Contents

Notice of Annual General Meeting Statement Accompanying Notice of Annual General Meeting Corporate Information Profile of the Board of Directors Executive Deputy Chairman's Statement Audit Committee Report Statement on Corporate Governance Statement on Internal Control Directors' Responsibility Statement Additional Compliance Information Financial Statements Analysis of Shareholdings List of Thirty Largest Shareholders List of Properties Held by PSCI Group Appendix 1 Proxy Form

5 6 7 10 13 15 20 22 23 25 109 110 112

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Thirty-Fifth Annual General Meeting of the Company will be held at 4th Floor, Menara Boustead, Jalan Raja Chulan, 50200 Kuala Lumpur on Wednesday, 27 June 2007 at 10.00 a.m. to transact the following businesses: AGENDA 1. To receive the Audited Financial Statements for the financial year ended 31 December 2006 and the Reports of Directors and Auditors thereon. (Ordinary Resolution 1) 2. To approve the payment of Directors Fees for the year ended 31 December 2006. (Ordinary Resolution 2)

3. To re-elect the following Directors retiring in accordance with Article 103 of the Companys Articles of Association: (i) Tuan Haji Mohd Noordin Bin Abdullah (ii) Encik Idris Bin Zakaria (Ordinary Resolution 3) (Ordinary Resolution 4)

4. To re-appoint Messrs Ernst & Young as Auditors of the Company and authorise the Directors to determine their remuneration. (Ordinary Resolution 5) 5. As Special Business to consider and if thought fit, to pass the following Ordinary Resolution, with or without modifications: ORDINARY RESOLUTION AUTHORITY TO ISSUE SHARES THAT subject always to the Companies Act, 1965 and the approvals of the relevant authorities, the Directors be and are hereby empowered, pursuant to Section 132D of the Companies Act, 1965, to issue and to allot shares in the Company from time to time at such price, upon such terms and conditions, for such purposes and to such person or persons whomsoever as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares issued pursuant to this Resolution does not exceed 10% of the issued share capital of the Company for the time being and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company. (Ordinary Resolution 6)

6. As Special Business to consider and if thought fit, to pass the following Ordinary Resolution, with or without modifications: ORDINARY RESOLUTION - PROPOSED RENEWAL OF SHAREHOLDERS MANDATE AND PROPOSED ADDITIONAL SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE THAT, subject to the Companies Act, 1965 (Act), the Memorandum and Articles of Association of the Company and the Listing Requirements of the Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and its Subsidiaries to enter into all transactions involving the Related Parties as specified in Section 2.3 of the Circular to Shareholders dated 1 June 2007 provided that such transactions are:(i) recurrent transactions of a revenue or trading nature; (ii) necessary for the day-to-day operations; (iii) carried out in the ordinary course of business on normal commercial terms which are not more favourable to the Related Parties than those generally available to the public; and (iv) are not to the detriment of the shareholders. AND THAT such approval shall continue to be in force until:(a) the conclusion of the next Annual General Meeting (AGM) of the Company, at which time it will lapse, unless by a resolution passed at the said AGM, such authority is renewed; (b) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or (c) revoked or varied by a resolution passed by the shareholders in a General Meeting; whichever is the earlier.

Notice of Annual General Meeting

AND FURTHER THAT the Directors of the Company be authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the Mandate." (Ordinary Resolution 7) 7. As Special Business to consider and if thought fit, to pass the following Special Resolution, with or without modifications: SPECIAL RESOLUTION - PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION THAT the draft Articles of Association contained in Appendix I of the Annual Report 2006, be and is hereby approved and adopted as the Articles of Association of the Company in substitution for and to the exclusion of the existing Articles of Association. (Special Resolution 1) 8. As Special Business to consider and if thought fit, to pass the following Special Resolution, with or without modifications: SPECIAL RESOLUTION - PROPOSED CHANGE OF COMPANYS NAME THAT the name of the Company be changed from PSC Industries Bhd to Boustead Heavy Industries Corporation Bhd with effect from the date of issuance of Certificate of Incorporation on Change of Name by the Companies Commission of Malaysia and that the name of the Company wherever it appears in the Memorandum and Articles of Association be amended accordingly. AND THAT the Directors of the Company be and are hereby authorised to carry out all the necessary formalities in effecting the change of name. (Special Resolution 2) 9. To transact any other business of which due notice shall have been received.

BY ORDER OF THE BOARD

DAVID LOO KEAN BENG KANG SHEW MENG SEOW FEI SAN Secretaries Kuala Lumpur Date : 1 June 2007

NOTES:1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company.

2. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing. If the appointer is a Corporation, the Form of Proxy must be executed under its Common Seal or under the hand of its officer or attorney duly authorised. 3. The instrument appointing a proxy must be deposited at the Registered Office of the Company, 17th Floor, Menara Boustead, 69 Jalan Raja Chulan, 50200 Kuala Lumpur not less than forty-eight hours before the time appointed for holding the meeting.

Notice of Annual General Meeting

4.

Explanatory notes on Special Business: Ordinary Resolution 6 The proposed Ordinary Resolution 6, if passed, will empower the Directors of the Company to issue and allot not more than 10% of the issued share capital of the Company subject to the approvals of all the relevant authorities and for such purposes as the Directors consider would be in the interest of the Company. This authorisation will, unless revoked or varied by the Company in a general meeting, expire at the next Annual General Meeting of the Company. Ordinary Resolution 7 The proposed Ordinary Resolution 7, if passed, will enable the Company and/or its Subsidiaries to enter into recurrent transactions involving the interests of Related Parties, which are of a revenue or trading nature and necessary for the Groups day-to-day operations, subject to the transactions being carried out in the ordinary course of business and on terms not to the detriment of the minority shareholders of the Company. Special Resolution 1 The proposed Special Resolution 1, if passed, will amend the Articles of Association of the Company by adopting a new Articles of Association as set out in Appendix 1 of the Annual Report 2006. Special Resolution 2 The proposed Special Resolution 2, if passed, will change the Companys name from PSC Industries Bhd to Boustead Heavy Industries Corporation Bhd.

Statement Accompanying The Notice of Annual General Meeting

DIRECTORS STANDING FOR RE-ELECTION Names of Directors who are standing for re-election as in Ordinary Resolutions 3 and 4 of the Notice of Annual General Meeting are:(i) Tuan Haji Mohd Noordin Bin Abdullah (ii) Encik Idris Bin Zakaria Further details of the above Directors are set out in the Directors' Profile on page 9 of the Annual Report.

BOARD MEETINGS There were eight (8) Board Meetings held during the financial year ended 31 December 2006. The meetings were held at the Conference Room, 17th Floor, Menara Boustead, Jalan Raja Chulan, 50200 Kuala Lumpur and the attendance of the directors is set out on page 16 of the Annual Report.

PLACE, DATE AND TIME OF THE 2007 ANNUAL GENERAL MEETING The Thirty-Fifth Annual General Meeting will be held at 4th Floor, Menara Boustead, Jalan Raja Chulan, 50200 Kuala Lumpur on Wednesday, 27 June 2007 at 10.00 a.m.

Corporate Information

BOARD OF DIRECTORS Y. Bhg. Laksamana Madya (Rtd) Dato Seri Ahmad Ramli Bin Haji Mohd Nor Executive Deputy Chairman/ Group Managing Director Y. Bhg. Datuk Azzat Bin Kamaludin Non-Independent Non-Executive Director En. Ishak Bin Osman Non-Independent Non-Executive Director Mr. David William Berry Independent Non-Executive Director En. Idris Bin Zakaria Independent Non-Executive Director Tn. Hj. Mohd Noordin Bin Abdullah Independent Non-Executive Director

REGISTERED OFFICE 17th Floor, Menara Boustead 69 Jalan Raja Chulan 50200 Kuala Lumpur Tel. No : 03-2031 6516 Fax. No : 03-2026 5978

PRINCIPAL PLACE OF BUSINESS 17th Floor, Menara Boustead 69 Jalan Raja Chulan 50200 Kuala Lumpur Tel. No : 03-2078 7770 Fax. No : 03-2078 7768 REGISTRAR Epsilon Registration Services Sdn Bhd 312, 3rd Floor, Block C Kelana Square 17 Jalan SS7/26 47301 Petaling Jaya Selangor Darul Ehsan Tel. No : 03-7806 2116 Fax. No : 03-7806 1261 PRINCIPAL BANKERS Affin Bank Berhad RHB Bank Berhad Malayan Banking Berhad STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad Main Board

SECRETARIES David Loo Kean Beng Kang Shew Meng Seow Fei San

AUDITORS Ernst & Young Level 23A, Menara Milenium Jalan Damanlela Pusat Bandar Damansara 50490 Kuala Lumpur Tel. No : 03-7495 8000 Fax. No : 03-2095 9076

Prole of The Board of Directors

He was appointed to the Board on 17 August 2005.

Y. BHG. LAKSAMANA MADYA (RTD) DATO SERI AHMAD RAMLI BIN HAJI MOHD NOR
Executive Deputy Chairman/ Group Managing Director 63 years of age, Malaysian

He graduated from the Brittania Royal Naval College Dartmouth, United Kingdom, Indonesia Naval Staff College, United States Naval War College and Naval Post-Graduate School in Monterey. He also holds a Masters Degree in Public Administration from the Harvard University, United States. He retired as the Chief of the Royal Malaysian Navy in 1999. Current directorships in public companies include, Afn Bank Berhad, Muhibbah Engineering Berhad, Comintel Corporation Berhad and Favelle Favco Berhad. He does not have any family relationship with any Director and/or major shareholders of PSC Industries Berhad (PSCI), nor any personal interest in any business arrangement involving the Company.

Profile of The Board of Directors

Y. BHG. DATUK AZZAT BIN KAMALUDIN

He was appointed to the Board on 17 August 2005. He is a member of the Audit Committee. He is a lawyer by profession, and is a partner of the law firm of Azzat & Izzat. He graduated from the University of Cambridge with degrees in Law and in International Law in 1969 and was admitted as a Barrister-atLaw of the Middle Temple, London in 1970. Prior to being admitted as an advocate and solicitor of the High Court of Malaya in 1979, he served as an Administrative and Diplomatic Officer with the Ministry of Foreign Affairs Malaysia in various capacities. He is also presently a Director of Affin Holdings Berhad, Boustead Holdings Berhad, KPJ Healthcare Berhad, Pulai Springs Resort Berhad, Celcom (Malaysia) Berhad, Visdynamics Holdings Berhad and several other private limited companies. He served as a member of the Securities Commission from 1 March 1993 to 21 March 1999. He does not have any family relationship with any Director and/or major shareholders of PSCI, nor any personal interest in any business arrangement involving the Company, other than the rendering of professional services to the Group which is carried out in the ordinary course of business of Azzat & Izzat, of which he is a partner.

Non-Independent Non-Executive Director 62 years of age, Malaysian

MR. DAVID WILLIAM BERRY

Independent Non-Executive Director 59 years of age, New Zealander and Permanent Resident of Malaysia

He was appointed to the Board on 23 February 2006. He is a member of the Audit Committee. He first arrived in Malaysia in 1980 as the Chief Executive of Chartered Merchant Bankers (now known as Affin Merchant Bank). In a career in financial services spanning over 30 years, he has acquired experience in commercial and merchant banking as well as investment management and venture capital. From 2002 to 2004, he served as Executive Director and CEO of Cahya Mata Sarawak Berhad, a diversified public company listed on Bursa Malaysia Securities Berhad. He is well-versed in corporate affairs and governance issues and today, is active as Managing Director Governance at Columbus Circle Governance Sdn Bhd, a specialist firm providing advice and counsel to companies in the areas of corporate governance, investor relations, financial communications, risk management, internal controls and corporate/financial strategy. Between 1990 and 2002, he served as a Non-Executive Director of Boustead Holdings Berhad. He is a member of the Board of Governors of Malaysian Institute of Corporate Governance. He does not have any family relationship with any Director and/or major shareholders of PSCI, nor any personal interest in any business arrangement involving the Company.

Profile of The Board of Directors

EN. ISHAK BIN OSMAN

Non-Executive Non Independant Director 60 years of age, Malaysian

He was appointed to the Board on 22 January 1998 as the Executive Director - Operations. He was re-designated as Non-Executive Director of PSCI on 1 September 2006. He graduated from University of Malaya with a degree in Economics (Hons) majoring in Accountancy and holds a Master of Business Administration in Finance from Leuven University, Belgium. He started his working career in the Ministry of Finance, Malaysia and held various positions in the Ministry during his eleven (11) years with the Government. He joined Amanah Merchant Bank Berhad as Senior Manager Project Finance in 1982 and was subsequently promoted to be General Manager Banking & Advisory Service in 1984. In 1987, he moved to Kumpulan Kewangan Berhad (KKB), the holding company of Amanah Merchant Bank as a Senior General Manager-Operation. During his services with KKB, he sat on various Boards namely, Amanah Merchant Bank, Malaysia Discount Bhd, Amanah International Insurance Bhd, Malaysia Credit Finance Bhd and KK Industries Bhd. In 1989, he assumed the Managing Directors position in Malaysia Credit Finance Bhd. He does not have any family relationship with any Director and/or major shareholders of PSCI, nor any personal interest in any business arrangement involving the Company.

EN. IDRIS BIN ZAKARIA

He was appointed to the Board on 8 July 1998. He is a member of the Audit, Remuneration and Nomination Committees. He holds a diploma in Automobile Engineering, Japan. He established himself in the automobile sector for thirty (30) years and has served company such as UMW Toyota, Malaysia. He is a Director of several private companies and was a Director of Actacorp Berhad. He was also a member of the Kuala Lumpur Dewan Bandaraya Advisory Council. He does not have any family relationship with any Director and/or major shareholders of PSCI, nor any personal interest in any business arrangement involving the Company.

