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KPS Consortium Bhd (143816-V) • Annual Report 2009 �

Table of Contents

Notice of Annual General Meeting

Corporate Information

Profile of the Board of Directors

Corporate Governance Statement

Other Information Required Pursuant to Part A,Appendix 9C of the BMSB Listing Requirements

Audit Committee

Statement on Internal Control

Chairman/Group Managing Director’s Statement

Financial Statements

Directors’Report

StatementbyDirectors

StatutoryDeclaration

IndependentAuditors’Report

BalanceSheets

IncomeStatements

StatementsofChangesinEquity

CashFlowStatements

NotestotheFinancialStatements

List of Properties

Shareholdings Structure

eDividend

Proxy Form

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Enclosed•

KPS Consortium Bhd (143816-V) • Annual Report 20092 KPS Consortium Bhd (143816-V) • Annual Report 2009

Notice of Annual General Meeting

KPS CONSORTIUM BERHAD (CompanyNo.143816-V)IncorporatedinMalaysia

NOTICEISHEREBYGIVENTHATtheTwentyFourthAnnualGeneralMeetingoftheCompanywillbeheldatKlangExecutiveClub,PersiaranBukitRaja2,BandarBaruKlang,41150Klang,SelangorDarulEhsanonSaturday,26June2010at11.00amforthefollowingpurposes:-

AGENDA

AS ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the financial year ended 31December2009togetherwiththeReportsoftheDirectorsandAuditorsthereon. (PleaserefertoNote1).

2. To re-elect the following Director retiring in accordance with Article 80 of the Company’sArticlesofAssociation:-

Mr.LauFookMeng

3. ToapprovethepaymentofDirectors’feeforthefinancialyearended31December2009.4. To re-appoint Messrs SJ Grant Thornton as Auditors of the Company and to hold officeuntiltheconclusionofthenextAnnualGeneralMeetingandtoauthorisethe DirectorstofixtheAuditors’remuneration.AS SPECIAL BUSINESS

Toconsiderand,ifthoughtfit,topassthefollowingresolution:-

5. ORDINARY RESOLUTION - AUTHORITY TO ISSUE SHARES PURSUANT TO SECTION �32D OF THE COMPANIES ACT, �965

“THATpursuanttoSection132DoftheCompaniesAct,1965,andsubjecttothe approval from other relevant governmental/regulatory authorities, the Directors beandareherebyempoweredtoissuesharesintheCompanyfromtimetotime anduponsuchtermsandconditionsandforsuchpurposesastheDirectorsmay deem fit provided that the aggregate number of shares issued pursuant to this resolutiondoesnotexceed10%oftheissuedcapitaloftheCompanyatthedateof thisAnnualGeneralMeetingandthatsuchauthorityshallcontinueinforceuntil theconclusionofthenextannualgeneralmeetingoftheCompany.”6. TotransactanyotherbusinesswhichmayproperlybetransactedatanAnnualGeneral Meetingforwhichduenoticeshallhavebeengiven.

Resolution �

Resolution 2

Resolution 3

Resolution 4

KPS Consortium Bhd (143816-V) • Annual Report 2009 KPS Consortium Bhd (143816-V) • Annual Report 2009 3

Notice of Annual General Meeting (cont’d.)

ByorderoftheBoard

LIM SECK WAH (MAICSA 0799845)M. CHANDRASEGARAN A/L S.MURUGASU (MAICSA 078�03�) CompanySecretaries

SelangorDarulEhsan

Datedthis4thdayofJune2010

NOTES:-

1. TheAgendaNo.1ismeantfordiscussiononlyastheCompany’sArticlesofAssociationprovidesthattheaudited financialstatementsaretobelaidinthegeneralmeetingonlywhichdoesnotrequireaformalapprovalof shareholders.Hence,isnotputforwardforvoting.

2. Amembershallbeentitledtoappointmorethanone(1)proxytoattendandvoteinhisplace.Aproxyneedsnotbe amemberoftheCompanyandtheprovisionofSection149(1)(b)oftheCompaniesAct,1965shallnotapplytothe Company.

3. Whereamemberappointsmorethanone(1)proxy,theappointmentsshallbeinvalidunlesshespecifiesthe proportionsofhisholdingstoberepresentedbyeachproxy.

4. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories)Act1991,itmayappointatleastone(1)proxyinrespectofeachsecuritiesaccountitholdswithordinary sharesofthecompanystandingtothecreditofthesaidsecuritiesaccount.

5. Iftheappointerisacorporation,theproxyformmustbeexecutedunderitsCommonSealorunderthehandofits attorney.

6. Theinstrumentappointingaproxyandthepowerofattorney, ifany,underwhichit issignedoracertifiedcopy thereofmustbedepositedattheCompany’sRegisteredOffice,Lot765,JalanHajiSiratOffJalanMeru,42100Klang, SelangorDarulEhsannotlessthan48hoursbeforethetimesetforholdingtheMeetingoranyadjournmentthereof.

7. ExplanatorynotesontheSpecialBusiness

7.1 TheproposedResolution4isprimarilytogiveflexibilitytotheBoardofDirectorstoissueandallotsharesatany timeintheirabsolutediscretionandforsuchpurposesastheyconsiderwouldbeintheinterestoftheCompany withoutconveningageneralmeeting.Thisauthority,unlessrevokedorvariedatageneralmeeting,willexpire attheconclusionofthenextannualgeneralmeetingoftheCompany.

TheCompanycontinuestoconsideropportunitiestobroadenitsearningspotential.Ifanyoftheexpansion/ diversificationproposalsinvolvestheissueofnewshares,theDirectors,undercertaincircumstancewhenthe opportunityarises,wouldhavetoconveneageneralmeetingtoapprovetheissueofnewshareseventhough thenumberinvolvedmaybelessthan10%oftheissuedcapital.

Inordertoavoidanydelayandcostsinvolvedinconveningageneralmeetingtoapprovesuchissueofshares, itisthusconsideredappropriatethattheDirectorsbeempoweredtoissuesharesintheCompany,uptoany amountnotexceeding intotal10%of the issuedsharecapitalof theCompanyfor thetimebeing, forsuch purposes. The renewed authority for allotment of shares will provide flexibility to the Company for the allotment of shares for the purpose of funding future investment, working capital and/or acquisitions.

No shares have been issued and allotted by the Company since obtaining the said authority from its shareholdersatthelastAnnualGeneralMeetingheldon27June2009.


Corporate Information

BOARD OF DIRECTORSDirectors

COMPANY SECRETARIES

STOCK EXCHANGE LISTING

AUDIT COMMITTEEChairman

Member

NOMINATION COMMITTEEChairman

Member

REMUNERATION COMMITTEEChairman

Member

KohPohSengChairman/Group Managing Director

LauFookMengExecutiveDirector

FaunCheeYarnIndependentandNon-ExecutiveDirector

TanKongAngIndependentandNon-ExecutiveDirector

LimChoonLiatIndependentandNon-ExecutiveDirector

LimSeckWah(MAICSA0799845)M.Chandrasegarana/lS.Murugasu(MAICSA0781031)

BursaMalaysiaSecuritiesBerhad,MainMarketStockcode:9121

FaunCheeYarn

TanKongAngLimChoonLiat

FaunCheeYarn

TanKongAngLimChoonLiat

FaunCheeYarn

KohPohSengTanKongAngLimChoonLiat


Corporate Information (cont’d.)

REGISTERED OFFICE ANDPRINCIPAL PLACE OF BUSINESS

REGISTRAR

AUDITORS

PRINCIPAL BANKERS

SOLICITORS

WEBSITE

E-MAIL ADDRESS

Lot765,JalanHajiSiratOffJalanMeru,42100Klang,SelangorTel:(603)32915566Fax:(603)32914489

MegaCorporateServicesSdnBhdLevel15-2,FaberImperialCourtJalanSultanIsmail50250KualaLumpurTel:(603)26924271Fax:(603)27325388

SJGrantThornton(MemberofGrantThorntonInternationalLtd)Level11,FaberImperialCourtJalanSultanIsmail50250KualaLumpurTel:(603)26924022Fax:(603)27325119AmBank(Malaysia)BerhadMalayanBankingBerhadHSBCBankMalaysiaBerhad

MessrsSooThienMing&NashrahRhiza&Richard,Advocates&AssociatesHSLee&Co.

http://www.kpscb.com.my

[email protected]


Profile of The Board of Directors

TheBoardofDirectorsofKPSConsortiumBerhad(“KPSCB”or“theCompany”)comprisingtheChairman/GroupManagingDirector,one(1)ExecutiveDirectorandthree(3)IndependentNon-ExecutiveDirectors.

TheBoardmeetsquarterlyandadditionalBoardMeetingsareheldasandwhenrequired.TheBoardmetfour(4)timesduringthefinancialyearended31December2009.

ParticularsoftheDirectorsareasfollows:

KOH POH SENG,Malaysian,age54,isthefounderandManagingDirectorofKPSPlywoodSdnBhd(“KPSP”)andwas appointed as the Chairman and Group Managing Director of KPS Consortium Berhad (“KPSCB”) on18September2002.Hehasmorethantwentyyearsofexperienceintradingofplywoodandwoodrelatedproducts. In1990,KPSPwassetupbyMrKoh toundertake thebusinessof trading inplywood. KPSPventuredintothetradingofcementandsteelbarssince1998.

Presently,MrKohisalsoadirectorofvariousotherprivatecompanies,wherebytheirprincipalactivitiesarethatofconstructionandtimber.

HeisamemberoftheRemunerationCommittee.

LAU FOOK MENG,Malaysian,age58,wasappointedExecutiveDirectorofKPSCBon19September2002.Heisa chartered accountant who has obtained his Fellowship from the Institute of Chartered Accountant ofEngland&Wales.Upongraduation,hejoinedAsiaticDevelopmentBhdin1981asanAccountantuntil1983.In1984,hejoinedUnicoHoldingsBhdastheGroupAccountantandleftin1992.From1993to2002,hewastheGeneralManagerofNichmurniSdnBhd.Currently,heisaDirectorofOCIBerhad.

FAUN CHEE YARN, Malaysian, age 50, was appointed as an Independent and Non-Executive Director ofKPSCBon1November2008.HeisaFellowMemberoftheMalaysianInstituteofAccountantsandcertifiedmemberoftheFinancialPlanningAssociationofMalaysia.

HehasmanyyearsofexperiencesinprivatesectorasanAuditor,Accountant,FinanceManagerandGeneralManagerinvarioussectorsincludingsoftware,insuranceagency,recyclingandvehiclefleetmanagement.HewastheFinanceManagerofarenownedrecyclingcompanyinMalaysiabeforere-designatedasFinancialControllersince2009.

HeisaChairmanoftheAuditCommittee,NominationCommitteeandRemunerationCommittee.


Profile of The Board of Directors (cont’d.)

TAN KONG ANG,Malaysian,age50,wasappointedasanIndependentandNon-ExecutiveDirectorofKPSCBon26May2009.HeisaMemberofCharteredInstituteofMarketingUKformorethan20years.

He is a professional manager with more than 26 years of working experiences in sale, marketing,purchasing, operation, administration and management. He possesses extensive working experiences inthetextile industry,electricalandelectronic,agencieshouse,wholesaler,retailer,distributor,oilandgas,hardware, building material, chemical, steel industry, financial products, life and general insuranceorganizations.

HeisamemberoftheAuditCommittee,NominationCommitteeandRemunerationCommittee.

LIM CHOON LIAT,Malaysian,age49,wasappointedasanIndependentandNon-ExecutiveDirectorofKPSCBon26May2009.HeobtainedBachelorofScience(Forestry)fromFacultyofForestry,UniversityPertanianMalaysia,Serdang,SelangorDarulEhsan.

