trc synergy berhad -...

TRC SYNERGY BERHAD413192 D

ANNUAL REPORT 2004

A WALL BEGINS WITH ONE BRICK. A BUILDING BEGINS WITH MANY.

BEHIND LAYERS OF PAINT, CEMENT, GLASS AND METAL FACADES, A STRUCTURE OF BRICKS IS CAREFULLY CONSTRUCTED TO STAND THE TESTS OF TIME. THESE SIMPLE RECTANGULAR UNASSUMING BLOCKS ARE THE ESSENCE OF EVERY BUILDING, EVERY BRIDGE, EVERY HOSPITAL, EVERY HOME.

BRICKS ARE THE SIMPLEST AND MOST NECESSARY ELEMENT IN THE BUILDING AND CONSTRUCTION INDUSTRY. EACH INTERLAYING BRICK IS STRONG AND STURDY AND SIGNIFIES TRC SYNERGY BERHAD’S CORE AND DEDICATED INVOLVEMENT IN THE INDUSTRY.

AS BRICKS FORM BUILDINGS, TRC’S SUCCESS IS ACHIEVED THROUGH THE SYNERGISTIC EFFORTS AND COMBINED CALIBERS OF ALL ITS MEMBERS. IT IS THIS FORMULA THAT GUIDES THE COMPANY’S REALIZATION OF BECOMING ONE OF MALAYSIA’S LARG-EST AND MOST SUCCESSFUL CORPORATIONS.

WE ARE THE BUILDING BLOCKS OF OUR NATION.introduction 01

TABLE OF CONTENTS

2

7

8

10

11

12

18

21

25

59

60

64

66

67

Chairman’s Statement

Corporate Profile

Board Of Directors’ Profile

Corporate Information

Corporate Structure

Statement on Corporate Governance

Statement on Internal Control

Audit Committee Report

Financial Statements

List of Properties

Analysis of Shareholdings

Notice of 8th Annual General Meeting

Statement Accompanying Notice of Annual General Meeting

Proxy Form

TO ALL OUR SHAREHOLDERS

ON BEHALF OF THE BOARD OF TRC SYNERGY BERHAD, I HAVE PLEASURE IN PRESENTING TO YOU THE ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004.

02 T R C S Y N E R G Y B E R H A D | A N N U A L R E P O R T

REVIEW OF OPERATIONSThe year 2004 has been another challenging year for the Group. In the past 12 months, there has been a sharp

decline in the number of government and private sector jobs and infrastructure projects. Overall, the construction

sector contracted by 1.9% in the year under review. The scarcity of jobs coupled by the sharp rise in construc-

tion related material costs like steel bars and diesel have greatly impacted the Group’s performance.

CONSTRUCTION DIVISIONFor the period under review, construction activity was the main revenue contributor for the Group. Due to the

slowdown in the construction sector, the Group’s construction arm was not able to secure any sizeable projects.

The New Prison Complex in Bentong, which was initially expected to commence in the third quarter of 2004,

has now been deferred to the first half of 2005.

In order to cushion the impact of the contracting domestic construction activity, the Group has intensified its

efforts to venture abroad, particularly, in countries like India, Middle East and Africa. We are confident that some

of these ventures would materialise in the coming years and this would help to sustain the Group’s construction

division.

PROPERTY DIVISIONThe Group, through its property arm, has successfully completed 122 units of semi-detached and terrace

houses in Ulu Klang known as Andaman Ukay and a Certificate of Fitness was issued in June 2004.

The associated company of the Group is currently developing part of a piece of land measuring 163 acres

in the Plentong region, next to Permas Jaya, in Johor Bahru. It has, to date, completed Phase A compris-

ing of 352 units of Medium Cost Apartments. Two blocks out of the five blocks of Medium Cost Apart-

ments in Phase B comprising 356 units are currently being developed. So far, the sales for Phase B have

been slow due to the soft property market in Johor. We are currently re-strategising the development of

the remaining land bank to be more in line with the prevailing market trends and demands of properties

in Johor and to tap into its potential.

Dato’ Hj Sufri Bin Hj Mohd Zin (Executive Chairman)

CHAIRMAN’S STATEMENT

T R C S Y N E R G Y B E R H A D | A N N U A L R E P O R T 03

MANUFACTURING DIVISIONDue to the slowdown in construction activity, this division was relatively dormant for the period under

review.

FINANCIAL PERFORMANCEThe Group recorded a turnover of RM304.438,368 million and a pre-tax profit of RM378,811 for the

financial year ended 31 December 2004.

The low pre-tax margin is largely due to the rise in diesel prices and other construction material costs,

which have invariably eroded the Group’s margin.


Seri Setia Bridge at Putrajaya


CHANGES IN THE COMPOSITION OF THE GROUPOn 2 July 2004, the Company acquired 9 shares of RM1.00 each in TRC Infra Sdn. Bhd., at par representing 90% equity interest, thus

becoming a new subsidiary of the Group.

The Group had also incorporated a new subsidiary in India known as TRC Construction India Private Limited on 12 August 2004. It is

a wholly-owned subsidiary of the Company and it is expected to carry out construction activities in India.

In addition to the above,, the Company had on 1 November 2004 incorporated a wholly-owned subsidiary, TRC International Pte. Ltd -

an offshore company in Labuan - to serve as an investment holding company for the international activities of the Group.

The rationale for the acquisition and incorporation of the above companies is to set a platform for the Group to expand its operations

both locally and internationally.

