(Company No W)

Transcription

1 (Company No W)

2 Page C O N T E N T S CORPORATE INFORMATION 2-3 CORPORATE STRUCTURE 4 PROFILE OF DIRECTORS 5-6 CHAIRMAN'S STATEMENT 7-8 STATEMENT ON CORPORATE GOVERNANCE STATEMENT ON INTERNAL CONTROL AUDIT COMMITTEE REPORT DIRECTORS REPORT STATEMENT BY DIRECTORS 25 STATUTORY DECLARATION 25 REPORT OF THE AUDITORS 26 INCOME STATEMENTS 27 BALANCE SHEETS 28 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY COMPANY STATEMENT OF CHANGES IN EQUITY 31 CASH FLOWS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS LIST OF PROPERTIES STATEMENT OF SHAREHOLDINGS SUBSTANTIAL SHAREHOLDERS 77 DIRECTORS SHAREHOLDINGS 77 NOTICE OF ANNUAL GENERAL MEETING FORM OF PROXY Enclosed 1

3 CORPORATE INFORMATION DIRECTORS MOHD ALKAF BIN MOHD KAHAR CHAIRMAN Independent Non-Executive Director KUO WEN CHI DEPUTY CHAIRMAN Executive Director KUO JEN CHANG CHIEF EXECUTIVE OFFICER Executive Director KUO JEN CHIU CHIEF OPERATING OFFICER Executive Director MARY HENERIETTA LIM KIM NEO Executive Director YONG KOK FONG Senior Independent Non-Executive Director LAW NGEE SONG Independent Non-Executive Director AUDIT COMMITTEE MOHD ALKAF BIN MOHD KAHAR - CHAIRMAN YONG KOK FONG LAW NGEE SONG REMUNERATION COMMITTEE MOHD ALKAF BIN MOHD KAHAR - CHAIRMAN YONG KOK FONG LAW NGEE SONG MARY HENERIETTA LIM KIM NEO NOMINATION COMMITTEE MOHD ALKAF BIN MOHD KAHAR - CHAIRMAN YONG KOK FONG LAW NGEE SONG SECRETARIES WOO YIN PUN (F) - MAICSA NO LEONG SIEW FOONG (F) - MAICSA NO REGISTERED OFFICE SUITE 6.1A, LEVEL 6, MENARA PELANGI, JALAN KUNING, TAMAN PELANGI, JOHOR BAHRU, JOHOR DARUL TAKZIM. TEL: FAX:

4 SHARE REGISTRAR SYMPHONY SHARE REGISTRARS SDN. BHD. (Company No D) LEVEL 26, MENARA MULTI PURPOSE CAPITAL SQUARE, NO. 8, JALAN MUNSHI ABDULLAH, KUALA LUMPUR. TEL: FAX: AUDITORS ERNST & YOUNG CHARTERED ACCOUNTANTS SUITE 11.2, LEVEL 11, MENARA PELANGI, JALAN KUNING, TAMAN PELANGI, JOHOR BAHRU, JOHOR DARUL TAKZIM. TEL: FAX: PRINCIPAL PLACE OF BUSINESS PLO 22, PARIT RAJA INDUSTRIAL ESTATE, PARIT RAJA, BATU PAHAT, JOHOR. MALAYSIA. PRINCIPAL BANKERS RHB BANK BERHAD CIMB BANK BERHAD EON BANK BERHAD CITIBANK BERHAD STOCK EXCHANGE MAIN BOARD OF THE BURSA MALAYSIA SECURITIES BERHAD STOCK CODE: 5101

5 CORPORATE STRUCTURE EVERGREEN FIBREBOARD BERHAD (COMPANY NO W) M A L A Y S I A T H A I L A N D I N D O N E S I A DTI 46.67% ATP 100% EDP 100% EJB 100% EHR 100% EAC 100% SFC 100% DKC 25% GRE 99.99% ECO 99.94% PTH 51% Abbreviations:- DTI - Dawa Timber Industries (M) Sdn Bhd (Co. No M) ATP - AllGreen Timber Products Sdn Bhd (Co. No T) EDP - Evergreen Decor Products (M) Sdn Bhd (Co. No A) EJB - Evergreen Fibreboard (JB) Sdn Bhd (Co. No M) EHR - Evergreen Hevea Resources Sdn Bhd (Co. No A) (Acquired on 18 June 2007) EAC - Evergreen Adhesive & Chemicals Sdn Bhd (Co. No T) (Acquired on 22 August Formerly known as Evergreen Adhesive Sdn Bhd) SFC - Siam Fibreboard Co., Ltd (Co. No ) DKC - Dynea Krabi Co. Ltd (Co. No ) GRE - GRE ENergy Co., Ltd (Co. No ) (Acquired on 13 February 2007) ECO - ECO Generation Co., Ltd. (Co. No ) (Acquired on 15 June 2007) PTH - PT Hijau Lestari Raya Fibreboard (Co. No. 131) (Incorporated on 28 June 2007)

6 PROFILE OF DIRECTORS Mohd Alkaf Bin Mohd Kahar, Malaysian, aged 60, is the Independent Non-Executive Chairman of the Company. He became a member of the Board of Directors on 15 February 1998 and was appointed as Chairman on 15 April Currently, he is the Chairman of the Audit Committee, Remuneration Committee and Nomination Committee. He graduated from the University of Malaya with a Bachelor of Arts Degree majoring in Economics in In 1975, he obtained his Masters of Arts Degree in Development Economics at Williams College in Massachusetts, United States. He joined the Administrative and Diplomatic Service and served the Government in the Economic Planning Unit, Prime Minister s Department ( ) and the Ministry of Finance ( ). He was the Ministry s Representative Director on the National Tobacco Board and the Terengganu State Economic Development Corporation. He was Deputy Secretary (Economic Division) of the Ministry of Finance when he left the Government service in 1984 to join RHB Bank Berhad first as Senior Manager (Treasury) then as Divisional Manager (Banking Operations) and subsequently as General Manager. He resigned from RHB Bank Berhad in Kuo Wen Chi, Singaporean, aged 74, is the Executive Deputy Chairman of the Company. He is the founder of the Evergreen Group of Companies. He became a member of the Board of Directors on 15 May 1991 and was appointed as Non-Executive Deputy Chairman on 15 April Subsequently, he was redesignated as Executive Deputy Chairman in the Company on 16 March His career started in 1949 as a Production Supervisor at Lin Shan Hao Plywood Co Ltd in Taiwan. He brings with him more than 40 years of experience in the wood-based industry. Subsequently in 1972, he moved to Singapore to establish his own business with the incorporation of Evergreen Timber Products Co. Pte Ltd ( ETP ). He was then appointed the Managing Director and was responsible for the overall management of the company. In 1977, he ventured into Malaysia to establish the Evergreen Group of Companies. He has been the main driving force behind the growth and development of the Evergreen Group. His current responsibilities include management and business; and strategic planning and developing the strategic direction. He is the husband of Hsu Mei Lan; and father of Kuo Jen Chang, Kuo Jen Chiu and Kuo Huei Chen. Kuo Jen Chang, Singaporean, aged 45, is the Chief Executive Officer of the Company. He became a member of the Board of Directors on 15 May 1991 and was appointed Managing Director on 15 April Subsequently, he was redesignated Chief Executive Officer in the Company on 15 May He graduated with a Bachelor s Degree in Electronics Engineering from the University of Wisconsin, United States in His career started in 1987 when he joined ETP in Singapore as Procurement Manager responsible for sourcing and negotiations on machinery for the upgrading and expansion of the company. In 1989, he was appointed Director of Evergreen Décor Products (M) Sdn Bhd ( EDP ), a subsidiary company of the Company. He was overseeing the entire operations of the Company up until In the capacity of Chief Executive Officer, he is responsible for the entire set-up operations of the Group. He is the son of Kuo Wen Chi and Hsu Mei Lan; and brother of Kuo Jen Chiu and Kuo Huei Chen. Kuo Jen Chiu, Singaporean, aged 42, is the Chief Operating Officer of the Company. He became a member of the Board of Directors on 15 May 1991 and was appointed Executive Director on 15 April He was redesignated Chief Operating Officer on 3 April He graduated with a Degree in Computer Science from the University of Wisconsin, United States in He started his career as Marketing Manager with ETP in Singapore in In the capacity of Executive Director, he oversees the Financial and Marketing Departments of the Group. His responsibilities include identifying opportunities and developing new markets. He brings with him more than fourteen (14) years experience in the industry. He is the son of Kuo Wen Chi and Hsu Mei Lan; and brother of Kuo Jen Chang and Kuo Huei Chen.

7 Mary Henerietta Lim Kim Neo, Malaysian, aged 44, is the Executive Director of the Company. She became a member of the Board of Directors on 15 December 1995 and was appointed as Executive Director on 15 April Currently, she is a member in the Remuneration Committee. Her career started as a Human Resources/Administrative Officer with KS Liew LT and Partners, a consulting engineering firm, in She was responsible for the company s day-to-day matters with the government authorities and human resource issues of the the company. In 1992, she left for the manufacturing industry and joined EFB as a Human Resources/ Administrative Executive to oversee the Human Resource and Administrative Department. Subsequently in 1995, she was promoted to Human Resource and Administrative Manager and was also appointed a Director. In 2000, she was appointed to her current position in the Company to oversee the Administrative issues of the Evergreen Group in Malaysia. Yong Kok Fong, Malaysian, aged 32, is the Independent Non-Executive Director of the Company. He became a member of the Board of Directors on 1 June Currently, he is a member of the Audit Committee, Remuneration Committee and Nomination Committee. He completed his Association of Chartered Certified Accountants examinations in February 1999, and obtained a Diploma in Accounting from the London Chamber of Commerce and Industry in He has been a member of the Association of Chartered Certified Accountants, United Kingdom since July He is also a Chartered Accountant with the Malaysian Institute of Accountants since September 2002, an Associate Member of the Malaysian Institute of Taxation since May 2003, a Non-Practicing Member with The Institute of Certified Public Accountants of Singapore since June 2005 and a member with The Institute Malaysian of Certified Public Accountants since December Currently, he is attached with an accounting firm where he is involved in advisory and assurance services. From May 2004 to December 2006, he was a Chief Financial Officer of a company, listed on the SGX-SESDAQ. He was responsible for the overall financial planning and management functions of the group, including the overview of financial reports and ensuring compliance with the Malaysia and Singapore statutory requirements. From July 2003 to May 2004, he served as the Chief Financial Officer of another company listed on the SGX-SESDAQ, where he was responsible for the company s overall financial planning and management functions. From October 2002 to June 2003, he was the Group Financial Controller of a private limited company. Between March 1999 and October 2002, he was with an international accounting firm, Ernst & Young where he last held the position of Audit Senior carrying out statutory audit on private limited and public limited companies. Law Ngee Song, Malaysian, aged 42, the Independent Non-Executive Director of the Company. He became a member of the Board of Directors on 8 January Currently, he is a member of the Audit Committee, Remuneration Committee and Nomination Committee. He graduated from the Australian National University in 1989 with a Bachelor of Commerce and Bachelor of Laws. He was admitted as Advocate and Solicitor, High Court of Malaya. Since graduation, he has been practicing as Legal Assistant in Allen & Gledhill (1991 to 1995) and subsequently promoted as Partner (1995 to 1996) of the firm. He is now a Partner of Messrs Nik, Saghir & Ismail. Other information Except as disclosed above, none of the Directors has any family relationship with any Director and/or substantial shareholder of the Company. Conflict of Interest None of the Directors has any conflict of interest with the Company. Conviction for offences None of the Directors has been convicted for offences within the past ten (10) years other than traffic offences.

8 CHAIRMAN'S STATEMENT On behalf of the Board of Directors of Evergreen Fibreboard Berhad, I have the pleasure of presenting our Annual Report and audited Financial Statements of the Group and Company for the financial year ended 31 December CORPORATE DEVELOPMENT Towards our objective of attaining a regional presence in the medium density fibreboard (MDF) industry and at the same time relentlessly pursuing to be a cost efficient producer, we undertook a number of strategic investments during the year under review, premised on careful and meticulous planning. On 30 April 2007, we signed a Sales and Purchase Agreement for RM120 million for the installation and commissioning in the third quarter of 2008 of a third production line in Siam Fibreboard Co., Ltd (SFCL) in Thailand as part of our capacity expansion plan. The line would have an annual capacity of 268,000 cubic metres of super-thin 1.5mm high density fibreboard, 2.5mm and 3.0mm normal MDF. The super-thin boards would not only enhance our market penetration but also create a market niche for the Group. In September 2007, we completed the acquisition of the remaining 25% shares in SFCL for RM36.4 million. Following the acquisition and SFCL becoming EFB s full-fledge subsidiary, we would have full control of its operations and can fully account for its future profits. In February 2007, we acquired 1,333,327 ordinary shares of GRE Energy Co., Ltd for a power plant dedicated to supply electricity to SFCL which would not only enjoy uninterrupted supply of electricity but also cost savings in the face of high fuel price. The Joint-Venture Agreement of 20 April 2007 and the subsequent establishment of PT Hijau Lestari Raya Fibreboard marked the beginning of our presence in Indonesia. The plant is currently undergoing commissioning and once production starts, will enable us to penetrate new markets and contribute positively to our growth and earnings. On the local front, Evergreen Adhesive and Chemicals Sdn Bhd, a subsidiary of EFB has been set up to manufacture resins for use by our subsidiaries in the country and ensuring uninterrupted supply. PERFORMANCE AND FINANCIAL REVIEW For the financial year ended 31 December 2007, the Group s revenue of RM732 million represents an increase of 38.5% over RM528 million recorded in the previous year ended 31 December 2006 while the profit after tax and before minority interest of RM131 million doubled that of RM65 million of the previous year. The significant improvement in revenue and profit is attributable to the additional production volume contributed by our newly-acquired subsidiary, Evergreen Fibreboard (JB) Sdn Bhd despite the damage caused to one of its production lines due to a fire; improvement in our production efficiency; the encouraging selling price for most of our products; and the cost management programmes which we successfully implemented in the face of glue and freight cost increases. Our Group also recorded earnings per share of sen for the year ended 31 December 2007 against sen for the year ended 31 December 2006, and our net assets per share increased to RM1.12 from RM0.94. DIVIDEND We continue to adopt a dividend policy which aligns our dividend payment to profit performance after taking into consideration our future prospects, expansion plans, cash flow requirements and the availability of tax credits. During the year under review, we declared a first tax-exempt dividend of 10% or 2.5 sen per share which was paid on 19 November Your Board is now recommending a final tax exempt dividend of 18% or 4.5 sen per share which would bring the year s total tax-exempt dividend to 28% or 7.0 sen per share and total payment to shareholders to RM33.6 million or 26% of our profit after tax. 7

9 PROSPECTS The global economy is expected to grow slower than earlier forecasted with the imminent slipping of the US economy into a recession. The growth of the Asian economies is also expected to slow down with the possibility of inflation becoming more entrenched. Under such a scenario, prudence dictates that we should be conservative in the forecast of our performance in the current year. Nevertheless your Board is cautiously optimistic that barring any unforeseen circumstances, we would be able to at least perform as well as we did for Our cautious stance is premised upon our diversified export market; our recent investments and efforts at enhancing our technical efficiency both of which would lead to increased production; our assured and uninterrupted supply of raw materials, especially glue at stable cost; and our assumption that the price of our products would remain at their 2007 level. FUTURE PLANS While our plan for the current year is to forcus on efforts at bringing our new production lines to their maximum capacity, we would continue to seek and capitalize on business opportunities that present themselves either locally or overseas, through direct investments or joint ventures. APPRECIATION On behalf of the Board, I would like to express our deep appreciation to the various regulatory authorities for their assistance and to our customers and business partners for their continuous support. The Board also wishes to express its appreciation to the management and staff for their loyalty, dedication and commitment while the company pursues to grow steadily and at the same time attain reasonable dividend yields for our shareholders. Last but not least, my appreciation to my fellow members in the Board for their wise counsel. Mohd Alkaf Bin Mohd Kahar Chairman

10 C O R P O R A T E S T A T E M E N T S Page STATEMENT ON CORPORATE GOVERNANCE STATEMENT ON INTERNAL CONTROL AUDIT COMMITTEE REPORT 18-20