Between1986 and1991, heworked as aTechnicalTrainingOfficer atMalaysianTimber IndustryBoard(MTIB), Ministry of Primary Industries. He organized technical training courses at national level for theMalaysianfurnitureindustries/timberindustrialist,intheareaoffurnitureproductiontechnology,furniturefinishing,furnituredesign,furnituremarketingandtechnicalaspectsoftimberi.e.preservationoftimber,kilndryingoftimber,identificationoftimberandgradingoftimber.

Between 1991 and 1995, he was appointed as the Executive Director in Furnicom Machinery Sdn Bhd,CamycomSdnBhdandCamycomEngineeringSdnBhd.From 1995 to present, he is the Managing Director for Bonaprimo Resources Sdn Bhd, a WoodworkingMachinery business as well as consultancy services for the furniture industries. He is also an AssociateSeniorConsultantofSageForestry&TimberConsultantsSdnBhd.HeisinvolvedinprovidingconsultancyservicesforPengurusanDanaharta,inassessingtheassetsoffailedfurniturecompanieswithnonperformingloansandintheStudyforMIDA–AstudyoftheImpactofAFTAandAIAontheWood/Cane/Bamboo-basedIndustryinMalaysia.HeisamemberoftheAuditCommittee,NominationCommitteeandRemunerationCommittee.

Note:

All the above-named Directors of the Company have no family relationship with the other directors orsubstantial shareholders of the Company; and have not been convicted of any criminal offences(otherthanordinarytrafficoffences,ifany)anddonothaveanyconflictofinterestoftheCompany.


Corporate Governance Statement

TheBoardofDirectorsfullyacknowledgestheimportanceofgoodcorporategovernanceandistakingstepstoevaluatethestatusofthecorporategovernancepracticesadoptedbytheGroupastabulatedbelowanditscompliancewiththecodeofbestpracticesassetoutinPart1andPart2oftheMalaysianCodeonCorporateGovernancepursuanttoParagraph15.25oftheListingRequirementsoftheBursaMalaysiaSecuritiesBerhad(“BMSB”)throughoutthefinancialyearfrom1January2009to31December2009.TheBoardwillcontinuallyevaluatethestatusoftheGroup’scorporategovernancepracticesandprocedurestoensureconformanceandenhanceperformanceinpursuitofitscommitmenttothehigheststandardsofcorporategovernance.

�.0 Board of Directors

�.� Board Composition and Balance

TheBoardcurrentlyhasfive(5)members,comprisingtheChairman/GroupManagingDirector, one(1)ExecutiveDirectorandthree(3)IndependentNon-ExecutiveDirectors.TheCompanyisin compliancewithParagraph15.02oftheBMSBListingRequirementswherebyone-thirdofitsBoard membersareindependentdirectors.TheprofileofeachDirectorispresentedseparatelyinthe AnnualReport. AllBoardmembersparticipatefullyindecisionsmakingonthekeyissuesinvolvingtheGroup. TheChairman/GroupManagingDirectorhasprimaryresponsibilitiesformanagingtheGroup’s day-to-dayoperationsand togetherwith theExecutiveDirector andNon-ExecutiveDirectors to ensurethatthestrategiesproposedbythemanagementarefullydiscussedandexamined,and take into account the long term interests of the various stakeholders including shareholders, employees, clients, suppliers and the various communities in which the Group conducts its business.

TheBoardisassuredofabalancedandindependentviewatallBoarddeliberationslargelydueto thepresenceof itsNon-ExecutiveDirectorswhoare independent fromManagementandmajor shareholdersoftheCompany.TheIndependentDirectorsarealsofreefromanybusinessorother relationships that could materially interfere with the exercise of their independent judgment. TogetherwiththeChairman/GroupManagingDirectorandExecutiveDirectorwhohaveintimate knowledgeoftheCompany’sandGroup’sbusiness,theBoardisconstitutedofindividualswhoare committedtobusinessintegrityandprofessionalisminallitsactivities.

Aspartofitscommitment,theBoardsupportsthehigheststandardsofcorporategovernanceand thedevelopmentofthebestpracticesfortheGroup.

In addition to the role of guidance by the Non-Executive Directors, each Director brings independent judgment to bear on issues of strategy, performance, resources and standard of conduct.

�.2 Duties and Responsibilities of the Board

The Board retains full and effective control of the Company and the Group. This includes responsibilityfordeterminingtheGroup’soverallstrategicdirectionaswellasdevelopmentand controloftheGroup. TheGroupManagingDirectoralsoundertakestheroleoftheChairman. Despitethattherolesarecombined,thereisastrongindependentelementontheBoardasthere are adequatenumberof independentdirectorswhoareparticularly important as theyprovide unbiasedandindependentviews,adviceandjudgment.


Corporate Governance Statement (cont’d.)

�.3 Board Meetings and Supply of Information

Four (4)BoardMeetingswereheldduring the financial yearended31December2009and the detailsofattendanceofeachdirectoraresetoutbelow:

Name ofDirectors

MrKohPohSeng MrLauFookMeng MrFaunCheeYarn MrTanKongAng(appointedon26/5/09) MrLimChoonLiat(appointedon26/5/09) MrLeeWhayHoong(resignedon26/5/09)

Total Number ofMeetings Attended

4/44/44/43/33/31/1

TheBoardMeetingswereheldatNo.3, JalanBK1/10,BandarKinrara IndustrialCentre,47100 Puchong,Selangor.

Thedateandtimeofthemeetingsheldwereasfollows:

Date

27February2009 28May2009 28August2009 21November2009

Time

11.30am12.30pm10.30am11.30am

AllDirectorshavecompliedwiththeminimumattendanceatBoardmeetingsasstipulatedinthe ListingRequirementsoftheBMSBduringthefinancialperiod.

The agendaandBoardpapers for each itemaswell asminutesofpreviousmeetings areduly servedtoallBoardmembersfewdaysbeforetheBoardmeetingstogiveDirectorstimetoreview andstudyandthus,todeliberateontheissuestoberaisedattheBoardmeetings.

InarrivingatanydecisiononrecommendationsbytheManagement,thoroughdeliberationand discussionby theBoard isapre-requisite. Allproceedingsof theBoardMeetingsareminuted andsignedbytheChairmanofthemeetinginaccordancewiththeprovisionofSection156ofthe CompaniesAct,1965.

TheBoardiskeptupdatedontheCompanyandGroup’sactivitiesanditsoperationsonaregular basis. The directors also have access to reports on the Group’s activities, both financial and operational.

AlldirectorshaveaccesstotheadviceandservicesoftheCompanySecretarywhoisresponsible forensuringthatboardproceduresarefollowedandtheBoardmayalsotakeindependenceadvice, attheCompany’sexpense,inthefurtheranceoftheirdutiesifsorequired.TheBoardalsohas unlimitedaccesstoallinformationwithregardtotheactivitiesoftheCompany.

KPS Consortium Bhd (143816-V) • Annual Report 2009�0 KPS Consortium Bhd (143816-V) • Annual Report 2009


�.4 Directors’ Training TheBoardasawholeensuresthatitappointsonlyindividualsofsufficientcaliber,knowledgeand experiencetofulfillthedutiesofaDirectorappropriately.TheBoardofDirectorsisawareofthe importanceofcontinuouslypursuing for the relevantseminars/ trainingprogrammes toequip themselvestodischargetheirdutiesdiligently.

ThenewappointedDirectors,Mr.TanKongAngandMr.LimChoonLiathaverespectivelyattended theMandatoryAccreditationProgramme(MAP)on23June2009and24June2009.

TheBoardmembershaveattendedthecontinuouseducationprogrammefor thefinancialyear 2009.TrainingprogrammesandseminarsattendedbytheDirectorsduringthefinancialyearare asfollows:

MrKohPohSeng

• ImplementingBusinessPlanStrategies MrLauFookMeng

• FRSUpdates2009 • TechnicalBriefing–MainMarketListingRequirements • MindMappingforQuickAction–MIA • Budget2010TaxProposals

MrFaunCheeYarn

• FRSUpdates2009 • TechnicalBriefing-MainMarketListingRequirements • Budget2010TaxProposals • MakingSenseoftheAuditorsReportandItsImpact

MrTanKongAng • ImplementingBusinessPlanStrategies

MrLimChoonLiat • RiskManagementBestPractises

�.5 Appointments to the Board The appointment of any additional Director is made as and when it is deemed necessary by the existing Board with due consideration given to the mix of expertise and experience requiredforaneffectiveBoard.

TheNominationCommittee isempoweredby theBoardand its termsof reference toconsider and evaluate the appointment of new Directors and Directors to Board Committees of the Company. The Nomination Committee will recommend the candidates to the Board for the appointment. The Nomination Committee also keeps under review the Board structure, size and composition and the mix of skills and core competencies required for the Board to discharge its duties effectively. In addition, the Nomination Committee will deliberate on Board succession plan as and when appropriate. The Nomination Committee will also assess the effectiveness of the Board as a whole, the Committees of the Board and the contribution ofeachindividualDirectoronatleastanannualbasis.

KPS Consortium Bhd (143816-V) • Annual Report 2009 KPS Consortium Bhd (143816-V) • Annual Report 2009 ��


TheNominationCommitteecomprisesthefollowing:-

a. MrFaunCheeYarn(Chairman) b. MrTanKongAng c. MrLimChoonLiat

�.6 Retirement and Re-election InaccordancewiththeArticlesofAssociationoftheCompany,atleastone-thirdoftheDirectors shallretirebyrotationateachAnnualGeneralMeetingandcanofferthemselvesforre-election attheAnnualGeneralMeeting(“AGM”).DirectorswhoareappointedbytheBoardtofillcasual vacancies or as additional directors during the financial year are subject to re-election by shareholdersatthenextAGMfollowingtheirappointment.AllDirectorsshallretirefromoffice atleastonceineverythreeyears,butshallbeeligibleforre-election.

�.7 Relationship of the Board to Management • Quality of Information Information plays a key role in the Board’s decision-making and in setting up the policies and strategies of the Company. The Board has unrestricted access to timely and accurate information,whichisnotonlyconfinedtoqualitativeandquantitativeinformation,butalso to other information deemed suitable such as customer satisfaction, products and services quality,marketshareandmarketreactionandmacroeconomicperformance.

• Access to information Prior to the board meetings, all Directors receive an agenda and Board Papers containing informationrelevanttothebusinessofthemeetingincludinginformationonmajorfinancial, operational and corporate matters relating to the activities and performance of the Group. This is issued in sufficient time to enable Directors to obtain further explanation, where necessary,inordertobeproperlyinformedbeforethemeeting.

All Board members have unlimited access to the financial information. They get the advice from theCompanySecretary,Auditors, legal advisoror anyother resources,be it from the organizationorexternally.

• Use of Board Committees As appropriate, the Board has delegated certain responsibilities to Board Committees that operatewithinclearlydefinedtermsofreference.TheCommitteesareasfollows: a. AuditCommittee b. RemunerationCommittee c. NominationCommittee

AlltheaboveCommitteeshavewrittentermsofreferenceandoperatingprocedures.Eachof thecommitteeshastheauthoritytoexamineparticularissuesandreporttotheBoardwiththeir recommendations.TheultimatedecisiononallmatterslieswiththeBoard.

�.8 The relationship between the Board and the shareholders Theprincipalforumfordialoguewithshareholders is theAGM,duringwhichshareholdersare encouraged toparticipateandposequestions to theBoard regardingoperationaland financial information.TheAGMalsoallowsshareholdersanopportunitytointeractdirectlywiththeBoard andseekfirst-handinformationontheabovematters.ExtraordinaryGeneralMeetingsareheld as and when shareholders’ approvals are required on specific matters and shareholders are notifiedofsuchmeetingsrequirements.