ECONOMIC OUTLOOKIn accordance with the Economic Report 2004/2005, the construction sector is forecasted to grow by 1.8% in the year 2005, contrib-

uted partly by the civil-engineering sub-sector. The housing sub-sector is also envisaged to remain robust, underpinned by higher

incomes, low interest rates, and easy access to loans.

Greater public spending is seen on road and util ity, especially water, projects in the coming years. Emphasis on improving road network

is mainly focused on East Malaysia and the upgrading of federal roads in the state of Pahang, Terengganu and Kelantan. We envisage

that the Government will revive spending on projects under the Ninth Malaysia Plan (9MP) and this is expected to have a positive impact

on the performance of the Group going forward.

DIVIDENDWith due recognition to the Company’s shareholders’ support, the Board of Directors is recommending a First and Final gross dividend

of 1.5 sen per share less 28% income tax amounting to RM997,920.00 for the financial year ended 31 December 2004. The dividend

is subject to the shareholders’ approval at the forthcoming annual general meeting.

ACKNOWLEDGEMENT AND APPRECIATIONOn behalf of the Board of Directors, I would like to extend our sincere appreciation to all our valued clients, bankers and business associ-

ates for their undivided support. I would also like to put on record my gratitude to the management and staff of the Group for their effort

and hard work in spite of the challenging business environment in the preceding year.

Finally, we acknowledge and appreciate the continuing support of our shareholders and we hope that the prospect for the coming years

would be better for the Group.


Pedestrian Bridge at Taman Seri Empangan at Putrajaya

TRC Synergy Berhad was initially incorporated as a private limited company in Malaysia under the Companies Act, 1965 on 11 December 1996 under the name TRC Synergy Sdn Bhd. On 8 January 1997, the company changed its status from a private limited company to a public company and assumed the name TRC Synergy Berhad (TRCS).

TRCS was listed on the Main Board of the Bursa Malaysia Securities Berhad on 6 August 2002, where it offered Public Issue and Offer For Sale of 16,000,000 and 3,500,000 ordinary shares respectively. TRCS is principally an investment holding company while the principal activities of its subsidiary companies and associate company are related to general contracting works. This includes building and infrastructure construction, turnkey design and building contracts, hiring and servicing of vehicles and construction equipment, manufacturing and dealing in concrete prod-ucts, property development and project management services.

The TRCS group of companies employs over 800 personnel of which more than 15% are in the sub-professional and professional group. TRCS not only has the ability to undertake common proj-ects like roads and buiing construction, but also specializes in mega projects like airports, railway trackworks, stadium, hospitals and large property development ventures.

The company’s motto “As one with the nation” sums up the company’s aspiration to progress in tandem with the nation’s vision.

CORPORATE PROFILE


Dato’ Haji Sufri Bin Haji Mohd Zin, Malaysian, aged 48, was appointed as the Managing Director of TRC Synergy Berhad (“TRC” or “the Company”) on 29 March 2002 and is presently the Executive Chairman of the Company and the Managing Director of its subsidiary Companies. He graduated from Institute of Teknologi MARA (“ITM”) in 1982 with a Diploma in Business Studies. He started his career as a banker with Bank Bumiputera Malaysia Bhd in 1982. His inherent perseverance and unique business acumen led him into the building and construction industry in 1984. YBhg Dato’ Hj Sufri is a member of the Audit Committee. During the Finan-cial year ended 31 December 2004, he attended all of the six (6) Board Meetings. He does not have any personal interest in any business arrangement involving the Company, except that he is a substantial shareholder of Andaman Budi Sdn. Bhd. which is an associate company of Trans Resources Corporation Sdn. Bhd., a wholly owned subsidiary of the Company.

Dato’ Hj Sufri Bin Hj Mohd Zin (Executive Chairman)

Abdul Aziz Bin Mohamad, Malaysian, aged 46, was appointed as an Executive Direc-tor of the Company on 29 March 2002. He joined TRC Group as a Senior Contract Executive in 1994 and was later promoted to Deputy General Manager (Contracts) in 1997. He received his early education in the Malay College Kuala Kangsar (MCKK) and later graduated from Trent Polytechnic in Nottingham, England in 1983. He is a Quantity Surveyor by profession and a member of the Institution of Surveyors, Malay-sia. He started his career as an Assistant Quantity Surveyor in England with Rider Hunt and Partners in 1982. He later joined Jabatan Kerja Raya (JKR) Kuala Lumpur in 1983 as a Quantity Surveyor where he administered the contractual aspects of projects. Aziz attended all of the six (6) Board Meetings held during the financial year ended 31 December 2004. He does not have any personal interest in any business arrangement involving the Company, except that he is a shareholder of Andaman Budi Sdn. Bhd. which is an associated company of Trans Resources Corporation Sdn. Bhd., a wholly owned subsidiary of the Company.

