CONTENTSknusford.listedcompany.com/misc/ar2011.pdf · 2012. 6. 5. · Listed on Bursa Malaysia Main...

CONTENTSCorporate Information 2

Notice of Annual General Meeting 3

Statement AccompanyingNotice of Annual General Meeting 6

Profile of Directors and Chief Executive Officer 7

Chairman’s Statement 9

Statement on Corporate Governance 13

Statement on Internal Control 18

Statement on Internal Audit Function 19

Directors’ Responsibility Statement 20

Corporate Social Responsibility 20

Audit Committee’s Report 21

Directors’ Report 24

Statements of Financial Position 28

Statements of Comprehensive Income 29

Statement of Changes in Equity 30

Statements of Cash Flows 31

Notes to the Financial Statements 33

Statement by Directors 67

Statutory Declaration 68

Independent Auditors’ Report 69

Material Litigation and Other Information 70

Analysis of Shareholdings 71

Particulars of Properties 73

Form of Proxy

Corporate Information

BOARD OF DIRECTORSDatuk Halimah Binti Mohd Sadique - Independent Non-Executive DirectorLim Keng Cheng - Executive DirectorDato' Lim Kang Hoo - Executive DirectorKhoo Nang Seng @ Khoo Nam Seng - Executive DirectorDato' Lim Kang Swee - Executive DirectorAznam Bin Mansor - Non-Independent Non-Executive DirectorLim Ts-Fei - Independent Non-Executive DirectorDr. Wong Kai Fatt - Independent Non-Executive DirectorKang Hui Ling - Senior Independent Non-Executive Director

CHAIRMAN REGISTRARDatuk Halimah Binti Mohd Sadique Insurban Corporate Services Sdn Bhd

149, Jalan Aminuddin Baki

Taman Tun Dr. Ismail

CHIEF EXECUTIVE OFFICER 60000 Kuala LumpurLim Keng Cheng Tel: 03-77275573

Fax: 03-77285948

COMPANY SECRETARYLim Thiam Wah, ACIS AUDITORS

KPMGChartered Accountants

REGISTERED OFFICE Level 10, KPMG TowerGround Floor, Wisma Ekovest 8, First AvenueNo. 118, Jalan Gombak Bandar Utama53000 Kuala Lumpur 47800 Petaling Jaya, SelangorTel : 03-40232525 Tel : 03-77213388Fax : 03-40214027 Fax : 03-77213399

PRINCIPAL PLACE OF BUSINESS PRINCIPAL BANKERS1st Floor, Wisma Ekovest AmBank Berhad

No. 118, Jalan Gombak Malayan Banking Berhad53000 Kuala LumpurTel : 03-40232525Fax : 03-40218499

LISTING STATUSListed on Bursa Malaysia Main Market

KNUSFORD BERHAD (380100-D)2

Notice of Annual General Meeting

AGENDA

1. To receive and adopt the Audited Financial Statements for the financial year ended31 DECEMBER 2011 together with the Reports of the Directors and the Auditors thereon.

2. To re-elect the following Directors who retire by rotation in accordance with Article82 of the Company's Articles of Association:-

Dato’ Lim Kang HooMs. Lim Ts-FeiMs. Kang Hui Ling

3. To re-elect Mr. Khoo Nang Seng @ Khoo Nam Seng who retires in accordance withSection 129 (6) of the Companies Act, 1965.

4. To approve the payment of Directors' Fees for the financial year ended 31 DECEMBER2011.

5. To declare a First and Final Dividend of 5 sen per ordinary share in respect of thefinancial year ended 31 DECEMBER 2011 as follows:-

Dividend of 3.6 sen per ordinary share less 25% income tax and;Single Tier Dividend of 1.4 sen per ordinary share.

6. To re-appoint Messrs. KPMG as Auditors and to authorise the Directors to fix theirremuneration.

7. As Special Business, to consider and if thought fit, to pass the following resolutions withor without modifications:-

ORDINARY RESOLUTION 1AUTHORITY PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965

"That subject always to the Companies Act, 1965, the Articles of Association of theCompany and the approvals of the Bursa Malaysia Securities Berhad and otherrelevant governmental/regulatory authorities, where such approvals are necessary, the Directors be and are hereby authorised, pursuant to Section 132D of the CompaniesAct, 1965, to issue shares in the Company from time to time and upon such terms andconditions and for such purposes as the Directors may deem fit, provided that theaggregate number of shares to be issued pursuant to this resolution does not exceed10% of the issued share capital of the Company for the time being, and that suchauthority shall continue in force until the conclusion of the next Annual GeneralMeeting".

ORDINARY RESOLUTION 2PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE AND ADDITIONAL MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE

"THAT authority be and is hereby given pursuant to paragraph 10.09 of the Main MarketListing Requirements of the Bursa Malaysia Securities Berhad for the Company and itssubsidiaries to enter into recurrent related party transactions of a revenue or tradingnature as stated in paragraph 3.3 of the Circular to Shareholders dated 4 June 2012with the related parties listed in paragraph 3.2 of the Circular which are necessary forthe day-to-day operations, in the ordinary course of business, made on at arm'slength basis and on normal commercial terms which are not more favourable thanthose normally available to the public and are not to the detriment of the minorityshareholders;

(Resolution 1)

NOTICE IS HEREBY GIVEN THAT the Sixteenth Annual General Meeting of the Company will be held at GRANDSEASONS HOTEL, 72 JALAN PAHANG, 53000 KUALA LUMPUR on Monday, 25 June 2012 at 11.00 a.m for the purposeof transacting the following businesses:-

(Resolution 2)(Resolution 3)(Resolution 4)

(Resolution 5)

(Resolution 6)

(Resolution 7)

(Resolution 8)

(Resolution 9)

KNUSFORD BERHAD (380100-D) 3

And that the authority conferred by this Mandate shall commence immediatelyupon the passing of this resolution and is subject to annual renewal. In this respectthe authority shall only continue to be in force until:-

i) the conclusion of the next Annual General Meeting of the Company at whichtime the authority will lapse, unless the authority is renewed by a resolutionpassed at that Annual General Meeting;

ii) the expiration of the period within which the next Annual General Meetingafter the date it is required to be held pursuant to Section 143(1) of theCompanies Act, 1965 (but not extending to such extensions as may be allowedpursuant to Section 143(2) of the Companies Act, 1965); or

iii) revoke or varied by resolution passed by the shareholders in general meeting,

whichever is the earlier".

8. To transact any other matter for which due notices have been given in accordancewith the Company's Articles of Association and the Companies Act, 1965.

NOTICE IS ALSO HEREBY GIVEN THAT subject to the approval of the shareholders at theSixteenth Annual General Meeting, the First and Final dividend of 5 sen per ordinaryshare (dividend of 3.6 sen per ordinary share less 25% income tax and single tier dividendof 1.4 sen per ordinary share) will be paid on 18 September 2012 to members whosenames appear in the Record of Depositors on 30 August 2012.

FURTHER NOTICE IS HEREBY GIVEN THAT a Depositor shall qualify for entitlement only inrespect of:

i. Shares transferred into the Depositor's Securities Account before 4.00 p.m. on 30August 2012 in respect of ordinary transfers; and

ii. Shares bought on the Bursa Malaysia on a cum entitlement basis according to theRules of the Bursa Malaysia Securities Berhad.

By Order of the Board

Lim Thiam Wah, ACISCompany Secretary

Kuala Lumpur

4 June 2012

(Resolution 10)



Notes:

1. Only depositors whose names appear in the General Meeting Record of Depositors as at 13 June 2012shall be entitled to attend and vote at the 16th Annual General Meeting.

2. A member shall be entitled to appoint not more than two (2) proxies to attend and vote at the samemeeting provided that where a member appoints two (2) proxies, the appointment shall be invalid unlesshe specifies the proportions of his shareholdings to be represented by each proxy.

3. A proxy may but need not be a member of the Company and the provisions of Section 149 (1)(b) of theCompanies Act, 1965 shall not apply to the Company. There shall be no restriction as to the qualificationof a proxy.

4. For an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficialowners in one securities account (”omnibus account”), there is no limit to the number of proxies which theexempt authorised nominee may appoint in respect of each omnibus account it holds.

5. If the appointor is a corporation, the proxy form must be executed under its common seal or under thehand of an officer or attorney duly authorised.

6. To be valid, the proxy form, duly completed must be deposited at the Registered Office not less than 48hours before the time for holding the meeting or any adjournment thereof.