2.0 Directors’ Remuneration

2.� The Level and Make-Up of Remuneration TheremunerationoftheDirectorsoftheCompanyandforthefinancialyearended31December 2009issetoutbelow:

(i) AggregateremunerationofDirectorswithcategorisationintoappropriatecomponents:

(ii) NumberofDirectorswhoseremunerationfallsintothefollowingbands:

Total(RM)

ExecutiveDirector

(RM)

FeesSalary & other emoluments

Total

60,000108,000

168,000

Non-ExecutiveDirectors

(RM)

60,000-

60,000

60,000108,000

168,000

TotalExecutive

DirectorRange ofRemuneration

Below RM50,000RM50,001 to RM100,000RM100,001 to RM150,000

51-

Non-ExecutiveDirectors

4--

11-

There is no contract of service between any Directors and the Company or its subsidiary Companies.

2.2 Procedure In compliance with the Listing Requirements of the BMSB, the Board has established a Remuneration Committee comprising Independent Non-Executive Directors and the Chairman/ GroupManagingDirector.TheCommittee’sprimaryresponsibilityistorecommendtotheBoard, the remuneration of Directors. In the case of Executive Directors, the component parts of remunerationarestructuredtolinkrewardstocorporateandindividualperformance.Inthecase of Non-Executive Directors, the level of remuneration reflects the experience and level of responsibilitiesundertakenbytheparticularnon-executiveconcerned.

However,thefinaldecisiononremunerationforDirectorsisamatterfortheBoardasawholeand individual directors are required to abstain from discussion of their own remuneration. The membersoftheRemunerationCommitteeareasfollows: a. MrFaunCheeYarn(Chairman) b. MrKohPohSeng c. MrTanKongAng d. MrLimChoonLiat

KPS Consortium Bhd (143816-V) • Annual Report 2009 KPS Consortium Bhd (143816-V) • Annual Report 2009 �3


3.0 Shareholders

3.� Dialogue between the Company and Investors TheGroupvaluesdialoguewithinvestorsasameanofeffectivecommunicationthatenablesthe BoardtoconveyinformationabouttheGroup’sperformance,corporatestrategyandothermatters affectingshareholders’interests.

The AGM is the principal forum for dialogue with individual shareholders. It is a crucial mechanism in shareholder communication for the Company. At the Company’s AGM, shareholdershavedirectaccesstotheBoardandaregiventheopportunitytoaskquestionsduring the open questions and answers session prior to moving for approval of the Company’s AuditedFinancialStatementsandDirectors’Report for the financialyearandotherbusinesses (ifapplicable).Theshareholdersareencouragedtoaskquestionsbothabouttheresolutionsbeing proposedorabouttheGroup’soperationsingeneral.

TheChairman/GroupManagingDirectoralsoaddresses theshareholderson thereviewof the Group’soperations for the financial yearandoutlines theprospectsof theGroup for thenew financialyear.

TheBoardisalsocommittedtoensurethatshareholdersarewellinformedofmajordevelopments oftheCompanyandtheGroupandtheinformationisalsocommunicatedtothemthroughthe followingchannels:-

a. theAnnualReport;

b. variousdisclosuresandannouncementsmade to theBMSB including thequarterly results andannualresults;and

c. theCompany’swebsitewww.kpscb.com.my throughwhich shareholdersand thepublic in general can gain access to the latest corporate and product information of the Group.

3.2 Annual General Meeting (“AGM”) NoticeofAGMandannualreportsaresentouttoshareholdersatleast21daysbeforethedateof themeeting.

AttheAGM,theBoardalsoprovidesopportunitiesforshareholderstoraisequestionspertaining tothebusinessactivitiesoftheGroup.Directorsandseniormanagementstaffareavailableto provideresponsestoshareholders’questionsduringthesemeetings.

Forthere-electionofDirectors,theBoardwillensurethatfullinformationisdisclosedthrough the notice of meeting regarding Directors who are retiring and who are willing to serve if re-elected.

Each item of special business included in the notice of meeting will be accompanied by an explanatorystatementfortheproposedresolutiontofacilitatefullunderstandingandevaluation ofissuesinvolved.



4.0 Accountability And Audit

4.� Financial Reporting The Board is aware of its responsibilities to shareholders and the requirement to present a balanced and comprehensive assessment of the Group’s financial position, by means of the annual and quarterly reports and other published information. In this regard, the Board is primarilyresponsibleforthepreparationofafinancialstatementtopresentafairandbalanced reportofthefinancialstateofaffairsoftheGroup.

Before releasing to the Bursa Malaysia Securities Berhad, the quarterly financial results are reviewedby theAuditCommitteeandapprovedby theBoardofDirectors. Thedetailsof the CompanyandtheGroup’sfinancialpositionsareincludedintheFinancialStatementssectionof theAnnualReport.

4.2 Internal Control TheDirectorsacknowledgetheirresponsibilitiesfortheinternalcontrolsystemintheCompany and the Group, covering not only financial controls but also controls relating to operational, complianceandriskmanagement. Thesystemof internal controls involveseachkeybusiness unit and its management, including the Board, and is designed to meet the business units’ particularneeds,andtomanagetheriskstowhichtheyareexposed.Thesystem,byitsnature, canonlyprovidereasonableandnotabsoluteassuranceagainstmaterialmisstatement, lossor fraud.Theconceptofreasonableassurancerecognisesthecostingaspect,wherebythecostof controlproceduresisnottoexceedtheexpectedbenefits.

TheBoardrecognisesthatriskscannotbefullyeliminated.Assuch,thesystems,processesand proceduresbeingputinplaceareaimedatminimizingandmanagingthem.Ongoingreviewsare continuously being carried out to ensure that the effectiveness, adequacy and integrity of the systemofinternalcontrolsinsafeguardingtheCompany’sassets.

4.3 Audit Committee The Audit Committee meets periodically with senior financial management staff and the external auditors to review theCompany’sand theGroup’s financial reporting, thenatureand scopeofauditreviews,andtheeffectivenessofthesystemsofinternalcontrolandcompliance.

The terms of reference of the Audit Committee have recently been revised to conform to the ListingRequirementsoftheBMSB.ThetermsofreferenceandactivitiesoftheAuditCommittee duringthefinancialyearended31December2009areprovidedseparatelyinthisAnnualReport.

4.4 Relationship with Auditors TheCompany’sexternalauditors,SJGrantThorntonreporttomembersoftheCompanyontheir findings which are included as part of the Company’s financial reports with respect to each year’sauditonthestatutoryfinancialstatements. Indoingso,theCompanyhasestablisheda transparentarrangementwiththeauditorstomeettheirprofessionalrequirements.Fromtime to time, theauditorshighlight to theAuditCommitteeandBoardofDirectorsonmatters that requiretheBoard’sattention.



5.0 Statement On The Extent Of Compliance With The Best Practices In Corporate Governance Set Out In Part 2 Of The Malaysian Code On Corporate Governance

Save as disclosed below, the Group has substantially complied with the Best Practices of the Code throughoutthefinancialyear: a) The Board does not have a formal schedule of matters specifically reserved to it for decision. However,ithasbeenthepracticefortheBoardtodeliberateonmattersthatinvolveoverallGroup strategyanddirection,acquisitionanddivestmentpolicy, approvalofmajorcapital expenditure, consideration of significant financial matters and the review of the financial and operating performanceoftheGroup.

TheBoardhasnotdevelopedpositiondescriptions for theBoardand theGroupChiefExecutive Officer.Thisismainlyduetothecurrentset-upoftheBoardandthevariousBoardCommitteesthat areinplacewhichissufficetofacilitatethesmoothfunctioningoftheGroup.

b) TheBoard,throughvariousmanagementcommittees,hasbeenabletoidentifybusinessrisksand ensuretheimplementationofappropriatemeasurestomanagetheserisks.Nevertheless,theBoard isof theview thatamorestructuredriskmanagementprocesswouldneed tobeestablished to betteridentify,monitorandmanagethebusinessrisksaffectingtheGroup.

6.0 Directors’ Responsibility Statement On Annual Audited Accounts

TheBoardofDirectorsisrequiredunderParagraph15.26(a)oftheListingRequirementsoftheBMSB to issue a statement explaining their responsibility in the preparation of the annual financial statements.

The Directors are required by the Companies Act, 1965 to prepare financial statements for each financialyearwhichgiveatrueandfairviewofthestateofaffairsoftheCompanyandoftheGroup asattheendofthefinancialyearandoftheprofitandlossoftheCompanyandoftheGroupforthe financialyear.

Inpreparingthosefinancialstatements,theDirectorsarerequiredto:-

a) useappropriateaccountingpoliciesandconsistentlyapplythem; b) makejudgementsandestimatesthatarereasonableandprudent;and c) state whether applicable accounting standards have been followed, subject to any material departuresbeingdisclosedandexplainedinthefinancialstatements.

TheDirectorsareresponsibleforkeepingproperaccountingrecords,whichdisclose,withreasonable accuracyatanytime,thefinancialpositionoftheCompanyandoftheGroupandtoenablethemto ensurethattheaccountscomplywiththeCompaniesAct,1965.TheDirectorshadalsoensuredthat properinternalcontrolshadbeenimplemented.

TheDirectorsare satisfied that inpreparing the financial statementsof theGroup for the financial yearended31December2009, theGrouphasusedtheappropriateaccountingpoliciesandapplied them consistently and prudently. The Directors are of the opinion that all relevant approved accountingstandardshavebeenfollowedandconfirmthatthefinancialstatementshavebeenprepared onagoingconcernbasis.


Other Information Required Pursuant to Part A,Appendix 9C of the BMSB Listing Requirements

InconformancewiththeBursaMalaysiaSecuritiesBerhadListingRequirements,thefollowinginformationisprovided:

• Utilisation of Proceeds Noproceedswereraisedfromanycorporateproposalduringthefinancialyear.

• Share buybacks Duringthefinancialyear,therewerenosharebuybacksbytheCompany.

• Option, Warrants and Convertible Securities TheCompanyhasnotissuedanyoptions,warrantsorconvertiblesecuritiesduringthefinancialyear.

• American Depository Receipt (“ADR”) / Global Depository Receipt (“GDR”) Duringthefinancialyear,theCompanydidnotsponsoranyADRorGDRprogramme.

• Sanctions and/or Penalties Therewerenosanctionsand/orpenaltiesimposedontheCompanyanditssubsidiaries,Directorsor managementstaffbytherelevantregulatorybodiesduringthefinancialyear.

• Non-Audit Fee Therewasnonon-auditfeepayabletotheexternalauditorsbytheCompanyanditssubsidiariesforthe financialyearended31December2009.

• Variance from Profit Forecast or Unaudited Results Previously Made There were no variances exceeding 10% from the unaudited results previously released by the Company.

• Profit Guarantee Duringthefinancialyear,therewerenoprofitguaranteesgivenbytheCompany.

• Material Contracts Therewerenomaterialcontracts(notbeingcontractsenteredintointheordinarycourseofbusiness) subsistingas ator entered into since the endof theprevious financial year,by theCompanyor its subsidiaries,whichinvolvedtheinterestsoftheDirectorsandmajorshareholders.• Revaluation of landed properties TheGroupdoesnothavearevaluationpolicyforitslandedproperties.

• Recurrent related party transactions of a revenue nature Therewerenorecurrentrelatedpartytransactionsofarevenuenatureduringtheyear.

• Corporate Social Responsibility The Group looks after the welfare of the employees such as providing lodging and food for the employees. The Group heeds the save the environment by involving in recycling of papers for the productionofjumbotoiletrollsandserviette.Thefactoriespreserveenvironmentandnaturebymake gooduseofwastewood,oilpalmwaste(bio-slab)andsawdust.

TheGroupemphasizesonEnvironment,HealthandSafetyandprovidessafetymeasurementstothe factorymembers.