Abdul Aziz Bin Mohamad(Executive Director)

BOARD OF DIRECTORS’ PROFILE08 T R C S Y N E R G Y B E R H A D | A N N U A L R E P O R T

General (R) Dato’ Seri Mohd Shahrom Bin Dato’ Hj Nordin, aged 58, was appointed as a Director of the Company on 25 March 2004. After his secondary education, he was selected for Officer Cadet training at the Royal Military College, Sungai Besi in 1966 before being commissioned as a Second Lieutenant to the Royal Malay Regiment in 1968 and assigned as a Platoon Commander with the 2nd Battalion, Royal Malay Regiment. General (R) Dato’ Seri Mohd Shahrom has served in various appointments at command, staff, training and at diplomatic service levels and he was the Chief of the Malaysian Army from 1 January 2003 to 15 September 2003. Prior to that appointment, he was the Chief of staff at the Armed Forces Headquarters. Currently, he is the Senior Vice President Defence of the National Aerospace & Defence Industries Sdn. Bhd. (NADI). He is also the Chairman of SME Aerospace Sdn. Bhd. (SMEA) and Director of SME Ordnance Sdn. Bhd. (SMEO). Both SMEA and SMEO are subsidiary companies of the NADI Group of Companies. General (R) Dato’ Seri Mohd Shahrom attended five (5) out of six (6) Board Meetings held during the financial year ended 31 December 2004.

General (R) Dato’ Seri Mohd Shahrom Bin Dato’ Hj Nordin(Non-Independent, Non-Executive Director)

Rahman Bin Ali(Independent, Non–Executive Director)

Rahman Bin Ali, Malaysian, aged 48, was appointed as a Director of the Company on 13 May 2002. He graduated from University of Malaya in 1982 with a Degree in Accounting. He is currently a Chartered Accountant of the Malaysian Institute of Accountants. He started his career as a credit officer with Bank Bumiputera Malaysia Berhad in 1982. He left the bank in 1986 to set up his own management consultancy company under the name of Advance Management Services in 1986 before becoming a Branch Manager with a public accounting firm, Sahir and Co. in 1990. In 1994, he set up his own accounting firm by the name A. Rahman & Associates and later became a partner of Omar Arif, A. Rahman & Associates in 1996. Rahman is a member of the Audit Commit-tee, Nomination Committee and Remuneration Committee. He attended five (5) out of six (6) Board Meetings held during the financial year ended 31 December 2004.

Noor Zilan Bin Mohamed Noor, Malaysian, aged 45, was appointed as a Director of the Company on 13 May 2002. He graduated from ITM in 1983 with a Diploma in Law. He then joined United Malayan Banking Corporation as a Trainee Executive Officer before pursuing his further studies in the United Kingdom in 1984 where he graduated from City of London Polytechnics with LLB (Hons) majoring in Business Law in 1987. Subse-quently, he went on to read Law at Lincoln’s Inn and was called to the English Bar in 1988. Upon returning to Malaysia he was called and admitted to the Malaysian Bar in 1989 as an Advocate & Solicitor. He then worked as a Legal Assistant before starting his own law firm in 1991 and is now a Senior Partner with an established law firm in Kuala Lumpur specializing in the area of Corporate Law, Banking, Building and Construction Law apart from civil & criminal litigation. Noor Zilan is the Chairman to the Audit Commit-tee, Nomination Committee and Remuneration Committee. He attended all of the six (6) Board Meetings held during the financial year ended 31 December 2004.

Noor Zilan Bin Mohamed Noor(Independent, Non–Executive Director)


NOTESave as disclosed,

1) none of the Directors have:-

i) ii) ii i)

2) none of the Directors holds directorship in other public companies.

any family relationship with any director and/or substantial shareholders of the Company; any conflict of interest with the Company; and any conviction for offences (other than traffic offences) within the past ten (10) years.

BOARD OF DIRECTORSDato’ Hj Sufri Bin Hj Mohd Zin(Executive Chairman)

Abdul Aziz Bin Mohamad(Executive Director)

Rahman Bin Ali(Independent Non-Executive Director)

Noor Zilan Bin Mohamed Noor(Independent Non-Executive Director)

General (R) Dato’ Seri Mohd Shahrom Bin Dato’ Hj Nordin(Non-Independent, Non-Executive Director) (Appointed on 25 March 2004)

COMPANY SECRETARIESAbdul Aziz Bin Mohamed(LS 007370)

Dato’ Tang Swee Guan(MIA No. 5393)

REGISTERED OFFICE /PRINCIPAL PLACE OF BUSINESSWisma TRCNo. 217 & 218 Jalan Negara 2Taman Melawati53100 Ulu KlangSelangor Darul Ehsan

Tel No. : +603 4108 0105 / +603 4108 0106Fax No. : +603 4108 0104E-mail : [email protected]

BRANCH OFFICE Lot 3626, Block 16, KCLDTaman TimberlandLorong Rock 293200 KuchingSarawak

Tel No. : 082-239998Fax No. : 082-421998

WEBSITEwww.trc.com.my


CORPORATE INFORMATION

AUDITORSKumpulan Naga (AF-0024)Suit 1, 1st Floor, Wisma LeopadNo. 5, Jalan Tun Sambanthan50470 Kuala Lumpur

SHARE REGISTRARSymphony Share Registrars Sdn Bhd(formerly known as Malaysian Share Registration Services Sdn Bhd)

Level 26, Menara Multi PurposeCapital Square8, Jalan Munshi Abdullah50100 Kuala Lumpur

Tel : +603 2721 2222Fax : +603 2721 2530 / 603 2721 2531

PRINCIPAL BANKERSEON Bank BerhadMalayan Banking BerhadArab-Malaysian Merchant Bank BerhadAffin Bank Berhad

SOLICITORSMessrs Noorzilan & PartnersMessrs C.C. Choo & Co.