7. Explanatory notes on Special Business:-

i) The Proposed Resolution 9 if passed, will empower the Directors of the Company to issue and allotshares in the Company up to an aggregate amount not exceeding 10% of the issued share capital ofthe Company for the time being for such purposes as they consider would be in the interest of theCompany. This authority unless revoked or varied at a general meeting will expire at the next AnnualGeneral Meeting. As at the date of this notice, no new shares in the Company were issued pursuantto the mandate granted to the Directors at the last Annual General Meeting held on 27 June 2011 andwhich will lapse at the conclusion of the Sixteenth Annual General Meeting. The general mandate willprovide flexibility to the Company for any possible fund raising activities including but not limited forfurther placing of shares for purpose of funding future investment(s), working capital and/or acquisitions.

ii) The Proposed Resolution 10, if passed, will authorise the Group to enter into recurrent related partytransactions as specified in the Circular to Shareholders dated 4 June 2012, provided that suchtransactions are of a revenue or trading nature which are necessary for the Group's day-to-dayoperations and are in the ordinary course of business made at on arm's length basis and on normalcommercial terms which are not more favourable to the related parties than those generally availableto the public and are not detrimental to the minority shareholders of the Company. This authority,unless revoked or varied at a general meeting, will expire at the next Annual General Meeting of theCompany.



PARTICULARS OF DIRECTORS WHO ARE STANDING FOR ELECTION AT THE SIXTEENTH ANNUAL GENERAL MEETING

There is no Director standing for election at the Sixteenth Annual General Meeting.


Statement Accompanying Notice of Annual General Meeting

DATUK HALIMAH BINTI MOHD SADIQUE, aged 50, Malaysian, was appointed as Chairman and Independent Non-Executive Director of Knusford Berhad on 10 May 2011. Datuk Halimah started her career as a teacher after hergraduation from the Maktab Perguruan Kuantan. She was the Chairman of the Jawatankuasa Perpaduan danKebajikan Masyarakat Negeri Johor from 1995 to 1999, Chairman of the Jawatankuasa Pembangunan Keluarga,Hal Ehwal Wanita dan Kesihatan Negeri Johor from 1999 to 2004, Chairman of the Jawatankuasa Kerajaan Tempatandan Kesihatan Negeri Johor from April 2004 to 2008.

Subsequently, she was elected to the parliament in 2008 and is now the Member of the Parliament for Tenggaraconstituency, Johor. She was appointed as Chairman of Commercial Vehicle Licensing Board (CVLB) from June2009 to January 2011. Presently, she is a member of the Board of Directors of Perbadanan Tabung Pendidikan TinggiNasional (PTPTN) since February 2009.

She has served in various capacity within UMNO such as Exco Pergerakan Wanita UMNO Malaysia, Ketua WanitaUMNO Negeri Johor, Ketua UMNO Bahagian Tenggara dan Ketua Wanita UMNO Bahagian Tenggara.

Datuk Halimah was also involved in several Non Government Organisations and held the positions of Chairman ofthe Jawatankuasa Orang Kurang Upaya, Jawatankuasa Perunding Hal Ehwal Wanita Negeri Johor, PersatuanMencegah Dadah (PEMADAM) Negeri Johor, Yang DiPertua Majlis Kebajikan Masyarakat Negeri Johor from 1995to 2000. She was a member of Majlis Penasihat Kebangsaan mengenai Integrasi Wanita Dalam Pembangunan(NACIWID) from 1997 to 2000, Chairman of Biro Hal Ehwal Wanita PEMADAM Kebangsaan from 1999 to 2001, ViceChairman of Asia Pacific Forum on Families Malaysia (APFAM), Chairman of Majlis Pembangunan Wanita danKeluarga Negeri Johor and Chairman of Jawatankuasa Gaya Hidup Sihat Negeri Johor.

MR. LIM KENG CHENG, aged 50, Malaysian, was appointed as Chief Executive Officer of Knusford Berhad on 28November 2008 and subsequently also appointed as Executive Director on 5 October 2009. Mr. Lim has more than30 years of working experience in the building and civil, design and build turnkey construction projects, machinerytrading and property development industries, having started his career immediately after his high school education.At present, he is the Managing Director of Ekovest Berhad, a public company listed on the Main Market of BursaMalaysia. He also sits in the board of several private limited companies, amongst others, Konsortium LebuhrayaUtara-Timur (KL) Sdn Bhd, a concessionaire of the Duta-Ulu Kelang Expressway (DUKE).

DATO' LIM KANG HOO, aged 57, Malaysian, was appointed to the Board of Directors of Knusford Berhad on 7December 2000. Dato' Lim is a businessman with over 35 years of experience in the construction related industry.He started his involvement in the machinery business soon after completing his secondary education, assisting thefamily construction business. Later he team-up with Mr. Khoo Nang Seng @ Khoo Nam Seng in 1989 to form WengconEquipment Sdn Bhd. The company's rapid development and growth was largely due to his dynamism and vision.His vast experience in the industry is an asset to the Knusford Berhad Group. At present, he is the Executive Chairmanof Ekovest Berhad, director of PLS Plantations Berhad and also a director of several other private limited companies.

MR. KHOO NANG SENG @ KHOO NAM SENG, aged 72, Malaysian, was appointed to the Board of Directors ofKnusford Berhad on 7 December 2000. He is the co-founder and a director of Wengcon Holdings Sdn Bhd andWengcon Equipment Sdn Bhd. He was trained at Technical College, Kuala Lumpur in civil engineering. Upongraduation, he joined and served Jabatan Kerja Raya for six years. In 1970, he ventured into the constructionbusiness on his own and in 1989, teamed up with Dato' Lim Kang Hoo to form Wengcon Equipment Sdn Bhd. Histremendous drive and sharp business acumen was one of the major reasons behind the success of the group. Atpresent, he is an executive director of Ekovest Berhad and also a director of several other private limited companies.

DATO’ LIM KANG SWEE, aged 53, Malaysian, was appointed to the Board of Directors of Knusford Berhad on 7December 2000. Dato’ Lim has more than fifteen years of experience in the rental and reconditioning business.After completing his secondary education he started his sole-proprietorship under the name of Wincon Trading &Co. which deals in rental, reconditioning of machinery and sale in spare parts and building materials. He travelsextensively overseas to Japan, United Kingdom and Australia to meet with manufacturers, principals and dealersof spare parts, new and used machinery and equipment in order to source for quality supplies. Further, he has builta good understanding and reputation with suppliers during his fifteen years in the business. Hence, his vast experienceand knowledge will contribute positively to the Knusford Berhad Group. In 1994, he discontinued his sole-proprietorshipbusiness, after which he teamed up with Mr. Khoo Nang Seng @ Khoo Nam Seng and his brother, Dato' Lim KangHoo to manage and expand the business of Wengcon Holdings Sdn Bhd. At present, he is also a director of severalother private limited companies.

Profile of Directors and Chief Executive Officer


EN. AZNAM BIN MANSOR, aged 54, Malaysian, was appointed to the Board of Directors of Knusford Berhad on 7December 2000. He graduated with a Degree in Bachelor of Law (Hons) from the North East London Polytechnic,London in 1983 and was called to the Malaysian Bar as an Advocates and Solicitor in 1986. He started his careeras a legal officer in Malayan Banking Berhad. He then joined Skrine& Co., a legal firm, and held the position of legalassistant for eight years. Presently, he is a partner of Lee Hishamuddin Allen & Gledhill, a legal firm in Kuala Lumpur.He is also the Chairman of MikroMSC Berhad, Benalec Holdings Berhad and Focus Lumber Berhad. He also sits inthe Board of several other private limited companies.

MS. LIM TS-FEI, aged 49, Malaysian, was appointed to the Board of Directors of Knusford Berhad on 9 January 2001.She graduated with a Degree in Bachelor of Law from the University of Hull, England and was called to the EnglishBar as a barrister in 1988. Upon her return to Malaysia, she commenced her chambering with Chye, Chow, Chung& Co., a legal firm in Kuala Lumpur. She was called to the Malaysian Bar in 1989 and continued to practise as alegal assistance in the same firm for eight years. She is presently a partner of the firm.

DR. WONG KAI FATT, aged 65, Malaysian, was appointed to the Board of Directors of Knusford Berhad on 9 January2001. He graduated with a Bachelor of Medicine, Bachelor of Surgery from the University of Singapore in 1972. Heworked in Johor Bahru General Hospital and Ipoh General Hospital for three years before venturing into his ownprivate practice in Kuala Lumpur.