Audit Committee

�. Members

ThecurrentmembersoftheCommitteeandtheirrespectivedesignationsareasfollows:

• MrFaunCheeYarn Chairman/IndependentandNon-ExecutiveDirector

• MrTanKongAng Member/IndependentandNon-ExecutiveDirector

• MrLimChoonLiat Member/IndependentandNon-ExecutiveDirector

The Audit Committee consists of three (3) members all of whom are Independent Non-Executive directors.TheCompanyhascompliedwithParagraph15.09(1)(b)ofBursaMalaysiaSecuritiesBerhad’s ListingRequirements,whichrequirestheAuditCommitteemembersmustbenon-executivedirectors, withamajorityofthembeingindependentdirectors.

2. Terms of Reference

ThetermsofreferenceoftheAuditCommitteehadbeenrevisedtoconformtotheListingRequirements oftheBMSB.

Composition

TheAuditCommitteeshallbeappointedfromamongtheirmembersandshouldconsistofnofewer than three (3) members and must be all Non-Executive Directors of whom the majority must be IndependentDirectors.

Atleastone(1)memberoftheCommittee:-

i) mustbeamemberoftheMalaysianInstituteofAccountants(“MIA”);or

ii) ifheisnotamemberoftheMIA,hemusthaveatleast3years’workingexperienceand:-

• hemusthavepassedtheexaminationsspecifiedinPart1ofthe1stScheduleoftheAccountants Act1968;or

• hemustbe amemberofoneof the associationsof accountants specified inPart II of the1st ScheduleoftheAccountantsAct1967

• fulfilssuchotherrequirementsasprescribedorapprovedbytheExchange.

NoalternatedirectorshallbeappointedasamemberoftheCommittee.

The Chairman of the Committee shall be an Independent Non-Executive Director appointed by the Board.

IntheeventofanyvacancyintheAuditCommitteeresultinginthenumberofmembersbeingreduced tobelowthree,theCompanymustfillthevacancywithinthree(3)months. The terms of office and performance of the Audit Committee and each of its members shall be reviewedbytheBoardatleastonceeverythree(3)years.


Audit Committee (cont’d.)

3. Audit Committee Meetings Attendance

TheAuditCommitteehadconductedfour(4)meetingsforthefinancialyearended31December2009. Details of attendance of the Audit Committee members during this financial period are set out as below:

Name ofCommittee Member

MrLauFookMeng(Resignedon26/2/2009) MrLeeWhayHoong(Resignedon26/5/2009) MrFaunCheeYarn MrTanKongAng(Appointedon26/5/2009) MrLimChoonLiat(Appointedon26/5/2009)

No. of meetings attended/held during member’s tenure

1/11/14/43/33/3

4. Activities Of The Audit Committee

The principal activities undertaken by the Audit Committee during the financial period were summarizedasfollows:

(a) Reviewedthequarterlyfinancialresultsandannouncementsforthefinancialquarterspriortothe BoardofDirectorsforconsiderationandapproval;

(b) Reviewedtheauditedfinancialstatementsforthefinancialyearended31December2009;

(c) Reviewedtheexternalauditors’reportsforthefinancialyearended31December2009inrelation toauditandaccountingissuesarisingfromtheaudit;

(d) Reviewedtheexternalauditors’auditplanfortheyearended31December2009;

(e) Considered the nomination of external auditors for recommendation to the Board for reappointment;

(f) Reviewed the internal audit plan, findings, reports and management implementation of audit recommendations;

(g) Reviewed thedisclosure statementsonCorporateGovernance,AuditCommitteeReport and the StatementonInternalControlandrecommendedtotheBoardforadoption;

(h) Deliberated the disclosure requirements for corporate social responsibility and identified the managementactionplan.

5. Internal Audit Function

TheinternalauditfunctionisessentialinassistingtheAuditCommitteeinreviewingthestateofthe systemofinternalcontrolmaintainedbythemanagement.

TheCompanyoutsourceditsinternalauditfunctiontoaninternalauditconsultingcompany.Theaudit teammembersare independentof theactivitiesauditedby them. The internalauditors reviewand assesstheGroup’ssystemofinternalcontrolandreporttotheCommitteefunctionally.

TheCommitteeapprovestheannualinternalauditplanbeforethecommencementoftheinternalaudit reviewsforeachfinancialyear.Duringthefinancialyear,theinternalauditorsconductedreviewson theoperationsoftheGroupandpresentedtheirreportstotheAuditCommittee.Areasofimprovement identifiedwerecommunicatedtothemanagementforfurtheraction.



6. Authority

TheCommitteeisauthorisedbytheBoard:-

(i) Toinvestigateanymatterwithinitstermsofreference;

(ii) Tohavetheresourceswhicharerequiredtoperformitsduties;

(iii) TohavefullandunrestrictedaccesstoanyinformationpertainingtotheCompany;

(iv) Tohavedirectcommunicationchannelswiththeexternalauditorsandperson(s)carryingoutthe internalauditfunctionoractivity(ifany);

(v) Toobtainindependentprofessionalorotheradvice;and

(vi) To convene meetings with the external auditors, the internal auditors or both excluding the attendanceofotherdirectorsandemployees,wheneverdeemednecessary.

7. Functions

ThefunctionsoftheCommitteeareasfollows:-

(a) TheCommitteeshallreview,appraiseandreporttotheBoardon:

• thediscussionwiththeexternalauditors,priortothecommencementofaudit,theauditplan which states the nature and scope of the audit and to ensure co-ordination of audit where morethanoneauditfirmisinvolved;

• the review with the external auditors, his evaluation of the system of internal controls, his managementletterandmanagement’sresponse;

• thediscussionofproblemsandreservationsarisingfromtheexternalaudits,theauditreport andanymatterstheexternalauditorsmaywishtodiscuss;

• the assistance given by the employees of the Group to the external and internal auditors;

• any related party transaction and conflict of interest situation that may arise within the Group or Company, including any transaction, procedure or course of conduct that raises questionsofmanagementintegrity.

(b) ToreviewwhereappropriatewhetherthereisareasontobelievethattheGroup’sexternalauditors isnotsuitableforre-appointment;

(c) Toconsideranyquestionofresignationordismissaloftheexternalauditors;

(d) ToreviewquarterlyreportingandyearendfinancialstatementsoftheGroupbeforesubmission totheBoard,focusingparticularlyon:-

• changesinorimplementationofmajoraccountingpolicy;

• significantadjustmentsarisingfromtheaudit;

• thegoingconcernassumption;and

• compliancewithaccountingstandardsandotherlegalrequirements.



7. Functions (cont’d.)

(e) Toreviewthefollowinginrespectofinternalauditfunction:-

• Adequacyofthescope,functions,competencyandresourcesoftheInternalAuditDepartment andthatithasthenecessaryauthoritytocarryoutitswork;

• Internalauditprogrammes;

• Themajorfindingsofinternalauditinvestigationsandmanagement’sresponses,andensure thatappropriateactionsaretakenontherecommendationsoftheInternalAuditDepartment;

• Appraisal or assessments of the performance of the senior staff of the Internal Audit Department;

• Approval of any appointment or termination of senior staff member of the Internal Audit Department;

• Resignationsofseniorinternalauditstaffmembersandprovidingtheresigningstaffmember anopportunitytosubmithis/herreasonforresignation;

(f) Toconsiderthemajorfindingsofinternalauditinvestigationsandmanagement’sresponse;

(g) Torecommendthenominationandappointmentofexternalauditorsaswellastheauditfee;

(h) TopromptlyreportanymattersresultinginbreachoftheBursaSecuritiesListingRequirements totheBoard.WheretheCommitteeisoftheopinionthatsuchmatterreportedbyittotheBoard hasnotbeensatisfactorilyresolved, theCommitteeshallpromptlyreportsuchmatter toBursa Securities;and

(i) Anyother function thatmaybemutuallyagreeduponby theCommitteeand theBoard,which wouldbebeneficialtotheCompanyandensuretheeffectivedischargeoftheCommittee’sduties andresponsibilities.

AttendanceAtMeetings

TheCommitteeshallmeetatleastfour(4)timesayearandsuchadditionalmeetingsastheChairman shalldecide inordertofulfill itsduties. Inaddition,theChairmanmaycallameetingoftheAudit Committee if a request is made by any committee member, any Executive Director, or the external auditors.

Inordertoformaquorum,themajorityofmemberspresentmustbeindependentdirectors.

FrequencyOfMeetings

Meetingsshallbeheldnotlessthanfour(4)timesayeartoreviewthequarterlyresultsandyear-end financialstatements.Othermeetingsmaybeheldasandwhenrequired.

KPS Consortium Bhd (143816-V) • Annual Report 2009 KPS Consortium Bhd (143816-V) • Annual Report 2009 2�

Statement on Internal Control

It is a requirement of the Malaysian Code of Corporate Governance that the Board of Directors shouldmaintain a sound system of internal controls to safeguard shareholders’ investments and the Group’sassets.

Pursuanttoparagraph15.26(b)oftheMainMarketListingRequirementsandStatementonInternalControl:Guidance for Directors of Public-Listed Companies, the Board of Directors are pleased to present theStatementonInternalControloftheGroupcomprisingKPSConsortiumBerhadanditssubsidiariesforthefinancialyearended31December2009.

BOARD RESPONSIBILITYTheBoardofDirectorsBoardaffirmsitsresponsibilityinmaintainingasoundsystemofinternalcontrolandriskmanagementprocedureswithintheGroupandforreviewingitsadequacyandintegrity.However,theBoardrecognisesthatreviewingoftheGroup’ssystemofinternalcontrolsisaconcertedandcontinuingprocess,designedtomanageratherthaneliminatetheriskoffailuretoachievebusinessobjectives.Hence,allinternalcontrolscanonlyprovidereasonableandnotabsoluteassuranceagainstmaterialmisstatementorloss.Instrivingforcontinuousimprovement,theBoardwillputinplaceappropriateactionplans,whennecessary,tofurtherenhancetheGroup’ssystemsofinternalcontrol.

INTERNAL CONTROLTheinternalcontrolssystemisestablishedafterconsideringtheoverallcontrolenvironmentoftheGroup.Thesystemisdesignedtoachieveproperbalancebetweenrisksundertakenandthepotentialreturnstoshareholders.ThekeyelementsoftheGroup’ssystemofinternalcontrolsareasdescribedbelow:

• KeyresponsibilitiesandlinesofaccountabilitywithintheGrouparedefined,withclearreportinglines uptotheSeniorManagementoftheGroupandtotheBoardofDirectors.TheGroup’sdelegationof authority sets out the decisions that need to be taken and the appropriate authority levels of ManagementincludingmattersthatrequireBoardapproval.

• TheGroup’smanagementmonitorsandreviewsthefinancialresultsandforecastsforallbusinesses withintheGroupandformulatesactionplansforoperationalandfinancialperformanceimprovement.

• Key policies and procedures are outlined in the Group. These policies are communicated to lien management to ensure that the control procedures, including those relating to authorisation, monitoringandreconciliationprocessesarefollowed.

• At theBoard level,key financialandoperatingperformancesof theGroupare reviewed. Quarterly, discussionswith themanagementon theprogressofbusinessoperationsandsignificant issuesare heldbytheBoardandinternalauditfindingsandreportsarereviewedbytheAuditCommitteebefore presentingtotheBoard.

INTERNAL AUDITTheGrouphadengagedanindependentprofessionalservicesfirmtocarryouttheInternalAuditfunction.Theobjectiveoftheinternalauditfunctionistoreviewtheadequacyandintegrityoftheinternalcontrolsystemsofkeybusinessunits.


Statement on Internal Control (cont’d.)

