any information which it requires in the course of performing its duties; iv) have unrestricted access to the chief executive officer and chief financial officer; v) have direct communication channels with the external and internal auditors (if any); and vi) be able to obtain independent professional or other advice in the performance of its duties at the cost of the Company. f) Duties The duties of the Audit Committee shall include a review of: i) the nomination of external auditors; ii) the adequacy of existing external audit arrangements, with particular emphasis on the scope and quality of the audit; iii) the effectiveness of the internal control and management information systems; iv) the internal audit findings and implementation status of recommendations made by internal auditors; v) the quarterly reports and year-end financial statements of the Company with both the external auditors and senior management; vi) the external auditor s audit report; vii) any management letter sent by the external auditors to the Company and the management s response to such letter; viii) any letter of resignation from the Company s external auditors; ix) the assistance given by the Company s officers to the external auditors; x) all areas of significant financial risk and the arrangements in place to contain these risks to acceptable levels; and xi) all related party transactions and potential conflict of interest situations. 26

28 AUDIT COMMITTEE REPORT (Cont d) 3. SUMMARY OF ACTIVITIES The Audit Committee is scheduled to meet at least four (4) times a year, with additional meetings being convened when necessary. Details of the attendance during the year under review are as follows:- Name No. of meetings attended % during the financial year Lim Foo Seng 5/5 100 Md Hilmi Bin Datuk Hj Md Noor 5/5 100 (Resigned on 23 February 2007) Shinichi Yamamoto 5/5 100 Looi Kem Loong 5/5 100 Koay Ben Ree Not Applicable N/A (Appointed with effect from 23 February 2007) During the year under review, the following were the activities of the Audit Committee: 1. Reviewed the quarterly financial results and ensured that the financial reporting and disclosure requirements of relevant authorities had been complied with, focusing particularly on: 1.1 changes in or implementation of major accounting policies and practices; 1.2 the on-going concern assumption; 1.3 significant and unusual events; and 1.4 compliance with accounting standards and other legal requirements. 2. Reviewed the related party transactions and conflict of interest situation, if any, within the Company or group including any transactions, procedures or course of conduct that raised questions of management integrity in the ordinary course of business. 3. Reviewed the audit strategy and plan of the External Auditors. 4. INTERNAL AUDIT FUNCTION During the financial year, the Company does not have an internal audit department and the Audit Committee relied on discussions with the senior management and executive directors, review of quarterly financial statements and input from the external auditors to discharge its duties. The Executive Directors through their daily involvement in the business operations and attendance at operational and management level meetings, monitors the Company s policies and procedures. Any significant unresolved matters, requiring the Board of Directors intervention will be reported by the Executive Directors accordingly. 27

29 STATEMENT ON INTERNAL CONTROL INTRODUCTION The Malaysian Code on Corporate Governance stipulates that the Board of Directors of listed companies should maintain a sound system of internal control to safeguard shareholders investments and the Group s assets. Below is the Board of Directors Statement on Internal Control which has been prepared with reference to the Bursa Securities Statement on Internal Control: Guidance for Directors of Public Listed Companies. RESPONSIBILITIES The Board of Directors recognises the importance of a sound system of internal control and effective risk management practices to good corporate governance. The Board affirms its overall responsibility for maintaining sound systems of internal control within the Group covering financial, operational, compliance and risk management issues, and for reviewing regularly the adequacy and effectiveness of such systems within the Group. Sound systems of internal control will help to safeguard the Group s assets and shareholders investment. The Board, in the discharge of its stewardship responsibilities, is committed to identify key risks to which companies within the Group are exposed and will introduce appropriate systems progressively to manage such risks. Notwithstanding that, there are, however, limitations inherent in any system of internal control, and such system is designed to manage rather than eliminate the risk that may impede the achievement of business objectives. It should be appreciated that it could therefore only provide reasonable and not absolute assurance against material misstatement of management or financial information or financial losses or frauds. It should be further noted that the cost of control procedures should not exceed the benefits to be derived from such procedures. KEY ELEMENTS OF INTERNAL CONTROL Some of the key control procedures have been embedded in the operations of the business with sufficient assurance mechanism to safeguard the assets of the Group and to preserve shareholders investment. The following key elements ensure that the proper control regime is maintained: Audit Committee The Audit Committee reviews the Group s accounting and reporting policies and practices, and the adequacy and effectiveness of the systems of internal control. The Audit Committee also ensures that there is continuous effort by management to address and resolve areas where control weaknesses exist. The Audit Committee reviews the quarterly results of the Group and recommends adoption of such results to the Board before announcement to Bursa Securities is made. Risk Management Currently there is no structured risk management process to assess significant risks faced by the Group. However, the findings of the external auditors and informal identification and review of risks are carried out during management meetings as an on going process for identifying, evaluating and managing significant risks faced by the Group. The topics that were discussed include corporate image, environment, health and safety, human resource, product quality, project activities, general performance and competitors activities. 28