STOCK EXCHANGE LISTINGBursa Malaysia Securities Berhad (Main Board)(Stock No. : 5054)

Warden Quarters at Politeknik Kuching, Sarawak


CORPORATE STRUCTURE

TRC SYNERGY BERHAD413192 D

TRANS RESOURCESCORPORATION SDN BHD

(100%)120265 P

TRC INFRA SDN BHD(90%)

645178 P

TRC CONSTRUCTIONINDIA PTE LTD

(100%)U45203KL2004PTC017360

TRC INTERNATIONALPTE LTD(100%)LL04510

TRC-PDI JV SDN BHD (60%)

616448 K

GOMEX SDN BHD(45%)

681546 D

TRC DEVELOPMENTSDN BHD

(100%)309248 U

ANDAMAN BUDISDN BHD

(40%)444162 W

TRC CONSTRUCTION (SARAWAK) SDN BHD

(100%)621714 W

TRC CONCRETEINDUSTRIES SDN BHD

(100%)151401 V

The Board of Directors of TRC Synergy Berhad (“the Board”) upholds good corporate gover-

nance and has always ensured that the highest standards of corporate governance as set out

in the Malaysian Code on Corporate Governance (“The Code”) are practiced within the group.

These have been recognized by the Board as the Group’s key responsibilities in order to pro-

tect and enhance long term shareholder value and to safeguard the Group’s assets.

The Board will continuously evaluate the Group’s corporate governance practices and proce-

dures, and where appropriate will adopt and implement the best practices as enshrined in the

Code. In accordance with paragraph 15.26 of the Bursa Malaysia’s Listing Requirements (“Listing

Requirements”), the Board is pleased to provide the following statement detailing the manner

the Group has applied the Principles and the extent of compliance with the Best Practices.

STATEMENT ON CORPORATE GOVERNANCE


Road P4/02-6 Precinct 4, Putrajaya

1. DIRECTORS

a) The Board of DirectorsThe Group is led and controlled by an effective Board of Directors headed by the Executive Chairman who has detailed knowledge and

vast experience in the construction industry. The rest of the Board members possess a wide range of skill and experiences ranging from

construction, finance, legal and general management disciplines suitable for managing the Group’s businesses.

The Board of Directors has overall responsibility for the performance of the Group inclusive of corporate governance, strategic planning

and maintaining effective control over financial and operational matters.

b) Board BalanceThe Board consists of five members comprising two Executive Directors, two Independent Non-Executive Directors and one Non Indepen-

dent Non Executive Director. The Company complies with the criteria of having at least one-third of the Board Members as Independent

Non-Executive Directors. The profiles of the Directors are presented in this Annual Report on pages 8 and 9.

Two of the Board members are Independent Non-Executive Directors who provide broad, unbiased and balanced assessments on

proposals initiated by the Executive Directors and the senior management of the Group.

The Non-Executive Directors also include a representative of Lembaga Tabung Angkatan Tentera, one of the substantial shareholders of

the Company, who brings independent judgments that safeguards the interest of overall shareholders of the Company.

c) Board MeetingDuring the financial year ended 31 December 2004, six board meetings were held. In the meetings, the Board deliberated and consid-

ered matters relating to the Group’s financial performance, key business and operational issues and business plans. Details of attendance

at the meeting are as follows:-

The Board has agreed to meet at least four times a year with additional matters addressed by way of circular resolutions and additional

meetings to be held as and when the need arises.

d) Supply of Information to the BoardAll Directors have unfettered access to all information within the Group as a full Board or in their individual capacity in carrying out their

duties and responsibilities. They also have direct access to the advice and services of the Company Secretaries, internal and external

auditors and other independent professionals at all times.

As for the Board meeting, the Board members are provided with adequate information in the form of a complete set of Board files two

weeks prior to the meeting.

e) Appointment and Re-election of DirectorsThe Company has a formal and transparent procedure for the appointment of new directors and re-election of directors. These aspects

are spelt out clearly in the Company’s Articles of Association.

Dato’ Hj Sufri Bin Hj Mohd Zin

Abdul Aziz Bin Mohamad

Noor Zilan Bin Mohamed Noor

Rahman Bin Ali

Gen (B) Dato’ Seri Mohd Shahrom Bin Dato Hj Nordin (Appointed on 25/3/04)

6/6

6/6

6/6

5/6

5/5

NAME NO. OF MEETINGS ATTENDED


All newly appointed Directors are subject to election by shareholders at the Annual General Meeting subsequent to their appointment.

As for the re-election of Directors, the Articles of Association of the Company provides at least one-third of the Directors are required to

retire by rotation at each financial year and are eligible to offer themselves for re-election at the Annual General Meting. All Directors

shall retire from office at least once in each three years.

f) Directors’ TrainingGen (B) Dato’ Seri Mohd Shahrom bin Dato Hj Nordin, who was appointed as Director on 25 March 2004, has attended and completed

the Mandatory Accreditation Program (“MAP”). He will continue to undergo Continuous Education Programme (“CEP”) as prescribed by

the Listing Requirements commencing from the year 2005. As for the other Directors, all of them have completed MAP as well as 72

CEP points that need to be completed during the year 2003 and 2004. For year 2005, the Board as a whole will determine the training

needs for directors and they have principally agreed to attend at least one training every year.

g) Board CommitteesAs recommended by the Code, the Board has established the following committees to assist the Board in discharging its duties:-

Each of these committees has its own functions and responsibilities and they report to the Board.