MS. KANG HUI LING, aged 40, Malaysian, was appointed to the Board of Directors of Knusford Berhad on 28 February2005. She holds a Bachelor of Accounting (Hons) Degree from University of Malaya in 1997. She is a member of theMalaysian Institute of Accountants and the Malaysian Institute of Public Accountants. Since her graduation, sheacquired 4 years of audit experience in one of the big five audit firm. As audit senior associate, she also gainedexposure in the field of operational audit and financial due diligence. Subsequently she joined a medium sizemultinational consultancy firm as the Finance and Admin Manager where she was responsible for establishing andimplementing the company’s accounting and operating policies and procedures. She is presently a partner of aprofessional firm registered with the Malaysian Institute of Accountants. She is also an independent non-executivedirector of Ekovest Berhad and PLS Plantations Berhad.

Conflict of interestThere is no conflict of interest between the Directors and the Group except for the recurrent related party transactionswhere the Directors have interest, as disclosed in the Note 29 of the Audited Financial Statements.

Conviction for offencesNone of the Directors have been convicted for any offences (except traffic offences) within the last 10 years.

Family RelationshipNo Director has family relationship with other Directors or major shareholders except for Dato' Lim Kang Hoo andDato' Lim Kang Swee, who are brothers, Mr. Lim Keng Cheng, is the nephew of Dato' Lim Kang Hoo and Dato' LimKang Swee .

Board of Directors' MeetingsA total of 5 Board of Directors' Meetings were held during the financial year ended 31 December 2011.

Attendance at the Board of Directors' Meetings

No. of Board of Directors' Meetings Attended

1. Datuk Halimah Binti Mohd Sadique 2/32. Dato’ Lim Kang Hoo 4/53. Mr. Khoo Nang Seng @ Khoo Nam Seng 4/54. Dato’ Lim Kang Swee 4/55. Mr. Lim Keng Cheng 5/56. En. Aznam Bin Mansor 3/57. Ms. Lim Ts-Fei 5/58. Dr. Wong Kai Fatt 4/59. Ms. Kang Hui Ling 5/5

Profile of Directors and Chief Executive Officer


On behalf of the Board of Directors, I am pleased to present the annual report and audited financial statementsof the Company and the Group for the financial year ended 31 December 2011.

Overview and results

For the financial year ended 31 December 2011, the Group recorded a profit before tax and profit after taxof RM85.373 million and RM60.033 million, an increase of 262 % and 250% over the profit before tax and profitafter tax of RM23.606 million and RM17.152 million achieved in the previous financial year. However, the Grouprevenue of RM302.021 million represents a marginal decrease of 2.64 % from RM310.222 million recorded in theprevious financial year.

The construction contracts under Segi Tiara Sdn Bhd in respect of the coastal highway worth approximatelyRM538.00 million in the Iskandar Region have been successfully completed and this has been the major contributortowards both the turnover and profits of the group for this year. The management is also pleased that theconstruction works has also contributed towards the increased in business for companies within the Group inrespect of machinery rental and material supply.

The Group’s effort in its property development arm has also brought about positive results. The continuouspositive sentiment in the property development and the announcement of the extension in the Mass RapidTransit to include Kajang has a positive impact in the sales of property in our development there.

In an effort to replenish the depleting land bank in the Group’s existing land bank in Kajang, the Group throughits wholly owned subsidiary, Lakaran Cahaya Sdn Bhd has on 29 February 2012 entered into a conditional SaleAnd Purchase Agreement to acquire a parcel of freehold land measuring approximately 5.3874 hectares fora cash consideration of RM 14.21m, which is adjacent to its existing land bank for future development.

Our 40% associate company, CBD Development Sdn Bhd (“CBDD”) has obtained a letter from Unit PerancangEkonomi Negeri Johor on 25 January 2012 wherein the Johor State Executive Council has in principle agreedto appoint CBDD as the turnkey contractor for the project known as “the Wave” consisting works in respect ofrelocation of city hawkers to a new building to be known as “I Malaysian Food Court” which is one of thecomponent project within the Proposed Transformation Plan for Johor Bahru City.

In addition thereto, CBDD has also been appointed as the Master Developer for the Transformation of JohorBahru Central District. The above awards are subject to CBDD submitting such required detail proposals in duecourse.

It is hopeful that under this new project, the Group will be able to participate in more infrastructure and propertydevelopment works.

Dividend

In appreciation of the continuing support by our shareholders, the Board of Directors had on 29 February 2012recommended, subject to the approval of the shareholders being obtained, a first and final dividend of 3.60sen less 25% income tax per ordinary share of RM1.00 each and single tier dividend of 1.40 sen per ordinaryshare of RM1.00 each for the financial year ended 31 December 2011.

Corporate Development

The Company has not implemented any new corporate proposal during the financial year ended 31 December2011.

The Board will continue to look into other development plans and tender for new potential projects in order tomaintain satisfactory results as well as enhance shareholder value.

Chairman’s Statement


Industry Overview and Prospect

All things considered, Malaysia economic growth in 2012, though may not out-perform the achievements of2011, will be comfortable.

The Government Transformation Programme had made some progress, improving the delivery of some publicservices. A number of Economic Transformation Programme (ETP) projects also delivered higher private-sectorinvestments and successful large property joint ventures between the government and the private sector, bothof which helped revive the investment climate.

Under such challenging global conditions, the economy is expected to expand 4% to 5% in 2012 as releasedby Bank Negara Malaysia in its annual report. This is less than the Finance Ministry’s 5% to 6% forecast in October2011, and a 5.1% pace in 2011.

Notwithstanding the above, domestic growth will continue, owing primarily to the expansion of consumerdemand particularly the financial assistance offered by the Government to help the poor and an incrementin public sector wages.

However, the continuing recession and potential financial meltdown in the euro zone are sure to dampendemand for Malaysian exports in 2012. Malaysia’s exports to the EU fell from 9.4% of GDP during 2001–2008 to7.4% during 2009–2010, while exports to China grew from 6.7% to 14.6%. Hence, the weaker demand from theeuro zone is a worry, but any slowdown in the Chinese economy would create more anxiety.

Bearing in mind of the slower economic development in Malaysia, the Group has been cautious in its attemptsto secure work. The “Wave” project will be the focus for the Group this year. The Group will put in more effortin pushing this project forward as it is consist of various components which the Group has expertise in and theGroup is familiar with the market condition of the Iskandar Region having spent some time there.

To keep the Group moving forward, efforts will also be put in to push its property development arm. With thecurrent positive sentiment in property investment, particularly in areas where the Group has some land bank,the Group will introduce suitable products into the market from time to time. Such growth, though slow, will beable to sustain the Group in the long term.

Barring unforeseen circumstances, the Board of Directors is confident that the Group is adequately preparedand ready to take on these challenge and opportunities that lie ahead. We will continue to maintain satisfactoryresults notwithstanding the challenging economic and political factors beyond the control of the Group.

Acknowledgment

On behalf of the Board of Directors, I would like to express my sincere thanks to my fellow directors, managementteam and staff for their collective commitments and undivided contributions to the Group during the year. Ialso would like to thank our valued shareholders, customers, business partners and bankers for their support andconfidence in the Group; I also extend my appreciation to all our management and staff for their dedication,hard work and contribution to the Group.

DATUK HALIMAH BINTI MOHD SADIQUEChairman


Chairman’s Statement

Statement On Corporate Governance

The Board of Directors ("Board") of Knusford Berhad remains committed to ensure the highest standard ofcorporate governance is practised throughout the Company and its subsidiaries ("the Group") to enhanceshareholders’ value and improve its financial performance. The Board is therefore pleased to report to theshareholders the manner in which the Group has applied the principles and best practices of the MalaysianCode on Corporate Governance ("the Code").

THE BOARD OF DIRECTORS

(a) Composition and Balance

The Group is led by an effective and experienced Board, comprising Nine (9) members, made up ofFour (4) Independent Non-Executive Directors, One (1) Non-Independent Non-Executive Director andFour (4) Executive Directors. This composition satisfies the Bursa Securities Listing Requirements for theMain Market that requires at least 2 Directors or 1/3 of the Board whichever is higher, to be IndependentDirectors.

The presence of the Independent Non-Executive Directors promotes objectivity and they have thecompetence necessary to advise the Board on its decisions. They provide an effective check andbalance to the Board’s decision making process. The Board’s composition brings together an extensivegroup of experienced Directors from varied backgrounds and they bring with them wide range of skillsand experience in areas relevant to managing and directing the Group’s operations. The Board issatisfied that the current Board’s composition fairly protects the investment of the minority shareholdersand represents a balanced mix of skills and experience to discharge the Board’s duties and responsibilities.In addition, no individual director or group of directors dominates the Board’s decision making. Theprofile of each Board member is entailed on page 7 to 8 of this Annual Report.

(b) Duties and Responsibilities

The Board is responsible for the overall strategic leadership, identification and management of principalrisks and development and control of the Group. Specific duties and responsibilities are delegated bythe Board to Board Committees in accordance with their respective Terms of Reference.

