Notice of Annual General Meeting

Annual Report 2005

NOTICE IS HEREBY GIVEN that the Thirty-Fifth Annual General Meeting of the Company will be held at Junior Ballroom 2, Level 2, Hotel Nikko, 165 Jalan Ampang, 50450 Kuala Lumpur on 29 June 2006 at 2.30pm for the following purposes:-

AGENDA 1. To receive and adopt the Statutory Financial Statements for the year ended (Resolution 1) 31 December 2005 and the Reports of the Directors and Auditors thereon.

2 To approve the payment of Directors’ fees for the year ended 31 December 2005 (Resolution 2)

3. To re-elect the following Directors retiring in accordance with Article 80 of the Company’s Articles of Association and being eligible, offer themselves for re-election:

i) Muhammad Nasir Bin Puteh (Resolution 3) ii) Yusof Ali Bin Haji M. Zain (Resolution 4) iii) Hazli Bin Ibrahim (Resolution 5)

4. To re-appoint Auditors and to authorise the Directors to fix their remuneration. (Resolution 6)

5. To transact any other business of which due notice have been given.

BY ORDER OF THE BOARD

YEAP KOK LEONG (MAICSA NO. 0862549) Company Secretary

Dated this 6 June 2006 Kuala Lumpur

NOTES:- 1. A member of the Company entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy may, but need not, be a member of the Company and a member may appoint any person to be his proxy without limitation and the provision of Section 149(1) (b) of the Companies Act 1965 shall apply to the Co m p a n y 2. Wh e r e a member of the Company is an authorised nominee as defined under the Security Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 3. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under Seal or under the hand of an officer or attorney duly au t h o r i s e d . 4. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. 5. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall deposited at the Registered Office of the Company at 20th Floor, East Wing, Plaza Permata, Jalan Kampar Off Jalan Tun Razak, 50400 Kuala Lumpur, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof. 1 Statement Accompanying Notice of AGM M E N T I G A Corporation Berhad

1) Directors who are standing for re-election

The Directors who are offering themselves for re-election at the Thirty-Fifth Annual General Meeting of the Company are as follows:

Article 80

i) Muhammad Nasir Bin Puteh ii) Yusof Ali Bin Haji M. Zain iii) Hazli Bin Ibrahim

2) Details of attendance of Directors at Board meetings

The details of attendance of each Director at Board meetings are laid out on pages 15 of this Annual Report.

3) Date, Time and Place of the Thirty-Fifth Annual General Meeting

The Annual General Meeting will be held at at Junior Ballroom 2, Level 2, Hotel Nikko, 165 Jalan Ampang, 50450 Kuala Lumpur on 29 June 2006 at 2.30pm

4) Details on Directors who are standing for re-election

i) Details of Directors standing for re-election are set out on page no 9 to 11 of this Annual Report.

ii) None of the Directors standing for re-election have been convicted of offences within the past 10 years other than traffic offences, if any.

2 Report Of The Audit Committee

Annual Report 2005

MEMBERS AND MEETINGS

The Audit Committee comprises of two Independent Non-Executive Directors and one Non-Independent Non-Executive Director of the Board. The Committee had five (5) meetings during the financial year. Details of the members and the attendance of the meetings are as follows:

No. of Meetings attended

Bahudin Bin Mansor (Chairman) 5/5

Dato’ Haji Mohd Ali Hanafiah Bin Sh Ruji 5/5

Hazli Bin Ibrahim 5/5

The External Auditor was invited to attend the meeting when the annual financial statement was being tabled. Other members of senior management of the Group attended some of these meetings upon invitation by the Chairman of the Committee.

SUMMARY OF ACTIVITIES

During the period, the Audit committee carried out its duties as set in the terms of reference. Other main issues discussed by the Audit Committee were as follows i. Reviewed the quarterly results of the Group and made recommendations to the Board for approval. ii. The disclosure requirements of the Listing Requirements of Bursa Malaysia Securities Berhad. iii. Evaluate the performance of external auditors and make recommendation to the Board (subject to the shareholders’ approval) on their appointment, scope of work, etc

GROUP INTERNAL AUDIT

The Board intends to set up an Internal Audit Division to provide an independent assessment an adequacy efficiency and effectiveness of internal control procedures and to ensure that there is no potential risk exposure over key business processes within the Group. The present level of operation and limited human resources in the Group does not justify the setting up of Group Internal Audit Function.

TERMS OF REFERENCE OF AUDIT COMMITTEE

1.0 MEMBERSHIP

1.1 The Committee shall be appointed by the Board of Directors amongst the Directors of the Company which fulfils the following requirements:

3 Report Of The Audit Committee

M E N T I G A Corporation Berhad

(a) the Committee must be composed of no fewer than 3 members;

(b) a majority of the Committee must be independent director; and

(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:

(a) he must have passed the examinations specified in art I of the 1st Schedule of the Accountant Act 1967; or

(b ) he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountant Act 1967.

(iii) (a) a degree/masters/doctorate in accounting or finance and at least 3 years' post qualifications experience in accounting or finance; or

(b) at least 7 years’ experience being a chief financial officer of a corporation or having the function of being primarily responsible for the management of the financial affairs of a corporation.

1.2 The members of the Committee shall elect a Chairman from among themselves who shall be an independent director.

1.3 No alternate director shall be appointed as a member of the Committee.

1.4 In the event of any vacancy in the Committee resulting in the non-compliance of the listing requirement of the Exchange pertaining to composition of audit committee, the Board of Directors shall within three months of that event fill the vacancy.

1.5 The terms of office and performance of the Committee and each of its members must be reviewed by the Board of Directors at least once every 3 years to determine whether the Committee and its members have carried out their duties in accordance with their terms of reference.

2.0 MEETINGS

2.1 Frequency

2.1.1 Meetings shall be held not less than four times a year.

2.1.2 Upon the request of the external auditor, the Chairman of the Committee shall convene a meeting of the Committee to consider any matter the external auditor believes should be brought to the attention of the Directors or shareholders.

4 Report Of The Audit Committee

Annual Report 2005

2.2 Quorum

2.2.1 A quorum shall consist of a majority of independent directors.

2.3 Secretary

2.3.1 The Company Secretary shall be the Secretary of the Committee or in his absence, another authorized by the Chairman of the Committee.

2.4 Attendance

2.4.1 The Financial Director, the Head of Internal Audit (where such a function exists) and a representative of the external auditor shall normally attend meetings.

2.4.2 Other Directors and employees may attend any particular meeting only at the Committee’s invitation, specific to the relevant meeting.

2.4.3 At least once a year, the Committee shall meet with the external auditors without any executive Board members present.

2.5 Reporting Procedure

2.5.1 The minutes of each meeting shall be circulated to all members of the Board.

2.6 Meeting Procedure

The Committee shall regulate its own procedure, in particular:-

(a) the calling for meetings

(b) the notice to be given of such meetings

(d) the keeping of minutes; and

(e) the custody, production and inspection of such minutes

3.0 RIGHTS

The Committee in performing its duties shall in accordance with a procedure to be determined by the Board of Directors:

(a) have authority to investigate any matter within its terms of reference

(b) have the resources which are required to perform its duties

5 Report Of The Audit Committee

M E N T I G A Corporation Berhad

(d) have direct communication channels with the external auditor and person(s) carrying out the internal audit function or activity (if any)

(e) be able to obtain independent professional or other advice; and

(f) be able to convene meetings with external auditors, excluding the attendance of the executive members of the committee, whenever deemed necessary.

4.0 FUNCTIONS

The Committee shall, amongst others, discharge the following functions:

4.1 To review:

(a) the quarterly results and year end financial statements, prior to the approval by the Board, focusing particularly on:-

(i) the going concern assumption

(ii) changes in implementation of major accounting policy changes

(iii) significant and unusual events; and

(iv) compliance with accounting standards and other legal requirements

(b) any related party transaction and conflict of interest situation that may rise within the Company or grou p including any transactions, proc e d u r e or course of conduct that raises questions or management integrity.

(i) the audit plan

(ii) his evaluation of the system of internal controls

(iii) his audit report; and

(iv) his management letter and management’s response

(v) the assistance given by the Company’s employees to the external auditor

4.2 To monitor the management’s risk management practices and procedures

4.3 In respect of the appointment of external auditors

(a) to review whether there is reason (supported by grounds) to believe that the external auditor is not suitable for re appointment

(b) to consider the nomination of a person or persons as external auditors and the audit fee

Annual Report 2005

4.4 In respect of the internal audit function:

(a) to review the adequacy of the scope, functions and resources of the internal audit functions and that it has the necessary authority to carry out its work

(b) to review the internal audit programme, processes, the results of the internal audit programme, processes, or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;

(d) to approve any appointment or termination of senior staff members of the internal audit function; and

(e) to inform itself of any resignation of internal audit staff member and provide the resigning staff member an opportunity to submit his reasons for resigning

4.5 To promptly report such matter to the Bursa Malaysia if the Committee is of the view that the matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Listing Requirements.

4.6 To carry out such other functions as may be agreed to by the Committee and the Board of Directors.

7 Corporate Information

M E N T I G A Corporation Berhad

Secretary Mr. Yeap Kok Leong (MAICSA No. 0862549)

Auditors Ash’ariCheong (AF1534) Chartered Accountant B42, Abacus Business Centre Lorong Tun Ismail 8, Sri Dagangan 2 25000 Kuantan, Registered Office Pahang Darul Makmur 20th Floor, East Wing Tel: 09-5178388 Plaza Permata, Jalan Kampar Fax: 09-5158098 Off Jalan Tun Razak 50400 Kuala Lumpur Bankers Tel: 03-40439411 Bumiputra Commerce Bank Berhad Fax: 03-40431233 Jalan Sultan Abdullah 26600 Pekan, Pahang Darul Makmur Registrar Tel: 09-4222024 Tenaga Korporat Sdn Bhd Fax: 09-4221146 20th Floor, East Wing Plaza Permata, Jalan Kampar HSBC Bank Malaysia Berhad Off Jalan Tun Razak 1& 3, Jalan Hj. Abd. Aziz 50400 Kuala Lumpur 25000 Kuantan, Pahang Darul Makmur Tel: 03-40416522 Tel: 09-5244666 Fax: 03-40426352 Fax: 09-5141319 Solicitors Abraham Ooi & Partners No.106, 8th Floor, Wisma Harwant Jalan Tuanku Abdul Rahman 50100 Kuala Lumpur Tel: 03-26910654 Fax: 03-26910644

8 Directors Profile

Annual Report 2005

YAB DATO’ SRI HJ. ADNAN BIN HJ YAAKOB

YAB Dato' Sri Haji Adnan bin Haji Yaakob, Malaysian, aged 56, holds a Bachelor’s Degree of Arts from University Malaya in 1975 and obtained his Diploma in Education from the same university in 1977. He was appointed to the Board on 4th December 2002 and is currently a non-independent non-executive Director and Chairman of the Company. He is also the Chairman of the Nomination Committee and Remuneration Committee of the Bo a r d. He is a member of the Pahang State Legislative Assembly, rep r esenting Pelangai constituency since 1986 until todate. Dato’ Sri Hj. Adnan was also a member of the State Executive Council of Pahang Darul Makmur from 1990 to 1999. He was appointed as Menteri Besar of Pahang from 25 May 1999 until todate. He holds various chairmanship posts in State Agencies of Pahang namely; Perbadanan Kemajuan Negeri Pahang (PKNP), Amanah Saham Pahang Berhad (ASPA), Lembaga Kemajuan Perusahaan Pertanian Pahang (LKPP), Yayasan Pahang, Perbadanan Perpustakaan Awam Pahang (PPAP) and Pasdec Holdings Berhad.

There is no family relationship between him and any directors or major shareholders of the company nor any conflict of interest with the Company. He has not been convicted of any offence within the past 10 years.

DATO’ HAJI MOHD ALI HANAFIAH BIN SH. RUJI

Dato' Haji Mohd Ali Hanafiah bin Sh. Ruji, Malaysian, aged 59, is the General Manager of Amanah Saham Pahang Berhad. He graduated with a Bachelors Degree in Economics from University Malaya. He joined ASPA in 1978 and has held several managerial positions in the group prior to his current appointment. He is a member of the Audit committee of the Board.

He is also the director of a few subsidiaries of Amanah Saham Pahang Berhad including Pengurusan Kumipa Berhad, a Unit Trust Management Company, Perpa Parquet Sdn Bhd and Goodwood Industries Sdn Bhd. He also serves as a member of the investment committee of Pengurusan Kumipa Berhad.

There is no family relationship between him and any directors or major shareholders of the company nor any conflict of interest with the company. He has not been convicted of any offence within the past 10 years.