TheAuditCommitteereviewsandapprovestheannualinternalauditplanbeforetheInternalAuditorscarryouttheirfunctions.AllauditfindingsarereportedtotheCommitteeandareasofimprovementandauditrecommendationsidentifiedarecommunicatedtothemanagementforfurtheraction.

Thecostincurredfortheinternalauditfunctioninrespectofthefinancialyearended31December2009wasRM40,000.

RISK MANAGEMENTRisk management practice ensures that significant risks are continuously identified and managedeffectively.Currently,theGroupreliesonthemanagementtoassessthekeybusinessrisksoftheGroupandtoimplementmeasurestoassisttheBoardindischargingitsriskmanagementresponsibilities.

CONCLUSIONThereisnosignificantbreakdownorweaknessesinthesystemofinternalcontroloftheGroupthathaveresultedmateriallossesincurredbytheGroupforthefinancialyearended31December2009.TheBoardbelievesthatthecurrentreviewframeworkandthesystemsofinternalcontrolthathasbeeninplacefortheyearunderreviewarereasonableforthepresentlevelofoperations.Nonetheless,theGroupwillcontinuetotakethenecessarymeasurestoensurethatthesystemofinternalcontrolisfunctioningeffectively.

TheBoardofDirectorshasapprovedthisstatementforissuance.


Chairman/Group Managing Director’s Statement

OnbehalfoftheBoardofDirectors,IampleasedtopresenttheAnnualReportandAuditedAccountsoftheGroupandoftheCompanyforthefinancialyearended31December2009.

Overview of Group Results

Operating Results

Forthefinancialyearended31Dec2009,Group’sturnoverwasRM311.5million(2008:RM289.7million).Werecordedapre-taxprofitofRM9.4millionascomparedtoRM6.3millioninthepreviousyear.

AtCompanylevel,noturnoverintermofdividendincomefromsubsidiarieswasrecorded.

Review of Operations

TheGroupsperformanceareexplainedunderthevariousactivityreportsbelow:

PaperMilling

The Group’s tissue mill registered external revenue of RM12.6 million compared with previous year ofRM11.1million.ThisdivisionregisteredhigheroperatingprofitbeforetaxandfinancecostofRM2.6millionascomparedtoprofitofRM2.1millioninyear2008.

PaperConvertingandTradingofWoodfreePaper

ThisdivisionrecordedturnoverofRM41.2millionascomparedtoRM41.3millionpreviously.ThisdivisionshowedaprofitbeforetaxandfinancecostofRM0.5millionascomparedtoaprofitofRM1.4millioninthepreviousyear2008.ThelowerprofitisduetoprovisionforstockimpairmentRM1.0million.

PlywoodandBuildingMaterialsTradingandTimberManufacturing

ThePlywoodandBuildingMaterialsDivisionregisteredlowerturnoverofRM233.9million(2008:RM213.0million)andoperatingprofitbeforetaxandfinancecostofRM6.9millioncomparedwithoperatingprofitofRM4.7million.Operatingprofitmarginimprovedforyear2009comparedwithyear2008.

Theyear2009Saleswereaffectedinthe4thquarterduetofinancialcrisisandeconomicrecession.


Chairman/Group Managing Director’s Statement (cont’d.)

Others – trading of paper products and general household products

TurnoverforthisdivisionwasRM23.6millioninyear2009comparedwithRM24.0millionforthepreviousyear.ThisdivisionmadeaprofitbeforetaxationofRM0.87millioncomparedwithRM0.33millionin2008.

Dividend

TheBoardisunabletoproposeanydividend.

Outlook and Prospects

Thefutureoutlookformostofthedivisionsareexpectedtoregisterslightlyhigherrevenueduetotheworldeconomic recovery and mitigated by efforts of the Malaysian Government to boost domestic economy.AftertaxprofitsshouldshowimprovementsduetoeffortsbytheManagementtocontrolcostsandimproveoperatingmargins.

Acknowledgement

ThelastfewyearshaveproventheresilienceoftheCompanyandIwouldliketothanktheshareholdersfortheirunwaveringsupportsofar.

TheBoardwouldliketothankMrLeeWhayHoongwhoresignedon26May2009respectivelyforhispastcontributiontotheGroup.Wewishhimeverysuccessinhisfutureendeavours.

We owe a similar gratitude to our customers and business associates for their unwavered supportthroughout thedifficult timesof the last fewyears. Iwouldalso like toexpressourappreciation toallGovernmentagenciesandregulatoryauthoritiesfortheirassistanceandguidance.

Finallyandaboveall,onbehalfoftheBoard,Iwishtoofferourheartfeltthankstoallourstafffortheirdedication and loyalty over the past year and their steadfastness and resilience in facing the newchallenges.

Koh Poh SengChairman/ Group Managing Director


KPS CONSORTIUM BERHAD(IncorporatedinMalaysia)

REPORTS AND FINANCIAL STATEMENTS

3� December 2009

CONTENTS

• Directors’Report

• StatementbyDirectors

• StatutoryDeclaration

• IndependentAuditors’Report

• BalanceSheets

• IncomeStatements

• StatementsofChangesinEquity

• CashFlowStatements

• NotestotheFinancialStatements

PAGES

26

30

30

3�

33

35

36

37

40


Directors’ Report

TheDirectorshavepleasureinpresentingtheirreporttogetherwiththeauditedfinancialstatementsoftheGroupandoftheCompanyforthefinancialyearended31December2009.

PRINCIPAL ACTIVITIES

TheprincipalactivityoftheCompanyisinvestmentholding.

TheprincipalactivitiesofthesubsidiarycompaniesaredisclosedinNote12totheFinancialStatements.

Therehavebeennosignificantchanges inthenatureoftheactivitiesoftheCompanyanditssubsidiarycompaniesduringthefinancialyear.

FINANCIAL RESULTS

CompanyRM

Profit for the financial year

Attributable to:- Equity holders of the Company Minority interests

2,354,806

2,354,806-

2,354,806

GroupRM

7,422,845

7,450,477(27,632)

7,422,845

DIVIDENDS

TherewerenodividendspaidordeclaredbytheCompanysincetheendofthepreviousfinancialyear.

RESERVES AND PROVISIONS

Therewerenomaterialtransferstoorfromreservesorprovisionsduringthefinancialyear.

ISSUE OF SHARES AND DEBENTURES

Therewerenosharesordebenturesissuedduringthefinancialyear.


Directors’ Report (cont’d.)

INFORMATION ON THE FINANCIAL STATEMENTS

Before the financial statements of the Group and of the Company were made out, the Directors tookreasonablesteps:-

(a) toascertainthatactionhadbeentakeninrelationtothewritingoffofbaddebtsandthemakingof allowancefordoubtfuldebtsandsatisfiedthemselvesthatallknownbaddebtshadbeenwrittenoff andadequateallowancehadbeenmadefordoubtfuldebts;and

(b) toensurethatanycurrentassetswhichwereunlikelytoberealisedintheordinarycourseofbusiness includingtheirvaluesasshownintheaccountingrecordsoftheGroupandoftheCompanyhavebeen writtendowntoanamountwhichtheymightbeexpectedsotorealise.

Atthedateofthisreport,theDirectorsarenotawareofanycircumstances:-

(a) whichwouldrendertheamountswrittenoffforbaddebtsortheamountoftheallowancefordoubtful debtsinthefinancialstatementsoftheGroupandoftheCompanyinadequatetoanysubstantialextent; or

(b) whichwouldrender thevaluesattributedtocurrentassets in thefinancialstatementsof theGroup andoftheCompanymisleading;or

(c) whichhavearisenwhichrenderadherencetotheexistingmethodofvaluationofassetsorliabilitiesof theGroupandoftheCompanymisleadingorinappropriate.

Nocontingentorotherliabilityhasbecomeenforceableorislikelytobecomeenforceablewithintheperiodoftwelvemonthsaftertheendofthefinancialyearwhich,intheopinionoftheDirectors,willormayaffecttheabilityoftheGroupandoftheCompanytomeetitsobligationsasandwhentheyfalldue.

Atthedateofthisreport,theredoesnotexist:-

(a) any charge on the assets of the Group and of the Company which has arisen since the end of the financialyearwhichsecurestheliabilityofanyotherperson;or

(b) anycontingentliabilityoftheGroupandoftheCompanywhichhasarisensincetheendofthefinancial year.

OTHER STATUTORY INFORMATION

TheDirectorsstatethat:-

Atthedateofthisreport,theyarenotawareofanycircumstancesnototherwisedealtwithinthisreportorthefinancialstatementswhichwouldrenderanyamountstatedinthefinancialstatements.

IntheopinionoftheDirectors:-

(a) the results of operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(b) therehasnotarisenintheintervalbetweentheendofthefinancialyearandthedateofthisreport anyitem,transactionoreventofamaterialandunusualnaturelikelytoaffectsubstantiallytheresults ofoperationsoftheGroupandoftheCompanyforthecurrentfinancialyearinwhichthisreportis made.


DIRECTORS OF THE COMPANY

TheDirectorsinofficesincethedateofthelastreportareasfollows:-

KohPohSeng(Chairman/GroupManagingDirector)LauFookMeng(ExecutiveDirector)FaunCheeYarn(IndependentNon-ExecutiveDirector)TanKongAng(IndependentNon-ExecutiveDirector)(appointedon26.5.2009)LimChoonLiat(IndependentNon-ExecutiveDirector)(appointedon26.5.2009)LeeWhayHoong(IndependentNon-ExecutiveDirector)(resignedon26.5.2009)

InaccordancewithArticle80oftheCompany’sArticlesofAssociation,Mr.LauFookMengwillretirefromtheBoardattheforthcomingAnnualGeneralMeetingandbeingeligibleofferhimselfforre-election.

AccordingtotheRegisterofDirectors’Shareholdings,theinterestsofDirectorsinofficeattheendofthefinancialyearinsharesintheCompanyduringthefinancialyearwereasfollows:-


At31.12.2009

Direct interestKoh Poh Seng 60,590,525

Sold

(34,000)

Bought

Ordinary Shares of RM1 Each

10,000

At1.1.2009

60,614,525

ByvirtueofMrKohPohSeng’sinterestintheCompany,heisalsodeemedtohaveinterestinthesharesofallthesubsidiarycompaniestotheextentthattheCompanyhasaninterestunderSection6AoftheCompaniesAct,1965.

Otherthanthosedisclosedabove,nootherDirectorsattheendofthefinancialyearheldanyinterestinsharesoftheCompanyoritsrelatedcorporationsduringthefinancialyear.


At31.12.2009

Direct interestKoh Poh Seng 60,590,525

Sold

(34,000)

Bought

Ordinary Shares of RM1 Each

10,000

At1.1.2009

60,614,525


DIRECTORS’ BENEFITS

Duringandattheendofthefinancialyear,noarrangementssubsistedtowhichtheCompanyisaparty,withtheobjectorobjectsofenablingDirectorsoftheCompanytoacquirebenefitsbymeansoftheacquisitionofsharesintheCompanyoranyotherbodycorporate.

Since the endof theprevious financial year, noDirectorhas receivedorbecomeentitled to receive anybenefit (otherthanasdisclosedinNote22totheFinancialStatements)byreasonofacontractmadebytheCompanyorarelatedcorporationwiththeDirectororwithafirmofwhichheisamember,orwithacompanyinwhichhehasasubstantialfinancialinterest.

AUDITORS

MessrsSJGrantThorntonhaveexpressedtheirwillingnesstocontinueinoffice.

OnbehalfoftheBoard

................................................................. )KOHPOHSENG ) ) ) ) ) ) ) DIRECTORS ) ) )................................................................. )LAUFOOKMENG ) KualaLumpur19April2010


IntheopinionoftheDirectors,thefinancialstatementssetoutonpages33to85aredrawnupinaccordancewithFinancialReportingStandardsandtheCompaniesAct,1965inMalaysiasoastogiveatrueandfairviewofthefinancialpositionoftheGroupandoftheCompanyasat31December2009andofitsfinancialperformanceandcashflowsoftheGroupandoftheCompanyforthefinancialyearthenended.

