ANNUAL REPPORRT 2008 - malaysiastock.biz fileprofile of the board of directors...

Goodway Integrated Industr ies Berhad(618972-T)

ANNUAL REPPORRT 2008

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CONTENTS

MILESTONES ............................................................................................................................. 1

CORPORATE STRUCTURE …………………………………………………………………. 3

CORPORATE INFORMATION ................................................................................................. 4

CHAIRMAN’S STATEMENT ………………………………………………………………… 5

PROFILE OF THE BOARD OF DIRECTORS ………………………………………………... 8

AUDIT COMMITTEE REPORT ................................................................................................. 12

CORPORATE GOVERNANCE STATEMENT ……………………………………………… 16

CORPORATE SOCIAL RESPONSIBILITY STATEMENT ..................................................... 23

STATEMENT ON INTERNAL CONTROL ………………………………………………….. 24

OTHER INFORMATION ............................................................................................................ 26

FINANCIAL STATEMENTS

Directors’ Report ………………………………………………………………………… 29

Balance Sheets …………………………………………………………………………… 35

Income Statements ……………………………………………………………………….. 37

Consolidated Statement of Changes in Equity …………………………………………… 38

Statement of Changes in Equity ………………………………………………………….. 40

Cash Flow Statements ……………………………………………………………………. 41

Notes to the Financial Statements ………………………………………………………... 44

Statement by Directors …………………………………………………………………… 95

Statutory Declaration …………………………………………………………………….. 96

Independent Auditors’ Report…..………………………………………………………... 97

LIST OF GROUP PROPERTIES .……………………………………………………………… 99

ANALYSIS OF SHAREHOLDINGS ………………………………………………………….. 101

NOTICE OF ANNUAL GENERAL MEETING ………………………………………………. 104

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING ………... 108

PROXY FORM ………………………………………………………………………………… Enclosed

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MILESTONES

1990 • Goodway Rubber Industries Sdn Bhd (“GWRI”) commenced its operation in Sabah, East

Malaysia. 1993 • GWRI entered into a Technology Transfer and Joint Venture Agreement with Gummiwerk

Kraiburg Produktions GmbH of Germany for ten years and the operations in Sabah were moved to Nilai Industrial Estate in West Malaysia.

• GWRI acquired the equity interest in Kilotrac Industries Sdn Bhd to carry out research and development activities and to provide training on retreading process to its customers.

1997 • GWRI was accredited the TUV Certificate Body of Rheinish-Westfalischer ISO 9002. 1998 • Acquisition of equity stake in Goodway Rubber Company Pty Ltd, a company incorporated in

Australia, to be the marketing arm in the Oceanic Region. 2001 • GWRI expanded its production capacity from 14,400 tonnes to 30,000 tonnes per annum via

additional two (2) production lines. • The TUV Certificate Body of Rheinish-Westfalischer ISO 9002 was upgraded to the TUV

Certificate Body of Rheinish-Westfalischer ISO 9001:2000. • The Group expanded its business operation by venturing into manufacturing of technical

compound. 2003 • Goodway Integrated Industries Berhad (“GIIB”) was established as an investment holding

company of GWRI and all its subsidiaries. • GWRI received re-certification of the TUV Certification Body of Rheinish-Westfalischer ISO

9001:2000. • GWRI was awarded the Enterprise 50 Award 2003. 2004 • GIIB was listed on the Second Board of Bursa Malaysia Securities Berhad. • GIIB was invited by National Productivity Corporation (now known as Malaysia Productivity

Corporation) to sit on its panel for the Group’s Total Productivity Management Programme. • GWRI was awarded the Enterprise 50 Award 2004 for two consecutive years.

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MILESTONES (continued) 2005 • GIIB issued Murabahah Underwritten Notes Issuance Facility/Islamic Medium-Term Notes

(“MUNIF/IMTN”) of up to RM80 million. • GIIB acquired the largest retreading Group in Asia, Big Wheel Holdings Sdn Bhd and its group

of companies and certain business assets and assumptions of selected liabilities of Sierra Growth Sdn Bhd as part of its expansion plan.

• GIIB successfully organised the first National Fleet Convention. • GIIB penetrates into the European market by setting up a trading arm under Goodway Europe

(Sweden) A. B. 2006 • GIIB entered into an agreement with PT OTR Technology Internasional to set up a plant for

retreading of Off-The-Road tyres. • GIIB penetrates into the China market via the incorporation of Suzhou Goodway Rubber

Products Co. Ltd. • The Group sold its first total retreading business system and tyre retreading machineries in China. 2007 • GIIB entered into an agreement with Autoways (Malaya) Sdn Bhd (Receiver and Manager

Appointed) (“Autoways”) to acquire certain assets of Autoways which includes manufacturing and retreading facilities.

2008 • The manufacturing and retreading facilities located at Shah Alam had commenced its operation in

order to cater for the retread market in West Malaysia. • GIIB expands its retreading facilities in China through joint venture Company formed under the

name of Shenzhen Xinxihu Goodway Tyre Services Co. Ltd. • GWRI received the coveted international certification of OHSAS 18001 for Occupational Health

and Safety System from the TUV Certification Body.

CORPORATE STRUCTURE

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Goodway Rubber Industries Sdn Bhd (100%)

Goodway Marketing Sdn Bhd (100%)

Goodway Rubber Technology Sdn Bhd (100%)

Kilotrac Industries Sdn Bhd (100%)

Big Wheel Green Tyres Sdn Bhd (100%)

Big Wheel (Malaysia) Sdn Bhd (100%)

GOODWAY INTEGRATED

INDUSTRIES BERHAD Goodway SMR Sdn Bhd (100%)

Ever Lord Tyres Sdn Bhd (100%)

Bigwheel OTR Sdn Bhd (60%)

Goodway Rubber Company Pty Ltd (90%)

Goodway Europe (Sweden) A.B. (100%)

Goodway (HK) Pte Limited (100%)

Goodway Simplex (HK) Pte Limited (100%)

Suzhou Goodway Rubber Products Co. Ltd. (100%)

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CORPORATE INFORMATION

BOARD OF DIRECTORS Mok Yuen Lok (Chairman, Independent Non-Executive Director) Tai Boon Wee (Chief Executive Officer) Wong Ping Kiong (Chief Operating Officer) Ismail Bin Mahayudin (Independent Non-Executive Director) Nor Idzam Bin Ya’akub (Independent Non-Executive Director ) Lt Jen (B) Datuk Hj Adenan Bin Hj Mohamad Zain (Non-Independent Non-Executive Director) AUDIT COMMITTEE Mok Yuen Lok (Chairman) Ismail Bin Mahayudin Nor Idzam Bin Ya’akub JOINT NOMINATION AND REMUNERATION COMMITTEE Ismail Bin Mahayudin (Chairman) Mok Yuen Lok Nor Idzam Bin Ya’akub ESOS COMMITTEE Tai Boon Wee Wong Ping Kiong COMPANY SECRETARY Koon Wai Ye (MAICSA 7048269) REGISTERED OFFICE Lot 1 & 3, Jalan Rivet 15/15 Seksyen 15, 40000 Shah Alam Tel : 603-5519 1818 Fax : 603-5519 6868 PRINCIPAL BANKERS HSBC Bank Malaysia Berhad AmBank (M) Berhad CIMB Bank Berhad

PRINCIPAL PLACE OF BUSINESS

Manufacturing Plant Lot PT 1654 & PT 1657, Nilai Industrial Estate 71800 Nilai, Negeri Sembilan Darul Khusus Tel : 606-799 4833 Fax : 606-799 4866

Sales & Marketing / Corporate Office Lot 1 & 3, Jalan Rivet 15/15 Seksyen 15, 40000 Shah Alam Tel : 603-5519 1818 Fax: 603-5519 6868 E-mail : [email protected] Website: http://www.goodway-integrated.com SHARE REGISTRAR Symphony Share Registrars Sdn Bhd Level 26, Menara Multi-Purpose Capital Square 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : 603-2721 2222 Fax: 603-2721 2530/2531 AUDITORS KPMG (AF 0758) KPMG Tower 8, First Avenue Bandar Utama 47800 Petaling Jaya Selangor, Malaysia Tel : 603-7721 3388 Fax: 603-7721 3399 STOCK EXCHANGE LISTING Second Board Bursa Malaysia Securities Berhad

CHAIRMAN’S STATEMENT On behalf of the Board of Directors, I am pleased to present the Annual Report together with the Financial Statements of the Company for the financial year ended 31 December 2008. FINANCIAL HIGHLIGHTS 2008 has indeed been a tumultuous year where most of the global prime industries were affected by the turbulent economic environment caused by firstly, the soaring crude oil prices which caused inflationary pressures during the 2nd quarter of 2008, and secondly, the credit crunch and subprime crisis which resulted in liquidity shrinkages during the 3rd quarter of 2008. As the crisis deteriorated in September 2008 with closures of many once-indomitable companies, stock markets worldwide crashed and financial markets experienced a period of high volatility and a considerable loss of market confidence. The commodities markets were also not spared from the financial turmoil brought about by the subprime crisis, causing wide fluctuations particularly in crude oil prices triggering a spiraling effect on the prices of other commodities. In spite of the global turmoil, the Group still managed to demonstrate a steady growth rate of 21% with a revenue of RM253 million as compared to RM209 million posted in the financial year ended 2007 (FYE 2007). This is attributable to the continuous efforts of the Goodway team to expand its business segment and strengthen its market share and position. However, the Group registered a loss after tax of RM12.8 million during the year under review as compared to a profit after tax of RM4.2 million in FYE 2007 due to write-downs and compressed margins in response to the uncertain market conditions. The main factors contributing to the loss were the spike in the costs of raw materials (mainly natural rubber prices), foreign exchange losses, impairment of assets and the write down of stock values. Although the overall Group’s performance had dampened, the Group is optimistic that the demand for retreaded tyres will continue to grow as it is increasingly become the only viable solution for fleet owners and heavy machine operators in the mining sector to achieve cost efficiency, as they respond to environmentalists’ pressures to reduce pollution, reuse and recycle. OPERATIONAL HIGHLIGHTS During the year under review, the Group undertook several proactive measures to mitigate the adverse effects as a result from the uncertain economic conditions - such as the implementation of cost reduction programs (which included deferring costs of expansion programs) and focusing on debt collection, reducing inventories holding periods, and reviewing credit terms to customers to enhance working capital efficiency. It is envisaged that these proactive measures will further improve the Group’s overall performance and cost effectiveness.

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CHAIRMAN’S STATEMENT (continued)

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Rubber Compounding The Company recognises the importance of customers’ support and their long term commitment towards the Company in promoting the products marketed under the brand name Supercool®. As an appreciation for their commitment and loyalty, the Company had extended support programs and incentive packages to these retreaders/customers to form a stronger partnership and preserve a long term business relationship. In terms of the overall performance of the rubber compounding segment, the sales of technical compound recorded at RM36 million, yielding a 20% growth from RM30 million posted in year 2007, indicating an improved market On the other hand, the revenue derived from the sale of the rubber compound reduced by 18% to RM96 million as compared to the preceding year’s revenue of RM117 million. The lower revenue was due to the constant review of the pricing policy carried out by the Company to compete in the current volatile market conditions, which resulted in the loss of some market share. Retreading Services The retreading segment had shown marginal growth with revenue recorded at RM69 million during the year under review as compared to RM62 million registered in year 2007. Nevertheless, the commencement of the retreading business under a joint venture project with Shenzhen Xinxihu Holding Co. Ltd, one of the largest transportation companies in Shenzhen, is anticipated to boost the retreading segment’s revenue further. MOVING FORWARD It has always been the Group’s main objective and priority to use innovation and technology to constantly deliver products and services that add value to our customers. Guided by this mission, the Group places great emphasis on quality excellence in both products and services offered, focusing mainly on the precision of our manufacturing processes to achieve flawless goods. In order to develop a market with high retread quality and performance consistency, the Group has identified a scheme that focuses on the transfer of technology, know-how and provision of technical consultation to potential entrepreneurs who wish to embark in the business of retreading tyres. This plan is set to kick-off within a period of three years targeting the South East Asia region. PROSPECTS FOR YEAR 2009 The Group’s liquidity position was on budget despite pressures on profit margins from the previous year. With rubber prices being fairly stable and the rise in demand for retreaded tyres, sales generated from the rubber compounding segment reflected positive returns and the OTR business segment also showed positive progress with more customers placing orders in the first quarter of 2009. In respect of the business outlook, the Group is optimistic that the economic conditions will be better and more predictable, as the dust settles over the unexpected events of 2008.

demand for such product.

CHAIRMAN’S STATEMENT (continued) NOTES OF APPRECIATION Finally, I would like thank my fellow board members, senior management and staff of Goodway for their immense contribution, commitment and loyalty to the Group. To our valued stakeholders, I would like to take this opportunity to personally thank all of you for your unwavering support, contribution, trust and confidence in us. We will continue to ensure that your journey with Goodway will be a fruitful one. Mok Yuen Lok Chairman 1 June 2009

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PROFILES OF THE BOARD OF DIRECTORS Mok Yuen Lok Chairman, Independent Non-Executive Director Malaysian, aged 49 Mok Yuen Lok was appointed as an Independent Non-Executive Director on 20 May 2004 and subsequently was appointed as Chairman of the Company on 22 August 2006. He is also the Chairman of the Audit Committee and a member of the Joint Nomination and Remuneration Committee of the Company. After graduating in 1981 with a Bachelor of Science from Heriot Watt University, Edinburgh, UK, he received an articleship at Messrs Ernst & Whinney (now known as Messrs Ernst & Young) where he qualified 5 years later as a member of the Malaysian Institute of Certified Public Accountants. He has since been involved in the accounting profession for over 18 years as a practicing member of the Malaysian Institute of Accountants. He is now the Country Managing Partner of Horwath, an international accounting firm, and is the Regional Executive Director of Horwath International covering 22 countries in Asia Pacific. He is also an Independent Director and Chairman of the Audit Committee of Scomi Marine Berhad; a main board company. He is presently the Honorary Secretary of Hospis Malaysia, a non-profit charitable organisation, and was the Chapter Chair of the Young Presidents Organisation, Malaysia Chapter (2006-2007), and past President of the World Entrepreneurs’ Organisation, Malaysia Chapter (2003-2004). Tai Boon Wee Chief Executive Officer Malaysian, aged 49 Tai Boon Wee was appointed as the Chief Executive Officer and Group Managing Director of the Company on 20 May 2004 and he is also a member of the ESOS Committee. He joined Goodway Rubber Industries Sdn Bhd in 1989 as the Marketing Manager overseeing the international market. With his visionary leadership and outstanding performance, he was later appointed as the Operations Director in 1991 and subsequently assumed the position of Managing Director in 1994. He had contributed immensely to the Group’s expansion from 1993 to 2003 by successfully leading a 10 years joint venture project with Gummiwerk Kraiburg Produktions GmbH (“GK”), a German rubber compound entity, involving the transfer of technology know-how for the manufacturing of technical rubber and rubber compounds by GK to the Group. Tai Boon Wee was the chief strategist for the overall market expansion of the Group globally. He was also instrumental in orchestrating the listing of Goodway Integrated Industries Berhad on Bursa Malaysia Securities Berhad in 2004.

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PROFILE OF THE BOARD OF DIRECTORS (continued) Wong Ping Kiong Chief Operating Officer Malaysian, aged 46 Wong Ping Kiong was appointed as an Executive Director of the Company on 20 May 2004 and also the member of the ESOS Committee. She begins her career with Goodway group of companies since 1989. Throughout her employment with Goodway, Wong Ping Kiong had demonstrated great leadership and entrepreneurial skill that earned her several senior posts including Managing Director and in early 2008, Chief Operating Officer of the Group. Her immense contribution to the Group was shown through her dedication and sheer commitment in leading the sales and marketing team to greater heights in 2007. She graduated from Oklahoma State University, United States of America with a degree in Bachelor of Science in Business Administration majoring in Accounting and minor in Management Information System. Ismail Bin Mahayudin Independent Non-Executive Director Malaysian, Aged 66 Ismail Bin Mahayudin was appointed as an Independent Non-Executive Director of the Company on 20 May 2004. He is also the Chairman of the Joint Nomination and Remuneration Committee, and a member of the Audit Committee of the Company. Prior to his retirement from the BIMB Holdings Berhad, he was a Management Member of BIMB Holdings Berhad and Senior General Manager, Treasury and International Banking Division of Bank Islam Malaysia Berhad (“BIMB”). He started his career as a teacher in Sekolah Menengah Dato’ Seri Amar Diraja, Muar, Johor, in 1971. He joined Bank Bumiputra Malaysia Berhad in 1975 as Officer in the Trade Finance Department. In 1980, he joined Bank of Commerce Malaysia Berhad as Manager of the Bills Department. He joined BIMB in 1983 as General Manager, Trade Finance and Treasury Division and assumed position as Senior General Manager of the Retail Banking Division in 1994 until 1998. He retired from BIMB in 2002. He graduated from University of Malaya and Malayan Teachers College, Kuala Lumpur. He was the Chairman of BIMB Foreign Currency Clearing Agency Sdn Bhd, Al-Wakalah Nominees (Tempatan) Sdn Bhd and BIMB International Islamic Trust (Labuan) Sdn Bhd. He was also a Director of Syarikat Takaful Malaysia Bhd and Bank Islam (L) Ltd. He is presently Adviser, CIMB Islamic Bank Berhad.