MUHAMMAD NASIR BIN PUTEH

Muhammad Nasir bin Puteh, Malaysian, aged 48, holds a Bachelor's Degree of Science in Physics from University Malaya. He was appointed as Managing Director of the company on 3rd November 2003. He commenced his career in 1983 with Texas Instrument (M) Berhad upon graduation as a Production Supervisor and later joined Affin Bank Berhad on 3rd August 1984. During his tenure in the bank, he has acquired vast experience at various units and department including the Audit Department and Branches. His strong background in banking and financial sector is an added advantage to the company and is the key person in negotiating for the successful hefty loan haircut with various Banks and Danaharta- a national asset management company of Malaysia.

There is no family relationship between him and any directors or major shareholders of the Company nor any conflict of interest with the Company. He has not been convicted of any offence within the past ten (10) years.

9 Directors Profile

M E N T I G A Corporation Berhad

DATO' MOHD GHAZALI BIN DATO' MOHD KHALID

Dato' Mohd Ghazali bin Dato' Mohd Khalid, Malaysian, aged 59, holds an Advance Diploma in Business Administration from Ateneo De Manila Graduate School of Business, Philippines. He was appointed to the Board on 9th September 1993. He is currently a non-independent non-executive director. He started his career as government servant since 1970 in Police Department and holding a last post of Personal Assistant to the Inspector General of Police, Malaysia. He later joined TDM Bhd as Executive Director from 1986-1988, Executive Director of Aokam Perdana Berhad from 1988-1992, Executive Chairman/Chief Executive Officer of Malaysian General Investment Corporation Berhad from 1993-2003. He is currently Board of Directors of LB Aluminium Berhad and Super Enterprise Holdings Berhad.

BAHUDIN BIN MANSOR

Bahudin bin Mansor, Malaysian, aged 46, was appointed to the board of Mentiga Corporation Berhad (Mentiga) on 4th November 2003. He is the Senior Independent Non-Executive Director and Chairman of the Audit Committee. He is also a member of the Nomination and Remuneration Committee of the Board. He holds a Bachelor of Science degree majoring in Finance and Accounting from Drake University, Des Moines, Iowa, USA and Advance in Diploma In Accountancy from Institute Technology Mara, Shah Alam, Selangor. He has held various senior management positions with companies in various institutions. He has a total of about 22 years experience in Audit, Finance and Administration.

YUSOF ALI BIN HAJI M. ZAIN

Yusof Ali bin Haji M. Zain, Malaysian, aged 61, holds LLB and LLM from Buckingham, England, MSc (Transport) and MBA (Management) from Cranfield, England. He is an Advocate & Solicitor of High Court of Malaya. He was appointed to the Board of Directors of Mentiga Corporation Berhad on 20th February,2004. He is a member of the Remuneration Committee of the Board.

He commenced his career in banking sector from 1994 until year of 2000 in Affin Bank Berhad, and holding a post of General Manager. During his tenure in the bank, he was assigned in various capacity including human resource management and training, marketing, corporate communication and public relations. Prior to this he has held various senior management positions in transportation companies from 1974 to 1990. His strong background in banking and financial sector is an added advantage to Mentiga Corporation Berhad. He is currently the Group Managing Director of PASDEC Holdings Berhad.

10 Directors Profile

Annual Report 2005

HAZLI BIN IBRAHIM

Hazli bin Ibrahim, Malaysian, aged 43 years, graduated with a Bachelor of Finance with Accounting from the University of East London in 1986 and is a fellow of the Association of Chartered Certified Accountants. He obtained his MBA in 1993 from City University Business School in London. He was appointed to the Board of Directors of Mentiga Corporation Berhad on 20th February, 2004. He is a member of the Nomination and Audit Committee of the Board.

He started his career in London with several firms of chartered accountants. Upon his return to Malaysia in August 1994, he joined the corporate finance unit of Aseambankers, an investment banking arm of Maybank Berhad. Subsequently in November 1996, he moved to Amanah Merchant Bank Berhad. He left Amanah Group in September 1998 to join Pengurusan Danaharta Nasional Berhad ("Danaharta"), a national asset management company of Malaysia, as the Head of Corporate Planning, Corporate Services Division.

He left Danaharta in October 2002 to set up Haz-iq Capital Sdn Bhd, a consultancy firm, specializing in corporate finance works, where he is currently the Managing Director. His key areas of expertise includes taking companies for listing on Bursa Malaysia Securities Berhad/Mesdaq Market, corporate and debt restructuring and fund raising exercise. He is currently a member of the Board of Directors of Ayer Hitam Tin Dredging Malaysia Berhad.

11 C h a i r m a n ’s Statement

M E N T I G A Corporation Berhad

Dear Shareholders On behalf of the Board of Directors of Mentiga Corporation Berhad, I present the Annual Report and Audited Financial Statements of the Group and the Company for the financial year ended 31 December 2005.

FINANCIAL RESULTS

For the financial year ended 31 December 2005, the Group recorded RM18.8 million net loss against a net profit of RM2.5 million in the previous financial year. The net loss of the current financial year was due to an amount of RM7 million being accrual for full and final settlement for legal claim with a licensed bank and a lower revenue from sales of timber and related products by RM15.8 million.

CORPORATE DEVELOPMENT

On 15 March 2005, the revised comprehensive proposals ("Comprehensive Proposals") had been submitted to the Securities Commission (SC) for approval. The Proposals are as follows :

• Proposed revaluation of the property assets of Mentiga and its subsidiaries ("Proposed revaluation")

• Proposed debt settlement via the issue of new ordinary shares of RM1 each in Mentiga ("Mentiga shares") as settlement of an amount owing by Mentiga to its shareholder, Amanah Saham Pahang Berhad ("ASPA") ("Proposed debt settlement")

• Proposed restricted issue of 20,000,000 Redeemable Convertible Preference Shares of RM1 each in Mentiga ("RCPS") to ASPA ("Proposed restricted issue")

• Proposed employee share option scheme for eligible employees and Directors of Mentiga and its subsidiaries ("Proposed ESOS")

• The disposal of Selat Bersatu Berhad, a 56% owned subsidiary of Mentiga, of 18,900 ordinary shares of Indonesian Rupiah 1,000,000 each in PTRJ representing its entire investment of 90% equity interest in PTRJ to Delloyd Plantation Sdn. Bhd. and Taipan Hectares Sdn. Bhd., for cash consideration of RM61,200,000 ("Proposed disposal")

• Proposed increase in the authorised share capital of Mentiga; and

• Pr oposed amendments to the Memorandum and Articles of Associates of Mentiga ("Proposed Amendments")

12 C h a i r m a n ’s Statement

Annual Report 2005

SC had also via its letter dated 22 Feb 2006 approved an extension of time up to 31 Aug 2006 for the Company and its Group to implement the Proposals.

DIVIDEND

The Board of Directors does not recommend any dividend payment for the year under review.

PROSPECT FOR 2006 AND STRATEGIES

The Group is still in the process of regularising its financial position in order to enhance its core business which are timber related activities, construction, property development and plantation.

ACKNOWLEDGEMENT

On behalf of the Board, I would like to express my sincere appreciation to the management team and staff of the Group for their commitment and dedication. I would also like to thank all our shareholders, business associates, clients and financiers for their continued support during this challenging time.

Thank you.

Dato’ Sri Haji Adnan Haji Yaakob

Chairman

13 Corporate Governance

M E N T I G A Corporation Berhad

The Board of Directors ("The Board") of the Company is committed to ensuring that the highest standards of corporate governance are observed and practiced throughout the Group as a means of managing the business and affairs of the Group with integrity and professionalism with the objective of safeguarding shareholders’ investment and enhancing shareholders’ value. The Board fully supports the prescriptions and recommendations of the Malaysian Code of Corporate Governance ("Code").

Set out below is a statement of how the Group has applied and complied the principles of the Code.

The Board of Directors

The Company is led and managed by a Board comprising of seven (7) members with wide range of business, financial, public service and corporate experience expertise. A brief description of the background of each Director is set out on pages 9 & 11 of the Annual Report.

The Board has overall responsibility for the strategic direction of the Group. The Board meets regularly to review corporate strategies, operations and performance of business units within the Group. All Board members bring an independent judgement to bear on issues of strategy, performance, resources and standard of conduct.

Board Composition

The Board currently has one Executive Director, four Non-Independent Non-Executive Directors and two Independent Non-Executive Directors forming 1/3 of the Board thus ensuring that minority shareholders’ interest are adequately represented.

A clear division of responsibility between the Chairman and the Executive (Managing) Directors exists to ensure a balance of power and authority. The Board is led by YAB Dato’ Sri Haji Adnan bin Haji Yaakob and is primarily responsible for the orderly conduct and working of the Board. The Executive Management is led by Encik Muhammad Nasir bin Puteh and is responsible for the day to day running of the business and the implementation of Board policies and decisions.

The composition of the Board is further balanced by the presence of Independent Non-Executive Directors. Although all the Directors have an equal responsibility for the Group’s business directions and operations, the role of these Independent Non-Executive Directors are particularly important in ensuring that the strategies proposed by the management are fully discussed and evaluated, having considered the long term interests of all interested parties, including the shareholders, employees, customers, suppliers and the communities as a whole.

Encik Bahudin bin Mansor, who is the Chairman of the Audit Committee and a member of the Remuneration and Nomination Committee, acts as the Senior Independent Non- Executive Director to whom any concerns pertaining to the Group may be conveyed.

The interest of major shareholders and the investment of minority shareholders are fairly reflected through Board representation

Board Meetings

During the financial year ended 31 December 2005, seven Board meetings were held.

14 Corporate Governance

Annual Report 2005

Set out below is the record of attendance of the Board members.

Directors Designation No. of Meetings Attended

YAB Dato’ Sri Haji Adnan Non -Independent [5/7] or 71% Bin Haji Yaakob Non-Executive Chairman

Dato’ Haji Mohd. Ali Non- Independent [7/7] or 100% Hanafiah Bin Sh. Ruji Non-Executive

Dato’ Mohd. Ghazali Non -Independent [7/7] or 100% Bin Mohd. Khalid Non-Executive

Muhammad Nasir Bin Puteh Managing Director [7/7] or 100%

Yusof Ali bin Haji M. Zain Non- Independent [7/7] or 100% Non-Executive

Bahudin Bin Mansor Independent Non-Executive [7/7] or 100%

Hazli Bin Ibrahim Independent Non-Executive [6/7] or 86%

Supply of Information to the Board

Prior to the Board meetings, all directors receive Board papers containing information relevant to the business of the meeting, in a form and of a quality appropriate to facilitate an informed decision making process. The papers are issued in a sufficient time to enable the directors to examine the issues and to obtain further explanations where necessary. The Board papers includes, among others, the following:

• Minutes of previous Board meeting (s) • Minutes of meetings of Committees of the Board • Directors’ Circular Resolutions. • Quarterly performance report of the Group • Quarterly financial statements to Bursa Malaysia Securities Berhad • Major operational, financial and corporate issues.

In addition, all directors have access to the advice and services of the Company Secretary and independent pr ofessional advice is available in appropriate circumstances at the company’s expense to carry out their duties.

Appointments to the Board

The appointment of new Directors is under the preview of the Nomination Committee, which is responsible for making recommendations to the Board on the suitable candidate for appointment.

15 Corporate Governance

M E N T I G A Corporation Berhad

Re-election

In accordance with the Company’s Articles of Association, all Directors who are appointed by the Board are subject to election by the shareholders at the Annual General Meeting subsequent to their appointment. The Article of Association also provides that one third of the Directors are subject to re-election by rotation at each Annual General Meeting.

Committees

The Board has delegated certain responsibilities to the following committees. Each Committee operates under their respective approved terms of reference. These Committees have the authority to examine particular issues and report to the Board their recommendations. The ultimate responsibility for the final decision on most matters lies with the entire Board.

(a) Audit Committee

The Audit Committee Report is detailed in pages 3 to 7 of the Annual report.

(b) Nomination Committee

The present members of the Nomination Committee are:-

YAB Dato’ Sri Haji Adnan Bin Haji Yaakob (Chairman)

Bahudin Bin Mansor

Hazli Bin Ibrahim

The Committee met once during the financial year 2005.

The Primary functions of the Nomination Committee are as follows:

•To access and recommend new Directors to the Board •To review annually the mix of skills and experience, and other qualities, including core competencies, which Non-executive Directors should contribute to the Board. •To implement formal appraisal process for the evaluation of the effectiveness of the Board as a whole, the committees of the Board and individual contribution of each Board members. •To recommend to the Board whether directors who are retiring by rotation should to be re-elected.