11 STATEMENT ON CORPORATE GOVERNANCE INTRODUCTION Pursuant to Paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Securities), the Directors are required to issue a Statement in relation to its compliance with The Malaysian Code on Corporate Governance (the Code). The Board of Evergreen Fibreboard Berhad is committed in maintaining a high standard of corporate governance and upholding its fundamental duty to safeguard the Group s assets as to enhance shareholders value and the financial performance of the Group. The Board is pleased to disclose below a description of how the Group has applied the principles of good governance and the extent to which it has complied with the best practices set out in the Code. 1. THE BOARD OF DIRECTORS (a) Board Composition and Attendance All Board members are individuals of high calibre and credibility. The Evergreen Group is led and managed by an experienced board whose members have vast experience and expertise in the wood-based panel industry, business management, finance, law and marketing. The profiles of the Directors are set out on pages 5 to 6 of this Annual Report. The Board has the overall responsibility ensuring that the proper management of Group s business, and the adequacy and integrity of its internal control systems as well as to undertake and formulate investor relations program or shareholder communication policy. During the financial year ended 31 December 2007, five (5) Board meetings were held and details of the directors attendance are as follows: Directors Directorship Attendance Mohd Alkaf Bin Mohd Kahar (Chairman) Independent, Non-Executive Director 5/5 Kuo Wen Chi (Deputy Chairman) Executive Director 5/5 Kuo Jen Chang ^ (Chief Executive Director) Executive Director 5/5 Kuo Jen Chiu (Chief Operating Officer) Executive Director 5/5 Mary Henerietta Lim Kim Neo* Executive Director 5/5 Yong Kok Fong Independent, Non-Executive Director 5/5 Law Ngee Song Independent, Non-Executive Director 5/5 Note: ^ Redesignated as Chief Executive Officer with effect from 15 May 2007 * Resigned as member of Audit Committee on 26 November 2007 The Board for the year ended 31 December 2007 comprises seven (7) members, four (4) of which are Executive Directors and three (3) Independent Non-Executive Directors. During the financial year, the composition of the Board was in compliance with Listing Requirements of Bursa Securities which requires at least one-third (1/3) of the Board to be Independent Directors. Mr Yong Kok Fong is the Senior Independent Non-Executive Director to whom shareholder concerns may be conveyed. 10

12 (b) Duties and Responsibilities The role of the Chairman and that of the Chief Executive Officer is distinct and separate, each with its own individual responsibility. Each has clearly defined duties, power and authorities. The Chairman is responsible for the orderly conduct of the Board while the Group Chief Executive Officer is responsible for the entire operations of the Group and the implementation of the Board s decisions and policies. The Group Chief Executive Officer is subject to the control of the Board of Directors. The Non-Executive Directors contribute their knowledge and experience in the decision-making process. They fulfill their role by providing unbiased views and independent judgments and they ensure that no group of Directors or any individual Director dominates the Board s discussion. The decisions of the Board are decided by a simple majority of votes of the Directors present at the Board meetings. None of the Independent Non-Executive Directors is involved in the day-to-day running and management of the Group s business operations. (c) Re-election The Articles of Association of the Company provides that an election of Directors shall take place each year and one-third (1/3) of the Directors for the time being or the number nearest to one-third shall retire from office so that all Directors shall retire from office at least once every three years but shall be eligible for reelection. (d) Meetings and Supply of information to the Board Prior to each Board meeting, all Directors receive an agenda and a full set of Board papers for each agenda item to be discussed. Relevant Directors will provide explanation of pertinent issues. All proceedings from the Board meetings are minuted and signed by the Chairman of the meeting in accordance with the provision of Section 156 of the Companies Act, The Board is kept updated on the Company s financial performance, activities and its operations. All Directors have access to the advice and services of the Company Secretaries who are responsible for ensuring that Board s procedures are followed. (e) Directors Training All Directors have completed the Mandatory Accreditation Programme and Continuing Education Programme (CEP) prescribed by Bursa Securities. For the financial year ended 31 December 2007, some Directors have broaden their horizon by virtue of their profession, whilst some of them have attended seminars and/ or conferences organized by relevant regulatory authorities, trainers and/ or professional bodies on the relevant regulations and developments in the market place, to keep themselves abreast with relevant changes whilst discharging their duties. (f) Board Committees In accordance with the best practices of the Code, the Board has delegated certain functions to the Board Committees to assist in the execution of its responsibilities with clearly defined terms of reference. The Board Committees include the Audit Committee, the Nomination Committee and the Remuneration Committee. The Chairman of the respective Committees report to the Board on the outcome of each Committee s Meetings. AUDIT COMMITTEE The Audit Committee was established on 31 January 2005 and is chaired by Mohd Alkaf Bin Mohd Kahar. Other members of the Audit Committee are Yong Kok Fong and Law Ngee Song. The details on the composition, terms of reference and summary of activities of the Audit Committee are set out on pages 18 to 20 of this Annual Report. 11

13 NOMINATION COMMITTEE The Nomination Committee was set up on 24 May 2005 and exclusively comprised of Non-Executive Directors with a majority of Independent Directors. The present members of the Nomination Committee of the Company are as follows: - Chairman Mohd Alkaf Bin Mohd Kahar Member Yong Kok Fong Law Ngee Song The primary objective of the Nomination Committee is to ensure that the Directors of the Board bring character to the Board which should provide a required mix of responsibilities, skills and experience. The Nomination Committee will also assist the Board in reviewing on an annual basis the appropriate balance and size of non-executive participation and in establishing procedures and processes towards an annual assessment of the effectiveness of the Board as a whole, the Committees of the Board and the contribution of each individual Director. In carrying out its duties and responsibilities, the Nomination Committee will in principle have full, free and unrestricted access to the Company s records, properties and personnel. The Nomination Committee may use the services of professional recruitment firms to source for the right candidate for directorship or seek independent professional advice. REMUNERATION COMMITTEE The Remuneration Committee was set up on 24 May 2005 and presently has, the following four (4) members, which comprises three (3) Independent, Non-Executive Directors, and one (1) Non-Independent, Executive Director: - Chairman Mohd Alkaf Bin Mohd Kahar Member Yong Kok Fong Mary Henerietta Lim Kim Neo Law Ngee Song The primary objective of the Remuneration Committee is to assess the appropriate remuneration of each Director which should reflect their responsibility, commitment and contribution. The individual Director do not participate in discussion and decision of their own remuneration. In carrying out its duties and responsibilities, the Remuneration Committee will in principle have full, free and unrestricted access to the Company s records, properties and personnel. The Board would ultimately decide the remuneration of the Directors. The Directors fees would be endorsed by the Board for approval by the shareholders at the forthcoming Annual General Meeting. The summary of the remuneration of the Directors of the Company during the financial year is disclosed under Note 7 on page 44 of this Annual Report. 12

14 2. RELATION WITH SHAREHOLDERS Dialogue between companies and investors The Company strictly adheres to the disclosure requirements of Bursa Securities and recognizes the importance of timely and equal dissemination of information to shareholders and stakeholders. A website ( is available for access of information by shareholders and the public. Informations posted on the website are updated periodically. The Annual General Meeting ( AGM ) The AGM is the principal forum for dialogue with shareholders. Shareholders are notified of the meeting and provided with a copy of the Company s Annual Report at least 21 days before the date of the meeting. The Board members are available to respond to all queries and undertake to provide sufficient clarification on issues and concerns raised by the shareholders. The external auditors are also present to provide their professional and independent clarification on queries raised by shareholders. Status of all resolutions proposed at the AGM are announced to Bursa Securities at the end of the meeting day. Proceedings of the AGM are properly minuted. 3. ACCOUNTABILITY AND AUDIT (i) Financial Reporting The Board takes responsibility in ensuring that the financial statements of the Group and the Company give a true and fair view of the state of affairs of the Group and the Company. The Board is responsible for ensuring that the financial statements are drawn up in accordance with the provisions of the Companies Act, 1965, the Listing Requirements of Bursa Securities, the standards approved by the Malaysia Accounting Standards Board and other statutory and regulatory requirements. The Group s quarterly interim financial reports and the annual financial statements are reviewed by the Audit Committee and approved by the Board prior to being released to Bursa Securities within the stipulated timeframe. (ii) Internal Control The Board acknowledges its overall responsibility for ensuring that a sound system of internal control is maintained throughout the Group and the need to review its effectiveness regularly to safeguard the Group s assets. The Board recognises that risks cannot be totally eliminated and the system of internal control instituted can only help minimize and manage risks. Shareholders must know that the internal control system, by nature, can only provide reasonable but not absolute assurance against loss. A Statement on Internal Control is separately set out in pages 16 to 17 of this Annual Report. (iii) Relationship with the Auditors The Company has established a transparent relationship with its external and internal auditors. The Audit Committee acts as an independent channel of communication for the auditors to convey their objective views and professional advice on the Group s financial and operational activities. The Audit Committee recommends the appointment of the external auditors and their remuneration to the Board for approval. The appointment of the external auditors is subject to the approval of the shareholders at the AGM. The external auditors have an obligation to bring any significant matters relating to the financial audit of the Group to the Audit Committee. They are invited to attend the Audit Committee s meeting when necessary. 13

15 OTHER INFORMATION Conflict of Interest None of the Directors and/or major shareholders of Evergreen Fibreboard Berhad have any personal interest in any business arrangement involving the Company. All Directors have had no convictions for any offences within the past ten years. Material Contracts None of the Directors and major shareholders has any material contract with the Company and/or its subsidiaries during the financial year. Sanctions and/or Penalties Imposed There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies. Share Buybacks There were no share buybacks by the Company during the financial year. Exercise of Options, Warrants or Convertible Securities There were no options, warrants or convertible securities issued during the year. Utilisation of Proceeds The total gross proceeds of RM106,772,400 arising from the Public Issue and has been utilised in the following manner:- Proposed Utilization as at Utilization 19 Feb 2008 Balance RM 000 RM 000 RM 000 Repayment of revolving credit and term loan 32,000 32,000 Nil Purchase of property and equipment 9,000 8, Listing Expenses 5,208 5,208 Nil Group working capital 60,564 60,564 Nil 106, , American Depository Receipts/ Global Depository Receipts The Company did not sponsor any American Depository Receipts or Global Depository Receipts programmes during the financial year. Non-Audit Fees Non-audit fees paid to the external auditors during the financial year is RM35,300. Profit Estimate, Forecast or Projection During the year, there was no Profit Estimate, Forecast or Projection given by the Company. Profit Guarantee There was no profit guarantee given by the Company during the year. 14

16 Contracts Relating to Loan There were no contracts relating to a loan by the Company and its subsidiaries. Revaluation Policy There were no revaluations performed on all properties of the Group during the financial year. Sanction and Penalties As at to date there were no sanctions or penalties imposed on the Company by Bursa Securities or Securities Commission. STATEMENT ON CORPORATE SOCIAL RESPONSIBILITY Our Commitment to Corporate Social Responsibility ( CSR ) in our business is demonstrated by emphasizing the importance of business ethics for a sustainable growth. CSR in our Group is practice in support for a sustainable development through: - In The Environment Certified under Chain of Custody which is accredited by the Forest Stewardship Council on certain source of our raw materials Proper storage and disposal of schedule wastes as required by regulatory Recycling of waste for all recyclable materials Certified Emission Reduction In The Workplace Continuous Training provided to selected employees Safety and Health Trainings from time to time for a safe and healthy environment Providing work opportunities for pensioners In The Community Cash donation to employees/family affected by floods / tragedy 15

17 STATEMENT ON INTERNAL CONTROL INTRODUCTION Paragraph 15.27(b) of the Listing Requirements of Bursa Malaysia Securities Berhad requires the Board of Directors of public listed companies to include in its annual reports a statement about the state of internal control of the listed issuer as a group. The Board of Directors ( the Board ) is committed to maintaining a sound system of internal control in the Group and is pleased to provide the following statement, which outlines the nature and scope of internal control of the Group during the year. BOARD S RESPONSIBILITY The Board is ultimately responsible for the Group s system of internal control which includes the establishment of an appropriate controlled environment and framework as well as reviewing its adequacy and integrity. Due to the limitations that are inherent in any system of internal control, this system is designed to manage, rather than eliminate, the risk of failure to achieve corporate objectives. Accordingly, the system of internal control can only provide reasonable but not absolute assurance against material misstatement or losses. ENTERPRISE RISK MANAGEMENT FRAMEWORK The Board believes that the ability to manage its risks is paramount to achieving sustained profitability and enhanced shareholders value. In line with best practices, the Board has put in place an Enterprise Risk Management (ERM) framework, developed within its risk appetite. The ERM Framework sets out the Group s underlying approach to risk management and is overseen by the Board. The Board is assisted by a Risk Management Committee (RMC), which comprises Executive Directors and Senior Management of the Group. The RMC is responsible for implementing the Group s risk management policy and to identify, evaluate, review and manage the significant risks that affect the businesses and operations on an on-going basis. Besides, the RMC also reviews the effectiveness and adequacy of the controls and actions that have been carried out by the Management in mitigating the risks. Furthermore, the RMC will highlight significant risks and make recommendations to the Board in strengthening the risk management and internal control systems. For the financial year ended 31 December 2007, the ERM framework has been implemented in Evergreen Fibreboard Berhad, Allgreen Timber Products Sdn Bhd, Evergreen Fibreboard (JB) Sdn Bhd (with effect from 10 August 2007) and Siam Fibreboard Company Limited (with effect from 13 November 2007). INTERNAL AUDIT FUNCTION The Board recognises the increasing importance of maintaining a sound system of internal control in order to safeguard the shareholders investment and the Group s assets. A professional firm, KPMG, was appointed to perform the roles and responsibilities of the internal audit department. The objectives of the internal audit function are to provide independent and objective assurance as well as other consultative activities designed to add value and improve the Group s operations. The primary roles and responsibilities of the internal audit function are to assist the Audit Committee in discharging its responsibilities to review the adequacy and the integrity of the Group s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines. The Audit Committee has approved a risk-based internal audit plan. Quarterly internal audits and follow-ups have been carried out and reports on the audit findings have been submitted to the Audit Committee for its review on a quarterly basis. 16

18 OTHER RISK AND CONTROL PROCESSES Apart from risk management and the internal audit, the Board has put in place the following internal control elements:- An organizational structure with formally defined lines of responsibility and delegation of authority. A Key Performance Indicator (KPI) System is used in Evergreen Fibreboard Berhad to monitor the effectiveness of staff (executive and above only) performance. Formalized quality manuals in relation to ISO 9001:2000 for Evergreen Fibreboard Berhad, Allgreen Timber Products Sdn Bhd and Evergreen Fibreboard (JB) Sdn Bhd. These manuals provide clear guidance to the employees in managing its quality management system. In overseeing the Group s financial performance, business development, corporate matters, management and departmental issues, the Executive Directors attend management meetings and review monthly management accounts and operational reports. Quarterly financial information with variance management report is provided and presented to the Audit Committee and the Board for deliberation. Close and active involvement of the Executive Directors in the day-to-day business operations of the Group. Implementation of Corporate policy on succession planning. Implementation of Corporate policy on fraud management and code of conduct. Establishment of a Cost-down Committee to manage and maintain cost effective production. Implementation of formal Limits of Authority. WEAKNESSES IN INTERNAL CONTROLS THAT RESULT IN MATERIAL LOSSES There were no material losses incurred during the current financial year as a result of weaknesses in internal control. The Board continues to take necessary measures to strengthen the Group s internal control system. 17

19 AUDIT COMMITTEE REPORT Chairman Mohd Alkaf Bin Mohd Kahar - Independent Non-Executive Director Members Yong Kok Fong - Independent Non-Executive Director Law Ngee Song - Independent Non-Executive Director Mary Henerietta Lim Kim Neo* - Executive Director Note: * Resigned as Audit Committee Member with effect from 26 November 2007 TERMS OF REFERENCE Constitution The Board of Directors resolved to establish a Committee of the Board to be known as the Audit Committee on 31 January The terms of reference of the Audit Committee shall be as follows: Membership The Committee shall be appointed by the Board from amongst its Directors excluding alternate directors which fulfils the following requirements: (a) the audit committee must be composed of no fewer than three (3) members the majority of whom must be independent directors; (b) all members of the audit committee should be non-executive directors and financially literate; and (c) at least one member of the audit committee: (i) must be a member of the Malaysian Institute of Accountants; or (ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years working experience and: (aa) he must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act, (bb) 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, (iii) fulfils such other requirements as prescribed or approved by the Bursa Malaysia Securities Berhad ( Bursa Securities ) The members of the Committee shall elect a chairman from among their number who shall be an independent director. The Board shall, within three (3) months of a vacancy occurring in the Committee which results in the number of members being reduced to below three (3), appoint such number of new members as may be required to make up the minimum number of three (3) members. The Board shall review the term of office and performance of the Committee and each of its members at least once every three years. Rights The Committee shall: (a) have explicit authority to investigate any matter within its terms of reference; (b) have the resources which are required to perform its duties; (c) have full and unrestricted access to any information pertaining to the Company; (d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any); (e) be able to obtain independent professional or other advice; 18