Independent Non-Executive Director 62 years of age, Malaysian

TN. HJ. MOHD NOORDIN BIN ABDULLAH

He was appointed to the Board on 12 December 2001. He is the Chairman of the Audit, Remuneration and Nomination Committees. He holds a Diploma in British Banking from City of London College. He has more than thirty (30) years of experience in the banking sector. During his employment with Bank Bumiputra Malaysia Berhad, he had the privilege to serve as the Head of Credit Recovery and Compliance Division, Retail & Islamic Banking Division, Area Manager of Regional Office in Wilayah Persekutuan/Selangor and Regional Office Johor/Melaka and also as the General Manager of Kuala Lumpur main branch. He does not have any family relationship with any Director and/or major shareholders of PSCI, nor any personal interest in any business arrangement involving the Company.

Independent Non-Executive Director 66 years of age, Malaysian

Executive Deputy Chairman's Statement

Y. Bhg. Laksamana Madya (Rtd) Dato Seri Ahmad Ramli Bin Haji Mohd Nor

Dear Shareholder,
I am pleased to present our annual report in a year where the previous business and financial predicament that we faced has finally turned a corner. With the achievements of our debt restructuring and regularisation exercise over the past year, we are well poised to steer the Group and Company towards achieving profitability and a sustainable viability. Given our status as a Practice Note (PN) 17 company and our dire financial position, our major focus in the year has been the restructuring and regularisation of the Group. On 1 December 2005, the Company had announced that it was an affected listed issuer under PN 17 with the prospect of imminent delisting from Bursa Malaysia Securities Berhad. To avoid delisting and ensuing liquidation, the Company proposed a comprehensive Debt Restructuring Scheme to the creditor banks entailing a significant waiver of outstanding debt. On 21 December 2006, the Group successfully submitted the Debt Restructuring and Regulatisation Plan to Securities Commission (SC). Subsequent to the submission, the Company achieved several significant milestones, including approvals from SC, relevant shareholders and scheme creditors.

10

Executive Deputy Chairman's Statement

We are close to concluding the regularisation, the final hurdle of obtaining Court approvals and the issue of new shares are expected to be completed soon. The speed at which this debt restructuring has proceeded is in no small measure attributable to the efficient and effective project management and the guidance provided by the Directors of PSCI. With that positive and prospective background, I am pleased to present to you our annual report for the year ended 31 December 2006. This report provides a review of key developments that have taken place during the year, which I hope, will offer you a better understanding of the course the Group has pursued, and its prospects ahead.

Financial Review
The financial position of the Group has inevitably deteriorated largely due to the impairment of property, plant and equipment of RM37 million. Further, the Group recorded a lower turnover of RM80 million in 2006 compared to RM171 million in the previous year. Nevertheless, net loss at RM94 million was significantly lower compared to RM533 million in 2005. Consequently, loss per share was lower at 54 sen during the year under review compared to last years loss per share of 306 sen. The concluded debt regularisation and restructuring exercise will resolve about RM595 million owed to creditor banks and substantially reduce accumulated losses of RM771 million as at 31 August 2006. Essentially, the exercise addressed the Groups total debt of RM595 million and the full and final settlement in the sum of RM144,007,607 was proposed and accepted. This amount was settled by the issuance of 144,007,607 Settlement Shares to be allotted to then renounced entirely by the scheme creditors for cash consideration of RM1.00 per share. In addition to that, a rights issue entailing RM69.6 million was raised to be utilised as working capital for the Group. The restructuring exercise will reduce the companys accumulated losses as at 31 August 2006 from RM771 million to RM172 million and improve the shareholders funds position from a negative RM535 million to a positive of RM67 million. This is indeed a desirable consequence as it provides positive affirmation of the Groups solvency and a significant first step towards share value enhancement.

Review of Operations
PSCI intends to continue to leverage on our expertise and niche in maritime, oil and gas as well as commercial shipping to grow our business. We are strongly positioned to benefit from the growing importance of emerging markets as globalisation changes the patterns of the economics. Additionally, the increased number of projects and spending under the Ninth Malaysia Plan augurs well for the Groups prospects. We have previously been handicapped by a weak financial position which impaired our ability to raise funding to secure and finance such contracts. This situation will change with our successful debt restructuring and PSCI is well poised to take advantage of the impending prospects. We believe that with positive shareholder funds and the Group's rebranding exercise, financial institutions will be much more supportive. This will enable us to pursue the substantial opportunities which are now before us. Our core focus has been to sustain the technical capability within the Group. We are pleased that despite the difficulties faced, the Company has managed to retain most of its core employees, who are well qualified and experienced to ensure the deliverability of all terms specified in such contracts which can be quite technical in nature.

11

Executive Deputy Chairman's Statement

We are already experiencing some measure of success in the year under review, i.e. despite the difficulties, the Group successfully handed over two Offshore Patrol Vessels to Tentera Laut DiRaja Malaysia and we are on track to launch the third and fourth vessels for further testing and fitting in 2007 prior to completion and delivery in 2009. We are pleased also that in the first quarter of 2007, the Group secured a USD42 million contract with Gagasan Carriers Sdn Bhd for the construction and sale of three chemical tankers. Further, the Groups associate company, Boustead Naval Shipyard Sdn Bhd (formerly known as PSC-Naval Dockyard Sdn Bhd), was awarded a RM41 million contract by Tanjung Kapal Services Sdn Bhd in 2006, a wholly-owned subsidiary of Tanjung Offshore Berhad. The contract involves the engineering, construction, testing and delivery of an anchor handling tug supply vessel. We are confident that this segment of the business will continue to have a direct and indirect contribution to the Groups profitability. At this point I would like to recognise and thank the Securities Commission and Bursa Malaysia Securities Berhad for their efficiency and guidance in our restructuring exercise, the Creditor Banks for their patience and support, our Board, staff and consultants for their relentless dedication and commitment. Finally, and certainly not lastly, to our loyal shareholders for their continued confidence in us.

Terima kasih. Laksamana Madya (Rtd) Dato Seri Ahmad Ramli Bin Haji Mohd Nor Executive Deputy Chairman

12

Audit Committee Report

COMPOSITION OF MEMBERS
Chairman Tn. Hj. Mohd Noordin Bin Abdullah (Chairman, Independent Non-Executive Director) Members Y. Bhg. Datuk Azzat Bin Kamaludin (Non-Independent Non-Executive Director) Mr. David William Berry (Independent Non-Executive Director) En. Idris Bin Zakaria (Independent Non-Executive Director)

MEMBERSHIP
The Audit Committee shall be appointed by the Board from amongst the directors of the Company and shall number not less than three (3) members, a majority of whom shall be Independent Non-Executive Directors. The members of the Audit Committee shall elect a Chairman from amongst themselves who is an Independent Non-Executive Director. The terms of office and performance of the Committee and each of its members shall be reviewed by the Board no less than once every three (3) years.

AUTHORITY
The Committee is authorised by the Board to investigate any activity within its terms of reference and shall have unrestricted access to any information it requires from any employees and all employees are directed to co-operate with any request made by the Committee. The Committee is also authorised by the Board to obtain external legal or other independent professional advice as necessary. The Committee shall have direct access to the internal and external auditors and be able to convene meetings with external auditors excluding the attendance of the executive members of the Committee, whenever necessary.

DUTIES AND RESPONSIBILITY

The duties of the Committee shall be: To consider the appointment, resignation and dismissal of external auditors and the audit fee. To discuss with the external auditors, prior to the commencement of audit, the nature and scope of audit and to ensure co-ordination of audit where more than one audit firm is involved. To review the quarterly announcements to the Bursa Malaysia Securities Berhad and year end annual financial statements before submission to the Board. To discuss problems and reservations arising from the interim and final external audits, and any matters the external auditors may wish to discuss (in the absence of management, where necessary). To review the external auditors management letter and managements response. To do the following in respect of the internal audit function:review the adequacy of scope, functions and resources of the internal audit function and that it has the necessary authority to carry out its work. review internal audit programme. ensure co-ordination of external audit with internal audit. consider the major findings of internal audit investigations and managements response, and ensure that appropriate actions are taken on the recommendations of the internal audit function.

13

Audit Committee Report

To monitor related party transactions entered into by the Company and the Group, and to ensure that the Directors report such transactions as necessary in accordance with the Bursa Malaysia Securities Berhads Listing Requirements. To review the effectiveness of internal control systems. To perform any other such function as may be agreed to by the Audit Committee and the Board.

MEETINGS AND MINUTES

Meetings shall be held not less than four times a year, or more frequently when necessary. The presence of internal and external auditors will be requested if required. Other Board members and employees may attend meetings upon the invitation of the Audit Committee. The external auditors may request a meeting if they consider it necessary. Written notice of the meeting together with the agenda shall be given to the members of the Committee and where applicable, the external auditors. The Secretary to the Audit Committee shall be the Company Secretary. Minutes of each meeting shall be distributed to each member of the Board. The Chairman of the Committee shall report on each meeting to the Board. During the financial year ended 31 December 200, there were five (5) Audit Committee meetings held. The details of attendance of the Committee members are as follows:-

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

NAME OF DIRECTORS Tn. Hj. Mohd Noordin Bin Abdullah Y. Bhg. Datuk Azzat Bin Kamaludin Mr. David William Berry# En. Idris Bin Zakaria INDEPENDENT Yes No Yes Yes ATTENDANCE OF MEETINGS 4/5 5/5 4/4 5/5

Notes:# Appointed on 23 February 2006.

During the financial year ended 31 December 200, the activities undertaken by the Audit Committee included the following: 1. Reviewing the quarterly financial statements before announcements to the Bursa Malaysia Securities Berhad. 2. Reviewing the year-end financial statements together with external auditors management letter in relation to the audit and accounting issues arising from the audit and managements response. 3. Discussing and reviewing the external auditors scope of work, audit plan and procedures. . Discussing and reviewing the state of internal control in the Company.

INTERNAL AUDIT FUNCTION

The Internal Audit Division is responsible for providing independent assessments for adequate, efficient and effective internal control systems to anticipate potential risks exposures over key business processes within the Group.

1

Corporate Governance

The Code The Board of Directors is committed to ensuring the highest standards of corporate governance are practised throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders value and the financial performance of PSCI.

BOARD OF DIRECTORS
Composition of the Board The Board currently has 6 members, comprising 1 Executive Director and 5 Non-Executive Directors, 3 of whom are Independent Directors. No individual dominates the Boards decision making and the number of Directors reflects fairly the investment of the shareholders. The Board also fulfills the requirement of having at least one-third of its members as Independent Non-Executive Directors. Y. Bhg. Laksamana Madya (Rtd) Dato Seri Ahmad Ramli Bin Haji Mohd Nor leads the Board as Executive Deputy Chairman and Group Managing Director of the Company. Together, the Directors bring a wide range of business; commercial and financial experience relevant to the direction of the Group. The Board continues to give close consideration to maintaining a balance in its size, composition and spread of experience and expertise. This balance enables the Board to provide effective leadership as well as independent judgement on business decisions, taking into account the long term interests of the Groups shareholders, customers, suppliers and other business associates. The profile of the members of the Board is also provided on pages 7 to 9 in this Annual Report. In accordance with the requirement of the Malaysian Code on Corporate Governance, Tn. Hj. Mohd Noordin Bin Abdullah has been appointed as the Senior Independent Non-Executive Director to be available to deal with concerns of the shareholders of the Company.

Board Responsibilities There is no separate division of responsibilities between the Executive Deputy Chairman and Group Managing Director of the Company to ensure that there is a balance of power and authority. However, the presence of Independent NonExecutive Directors of the calibre necessary to execute sufficient weight in the Board decisions creates a balance in the decision making processes, and both the Board and the Audit Committee are working towards ensuring full compliance with the Principles and Best Practices of the Code. Nevertheless, the ultimate responsibility for the final decision on all matters lies with the Board of Directors. An effective Board leads and controls the Group. This entails reviewing and adopting strategic plans for the Company, setting direction, overseeing the conduct of the business and managing the Company. Key matters such as the regularisation plans to address the Groups PN17 status, approval of annual and quarterly results, acquisitions and disposals, capital expenditures, budgets, material contracts and business engagements, succession planning for top management are reserved for the Board. The Board is assisted by various committees, which oversees the day-to-day operations of the Group including review of monthly performance, budgets, capital investment proposals and many other operating issues arising out of the ordinary course of business. The Board has also delegated certain responsibilities to other Board committees, which operate within clearly defined terms of reference. Standing committees of the Board include the Audit Committee, the Nomination Committee, the Remuneration Committee and the EXCO Committee. The responsibilities of the Nomination Committee and the

15

Corporate Governance

Remuneration Committee have been delegated by the Board to an Executive Committee to expedite the regularisation plans and to oversee all aspects of the Groups operations. The Board fully intends to reinstate the respective committees following the completion of its PN17 regularisation plans. Board Meetings Board meetings are held at quarterly intervals with additional meetings convened for particular matters, when necessary. All Directors are fully briefed in advance of Board meetings on the matters to be discussed and have access to any further information they may require. The Board may, whenever required, set up committees delegated with specific powers and responsibilities. The Directors have access to the advice and services of the Company Secretaries, who are responsible for ensuring the Board meeting procedures, are followed and that applicable rules and regulations are complied with. The Memorandum and Articles of Association of the Company provides for the Chairman to have the casting vote in the event an equality of votes arises over an issue in question. The Board met for a total of eight (8) times during the financial year ended 31 December 2006 and the attendance of each Director is stated in the table below:-

Name of Director

Status of Directorship

Independent No

Attendance of Meetings 8/8

Y. Bhg. Laksamana Madya Executive Deputy (Rtd) Dato Seri Ahmad Ramli Chairman/Group Bin Haji Mohd Nor Managing Director Y. Bhg. Datuk Azzat Bin Kamaludin Mr. David William Berry+ En. Ishak Bin Osman En. Idris Bin Zakaria Tn. Hj. Mohd Noordin Bin Abdullah
Notes:+ Appointed on 23 February 2006.