The present members of the Remuneration Committee are:-

YAB Dato’ Sri Haji Adnan Bin Haji Yaakob (Chairman)

Bahudin Bin Mansor

Yusof Ali bin Haji M. Zain

The Committee met once during the financial year 2005 16 Corporate Governance

Annual Report 2005

Remuneration Procedure

The Remuneration Committee recommends to the Board the framework of the remuneration package for the Managing Director which includes but not exhaustive of the basic salary, benefit in kind and service contract and Senior Management and its costs. The ultimate responsibility to approve this remuneration package lies entirely with the Board.

Directors’ Remuneration

The Company has adopted the objectives as recommended by the Code to determine the remuneration of the Directors so as to ensure that the Company attracts and retains the qualified Directors needed to run the Company successfully.

1. Directors’ remuneration for the financial year ended 31 December 2005

A. Aggregate Remuneration of Directors categorized into appropriate components:

Salary & Other Benefit in Emoluments Kind Total Category RM RM RM

Executive Director 427 - 427 Non-Executive Director 192 - 192

Total 619 - 619

B. The number of Directors whose remuneration falling within the following bands are:

Non- Executive Executive Band Director Director Total

Less than RM50,000 0 5 5

RM50,000 to RM100,000 0 1 1

RM100,000 to RM150,000 0 0 0

RM400,000 to RM450,000 1 0 1

Directors’ fees (if any) is tabled to the company’s shareholders for approval at the Company’s Annual General Meeting.

17 Corporate Governance

M E N T I G A Corporation Berhad

Directors’ Training

During the financial year, a few Directors have attended seminars and courses organized by the relevant regulatory authorities and professional bodies to comply with their Continuing Education Programme ("CEP") obligations. The Board will continue to undergo other relevant training programmes to keep abreast with relevant changes in laws and regulations.

Relationship with Shareholders

The Board recognizes the value of good investor and the importance of disseminating information in a fair and equitable manner. Thus the Board stresses on maintaining good relationship with shareholders through distribution of annual reports and announcement of all material information including quarterly financial performance of the Group to the MSEB.

The Company endeavors to maintain regular contact with analysts and institutional shareholders on new development or progress of the Group’s business.

The Annual General Meeting (‘AGM’) is a platform for the Board and shareholders to communicate on the Group’s performance and any other matters of concern or interest to shareholders. At the AGM, shareholders are given the opportunity to seek clarification on any matters pertaining to the business and financial performance of the Group.

ACCOUNTABILITY AND AUDIT

Financial Reporting

The Board is responsible to ensure that the financial statements prepared are drawn up in accordance with the provision of the Companies Act, 1965 and applicable approved accounting standards in Malaysia.

The Board is assisted by the Audit Committee to oversee the Group’s financial reporting process and the quality of its financial reporting.

Statement of Directors’ responsibility in respect of the Audited Financial Statements pursuant to Paragraph 15.27 (a) of the Listing Requirements

The Directors are required by law to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and Group and their results and cash flows for that year. In preparing the financial statements for the financial year ended 31 December 2005, the Directors have:-

- selected suitable accounting policies and applied then consistently - made judgements and estimates that are reasonable and prudent - stated whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. - Prepared financial statements on the going concern basis as the directors have a reasonable expectation, having made inquiries, that the Group and Company have adequate resources to continue operation for the foreseeable future.

18 Corporate Governance

Annual Report 2005

The Directors are responsible for ensuring that the proper accounting records are kept which disclose with reasonable accuracy at any time that financial position of the Company and Group. The Directors also have overall responsibilities for taking such measures to safeguard the assets of the Group in preventing and to detect fraud and other irregularities.

Relationship with the Auditors

The Board through the establishment of an Audit Committee has managed an appropriate relationship with the external auditors and there are formal and transparent arrangements in reviewing of the external auditor’s audit plan, report, internal control issues and procedures. The key features and the roles of the Audit Committee in relation to the external auditors are included in Audit Committee’s Term of Reference as describes in the Audit Committee Report.

STATEMENT OF INTERNAL CONTROL

Responsibility

The Board is responsible for maintaining a sound system of internal control to safeguard shareholders’ investment and the group’s assets. The internal control system involves the various processes and procedures at appropriate level of the business. This is to ensure that all transactions are authorized and proper risk management and controls are in place to safeguard against material loss or fraud.

In view of the continually evolving business environment that the group operates in, the internal control system can only provide reasonable and not absolute assurance against such loss or fraud.

Internal Audit Function

The present level of operation and limited human resources in the group does not justify the setting up of an Internal Audit Division. However the company plans to set up an Internal Audit Division in future to provide an independent assessment on adequacy efficiency and effectiveness of internal control procedures and to ensure that there is no potential risk exposure over key business processes within the group. The Committee has the authority to examine the finding of the Internal Audit Division and report its recommendations to the Board. The ultimate responsibility for the final decision on all matters, however, lies with the entire Board.

19 Corporate Structure

M E N T I G A Corporation Berhad

Mentiga Plantation Management Sdn Bhd (365302-W) 100%

Mentiga Mentiga Plantation Sdn Bhd Development & (190889-U) Construction Sdn Bhd 100% (660363-U) 100%

MENTIGA Corporation Berhad (10289-k) Selat Besatu Sdn Bhd (361274-P) 56%

PT Rebinmas Jaya 90%

Lesong Forest Products Sdn Bhd (23961-T) 100%

20 Report and Financial Statements 2005

22-25 Directors’ Report 26 Income Statements 27 Balance Sheets 28 Consolidated Statements of Changes in Equity 29-30 Cash Flow Statements 31-54 Notes to the Financial Statements 55 Statement by Directors 55 Statutory Declaration 56 Auditors’ Report Directors' Report for the year ended 31 December 2005

M E N T I G A Corporation Berhad

The Directors submit their annual report to the members together with the audited financial statements of the Group and Company for the year ended 31 December 2005.

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding, timber extraction and trading in timber related products. The principal activities of the subsidiaries are set out in Note 12 to the financial statements. There were no significant changes in the nature of these activities during the year.

FINANCIAL RESULTS

Group Company RM RM

Loss after tax (19,209,073) (11,139,159) Minority interest 403,731 -

Net loss for the year (18,805,342) (11,139,159)

DIVIDEND

No dividend has been paid, declared or proposed by the Company since 31 December 2004.

RESERVES AND PROVISIONS

All material transfers to or from reserves and provisions during the year are shown in the financial statements.

RESTRUCTURING SCHEMES AND OTHER ANNOUNCEMENTS

Restructuring schemes

On 15 March 2005, the revised comprehensive proposals (“Comprehensive Proposals”) had been submitted to the Securities Commission (SC) for approval. The Proposals are as follows:

• Proposed revaluation of the property assets of Mentiga and its subsidiaries (“Proposed revaluation”)

• Proposed debt settlement via the issue of new ordinary shares of RM1 each in Mentiga (“Mentiga shares”) as settlement of an amount owing by Mentiga to its shareholder, Amanah Saham Pahang Berhad (“ASPA”) (“Proposed debt settlement”)

• Proposed restricted issue of 20,000,000 Redeemable Convertible Preference Shares of RM1.00 each in Mentiga (“RCPS”) to ASPA (“Proposed restricted issue”)

• Proposed employee share option scheme for eligible employees and Directors of Mentiga and its subsidiaries (“Proposed ESOS”)

• The disposal by Selat Bersatu Sdn Bhd, a 56% owned subsidiary of Mentiga, of 18,900 ordinary shares of Indonesian Rupiah 1,000,000 each in PTRJ representing its entire investment of 90% equity interest in PTRJ to Delloyd Plantation Sdn Bhd and Taipan Hectares Sdn Bhd, for a cash consideration of RM61,200,000 (“Proposed disposal”)

• Proposed increase in the authorised share capital of Mentiga; and

• Proposed amendments to the Memorandum and Articles of Associates of Mentiga (“Proposed Amendments”).

SC had approved the Proposals on 30 August 2005 subject to the following conditions :

(i) Mentiga is required to make full disclosure in its circular to shareholders on the following :

(a) The reasons for the past losses of the Mentiga Group; and

(b) The actions taken to improve its corporate governance and reporting structure. 22 Directors' Report for the year ended 31 December 2005

Annual Report 2005

RESTRUCTURING SCHEMES AND OTHER ANNOUNCEMENTS (cont’d)

Restructuring schemes (cont’d)

(ii) A separate Document of Title “Hak Guna Usaha” (HGU) in respect of certain oil palm plantations owned by PTRJ which have yet to be issued with document(s) of title must be obtained prior to the implementation of the Proposed Disposal;

(iii) ASPA is required to submits an undertaking that it will maintain controlling interest (i.e. above 51%) in Mentiga for the next 3 years after completion of the Proposals (i.e. from the date of full conversion of the RCPS);

(iv) ASPA is required to submit an undertaking that it will continue providing Mentiga with financial support should the outcome of the cases which are currently undergoing trial are not in Mentiga’s favour;

(v) The Proposed Disposal must be inter-conditional with the Comprehensive Proposals;

(vi) ASPA must convert such number of RCPS in order for Mentiga to comply with the minimum paid-up capital requirement of RM60 million for listing on the Main Board of Bursa Saham Malaysia Securities Berhad (“Bursa Securities) prior to the re-listing of Mentiga on Bursa Securities;

(vii) Mentiga is required to have the ownership title for the two 99-year leasehold plots of vacant building land held under H.D. (D) 15693 P.T. 45064, Mukim of Kuala Kuantan, District of Kuantan, Pahang Darul Makmur (“Indera Mahkota Land”) transferred to Mentiga within 1 year from the date of SC’s approval letter;

(viii) Mentiga is required to ensure that the buildings comprising its plywood factory located at Lot 1449/P.N. 2490 and H.S. (D) 3364/P.T. 2205, Mukim Langgar, District of Pekan, Pahang Darul Makmur are built in accordance with the building by-laws prior to the implementation of the exercise;

(ix) Mentiga is required to obtain the necessary approvals for the building plans and Certificate of Fitness for its plywood factory located at H.S. (D) 13/P.T. 361, Mukim of Rompin, District of Rompin, Pahang Darul Makmur before the occupation of the premise;

(x) Mentiga is required to make quarterly announcement to Bursa Securities on the status of its application for the transfer of ownership of the Indera Mahkota Land. Mentiga is also required to update the SC on the above status when such announcement is made to Bursa Securities;

(xi) Mentiga is required to provide the SC with a detailed report together with the relevant information on the events/transactions that led to the deficit in the shareholders’ funds of the Mentiga Group within 6 months from the date of the SC’s approval of the Proposals. Based on the report, Mentiga is also required to take the necessary actions to recover its past losses, and make a report to the relevant authorities should there have been any transgression of any relevant laws, regulations, guidelines or the Memorandum and Articles of Association of Mentiga by its Directors and/or any other party that resulted in the said losses;

(xii) CIMB/Mentiga is required to inform the SC upon completion of the Proposals; and

(xiii) CIMB/Mentiga is required to comply with the relevant requirements of the Policies and Guidelines on Issue/Offer of Securities of the SC in relation to the implementation of the Proposals.

SC in its letter dated 22 February 2006 had approved an extension of time up to 31 August 2006 for the Group and Company to implement the Proposals.

On 28 March 2006, the shareholders, in the Extraordinary General Meeting, had passed all the Resolutions in relation to the restructuring schemes.

Other announcements

In relation to the Proposed Disposal on 18 January 2005, the Company announced that the Vendors and Purchases on 18 April 2006 had entered into Fifth Supplementary Agreement to further extend the last date for the conditions precedent in the Sales and Purchase (SPA) to be fulfilled from 17 April 2006 to 17 August 2006.

23 Directors' Report for the year ended 31 December 2005

M E N T I G A Corporation Berhad

DIRECTORS

The Directors who have held office during the period since the date of the last report are as follows:

YAB Dato' Sri Haji Adnan bin Haji Yaakob – Chairman Muhammad Nasir bin Puteh – Managing Director Dato' Mohd Ghazali bin Mohd Khalid Dato' Haji Mohd Ali Hanafiah bin Sh Ruji Bahudin bin Mansor Hazli bin Ibrahim Yusof Ali bin Haji M.Zain

DIRECTORS' BENEFITS

During and at the end of the year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to 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 year, no Director has received or become entitled to receive a benefit (other than directors’ remuneration disclosed in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

DIRECTORS' INTERESTS IN SHARES

According to the register of directors' shareholdings, particulars of interests of Directors who held office at the end of the year in shares in the Company and its related corporations are as follows:

Number of ordinary shares of RM1 each 1 January 2005 Bought Sold 31 December 2005

Direct interest

Dato' Mohd Ghazali bin Mohd Khalid 385,000 -- 385,000 Dato' Haji Mohd Ali Hanafiah bin Sh Ruji 85,000 -- 85,000

The Directors, by virtue of their interest in shares of the Company, are also deemed to have interests in shares of the subsidiaries to the extent that the Company has an interest.