(c) Board Meetings

The Board meets on a quarterly basis with additional meetings being convened when necessary todeliberate and consider matters relating to the Group’s financial performance, strategy and corporatedevelopment. For the financial year ended 31 December 2011, the Board met 5 times with the followingrecorded attendance of the Directors who held office:

Name of Director Designation No. of meetings attendedDatuk Halimah Binti

Mohd Sadique Independent Non-Executive Director 2/3Dato’ Lim Kang Swee Executive Director 4/5Dato’ Lim Kang Hoo Executive Director 4/5Lim Keng Cheng Executive Director 5/5Khoo Nang Seng

@ Khoo Nam Seng Executive Director 4/5Aznam Bin Mansor Non-Independent Non-Executive Director 3/5Lim Ts-Fei Independent Non-Executive Director 5/5Dr. Wong Kai Fatt Independent Non-Executive Director 4/5Kang Hui Ling Senior Independent Non-Executive Director 5/5


(d) Supply of Information

The Board has unrestricted and timely access to all information necessary for the discharge of itsresponsibilities. Board meetings are structured with pre-determined agenda which encompasses variousaspects of matters under discussion. Notice of Board Meetings and the necessary board papers arecirculated to Directors in advance to enable meaningful deliberation and sound decisions to be madeduring Board meetings. All meetings of the Board are duly recorded by the Company Secretary in theBoard Minutes. All Directors have access to the services and advice of the Company Secretary,management staff and other independent professionals, at the expense of the Group in the dischargeof their duties.

(e) Appointment and Re-election of Directors

The Board is guided by formal recommendation by the Nomination Committee for any new appointmentto the Board. Newly appointed Board members are subject to retirement at the next Annual GeneralMeeting ("AGM") of the Company subsequent to their appointment. Article 82 of the Company’sArticles of Association also provide that at least one-third (1/3) of the Directors shall retire by rotationat each Annual General Meeting and that all Directors shall retire once in every three (3) years. Aretiring Director shall be eligible for re-election.

Directors over seventy (70) years of age are required to submit themselves for re-appointment annuallyin accordance with Section 129(6) of the Companies Act, 1965 ("the Act").

(f) Directors’ Training

The Directors have completed the Mandatory Accreditation Program prescribed by the Bursa SecuritiesListing Requirements. During the financial year, the group organised a training course entitled “LeadingStrategic Change” for all the Directors and Senior Management in compliance with paragraph 15.08of the Bursa Securities Listing Requirements. Apart from this, some of the Directors have attended othercourses in their own initiatives. The Directors will continue to attend training programmes from time totime to further enhance their skills and knowledge and equip themselves to effectively dischargetheir duties.

(g) Conflict of Interest

The Directors are committed to determining whether they have any potential or actual conflict ofinterest with regards to any matters being discussed. The Directors must declare interests they mayhave that constitute a related party transaction and abstain from voting in respect of such transactionwhen considering such matter.

BOARD COMMITTEES

The Board has delegated specific responsibilities to three (3) committees, namely the Audit Committee,Nomination Committee and Remuneration Committee, all of which are governed by the respective terms ofreference. The Board Committees will deliberate and examine issues within its terms of reference and reportto the Board on significant matters that requires the Board’s attention.



BOARD COMMITTEES (continued)

(a) Nomination Committee

The committee is responsible for providing the Board with recommendation on candidates for directorshipsin the Company to fill the seats on the Company’s board committees. In addition, the committee isresponsible to assess the effectiveness of the Board, Board Committees and the performance andcontribution of each director.

The Nomination Committee comprises entirely of Independent Non-Executive Directors are as follows:

i) Kang Hui Ling – Senior Independent Non-Executive Director (Chairman)ii) Lim Ts-Fei – Independent Non-Executive Director (Member)iii) Dr Wong Kai Fatt – Independent Non-Executive Director (Member)

Ms Kang Hui Ling was appointed as the Chairman of the Nomination Committee subsequent to thefinancial year ended 31 December 2011. This is initiated in pursuant to the Group’s aspiration on theearly adoption of the new Malaysian Code on Corporation Governance 2012.

(b) Remuneration Committee

The Remuneration Committee comprises of the following Independent Non-Executive Directors:

i) Kang Hui Ling – Senior Independent Non-Executive Director (Chairman)ii) Lim Ts-Fei – Independent Non-Executive Director (Member)iii) Dr Wong Kai Fatt – Independent Non-Executive Director (Member)

The Committee assists the Board of Directors in reviewing and assessing the remuneration packagesof the executive directors. The remuneration packages of the Company’s Non-Executive Directors aredetermined by the Board as a whole, with the Director concerned abstaining from participating in thedecision making in respect of his individual remuneration.

Ms Kang Hui Ling was appointed as the Chairman of the Remuneration Committee subsequent to thefinancial year ended 31 December 2011. This is initiated in pursuant to the Group’s aspiration on theearly adoption of the new Malaysian Code on Corporation Governance 2012.

(c) Audit Committee

The Audit Committee is led by an independent Director. The responsibilities, composition, terms ofreference and activities of the Committee are outlined in this Annual Report under the section on AuditCommittee Report.

DIRECTORS’ REMUNERATION

The aggregate remuneration of the Directors of the Board for the year ended 31 December 2011 is as follows:

(a) Total Remuneration

Executive Directors Non-Executive Directors TotalRM ‘000 RM ‘000 RM ‘000

Salary and OtherEmolument 1,042 - 1,042

Fees 80 100 180

Benefits-In-Kind 15 32 47

Total 1,137 132 1,269



DIRECTORS’ REMUNERATION (continued)

(b) Directors’ remuneration by bands

The number of Directors whose total remuneration falls within the following bands during the financial yearended 31 December 2011 is as follows:

Remuneration Band Executive Directors Non-Executive Directors Total

Up to RM50,000 1 5 6

RM150,001 to RM200,000 1 - 1

RM250,001 to RM300,000 1 - 1

RM650,001 to RM700,000 1 - 1

Total 4 5 9

The details of the individual Director’s remuneration are not disclosed in this report as the Board considers the above disclosures satisfy the accountability and transparency aspects of the Code.

SHAREHOLDERS

(a) Shareholders and Investors Relations

The Board recognizes the importance of regular and timely dissemination of information to shareholdersand investors via annual reports, financial statements, circulars, quarterly financial reports to investorsand various announcements made to Bursa Securities during the year.

All the information disseminated is in accordance to Bursa Malaysia disclosure rules and regulationsand the Board has taken steps to ensure that no market sensitive information is disclosed to any partyprior to making an official announcement to Bursa Securities. The Group has also made available thecorporate and financial information to shareholders and the public through the Group’s website at www.knusford.com.my.

(b) Annual General Meeting

An important forum for communication and dialogue with the shareholders is through the AnnualGeneral Meeting (“AGM”), whereby shareholders are encouraged to meet and communicate withthe Board and to vote on resolutions. During the AGM, the Board presents the progress and performanceof the Group to provide shareholders with the opportunity to seek clarification on the Group’s businessesand financial performance.

ACCOUNTABILITY AND AUDIT

(a) Financial Reporting

The Board aims to present a balanced and meaningful assessment of the Group’s financial performanceand prospects at the end of the financial year, primarily through the annual financial statements andquarterly announcement of results to shareholders. The Board ensures that the Group’s financialstatements are drawn up in accordance with the provisions of the Companies Act 1965 and applicableapproved accounting standards so as to offer a balanced and comprehensive assessment of theGroup’s financial position and prospects to the shareholders. A Responsibility Statement by the Directorsis set out on page 20 of this Annual Report.



ACCOUNTABILITY AND AUDIT (continued)

(b) Internal Control

The Group’s Statement on Internal Control is set out on pages 18 to 19 of this annual report to providean overview on the state of internal control throughout the year.

(c) Relationship with the Auditors

Through the Audit Committee, the Board has established a formal and transparent arrangement formaintaining appropriate relationships with the Group’s auditors, both external and internal. The auditorshave continued to meet with the Audit Committee regularly to review the audit plan, the results of theaudit and any other matters that requires the Audit Committee’s attention. The Audit Committee Reportis set out on pages 21 to 23.



INTRODUCTIONPursuant to paragraph 15.26 (b) of the Listing Requirements ("LR") of Bursa Malaysia Securities Berhad ("BursaSecurities") for the Main Market and as guided by the Statement on Internal Control: Guidance for Directors ofPublic Listed Companies (‘the Guidance"), the Board of Directors ("the Board") of Knusford Berhad is pleasedto include a statement on the state of the Group’s system of internal control in the annual report.