Non-Independent Non-Executive Director Independent Non-Executive Director Non-Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director

No Yes No Yes Yes

8/8 6/6 8/8 8/8 5/8

Supply of Information Prior to the Board Meeting, an agenda and a Board report will be issued to all Directors for their review. This is issued in sufficient time to enable the Directors to obtain further explanation, where necessary, in order to be properly briefed before the meeting. The Board report contains relevant information on the business of the meeting. The Board has approved a procedure to take independent professional advice in appropriate circumstances, at the Companys expense. Before incurring such professional fees, the Director concerned must consult with the Executive Deputy Chairman of the Board or with two other Directors, one of whom is Non-Executive. Directors have access to all information within the Company, whether as a full Board or in their individual capacity, in furtherance of their duties. Directors also have access to the advice and services of the Company Secretaries who are responsible for ensuring that Board procedures are adhered to.

1

Corporate Governance

Appointment and re-election of Directors In accordance with the Companys Articles of Association, all newly appointed Directors shall retire from office but shall be eligible for re-election at the next Annual General Meeting subsequent to their appointment. The Articles further provide that at least one third of the remaining Directors be subject to re-election by rotation at each Annual General Meeting.

BOARD COMMITTEES
Audit Committee The Audit Committee reviews issues of accounting policy and presentation for external financial reporting, monitors the work of the internal audit function and ensures an objective and professional relationship is maintained with external auditors. The Committee has full access to both the internal and external auditors who, in turn, have access at all times to the Chairman of the Committee. The report of the Audit Committee is set out on pages 13 & 14 of the Annual Report. Nomination Committee (currently suspended) The Board has established a Nomination Committee consisting of the following Independent Non-Executive Directors:Chairman : Tn. Hj. Mohd Noordin Bin Abdullah Member : En. Idris Bin Zakaria The functions of the Nomination Committee shall be to: Recommend candidates for all directorships. Recommend appointments to Board Committees. Annually review the required mix of skills and experience and other qualities, including core competencies, which Non-Executive Directors should bring to the Board. The Directors have direct access to the advice and services of the Groups Company Secretaries who are responsible for ensuring that all appointments are properly made and all necessary information is obtained from Directors, both for the Companys own records and for the purposes of meeting the requirements of the Companies Act 1965, the Listing Requirements of the Bursa Malaysia Securities Berhad and other regulatory requirements. On appointment, Directors will receive information on the Company which include financial, corporate business and regulatory information. Information will be regularly updated through meetings or written circulars. Directors are encouraged to attend training courses at the Companys expense to keep abreast with development in the market place. All Directors of the Company have attended the Mandatory Accreditation Programme conducted by the Approved Organiser. The Directors will continue to undergo other relevant training programmes to further enhance their knowledge on a continuous basis in compliance with Practice Note No. 15/2003 of the Listing Requirements of the Bursa Malaysia Securities Berhad on the Continuing Education Programme.

17

Corporate Governance

Remuneration Committee (currently suspended) The Board has established a Remuneration Committee consisting of the following Independent Non-Executive Directors:Chairman : Tn. Hj. Mohd Noordin Bin Abdullah Members : En. Idris Bin Zakaria The terms of reference approved for the Committee are to: Review and recommend the general remuneration policy of the Group. Recommend to the Board the remuneration of any Executive Director in all its forms, drawing from outside advice as necessary and to review annually the compensation of Directors. Remuneration packages of Non-Executive Directors and Non-Executive Chairman are a matter for the Board as a whole and the individuals concerned are required to abstain from discussion of their own remuneration. The policy of the Remuneration Committee is to reward employees competitively, taking into account performance, market comparisons and competitive pressure in the industry. The component parts of remuneration are structured so as to link rewards to corporate and individual performance, in the case of any Executive Director. In the case of NonExecutive Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by the particular Non-Executive Directors concerned. A summary of the remuneration of the Directors for the financial year ended 31 December 2006, distinguishing between Executive and Non-Executive Directors in aggregate, with categorisation into appropriate components and the number of Directors whose remuneration falls into each successive band are as follows: Executive Directors (RM) Fees Salary EPF Allowance Benefit in kind Total Directors Remuneration Executive Directors RM0 RM50,000 RM50,001 RM100,000 RM400,001 RM450,000 Total 1 - - 1 Non-Executive Directors 3 1 1 5 Total 4 1 1 6 12,000 - - 6,500 - 18,500 Non-Executive Directors (RM) 65,234 304,000 39,360 72,445 23,467 504,506

Total (RM) 77,234 304,000 39,360 78,945 23,467 523,006

Included in the Non-Executive Directors category are the details in respect of a Director who was re-designated from an Executive Director to Non-Executive Director on 1 September 2006: - Salary, EPF and allowance of RM371,895 and benefit in kind of RM23,467 incurred for the period from 1 January 2006 to 31 August 2006. - Directors' remuneration range from RM400,001 to RM450,000. 1

Corporate Governance

INVESTORS AND SHAREHOLDERS RELATIONSHIP

The Annual General Meeting is the principal forum for dialogue with the shareholders. Notice of the Annual General Meeting and Annual Reports are sent out to shareholders at least twenty-one (21) days before the date of the meeting. At each Annual General Meeting, the Board encourages shareholders to participate in the question and answer session pertaining to the business activities of the Group. The Executive Deputy Chairman and where appropriate, the Chairman of the Audit Committee is available to respond to shareholders questions during the meeting. Where appropriate, the Chairman will undertake to provide a written answer to any significant question, which cannot be readily answered during the meeting.

ACCOUNTABILITY AND AUDIT

Financial Reporting In presenting the annual financial statements and quarterly announcements of results to the shareholders, the Board aims to present a balanced and understandable assessment of the Groups position and prospects. Before the financial statements are drawn up, the Directors take all necessary steps to ensure that the Group has used all the applicable accounting policies consistently, and that the policies are supported by reasonable and prudent judgements and estimates. All accounting standards, which the Board considers to be applicable, are followed, subject to any explanations and material departures disclosed in the notes to the financial statements. The role of the Audit Committee in the review and reporting of the financial information of the Group is outlined in the Report of the Audit Committee in the Annual Report. Relationship with the Auditors The Board has established a formal and transparent relationship with the auditors. The appointment of the external auditors is subject to the approval of shareholders at the Annual General Meeting whilst their remuneration is determined by the Board. The roles of both the external and internal auditors are further described in the Audit Committee Report. Statement of Internal Control The information on the Groups system of Internal Control is presented in the statement on Internal Control in the Annual Report.

19

Statement on Internal Control

The Board of Directors (the Board) is committed to maintaining a sound system of internal control to safeguard shareholders investment and the Groups assets. The Board is pleased to provide the following Statement on Internal Control which outlines the nature and scope of internal controls of the Group during the year pursuant to Paragraph 15.27(b) of the Listing Requirements of the Bursa Malaysia Securities Berhad.

RESPONSIBILITY
The Board affirms its overall responsibility for the Groups systems of internal control and for reviewing the adequacy and effectiveness of the Groups internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines. The review covers financial, operational and compliance controls of the Group. In view of the inherent limitations in any system of internal controls, the system is designed to manage rather than eliminate the risk of failure to achieve its corporate objectives. Accordingly, it can only provide reasonable but not absolute assurance against misstatement or loss. The Board has delegated certain responsibilities to other Board committees, which operate within clearly defined terms of reference. Standing committees of the Board include the Audit Committee, the Nomination Committee and Remuneration Committee. During the financial year, the responsibilities of the Nomination Committee and Remuneration Committee have been suspended due to its lack of resources under its current PN17 status. The Board delegated its responsibility to an Executive Committee of the Board, which oversees all aspects of the Groups operations and especially to expedite the regularisation plans to its PN17 status. The Board fully intends to reinstate the respective committees following the completion of its PN17 regularisation plans.

INTERNAL CONTROL
Whilst the Board maintains full control and direction over appropriate strategic, financial, organisational and compliance issues, it has delegated to executive management the implementation of the systems of internal control within an established framework. The key elements of the Groups internal control systems include the following: The role played by the Group Managing Director as the channel of communication between the Board and the management. The Group Managing Director who is empowered to manage the business of the Group implements the Boards expectations of the systems of internal control. The Group Managing Director, together with the respective management team, attended to various management and operations meetings, and review financial and operations reports, in order to monitor the performance and profitability of the Groups businesses. The Group Managing Director and the management team practise an open door policy whereby matters arising are promptly and effectively dealt with drawing on the experience and knowledge of employees throughout the Group. The Group has clearly defined organisational structures and delegations of responsibilities and authorisations limits at various management levels. The Group also has in place various support functions, which are centralised at Head Office. These comprise Secretarial, Legal, Human Resource, Finance and Treasury. These support functions maintain consistency in the setting and application of policies and procedures relating to these functions, and reduce duplication of efforts, thereby providing synergy to the Group. The management of key operating subsidiary companies are responsible for:- the conduct and performance of their respective business unit; - identification and evaluation of significant risks applicable to their respective area of business together with the design and operation of suitable internal controls; - ensuring that an effective system of internal controls is in place; - meeting defined reporting deadlines and ensuring compliance with policies, procedure and regulatory requirement.

20

Statement on Internal Control

Detailed budgeting process whereby key operating subsidiary companies prepare budgets for the coming year, which are approved at the operating level. Actual performance compared with budget is reviewed periodically with explanations of major variances. Corporate values and code of conduct, which emphasise on ethical behaviour are set out in Groups Employee Handbook. As the Group is in PN17, the internal audit function has been minimal as the Board and the Audit Committee have focused on the Proposed Restructuring Plan to regularise the financial position of the Group. The external auditors are engaged to express an opinion on the financial statements. They review and test the systems of internal control and the data contained in the financial statements to the extent necessary to express their audit opinion. Findings arising from the audit are discussed with management and material findings reported to the Audit Committee. The effectiveness of the Groups system of internal controls will continue to be reviewed and updated by the Board through the Audit Committee which in line with the changes in the operating environment. The Board is of the view that the current system of internal control is in place throughout the Group and sufficient to safeguard the Groups interest. This statement is made in accordance with a resolution of the Board of Directors dated 25 April 2007.

21

Statement of Directors Responsibility in Relation to The Financial Statements and Other Information
The Directors are required by the Companies Act, 1965 to prepare financial statements for each year which give a true and fair view of the state of affairs of the Group and of the Company at the end of the financial year and of their results and cash flows for the financial year then ended. In preparing these financial statements, the Directors have: adopted suitable accounting policies and applying them consistently; made judgements and estimates that are prudent and reasonable; ensured applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepared the financial statements on the going concern basis, unless it is inappropriate to presume that the Group and the Company will continue in business. The Directors are responsible for ensuring that the Company keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and of the Company and which enable them to ensure that the financial statements comply with the Companies Act, 1965. The Directors have overall responsibility for taking such steps that are reasonably open to them to safeguard the assets of the Group and the Company to prevent and detect fraud and other irregularities.

22

Additional Compliance Information

SANCTIONS AND/OR PENALTIES

There were no public sanctions and/or penalties imposed on the Company and its subsidiaries, directors and management by any regulatory bodies during the financial year ended 31 December 2006.

REVALUATION POLICY ON LANDED PROPERTIES

The Groups landed properties classified under property, plant and equipment are not revalued, but are reviewed at each balance sheet date to determine if there is any indication of impairment. These landed properties are stated at cost less accumulated depreciation and impairment. For landed properties classified as investment properties, the Group assesses the fair value at the end of each financial year and the change in fair value is taken as gains or losses in the income statements.

NON-AUDIT FEES
The amount of non-audit fees paid to the external auditors by the Group and by the Company for the financial year amounted to RM290,000 and RM250,000 respectively.

SHARE BUY-BACKS
The Company did not make any share buy-back during the financial year.

OPTIONS AND WARRANTS

No options and warrants were exercised during the financial year.

AMERICAN DEPOSITORY RECEIPT (ADR) OR GLOBAL DEPOSITORY RECEIPT (GDR)

The Company did not sponsor any ADR or GDR programme during the financial year.

VARIATION IN RESULTS
There was no material variation between the audited results for the financial year ended 31 December 2006 and the unaudited results previously released for the financial quarter ended 31 December 2006.

PROFIT GUARANTEE
The Company did not make any arrangement during the financial year which requires profit guarantee.

MATERIAL CONTRACTS
On 6 November 2006, as wholly owned subsidiary, PSC Asset Holdings Sdn Bhd had entered into a Sales & Purchase agreement with Boustead Holdings Berhad, a substantial shareholder of the Company, to dispose of three pieces of land together with buildings erected thereon, known as Menara PSCI for a cash consideration of RM54 million ("Proposed Disposal"). The Proposed Disposal was completed on 27 April 2007. There were no other material contracts entered into by the Company and its subsidiary companies, involving directors and substantial shareholders during the financial year.

23

Additional Compliance Information

RECURRENT RELATED PARTY TRANSACTIONS

At the Annual General Meeting held on 15 June 2006, the Company obtained Shareholders Mandate to allow the Group to enter into recurrent related party transactions of a revenue or trading nature. In accordance with Section 4.1.5 of Practice Note No. 12/2001 of the Bursa Malaysia Securities Berhad Listing Requirements, the details of recurrent related party transactions conducted during the financial year ended 31 December 2006 pursuant to the Shareholders' Mandate are disclosed as follows:-

Related party

Interested Director/ Interested Major Shareholder Dato Seri Ahmad Ramli Bin Haji Mohd Nor Datuk Azzat Bin Kamaludin Boustead Holdings Berhad Lembaga Tabung Angkatan Tentera Datuk Azzat Bin Kamaludin

Nature of transactions

Value of transactions RM000 41

Boustead Naval Shipyard Sdn Bhd (formerly known as PSC-Naval Dockyard Sdn Bhd) Messrs Azzat & Izzat

Equipment rental by Penang Shipbuilding & Construction Sdn Bhd Work subcontracted to Penang Shipbuilding & Construction Sdn Bhd Workshop rental/telephone charges charged to Naval And Defence Communication System Sdn Bhd Work subcontracted to Naval And Defence Communication System Sdn Bhd Work subcontracted to Aeromarine Maintenance Services Sdn Bhd Work subcontracted to Atlas Defence Technology Sdn Bhd Purchases of equipment & machinery from Dominion Defence & Industries Sdn Bhd Provision of legal services to PSC Industries Berhad group

6,895

255

960

686 896

26,952

139

2

Financial Statements

Directors' Report Statements by Directors and Statutory Declaration Report of The Auditors Income Statements Balance Sheets Statements of Changes in Equity Cash Flow Statements Notes to The Financial Statements

26

29 30 32 33 34 37 40

25

25 25

Directors' Report

DIRECTORS' REPORT
The Directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2006.