Other than disclosed above, according to the register of directors’ shareholding, the other Directors in office at the end of the year do not hold any shares in the Company.

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the income statements and balance sheets were made out, the Directors took reasonable steps:

• to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts have been written off and that adequate allowance had been made for doubtful debts; and

• to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and Company had been written down to an amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:

• which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and Company inadequate to any substantial extent; or

24 Directors' Report for the year ended 31 December 2005

Annual Report 2005

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (cont’d)

• which would render the values attributed to current assets in the financial statements of the Group and Company misleading; or

• which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and Company misleading or inappropriate.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the year which, in the opinion of the Directors, will or may affect the ability of the Group or Company to meet their obligations when they fall due other than those stated in Note 25 to the financial statements.

At the date of this report, there does not exist:

• any charge on the assets of the Group or Company which has arisen since the end of the year which secures the liability of any other person; or

• any contingent liability of the Group or Company which has arisen since the end of the year.

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.

In the opinion of the Directors:

• the results of the operations of the Group and Company during the year were not substantially affected by any item, transaction or event of a material and unusual nature other than the financial statements have been prepared on a going concern basis, which assumes that the Group and Company will continue in operational existence for the foreseeable future having adequate funds to meet their obligations as they fall due. The validity of this assumption depends on the continuous negotiation for the financial support from the Group’s and Company’s substantial shareholder, ASPA which is wholly owned by the State Government of Pahang Darul Makmur as well as the ability of the Group and Company to successfully implement the proposed restructuring scheme approved by the Securities Commission and to generate profits and positive cash flows to sustain their operations and the exceptional items stated in Note 7(b) to the financial statements; and

• there has not arisen in the interval between the end of the year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group or Company for the year in which this report is made.

AUDITORS

The auditors, Ash’ariCheong, have expressed their willingness to continue in office.

In accordance with a resolution of the Board of Directors dated 27 April 2006

Muhammad Nasir bin Puteh Managing Director

Dato’ Haji Mohd Ali Hanafiah bin Sh Ruji Director

25 Income Statements for the year ended 31 December 2005

M E N T I G A Corporation Berhad

Group Company 2005 2004 2005 2004 Note RM RM RM RM

Revenue 6 5,728,519 21,539,496 1,632,888 17,427,223

Cost of sales (in 2004 less exceptional item of the recovery of impairment of property, plant and equipment of RM5,692,118) 7(b) (11,078,428) (2,455,905) (3,685,919) (4,240,042)

Gross (loss)/profit (5,349,909) 19,083,591 (2,053,031) 13,187,181

Other operating incomes 1,046,745 449,999 163,639 290,356

Allowances for doubtful debts written back - subsidiary - - 188,638 - - receivables 7,848,443 - 7,848,443 -

Selling and distribution costs (186,528) (122,176) (186,528) (122,176)

Exceptional items 7(b) (7,000,000) - (9,705,000) (31,715,900)

Administrative expenses (13,619,689) (12,906,698) (7,333,717) (7,035,013)

(Loss)/Profit from operations 7(a) (17,260,938) 6,504,716 (11,077,556) (25,395,552)

Finance cost – interest expense (2,059,879) (2,583,087) (145,603) (214,389)

(Loss)/Profit from ordinary activities before tax (19,320,817) 3,921,629 (11,223,159) (25,609,941)

Tax 9 111,744 (1,468,208) 84,000 (1,427,000)

(Loss)/Profit for the year (19,209,073) 2,453,421 (11,139,159) (27,036,941)

Minority interest 403,731 - - -

Net (loss)/profit for the year (18,805,342) 2,453,421 (11,139,159) (27,036,941)

Basic (loss)/earnings per share (sen) 10 (50.15) 6.54

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

26 Balance Sheets as at 31 December 2005

Annual Report 2005

Group Company 2005 2004 2005 2004 Note RM RM RM RM

Non current assets

Property, plant and equipment 11 63,544,986 66,275,191 14,365,638 15,558,877 Subsidiaries 12 - - 16,796,373 16,931,373 Land held for development 13 5,717,205 5,717,205 5,717,205 5,717,205 Deferred tax assets 14 396,000 - 396,000 312,000

69,658,191 71,992,396 37,275,216 38,519,455

Current assets

Inventories 15 286,489 813,581 228,571 736,000 Receivables, deposits and prepayments 16 11,810,865 7,962,756 10,947,366 7,459,225 Amounts due from subsidiaries 17 - - 35,681,688 31,671,805 Deposits, bank and cash balances 18 1,892,862 1,284,399 836,963 357,961

13,990,216 10,060,736 47,694,588 40,224,991

Less: Current liabilities

Payables 19 58,357,104 43,087,644 41,092,697 30,543,658 Advance from a substantial shareholder 20 59,551,157 58,899,805 37,277,130 36,625,778 Amounts due to subsidiaries 17 - - 30,352,967 28,512,419 Retirement benefits 21 1,109,382 738,459 1,109,382 738,459 Tax liabilities 29,376 1,787,551 29,376 29,376 Borrowings (interest bearing) 22 11,187,085 11,186,457 - - Bank overdrafts 18 12,573,004 11,706,720 - -

142,807,108 127,406,636 109,861,552 96,449,690

Net current liabilities (128,816,892) (117,345,900) (62,166,964) (56,224,699)

Less: Non current liabilities

Accrual for legal claim with a licensed bank 19 4,165,000 - 4,165,000 - Deferred tax liabilities 14 2,388,546 2,109,208 - - Retirement benefits 21 3,228,922 3,441,267 3,228,922 3,441,267 Borrowings (interest bearing) 22 29,440 38,971 - -

9,811,908 5,589,446 7,393,922 3,441,267

(68,970,609) (50,942,950) (32,285,670) (21,146,511)

Capital and reserves

Share capital 23 37,500,000 37,500,000 37,500,000 37,500,000 Exchange fluctuation reserve 24 (3,246,087) (4,023,770) - - Accumulated loss (103,224,522) (84,419,180) (69,785,670) (58,646,511)

(68,970,609) (50,942,950) (32,285,670) (21,146,511)

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

27 Statements of Changes in Equity for the year ended 31 December 2005

M E N T I G A Corporation Berhad

Exchange fluctuation Share capital reserve Accumulated (Note 23) (Note 24) loss Total RM RM RM RM

GROUP

31 December 2003 37,500,000 (5,504,920) (86,872,601) (54,877,521) Currency translation differences arising during the year - 1,481,150 - 1,481,150 Net profit for the year - - 2,453,421 2,453,421

31 December 2004 37,500,000 (4,023,770) (84,419,180) (50,942,950)

31 December 2004 37,500,000 (4,023,770) (84,419,180) (50,942,950) Currency translation differences arising during the year - 777,683 - 777,683 Net loss for the year - - (18,805,342) (18,805,342)

31 December 2005 37,500,000 (3,246,087) (103,224,522) (68,970,609)

Share capital Accumulated (Note 23) loss Total RM RM RM

COMPANY

31 December 2003 37,500,000 (31,609,570) 5,890,430 Net loss for the year - (27,036,941) (27,036,941)

31 December 2004 37,500,000 (58,646,511) (21,146,511)

31 December 2004 37,500,000 (58,646,511) (21,146,511) Net loss for the year - (11,139,159) (11,139,159)

31 December 2005 37,500,000 (69,785,670) (32,285,670)

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

28 Cash Flow Statements for the year ended 31 December 2005

Annual Report 2005

Group Company 2005 2004 2005 2004 RM RM RM RM

Operating activities

Net (loss)/profit for the year (18,805,342) 2,453,421 (11,139,159) (27,036,941)

Adjustments to reconcile net (loss)/ profit for the year to cash from operations:

Property, plant and equipment

- depreciation 3,162,351 3,041,979 1,202,138 1,194,690 - gain on disposal - (23,998) - - - written off 1 12,880 - - - impairment recovery - (5,692,118) - -

Allowance for diminution in value in subsidiaries - - 735,000 12,770,000

Allowance for doubtful debts

- Subsidiaries - - 1,970,000 1,410,812 - Receivables - 251,014 - 251,014

Written off

- Subsidiaries - - - 17,535,088

Provision for retirement benefits 747,622 501,714 747,622 501,714

Interest expense 2,083,782 2,583,086 - 214,389

Tax (111,744) 1,468,208 (84,000) 1,427,000

(12,923,330) 4,596,186 (6,568,399) 8,267,766

Changes in working capital:

- inventories 526,324 (776,062) 507,429 (736,000) - receivables, deposits and prepayments (3,864,966) (4,428,007) (9,468,024) (9,002,260) - payables 19,158,437 4,866,497 17,205,939 2,126,521

Cash from operations 2,896,465 4,258,614 1,676,945 656,027

Interest paid (675,055) (1,079,610) - (214,389)

Tax paid (187,148) (130,649) - -

Retirement benefits paid (589,044) (280,746) (589,044) (280,746)

Net cash flow generated from operating activities 1,445,218 2,767,609 1,087,901 160,892

29 Cash Flow Statements for the year ended 31 December 2005

M E N T I G A Corporation Berhad

Group Company 2005 2004 2005 2004 Note RM RM RM RM

Investing activities

Additional investment in subsidiary - - (600,000) -

Property, plant and equipment

- additions (1,684,107) (407,542) (8,899) (38,083) - proceeds from disposal - 24,000 - -

Net cash flow used in investing activities (1,684,107) (383,542) (608,899) (38,083)

Financing activities

Hire purchase principal payments (8,903) (2,127) - -

(Decrease)/Increase in cash and cash equivalents (247,792) 2,381,940 479,002 122,809 Currency translation differences (10,029) (9,742) - - Cash and cash equivalents

- at start of year (10,422,321) (12,794,519) 357,961 235,152

- at end of year 18 (10,680,142) (10,422,321) 836,963 357,961

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

30 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

1 GENERAL INFORMATION

The principal activities of the Company are investment holding, timber extraction and trading in timber products. The principal activities of the subsidiaries are set out in Note 12 to the financial statements. There were no significant changes in the nature of these activities during the year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Main Board of the Bursa Malaysia Securities Berhad and is presently placed under Practice Note 4/2002.

The address of the registered office of the Company is 20th Floor, East Wing, Plaza Permata, Jalan Kampar Off Jalan Tun Razak, 50400 Kuala Lumpur.

The address of the principal place of business of the Company is Peramu Jaya, 26607 Pekan, Pahang Darul Makmur.

2 RESTRUCTURING SCHEMES AND OTHER ANNOUNCEMENTS

Restructuring schemes

On 16 March 2005, the revised comprehensive proposals ("Comprehensive Proposals") had been submitted to the Securities Commission (SC) for approval :

• Proposed revaluation of the property assets of Mentiga and its subsidiaries ("Proposed revaluation")

• Proposed debt settlement via the issue of new ordinary shares of RM1 each in Mentiga ("Mentiga shares”) as settlement of an amount owing by Mentiga to its shareholder, Amanah Saham Pahang Berhad ("ASPA") ("Proposed debt settlement")

• Proposed restricted issue of 20,000,000 Redeemable Convertible Preference Shares of RM1.00 each in Mentiga ("RCPS") to ASPA ("Proposed restricted issue")

• P roposed employee share option scheme for eligible employees and Directors of Mentiga and its subsidiaries ("Proposed ESOS")

• Proposed increase in the authorised share capital of Mentiga; and

• Proposed amendments to the Memorandum and Articles of Associates of Mentiga ("Proposed Amendments").

SC had approved the proposals on 30 August 2005 subject to the following conditions :

(i) Mentiga is required to make full disclosure in its circular to shareholders on the following :

(a) The reasons for the past losses of the Mentiga Group; and

(b) The actions taken to improve its corporate governance and reporting structure.

(ii) A separate Document of Title "Hak Guna Usaha" (HGU) in respect of certain oil palm plantations owned by PTRJ which have yet to be issued with document(s) of title must be obtained prior to the implementation of the Proposed Disposal;

(v) The Proposed Disposal must be inter-conditional with the Comprehensive Proposals;

(vi) ASPA must convert such number of RCPS in order for Mentiga to comply with the minimum paid-up capital requirement of RM60 million for listing on the Main Board of Bursa Saham Malaysia Securities Berhad ("Bursa Securities) prior to the re-listing of Mentiga on Bursa Securities; 31 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

2 RESTRUCTURING SCHEMES AND OTHER ANNOUNCEMENTS (cont’d)

(vii) Mentiga is required to have the ownership title for the two 99 year leasehold plots of vacant building land held under H.D. (D) 15693 P.T. 45064, Mukim of Kuala Kuantan, District of Kuantan, Pahang Darul Makmur ("Indera Mahkota Land") transferred to Mentiga within 1 year from the date of SC’s approval letter;

(xii) CIMB/Mentiga is required to inform the SC upon completion of the Proposals; and

(xiii) CIMB/Mentiga is required to comply with the relevant requirements of the Policies and Guidelines on Issue/Offer of Securities of the SC in relation to the implementation of the Proposals.