30 STATEMENT ON INTERNAL CONTROL (Cont d) Reporting and Review The Group has in place a management reporting mechanism whereby financial information is generated for senior management review on a timely manner. The Group Managing Director meets regularly with the Executive Director and senior management to review, discuss and resolve operational, financial, corporate and business issues. Other Risks and Control Processes In addition to the above, the Group also has in place the following key elements: An organisation structure, with clearly defined authority limits and reporting mechanism to higher levels of management and to the Board, which supports the maintenance of a strong control environment. Specific responsibilities have delegated to the relevant Board committees, all of which have formalised terms of reference. These committees have the authority to examine all matters within their scope and report to the Board with their recommendations. Conclusion The system of internal control is satisfactory and has not resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group s annual report. The Group continues to take measures to strengthen the internal control environment. 29

31 ADDITIONAL DISCLOSURES STATUS OF THE UTILISATION OF THE INITIAL PUBLIC OFFER PROCEEDS As at 31 December 2006, the status of utilisation of the proceeds for Quest Group is summarised below:- Purpose Approved Utilisation for the Cumulative Unutilised Utilisation current financial utilisation as at balance year ended 31 December December 2006 Unutilised: RM 000 RM 000 RM 000 RM 000 Capital Expenditure Working Capital R&D expenses Listing expenses * 9, * The unutilised balance of the budgeted listing expenses as at 31 December 2006 will be utilised for working capital purposes. MATERIAL CONTRACTS INVOLVING DIRECTORS AND SUBSTANTIAL SHAREHOLDERS INTEREST There were no material contracts entered by the Company or its subsidiaries involving directors and substantial shareholders interest in the financial year ended 31 December VARIATION OF RESULTS There were no significant variations between the audited results for the financial year and the unaudited results previously announced. SANCTIONS AND /OR PENALTIES There were no sanctions and /or penalties imposed on the Company and its subsidiaries, directors or management by the relevant regulatory bodies during the financial year. 30

32 ADDITIONAL DISCLOSURES (Cont d) NON-AUDIT FEES Other fees paid by the Company to external auditors for the financial year ended 31 December 2006 other than the statutory audit fees were RM1, as disclosed in Note 10 of the financial statements. PROFIT FORECAST/PROFIT GUARANTEE The Company did not issue any profit forecast in any public documents during the current financial year. REVALUATION POLICY ON LANDED PROPERTIES The Company does not have any revaluation policy on landed properties. 31

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34 financial statements... Stimulating growth... ensuring our continual success

35 FINANCIAL REPORT RUBY QUEST BERHAD (Company No T) (Incorporated in Malayasia) Contents Directors Report Statement by the Directors 39 Statutory Declaration 39 Report of the Auditors 40 Income Statements 41 Balance Sheets 42 Statements of Changes in Equity Cash Flow Statements 45 Notes of the Financial Statements r U B Y Q U E S T B E r H A D