OnbehalfoftheBoard

............................................................... ..................................................…............KOHPOHSENG LAUFOOKMENG KualaLumpur19April2010

Statement by Directors

I,LauFookMeng,beingtheDirectorprimarilyresponsibleforthefinancialmanagementofKPSConsortiumBerhad, do solemnly and sincerely declare that to the best of my knowledge and belief, the financialstatementssetoutonpages33to85arecorrectandImakethissolemndeclarationconscientiouslybelievingthesametobetrueandbyvirtueoftheprovisionsoftheStatutoryDeclarationsAct,1960.

Subscribedandsolemnlydeclaredby )theabovenamedatKualaLumpurin )theFederalTerritorythisdayof )19April2010 ) ............................................................................ LAU FOOK MENG Beforeme:

CommissionerforOaths

Statutory Declaration

PESU

RUHJAYA SUMPAH

MA L A Y S I A

W.490S. ARULSAMY

16 - Tingkat Bawah Jalan Pudu, 55100 Kuala Lumpur.


Report on the Financial Statements

WehaveauditedthefinancialstatementsofKPSConsortiumBerhad,whichcomprisethebalancesheetsasat31December2009andtheincomestatements,statementsofchangesinequityandcashflowstatementsoftheGroupandoftheCompanyforthefinancialyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotes,assetoutonpages33to85.

Directors’ResponsibilitiesfortheFinancialStatements

ThedirectorsoftheCompanyareresponsibleforthepreparationandfairpresentationofthesefinancialstatements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia.This responsibility includes: designing, implementing and maintaining internal control relevant to thepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherdue to fraud or error; selecting and applying appropriate accounting policies; and making accountingestimatesthatarereasonableinthecircumstances.

Auditors’Responsibilities

Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithapprovedstandardsonauditinginMalaysia.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialstatementsarefreefrommaterialmisstatement.

Anaudit involvesperformingprocedurestoobtainauditevidenceabout theamountsanddisclosures inthefinancialstatements.Theproceduresselecteddependonourjudgement,includingtheassessmentofrisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,weconsiderinternalcontrolrelevanttotheCompany’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany’sinternalcontrol.AnauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebytheDirectors,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

Inouropinion,thefinancialstatementshavebeenproperlydrawnupinaccordancewithFinancialReportingStandardsandtheCompaniesAct,1965inMalaysiasoastogiveatrueandfairviewofthefinancialpositionoftheGroupandoftheCompanyasat31December2009andoftheirfinancialperformanceandcashflowsforthefinancialyearthenended.

Independent Auditors’ Report


Independent Auditors’ Report (cont’d.)

Report on Other Legal and Regulatory Requirements

InaccordancewiththerequirementsoftheCompaniesAct,1965inMalaysia,wealsoreportthefollowing:-

a) Inouropinion,theaccountingandotherrecordsandtheregistersrequiredbytheActtobekeptby theCompany and its subsidiary companies ofwhich wehave acted as auditorshavebeenproperly keptinaccordancewiththeprovisionsoftheAct.

b) WearesatisfiedthattheFinancialStatementsofthesubsidiarycompaniesthathavebeenconsolidated with the Company’s financial statements are in form and content appropriate and proper for the purposesofthepreparationofthefinancialstatementsoftheGroupandwehavereceivedsatisfactory informationandexplanationsrequiredbyusforthosepurposes.

c) The auditors’ reports on the financial statements of the subsidiary companies did not contain any qualificationoranyadversecommentmadeunderSection174(3)oftheAct.

Other Matters

ThisreportismadesolelytothemembersoftheCompany,asabody,inaccordancewithSection174oftheCompaniesAct,1965inMalaysiaandfornootherpurpose.Wedonotassumeresponsibilitytoanyotherpersonforthecontentofthisreport.

SJ GRANT THORNTON DATO’ N. K. JASANI(NO.AF:0737) CHARTEREDACCOUNTANTCHARTEREDACCOUNTANTS (NO:708/03/12(J/PH))

KualaLumpur 19April2010


Balance Sheetsasat31December2009

2008RM

SHARE CAPITALSHARE PREMIUMACCUMULATED LOSSES

MINORITY INTERESTS

Total equity

NON-CURRENT LIABLITIESBorrowingsDeferred taxationFinance creditors

REPRESENTED BY:-

NON-CURRENT ASSETSProperty, plant and equipmentPrepaid land lease paymentsInvestment propertiesInvestment in subsidiary companiesGoodwill on consolidation

Total non-current assets

CURRENT ASSETSInventoriesTrade receivablesOther receivablesAmount due from subsidiary companiesTax recoverableFixed deposits with licensed banksCash and bank balances

Total current assets

2009RM

2008RM

CompanyGroup

2009RM

147,827,1585,400,842

(3,148,611)

150,079,389

25,126

150,104,515

- 81,000

302,717

150,488,232

38,039,605 2,341,414 4,461,684

- 43,151,039

87,993,742

32,866,280 67,388,105

6,684,168 -

25,561 11,846,256

9,832,245

128,642,615

147,827,158 5,400,842

(10,599,088)

142,628,912

52,758

142,681,670

559,489 88,000

210,291

143,539,450

39,291,148 2,413,644 4,562,334

- 43,151,039

89,418,165

29,419,085 57,907,641

2,623,288 -

29,309 11,154,761

8,080,800

109,214,884

147,827,158 5,400,842

(29,730,849)

123,497,151

-

123,497,151

- - -

123,497,151

- - -

119,646,201 -

119,646,201

- -

21,042 13,574,513

- -

74,365

13,669,920

147,827,158 5,400,842

(32,085,655)

121,142,345

-

121,142,345

- - -

121,142,345

- - -

117,204,492 -

117,204,492

- -

36,913 13,949,126

- -

19,953

14,005,992

Note

5

678

910111213

14151612

17


2008RM

CURRENT LIABLITIESTrade payablesOther payablesAmount due to subsidiary companiesAmount due to a DirectorTax payableBorrowings

Total current liabilities

NET CURRENT ASSETS

2009RM

2008RM

CompanyGroup

2009RM

14,163,756 3,255,887

- -

702,762 48,025,720

66,148,125

62,494,490

150,488,232

11,465,410 3,904,265

- 26,198

217,510 39,480,216

55,093,599

54,121,285

143,539,450

- 104,430

9,714,540 - - -

9,818,970

3,850,950

123,497,151

- 105,607

9,962,532 - - -

10,068,139

3,937,853

121,142,345

Note

18191220

6

Balance Sheetsasat31December2009(cont’d.)

Theaccompanyingnotesformanintegralpartofthefinancialstatements.


Income StatementsfortheFinancialYearEnded31December2009

2008RM

Revenue

Cost of sales

Gross profit

Other income

Distribution costs

Administrative expenses

Finance costs

Other expenses

Profit/(loss) before taxation

Taxation

Profit/(loss) for the financial year

Attributable to:- Equity holders of the Company Minority interests

Earnings per share attributable to equity holders of the Company

2009RM

2008RM

CompanyGroup

2009RM

311,541,921

(282,334,693)

29,207,228

3,655,411

(7,237,149)

(6,285,886)

(1,620,714)

(8,302,247)

9,416,643

(1,993,798)

7,422,845

7,450,477 (27,632)

7,422,845

5.25

289,724,807

(265,642,812)

24,081,995

2,313,189

(6,211,020)

(6,414,236)

(2,373,065)

(5,040,159)

6,356,704

(1,171,790)

5,184,914

5,180,125 4,789

5,184,914

3.65

-

-

-

4,552,264

-

(204,471)

-

(1,992,987)

2,354,806

-

2,354,806

2,354,806 -

2,354,806

-

-

-

-

-

(187,897)

-

(7,525)

(195,422)

-

(195,422)

(195,422) -

(195,422)

Note

21

22

23

24



Statements of Changes in EquityfortheFinancialYearEnded31December2009

Tota

leq

uit

yR

M

Gro

up

Bal

ance

at

1 J

anu

ary

20

08

Pro

fit

for

the

fin

anci

al y

ear

Bal

ance

at

31

Dec

emb

er 2

00

8

Pro

fit

for

the

fin

anci

al y

ear

Bal

ance

at

31

Dec

emb

er 2

00

9

Com

pan

y

Bal

ance

at

1 J

anu

ary

20

08

Loss

for

the

fin

anci

al y

ear

Bal

ance

at

31

Dec

emb

er 2

00

8

Pro

fit

for

the

fin

anci

al y

ear

Bal

ance

at

31

Dec

emb

er 2

00

9

Dis

trib

uta

ble

<--------- N

on

-dis

trib

uta

ble

------->

<-------------- A

ttri

bu

tab

le t

o e

qu

ity

hold

ers

of

the

Com

pan

y ------------->

13

7,4

96

,75

6

5,1

84

,91

4

14

2,6

81

,67

0

7,4

22

,84

5

15

0,1

04

,51

5

Min

ori

tyin

tere

sts

RM

47

,96

9

4,7

89

52

,75

8

(27

,63

2)

25

,12

6

Tota

lR

M

137,4

48

,78

7

5,1

80

,12

5

142,6

28

,91

2

7,4

50

,47

7

150,0

79

,38

9

121,3

37

,76

7

(1

95

,42

2)

121,1

42

,34

5

2,3

54

,80

6

123,4

97

,15

1

Acc

um

ula

ted

loss

es RM

(15,7

79,2

13)

5,1

80,1

25

(10,5

99,0

88)

7,4

50,4

77

(3,1

48,6

11)

(31,8

90,2

33)

(195,4

22)

(32,0

85,6

55)

2,3

54,8

06

(29,7

30,8

49)

Shar

ep

rem

ium

RM

5,4

00,8

42

-

5,4

00,8

42

-

5,4

00,8

42

5,4

00,8

42

-

5,4

00,8

42

-

5,4

00,8

42

Shar

eca

pit

alR

M

14

7,8

27

,158

-

14

7,8

27

,158

-

14

7,8

27

,158

14

7,8

27

,158

-

14

7,8

27

,158

-

14

7,8

27

,158

Th

eac

com

pan

yin

gn

ote

sfo

rma

ni

nte

gra

lp

art

of

the

fin

anci

als

tate

men

ts.