2. DIRECTORS’ REMUNERATION

The Group has adopted the principle recommended by the Code whereby the level or remuneration of the Directors and senior manage-

ment should reflect the level of responsibility and contributions toward the successful and efficient running of the Group’s activities.

ProcedureTo assist the Board in the discharge of its duties, the Board had established a Remuneration Committee on 22 May 2002. As at the date

of the Annual Report, the composition of the Remuneration Committee is as follows:-

The Committee will review and recommend to the Board the remuneration package of the executive directors and senior management

of the Group with the main aim of providing a level of remuneration sufficient to attract and retain competent executives who can manage

the Group effectively.

During the financial year ended 31 December 2004, the Committee met once with all members present.

DisclosureThe aggregate remuneration of the Directors received and receivable from the Company and its subsidiaries during the financial year are

as follows:-

i)

ii)

i i i)

iv)

i)

ii)

Audit Committee

Nomination Committee

Remuneration Committee

Employees’ and Directors’ Share Option Scheme (ESOS) Committee


Rahman Bin Ali


Executive Directors

Non-Executive Director

Total

120,000.00

75,000.00

195,000.00

578,880.00

-

578,880.00

69,877.80

-

69,877.80

CATEGORY FEES (RM) SALARIES (RM) EPF & SOCSO (RM)

The remuneration paid to the Directors, analysed into the following bands, is as follows:-

3. RELATIONSHIP WITH INVESTORS AND SHAREHOLDER COMMUNICATION

The Board acknowledges the need for shareholders to be informed of all important issues and major developments concerning the

Company. In addition to the various announcements made during the year, the timely release of financial results on a quarterly basis

provides shareholders with an overview of the Group’s performance and operations.

During the financial year ended 31 December 2004, there were a number of dialogues and analyst briefings organised by the Company.

These sessions were held either at the request of the analysts or initiated by the Company. During the discussions which were attended

by the Executive Directors and Senior Management staff, relevant information pertaining to the Group was disseminated to the public.

The Company also has a cordial relationship with reporters who have been playing a very effective role in conveying the Group’s informa-

tion to the public, shareholders and investors.

Besides, shareholders, investors and members of the public may also obtain updated information on the Group by accessing to the

Company’s website at www.trc.com.my.

The company uses the Annual General Meeting as the primary channel of communication with its shareholders. Shareholders who are

unable to attend to the meeting can appoint their proxies who can vote on their behalf. The Board of directors, senior management as

well as the Company’s Auditors are present to answer any relevant questions raised at the meeting.

4. ACCOUNTABILITY AND AUDIT

i. Financial ReportingIn presenting the Company’s financial statements and quarterly results to shareholders and other interested parties, the Board aims to

present a balanced and understandable assessment of the Group’s financial position and prospects.

The financial statements of the Company and of the Group are prepared in accordance with the requirements of the applicable Approved

Accounting Standards in Malaysia and the provisions of the Companies Act, 1965.

The Group’s annual financial statements and quarterly results are reviewed by the Audit Committee and approved by the Board before

announcement to Bursa Malaysia for public release.

The statement explaining the Directors’ responsibilities for preparing the annual audited financial statements pursuant to paragraph

15.27(a) of the Listing Requirements is set out on page 17 of the Annual Report.

ii. Internal ControlThe Board acknowledges and places strong emphasis in maintaining a sound system of internal control which is necessary to safeguard

the Group’s assets and shareholders’ interest. Details of the Group’s internal control system is presented in the Statement on Internal

Control and Audit Committee Report set out on pages 18 to 20 and pages 21 to 24 respectively.


Less than RM 50,000

RM 200,000 – RM 300,000

RM 450,000 – RM 550,000

-

1

1

3

-

-

RANGE OF REMUNERATION NUMBER OF EXECUTIVE DIRECTORS NUMBER OF NON-EXECUTIVE DIRECTORS

iii. Relationship with AuditorsThrough the Audit Committee, the Group has established a transparent and appropriate relationship with the Group’s external auditors in

seeking their advice and towards ensuring compliance with the applicable Approved Accounting Standards.

STATEMENT OF COMPLIANCE WITH THE BEST PRACTICE OF THE MALAYSIAN CODE ON CORPORATE GOVERNANCE (THE CODE)

Save as disclosed below, the group has substantially complied with the Best Practices in Corporate Governance set out in Part 2 of the Code:-

ADDITIONAL CORPORATE INFORMATION

In compliance with the Listing Requirements, the following information is provided:-

i. Utilization of proceedsDuring the financial year ended 31 Dicember 2004, the company has fully util ized the prceeds from Private Placement exercise amount-

ing to RM16.1 million for the company‘s working capital and defray expenses in relation to the corporate exercise.

ii. Share buybacksThe Company has not undertaken any share buyback exercises during the financial year ended 31 December 2004.

iii. Option, Warrants or Convertible SecuritiesDuring the financial year ended 31 December 2004 the Company established a Share Option Scheme for Employees and Directors (“The

Scheme”). The Scheme shall remain in force for a duration of five years commencing from 22 June 2004. Details of the Scheme are

reported in the Directors’ Report on page 28.

iv. American Depository Receipt (ADR) / Global Depository Receipt (GDR)The Company has not sponsored any ADR or GDR Programmes.

v. Sanctions and / or penaltiesThere were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regula-

tory bodies during the financial year ended 31 December 2004.

vi. Non-Audit FeesThe non-audit fees paid to external auditors amounting to RM46,450.00 for the financial year ended 31 December 2004.