SC in its letter dated 22 February 2006 had approved an extension of time up to 31 August 2006 for the Group and Company to implement the Proposals.

On 28 March 2006, the shareholders, in the Extraordinary General Meeting, had passed all the Resolutions in relation to the restructuring schemes.

Other announcements

3 BASIS OF PREPARATION

(a) The financial statements of the Group and Company have been prepared under the historical cost convention, unless otherwise indicated in the individual policy statements in Note 4 to the financial statements. The financial statements comply with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965.

The preparation of financial statements in conformity with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported year. Actual results could differ from those estimates.

(b) For the year ended 31 December 2005, the Group and Company incurred a net loss of RM18,805,342 and RM11,139,159 respectively. As at 31 December 2005, the Group's and Company's current liabilities exceeded their current assets by RM128,816,892 and RM62,166,964 respectively. The bank overdrafts and borrowings of the Group as at 31 December 2005 amounted to RM23,789,529. One of its subsidiaries, Mentiga Plantation Sdn Bhd, had defaulted in the payment of interest and principal sums of its credit facilities.

32 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

3 BASIS OF PREPARATION (cont’d)

The financial statements have been prepared on a going concern basis, which assumes that the Group and Company will continue in operational existence for the foreseeable future having adequate funds to meet their obligations as they fall due. The validity of this assumption depends on the continuous negotiation for the financial support from the Group’s and Company’s substantial shareholder, ASPA which is wholly owned by the State Government of Pahang Darul Makmur as well as the ability of the Group and Company to successfully implement the proposed restructuring scheme approved by the Securities Commission and to generate profits and positive cash flows to sustain their operations.

If the Group and Company are not able to successfully implement the proposed restructuring scheme to continue as a going concern, adjustments would have to be made to reduce the values of assets to their recoverable amounts, to provide for any further liabilities which might arise, and to reclassify fixed and non-current assets as current assets, and long term liabilities as current liabilities.

4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been used consistently in dealing with items, which are considered material in relation to the financial statements.

(a) Property, plant and equipment

Property, plant and equipment are initially stated at cost. Certain land and buildings are subsequently shown at fair value, based on valuations by external independent valuers, less subsequent amortisation/depreciation and impairment losses. All other property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

The Group had applied the transitional provision of MASB on adoption of FRS No.1162004 (MASB No.15) Property, Plant and Equipment whereby a reporting enterprise which does not adopt a policy of revaluation is allowed to retain revalued amounts on the basis of their previous revaluations, subject to continuity in depreciation policy and the requirement to write an asset down to its recoverable amount.

Surpluses arising on revaluation are credited to revaluation reserve. Any deficit arising from subsequent revaluation is charged against the revaluation reserve to the extent of a previous surplus held in the revaluation reserve for the same asset. In all other cases, a decrease in carrying amount is charged to income statement.

Leasehold land is amortised in equal instalments over the period of the respective leases ranging from 30 to 99 years.

Other property, plant and equipment are depreciated on the straight line basis to write off the cost of the assets, or their revalued amounts, to their residual values over their estimated useful lives at the following annual rates:

% Building 2 - 33 Plant and machinery 5 - 20 Motor vehicles, equipment and fixtures 10 - 25 Road 10

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in profit/(loss) from operations.

(b) Planting expenditure

New planting

Planting expenditure of new oil palm plantations have been capitalised as immature plantation cost and shown as property, plant and equipment. As and when the new oil palm plantation matures the planting expenditure will be taken to the income statement as revenue expenditure.

Interest costs on borrowings to finance the immature plantations are capitalised as part of the cost of the plantations until the plantations achieved maturity. The cost of matured plantations is amortised over the economic useful life of 20 years commencing from the year of maturity. Amortisation on immature plantations commences when the plantations achieved maturity.

33 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Subsidiaries are those enterprises in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases.

Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of are included from the date of acquisition up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries’ net assets are determined and these values are reflected in the consolidated financial statements. The excess of the cost of acquisition over the fair value of the Group’s share of the subsidiaries identifiable net assets at the date of acquisition is reflected as goodwill on consolidation.

Investments in subsidiaries are shown at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount.

Intragroup transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

Minority interest is measured at the minorities’ share of the post acquisition fair values of the identifiable assets and liabilities of the acquiree. Separate disclosure is made of minority interest.

(d) Land held for development

Land held for property development consist of land on which no significant development work has been undertaken or where development activities are not expected to be completed within the normal operating cycle. Such land is classified as non- current asset and is stated at cost less accumulated impairment losses.

Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties, commission, conversion fees and other relevant levies. Land held for property development is transferred to property development costs (under current assets) when development activities have commenced and where the development activities can be completed.

(e) Impairment of assets

Property, plant and equipment and other non-current assets, including intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment loss is recognised for the amount by which carrying amount of the assets exceed its recoverable amount. The recoverable amount is the higher of an asset’s net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the lowest level for which there is separately identifiable cash flows.

The impairment loss is charged to the income statement unless it reverses a previous revaluation in which case it is charged to revaluation surplus. Any subsequent increase in recoverable amount is recognised in the income statement unless its reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus.

(f) Trade receivables

Trade receivables are carried at invoiced amounts less an estimate made for doubtful debts based on a review of outstanding amounts at the year end. Bad debts are written off when identified.

(g) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of finished goods comprises raw materials, direct labour, other direct costs and an appropriate proportion of production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

34 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(h) Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, bank balances, deposits held at call with banks, bank overdrafts and short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(i) Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Temporary differences are not recognised for the initial recognition of assets and liabilities that at the time of the transaction affects neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

(j) Employee benefits

(i) Short term employee benefits

Wages, salaries, paid annual leave and bonuses are accrued in the year in which the associated services are rendered by employees of the Group.

(ii) Post-employment benefits

The Group has defined contribution plans in accordance with local conditions and practices in Malaysia.

The Group's contributions to defined contribution plans are charged to the income statement in the year to which they relate. Once the contributions have been paid, the Company has no further payment obligations.

(k) Retirement benefits

The Group operates a defined benefit plan for its employees, which is unfunded. The retirement benefits are provided after taking into account the recommendations of independent qualified actuarist.

The retirement benefits are assessed using the projected unit credit method. Under this method, the cost of providing retirement benefits is charged to the income statement so as to spread the regular cost over the service lives of employees in accordance with the advice of qualified actuarist who carry out a full valuation of the plan every three years. The last actuarial valuation was carried out at 31 December 2003.

(l) Foreign currencies

(i) Foreign entities

The Group’s foreign entities are those operations that are not an integral part of the operations of the Company. Income statements of foreign entities and the balance sheets are translated into Ringgit Malaysia at exchange rates ruling at the balance sheet date. Exchange differences arising from the retranslation of the net investment in foreign entities are taken to ‘Currency translation differences’ in the shareholders’ equity. On disposal of the foreign entity, such translation differences are recognised in the income statement as part of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the Company and are translated accordingly at the exchange rate ruling at the date of the transaction.

35 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(l) Foreign currencies (cont’d)

(ii) Foreign currency transactions

Foreign currency transactions in Group companies are accounted for at exchange rates ruling at the transaction dates. Foreign currency monetary assets and liabilities are translated at exchange rates prevailing at the balance sheet date. Exchange differences arising from the settlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilities are included in the income statement.

The principal closing rates used in translation of foreign currency amounts are as follows:

2005 2004 Foreign currency RM RM

1 US Dollar 3.8090 3.8000 1000 Rupiah 0.3850 0.4080

(m) Revenue recognition

Sales of palm oil fresh fruit bunches and timbers are recognised upon delivery of products and customer acceptance.

Sales of logs, which are in the concession areas, are recognised when ownership, risks and benefits are passed onto the purchasers based on sale and purchase agreement.

Interest, rental and other income are recognised on accrual basis.

(n) Financial instruments

(i) Financial instruments recognised on the balance sheet

The particular recognition method adopted for financial instruments recognised on the balance sheet is disclosed in the individual policy statement associated with each item.

(ii) Fair value estimation for disclosure purposes

The carrying amounts of cash approximate fair values because of the short maturity periods of those instruments.

In assessing the value of borrowings, the Company assumes that borrowings with a maturity of less than one year, their fair values approximate their carrying values.

The fair values for financial assets and liabilities with a maturity of less than one year are assumed to approximate their carrying values.

36 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

5 FINANCIAL RISK MANAGEMENT AND POLICIES

The Group's overall financial risk management objective is to ensure that the Group creates value for its shareholders. The Group's activities expose it to a variety of financial risks, including credit risk, liquidity and cash flow risk, foreign currency exchange risk and interest rate risk. The Board regularly reviews these risks and approves treasury policies, which covers the management of each these risks and they are summarised below:

Credit risk

The Group is exposed to credit risk mainly from trade receivables, which is monitored on an on - going basis. The management believes that the concentration of credit risk is limited due to the ongoing credit evaluations on all customers and maintaining an allowance for doubtful debts, which management believes will adequately provide for potential credit risks. Therefore, the Group does not expect to incur material credit losses on its financial assets.

Liquidity and cash flow risk

It is the Group's policy to ensure continuity to service its cash obligation in the future by way of monitoring and forecasting its cash commitments and maintaining a level of cash and cash equivalent deemed adequate to the Group's operations and development activities. The Group aims at maintaining flexibility in funding by keeping committed credit lines available. In addition, the Group ensures that the amount of debt maturing in any one year is not beyond the Group's means to repay and/or refinance.

Foreign currency exchange risk

The Group is exposed to foreign currency risk arising from investments in a foreign subsidiary of which the assets and liabilities are denominated in Indonesian Rupiah. The Group is exposed to currency risk as a result of foreign currency transactions entered into by the subsidiary in currencies other than Indonesian Rupiah. The Group does not engage in foreign currency hedging on its foreign currency expenses but the management monitors these exposures on an ongoing basis.

Interest rate risk

The Group’s income and operating cash flows are substantially dependent to changes in market interest rate. The Group’s exposure to interest rate risk for changes in interest rate relate primarily to the Group’s interest-bearing debts. Which are being monitored regularly. The Group does not use derivative financial instruments to hedge its debts obligation.

6 REVENUE

Group Company 2005 2004 2005 2004 RM RM RM RM

Sales of timber and related products 1,632,888 17,427,223 1,632,888 17,427,223 Sales of palm oil fresh fruit bunches 4,095,631 4,112,273 - -

5,728,519 21,539,496 1,632,888 17,427,223

37 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

7 (LOSS)/PROFIT FROM OPERATIONS

(a) The following items have been charged/(credited) in arriving at (loss)/profit from operations:

Group Company 2005 2004 2005 2004 RM RM RM RM

Property, plant and equipment - depreciation 3,162,351 3,041,979 1,202,138 1,194,690 - gain on disposal - (26,198) - (2,200) - nursery written off - 12,880 - - Rental 65,960 37,700 25,160 14,700 Auditors’ remuneration 146,349 139,050 60,000 60,000 Staff costs (inclusive of Directors remuneration) 4,957,453 4,692,724 4,174,766 4,213,705 Provision for retirement benefits 747,622 501,714 747,622 501,714 Recovery of doubtful and bad debts - (1,175,270) - - Allowance for doubtful debts - receivables - 1,120,240 - 251,014 Unrealised exchange loss 2,736,057 2,857,534 - -

The number of employees at year end 768 757 283 310

(b) Exceptional items:

Group Company 2005 2004 2005 2004 RM RM RM RM

(i) Diminution in value of investments in subsidiaries - - (735,000) (12,770,000) (ii) Allowance for amounts due from subsidiaries - - (1,970,000) (1,410,812) (iii) Waiver of amount due from subsidiary - - - (17,535,088) (iv) Recovery of impairment of property, plant and equipment (included in cost of sales) - 5,692,118 - - (v) Accrual for full and final settlement for legal claim with a licensed bank* (7,000,000) - (7,000,000) -

(7,000,000) 5,692,118 (9,705,000) (31,715,900)

* The legal claim and appeals against the Company as first defendant by the licensed bank as to the Company’s obligation to remit all the progress payments due to a contractor to the licensed bank was dismissed by the High Court on 3 April 2000. However the Company is now being sued by the licensed bank as a third party defendant for approximately the same amount. On 22 March 2006, the licensed bank had agreed for a sum of RM7,000,000 as full and final settlement of their claim against the Company.