Cash Flow StatementsfortheFinancialYearEnded31December2009

2008RM

CASH FLOWS FROM OPERATING ACTIVITIES

Profit/(Loss) before taxation

Adjustments for:-Amortisation of prepaid land lease paymentsAllowance for slow moving inventoriesBad debts written offDepreciation of property, plant and equipmentDepreciation of investment propertiesLoss on disposal of property, plant and equipmentLoss on disposal of other investmentsInterest expensesInventories written offImpairment loss of investment in subsidiariesProperty, plant and equipment written offReversal of investment properties costAllowance for doubtful debts - current year - no longer requiredAllowance for slow moving inventories no longer requiredAllowance for diminution in value of other investments no longer requiredGain on disposal of property, plant and equipmentInterest income Impairment loss of investment in subsidiaries no longer required

Operating profit/(loss) before working capital changes

2009RM

2008RM

CompanyGroup

2009RM

9,416,643

72,230 45,126

2,988,934

2,709,949 100,650

29,815 -

1,252,221 1,077,945

- 390

-

2,946,898 (1,525,541)

(1,110,566)

-

(1,672) (160,871)

-

17,842,151

6,356,704

72,228 48,675

325,033

2,440,873 94,638

15,504 8,441

2,006,519 456,393

- 97,534 11,061

3,926,348 (827,998)

(187,424)

(10,220)

(199) (253,233)

-

14,580,877

2,354,806

- - -

- -

- - - -

1,982,510 - -

10,476 (128,045)

-

- - - -

(4,424,219)

(204,472)

(195,422)

- - -

- -

- - - - - - -

7,525 -

-

- - - -

-

(187,897)


2008RM

Changes in working capital:-InventoriesReceivablesPayablesSubsidiary companiesBill payablesDirectors

Cash generated from/(used in) operations

Interest paid Interest receivedTaxes paid

Net cash from/(used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Purchase of investment propertiesProceeds from disposal of property, plant and equipmentProceeds from disposal of other investments

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES Drawndown of term loanRepayment of term loanRepayment of finance creditors

Net cash used in financing activities

2009RM

2008RM

CompanyGroup

2009RM

(3,459,700) (17,951,635)

1,993,213 -

8,752,451 (26,198)

7,150,282

(1,252,221) 160,871

(1,511,798)

4,547,134

(1,110,375) -

96,467

-

(1,013,908)

- (766,436) (323,850)

(1,090,286)

(1,009,814) 13,310,412

(875,196) -

(18,869,892) 26,198

7,162,585

(2,006,519) 253,233

(897,172)

4,512,127

(4,997,289) (580,894)

19,199

3,583

(5,555,401)

498,788 (813,418) (202,721)

(517,351)

- 15,871 (1,177)

244,190 - -

54,412

- - -

54,412

- -

-

-

-

- - -

-

- (44,438) 28,176

199,421 - -

(4,738)

- - -

(4,738)

- -

-

-

-

- - -

-

Note

A

Cash Flow StatementsfortheFinancialYearEnded31December2009(cont’d.)


Cash Flow StatementsfortheFinancialYearEnded31December2009(cont’d.)

2008RM

CASH AND CASH EQUIVALENTSNet increase/(decrease)Brought forward

Carried forward

2009RM

2008RM

CompanyGroup

2009RM

2,442,940 19,235,561

21,678,501

(1,560,625) 20,796,186

19,235,561

54,412 19,953

74,365

(4,738) 24,691

19,953

Note

B

NOTES TO THE CASH FLOW STATEMENTS

A. PROPERTY, PLANT AND EQUIPMENT

During the financial year, the Group acquired property, plant and equipment properties with an aggregate cost of RM1,583,406 (2008: RM5,292,289) of which RM473,031 (2008: RM295,000) was acquiredbymeansofhirepurchase.CashpaymentsofRM1,110,375(2008:RM4,997,289)weremade bytheGrouptopurchasetheproperty,plantandequipment.

B. CASH AND CASH EQUIVALENTS

Cashandcashequivalentsincludedinthecashflowstatementscomprisethefollowingbalancesheets items:-

2008RM

Cash and bank balancesFixed deposits with licensed banks

2009RM

2008RM

CompanyGroup

2009RM

9,832,245 11,846,256

21,678,501

8,080,800 11,154,761

19,235,561

74,365 -

74,365

19,953 -

19,953

AsdisclosedinNote17totheFinancialStatements,thefixeddepositswithlicensedbankshavebeenpledgedtobanksforbankingfacilitiesgrantedtotheGroupandhence,arenotavailableforgeneraluse.



Notes to the Financial Statements31December2009

�. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS ThefinancialstatementsoftheGroupandoftheCompanyhavebeenpreparedinaccordancewiththe CompaniesAct,1965inMalaysiaandFinancialReportingStandardsissuedbyMalaysianAccounting StandardsBoard(“MASB”).

2. FINANCIAL RISK MANAGEMENT POLICIES

TheGroup’s financial riskmanagementpolicyseeks toensure thatadequate financial resourcesare availableforthedevelopmentoftheGroup’sbusinesseswhilstmanagingitsrisks.TheGroupoperates withinpoliciesthatareapprovedbytheBoardandtheGroup’spolicyisnottoengageinspeculative transactions.

ThemainareasoffinancialrisksfacedbytheGroupandthepolicyinrespectofthemajorareasof treasuryactivityaresetoutasfollows:

2.� Foreign Currency Risk

TheGroupisexposedtoforeigncurrencyriskasaresultofitsnormaloperatingactivities,both external and intra-Group where the currency denomination differs from the local currency, Ringgit Malaysia (RM). The Group’s and the Company policy is to minimise the exposure of foreigncurrencyrisktotransactionriskbymatchinglocalcurrencyincomeagainstlocalcurrency costs.

2.2 Credit Risk

The credit risk is controlled by the application of credit approvals, limits and monitoring procedures.Aninternalcreditreviewisconductedifthecreditriskismaterial.

2.3 Market Risk

Forkeyproductpurchases,theGroupestablishesfloatingandfixedpricelevelsthattheGroup and the Company’s considers acceptable and enters into physical supply agreements, where necessary, toachieve these levels.TheGroupdoesnot facesignificantexposure fromtherisk fromchangesinpricelevel.

2.4 Liquidity and Cash Flow Risks

TheGroupseekstoachieveabalancebetweencertaintyoffundingevenindifficulttimesforthe marketsortheGroupandaflexible,cost-effectiveborrowingstructure.Thisistoensurethatat theminimum,allprojectednetborrowingneedsarecoveredbycommittedfacilities.Also, the objectivefordebtmaturityistoensurethattheamountofdebtmaturinginanyoneyearisnot beyondtheGroup’smeanstorepayandrefinance.

2.5 Interest Rate Risk

TheGroup’sexposuretointerestrateriskforchangesininterestratesprimarilytoinvestment portfolioinfixeddepositsandcashequivalentswithfinancialinstitution.TheGroupmanagesits interestraterisksbyplacingsuchbalancesonvaryingmaturitiesandinterestrateterms.

TheGroup’sdebts includebankoverdrafts,short-termandlong-termborrowings.TheGroup’s interest rate management objective is to manage the interest expenses consistent with maintaininganacceptablelevelofexposuretointerestratefluctuation.Inordertoachievethis objective,theGrouptargetsamixoffixedandfloatingdebtbasedonassessmentofitsexisting exposureanddesiredinterestrateprofile.


Notes to the Financial Statements31December2009(cont’d.)

3. SIGNIFICANT ACCOUNTING POLICIES

3.� Accounting convention

The financial statements of the Group and of the Company are prepared under the historical cost convention, unless otherwise indicated in the summary of the significant accounting policies.

The financial statements are presented in Ringgit Malaysia (RM) which is the Group’s and the Company’sfunctionalcurrency.

3.2 Adoption of Revised Financial Reporting Standards (“FRSs”)

The followingare thestandardsand IC Interpretations thatarenotyeteffectiveandhavenot beenearlyadoptedbytheGroupandtheCompany:-

(1) AmendmentstoFRS1 -

(2) FRS1(#) -

(3) AmendmentstoFRS1(*) -

(4) AmendmentstoFRS2 -

(5) AmendmentstoFRS2(#) -

(6) FRS3(#) - (7) FRS4 - (8) AmendmenttoFRS5 -

(9) AmendmentstoFRS5(#) -

(10)FRS7 - (11)AmendmenttoFRS7 -

(12)AmendmenttoFRS7(*) -

First-timeAdoptionofFinancialReportingStandards.Amendments relating to cost of an investment in asubsidiary,jointlycontrolledentityorassociate

First-timeAdoptionofFinancialReportingStandards

Limited Exemption from Comparative FRS 7Disclosures for First-Time Adopters. Amendmentrelatingtotransitionprovisionsforfirsttimeadopter

ShareBasedPayment.Amendmentsrelatingtovestingconditionsandcancellations

Share Based Payment. Amendments Relating to thescopeofthestandard

BusinessCombinations

InsuranceContracts

Non-current Assets Held for Sale and DiscontinuedOperations. Amendment relating to disclosures ofnon-current assets (or disposal groups) classified asheldforsaleordiscontinuedoperations

Non-current Assets Held for Sale and DiscontinuedOperations. Amendment relating to the inclusion ofnon-currentassetsasheldfordistributiontoownersinthestandard

FinancialInstruments:Disclosures

Financial Instruments: Disclosures. Amendmentrelatingtofinancialassets

Improving Disclosures about Financial Instruments.Amendments relating to the fair value measurementusing fair valuehierarchyanddisclosureof liquidityrisk

KPS Consortium Bhd (143816-V) • Annual Report 200942



3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)

3.2 Adoption of Revised Financial Reporting Standards (“FRSs”) (cont’d.)

The followingare thestandardsand IC Interpretations thatarenotyeteffectiveandhavenot beenearlyadoptedbytheGroupandtheCompany(cont’d.):-

(13)FRS8 - (14)AmendmenttoFRS8 -

(15)FRS101 -

(16)AmendmenttoFRS107 -


(18)AmendmentstoFRS110 -


(20)AmendmenttoFRS117 - (21)AmendmenttoFRS118 -



(24)FRS123 - (25)AmendmentstoFRS123 -

(26)AmendmentstoFRS127 -

(27)FRS127(#) - (28)AmendmenttoFRS128 -

OperatingSegments

Operating Segments. Amendment relating todisclosureinformationaboutsegmentassets

PresentationofFinancialStatements(Revised)

Statements of Cash Flows. Amendment relating toclassificationofexpendituresonunrecognisedassets

AccountingPolicies,ChangesinAccountingEstimatesand Errors. Amendment relating to selection andapplicationofaccountingpolicies

Events After the Reporting Period. Amendmentrelating to reason for dividend not recognised as aliabilityattheendofthereportingperiod

Property,PlantandEquipment.Amendmentrelatingtoderecognitionofasset

Leases.Amendmentrelatingtoclassificationofleases

Revenue. Amendment relating to Appendix of thisstandardandrecognitionandmeasurement

EmployeeBenefits.Amendmentrelatingtodefinition,curtailmentandsettlements

AccountingforGovernmentGrantsandDisclosureofGovernment Assistance. Amendment relating todefinitionandgovernment loanatbelow-marketrateofinterest

BorrowingCosts

BorrowingCosts.Amendmentrelatingtoexclusionofincidentalcosttoborrowing

Consolidated and Separate Financial Statements.Amendments relating to cost of an investment in asubsidiary,jointlycontrolledentityorassociate

ConsolidatedandSeparateFinancialStatements.

Investments in Associates. Amendment relating toimpairmentlossesinapplicationoftheequitymethodandthescopeofthisstandard







(33)AmendmenttoFRS132(^) -




(37)AmendmentstoFRS138(#) -

(38)FRS139 -



(41) ICInterpretation9 - (42)AmendmentstoIC - Interpretation9(#)

(43) ICInterpretation10 -

(44) ICInterpretation11 - (45) ICInterpretation12(#) -

Financial Reporting in Hyperinflationary Economies.Amendmentrelatingtochangingoftermsused

Interests in Joint Ventures. Amendment relating toadditional disclosure required for joint venture thatdoesnotapplyFRS131

Financial Instruments: Presentation. Amendmentrelatingtoputtablefinancialinstruments

Financial Instruments: Presentation. Amendmentrelatingtoeffectivedateandtransition.

Financial Instruments: Presentation. Amendmentsrelatingtoclassificationofrightsissues.

Interim Financial Reporting. Amendment relating todisclosureofearningspershare

Impairment of Assets. Amendment relating to thedisclosureofrecoverableamount

IntangibleAssets.Amendmentrelatingtorecognitionofanexpense

IntangibleAssets.AmendmentsrelatingtotherevisiontoFRS3

Financial Instruments:Recognition andMeasurement

FinancialInstruments:RecognitionandMeasurement.Amendment relating to eligible hedged items,reclassification of financial assets and embeddedderivatives

InvestmentProperty.Amendmentrelatingtoinabilitytodeterminefairvaluereliably

ReassessmentofEmbeddedDerivatives

ReassessmentofEmbeddedDerivatives.AmendmentsrelatingtothescopeoftheICandrevisiontoFRS3

InterimFinancialReportingandImpairment

FRS2-GroupandTreasuryShareTransactions

ServiceConcessionArrangement









(48) ICInterpretation15(#) -



CustomerLoyaltyProgrammes

FRS 119 - The Limit on a Defined Benefit Asset,MinimumFundingRequirementsandtheirInteraction

AgreementsfortheConstructionofRealEstate

HedgesofaNetInvestmentinaForeignOperation

DistributionsofNon-CashAssetstoOwners

AlloftheaboveAmendments,ICInterpretationsandFRSswillbeeffectiveforaccountingperiod beginningonorafter1January2010,otherthanFRS8,thosemarkedwith(^),(#)and(*)which will be applicable to accounting period beginning on or after 1 July 2009, 1 March 2010, 1 July2010and1January2011respectively.TheexistingFRS1,3,127aswellasFRS201

2004

willbewithdrawnupontheadoptionofthenewrequirementsthattakeeffecton1July2010.

FRS1,2,4,5,120,128,129and131,ICInterpretations9,10,11,12,13,14,15,16and17are notexpectedtoberelevanttotheoperationsoftheGroupandoftheCompany.TheDirectors anticipatethattheotherFRS,amendmentstoFRSandICInterpretationswillbeadoptedinthe annualfinancialstatementsoftheGroupandoftheCompanyforthefinancialyearcommencing 1 January 2010 and that the adoption of these new/revised FRS, amendments to FRS and IC InterpretationswillhavenomaterialimpactonthefinancialstatementsoftheGroupandofthe Companyintheperiodforinitialapplicationexceptforthefollowing:-

FRS3BusinessCombination

Therevisedstandardcontinuestoapplytheacquisitionmethodtobusinesscombinations,with somesignificantchanges.Allpaymentstopurchaseabusinessaretoberecordedatfairvalue at theacquisitiondate,withcontingentpaymentsclassifiedasdebtsubsequently re-measured throughtheincomestatement.Thereisachoicetomeasurethenon-controllinginterestinthe acquireeat fairvalueorat thenon-controlling interest’sproportionateshareof theacquiree’s netassets.Allacquisition-relatedcostsshouldbeexpensed.

FRS7-FinancialInstruments:Disclosures

FRS7andtheconsequentialamendmenttoFRS101PresentationofFinancialStatementsrequire disclosureofinformationaboutthesignificanceoffinancialinstrumentsfortheGroup’sandthe Company’s financial position and performance, the nature and extent of risks arising from financialinstrumentsandtheobjectives,policiesandprocessesformanagingcapital.

FRS8OperatingSegments

FRS 8, which replaces FRS 1142004

Segment Reporting, requires the identification of operating segmentsbasedon internal reports thatare regularly reviewedby theGroup’schiefoperating decisionmakerinordertoallocateresourcestothesegmentsandtoassesstheirperformance. Currently, theGroup identifies twosetsofsegments (businessandgeographical)usingarisks and rewards approach, with the Group’s system of internal financial reporting to key managementpersonnelservingonlyasthestartingpointfortheidentificationofsuchsegments. As a result, following the adoption of FRS 8, the identification of the Group’s reportable segmentsmaychange.









FRS123BorrowingCosts

FRS123eliminatestheoptionavailableunderthepreviousversionofFRS123torecogniseall borrowingcostsimmediatelyasanexpense.TheGroupshallcapitaliseborrowingcoststhatare directlyattributabletotheacquisition,constructionorproductionofaqualifyingassetaspart ofthecostofthatasset.

FRS127–ConsolidatedandSeparateFinancialStatements

Therevisedstandardrequiredtheeffectsofalltransactionswithnon-controllingintereststobe recordedinequityifthereisnochangeincontrolandthesetransactionswillnolongerresultin goodwill or gains and losses.The standard also specifies the accountingwhen control is lost. Anyremaininginterestintheentityisremeasuredtofairvalue,andagainorlossisrecognised inprofitorloss.Lossesarerequiredtoallocatetonon-controllinginterests,evenifitresultsin thenon-controllinginteresttobeinadeficitposition.

FRS139-FinancialInstruments:RecognitionandMeasurement

FRS139establishesprinciplesforrecognisingandmeasuringfinancialassets,financialliabilities andsomecontractstobuyandsellnon-financialitems.Byvirtueoftheexemptioninparagraph 103ABofFRS139,theimpactonthefinancialstatementsuponfirstadoptionofthisstandard asrequirebyparagraph30(b)ofFRS108,AccountingPolicies,ChangesinAccountingEstimates andErrorsisnotdisclosed,ifany.

3.3 Significant Account Estimates and Judgements

Estimates, assumptionsconcerning the futureand judgementsaremade in thepreparationof the financial statements. They affect the application of the Group’s accounting policies and reportedamountsof assets, liabilities, incomeand expenses, anddisclosuresmade. Estimates andunderlyingassumptionsareassessedonanon-goingbasisandarebasedonexperienceand relevantfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunder thecircumstances.Actualresultmaydifferfromtheseestimates.

3.3.1 Keysourcesofestimationuncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial yeararediscussedbelow:-

Impairment of goodwill

TheGroupdetermineswhethergoodwillisimpairedatleastonceannually.Thisrequires the estimation of the value in use of the cash-generating units to which goodwill are allocated. Estimating the value in use requires the Group to make an estimate of the expectedfuturecashflowsfromthecash-generatingunitandalsotochooseasuitable discountrateinordertocalculatethepresentvalueofthosecashflows.





3.3 Significant Account Estimates and Judgements (cont’d.)

3.3.1 Keysourcesofestimationuncertainty(cont’d.)

Deferred tax assets

Deferred taxassetsare recognised for alldeductible temporarydifferences,unutilised taxlosses,unabsorbedcapitalallowancesandunusedtaxcreditstotheextentthatitis probablethattaxableprofitwillbeavailableagainstwhichallthedeductibletemporary differences, unutilised tax losses and unabsorbed capital allowances can be utilised. Significantmanagementjudgementisrequiredtodeterminetheamountofdeferredtax assetsthatcanberecognised,baseduponthe likelytimingandleveloffuturetaxable profitstogetherwithfuturetaxplanningstrategies.

Income taxes/deferred tax liabilities

TheGroupisexposedtoincometaxesinnumerousjurisdictions.Significantjudgement isinvolvedindeterminingtheGroup-wideprovisionforincometaxes.Therearecertain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognised tax liabilities based on estimatesofwhetheradditionaltaxeswillbedue.Wherethefinaltaxoutcomeofthese mattersisdifferentfromtheamountsthatwereinitiallyrecognised,suchdifferencewill impact the income tax and deferred tax provisions in the period in which such determinationismade.

Depreciation of property, plant and equipment and investment properties

Property,plantandequipmentaredepreciatedinastraight-linebasisovertheiruseful life.Managementestimatedtheusefullifeoftheseassetstobewithin3to50yearsfor property, plant and equipment and50 year for investmentproperties.Changes in the expected level of usage and technological developments could impact the economic usefullifeandtheresidualvaluesoftheseassets,thereforefuturedepreciationcharges couldberevised.

Impairment of property, plant and equipment, investment properties, prepaid land lease prepayment and investment in subsidiary companies

TheGroupcarriedout the impairment testbasedonavarietyof estimation including thevalue-in-useofthecash-generatingunittowhichtheassetsareallocated.Estimating the value-in-use requires the Group to make an estimate of the expected future cash flowsfromcash-generatedunitandalsotochooseasuitablediscountrate inorderto calculatethepresentvalueofthosecashflows.




3.3 Significant Account Estimates and Judgements (cont’d.)

3.3.2 Criticaljudgementmadeinapplyingaccountingpolicies

The following is the judgement made by management in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognisedinthefinancialstatements.

Classification between investment properties and owner-occupied properties

TheGroupdetermineswhetherapropertyqualifiesasaninvestmentproperty,andhas developedcriteriainmakingthatjudgement.Investmentpropertyisapropertyheldto earnrentalsorforcapitalappreciationorboth.Therefore,theGroupconsiderswhether aproperty generates cash flows largely independently of theother assetsheldby the Group.

Somepropertiescompriseaportionthatisheldtoearnrentalsorforcapitalappreciation andanotherportionthatisheldforuseintheproductionorsupplyofgoodsorservices orforadministrativepurposes.Iftheseportionscouldbesoldseparately(orleasedout separatelyunderafinancelease),theGroupaccountsfortheportionsseparately.Ifthe portionscouldnotbesoldseparately,thepropertyisaninvestmentpropertyonlyifan insignificantportionisheldforuseintheproductionorsupplyofgoodsorservicesor foradministrativepurposes.

Judgement is made on an individual property basis to determine whether ancillary servicesaresosignificant thatapropertydoesnotqualifyasan investmentproperty.

3.4 Subsidiary companies

A subsidiary company is a company in which the Group or the Company has the power to exercise control over the financial and operating policies so as to obtain benefits therefrom.

Investmentinsubsidiarycompaniesisstatedatcost.Whereanindicationofimpairmentexists, thecarryingamountofthesubsidiarycompaniesisassessedandwrittendownimmediatelyto theirrecoverableamount

3.5 Basis of consolidation The Group financial statements consolidate the audited financial statements of the Company andallof itssubsidiarycompanies,whichhavebeenprepared inaccordancewiththeGroup’s accountingpolicies. All intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated on consolidation unless cost cannotberecovered.

ThefinancialstatementsoftheCompanyanditssubsidiarycompaniesarealldrawnuptothe samereportingdate.





3.5 Basis of consolidation (cont’d.) Acquisitionof subsidiary companies is accounted forusing thepurchasemethod.The costof anacquisitionismeasuredasthefairvalueoftheassetsgiven,equityinstrumentsissuedand liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a businesscombinationaremeasuredinitiallyattheirfairvaluesattheacquisitiondate,irrespective oftheextentofanyminorityinterest. Any excess of the cost of the business combination over the group’s interest in the net fair valueoftheidentifiableassets,liabilitiesandcontingentliabilitiesrepresentsgoodwill.Goodwill isaccountedforinaccordancewiththeaccountingpolicyforgoodwillstatedinNote3.6.

Minorityinterestsrepresenttheportionofprofitorlossandnetassetsinsubsidiarycompanies not held by the Group. They are presented in the consolidated balance sheet within equity, separatelydisclosedintheconsolidatedincomestatement.

Anyexcessofthegroup’sinterestinthenetfairvalueoftheidentifiableassets, liabilitiesand contingentliabilitiesoverthecostofbusinesscombinationisrecognisedasincomeonthedate ofacquisition.

Subsidiary companies are consolidated from the date on which control is transferred to the Groupandarenolongerconsolidatedfromthedatethatcontrolceases.

The gain or loss on disposal of a subsidiary company is the difference between net disposal proceedsandtheGroup’sshareofitsnetassetstogetherwithanyunamortisedorunimpaired balanceofgoodwillonacquisitionandexchangedifferences.

3.6 Goodwill

Goodwill represents the excess of the cost of acquisition over the Group’s interest in the fair valueof the identifiableassets, liabilitiesandcontingent liabilitiesofasubsidiarycompanyat thedateofacquisition.

Goodwill arising on the acquisition of subsidiary companies is presented separately in the balancesheet.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.Goodwill is reviewed for impairment, annuallyormore frequently if eventsor changes incircumstancesindicatethatthecarryingvaluesmaybeimpaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groupofunits.Eachunitorgroupofunitstowhichthegoodwillissoallocated:-

- RepresentsthelowestlevelwithintheGroupatwhichthegoodwillismonitoredforinternal managementpurposes;and

- IsnotlargerthanasegmentbasedoneithertheGroup’sprimaryortheGroup’ssecondary reportingformat.

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