36 FINANCIAL REPORT Directors Report The directors have pleasure in submitting their report and the audited financial statements of the Group and the Company for the financial year ended 31 December Principal Activities The principal activities of the Company are investments holding and the provision of management services. The principal activities of the Group consist of manufacturing and distribution of air and water filters, installation of cleanroom and water treatment system and providing technical and management services. There have been no significant changes in the nature of these activities during the financial year. The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the MES- DAQ Market of the Bursa Malaysia Securities Berhad. Its registered office is situated at No.6, Jalan Salung 33/26, Seksyen 33, Shah Alam Technology Park, Shah Alam, Selangor Darul Ehsan. Financial Results Group Company Profit after taxation RM 1,432,496 RM 4,239,422 Reserves and Provisions All material transfers to or from reserves and provisions during the year are shown in the financial statements. Share Capital During the financial year, no allotment and issue of shares was made by the Company. Directors The directors who have held office during the period since the date of the last report are as follows: Wong Peng Yew Tan Sri Dato Mohamed Noordin Bin Hassan Md Hilmi Bin Datuk Hj Md Noor (Resigned on 23 February 2007) Lim Foo Seng Sim Keng Siong Shinichi Yamamoto Looi Kem Loong Koay Ben Ree (Appointed on 23 February 2007) 35

37 Directors Interests The following directors who held office at the end of the financial year had, according to the register required to be kept under Section 134 of the Companies Act, 1965, an interest in shares of the Company as stated below: Interest in shares of the Company Direct interest: Number of ordinary shares at RM0.0 each At At..006 Acquired Sold..006 Wong Peng Yew 33,745,199-11,000,000 22,745,199 Tan Sri Dato Mohamed Noordin Bin Hassan 3,821,930-1,670,000 2,151,930 Md Hilmi Bin Datuk Hj Md Noor 50, ,000 Lim Foo Seng 2,320, ,320,280 Sim Keng Siong 9,888,840 24,080,300 22,614,300 11,354,840 Shinichi Yamamoto 20, ,000 Looi Kem Loong - 20,000-20,000 Indirect interest by virtue of the interest held by the spouse of Sim Keng Siong 32, ,010 By virtue of the above directors shareholdings in Ruby Quest Berhad, they are deemed to have an interest in the ordinary shares of companies under the Ruby Quest Berhad s group of companies, to the extent of the Company has an interest. Directors Benefits Since the end of the previous financial year, no director has received or become entitled to receive any benefit (other than those 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. 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 acquisition of shares in or debentures of the Company or any other body corporate. 6 r U B Y Q U E S T B E r H A D

38 Other Statutory Information Before the income statements and balance sheets of the Group and the Company were made out, the directors took reasonable steps: (a) 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 had satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and (b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and the Company had 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: (a) which would render the amounts written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and the Company inadequate to any substantial extent; or (b) which would render the values attributed to current assets in the financial statements of the Group and the Company misleading; or (c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and the Company misleading or inappropriate. No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and the Company to meet their obligations as and when they fall due. At the date of this report, there does not exist: (a) any charge on the assets of the Group and the Company which has arisen since the end of the financial year which secures the liability of any other person; or (b) any contingent liability of the Group and the Company which has arisen since the end of the financial year. At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. In the opinion of the directors: (a) the results of the Group s and the Company s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and (b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and the Company for the financial year in which this report is made. 37

39 Auditors The auditors, Yong & Leonard, have expressed their willingness to continue in office. Signed in accordance with a resolution of the Board of Directors: SIM KENG SIONG Director LIM FOO SENG Director 12 April

40 Statement by Directors Pursuant to Section 169 (15) of the Companies Act, 1965 We, Sim Keng Siong and Lim Foo Seng, being two of the directors of Ruby Quest Berhad, do hereby state that, in the opinion of the directors, the financial statements set out on pages 7 to 40 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2006 and of the results and cash flows of the Group and of the Company for the year ended on that date in accordance with Malaysian Accounting Standards Board approved accounting standards for entities other than private entities and the provisions of the Companies Act, Signed in accordance with a resolution of the Board of Directors : SIM KENG SIONG Director LIM FOO SENG Director 12 April 2007 Statutory Declaration Pursuant to Section 169 (16) of the Companies Act, 1965 I, Lim Foo Seng, being the director primarily responsible for the financial management of Ruby Quest Berhad, do solemnly and sincerely declare that the financial statements set out on pages 7 to 40 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by ) Lim Foo Seng ) at Petaling Jaya in the state of Selangor Darul Ehsan ) on 12 April 2007 ) LIM FOO SENG Before me, Commissioner For Oaths 39