20 (f) 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; (g) be able to seek co-operation of all employees of the Company; and (h) report promptly to the Bursa Securities of matters which result in a breach of the Listing Requirements. in accordance with the procedure determined by the Board. Functions The functions of the Committee shall including the following: (1) Review the following and report the same to the Board: (a) with the external auditors, the audit plan; (b) with the external auditors, his evaluation of the system of internal controls; (c) with the external auditors, his audit report; (d) the assistance given by the employees of the Company to the external auditor; (e) the quarterly results and year end financial statements, prior to the approval by the Board, focusing particularly on: (i) changes in or implementation of major accounting policy changes; (ii) significant and unusual events; (iii) going concern assumptions; and (iv) compliance with accounting standards and other legal requirements; (f) any related party transaction and inter company transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity; (g) any letter of resignation including the written explanation of the resignation from the external auditors of the Company; (h) whether there is reason (supported by grounds) to believe that the Company s external auditor is not suitable for re-appointment; and (i) any significant audit findings, reservation, difficulties encountered or material weakness reported by the external and internal auditors. (2) To do the following, in relation to the internal audit function: - review the adequacy of the scope, function, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work; review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function; review any appraisal or assessment of the performance of members of the internal audit function; approve any appointment or termination of senior staff members of the internal audit function; and take cognizance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning. (3) Recommend the nomination of a person or persons as external auditor and auditors remuneration. (4) To carry out other function that may be mutually agreed upon by the Committee and the Board which would be beneficial to the Company and ensure the effective discharge of the Company s duties and responsibilities. (5) Verify the criteria for allocation of options pursuant to a share scheme for employees. Meetings a) Meetings of the Committee shall be held not less than four (4) times a year. b) The Chairman shall convene a meeting of the Committee if requested to do so in writing by any member, the management, or the internal or external auditors to consider any matters within the scope and responsibilities of the Committee. c) A meeting may be convened using telephone and/or the contemporaneous linking together by telephone or such other electronic communication media of a number of the Committee members being not less than the quorum shall be deemed to constitute a meeting of the Committee wherever in the world they are, as long as i. the quorum of Committee is met; ii. at the commencement of the meeting each Committee member acknowledges his presence thereof to all the other members taking part and such participation shall be deemed to be his presence in person; 19

21 iii. each of the Committee members taking part is able to be heard and hear each of the other members subject as hereinafter mentioned throughout the meeting; and iv. the Committee members present at the commencement of the meeting do not leave the meeting by disconnecting the telephone, but the meeting shall be deemed to have been conducted validly notwithstanding that the telephone or electronic communication media is accidentally disconnected during the meeting and provided that no discussions or decisions should be made in respect of matters by the members during the disconnection and that if the telephone or electronic communication media cannot be re-connected at all, the meeting shall then be adjourned. d) The external auditors may request a meeting if they consider that one is necessary and shall have the right to appear and be heard at any meeting of the Committee. e) Written notice of the meeting together with the agenda shall be given to the members of the Committee, external auditor and any other person invited to attend the meeting, where applicable. f) The Head of the Finance Department and the Head of Internal Audit (where such a function exists) shall normally attend meetings. Other Board members, employees, any professional or outsider and a representative of the external auditors with relevant experience or expertise may attend any particular meeting only at the Committee s invitation. g) At least twice a year, the Committee shall meet with the external auditor without Executive Board members present. h) The quorum for a meeting of the Committee shall be two (2) provided always that the majority of members present must be independent directors. i) Any decision of the Committee shall be by simple majority. j) The Committee shall record its conclusions in discharging its duties and responsibilities. k) The Company Secretary shall be the Secretary of the Committee. l) The Secretary is responsible for sending out notices of the meetings and preparing and keeping minutes of meetings. Reporting Procedures The Minutes of the Committee meeting shall be extended to all the members of the Board of Directors. Attendance of Audit Committee Meetings Details of attendance at Audit Committee Meetings held in the financial year ended 31 December 2007 as follows: No Name of Audit Committee Members Number of Meetings Attended 1 Mohd Alkaf Bin Mohd Kahar 5 2 Mary Henerietta Lim Kim Neo 5 3 Yong Kok Fong 5 4 Law Ngee Song 5 A total of 5 Audit Committee Meetings were held during the financial year ended 31 December Internal Audit Functions The Internal Audit Unit provides an independent and objective assurance that the system of internal controls of the Group is operating satisfactorily and effectively to provide assurance to the stakeholders and add value to the Group s operations. The Unit reports directly to the Audit Committee. The audit focuses its activities on regular reviews of internal control systems. The scope of the Internal Audit function covers mainly the audit of operating units. During the year, the Company engaged a professional service firm to support the internal audit function of the Company. 20

22 F I N A N C I A L S T A T E M E N T S Page DIRECTORS REPORT STATEMENT BY DIRECTORS 25 STATUTORY DECLARATION 25 REPORT OF THE AUDITORS 26 INCOME STATEMENTS 27 BALANCE SHEETS 28 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY COMPANY STATEMENT OF CHANGES IN EQUITY 31 CASH FLOWS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

23 DIRECTORS REPORT The Directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The principal activities of the Company are manufacturing of medium density fibreboard and wooden furniture (knockdown). The principal activities of the subsidiaries are as disclosed under Note 15 to the financial statements. There have been no significant changes in the nature of the Group s activities during the financial year. RESULTS Group RM Company RM Profit for the year 131,348,331 51,836,846 Attributable to : Equity holders of the Company 118,655,828 51,836,846 Minority interest 12,692, ,348,331 51,836,846 There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the statements of changes in equity. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature, other than the effects arising from the fire as disclosed in Note 5 to the financial statements. DIVIDENDS The amount of dividends paid by the Company since 31 December 2006 were as follows: RM In respect of the financial year ended 31 December 2006 as reported in the directors report of that year: Second interim tax exempt dividend of 2.0 sen, on 480,000,000 ordinary shares, declared on 4 January 2007 and paid on 12 February ,600,000 Final tax exempt dividend of 1.0 sen on 480,000,000 ordinary shares, declared on 11 May 2007 and paid on 8 August ,800,000 In respect of the financial year ended 31 December 2007: First interim tax exempt dividend of 2.5 sen, on 480,000,000 ordinary shares, declared on 8 October 2007 and paid on 19 November ,000,000 26,400,000 At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 December 2007, of 4.5 sen on 480,000,000 ordinary shares, amounting to a dividend payable of RM21,600,000 will be proposed for shareholders approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December

24 DIRECTORS The names of the directors of the Company in office since the date of the last report and at the date of this report are : Kuo Wen Chi Kuo Jen Chang Kuo Jen Chiu Law Ngee Song Mary Henerietta Lim Kim Neo Mohd Alkaf bin Mohd Kahar Yong Kok Fong DIRECTORS BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company or of a related corporation as shown in Note 7 to the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has substantial financial interests. DIRECTORS INTERESTS According to the register of directors shareholdings, the interests of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows : The Company Number of Ordinary Shares of RM0.25 Each 1 January 31 December 2007 Acquired Disposed 2007 Direct interest: Kuo Wen Chi 1,804, ,804,531 Kuo Jen Chang 84,903, ,903,910 Kuo Jen Chiu Mary Henerietta Lim Kim Neo 550,027 - (50,000) 500,027 Mohd Alkaf bin Mohd Kahar 9,400,065 - (1,500,000) 7,900,065 Yong Kok Fong 115, ,000 Indirect interest Kuo Wen Chi 201,019, ,019,724 Kuo Jen Chang 117,920, ,920,345 Kuo Jen Chiu 202,824, ,824,255 Mary Henerietta Lim Kim Neo 159,027 - (159,000) 27 Kuo Wen Chi, Kuo Jen Chang and Kuo Jen Chiu by virtue of their interests in the Company are deemed interested in shares of all the Company s subsidiaries to the extent the Company has an interest. 23

25 OTHER STATUTORY INFORMATION (a) Before the income statements and balance sheets of the Group and the Company were made out, the directors took reasonable steps : (i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that there were no known bad debts and that no provision for doubtful debts was necessary; and (ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render : (i) it necessary to write off any bad debts or to make any provision for doubtful debts in respect of the financial statements of the Group and the Company. (ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading. (c) At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. (d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. (e) As at the date of this report, there does not exist : (i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or (ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year. (f) In the opinion of the directors : (i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet its obligations as and when they fall due; and (ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made. AUDITORS The auditors, Ernst & Young, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the directors dated 7 April KUO JEN CHIU KUO JEN CHANG 24

26 STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, KUO JEN CHIU and KUO JEN CHANG, being two of the directors of, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 27 to 66 are drawn up in accordance with applicable Financial Reporting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2007 and of the results and the cash flows of the Group and of the Company for the year then ended. Signed on behalf of the Board in accordance with a resolution of the directors dated 7 April KUO JEN CHIU KUO JEN CHANG STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965 I, KUO JEN CHIU, being the director primarily responsible for the financial management of EVERGREEN FIBREBOARD BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 27 to 66 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 the ) abovenamed KUO JEN CHIU at ) Johor Bahru in the State of Johor Darul Ta'zim ) on 7 April ) KUO JEN CHIU Before me, No. A-J119 ABU BAKAR BIN MOHAMED AMIN Pesuruhjaya Sumpah Johor Bahru 25

27 REPORT OF THE AUDITORS TO THE MEMBERS OF (Incorporated in Malaysia) We have audited the accompanying financial statements set out on pages 27 to 66. These financial statements are the responsibility of the Company s directors. It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report. We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion : (a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia so as to give a true and fair view of : (i) the financial position of the Group and of the Company as at 31 December 2007 and of the results and the cash flows of the Group and of the Company for the year then ended; and (ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and (b) the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and the auditors report thereon of the subsidiaries of which we have not acted as auditors, as indicated in Note 15 to the financial statements, being financial statements that have been included in the consolidated financial statements. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditors report on the financial statements of the subsidiaries were not subject to any qualification material to the financial statements and did not include any comment required to be made under Section 174(3) of the Act. ERNST & YOUNG AF 0039 Chartered Accountants OONG KEE LEONG 1246/12/09(J) Partner Johor Bahru, Malaysia 7 April

28 INCOME STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 Group Company Note RM RM RM RM Revenue 3 731,571, ,104, ,187, ,129,468 Cost of sales 4 (475,513,220) (374,682,830) (200,870,026) (192,677,358) Gross profit 256,058, ,421,995 93,317,601 74,452,110 Other operating income 26,693,175 1,817,039 2,846,174 2,365,803 Administrative expenses (137,766,692) (86,935,727) (40,719,050) (37,516,135) Profit from operations 5 144,984,706 68,303,307 55,444,725 39,301,778 Finance costs 8 (7,349,981) (2,687,418) (461,059) (25,387) Share of profit of associates 3,091,437 2,112, Profit before taxation 140,726,162 67,728,584 54,983,666 39,276,391 Taxation 9 (9,377,831) (2,542,111) (3,146,820) (1,214,111) Profit for the year 131,348,331 65,186,473 51,836,846 38,062,280 Attributable to: Equity holders of the Company 118,655,828 59,722,071 51,836,846 38,062,280 Minority interests 12,692,503 5,464, ,348,331 65,186,473 51,836,846 38,062,280 Earnings per share attributable to equity holders of the Company (sen): Basic, for profit for the year Diluted, for profit for the year Net dividend paid per ordinary share (Sen) Proposed dividend per ordinary share (Sen) The accompanying notes form an integral part of the financial statements. 27

29 BALANCE SHEETS AS AT 31 DECEMBER 2007 Group Company Note RM RM RM RM ASSETS Non-current assets Property, plant and equipment ,401, ,404, ,212, ,386,698 Prepaid lease payments 13 10,386,703 10,096,895 8,953,255 9,138,203 Goodwill 14 13,531,016 12,862, Investment in subsidiaries ,991,634 79,650,870 Interests in associates 16 18,941,674 15,850,237 13,231,003 13,231, ,260, ,213, ,388, ,406,774 Current assets Inventories 17 81,597,462 64,580,242 45,026,477 35,941,477 Trade receivables 18 52,267,536 47,113,478 24,010,440 27,911,260 Other receivables 19 72,293,809 8,193,207 89,857,311 51,447,631 Marketable securities 20 18,705,417 57,702,124 18,705,417 57,702,124 Cash and bank balances ,894,182 89,653,429 55,739,129 61,502, ,758, ,242, ,338, ,505,226 TOTAL ASSETS 908,018, ,456, ,727, ,912,000 EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Share capital ,000, ,000, ,000, ,000,000 Share premium 28 78,149,400 78,149,400 78,149,400 78,149,400 Foreign exchange reserve 29 16,732,142 2,305, Retained earnings ,786, ,531, ,352, ,916, ,668, ,986, ,502, ,065,404 Minority interests 6,686,405 25,520, Total equity 539,354, ,507, ,502, ,065,404 Non-current liabilities Borrowings ,349, ,117, , ,285 Deferred taxation 26 16,875,890 15,687,000 18,045,890 18,752,000 Current liabilities 157,225, ,804,344 18,316,053 19,115,285 Borrowings 22 87,699,084 14,376,339 35,226, ,821 Trade payables 24 45,650,769 35,339,944 22,815,308 22,056,638 Other payables 25 74,441,462 19,064,987 27,515,739 29,114,597 Provision for tax 3,646,735 1,363,655 2,351,393 1,379, ,438,050 70,144,925 87,908,888 52,731,311 Total liabilities 368,663, ,949, ,224,941 71,846,596 TOTAL EQUITY AND LIABILITIES 908,018, ,456, ,727, ,912,000 The accompanying notes form an integral part of the financial statements. 28

30 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2007 < Attributable to Equity Holders of the Company > Minority Total Interests Equity < Non-distributable > Distributable Foreign Share Share Exchange Retained Note Capital Premium Reserve Earnings Total RM RM RM RM RM RM RM At 1 January ,000,000 78,149,400 2,305, ,531, ,986,495 25,520, ,507,133 Foreign currency translation of Group ,426,218-14,426,218-14,426,218 Net income recognised directly in equity ,426,218-14,426,218-14,426,218 Profit for the year ,655, ,655,828 12,692, ,348,331 Total recognised income and expense for the year ,426, ,655, ,082,046 12,692, ,774,549 Acquisition of subsidiary ,109,567 7,109,567 Acquisition of minority interest (38,636,303) (38,636,303) Dividends paid (26,400,000) (26,400,000) - (26,400,000) At 31 December ,000,000 78,149,400 16,732, ,786, ,668,541 6,686, ,354,946 29

31 < Attributable to Equity Holders of the Company > Minority Total Interests Equity < Non-distributable > Distributable Foreign Share Share Exchange Retained Note Capital Premium Reserve Earnings Total RM RM RM RM RM RM RM At 1 January 2006 As previously stated 120,000,000 78,149,400 (4,665,761) 184,839, ,322,699 20,056, ,378,935 Effect of adopting FRS , , ,040 At 1 January 2006 (restated) 120,000,000 78,149,400 (4,665,761) 185,009, ,492,739 20,056, ,548,975 Foreign currency translation of Group - - 6,971,685-6,971,685-6,971,685 Net income recognised directly in equity - - 6,971,685-6,971,685-6,971,685 Profit for the year ,722,071 59,722,071 5,464,402 65,186,473 Total recognised income and expense for the year - - 6,971,685 59,722,071 66,693,756 5,464,402 72,158,158 Dividends paid (19,200,000) (19,200,000) - (19,200,000) At 31 December ,000,000 78,149,400 2,305, ,531, ,986,495 25,520, ,507,133 The accompanying notes form an integral part of the financial statements. 30

32 COMPANY STATEMENT OF CHANGES IN EQUITY Non Distributable Distributable Share Share Retained Total Note Capital Premium Earnings Equity RM RM RM RM At 1 January 2006 Issue of shares 120,000,000 78,149, ,053, ,203,124 Profit for the year ,062,280 38,062,280 Dividends paid (19,200,000) (19,200,000) At 31 December ,000,000 78,149, ,916, ,065,404 At 1 January ,000,000 78,149, ,916, ,065,404 Profit for the year ,836,846 51,836,846 Dividends paid (26,400,000) (26,400,000) At 31 December ,000,000 78,149, ,352, ,502,250 The accompanying notes form an integral part of the financial statements. 31