BOARD RESPONSIBILITYThe Board acknowledges its responsibilities and recognises the importance of ensuring a sound system of internalcontrol to safeguard shareholders’ investments and the Group’s assets. The Board is aware that ultimately, theresponsibility for the Group’s system of internal control, which includes the establishment of an appropriatecontrol environment and framework as well as reviewing its adequacy and integrity, rests with the Board.

As there are limitations inherent in any system of internal control, the system is therefore designed to managerather than eliminate risks that may impede the Group from achieving its business objectives. The Boardacknowledges that such internal control system can only provide reasonable and not absolute assuranceagainst any material misstatement, losses or errors.

KEY FEATURES OF THE GROUP’S INTERNAL CONTROL SYSTEMThe key features of the Group’s internal control system are summarised as follows:-

• The Group maintains a defined organisation structure with clear lines of reporting that includes properdelegation of authority to facilitate internal checks and balances.

• Monthly management accounts are prepared by the Group Finance Department for Management’sreview, whilst quarterly financial results are presented to the Audit Committee and the Board for purposesof monitoring the Group’s progress towards achieving its business objectives.

• Standard operating manuals incorporating various internal controls are in place to govern the Group’sbusiness operations and functions.

• Outstation offices are visited by members of Senior Management as and when necessary.

RISK MANAGEMENT PROCESSThe Board acknowledges that the Group’s business activities involve some degree of risk that may affect theachievement of its business objectives and an effective risk management framework should be an integral partof the Group’s daily operations. It is the responsiblity of key management and Heads of Department to identify,evaluate and manage risks faced by the Group on an ongoing basis within defined parameters. Significant risksare communicated to the Board at their scheduled meetings.

The above mentioned practices and initiatives by the Management serve as an on-going process adopted bythe Group to identify, evaluate and manage risks faced by the Group.

Statement on Internal Control


Statement on Internal Control

INTERNAL AUDIT FUNCTIONThe Group’s internal audit function is outsourced to a professional services firm to provide the Audit Committeewith an independent assessment on the adequacy and effectiveness of the Group’s system of internal control.

During the financial year ended 31 December 2011, the outsourced internal audit function carried out auditsin accordance with the internal audit plan approved by the Audit Committee. The results of their review werepresented to the Audit Committee and follow up visits were conducted to ensure that management’s actionplans in respect of matters highlighted in the internal audit reports have been adequately addressed.

Based on the internal audit reviews conducted, none of the weaknesses have resulted in any material losses,contingencies or uncertainties that would require a separate disclosure in this annual report.

CONCLUSIONThe Board is of the view that the Group’s system of internal control is adequate to safeguard shareholders’investments and the Group’s assets. However, the Board is also cognizant of the fact that the Group’s systemof internal control and risk management practices must continuously evolve to meet the changing andchallenging business environment. Therefore, the Board will, when necessary, put in place appropriate actionplans to further enhance the system of internal control.

This statement was approved by the Board of Directors on 24 April 2012.

The Board recognises the importance of a sound system of internal control to safeguard the shareholders’investment and the Group’s assets.

The Group’s Internal Audit Function, which is outsourced to a professional services firm, is an integral part of theassurance mechanism in ensuring that the Group’s system of internal control is adequate and effective. Theoutsourced internal audit function reports directly to the Audit Committee.

On an annual basis, an internal audit plan is tabled to the Audit Committee for review and approval, and theoutsourced internal audit function executes audits based on the approved audit plan. The results of the auditreviews are periodically reported to the Audit Committee. In addition, the outsourced internal audit functioncarries out follow up reviews to ensure that previously reported issues have been adequately addressed byManagement and the results of such reviews are also periodically reported to the Audit Committee.

The internal audits conducted did not reveal weaknesses which would result in material losses, contingenciesor uncertainties that would require a separate disclosure in the Annual Report.

The cost incurred for outsourcing the internal audit function of the Group for the financial year ended 31December 2011 is at RM70,054.40 (2010: RM69,487.85)


Statement on Internal Audit Function

The Board is fully accountable to ensure that the financial statements are drawn up in accordance withCompanies Act, 1965 and the applicable approved accounting standards set by Malaysian AccountingStandards Board so as to give a true and fair view of the state of affairs of the Group and the Company as at31 December 2011 and of the results and cash flows of the Group and Company for the financial year endedon that date.

In the preparation of the financial statements, the Directors have:

a) applied relevant and appropriate accounting policies consistently and in accordance with applicableapproved accounting standards;

b) made judgments and estimates that are prudent and reasonable; andc) used the going concern basis for the preparation of the financial statements.

The Directors are responsible for ensuring that proper accounting records are kept in accordance with the Act.The Directors also have overall responsibility in taking such steps as are reasonably open to them to safeguardthe assets of the Group and to prevent and detect fraud and other irregularities.

The Group recognizes its social obligation to the society and is striving for a balanced approach in fulfilling itskey objectives and the expectations of stakeholders.

To fulfill its corporate social responsibility, the Group has supported various charitable causes during the financialyear and is committed to carry on its efforts further on a sustainable basis.

Directors’ Responsibility Statement


Corporate Social Responsibility

The Board of Directors of Knusford Berhad is pleased to present the report of the Audit Committee for the financialyear ended 31 December 2011.

COMPOSITION AND ATTENDANCE OF MEETINGS

The Audit Committee currently comprises of three (3) Independent Non-Executive Directors and details of theirattendance at meetings during the financial year ended 31 December 2011 are as follows:-

Attendance of meetingsChairman: Lim Ts-Fei

(Independent Non-Executive Director) 5/5

Members: Dr Wong Kai Fatt(Independent Non-Executive Director) 4/5

Kang Hui Ling(Senior Independent Non-Executive Director, MIA Member) 5/5

TERMS OF REFERENCE OF THE AUDIT COMMITTEE

Composition

(1) The members of the Audit Committee shall be appointed by the Board of Directors (“Board”) from amongsttheir members and shall consist of no fewer than three (3) members with a majority of them being independentdirectors.

(2) At least one of the Committee members:(a) must be a member of the Malaysian Institute of Accountants ("MIA"); or(b) if he/she is not a member of MIA, he/she must have at least three (3) years working experience and:

• passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or• is a member of one of the associations of accountants specified in Part II of the 1st Schedule

of the Accountants Act 1967; or(c) fulfills such other requirements as prescribed or approved by Bursa Malaysia Securities Bhd.

(3) No Alternate Director may be appointed as a member of the Committee.

Chairman

The members of Audit Committee shall elect amongst them an independent director to act as the Chairmanof the Audit Committee.

Secretary

The Company Secretary of the Company shall be Secretary of the Committee and shall be responsible inconjunction with the Chairman, for drawing up the agenda and circulating it prior to each meeting. TheSecretary shall also be responsible for keeping the minutes of meetings of Audit Committee and circulatingthem to the Audit Committee members.

Meetings

At least four (4) meetings shall be held in a year. However, meetings may also be held as and when requiredor upon the request of the external auditors to consider any matters that they believe should be brought to theattention of the Directors and/or shareholders. The agenda of the Audit Committee meetings shall be circulatedbefore each meeting to members of the Audit Committee. The Audit Committee may require other Boardmembers, senior management personnel, external auditors and external independent professional advisers toattend any of its meetings if deemed necessary.

Audit Committee’s Report


Quorum

The quorum for a meeting shall be two (2) members, provided that the majority of members present at themeeting shall be independent. In the absence of the Chairman, the members present shall elect a Chairmanfor the meeting among the members present.

Powers of the Audit Committee

The Audit Committee has been granted appropriate authority by the Board of Directors to carry out their dutiesand responsibilities including the following:-• Investigation into any matters within their terms of reference.• Seek any information it requires from any employee of the Group.• Engage external, legal or professional advice at the cost and expense of the Group where necessary.• Full and unrestricted access to any information pertaining to the Group and the Company.• Direct communication with the external auditors and/or persons carrying out the internal audit function or

activity.• Meet with the external auditors at least twice a year without executive board members present.• Right to employ resources which are required to perform its duties.

Duties and Responsibilities of the Audit Committee

The duties and responsibilities of the Committee shall include the following:

(a) Internal Audit

• To review the adequacy of the scope, functions, competency and resources of the Internal AuditFunction and that it has the necessary authority to carry out its work.

• To review the internal audit plan and results and, where necessary, ensure that appropriate actionsare taken on the recommendations of the internal audit Function.

• To evaluate the performance and decide on the remuneration of the outsourced internal auditfunction.

• To review the assistance given to internal auditors by employees of the company.

(b) External Audit

• To consider the appointment of the external auditor, the audit fee and any question of resignationor dismissal.

• To review the external auditors’ audit plan, their evaluation of the system of internal controls, scopeof their audits, their audit reports, management letter and management response.

• To review and report on the assistance and co-operation given by the employees of the Groupto the auditors.

• To review the independence and objectivity of the external auditors and their services, including non-audit services.

• To review problems and reservations arising from interim and final audits, and any matter the auditormay wish to discuss (in the absence of management where necessary).

(c) Financial Reporting

To review the quarterly and annual financial statements of the Company and Group and recommendto the Board for approval, focusing particularly on:-• changes in or implementation of new accounting policies and practices.• significant and unusual events.• going concern of entities within the group.• compliance with applicable approved accounting standards and other legal and regulatory

requirements.




Duties and Responsibilities of the Audit Committee (Cont’d)

(d) Related Party Transactions

To monitor and review any related party transactions and conflict of interest situation that may arisewithin the Group including any transaction, procedure that raises questions on management integrity.

(e) Other Matters• To perform such other functions and responsibilities as may be agreed to by the Committee and

the Board.• To promptly report to Bursa Securities on any matter reported to the Board which has not been

satisfactorily resolved resulting in a breach of the Listing Requirements.• To review whether the share options allocated are in compliance with the by-laws and criteria of

Employee Share Option Scheme approved by shareholders.• To review any major findings of internal investigations and management’s audit.

Summary of Activities of the Audit Committee

During the financial year ended 31 December 2011, the following activities were carried out by the AuditCommittee:

(a) Reviewed the unaudited quarterly reports on the consolidated results of the Group before recommendingto the Board for their approval and release to Bursa Securities.

(b) Reviewed and approved the internal audit plan prepared by the internal audit function.

(c) Reviewed the internal audit reports, recommendations and Management’s response and ensured thatthe action plans had been carried out by Management on a timely basis.

(d) Reviewed the audit plan of the Group as proposed by the external auditors, in terms of the nature andextent of the audit procedures, significant accounting and audit issues, impact of new or proposedchanges in the accounting standards and any other regulatory requirements.

(e) Reviewed the annual report and audited financial statements of the Company and the Group withthe external auditors prior to tabling to the Board for their consideration and approval.

(f) Reviewed the related party transactions and considered conflict of interest situations that may arise within the Group.

Summary of Activities of the Internal Audit Function

The activities of the Internal Audit Function during the financial year were as follows:

(a) Developed the internal audit plan for year 2012;

(b) Regular review of business processes in accordance with the internal audit plan approved by theCommittee;

(c) Reporting the results of internal audit reviews and provide recommendations for improvement to theCommittee on a periodic basis;

(d) Followed up on the implementation of audit recommendations and action plans agreed upon byManagement.

The internal audits conducted did not reveal weaknesses which would result in material losses, contingenciesor uncertainties that would require disclosure in the Annual Report.


The Directors have pleasure in submitting their report and the audited financial statements of the Group andof the Company for the year ended 31 December 2011.

Principal activities

The Company is principally engaged in investment holding and property investment whilst the principal activitiesof the subsidiaries are as stated in Note 28 to the financial statements. There have been no other significantchanges in the nature of these activities during the financial year.

ResultsGroup CompanyRM’000 RM’000

Profit for the year attributable toowners of the Company 60,033 3,312

Reserves and provisions

There were no material transfers to or from reserves and provisions during the financial year under review.

Dividends

No dividend was paid during the financial year and the Directors recommended:

i) A first and final dividend of 3.6 sen per ordinary shares less tax at 25% to totalling RM2,690,415 (2.7 sen netper ordinary share) in respect of the year ended 31 December 2011; and

ii) A single tier dividend of 1.4 sen per ordinary shares totalling RM1,395,030 in respect of the year ended 31December 2011.

The financial statements for the current financial year do not reflect this proposed dividend. Such dividend willbe accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December2012 upon approval by the shareholders of the Company.

Directors of the Company

Directors who served since the date of the last report are:

Datuk Halimah Binti Mohd Sadique (Appointed on 10.5.2011)Dato’ Lim Kang HooDato’ Lim Kang SweeKhoo Nang Seng @ Khoo Nam SengLim Keng ChengAznam bin MansorLim Ts-FeiDr. Wong Kai FattKang Hui Ling

Directors’ Reportfor the year ended 31 December 2011


Directors’ interests

The interests and deemed interest in the ordinary shares of the Company and of its related corporations (otherthan wholly-owned subsidiaries) of those who were Directors at year end as recorded in the Register of Directors’Shareholdings are as follows:

Number of ordinary shares of RM1.00 each

At At1.1.2011 Bought (Sold) 31.12.2011

Interests in the Company

Dato’ Lim Kang Swee 8,154,000 - - 8,154,000Dato’ Lim Kang Hoo

- own 615,749 - - 615,749- others 5,000 - (5,000) -

Khoo Nang Seng @ Khoo Nam Seng 8,124,122 - - 8,124,122Aznam bin Mansor 8,000 - - 8,000Lim Ts-Fei 10,000 - - 10,000Lim Keng Cheng 1,691,500 - - 1,691,500

Deemed interests in the Company through

i) Kinston Park Sdn. Bhd.Dato’ Lim Kang Hoo 2,410,000 - - 2,410,000

ii) Aman Setegap Sdn. Bhd.Dato’ Lim Kang Hoo 30,000,000 - - 30,000,000

iii) Bidarcita Sdn. Bhd.Dato’ Lim Kang Swee 439,000 - - 439,000

iv) Icon Sejati Sdn. Bhd.Lim Keng Cheng 464,000 - (464,000) -

v) Fablelite Sdn. Bhd.Lim Keng Cheng 287,500 - - 287,500

vi) Lim Seong Hai Holdings Sdn. Bhd.Lim Keng Cheng 1,735,500 - - 1,735,500

Deemed interests in the subsidiary company

i) Yasmin Marine Technology Sdn. Bhd.Dato’ Lim Kang Swee 80 - - 80Dato’ Lim Kang Hoo 80 - - 80Khoo Nang Seng @ Khoo Nam Seng 80 - - 80

By virtue of their interests in the shares of the Company, Dato’ Lim Kang Swee, Dato’ Lim Kang Hoo, and LimKeng Cheng are also deemed interested in the shares of the subsidiaries during the financial year to the extentthat Knusford Berhad has an interest.

None of the other Directors holding office at 31 December 2011 had any interest in the ordinary shares of theCompany and of its related corporations during the financial year.




Directors’ benefits

Since the end of the previous financial year, no Director of the Company has received nor become entitledto receive any benefit (other than a benefit included in the aggregate amount of emoluments received ordue and receivable by Directors as shown in the financial statements) by reason of a contract made by theCompany or a related corporation with the Director or with a firm of which the Director is a member, or witha company in which the Director has a substantial financial interest, other than certain Directors who havesignificant financial interests in companies which traded with certain companies in the Group in the ordinarycourse of business as disclosed in Note 29 to the financial statements.

There were no arrangements during and at the end of the financial year which had the object of enablingDirectors of the Company to acquire benefits by means of the acquisition of shares in or debentures of theCompany or any other body corporate.

Issue of shares

There were no changes in the authorised, issued and paid-up capital of the Company during the financial year.

Options granted over unissued shares

No options were granted to any person to take up unissued shares of the Company during the year.

Other statutory information

Before the statements of financial position and statements of comprehensive income of the Group and of theCompany were made out, the Directors took reasonable steps to ascertain that:

i) all known bad debts have been written off and adequate provision made for doubtful debts, and

ii) any current assets which were unlikely to be realised in the ordinary course of business have been writtendown to an amount which they might be expected so to realise.

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

i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts,in the Group and in the Company inadequate to any substantial extent, or

ii) that would render the value attributed to the current assets in the Group and in the Company financialstatements misleading, or

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

iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated inthe financial statements of the Group and of the Company misleading.

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

i) any charge on the assets of the Group or of the Company that has arisen since the end of the financialyear and which secures the liabilities of any other person, or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of thefinancial year.



Other statutory information (continued)

No contingent liability or other liability of any company in the Group has become enforceable, or is likely tobecome enforceable within the period of twelve months after the end of the financial year which, in the opinionof the Directors, will or may substantially affect the ability of the Group and of the Company to meet theirobligations as and when they fall due.

In the opinion of the Directors, except for the impairment of amount due from contract customer amountingto RM17,312,060, the financial performance of the Group and of the Company for the financial year ended31 December 2011 have not been substantially affected by any item, transaction or event of a material andunusual nature nor has any such item, transaction or event occurred in the interval between the end of thatfinancial year and the date of this report.

Subsequent events

On 24 February 2012, the Company entered into a shares sale agreement to acquire 2 ordinary shares of RM1each in Lakaran Cahaya Sdn. Bhd. for a cash consideration of RM2 representing 100% of the total issued andpaid-up capital of Lakaran Cahaya Sdn. Bhd. Subsequently, on 29 February 2012, the Group, through a subsidiary,Lakaran Cahaya Sdn. Bhd., entered into a sales and purchase agreement to acquire a parcel of freehold landunder GRN 49797 Lot 942, Mukim Semenyih, Daerah Ulu Langat, Negeri Selangor for a cash consideration ofRM14,210,000.

Auditors

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

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

Dato’ Lim Kang Hoo

Lim Keng Cheng

Kuala Lumpur, Malaysia

Date: 24 April 2012


Group Company

Note 2011 2010 2011 2010RM’000 RM’000 RM’000 RM’000

AssetsProperty, plant and equipment 3 17,758 19,060 7 8Investment property 4 42,169 40,328 25,667 26,111Investments in subsidiaries 5 - - 85,142 86,292Investment in associate 6 2,000 40 2,000 40Land held for property

development 7 26,777 26,777 - -Deferred tax assets 8 912 2,593 - -

Total non-current assets 89,616 88,798 112,816 112,451

Property development costs 10 10,650 14,318 - -Trade and other receivables 9 110,659 173,827 4,325 12,726Inventories 11 2,273 3,550 - -Tax recoverable 10 399 10 3Cash and cash equivalents 12 105,142 34,592 13,013 11,067

Total current assets 228,734 226,686 17,348 23,796

Total assets 318,350 315,484 130,164 136,247

EquityShare capital 99,645 99,645 99,645 99,645Share premium 22,693 22,693 22,693 22,693Retained earnings 125,998 65,965 7,386 4,074

Total equity attributable toowners of the Company 13 248,336 188,303 129,724 126,412

LiabilitiesBorrowings 14 549 758 - -Deferred tax liabilities 8 2,288 5,055 - -

Total non-current liabilities 2,837 5,813 - -

Payables and accruals 15 54,581 97,935 415 2,398Borrowings 14 779 20,304 25 7,437Taxation 11,817 3,129 - -

Total current liabilities 67,177 121,368 440 9,835

Total liabilities 70,014 127,181 440 9,835

Total equity and liabilities 318,350 315,484 130,164 136,247

Statements of Financial Positionas at 31 December 2011

The notes on pages 33 to 65 are an integral part of these financial statements.


Group Company

Note 2011 2010 2011 2010RM’000 RM’000 RM’000 RM’000

Continuing operationsRevenue 16 302,021 310,222 5,656 3,139Cost of sales 17 (191,166) (278,075) (797) (712)

Gross profit 110,855 32,147 4,859 2,427Other income 983 2,768 - -Administrative expenses (27,711) (10,471) (1,796) (372)

Results from operating activities 84,127 24,444 3,063 2,055Interest income 1,560 534 346 841Interest expense (314) (1,372) - (589)

Profit before tax 18 85,373 23,606 3,409 2,307Income tax expense 20 (25,340) (6,454) (97) (104)

Profit for the year/Totalcomprehensive incomefor the year attributable toowners of the Company 60,033 17,152 3,312 2,203

Basic earnings perordinary share (sen) 22 60.25 17.21


Statements of Comprehensive Incomefor the year ended 31 December 2011


Attributable to equity holders of the CompanyNon-distributable Distributable

Share Share Retainedcapital premium earnings Total

Group RM’000 RM’000 RM’000 RM’000

At 1 January 2010 99,645 22,693 48,813 171,151

Profit for the year/Totalcomprehensive income for the year - - 17,152 17,152

At 31 December 2010/1 January 2011 99,645 22,693 65,965 188,303


At 31 December 2011 99,645 22,693 125,998 248,336

Company

At 1 January 2010 99,645 22,693 1,871 124,209


At 31 December 2010/1 January 2011 99,645 22,693 4,074 126,412


At 31 December 2011 99,645 22,693 7,386 129,724


Statement of Changes in Equityfor the year ended 31 December 2011


Group Company2011 2010 2011 2010

Note RM’000 RM’000 RM’000 RM’000Cash flows from operating activities

Profit before tax 85,373 23,606 3,409 2,307Adjustments for:

Depreciation of property, plantand equipment 3 5,059 6,726 1 2

Depreciation of investment property 4 666 648 445 440Impairment loss on property, plant

and equipment - 767 - - Dividend income - - (5,200) (2,500)Gain on disposal of property, plant

and equipment (452) (1,848) - -Gain on disposal of subsidiary - (271) - -Interest expense 314 1,372 - 589Interest income (1,560) (534) (346) (841)

Operating profit/(loss) before changes in working capital 89,400 30,466 (1,691) (3)

Changes in working capital:Properties under development 3,668 (823) - -Inventories 1,277 753 - -Trade and other receivables 63,168 (37,277) 3,971 (1,233)Payables and accruals (43,354) 7,760 (1,983) (124)

Cash generated from/(used in) operations 114,159 879 297 (1,360)Income taxes paid (17,349) (4,316) (104) (109)Income tax refund - 643 - -

Net cash generated from/(used in)operating activities 96,810 (2,794) 193 (1,469)

Cash flows from investing activitiesAcquisition of property, plant and

equipment (i) (3,303) (1,058) - (8) Acquisition of investment property 4 (2,507) (85) (1) (84)

Repayment of unquoted share 5 - - 1,150 -Repayment from subsidiaries - - 9,630 6,459 Acquisition of investment in associate - - - (15)Investment in associate 6 (1,960) (40) (1,960) (40)Interest received 1,560 534 346 841Deposits pledged with licensed banks (398) (40) (302) (270)Proceeds from disposal of property,

plant and equipment 659 4,111 - -Proceeds from disposal of investment

property - 301 - -Net cash flow from disposal of subsidiary - 4,530 - -

Net cash (used in)/generated frominvesting activities (5,949) 8,253 8,863 6,883

Statements of Cash Flowsfor the year ended 31 December 2011


Group Company2011 2010 2011 2010

Note RM’000 RM’000 RM’000 RM’000

Cash flows from financing activities Interest paid (314) (1,372) - (589) Repayment of borrowings, net (18,150) (4,252) (6,350) (5,650)

Repayment of finance lease liabilities (1,183) (3,108) - -Net cash used in financing activities (19,647) (8,732) (6,350) (6,239)

Net increase/(decrease) in cash and cashequivalents 71,214 (3,273) 2,706 (825)

Cash and cash equivalents at 1 January (ii) 19,149 22,422 (813) 12

Cash and cash equivalents at 31 December (ii) 90,363 19,149 1,893 (813)

i) Acquisition of property, plant and equipment

During the year, the Group acquired property, plant and equipment with an aggregate cost of RM3,964,000(2010: RM1,140,000), of which RM661,000 (2010: RM82,000) were acquired by means of finance leasearrangements.

ii) Cash and cash equivalents

Cash and cash equivalents included in the statements of cash flows comprise the following statements offinancial position amounts:

Group Company2011 2010 2011 2010

Note RM’000 RM’000 RM’000 RM’000

Cash and bank balances 12 18,263 6,565 135 74Deposits with licensed banks 12 86,879 28,027 12,878 10,993Bank overdraft 14 (25) (1,087) (25) (1,087)

105,117 33,505 12,988 9,980Less: Deposits pledged 12 (14,754) (14,356) (11,095) (10,793)

90,363 19,149 1,893 (813)



Statements of Cash Flowsfor the year ended 31 December 2011(continued)

Notes to the Financial Statements

Knusford Berhad is a public limited liability company, incorporated and domiciled in Malaysia and is listed onthe Main Market of Bursa Malaysia Securities Berhad. The addresses of the registered office and principal placeof business of the Company are as follows:

Registered officeGround Floor,Wisma Ekovest,No.118, Jalan Gombak,53000 Kuala Lumpur.

The consolidated financial statements as at and for the year ended 31 December 2011 comprise the Companyand its subsidiaries (together referred to as the Group). The financial statements of the Company as at and forthe year ended 31 December 2011 do not include other entities.

The Company is principally engaged in investment holding and property investment whilst the principal activitiesof the subsidiaries are as stated in Note 28 to the financial statements.

These financial statements were authorised for issue by the Board of Directors on 24 April 2012.

1. Basis of preparation

(a) Statement of compliance

The financial statements of the Group and the Company have been prepared in accordance withFinancial Reporting Standards (FRSs), generally accepted accounting principles and the Companies Act, 1965 in Malaysia.

The following are accounting standards, amendments and interpretations of the FRS framework thathave been issued by the Malaysian Accounting Standards Board (MASB) but have not been adoptedby the Group and the Company:

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2011• IC Interpretation 19, Extinguishing Financial Liabilities with Equity Instruments• Amendments to IC Interpretation 14, Prepayments of a Minimum Funding Requirement

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2012• FRS 124, Related Party Disclosures (revised)• Amendments to FRS 1, First-time Adoption of Financial Reporting Standards – Severe Hyperinflation

and Removal of Fixed Dates for First-time Adopters• Amendments to FRS 7, Financial Instruments: Disclosures – Transfers of Financial Assets• Amendments to FRS 112, Income Taxes – Deferred Tax: Recovery of Underlying Assets

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2012• Amendments to FRS 101, Presentation of Financial Statements – Presentation of Items of Other

Comprehensive Income

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2013• FRS 10, Consolidated Financial Statements• FRS 11, Joint Arrangements• FRS 12, Disclosure of Interests in Other Entities• FRS 13, Fair Value Measurement• FRS 119, Employee Benefits (2011)• FRS 127, Separate Financial Statements (2011)• FRS 128, Investments in Associates and Joint Ventures (2011)• IC Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine• Amendments to FRS 7, Financial Instruments: Disclosures – Offsetting Financial Assets and Financial

Liabilities

Principal place of business1st Floor,Wisma Ekovest,No.118, Jalan Gombak,53000 Kuala Lumpur.


1. Basis of preparation (continued)

(a) Statement of compliance (continued)

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January2014• Amendments to FRS 132, Financial Instruments: Presentation – Offsetting Financial Assets and

Financial Liabilities

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January2015• FRS 9, Financial Instruments (2009)• FRS 9, Financial Instruments (2010)• Amendments to FRS 7, Financial Instruments: Disclosures – Mandatory Date of FRS 9 and Transition

Disclosures

The Group and the Company plans to apply the abovementioned standards, amendments andinterpretations from the annual period beginning on 1 January 2012 for those standards, amendmentsor interpretations that are effective for annual periods beginning on or after 1 July 2011 and 1 January2012, except for all IC Interpretations which are not applicable to the Group and the Company.

The initial application of a standard, an amendment or an interpretation, which will be appliedprospectively or which requires extended disclosures, is not expected to have any financial impactsto the current and prior periods financial statements upon their first adoption.

The Group’s and the Company’s financial statements for annual period beginning on 1 January 2013will be prepared in accordance with the Malaysian Financial Reporting Standards (MFRSs) issued bythe MASB and International Financial Reporting Standards (IFRSs). As a result, the Group and theCompany will not be adopting FRSs, Interpretations and amendments that are effective for annualperiods beginning on or after 1 July 2012.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis.

(c) Functional and presentation currency

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

(d) Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates andassumptions that affect the application of accounting policies and the reported amounts of assets,liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimate is revised and in any future periodsaffected.

There are no significant areas of estimation uncertainty and critical judgements in applying accountingpolicies that have a significant effect on the amounts recognised in the financial statements.




2. Significant accounting policies

The accounting policies set out below have been applied consistently to the periods presented in thesefinancial statements, and have been applied consistently by the Group entities.

(a) Basis of consolidation

(i) Subsidiaries

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

Under the purchase method of accounting, the financial statements of subsidiaries are includedin the consolidated financial statements from the date that control commences until the date thatcontrol ceases.

Investments in subsidiaries are stated in the Company’s statement of financial position at cost lessimpairment losses, unless the investment is classified as held for sale (or included in a disposal groupthat is classified as held for sale).

(ii) Associates

Associates are entities, including unincorporated entities, in which the Group has significantinfluence, but not control, over the financial and operating policies.

Investments in associates are accounted for in the consolidated financial statements using theequity method less any impairment losses, unless it is classified as held for sale or included in adisposal group that is classified as held for sale. The consolidated financial statements include theGroup’s share of profit or loss and other comprehensive income of the equity accounted associates,after adjustments if any, to align the accounting policies with those of the Group, from the datethat significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an equity accounted associate, the carryingamount of that interest including any long-term investments is reduced to nil, and the recognitionof further losses is discontinued except to the extent that the Group has an obligation or has madepayments on behalf of the investee.

Investments in associates are stated in the Company’s statement of financial position at cost lessany impairment losses, unless the investment is classified as held for sale.

(iii) Non-controlling Interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary notattributable directly or indirectly to the equity holders of the Company, are presented in theconsolidated statement of financial position and statement of changes in equity within equity,separately from equity attributable to the owners of the Company. Non-controlling interests in theresults of the Group is presented in the consolidated statement of comprehensive income as anallocation of the profit or loss and the comprehensive income for the year between non-controllinginterests and the owners of the Company.

(iv) Transactions eliminated on consolidation

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions,are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminatedin the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

35



2. Significant accounting policies (continued)

(b) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entitiesat exchange rates at the dates of the transaction.

Monetary assets and liabilities denominated in foreign currencies at reporting date are retranslatedto the functional currency at the exchange rate at that date. Non-monetary assets and liabilitiesdenominated in foreign currencies that are measured at fair value are retranslated to the functionalcurrency at the exchange rate at the date that the fair value was determined. Foreign currencydifferences arising on retranslation are recognised in the profit or loss.

(c) Financial instruments

(i) Initial recognition and measurement

A financial asset or a financial liability is recognised in the statement of financial position when,and only when, the Group or the Company becomes a party to the contractual provisions of theinstrument.

A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrumentnot at fair value through profit or loss, transaction costs that are directly attributable to the acquisitionor issue of the financial instrument.

(ii) Financial instrument categories and subsequent measurement

The Group and the Company categorise financial instruments as follows:

Financial assets

Loans and receivables

Loans and receivables category comprises receivables and cash and cash equivalents.

Financial assets categorised as loans and receivables are subsequently measured at amortisedcost using the effective interest method.

Financial liabilities

All financial liabilities are subsequently measured at amortised cost.

(iii) Derecognition

A financial asset or part of it is derecognised when, and only when the contractual rights to thecash flows from the financial asset expire or the financial asset is transferred to another party withoutretaining control or substantially all risks and rewards of the asset. On derecognition of a financialasset, the difference between the carrying amount and the sum of the consideration received(including any new asset obtained less any new liability assumed) and any cumulative gain or lossthat had been recognised in equity is recognised in profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specifiedin the contract is discharged or cancelled or expires. On derecognition of a financial liability, thedifference between the carrying amount of the financial liability extinguished or transferred toanother party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.




(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are stated at cost less accumulated depreciation andimpairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset and anyother costs directly attributable to bringing the asset to working condition for its intended use, andthe costs of dismantling and removing the items and restoring the site on which they are located.The cost of self-constructed assets also includes the cost of materials and direct labour and, forqualifying assets, borrowing costs are capitalised in accordance with the Group’s accountingpolicy. Purchased software that is integral to the functionality of the related equipment is capitalisedas part of that equipment.

The cost of property, plant and equipment recognised as a result of a business combination isbased on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged between knowledgeable willing parties in an arm’s lengthtransaction after proper marketing wherein the parties had each acted knowledgeably, prudentlyand without compulsion. The fair value of other items of plant and equipment is based on thequoted market prices for similar items when available and replacement cost when appropriate.

When significant parts of an item of property, plant and equipment have different useful lives, theyare accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined bycomparing the proceeds from disposal with the carrying amount of property, plant and equipmentand are recognised net within “other income” or “other expenses” respectively in profit or loss.

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carryingamount of the item if it is probable that the future economic benefits embodied within the partwill flow to the Group and its cost can be measured reliably. The carrying amount of the replacedpart is de-recognised. The costs of the day-to-day servicing of property, plant and equipment arerecognised in the profit or loss as incurred.

(iii) Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or otheramount substituted for cost, less its residual value.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful livesof each part of an item of property, plant and equipment. Leased assets are depreciated overthe shorter of the lease term and their useful lives unless it is reasonably certain that the Group willobtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plantand equipment under construction are not depreciated until the assets are ready for their intendeduse.

The estimated useful lives for the current and comparative periods are as follows:

• Buildings 5 - 50 years• Equipment, furniture and fittings 10 years• Plant and machinery 10 - 20 years• Motor vehicles 5 years

Depreciation methods, useful lives and residual values are reviewed and adjusted as appropriateat the end of the reporting period.




(e) Leased assets

Finance lease

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

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

(f) Investment property

(i) Investment property carried at cost

Investment properties are properties which are owned or held under a leasehold interest to earnrental income or for capital appreciation o

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