kubmalaysia kub malaysia berhad 6022-d kub … -ar31-12-2006.pdfof kub malaysia berhad will be held...

LEVEL 8 BLOCK DKOMPLEKS KELANA CENTRE POINTJALAN SS7/19 KELANA JAYA47301 PETALING JAYASELANGOR DARUL EHSANMALAYSIATEL: +60 3 7680 9666FAX: +60 3 7680 9669

www.kub.com

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2006

KUB MALAYSIA BERHAD 6022-D KUB MALAYSIA BERHAD ANNUAL REPORT 2006

PROFILE OF KUB MALAYSIAKUB MALAYSIA BERHAD IS AN INVESTMENT HOLDINGCOMPANY, LISTED ON THE MAIN BOARD OF BURSA MALAYSIASECURITIES BERHAD. KUB MALAYSIA PROVIDES VARIOUSSERVICES AND PRODUCTS IN THE ICT INDUSTRY AND THE ENERGY SECTOR. WITH THE LATTER, KUB MALAYSIA IS THE LARGEST INDEPENDENT BOTTLER OF LIQUEFIEDPETROLEUM GAS (LPG) IN THE COUNTRY.

IN ADDITION TO ICT AND ENERGY, KUB MALAYSIA PLANS TOVENTURE INTO LUCRATIVE NEW CORE AREAS OF DEFENSE AND FACILITIES MANAGEMENT IN THE NEAR FUTURE. IN ANAIM TO RECORD FURTHER SUCCESS, IT HAS IDENTIFIED ANDBEGUN REALIZING ITS CORPORATE BLUEPRINT.

OUR VISIONTO OWN AND DEVELOP BUSINESSES WITH SUSTAINABLE PROFITSWHICH GENERATE PREMIUM RETURNS TO SHAREHOLDERS

OUR MISSIONTO FOCUS ON CORE COMPETENCIES AND SUSTAIN GROWTH

TO LEVERAGE AND MAXIMIZE SYNERGIES AMONG OURBUSINESSES

TO DEVELOP A CULTURE THAT EMPHASIZES HIGH PERFORMANCE

TO BE A STRATEGIC PARTNER IN NATION BUILDING

TO FULFILL OUR SOCIAL RESPONSIBILITIES IN OUR COMMUNITY

concept & design by CHIMERA SDN BHD

CONTENTS

CORPORATE002 Notice of 42nd Annual General Meeting003 Statement Accompanying Notice of

42nd Annual General Meeting004 Group Financial Overview006 Corporate Information008 Corporate Structure010 Organization Structure012 Board of Directors014 Directors’ Profile018 Senior Management Team022 Chairman’s Statement030 Chief Executive’s Operations Review038 Corporate Social Responsibility Report042 In the News043 Statement on Corporate Governance050 Additional Compliance Information051 Statement on Internal Control053 Board Audit Committee Report

FINANCIAL060 Directors’ Report064 Statement by Directors065 Statutory Declaration066 Report of the Auditors068 Balance Sheets070 Income Statements071 Consolidated Statements of Changes in Equity072 Statement of Changes in Equity073 Cash Flow Statements075 Notes to the Financial Statements128 List of Properties134 Analysis of Shareholding

Proxy form

STRONGERTOGETHER

ANNUAL REPORT 2006KUB MALAYSIA BERHAD

NOTICE OF 42ND ANNUAL GENERAL MEETING

002003


NOTICE IS HEREBY GIVEN THAT THE 42ND ANNUAL GENERAL MEETINGOF KUB MALAYSIA BERHAD WILL BE HELD AT LAMAN PUTERI, HOTELSINGGAHSANA PETALING JAYA, PERSIARAN BARAT OFF JALAN SULTAN,46760 PETALING JAYA, SELANGOR ON THURSDAY, 28 JUNE 2007 AT 10.00 AMFOR THE FOLLOWING PURPOSES:

Securities Berhad and that such authority shall continuein force until the conclusion of the next Annual GeneralMeeting of the Company”Ordinary Resolution 7

8 Proposed Adoption of New Articles of Association of the Company

“THAT the new Articles of Association of theCompany as set out in Appendix 1 of the Circular to the Shareholders dated 6 June 2007 be and ishereby approved and adopted”Special Resolution 1

ANY OTHER ORDINARY BUSINESS9 To transact any other ordinary business of which due

notice shall have been given in accordance with theCompanies Act, 1965 and/or the Articles of Association.

By order of the Board

Eulis Rachmatiah Iskandar Sastrawidjaja (LS008774)YM Tunku Alizan Raja Muhammad Alias (BC/T/342)Harnita Harmain(LS008063)SECRETARIES

Petaling Jaya6 June 2007

NOTES:1 A member of the Company entitled to attend and vote at the

abovementioned Meeting is entitled to appoint one other person orpersons, whether a member or not as his/her proxy/proxies to attendand vote in his/her stead. Where a member appoints two or moreproxies, the member shall specify the proportion of the member’sshareholdings to be represented by each proxy.

2 The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorized or if the appointer is a corporation, either under its common seal or signed under the handof its attorney or by an officer on behalf of the corporation.

3 The Proxy Forms must be deposited at the office of The Company’s ShareRegistrar, Symphony Share Registrars Sdn Bhd, Level 26, Menara Multi-Purpose, Capital Square, No 8 Jalan Munshi Abdullah, 50100 Kuala Lumpurby hand or fax to 03-27212530/31 not less than twenty four (24) hoursbefore the time for holding the Meeting or an adjournment thereof.

4 Explanatory Note on Special Business:Ordinary Resolution (7), if passed, will give the Directors of the Company,from the date of the above Meeting, authority to issue and allot ordinaryshares from the unissued capital of the Company being for such purposesas the Directors consider would be in the interest of the Company. Thisauthority will, unless revoked or varied by the Company in the generalmeeting, expire at the next Annual General Meeting.

Special Resolution (1), if passed, will ensure that the Articles ofAssociation of the Company will be consistent with the provisions of the Listing Requirements of Bursa Malaysia Securities Berhad.

AGENDAORDINARY BUSINESS1 To receive the Audited Financial Statements for the

financial year ended 31 December 2006 together withthe Reports of the Directors and Auditors thereon.Ordinary Resolution 1

2 To re-elect Dato’ Nordin Baharuddin who retires inaccordance with Article 97 of the Company’s Articlesof Association, and being eligible has offered himselffor re-election.Ordinary Resolution 2

3 To accept the retirement of Dato’ Ir. Harun AhmadSaruji who retires pursuant to Article 97 of theCompany’s Articles of Association and is not seekingre-election.Ordinary Resolution 3

4 To re-elect Encik Mohd Nazar Samad who retirespursuant to Article 102 of the Company’s Articles of Association and being eligible has offered himselffor re-election.Ordinary Resolution 4

5 To approve the Directors’ fees for the financial yearended 31 December 2006.Ordinary Resolution 5

6 To re-appoint Messrs KPMG Desa Megat & Co asAuditors of the Company and to authorise theDirectors to fix their remuneration.Ordinary Resolution 6

SPECIAL BUSINESS7 To consider and if thought fit to pass the following

Ordinary Resolution:

“THAT pursuant to Section 132D of the CompaniesAct,1965 (“Act”) and subject always to the approvalof the relevant authorities, the Directors be and arehereby empowered to issue the shares in the Companyfrom time to time and upon such terms and conditionsand for such purpose the Directors may deem fitprovided that the aggregate number of shares issuedpursuant to this resolution does not exceed 10% ofthe issued share capital of the Company for the timebeing and that the Directors be and also empoweredto obtain the approval for the listing of and quotationfor the additional shares so issued on the Bursa Malaysia

STATEMENT ACCOMPANYING NOTICE OF 42ND ANNUAL GENERAL MEETING


1 THE DIRECTORS WHO ARE STANDING FOR RE-ELECTION AT THE 42ND ANNUAL GENERALMEETING OF THE COMPANY1.1 Director retiring pursuant to Article 97 of the Company’s Article of Association:

a Dato’ Nordin Baharuddin

1.2 Director retiring pursuant to Article 102 of the Company’s Article of Association:a Encik Mohd Nazar Samad

Further details of the above Directors seeking for re-election are set out in the Directors’ profiles, which appear from pages 014 to 017 of this Annual Report.

2 GENERAL MEETINGS HELD IN THE FINANCIAL YEAR ENDED 31 DECEMBER 20062.1 An Extraordinary General Meeting was held on 25 January 2006 at 10.00 am at Dewan Tun Hussein Onn,

Putra World Trade Centre (PWTC), 50480 Kuala Lumpur.

2.2 The 41st Annual General Meeting was held on 29 June 2006 at 10.00 am at Dewan Tun Hussein Onn, Putra World Trade Centre (PWTC), 50480 Kuala Lumpur.

3 BOARD MEETINGS HELD IN THE FINANCIAL YEAR ENDED 31 DECEMBER 2006a A total of fifteen (15) Board Meetings were held during the financial year ended 31 December 2006 as follows:

NO DATE OF BOARD MEETINGS TIME NO DATE OF BOARD MEETINGS TIME

1 5 January 2006 10.00 AM 9 19 July 2006 10.00 AM2 20 January 2006 10.00 AM 10 11 August 2006 03.00 PM3 23 February 2006 02.30 PM 11 24 August 2006 10.00 AM4 20 March 2006 03.00 PM 12 4 September 2006 11.00 AM5 20 April 2006 10.00 AM 13 15 September 2006 09.00 AM6 25 April 2006 10.00 AM 14 10 October 2006 11.00 AM7 29 May 2006 09.00 AM 15 9 November 2006 09.00 AM8 21 June 2006 10.00 AM

b Details of Attendance of the Directors at the Board Meetings for the financial year ended 31 December 2006are as follows:

NAME OF DIRECTORS NO OF MEETINGS ATTENDED

Dato’ Nordin Baharuddin 14/15Datuk Haji Faisyal Yusof Hamdain Diego 14/15Dato’ Kamilia Ibrahim 13/15Dato’ Ir. Harun Ahmad Saruji 14/15Rosman Abdullah 12/15Raja Ali Raja Othman 14/15Mohammed Ezzuddeen Mohd Effendi 12/15Omar Haji Ahmad 15/15

All Board Meetings were held at the Board Room, Level 23 KUB.com, Jalan Yap Kwan Seng, 50450 Kuala Lumpurexcept for a meeting held on 10 October 2006, which was held at Cubic Electronics Sdn Bhd, No.1 Jalan T.U 43,Taman Tasik Utama, Ayer Keroh, Melaka.