33 CASH FLOW STATEMENTS CASH FLOWS FROM OPERATING ACTIVITIES Group Company RM RM RM RM Profit before taxation 140,726,162 67,728,584 54,983,666 39,276,391 Adjustments for : Gain on acquisition of minority interest (1,549,825) Amortisation of prepaid lease payments 203, , , ,948 Depreciation 28,274,629 21,961,136 8,269,885 8,253,597 Interest expense 7,349,981 2,687, ,059 25,387 Interest income (3,123,904) (1,938,679) (1,968,224) (1,883,353) Dividend income - - (410,646) (940,500) Gain on disposal of marketable securities (1,078,843) (1,703,300) (1,078,843) (1,703,300) Loss/(Gain) on disposal of property, plant and equipment (28,802) 578,627 28, ,395 Loss on investment in subsidiary ,216 - Property, plant and equipment written off 18,984,982 3, Provision for doubtful debt - 141, ,000 Foreign exchange difference Unrealised loss/(gain) on exchange (234,882) 66,698 (6,137) 233,898 Share of profit of associates (3,091,437) (2,112,695) - - Operating profit before working capital changes 186,431,304 87,615,256 60,545,989 44,144,463 Increase in inventories (17,017,220) (14,218,414) (9,085,000) (3,016,010) Decrease/(Increase) in trade and other receivables (56,145,538) 9,769,713 4,493,984 8,093,028 Increase/(Decrease) in trade and other payables 60,000,281 5,436,616 (840,188) 870,953 Cash generated from operations 173,268,827 88,603,171 55,114,785 50,092,434 Interest paid (7,349,981) (2,687,418) (461,059) (25,387) Tax paid (5,986,546) (1,865,375) (2,880,793) (1,822,784) Net cash generated from operating activities 159,932,300 84,050,378 51,772,933 48,244,263 32

34 CASH FLOWS FROM INVESTING ACTIVITIES Group Company RM RM RM RM Acquisition of subsidiary (14,131,503) - (32,345,578) (2) Additional investment in a subsidiary (37,086,478) - (37,086,478) (9,999,998) Sale of marketable securities 38,996,704 1,318,301-1,318,301 Interest received 3,123,904 1,938,679 1,968,224 1,883,353 Income from marketable securities 1,078,843 1,703,300 1,078,843 1,703,300 Dividend received ,646 - Purchase of property, plant and equipment (177,143,872) (123,404,746) (1,991,914) (9,154,180) Purchase of prepaid lease payments (493,051) Goodwill arising from purchase of business - (8,000,000) - - Proceeds from disposal of property, plant and equipment 1,913, ,133 57,026 60,000 Proceeds from winding up of subsidiary - - 2,009,077 - Net cash used in investing activities (183,742,086) (125,735,333) (65,900,154) (14,189,226) CASH FLOWS FROM FINANCING ACTIVITIES Advance to subsidiary (10,570,501) Drawdown of term loan 94,613, ,000,000 35,000,000 - Repayment of hire purchase creditors (1,005,259) (256,568) (236,384) (199,550) Repayment of term loans (17,211,791) (11,434,052) - - Dividends paid (26,400,000) (19,200,000) (26,400,000) (19,200,000) Net cash generated from/(used in) financing activities 49,996,163 69,109,380 8,363,616 (29,970,051) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 26,186,377 27,424,425 (5,763,605) 4,084,986 EFFECTS OF FOREIGN EXCHANGE RATE CHANGES 7,054,376 (1,495,704) - 233,898 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 89,653,429 63,724,708 61,502,734 57,183,850 CASH AND CASH EQUIVALENTS AT END OF YEAR (NOTE 21) 122,894,182 89,653,429 55,739,129 61,502,734 The accompanying notes form an integral part of the financial statements. 33

35 1. CORPORATE INFORMATION NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2007 The principal activities of the Company are the manufacture of medium density fibreboard and wooden furniture (knock-down). The principal activities of the subsidiaries are as disclosed under Note 15. There have been no significant changes in the nature of the principal activities during the financial year. The Company is a public listed company, incorporated and domiciled in Malaysia and is listed on the Main Board of Bursa Malaysia Securities. The registered office of the Company is located at Suite 6.1A, Level 6, Menara Pelangi, Jalan Kuning, Taman Pelangi, Johor Bahru, Johor Darul Ta zim. The principal place of business is located at PLO 22, Parit Raja Industrial Estate, Batu Pahat, Johor Darul Ta zim. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 7 April SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of Preparation The financial statements of the Group and of the Company have been prepared under the historical cost convention and comply with the provisions of Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia. 2.2 Summary of Significant Accounting Policies (a) Subsidiaries and Basis of Consolidation (i) Subsidiaries Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity. In the Company s separate financial statements, investments in subsidiaries are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit and loss. (ii) Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Company. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intragroup balances, transactions and unrealised gains and losses are eliminated in full. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances. Acquisitions of subsidiaries are accounted for using the purchase method. The purchase method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of the acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition. 34

36 (b) Associates Any excess of the cost of the acquisition over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represent goodwill. Any excess of the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in profit and loss. Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. It is measured at the minorities share of the fair value of the subsidiaries identifiable assets and liabilities at the acquisition date and the minorities share of changes in the subsidiaries equity since then. Associates are entities in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not in control or joint control over those policies. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in associate is carried in the consolidated balance sheet at cost adjusted for post-acquisition changes in the Group s share of net assets of the associate. The Group s share of the net profit or loss of the associate is recognised in the consolidated profit or loss. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes. In applying the equity method, unrealised gains and losses on transactions between the Group and the associate are eliminated to the extent of the Group s interest in the associate. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group s net investment in the associate. The associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of the Group s share of the net fair value of the associate s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group s share of the associate s profit or loss in the period in which the investment is acquired. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any long-term interests that, in substance, form part of the Group s net investment in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The most recent available audited financial statements of the associates are used by the Group in applying the equity method. Uniform accounting policies are adopted for like transactions and events in similar circumstances. In the Company s separate financial statements, investments in associates are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss. (c) Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business combination over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. 35

37 (d) Property, Plant and Equipment and Depreciation All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Subsequent to recognition, property, plant and equipment except for freehold land are stated at cost less accumulated depreciation and any accumulated impairment losses. Freehold land has an unlimited useful life and therefore is not depreciated. Construction-in-progress are also not depreciated as these assets are not available for use. Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, at the following annual rates : Buildings Plant and machinery Other assets years 5-20 years 5-10 years The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in profit or loss. (e) Impairment of Non-Financial Assets The carrying amounts of assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated to determine the amount of impairment loss. For goodwill, the recoverable amount is estimated at each balance sheet date or more frequently when indicators of impairment are identified. For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs to. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. An asset s recoverable amount is the higher of an asset s or CGU s fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. An impairment loss is recognised in profit or loss in the period in which it arises. Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the 36

38 asset s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss. (f) Inventories Inventories are stated at the lower of cost (determined on a first-in, first-out basis) and net realisable value. The cost of raw materials and spare parts comprises cost of purchases and incidentals incurred in bringing the inventories to their present location and condition. The cost of finished goods and work-in-progress includes direct materials, direct labour, other direct costs and appropriate proportion of production overheads based on normal operating capacity. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (g) Financial Instruments Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instrument. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are recognised directly in equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously. (i) Cash and Cash Equivalents For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank, deposits at call and short term highly liquid investments which have an insignificant risk of changes in value. (ii) Marketable Securities Marketable securities are carried at the lower of cost and market value, determined on an aggregate basis. Cost is determined on the weighted average basis while market value is determined based on quoted market values. Increases or decreases in the carrying amount of marketable securities are recognised in profit or loss. On disposal of marketable securities, the difference between net disposal proceeds and the carrying amount is recognised in profit or loss. (iii) Trade Receivables Trade receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date. (iv) Trade Payables Trade payables are stated at the fair value of the consideration to be paid in the future for goods and services received. (v) Interest Bearing Loans and Borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. 37

39 (vi) Equity Instruments (h) Leases Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided. (i) Classification A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incident to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not transfer substantially all the risks and rewards are classified as operating leases. (ii) Finance Leases - the Group as Lessee Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets. Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are charged to the income statement over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. The depreciation policy for leased assets is consistent with that for depreciable property, plant and equipment as described in Note 2(d). (iii) Operating Leases - the Group as Lessee Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term. (i) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 38

40 (j) Income Tax Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date. Deferred tax is provided for, using the liability method. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised as income or an expense and included in the profit or loss for the period, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of any excess of the acquirer s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities over the cost of the combination. (k) Provisions Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost. (l) Employee Benefits (i) Short Term Benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increased their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. (ii) Defined Contribution Plans As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund ( EPF ). Such contributions are recognised as an expense in the income statement as incurred. (m) Foreign Currencies (i) Functional and Presentation Currency The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company s functional currency. 39

41 (ii) Foreign Currency Transactions In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Nonmonetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period except for exchange differences arising on monetary items that form part of the Group s net investment in foreign operation. Exchange differences arising on monetary items that form part of the Group s net investment in foreign operation, where that monetary items is denominated in either the functional currency of the reporting entity or the foreign operation, are initially taken directly to the foreign exchange reserve within equity until the disposal of the foreign operations, at which time they are recognised in profit or loss. Exchange differences arising on monetary items that form part of the Group s net investment in foreign operation, where that monetary item is denominated in a currency other than the functional currency of either the reporting entity or the foreign operation, are recognised in profit or loss for the period. Exchange differences arising on monetary items that form part of the Company s net investment in foreign operation, regardless of the currency of the monetary item, are recognised in profit or loss in the Company s financial statements or the individual financial statements of the foreign operation, as appropriate. (iii) Foreign Operations The results and financial position of foreign operations that have a functional currency different from the presentation currency (RM) of the consolidated financial statements are translated in RM as follows: - Assets and liabilities for each balance sheet presented are translated at the closing rate prevailing at the balance sheet date; - Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions; and - All resulting exchange differences are taken to the foreign exchange reserve within equity. Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2006 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the balance sheet date. Goodwill and fair value adjustments which arose on the acquisition of foreign subsidiaries before 1 January 2006 are deemed to be assets and liabilities of the parent company and are recorded in RM at the rates prevailing at the date of acquisition. (n) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the Company and the amount can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised : (i) Sale of Goods Revenue is recognised net of sales taxes and upon transfer of significant risks and rewards of ownership to the buyer. (ii) Interest Income Interest is recognised on an accrual basis using the effective interest method. (iii) Dividend Income Dividend income is recognised when the right to receive payment is established. 40

42 2.3 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs At the beginning of the current financial year, the Group and the Company adopted the following new/revised FRSs, which have become mandatory for the financial period beginning on or after 1 January FRS 6 Amendments to FRS Exploration for and Evaluation of Mineral Resources Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures Both FRS 6 and Amendments to FRS are not applicable to the Group and the Company. The Group and the Company have not early adopted the following new and revised FRSs, Amendments to FRS and Interpretations which become or are expected to become mandatory for the future financial periods : FRS 139 Financial Instruments: Recognition and Measurement* Amendments to FRS 107 Cash Flow Statements ** Amendments to FRS 111 Construction Contracts # Amendments to FRS 112 Income Taxes ** Amendments to FRS 118 Revenue ** Amendments to FRS 120 Accounting for Government and Disclosure of Government Assistance # Amendments to FRS 121 The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation ** Amendments to FRS 134 Interim Financial Reporting ** Amendments to FRS 137 Provision, Contingent Liabilities and Contingent Assets ** IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities # IC Interpretation 2 Members Shares in Co-operative Entities and Similar Instruments # IC Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds # IC Interpretation 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment # IC Interpretation 7 Applying the Restatement Approach under FRS Financial Reporting in Hyperinflationary Economies # IC Interpretation 8 Scope of FRS 2 # * The effective date of FRS 139 has yet to be announced. By virtue of the exemption in this standard, the impact of applying FRS 139 on the Group and the Company s financial statements upon first adoption of this standard is not disclosed. ** This FRS does not have significant impact on the Group and the Company s financial statements upon its initial application. # This FRS is not relevant to the Group and the Company s operations. 2.4 Significant Accounting Estimates and Judgements Key Sources of Estimation Uncertainty The key assumption concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below : (a) Harvesting of rubber wood The Group recognises costs of sales of rubber wood in the income statement by using the stage of completion method. The stage of completion is determined by the proportion that the rubber wood being harvested and transported to date to the estimated total harvesting quantity. Significant judgement is required in determining the stage of completion, the extent of the rubber wood cost incurred and the estimated total harvesting quantity. In making the judgement, the Company evaluates based on past experience and by relying on the work of specialists. 41

43 (b) Deferred tax assets Deferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The total carrying value of recognised tax losses and capital allowances of the Group was RM13,309,776 (2006: RM7,787,000). Further details are disclosed in Note 26. (c) Income tax provision Judgment is involved in determining the Group s provision for income taxes as there are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provision in the period in which such determination is made. (d) Impairment of goodwill The Group determines whether goodwill is impaired at least on an anuual basis. This requires an estimation of the value-in-use of the cash generating units ( CGU ) to which goodwill is allocated. Estimating a value-in-use amount requires management to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill as at 31 December 2007 was RM13,531,016 (2006: RM12,862,091). Further details are disclosed in Note 14. (e) Depreciation of plant and machinery The cost of plant and machinery for the manufacture of medium density fibreboard is depreciated on a straight-line basis over the assets useful lives. Management estimates the useful lives of these plant and machinery to be within 5 to 20 years. These are common life expectancies applied in the fibreboard industry. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore furture depreciation charges could be revised. A 3% difference in the average useful lives of these assets from management s estimates would result in approximately 1.1% variance in profit for the year. 3. REVENUE Revenue of the Group and Company represents principally invoiced value of goods sold less returns and discounts. 4. COST OF SALES Cost of sales represents cost of inventories sold. 42

44 5. PROFIT FROM OPERATIONS Profit from operations is stated after charging/(crediting) : Group Company RM RM RM RM Amortisation of prepaid lease payments (Note 13) 203, , , ,948 Audit fee statutory audit 185,661 92,744 55,000 55,000 - prior year - (6,100) other services - current year 15,000 48,000 15,000 48,000 - prior year 20,300-9,000 - Depreciation (Note 12) 28,274,629 21,961,136 8,269,885 8,253,597 Dividend income (410,646) - (410,646) (940,500) Hostel rental 338, , , ,963 Gain on acquisition of minority interest (1,549,825) Interest income (3,123,904) (1,938,679) (1,968,224) (1,883,353) Income from marketable securities (1,078,843) (1,703,300) (1,078,843) (1,703,300) Loss/(gain) on foreign exchange - realised (578,806) 1,560,793 1,034,634 1,371,207 - unrealised (234,882) 66,698 (6,137) 233,898 Loss/(gain) on disposal of property, plant and equipment (28,802) 578,627 28, ,395 Loss on investment in subsidiary ,216 - Property, plant and equipment written off 18,984,982 3, Insurance compensation (20,937,000) Provision for doubtful debts - 141, ,000 Rental of equipment 757, , , ,910 Rental of premises - 94, Rental of land 117,221 24,500 42,000 24,500 Staff costs (Note 6) 56,987,216 45,460,198 33,022,001 33,999,865 A fire in September 2007 resulted in a temporary disruption of one of the production lines of the subsidiary, Evergreen Fibreboard (JB) Sdn Bhd. This has resulted in the write off of plant, property and equipment with carrying values amounting to approximately RM18,930,000 to the Group s result. Based on the best available information, the Directors estimated and recognised insurance compensation relating to the fire as income during the year of RM20,937,000, of which RM5,000,000 was received during the year. The balance sum receivable of RM15,937,000 is classified within Other Receivables in Note STAFF COSTS Group Company RM RM RM RM Wages and salaries 52,025,726 42,105,838 30,263,153 31,254,126 EPF and SOCSO 3,853,215 3,209,460 2,605,021 2,600,839 Other staff related expenses 1,108, , , ,900 56,987,216 45,460,198 33,022,001 33,999,865 Included in staff costs of the Group and of the Company are executive directors remuneration amounting to RM4,093,629 (2006 : RM4,023,362) and RM3,746,629 (2006 : RM3,699,458) respectively as further disclosed in Note 7. 43

45 7. DIRECTORS REMUNERATION Group Company Directors of the Company RM RM RM RM Executive: Salaries and emoluments 4,039,206 3,956,327 3,692,206 3,632,423 Bonus 54,423 67,035 54,423 67,035 Benefits-in-kind 65,500 65,500 65,500 65,500 Non-executive: 4,159,129 4,088,862 3,812,129 3,764,958 Allowances and emoluments 121,863 94, ,863 94, ,863 94, ,863 94,098 Total 4,280,992 4,182,960 3,933,992 3,859,056 Analysis excluding benefits-in-kind : Total executive directors remuneration excluding benefits-in-kind 4,093,629 4,023,362 3,746,629 3,699,458 Total non-executive directors remuneration excluding benefits-in-kind 121,863 94, ,863 94,098 The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below : Number of Directors Executive directors : RM300,001 - RM350, RM950,001 - RM1,000, RM1,150,001 - RM1,200, RM1,300,001 - RM1,350,000-1 RM1,350,001 - RM1,400, Non-executive directors : Below RM50, RM50,001 - RM100, FINANCE COSTS Group Company RM RM RM RM Hire purchase interest 103,688 62,669 30,216 25,387 Term loan interest 7,246,293 2,624, ,843-7,349,981 2,687, ,059 25,387 44