PRINCIPAL ACTIVITIES
The principal activities of the Company are investment holding, property holding and development. The principal activities of the subsidiary companies are described in Note 22 to the financial statements. There have been no significant changes in the nature of the principal activities of the Company and its subsidiary companies during the financial year.

RESULTS
Group RM000 Loss for the year Attributable to: Shareholders of the Company Minority interests (93,257) (94,218) 961 (93,257) Company RM000 (52,757) (52,757) (52,757)

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. In the opinion of the Directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature other than as disclosed in the financial statements.

DIVIDENDS
No dividend has been paid or declared by the Company since the end of the previous financial year. The Directors do not recommend the payment of any dividend for the current financial year.

DIRECTORS
The names of the Directors of the Company in office since the date of the last report and at the date of this report are: Laksamana Madya (Rtd) Dato Seri Ahmad Ramli Bin Haji Mohd Nor Datuk Azzat Bin Kamaludin Ishak Bin Osman Idris Bin Zakaria Mohd Noordin Bin Abdullah David William Berry (Executive Deputy Chairman/Group Managing Director/ Chief Executive) (Non Independent Non-Executive Director) (Executive Director Operations; redesignate to Non-Executive Director on 01.09.2006) (Independent Non-Executive Director) (Independent Non-Executive Director) (Independent Non-Executive Director)

DIRECTORS BENEFITS
Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the Directors might acquire benefits by means of acquisition of shares in or debentures, of the Company or any other body corporate.

2

Directors' Report

DIRECTORS BENEFITS (CONT'D)

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors or the fixed salary of a full-time employee of the Company as shown in Note 13 to the financial statements) by reason of a contract made by the Company or a related corporation with any Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest, except as disclosed in Note 42 to the financial statements.

DIRECTORS INTERESTS
According to the register of Directors shareholdings, the interest of Directors in office at the end of the financial year in shares of the Company and its related corporations during the financial year were as follows:Number of Ordinary Shares of RM1 Each Bought - - Sold - -

The Company Laksamana Madya (Rtd) Dato Seri Ahmad Ramli Bin Haji Mohd Nor Mohd Noordin Bin Abdullah Related corporations Boustead Properties Berhad Datuk Azzat Bin Kamaludin Affin Holdings Berhad Datuk Azzat Bin Kamaludin

At 1.1.2006 1,000 100

At 31.12.2006 1,000 100

5,000 110,000

- -

- -

5,000 110,000

Affin Holdings Berhad Datuk Azzat Bin Kamaludin

At 1.1.2006 22,500

Number of Warrants (W2/W3) (in units) Bought - Sold -

At 31.12.2006 22,500

None of the Directors in office at the end of the financial year had any interest in the Company during the financial year.

ISSUE OF SHARES AND DEBENTURES

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

OTHER STATUTORY INFORMATION

(a) Before the income statements and balance sheets of the Group and of the Company were made out, the Directors took reasonable steps:(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

27

27

Directors' Report

OTHER STATUTORY INFORMATION (CONT'D)

(b) At the date of this report, the Directors are not aware of any circumstances which would render:(i) the amount written off for bad debts or the amount of the provision for doubtful debts inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading. (c) At the date of this report, except for the effects arising from the implementation of the Proposed Restructuring Scheme as disclosed in Note 6 to the financial statements, the Directors are not aware of any other circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. (d) At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. (e) As at the date of this report, there does not exist: (i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or (ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year. (f) In the opinion of the Directors: (i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and

(ii) except for the effects arising from the change in accounting policies and from the implementation of the Proposed Restructuring Scheme as disclosed in the notes to the financial statement, the results of the operations of the Group and the Company for the financial year ended 31 December 2006 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item transaction or event occurred in the interval between the end of that financial year and the date of this report.

SIGNIFICANT EVENTS
Significant events during the financial year are disclosed in Note 45 to the financial statements.

SUBSEQUENT EVENTS
Details of subsequent events during the financial year are disclosed in Note 46 to the financial statements.

AUDITORS
The auditors, Ernst & Young, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the Directors dated 25 April 2007.

Laksamana Madya (Rtd) Dato' Seri Ahmad Ramli Bin Haji Mohd Nor

Datuk Azzat Bin Kamaludin

2

29

Statement by Directors Directors' Report

STATEMENT BY DIRECTORS

PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, Laksamana Madya (Rtd) Dato Seri Ahmad Ramli Bin Haji Mohd Nor and Datuk Azzat Bin Kamaludin, being two of the Directors of PSC Industries Berhad, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 32 to 108 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable MASB Approved Accounting Standards in Malaysia For Entities Other Than Private Entities and so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2006, and of the results and the cash flows of the Group and of the Company for the financial year then ended. Signed on behalf of the Board in accordance with a resolution of the Directors dated 25 April 2007.

Laksamana Madya (Rtd) Dato' Seri Ahmad Ramli Bin Haji Mohd Nor

Datuk Azzat Bin Kamaludin

STATUTORY DECLARATION

PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965 I, Peramjeet Singh A/L Gian Singh, being the officer primarily responsible for the financial management of PSC Industries Berhad, do solemly and sincerely declare that the accompanying financial statements set out on pages 32 to 108 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the abovenamed Peramjeet Singh A/L Gian Singh at Kuala Lumpur in the Federal Territory on 25 April 2007. Before me, Soh Ah Kau (No. W315) Commissioner for Oaths Kuala Lumpur

Peramjeet Singh A/L Gian Singh

29

30

Report of The Auditors to The Members of PSC Industries Berhad

We have audited the accompanying financial statements set out on pages 32 to 108. These financial statements are the responsibility of the Companys Directors. It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report. We have conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing of the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities so as to give a true and fair view of: (i) the financial position of the Group and of the Company as at 31 December 2006 and of the results and the cash flows of the Group and of the Company for the financial year then ended; and

(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and (b) the accounting and other records and the registers required by the Act, to be kept by the Company have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and the auditors reports thereon of the subsidiaries of which we have not acted as auditors, as indicated in Note 22 to the financial statements, being financial statements that have been included in the consolidated financial statements. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditors reports on the financial statements of the subsidiaries were not subject to any qualification other than emphasis of matter as disclosed in Note 22 to the financial statements and did not include any comment required to be made under Section 174(3) of the Act. Without qualifying our opinion, we draw your attention to Note 2 to the financial statements that:(i) the Company is an affected issuer under PN17/2005 vide its announcement to Bursa Malaysia on 1 December 2005;

(ii) the Group and the Company have incurred a net loss of RM93.2 million and RM52.7 million respectively for the year ended 31 December 2006 and, as of that date, the Groups and the Companys current liabilities exceeded its current assets by RM593.2 million and RM270.9 million respectively; (iii) the Group and the Company have defaulted in their repayment of loan and other bank borrowing facilities amounting to RM588.5 million and RM254.7 million respectively as at 31 December 2006; (iv) on 17 October 2006, the High Court of Malaya had granted to the Company and its subsidiary, Penang Shipbuilding & Construction Sdn Bhd (PSC) an order pursuant to Sections 176(1) and 176(10) of the Companies Act, 1965 upon application made by the Company and PSC, as set out in Note 45 to the financial statements; and (v) the Board of Directors of the Company has proposed to implement the Proposed Restructuring Scheme (Proposal) as detailed in Note 6 to the financial statements. The Proposal was submitted to Securities Commission for approval on 21 December 2006. The Proposal was approved by relevant authorities, shareholders and scheme creditors as set out in Note 46 to the financial statements. The ability of the Group and the Company to continue as a going concern is dependent on the successful implementation of the proposed restructuring scheme and the implementation of the turnaround plans to return the Group to profitibality.

30

Report of The Auditors to The Members of PSC Industries Berhad

The financial statements have been prepared on the assumption that the Group and the Company are going concerns, and do not include any adjustments relating to the amounts and classification of assets and liabilities that might be necessary should the relevant implementation of the restructuring scheme be delayed or is not forthcoming.

Ernst & Young No. AF 0039 Chartered Accountants Kuala Lumpur, Malaysia 25 April 2007

Habibah Bte Abdul No. 1210/05/08(J) Partner

31

Income Statements

For the year ended 31 December 2006

Group Note 2006 RM'000 Revenue Cost of sales Gross profit Other income Distribution expenses Administration expenses Other expenses Operating loss Finance costs Share of loss in associate companies Loss before tax Income tax expense Loss for the year Attributable to: Equity holders of the Company Minority interests Loss per share attributable to equity holders of the Company (sen) Dividends per share (sen) - gross 16 - - 15 (54) (306) (94,218) 961 (93,257) (533,490) (86,209) (619,699) (52,757) - (52,757) (432,700) (432,700) 11 14 (10) (89,914) (3,343) (93,257) (59) (619,464) (235) (619,699) - (52,757) - (52,757) (440,756) 8,056 (432,700) 7 8 9 10 80,476 (65,645) 14,831 17,259 (183) (31,539) (50,168) (49,800) (40,104) Restated 2005 RM'000 170,963 (166,262) 4,701 1,369,133 (100) (101,203) (1,790,910) (518,379) (101,026) 2006 RM'000 334 - 334 1,107 - (1,188) (39,250) (38,997) (13,760) Company Restated 2005 RM'000 993 - 993 16 - (1,452) (419,116) (419,559) (21,197)

The accompanying notes form an integral part of the financial statements. 32

Balance Sheets

As at 31 December 2006
Group ASSETS Non-current assets Property, plant and equipment Investment properties Intangible assets Investments in subsidiary companies Investments in associate companies Other investments 17 18 19 22 23 24 49,601 6,500 - - 26 56,127 Current assets Inventories Trade and other receivables Due from customers on contracts Tax recoverable Cash and bank balances 25 26 27 28 2,135 64,997 4,283 - 17,670 89,085 Non-current assets held for sale TOTAL ASSETS EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Share capital Other reserves Accumulated losses Total shareholder's deficit Minority interests Total equity Non-current liabilities Borrowings Deferred taxation Current liabilities Borrowings Trade and other payables Due to customer on contracts Tax payable Total liabilities TOTAL EQUITY AND LIABILITIES 29 57,100 146,185 202,312 86,450 89,686 15 - 10 505 176,666 2,879 91,794 3,887 - 17,550 116,110 - 116,110 292,776 - - - 8,685 - - 8,685 - 3,089 - 160 26 3,275 3,100 6,375 15,060 247 2,566 36,141 445 39,399 6,089 170 40 6,299 6,299 45,698 Note 2006 RM'000 2005 RM'000 Company 2006 RM'000 2005 RM'000

30 31 32 33 38 33 36 27

174,083 61,722 (779,946) (544,141) 6,074 (538,067) 201 823 1,024 589,779 145,172 374 4,030 739,355 740,379 202,312

174,083 72,642 (669,949) (423,224) 5,316 (417,908) 607 533 1,140 586,258 120,528 211 2,547 709,544 710,684 292,776

174,083 70,243 (506,563) (262,237) - (262,237) - - - 254,756 22,541 - - 277,297 277,297 15,060

174,083 70,243 (453,806) (209,480) (209,480) 68 68 241,039 14,071 255,110 255,178 45,698

The accompanying notes form an integral part of the financial statements. 33

Attributable to Equity Holders of the Company Non-distributable

Note

Share capital RM000 Total RM000

Share premium RM000

Revaluation reserve RM000

Exchange fluctuation reserve RM000 Accumulated losses RM000 Minority interests RM000 Total equity RM000

At 1 January 2005 174,083 - 174,083 70,243 10,841 (8,422) (136,459) 110,286 - 10,841 - (4,859) 5,982 - 91,908 70,243 - (8,422) (131,600) 104,304 91,908 196,212 5,982 202,194

As previously stated

Prior year adjustments

47

For the year ended 31 December 2006

At 1 January 2005 (restated)

Foreign currency translation - - - - - - - - - - - - - (20) - (20) - - (12) (128) (243) (32) (128) (243)

- Group

Consolidated Statements of Changes in Equity

3 - - - - - 174,083 70,243 - - 10,841 - - - - - - - - - - (8,442) - - (20) - (548,690) 15,200 (533,490) (533,490) (669,949)

Dividends paid to minority

interests

Disposal of subsidiary company

Net expense recognised (20) (548,690) 15,200 (533,490) (533,490) (423,224) (383) (86,209) - (86,209) (86,209) 5,316 (403) (634,899) 15,200 (619,699) (619,699) (417,908)

directly in equity

Loss for the year:

As previously stated

Prior year adjustments

47

Loss for the year (restated)

Total recognised income and

expense for the year

At 31 December 2005 (restated)

Note

Share capital RM000 Total RM000

Attributable to Equity Holders of the Company Non-distributable Exchange Share Revaluation fluctuation Accumulated premium reserve reserve losses RM000 RM000 RM000 RM000 Minority interests RM000 Total equity RM000

At 1 January 2006 (restated) As previously stated Effects of adopting FRS 140 174,083 - 174,083 70,243 - (8,422) (685,728) (449,844) 5,316 (444,528) 70,243 - 10,841 (10,841) (8,422) - (669,949) (15,779) (423,224) (26,620) 5,316 - (417,908) (26,620)

47

At 1 January 2006 (restated)

Consolidated Statements of Changes in Equity

For the year ended 31 December 2006 (cont'd)

Foreign currency translation - Group Dividends paid to minority interests - - - - - 174,083 70,243 - (8,521) (779,946) - - - (94,218) - - - - (79) - - (94,218) (79) (94,218) (94,218) (544,141) - - - - - (150) (203) 961 961 6,074 - - (79) - (79) (53)

(132) (150) (282) (93,257) (93,257) (538,067)

Net expense recognised directly in equity Loss for the year

35

Total recognised income and expense for the year

At 31 December 2006 (restated)

The accompanying notes form an integral part of the financial statements.