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PROFILE OF THE BOARD OF DIRECTORS (continued) Nor Idzam Bin Ya’akub Independent Non-Executive Director Malaysian, aged 46 Nor Idzam Bin Ya’akub was appointed as a Non-Independent Non-Executive Director of the Company on 20 May 2004 and subsequently been re-designated as an Independent Non-Executive Director on 13 November 2007. He was appointed as a member of the Audit Committee on 13 November 2007. He is also a member of the Joint Nomination and Remuneration Committee of the Company. He graduated from Edith Cowan University, Western Australia majoring in Accounting and Computing and has approximately 17 years of experience in the financial and venture capital industry. He now manages his own venture capital, private equity and consultancy firms. Having been in the financial and venture capital industry for more than 17 years, he was instrumental in the setting up of the venture capital arm for BHB Group, where he was the CEO/Director. Prior to joining BHB Group, he was a member of the senior management of a venture capital company, a joint venture between a leading local development bank and foreign institutional investors from Japan, Taiwan, Singapore, Asian Development Bank Ltd and Brunei. Prior to that, he was attached with a venture capital company, a sister company of the PNB Group and was responsible for nurturing entrepreneurs and new start up companies. Lt Jen (B) Datuk Hj Adenan Bin Haji Mohamad Zain Non-Independent Non-Executive Director Malaysian, aged 61 Lt Jen (B) Datuk Hj Adenan Bin Haji Mohamad Zain was appointed as Non-Independent Non-Executive Director of the Company on 28 October 2005. He received his early education in Penang and graduated from the University of Kent at Canterbury, UK with a Diploma in Politics and International Relations in 1987 and with a Master of Arts Degree in International Relations in 1988. He was awarded a Diploma (PSc) by the Malaysian Armed Forces Staff College (“MAFSC”) and Defence Services Staff College (DSSC) Wellington, India. He was also awarded a Master of Science Degree (MSc) in Defence Studies by University of Madras, India. Lt Jen (B) Datuk Hj Adenan Bin Haji Mohamad Zain served in the Malaysian Armed Forces for 38 years before retiring on 10 November 2004. During his early service in the Armed Forces, he held many important positions such as Directing Staff at the MAFSC and Chief of Staff of an Infantry Division. In the rank of Brigadier General, he was the Director of Training Management at the Training and Doctrine Command (TRADOC) and later as the Commandant of the Malaysian Armed Forces Academy (ATMA). He spent the last five years of his service at the Ministry of Defence in the rank of Major General and Lt General. He held the appointment of Assistant Chief of Staff Defence Planning for four years and finally as the Chief of Staff at the Malaysian Armed Forces Headquarters. For his services to the King and Country, Lt Jen (B) Datuk Hj Adenan was conferred with several awards and decorations carrying the title Dato’/ Datuk.

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FURTHER INFORMATION ON BOARD OF DIRECTORS a) Shareholdings

Details of Directors’ Shareholdings in the Company are disclosed in page 101 of this Annual Report.

b) Conviction of offences None of the Directors have any convictions of offences within the past 10 years.

c) Conflict of interest None of the Directors have conflict of interest with the Company. None of the Directors have any family relationship with any director and/or major shareholders of the Company save and except for Mr Tai Boon Wee (“Mr Tai”), who is related to Massive Structure Sdn Bhd, a major shareholder of the Company. Massive Structure Sdn Bhd is a company incorporated in Malaysia and its shareholders are Madam Goh Gee Thien and Mr Tai Qisheng. Both Madam Goh Gee Thein and Mr Tai Qisheng are related to Mr Tai Boon Wee as wife and son respectively.

d) Attendance at Board Meetings The number of board meetings attended by the Board of Directors of the Company are disclosed in the Corporate Governance Statement in page 17 of the Annual Report.

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AUDIT COMMITTEE REPORT ESTABLISHMENT AND COMPOSITION The Audit Committee of the Company was established on 20 May 2004 and comprises the following members:

Chairman Mok Yuen Lok (Independent Non-Executive Director, a member of MIA) Members Ismail Bin Mahayudin (Independent Non-Executive Director) Nor Idzam Bin Ya’akub (Independent Non-Executive Director)

1. TERMS OF REFERENCE

1.1 Membership

(a) The Committee shall be appointed by the Board pursuant to a Board Resolution. (b) It shall comprise at least three (3) members of whom all must be non-executive

directors with a majority of them being independent directors. (c) At least one member of the Committee:

i) must be a member of the Malaysian Institute of Accountants (MIA); or ii) if he/she is not a member of the MIA, he/she must have at least three (3)

years’ working experience and ; • he/she must have passed the examination specified in Part 1 of the 1st

Schedule of the Accountants Act 1967; or • he/she must be a member of one of the associations of accountants

specified in part II of the 1st Schedule of the Accountants Act 1967 iii) Fulfills such other requirements as prescribed or approved by Bursa Malaysia

Securities Berhad (“Bursa Securities”).

(d) The Chairman of the Committee shall be an independent non-executive director nominated by the Board and shall be appointed amongst the members.

1.2 Objectives

(a) To provide an additional assurance to the Board by giving objective and

independent review of the financial aspect and the operational and administrative controls and procedures.

(b) To assist the Board in establishing and maintaining internal controls for areas of

risk as well as safeguarding of assets.

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AUDIT COMMITTEE REPORT (continued)

(c) To assess and supervise the quality of audit work conducted by the internal and external auditors.

(d) To reinforce the independence of the company’s external auditor and to ensure that

the auditor will have a free reign in the audit process. (e) To provide a forum for regular, informal and private discussions between the

external auditor, the internal auditors or both excluding the attendance of the other directors and employees of the Company whenever deemed necessary.

(f) To reinforce the objectivity of the internal audit department.

1.3 Authority

The Committee is authorised by the Board:

(a) To investigate any activity within the Committee’s terms of reference and shall have unlimited access to both the internal and external auditors, as well as employees of the Group;

(b) To obtain an independent legal or other professional advice as and when it

considers necessary; (c) To establish a Sub-Audit Committee(s) to carry out certain investigations on behalf

of the Committee in such manner, as the Committee shall deem fit and necessary.

1.4 Functions, Duties and Responsibilities

The functions of the Committee shall be as follows and report the same to the Board:

(a) To review with the internal and external auditors their audit plans and reports. (b) To review the scope of the internal audit programmes and procedures and to

consider the results of the internal audit investigations. (c) To evaluate the adequacy of the scope, functions, competency and resources of the

internal audit functions and that it has the necessary authority to carry out its work.

(d) To evaluate the adequacy and effectiveness of the internal audit control systems and accounting policies.

(e) The internal audit function is to report directly to the audit committee.

(f) To review the assistance given by the officers of the Group to the external auditors. (g) To review the quarterly, annual and consolidated financial statements of the

Company and thereafter to submit the same for Board’s approval, focusing particularly on any changes in accounting policies and practices; significant adjustments arising from the audit; the going concern assumptions; compliance with the accounting standards and other legal requirements.

(h) To review any related party transactions within the Company or Group.

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(i) To identify and direct any special projects or investigations deemed necessary. (j) To nominate a person or persons as the Company’s external auditors. (k) To carry out such other functions and to consider other topics, as may agreed upon

with the Board. (l) To review reports and consider recommendations from the Sub-Audit

Committee(s), if any. (m) To conduct an induction programme for newly appointed Directors. (n) To review the basis of allocation of the Group’s ESOS annually.

1.5 Meetings

The Committee shall meet at least four (4) times a year. The Company’s Head of Finance is usually invited to attend all the meetings. A representative of the external auditors will also be invited to attend the meetings occasionally to consider the final audited financial statements and such other matters as determined by the Committee. The Company Secretary shall be the secretary of the Committee. During the financial year, the Audit Committee had met five (5) times and details of the attendance of each member in respect of the Audit Committee meetings held are as tabulated below:-

Name Attendance

Mok Yuen Lok 5/5 Ismail Bin Mahayudin 5/5 Nor Idzam Bin Ya’akub 4/5

2. SUMMARY OF ACTIVITIES CARRIED OUT BYTHE AUDIT COMMITTEE

DURING THE FINANCIAL YEAR ENDED 31 DECEMBER 2008 The Audit Committee, in accordance with its Terms of Reference, carried out The following activities during the year under review :-

a. Reviewing of the quarterly financial results and making suitable recommendations

thereon to the Board for adoption prior to their release to Bursa Securities. b. Reviewing the external auditor’s report on audit findings and accounting issues thereon to

the Board for adoption prior to their release to Bursa Securities. c. Discussion with external auditors on the impact of new accounting standards issued by

the Malaysian Accounting Standards Board on the Group’s financial statements. d. Discussion with external auditors on the Group Audit Plan which sets out the auditor’s

responsibilities and scope of audit work in respect of the Group’s financial statements. e. Reviewing the annual financial budget for the Group.

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f. Reviewing letters of engagement presented by the external auditors, which outlines the terms governing the re-appointment as statutory auditors, reviewing of the Directors’ statement on internal control as well as audit fees before the same is recommended to the Board for approval.

3. INTERNAL AUDIT FUNCTION

The Board outsourced its internal audit function to an external consultant, who assists the Audit Committee in discharging its duties and responsibilities. During the financial year under review, the consultant had reviewed the profitability management, expenses cycle and, inventory and warehousing cycle for the Group’s local subsidiaries based on the key risk areas selected from the risk profiles.

2 4. STATEMENT ON EMPLOYEE’S SHARE OPTION SCHEME (“ESOS”)

The Audit Committee had verified all allocations of options granted during the year under review in accordance with the provisions set out in the Company’s ESOS Bye-Laws.

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CORPORATE GOVERNANCE STATEMENT The Board of Directors takes cognisance that by observing and practicing high standards of corporate governance in conducting its business and corporate affairs, the Group would enhance and protect its shareholders’ value and that of the Group. In this regard, the Board of Directors is committed in ensuring proper corporate governance is upheld by the Company. These principles and best practices as set out in Part 1 and Part 2 of the Malaysian Code on Corporate Governance (“the Code”). Set out below are the areas of which the Group has applied the principles and best practices of corporate governance in compliance with the Code during the financial year ended 31 December 2008. 1. THE BOARD OF DIRECTORS

1.1 Board Balance

The Board of Directors presently comprise six (6) members, in particular, the Chairman who is an Independent Non-Executive Director, two (2) Non-Independent Executive Directors, one (1) Non-Independent Non-Executive Director and two (2) Independent Non-Executive Directors. The Company is in compliance with the provisions of the Listing Requirement (“LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) and has maintained the requisite number of Independent Non-Executive Directors of at least one third of the Board. There is also clear segregation of responsibilities between the Executive and Non-Executive Directors to ensure a balance of power and authority. In this respect, the Chairman is responsible for running the Board and acts as a facilitator at all Board Meetings, whilst the Chief Executive Officer is responsible for determining the Group’s direction through strategic planning and implementing relevant strategies. Generally, the Executive Directors are responsible for making and implementing operational and corporate decisions. On the other hand, the Non-Executive Directors’ pivotal role is ensuring corporate accountability by providing unbiased and independent views as well as sharing their knowledge and experience towards the corporate decision-making process. In the event that there is a potential conflict of interest, it is a mandatory practice for the director concerned to declare his interest and abstain from any board decisions. The diverse entrepreneurial and financial expertise among the Board of Directors will enhance their stewardship in spearheading the Group’s direction towards achieving its

1.2 Board Meetings

Board meetings are scheduled and held on a quarterly basis with additional meetings convened as and when necessary. The Board will discuss on matters specifically reserved to it and also to deliberate on decisions that ensure the direction and control of the Company is well managed. During the financial year under review, the Board had met on five (5) occasions to deliberate on various matters including the Group’s quarterly financial results and overall divisional performance, major investments and other significant corporate matters.

Goals and objectives. The profile of the Board of Directors is set out in pages 8 to 11 of this Annual Report.

CORPORATE GOVERNANCE STATEMENT (continued)

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Details of the attendance of each Director in respect of the board meetings held during the financial year are as tabulated below:-

Name Attendance

1. Mok Yuen Lok (Chairman) 5/5 2. Tai Boon Wee 5/5 3. Wong Ping Kiong 4/5 4. Ismail Bin Mahayudin 5/5 5. Nor Idzam Bin Ya’akub 4/5 6. Lt Jen (B) Datuk Hj Adenan Bin Hj Mohamad Zain 4/5

1.3 Supply of Information

During the financial year, the Directors had attended scheduled Board meetings structured according to a pre-set agenda with board papers distributed in advance prior to the meeting. The board papers that cover updates on operational, financial and corporate developments were circulated in a timely manner to enable the Directors to obtain further information or seek clarification from the Management before making an informed decision.

All Directors whether as a full Board or in their individual capacities, have access to all information within the Group as well as advice and services of the Company Secretary. In addition, the Directors may engage external and independent professional advisors, whenever required, at the Company’s expense in order to discharge their duties and responsibilities more effectively.

1.4 Appointment and Re-election of Directors

The appointment of directors is conducted through a formal and transparent process, which was approved and adopted by the Board. The potential candidate will be assessed and reviewed by the Joint Nomination and Remuneration Committee (“JNRC”) prior to the recommendation to the Board for approval and appointment. The Company Secretary ensures that all appointments are properly made for the purposes of meeting statutory obligations, as well as obligations arising from the LR of Bursa Securities or other regulatory requirements.

The Company’s Articles of Association governs that one third of the Board for the time being, shall retire from office and be eligible for re-election provided at all times that all Directors shall retire from office once at least in each three (3) years, but shall be eligible for re-election. This provides the opportunity for shareholders to renew their mandate. The Article of Association further governs that the Managing Director or Deputy Managing Director shall, while he continues to hold office, be subject to retirement by rotation. The election of each Director is voted separately. To assist the shareholders in their decision making, sufficient information such as the personal profile, attendance of Board meetings and shareholdings in the Group held by each Director standing for re-election will be furnished in a separate Statement Accompanying the Notice of Annual General Meeting.


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Directors who are over seventy years of age are required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, 1965. The Board, through the JNRC, annually appraises its composition to ensure it has the required mix of skills, experience and other qualities, including core competencies which are required for them to discharge their duties and responsibilities effectively and efficiently.

1.5 Directors’ Training

All Directors have completed the Mandatory Accreditation Programme as required under the Listing Requirements of Bursa Securities. During the year under review, all Directors had attended several training programmes in areas such as finance, business, marketing, audit and taxation, capital market, Islamic banking and corporate governance. The Directors will continue to undergo other relevant training programmes to further enhance their skills and knowledge and to keep abreast with the relevant changes and development of laws and regulation as well as the business environment.

1.6 Board Committees

The Board had established three (3) Board Committees to assist in carrying out specific responsibilities for the Company, which operate within a clearly defined terms of reference. Notwithstanding the aforesaid, the ultimate responsibility for the final decision lies with the full Board. The Committees of the Board include the Audit Committee, Joint Nomination and Remuneration Committee, and ESOS Committee.

a. Audit Committee

The objectives of the Audit Committee are as follows:-

i. To provide additional assurance to the Board by giving objective and independent reviews of the financial aspects and the operational and administrative controls and procedures.

ii. To assist the Board in establishing and maintaining internal controls for areas

of risk as well as safeguarding of assets.

iii. To assess and supervise the quality of audit work conducted by the internal and external auditors.

iv. To reinforce the independence of the company’s external auditor and to ensure that the auditor will have a free reign in the audit process.

v. To provide a forum for regular, informal and private discussions between the external auditor, the internal auditors or both excluding the attendance of the other directors and employees of the Company whenever deemed necessary.

vi. To reinforce the objectivity of the internal audit department.

The Audit Committee Report together with the summary of the activities of the Committee during the financial year end is set out on pages 12 to 15 of the Annual Report.


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b. Joint Nomination and Remuneration Committee

On 12 August 2004, the Board established a Nomination Committee as well as a Remuneration Committee. On 28 February 2008, the Board had decided and approved that both committees be combined and be known as Joint Nomination and Remuneration Committee (“JNRC” or “the Committee”) for the purpose of expediency and its members are entrusted with the function of both committees. The members of the JNRC are as follows: - i. Ismail Bin Mahayudin (Chairman) ii. Mok Yuen Lok iii. Nor Idzam Bin Ya’akub

The role of the JNRC is to assess and recommend to the Board, suitable candidates to act as directors of the Company. The Committee carries out annual evaluations on the Board as a whole including individual contribution to ensure that it has the optimal mix of qualifications, skills, experience and other qualities, including core competencies which they should possess in order to serve effectively and efficiently to the Board. In respect of remuneration matters, the JNRC recommends to the Board the remuneration framework for Directors as well as the remuneration packages of Executive Directors for approval. The Committee formulates and reviews the remuneration packages with the aim of attracting, retaining and motivating Directors of the highest caliber which are required to manage the business of the Company and uphold shareholders’ interest. During the course of the Board’s deliberation in determining the remuneration packages for the Executive Directors, none of the Executive Directors have participated in the aforesaid deliberation. Further, each Director will abstain from participating in the decision-making of their respective remuneration packages.

c. ESOS Committee

The ESOS Committee was established on 9 June 2004 and the members are as follows:-

i. Tai Boon Wee ii. Wong Ping Kiong

The ESOS Committee administers the Group’s Employees’ Share Option Scheme in accordance with the objectives and regulations set-out in the Bye-Laws and in such manner that is deem fit within the powers and duties that are conferred upon it by the Board.


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2. DIRECTORS’ REMUNERATION

Details of the Directors’ remuneration for the financial year ended 31 December 2008 are as follows:

a. The aggregate remuneration of the Directors, distinguishing between executive and non-

executive directors is categorised below:-

Category of Directors

Fees

RM’000

Remuneration

RM’000

Other emoluments*

RM’000

Total

RM’000 Executive 57 655 188 900 Non-Executive 66 - 99 165 123 655 287 1,065

* Other emoluments includes E.P.F

b. The number of Directors remuneration that fall within the following brackets/range are as set out below:-

Number of Directors Bracket / Range (RM)

Executive Non-Executive Below 50,000 - 4 50,001 - 100,000 - - 100,001 - 150,000 - - 150,001 - 200,000 - - 200,001 - 250,000 - - 250,001 - 300,000 - - 300,001 - 350,000 - - 350,001 - 400,000 1 - 400,001 - 450,000 - - 450,001 - 500,000 - - 500,001 - 550,000 1 - -------- -------- 2 4 ===== =====

3. RELATIONSHIP AND COMMUNICATION WITH SHAREHOLDERS / INVESTORS

The Group values the importance of an effective communication channel between the Board, shareholders and general public. Press releases and announcements on quarterly financial results and corporate exercises are the primary modes of disseminating information on the Group’s business activities and financial performance to the shareholders and general public. Other corporate information available to shareholders is in the form of Annual Reports and Circulars to Shareholders. The policy of the Board is to maintain an active communication channel with its shareholders with the intention of providing shareholders a clear and complete view of the Group’s performance and direction. The Annual General Meeting (“AGM”) represents the principal forum for dialogue and interaction between the Board and shareholders. During the AGM, shareholders are informed of the current developments of the Company and they will be given an opportunity to seek clarifications or provide feedback and comments to the Directors and Management for consideration.


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Bursa Securities allows the Company to electronically publish all its announcements, including quarterly financial result, Circulars to Shareholders and Annual Reports. These can be accessed any time through Bursa Securities’ website, http://www.bursamalaysia.com. The Company also endeavours to provide as much information as possible to its shareholders in compliance with the statutory and legal framework governing the release of material and price-sensitive information. As such, corporate disclosures will take into account the prevailing legislative restrictions and requirements as well as the investors’ need for timely release of price-sensitive information, such as financial performance results and statements, material acquisitions, significant corporate proposals as well as other significant corporate events.