46 9. TAXATION Group Company RM RM RM RM Current income tax: Malaysia income tax 3,972,082 2,840,111 3,852,930 2,840,111 Foreign tax 4,216, Deferred tax (Note 26) : Relating to origination and reversal of temporary differences 1,257,724 (347,000) (776,176) (1,607,000) (Over)/ Underprovision in prior years (68,834) 49,000 70,066 (19,000) Total income tax expense 9,377,831 2,542,111 3,146,820 1,214,111 Domestic income tax is calculated at the Malaysian statutory rate of 27% (2006 : 28%) of the estimated assessable profit for the year. The domestic statutory tax rate will be reduced to 26% from the current year s rate of 27%, effective year of assessment 2008 and to 25% effective year of assessment The computation of deferred tax as at 31 December 2007 has reflected these changes. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows : Group Company RM RM RM RM Profit before taxation 140,726,162 67,728,584 54,983,666 39,276,391 Taxation at Malaysian statutory tax rate of 27% (2006 : 28%) 37,996,063 18,964,004 14,845,590 10,997,389 Effect of different tax rates in other countries (8,096,951) Effect of changes in tax rates on opening balance of deferred tax 200,244 (1,756,953) - (1,455,571) Effect of changes in tax rates 181, ,148 26,075 17,148 Income not subject to tax (8,616,497) (10,490,310) (8,152,058) (4,043,425) Expenses not deductible for tax purposes 763, , , ,302 Expenses eligible for double deduction (11,996,232) (4,858,559) (3,962,973) (4,567,732) (Under)/Overprovision of deferred tax in prior year (70,042) 49,000 70,066 (19,000) Effect of share of results of associates (983,427) Tax for the year 9,377,831 2,542,111 3,146,820 1,214,111 45

47 10. EARNINGS PER SHARE Earnings per ordinary share is calculated by dividing the net profit for the year by the weighted average number of ordinary shares in issue during the financial year as follows: RM RM Profit attributable to ordinary equity holders of the Company (RM) 118,655,828 59,722,071 Weighted average number of ordinary shares in issue 480,000, ,000,000 Basic earnings per share (Sen) Diluted earnings per share (Sen) DIVIDENDS Dividends in respect of Year Dividends Recognised in Year RM RM RM RM Recognised during the year Third interim dividend for 2005: 2.0 sen on 480,000,000 ordinary shares ,600,000 First interim dividend for 2006: 2.0 sen on 480,000,000 ordinary shares - 9,600,000-9,600,000 Second interim dividend for 2006: 2.0 sen on 480,000,000 ordinary shares - 9,600,000 9,600,000 - Final dividend for 2006: 1.0 sen on 480,000,000 ordinary shares - 4,800,000 4,800,000 - First interim dividend for sen on 480,000,000 12,000,000-12,000,000 - ordinary shares Not Recognised as at 31 December Proposed for approval at AGM Final dividend for 2007: 4.5 sen on 480,000,000 ordinary shares 21,600, ,600,000 24,000,000 26,400,000 19,200,000 At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 December 2007, of 4.5 sen on 480,000,000 ordinary shares, amounting to a dividend payable of RM21,600,000 will be proposed for shareholders approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December

48 12. PROPERTY, PLANT AND EQUIPMENT Freehold Plant land and and Other Construstion buildings machineries assets* in progress Total Group RM RM RM RM RM At 31 December 2007 Cost At beginning of the year 93,718, ,880,299 18,817,772 19,666, ,082,969 Additions 9,154,514 97,309,825 2,058,592 70,995, ,518,147 Acquisition of subsidiaries (Note 15(a)) ,410,854 13,410,854 Disposals (1,908,700) (545,116) (412,372) - (2,866,188) Written off - (19,710,750) (3,670) - (19,714,420) Reclassification 2,662,506 15,869,131 2,628,783 (21,160,420) - Exchange differences 1,793,466 10,060,307 1,798,339 2,053,840 15,705,952 At end of the year 105,420, ,863,696 24,887,444 84,965, ,137,314 Accumulated Depreciation At beginning of the year 9,618, ,637,524 9,422, ,678,270 Charge for the year 2,472,139 22,763,400 3,039,090-28,274,629 Disposals (188,961) (458,337) (334,325) - (981,623) Written off - (727,566) (1,872) - (729,438) Exchange differences 398,516 2,481, ,611-3,494,421 At end of the year 12,299, ,696,315 12,740, ,736,259 Net Carrying Amount At 31 December ,120, ,167,381 12,147,319 84,965, ,401,055 Group At 31 December 2006 Cost At beginning of the year 65,634, ,279,700 16,305,663 6,312, ,532,856 Additions 26,698,727 80,811,038 2,082,271 13,812, ,404,746 Disposals (63,740) (1,530,606) (138,196) - (1,732,542) Reclassification - 1,229,133 - (1,229,133) - Exchange differences 1,449,184 4,091, , ,657 9,877,909 At end of the year 93,718, ,880,299 18,817,772 19,666, ,082,969 Accumulated Depreciation At beginning of the year 7,421, ,282,555 7,110, ,814,871 Charge for the year 2,018,582 17,585,716 2,356,838-21,961,136 Disposals (13,521) (319,295) (108,743) - (441,559) Exchange differences 191,207 1,088,548 64,067-1,343,822 At end of the year 9,618, ,637,524 9,422, ,678,270 Net Carrying Amount At 31 December ,100, ,242,775 9,395,151 19,666, ,404,699 47

49 Freehold Plant land and and Other buildings machineries assets* Total Company RM RM RM RM At 31 December 2007 Cost At beginning of the year 31,241, ,996,068 8,964, ,202,378 Additions 10,400 1,840, ,011 2,180,803 Disposals - (538,342) (197,283) (735,625) At end of the year 31,251, ,298,118 9,097, ,647,556 Accumulated Depreciation At beginning of the year 4,150,685 96,940,206 5,724, ,815,680 Charge for the year 489,983 6,625,423 1,154,479 8,269,885 Disposals - (454,943) (195,591) (650,534) At end of the year 4,640, ,110,686 6,683, ,435,031 Net Carrying Amount At 31 December ,611,065 76,187,432 2,414, ,212,525 Company At 31 December 2006 Cost At beginning of the year 28,361, ,310,615 8,357, ,028,848 Additions 2,880,165 5,537, ,417 9,154,180 Disposals - (852,145) (128,505) (980,650) At end of the year 31,241, ,996,068 8,964, ,202,378 Accumulated Depreciation At beginning of the year 3,660,876 90,567,533 4,697,929 98,926,338 Charge for the year 489,809 6,631,323 1,132,465 8,253,597 Disposals - (258,650) (105,605) (364,255) At end of the year 4,150,685 96,940,206 5,724, ,815,680 Net Carrying Amount At 31 December ,090,648 81,055,862 3,240, ,386,698 * Other assets comprise motor vehicles, signboard, furniture and fittings, office equipment, air conditioners, computers and telecommunication systems. 48

50 (a) During the financial year, the Group and the Company acquired property, plant and equipment at aggregate costs of RM192,929,001 (2006 : RM123,404,746) and RM2,180,803 (2006 : RM9,154,180) respectively of which RM2,466,555 (2006 : RMNil) and RM250,000 (2006 : RMNil) respectively were acquired by means of hire purchase arrangements. Net carrying amounts of property, plant and equipment held under hire purchase are as follows : Group Company RM RM RM RM Motor vehicles 2,989, , , ,861 (b) Net carrying amounts of property, plant and equipment pledged for banking facilities are as follows : Group RM RM Freehold land and buildings 34,017,513 30,629,791 Plant and machineries 148,285,117 68,505, ,302,630 99,135,294 (c) Net carrying amounts of property, plant and equipment registered in the name of a director holding in trust on behalf of the Group and the Company are as follows : Group and Company RM RM Motor vehicles 200, ,831 (d) Net carrying amounts of freehold land still in the process of transfer of land title are as follows: Group RM RM Freehold land 3,894,154 3,894, PREPAID LEASE PAYMENTS Group Company RM RM RM RM At 1 January 10,096,895 10,300,139 9,138,203 9,323,151 Addition 493, Amortisation for the year (Note 5) (203,243) (203,244) (184,948) (184,948) At 31 December 10,386,703 10,096,895 8,953,255 9,138,203 Leasehold land with an aggregate carrying value of RM Nil (2006: RM1,076,827) is pledged as security for borrowings (Note 22). 49

51 14. GOODWILL Group RM RM Cost At beginning of year 12,862,091 10,715,149 Acquisition of business 668,925 8,000,000 Effects of adopting FRS 3 - (5,853,058) At end of year 13,531,016 12,862,091 Accumulated amortisation and impairment At beginning of year - 5,853,058 Effects of adopting FRS 3 - (5,853,058) At end of year - - Net carrying amount At end of year 13,531,016 12,862,091 Impairment tests for goodwill Goodwill has been allocated to the Group s CGUs identified according to country of operation as follows: Group RM RM Thailand Operations 5,531,016 4,862,091 Malaysia Operations 8,000,000 8,000,000 13,531,016 12,862,091 Key assumptions used in value-in-use calculations The recoverable amount of a CGU is determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are based on the cash flows forecasted in the preceding years. The key assumptions used for value-in-use calculations are : Gross Margin Discount Rate Thailand Operations 43% 10% Malaysia Operations 30% 10% The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill: (i) Budgeted gross margin The basis used to determine the value assigned to the budgeted gross margins is the average gross margins achieved in the year immediately before the budgeted year, adjusted for projected market conditions and machine capability. (ii) Discount rate The discount rate used is based on the pre-tax weighted average cost of capital and an appropriate risk premium. (iii) Growth rate No growth rate was projected in the value-in-use calculations. Sensitivity to changes in assumptions Management believes that no reasonably possible change in any of the above key assumptions would cause the carrying values of the units to materially exceed their recoverable amounts. 50

52 15. INVESTMENT IN SUBSIDIARIES Company RM RM Unquoted shares, at cost 146,991,634 85,439,577 Provision for diminution in value - (5,788,707) Details of the subsidiaries are as follows : 146,991,634 79,650,870 Effective Country of equity interest Name of Subsidiaries Incorporation Principal Activities Allgreen Timber Products Malaysia 100% 100% Manufacture of Sdn. Bhd. particleboard Siam Fibreboard Company Thailand 100% 75% Manufacture of Limited* medium density fibreboard GRE Energy Co. Ltd* Thailand 99.99% - Cogeneration of electricity ECO Generation Co. Ltd.* Thailand 99.94% - Cogeneration of electricity PT Hijau Lestari Raya Indonesia 51% - Manufacture of Fibreboard** medium density fibreboard, glue and resin Evergreen Fibreboard (JB) Malaysia 100% 100% Manufacture of Sdn. Bhd. medium density fibreboard Evergreen Hevea Resources Malaysia 100% - Trading and Sdn. Bhd. managing of plantation Evergreen Adhesive & Malaysia 100% - Manufacture of Chemicals Sdn. Bhd. urea formaldehyde concentrate and adhesive products Evergreen Decor Products Malaysia 100% 100% Dormant (M) Sdn. Bhd. Evergreen Molded Panels Malaysia 100% 100% In the process Sdn. Bhd. of members voluntary liquidation * Audited by firms other than Ernst & Young, Malaysia ** Audited by members firm of Ernst & Young Global in Indonesia 51

53 On 13 February 2007, Evergreen Fibreboard Berhad ( EFB ) acquired 1,333,327 ordinary shares of Baht 100 each representing 99.99% of the paid up capital of GRE Energy Co. Ltd ( GRE ) for a cash consideration of Thai Baht 138 million (approximately RM13.7 million). The principal activity of GRE is cogeneration of electricity for an approved capacity of 9.6 megawatts of electricity and 20 tons of steam at 13 bar using biomass for heat energy required for the production of Medium Density Fibreboard. The acquisition was completed on 28 February On 20 April 2007, EFB had entered into Joint Venture Agreement with P.T. Hutrindo Jaya Fibreboard Mfg. Co. ( HUTRINDO ) and P.T. Uforin Prajen Adhesive Industry ( UFORIN ) (HUTRINDO and UFORIN hereinafter collectively shall be referred as LOCAL PARTNER) to form a joint venture limited liability company, PT Hijau Lestari Raya Fibreboard, under the laws of the Republic of Indonesia for the purpose of manufacturing fibreboard, glue and resin in Indonesia, and also for the purpose of acquiring the LOCAL PARTNER s Assets. EFB holds 51% of the total issued and paid up capital of PT Hijau Lestari Raya Fibreboard. The remaining 49% shares are held by the LOCAL PARTNER. On 31 July 2007, PT Hijau Lestari Raya Fibreboard had entered into a Sale and Purchase of Assets Agreement with the LOCAL PARTNER for a sum of USD21 million (approximately RM72.45 million). On 15 June 2007, EFB announced the acquisition of 9,994 ordinary shares of Thai Baht 100 each representing 99.94% of paid up capital of ECO Generation Co. Ltd. for a cash consideration of approximately Thai Baht 1.0 million (approximately RM100,000). The principal activity of ECO is mainly to supply electricity and steam for the 3rd MDF Line of Siam Fibreboard Company Limited ( SFCL ) with an approved capacity of 4.8 megawatts of electricity and 20 tons of steam at 13 bar using biomass. The acquisition was completed on 11 July On 18 June 2007, EFB announced the acquisition of four ordinary shares of RM1.00 each representing 100% of the paid up capital of Evergreen Hevea Resources Sdn. Bhd. ( EHRSB ) for a cash consideration of RM4.00. The principal activity of EHRSB is the trading and managing of plantation. The acquisition was completed on 19 June On 22 August 2007, EFB announced the acquisition of two ordinary shares of RM1.00 each representing 100% paid up capital of Evergreen Adhesive & Chemicals Sdn. Bhd. ( EACSB ) for a cash consideration of RM2.00. The principal activity of EACSB is to manufacture urea formaldehyde concentrate and adhesive products. The acquisition was completed on 23 August (a) Acquisition of subsidiaries The cost of acquisition comprised of the following: RM Purchase consideration satisfied by cash 22,139,307 Cost attributable to the acquisition, paid in cash 116,479 Total cost of acquisition 22,255,786 The acquired subsidiaries have contributed the following results to the Group: RM Loss for the year 2,004,413 If the acquisition had occurred on 1 January 2007, the Group s revenue and profit for the year would have been RM 731,571,443 and RM 131,468,707 respectively. 52

54 The assets and liabilities arising from the acquisitions are as follows: Fair value recognised on acquisition RM Acquiree s carrying amount RM Property, plant and equipment (Note 12) 13,410,854 13,410,854 Trade and other receivables 12,848,311 12,848,311 Cash and bank balances 8,124,283 8,124,283 34,383,448 34,383,448 Trade and other payables (5,687,020) (5,687,020) Fair value of net assets 28,696,428 Less: Minority interests (7,109,567) Group share of net assets 21,586,861 Goodwill on acquisition 668,925 Total cost of acquisition 22,255,786 The cash outflow on acquisition is as follows: RM Purchase consideration satisfied by cash 22,139,307 Cost attributable to the acquisition, paid in cash 116,479 Total cash outflow of the Company 22,255,786 Cash and cash equivalents of subsidiary acquired (8,124,283) Net cash outflow of the Group 14,131,503 On 23 August 2007, EFB announced the acquisition of 825,750 ordinary shares and 91,750 preference shares of Baht 100 each representing 25% of the paid up capital of SFCL for a cash consideration of approximately RM36.4 million. The acquisition was completed on 10 September There were no acquisitions subsequent to 31 December INTERESTS IN ASSOCIATES Group Company RM RM RM RM Unquoted shares, at cost 12,290,503 12,290,503 12,290,503 12,290,503 Loan to an associate 940, , , ,500 Share of post-acquisition reserves 5,710,671 2,619, ,941,674 15,850,237 13,231,003 13,231,003 The loan to an associate is unsecured, bears interest at 3% per annum and is not expected to be repaid within the next 12 months. 53