Company Statement of Changes in Equity

For the year ended 31 December 2006
Attributable to Equity Holders of the Company Non-distributable Share Share Accumulated capital premium losses RM000 RM000 RM000

Note At 1 January 2005 As previously stated Prior year adjustments At 1 January 2005 (restated) Loss for the year At 31 December 2005 (restated) At 1 January 2006 (restated) Loss for the year At 31 December 2006 47

Total equity RM'000

174,083 - 174,083 - 174,083

70,243 - 70,243 - 70,243

(23,672) 2,566 (21,106) (432,700) (453,806)

220,654 2,566 223,220 (432,700) (209,480)

174,083 - 174,083

70,243 - 70,243

(453,806) (52,757) (506,563)

(209,480) (52,757) (262,237)

The accompanying notes form an integral part of the financial statements. 3

Cash Flow Statements

For the year ended 31 December 2006

Group 2006 RM'000 Cash Flows from Operating Activities Loss before tax Adjustments for: Amortisation of deferred assets Bad debts written off Cancellation of dividend by subsidiary companies Deferred expenditure written off Deferred assets written off Deposit written off Depreciation of property, plant and equipment Gain on disposal of a subsidiary company Gain on disposal of associate company Goodwill written off Impairment of other investments Impairment of investments in subsidiary companies Impairment of property, plant and equipment Interest expense Interest income Interest waiver to subsidiary companies Inventories written down Net (gain)/loss on disposal of property, plant and equipment Balance carried forward (89,914) - 227 - - - - 4,098 (13) - 15 479 - 36,835 40,104 (2,139) - 27 (113) (10,394) (619,464) 3,951 22,751 - 143,486 63,217 1,000 18,637 (1,322,346) (1,061) 203,496 1,128 - 35,177 101,026 (4,093) - 3,716 333 (1,349,046) (52,757) - - 4,000 - - - 132 - - - 445 30,456 - 13,760 (334) - - (39) (4,337) (440,756) - - 12,380 - - - 73 - - 445 262,726 - 21,197 (509) 19,020 - (125,424) 2005 RM'000 Company 2006 RM'000 2005 RM'000

37

Cash Flow Statements

For the year ended 31 December 2006 (cont'd)

Group 2006 RM'000 Cash Flows from Operating Activities Balance brought forward Offshore Patrol Vessels expenditure written off Provision for doubtful debts Provision for foreseeable loss in relation to freehold land of a subsidiary company Provision for warranty costs Provision for restructuring costs Property, plant and equipment written off Reversal of write-down of inventories Share of loss in associate companies Net unrealised loss/(gain) on foreign exchange Write back of provision for doubtful debts Fair value adjustment on investment property Debt waiver by creditors Operating loss before changes in working capital Changes in working capital Inventories Receivables Payables Contruction contracts Cash generated from/(used in) operations (10,394) - 1,445 6,500 148 3,606 377 (16) 10 15 (675) (534) (9,140) (8,658) 374 (4,587) 19,002 (233) 5,898 (1,349,046) 455,341 274,980 - 410 - 2,441 (34) 59 (15,788) (18,744) - - (650,381) (3,942) (63,462) 159,139 531,070 (27,576) (4,337) - - - - 3,606 5 - - - (468) (534) (64) (1,792) - 802 928 - (62) (125,424) - 121,510 - - - - (3,914) - 5,388 (1,297) 177 2005 RM'000 2006 RM'000 Company 2005 RM'000

3

Cash Flow Statements

For the year ended 31 December 2006 (cont'd)

Group 2006 RM'000 Cash Flows from Operating Activities (Cont'd) Cash generated from/(used in) operations Interest paid Tax (paid)/refund Deferred expenditure paid Net cash generated from (used in) operating activities Cash flows from investing activities Interest received Proceeds from disposals of property, plant and equipment Proceeds from disposal of a subsidiary company (Note 22 (b)) Withdrawal from fixed deposit pledged Placement of fixed deposits pledged Purchase of property, plant and equipment Net cash (used in)/generated from investing activities Cash flows from financing activities Dividends paid to minority interests Net (repayment)/drawdown of borrowings Net cash (used in)/generated from financing activities Net (decrease)/increase in cash and cash equivalents Effect of foreign exchange rate changes Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (Note 28) 5,898 (2,246) (1,473) - 2,179 397 616 - 1,268 (1,046) (4,821) (3,586) (27,576) (16,688) (765) (382) (45,411) 4,093 2,232 (2,782) 37,084 (3,599) (15,203) 21,825 (62) (2) 10 - (54) - 149 - - - - 149 177 (54) (50) 73 16 - - 135 - - 151 2005 RM'000 Company 2006 RM'000 2005 RM'000

(150) (697) (847) (2,254) (36) (19,875) (22,165)

(128) (24,805) 24,677 1,091 - (20,966) (19,875)

- (109) (109) (14) - 40 26

- (303) (303) (79) 119 40

The accompanying notes form an integral part of the financial statements. 39

Notes to The Financial Statements

1. CORPORATE INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Board of Bursa Malaysia Securities Berhad. The registered office is 17th Floor, Menara Boustead, 69, Jalan Raja Chulan, 50200 Kuala Lumpur. The consolidated financial statements as at and for the year ended 31 December 2006 comprise the Company and its subsidiary companies (together referred to as the Group) and the Groups interest in associate companies. The financial statements of the Company as at and for the year ended 31 December 2006 do not include other entities. The principal activities of the Company are investment holding, property holding and development. The principal activities of the subsidiary companies are mainly heavy engineering construction, ship repair, ship building contractor, ship engineering and fabrication, supply and design of electronics and system technology in relation to the shipping and marine industry, marketing and distributing Exocet Weapon System, providing, supplying and servicing BOFORS weapon systems, design, manufacture, supply, integrated service and maintenance repair and overhaul of the communication systems and equipment. There have been no significant changes in the nature of the principal activities during the financial year. The financial statements of the Group and the Company were authorised for issue by the Board of directors in accordance with a resolution of the Directors on 25 April 2007.

2. GOING CONCERN As at 31 December 2006, the Group and the Company have incurred a net loss of RM93.2 million and RM52.7 million respectively for the year ended 31 December 2006, and, as of that date, the Groups and Companys current liabilities exceeded the current assets by RM593.2 million and RM270.9 million respectively. The Group and the Company have defaulted in their repayment of loan and other bank borrowing facilities amounting to RM588.5 million and RM254.7 million respectively as at 31 December 2006. The lenders had issued letters of demand for the full repayment of outstanding balances and have initiated legal actions against the Company and its subsidiary companies. The Company is now classified as an affected listed issuer pursuant to Practice Note 17 of the Bursa Malaysia Securities Berhad Listing Requirement. On 30 August 2006, Bursa Malaysia Securities Berhad had approved an extension until 31 December 2006 for the Company to submit its Regularisation Plan. On 17 October 2006, the High Court of Malaya had granted to the Company and its subsidiary companies, Penang Shipbuilding & Construction Sdn Bhd (PSC), an order pursuant to Sections 176(1) and 176(10) of the Companies Act, 1965 upon application made by the Company and PSC, the details of which are in Note 45(b). In this respect, the Directors of the Company propose to implement the Proposed Restructuring Scheme as set out in Note 6 herewith. The Proposed Restructuring Scheme has been submitted to Securities Commission on 21 December 2006 and the proposal was approved by relevant authorities, shareholders and scheme creditors as set out in Note 46 to the financial statements. Accordingly, the ability of the Group and the Company to continue as a going concern is dependent on the success of the approval and implementation of the proposed restructuring scheme, profitability and positive cash flows generated from future operations and financial support of the shareholders. The financial statements of the Group and the Company have been prepared on the assumption that the Group and the Company are going concern and do not include any adjustments relating to the amounts and classification of assets and liabilities that might be necessary should the relevant implementation of the proposed restructuring scheme be delayed or not forthcoming.

0

Notes to The Financial Statements

3. BASIS OF PREPARATION (a) Statement of compliance The financial statements comply with the provisions of the Companies Act, 1965 and applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities. The MASB had issued a number of new and revised Financial Reporting Standards ("FRSs") that are effective for accounting periods beginning on or after 1 January 2006 or available for early adoption. At the beginning of the current financial year, the Group and the Company had adopted the new and revised FRSs which are mandatory for the financial periods beginning on or after 1 January 2006 as fully described in Note 5 to the financial statements. In addition, the MASB has issued the following FRSs and Interpretations that are effective for annual periods beginning after January 2006, and that have not been applied in preparing these financial statements: (i) (ii) (iii) (iv) (v) (vi) FRS 117 - Leases FRS 124 - Related Party Transactions FRS 139 - Financial Instruments: Recognition and Measurement FRS 6 - Exploration for and Evaluation of Mineral Resources Amendment to FRS 119: Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures Amendment to FRS 121: The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation (vii) IC Interpretation 1: Changes in Existing Decommissioning, Restoration and Similar Liabilities (viii) IC Interpretation 2: Members Shares in Co-operative Entities and Similar Instruments (ix) IC Interpretation 5: Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds (x) IC Interpretation 6: Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment (xi) IC Interpretation 7: Applying the Restatement Approach under FRS 129 Financial Reporting in Hyperinflationary Economies (xii) IC Interpretation 8: Scope of FRS 2 The Group plans to apply FRS 117, FRS 124, and the Amendment to FRS 119 2004 initially for the annual period beginning 1 January 2007 and to apply the rest of the above-mentioned FRSs (except for FRS as explained below and FRS 139 which effective date has yet to be announced) and Interpretations for the annual period beginning 1 January 2008. The impact of applying FRS 117, FRS 124 and FRS 139 on the financial statements upon first adoption of these standards as required by paragraph 30(b) of FRS 108, Accounting Policies, Changes in Accounting Estimates and Errors is not disclosed by virtue of the exemptions given in the respective standards. FRS 6 is not applicable to the Company. Hence no further disclosure is warranted. The initial application of the other standards and interpretations are not expected to have any material impact in the financial statements of the Group and of the Company.

(b) Basis of measurement The financial statements of the Group and of the Company are prepared under the historical cost convention, except for the following assets as explained in their respective accounting policy notes: Property, plant and equipment Investment properties

(c) Functional and presentation currency The financial statements are presented in Ringgit Malaysia (RM), which is the Companys functional currency. All financial information presented are in Ringgit Malaysia (RM) and are rounded to the nearest thousand (RM000) except when otherwise indicated.

1

Notes to The Financial Statements

3. BASIS OF PREPARATION (CONT'D) (d) The use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes:(i) Impairment of property, plant and equipment During the current financial year, the Group has recognised impairment losses of in respect of a subsidiarys land, buildings and yard development included within property, plant and equipment. The Group carried out an impairment test based on the valuation exercise performed by registered independent valuers. The carrying amount of property, plant and equipment of the Group as at 31 December 2006 was RM38.8 million (2005: RM78.2 million). Further details of the impairment losses recognised are disclosed in Notes 11 and 17 to the financial statements. (ii) Investment property Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. In the absence of current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows then is applied to the net annual cash flows to arrive at the property valuation. Further details of the carrying amount are disclosed in Note 18 to the financial statements.

(iii) Useful lives of property, plant and equipment The Group estimates the useful lives of property, plant and equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of property, plant and equipment are reviewed on a periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of property, plant and equipment are based on the internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations oculd be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timings of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the property, plant and equipment would increase the recorded expenses and decrease the non-current assets.

(iv) Income Taxes Significant estimation is involved in determining the group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

2

Notes to The Financial Statements

3. BASIS OF PREPARATION (CONT'D) (v) Classification between investment properties and property, plant and equipment The Group has developed certain criteria based on FRS 140 in making judgement whether a property qualifies as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease, the Group would account for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.

(vi) Construction contracts The Group recognises construction revenue and costs, including rendering of services, in the income statement by using the stage of completion method. The stage of completion is determined by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. Significant judgement is required in determining the stage of completion, the extent of the contract costs incurred, the estimated total contract revenue and costs, as well as the recoverability of the contract projects. In making the judgment, the Group evaluates by relying on past experience and the work of specialists.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by the Group and the Company, unless otherwise stated. Certain comparative amounts have been reclassified to conform to the current years presentation (see Note 47). In addition, the comparative financial statements have been restated to take into account the re-instatement of certain assets of the Group and the Company (see Note 47). (a) Subsidiary companies Subsidiary companies are those companies controlled by the Group, in which the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Investments in subsidiary companies are stated in the Companys balance sheet at cost less impairment losses. The policy for recognition and measurement of impairment losses is in accordance with Note 4 (o).

(b) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Company. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intragroup balances, transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances. Acquisitions of subsidiaries are accounted for using the purchase method. The purchase method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition. Any excess of the cost of the acquisition over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. Any excess of the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in the income statement. 3

Notes to The Financial Statements

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (c) Minority interests Minority interests at the balance sheet date, being the portion of the net assets of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheets and statements of changes in equity within equity, separately from equity attributable to the equity shareholders of the Company. Minority interests in the results of the Group is presented on the face of the consolidated income statements as an allocation of the total profit or loss for the period between minority interests and the equity shareholders of the Company. Where losses applicable to the minority exceed the minoritys interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Groups interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Groups interest is allocated all such profits until the minoritys share of losses previously absorbed by the Group has been recovered.

(d) Associate companies Associate companies are entities in which the Group is in a position to exercise significant influence, but not control, over the financial and operating policies through management participation. Associates are accounted for in the consolidated financial statements using the equity method. The consolidated financial statements include the Groups share of the income and expenses of the equity accounted associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. Unrealised gains on transactions between the Group and the associate are eliminated to the extent of the Groups interest in the associate companies. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extend that there is no evidence of impairment. When the Groups share of losses exceeds its interest in an equity accounted associate, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. The most recent available audited financial statements of the associate companies are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminous with those of the Group, the share of results is arrived at from the last audited financial statements available and management financial statements to the end of the accounting year. Investments in associate companies are stated at cost less impairment losses. The policy for recognition and measurement of impairment losses is in accordance with Note 4 (o).

(e) Goodwill Goodwill (negative goodwill) arises on the acquisition of subsidiary and associate companies. For acquisitions prior to 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Groups interest in the fair values of the net identifiable assets and liabilities. With the adoption of FRS 3 beginning 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.



Notes to The Financial Statements

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (f) Property, plant and equipment and depreciation (i) Recognition and measurement Property, plant and equipment are stated at cost or valuation less accumulated depreciation and impairment losses. The Group has availed itself to the transitional provision when the MASB first adopted IAS 16, Property, Plant and Equipment in 1998. Certain long term leasehold land, reclaimed land and building and short term leasehold land were revalued in 1991 and 1997 and no later valuation has been recorded for these property, plant and equipment (except in the case of impairment adjustments based on a valuation). When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

(ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is de-recognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.

(iii) Reclassification to investment property Property that is being constructed for future use as investment property is accounted for as property, plant and equipment until construction or development is complete, at which time it is re-measured to fair value and reclassified as investment property. Any gain or loss arising on re-measurement is recognised in the income statement. When the use of a property changes from owned-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Any gain arising on remeasurement is recognised directly in equity. Any loss is recognised immediately in the income statement.

(iv) Depreciation Freehold land is not depreciated while leasehold land are amortised over the remaining period of the lease. Depreciation of other property, plant and equipment is calculated on a straight line basis to write off their cost of each asset to its residual value over the estimated useful life, at the following annual rates: Leasehold land Buildings, jetties, slipways and roads Leasehold land improvements Plant and machinery Equipment, furniture, fittings, tools and renovation Barges and motor vehicles Over 29 - 99 years 3% - 10% 1% - 10% 5% - 20% 7% - 50% 5% - 25%

The depreciable amount is determined after deducting the residual value. The residual value, depreciation method and useful life are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in profit or loss and the unutilised portion of the revaluation surplus on that item is taken directly to retained earnings.

5

Notes to The Financial Statements

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (f) Property, plant and equipment and depreciation (cont'd) (v) Change in estimates During the financial year, the depreciation rate for motor vehicles had been revised from 10% per annum to 20% per annum for the Company. The revisions were accounted for prospectively as a change in accounting estimates and as a result, the depreciation charge of the Group and of the Company increased by RM0.03 million for the current financial year.

(g) Capital work in progress Capital work in progress consists of building, workshop and platform under construction/installation for intended use as production facilities. The amount is stated at cost and not depreciated until the assets is fully completed and brought into use.

(h) Investment properties Investment properties are properties which are owned or held under a leasehold interest to earn rental income or for capital appreciation or for both. These include land held for a currently undetermined future use. Investment property was previously stated at revaluation with surplus recognised as revaluation reserve. Following the adoption of FRS 140, Investment Properties, all investment properties are measured initially and subsequently at fair value with any change therein recognised in the income statement. This change in accounting policy has been applied in accordance with the transitional provisions in FRS 140 and the effects of adopting FRS 140 are set out in note 5 (c). When an item of property, plant and equipment is transferred to investment property following a change in its use, any difference arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised directly in equity as a revaluation of property, plant and equipment. However, if a fair value gain reverse a previous impairment loss, the gain is recognised in the income statements. Upon disposal of the investment property, any surplus previously recorded in equity is transferred to retained earnings; the transfer is not made through the income statement. When the use of a property changes such that it is reclassified as property, plant and equipment or inventories, its fair value at the date of reclassification becomes its cost for subsequent accounting. Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. In the absence of current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows then is applied to the net annual cash flows to arrive at the property valuation. Valuations reflect, where appropriate: the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, and the markets general perception of their creditworthiness; the allocation of maintenance and insurance responsibilities between the Group and the lessee; and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices and where appropriate counternotices have been served validly and within the appropriate time. A property interest under an operating lease is classified and accounted for as an investment property on a property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year in which they arise.



Notes to The Financial Statements

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (i) Other investments Other investments which comprise debt and equity securities are recognised initially at fair value plus attributable transaction costs. Subsequent to initial recognition: (i) Investments in quoted shares are stated at the lower of cost and market value. (ii) Investment in unquoted shares are stated at cost less impairment losses. The policy for recognition and measurement of impairment losses is in accordance with Note 4 (o). (iii) Other investments which are held on long term basis are stated at cost less impairment losses. The policy for recognition and measurement of impairment losses is in accordance with Note 4 (o). On disposal of an investment, the difference between net disposal proceeds and its carrying amount is recognised in profit or loss in the year which they arise.

(j) Construction contracts Where the outcome of a construction contract involving the rendering of services can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to proportion of contract costs incurred for work performed to date to the estimated total contract costs. Where the outcome of a construction contract involving the rendering of services cannot be reliably estimated, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the total of costs incurred on construction contracts involving the rendering of services, plus recognised profits (less recognised losses), exceeds progress billings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurred plus, recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts.

(k) Inventories Inventories are valued at the lower of cost and net realisable value. Cost is determined principally on a first-in, first-out basis and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

(l) Receivables Receivables are initially recognised at their cost when the contractual right to receive cash or another financial asset from another entity is established. Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts. Bad debts are written off when identified. Receivables are not held for the purpose of trading.

7

Notes to The Financial Statements

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (m) Cash and cash equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of cash flow statement, cash and cash equivalents are presented net of bank overdraft and pledged deposits.

(n) Leases (i) Classification A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not transfer substantially all the risk and rewards are classified as operating leases, with the following exceptions: Property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a property by property basis and, if classified as investment property, is accounted for as if held under finance lease as described in Note 4 (h); and Land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. (ii) Finance leases and hire purchase - the Group as lessee Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Companys incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets. Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 4 (f)(iv).

(iii) Operating leases - the Group as lessee Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expenses over the lease term on a straight-line basis.

(iv) Operating leases the Group as lessor Assets leased out under operating leases are presented on the balance sheets according to the nature of the assets. Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease (Note 4 (v)). Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.



Notes to The Financial Statements

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (o) Impairment of non-financial assets The carrying amounts of assets, other than investment property, construction contract assets, inventories and non-current assets held for sale, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists then the assets recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful life and intangible assets or that are not yet available for use, the recoverable amount is estimated at each balance date or more frequently when indicators of impairment are identified. For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs to. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Groups CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. An assets recoverable amount is the higher of an assets or CGUs fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. An impairment loss is recognised in profit or loss in the period in which it arises, unless the assets are carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset. Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.

(p) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.

9

Notes to The Financial Statements

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (q) Foreign currencies (i) Functional and presentation currency The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Companys functional currency.

(ii) Foreign currency transactions In preparing the financial statements of the individual entities, transactions in currencies other than the entitys functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period.

(iii) Group companies For the purpose of consolidation, financial statements of the foreign subsidiary companies are translated into RM at rate of exchange ruling at the balance sheet date while income statements are translated at average rates for the financial year. Exchange differences arising from these translations are reflected in the exchange fluctuation reserve account within equity. Goodwill and fair value adjustments arising on the acquisition on a foreign entity are treated as assets and liabilities of the foreign entity on or after 1 January 2006 and are recorded in the functional currency of the foreign operations and translated at the closing rate at the balance sheet date. Goodwill and fair value adjustments which arose on the acquisition of foreign subsidiaries before 1 January 2006 are deemed to be assets and liabilities of the parent company and are recorded in RM at the rates prevailing at the date of acquisition. The principal exchange rates used for every unit of foreign currency ruling at the balance sheet date used are as follows: 2006 RM 1 United States Dollar 1 Australian Dollar 1 Euro 1 Sterling Pound 1 Swiss Franc 1000 Ghana Cedis (r) Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial year and is measured using the tax rates that have been enacted at the balance sheet date. Deferred tax is provided for, using the liability method. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transactions, affects neither accounting profits nor taxable profit. 3.53 - 4.65 - - 0.37 2005 RM 3.78 2.77 4.49 6.52 2.88 0.41

50

Notes to The Financial Statements

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (r) Income tax (cont'd) Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised as income or an expense and included in the profit or loss for the period, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill. Additional taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

(s) Financial instruments Financial instruments are recognised in the balance sheets when the Group has become a party to the contractual provisions of the instrument. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

(t) Payables Trade and other payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received. Payables are recognised when there is a contractual obligation to deliver cash or another financial asset to another entity.

(u) Interest bearing borrowings Interest bearing bank loans and overdrafts are recorded at the amount of proceeds received, net of repayments.

(v) Revenue recognition (i) Contract revenue and profit on long term construction contracts are accounted for on the percentage of completion method by reference to the percentage of actual construction work completed and cost incurred. When the outcome of a construction contract cannot be estimated reliably: 1. Revenue is recognised only to the extent of a contract costs incurred that is probable will be recoverable; and 2. Contract costs will be recognised as an expense in the financial year in which they are incurred. In all cases, full provisions for these losses are made in the financial statements where foreseeable losses on contracts are anticipated.

(ii) Revenue from trading activities are recognised upon delivery of product and customer acceptance, if any, or performance of services, net of discount and sales returns. (iii) Rental income from investment property is recognised in the income statement on a straight-line basis over the term of the lease. (iv) Dividend income is recognised in the income statement as and when declared or right to receive payment is established.

51

Notes to The Financial Statements

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (w) Employee benefits (i) Short term benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in the profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (EPF).

(iii) Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefit as a liability and an expense when it is demonstrably committed to either terminate the employment of current employees according to a detailed plan without possibility of withdrawal or providing termination benefits as a result of an offer are made to encourage voluntary redundancy. In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefits is based on the number of employees expected to accept the offer. Benefits falling due more than twelve months after balance sheet date are discounted to present value.

(x) Borrowing costs All borrowing costs are recognised in the income statement using the effective interest method, in the period in which they are incurred except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use. The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

(y) Derivative financial instruments Derivative financial instruments are not recognised in the financial instruments.

(z) Equity instruments Ordinary shares, are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided.

52

Notes to The Financial Statements

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (za) Non-current assets held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only terms that are usual and customary. Immediately before classification as held for sale, the measurement of the non-current assets is brought up-todate in accordance with applicable FRSs. Then, on initial classification as held for sale, non-current assets are measured in accordance with FRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in profit or loss.

5. CHANGES IN ACCOUNTING POLICIES, EFFECTS AND CHANGES IN COMPARATIVES ARISING FROM THE ADOPTION OF NEW AND REVISED FRSs On 1 January 2006, the Group and the Company adopted the following FRSs mandatory for financial periods beginning on or after 1 January 2006: FRS 2 FRS 3 FRS 5 Share-based Payment Business Combinations Non-current Assets Held for Sale and Discontinued Operations

FRS 101 Presentation of Financial Statements FRS 102 Inventories FRS 108 Accounting Policies, Changes in Estimates and Errors FRS 110 Events after the Balance Sheet Date FRS 116 Property, Plant and Equipment FRS 121 The Effects of Changes in Foreign Exchange Rates FRS 127 Consolidated and Separate Financial Statements FRS 128 Investment in Associates FRS 131 Interests in Joint Ventures FRS 132 Financial Instruments: Disclosure and Presentation FRS 133 Earnings Per Share FRS 136 Impairment of Assets FRS 138 Intangible Assets FRS 140 Investment Property The adoption of above FRS, except for FRS 2 and FRS 131 which are not applicable to the Group, does not have any significant financial impact on the Group except for FRS 101 and FRS 140. At the date of authorisation of these financial statements, the following FRSs, amendments to FRS and Interpretations were not early adopted by the Company. However, they were in issue but are not yet effective: (i) FRS 117 - Leases (ii) FRS 124 - Related Party Transactions (iii) FRS 139 - Financial Instruments: Recognition and Measurement (iv) FRS 6 - Exploration for and Evaluation of Mineral Resources (v) Amendment to FRS 119 : Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures (vi) Amendment to FRS 121: The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation (vii) IC Interpretation 1 : Changes in Existing Decommissioning, Restoration and Similar Liabilities (viii) IC Interpretation 2 : Members Shares in Co-operative Entities and Similar Instruments (ix) IC Interpretation 5 : Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds 53

Notes to The Financial Statements

5. CHANGES IN ACCOUNTING POLICIES, EFFECTS AND CHANGES IN COMPARATIVES ARISING FROM THE ADOPTION OF NEW AND REVISED FRSs (CONT'D) (x) IC Interpretation 6: Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment (xi) IC Interpretation 7: Applying the Restatement Approach under FRS 129 Financial Reporting in Hyperinflationary Economies (xii) IC Interpretation 8: Scope of FRS 2 The principal changes in accounting policies and their effects resulting from the adoption of the other new and revised FRSs are discussed below: (a) FRS 5 non-current assets held for sale and discontinued operations Prior to 1 January 2006, non-current assets held for sale were neither classified nor presented as current assets or liabilities. There were no differences in the measurement of non-current assets held for sale and those for continuing use. Upon the adoption of FRS 5, non-current assets held for sale are classified as current assets and are stated at lower of carrying amount and fair value less costs to sell. The Group has applied FRS 5 prospectively in accordance with the transitional provisions.

(b) FRS 101 presentation of financial statements Prior to 1 January 2006, minority interests at the balance sheet date were presented in the consolidated balance sheet separately from liabilities and equity. Upon the adoption of the revised FRS 101, minority interests are now presented within total equity. In the consolidated income statement, minority interests are presented as an allocation of the total profit or loss for the year. A similar requirement is also applicable to the statement of changes in equity. The revised FRS 101 also requires disclosure, on the face of the statement of changes in equity, total recognised income and expenses for the year, showing separately the amounts attributable to equity holders of the Company and to minority interests. These changes in presentation have been applied retrospectively and have no impact on the Companys financial statements.

(c) FRS 140 investment properties Investment property was previously stated at valuation with surplus recognised as revaluation reserve. Upon the adoption of FRS 140, investment properties are now stated at fair value and gains and losses arising from changes in fair values are recognised in profit or loss in the year in which they arise. The Group has applied FRS 140 in accordance with the transitional provisions. The change in accounting policy has had no impact as amounts reported in 2005 or prior years. Instead, the changes have been accounted for by restating the opening balances as at 1 January 2006. The adoption of FRS 140 has the effect of increasing accumulated losses at 1 January 2006 by RM15.8 million.

6. PROPOSED RESTRUCTURING SCHEME The Directors of the Company proposed to implement the following Proposed Disposal and Proposed Restructuring Scheme: 6.1 Proposed disposal of Menara PSCI (Proposed Disposal) Proposed disposal of three lots of land held under Geran No. 27123 Lot No. 1199, Geran No. 27124 Lot No. 1197 and Geran No. 27125 Lot No. 1198, Section 13, all in Town of Georgetown, North East District, State of Pulau Pinang measuring approximately 71,817 square feet together with a building erected thereon, known as Menara PSCI, by PSC Asset Holdings Sdn Bhd, a wholly owned subsidiary of PSC Industries Berhad (PSCI), to Boustead Holdings Berhad (Boustead) for a cash consideration of RM54 million.

5

Notes to The Financial Statements

6. PROPOSED RESTRUCTURING SCHEME (cont'd) 6.1 Proposed disposal of Menara PSCI (Proposed Disposal)(cont'd) The above property is currently charged to OCBC Bank (Malaysia) Berhad for credit facility granted by OCBC Bank (Malaysia) Berhad to PSC Asset Holdings Sdn Bhd and Penang Shipbuilding & Construction Sdn Bhd (PSCSB). The proceeds of RM54 million from the Proposed Disposal will be utilised in full to partially repay the outstanding loan to OCBC Bank (Malaysia) Berhad as at 31 August 2006. As at 31 December 2006, the above investment property has been reclassified as non-current asset held for sale as disclosed in Note 18 to the financial statements.

6.2 Proposed capital reconstruction 6.2.1 Proposed Share Capital Reduction The Proposed Share Capital Reduction pursuant to Section 64 of the Companies Act, 1965 (the Act), will involve the reduction of the issued and paid-up share capital of the Company of RM174,083,348 comprising 174,083,348 ordinary shares of RM1.00 each in the following manner:i. 3 ordinary shares of RM1.00 each in the issued and paid-up capital of the Company which are held by Boustead Holdings Berhad will be cancelled; and ii. the remaining 174,038,345 ordinary shares of RM1.00 each in the issued and paid-up capital of PSCI will be reduced by RM0.80 per share to become 174,083,345 ordinary shares of RM0.20 each. 6.2.2 Proposed Share Capital Consolidation Thereafter, the issued and paid-up share capital of the Company of RM34,816,669 comprising 174,083,345 ordinary shares of RM0.20 each will be consolidated such that every five (5) ordinary shares of RM0.20 each shall constitute one (1) ordinary share of RM1.00 each credited as fully paid-up and the resulting issued and paid-up share capital of the Company of RM34,816,669 will comprise 34,816,669 ordinary shares of RM1.00 each.

6.2.3 Proposed Share Premium Account Cancellation As at 31 August 2006, the share premium account of the Company amounted to RM70,243,000 (Share Premium Account). Pursuant to Section 60(2) of the Act, the provisions of the Act relating to the reduction of share capital shall apply as if the Share Premium Account were paid-up share capital of the Company. Hence, the Proposed Share Capital Reduction, Proposed Share Capital Consolidation and Proposed Share Premium Account Cancellation will give rise to an aggregate credit of approximately RM209.5 million which will be utilised to reduce the Groups accumulated losses.

55

Notes to The Financial Statements

6. PROPOSED RESTRUCTURING SCHEME (cont'd) 6.3 Proposed debt settlement The Proposed Debt Settlement involving the Company and PSCSB will be implemented by way of a scheme of arrangement under Section 176 of the Act in respect of the amount owing (Scheme Debt) to the Scheme Creditors of both the Company and its wholly owned subsidiary, PSCSB. The Proposed Debt Settlement may be summarised as follows: Scheme Debt as at Cut-Off Date Less: Collateral Set-off # Total Scheme Debt waived Balance fully settled by issuance of the Settlement Shares ^ RM 539,926,530 * (3,100,000) @ (392,818,923) 144,007,607

* Based on the market value of the non-operating Scheme Assets as appraised by C H Williams vide the Valuation Report dated 15 November 2006. @ Comprising the following:(i) waiver of all outstanding interest up to the Cut-Off Date amounting to RM139,643,340; and (ii) waiver of 70% of the principal amount as at the Cut-Off Date amounting to RM253,175,582 ^ New ordinary shares of RM1.00 each in the Company to be issued as fully paid-up to the renounces of the Scheme Creditors pursuant to the Proposed Debt Settlement
#

As defined in Section 6.3.1(iii) below

The Settlement of the Scheme Debt is estimated to result in an interest savings of RM51 million per annum. 6.3.1 Particulars The Scheme Debt owing to the Secured Creditors of the Company and PSCSB will be settled in the following manner: (i) Waiver of any or all interests or (in the case of Scheme Debt based on Syariah principles) profit, compensation or equivalent accruing on the outstanding debt after the Cut-Off Date and any penalties, charges, fees, costs and expenses and indemnity payment obligations or (in the case of Scheme Debt based on Syariah principles) other compensation, penalty charges or equivalent; (ii) Full settlement of secured debt up to the collateral value of the operating assets in the manner set out in sub-paragraphs (iii) and (iv) below, and the portion of the outstanding debt exceeding the collateral value shall be referred to as Partially Unsecured Debt; (iii) Debt secured on non-operating assets shall be settled by way of requiring the creditor to foreclose (otherwise acquiring) the non-operating assets or extinguishing all rights of the Group in relation to the said operating assets as settling the debt to the extent of the collateral value (Collateral SetOff); (iv) Debt secured on operating assets shall be settled by way of issuance of Settlement Shares for the secured debt to the extent of the collateral value of the operating assets or outstanding debt whichever is lower; whereupon, the Secured Creditors shall discharge (or otherwise extinguish) its security interest over the said operating assets and title and possession to all Scheme Assets that are under hire purchase or are otherwise owned by the Secured Creditors shall be transferred to the Company or PSCSB, and all interest of the Scheme Creditors in the said operating assets shall be extinguished;

5

Notes to The Financial Statements

6. PROPOSED RESTRUCTURING SCHEME (cont'd) 6.3 Proposed debt settlement (cont'd) 6.3.1 Particulars (cont'd) v. The Settlement Shares to be allotted to the Secured Creditors will be renounced entirely by the Scheme Creditors for a cash consideration of RM1.00 per Settlement Share (as detailed in Section 6.3.4 below); and vi. The Partially Unsecured Debt shall be treated as an unsecured debt and shall be settled in a manner similar to that for the Unsecured Creditors as set out below. The settlement for the Secured Creditors of the Company and PSCSB is summarised below. Secured Creditors of the Company RM 5,831,956 (3,100,000) - 2,731,956 Secured Creditors of PSCSB RM 103,650,088 - (35,503,786) 68,146,302

Total RM 109,482,044 (3,100,000) (35,503,786) 70,878,258

Scheme Debt as at Cut-Off Date Less : Collateral Set-Off for the non-operating Scheme Assets * Less : Issue of Settlement Shares for the operating Scheme Assets # Balance as per Partially Unsecured Debt

Notes: * Based on the market value as appraised by C H Williams vide valuation report dated 15 November 2006
#

Based on the lower of the outstanding debt and the market value of the operating Scheme Assets, being the Pulau Jerejak Shipyard, plant and machinery which consist of 2 units of MHE-Demag overhead crane situated at Pulau Jerejak Shipyard, 1 unit of passenger ferry situated at Pulau Jerejak Shipyard and 1 unit of steel floating dock situated at Pulau Langkawi, as appraised by C H Williams vide valuation reports dated 17 November 2006 and 22 November 2006, respectively

57

Notes to The Financial Statements

6. PROPOSED RESTRUCTURING SCHEME (cont'd) 6.3 Proposed debt settlement (cont'd) 6.3.1 Particulars (cont'd) The Scheme Debt owing to the Unsecured Creditors of the Company and PSCSB will be settled in the following manner: (i) Waiver of any and all interests or (in the case of Scheme Debt based on Syariah principles) profit, compensation or equivalent up to and including the Cut-Off Date and any penalties, charges, fees, costs and expenses and indemnity payment obligations or (in the case of Scheme Debt based on Syariah principles) other compensation, penalty charges or equivalent for such period, for all the unsecured debt; (ii) Waiver of any and all interests or (in the case of Scheme Debt based on Syariah principles) profit, compensation or equivalent after the Cut-Off Date and any and all penalties, charges, fees, costs and expenses and indemnity payment obligations or (in the case of Scheme Debt based on Syariah principles) other compensation, penalty charges or equivalent, for all the unsecured debt; (iii) Waiver of 70% of the principal amount of all the unsecured debt as at the Cut-Off Date and such post-waiver principal amount of the unsecured debt shall be referred to as the Restructured Debt; (iv) Issuance of the Settlement Shares as full settlement for the Restructured Debt; and (v) The Settlement Shares to be allotted to the Unsecured Creditors will be renounced entirely by the Unsecured Creditors for a cash consideration of RM1.00 per Settlement Share. Each of the Secured Creditors and Unsecured Creditors of PSCSB which have the benefit of a corporate guarantee from PSCI shall fully discharge and release PSCI from all its obligations under the said corporate guarantee and all outstanding amount shall be and will be deemed to be fully and irrevocably settled, satisfied, released and discharged as between PSCI and such Secured Creditors and Unsecured Creditors. The settlement for the Partially Unsecured Debt and the Unsecured Creditors of PSCI and PSCSB is summarised below: Partially Unsecured Debt RM 70,878,258 Unsecured Creditors of the Company RM 248,924,155 Unsecured Creditors of PSCSB RM 181,520,331

Total RM 501,322,744

Scheme Debt as at Cut-Off Date Less : Waiver of all interests and 70% of principal amount of Scheme Debt Balance of Restructured Debt To be settled by the issuance of Settlement Shares

(49,972,462) 20,905,796 (20,905,796) -

(202,080,882) 46,843,273 (46,843,273) -

(140,765,579) 40,754,752 (40,754,752) -

(392,818,923) 108,503,821 (108,503,821) -

5

Notes to The Financial Statements

6. PROPOSED RESTRUCTURING SCHEME (cont'd) 6.3 Proposed debt settlement (cont'd) 6.3.2 Binding Effect of Proposed Scheme of Arrangement The proposed scheme of arrangement to effect the Proposed Debt Settlement shall, if sanctioned by order of the Court under Section 176(3) of the Act, be binding on the Scheme Creditors and shall take effect upon the lodgement of the said order with the Companies Commission of Malaysia within one month thereof or such earlier date as the Court may determine pursuant to Section 176(5) of the Act. 6.3.3 Ranking of Settlement Shares The Settlement Shares shall, upon allotment and issue, rank pari passu in all respects with the ordinary shares of the Company existing at the time of such issue, except that the Settlement Shares shall not be entitled to participate in any rights, allotment, dividends and/or any other distributions, the entitlement date of which falls on or prior to the allotment date of the Settlement Shares. 6.3.4 Proposed Renunciation

As part of the terms of the Proposed Debt Settlement, the entire 144,007,607 Settlement Shares (Renounced Shares) will be renounced by the Scheme Creditors in favour of Boustead Holdings Berhad (Boustead) and/or such other prospective investor(s) as the Board may identify and approve (Renouncees) in the following manner: No. of Settlement Shares Renounced in PSCSB favour of Renounced in Renouncees favour of other than Boustead Boustead 56,409,582 71,141,609 127,551,191 - 16,456,416 16,456,416

Scheme Creditors Secured creditors Unsecured creditors

Entitlement of Settlement Shares 56,409,582 87,598,025 144,007,607

* Boustead, subject to the approval of its shareholders, has on 28 February 2007 given its written undertaking to acquire up to 144,007,607 Renounced Shares. In the event that the Renouncees other than Boustead does not acquire its portion of the Renounced Shares, Boustead will acquire the entire Renounced Shares and its resultant shareholding in the Company will be 71.62% The consideration for the Proposed Renunciation shall be the cash sum of RM144,007,607 or RM1.00 per share based on the issue price of RM1.00 each paid into an account operated by a party nominated by the Company (Stakeholder) no later than three (3) market days prior to the listing of the Renounced Shares and the Rights Shares. The said Stakeholder shall release the cash sum to the renouncing Scheme Creditors within one (1) market day from the listing of the Renounced Shares. In consideration of the aforementioned cash payment, the Renounced Shares will be credited directly into the respective Central Depository System accounts of the Renouncees prior to the listing of and quotation for the Renounced Shares on the Main Board of Bursa Securities.