There is no Director being appointed or resigned during the financial year ended 31 December 2006.

GROUP FINANCIAL OVERVIEW

004005


5-YEAR FINANCIAL SUMMARYYear ended 31 December 2006

IN RM’000 2006 2005 2004 2003 2002

RESTATED

Continuing OperationsRevenue 765,881 684,077 799,811 625,281 575,691Operating loss (43,063) (28,314) (8,926) (20,819) (272,843)Loss before tax (43,703) (26,079) (9,979) (20,139) (274,031)Loss from continuing operations (47,640) (33,912) (16,663) (27,462) (279,280)

Discontinued OperationsLoss from discontinued operations (4,683) (4,488) 0 0 0Loss for the Year (52,323) (38,400) (16,663) (27,462) (279,280)

REVENUE IN RM’000

02 575,691

03 625,281

04 799,811

05 684,077

06 765,881

(272,843) 02

(20,819) 03

(8,926) 04

(28,314) 05

(43,063) 06

OPERATING LOSSIN RM’000

(274,031) 02

(20,139) 03

(9,979) 04

(26,079) 05

(43,703) 06

LOSS BEFORE TAXIN RM’000

-300 -250 -200 -150 -100 -50-300100 200 300 400 500 600 700 800 -250 -200 -150 -100 -50

LOSS FROM CONTINUING OPERATIONSIN RM’000

0 02

0 03

0 04

(4,488) 05

(4,683) 06

(279,280) 02

(27,462) 03

(16,663) 04

(33,912) 05

(47,640) 06

(279,280) 02

(27,462) 03

(16,663) 04

(38,400) 05

(52,323) 06

LOSS FOR THE YEARIN RM’000

-300 -250 -200 -150 -100 -50-5 -4 -3 -2 -1-300 -250 -200 -150 -100 -50

LOSS FROM DISCONTINUED OPERATIONSIN RM’000

NON-CURRENT ASSET IN RM’000

02 671,532

03 601,517

04 530,360

05 468,824

06 248,574

02 463,425

03 443,544

04 411,714

05 405,077

06 420,508

CURRENT ASSETIN RM’000

100 200 300 400 500 600 700 800

500400300200100

02 377,048

03 380,949

04 442,678

05 481,382

06 601,966100 200 300 400 500 600 700 800

12010080604020

02 118,929

03 107,007

04 98,670

05 109,156

06 46,222

CURRENT LIABILITIESIN RM’000

NON-CURRENT LIABILITIESIN RM’000

SHAREHOLDERS’ EQUITYIN RM’000

02 436,989

03 403,665

04 433,007

05 405,168

06 363,246500400300200100

5-YEAR FINANCIAL RECORDYear ended 31 December 2006

IN RM’000 2006 2005 2004 2003 2002

RESTATED

Non-current asset 248,574 468,824 530,360 601,517 671,532Current Asset 601,966 481,382 442,678 380,949 377,048Current liabilities 420,508 405,077 411,714 443,544 463,425Non-current liabilities 46,222 109,156 98,670 107,007 118,929Shareholders’ equity 363,246 405,168 433,007 403,655 436,989

CORPORATEINFORMATION

006007


BOARD OF DIRECTORSDato’ Nordin BaharuddinNon-Independent Non-Executive DirectorCHAIRMAN

Datuk Haji Faisyal Datuk Yusof Hamdain Diego Independent Non-Executive DirectorDEPUTY CHAIRMAN

Dato’ Kamilia IbrahimNon-Independent Non-Executive DirectorDIRECTOR

Dato’ Ir. Harun Ahmad SarujiSenior Independent Non-Executive DirectorDIRECTOR

Rosman AbdullahNon-Independent Non-Executive DirectorDIRECTOR

Raja Ali Raja OthmanIndependent Non-Executive DirectorDIRECTOR

Mohamed Ezzuddeen Mohd EffendiIndependent Non-Executive DirectorDIRECTOR

Omar Haji AhmadIndependent Non-Executive DirectorDIRECTOR

Mohd Nazar Samad Executive DirectorEXECUTIVE DIRECTOR & CHIEF EXECUTIVE

SECRETARIESEulis Rachmatiah Iskandar Sastrawidjaja (LS008774)YM Tunku Alizan Raja Muhammad Alias (BC/T/342)Harnita Harmain (LS008063)

REGISTERED OFFICELevel 8 Block DKompleks Kelana Centre PointJalan SS7/19 Kelana Jaya47301 Petaling JayaSelangorTel: +60 3 7680 9666Fax: +60 3 7680 9669www.kub.com

SHARE REGISTRARSymphony Share Registrars Sdn Bhd (378993-D)Level 26Menara Multi-PurposeCapital SquareNo 8 Jalan Munshi Abdullah50100 Kuala Lumpur Tel: +60 3 2721 2222Fax: +60 3 2721 2530

AUDITORSMessrs KPMG Desa Megat & Co (Firm No AF0759)Wisma KPMGJalan DungunDamansara Heights50490 Kuala LumpurTel: +60 3 2095 3388Fax: +60 3 2095 0971

PRINCIPLE BANKERSCIMB Bank BerhadMaybank BerhadAffin Bank Berhad

STOCK EXCHANGE LISTINGMain Board,Bursa Malaysia Securities Berhad

STOCK CODEKUB 6784

CORPORATESTRUCTURE

008009


STRONGERTOGETHER

KUBMALAYSIABERHAD

INFORMATION &COMMUNICATIONTECHNOLOGY(ICT)

KUB Telekomunikasi Sdn Bhd 100%KUB-Fujitsu Telecommunications (Malaysia) Sdn Bhd 70%Sphairon Sdn Bhd 49%Tele Dynamics Sdn Bhd 60%

EDUCATION & TRAINING (E&T)

ITTAR Sdn Bhd 100%ITTAR-IPP (PJ) Sdn Bhd 100%ITTAR-ILP (Prai) Sdn Bhd 100%Academy for Knowledge of Accounting & Leadership Sdn Bhd (AKAL) 100%

ENERGYSummit Petroleum (Malaysia) Sdn Bhd 100%KUB Power Sdn Bhd 100%Progas Pakistan (Pvt) Ltd 21.2%

PROPERTIES, ENGINEERING & CONSTRUCTION (PEC)

KUB Development Bhd 100%Perbiba Sdn Bhd 100%KUB Realty Sdn Bhd 100%KUB Realty (PJ) Sdn Bhd 100%Peraharta Sdn Bhd 100%Bina Alam Bersatu Sdn Bhd 55%

FOOD & BEVERAGE (F&B)

A&W (Malaysia) Sdn Bhd 100%A&W Restaurants (Thailand) Co Ltd 100%KUB Singgahsana (PJ) Sdn Bhd 100%

MANUFACTURING, PLANTATION & CONSUMER PRODUCTS ManufacturingKUB Tekstil Sdn Bhd 100%Utama Steel Works Sdn Bhd 51%ConsumerPernida Sdn Bhd 100%PlantationKUB Agrotech Sdn Bhd 100%KUB Sepadu Sdn Bhd 60%

STRONGERTOGETHER

ORGANIZATION STRUCTURE

010011


GROUP INTERNAL AUDITCHIEF INTERNAL AUDITOR

GROUP HUMAN CAPITAL DEVELOPMENTGENERAL MANAGER

GROUPFINANCECHIEF FINANCIAL OFFICER

GROUP ITHEAD

GROUP CORPORATEDEVELOPMENT SERVICESGENERAL MANAGER

GROUP CORPORATEAFFAIRS & COMMUNICATIONSHEAD

GROUP LEGAL & SECRETARIALGENERAL MANAGER

GROUPPROJECTMANAGEMENT OFFICEHEAD

GROUPRISKMANAGEMENTHEAD

EXECUTIVEDIRECTOR& CHIEFEXECUTIVE

BOARD OFDIRECTORS

012013


FROM LEFT TO RIGHTDatuk Haji Faisyal Datuk Yusof Hamdain Diego Independent Non-Executive DirectorDEPUTY CHAIRMAN

Raja Ali Raja OthmanIndependent Non-Executive DirectorDIRECTOR

Dato’ Ir. Harun Ahmad SarujiSenior Independent Non-Executive DirectorDIRECTOR

Mohd Nazar Samad Executive DirectorEXECUTIVE DIRECTOR & CHIEF EXECUTIVE

Rosman AbdullahNon-Independent Non-Executive DirectorDIRECTOR

Dato’ Kamilia IbrahimNon-Independent Non-Executive DirectorDIRECTOR

Omar Haji AhmadIndependent Non-Executive DirectorDIRECTOR

Dato’ Nordin BaharuddinNon-Independent Non-Executive DirectorCHAIRMAN

Mohamed Ezzuddeen Mohd EffendiIndependent Non-Executive DirectorDIRECTOR

Tunku Alizan Raja Muhammad AliasCOMPANY SECRETARY

Eulis Rachmatiah Iskandar SastrawidjajaCOMPANY SECRETARY

DIRECTORS’PROFILE

014015


DATO’ NORDIN BAHARUDDINNon-Independent Non-Executive DirectorCHAIRMAN

Chairman of Board Investment CommitteeMember of EXCO

Dato’ Nordin Baharuddin, aged 58, Malaysian, wasappointed to the Board of KUB Malaysia Berhad on 19 May 2005.

Dato’ Nordin retired as Chairman of Ernst & YoungMalaysia in 2004 after 35 years in the accounting andauditing profession in Malaysia and overseas. He hasalso retired as Chairman of Syarikat Prasarana NegaraBerhad on 31 December 2006.

He is a Chartered Accountant of The Malaysian Institute of Accountant (“MIA”) and a Fellow of the Institute of Chartered Accountants in England and Wales. He isactive in local professional accounting bodies through his membership of and serving as Vice-President of theMalaysian Institute of Certified Public Accountants, CouncilMember and Co-Chairman of the Public Practice ReviewCommittee of the MIA and Member of the MalaysianFinancial Reporting Foundation. Notably, Dato’ Nordin is also a Member of the Mongolia Institute of Certified

Public Accountants and helped develop the profession inMongolia as well as provided professional advice to thebanking and corporate sectors through his participationas Partner in Charge of Ernst & Young Mongolia. He isalso a member of the Working Group on CorporateGovernance for the Islamic Financial Services Board.

Currently, Dato’ Nordin is an Independent Non-ExecutiveDirector of Sarawak Enterprise Corporation Berhad,Scomi Engineering Berhad, Visdynamics Holding Berhadand Senior Advisor to Citibank Berhad. He also sits on the Boards of several subsidiary companies of KUBMalaysia Berhad.

He does not have any family relationship with anyDirector and/or major shareholder of KUB MalaysiaBerhad. He has never been convicted of any offenceover the past 10 years and has no conflict of interestwith KUB Malaysia Berhad.

DATUK HJ FAISYAL DATUK YUSOF HAMDAIN DIEGOIndependent Non-Executive DirectorDEPUTY CHAIRMAN

Member of EXCO

Datuk Hj Faisyal Datuk Yusof Hamdain Diego, aged 45,Malaysian, was appointed to the Board of KUB MalaysiaBerhad on 18 August 2005.

He holds a Bachelor of Arts (Honours) degree inEconomics from York University, Toronto, Canada.

Datuk Hj Faisyal has been the Executive Chairman ofArus Sutera Sdn Bhd since 1997, Director for PerkasaTrading Sdn Bhd (a SEDCO subsidiary) since 1996 andTreasurer of the Dewan Perniagaan Melayu Malaysia(Sabah) since 1997.

He currently sits on the Board of Bursa Malaysia Berhadand the Boards of several subsidiary companies of KUBMalaysia Berhad.


DATO’ KAMILIA IBRAHIMNon-Independent Non-Executive DirectorDIRECTOR

Chairman of Board Nomination Committee

Dato’ Kamilia Ibrahim, aged 55, Malaysian, wasappointed to the Board of KUB Malaysia Berhad on 28 April 1997.

She sits on the Boards of several subsidiary companies ofKUB Malaysia Berhad and the Advisory panel of MaybankEthical Unit Trust.

Currently, she is the principal partner in her law firm,which specializes in property, commercial and banking.Politically active, she has been an elected member ofthe Wanita UMNO National Executive Council since 1987and heads its Legal Affairs Bureau. She has served as amember of the National Islamic Council Malaysia since2000. She was appointed in 2004 as a Commissioner forthe Royal Commission Enhancing the Operation and theManagement of the Royal Malaysian Police.

She obtained her LLB and LLM from University Malaya and her Diploma In Syariah Law & Practice from theInternational Islamic University of Malaysia (IIUM).

She does not have any family relationship with anyDirector and/or major shareholder of KUB MalaysiaBerhad. She has never been convicted of any offenceover the past 10 years and has no conflict of interestwith KUB Malaysia Berhad.

DATO’ IR. HARUN AHMAD SARUJISenior Independent Non-Executive DirectorDIRECTOR

Member of Board Audit CommitteeMember of Board Remuneration Committee

Dato’ Ir. Harun Ahmad Saruji, aged 70, Malaysian, was appointed to the Board of KUB Malaysia Berhad on 1 January 1993 and also serves on the Boards of severalsubsidiary companies of KUB Malaysia Berhad.

He has served the Malaysian Government for 35 yearsand his last position was as the Chief Executive Officerof the Perak State Development Corporation (PerbadananKemajuan Negeri Perak), the leading state agency in thedevelopment and promotion of industries, new townships,housing estates and commercial centers.

He obtained his Bachelor of Science in Civil Engineeringfrom the University of Brighton, UK and is a Member ofthe Institute of Engineers, Malaysia and a ProfessionalEngineer of the Board of Engineers, Malaysia.

He is currently the Chairman of Perak CorporationBerhad (PCB), a company listed on the Main Board of Bursa Malaysia Securities Berhad and also serves as Director in several PCB subsidiaries.

He does not have any family relationship with anyDirector and/or major shareholder of KUB MalaysiaBerhad. He has never been convicted of any offenceover the past 10 years and has no conflict of interest with KUB Malaysia Berhad.

DIRECTORS’PROFILEcontinued

016017


ROSMAN ABDULLAHNon-Independent Non-Executive DirectorDIRECTOR

Member of Board Audit CommitteeMember of Board Investment Committee

Rosman Abdullah, aged 40, Malaysian, was appointed to the Board of KUB Malaysia Berhad on 19 May 2005.

An accountant by profession, Rosman has vastexperience in corporate and business management,corporate finance, accounting and auditing. He is a chartered member of the Malaysian Institute ofAccountants, and a member of the Australian Society of Certified Practicing Accountants. He holds a Bachelorof Commerce (Accounting) degree from the AustralianNational University and had attended the AdvancedManagement Programme at the Oxford University.

Currently, he is the Group Chief Executive Officer of PECDBerhad, a company listed on the Main Board of BursaMalaysia Securities Berhad. Previously, he had served as the Executive Director of Malaysia Airport HoldingsBerhad (MAHB) from 1997 until 2003 and as ExperiencedManager at Arthur Andersen & Co from 1989 to 1997.

On 1 June 2006, his position as Chairman & Director ofMESDAQ-listed Datascan Berhad has been redesignatedto non-Independent & non-executive director. He is alsoan independent director of Kumpulan Fima Berhad andNarra industries Berhad, companies listed on BursaMalaysia’s Main Board.


MOHAMED EZZUDDEEN MOHD EFFENDIIndependent Non-Executive DirectorDIRECTOR

Member of Board Nomination CommitteeChairman of Board Remuneration Committee

Mohamed Ezzuddeen Mohd Effendi, aged 47, Malaysian,was appointed to the Board of KUB Malaysia Berhad on18 August 2005.

He holds a Bachelor of Science in Management degreefrom the University of Dublin, Ireland as well as anAdvanced Diploma in Marketing Techniques from theCollege of Marketing and Design in Dublin, Ireland.

Mohamed Ezzuddeen gained vast experience incorporate restructuring and mergers & acquisitions (M & A) process during his work in Corporate Affairs at Renong Berhad’s ICT Division. He was a ManagingDirector of RenCorp Sdn Bhd from 1994 to 1998 and E-Form Resources Sdn Bhd from 1999 to 2000.

Currently he is the Chief Executive Officer of theNational Development Institute of Research (NADIR).


RAJA ALI RAJA OTHMANIndependent Non-Executive DirectorDIRECTOR

Member of Board of Investment

Raja Ali Raja Othman, aged 41, Malaysian, was appointedto the Board of KUB Malaysia Berhad on 18 August 2005.

He is attached to ECM Libra Avenue Securities Sdn Bhd as Deputy Chief Executive Officer.

Prior to joining ECM Libra Avenue, he was attached tothe global accountancy firms of Arthur Andersen andErnst & Young for over 14 years where his last positionwas as Executive Director, Transaction Advisory Services.

He is a Fellow of the Chartered Association of CertifiedAccountants (FCCA) and a Chartered Accountant withthe Malaysian Institute of Accountants.


OMAR HAJI AHMADIndependent Non-Executive DirectorDIRECTOR

Chairman of Board Audit CommitteeMember of Board Nomination CommitteeMember of Board Remuneration Committee

Omar Hj. Ahmad, aged 41, Malaysian, was appointed tothe Board of KUB Malaysia on 18 August 2005.

He gained significant hands-on experience in strategicmanagement, business planning, project management and corporate finance at leading corporations includingKumpulan Utusan from 1995 until 2001 and ESSO Production(M) Inc. from 1992 until 1995. A media veteran with morethan 11 years experience, he is currently the ManagingDirector of Omnicast (M) Sdn Bhd with principal activities inmedia strategic consultancy, broadcasting and advertising.

Omar obtained his accounting qualifications from the University of Newcastle-upon-Tyne UK and ICAEWtrained in London. He has also attended numerouscourses including INSEAD International ManagementProgram Hong Kong in year 2000.


MOHD NAZAR SAMAD Executive DirectorEXECUTIVE DIRECTOR & CHIEF EXECUTIVE

Chairman of EXCO

Mohd Nazar Samad, aged 50, Malaysian, was appointedto the Board of KUB Malaysia Berhad on 1 March 2007.

He holds a Diploma in Accountancy from Mara Instituteof Technology and Bachelor of Science Degree in BusinessAdministration from Oklahoma City University, USA.

He began his career with Bank Pertanian Malaysia andRakyat First Merchant Bankers Berhad (1978-1991). In 1992,he joined Cold Storage Malaysia Berhad as Head of CorporateAffairs and rose subsequently to the position of GroupChief Executive. In 1996, he joined Krystar ManagementSdn Bhd, management consulting firm, which establishedthe Eraman duty free outlets for Malaysia Airports Bhd.

From 1998 to 2002, he was Executive Director and ChiefExecutive Officer of Buildmax Ltd, a building materialsmanufacturing business listed on the Johannesburg StockExchange in South Africa, and he returned to Malaysia in2003 as Chairman and Advisor to Diversatech (M) Sdn Bhd,a company engaged in the manufacture and sale ofspecialised agricultural fertilisers.


SITTING FROM LEFT TO RIGHTEulis Rachmatiah Iskandar SastrawidjajaGENERAL MANAGER/COMPANY SECRETARY

Legal & Secretarial

Mohd Nazar SamadEXECUTIVE DIRECTOR & CHIEF EXECUTIVE

Henry Ho Kien WaiHEAD

Group IT

Norashekin YusofACTING HEAD

Group Corporate Affairs & Communications

Ab Aziz MohamedHEAD OF ICT DIVISION

PRESIDENT

KUB Telekomunikasi Sdn Bhd

Haniza Ros NasaruddinHEAD

Project Management Office

Wan Mohd Nor Wan AhmadHEAD OF ENERGY DIVISION

CHIEF EXECUTIVE OFFICER

Summit Petroleum (Malaysia) Sdn Bhd

STANDING FROM LEFT TO RIGHTWan Ahmad Rudirman Wan RazakGENERAL MANAGER

Corporate Development Services

Nazrul Hisham Abdul HamidCHIEF INTERNAL AUDITOR

Yan Siew ChingSENIOR MANAGER

Group Finance

Errman Zuhady ZainalGENERAL MANAGER

Human Capital Development

SENIOR MANAGEMENT TEAM

018019


INTEGRITY

WE SUPPORT THE PEOPLE WE WORK WITH.

WE SERVE OUR CUSTOMERS TO THE BEST OF OUR ABILITIES.

“To thine own self be true, and it must follow, as the night the day, thou can’t not then be false to any man.”

~ william shakespeare

ST

CHAIRMAN STATEMENT

022023


STRONGERTOGETHER

FINANCIAL YEAR 2006 (FY06) HAS BEEN A CHALLENGING YEAR FOR THE GROUP, AND WE OWE OUR RESILIENCE TO THESUPPORT OF OUR KEY STAKEHOLDERS.

ON BEHALF OF THE BOARD, WE WISH TO THANK OUR MANAGEMENT AND STAFF, WHO HAVE CONTRIBUTED THEIR MAXIMUMABILITIES, CREATIVITY AND LOYALTYDESPITE CHALLENGING CONDITIONS. WE RECOGNIZE YOUR WORTH AND WILLCONTINUE TO INVEST IN YOUR PERSONALAND PROFESSIONAL DEVELOPMENT AS WE WORK HAND-IN-HAND TO CREATE ANORGANIZATION THAT INSPIRES PRIDE AND EMBODIES DISCIPLINE, INNOVATIONAND ACHIEVEMENT.

Dato’ Nordin BaharuddinCHAIRMAN

Secondly, we wish to thank all our customers and partners for their support and patronage throughout these years.We are pleased to have forged invaluable long-term relationships with you and look forward to working closely withyou and serving you for many years to come.

Having bitten the bullet through our aggressive asset disposal and reallocation strategies, we are optimistic that theGroup is on the right track to improve its operational and financial performance in achieving our mission to enhanceshareholders’ value in the years to come.

STRONGERTOGETHER

CHAIRMAN STATEMENTcontinued

024025


BOARD OF DIRECTORSI wish to record my appreciation to my fellow Boardmembers for continously providing strategic guidance,support and essential oversight, particularly in the areas of risk and control management as well as processimprovements, which are fundamental in creating anatmosphere of rigorous decision making to entrenchstakeholder confidence.

I would like to extend my thanks to long-serving directorDato’ Ir Harun Ahmad Saruji, who has decided not tooffer himself for re-election at the 42nd Annual GeneralMeeting. The Board would also like to extend its thanksto Encik Izham Yusoff, the former Chief Executive Officer,for his services to the Group throughout the period from1 July 2004 to 2 April 2007. We wish them every successin their future endeavors.

At the same time, I am pleased to welcome Encik Mohd Nazar Samad as the executive director and chiefexecutive effective 2 April 2007. With this appointment,Encik Nazar is also the chairman of the ExecutiveCommittee. I am confident that Encik Mohd Nazar will provide strong leadership, hands on experience and direction for the Group to pursue its future growthgiven his wealth of experience in financial services and general management in various sector.

PERFORMANCE REVIEWIn FY06, the Group instituted its Strategic Blueprint as a platform for long-term growth, which prescribed fiveStrategic Thrusts namely the immediate divestment ofnon strategic businesses, identifying certain companiesand assets for fund raising, the retention and enhancementof selected core businesses, venturing into new corebusinesses and the rationalization of capital.

For the year under review, the Group revenue increasedby approximately 12% to RM765.88 million. The core ICTand Energy sectors retained their position as the maincontributors to Group revenue, contributing 47% and 43% respectively.

In line with our Strategic Blueprint and after dueconsideration and a thorough discussion with our auditors,the Board decided to adopt a prudent approach in makingcertain provisions in relation to subsidiaries which havebeen or are in the process of being disposed off or wound-up resulting in after-tax losses of RM52.32 million for the FY06.

On a positive note, the continuous efforts to transformthe Group coupled with the bullish sentiment in theequity market in the latter half of FY06 and early FY07drove KUB Malaysia’s share price to a 12-month high of 77 sen during the first quarter of FY07 as compared to 35 sen in the third quarter of FY06.

STRENGTHENING CORPORATE GOVERNANCEGoing forward, we intend to reinforce the framework and substance of our corporate governance and ethicssystem by embarking on a new KUB Integrity Plan thatwill inculcate the four revised Core Values into ourpeople: Integrity, Teamwork, Trust and Mutual Respect,and Excellence. The KUB Integrity Plan which wasintroduced in the first quarter of FY07 is consistent with the objectives of the National Integrity Planpromoted by the Government, which aims to establish a fully moral and ethical society whose citizens arestrong in religious values and imbued with the highestethical moral standards.

Furthermore, to boost stakeholder comfort andconfidence, we will fortify our existing Risk ManagementProgram and Corporate Governance Framework toenhance internal risk and control processes in line with industry best practices. In particular, we intend to tighten the supervision and monitoring processes as well as the checks-and-balances embedded in keyfunctions like treasury, finance and project managementin order to safeguard the interest of stakeholders andensure the achievement of corporate objectives.

THE KUB INTEGRITY PLANWHICH WAS INTRODUCED INTHE FIRST QUARTER OF FY07IS CONSISTENT WITH THEOBJECTIVES OF THE NATIONALINTEGRITY PLAN PROMOTEDBY THE GOVERNMENT, WHICHAIMS TO ESTABLISH A FULLYMORAL AND ETHICAL SOCIETYWHOSE CITIZENS ARE STRONGIN RELIGIOUS VALUES ANDIMBUED WITH THE HIGHESTETHICAL MORAL STANDARDS.

ABOVEAt the AGM, the shareholders are given opportunity to ask theirquestions and seek clarifications on the businesses and performance of the Group. YBhg Dato’ NordinBaharuddin, Chairman, attended to questions raised by the shareholderat the 41st AGM.

BELOWSafe, efficient and reliable source of energy for the people of Pakistan.

ST

CHAIRMAN STATEMENTcontinued

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COMMITTED TO CORPORATE SOCIAL RESPONSIBILITYIn line with the newly introduced KUB Integrity Plan that promotes strong ethical values, KUB Malaysia retainsits commitment to its Corporate Social Responsibility (CSR)Program, which revolves primarily around promoting andeducating environment’s preservation and conservation.We are committed to be a good corporate citizen byensuring all business affairs are guided by the core valuesof our company. Apart from being a social imperative,our initiatives through CSR programes improve the qualityof life in communities where we live and work. This isessential for any organization to remain viable, vital and accepted in today’s marketplace.

In FY06, we continued to provide both financial aids and our expertise to the communities in which we work.Among the programs embarked by the Group were major beach clean-up and education program targetedto the residents of Perhentian Island, Terengganu withthe objective of educating them on how to improve theirquality of life by capitalizing on economic opportunitiesvia sustainable tourism. We also provided donations in cash and kind to victims of the Johore floods and to theIJN Foundation, which helps fund the underprivilegedheart patients.

In FY07, we started our CSR initiative by sponsoring a year’s supply of milk to baby elephants at the KualaGandah National Elephant Conservation Centre in Pahang,which helps preserve the nation’s wildlife heritage and is in line with our environmental aspirations.

ABOVEEncik Mohamed Ezzuddeen MohdEffendi, Director at the launch ofKUB Malaysia's Integrity Plan. The KUB Malaysia Integrity Plan is our way of delivering thegovernment's call and supporting the efforts towards the establishmentof a nation that is united, infused by strong moral and ethical values,democratic, liberal, tolerant, caring,economically just and equitable,progressive and prosperous.

BELOWThe Group ventured into the businessof providing end-to end solution inManaged Security Services by inkingstrategic alliances with global marketleaders namely Cybertrust and Trend Micro, witnessed by YB DatukDr Awang Adek, Finance Minister II.

THE MALAYSIAN ECONOMYIS EXPECTED TO MAINTAIN ASTEADY GROWTH PATH IN 2007WITH A 6.0% GDP GROWTH RATEWITH THE GROWTH MOMENTUMSUPPORTED BY DOMESTIC DEMAND FROM BOTH PRIVATEAND PUBLIC SECTORS. SOLIDSUPPORT FOR DOMESTICGROWTH IS BELIEVED TO COMEFROM SUSTAINABLE PRIVATECONSUMPTION, CONTINUEDEXPANSION IN INVESTMENTACTIVITIES AND THE EFFICIENTIMPLEMENTATION OF THE NINTHMALAYSIA PLAN (9MP) PROJECTS.

STRONGERTOGETHER

PROSPECTSThe Malaysian economy is expected to maintain a steadygrowth rate in 2007 of 6.0% with the growth momentumsupported by domestic demand from both private andpublic sectors. Solid support for domestic growth isbelieved to come from sustainable private consumption,continued expansion in investment activities and theefficient implementation of the Ninth Malaysia Plan(9MP) projects.

In line with the above and in accordance with theGroup’s Strategic Blueprint, we have identified severalcore areas which are believed to contribute significantlyto the Group’s earning profile. The areas identified underthe 9MP will become a catalyst in generating economicvalues to the Group namely information & communicationtechnology (ICT), energy, facilities management andproperty, engineering & construction as well as othernew growth opportunities.

Going forward, the Group will continue streamlining its operations and activities. Cost optimization willcontinue to be a vital element in ensuring operationalefficiency thus improving its financial performance. The Group will also continuously improve the businessprocesses and human capital development. This willprovide the right ingredients to succeed in achieving the Group’s mission and vision.

Thank you.

Dato’ Nordin BaharuddinCHAIRMAN

TEAMWORK

TASKS BECOME EASIER AND PROBLEMS ARE SOLVED FASTER WHEN WE POOL OUR RESOURCES AND WORK TOGETHER.

“The achievements of an organization are the results of the combined effort of each individual.”

~ vincent lombardi

ST

CHIEF EXECUTIVE’SOPERATION REVIEW

030031


STRONGERTOGETHER

DURING THE PERIOD UNDER REVIEW, THE GROUP STEADILY IMPLEMENTED THEKEY STRATEGIC THRUSTS AS OUTLINED IN THE STRATEGIC BLUEPRINT FOR ITSBUSINESS TRANSFORMATION. AMONG THEEFFORTS UNDERTAKEN IN FY06 WERECONSOLIDATION OF BUSINESS ENTITIES,DISPOSAL OF UNPRODUCTIVE ASSETS,STREAMLINING OF BUSINESS PROCESSESAND COST OPTIMISATION ACTIVITIES.

Mohd Nazar SamadEXECUTIVE DIRECTOR& CHIEF EXECUTIVE

Subsequent to the FY06 activities, the Group has identified new core areas namely Information & CommunicationTechnology (ICT), Energy, Facilities Management (FM) and Property, Engineering & Construction (PEC). In addition, the Group is also looking at embarking on strategic projects and investments that could generate sustainable goodreturns and synergistic to the existing core businesses.

FY2006 PERFORMANCE REVIEWDuring the year under review, the Group disposed off several non-core assets and loss-making companies that wereexhausting the Group’s earnings profile namely PSC Naval Dockyard Sdn Bhd, and Computer Forms Malaysia Berhad for a total consideration of RM29.8 million.

During the period, the Group had also entered into an agreement with Progas Energy Limited that diluted the equityinterest in Progas Holdings Limited from 61.9% to 38.2% and accordingly, this company ceased to be a subsidiary ofthe Group.

The assets disposal initiatives led to freeing up the capital and resources, which was utilized for debt reduction,capital reassignment as well as diversifying and boosting revenue streams in the existing businesses of Information & Communications Technology (ICT) and Energy through aggressive business development activities.

On year-on-year basis, the Group revenue increased by 12% from RM684.08 million to RM765.88 million which wasmainly contributed by the ICT and Energy businesses.

The ICT division contributed RM359.1 million or 47% of the Group’s revenue. Despite a competitive environment, the ICT related businesses successfully registered higher revenue of 13% to RM359.51 million from RM319.04 millionlast year. The achievement was primarily due to higher contract value awarded by major clients like Telekom MalaysiaBerhad (TMB) to the group’s subsidiaries namely KUB Telekomunikasi Sdn Bhd and KUB-Fujitsu Telecommunications(Malaysia) Sdn Bhd amounting to a total of RM73.25 million.

CHIEF EXECUTIVE’SOPERATION REVIEWcontinued

032033


The ICT division also increased its sales and rental of electronic imaging products and completed a majorportion of the RM73.9 million worth of pilot projects forRTM broadcasting digitalisation. Under telecommunicationsector, we have expanded our presence regionally, havingventured into supplying and installing telecommunicationequipment to Bangladesh’s Aktel and Indonesia’s PTTelkom. In the future, we intend to leverage on TMB’sinternational operations in order to penetrate regionalemerging markets.

In the Energy division, the revenues were boosted byimproved sales and higher market share of domesticLPG. Revenue increased by 33% to RM329.5 million fromRM248.0 million in FY05. Despite intense competition in LPG market, Summit Petroleum (Malaysia) Sdn Bhdmanaged to increase its sales tonnage by 16% from 106,328metric tonne in 2005 to 122,992 metric tonnes in 2006.Revenues were further boosted by KUB Power Sdn Bhd,driven by the RM90 million worth of contracts from TenagaNasional Berhad (TNB) for Bukit Tarek sub-station, a jointventure project with Siemens Sdn Bhd and Kapar sub-station project worth RM63.0 million and RM28.7 millionrespectively. In an effort to improve its revenue base, thedivision is exploring and pursuing more contracts fromTNB as well as other independent power producers.

At the Group level, KUB Malaysia Berhad recorded an after tax accounting loss of RM52.3 million of whichRM47.6 million was derived from the existing operationswhilst the remaining RM4.7 million came from thediscontinued operations. The loss was registered mainlydue to expenses incurred in relation to subsidiaries whichhave been or in the process of being disposed off orwound up. Taking these expenses out of this equation,the Group has reduced its operational loss after tax by 37% from RM33.9 million to RM21.5 million.

As a result of our divestment exercise, the Groupregistered a net repayment of RM70.4 million debt thusreducing its total borrowings by 38% from RM197 millionto RM122 million. In terms of gearing, it represents animprovement of debt ratio from 0.49 times to 0.34 times.

THIS PAGEYang Berhormat Dato’ Sri Najib TunAbdul Razak and Yang BerhormatDatuk Azmi Khalid visited our joint-venture landfill project at Bukit Tagarwith Berjaya Corporation Berhadaccompanied by Yang BerbahagiaDato’ Nordin Baharuddin and EncikMohd Nazar Samad.

NEXT PAGEState of the art summit’s bottling plant at Pulau Indah, Wesport.

The recent completed Bukit Tarek sub-station project for TNB by KUB Power Sdn Bhd.

FY2007 OUTLOOKIn FY06, there have been various aggressive effortsexecuted in an attempt to improve the overall operationaland financial position of the Group. This momentum willbe continuously driven into FY2007 and steer the Group’sdual agenda in finalising the disposal of non-core assetsand unlocking the value of unproductive assets vis-à-visnurturing and growing the four newly refined core areasnamely Information & Communication Technology (ICT),Energy, Facilities Management and Property, Engineering& Construction. The Group intends to achieve the objectivethrough upscaling the business development activitiesand exploring new strategic investment opportunities.The Group will also be on a constant look out for othernew areas that could provide sustainable and good returnon investment as well as providing synergy and added valueto the Group. All these initiatives will be implementedwhilst taking into consideration the balance principleof risk management and long term returns.

In FY07, the Group targeted to complete the disposal of its 100% stake in KUB Tekstil Sdn Bhd to My-PartnersSolutions Sdn Bhd for RM15.7 million and Universiti TunAbdul Razak to Yayasan Pendidikan Tun Abdul Razak for RM45 million cash.

In the ICT sector, the Group will improve its profitabilitythrough migration from low-margin contractual servicesto sustainable high-yield services and solutions. Variousgovernment related and private projects will be pursuedaggressively as to ensure a steady income to the Group.The Group will position itself to take advantage of the newsegments in ICT which was identified under the 9MP andthe MYICMS 886 (Malaysian Information, Communicationand Multimedia Services Strategy), particularly in theareas of managed security services (MSS). In view of this,the Group has ventured into the business of providingend-to-end solutions in MSS by inking strategic allianceswith global market leaders namely Cybertrust and TrendMicro in the first quarter of FY2007. The MSS market inMalaysia is poised to grow as organisations strive to protecttheir IT infrastructure and infostructure from securitythreats and virus attacks.

In order to be less dependent on the telecommunicationsector, the Group will intensify its effort with specific focuson the new sources of growth in particular the informationand system security, digital content development anddigital broadcasting. For these, collaborative initiativeswill also be undertaken glocally to build smart andstrategic partnerships to create value added services to complement and supplement the Group’s foray in ICT sector.

THE GROUP WILL POSITIONITSELF TO TAKE ADVANTAGEOF THE NEW SEGMENTS INICT WHICH WAS IDENTIFIEDUNDER THE 9MP AND THEMYICMS 886 (MALAYSIANINFORMATION, COMMUNICATIONAND MULTIMEDIA SERVICESSTRATEGY), PARTICULARLYIN THE AREAS OF MANAGEDSECURITY SERVICES (MSS).

CHIEF EXECUTIVE’SOPERATION REVIEWcontinued

034035


The Group’s involvement in the Energy Sector is currentlylimited to bottling and distribution of domestic cookinggas (LPG) by Summit Petroleum (Malaysia) Sdn Bhd andconstruction of sub-stations for TNB by KUB Power Sdn Bhd.Moving forward, the Group will position itself to becomea significant player in the LPG market by increasingbottling capabilities, optimising logistic costs, aggressivemarketing and widening the geographical dealers’ network.The Group aims to play a bigger role in the power sectorthrough capacity and capability building.

As we move forward, the Group intends to deepen its involvement in the oil and gas industry via strategicpartnership and acquisition that would generate immediateand sustainable earnings. The Group is also looking foropportunities to venture into the provision of supportservices for the upstream oil and gas industry.

In addition to the ICT and Energy sectors, the Group hasalso identified several strategic initiatives to enhance its revenue base through introduction of facilitiesmanagement as a new core business and strengtheningthe property, engineering & construction division. In line with the Government aspiration to promote cultureof preventive maintenance and biotechnology industry,the Group plans to venture into the soft side of facilitiesmanagement such as biotechnology related services as well as the traditional building maintenance.

Premised on the growth prospects in the emerging wastemanagement industry, with the implementation of theSolid Waste Management (SWM) Bill and further guidedby the National Strategic Plan for Solid Waste Management(NSPSWM), the Group aspires to develop further thedomain of facilities management by the provision ofenvironmental related services. By doing so, it will notonly contribute to the Group’s earnings profile but alsoreinforce the Group’s position as a player in the valuechain of SWM hierarchy.

In the areas of property, engineering & construction, the Group will take advantage of the higher allocation ofinfrastructure development under the 9MP by reinforcingits capabilities and capacities to aggressively participatein the industry via Bina Alam Sdn Bhd which has been an active player thus far.

THIS PAGEYang Berhormat Senator Dato’ HajahSaripah Aminah Haji Syed Mohamedraised her questions on the performanceof KUB Malaysia during the Briefingto Senators held at the Parliment on21 December 2006.

Participants at the managed SecurityServices (MSS) Seminar organized by KUB Malaysia with Cybertrust &Trend Micro. MSS is KUB Malaysiainitiative to provide security protectionto an organisation’s informationtechnology infrastructure.

NEXT PAGEKUB Malaysia Berhad’s shareperformance for 2006 & 2007.

AS WE MOVE FORWARD,THE GROUP INTENDS TODEEPEN ITS INVOLVEMENTIN THE OIL AND GAS INDUSTRYVIA STRATEGIC PARTNERSHIPAND ACQUISITION THATWOULD GENERATE IMMEDIATEAND SUSTAINABLE EARNINGS.

Alongside with the core areas as mentioned earlier,the Group will continue to explore other strategicbusiness opportunities pro-actively in the niche andgrowth sector of the economy, the regional growthcorridors, Private Finance Initiatives (PFIs), outsourcingprojects and the business spin-off from government–linked companies (GLCs), which are synergistic,complementary and supplementary to the Group’score businesses by leveraging on strategic partnership,mergers and acquisitions.

Barring any unforeseen circumstances, the Group isconfident that the initiatives to be undertaken willimprove the business operations in the near future. In achieving this, the Group will also invest in thedevelopment of human capital as well as attract andretain pool of talents. The Group believes that the newly implemented Integrity Plan will be a vitalplatform to embrace integrity and establish culture of professionalism which will contribute to theoperational efficiency and efficacy.

ACKNOWLEDGEMENTSI wish to take this opportunity to thank the Board of Directors for the undivided and continuous supportextended to me in ensuring smooth implementation of the corporate restructuring exercise of KUB MalaysiaBerhad. I believe that this is a challenging task but yet achievable with the solid support, wholeheartedcommitment and dedication by the management andstaff. Given the strong culture of teamwork, I mustthank my predecessor, Encik Izham Yusoff for forging a management team that has made progress in the early stage of the restructuring exercise.

Certainly, none of the Group’s initiatives could be achieved without the continuous support of our shareholders, partners, business associates andcustomers. The Group pledges to fulfill its obligation as laid out in the vision and mission, and is committed to become a focused investment holding company that delivers great value to its diverse stakeholders.

Thank you

Mohd Nazar SamadEXECUTIVE DIRECTOR & CHIEF EXECUTIVE

9.3.06 31.7.06 30.8.06 29.9.06 31.10.06 30.11.06 29.12.06 31.1.07 21.2.07 28.2.07 30.3.07

500

400

300

200

100

50

150

250

350

450

80

70

60

50

40

35

45

55

65

75

TRUST &MUTUALRESPECT

“We confide in our strength, without boasting of it; we respect that of others, without fearing it.”

~ thomas jefferson

EVERYONE’S OPINION IS VALUED.

EVERYONE’S CONTRIBUTIONIS APPRECIATED.

CORPORATE SOCIAL RESPONSIBILITY REPORT

038039


SERVING COMMUNITIESAND ENVIRONMENTAS A GOOD CORPORATE CITIZEN, KUB MALAYSIATAKES ITS COMMITMENT TO CORPORATE SOCIALRESPONSIBILITY (CSR) VERY SERIOUSLY. GOODCORPORATE CITIZENSHIP IS A CORE VALUE OFOUR COMPANY AND IS INTEGRAL TO THE WAYWE CONDUCT BUSINESS AROUND THE REGION.APART FROM TREATING CSR AS A SOCIALIMPERATIVE, WE PLACE A HIGH PRIORITY ONIMPROVING THE QUALITY OF LIFE AND THEENVIRONMENT IN COMMUNITIES WHERE WELIVE AND WORK AS THE BASIS TO REMAININGVIABLE AND VITAL IN TODAY’S MARKET PLACE.

THIS PAGEStudents of Sekolah KebangsaanPulau Perhentian, Terengganu weretreated with tele-matches after theyhad completed the cleaning of theirschools and beach cleaning.

NEXT PAGEConstructing a walk-path at KualaGandah’s Public Picnic Garden waspart of the assignment undertaken by the employees under the CSRProgram.

Stronger Together to build a gazebofor public use at Kuala Gandah’sPublic Picnic Garden.

Community service is a top priority for KUB Malaysia,since we interact closely with society. Despite ourlimited resources, we make a special effort to supportselective philanthropy for deserving communities andstakeholders, especially in times of suffering or need.We also extend a helping hand by supporting employeeinvolvement in community issues and volunteerism,which enriches both the community and the company.We actively look at creative ways to support and enrich communities through initiatives like sponsoringendangered animals, improving the landscape andproviding environmental education, which are closelyaligned with our environmental values and core businessesof Energy and environmental management. We believethat the opportunities for meaningful interaction withthe community are vast, and the following are some ofthe opportunities we seized in FY2006 and early FY2007.

IN TIMES OF NEEDThe devastating floods in Johor destroyed the lives ofmillions while causing estimated losses of RM2.4 billion,representing 0.45% of the country's 2006 nominal grossdomestic product. Based on three weeks of flooding,economic losses alone were estimated at RM1.95 billion.Factoring in costs of clean-up and reconstruction pushedtotal losses to RM2.4 billion.

A full recovery from flood damage is expected to takebetween 10–15 months. To help alleviate financial woesand assist with ongoing reconstruction, KUB Malaysiajoined forces with UMNO Bahagian Mersing led by Deputy Minister of Health, YB Datuk Dr. Abdul LatiffAhmad to donate a sizeable cash and contributions inkind to the villagers of Perkampungan Orang Asli TanahAbang, Mersing, Johor.

HEART TO HEARTThrough our ongoing philanthropy program, KUB Malaysia made cash contributions to the IJN Foundation, to helpfinance the costs of treatment for underprivileged heartpatients. The IJN Foundation’s mandate is to raise fundsto provide ongoing resources which allow the hospital to purchase medical equipment and sustain programsthat maintain its position as a leader in the provision of quality cardiac care in the country and the region.

WE ACTIVELY LOOK AT CREATIVE WAYS TO SUPPORTAND ENRICH COMMUNITIESTHROUGH INITIATIVES LIKESPONSORING ENDANGEREDANIMALS, IMPROVING THELANDSCAPE AND PROVIDINGENVIRONMENTAL EDUCATION, WHICH ARE CLOSELY ALIGNEDWITH OUR ENVIRONMENTALVALUES AND CORE BUSINESSES OF ENERGY AND FACILITIESMANAGEMENT.

CORPORATE SOCIAL RESPONSIBILITY REPORTcontinued

040041


CARING PRESENCE50 employees of the KUB Group volunteered to joinforces with the people and students of Pulau PerhentianBesar to execute a two-day community programmefocused on education. The programme was launched by Kuala Besut State Assembly Member and comprisedcorporate contribution in the form of badly neededschoolbooks, as well as the cleaning and repainting of Sekolah Rendah Pulau Perhentian together with 180students. As part of an environmental campaign, theUNITAR Faculty of Hospitality and Tourism Managementjoined the group for a beach cleaning exercise and held a special class demonstration on food preparation forstall traders of Pulau Perhentian. The students wererewarded in the form of fun tele-matches.

THE POWER TO CHANGEAs part of our environmental initiatives, KUB Malaysiaemployees generously volunteered their time to build a public garden for visitors to the Kuala Gandah NationalElephant Conservation Centre. Volunteers were dividedinto seven groups to complete the project that comprisedthe cleaning-up and rehabilitation of Sungai Gandah,tree-planting (two hundred plants), as well as theconstruction of three picnic tables, fences, a gazeboand a walk-way.

The public garden was built on an empty plot of landbelonging to the Department of Wildlife and NationalParks (DWNP). It has vastly improved the quality of life for both visitors and the community, especially the families and children of DWNP staff.

GOT MILK?As part of our environmental commitment, KUB Malaysiais closely concerned with the preservation of our floraand fauna. In 2005, KUB Malaysia sponsored a year’ssupply of vitamins for the sun bears kept in captivity in Zoo Negara. In 2007, we continued our commitmentand leveraged our experience in sponsorship by sponsoringa year’s supply of milk to a baby elephant named Siput,which is being looked after at the Kuala Gandah NationalElephant Conservation Centre.

The Kuala Gandah centre is a base for the ElephantRelocation Team, which began the elephant translocationprogramme in 1974. The only one of its kind in Malaysia,the Team is dedicated to locating, subduing and thentranslocating problem elephants from endangered habitatswhich are being encroached upon by plantations to othersuitable habitats throughout Peninsular Malaysia, such asTaman Negara.

THIS PAGEBaby elephant named ‘SIPUT’ wasgiven a special treat when she receiveda one year supply of milk sponsored by KUB Malaysia Berhad.

Students waited anxiously to receive their prizes after the 3-hourtele-matches organized by thecommittee during the CSR project at Pulau Perhentian, Terengganu.

NEXT PAGETogether with the Kuala Gandah’sElephant Conservatory officers,employees of the Group cleaned up the river from debris and branches.Fences were later put-up to ensurepublic safety especially children who visited the picnic garden.

WE SUBSCRIBE TO THE UNIVERSAL PHILOSOPHY OF CSR, WHICH IS DEFINEDAS INTEGRATING OPEN ANDTRANSPARENT BUSINESSPRACTICES THAT ARE BASED ON ETHICAL VALUES AND RESPECT FOR THE COMMUNITY,EMPLOYEES, THE ENVIRONMENT,SHAREHOLDERS AND OTHER STAKEHOLDERS INTOCORPORATE STRATEGIESAND DAILY BUSINESS.

Over the past 30 years, the 24-man team has helpedprevent the further decline of the elephant populationby relocating more than 450 wild elephants.

LOOKING FORWARDAt this early stage of CSR adoption, we are limited byscarce resources and therefore aim largely to delivervalue through environmental and community projectsthat are synergistic with our core businesses.

However, we subscribe to the universal philosophy ofCSR, which is defined as integrating open and transparentbusiness practices that are based on ethical values andrespect for the community, employees, the environment,shareholders and other stakeholders into corporatestrategies and daily business. We understand that CSR is designed to deliver sustainable value to society atlarge and that a company that practices sustainablebusiness aligned with the interests of our stakeholderswill be more efficacious and accepted in the long run.

Therefore, we pledge in future to examine our strategies and businesses to see how we can integrate CSR best practices and deliver more value in a sustainable,long-term manner. As we move forward, employeeinvolvement and volunteerism will remain high on our agenda, in line with our core values of integrity,teamwork, trust, and mutual respect and excellence.Specifically, we will also further our environmentalethics on a longer-term basis by looking at greening our products and services as well as our production and supply chain, particularly in the high-impact core businesses of Energy and Facilities Management,which incorporates environmental services.

IN THE NEWS

042043


29.082006

02.092006

22.022007

19.112006

03.032007

08.012007

06.032007

THE SUN, 29 AUG 2006

KUB CONSIDERS CAPITAL REDUCTION….

KUB Malaysia Bhd is mulling a capitalreduction exercise to offset lossesaccumulated over the past few years. The proposal was now being considered as the company was at the tail-end of its losing years.

NEW STRAITS TIMES, 8 JAN 2007

KUB PUSHES SINGLE DATACENTER CONCEPT FOR GOVT

Conglomerate KUB Malaysia Berhad isexpecting a stronger information andcommunications technology (ICT) businessover the next few years. “We want to diversifyour earnings potential, especially from thetelecommunications sector and Governmentagencies. Based on the Ninth Malaysia Plan,there are plenty of ICT initiatives that theGovernment is planning to embark on toimprove its service delivery and these include the establishment of data centersfor a number of Ministries.”

BH, 6 MAR 2007

UMUM PELANTIKAN BARU

KUB Malaysia Berhad melantik Mohd Nazar Samad Pengarah Eksekutif dan Pengerusi Jawatankuasa Eksekutif KUB Malaysia berkuatkuasa 1 Mac lalu.

THE STAR, 22 FEB 2007

KUB VENTURES INTO IT SECURITY

KUB Malaysia Berhad has ventured intomanaged security services (MSS) for IT, signing memorandum of understanding withUnited States and Japanese-based principalsCybertrust and Trend Micro. The partnershipwould make KUB Malaysia the first IT vendor in the country to roll out end-to-end round-the-clock threat management services, it claimed.

NEW STRAITS TIMES, 3 MAR 2007

KUB MALAYSIA TO SELL UNITAR TO YAYASAN PINTAR FOR RM45M

KUB Malaysia Berhad has agreed to sell its education and training business to Yayasan Tun Abdul Razak (Yayasan Pintar) forRM45 million. KUB Malaysia chief executiveofficer Izham Yusoff in a statement said thedivestment is part of a move to sharpen the group’s operations.

THE STAR, 2 SEP 2006

THE TURNAROUND PLAN. THE PLAN APPEARS TO HAVE BORNE FRUIT WHENKUB POSTED GAINS AFTER SIX YEARS OF LOSSES…..

The turnaround plan met the approval ofMinority Shareholder Watchdog Group chiefexecutive officer Abdul Wahab Jaafar Sidek,who opined that KUB could be profitable thisyear, adding that the blueprint needed to be refined in the future.

UTUSAN MALAYSIA, 19 NOV 2006

UNITAR IBARATUNIVERSITI UMNO...

Pada sesi ucapan penggulungan PerhimpunanAgung UMNO ke-57 Jumaat lalu, di hadapanpara perwakilan UMNO, Timbalan Presiden parti,Datuk Seri Najib Tun Razak mengumumkanUMNO mengambil alih semula Universiti Tun Abdul Razak (UNITARA) daripada KUB Malaysia Berhad.

STATEMENT ONCORPORATE GOVERNANCE


KUB Malaysia Berhad Board of Directors (“the Board”) is committed to the highest standards of corporate governancethroughout the Group. The Board is accountable to the Company’s shareholders for good governance and this statementdescribes how the principles of good governance and the best practices of the Malaysian Code on Corporate Governance(“the Code”) enforced by the disclosure requirement of the Bursa Malaysia Securities Berhad (“BMSB”) listing requirements,are applied by the Group.

The Board is pleased to disclose the following report on the application of the principles and compliance with the bestpractices as set out in the Code.

A THE BOARD OF DIRECTORSThe Board is responsible to lead and direct the Group in an effective manner and discharged its responsibilitiesin the manner described below:

1 Board Composition and BalanceAs at the date of this statement, the Board consists of nine (9) members comprising three (3) non-independent non-executive Directors, five (5) independent non-executive Directors and one (1)Executive Director.

The Board is ultimately responsible for the Group’s corporate governance, strategic direction, overseeingthe investments of the Company, establishing goals for management and monitoring the achievement ofthese goals. The Board’s authority is defined and communicated through KUB Management Guide.

The Directors, collectively bring with them a wide range of expertise in areas such as finance, business,legal and technical experience. A brief profile of each Director appears on pages 014 to 017 of this annualreport. The profile indicates the high level and range of business experience amongst board members which is essential to manage effectively a business of the size and complexity of the Group.

The Board composition complies with paragraph 15.02 of the Listing Requirements of BMSB, which requires a minimum of two (2) Directors, or one third (1/3) of the Board members, whichever is the higher, to beindependent Directors.

In order to promote a balance of power and authority, the offices of Chairman and Executive Director &Chief Executive have been held separately. The Board is led by the Chairman, Dato’ Nordin Baharuddin andthe executive management is led by Encik Mohd Nazar Samad, the Executive Director & Chief Executive whoreplaced the former CEO, Encik Izham Yusoff in April 2007. Dato’ Ir. Harun Ahmad Saruji has been appointedas the senior independent non-executive Director who is available to shareholders, if they have concerns thathave not been resolved through the normal channel of contact with the Chairman or Executive Director &Chief Executive. The appointment reflected the Board’s commitment to embrace a complete best practicesas set out pursuant to the Best Practises Provision AA VII of the Code.

The roles of Chairman and the Executive Director & Chief Executive are clearly defined in their individualposition descriptions. The Chairman provides coherent leadership and assumes the responsibility for theeffective running of the Board, as well as represents the Board to the shareholders. The Executive Director & Chief Executive, supported by his team of management, is responsible for the day-to-day management of the business, organisational effectiveness as well as implementation of Board’s policies and decisions.

STATEMENT ONCORPORATE GOVERNANCEcontinued

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2 Board Meetings & AttendanceThe Board is highly dedicated and has exhibited utmost commitment to the Group, evidenced by its members’attendance record. During the financial year ended 31 December 2006, fifteen (15) Board meetings were held.The record of attendance at Board meetings is as follows:

DIRECTORS MEETING ATTENDANCE

Dato’ Nordin Baharuddin 14/15Chairman, non-independent non-executive DirectorDatuk Hj Faisyal Datuk Yusof Hamdain Diego 14/15Independent non-executive DirectorDato’ Ir Harun Ahmad Saruji 14/15Senior independent non-executive DirectorDato’ Kamilia Ibrahim 13/15Non-independent non-executive Director Rosman Abdullah 12/15Non-independent non-executive DirectorMohamed Ezzuddeen Mohd Effendi 12/15Independent non-executive DirectorRaja Ali Raja Othman 14/15Independent non-executive DirectorOmar Haji Ahmad 15/15Independent non-executive DirectorMohd Nazar Samad –Executive Director(Appointed w.e.f. 1 March 2007)

3 Access to and Supply of Quality Information and AdviceAll relevant papers, which are comprehensive and encompass both quantitative and qualitative factors, for deliberation by the Board are circulated in advance to its Directors to facilitate focused discussion andeffective decision-making process. Members of the senior management team and professional advisers areinvited into Board meetings to provide the necessary information and attend to the Board’s enquiries on relevant issues, enabling the Board to make informed decisions premised on in-depth knowledge. There is also a formal procedure sanctioned by the Board of Directors, whether as a full board or in their individualcapacity, for Directors to obtain independent professional advice at the Company’s expense.

A balance of financial and non-financial information is encapsulated in the papers covering the Group’s strategies,financial results, overall performance of the Group, budgets, corporate proposals, major investments, businessdirections and corporate governance matters for the Board’s deliberation at the Board meetings.

All Directors have unrestricted access to all relevant information to discharge their responsibilities, as well asaccess to the advice and services of three (3) Company Secretaries who are responsible to ensure that Boardmeeting procedures are observed, and applicable laws and regulations are complied with.

Board meetings are scheduled in advance at the turn of the new calendar, allowing the Directors to plan aheadand enter the calendar year’s meetings into their individual schedules.

B BOARD STRUCTURE AND EFFECTIVENESSIn executing its responsibilities, the Board delegates certain responsibilities to its Committees as follows:

i Board Audit Committee (“BAC”)ii Board Nomination Committee (“BNC”)iii Board Remuneration Committee (“BRC”)iv Board Investment Committee (“BIC”)v Executive Committee (“EXCO”)

All committees have clearly defined terms of reference outlining their responsibilities and operating procedures.The Chairman of the various committees will report to the Board the outcome of the committees meetings.These committees were formed in order to enhance business and operational efficiency as well as efficacy.However, the Board retains full responsibilities for the direction and control of the Company and the Group.

i Board Audit CommitteeExplained on pages 053 to 057 of this annual report.

ii Board Nomination CommitteeThe Nomination Committee consists of the following members:

NAME OF MEMBERS

Dato’ Kamilia IbrahimChairman, non-independent non-executive DirectorMohamed Ezzuddeen Mohd EffendiIndependent non-executive DirectorOmar Haji AhmadIndependent non-executive Director

During the financial year, the Committee met once with full attendance.

The Nomination Committee is empowered by the Board to bring to the Board recommendations as to theappointment of new Directors for KUB Malaysia Berhad and its subsidiaries.

In addition, the Committee will review the required mix of skills, experience and other core competencies,which the non-executive Directors should bring to the Board. The Committee believes that the Board’scurrent composition possesses the required mix of skills and core competencies necessary for the Board’seffective discharge of its duties.


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iii Board Remuneration CommitteeThe Remuneration Committee consists of the following members:

NAME OF MEMBERS

Mohamed Ezzuddeen Mohd EffendiChairman, Independent non-executive DirectorDato’ Ir. Harun Ahmad SarujiSenior independent non-executive DirectorOmar Haji AhmadIndependent non-executive Director

During the financial year, the Committee met once with full attendance.

The policy practised on Directors’ remuneration by the Remuneration Committee is to provide the remuneration package needed to attract, retain and motivate the Directors of the quality required to manage the businesses of the Group and to align the interests of the Directors with those of the shareholders.

The Committee is responsible for recommending to the Board the remuneration framework for Directors as wellas the remuneration packages of executive Directors. Nevertheless, it is the ultimate responsibility of the entireBoard to approve the remuneration of the Directors. None of the executive Directors participated in any way indetermining their individual remuneration.

The executive Directors’ remuneration comprises basic salary and Group’s other customary benefits madeavailable where appropriate. The non-executive Directors’ remuneration comprises fees and allowances wherethe determination is balanced with their expected roles and responsibilities.

iv Board Investment CommitteeThe Investment Committee consists of the following members:

NAME OF MEMBERS

Dato’ Nordin BaharuddinChairman, non-independent non-executive DirectorRaja Ali Raja OthmanIndependent non-executive DirectorRosman AbdullahNon-independent non-executive Director

The Committee met six (6) times during the financial year.

The Committee is responsible to make recommendation to the Board in relation to the management of Group’sinvestment and divestment activities.

v Executive Committee The Executive Committee consists of the following members:

NAME OF MEMBERS

Mohd Nazar SamadChairman, Executive Director(Appointed w.e.f. 9 March 2007)Dato’ Nordin BaharuddinNon-independent non-executive DirectorDatuk Hj Faisyal Datuk Yusof Hamdain DiegoIndependent non-executive DirectorIzham Yusoff Chief Executive Officer(Resigned w.e.f. 2 April 2007)Raja Ali Raja OthmanIndependent non-executive Director(Resigned w.e.f. 13 January 2006)*

* Raja Ali Raja Othman resigned from the Executive Committee but to the date of this statement, he remainsas a member of the Board.

The committee met fourteen (14) times during the financial year.

The EXCO is delegated with such powers to ensure the smooth and effective running of the Company and their authority is stated in KUB Management Guide.

APPOINTMENT TO THE BOARD The Board Nomination Committee is responsible for making recommendations in respect of any appointment to theBoard. In making the recommendations, the Board Nomination Committee considers the required blend of skills andexperience which the Directors should be equipped.

Any new nomination received is put to the full Board for assessment and endorsement. The appointment of membersis carried out through a proper selection process, which is consistent with the Articles of Association of the Company.The Company Secretary will also ensure that all appointments are properly made, and that legal and regulatoryobligations are met.

RE-ELECTION OF DIRECTORSIn accordance with the Company’s Articles of Association, all of the Directors who are appointed by the Board aresubject to election by shareholders at the first Annual General Meeting after their appointment and are subject to re-election once every 3 years.


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CONTINUING PROFESSIONAL DEVELOPMENTAll Directors are encouraged to acquire appropriate professional development training to enhance the business acumenand professionalism in discharging their fiduciary duties to the Company.

Apart from attending the Mandatory Accreditation Programme and Continuing Educational Programme accredited by BMSB, the Directors are also equipped with business exposure through visits to operation sites and familiarisationprogramme.

DIRECTORS’ REMUNERATION The Board Remuneration Committee recommends to the Board the remuneration package for the Executive Directorand Chief Executive Officer, which is benchmarked to the market and information from independent sources on thepackage for similar position in a select group of comparable companies.

The Board determines fees payable to the non-executive Directors upon recommendation made by the BoardRemuneration Committee after considering the rates comparable to other relevant companies, and such fees aretabled to the shareholders of the Company for approval.

The aggregate remuneration of Directors are categorised into appropriate components for the financial year ended 31 December 2006, as follows:

BONUS/ MEETING

IN RM SALARIES ALLOWANCES EXPENSES FEES TOTAL

Executive Directors – – – – –Non-executive Directors – 240,000.00 175,000.00 288,000.00 703,000.00

The number of Directors whose remuneration falls into the following bands during the financial year ended 31 December2006 are as follows:

NO OF DIRECTORS EXECUTIVE NON EXECUTIVE

RANGE OF REMUNERATION (RM) DIRECTORS DIRECTORS TOTAL

Below 50,000 – – –50,001 - 100,000 – 6 6100,001 - 150,000 – 1 1150,001 - 200,000 – – –200,001 - 250,000 – 1 1250,001 - 300,000 – – –Total – 8 8

The Board is of the opinion that, while individual Directors’ remuneration is not disclosed, information provided above,which is made in accordance with Bursa Malaysia’s Listing Requirements, is sufficient to provide an understanding andbasis for evaluation of KUB’s corporate governance.

C CONTINUOUS COMMUNICATION WITH SHAREHOLDERSThe Company communicates with its shareholders and investors primarily through its Annual General Meeting(AGM), annual report, the quarterly financial statements and the various disclosures and announcements madeto BMSB.

At the AGM, the shareholders are given opportunity to ask their questions and seek clarifications on the businessesand performance of the Group.

Additionally, shareholders can also have access to information by accessing the corporate website at www.kub.com.This website is maintained by the Group and provides up-to-date information to its shareholders as well asstakeholders at large.

D ACCOUNTABILITY AND AUDIT1 Financial Reporting

The Board aims to provide and present a balanced and meaningful assessment of the Group’s financialperformance and prospects at the end of the financial year, primarily through the annual financialstatements, quarterly announcement to shareholders as well as Chairman’s statement and review of operations in the annual report.

The BAC assists the Board in scrutinising information for disclosure in the reports and the overall quality of the financial reporting.

2 Directors’ Responsibility Statement (Pursuant to Paragraph 15.27(a) of BMSB Listing Requirement)The Board is accountable for ensuring that the financial statements present a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of their profit or loss and cash flows for the year then ended. In preparing the financial statements, the Directors haveensured that applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 have been applied.

In preparing the financial statements, the Directors have selected and applied consistently suitableaccounting policies and made reasonable and prudent judgements and estimates.

The Directors also have general responsibility for taking such steps as are reasonably open to them tosafeguard the assets of the Group and to prevent and detect fraud and other irregularities.

3 Relationship with AuditorsThrough the BAC, the Board maintains an active, transparent and professional relationship with the external auditors, Messrs KPMG Desa Megat & Co. The BAC meets with the external auditors without the presence of management at least once a year in its aim to establish a transparent and appropriaterelationship. The BAC report is provided on pages 053 to 057.

4 Internal ControlThe Code requires the Board to maintain a sound system of internal controls to safeguard shareholders’investment and the Group’s assets. The Group’s Statement on Internal Controls pursuant to Paragraph15.27(b) of the BMSB Listing Requirement is set out on page 051 to 052.

This statement is made in accordance with a resolution of the Board of Directors dated 28 May 2007.

ADDITIONALCOMPLIANCE INFORMATION

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E ADDITIONAL COMPLIANCE INFORMATIONThe following information is provided in compliance with Paragraph 9.25 of the Listing Requirements of BMSB:

a Non-audit feesThe amount of non-audit fees paid to the External Auditors by the Group for the financial year ended 31 December 2006, amounted to RM 279,400.

b Recurrent Related Party TransactionsThe Company has obtained professional services from its non-executive Directors and substantial shareholderduring the year. These services were in relation to the rental and maintenance of Point of Sales system andlegal advisory services respectively. The amount was not significant, since it did not exceed RM 1 million peryear and did not surpass the 1% of revenue threshold, and thus did not warrant an announcement.

c Imposition of Sanctions/PenaltiesDuring the financial year, no sanctions and/or penalties were imposed on the Company, its subsidiaries,Directors or Management by the relevant regulatory authority.

d Material ContractsDuring the financial year, there were no financial contracts entered into by the Company and its subsidiaries(not being contracts entered into in the ordinary course of business) involving directors and substantialshareholders.

e Variation in ResultsThere was a variance of more than 10% between the audited results of the financial year 2006 and the unaudited results previously announced due to the Board’s decision subsequent to the fourth quarterannouncement and audited adjustments taken upon the completion of the audit for the financial yearended 31 December 2006. The reconciliation for the variance is as follows:

IN RM’OOO

Expenses incurred on behalf of subsidiaries which have been or in the process of being disposed of or wound-up 26,110 Underprovision of tax 3,094Inventory write off 2,937Impairment of property, plant and equipment 1,155Allowance for doubtful debt 2,381Others (net) (507)Deviation of unaudited and audited results 35,170

f Revaluation Policy on Landed PropertiesThe revaluation policy on landed properties is as set out in the financial statements.

g Profit GuaranteeThe Company did not give any profit guarantee during the financial year.

h Share BuybackThere is no share buyback during the financial year.

i American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”)The Company did not sponsor any ADR or GDR programme during the financial year.

j Options, Warrant or Convertible SecuritiesDuring the financial year, no options, warrant or convertible securities were issued by the Company.

INTRODUCTIONThis statement is made pursuant to the ListingRequirements of Bursa Malaysia Securities Berhad with regard to the Group’s compliance with thePrinciples and Best Practices provisions relating to internal controls as stipulated in the Malaysian Code on Corporate Governance (the “Code”).

The Board is pleased to present hereinafter the annual update on the Group’s state of internal controlscoupled with work done during the year under review.

BOARD RESPONSIBILITYThe Board of Directors affirms that it is ultimatelyresponsible for the Group’s system on internal controlthat includes the assurance of its adequacy and integrityat all times, and its alignment with our businessobjectives. However, it should be noted that this system is designed to manage rather than to eliminatethe risks of failure to achieve business objectives and as such, could only provide reasonable but not absoluteassurance against material misstatement or loss.

The Board has established a process for identifying,evaluating and managing significant risks faced by the Group except for the material joint ventures andassociated companies. The process has been in placethroughout the year and up to the date of approval ofthe annual report and financial statements. It has beenreviewed by the Board and accords with the Statementon Internal Control: Guidance for Directors for PublicListed Companies (“Internal Control Guidance”).

ENTERPRISE WIDE RISK MANAGEMENT FRAMEWORKThe Board acknowledges that the identification and the management of principal risks play an important and integral part in achieving the Group’s businessobjectives and the management of its daily operations.

The Board has put in place an enterprise-wide riskmanagement framework in the Group to ensure anongoing process of identifying, evaluating, monitoringand managing the significant risk exposures inherent in its business operation. Subsequently, the followinginitiatives were reviewed by the BAC and presented to the Board:

• Streamlining risk management and businessplanning activities to ensure that controls andmitigation plans for risk management are built into business plans and budgets of the Group.

• Continuous communication and coordination of risk management activities in the Group throughrisk forum held on a quarterly basis throughout the year.

• Implementing the KUB Integrity Plan, which include the initiative to formulate the Group Codeof Ethics, Introduction of Whistle-Blowing Policy and review of the respective authority limits in the KUB Management Guide (KUBMaG).

KEY INTERNAL CONTROL SYSTEM Control StructureThe Board is fully committed to ensuring that a propercontrol environment is maintained at the Group. The key elements of the Group’s internal control system are listed below:

Board CommitteesSpecific Board responsibilities have been delegated to committees established with formalised and specificterms of reference, to assist the Board in the executionof its responsibilities. The following are the committeesestablished:

• Board Audit Committee (Please refer to page 053 for further explanation)

• Board Nomination Committee(Please refer to page 045 for further explanation)

• Board Remuneration Committee(Please refer to page 046 for further explanation)

• Board Investment Committee(Please refer to page 046 for further explanation)

• Executive Committee(Please refer to page 047 for further explanation)

These committees have the authority to examine all matters within their scope and terms of referenceand report back to the Board on a periodic basis withtheir recommendations for review or approval by the Board, where appropriate.

STATEMENT ONINTERNAL CONTROL


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STATEMENT ONINTERNAL CONTROLcontinued

ORGANISATIONAL STRUCTUREThe Board has put in place a defined organisationalstructure that is directly aligned to the strategic andoperational demand of the business. Each operationalunit is headed by personnel who are fully accountable toensure that the business activities are implemented withfull compliance with the Group’s objectives and policies.

POLICIES AND LIMITS OF AUTHORITYThe delegation of responsibilities to the BoardCommittees and the management as well as thedelineation of their respective authority limits havebeen defined in the KUB Management Guide (KUBMaG)and the establishment of similar authority guides for all the active subsidiaries of the Group, which have since been reviewed and approved for implementationby KUB management as well as the respective Boards ofthe subsidiaries. These policies and limits of authorityare monitored by the Group Internal Audit Division andguide the management in its day-to-day operations.

At th

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