Part 2, AA II

Part 2, AA VII

Chairman and ChiefExecutive

Senior IndependentNon-ExecutiveDirector to whomconcerns may beconveyed

The Company is headed by an Executive Chairman and therefore, the roles of the Chairman and the Chief Executive Officer are not separate. The Board is of the opinion that the check and balance of power is undertaken by the strong presence of Independent Non-Executive Directors in the Board. Furthermore, the Chairman encourages all Directors to participate actively in all deliberation of issues that concern the Group.

Hence, the Board maintains the view that this combined arrangement will not hamper the Board from making fair decisions for the best interest of the Group.

Presently, all Board Members are accessible by the shareholders and public inves-tors where they can relay their concerns over company matters. Therefore, the appointment of Senior Independent Non-Executive Director to assume such respon-sibilities is not timely necessary.

PROVISION OF THE CODE DETAILS EXPLANATION

vii. Variation of ResultsThere is a deviation of more that 10% between the loss after tax and minority interest stated in the announced unaudited consolidated

results and the audited results of the Group for the financial year ended 31 December 2004.

We append below a reconciliation between the net loss after tax and minority interest stated in the announced unaudited accounts which

was released to Bursa Malaysia on 28 February 2005 and the net profit as reported in the Group’s audited accounts for the financial

year ended 31 December 2004 :-

viii. Profit GuaranteeThere was no profit guarantee given by the Company during the financial year ended 31 December 2004.

ix. Material ContractsThere was no material contracts between the Company and its subsidiaries involving Directors and major shareholders’ interests during

the financial year ended 31 December 2004.

x. Revaluation of landed propertiesThe Company does not adopt a policy of regular revaluation of its properties.

xi. Recurrent Related Party TransactionThe Company did not enter into any recurrent related party transaction which requires the shareholders’ mandate during the financial

year ended 31 December 2004.

STATEMENT OF DIRECTORS’ RESPONSIBILITY IN RELATION TO THE FINANCIAL STATEMENTS

The Board is responsible to ensure that the financial statements are prepared in accordance with the provision of the Companies Act,

1965 and applicable approved accounting standards in Malaysia so as to ensure a true and fair view of the state of affairs of the Group

and the Company as at the end of each financial year and of their results and their cash flows for that financial year then ended. The

Board is also responsible to maintain accounting records that disclose with reasonable accuracy the financial position of the Group and

the Company, and which enable them to ensure that the financial statements comply with the Companies Act, 1965.

The Directors have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the

Group, and to prevent and detect fraud and other irregularities.

The Directors are satisfied that in preparing the financial statements of the Group for the financial year ended 31 December 2004, the

Group has adopted appropriate accounting policies and applied them prudently and consistently. They are also satisfied that reasonable

and prudent judgments and estimates were made and all applicable Approved Accounting Standards in Malaysia have been followed

accordingly.


Net loss after taxation and minority interest as announced on 28 February 2005

AdjustmentOverprovision of taxationAdditional share loss of associated companyShare of taxation of associated companyAdditional loss of subsidiary companyReversal of deferred taxationOther adjustments

Net profit after taxation and minority interests as per the audited accounts

(137,786)

185,680(4,000)(2,552)(1,496)

1,027131

41,004

RM

The Board of Directors of TRC Synergy Berhad (“the Board”) is committed to maintaining a

sound System of Internal Control in the Group and is pleased to provide the following state-

ment that outlines the nature and scope of internal control of the Group during the financial

year ended 31 December 2004 pursuant to paragraph 15.27(b) of the Bursa Malaysia’s List-

ing Requirements.

STATEMENT ON INTERNAL CONTROL


Kuala Penyu Hospital, Sabah

1. RESPONSIBILITY

The Board acknowledges the importance of sound internal controls and risk management practices within the Group to meet its business

objectives. The Board affirms its overall responsibility for the effectiveness of the Group’s systems of internal control and risk manage-

ment, and for reviewing the adequacy and integrity of these systems. The internal control system involves the core business and its key

management, including the Board, and is designed to meet the Group’s particular needs and to manage the risks to which it is exposed.

The system of Internal Control aims to:-

i)

ii)

i i i)

The Board is fully aware that this system, by its nature, can only provide reasonable, and not absolute, assurance against material

misstatement, loss and fraud. These systems are designed to manage, rather than eliminate, the risk of failure to achieve the business

objectives of the Group.

2. INTERNAL CONTROL

The key elements of the Group’s internal control system are described below:-

a) Internal Audit DepartmentThe Internal Audit Department which was established on 20 August 2004 reviews key business processes and controls and assists the

Audit Committee in the discharge of its duties and responsibilities. Its role is to provide independent and objective reports on the organi-

zation, management, records, accounting policies and internal controls to the Audit Committee and the Board.

b) Quality PolicyThere is a clear and well documented Quality Policy in accordance with ISO 9001 : 2000 by a wholly-owned subsidiary of the Company

which is undertaking the core business of the Group. This policy and the related procedures are communicated to the respective staff

members. Amongst the salient features of the Quality Policy are as follows:-

i)

ii)

i i i)

iv)

v)

c) Line of ReportingClearly defined delegation of responsibilities to committees of the Board and to operating units, including authorisation levels for all

aspects of the business. This also includes detailed job descriptions and specifications provided to each employee of the Group which

is further reiterated through a well defined organizational structure.

d) Dissemination of Information within the GroupRegular and comprehensive information is provided to Management covering financial performance and key business indicators, key

operating statistics/ indicators, key business risks, legal, environmental and regulatory matters. Key matters affecting the Group are

brought to the attention of the Audit Committee and are reported to the Board on a regular basis.

safeguard shareholders’ interest and the assets of the Group;

ensure that proper accounting records are maintained; and

that the financial information used within the business and the publication to the public is reliable.