8 DIRECTORS' REMUNERATION

Group Company 2005 2004 2005 2004 RM RM RM RM

Fees 54,000 - - - Emoluments other than fees 619,200 531,200 619,200 531,200 Gratuity to Directors resigned during the year - 180,000 - 180,000

673,200 711,200 619,200 711,200

38 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

9 TAX

(a) Tax charge for the year

Group Company 2005 2004 2005 2004 RM RM RM RM

Deferred Tax (Note 14) - reversal of temporary differences (111,744) 1,468,208 (84,000) 1,427,000

(b) Numerical reconciliation of income tax expense

The tax on the Group's and Company's (loss)/profit before tax differs from the theoretical amount that would arise using the statutory income tax rate of Malaysia as follows:

Group Company 2005 2004 2005 2004 RM RM RM RM

(Loss)/Profit before tax (19,320,817) 3,921,629 (11,223,159) (25,609,941)

Tax calculated as follow: - at a tax rate of 28% (2004: 28%) (5,315,109) 1,098,056 (3,142,485) (7,170,783)

Tax effect of: - different for tax rate (94,720) - - - - expenses not deductible for tax purposes 2,587,414 1,752,402 3,059,795 9,367,108 - income not taxable (13,104) (327,633) (52,819) (71,333) - deferred tax asset arising on tax losses not recognised 2,672,024 - - - - temporary differences arising during the year not recognised 51,509 (1,054,617) 51,509 (697,992) - under provision in prior year 242 - - -

Tax expense (111,744) 1,468,208 (84,000) 1,427,000

10 BASIC (LOSS)/EARNINGS PER SHARE

Basic (loss)/earnings per share of the Group is calculated by dividing the net (loss)/profit for the year by the weighted average number of ordinary shares in issue during the year.

2005 2004

Net (loss)/profit for the year (RM) (18,805,342) 2,453,421 Weighted average number of ordinary shares in issue 37,500,000 37,500,000 Basic (loss)/earnings per share (sen) (50.15) 6.54

39 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

40 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

41 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

11 PROPERTY, PLANT AND EQUIPMENT (cont’d)

Long term Motor vehicles, leasehold Plant and equipment and land Buildings machinery fixtures Total Company RM RM RM RM RM

Net book value at 31 December 2003 1,701,218 11,599,203 3,361,995 53,068 16,715,484

Additions - - - 38,083 38,083 Depreciation charge (24,976) (316,310) (832,774) (20,630) (1,194,690)

Net book value at 31 December 2004 1,676,242 11,282,893 2,529,221 70,521 15,558,877 Additions - - - 8,899 8,899 Depreciation charge (24,978) (316,310) (832,770) (28,080) (1,202,138)

Net book value at 31 December 2005 1,651,264 10,966,583 1,696,451 51,340 14,365,638

At 31 December 2004

Cost 151,902 157,501 25,986,919 3,442,703 29,739,025 Valuation 1,842,000 15,658,000 - - 17,500,000 Accumulated depreciation (317,660) (4,532,608) (23,457,698) (3,372,182) (31,680,148)

Net book value 1,676,242 11,282,893 2,529,221 70,521 15,558,877

At 31 December 2005

Cost 151,902 157,501 25,986,919 3,451,602 29,747,924 Valuation 1,842,000 15,658,000 - - 17,500,000 Accumulated depreciation (342,638) (4,848,918) (24,290,468) (3,400,262) (32,882,286)

Net book value 1,651,264 10,966,583 1,696,451 51,340 14,365,638

A foreign subsidiary had obtained authorisation ("Izin Lokasi") to develop oil palm plantations on the short term leasehold land of approximately 14,000 hectares located in Belitung, South of Sumatera, Indonesia. As at 31 December 2005, the foreign subsidiary has obtained land rights ("Hak Guna Usaha") for 12,002 hectares.

Depreciation expenses related to plantation development that has been capitalised as additions of the Group during the year is RM NIL (2004: RM11,719).

The Directors revalued land and buildings on 1 January 1982 and 10 October 1991 based on valuations carried out by independent professional valuers at an open market value after taking into consideration the Comparison Method. The book values of the land and buildings were adjusted to reflect the revaluations and the resultant surpluses were credited to revaluation reserve. The net book value of revalued land and buildings, had these assets been carried at historical cost is as follows:

Group Company 2005 2004 2005 2004 RM RM RM RM

Long term leasehold land 4,503,455 4,555,876 564,118 572,278 Buildings 4,765,758 4,960,968 3,925,409 4,120,619

9,269,213 9,516,844 4,489,527 4,692,897

42 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

11 PROPERTY, PLANT AND EQUIPMENT (cont’d)

The net book value of assets pledged as security for bank overdrafts and borrowings as stated in Notes 18 and 22 to the financial statements are as follows:

Group 2005 2004 RM RM

Long term leasehold land 10,195,226 10,316,437 Buildings 203,584 114,631 Mature and immature plantations 11,517,678 12,073,958 Plant and machinery 6,175 1,545 Motor vehicles, equipment and fixtures 234,338 136,400

22,157,001 22,642,971

12 SUBSIDIARIES Company 2005 2004 RM RM

Investments in unquoted shares, at cost 31,301,373 30,701,373 Allowance for diminution in value (14,505,000) (13,770,000)

16,796,373 16,931,373

Details of the subsidiaries are as follows :

Group’s effective Country of interest Name incorporation Principal activities 2005 2004 %%

Mentiga Plantation Sdn Bhd Malaysia Oil palm plantation 100 100

Lesong Forest Products Sdn Bhd Malaysia Logging and renting of its 100 100 sawmilling factory

Mentiga Development & Construction Sdn Bhd Malaysia General construction - dormant 100 100

Mentiga Plantation Management Malaysia Dormant 100 100 Sdn Bhd

Selat Bersatu Sdn Bhd Malaysia Investment holding 56 56

PT Rebinmas Jaya # Indonesia Oil palm plantation *50.4 *50.4

# Not audited by Ash’ariCheong. * Effective indirect holding through Selat Bersatu Sdn Bhd

43 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

12 SUBSIDIARIES (cont’d)

The auditors’ reports on the financial statements of the following subsidiaries are qualified and the qualifications are set out below:

(a) Mentiga Plantation Sdn Bhd

The auditors’ report is qualified as follows:

"For the year ended 31 December 2005, the Company incurred a net loss of RM2,950,398. At that date, the Company's current liabilities had exceeded its current assets by RM33,257,547 and its shareholders' equity was in deficit of RM12,567,986. In view of these factors, the appropriateness of preparing the financial statements of the Company on a going concern basis depends on the continuous financial support from its creditors and banker and also its ability to generate profit and positive cash flows in the future. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.

No arrangements had been made to ensure that sufficient financing is available to enable the Company to continue its operations without a significant curtailment in activities and neither have we obtained management's consideration as to its ability to generate profit and positive cash flows in the future. Accordingly, we are unable to satisfy ourselves as to the appropriateness of preparing the financial statements on a going concern basis.

In view of the significance of the matters set out in paragraph 3 above, we are unable to express an opinion as to whether the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to give a true and fair view of the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements, and the state of affairs of the Company as at 31 December 2005 and of the results and cash flows of the Company for the year ended on that date. In all other respects, the financial statements are in accordance with the applicable approved accounting standards in Malaysia and comply with the Companies Act, 1965."

(b) Selat Bersatu Sdn Bhd

The auditors’ report is qualified as follows:

"As at 31 December 2005, the Group and Company has an accumulated loss of RM52,337,199 and RM34,914,531 respectively. At that date, the Group and Company’s current liabilities had exceeded the current assets by RM72,059,136 and RM67,851,773 respectively. The Group and Company’s shareholders’ equity were in deficit of RM47,652,516 and RM24,914,529 respectively. In view of these factors, the appropriateness of preparing the financial statements of the Group and Company on a going concern is dependent on the continuous financial support from its holding company and Amanah Saham Pahang Berhad (ASPA) and its ability to generate profit and positive cash flow in the future. The Group and Company are in negotiation for continuous financial support from the holding company and ASPA as well as to successfully disposing its Indonesian subsidiary. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classification of liabilities that may be necessary if the Group and Company are unable to continue as a going concern.

No arrangements had been made to ensure that sufficient financing is available to enable the Group and the Company to continue its operations without a significant curtailment in activities and neither have we obtained management's assurance as to its ability to generate profit and positive cash flows in the future. Accordingly, we are unable to satisfy ourselves as to the appropriateness of preparing the financial statements on a going concern basis.

In view of the significance of the matter set out in paragraph 4 above, we are unable to express an opinion as to whether the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to give a true and fair view of the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements and the state of affairs of the Group and Company as at 31 December 2005 and of the results and cash flows of the Group and Company for the year ended on that date."

44 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

12 SUBSIDIARIES (cont’d)

The auditors’ report includes an emphasis of matters as follows:

"The accompanying financial statements have been prepared assuming that the Company will continue to operate as a going concern. Note 19 to the financial statements summarises the effects of the economic conditions in Indonesia on the Company, as well as the measures the Company has implemented and plans to implement in response to these economic conditions. These economic conditions have contributed to recurring losses, a capital deficiency and a negative working capital. The accompanying financial statements include the effects of the economic conditions to the extent they can be determined and estimated."

Note 19 as stated in the above paragraph is in respect of economic conditions and going concern and is as follows:

"The operations of the Company have been affected, and may continue to be affected by economic conditions in Indonesia. Significant currency depreciations and difficulties in obtaining loan in domestic market have a severe impact on the Company’s financial position.

The adverse economic condition in recent years have contributed recurring loss from operation amounting to Rp13,697,021,000 and Rp3,651,000,000 for the years ended December 31, 2005 and 2004, respectively. As of December 31, 2005, the Company also had a capital deficiency of Rp39,788,279,000 (2004: Rp33,101,195,000) and a net working capital deficit of Rp4,754,879,000 (2004: Rp4,089,259,000).

In response to these economic conditions, Company has initiated various plans and implemented certain measures, including:

a. Advancement of fertiliser used in the field maintenances program;

b. Field maintenances are confined to circle and selective weeding in the mature area;

c. Priorities were given to crop harvesting in the mature areas to generate cash to finance the estate operation;

d. Expansion on the remaining unplanted areas is placed on hold until adequate funds has been received from it’s shareholder.

Furthermore, the Company has obtained a letter of support from Amanah Saham Pahang Berhad ("ASPB") dated February 15, 2006. In this letter, ASPB confirms its intention and ability to provide financial support if and when required by the Company to allow it to continue operating as a going concern. Accordingly, management believes that the going concern basis of accounting is appropriate in relation to presentation of the financial statements as of December 31, 2005.

In addition, following the SPA between SBSB, KB, Delloyd and Taipan as discussed in Note 14, the new major shareholders have confirmed their intention and ability to provide financial support if and when required by the Company to allow it to continue operating as a going concern.

Resolutions of these adverse economic conditions and recovery of the economy are dependent on the fiscal and monetary measures that it will be taken by the government, action which are beyond the Company’s control."

13 LAND HELD FOR DEVELOPMENT

Group and Company 2005 2004 RM RM

Long term leasehold land, at cost 4,885,581 4,885,581 Development expenditure 831,624 831,624

5,717,205 5,717,205

Long term leasehold land is held for development and is not expected to be developed within the next twelve months. The ownership on the long term leasehold land is registered in the name of the vendor and will be transferred to the Company upon payment of the transfer fee. As at year end the Company is making arrangement for the transfer fee to be paid.