55 Details of the subsidiaries are as follows : Effective Interest Country of Held (%) Name of Associate Incorporation Principal Activities Dawa Timber Industries Malaysia 44.67% 44.67% Manufacture of Sdn. Bhd. plywood. Dynea Krabi Co. Ltd. Thailand 25.00% 25.00% Manufacturing of panel board resins, impregnated papers and industrial resins. The summarised financial information of the associates are as follows : RM RM Assets and liabilities Current assets 52,985,000 46,580,000 Non-current assets 46,899,000 43,077,000 Total assets 99,884,000 89,657,000 Current liabilities 34,835,000 34,295,000 Non-current liabilities 9,787,000 13,296,000 Total liabilities 44,622,000 47,591,000 Results Revenue 121,092,000 85,695,000 Profit for the year 12,151,000 7,235, INVENTORIES Group Company RM RM RM RM At cost : Raw materials 19,371,224 14,345,023 13,994,268 10,539,897 Work in progress 2,336,786 1,538,784 64,236 41,853 Finished goods 16,701,149 14,324,804 9,581,729 7,478,839 Factory supplies 761,463 6,608, Packing materials 973, , , ,164 Spare parts 41,453,155 27,572,713 21,279,467 17,762,724 81,597,462 64,580,242 45,026,477 35,941,477 54

56 18. TRADE RECEIVABLES Group Company RM RM RM RM Third parties 51,056,667 46,498,854 18,892,863 26,416,363 Subsidiaries - - 3,906, ,273 Associates 1,210, ,624 1,210, ,624 52,267,536 47,113,478 24,010,440 27,911,260 The Group s primary exposure to credit risk arises through its trade receivables. The Group s trading terms with its customers are mainly on credit for local customers and payment in advance for overseas customers. The normal credit term ranges from 15 to 90 days. Other credit terms are assessed and approved on a case-by-case basis. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables and overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Group s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. Trade receivables are non-interest bearing. Amounts due from subsidiaries and associates are unsecured, non-interest bearing, have no fixed terms of repayment and are to be settled in cash. 19. OTHER RECEIVABLES Group Company RM RM RM RM Subsidiaries ,120,181 49,465,867 Associate 182, , Sundry receivables 11,952,834 5,726,578 4,930, ,883 Deposits and prepayments 22,683,030 2,343,604 1,806,484 1,068,881 Advance payments to suppliers 19,537, Insurance compensation receivable 15,937, Tax recoverable 2,001, ,293,809 8,193,207 89,857,311 51,447,631 The amount due from subsidiaries and associate, which arose mainly from advances and transfer of assets and liabilities pursuant to a restructuring exercise in previous years, is unsecured, non-interest bearing, repayable on demand and are to be settled in cash. 20. MARKETABLE SECURITIES Group and Company RM RM At cost: Money market fund 18,705,417 57,702,124 At market value: Money market fund 18,705,417 57,702,124 55

57 21. CASH AND BANK BALANCES Group Company RM RM RM RM Cash on hand and at banks 36,925,232 50,868,590 12,112,519 26,157,888 Deposits with licensed banks 85,968,950 38,784,839 43,626,610 35,344,846 Cash and bank balances 122,894,182 89,653,429 55,739,129 61,502,734 Other information on financial risks of cash and cash equivalents are disclosed in Note BORROWINGS Group Company RM RM RM RM Short Term Borrowings Secured: Term loans 37,486,592 14,077, Hire purchase and finance lease liabilities (Note 23) 686, , , ,821 38,172,726 14,376, , ,821 Unsecured: Term loans 49,526,358-35,000,000-49,526,358-35,000,000-87,699,084 14,376,339 35,226, ,821 Long Term Borrowings Secured: Term loans 138,678, ,474, Hire purchase and finance lease liabilities (Note 23) 1,671, , , , ,349, ,117, , , ,349, ,117, , ,285 Total Borrowings Term loans 225,691, ,551,506 35,000,000 - Hire purchase and finance lease liabilities (Note 23) 2,357, , , ,106 Maturity of borrowings (excluding hire purchase and finance lease): 228,049, ,493,683 35,496, ,106 Within one year 87,012,950 14,077,478 35,000,000 - More than 1 year and less than 2 years 45,894,545 37,817, More than 2 years and less than 5 years 83,961,361 91,656, More than 5 years 8,822, ,691, ,551,506 35,000,000-56

58 The borrowings are secured by the following : (i) Debentures over fixed and floating charges over the present and future assets of certain subsidiaries. (ii) Legal charge over the freehold land and plant and machineries of the Company and certain subsidiaries as disclosed in Note 12. (iii) Priority and Security Sharing Agreement. (iv) Corporate guarantee by the Company. Other information on financial risks of borrowings are disclosed in Note HIRE PURCHASE AND FINANCE LEASE LIABILITIES Group Company RM RM RM RM Future minimum lease payments: Not later than 1 year 837, , , ,645 Later than 1 year and not later than 2 years 825, , , ,580 Later than 2 years and not later than 5 years 1,069, ,836 53, ,878 Later than 5 years 2,788 19,780 2,788 19,780 2,735,177 1,077, , ,883 Less: Future finance charges (377,745) (135,075) (68,760) (79,777) Present value of finance lease liabilities 2,357, , , ,106 Analysis of present value of finance lease liabilities: Not later than 1 year 686, , , ,821 Later than 1 year and not later than 2 years 706, , , ,715 Later than 2 years and not later than 5 years 962, ,228 41, ,904 Later than 5 years 2,369 16,666 2,369 16,666 2,357, , , ,106 Analysed as: Due within 12 months (Note 22) 686, , , ,821 Due after 12 months (Note 22) 1,671, , , ,285 2,357, , , ,106 Other information on financial risks of hire purchase and finance lease liabilities are disclosed in Note

59 24. TRADE PAYABLES Group Company RM RM RM RM Third parties 36,780,463 28,202,315 22,328,784 21,517,707 Subsidiaries , ,931 An associate 8,870,306 7,137, ,665-45,650,769 35,339,944 22,815,308 22,056,638 Trade payables are non-interest bearing and the normal credit terms granted to the Group range from 7 to 90 days. 25. OTHER PAYABLES Group Company RM RM RM RM Amount due to subsidiaries ,270,125 22,956,154 Amount due to affiliated companies 161,151 2,326, Sundry payables 15,632,046 8,983,508 1,816,982 2,151,577 Amount due to minority shareholders 44,125, Advances and accruals 14,522,705 7,755,094 4,428,632 4,006,866 74,441,462 19,064,987 27,515,739 29,114,597 The amount due to subsidiaries which arose mainly from advances and transfer of assets and liabilities pursuant to a restructuring exercise in previous years, is unsecured, non-interest bearing, repayable on demand and is to be settled in cash. Affiliated companies are those companies in which minority shareholders have interests. The amount due to minority shareholders, which arose mainly from acquisition of assets during the year, is unsecured, non-interest bearing, repayable on demand and is to be settled in cash. 26. DEFERRED TAXATION Group Company RM RM RM RM At 1 January 15,687,000 16,020,734 18,752,000 20,378,000 Recognised in the income statement (Note 9) 1,188,890 (298,000) (706,110) (1,626,000) Exchange difference - (35,734) - - At 31 December 16,875,890 15,687,000 18,045,890 18,752,000 Presented after appropriate offsetting as follows: Deferred tax assets (13,309,776) (7,787,000) - - Deferred tax liabilities 30,185,666 23,474,000 18,045,890 18,752,000 16,875,890 15,687,000 18,045,890 18,752,000 58

60 The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows: Deferred Tax Liabilities: Property, Plant and Equipment Group Company RM RM At 1 January ,474,000 18,752,000 Recognised in the income statement 6,711,666 (706,110) At 31 December ,185,666 18,045,890 At 1 January ,162,734 20,378,000 Recognised in the income statement (688,734) (1,626,000) At 31 December ,474,000 18,752,000 Deferred Tax Assets of the Group: Unabsorbed Unutilised capital tax allowance losses Total RM RM RM At 1 January 2007 (5,337,000) (2,450,000) (7,787,000) Recognised in the income statement (4,069,868) (1,452,908) (5,522,776) At 31 December 2007 (9,406,868) (3,902,908) (13,309,776) At 1 January 2006 (3,369,000) (4,773,000) (8,142,000) Recognised in the income statement (1,968,000) 2,323, ,000 At 31 December 2006 (5,337,000) (2,450,000) (7,787,000) 27. SHARE CAPITAL Group and Company Number of Ordinary Shares of RM0.25 Each Amount Authorised RM RM At 1 January/31 December 1,200,000,000 1,200,000, ,000, ,000,000 Issued and fully paid At 1 January/31 December 480,000, ,000, ,000, ,000, SHARE PREMIUM The share premium which is non-distributable represents the premium arising from the issue of shares. Movements in the share premium account are shown in the statement of changes in equity. 59

61 29. FOREIGN EXCHANGE RESERVE The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group s presentation currency. 30. RETAINED EARNINGS Prior to the year of assessment 2008, Malaysian companies adopted the full imputation system. In accordance with the Finance Act 2007 which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividend paid, credited or distributed to its shareholders, and such dividends will be exempted from tax in the hands of the shareholders ( single tier system ). However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders under limited circumstances. Companies also have an irrecoverable option to disregard the 108 balance and opt to pay dividends under the single tier system. The change in the tax legislation also provides for the 108 balance to be locked-in as at 31 December 2007 in accordance with Section 29 of the Finance Act The Company did not elect for the irrevocable option to disregard the 108 balance. Accordingly, during the transitional period, the Company may utilise the credit in the 108 balance as at 31 December 2007 to distribute cash dividend payments to ordinary shareholdings as defined under the Finance Act As at 31 December 2007, the Company has sufficient credit in the 108 balance to pay franked dividends amounting to RM159,522,000 (2006 : RM137,479,000) out of its retained earnings. If the balance of the retained earnings of RM43,831,000 (2006 : RM40,437,004) were to be distributed as dividends, the Company may distribute such dividends under the single tier system. 31. CAPITAL COMMITMENTS Group Company RM RM RM RM Capital expenditure Approved but not contracted for 12,388, ,100,000 4,983,034 1,500,000 Approved and contracted for 131,502,075 11,500, ,705 2,800, ,890, ,600,000 5,259,739 4,300, CONTINGENT LIABILITIES Company RM RM Unsecured: Corporate guarantees to banks for credit facilities granted to certain subsidiaries 101,436, ,543,925 Shareholder guarantees to bank for credit facilities granted to overseas subsidiaries 60,592,182 30,005,686 Corporate guarantee to a third party for a loan granted to a Thailand associate 940, , ,969, ,490,111 60

62 33. RELATED PARTY TRANSACTIONS Group Company RM RM RM RM Associates Sale of products 6,690,675 4,940,240 6,690,675 4,940,240 Sale of property, plant and equipment Purchase of products 43,095,792 39,680,926 1,980,926 2,442,177 Subsidiaries: Sale of products and rendering of services - - 5,766, ,897 Sales of property, plant and equipment ,026 - Sale of spare parts , ,426 Purchase of products - - 7,668,465 2,472,144 Purchase of property, plant and equipment - - 3,000 10,000 The directors are of the opinion that all the transactions above have been entered into in the normal course of business and have been established on terms and conditions that are mutually agreed upon. 34. FINANCIAL INSTRUMENTS (a) Financial Risk Management Objectives and Policies The Group s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group s businesses whilst managing its interest rate risks (both fair value and cash flow), foreign exchange risk, liquidity risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. It is, and has been throughout the year under review, the Group s policy that no trading in derivative financial instruments shall be undertaken. (b) Interest Rate Risk Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest-bearing financial assets, the Group s income and operating cash flows are substantially independent of changes in market interest rates. The Group s interest-bearing financial assets are mainly short term in nature and have been mostly placed in fixed deposits and short term deposits. The Group s interest rate risk arises primarily from interest-bearing borrowings. Borrowings at floating rates expose the Group to cash flow interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings. 61

63 The following tables set out the carrying amounts, the interest rates as at the balance sheet date and the remaining maturities of the Group s and the Company s financial instruments that are exposed to interest rate risk : More Interest Within Than 5 Note Rate Year Years Years Years Total % RM RM RM RM RM At 31 December 2007 Group Fixed rate Deposits with licensed banks to ,968, ,968,950 Hire purchase and finance lease liabilities to , , ,875 2,369 2,357,432 Floating rate Term loans to ,012,950 45,894,545 83,961,361 8,822, ,691,620 Company Fixed rate Deposits with licensed banks to ,626, ,626,610 Hire purchase and finance lease liabilities to , ,448 41,346 2, ,611 At 31 December 2006 Group Fixed rate Deposits with licensed banks to ,784, ,784,839 Hire purchase and finance lease liabilities to , , ,228 16, ,177 Floating rate Term loans to ,077,478 37,817,107 91,656, ,551,506 At 31 December 2006 Company Fixed rate Deposits with licensed banks to ,344, ,344,846 Hire purchase and finance lease liabilities to , , ,904 16, ,106 62

64 (c) Foreign Exchange Risk The Group is exposed to transactional currency risk primarily through sales and purchases that are denominated in a currency other than the functional currency of the operations to which they relate. The currency giving rise to this risk is primarily United States Dollars (USD) and Euro. Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are kept to an acceptable level. Material foreign currency transaction exposures are hedged, mainly with derivative financial instruments such as forward foreign exchange contracts. The Group maintains a natural hedge, whenever possible, by borrowing in the currency of the country in which the property or investment is located or by borrowing in currencies that match the future revenue stream to be generated from its investments. The net unhedged financial assets and financial liabilities of the Group companies that are not denominated in their functional currencies are as follows : Functional Currency of the Group Companies Net Financial Assets/(Liabilities) Held in Non-Financial Currencies Ringgit United States Other Malaysia Dollars Euro Currencies* Total RM RM RM RM RM At 31 December 2007 Ringgit Malaysia - 21,267,402 9,678,782 (331) 30,945,853 Thai Baht (1,137,921) 2,156,587 (175,771) (954) 841,941 Indonesian Rupiah - (57,094,478) - - (57,094,478) (1,137,921) (33,670,489) 9,503,011 (1,285) (25,306,684) At 31 December 2006 Ringgit Malaysia - 15,963, ,963,616 Thai Baht (839,155) (1,762,453) - - (2,601,608) (839,155) 14,201, ,362,008 * Other currencies consist of Singapore Dollars, Swiss Franc, Swedish Krona and Japanese Yen. As at balance sheet date, the Group and the Company had entered into forward foreign exchange contracts with the following notional amounts and maturities: Group Company Maturing Within 1 Year Forwards used to hedge anticipated sales RM RM Currency At 31 December 2007 United States Dollar 46,117,089 32,111,850 At 31 December 2006 United States Dollar 30,575,748 16,525,200 63

65 (d) Liquidity Risk The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both capital markets and financial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness. (e) Credit Risk The Group s credit risk is primarily attributable to trade receivables. The Group trades only with recognised and creditworthy third parties. It is the Group s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis and the Group s exposure to bad debts is not significant. The credit risk of the Group s other financial assets, which comprise cash and cash equivalents and marketable securities, arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these financial assets. The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial assets. (f) Fair Values The carrying amounts of financial assets and liabilities of the Group and of the Company at the balance sheet date approximated their fair values except for the followings: At 31 December 2007 Group Company Carrying Carrying Amount Fair Value Amount Fair Value RM RM RM RM Forward foreign exchange contracts - (1,344,000) - (1,341,000) At 31 December 2006 Forward foreign exchange contracts - (593,000) - (592,000) The fair value of a forward foreign exchange contract is the amount that would be payable or receivable on termination of the outstanding position arising and is determined by reference to the difference between the contracted rate and spot exchange rate as at the balance sheet date. 64

66 35. SEGMENT INFORMATION The primary segment reporting format is determined to be geographical segments as the Group s risks and rates of return are affected predominantly by the local economic environment in which it operates. Segmental reporting by business has not been presented as the Group s operations are within similar activities. Geographical Segments: The Group is organised into three major geographical segments: (i) Malaysia- manufacture of medium density fibreboard, wooden furniture (knock down), particleboard, glue, resin as well as trading and managing of plantation (ii) Thailand - production and distribution of medium density fibreboard. (iii) Indonesia - manufacture of medium density fibreboard, glue and resin. The directors are of the opinion that all inter-segment transactions have been entered in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties Malaysia Thailand Indonesia Elimination Consolidation RM RM RM RM RM REVENUE External sales 433,299, ,272, ,571,443 Inter-company sales 20,905, (20,905,347) - Total Revenue 454,204, ,272,298 - (20,905,347) 731,571,443 Results Segment results 74,534,987 70,064,438 (861,345) 1,246, ,984,706 Finance costs (5,245,936) (2,101,793) (2,252) - (7,349,981) Share of profit of associates 994,196 2,097, ,091,437 Profit before tax 70,283,247 70,059,886 (863,597) 1,246, ,726,162 Taxation (5,160,972) (4,216,859) - - (9,377,831) Profit for the year 65,122,275 65,843,027 (863,597) 1,246, ,348,331 Assets Segment assets 728,890, ,467,731 83,725,677 (238,006,230) 889,077,180 Interests in associates 11,149,477 7,792, ,941,674 Consolidated total assets 908,018,854 Liabilities Segment liabilities 282,935, ,374,349 70,671,265 (94,317,536) 368,663,908 Consolidated total liabilities 368,663,908 Other Information Amortisation of prepaid lease payments 203, ,243 Capital expenditures 18,415,372 93,315,249 81,691, ,422,052 Depreciation 14,775,796 13,403,533 95,300-28,274,629 65