Internal Quality Audits are conducted at planned intervals to determine whether the Quality Management System is effectively imple-

mented and maintained and conforms to the established system requirements of Internal Standard, ISO 9001:2000.

On an annual basis, an overall Internal Quality Audit Plan is devised encompassing every department and project, taking into consid-

eration the status and importance of relevant processes, areas to be audited as well as results of previous audits.

Qualified Internal Quality Auditors will be assigned with audit works in accordance with the Internal Quality Audit Plan where the

reports shall be examined and analyzed and reported to the management during Management Review Board Meeting.

As part of the Quality Management System, the management shall meet on a monthly basis to discuss and deliberate all issues

relating to the business of the Group.

The Audit Committee is accessible to the relevant reports produced in relation to the Quality Management and if the need arises, the

matter shall be further discussed in the Board Meeting.


e) Detail Budgeting ProcessA detailed budgeting process where operating units prepare budgets for every project for discussion in the Management Meeting. A monthly

monitoring of results against the budget, with major variances being followed up and management action taken, where necessary.

f) Risk Management FrameworkThe Group has in place an on-going process for identifying, evaluating, monitoring and managing the significant risks affecting the

achievement of its business objectives. This is an on-going process, subject to regular review by the Board, and accords with the “State-

ment on Internal Control: Guidance for Directors of Public Listed Companies”.

The Group adopts a decentralised approach to risk management by encouraging participation of all employees in such a manner that the

employees take ownership and responsibility for risks at their respective levels. The process of risk management and treatment is

overseen by the senior management and reported to the Board through the Audit Committee. The risk management framework is also

embodied in the Quality Policy in accordance with ISO 9001 : 2000 practised by a wholly-owned subsidiary of the Company.

g) Audit CommitteeThe Audit Committee, on behalf of the Board, regularly reviews and holds discussions with the management on the matters relating to

internal control, the external auditors and the management.

The Report on the Audit Committee set out on pages 21 to 24 of this Annual Report contains further details on the activities undertaken

by the Audit Committee in 2004.

h) Board The Board holds regular discussions with the Audit Committee, Management and external auditors and reads their reports on matters

relating to internal controls and deliberates their recommendations for implementation.

The Directors have taken the necessary steps, as are reasonably open to them, to ensure that appropriate systems are in place for the

assets of the Group to be adequately safeguarded through the prevention and detection of fraud and other irregularities and material

misstatements.

The Directors believe that the system of internal control is considered appropriate to business operations, and that the risks taken are at

an acceptable level within the context of the business environment of the Group.

During the year, a number of improvements to internal controls were identified and addressed. There has been no significant weakness

noted which would result in any material loss.

This statement is made in accordance with a resolution of the Board of Directors dated 25 April 2005 .


1. COMPOSITION OF THE AUDIT COMMITTEE

The Audit Committee comprises of the following two Independent Non-Executive Directors and one executive director:-

Chairman:

Members:

Secretary :

Noor Zilan bin Mohamed Noor

(Independent Non-Executive Director)

i)

ii)

Abdul Aziz Bin Mohamed

(Company Secretary)

YBhg. Dato’ Hj Sufri Bin Hj Mohd Zin

(Eecutive Chairman)

Rahman Bin Ali

(Independent Non-Executive Director)

(Member of the Malaysian Institute of Accountants)

AUDIT COMMITTEE REPORT


Girls Hostel at Politeknik Kuching, Sarawak

2. TERMS OF REFERENCE

a) CompositionThe Board of Directors shall elect an Audit Committee from amongst themselves (pursuant to a resolution of the Board of Directors)

comprising not less than three members where the majority of them shall be independent non-executive members of the Board.

The members of the Audit Committee shall elect a Chairman from amongst themselves. All members of the Audit Committee, including

the Chairman, will hold office only so long as they serve as Directors of the Company. Should any members of the Audit Committee cease

to be a Director of the Company, his membership in the Audit Committee would cease forthwith.

If the members of the Audit Committee for any reason be reduced to below three, the Board of Directors shall within three months of

that event, appoint such number of new members as may be required to make up the minimum number of three members.

b) ObjectivesThe primary objectives of the Audit Committee are:

i)

i i)

i i i)

c) Duties and responsibilitiesThe duties and responsibilities of the Audit Committee shall be:

i)

ii)

i i i)

iv)

v)

vi)

vii)

vii i)

d) AuthorityThe Committee is authorized by the Board to investigate any activity within the terms of reference. It is authorized to seek any information

it requires from any employees and all employees are directed to co-operate with any request made by the Committee.

To provide assistance to the Board in fulfi l l ing its fiduciary responsibilities particularly relating to business ethics, policies and

practices and financial management and control.

To provide greater emphasis on the audit functions by increasing the objectivity and independence of external and internal auditors

and providing a forum for discussion that is independent of the management.

To maintain through regularly scheduled meetings a direct line of communication between the Board and the external auditors,

internal auditors and management.

To consider the appointment of the external auditors, determination of audit fees and any questions of resignation or dismissal.