45 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

14 DEFERRED TAX ASSETS/LIABILITIES

Deferred tax liabilities are offset when there is a legal enforceable right to set off current tax assets against current tax liabilities that relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the balance sheets:

Group Company 2005 2004 2005 2004 RM RM RM RM

Deferred tax assets 396,000 312,000 2,672,000 2,627,000 Deferred tax liabilities (2,388,546) (2,421,208) (2,276,000) (2,315,000)

(1,992,546) (2,109,208) 396,000 312,000

At start of year (2,109,208) (641,000) 312,000 1,739,000 Charged to income statement (Note 9)

- post-employment benefit obligations 45,000 62,000 45,000 62,000 - tax losses - (347,000) - (347,000) - property, plant and equipment 71,662 (1,183,208) 39,000 (1,142,000)

116,662 (1,468,208) 84,000 (1,427,000)

At end of year (1,992,546) (2,109,208) 396,000 312,000

Deferred tax assets (before offsetting)

Post-employment benefit obligations 1,215,000 1,170,000 1,215,000 1,170,000 Unabsorbed business loss 1,457,000 1,457,000 1,457,000 1,457,000 2,672,000 2,627,000 2,672,000 2,627,000 Offsetting (2,276,000) (2,627,000) (2,276,000) (2,315,000)

Deferred tax assets (after offsetting) 396,000 - 396,000 312,000

Deferred tax liabilities (before offsetting)

Property, plant and equipment (4,664,546) (4,736,208) (2,276,000) (2,315,000) Offsetting 2,276,000 2,627,000 2,276,000 2,315,000

Deferred tax liabilities (after offsetting) (2,388,546) (2,109,208) - -

The amounts of deductible temporary differences and unused tax losses (both of which have no expiry date) for which no deferred tax asset is recognised in the balance sheets are as follows:

Group Company 2005 2004 2005 2004 RM RM RM RM

Deductible temporary difference 841,000 730,000 - - Tax losses 49,307,000 50,605,000 48,606,000 47,213,000

46 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

15 INVENTORIES

Group Company 2005 2004 2005 2004 RM RM RM RM

Finished goods, at cost 28,524 627,115 28,524 627,115

Raw materials, at cost - 41,819 - 41,819

Stores, at cost 257,965 144,647 200,047 67,066

286,489 813,581 228,571 736,000

Inventories of the Group held in a subsidiary are in respect of stores of RM14,164 (2004 : RM77,581) which have been pledged as security for borrowings as disclosed in Note 22 to the financial statements.

16 RECEIVABLES, DEPOSITS AND PREPAYMENTS

Group Company 2005 2004 2005 2004 RM RM RM RM

Trade receivables 25,577,718 29,770,589 25,214,260 29,363,689 Allowance for doubtful debts (15,245,037) (22,898,790) (15,236,418) (22,890,171)

10,332,681 6,871,799 9,977,842 6,473,518

Other receivables 946,726 559,458 312,847 322,827 Allowance for doubtful debts (452,162) (452,162) (277,376) (277,376)

494,564 107,296 35,471 45,451

Deposits 1,002,618 1,009,118 362,603 369,103 Allowance for doubtful debts (597,896) (597,896) - -

404,722 411,222 362,603 369,103

Prepayments 632,285 625,826 571,450 571,153 Allowance for doubtful debts (53,387) (53,387) - -

578,898 572,439 571,450 571,153

11,810,865 7,962,756 10,947,366 7,459,225

The currency profiles of receivables are as follows:

- Ringgit Malaysia 10,585,172 7,094,415 10,375,916 6,888,072 - Rupiah 646,795 295,902 - -

11,231,967 7,390,317 10,375,916 6,888,072

Credit term of trade receivables of the Group and Company for export is 60 days (2004 : 60 days) and cash term for local sales.

47 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

17 AMOUNTS DUE FROM/TO SUBSIDIARIES

The amounts due from/to subsidiaries are advances, which are unsecured, free of interest and with no fixed terms of repayment. Amounts due from/to subsidiaries are in Ringgit Malaysia.

18 CASH AND CASH EQUIVALENTS

Group Company 2005 2004 2005 2004 RM RM RM RM

Deposit with licensed bank 5,000 5,000 - - Bank and cash balances 1,887,862 1,279,399 836,963 357,961

Deposits, bank and cash balances 1,892,862 1,284,399 836,963 357,961 Bank overdrafts (Note 22) (12,573,004) (11,706,720) - -

(10,680,142) (10,422,321) 836,963 357,961

As at 31 December 2005, fixed deposit of the Group has a maturity period of 90 days with an effective interest rate at the year-end of 3.7% (2004: 3.7%). Bank balances are deposits held at call with banks.

The currency profiles of bank and cash balances are as follows:

Group Company 2005 2004 2005 2004 RM RM RM RM

- Ringgit Malaysia (10,934,781) (10,596,485) 836,963 357,961 - Rupiah 253,377 172,907 - - - US Dollar 1,262 1,257 - -

(10,680,142) (10,422,321) 836,963 357,961

19 PAYABLES

Group Company 2005 2004 2005 2004 RM RM RM RM

Trade payables 25,829,040 22,838,437 22,882,370 22,686,476 Other payables 1,821,149 3,452,096 180,000 285,416 Accrued liabilities 2,680,722 2,930,604 1,406,243 1,198,641 Interest accrued 8,616,068 7,207,341 - - Accrual for full and final settlement of legal claim with a licensed bank 2,835,000 - 2,835,000 - Deposits 16,575,125 6,659,166 13,789,084 6,373,125

58,357,104 43,087,644 41,092,697 30,543,658

48 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

19 PAYABLES (cont’d)

The currency profiles of payables are as follows:

Group Company 2005 2004 2005 2004 RM RM RM RM

- Ringgit Malaysia 55,894,554 39,363,130 41,092,697 30,543,658 - Rupiah 2,462,550 3,724,514 - -

58,357,104 43,087,644 41,092,697 30,543,658

Credit terms of trade payables of the Group and Company range from 60 to 90 days (2004: 60 to 90 days).

Included in the deposits are amounts of RM13,365,959 (2004 : RM5,950,000) being security deposits received for logs sales.

Accrual for full and final settlement for a legal claim with a licensed bank is payable as follows:

Group and Company 2005 2004 RM RM

Initial amount of RM2,000,000 was paid in April 2006 and RM835,000 to be paid by 1 October 2006 2,835,000 - Balance to be paid in four half yearly installments of RM835,000 each and last installment of RM825,000 (shown as non-current liabilities) 4,165,000 -

7,000,000 -

The fair value of the non-current portion is RM3,574,430.

20 ADVANCE FROM A SUBSTANTIAL SHAREHOLDER

The advance from a substantial shareholder, Amanah Saham Pahang Berhad (ASPA) is unsecured, free of interest and with no fixed terms of repayment. The advance from a substantial shareholder is in Ringgit Malaysia. ASPA is a company incorporated in Malaysia, which is wholly owned by the State Government of Pahang Darul Makmur.

21 RETIREMENT BENEFITS

Group and Company 2005 2004 RM RM

At 31 December Current 1,109,382 738,459 Non current 3,228,922 3,441,267

4,338,304 4,179,726

At 1 January 4,179,726 3,958,758 Charged to income statement 747,622 501,714 Payment for the year (589,044) (280,746)

At 31 December 4,338,304 4,179,726

49 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

21 RETIREMENT BENEFITS (cont’d)

The amount recognised in the balance sheets can be analysed as follows:

Group and Company 2005 2004 RM RM

Present value of benefit obligation 4,957,452 4,782,285 Unrecognised actuarial gain (619,148) (602,559)

Net liability recognised in balance sheet 4,338,304 4,179,726

The amount recognised in the income statements can be analysed as follows:

Group and Company 2005 2004 RM RM

Current service cost 210,074 216,962 Interest cost 322,348 322,026 Amortisation of transition obligation 215,200 215,200 Past service cost - (252,474)

747,622 501,714

The principal actuarial assumptions used in respect of the defined benefit plan are as follows:

Group and Company 2005 2004 %%

Discount rate 7 7 Salary increase rate 5 5

22 BORROWINGS (INTEREST BEARING)

Group 2005 2004 RM RM

Current

Bank borrowings (secured ) 11,177,555 11,177,555 Hire purchase liabilities (secured) 9,530 8,902

11,187,085 11,186,457

Non current Hire purchase liabilities 29,440 38,971

11,216,525 11,225,428

Currency profile of borrowings is in Ringgit Malaysia.

Bank overdrafts and other borrowings are secured over the long term leasehold land and a fixed and floating charge by way of a debenture over all present as well as future assets of a subsidiary.

50 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

22 BORROWINGS (INTEREST BEARING) (cont’d)

The effective interest rates on the Group borrowings as at year-end are as follows:

2005 2004 %%

Bank overdrafts 9.4 9.4 Other borrowings 9.4 9.4

Hire purchase liabilities are effectively secured as the rights to the hired assets revert to the hirer in the even of default.

Group 2005 2004 RM RM

Current Hire purchase liabilities (secured) 9,530 8,902

Non Current Hire purchase liabilities (secured) 29,440 38,971

Hire purchase Minimum hire purchase payments - not later than 1 year 11,604 11,604 - later than 1 year but not later than 5 years 31,891 43,495

43,495 55,099

Future finance charges on hire purchase (4,525) (7,226)

Present value of hire purchase liabilities 38,970 47,873

Representing hire purchase liabilities : - current 9,530 8,902 - non current 29,440 38,971

38,970 47,873

Present value of hire purchase liabilities : - not later than 1 year 9,530 8,902 - later than 1 year and not later than 5 years 29,440 38,971

38,970 47,873

23 SHARE CAPITAL

Group and Company 2005 2004 RM RM

Authorised ordinary shares of RM1 each

At start and end of year 60,000,000 60,000,000

Issued and fully paid ordinary shares of RM1 each At start and end of year 37,500,000 37,500,000

51 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

24 EXCHANGE FLUCTUATION RESERVE

The movement in the reserve is as follows:

Group 2005 2004 RM RM

Non-distributable

At start of year (4,023,770) (5,504,920) Arising in year 777,683 1,481,150

At end of year (3,246,087) (4,023,770)

25 CONTINGENT LIABILITIES, UNSECURED

Group Company 2005 2004 2005 2004 RM RM RM RM

Corporate guarantee for credit facilities granted to a subsidiary - - 25,000,000 25,000,000 Legal claim by a licensed bank* - 32,649,332 - 32,649,332 Claim made by a project employer and contractor 15,750,854 15,750,854 15,750,854 15,750,854 Legal claims by contractors ** 5,778,441 5,778,441 5,778,441 5,778,441

21,529,295 54,178,627 46,529,295 79,178,627

* On 22 March 2006, the licensed bank had agreed for a sum of RM7,000,000 as full and final settlement of their claim against the Company. The amount has been accrued for in the financial statements of the Group and Company (Note 7(b)).

** Legal claims against the Company in respect of contract work done together with interest. The Company had disputed the existence of these liabilities.

(a) The Indonesian subsidiary’s major supplier, PT Tata Hamparan Eka Persada had submitted a notification since 1998 that requires the Indonesian subsidiary to pay penalty on late payment of the outstanding payable. The subsidiary had disputed this. There is no further progress on this issue in 2005.

(b) The Indonesian subsidiary had a lawsuit from one of its contractor, CV Harapan Baru (Harapan). In the High Court decision on October 21, 2002, the Indonesian subsidiary was requested to pay the contractor amounted RM290,791 (for interest and penalty amounted RM221,038 and RM69,753 respectively) and court fee of RM51. The Indonesian subsidiary has filed an objection in respect to the decision and continued this legal case through Supreme Court in Jakarta. On June 11, 2005, based on the Tanjung Pandan State Court decision, Harapan has agreed to withdraw their lawsuit against the Indonesian subsidiary in respect for a compensation amounting to RM211,824. The Indonesian subsidiary has paid the related amount and recognised it as miscellaneous expense in the current year income statement.

52 Notes to Financial Statement for the year ended 31 December 2005

Annual Report 2005

26 SEGMENTAL REPORTING

The Group is organised into two main business segments:

• manufacturing - timber extraction and trading in timber products • plantation - oil palm plantation-fresh fruits bunches

(a) Primary reporting format – business segment

Manufacturing Plantation Others Group 2005 RM’000 RM’000 RM’000 RM’000

Sales External sales 1,633 4,096 - 5,729

Results Segment result (external) (11,755) (4,950) (585) (17,290) Finance cost (2,060)

Profit from ordinary activities before tax (19,350) Tax 112

Net profit for the year (19,238)

Other information Segment assets 26,379 48,553 2,603 77,535 Unallocated assets 5,717

Total assets 83,252

Segment liabilities 75,535 37,692 1,804 115,031 Unallocated liabilities 37,192

Total liabilities 152,223

Depreciation and amortisation 1,202 1,926 34 3,162

Manufacturing Plantation Others Group 2004 RM’000 RM’000 RM’000 RM’000

Sales External sales 17,427 4,112 - 21,539

Results Segment result (external) (11,214) 18,136 (418) 6,504 Finance cost (2,583)

Profit from ordinary activities before tax 3,921 Tax (1,468)

Net profit for the year 2,453

Other information Segment assets 24,136 49,579 2,621 76,336 Unallocated assets 5,717

Total assets 82,053

Segment liabilities 67,170 30,490 1,327 98,987 Unallocated liabilities 34,008

Total liabilities 132,995

Depreciation and Amortisation 1,195 1,742 105 3,042 53 Notes to Financial Statement for the year ended 31 December 2005

M E N T I G A Corporation Berhad

26 SEGMENTAL REPORTING (cont’d)

(a) Primary reporting format – business segment

Segments assets consist primarily of property, plant and equipment, inventories, receivables and operating cash, and mainly exclude investment. Segment liabilities comprise operating liabilities and exclude item such as taxation and corporate borrowings.

Capital expenditure comprises additions to property, plant and equipment (Note 11).

(b) Secondary reporting format - geographical segments

The Group operate in two main geographical areas:

Malaysia* – timber extraction, trading in timber related products and oil palm plantation

Indonesia – oil palm plantation

* Company home country

Sales Total Assets 2005 2004 2005 2004 RM’000 RM’000 RM’000 RM’000

Malaysia 4,068 19,421 61,425 56,381 Indonesia 1,661 2,118 21,827 25,984

5,729 21,539 83,252 82,365

In determining the geographical segments of the Group, sales are based on the country in which the customers are located. There are no sales between segments. Total assets and capital expenditure are determined based on where the assets are located.

27 Approval of financial statements

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 27 April 2006.

54 Statement by Directors Pursuant to Section 169(15) of the Companies Act, 1965

M E N T I G A Corporation Berhad

We, Muhammad Nasir bin Puteh and Dato’ Haji Mohd Ali Hanafiah bin Sh Ruji, two of the Directors of Mentiga Corporation Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 8 to 50 are drawn up so as to give a true and fair view of the state of affairs of the Group and Company as at 31 December 2005 and of the results and cash flows of the Group and Company for the year ended on that date in accordance with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965.

In accordance with a resolution of the Board of Directors dated 27 April 2006

Muhammad Nasir bin Puteh Managing Director

Dato’ Haji Mohd Ali Hanafiah bin Sh Ruji Director

S t a t u t o ry Declaration Pursuant to Section 169(16) of the Companies Act, 1965

I, Abu Bakar bin Jani, the officer primarily responsible for the financial management of Mentiga Corporation Berhad, do solemnly and sincerely declare that the financial statements set out on pages 8 to 50 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, 1960.

Abu Bakar bin Jani

Subscribed and solemnly declared by the abovenamed Abu Bakar bin Jani

At: Kuantan On: 27 April 2006

Before me:

Chan Yoke Har Commissioner for Oaths 55 Report of the Auditors to the Members of Mentiga Corporation Berhad

M E N T I G A Corporation Berhad

1 We were engaged to audit the financial statements of Mentiga Corporation Berhad as set out on pages 8 to 50. These financial statements are the responsibility of the Company’s Directors. Our responsibility is to audit these financial statements.

2 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.

3 The approved auditing standards in Malaysia 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 financial statement presentation.

4 As disclosed in Note 3(b) to the financial statements, the financial statements have been prepared on a going concern basis, which assumes that the Group and Company will continue in operational existence for the foreseeable future having adequate funds to meet their obligations as they fall due. The validity of this assumption depends on the continuous negotiation for the financial support from the Group’s and Company’s substantial shareholder, ASPA which is wholly owned by the State Government of Pahang Darul Makmur as well as the ability of the Group and Company to successfully implement the proposed restructuring scheme approved by the Securities Commission and to generate profits and positive cash flows to sustain their operations. As the successful implementation of the proposed restructuring scheme is still pending, we are unable to satisfy ourselves that the going concern basis used in the preparation of the financial statements is appropriate.

5 As disclosed in Note 25 to the financial statements, the Group and Company have legal claim and claim of RM21,529,295 made by a project employer and contractors. We are unable to obtain all information and explanations on these claims and the extent of the liabilities of the Group and Company thereon.

6 In view of the significance of the matters set out in paragraphs 4 and 5 above, we are unable to express an opinion as to whether the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards in Malaysia so as to give a true and fair view of:

(a) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and

(b) the state of affairs of the Group and Company as at 31 December 2005 and of the results and cash flows of the Group and Company for the year ended on that date.

7 In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the said Act.

8 We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company's financial statements 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.

9 The auditors' reports on the financial statements of the subsidiaries were not subject to any qualification or any comment made under subsection (3) of Section 174 of the Act except as detailed in Note 12 to the financial statements.

Ash'ariCheong [AF: 1534] Chartered Accountants

Dato’ Cheong Keap Tai [1129/12/07 (J/PH)] Partner of the firm

Kuantan 27 April 2006

56 List Of Properties

Annual Report 2005

Landed properties of Mentiga Group as at 31 December 2005 are set out below:

Usage Area Net book Approximate As at (Acres) Value Age of Description/Location 31.12.2005 RM’000 Building (Year)

1. Mentiga Corporation Berhad Leasehold land known, as Lot

(i) No. P.T. 1209 Timber Land 31.64 1,524 27 HS (D) 145, Mukim of Langgar Complex Built-up District of Pekan 11.53 Pahang Darul Makmur (Leasehold for a term of 99 years expiring on 3.2.2073)

(ii) No. P.T. 2204 Logyard 4.35 127 - HS (D) 3364, Mukim of Langgar District of Pekan Pahang Darul Makmur (Leasehold for a term of 66 years expiring on 2.1.2063)

2. Mentiga Plantation Sdn. Bhd. Agriculture 10,922 10,195 - No. P.T. 906 HS (D) No. 13287 Jungle Land Mukim of Ulu Kuantan (Oil Palm) District of Kuantan Pahang Darul Makmur (Leasehold for a term of 99 years expiring on 29.8.2094)

3. Lesong Forest Products Sdn. Bhd. Timber 57 2,537 25 HS (D) No. P.T. 361 Complex District of Rompin Mukim of Rompin Pahang Darul Makmur (Leasehold for a term of 99 years expiring on 3.2.2076)

4. PT Rebinmas Jaya Agriculture 30,225 6,365 Kec. Pembantu Sijuk (Oil Palm) Kec. Kelapa Kampit Kec. Pembantu Badau Kec. Gantung, Kec Dendang Kabupaten Daerah Tingkat 11 Belintung Sumatera Selatan, Indonesia (Leasehold for a term of 30 years expiring on 7.11.2029)

57 List Of Properties

M E N T I G A Corporation Berhad

Subsidiary Companies

Name of Company Country of Principal Holdings Incorporation Activities 2005 2004 %%

1. Mentiga Plantation Sdn. Bhd. Malaysia Oil Palm Plantation 100 100

2. Lesong Forest Products Malaysia Timber extraction, 100 100 Sdn. Bhd. trading in timber product and renting properties

3. Mentiga Development & Malaysia General construction 100 100 Construction Sdn. Bhd. -dormant

4. Mentiga Plantation Malaysia Provision of management 100 100 Management Sdn. Bhd. and advisory services to oil palm plantations

5. Selat Bersatu Sdn. Bhd. Malaysia Investment holding 56 56

6. PT Rebinmas Jaya # Indonesia Oil palm plantation *50.4 *50.4

# Not audited by Ash’ariCheong. * Indirect holding through Selat Bersatu Sdn. Bhd.

58 Statistic Of Shareholdings

Annual Report 2005

Shareholdings as at 28 April 2006

Authorised Share Capital : RM200,000,000 divided into 150,000,000 Ordinary share of RM1.00 each and 50,000,000 Preference shares of RM1.00 each Issued : RM37,500,000 comprising of 37,500,000 Ordinary shares of RM1.00 each Voting Rights : One vote per share

Analysis of shareholding structure as at 28 April 2006

No.of No. of Size of Shareholding Shares Percentage Holdings Percentage 1-99 0 0 0 0 100 - 1,000 1,596,000 4.26 1,597 43.96 1,001 – 10,000 6,915,000 18.44 1,830 50.37 10,001 – 100,000 4,870,000 12.98 192 5.28 100,001 – 1,874,999 6,741,000 17.98 12 0.33 1,875,000 and above 17,378,000 46.34 2 0.06

Total 37,500,000 100.00 3,633 100.00

Substantial shareholders as at 28 April 2006

Percentage of Name of substantial shareholders Direct issued capital i. Amanah Saham Pahang Berhad 19,228,000 51.27 ii. Kumpulan Modal Bumiputra Pahang 2,500,000 6.67

Thirty Largest Shareholders as at 28 April 2006

No.of Percentage of No.Name of shareholders shares Issued capital

1 Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Amanah Saham Pahang Berhad (3462 Kuan) 12,000,000 32.00

2 Amanah Saham Pahang Berhad 5,378,000 14.34

3 EB Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Amanah Saham Pahang Berhad (Mentakab) 1,850,000 4.93

4 Amanah Raya Berhad Kumpulan Modal Bumiputra Pahang 1,300,000 3.47

5 Amanah Raya Berhad Kumpulan Modal Bumiputra 1,200,000 3.20

6 Ospac Group Sdn.Bhd 588,000 1.57

7 Mayban Nominees (Tempatan) Sdn Bhd Mayban Trustees Berhad for Amanah Saham Bank Islam Tabung Pertama (N14011940160) 390,000 1.04

59 Statistic Of Shareholdings

M E N T I G A Corporation Berhad

No.of Percentage of No.Name of shareholders shares Issued capital

8 Kok Seng Yah @ Goh Seng Yah 300,000 0.80

9 Mayfin Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Dato’ Mohd Ghazali Mohd Khalid (MDT) 252,000 0.67

10 Tan Piak Cheng 212,000 0.57

11 Chua Hock Chin 190,000 0.51

12 Goh Leong Chuan 179,000 0.48

13 Tan Puay Seng 174,000 0.46

14 Seng Joo Seang 130,000 0.35

15 Citicorp Nominees (Asing) Sdn Bhd CBHK PBGSGP for Shenzen Investments Ltd 100,000 0.27

16 Teo Ah Bah @ Teo Chuang Kwee 100,000 0.27

17 Thong & Kay Hian Nominees (Asing) Sdn.Bhd UOB Kay Hian Pte Ltd For Ang Thuan Kern 100,000 0.27

18 Ji Jock Wah 95,000 0.25

19 EB Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Dato’ Mohd Ali Hanafiah Bin Sh Ruji (Mentakab) 85,000 0.23

20 RHB Nominees (Tempatan) Sdn Bhd Telekom Malaysia Retirement Benefit Scheme 85,000 0.23

21 Sheikh Othman Bin Sheikh Abdul Rahman 84,000 0.22

22 Quah Cheng Liew 81,000 0.22

23 BIMSEC Nominees (Tempatan) Sdn Bhd Bank Islam Malaysia Berhad 80,000 0.21

24 Tan Kim Kiew @ Tan Kim Leong 71,000 0.19

25 Wong Lee Peng 70,000 0.19

26 Liang Kun Chi @ Liong Kun Chi 60,000 0.16

27 SH Mohd Nasimuddin Kamal Bin SH Md Amin 59,000 0.16

28 Syed Abdullah Bin Syed Omar 57,000 0.15

29 Mohd Nazri Bin Yunus 56,000 0.15

30 Eng Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Tan Seng Kee 56,000 0.15

60 Total 25,382,000 67.69 MENTIGA CORPORATION BERHAD (10289-K) CDS Account No. of Authorised Nominee * FORM OF PROXY

I/We ______

NRIC No./Passport No./Company No______of ______being a member of Mentiga Corporation Berhad ("Company"), do hereby appoint______

______

NRIC No./Passport No. ______of ______or failing him,______NRIC No./Passport No. ______of ______as my / our proxy to vote for me / us on my / our behalf at the Thirty-Fifth Annual General Meeting of the Company to be held at Junior Ballroom 2, Level 2, Hotel Nikko, 165 Jalan Ampang, 50450 Kuala Lumpur on Thursday, 29 June 2006 at 2.30 p.m. and any adjournment thereof.

RESOLUTIONS FOR AGAINST

1. To receive and adopt the Statutory Financial Statements for the year ended 31 December 2005 and the Reports of the Directors and Auditors thereon. 2. To approve the payment of Directors’ fees for the year ended 31 December 2005. 3. To re-elect Encik Muhammad Nasir Bin Puteh retiring in accordance with Article 80 of the Company’s Articles of Association. 4. To re-elect Encik Yusof Ali Bin Haji M.Zain retiring in accordance with Article 80 of the Company’s Articles of Association. 5. To re-elect Encik Hazli Bin Ibrahim retiring in accordance with Article 80 of the Company’s Articles of Association. 6. To re-appoint Auditors of the Company and to authorise the Directors to fix their remuneration.

(Please indicate with an "X" in the appropriate box against the resolution how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his discretion.)

Signature/ Common Seal

Number of shares held :

Date :

Notes:

1 A member of the Company entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy may, but need not, be a member of the Company and a member may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. 2. Where a member of the Company is an authorised nominee as defined under the Security Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 3. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under Seal or under the hand of an officer or attorney duly authorised. 4. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. 5. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall deposited at the Registered Office of the Company at 20th Floor, East Wing, Plaza Permata, Jalan Kampar Off Jalan Tun Razak, 50400 Kuala Lumpur, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

* Applicable to shares held through a nominee account. This page is intentionally left blank