67 35. SEGMENT INFORMATION (Cont d) 2006 Malaysia Thailand Indonesia Elimination Consolidation RM RM RM RM RM REVENUE External sales 309,240, ,864, ,104,825 Inter-company sales 3,313, (3,313,405) - Total revenue 312,553, ,864,279 - (3,313,405) 528,104,825 Results Segment results 45,192,095 24,056,925 - (945,713) 68,303,307 Finance costs (488,099) (2,199,319) - - (2,687,418) Share of profit of associates 704,387 1,408, ,112,695 Profit before tax 45,408,383 23,265,914 - (945,713) 67,728,584 Taxation (2,542,111) (2,542,111) Profit for the year 42,866,272 23,265,914 - (945,713) 65,186,473 Assets Segment assets 640,121, ,957,595 - (145,472,556) 651,606,165 Interests in associates 10,155,279 5,694, ,850,237 Consolidated total assets 667,456,402 Liabilities Segment liabilities 231,424,893 58,264,085 - (73,739,709) 215,949,269 Consolidated total liabilities 215,949,269 Other Information Amortisation of prepaid lease payments 203, ,244 Capital expenditures 110,588,722 12,816, ,404,746 Depreciation 10,671,580 11,289, ,961,136 The following table provides an analysis of the Group s revenue by geographical segment: Revenue from sales to external customers by location of the customers RM RM United States 59,127,429 53,332,904 Africa 11,472,695 5,614,410 Europe 28,750,255 23,871,449 Far East Asia 126,705, ,330,922 Mediterranean 29,703,048 9,554,415 Middle East 190,599, ,677,819 South Asia 47,962,268 35,636,124 South East Asia 236,437, ,439,362 Other Countries 812, , ,571, ,104,825 66

68 O T H E R I N F O R M A T I O N Page LIST OF PROPERTIES STATEMENT OF SHAREHOLDINGS SUBSTANTIAL SHAREHOLDERS 77 DIRECTORS SHAREHOLDINGS 77 NOTICE OF ANNUAL GENERAL MEETING FORM OF PROXY Enclosed 67

69 NET BOOK VALUE YEARS OF NO LOCATION TENURE LAND AREA USAGE AS AT 31 DEC 2007 ACQUISITION RM 1 PTD HS(D) LEASEHOLD 2.49 ACRES INDUSTRIAL / 2,482, /07/2003 MUKIM OF SRI GADING, 60 YEARS SINGLE STOREY DISTRICT OF BATU PAHAT, EXPIRING ON WAREHOUSE, JOHOR 10/09/2050 STORAGE AREA WITH THE GUARD HOUSE ADDRESS : PLO 3, LOCATED ALONG JALAN PADI KEDAH, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 2 PTD 7203 HS(D) LEASEHOLD 0.50 ACRE INDUSTRIAL / 479, /07/2003 MUKIM OF SRI GADING, 60 YEARS FUTURE DISTRICT OF BATU PAHAT, EXPIRING ON DEVELOPMENT JOHOR 11/07/2046 ADDRESS : PLO 2, LOCATED ALONG JALAN PADI KEDAH, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 3 PTD 7205 HS(D) LEASEHOLD 1.00 ACRE INDUSTRIAL / 976, /07/2003 MUKIM OF SRI GADING, 60 YEARS WAREHOUSE / DISTRICT OF BATU PAHAT, EXPIRING ON PRODUCTION AREA JOHOR 03/09/2047 AND STORAGE AREA. ADDRESS : PLO 6, LOCATED ALONG JALAN PADI KEDAH, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 4 PTD 5844 HS(D) LEASEHOLD 1.00 ACRE INDUSTRIAL / 976, /07/2003 MUKIM OF SRI GADING, 60 YEARS WAREHOUSE / DISTRICT OF BATU PAHAT, EXPIRING ON PRODUCTION AREA JOHOR 26/02/2043 AND STORAGE AREA. ADDRESS : PLO 4, LOCATED ALONG JALAN PADI KEDAH, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. LIST OF PROPERTIES AS AT 31 DECEMBER

70 NET BOOK VALUE YEARS OF NO LOCATION TENURE LAND AREA USAGE AS AT 31 DEC 2007 ACQUISITION RM 5 PTD HS(D) LEASEHOLD 2.00 ACRES INDUSTRIAL / 4,481, /07/2002 MUKIM OF SRI GADING, 60 YEARS MAIN OFFICE DISTRICT OF BATU PAHAT, EXPIRING ON ADMINISTRATION, JOHOR 01/04/2051 PRODUCTION AREA AND WAREHOUSE ADDRESS : PLO 17, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 6 PTD HS(D) LEASEHOLD 1.20 ACRES INDUSTRIAL / 1,479, /07/2002 MUKIM OF SRI GADING, 60 YEARS PRODUCTION AREA/ DISTRICT OF BATU PAHAT, EXPIRING ON CANTEEN / JOHOR 21/03/2055 TRAINING ROOM AND WAREHOUSE ADDRESS : PLO 27, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 7 PTD HS(D) LEASEHOLD 2.53 ACRES INDUSTRIAL / 2,321, /12/2000 MUKIM OF SRI GADING, 60 YEARS PRODUCTION DISTRICT OF BATU PAHAT, EXPIRING ON JOHOR 13/06/2056 ADDRESS : PLO 28, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 8 PTD HS(D) LEASEHOLD 3.83 ACRES INDUSTRIAL / 4,546, /11/2002 MUKIM OF SRI GADING, 60 YEARS WAREHOUSE DISTRICT OF BATU PAHAT, EXPIRING ON JOHOR 02/11/2053 ADDRESS : PLO 18, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 9 PTD HS(D) LEASEHOLD 2.00 ACRES INDUSTRIAL / 3,192, /01/1995 MUKIM SRI GADING, 60 YEARS PRODUCTION AND DISTRICT OF BATU PAHAT, EXPIRING ON CONCRETE LOG POND JOHOR 06/01/2055 ADDRESS : PLO 21, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 69

71 NET BOOK VALUE YEARS OF NO LOCATION TENURE LAND AREA USAGE AS AT 31 DEC 2007 ACQUISITION RM 10 PTD HS(D) LEASEHOLD 7.85 ACRES INDUSTRIAL/ 8,037, /09/1993 MUKIM OF SRI GADING, 60 YEARS PRODUCTION AREA DISTRICT OF BATU PAHAT, EXPIRING ON JOHOR 08/09/2053 ADDRESS : PLO 22, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 11 PTD HS(D) LEASEHOLD 2.50 ACRES INDUSTRIAL/ USE AS 1,474, /09/2003 MUKIM OF SRI GADING, 60 YEARS LOG YARD DISTRICT OF BATU PAHAT, EXPIRING ON AND PARKING SITE JOHOR 01/04/2051 ADDRESS : PLO 23, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 12 PTD 8605 HSM 4381 & PTD FREEHOLD SQ. M RESIDENTIAL/ HOSTEL 124, /03/ , HSM 4382 (1,540.0 SQ.FT.) MUKIM OF SRI GADING, DISTRICT OF BATU PAHAT, JOHOR ADDRESS : NO. 9 & 10, JALAN BINA 7, TAMAN PARIT RAJA, PARIT RAJA, BATU PAHAT, JOHOR. 13 PTD 7183 HS(D) LEASEHOLD 0.50 ACRES INDUSTRIAL / 772, /06/2003 MUKIM OF SRI GADING, 60 YEARS WAREHOUSE DISTRICT OF BATU PAHAT, EXPIRING ON JOHOR 31/07/2045 ADDRESS : NO. 7, JALAN PADI SIAM, PARIT RAJA INDUSTRIAL AREA, PARIT RAJA, BATU PAHAT, JOHOR. 14 PTD FREEHOLD 272,111 SF LOG YARD AREA 2,857, /08/2006 MUKIM OF SRI GADING, LAND (6.25 ACRES) DISTRICT OF BATU PAHAT 70

72 NET BOOK VALUE YEARS OF NO LOCATION TENURE LAND AREA USAGE AS AT 31 DEC 2007 ACQUISITION RM 15 LOT NO 51613, PN6656 LEASEHOLD 4.99 ACRES INDUSTRIAL/ 5,434, /02/1990 (PREVIOUSLY PTD 90024, 60 YEARS PRODUCTION/ HS(D) ) MUKIM OF EXPIRING ON OFFICE BUILDING/ PLENTONG, DISTRICT OF 20/05/2050 WAREHOUSE JOHOR BAHRU, JOHOR ADDRESS : PLO 416, JALAN SUASA, PASIR GUDANG INDUSTRIAL AREA, PASIR GUDANG, JOHOR. 16 PTD 64788, HS(D) 69683, LEASEHOLD SQ.M BUILDING 251, /09/2005 PTD HS(D) 69684, 99 YEARS (1,540 SQ. FT) (RESIDENTIAL) / MUKIM OF PLENTONG, EXPIRING ON X 2 UNITS WORKERS HOSTEL DISTRICT OF JOHOR BAHRU, 06/05/2082 TOTAL GROSS JOHOR FLOOR AREA: SQ.M X 2 UNITS ADDRESS : NO. 13 & 15, JALAN 10/9, PERJIRANAN 10, TAMAN AIR BIRU, PASIR GUDANG, JOHOR. 17 PLO 202, MUKIM OF POGOH, FREEHOLD ACRES INDUSTRIAL/ OFFICE 11,911, /01/2005 DISTRICT OF SEGAMAT, JOHOR AND PRODUCTION BUILDING ADDRESS : PLO 202, SEGAMAT INDUSTRIAL AREA II, SEGAMAT, JOHOR. 18 PLO 203, MUKIM OF POGOH, FREEHOLD ACRES INDUSTRIAL LAND & 2,632, /01/2006 DISTRICT OF SEGAMAT, BUILDING JOHOR ADDRESS: PLO 203, SEGAMAT INDUSTRIAL AREA II, SEGAMAT, JOHOR. 19 LOT NO. 4, TITLE NO FREEHOLD ACRES OFFICE 9,003, /05/2004 ADMINISTRATION, PRODUCTION AREA AND WAREHOUSE ADDRESS : 417/ , STA INDUSTRIAL PARK, MOO 1, KANJANAVANICH ROAD, SUB- DISTRICT PATHONG, DISTRICT OF HAATYAI, SONGKHLA, THAILAND. 71

73 NET BOOK VALUE YEARS OF NO LOCATION TENURE LAND AREA USAGE AS AT 31 DEC 2007 ACQUISITION RM 20 LOT NO. 5, TITLE NO FREEHOLD ACRES OFFICE 6,610, /05/2004 ADMINISTRATION, PRODUCTION AREA AND WAREHOUSE ADDRESS : 417/ , STA INDUSTRIAL PARK, MOO 1, KANJANAVANICH ROAD, SUB- DISTRICT PATHONG, DISTRICT OF HAATYAI, SONGKHLA, THAILAND. 21 LOT NO. 6, TITLE NO FREEHOLD 0.84 ACRES LOG YARD AREA 264, /05/2004 ADDRESS : 417/ , STA INDUSTRIAL PARK, MOO 1, KANJANAVANICH ROAD, SUB- DISTRICT PATHONG, DISTRICT OF HAATYAI, SONGKHLA, THAILAND. 22 LOT NO. 8, TITLE NO FREEHOLD 7.72 ACRES LOG YARD AREA 1,517, /05/2004 ADDRESS : 417/ , STA INDUSTRIAL PARK, MOO 1, KANJANAVANICH ROAD, SUB- DISTRICT PATHONG, DISTRICT OF HAATYAI, SONGKHLA, THAILAND. 23 LOT NO. 9, TITLE NO FREEHOLD 9.23 ACRES POWER PLANT 1,823, /05/2004 PRODUCTION ADDRESS : 417/117, STA INDUSTRIAL PARK, MOO 1, KANJANAVANICH ROAD, SUB- DISTRICT PATHONG, DISTRICT OF HAATYAI, SONGKHLA, THAILAND. 24 LOT NO. 11, TITLE NO FREEHOLD 7.25 ACRES INDUSTRIAL/ 1,686, /08/2006 TRAILER PARKING, CAR PARK ADDRESS : 417/ , STA INDUSTRIAL PARK, MOO1, KANJANAVANICH ROAD, SUB-DISTRICT PATHONG, DISTRICT OF HAATYAI, SONGKHLA, THAILAND. 72

74 NET BOOK VALUE YEARS OF NO LOCATION TENURE LAND AREA USAGE AS AT 31 DEC 2007 ACQUISITION RM 25 HS(D) , FREEHOLD ACRES INDUSTRIAL/ OFFICE 20,437, /12/2006 LOT NO: MLO 6219, & PRODUCTION MUKIM OF PLENTONG BUILDING ADDRESS : 11 1/2 MILES, JALAN MASAI, MASAI, JOHOR. 26 ADDRESS : GM 302 LOT NO: 942, FREEHOLD ACRES AGRICULTURE LAND 30, /12/2006 MUKIM CHAAH BAHRU, DAERAH BATU PAHAT, JOHOR. 27 ADDRESS : GM 1262 LOT NO: 301, FREEHOLD ACRES AGRICULTURE LAND 129, /12/2006 MUKIM CHAAH BAHRU, DAERAH BATU PAHAT, JOHOR. 28 LOT NO: 11, TITLE NO: FREEHOLD 9.6 ACRES INDUSTRIAL/ 2,627, /08/2007 PRODUCTION AREA ADDRESS: 417/ , STA INDUSTRIAL PARK, MOO1, KANJANAVANICH ROAD, SUB-DISTRICT PATHONG, DISTRICT OF HAATYAI, SONGKHLA, THAILAND. 29 LOT NO: 11, TITLE NO: FREEHOLD 6.0 ACRES INDUSTRIAL/ 1,661, /08/2007 PRODUCTION AREA ADDRESS: 417/ , STA INDUSTRIAL PARK, MOO1, KANJANAVANICH ROAD, SUB-DISTRICT PATHONG, DISTRICT OF HAATYAI, SONGKHLA, THAILAND. 30 LOT NO: 11, TITLE NO: FREEHOLD 6.4 ACRES INDUSTRIAL/ 1,782, /08/2007 PRODUCTION AREA ADDRESS: 417/ , STA INDUSTRIAL PARK, MOO1, KANJANAVANICH ROAD, SUB-DISTRICT PATHONG, DISTRICT OF HAATYAI, SONGKHLA, THAILAND. 73

75 NET BOOK VALUE YEARS OF NO LOCATION TENURE LAND AREA USAGE AS AT 31 DEC 2007 ACQUISITION RM 31 HAK GUNA BANGUNAN NO. 01 LEASEHOLD 2 15,026M EMPTY LAND 107, /08/2007 SUMATERA SELATAN, MUSI (3.72 ACRES) BANYUASIN, BANYUASIN I, PEMATANG PALAS, GAMBAR SITUASI TANGGAL: 22542/1996 ADDRESS: NO. 1, PEMATANG, INDONESIA. PALAS -13 AUG 1996 (22542/1996) 32 HAK GUNA BANGUNAN NO. 02 LEASEHOLD 16,850M FACTORY BUILDING/ 430, /08/2007 SUMATERA SELATAN, MUSI (4.164 ACRES) BOILER BANYUASIN, BANYUASIN I, PEMATANG PALAS, GAMBAR SITUASI TANGGAL: 22543/1996 ADDRESS: NO. 2, PEMATANG, INDONESIA. PALAS -13 AUG 1996 (22543/1996) 33 HAK GUNA BANGUNAN NO. 03 LEASEHOLD 13,487M OFFICE BUILDING 344, /08/2007 SUMATERA SELATAN, MUSI (3.333 ACRES) BANYUASIN, BANYUASIN I, PEMATANG PALAS, GAMBAR SITUASI TANGGAL: 22541/1996 ADDRESS: NO. 3, PEMATANG, INDONESIA. PALAS -12 AUG 1996 (22541/1996) 34 HAK GUNA BANGUNAN LEASEHOLD 19,965M GLUE PLANT 324, /08/2007 NO. 35/PRAJEN (4.934 ACRES) SUMATERA SELATAN, BANYUASIN, BANYUASIN I, PRAJEN (dh. SUNGAI RENGAS) SURAT UKUR TANGGAL: 03/PRAJEN/2007 ADDRESS: 14/SEI RENGAS, INDONESIA. PALAS -15 NOV 1982 (2190/1982)