To discuss with the external auditor before the audit commences the nature and scope of the audit, and ensure co-ordination where

more than one audit firm is involved.

To review the quarterly results and year end financial statements before submission to the board, focusing particularly on:

To discuss problems and reservations arising from the interim and final audits, and any matters the auditors may wish to discuss (in

the absence of management where necessary).

To review the internal audit programme, consider the major findings of internal audit investigations and management’s response, and

ensure coordination between the internal and external auditors.

To keep under review the effectiveness of the internal control system, and in particular review the external auditor’s management

letter and management’s response.

To review any related party transactions and conflict of interest situations that may arise within the Group including any transactions,

procedure or course of conduct that raises questions of management integrity.

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

- Any changes in accounting policies and practices

- Major judgmental areas

- Significant adjustments resulting from the audit

- The going concern assumption

- Compliance with accounting standards

- Compliance with the stock exchange and legal requirements.



The Committee is empowered by the Board to retain persons having special competence as necessary to assist the Committee in fulfi l l ing

its responsibilities.

e) Meeting and MinutesThe primary objectives of the Audit Committee are:

The Audit Committee shall not hold less than three meetings a year and the quorum for each meeting shall be two members.

Minutes of each meeting shall be kept and distributed to each member of the Committee and also to the other members of the Board.

The Committee Chairman shall report on each meeting to the Board.

The Company Secretary shall act as the Secretary to the Audit Committee.

3. SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

During the financial year ended 31 December 2004, the Audit Committee met five times. The details of the attendance of the members

of the Audit Committee are as follows:-

During the financial year, the Audit Committee carried out reviews of the following:-

i)

ii)

i i i)

iv)

v)

4. INTERNAL AUDIT FUNCTION

During the year 2004, the Company has taken another proactive step to establish an Internal Audit Department as recommended by the

Malaysian Code on Corporate Governance. The department, which was established on 20 August 2004, will provide assistance to the

Audit Committee in the discharge of its duties and responsibilities.

The principal objective of the Internal Audit Department is to ascertain that adequate internal control is maintained in order to safeguard

the assets of the Group and the shareholders’ interest.

The quarterly management and annual audited financial statements to ensure compliance with statutory reporting requirements and

appropriate resolution of all accounting and audit matters requiring significant judgment and where appropriate, made recommenda-

tions to the Board.

The external auditor’s audit plan and scope for the Company and the Group, the audit report, significant issues raised and manage-

ment responses in relation thereto.

The external auditor’s fees and to recommend their reappointment to the Board.

Measures implemented by management with regard to risk management and internal control.

The statement of Corporate Governance and Statement on Internal Controls which are prepared in accordance with the provisions

set out under the Malaysian Code on Corporate Governance, the extent of compliance with the said Code and recommend to the

Board action plans to address further compliance matters.

1

2

3


Dato’ Hj Sufri Bin Hj Mohd Zin

Rahman Bin Ali

5/5

5/5

5/5

NO AUDIT COMMITTEE ATTENDANCE


After its establishment, the Internal Audit Department conducted a comprehensive audit on sub-contractors’ works order and related

documents which were reviewed by the Audit Committee and the necessary actions have been taken by the management to rectify the

identified weaknesses. The Department also established follow-up audit reviews to monitor and ensure that the recommendations agreed

by the Audit Committee have been effectively implemented.

Going forward, the Internal Audit Department will strengthen its capacity and efficiency for better contribution to the Group pursuant to

the Audit Charter and Internal Audit Plan which have been approved by the Audit Committee.

5. STATEMENT IN RELATION TO THE ALLOCATION OF SHARE OPTION SCHEME

The Audit Committee noted that the Company has established a Share Option Scheme for Employees and Directors (“The Scheme”)

pursuant to the By-Laws which was approved by the shareholders at the Extraordinary General Meeting held on 30 April 2004. The

Scheme shall remain in force for a duration of five years commencing from 22 June 2004.

The salient terms of the Scheme are as follows:-

i)

ii)

i i i)

iv)

v)

vi)

The option under the Scheme was offered to eligible employees and Directors on 22 June 2004 and 1 September 2004 at an offer

price of RM1.70 per option share.

The Audit Committee progressively reviews the offer made by the Company as to ensure they are made in accordance to the allocation

pursuant to the By-Laws.

During the financial year ended 31 December 2004 the Company has not offered any options to Non-Executive Directors.

the maximum number of the Company’s new shares to be made available under the Scheme shall not exceed fifteen percent (15%)

of the issued and paid up capital of the Company;

not more than fifty percent (50%) of the Company’s shares available under the Scheme shall be allocated to Directors and senior

management;

not more than ten percent (10%) of the Company’s shares available under the Scheme shall be allocated to an individual Director or

eligible employees who either singly or collectively through persons connected to them hold twenty percent (20%) or more of the

issued and paid up capital of the Company;

The eligible participants shall include eligible employees and Directors who as at the offer date have satisfied the following criteria :-

The Scheme shall remain in force for a duration of five years from the effective date of the launch.

The option price for each share shall be based on the weighted average market price (WAMP) of the Company’s share traded on the

Exchange for the five trading days preceding the date of offer with a discount if any that does not exceed ten percent (10%) from

the five days of the Company’s shares.

- is a confirmed employee or appointed director within the Group;

- has attained at least age of eighteen;

- is employed full time and is on the payroll of the Group;

- is under such category and of such criteria that the option committee may from time to time decide.

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