To further enhance the transparency and communication with the shareholders and all interested parties, the Company has set up its website, http://www.goodway-integrated.com for timely dissemination of business related information.

4. ACCOUNTABILITY AND AUDIT

4.1 Financial Reporting

In preparing the financial statements, the Directors have complied with Section 169(15) of the Companies Act, 1965 and applicable accounting standards in Malaysia so as to provide a true and fair view of the state of affairs and the result of the Company, and the Group. The Board is assisted by the Audit Committee to oversee the Group’s financial reporting processes to ensure accuracy, adequacy of all relevant information for disclosure and that necessary steps have been taken to ensure that the Group had used all the applicable accounting policies consistently, and that the policies are supported by reasonable prudent judgments and estimates.

4.2 Relationship with Auditors

The Board, through the Audit Committee has established a formal and transparent relationship with the external auditors which are maintained on a professional basis. Key features underlying the relationship of the Audit Committee with the external auditors are included in the Audit Committee’s term of reference as set out in pages 12 to 14 of the Annual Report.

4.3 Statement on Internal Control

The Statement on Internal Control furnished on pages 24 to 25 of the Annual Report provides an overview on the state of internal controls within the Group.


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4.4 Directors’ Responsibility Statement in Respect of the preparation of Audited

Financial Statements

The Board is responsible for ensuring the financial statements of the Group give a true and fair view of the affairs of the Group and the Company as at the end of the financial period and of the results and cash flows for the period ended.

The Directors consider that in preparing the financial statements: • The Group and the Company have adopted appropriate accounting policies and the

same has been consistently applied; • Reasonable and prudent judgments and estimates were made; and • All applicable approved accounting standards in Malaysia have been adhered to.

The Board acknowledges the responsibility for ensuring that the Company maintains accounting records that disclose with reasonable accuracy the financial position of the Group and the Company in accordance to the Companies Act, 1965. The Directors have a general responsibility in ensuring that such steps are reasonably available to them to safeguard the assets of the Group, to prevent and detect fraud and other irregularities.

4.5 Compliance Statement

The Company has complied with all the best practices of corporate governance set out in Part 2 of the Code, except for Best Practice AAVII (Nomination of Senior Independent Non-Executive Director) throughout the financial year. Given the current composition of the Board which reflects the element of independence, the Board does not consider it necessary at this juncture to nominate a Senior Independent Non-Executive Director.

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CORPORATE SOCIAL RESPONSIBILITY (“CSR”) STATEMENT Goodway’s core business has always been a ‘green’ business that focuses on preserving the environment where its main product of retreads serves as an ideal substitute for worn tyres.

The Company ensures that its continuous efforts in carrying out its role as a responsible corporate citizen through focused CSR activities is well observed and cultivated within its group of Companies. During the year under review, Goodway had carried out the following CSR activities: - i) Extended donations in the form of monetary contribution to Ti-Ratana Homes, a non-profit

organisation that houses 180 orphans, 50 elderly and infirm citizens, abused women and single mothers through a fund raising campaign;

ii) Organised annual road safety campaigns in collaboration with government bodies, youth foundations and highway operators to create road safety awareness among motorists;

iii) Exchange of knowledge with a group of foreign students from Holland on Goodway’s business, which is a ‘green’ business and how its fundamental operations are governed by the four pillars of CSR. As a result, the students’ level of knowledge and awareness surrounding the CSR practiced by Malaysian firms has broadened.

iv) Improvements and enhancements on the manufacturing process of products, which include formulation of rubber compounds using non-toxic chemicals and durability tests on products in order to meet international safety standard requirements before marketing to the customers.

v) Increased the general public awareness by drawing their attention on the importance of retreads in areas of cost efficiency and environmental aspects via exhibitions, trade shows and press releases;

vi) Provision of extensive technical support and consultancy to retreaders, truck drivers and end-users in areas such as plant and manufacturing process audits, technical trouble-shooting and fleet analysis (tyre maintenance and tyre inspection). The provision of services will ensure good quality of retreads produced and tyres are road worthy, which are essential to safeguard the customers’ and road users’ safety.

vii) Reviewed the best practices as set out in the Employees’ Occupational Health and Safety policy to achieve “Zero Accidents and Zero Illnesses” in the workplace.

STATEMENT ON INTERNAL CONTROL

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Introduction The Malaysian Code of Corporate Governance places the onus on the Board to maintain a sound system of internal control to safeguard shareholders’ investment and the Group’s assets. Pursuant to the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Board of Goodway Integrated Industries Berhad is pleased to include a statement on the state of the Group’s internal controls in the Annual Report. The statement below outlines the nature and scope of the internal controls of the Group during the financial year under review. Board Responsibility The Board recognises the importance of a sound system of internal control and risk management practices and as such affirms its overall responsibility for the Group’s system of internal control by periodically reviewing its adequacy and integrity. However, it should be noted that there are inherent limitations to any system of internal control. Therefore, the system of internal control implemented by the Management is designed to reduce rather than eliminate entirely the risks that may impede the Group from achieving its business objectives. In this regard, the internal control system can only provide a reasonable but not an absolute assurance against material misstatements or losses. Risk Management Framework The Head of Department is directly responsible for managing its own departmental issues and these issues are communicated to the Senior Management at scheduled management meetings. The implementation of the Group’s policies and procedures under the name, Group Management Policies & Procedures (“MOP”) in year 2006 has enabled the Group to establish a set of best practices for the Group to operate its business under a sound internal control system. The Risk Management Working Committee (“RMWC”) which was established in August 2007 pursuant to the Risk Management Policy was aimed to identify risks, assess the identified risks and recommend preventive measures to mitigate the risks. Internal Controls The Audit Committee shall evaluate and review the adequacy and effectiveness of the internal audit control function of the Group from reports received from the Internal Auditor, (which is outsourced to external consultants) as well as from the management. Internal audits are to be conducted based on the approved internal audit plan and the findings and results will be tabled for discussion at the Audit Committee meetings held during the year.

STATEMENT ON INTERNAL CONTROL (continued)

Other Key elements of Internal Controls The other key elements of the Group’s internal control system are as stated below: The Internal Auditor shall report directly to the Audit Committee.

The

The Group’s manufacturing operations in Nilai are ISO certified and are subject to ISO audits

conducted by external parties. Assurance The Board will continue to be vigilant and committed in ensuring that the system of internal controls as well as risk management practices is effective and efficient for the Group’s operations. Therefore, the Board will implement appropriate action plans to rectify any material weaknesses identified or further enhance the system of internal controls as and when necessary. No material weaknesses were identified during the financial year under review.

internal policies are set out in the MOP.

25

26

OTHER INFORMATION MATERIAL CONTRACTS There are no material contracts entered into by the Company and its subsidiaries which involved Directors’ and major shareholders’ interests either still subsisting at the end of the financial year or entered into since the end of the previous financial year. NON-AUDIT FEE There was no non-audit fee paid out or payable to Messrs KPMG, the Company’s auditors, during the financial year. SHARE BUY-BACKS The Company did not enter into any share buy-back transactions during the financial year. AMERICAN DEPOSITORY RECEIPT (“ADR”) OR GLOBAL DEPOSITORY RECEIPT (“GDR”) PROGRAMME. The Company has not sponsored any ADR or GDR programmes during the financial year. PROFIT FORECAST The Company did not make any release of profit forecast, estimates or projections during the financial year. PROFIT GUARANTEE There was no profit guarantee given by the Company during the financial year. IMPOSITIONS OF SANCTIONS AND PENALTIES There were no sanctions and penalties imposed on the Company, its subsidiaries, Directors and management by any regulatory bodies during the financial year. REVALUATION POLICY AND LANDED PROPERTIES The Group’s policy on Landed Properties is disclosed in Note 2( d) ( i) of the financial statements as set out on pages 4 8 to 4 9 of this Annual Report. RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE Details of the recurrent related party transactions of a revenue or trading nature undertaken by the Group during the financial year under review are disclosed in Note 27 of the audited financial statements as set out in page 9 1 to 9 2 of this Annual Report.

OTHER INFORMATION (continued) UTILISATION OF PROCEEDS There was no issuance of new shares, rights issues, issuance of bonds or any exercise of options under the Company’s Employees’ Share Option Scheme to raise any cash proceeds during the financial year. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES There were no exercise of options, warrants or convertible securities exercised/issued during the financial year.

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008

DIRECTORS’ REPORT The Directors hereby submit their report and the audited financial statements of the Group and of the Company for the year ended 31 December 2008. Principal activities The Company is principally engaged in investment holding whilst the principal activities of the subsidiaries are as stated in Note 6 to the financial statements. There has been no significant change in the nature of these activities during the financial year. Results Group Company RM’000 RM’000 Loss attributable to: Shareholders of the Company (12,896) (4,060) Minority interest 65 - ______ ______ (12,831) (4,060) ===== ===== Reserves and provisions There were no material transfers to or from reserves and provisions during the year under review. Dividends Since the end of the previous financial year, the Company paid a final ordinary dividend of 2 sen per ordinary share less tax at 26% totalling RM1,190,000 (1.48 sen net per ordinary share) in respect of the year ended 31 December 2007 on 29 August 2008. The Directors do not recommend any dividend to be paid for the year under review. Directors of the Company Directors who served since the date of the last report are:

Tai Boon Wee Wong Ping Kiong Mok Yuen Lok Ismail bin Mahayudin Nor Idzam bin Ya’akub Lt Jen (B) Datuk Hj Adenan bin Hj Mohamad Zain

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Directors’ interests The interests and deemed interests in the shares and options of the Company and of its related corporations (other than wholly-owned subsidiaries) of those who were Directors at year end (including the interests of the spouses or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows: Number of ordinary shares of RM0.50 each At At 1.1.2008 Bought Sold 31.12.2008 Tai Boon Wee: Interest in the Company: - direct 21,047,884 - - 21,047,884 - indirect* 4,382,180 2,000 - 4,384,180 Wong Ping Kiong: Interest in the Company: - direct 2,254,363 200,000 - 2,454,363 - indirect** 115,000 - - 115,000 Mok Yuen Lok: Interest in the Company: - direct 100,000 - - 100,000 Ismail bin Mahayudin: Interest in the Company: - direct 200,100 - - 200,100 - indirect** - 10,200 - 10,200 Number of options over ordinary shares of RM0.50 each At At Company 1.1.2008 Granted Forfeited 31.12.2008 Tai Boon Wee 670,000 - - 670,000 Wong Ping Kiong - direct 450,000 - - 450,000 - indirect** 57,000 - 57,000 - * Deemed interest in the Company by virtue of his spouse’s and child’s interest. ** Deemed interest in the Company by virtue of her spouse’s interest. By virtue of his interests in the shares of the Company, Tai Boon Wee is also deemed interested in the shares of the subsidiaries during the financial year to the extent that Goodway Integrated Industries Berhad has an interest. None of the other Directors holding office at 31 December 2008 had any interest in the ordinary shares of the Company and of its related corporations during the financial year.

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Directors’ benefits Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Company or of its related companies) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest, other than certain Directors who have significant financial interests in companies which traded with certain companies in the Group in the ordinary course of business and professional fee paid to a firm in which a Director is a partner as disclosed in Note 27 to the financial statements. There were no arrangements during and at the end of the financial year which had the object 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 apart from the issue of Employees’ Share Option Scheme. Issue of shares and debentures There were no other changes in the issued and paid-up capital of the Company during the financial year. There were no debentures issued during the financial year. Options granted over unissued shares No options were granted to any person to take up unissued shares of the Company during the year apart from the issue of options pursuant to the Employees’ Share Option Scheme (“ESOS”). Pursuant to the general meeting held on 19 May 2004, the Company’s shareholders had approved the establishment of the ESOS and came into effect on 8 July 2004. The salient features of the ESOS are, inter alia, as follows: i) The ESOS is made eligible to employees and executives directors of the Group. ii) Eligible employees and Executive Directors must be at least eighteen (18) years of age and are

those who have been employed for a continuous period of at least six (6) months in the Group and upon confirmation.

iii) The option is personal to the grantee and is exercisable only by the grantee personally whilst he

is in the employment of any company in the Group. iv) The maximum number of new ordinary shares offered under the ESOS shall not exceed 10% of

the issued and paid-up capital of the Company at any point in time during the duration of the ESOS.

v) The exercise price shall be at a discount of not more than 10% from the weighted average of

the market price of the Shares as shown in the daily official list issued by the Bursa Malaysia Securities Berhad for the five (5) trading days immediately preceding the respective dates of the offer made by the ESOS Committee in writing to the grantee or at the par value of the ordinary shares of the Company, whichever is higher.

31

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Options granted over unissued shares (continued) vi) The ESOS shall be in force for a period of five (5) years, unless terminated earlier or extended

in accordance with the terms of the Bye-Laws of the ESOS. The option granted may be exercised at any time within a period of five (5) years from the date of offer of the option or such shorter period as may be specifically stated in the offer upon giving notice in writing. In the event that the duration of the option shall be renewed, the date of expiry of the option shall be the date of expiry as so extended or renewed.

vii) The options granted may be exercised in full or in lesser number of ordinary shares provided

that the number shall be in multiples of 100 shares. The other terms and conditions of the ESOS as stipulated in the Bye-Laws of ESOS have remained the same as previous year. The persons to whom the options have been granted have no right to participate by virtue of the options in any share issue of any other company. The options offered to take up unissued ordinary shares of RM0.50 each and the exercise prices are as follows: Number of options over ordinary shares of RM0.50 each Date of Exercise At At offer Price (RM) 1.1.2008 Granted Exercised Forfeited 31.12.2008 8.7.2004 1.25 1,916,000 - - (11,000) 1,905,000 18.4.2005 1.12 485,000 - - (88,000) 397,000 15.8.2006 0.63 143,000 - - (40,000) 103,000 11.5.2007 0.82 448,000 - - (237,000) 211,000 ____________________________________________________ 2,992,000 - - (376,000) 2,616,000 ============================================== The Company has been granted an exemption by the Companies Commission of Malaysia from having to disclose in this report the names of persons to whom options have been granted less than 45,000 ordinary shares during the year and details of their holdings as required by Section 169 (11) of the Companies Act, 1965. This information has been separately filed with the Companies Commission of Malaysia. The names of the option holders and the number of options granted which are more than 45,000 ordinary shares are set out below:

Number of options granted over ordinary shares as at Name of option holders 31.12.2008 Tai Boon Wee 670,000 Wong Ping Kiong 450,000 Tim Heok Lin 446,000

Other statutory information Before the balance sheets and income statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that: i) all known bad debts have been written off and adequate provision made for doubtful debts,

and ii) all current assets have been stated at the lower of cost and net realisable value. At the date of this report, the Directors are not aware of any circumstances: i) that would render the amount written off for bad debts, or the amount of the provision for

doubtful debts, in the Group and in the Company inadequate to any substantial extent, or ii) that would render the value attributed to the current assets in the Group and in the Company

financial statements misleading, or

iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or

iv) not otherwise dealt with in this report or the financial statements, that would render any

amount stated in the financial statements of the Group and of the Company misleading. At the date of this report, there does not exist: i) any charge on the assets of the Group or of the Company that has arisen since the end of the

financial year and which secures the liabilities of any other person, or ii) any contingent liability in respect of the Group or of the Company that has arisen since the end

of the financial year. No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due. In the opinion of the Directors, except for the realised foreign exchange loss and impairment losses on plant and machinery as disclosed in Note 19 to the financial statements, the financial performance of the Group and of the Company for the financial year ended 31 December 2008 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report. Significant subsequent event i) On 19 January 2009, the Company has redeemed the first tranche of the MUNIF of RM10

million. ii) On 18 March 2009, Goodway Marketing Sdn.Bhd., a wholly owned subsidiary of the

Company has entered into a conditional sales and purchase agreement with a third party to dispose off its 5 units office suite for a total cash consideration of RM 6,221,000.

The completion of the disposal is pending fulfillment of all conditions precedent by both party.

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Auditors The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors: Tai Boon Wee Wong Ping Kiong Kuala Lumpur, 28 April 2009

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BALANCE SHEETS AT 31 DECEMBER 2008 Group Company 2008 2007 2008 2007 Note RM’000 RM’000 RM’000 RM’000 Restated Assets Property, plant and equipment 3 83,037 94,596 128 - Intangible asset 4 6,000 6,148 - - Prepaid lease payments 5 29,197 29,109 - - Investments in subsidiaries 6 - - 52,520 52,552 Investments in associates 7 409 - 500 - Investment in a jointly controlled

entity 8 2,010 - 2,076 - Other investment 9 - 500 - 500 Deferred tax assets 10 5,596 6,266 - - Receivables, deposits and prepayments 11 - - 86,063 93,094 _______ _______ _______ _______ Total non-current assets 126,249 136,619 141,287 146,146 ---------- ---------- ---------- ---------- Receivables, deposits and prepayments 11 42,677 59,172 1,591 1,710 Inventories 12 37,292 42,431 - - Current tax assets 953 1,141 27 27 Non current assets classified as held for sale 13 5,293 - - - Cash and cash equivalents 14 8,961 16,401 121 232 _______ _______ _______ _______ Total current assets 95,176 119,145 1,739 1,969 ---------- ---------- ---------- ---------- Total assets 221,425 255,764 143,026 148,115 ====== ====== ====== ====== Equity Share capital 40,189 40,189 40,189 40,189 Reserves 13,757 14,368 11,365 11,365

Retained earnings 9,085 23,171 9,891 15,141 _______ _______ _______ _______ Total equity attributable to equity holders of the Company 63,031 77,728 61,445 66,695 Minority interest 620 658 - - _______ _______ _______ _______ Total equity 15 63,651 78,386 61,445 66,695 ---------- ---------- ---------- ----------

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Balance sheets at 31 December 2008 (continued) Group Company 2008 2007 2008 2007 Note RM’000 RM’000 RM’000 RM’000 Restated Liabilities Loans and borrowings 16 57,900 54,786 50,088 50,000 Deferred tax liabilities 10 12,297 12,969 - - _______ _______ _______ _______ Total non-current liabilities 70,197 67,755 50,088 50,000 ---------- ---------- ---------- ---------- Payables and accruals 17 26,819 42,995 1,467 1,420 Current tax liabilities 21 416 - - Loans and borrowings 16 60,737 66,212 30,026 30,000 _______ _______ _______ _______ Total current liabilities 87,577 109,623 31,493 31,420 ---------- ---------- ---------- ---------- Total liabilities 157,774 177,378 81,581 81,420 ---------- ---------- ---------- ---------- Total equity and liabilities 221,425 255,764 143,026 148,115 ====== ====== ====== ====== The notes on pages 44 to 94 are an integral part of these financial statements.