76 STATEMENT OF SHAREHOLDINGS As at 1 April 2008 Authorised capital Issued and fully paid-up capital Class of shares Voting rights : RM300,000,000 divided into 1,200,000,000 ordinary shares of RM0.25 each : RM120,000,000 divided into 480,000,000 ordinary shares of RM0.25 each : Ordinary shares of RM0.25 each : One vote per share ANALYSIS OF SHAREHOLDINGS Holdings Number of Holders Number of Shares Percentage of Shares Less than to 1, , ,001 to 10,000 1,600 7,576, ,001 to 100, ,195, ,001 to less than 5% of issued shares ,698, % and above of issued shares 4 242,932, , ,000, THIRTY LARGEST SHAREHOLDERS Shareholders Number of Shares Percentage of Shares 1. KUO JEN CHANG 84,903, CITIGROUP NOMINEES (ASING) SDN BHD 72,746, EXEMPT SN FOR UBS AH HONG KONG 3. KUO HUEI CHEN 43,369, LEMBAGA TABUNG HAJI 41,912, ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 11,090, PHEIM ASSET MANAGEMENT SDN BHD FOR EMPLOYEES PROVIDENT FUND 6. KUO SZE HENRY S KUO 10,795, KUO SZE KUO JEFFREY S 10,785, KUO SZE KUO JUSTIN S 10,785, CITIGROUP NOMINEES (ASING) SDN BHD 10,664, UBS AG HONG KONG FOR GREAT ALPHINE ENTERPRISE LTD 10. HSBC NOMINEES (ASING) SDN BHD 8,000, EXEMPT AN FOR THE HONGKONG & SHANGHAI BANKING CORPORATION LIMITED 11. MOHD ALKAF BIN MOHD KAHAR 7,460, KE-ZAN NOMINEES (ASING) SDN BHD 7,013, KIM ENG SECURITIES PTE LTD FOR EXQUISITE HOLDINGS LIMITED 75

77 Name of shareholders Number of shares Percentage of shares 13. HSBC NOMINEES (ASING) SDN BHD 6,610, EXEMPT AN FOR MORGAN STANLEY & CO. INTERNATIONAL PLC 14. EVAWORLD SDN BHD 5,943, CESFIELD DEVELOPMENT SDN BHD 5,360, CITIGROUP NOMINEES (ASING) SDN BHD 5,250, MERRILL LYNCH INTERNATIONAL 17. CITIGROUP NOMINEES (ASING) SDN BHD 5,105, GSI FOR THE SFP ASIA MASTER FUND LTD 18. TM ASIA LIFE MALAYSIA BHD AS BENEFICIAL OWNER 4,317, NG PAIK PHENG 3,934, AMSEC NOMINEES (TEMPATAN) SDN BHD 3,686, AMTRUSTEE BERHAD FOR PACIFIC DIVIDEND FUND 21. UNIVERSAL TRUSTEE (MALAYSIA) BERHAD 3,560, PACIFIC PREMIER FUND 22. AMSEC NOMINEES (TEMPATAN) SDN BHD 3,176, AMTRUSTEE BERHAD FOR PACIFIC PEARL FUND 23. INTER-PACIFIC EQUITY NOMINEES (ASING) SDN BHD 3,001, KIM ENG SECURITIES PTE LTD FOR LOH YIH 24. JUASA HOLDINGS SDN BHD 3,000, CITIGROUP NOMINEES (ASING) SDN BHD 2,969, GOLDMAN SACHS INTERNATIONAL 26. CIMB GROUP NOMINEES (TEMPATAN) SDN BHD 2,833, CIMB TRUSTEE BERHAD FOR PACIFIC DANA AMAN 27. AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 2,550, PUBLIC ISLAMIC OPPORTUNITIES FUND 28. MALAYSIAN ASSURANCE ALLIANCE BERHAD 2,190, CITIGROUP NOMINEES (ASING) SDN BHD 2,155, UBS AG FOR BLACK RIVER COMMODITY SELECT FUND LTD 30. CITIGROUP NOMINEES (ASING) SDN BHD 2,145, UBS AG FOR BLACK RIVER ASIA FUND LTD 76

78 SUBSTANTIAL SHAREHOLDERS According to the Register required to be kept under Section 69L of the Companies Act, 1965, the following are the substantial shareholders of the Company: Direct Interest Deemed Interest Substantial Shareholders Number of % of Number of % of Shares Shares Shares Shares 1. KUO WEN CHI 1,804, ,019,724(1) KUO JEN CHANG 84,903, ,920,345(2) KUO JEN CHIU ,824,255(3) KUO HUEI CHEN 43,369, ,455,202(2) HSU MEI LAN ,824,255(1) KUO SZE HENRY S KUO 10,795, ,571,910(4) KUO SZE KUO, JUSTIN S 10,785, ,581,910(4) KUO SZE KUO, JEFFREY S 10,785, ,581,910(4) 4.50 Notes: (1) Deemed interested by virtue of the shareholdings of his children in EFB. (2) Deemed interested by virtue of the shareholdings of his/her father and siblings in EFB. (3) Deemed interested by virtue of his indirect shareholdings in Citigroup Nominees (Asing) Sdn Bhd and the shareholding of his father and siblings in EFB. (4) Deemed interested by virtue of the shareholdings of his siblings in EFB. LIST OF DIRECTORS SHAREHOLDINGS AS AT 1 APRIL 2008 According to the Register required to be kept under Section 134 of the Companies Act, 1965, the following are the shareholdings of the Directors in the Company: Direct Interest Deemed Interest Substantial Shareholders Number of % of Number of % of Shares Shares Shares Shares 1. MOHD ALKAF BIN MOHD KAHAR 7,900, KUO WEN CHI 1,804, ,019, KUO JEN CHANG 84,903, ,920, KUO JEN CHIU ,824, MARY HENERIETTA LIM KIM NEO 500, ,027 * 6. YONG KOK FONG 115, LAW NGEE SONG * Negligible 77

79 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the Seventeenth Annual General Meeting of Evergreen Fibreboard Berhad will be held at Sofitel Palm Resort, Pendeta 2, Main Convention Centre, Jalan Persiaran Golf, Off Jalan Jumbo, Senai, Johor Darul Takzim, Malaysia on Friday, 23 May 2008 at 9.00 a.m. for the following purposes: - Agenda ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the financial year ended 31 December 2007 together with the Directors and Auditors Report thereon. 2. To approve the payment of final dividend of 4.5 sen (tax-exempt) for the financial year ended 31 December To approve the payment of Directors Fees of RM148,300 for the financial year ending 31 December RESOLUTION 1 RESOLUTION 2 RESOLUTION 3 4. To re-elect the following Directors who retire during the year in accordance with Article 101 of the Company s Articles of Association and being eligible, offer themselves for re-election:- - Ms Mary Henerietta Lim Kim Neo - Mr Yong Kok Fong RESOLUTION 4 RESOLUTION 5 5. To consider, and if thought fit, to pass the following resolution: THAT pursuant to Section 129(6) of the Companies Act, 1965, Mr Kuo Wen Chi be and is hereby re-appointed as Director of the Company to hold office until the conclusion of the next Annual General Meeting. 6. To re-appoint Messrs Ernst & Young who retire as Auditors of the Company and authorise the Directors to fix their remuneration. RESOLUTION 6 RESOLUTION 7 SPECIAL BUSINESS 7. To consider and, if thought fit, to pass the following Ordinary Resolutions: ORDINARY RESOLUTION 1 AUTHORITY TO ALLOT SHARES - SECTION 132D THAT pursuant to Section 132D of the Companies Act, 1965 and subject to the approval of the relevant authorities, the Directors be and are hereby empowered to issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being and that the Directors be and also empowered to obtain approval for the listing of and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company. ORDINARY RESOLUTION 2 PROPOSED RENEWAL OF SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS ( Proposed Renewal of Shareholders Mandate ) THAT, subject always to the provisions of the Companies Act, 1965 ( the Act ), the Memorandum & Articles of Association of the Company, the Listing Requirements of Bursa Malaysia Securities Berhad or any other regulatory authorities, approval be and is hereby given for the Company and its subsidiaries ( EFB Group ) to enter into recurrent RESOLUTION 8 RESOLUTION 9 78

80 related party transactions of a revenue or trading nature in the ordinary course of business which are necessary for the day-to-day operations of the EFB Group as specified in section of the Company s Circular to Shareholders dated 30 April 2008 ( Circular ) on terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders and that authority conferred by this resolution shall take effect immediately upon the passing of this resolution and the shareholders mandate shall continue to be in force until: - (a) (b) (c) the conclusion of the next Annual General Meeting ( AGM ) of the Company following the AGM, at which the ordinary resolution for the Proposed Renewal of Shareholders Mandate was passed, at which time it will lapse, unless by a resolution passed at a general meeting, the authority is renewed; the expiration of the period within which the next AGM after that date is required to be held pursuant to Section 143(1) of the Act, (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or revoked or varied by resolution passed by the shareholders in general meeting; whichever is the earlier; AND THAT authority be and is hereby given to the Directors of the EFB Group to complete and do all such acts and things (including executing such documents as may be required) to give effect to such transactions as authorised by this Ordinary Resolution. AND THAT the estimates given on the recurrent related party transactions specified in section of the Circular being provisional in nature, the Directors and/or any of them be and are hereby authorised to agree to the actual amount or amounts thereof provided always that such amount or amounts comply with the review procedures set out in section of the Circular. ORDINARY RESOLUTION 3 PROPOSED SHAREHOLDERS MANDATE FOR NEW RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE ( Proposed Shareholders Mandate ) THAT, subject always to the provisions of the Companies Act, 1965 ( the Act ), the Memorandum & Articles of Association of the Company, the Listing Requirements of Bursa Malaysia Securities Berhad or any other regulatory authorities, approval be and is hereby given for the Company and its subsidiaries ( EFB Group ) to enter into recurrent related party transactions of a revenue or trading nature in the ordinary course of business which are necessary for the day-to-day operations of the EFB Group as specified in section of the Company s Circular to Shareholders dated 30 April 2008 ( Circular ) on terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders and that authority conferred by this resolution shall take effect immediately upon the passing of this resolution and the shareholders mandate shall continue to be in force until: - RESOLUTION 10 (a) (b) (c) the conclusion of the next AGM of the Company following the AGM, at which the ordinary resolution for the Proposed Shareholders Mandate was passed, at which time it will lapse, unless by a resolution passed at a general meeting, the authority is renewed; the expiration of the period within which the next AGM after that date is required to be held pursuant to Section 143(1) of the Act, (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or revoked or varied by resolution passed by the shareholders in general meeting; whichever is the earlier; 79

81 AND THAT authority be and is hereby given to the Directors of the EFB Group to complete and do all such acts and things (including executing such documents as may be required) to give effect to such transactions as authorised by this Ordinary Resolution. AND THAT the estimates given on the recurrent related party transactions specified in section of the Circular being provisional in nature, the Directors and/or any of them be and are hereby authorised to agree to the actual amount or amounts thereof provided always that such amount or amounts comply with the review procedures set out in section of the Circular. 8. To transact any other business appropriate to an Annual General Meeting. NOTICE OF DIVIDEND ENTITLEMENT NOTICE IS ALSO HEREBY GIVEN THAT subject to the approval of the shareholders at the Seventeenth Annual General Meeting, the Final Dividend of 4.5 sen (tax-exempt) in respect of the financial year ended 31 December 2007 will be payable on 22 August 2008 to Depositors registered in the Record of Depositors at the close of business on 30 July A Depositor shall qualify for entitlement only in respect of: a) Securities transferred into the Depositor s Securities Account before 4.00 p.m. on 30 July 2008 in respect of transfer; and b) Securities bought on the Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of the Bursa Malaysia Securities Berhad. BY ORDER OF THE BOARD WOO YING PUN (f) MAICSA NO LEONG SIEW FOONG (f) MAICSA NO Secretaries Johor Bahru Date: 30 April 2008 NOTES : 1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. The proxy need not be a Member of the Company and Section 149(1)(b) of the Companies Act, 1965 shall not apply. 2. A member shall be entitled to appoint more than one proxy (subject always to a maximum of two (2) proxies at each meeting) to attend and vote at the same meeting. 3. Where a member appoints more than one (1) proxy (subject always to a maximum of two (2) proxies at each meeting) the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 4. Where a member 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. 5. The instrument appointing a proxy shall be in writing under the hand of the appointer or if such appointer is a corporation under its common seal or the hand of its attorney. 6. The instrument appointing a proxy must be deposited at the Registered Office of the Company, Symphony Corporatehouse Sdn. Bhd. at Suite 6.1A, Level 6, Menara Pelangi, Jalan Kuning, Taman Pelangi, Johor Bahru, Johor not less than forty-eight (48) hours before the time appointed for holding the Meeting or any adjournment thereof. EXPLANATORY NOTES ON SPECIAL BUSINESS: The Proposed Resolution No. 8, if passed, is primarily to give flexibility to the Board of Directors to issue and allot shares at any time in their absolute discretion without convening a general meeting. This authority will unless revoked or varied by the Company in general meeting expire at the next Annual General Meeting. The Proposed Renewal of Shareholders Mandate and Proposed Shareholders Mandate under Proposed Resolution No. 9 and No. 10 would allow the Company to dispense with announcements to Bursa Malaysia Securities Berhad on the same or convene general meetings from time to time to seek shareholders approval as and when such recurrent related party transactions occur. Hence, the Proposed Renewal of Shareholders Mandate and Proposed Shareholders Mandate would result in a saving of administrative time, costs and expenses for the Company. It would also enable the EFB Group to meet its corporate objectives and realise business opportunities, as and when they shall become available to the EFB Group, in a more timely and effective way. 80

82 FORM OF PROXY CDS ACCOUNT NO. NO. OF SHARES HELD I/We... of... b e i n g a m e m b e r / m e m b e r s o f E V E R G R E E N F I B R E B O A R D B E R H A D, h e r e b y a p p o i n t... of... or failing him... of... as my/our proxy to vote for *me/us and on *my/our behalf at the Seventeenth Annual General Meeting of the Company to be held at Sofitel Palm Resort, Pendeta 2, Main Convention Centre, Jalan Persiaran Golf, Off Jalan Jumbo, Senai, Johor Darul Takzim, Malaysia on Friday, 23 May 2008 at 9.00 a.m. and at every any adjournment thereof *for/against he resolutions to be proposed thereat. *My/Our proxy is to vote as indicated below: NO. RESOLUTION FOR AGAINST 1. Receive the Audited Financial Statements for the year ended 31 December 2007 together with the Reports of the Directors and Auditors. 2. Payment of final dividend. 3. Approve the payment of Directors Fees of RM148,300 for the financial year ending 31 December Re-election of Directors retiring according to the Company s Articles of Association: Ms Mary Henerietta Lim Kim Neo 5. - Mr Yong Kok Fong 6. Re-appointment of Mr Kuo Wen Chi as Director pursuant to Section 129 (6) of the Companies Act, Re-appointment of Messrs Ernst & Young as Auditors. 8. Authority to allot shares. 9. Proposed Renewal of Shareholders Mandate for Recurrent Related Party Transactions. ( Proposed Renewal of Shareholders Mandate ) 10. Proposed Shareholders Mandate for Recurrent Related Party Transactions. ( Proposed Shareholders Mandate ) Please indicate with a cross (X) in the space whether you wish your votes to be cast for or against the resolution. In the absence of such specific directions, your proxy will vote or abstain as he thinks fit As witness my hand this...day of Signature of Member(s) NOTES: 1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. The proxy need not be a Member of the Company and Section 149(1)(b) of the Companies, 1965 shall not apply. 2. A member shall be entitled to appoint more than one proxy (subject always to a maximum of two (2) proxies at each meeting) to attend and vote at the same meeting. 3. Where a member appoints more than one (1) proxy (subject always to a maximum of two (2) proxies at each meeting) the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 4. Where a member 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. 5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if such appointer is a corporation under its common seal or the hand of its attorney. 6. The instrument appointing a proxy must be deposited at the office of the Registered Office of the Company, Symphony Corporatehouse Sdn. Bhd. at Suite 6.1A, Level 6, Menara Pelangi, Jalan Kuning, Johor Bahru, Johor not less than forty-eight (48) hours before the time appointed for holding the Meeting. 81

83 Please fold here Affix Stamp Here The Secretary (Company No: W) Suite 6.1A, Level 6, Menara Pelangi, Jalan Kuning, Taman Pelangi, Johor Bahru, Johor. Please fold here 82

84 ( W) Plo 22, Parit Raja Industrial Estate, Parit Raja, Batu Pahat, Johor, Malaysia. Tel: 6(07) Fax: 6(07) URL: