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Extracted from Annual Report 2007

Operation Overview And Financial Performance

The year under review saw encouraging financial performance despite operational and market challenges such as sharp increase of global fuel cost, escalating raw materials costs, tight rubberwood supply and continued appreciation of the Malaysian Ringgit against the United States Dollar. Within such challenging business conditions, the Group still manages to achieve revenue of RM150.6 million for the year compared to RM115.9 million during previous year, representing a commendable increase of 30%. There is a decrease of 20% in profit before tax from RM15.2 million in previous year to RM12.7 million during the year which was mainly attributable to the above economic and global uncertainties. However, the Group remains optimistic and confident of the future performance due to the popularity of its products in its primary market, Europe and America, as well as in Asia Pacific, Middle East and Africa and the Group's steadfast commitment to product quality, reliability of supply and innovative designs in its manufacturing operations.

Corporate And Business Development

During the year, the Group has completed the rights issue of up to 151,800,000 new ordinary shares of RM0.50 each in DPS ("rights share(s)") on the basis of one (1) rights share for every one (1) existing ordinary share of RM0.50 each held in DPS ("DPS share(s)" or "share(s)") together with up to 75,900,000 free detachable warrants ("warrant(s)") on the basis of one (1) free warrant for every two (2) rights shares subscribed.

With effect of 9.00 a.m., Monday, 14 January 2008, 132,000,000 Rights Shares and 66,000,000 Warrants were listed and quoted on the Main Board of Bursa Malaysia Securities Berhad.

This financial year marks the cultivation of dragonfruit trees via a wholly-owned subsidiary of the Group, Diamond Terrace Sdn Bhd. In addition, on 15 August 2007 Toko Industries Sdn Bhd has been acquired and now, a wholly-owned subsidiary of Shantawood Manufacturing Sdn Bhd. Toko Industries Sdn Bhd will be used as a vehicle to acquire agriculture land to carryout business under agro-based industries. The cultivation and plantation of approved food production project will qualify both the company and investing company income tax exemption incentives.

The aforesaid expansion and diversification has further strengthens DPS's growth.

Dividend

In exercising financial prudence, it is the Group's intention to strike a balance between dividend payouts and the setting aside of funds for future business expansions which will subsequently enhance value for shareholders.

The Board has recommended the final gross dividend of 1 sen per share (tax-exempt), subject to the shareholders' approval at the forthcoming Annual General Meeting.

Prospect

In general, looking at the GDP growths of the countries which from the bulk of our sale destinations namely, Malaysia, Europe, Asia Pacific, Middle East and Africa, with exception of U.S.A, which is reported to have a marginally lower growth, all the other countries are reported to have increased or stable GDP growths in this coming year. Thus, we are expecting the resulting increase in demand of our furniture due to the respectable GDP growths in the countries we trade would be more than sufficient to off-set the effects of the escalating of raw material costs, appreciation of Ringgit Malaysia and the hike in oil price. The Group remains optimistic and confident of the long-term prospects of the international furniture business.

The Group is of the opinion that the present market conditions are conducive towards its plans of moving up the value chain by penetrating higher-end markets with enhanced modern designs and materials in tandem with its current growth in business volume. The Group will continuously strives to differentiate its products through progressive designs, on time deliveries, fine workmanship, tight cost control and valuefor- money products. The Group will continue to participate in more international furniture exhibitions and fair with the objective to penetrate into new markets. With the focus on production process improvements, prudent inventory management, larger customer base with good sales terms and better value mix per shipment of products, we anticipate better performance and margins enhancement in the coming years.

Having experienced higher than normal rubberwood prices in the previous year, the Group shall continue its efforts to identify and venture into upstream activities; in particular rubber tree plantations. This move will contribute towards cushioning the impact of fluctuations in the supply and cost of raw materials and generating new income streams for the Group.

The Group will keep to its strategy of actively looking at enhancing its overall capital structure with a view to prepare it as a springboard for future expansion and diversification. The Group has been dynamically exploring new business opportunities in upstream, intermediate and downstream activities, relating to its core business. The Group sees the coming year as an exciting year ahead, as the strategies that it laid out are being put into place.

Corporate affairs which were materialized subsequent to financial year end:

• Letter of Intent was signed on 5 April 2008 between the Company and Fabryki Mebli Forte S.A. to establish a Strategic Alliance Arrangement for the purposes of cooperation and joint management on research and development and to develop, design, produce, market the furniture products for sales in the European Community and other parts of the world beginning from the financial year 2009 at the target annual sales volume of 50 million euros, and to work towards Germany MOW Fair, and also consider mutual co-operation for the participation of the development of the Forrest Management Unit (FMU) in the State of Sabah, East Malaysia.
• On 8 April 2008, the acquisition of 100% equity of a subsidiary, Hidayat Yakin Sdn Bhd (HYSB). HYSB has been granted approval by Jabatan Perhutanan Negeri Kelantan ("JPNK") to carry out for 50 years a project known as "Kawasan Cadangan Projek Peningkatan Stok Dirian Kawasan Hutan Simpanan Kekal Miskin Dengan Penanaman Spesies Pokok Getah Klon Balak" ("the Planting Project") measuring 400 hectares (equivalent to 988 acres) located at "Hutan Simpanan Kekal Serasa, Kompt. 11 (Sbhg), Kompt. 12 (Sbhg) and Kompt. 13 (Sbhg)", Mukim Kuala Stong, Daerah Dabong, Jajahan Kuala Krai, Kelantan Timur ("the said Compartments"). The Planting Project allows HYSB to plant "Timber Latex Clone" rubber trees on the said Compartments for 50 years and the net profit (after deducting costs and expenses) from the sales of rubber trees therefrom shall be shared between HYSB and JPNK in the ratio of 8:2.
• Memorandum of Understanding ("MOU") was entered into on 18 April 2008 between the Company and Hainan LVBO Industry and Commerce Company Ltd of Suite 2-1005, No. 89 HuiLong Building, South Longkun Road, Hai Kou, Hainan Province, China, a private limited company duly incorporated under the China's Companies Act to co-operate with each other on a joint venture basis to proceed with research and development of the cultivation of Jatropha trees and usage of Jatropha oil particularly in the area of biofuel.
• On 5 May 2008, the acquisition of 100% equity of Biotrend Asia (M) Sdn Bhd which has obtained the consent from Yayasan Kelantan Darulnaim ("YAKIN") to carry out a project known as "Usahama Projek Tanaman Kelapa Sawit" covering an area of 11,500 acres of Government Land located at Daerah Dabong, Jajahan Kuala Krai, Kelantan to carry out oil plam plantation on the said land for 66 years with an option to renew for another 33 years under a "Pajakan Kecil" (sub-lease) from YAKIN.

Corporate Governance

The Group remains committed to achieving and maintaining good standards of corporate governance. The Board views good corporate governance as an important element to safeguarding shareholders' interest.

Hence, the Board believes strongly that the Group needs to adhere to the standards set by the Malaysian Code on Corporate Governance and where possible even surpassing these standards.

Appreciation

I would like to take this opportunity to thank everyone within the DPS Group. Your effective execution of the Group's strategies through sheer hard work, dedication and commitment to team work in a demanding and challenging business environment have certainly contributed much to the success of the Group.

I also would like to express my earnest gratitude to all our valued shareholders, customers, suppliers and contractors, business partners and associates, authorities and members of the investing community, for their invaluable support, contribution and confidence in the Group.

As to the other Board members, thank you very much for your effort, professional advices and contribution in making this Board more effective and efficient.

DATUK (DR) SOW CHIN CHUAN
Executive Chairman & Managing Director