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INCOME STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008 Group Company Note 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Restated Revenue 18 253,591 208,818 - 17,650 Cost of goods sold (228,596) (175,697) - - _______ _______ _______ _______ Gross profit 24,995 33,121 - 17,650 Other income 406 463 2 - Distribution expenses (9,545) (6,959) - - Administrative expenses (17,241) (12,072) (955) (1,282) Other operating expenses (3,109) (1,447) (626) - _______ _______ _______ _______ Results from operating activities (4,494) 13,106 (1,579) 16,368 Interest income 220 174 2,538 3,020 Finance costs (8,128) (6,578) (5,019) (4,616) _______ _______ _______ _______ Operating (loss)/profit 19 (12,402) 6,702 (4,060) 14,772 Share of loss after tax and minority interest of equity accounted associates and jointly controlled entity (157) - - - _______ _______ _______ _______ (Loss)/Profit before tax (12,559) 6,702 (4,060) 14,772 Tax expense 22 (272) (2,432) - - _______ _______ _______ _______ (Loss)/Profit for the year (12,831) 4,270 (4,060) 14,772 ====== ====== ====== ====== Attributable to: Shareholders of the Company (12,896) 4,736 (4,060) 14,772 Minority interest 65 (466) - - _______ _______ _______ _______ (Loss)/Profit for the year (12,831) 4,270 (4,060) 14,772 ====== ====== ====== ====== Basic (loss)/earnings per ordinary share (sen): 23 (16.04) 5.90 ====== ====== Diluted (loss)/earnings per ordinary share (sen): 23 (16.02) 5.89 ====== ====== The notes on pages 44 to 94 are an integral part of these financial statements.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2008 Attributable to equity holders of the Company Non-distributable Distributable Share Share Share Translation Revaluation option Retained Minority Total capital premium reserve reserve reserve earnings Total interest equity Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2007 -as previously reported 40,000 11,087 (168) 3,049 94 14,881 68,943 1,047 69,990 -effect of adopting revised FRS 112 30 - - - - - 4,860 4,860 - 4,860 ______________________________________________________________________________________ At 1 January 2007 restated 40,000 11,087 (168) 3,049 94 19,741 73,803 1,047 74,850

Foreign exchange translation differences - - 122 - - - 122 77 199

Net gain recognised directly in equity - - 122 - - - 122 77 199 Profit for the year, as previously reported - - - - - 4,723 4,723 (466) 4,257 -effect of adopting revised FRS 112 30 - - - - 13 13 - 13 Profit for the year, restated - - 122 - - 4,736 4,858 (389) 4,469

Share options exercised 15 189 56 - - - - 245 - 245

Share-based payments 21 - - - - 128 - 128 - 128

Dividends to shareholders 24 - - - - - (1,306) (1,306) - (1,306) ______________________________________________________________________________________ At 31 December 2007 40,189 11,143 (46) 3,049 222 23,171 77,728 658 78,386

============================================================================

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-

Consolidated statement of changes in equity for the year ended 31 December 2008 (continued) Attributable to equity holders of the Company Non-distributable Distributable Share Share Share Translation Revaluation option Retained Minority Total capital premium reserve reserve reserve earnings Total interest equity Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2008 40,189 11,143 (46) 3,049 222 23,171 77,728 658 78,386

Foreign exchange translation differences - - (611) - - - (611) (103) (714)

Net loss recognised directly in equity - - (611) - - - (611) (103) (714)

Loss for the year - - - - - (12,896) (12,896) 65 (12,831)

Total recognised income and expense for the year - - (611) - - (12,896) (13,507) (38) (13,545)

Share options exercised 15 - - - - - - - - -

Share-based payments 21 - - - - - - - - -

Dividends to shareholders 24 - - - - - (1,190) (1,190) - (1,190) ____________________________________________________________________________________ At 31 December 2008 40,189 11,143 (657) 3,049 222 9,085 63,031 620 63,651 =========================================================================== The notes on pages 44 to 94 are an integral part of these financial statements.

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2008 Non-distributable Distributable Share Share Share option Retained Total Note capital premium reserve earnings equity RM’000 RM’000 RM’000 RM’000 RM’000 Company At 1 January 2007 40,000 11,087 94 1,675 52,856 Profit for the year - - - 14,772 14,772 Share options exercised 15 189 56 - - 245 Share-based payments 21 - - 128 - 128 Dividends to shareholders 24 - - - (1,306) (1,306) ______ ______ ______ ______ ______ At 31 December 2007 40,189 11,143 222 15,141 66,695 Loss for the year - - - (4,060) (4,060) Dividends to shareholders 24 - - - (1,190) (1,190) ______ ______ ______ ______ ______ At 31 December 2008 40,189 11,143 222 9,891 61,445 ===== ===== ===== ===== ===== The notes on pages 44 to 94 are an integral part of these financial statements.

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CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008 Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Cash flows from operating activities (Loss)/Profit before tax (12,559) 6,702 (4,060) 14,772

Adjustments for: Allowance for doubtful debts 122 1,394 - - Amortisation of MUNIF issue expenses 129 129 129 129 Amortisation of prepaid lease payments 159 93 - - Impairment loss on goodwill 148 - - - Depreciation of property, plant and equipment 7,991 7,208 20 - Dividend income - - - (17,650) Finance costs 8,128 6,578 5,019 4,616 Interest income (220) (174) (2,538) (3,020) Loss/(Gain) on disposal of property, plant and equipment 21 (18) - - Property, plant and equipment written off - 35 - - Share-based payments - 128 - 128 Share of loss of equity accounted associates and jointly controlled entity 157 - - - Unrealised foreign exchange loss 249 53 - - Impairment losses on investment in a subsidiary - - 600 - Impairment losses on plant and machinery 1,833 - - - ______ ______ ______ ______ Operating profit/(loss) before changes in working capital 6,158 22,128 (830) (1,025) Changes in working capital: Inventories 5,139 (11,624) - - Receivables, deposits and prepayments 11,647 (13,136) 7,021 195 Payables and accruals (11,828) 18,347 47 (525) ________ ________ _________ _________ Cash generated from/(used in) operations 11,116 15,715 6,238 (1,355) Tax paid (481) - - - Tax refund - 91 - - Interest paid (8,128) (6,578) (5,019) (4,616) Interest received 220 174 2,538 3,020 ______ ______ ______ ______ Net cash generated from/(used in) operating activities 2,727 9,402 3,757 (2,951) --------- --------- -------- --------

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Cash flow statements for the year ended 31 December 2008 (continued) Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Cash flows from investing activities

Acquisition of other investments - (500) - (500) Acquisition of property, plant and equipment (note ii) (4,356) (14,399) (16) - Investment in a jointly controlled entity (2,076) - (2,076) -

Acquisition of prepaid lease payments (247) (5,183) - - Dividends received - - - 17,650 Additional investment in a subsidiary - - (568) - Increase in investment in minority interest (103) (148) - -

Proceeds from disposal of property, plant and equipment 1,124 362 - - ______ ______ ______ ______ Net cash (used in)/generated from investing activities (5,658) (19,868) (2,660) 17,150 --------- --------- -------- -------- Cash flows from financing activities Dividends paid to shareholders of the Company (1,190) (1,306) (1,190) (1,306) (Repayment) /Drawdown of borrowings (1,170) 22,313 - - Payment of finance lease liabilities (464) (573) (18) - Proceeds from issuance of new ordinary shares - 245 - 245 Subsidiaries - - - (12,973) ______ ______ ______ ______ Net cash (used in)/ generated from financing activities (2,824) 20,679 (1,208) (14,034) --------- --------- --------- -------- Net (decrease) /increase in cash and cash equivalents (5,755) 10,213 (111) 165 Effect of exchange rate fluctuations on cash held (611) 100 - - Cash and cash equivalents at 1 January 15,327 5,014 232 67 ______ ______ ______ ______ Cash and cash equivalents at 31 December 8,961 15,327 121 232 ===== ===== ===== =====

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Cash flow statements for the year ended 31 December 2008 (continued) i) Cash and cash equivalents

Cash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts:

Group Company Note 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Cash and bank balances 14 8,961 16,401 121 232 Bank overdraft 16 - (1,074) - - ______ ______ ______ ______ 8,961 15,327 121 232 ===== ===== ===== ==== ii) Acquisition of property, plant and equipment During the year, the Group and the Company acquired property, plant and equipment with an

aggregate cost of RM4,703,000 (2007 - RM16,077,000) and RM148,000 (2007 - nil) respectively, of which RM347,000 (2007 - RM1,678,000) and RM132,000 (2007 - nil), were acquired by means of hire purchase plans.

The notes on pages 44 to 94 are an integral part of these financial statements.

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NOTES TO THE FINANCIAL STATEMENTS

Goodway Integrated Industries Berhad is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Second Board of Bursa Malaysia Securities Berhad. The addresses of the principal place of business and registered office of the Company are as follows: Principal place of business A-20-1, Northpoint Offices, Mid Valley City, No. 1, Medan Syed Putra Utara, 59200 Kuala Lumpur, Malaysia. Registered office A-20-1, Northpoint Offices, Mid Valley City, No. 1, Medan Syed Putra Utara, 59200 Kuala Lumpur, Malaysia. The consolidated financial statements of the Company as at and for the year ended 31 December 2008 comprise the Company and its subsidiaries and the Group’s interest in associates and a jointly controlled entity. The Company is principally engaged in investment holding whilst the principal activities of the subsidiaries are as stated in Note 6. The financial statements were approved by the Board of Directors on 28 April 2009. 1. Basis of preparation

(a) Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards (FRS), accounting principles generally accepted and the Companies Act, 1965 in Malaysia. These financial statements also comply with the applicable disclosure provisions of the Listing Requirements of the Bursa Malaysia Securities Berhad. The Company has not applied the following accounting standards (including their consequential amendments) and interpretations that have been issued by the Malaysian Accounting Standards Board (MASB) but are not yet effective:

FRSs / Interpretations Effective date FRS 4, Insurance Contracts 1 January 2010 FRS 7, Financial Instruments: Disclosures 1 January 2010 FRS 8, Operating Segment 1 July 2009 FRS 139, Financial Instruments: Recognition and Measurement 1 January 2010 IC Interpretation 9, Reassessment of Embedded Derivatives 1 January 2010 IC Interpretation 10, Interim Financial Reporting and Impairment 1 January 2010 FRS 4 and IC Interpretation 9 and 10 are not applicable to the Company. The Company plans to apply the rest of FRSs / Interpretation from the annual period beginning 1 January 2010.

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1. Basis of preparation (continued)

(a) Statement of compliance (continued)

The impact of applying FRS 7, FRS 8 and FRS 139 on the financial statements upon first adoption as required by paragraph 30(b) of FRS 108, Accounting Policies, Changes in Accounting Estimates and Errors is not disclosed by virtue of the exemptions given in the respective FRSs. The initial application of FRS 7, FRS 8 and FRS 139 is not expected to have any material impact on the Company’s financial statements.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis other than as disclosed in note 2(d).

(c) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

(d) Use of estimates and judgements The preparation of financial statements requires management to make judgements,

estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

• Note 3 and 5 - impairment test on plant and equipment and valuation of buildings

and prepaid lease payments • Note 4 - impairment test of intangible asset

• Note 21 - share-based payment transactions • Note 29 - contingencies and provisions

2. Significant accounting policies

The accounting policies set out below have been applied consistently to the periods presented in these financial statements, and have been applied consistently by Group entities, unless otherwise stated. The comparative financial statements have been restated to take into account the effect of adopting revised FRS 112, Income Taxes (see Note 2 (t) and Note (30)).

(a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities, including unincorporated entities, controlled by the Group. Control exists when the Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Subsidiaries are consolidated using the purchase method of accounting.

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2. Significant accounting policies (continued) (a) Basis of consolidation (continued)

(i) Subsidiaries (continued) Under the purchase method of accounting, the financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Investments in subsidiaries are stated in the Company’s balance sheet at cost less any impairment losses.

(ii) Associates Associates are entities, including unincorporated entities, in which the Group has

significant influence, but not control, over the financial and operating policies.

Associates are accounted for in the consolidated financial statements using the equity method. The consolidated financial statements include the Group’s share of the profit or loss of the equity accounted associates, after adjustments, if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an equity accounted

associate, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Investments in associates are stated in the Company’s balance sheet at cost less any

impairment losses. (iii) Joint ventures

Jointly-controlled entities Joint ventures are those entities over whose activities the Group has joint control,

established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions.

Joint ventures are accounted for in the consolidated financial statements using the equity method. The consolidated financial statements include the Group’s share of the profit or loss of the equity accounted joint ventures, after adjustments to align the accounting policies with those of the Group, from the date that joint control commences until the date that joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted joint venture, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the joint venture.

Investments in joint ventures are stated in the Company’s balance sheet at cost less impairment losses, unless the investment is classified as held for sale.

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2. Significant accounting policies (continued)

(a) Basis of consolidation (continued)

(iv) Minority interest

Minority interest at the balance sheet date, being the portion of the net identifiable assets of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheet and statement of changes in equity within equity, separately from equity attributable to the equity holders of the Company. Minority interest in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between minority interest and the equity holders of the Company.

Where losses applicable to the minority exceed the minority’s interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Group’s interest is allocated with all such profits until the minority’s share of losses previously absorbed by the Group has been recovered.

(v) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are translated at exchange rates at the dates of the transactions except for those that are measured at fair value, which are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in the income statements.

(ii) Operations denominated in functional currencies other than Ringgit Malaysia The assets and liabilities of operations in functional currencies other than RM, including goodwill and fair value adjustments, are translated to RM at exchange rates at the balance sheet date. The income and expenses of operations in functional currencies other than RM are translated to RM at exchange rates at the dates of the transactions.

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2. Significant accounting policies (continued) (b) Foreign currency (continued)

(ii) Operations denominated in functional currencies other than Ringgit Malaysia

(continued)

Foreign currency differences are recognised in translation reserve. On disposal, accumulated translation differences are recognised in the consolidated income statement as part of the gain or loss on sale.

(c) Derivative financial instruments

The Group holds derivative financial instruments to hedge its foreign currency risk exposures.

Forward foreign exchange contracts are accounted for on an equivalent basis as the underlying assets, liabilities or net positions. Any profit or loss arising is recognised on the same basis as that arising from the related assets, liabilities or net positions.

(d) Property, plant and equipment

(i) Recognition and measurement Items of property, plant and equipment are stated at cost / valuation less any

accumulated depreciation and any impairment losses. Property, plant and equipment under the revaluation model

The Group revalues its property comprising land and buildings every 5 years and at shorter intervals whenever the fair value of the revalued assets is expected to differ materially from their carrying value. Surpluses arising from revaluation are dealt with in the revaluation reserve account. Any deficit arising is offset against the revaluation reserve to the extent of a previous increase for the same property. In all other cases, a decrease in carrying amount is charged to the income statement. Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets includes the cost of materials and direct labour and, for qualifying assets, borrowing costs are capitalised in accordance with the Group’s accounting policy. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

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(d) Property, plant and equipment (continued)

(i) Recognition and measurement (continued)

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” or “other operating expenses” respectively in the income statement. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.

(iii) Depreciation

Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows: • buildings 10 and 50 years • plant and machinery 10 - 20 years • furniture and fittings 5 - 10 years • equipment 2 - 5 years • motor vehicles 5 years Depreciation methods, useful lives and residual values are reassessed at the balance sheet date.

(e) Lease assets (i) Finance lease

Leases in terms of which the Group or the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

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2. Significant accounting policies (continued) (e) Lease assets (continued)

(i) Finance lease (continued)

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

(ii) Operating lease

Leases, where the Group does not assume substantially all the risks and rewards of ownership are classifies as operating leases and the leased assets are not recognised on the Group’s balance sheet. Leasehold land that normally has an indefinite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted for as prepaid lease payments.

The Group had previously revalued its leasehold land in 2006 and has retained the unamortized revalued amount as the surrogate carrying amount of prepaid lease payments in accordance with the transitional provisions in FRS 117.67A when it first adopted FRS 117, Lease in 2006. Such prepaid lease payments is amortised over the lease term.

Payments made under operating leases are recognised in the income statements on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

(f) Intangible asset

(i) Goodwill

Goodwill arises on business combinations and is measured at cost less any accumulated impairment losses. Any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in the income statement.

(ii) Subsequent expenditure

Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

(iii) Amortisation

Goodwill with indefinite useful life is tested for impairment annually and whenever there is an indication that it may be impaired.

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(g) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of work-in-progress and manufactured inventories, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

(h) Receivables Receivables are initially recognised at their cost when the contractual right to receive

cash or another financial asset from another entity is established. Subsequent to initial recognition, receivables are stated at cost less allowance for

doubtful debts.

Receivables are not held for the purpose of trading.

(i) Non-current assets classified as held for sale Non-current assets that are expected to be recovered primarily through sale rather than

through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets are measured at the lower of their carrying amount and fair value less cost to sell.

(j) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value. For the purpose of the cash flow statement, cash and cash equivalents are presented net of bank overdrafts.

(k) Impairment of assets

The carrying amounts of assets except for financial assets (excluding investment in subsidiaries, associates and jointly controlled entity), inventories, non-current assets classified as held for sale and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill that has indefinite useful lives, the recoverable amount is estimated usually at each reporting date.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or group of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

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2. Significant accounting policies (continued) (k) Impairment of assets (continued)

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount unless the asset is carried at a revalued amount, in which case the impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. Impairment losses are recognised in the income statements. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised, unless it reverses an impairment loss on a revalued asset, in which case it is credited directly to revaluation surplus. Where an impairment loss on the same revalued asset was previously recognised in the income statement, a reversal of that impairment loss is also recognised in the income statement.

(l) Equity instruments

All equity instruments are stated at cost on initial recognition and are not re-measured subsequently.

Issue expenses

Incremental costs directly attributable to issue of equity instruments are recognised as a deduction from equity.

(m) Loans and borrowings

Loans and borrowings are stated at cost.

(n) Employee benefits (i) Short term employee benefits

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. The Group’s contribution to the statutory pension funds are charged to the income statements in the year to which they relate. Once the contributions have been paid, the Group has no further payment obligations.

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(n) Employee benefits (continued)

(ii) Share-based payment transactions

The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest. The fair value of employee share options is measured using a binomial lattice model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

(o) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

(p) Contingent liabilities

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(q) Payables

Payables are measured initially and subsequently at cost. Payables are recognised when there is a contractual obligation to deliver cash or another financial asset to another entity.

(r) Revenue recognition (i) Goods sold

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

(ii) Dividend income

Dividend income is recognised when the right to receive payment is established.

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2. Significant accounting policies (continued) (s) Interest income and borrowing costs

Interest income is recognised as it accrues, using the effective interest method. All borrowing costs are recognised in the income statement, using the effective interest method, in the period in which they are incurred except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use. The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

(t) Tax expense Tax expense comprises current and deferred tax. Tax expense is recognised in the income statements except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit (tax loss). Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax liability is recognised for all taxable temporary differences.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. In the prior years, unutilised reinvestment allowance or investment tax allowance was recognised as a reduction of tax expense as and when it was utilised. Following the adoption of the revised FRS 112, a tax incentive that is not a tax base of an asset is recognised as a reduction of tax expense in the income statement as and when it is granted and claimed. Any unutilised portion of the tax incentive is recognised as a deferred tax asset to the extent that it is probable that future taxable profits will be available against which the unutilised tax incentive can be utilised. This change in accounting policy is applied retrospectively and the effects are set out in Note 30.

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(u) Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

(v) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

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3. Property, plant and equipment Furniture Capital Plant and and Motor work-in- Buildings machinery fittings Equipment vehicles progress Total

Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cost / Valuation At 1 January 2007 40,775 39,431 902 8,754 2,046 4,419 96,327 Additions 3,820 8,956 130 741 1,596 834 16,077 Disposals / write off - (418) - (371) (855) - (1,644) Reclassification - 4,430 - 149 - (4,579) - Effects of movement in exchange rates 94 5 (2) (49) (9) - 39 ______________________________________________________________________________ At 31 December 2007/1 January 2008 44,689 52,404 1,030 9,224 2,778 674 110,799 Additions 611 2,755 498 342 395 102 4,703 Transfer to non-current assets classified as held for sale (5,538) - - - - - (5,538) Disposals / write off (145) (1,166) (10) (28) (714) - (2,063) Reclassification - 333 - - - (333) - Effects of movement in exchange rates (346) 192 (11) (17) (337) - (519) ______________________________________________________________________________ At 31 December 2008 39,271 54,518 1,507 9,521 2,122 443 107,382 ===================================================================== Representing items at: Cost 4,034 54,518 1,507 9,521 2,122 443 72,145 Valuation (2006) 35,237 - - - - - 35,237 ______________________________________________________________________________ At 31 December 2008 39,271 54,518 1,507 9,521 2,122 443 107,382 =====================================================================

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3. Property, plant and equipment (continued) Furniture Capital Plant and and Motor work-in- Buildings machinery fittings Equipment vehicles progress Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Accumulated depreciation and impairment loss At 1 January 2007 1,297 4,687 236 3,240 860 - 10,320 Depreciation for the year 876 4,236 107 1,433 556 - 7,208 Disposals / write off - (248) - (272) (744) - (1,264) Effects of movement in exchange rates - 5 1 1 (68) - (61) ______________________________________________________________________________ At 31 December 2007 / 1 January 2008 2,173 8,680 344 4,402 604 - 16,203 Depreciation for the year 954 4,881 157 1,369 630 - 7,991 Transfer to non-current assets classified as held for sale (245) - - - - - (245) Disposals / write off (27) (377) (9) (24) (540) - (977) Effects of movement in exchange rates - (111) (13) (19) (317) - (460) Impairment of assets - 1,833 - - - - 1,833 At 31 December 2008: Accumulated depreciation 2,855 13,073 479 5,728 377 - 22,512 Accumulated impairment loss - 1,833 - - - - 1,833 2,855 14,906 479 5,728 377 - 24,345 ==================================================== ===== ====== Carrying amounts At 1 January 2007 39,478 34,744 666 5,514 1,186 4,419 86,007 ==================================================== ===== ====== At 31 December 2007 / 1 January 2008 42,516 43,724 686 4,822 2,174 674 94,596 ==================================================== ===== ====== At 31 December 2008 36,416 39,612 1,028 3,793 1,745 443 83,037 ==================================================== ===== ======

57

3. Property, plant and equipment (continued)

Company

Motor vehicle RM’000 Cost 1 January 2008 - Additions 148 ______At 31 December 2008 148 =====Accumulated Depreciation At 1 December 2008 - Depreciation for the year 20 ______At 31 December 2008 20 =====Carrying amounts At 31 December 2008 128 =====3.1 Impairment losses Impairment losses have been recognised in the following line items of the income

statements: Group 2008 RM’000

Income statement Other operating expenses 1,833 ==== The following significant events led to the recognition of impairment losses: Events Description of cash Determination of Group generating units recoverable amount 2008 RM’000

Business loss Earthmovers tyre retreading value in use 4,208 Business loss Manufacturing of value in use 3,125 rubber compounds

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3. Property, plant and equipment (continued)

The main basis used to determine fair value less costs to sell are as follows: (i) Cash flows were projected based on actual operating results and the 5 year business plan. (ii) Assuming the rubber compounding business to grow by approximate 10% per annum

over 5 years (2009 - 2014). (iii) Assuming the earthmover tyre sales order to improved by approximately 69 pieces of

tyres per annum over 5 years (2009 - 2014). (iv) The pre-tax discount rates used to determine the value in use ranged from 10% to 12%. 3.2 Assets under hire-purchase arrangements

During the year, the Group and the Company acquired property, plant and equipment with an aggregate cost of RM4,703,000 (2007 - RM16,077,000) and RM148,000 (2007 - nil) respectively, of which RM347,000 (2007 - RM1,678,000) and RM132,000 (2007 - nil), were acquired by means of hire purchase plans.

3.3 Security

At 31 December 2008, buildings with a carrying amount of RM24,307,00 (2007 - RM40,368,000) are charged to banks as security for borrowings (see Note 16).

3.3 Property, plant and equipment under the revaluation model

The Group’s prepaid lease payments and buildings were revalued on 29 September 2006 by independent professional qualified valuers using an open market value method. The market value of the properties was determined by comparing them with recent sales and/or listings of similar properties in the vicinity or within similar localities. Adjustments were made for differences in factors such as location, physical characteristics, time element and leasehold interest. Professional judgement is called upon in interpreting available data and making the adjustments. Had the buildings been carried under the cost model, their carrying amounts would have been RM35,985,000 (2007 - RM36,676,000).

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4. Intangible asset Goodwill Group RM’000 Cost At 1 January 2007 6,000 Acquisition of minority interest 148 _____ At 31 December 2007/ 31 December 2008 6,148 ==== Accumulated impairment losses At 1 January 2007/31 December 2007 - Impairment loss 148 _____ At 31 December 2008 148 ==== Carrying amount At 1 January 2007 6,000 ==== At 31 December 2007/ 1 January 2008 6,148 ==== At 31 December 2008 6,000 ==== Impairment testing for cash-generating units containing goodwill through acquisition of

business with carrying amount of RM6,000,000 For the purpose of impairment testing, goodwill is allocated to the group of customers acquired

("the Unit") at which the goodwill is monitored for internal management purposes. The goodwill impairment test was based on value in use and was determined by the

management. The recoverable amount of the goodwill was based on value in use calculations. These

calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. The growth rate does not exceed the average historical growth rate over the long term for the industry.

Value in use was determined by discounting the future cash flows generated from the

continuing use of the Unit and was based on the following key assumptions:

Cash flow was projected based on actual operating results and the 5-year business plan.

Revenue was projected at about RM10,751,000 in the first year of the business plan. The anticipated semi-annual revenue growth included in the cash flow projections was 5% for the years 2009 - 2013. Management plans to achieve annual revenue of RM16,679,000 by the fifth year of the business plan.

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4. Intangible asset (continued)

Impairment testing for cash-generating units containing goodwill through acquisition of business with carrying amount of RM6,000,000 (continued)

A pre-tax discount rate ranging from 10% to 12% were applied in determining the

recoverable amount of the Unit. The discount rate was estimated based on the Company's incremental borrowing rate.

The values assigned to the key assumptions represent management's assessment of future

trends in the Company's and the Unit’s principal activities and are based on internal sources (historical data).

5. Prepaid lease payments

Leasehold land Unexpired period Group more than 50 years RM’000 Cost/Valuation

At 1 January 2007 24,156 Additions 5,183 ______ At 31 December 2007/1 January 2008 29,339 Additions 247 ______ At 31 December 2008 29,586

===== Representing items at: Cost 5,183 Valuation (2006) 24,403

______ At 31 December 2008 29,586

===== Amortisation

At 1 January 2007 137 Amortisation for the year 93 ______ At 31 December 2007 / 1 January 2008 230 Amortisation for the year 159 ______ At 31 December 2008 389

===== Carrying amounts At 1 January 2007 24,019 ===== At 31 December 2007 / 1 January 2008 29,109

===== At 31 December 2008 29,197

=====

61

62

5. Prepaid lease payments (continued) Security At 31 December 2008, prepaid lease payments with a carrying amount of RM29,197,000 (2007

- RM23,926,000) are charged to banks as security for borrowings (see note 16). 6. Investments in subsidiaries Company 2008 2007

RM’000 RM’000 At cost: Unquoted shares 52,552 52,552 Additional investment in a subsidiary 568 - Impairment of investment in a subsidiary (600) - ______ ______ 52,520 52,552 ===== ===== Details of the subsidiaries are as follows: Effective Country of ownership Name of subsidiary Principal activities incorporation interest 2008 2007 % % Goodway Rubber Manufacturing of Industries Sdn. Bhd. rubber compound and Malaysia 100 100 other related products Kilotrac Industries Sdn. Retreading of tyres Malaysia 100 100 Bhd. Goodway Rubber Dormant Malaysia 100 100 Technology Sdn. Bhd. Goodway Marketing Investment holding Malaysia 100 100 Sdn. Bhd. company Goodway Rubber Trading of rubber Australia 90 90 Company Pty. Ltd. * compound material Goodway Europe Trading of rubber Sweden 100 100 (Sweden) AB* compound material

Big Wheel Green Tyres Sdn Manufacturing and Malaysia 100 100 Bhd.(fka:Big Wheel retreading of tyres for (Sabah) Sdn. Bhd.) motor vehicles Big Wheel (Malaysia) Manufacturing and Malaysia 100 100 Sdn. Bhd. retreading of tyres and rubber products

6. Investments in subsidiaries (continued) Effective Country of ownership Name of subsidiary Principal activities incorporation interest 2008 2007 Goodway SMR Sdn. Bhd. Retailing and wholesale Malaysia 100 100 (fka:Big Wheel Marketing of nature rubber Sdn. Bhd.) Ever Lord Tyres Dormant Malaysia 100 100 Sdn. Bhd.

Bigwheel OTR Retreading of Malaysia 60 60 Sdn. Bhd. earthmovers tyres

Goodway (HK) Pte. Investment Hong Kong 100 100 Limited* holding company and its subsidiaries: Goodway Simplex (HK) Investment Hong Kong 100 100 Pte. Limited* holding company

Suzhou Goodway Rubber Manufacturing of Products Co. Ltd* rubber compound China 100 100

and other products * Not audited by KPMG.

7. Investment in associates Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Non-current At cost: Transfer from other investment 500 - 500 - Share of post -acquisition reserve (91) - - - ______ ______ ______ ______ 409 - 500 - ===== ===== ===== ===== Summary financial information on associates: Group Effective Country ownership Profit / Total Total incorporation interest Revenues (Loss) assets liabilities 2008 2007 (100%) (100%) (100%) (100%) 2008 % % RM’000 RM’000 RM’000 RM’000 Associated Autoways (Pvt) Ltd. Sri Lanka 20 20 14,846 (454) 7,831 5,961

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8. Investment in a jointly controlled entity Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Cost of investment 2,076 - 2,076 - Share of post acquisition reserve (66) - - - ______ ______ ______ ______ 2,010 - 2,076 - ===== ===== ===== ===== Summary financial information of jointly controlled entity Group 2008 2007 RM’000 RM’000 Assets and liabilities

Non current assets 817 - Current assets 4,608 - ______ ______ Total assets 5,425 - ===== ===== Current liabilities 2,604 - ______ _____ Total liabilities 2,604 - ===== ===== Results Revenue 1,426 - ===== ===== Net loss for the year (132) - ===== ===== Details of the jointly controlled entity are as follows: Effective Country of ownership Name Principal activities incorporation interest 2008 2007 % % Shenzhen Xinxihu Goodway Tyres Co. Ltd Retreading of tyres China 50 -

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9. Other investment Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Non-current At cost: Unquoted share 500 500 500 500 Transfer to investment in associates (500) - (500) - ______ ______ ______ ______ - 500 - 500 ===== ===== ===== ===== During the financial year, the investment in unquoted share has been reclassified to investment

in associate as the management is able to exercise significant influence over the investee company.

10. Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets Liabilities Net 2008 2007 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Restated Restated Restated Group Property, plant and equipment - - (12,297) (13,567) (12,297) (13,567) Provisions 15 (65) - - 15 (65) Other items - 656 - - - 656 Unabsorbed capital allowances 577 328 - - 577 328 Tax loss carry-forward 353 1,072 - - 353 1,072 Unutilised reinvestment allowances 4,651 4,873 - - 4,651 4,873 ________________ __________________ _______________ Tax assets / (liabilities) 5,596 6,864 (12,297) (13,567) (6,701) (6,703) Set off - (598) - 598 - - ________________ __________________ _______________ Net tax assets / (liabilities) 5,596 6,266 (12,297) (12,969) (6,701) (6,703) =============== =============== ===== ========

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10. Deferred tax assets and liabilities (continued)

Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Group 2008 2007 RM’000 RM’000 Unutilised tax losses 12,784 2,715 Unabsorbed capital allowances 457 - ______ _____ 13,241 2,715 ===== ====

The deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because the availability of future taxable profit cannot be clearly determined at this stage against which the Group can utilise the benefits there from.

Movement in temporary differences during the year

Recognised Recognised in income in income At statement At statement At 1.1.2007 (Note 22) 31.12.2007 (Note 22) 31.12.2008 Group RM’000 RM’000 RM’000 RM’000 RM’000 Restated Restated Property, plant and equipment 12,259 1,308 13,567 (1,270) 12,297 Provisions (177) 242 65` (80) (15) Other items (318) (338) (656) 656 - Unabsorbed capital allowances (900) 572 (328) (249) (577) Tax loss carry-forward (1,222) 150 (1,072) 719 (353) Unutilised reinvestment allowances (4,860) (13) (4,873) 222 (4,651)

______________________________________________ 4,782 1,921 6,703 (2) 6,701

=========================================

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11. Receivables, deposits and prepayments Group Company 2008 2007 2008 2007 Note RM’000 RM’000 RM’000 RM’000 Non-current Amounts due from subsidiaries 11.2 - - 86,063 93,094 ===== ===== ===== ===== Current Trade Trade receivables 41,028 58,227 - - Less: Allowance for doubtful debts (3,956) (4,034) - - ______ ______ ______ ______ 37,072 54,193 - - --------- --------- --------- --------- Non-trade Other receivables 2,053 1,249 233 153 Less: Allowance for doubtful debts (200) - - - ______ ______ ______ ______ 1,853 1,249 233 153 Deposits 1,439 1,000 - - Prepayments 11.3 2,313 2,730 1,358 1,557 ______ ______ ______ ______ 5,605 4,979 1,591 1,710 -------- -------- -------- -------- 42,677 59,172 1,591 1,710 ===== ===== ===== =====

11.1 Analysis of foreign currency exposure for significant receivables

Significant receivables outstanding at year end that are not in the functional currencies of the Group entities are as follows: Group 2008 2007 RM’000 RM’000 Functional currency Foreign currency RM AUD - 3,599 RM SEK - 1,298 RM USD 10,674 19,226 RM EURO 212 401 RM RMB - 427 RM SGD 1,736 810

===== ===== 11.2 Amount due from subsidiaries

The amount due from subsidiaries are non-trade in nature, unsecured, interest free and not repayable during the next twelve months except for an amount due from subsidiaries of RM31,714,000 (2007 - RM41,700,000) which is subject to interest rates ranging from 5.85% to 7.00% (2007 - 4.7% to 7.0%) per annum.

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11. Receivables, deposits and prepayments (continued)

11.3 Prepayments

Included in prepayments of the Group and the Company is unamortised issue expenses of RM463,000 (2007 - RM590,000) in connection with the issuance of MUNIF.

12. Inventories Group 2008 2007 RM’000 RM’000 At cost Raw materials 20,580 20,455 Work-in-progress 3,123 5,644 Finished goods 10,090 9,209 Goods in transit 1,025 4,344 ______ ______ 34,818 39,652 At net realisable value Finished goods 2,474 2,779 ______ ______ 37,292 42,431 ===== ===== The write-down of inventories to net realisable value amounted to RM Nil (2007 -

RM187,000). The write-down is included in cost of sales. 13. Non-current assets classified as held for sale

Certain buildings of a subsidiary are classified as held for sale upon the execution of conditional sales and purchase agreement to dispose of these properties. The completion of disposal is pending fulfilment of all conditions precedent by the subsidiary and the purchaser (see Note 32 (ii))

Details are as follows: Group 2008 RM’000 Buildings: Cost 5,538 Accumulated depreciation (245) ______ 5,293 =====

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14. Cash and cash equivalents Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Cash and bank balances 8,961 16,401 121 232 ===== ===== ===== ===== 15. Equity

15.1 Share capital

Group and Company Number of Number of Amount shares Amount shares 2008 2008 2007 2007 RM’000 ’000 RM’000 ’000 Authorised: Ordinary shares of RM0.50 each 50,000 100,000 50,000 100,000 ===== ====== ===== ====== Issued and fully paid: Ordinary shares of RM0.50 each On issue at 1 January 40,189 80,377 40,000 80,000 Share options exercised - - 189 377 ______ _______ ______ ______ On issue at 31 December 40,189 80,377 40,189 80,377 ===== ====== ===== ===== The holders of ordinary shares are entitled to dividends as declared from time to time and are

entitled to one vote per ordinary share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

15.2 Translation reserve The translation reserve comprises all foreign currency differences arising from the

translation of the financial statements of foreign operations. 15.3 Revaluation reserve

The revaluation reserve relates to the revaluation of property, plant and equipment.

15.4 Share option reserve

The share option reserve comprises the cumulative value of employee services received for the issue of share options. When the option is exercised, the amount from the share option reserve is transferred to share premium. When the share options expire, the amount from the share option reserve is transferred to retained earnings.

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15. Equity (continued)

15.5 Section 108 tax credit

Subject to agreement by the Inland Revenue Board, the Company has Section 108 tax credit and tax exempt income to frank all of its distributable reserves at 31 December 2008 if paid out as dividends.

The Finance Act 2007 introduced a single tier company income tax system with effect from year of assessment 2008. As such, the Section 108 tax credit as at 31 December 2008 (“Section 108 balance”) will be “frozen” and will be available to the Company until such time the credit is fully utilised or upon expiry of the six-year transitional period on 31 December 2013, whichever is earlier.

16. Loans and borrowings Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Non-current Term loans - secured 7,003 3,741 - - Finance lease liabilities - secured 897 1,045 88 - MUNIF - secured 50,000 50,000 50,000 50,000 _______ ______ ______ ______ 57,900 54,786 50,088 50,000 ====== ===== ===== ===== Current Term loans - secured 668 585 - - Bank overdraft - secured - 1,074 - - Bills payable - secured 7,968 13,610 - - - unsecured 21,635 20,507 - - Finance lease liabilities - secured 466 436 26 - MUNIF - secured 30,000 30,000 30,000 30,000 _______ ______ ______ ______ 60,737 66,212 30,026 30,000 ====== ===== ===== ===== 16.1 Security

The term loans, MUNIF, bank overdraft facilities and bills payable of the Group are

secured by way of charges over the Group’s prepaid lease payments (Note 5) and buildings (Note 3), future sales proceeds of a subsidiary and a personal guarantee from a Director.

16.2 Significant covenants

The MUNIF is subject to the fulfilment of the following significant covenants:

i) Gearing Ratio of the Group shall not be greater than 1.75 : 1.00 times throughout

the tenure of the MUNIF.

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16. Loans and borrowings (continued)

16.2 Significant covenants (continued)

ii) Finance Service Cover Ratio of the Group shall not be less than 1.50 : 1.00 times

throughout the tenure of the MUNIF. As at 31 December 2008, the Company has breached the gearing ratio covenant. However, the liability has not been classified as a current liability as the Board of Directors are of the opinion that an event of default has not occurred pursuant to Clause 7.1.2 of the Trust Deed and the liability is therefore not payable on demand as at the date of this report.

On 6 April 2009, the Board of Directors notified the Trustee of the breach in the gearing ratio covenant. The major MUNIF holder had on 8 April 2009 wrote to the Company to acknowledge the above breach of the gearing ratio covenant and has requested the Company to update the MUNIF holders on the Company’s plan and/or action to rectify the breach. On the same date, the major MUNIF holder has asked the Trustee to issue a notice to the Company to rectify the breach within 30 days from the date of notice. On 13 April 2009, the Trustee served a notice to the Company to rectify the breach within 30 days from the date of the notice. On 10 April 2009, Management met the major MUNIF holder to discuss the breach and also presented the Group’s future business plans and cash flows to remedy the breach. On 17 April 2009, the Board of Directors wrote to the major MUNIF holder to sought for an indulgence from the major MUNIF holder to rectify the non-compliance of the gearing ratio covenant by 31 August 2009. The Board of Directors had on 22 April 2009 wrote to another MUNIF holder for the same indulgence. On 24 April 2009, the Trustee informed the Company that they will keep this matter in abeyance until they receive further instructions from the MUNIF holders after the trustee was informed that the request by the Company to seek indulgence is now pending the MUNIF holders consideration. The Company has obtained an independent legal opinion which opined that an event of default has not occurred, despite the non-compliance of the above gearing ratio covenant after take into consideration the sequence of events after the breach and the provisions of Trust Deed dated 27 July 2005. The event of default will only be triggered under the Trust Deed where the breach continuing for a period of thirty (30) days following the service by the Facility Agent on the Issuer of a notice requiring the same to be remedied and the Facility Agent certifying the same in writing as being in its opinion, materially prejudicial to the interest of the Majority Underwriters. Should the Company fail to obtain the indulgence from the MUNIF holders and should the Company fail to rectify the breach within the stipulated period if the indulgence is granted, the non-current MUNIF amounting to RM50,000,000 and RM50,000,000 of the Group and of the Company respectively will be classified to current liabilities.

71

16. Loans and borrowings (continued) 16.3 Terms and debt repayment schedule Year of Carrying Under 1 1 - 2 2 - 5 Over 5

maturity amount year years years years Group RM’000 RM’000 RM’000 RM’000 RM’000 2008

Secured term loans - RM 2020 7,671 668 855 3,369 2,779 Secured bills payable

- RM 2009 29,603 29,603 - - - Finance lease liabilities and hire purchase - RM 2012 1,363 466 539 358 - Secured MUNIF - RM 2012 80,000 30,000 10,000 40,000 - _______ ______ ______ ______ ______

118,637 60,737 11,394 43,727 2,779 ====== ===== ===== ===== ===== 2007

Secured term loans - RM 2014 4,326 585 632 1,997 1,112 Secured Bank overdraft

- RM 2008 1,074 1,074 - - - Secured bills payable - RM 2008 34,117 34,117 - - - Finance lease liabilities - RM 2011 1,481 436 396 649 - Secured MUNIF - RM 2012 80,000 30,000 10,000 10,000 30,000 _______ ______ ______ ______ ______

120,998 66,212 11,028 12,646 31,112 ====== ===== ===== ===== ===== Secured term loans

The secured term loans are subject to an interest rate of 7.00% (2007 - 7.00% to 8.85%) per annum. Secured and unsecured bills payable The secured and unsecured bills payable is subject to interest rates ranging from 4.45% to 7.75% (2007 - 3.80% to 5.80%) per annum. .

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16.3 Terms and debt repayment schedule (continued)

Secured bank overdraft The secured bank overdraft in 2007 was subject to an interest rate 7.75% per annum. Secured MUNIF The secured MUNIF is subject to interest rates ranging from 5.85% to 7.00% (2007 - 4.70% to 7.00%) per annum

16.4 Finance lease liabilities Finance lease liabilities are payable as follows.

Minimum Minimum lease lease payments Interest Principal payments Interest Principal 2008 2008 2008 2007 2007 2007

Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Less than one year 532 66 466 514 78 436 Between one and five years 971 74 897 1,141 96 1,045

________________________________________________________ 1,503 140 1,363 1,655 174 1,481 =================================================

Company Less than one year 29 3 26 - - - Between one and five years 98 10 88 - - -

________________________________________________________ 127 13 114 - - - ================================================= The finance lease liabilities are subject to interest at flat rates of 4.1% to 10% (2007 - 2.60% to

3.40%) per annum.

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16. Loans and borrowings (continued)

17. Payables and accruals Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Trade Trade payables 17,585 33,528 - - --------- --------- --------- --------- Non-trade Other payables 5,395 5,400 - 2 Accrued expenses 3,839 4,067 1,467 1,418 ______ ______ ______ ______ 9,234 9,467 1,467 1,420 --------- --------- --------- --------- 26,819 42,995 1,467 1,420 ===== ===== ===== ===== 17.1 Analysis of foreign currency exposure for significant payables

Significant payables that are not in the functional currencies of the Group entities are as

follows: Group 2008 2007 RM’000 RM’000 Functional currency Foreign currency RM AUD - 1,038 RM SEK - 188 RM USD 2,684 4,403 RM EURO 55 207 RM RMB - 90

===== ===== 18. Revenue 2008 2007 Group RM’000 RM’000 Sales of rubber compounds 132,051 146,993 Revenue from retreading services 69,171 61,825 Trading 52,369 - _______ _______ 253,591 208,818 ====== ====== Company Dividend income from subsidiaries - 17,650 ======= ======

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19. Operating (loss)/profit Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Operating (loss)/profit is arrived at after charging: Allowance for doubtful debts 122 1,394 - - Allowance for obsolete inventories 259 187 - - Amortisation of MUNIF issuance expenses 129 129 129 129 Amortisation of prepaid lease payments 159 93 - - Auditors’ remuneration - KPMG 205 180 38 38 - Other auditors 39 35 - - Bad debts written off 103 19 - - Depreciation on property, plant and equipment 7,991 7,208 20 - Interest expense on: Bank overdraft 331 384 - - Bills payable 1,547 1,306 - - Finance lease liabilities 1,095 60 - - MUNIF 4,001 4,589 5,019 4,616 Term loans 1,154 239 - - Loss on disposal of property plant and equipment 21 - - - Impairment loss on goodwill 148 - - - Impairment losses on plant and machinery 1,833 - - - Personnel expenses (including key management personnel):

Key management personnel: - Directors’ fees 255 234 99 90 - Directors’ remuneration 2,598 2,041 137 121 - Other short term employee benefits (including estimated monetary value of benefits-in-kind) 332 265 - - - Share-based payments - 12 - - Other personnel: - Contributions to Employee Provident Fund 1,075 890 - - - Wages, salaries and others 18,421 11,428 - - - Share-based payments - 116 - -

Impairment on investment in a subsidiary - - 600 - Property, plant and equipment written off - 35 - - Rental of hostel 206 185 - - Rental of land and building 224 117 - - Rental of machinery 804 - - - Realised foreign exchange loss 733 - - - Unrealised foreign exchange loss 249 53 - - ===== ===== ===== =====

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19. Operating (loss)/profit (continued) Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 and after crediting: Gain on disposal of property, plant and equipment - 18 - - Realised foreign exchange gain - 1,004 - - Write back of allowance for doubtful debts - 3,286 - - Dividend income from a subsidiary - - - 17,650 ===== ===== ===== ===== 20. Key management personnel compensation The key management personnel compensations are as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Holding company’s directors - Fees 123 102 99 90 - Remuneration 816 800 137 121 Other short term employee benefits (including estimated monetary value of benefits-in-kind) 126 126 - - ______ ______ ______ ______ 1,065 1,028 236 211 --------- --------- --------- --------- Subsidiaries’ directors - Fees 132 132 - - - Remuneration 1,782 1,241 - - Other short term employee benefits (including estimated monetary value of benefits-in-kind) 206 139 - - ______ ______ ______ ______ Total short-term employee benefits 2,120 1,512 - - - Share-based payments - 12 - - ______ ______ ______ ______ 2,120 1,524 - - --------- --------- --------- --------- 3,185 2,552 236 211 ===== ===== ===== =====

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21. Employee benefits Share-based payments

On 19 May 2004, the Group established a share option programme that entitles Executive

Directors and employees to purchase shares in the Company. On 15 August 2007 and 11 May 2008 respectively, further grants on similar terms were offered to these employee groups. In accordance with these programmes, options are exercisable at the market price of the shares at the date of grant.

Additionally, there are two share option arrangements granted on 8 July 2004 and 18 April

2005 respectively. As allowed by the transitional provisions in FRS 2, the recognition and measurement principles in FRS have not been applied to these grants.

The terms and conditions of the grants are as follows; all option are to be settled by the physical delivery of shares:

Number of Contractual instruments Vesting life of Grant date/employees entitled (‘000) conditions options Option granted to Executive

Directors and employees* 2,659 None 60 months Option granted to Executive

Directors and employees* 923 None 51 months Option granted to Executive

Directors and employees 729 None 35 months

Option granted to Executive Directors and employees 787 None 26 months ______ Total share options 5,098

=====

* The recognition and measurement principles in FRS 2 have not been applied to these grants as they were granted prior to the effective date of FRS 2.

The number and weighted average exercise prices of share options are as follows:

Weighted Weighted average Number average Number exercise of options exercise of options price (‘000) price (‘000) 2008 2008 2007 2007 Outstanding at 1 January 1.13 2,992 1.10 3,474 Granted during the year - - 0.82 787 Forfeited during the year 0.88 (376) 0.93 (892) Exercised during the year - - 0.65 (377) ______ ______ ______ ______ Outstanding / Exercisable at 31 December 1.17 2,616 1.13 2,992 ===== ===== ===== =====

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21. Employee benefits (continued)

Share-based payments (continued) The options outstanding at 31 December 2008 have an exercise price in the range of RM0.63 to RM1.25 and a contractual life ranging of 26 months to 48 months. In 2007, 377,000 share options were exercised. The weighted average share price for the year was RM1.13. The fair value of services received in return for share options granted is based on the fair value of share options granted, measured using a binomial lattice model, with the following inputs:

Employees

2008 2007 Fair value of share options and assumptions Fair value at grant date 0.12 0.23 -------- -------- Weighted average share price 0.67 0.89 Exercise price 0.63 0.82 Expected volatility (weighted average volatility) 54% 56% Option life (expected weighted average life) 1 year 2 years Risk-free interest rate (based on Base Lending Rate) 6.55% 6.8% ===== ====== The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. Employee expenses Group 2008 2007 RM’000 RM’000 Share options granted in 2007 - 128 Share options granted in 2008 - - _____ ______ Total expense recognised as share-based payments - 128

===== =====

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22. Tax expense Recognised in the income statements Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Restated Current tax expense Malaysian tax - current 246 359 - - Malaysian tax - prior year 28 82 - - Overseas tax - current - 70 - - ______ ______ ______ ______ Total current tax 274 511 - - --------- --------- --------- --------- Deferred tax expense Origination and reversal of temporary differences (2) 1,535 - - Under provided in prior years - 386 - - ______ ______ ______ ______ Total deferred tax (2) 1,921 - - --------- --------- --------- --------- Total tax expense 272 2,432 - - ===== ===== ===== =====

Reconciliation of effective tax expense (Loss)/Profit for the year (12,831) 4,270 (4,060) 14,772 Total tax expense 272 2,432 - - _____ _____ ______ ______ (Loss)/Profit excluding tax (12,559) 6,702 (4,060) 14,772 ==== ==== ===== ===== Tax at Malaysian tax rate of 26% (2007 - 27%) (3,265) 1,810 (1,056) 3,988 Effect of lower tax rate for certain * subsidiaries 301 - - - Effect of different tax rates in foreign jurisdiction - (109) - - Effect of tax losses in respect of dormant

companies 71 38 - - Effect of change in tax rate** - (330) - - Effect of deferred tax assets not recognised 2,736 61 - - Non-deductible expenses 401 573 1,056 778 Tax exempt income - (76) - (4,766) Others - (3) - - Under provided in prior years 28 468 - - _____ _____ _____ _____ 272 2,432 - - ==== ==== ==== ====

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22. Tax expense (continued)

* With effect from year of assessment 2004, companies with paid-up capital of RM2.5 million and below at the beginning of the basis period for a year of assessment are subject to corporate tax at 20% on chargeable income up to RM500,000.

** The corporate tax rates are 26% for year of assessment 2008 and 25% for the subsequent

years of assessment. Consequently, deferred tax assets and liabilities are measured using these tax rates.

23. Earnings per ordinary share Basic (loss)/earnings per ordinary share The calculation of basic (loss)/earnings per ordinary share at 31 December 2008 was based on

the (loss)/profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding calculated as follows:

Total Group RM’000

2008 Loss attributable to ordinary shareholders (12,896) ===== 2007 Profit attributable to ordinary shareholders - as previously reported 4,723 - effect of adopting revised FRS 112 13 _____ 4,736 ====

Group 2008 2007 ’000 ’000 Weighted average number of ordinary shares Issued ordinary shares at 1 January 80,378 80,000 Effect of share options exercised - 220 ______ ______ At 31 December 80,378 80,220 ===== =====

Group 2008 2007 Sen Sen Basic (loss)/earnings per ordinary share (16.04) 5.90 ===== ===

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23. Earnings per ordinary share (continued) Diluted (loss)/earnings per ordinary share The calculation of diluted (loss)/earnings per ordinary share at 31 December 2008 was based

on (loss)/profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows:

Group Total 2008 RM’000

Loss attributable to ordinary shareholders (diluted) (12,896) Interest income resulting from conversion of ESOS 4 ______ (12,892) ===== 2007 Profit attributable to ordinary shareholders (diluted) 4,736 Interest income resulting from conversion of ESOS 57 ______ 4,793 =====

Weighted average number of ordinary shares diluted Group

2008 2007 ’000 ’000 Weighted average number of ordinary shares at 31 December 80,377 80,220 Effect of share options on issue 103 1,076 ______ ______ Weighted average number of ordinary shares (diluted) at 31 December 80,480 81,296 ===== ===== The average market value of the Company’s shares for purpose of calculating the dilutive

effect of share options was based on quoted market prices for the period that the options were outstanding. Group

2008 2007 Sen Sen Diluted (loss)/earnings per ordinary share (16.02) 5.89 ===== ====

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24. Dividends

Dividends recognised in the current year by the Company are: Sen Total per share amount

(net of tax) RM’000 Date of payment 2008 Final 2007 ordinary 1.48 1,190 29 August 2008 2007 Final 2006 ordinary 1.63 1,306 26 September 2007 25. Segmental information

Segment information is presented in respect of the Group’s business and geographical segments. The primary format, business segments, is based on the Group’s management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one year.

Business segments The Group comprises the following main business segments:

Rubber compounds Manufacture and distribution of rubber compounds and related products

Retreading services Retreading of tyres for motor vehicles, earthmovers and trading of tyres related products.

Trading Retailing and wholesale of nature rubber and other related

goods

Geographical segments

Retreading service and trading operate solely in Malaysia. The rubber compound segments are in Malaysia, Rest of Asia, Republic of China, Europe and Oceanic region (comprising Australia, New Zealand and Papua New Guinea).

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of assets.

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25. Segment reporting (continued) (a) Business segments Rubber Retreading Trading Other compounds services operations Eliminations Consolidated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2008 Total external revenue 132,051 69,171 52,369 - - 253,591 Inter-segment revenue 47,164 23,590 4,334 - (75,088) - __________________________________________________________________________ Total segment revenue 179,215 92,761 56,703 - (75,088) 253,591 ================================================================== Segment result 4,677 (3,574) (3,811) (1,772) (14) (4,494) ================================================================== Results from operating activities (4,494) Interest income 220 Finance costs (8,128) Share of loss of equity accounted associates and joint venture (66) (91) - - - (157) Tax expense (272) _______ Loss for the year (12,831) ======

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25. Segment reporting (continued) (a) Business segments (continued) Rubber Retreading Other compounds services Trading operations Eliminations Consolidated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2007 restated Total external revenue 146,993 61,825 - - - 208,818 Inter-segment revenue 57,571 19,493 - - (77,064) - _________________________________________________________________________ Total segment revenue 204,564 81,318 - - (77,064) 208,818 ================================================================= Segment result 10,154 3,339 - (189) (198) 13,106 ================================================================= Results from operating activities 13,106 Interest income 174 Finance costs (6,578) Tax expense (2,432) ______ Profit for the year 4,270 =====

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25. Segment reporting (continued) (a) Business segments (continued) Rubber Retreading Trading Other compounds services operations Eliminations Consolidated 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Restated Restated Restated Restated Restated Restated Segment assets 53,874 124,062 100,261 129,002 4,586 - 62,704 2,700 - - 221,425 255,764 Inter-segment assets (7,319) (15,939) 7,664 17,059 - - - - (345) (1,120) - - ______ ___________________________________________________________________________________________________ Total segment assets 46,555 108,123 107,925 146,061 4,586 - 62,704 2,700 (345) (1,120) 221,425 255,764 ============================================================================================== Segment liabilities 44,449 60,718 32,551 35,185 9,524 - 71,250 81,475 - - 157,774 177,378 ============================================================================================== Capital expenditure 2,321 5,507 1,896 15,588 586 - 147 165 - - 4,950 21,260 ============================================================================================== Depreciation 3,566 3,589 4,238 3,503 46 - 141 116 - - 7,991 7,208 ============================================================================================== Amortisation of prepaid lease payments - 46 159 47 - - - - - - 159 93 ==============================================================================================

85

25. Segment information (continued) (b) Geographical segments Rest Republic Oceanic Rest of Malaysia of Asia Europe of China region the world Eliminations Consolidated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2008

Revenue from external customers 170,591 27,668 7,446 23,023 16,687 8,176 - 253,591 Revenue from internal 59,282 - - 4,559 11,247 - (75,088) - _____________________________________________________________________________________ Segment revenue 229,873 27,668 7,446 27,582 27,934 8,176 (75,088) 253,591

============================================================================ Segment assets 203,467 - 3,161 7,473 7,324 - - 221,425 ============================================================================ Capital expenditure 4,914 - 5 31 - - - 4,950 ============================================================================ 2007 restated Revenue from external customers 127,776 30,235 5,793 12,679 21,530 10,805 - 208,818 Revenue from internal 51,760 - 3,102 4,689 17,513 - (77,064) - _____________________________________________________________________________________ Segment revenue 179,536 30,235 8,895 17,368 39,043 10,805 (77,064) 208,818 ============================================================================ Segment assets 229,982 - 3,174 6,882 15,726 - - 255,764 ============================================================================ Capital expenditure 17,026 - 5 3,869 360 - - 21,260 ============================================================================

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26. Financial instruments Financial risk management objectives and policies

Exposure to credit, interest rate, foreign currency and liquidity risk arises in the normal course

of the Group’s business. The Board reviews and agrees policies for managing each of these risks and they are summarised below. Derivative financial instruments are used to reduce exposure to fluctuations in foreign exchange rates. While these are subject to the risk of market rates changing subsequent to acquisition, such changes are generally offset by opposite effects on the items being hedged.

The Company’s accounting policies in relation to derivative financial instruments are set out in Note 2(c).

Credit risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The credit policy requires that credit evaluations be performed on new customers requiring credit. At the balance sheet date, there were no significant concentrations of credit risk by the Group other than amount due from subsidiaries at the Company level. The maximum exposure to credit risk for the Group and for the Company is represented by the carrying amount of each financial asset in the balance sheet.

Interest rate risk In the current low interest rate scenario, the Group borrows for operations at variable rates using its overdrafts, bills payables and long term MUNIF. The Group also entered into long term borrowings and hire purchase facilities at fixed rate.

Effective interest rates and repricing analysis

In respect of interest-bearing financial liabilities, the following table indicates their average effective interest rates at the balance sheet date and the periods in which they mature, or if earlier, reprice. Average effective Less interest than 1-5 Group rate Total 1 year years 2008 % RM’000 RM’000 RM’000 Fixed rate instruments Secured term loans 7.00 7,671 668 7,003 Finance lease liabilities 4.1-10 1,363 466 897 _____________________________ 9,034 1,134 7,900 ==========================

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26. Financial instruments (continued) Effective interest rates and repricing analysis (continued)

Average effective Less interest than 1-5 Group rate Total 1 year years 2008 % RM’000 RM’000 RM’000 Floating rate instruments Secured and unsecured bills payable 4.45-7.75 29,603 29,603 - Secured MUNIF 5.85-7.00 80,000 80,000 - _____________________________ 109,603 109,603 - 2007 ========================== Fixed rate instruments Secured term loans 7.11 4,326 585 3,741 Unsecured bank overdraft 7.75 1,074 1,074 - Finance lease liabilities 3.00 1,481 436 1,045 _____________________________ 6,881 2,095 4,786 ========================== Floating rate instruments Secured bills payable 4.80 34,117 34,117 - Secured MUNIF 5.85 80,000 80,000 - _____________________________ 114,117 114,117 - ========================== Company 2008 Floating rate instruments Secured MUNIF 5.85-7.00 80,000 80,000 - ========================== 2007 Floating rate instruments Secured MUNIF 5.85 80,000 80,000 - ==========================

Foreign currency risk The Group is exposed to foreign currency risk on sales and purchases that are denominated in

currencies other than Ringgit Malaysia. The currencies giving rise to this risk is primarily Australian Dollars, China Yuan Renminbi, Singapore Dollars, Euros, United States Dollar and Swedish Kronor.

88

89

26. Financial instruments (continued) Foreign currency risk (continued) The Group hedges trade receivables and trade payables denominated in foreign currencies on

an adhoc basis using forward contract and these amounted to RM11,756,000 at year end (2007 - RM12,962,000). The amounts of any deferred or unrecognised gain associated with anticipated future transactions are a gain of nil (2007 - RM64,000) and the expected timing of recognition as income or expense is over the next six months. Where necessary, the forward exchange contracts are rolled over upon maturity at market rates.

In respect of other monetary assets and liabilities held in currencies other than Ringgit

Malaysia, the Group ensures that the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short term imbalances.

Liquidity risk

The Group monitors and maintains a level of cash and cash equivalents and bank facilities deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

Fair values

The carrying amounts of cash and cash equivalents, receivables, other payables and short term

borrowings approximate fair values due to the relatively short term nature of these financial instruments. The carrying amounts of MUNIF approximate fair values as they are subject to variable interest rates which in turn approximate the current market interest rates for similar facilities at balance sheet date.

The Company provides financial guarantees to banks for credit facilities extended to certain

subsidiaries. The fair value of such financial guarantees is not expected to be material as the probability of the subsidiaries defaulting on the credit lines is remote.

It was not practicable to estimate the fair value of the Group’s investment in unquoted shares

due to the lack of comparable quoted market prices and the inability to estimate fair value without incurring excessive costs.

26. Financial instruments (continued) The fair values of other financial liabilities, together with the carrying amounts shown in the

balance sheet, are as follows. 2008 2007 Carrying Fair Carrying Fair amount value amount value Group RM’000 RM’000 RM’000 RM’000 Secured term loans 7,671 7,412 4,326 3,233 ==== ==== ==== ==== The valuation of financial instruments not recognised in the balance sheet reflects their current

market rates at the balance sheet date. The fair value of financial instruments not recognised in the balance sheet as at 31 December 2008 is:

Group

2008 2007 RM’000 RM’000 Forward foreign exchange contracts - 64 === ===

Estimation of fair values The following summarises the methods used in determining the fair values of financial instruments reflected in the table. Forward exchange contracts are either marked to market using listed market prices or by discounting the contractual forward price and deducting the current spot rate. For other financial liabilities, fair value is determined using estimated future cash flows discounted using market related rate for a similar instrument at the balance sheet date. The interest rate used to discount estimated cash flows are as follows:

2008 2007 Secured term loans 7.00% 7.11%

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27. Related parties

For the purposes of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel includes all the Directors of the Group, and certain members of senior management of the Group. The significant related party transactions of the Group and the Company, other than key management personnel compensation, are as follows:

Transactions Gross balance Net balance amount for outstanding outstanding the year ended at at Group 31 December 31 December 31 December 2008 RM’000 RM’000 RM’000 Other related parties A company in which a shareholder and director of the Company, Mr. Tai Boon Wee has substantial interest Sales to Coltrac Sdn. Bhd. 4,611 1,311 1,311 =============================== A company in which a shareholder and director of a subsidiary, Mr. Ngok Seng Lee has substantial interest Sales to Inatrac Sdn. Bhd. 313 4 4 Purchase from Inatrac Sdn. Bhd. 323 (100) (100) A firm in which a shareholder and director of the Company, Mr. Mok Yuen Lok is a partner Professional fee 21 - - ===============================

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27. Related parties (continued) Transactions Gross balance Net balance amount for outstanding outstanding the year ended at at Group 31 December 31 December 31 December 2007 RM’000 RM’000 RM’000 Other related parties A company in which a shareholder and director of the Company, Mr. Tai Boon Wee has substantial interest Sales to Coltrac Sdn. Bhd. 3,471 1,038 1,038 Purchase from Coltrac Sdn. Bhd. 1,249 - - =============================== A company in which a shareholder and director of a subsidiary, Mr. Ngok Seng Lee has substantial interest Sales to Inatrac Sdn. Bhd. 137 59 59 Purchase from Inatrac Sdn. Bhd. 455 (110) (110) A firm in which a shareholder and director of the Company, Mr. Mok Yuen Lok is a partner Professional fee 2 - - ===============================

The terms and conditions for the above transactions are based on normal trade terms. All the amounts outstanding are unsecured and expected to be settled with cash.

28. Capital commitments Group 2008 2007 RM’000 RM’000 Property, plant and equipment Authorised but not contracted for - 808 === ====

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29. Contingent liabilities - unsecured

The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.

(a) The Company has an unsecured contingent liability of RM28 million (2007 - RM41

million) in respect of a corporate guarantee given to a bank for credit facilities utilised by a subsidiary at 31 December 2008.

(b) The Company has undertaken to provide financial support to certain subsidiaries to

enable them to continue to operate as going concerns.

2008 2007

RM’000 RM’000 Balance sheet Deferred tax assets at 31 December 6,337 1,393 Under recognition of deferred tax assets - 4,873 ______ ______ Deferred tax assets at 31 December 6,337 6,266 ===== ===== Income statement for the year ended 31 December (Loss)/Profit for the year (12,831) 4,257 Under recognition of deferred tax assets - 13 ______ ______ (Loss)/Profit for the year (12,831) 4,270 ===== =====

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30. Changes in accounting policies

The accounting policies set out in Note 2 have been applied in preparing the financial statements for the year ended 31 December 2008.

The changes in accounting policies arising from the adoption of the revised FRS 112, Income

Taxes are summarised below:

In prior years, unutilised reinvestment allowance or investment tax allowance was recognised as a reduction of tax expense as and when it was utilised. Following the adoption of the revised FRS 112, a tax incentive that is not a tax base of an asset is recognised as a reduction of tax expense in the income statement as and when it is granted and claimed. Any unutilised portion of the tax incentive is recognised as a deferred tax asset to the extent that it is probable that future taxable profits will be available against which the unutilised tax incentive can be utilised. This change in accounting policy is applied retrospectively and the effects are as follows:

31. Comparative figures

The following comparative figures have been reclassified as a result of the change in accounting policy as stated in Note 30:

As As previously stated restated RM’000 RM’000

Balance sheet Deferred tax assets 6,266 1,393

Income statement

Tax expenses 2,432 2,445 Profit for the year 4,270 4,257

Statement of changes in equity

Retained earning at 1 January 2007 19,741 14,881 Retained earning at 31 December 2007 23,171 18,298

====== ===== 32. Significant subsequent event

(i) On 19 January 2009, the Company has redeemed the first tranche of the MUNIF of RM10 million.

(ii) On 18 March 2009, Goodway Marketing Sdn.Bhd., a wholly owned subsidiary of the

Company has entered into a conditional sales and purchase agreement with a third party to dispose off its 5 units office suite for a total cash consideration of RM 6,221,000.

The completion of the disposal is pending fulfillment of all conditions precedent by both party.

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95

Goodway Integrated Industries Berhad (Company No. 618972-T) (Incorporated in Malaysia) and its subsidiaries Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965

In the opinion of the Directors, the financial statements set out on pages 35 to 94 are drawn up in

accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to

give a true and fair view of the financial position of the Group and of the Company as of 31

December 2008 and of their financial performance and cash flows for the year then ended.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

…………………………………………..……………. Tai Boon Wee …………………………………………..……………. Wong Ping Kiong Kuala Lumpur, Date: 28 April 2009

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Goodway Integrated Industries Berhad (Company No. 618972-T) (Incorporated in Malaysia) and its subsidiaries Statutory declaration pursuant to Section 169(16) of the Companies Act, 1965

I, Teh Saw Ha, the officer primarily responsible for the financial management of Goodway

Integrated Industries Berhad, do solemnly and sincerely declare that the financial statements set

out on pages 35 to 94 are, to the best of my knowledge and belief, 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.

Subscribed and solemnly declared by the above named in Petaling Jaya, Selangor Darul Ehsan on

28 April 2009

……………………….……………….... Teh Saw Ha Before me: S. Selvarajah Commissioner for Oaths

Independent auditors’ report to the members of Goodway Integrated Industries Berhad (Company No. 618972-T) (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of Goodway Integrated Industries Berhad, which comprise the balance sheets as at 31 December 2008 of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 35 to 94. Directors’ Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2008 and of their financial performance and cash flows for the year then ended.

Emphasis of matter Without qualifying our opinion, we draw attention to Note 16.2 to the financial statements where the Company has breached the gearing ratio covenant on the MUNIF as of 31 December 2008. On 13 April 2009, the Trustee served a notice to the Company to rectify the breach within 30 days from the date of the notice. The Company has on 17 April 2009 and 22 April 2009 respectively sought for indulgence from the MUNIF holders to rectify the non-compliance of the gearing ratio covenant by 31 August 2009.

Should the Company fail to obtain the indulgence from the MUNIF holders and should the Company fail to rectify the breach within the stipulated period if the indulgence is granted, the non-current MUNIF amounting to RM50,000,000 and RM50,000,000 of the Group and of the Company respectively will be classified to current liabilities. Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: a) In our opinion, the accounting and other records and the registers required by the Act to be kept

by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

b) We have considered the accounts and the auditors’ reports of all the subsidiaries of which we

have not acted as auditors, which are indicated in Note 6 to the financial statements.

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c) We are satisfied that the accounts 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 financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

d) The audit reports on the accounts of the subsidiaries did not contain any qualification or any

adverse comment made under Section 174(3) of the Act. Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. KPMG Foong Mun Kong Firm Number: AF 0758 Approval Number: 2613/12/10(J) Chartered Accountants Chartered Accountant Petaling Jaya, Date: 28 April 2009

LIST OF GROUP PROPERTIES

The properties of the Group as at 31 December 2008 and their net book values (“NBV”) are indicated below: -

No Company Title Location Description and existing use Expiry of Lease Approximate

Age of Building Date of acquisition NBV

(RM’000)

(1) Goodway Rubber Industries Sdn. Bhd.

HS(D) 80552, PT No. 3909, Mukim of Setul, District of Seremban, Negeri Sembilan

Lot PT 1654 & PT 1657, Nilai Industrial Estate, 71800 Nilai, Negeri Sembilan

350, 527 sq ft of industrial land consist of one(1) office block, five (5) factories, two(2) warehouses and miscellaneous structures

99 year lease expiring on 3 October 2093

8 to 14 years *23 June 1994 13,506

(2) Goodway Rubber

Industries Sdn. Bhd. PN 9493, Lot 16365, Mukim of Labu, District of Seremban, Negeri Sembilan

A-3-1, 2, 3,4,6,7,9,10, 11, Taman Semarak Phase 2, 71809 Nilai, Negeri Sembilan

Nine (9) units medium cost apartment of 705sq ft each, used as accommodation for workers

Freehold 11 years *23 June 1994 559

(3) Goodway Rubber

Industries Sdn. Bhd. Geran Berbilang Muka No. 12/M10/3/665 to 667, Lot 9132, Mukim of Setul, District of Seremban, Negeri Sembilan

14-2-7, 8, 9 Taman Semarak Phase 2, 71809 Nilai, Negeri Sembilan

Three (3) unit low cost apartment of 683 sq ft used as accommodation for workers

Freehold 13 years *27 June 1994 114

(4) Kilotrac Industries

Sdn. Bhd. HS(D) 80551 PT No.3910 Mukim Setul District of Seremban, Negeri Sembilan

Lot PT 3910, Nilai Industrial Estate, 71800 Nilai, Negeri Sembilan

108,925 sq. ft. of industrial land with One (1) factory building

99 year lease expiring on 3 October 2093

10 years *7 January 1997 3,256

(5) Goodway Rubber Co.

Pty Ltd Lot 3 in strata plan 62538 at Minto

Unit 3, 11 Saggart Field Road, Minto NSW 2566 Australia

7,330 sq. ft. site office and with one (1) unit in a block of three (3) detached warehouses

Freehold 8 years **20 June 2000 1,601

(6) Big Wheel Green

Tyres Sdn. Bhd. (f.k.a Big Wheel (Sabah) Sdn Bhd)

1. CL 015583481, 2. CL 015583472 & 3. CL 015583463 District of Kota Kinabalu, Sabah.

KM 12, Jalan Tuaran, Kota Kinabalu, Sabah.

677,794 sq.ft. of industrial land consists of one (1) double storey office block, factory building, warehouse and labour quarters

1. 999 years expiring on 31.12.2915 2. 999 years expiring on 31.12.2915 3. 999 years expiring on 24.7.2921

4 years ***15 August 2005

36,751

(7)

Big Wheel Green Tyres Sdn. Bhd. (f.k.a Big Wheel (Sabah) Sdn Bhd)

CL 015319650

Lot No. 19, Jalan Karamunsing C, off Jalan JT By Pass, Kota Kinabalu, Sabah.

8,538 sq.ft. with a corner double storey terraced warehouse.

999 years expiring on 21.1.2901

23 years

***15 August 2005

2,047

(8) Big Wheel Green Tyres Sdn. Bhd. (f.k.a Big Wheel (Sabah) Sdn Bhd)

**** Miles 6, Jalan Petagas, Penampang, Kota Kinabalu

A single storey servicing outlet

**** 23 years 1986 – Constructed by own

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99

LIST OF GROUP PROPERTIES (continued)

100

No Company Title Location Description and existing use Expiry of Lease Approximate

Age of Building Date of acquisition NBV

(RM’000) (9) Goodway Marketing

Sdn. Bhd.

HS (D) 105025, Lot PT 12, Section 95A, Kuala Lumpur, Wilayah Persekutuan

No. A-20-1, 2, 3, 4, 5, 20th Floor, Block A Northpoint Offices, Mid Valley City, No. 1, Medan Syed Putra Utara, 59200, Kuala Lumpur

5 adjoining units together with the common corridor into one large premises of 8,816 sq ft used as offices.

99 years lease expiring on 6.6.2103

3 years *18 January 2005 5,293

(10) Big Wheel (Malaysia)

Sdn. Bhd. HS (D) 168282, Bandar Shah Alam, Daerah Petaling, Negeri Selangor.

Lot 3, Jalan Ribet 15/15, 40000 Shah Alam, Selangor

80,000 sq ft of industrial land consist of two (2) factories and miscellaneous structures


37 years 1 November 2007 3,712


Sdn. Bhd. H.S. (D) 13431, PT 2 Seksyen 16, Bandar Shah Alam, Daerah Petaling, Negeri Selangor.


52,000 sq ft of industrial land consist of one(1) office block, one (1) factories and miscellaneous structures


26 years 1 November 2007 2,352


Sdn. Bhd. HS (D) 23799, PT 43, Bandar Shah Alam, Daerah Petaling, Negeri Selangor.


19,100 sq ft of industrial land consist of one(1) office block, one (1) warehouse and miscellaneous structures


15 years 1 November 2007 742


Sdn. Bhd. HS (D) 168479, PT 45, Bandar Shah Alam, Daerah Petaling, Negeri Selangor.


19,100 sq ft of industrial land consist of one (1) warehouse and miscellaneous structures



(14) Big Wheel Malaysia

Sdn. Bhd. PN 7815/M6/2/211, Lot No. 21 Sek 24, No. Petak 211 dalam Tingkat No. 2, Bangunan No. M6, Bandar Shah Alam, Daerah Petaling, Selangor

No. 205, 1st Floor, Block 23, Section 24, Shah Alam, Selangor

One (1) unit apartment of 752 sq ft, now vacant.



(15) Goodway SMR Sdn. Bhd. (f.k.a. Big Wheel Marketing Sdn Bhd )

**** Locked Bag 13, SM182 89009 Keningau, Sabah

A single storey office and rubber collection center

**** 1 year 2008 – constructed by own

103

Total

70,906

* The property was valued on professional valuations made by Mr. Anthony Chua Kian Beng, a registered valuer in KGV-Lambert Smith Hampton, on the open market basis conducted in 29 September 2006. An accretion value of RM was recognized in the financial year. ** The property was valued on professional valuations made by Mr. Mark P. Wrightson, a certified practicing valuer in E.F. Hoskin & Associates Pty Limited, on the open market basis conducted in 19 December 2006. An accretion value of RM was recognized in the financial year.

*** The property was valued based on professional valuations made by Mr. Liaw Lam Thye, a registered valuer in Taylor Hobbs, on the open market basis conducted in 29 September 2006. An accretion value of RM was recognised in the financial year.

**** Rent of the commercial land from third party.

( )

. .

ANALYSIS OF SHAREHOLDINGS AS AT 30 APRIL 2009 Authorised Share Capital : RM50,000,000.00

Issued and paid-up capital : RM40,188,500.00

Class of shares : Ordinary shares of RM0.50 each

Voting rights : One vote per ordinary share Size of Shareholdings

No. of Shareholders

% of shareholders

No. of shares held

% of shareholdings

Less than 100 7 0.73 257 0.00 100 - 1,000 297 31.31 280,656 0.35 1,001 - 10,000 439 46.02 2,079,587 2.59 10,001 - 100,000 148 15.51 5,252,320 6.53 100,001 to less than 5% 58 6.08 21,871,775 27.21 5% and above 5 0.53 50,892,405 63.32 TOTAL 954 100.00 80,377,000 100.00 SUBSTANTIAL SHAREHOLDERS

Direct Indirect Name

No. of shares % No. of shares %1. Tai Boon Wee 21,047,884(1) 26.19 4,384,180(2) 5.452. Lembaga Tabung Angkatan Tentera 10,000,000 12.44 - -3. Sierra Growth Sdn Bhd 8,454,000(3) 10.52 - -4. Lee Fook Seng 7,008,341(4) 8.72 - -5. Massive Structure Sdn Bhd 4,382,180(5) 5.45 - - DIRECTORS’ INTEREST

Direct Indirect Name

No. of shares % No. of shares %1. Tai Boon Wee 21,047,884(1) 26.19 4,382,180(2) 5.452. Wong Ping Kiong 2,454,363(6) 3.05 145,000(7) 0.183. Ismail Bin Mahayudin 200,100 0.25 10,200(7) 0.014. Mok Yuen Lok 100,000 0.12 - -5. Nor Idzam Bin Ya’akub - - - -6. Lt Jen (B) Datuk Hj Adenan Bin Hj

Mohamad Zain - - - -

101

ANALYSIS OF SHAREHOLDINGS AS AT 30 APRIL 2009 (continued)

Notes: (1) Shares held in the name of-

(a) Individual account – 820,000 (b) Al Wakalah Nominees (Tempatan) Sdn Bhd – 14,606,991 (c) EB Nominees (Tempatan) Sendirian Berhad – 2,963,993 (d) CIMSEC Nominees (Tempatan) Sdn Bhd – 1,270,000 (e) RHB Capital Nominees (Tempatan) Sdn Bhd – 1,386,900

(2) Deemed interest by virtue of his spouse’s and son’s interest in GIIB via Massive Structure pursuant to Section 6A of the Companies Act, 1965

(3) Shares held in the name of MIDF Amanah Investment Nominees (Tempatan) Bank Berhad (4) Shares held in the name of-

(a) Individual account – 4,008,341 (b) EB Nominees (Tempatan) Sendirian Berhad – 3,000,000

(5) Shares held in the name of- (a) Individual account – 1,183,410 (b) Al Wakalah Nominees (Tempatan) Sdn Bhd – 3,198,770

(6) Shares held in the name of- (a) Individual account – 20,000 (b) EB Nominees (Tempatan) Sendirian Berhad – 2,234,363 (c) CIMB Group Nominees (Tempatan) Sdn Bhd – 200,000

(7) Deemed interest by virtue of shares held by spouse pursuant to Section 134(12)(c) of the Companies Act, 1965 LIST OF THIRTY LARGEST SHAREHOLDERS

NO. NAME NO. OF SHARES

HELD % 1 Al Wakalah Nominees (Tempatan) Sdn Bhd

- Pledged securities account for Tai Boon Wee 14,606,991 18.17

2 Lembaga Tabung Angkatan Tentera 10,000,000 12.443 MIDF Amanah Investment Nominees (Tempatan) Sdn Bhd

- Pledged securities account for Sierra Growth Sdn Bhd 8,454,000 10.52

4 Lee Fook Seng 4,008,341 4.995

Al Wakalah Nominees (Tempatan) Sdn Bhd - Pledged securities account for Massive Structure Sdn Bhd

3,198,770 3.98

6

EB Nominees (Tempatan) Sendirian Berhad - Pledged securities account for Lee Fook Seng

3,000,000 3.73

7

EB Nominees (Tempatan) Sendirian Berhad - Pledged securities account for Tai Boon Wee

2,963,993 3.69

8

EB Nominees (Tempatan) Sendirian Berhad - Pledged securities account for Wong Ping Kiong

2,234,363 2.78

9

EB Nominees (Tempatan) Sendirian Berhad - Pledged securities account for Ngok Seng Lee

2,120,980 2.64

10

AMSEC Nominees (Tempatan) Sdn Bhd - Pledged securities account for Chew Siow Geok

1,792,000 2.23

11 Quan Huaiyun 1,700,000 2.1212

RHB Capital Nominees (Tempatan) Sdn Bhd - Pledged securities account for Tai Boon Wee

1,386,900

1.73

13 CIMSEC Nominees (Tempatan) Sdn Bhd - CIMB bank for Tai Boon Wee

1,270,000 1.58

14 Massive Structure Sdn Bhd 1,183,410 1.4715 Soh Tong Hwa 980,000 1.2216

Alliancegroup Nominees (Tempatan) Sdn Bhd - Pledged securities account for Chew Siow Geok

850,000

1.06

17

Alliancegroup Nominees (Tempatan) Sdn Bhd - Pledged securities account For Lim Beng Guan

827,200

1.03

102

ANALYSIS OF SHAREHOLDINGS AS AT 30 APRIL 2009 (continued) LIST OF THIRTY LARGEST SHAREHOLDERS (continued)

18

Tai Boon Wee

820,000

1.02

19 Lee Wai Ching 794,000 0.9920

EB Nominees (Tempatan) Sendirian Berhad - Pledged securities account for Chew Siow Geok

682,000

0.85

21 Lim Kwee Fatt 550,000 0.6822 AFFIN Nominees (Tempatan) Sdn Bhd

- Pledged securities account for Lim Sing Eng 500,000 0.62

23 Tim Heok Lin 463,632 0.5824

SJ Sec Nominees (Tempatan) Sdn Bhd - Pledged securities account for Ko Achi @ Yiew Tong

364,400

0.45

25 Md Rasid Bin Mohamad 353,000 0.4426 Tan Chuan Yong 348,000 0.4327 Tan Kee Khoon 340,000 0.4228 Chew Chong Eu 339,400 0.4229

HLB Nominees (Tempatan) Sdn Bhd - Pledged securities account for Chew Siok Geok

338,200 0.42

30 Kenanga Nominees (Tempatan) Sdn Bhd - Amara Investment Management Sdn Bhd for Chen Khai Voon

319,000 0.40

103

NO. NAME NO. OF SHARES

HELD %

104

NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Sixth Annual General Meeting of the Company will be held at Dewan Perdana, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Tuesday, 23 June 2009 at 10.00 a.m. for the following purposes: 1. To receive and adopt the Audited Financial Statements for the financial year

ended 31 December 2008 and the Reports of the Directors and the Auditors thereon.

Resolution 1

2. To approve the payment of Directors’ Fees amounting to RM99,000 in respect of the financial year ended 31 December 2008.

Resolution 2

3. To re-elect the following Directors retiring in accordance with Article 79 of the Company’s Articles of Association:

(a) Tai Boon Wee Resolution 3 (b) Lt Jen (B) Datuk Hj Adenan bin Hj Mohamad Zain Resolution 4 4. To appoint Auditors of the Company and to authorise the Directors to fix

their remuneration.

“THAT Messrs Mazars, Chartered Accountants be and are hereby appointed as Auditors of the Company in place of the retiring Auditors, Messrs KPMG, Chartered Accountants and to hold office until the conclusion of the next Annual General Meeting at a remuneration to be determined by the Directors.”

Resolution 5

As Special Business To consider and if thought fit, to pass the following resolutions: 5. Ordinary Resolution -

Authority to Allot and Issue Shares pursuant to Section 132D of the Companies Act, 1965

Resolution 6

“THAT pursuant to Section 132D of the Companies Act, 1965 and

approvals from Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares so issued and other relevant authorities, where approval is necessary, authority be and is hereby given to the Directors to allot and issue shares in the Company at any time upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit provided always that the aggregate number of shares to be issued shall not exceed 10% of the issued share capital of the Company at any point of time AND THAT such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company.”

The Company had received a notice of Nomination pursuant to Section 172(11) of the Companies Act, 1965, of which a copy is annexed hereto in respect of the nomination of Messrs Mazars for appointment as Auditors of the Company and to propose the following ordinary resolution:-

NOTICE OF ANNUAL GENERAL MEETING (continued) 6. Ordinary Resolution -

Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature

Resolution 7

“THAT approval be and is hereby given for the renewal of the

Shareholders’ Mandate for the Goodway Integrated Industries Berhad Group of Companies to enter into any category of recurrent transactions of a revenue or trading nature falling within the types of transactions as set out in Section 3.3 in the Circular to Shareholders dated 1 June 2009 with the related parties falling within the classes of persons set out in Section 3.2 in the Circular which are necessary for day-to-day operations and are carried out in the ordinary course of business on terms which are not more favorable to the related parties than those generally available to the public and are not to the detriment of minority shareholders;

THAT the authority conferred by such mandate shall continue to be in force until: -

(a) the conclusion of the next Annual General Meeting (“AGM”) of the

Company at which time the mandate will lapse, unless by an ordinary resolution passed at the AGM, the mandate is renewed; or

(b) the expiration of the period within which the next AGM of the

Company is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(c) revoked or varied by ordinary resolution passed by the shareholders in a general meeting.

whichever is earlier.

AND THAT the Directors be and are hereby authorised to complete and do

all such acts and things including executing such documents as may be required to give effect to the transactions contemplated and/or authorised by this mandate.”

7. Ordinary Resolution - Proposed Renewal of Shareholder’s Mandate for Share Buy-Back by the Company

Resolution 8

“THAT, subject to the Companies Act, 1965 (“Act”), the Listing

Requirements of Bursa Malaysia Securities Berhad and the approval of all relevant governmental and/or regulatory authorities, the Company be and is authorized to purchase such number of ordinary shares of RM0.50 each in the Company (“Proposed Share Buy-Back”) as may be determined by the Board from time to time on Bursa Malaysia Securities Berhad upon such terms conditions as the Board may deem fit and expedient in the interest of the Company provided that the aggregate number of shares purchased pursuant to this resolution does not exceed ten percent (10%) of the issued and paid-up share capital of the Company which amount to 40,188,500 ordinary shares of RM0.50 each as at 30 April 2009 and an amount not exceeding the total retained earnings of RM9 million and share premium account of RM11 million based on the latest audited accounts of the Company as at 31 December 2008, be allocated by the Company for the Proposed Share Buy-Back.

105

NOTICE OF ANNUAL GENERAL MEETING (continued) THAT such authority shall commence upon the passing of this resolution

and shall remain in force until the conclusion of the next Annual General Meeting (“AGM”) of the Company unless earlier revoked or varied by ordinary resolution of the shareholders of the Company in general meeting.

THAT authority be and is hereby given to the Directors of the Company to decide in their discretion to retain the ordinary shares in the Company so purchased by the Company as treasury shares and/or cancel them and/or resell the treasury shares or distribute them as share dividend and/or subsequently cancel them.

AND THAT authority be and is hereby given to the Directors of the Company to take all such steps as are necessary (including executing all such documents as may be required) and to enter into any agreements and arrangements with any party or parties to implement, finalise and give full effect to the aforesaid with full powers to assent to any conditions, modifications, variations and/or amendments (if any) as may be imposed by the relevant authorities and to do all such acts and things as the Directors may deem fit and expedient in the interest of the Company.”

8. To transact any other business of the Company of which due notice shall have been given.

By order of the Board KOON WAI YE (MAICSA 7048269) Company Secretary

1 June 2009 Notes: 1. A member of the Company entitled to attend and vote at the meeting may appoint not more than two (2) proxies to

attend and vote instead of him. Where a member appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy. A member of the Company who, is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, 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.

2. A proxy need not be a member of the Company. 3. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised

in writing or, if the appointer is a corporation, either under its common seal or in some other manner approved by its Directors.

4. The instrument of proxy must be deposited at the Company’s registered office at Lot 1 & 3, Jalan Rivet 15/15, Seksyen 15, 40000 Shah Alam, not later than forty-eight (48) hours before the time appointed for holding the meeting.

EXPLANATORY NOTES ON SPECIAL BUSINESSES A) Resolution 6

The proposed Ordinary Resolution under item no. 5 of the agenda, if passed, will avoid any delay and cost involved in convening a general meeting and will empower the Directors to allot and issue up to 10% of the issued share capital of the Company. This authority will, unless revoked or varied by the Company in a general meeting, expire at the conclusion of the next Annual General Meeting or the expiration of the period within which the next Annual General Meeting is required by law to be held, whichever is earlier.

106

Shah Alam

NOTICE OF ANNUAL GENERAL MEETING (continued)

EXPLANATORY NOTES ON SPECIAL BUSINESSES (CONTINUED) B) Resolution 7

The proposed Ordinary Resolution under item no. 6 of the agenda, if passed, will renew the Shareholders’ Mandate to allow the Company and its subsidiaries to enter into Recurrent Related Party Transactions of a Revenue or Trading Nature and to enable the Company to comply with Paragraph 10.09, Part E of Listing Requirements of Bursa Malaysia Securities Berhad. The mandate will take effect from the date of the passing of the ordinary resolution until the next Annual General Meeting of the Company.

C) Resolution 8

The proposed Ordinary Resolution under item no. 7 of the agenda, if passed, will renew the mandate for the Company to buy back its own shares. The mandate shall continue to be in force until the next Annual General Meeting of the Company unless earlier revoked or varied by the ordinary resolution of the Company in the general meeting and is subject to annual renewal.

107

108

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING 1. Directors standing for re-election

The Directors retiring by rotation and standing for re-election pursuant to Article 79 of the Articles of Association of the Company are:

a) Tai Boon Wee b) Lt Jen (B) Datuk Hj Adenan Bin Hj Mohamad Zain

The profiles of the above named Directors are set out in pages 8 to 10 of the Annual Report. 2. Details of Attendance of Directors at Board Meetings

The details of attendance of Directors at Board Meetings are set out in page 17 of the Annual Report.

GOODWAY INTEGRATED INDUSTRIES BERHAD

(Company No. 618972-T)

PROXY FORM *I/We,……………………………………NRIC/Passport/Company No. ……….………………..….... of ……………………………………………………………………………...............................being a member of GOODWAY INTEGRATED INDUSTRIES BERHAD (Company No.: 618972-T), do hereby appoint………………………….. NRIC/Passport No…………..….……………….… or failing *him/her…………………………NRIC/Passport No…………..….……………….…………. or failing *him/her the Chairman of the Meeting as *my/our proxy to vote for *me/us on my/our behalf at the Sixth Annual General Meeting of the Company to be held at Dewan Perdana, Bukit Kiara Equestrian and Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Tuesday, 23 June 2009 at 10.00 a.m. and at any adjournment thereof as indicated: - NO. RESOLUTIONS FOR AGAINST 1. Ordinary Resolution No. 1 2. Ordinary Resolution No. 2 3. Ordinary Resolution No. 3 4. Ordinary Resolution No. 4 5. Ordinary Resolution No. 5 6. Ordinary Resolution No. 6 7. Ordinary Resolution No. 7 8. Ordinary Resolution No. 8

Please indicate with a cross (X) in the spaces provided whether you wish your votes to be cast for or against the resolutions. In the absence of specific directions, your proxy will vote or abstain as *he/she thinks fit. Signed this ………….. day of ……………. 2009 No of Shares Held *CDS Account No.:

………………………………………………………Signature(s)/Common Seal of Member(s) *CDS – Central Depository System Notes: 1. A member of the Company entitled to attend and vote at the meeting may appoint not more than two (2) proxies to attend and vote

instead of him. Where a member appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy. A member of the Company who, is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, 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.

2. A proxy need not be a member of the Company. 3. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if

the appointer is a corporation, either under its common seal or in some other manner approved by its Directors. 4. The instrument of proxy must be deposited at the Company’s registered office at Lot 1 & 3, Jalan Rivet 15/15, Seksyen 15, 40000

Shah Alam, not later than forty-eight (48) hours before the time appointed for holding the meeting.

®

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