59

Notes to The Financial Statements

6. PROPOSED RESTRUCTURING SCHEME (cont'd) 6.3.5 Proposed Rights Issue The Company proposes to undertake a renounceable rights issue of 69,633,338 new ordinary shares of RM1.00 each at an indicative issue price of RM1.00 per Rights Share on the basis of two (2) Rights Shares for every one (1) ordinary share of RM1.00 each held after the Proposed Capital Reconstruction. The issue price of the Rights Shares is payable in full upon acceptance by the entitled shareholders of the Company. The Rights Shares will be offered to the shareholders of the Company (except the holders of the Settlement Shares to be issued pursuant to the Proposed Debt Settlement) as per the Record of Depositors on the entitlement date to be announced in due course after obtaining the approvals required from all the relevant authorities. Part of the proceeds from the proposed renounceable rights issue above will be utilised to pay off the expenses of the restructuring exercise amounting to RM4.2 million.

6.4 Proposed exemption As part of the terms of the Proposed Debt Settlement, 144,007,607 Settlement Shares is proposed to be issued to the Scheme Creditors and will be renounced by the Scheme Creditors at a cash consideration of RM1.00 per Settlement Share in the following manner: 127,551,191 Settlement Shares will be renounced by the Scheme Creditors to Boustead; and 16,456,416 Settlement Shares will be renounced to such other prospective investor(s) as the Board may identify and approve. However, in the event that there is no other prospective investor(s) acquiring these Settlement Shares, Boustead had, on 28 February 2007, given to the Company their written undertaking to acquire up to the entire 144,007,607 including the aforesaid 16,456,416 Settlement Shares (Remaining Settlement Shares). On the assumption that Boustead does not acquire the Remaining Settlement Shares, Bousteads shareholding in the Company will increase from 32.5% equity interest to 65.0% equity interest, upon completion of the Proposals. In the event that Boustead acquires the Remaining Settlement Shares, Bousteads shareholding in the Company may potentially increase up to 71.6% equity interest, upon completion of the Proposals. In view of the above and pursuant to Part II of the Malaysian Code on Take Overs and Mergers, 1998, as amended from time to time and any re-enactment thereof, Boustead would be obliged to make a mandatory general offer for all the remaining Company Shares not held by Boustead upon completion of the Proposed Restructuring Scheme and proposed acquisition of up to 144,007,607 Settlement Shares pursuant to the Proposed Renunciation. On 22 January 2007, Affin Investment Bank Berhad, on behalf of Boustead, had submitted an application to the Securities Commission ("SC") in respect of the Proposed Exemption. The SC had, vide its letter dated 13 February 2007, stated that the SC will consider the Proposed Exemption subject to, amongst others, the provision of competent independent advice (IA) to the shareholders of the Company wherein the appointment of the IA and contents of the IA Circular must have been approved and consented by the SC.

0

Notes to The Financial Statements

6. PROPOSED RESTRUCTURING SCHEME (cont'd) 6.5 Approvals required 6.5.1 The Proposed Disposal is subject to approvals from the following:- (i) The SC; (ii) the SC (for and on behalf of Foreign Investment Committee (FIC)) under the FIC Guidelines (Boustead, as the purchaser); (iii) the shareholders of the Company at an Extraordinary General Meeting ("EGM") to be convened; and (iv) other relevant parties/authorities, if any. The Proposed Disposal is not conditional upon the Proposed Capital Reconstruction, Proposed Debt Settlement, Proposed Rights Issue collectively (Proposed Restructuring Scheme) and the Proposed Exemption. 6.5.2 The Proposed Restructuring Scheme and the Proposed Exemption are subject to the following approvals: (i) the SC for the Proposed Restructuring Scheme and the Proposed Exemption. (ii) the SC (for and on behalf of FIC) under the FIC Guidelines for the Proposed Restructuring Scheme. (iii) the Shareholders of the Company at an EGM to be convened for the Proposed Restructuring Scheme and Proposed Exemption. (iv) the Scheme Creditors at the Court-Convened Meetings for the Proposed Debt Settlement. (v) the confirmation of the High Court of Malaya for the Proposed Capital Reduction and the Proposed Share Premium Account Cancellation pursuant to Section 64 and 60 of the Act, as well as the requisite sanction of the High Court of Malaya for the Proposed Debt Settlement pursuant to Section 176 of the Act; (vi) the Bursa Securities for the listing of and quotation for the Settlement Shares and Rights Shares to be issued pursuant to the Proposed Restructuring Scheme on the Main Board of Bursa Securities; (vii) the shareholders of Boustead at an EGM to be convened for the proposed acquisition of up to the entire 144,007,607 Renounced Shares pursuant to the Proposed Renunciation; and (viii) Other relevant parties/authorities, if any As disclosed in Note 46, all approvals had been obtained from the shareholders, lenders and relevant authorities except for: - the confirmation of the High Court of Malaya for the Proposed Capital Reduction and the Proposed Share Premium Account Cancellation pursuant to Section 64 and 60 of the Act, as well as the requisite sanction of the High Court of Malaya for the proposal Debt Settlement pursuant to Section 176 of the Act; and - Bursa Securities for the listing of and quotation for the Settlement Shares and Rights Shares to be issued pursuant to the Proposed Restructuring Scheme on the Main Board of Bursa Securities. The Proposed Restructuring Scheme and the Proposed Exemption are inter-conditional with each other.

1

Notes to The Financial Statements

7. REVENUE Group 2006 RM'000 Sale of goods Shiprepair and maintenance related activities Construction and shipbuilding Rental income from investment property Interest income Management fees 8. COST OF SALES Cost of sales represents cost of goods sold, cost recognised by reference to the stage of completion method, cost of services rendered in relation to shiprepair and shipbuilding as well as direct operating expenses of investment property. 9. OTHER INCOME Group 2006 RM'000 Included in other income are: Gain on disposal of a subsidiary company (Note 22(b)) Gain on foreign exchange: - realised - unrealised Gain on diposal of property, plant and equipment Gain on disposal of associate company Interest income Rental income Write back of provision for doubtful debts Reversal of write-down of inventories (Note 25) Reversal of provision for warranties Fair value adjustment of investment property (Note 18) Debt waiver by creditors 13 118 77 113 - 2,139 2,327 675 16 1,344 534 9,140 2005 RM'000 1,322,346 580 15,882 - 1,061 4,093 1,406 18,744 34 - - - Company 2006 RM'000 - - - 39 - - - 468 - - 534 64 2005 RM'000 - - - - 16 - - - - - - 27,196 30,873 17,720 4,687 - - 80,476 2005 RM'000 829 115,964 48,758 5,412 - - 170,963 Company 2006 RM'000 - - - - 334 - 334 2005 RM'000 - - - - 493 500 993

2

Notes to The Financial Statements

10. FINANCE COSTS Group 2006 RM'000 Interest expense on: Term loans Overdraft Hire purchase and finance lease liabilities Advances from associate company Bankers acceptance Others 11. LOSS BEFORE TAX The following amounts have been included in arriving at loss before tax: Group 2006 RM'000 Staff costs (Note 12) Directors remuneration: - Executive Directors (Note 13) - Non-Executive Directors (Note 13) Auditors remuneration: - statutory audit - other services Amortisation of deferred assets (Note 20) Bad debts written off Cancellation of dividend by subsidiary companies Depreciation of property, plant and equipment (Note 17) Deposit written off Deferred assets written off (Note 20) Deferred expenditure written off (Note 21) Goodwill written off (Note 19) Interest waiver to subsidiary companies Inventories written down Impairment of investments in subsidiary companies (Note 22) Impairment of other investments (Note 24) Impairment of property, plant and equipment (Note 17) Loss on diposal of property, plant and equipment Loss on foreign exchange : - realised - unrealised Offshore Patrol Vessels expenditure written off Operating leases: - minimum lease payments for land and buildings - minimum lease payments for plant and equipment Property, plant and equipment written off 13,935 18 481 173 290 - 227 - 4,098 - - - 15 - 27 - 479 36,835 - 277 92 - 638 587 377 3 2005 RM'000 19,278 1,675 365 268 40 3,951 22,751 - 18,637 1,000 63,217 143,486 203,496 - 3,716 - 1,128 35,177 333 257 94 455,341 1,357 3,454 2,441 Company 2006 RM'000 - 18 106 10 250 - - 4,000 132 - - - - - - 30,456 445 - - - - - - - 5 2005 RM'000 84 347 93 9 21 - - 12,380 73 - - - - 19,020 - 262,726 445 - - - - - - - 35,485 2,124 418 1,770 307 - 40,104 2005 RM'000 96,269 2,746 1,540 - 439 32 101,026 Company 2006 RM'000 13,758 - 2 - - - 13,760 2005 RM'000 21,188 - 9 - - - 21,197

Notes to The Financial Statements

11. LOSS BEFORE TAX (CONT'D) The following amounts have been included in arriving at loss before tax: Group 2006 RM'000 Provision for doubtful debts Provision for foreseeable loss in relation to freehold land of a subsidiary company (Note 37) Provision for restructuring costs (Note 37) Provision for warranty costs (Note 37) Provision for Offshore Patrol Vessel ("OPV") cost escalation 1,445 6,500 3,606 148 - 2005 RM'000 274,980 - - 410 606,899 Company 2006 RM'000 - - 3,606 - - 2005 RM'000 121,510 - - - -

In prior year, a former subsidiary company wrote off the design and integrated logistics support system costs amounting to RM455.3 million due to significant uncertainty over its realisation in the future and there would be no economics benefits to be obtained thereafter. In addition, a provision of RM606.9 million was also made in view of the possible cost escalation in relation to the OPV project. OPV expenditure comprised all direct costs and other related costs common to the construction of patrol vessels, including interests from financing, depreciation and technical advisory fees in relation to the privatisation agreement with the Government of Malaysia for the construction of 27 units of OPV, of which 6 units had been secured and remaining 21 units was to be awarded by the Government. 12. STAFF COSTS (EXCLUDING DIRECTORS REMUNERATION) Group 2006 RM'000 Wages and salaries Social security contribution Contributions to defined contribution plan Termination benefits Others 9,808 80 1,089 202 2,756 13,935 2005 RM'000 13,536 90 1,424 350 3,878 19,278 Company 2006 RM'000 - - - - - - 2005 RM'000 67 1 8 - 8 84



Notes to The Financial Statements

13. DIRECTORS REMUNERATION Group 2006 RM'000 Executive Directors remuneration: Fees Other emoluments Non-Executive Directors remuneration (Note 11): Fees Other emoluments Total Directors remuneration: Estimated money value of benefits-in-kind Total Directors remuneration including benefits-in-kind Executive: Salaries and other emoluments Fees Contributions to defined contribution plan Estimated money value of benefits-in-kind Non-Executive: Salaries and other emoluments* Fees Estimated money value of benefits-in-kind** 12 6 18 65 416 481 499 23 522 6 12 - - 18 416 65 23 522 2005 RM'000 49 1,626 1,675 39 326 365 2,040 128 2,168 1,529 49 96 111 1,785 327 39 17 2,168 Company 2006 RM'000 12 6 18 58 48 106 124 - 124 6 12 - - 18 48 58 - 124 2005 RM'000 43 304 347 39 54 93 440 - 440 304 43 - - 347 54 39 - 440

* Included in the amount is RM371,895 (2005: RM Nil), being salary, EPF contribution and allowance paid to a Director who was re-designated from an Executive Director to a Non-Executive Director during the financial year. ** Included in the amount is RM23,467 (2005: RM Nil) in relation to a Director who was re-designated from an Executive Director to a Non-Executive Director during the financial year. The number of Directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below: Number of directors 2006 RM000 Executive Directors: RM0 - RM50,000 RM150,001 - RM200,000 RM450,001 - RM500,000 RM600,001 - RM650,000 Non-Executive: RM0 - RM50,000 RM50,001 - RM100,000 RM250,001 - RM300,000 RM400,001 - RM450,000 5 1 - - - 3 1 - 1 2005 RM000 1 1 2 1 2 1 1 -

Notes to The Financial Statements

14. INCOME TAX EXPENSE Group 2006 RM'000 Current income tax: Malaysian income tax - current year - prior year Non-Malaysian income tax - current year Deferred tax expense Origination and reversal of temporary differences 1,086 1,692 2,778 212 2,990 353 3,343 2005 RM'000 1,851 (51) 1,800 92 1,892 (1,657) 235 Company 2006 RM'000 - - - - - - - 2005 RM'000 - (226) (226) - (226) (7,830) (8,056)

Domestic current income tax is calculated at the statutory tax rate of 28% (2005: 28%) of the estimated assessable profit for the year. The domestic statutory tax rate will be reduced to 27% from the current years rate of 28%, effective year of assessment 2007 and to 26% effective year of assessment 2008. Certain subsidiaries of the Company qualify for the reduced statutory tax rate of 20% on the first RM500,000 (2005: RM500,000) of estimated assessable profit during the financial year. A reconciliation of income tax expense/(benefit) applicable to profit before taxation at the statutory income tax rate to income tax expense/(benefit) at the effective income tax rate of the Group and of the Company is as follows: Group 2006 RM'000 Loss before taxation Income tax at rate of 28% (2005: 28%) Different tax rates in other country Effect of reduced statutory rate on the first RM500,000 assessable profits Expenses not deductible for tax purposes Income not subject to tax Utilisation of previously unrecognised tax losses Deferred tax assets not recognised in respect of current years tax losses and unabsorbed capital allowances Under/(over)provision of tax expense in prior years Income tax expense Tax savings during the financial year arising from: Utilisation of previously unrecognised tax losses (89,914) (25,176) (39) (221) 13,649 (2,468) (316) 16,222 1,692 3,343 (316) 2005 RM'000 (619,464) (173,450) 64 (172) 208,241 (47,566) - 13,169 (51) 235 - Company 2006 RM'000 (52,757) (14,772) - - 14,897 (282) - 157 - - - 2005 RM'000 (440,756) (123,412) - - 115,823 (143) - (98) (226) (8,056) -



Notes to The Financial Statements

15. LOSS PER SHARE Basic loss per share has been calculated by dividing loss for the year attributable to ordinary equity holders of the Company of RM94.218 million (2005: RM533.49 million (restated)) by the weighted average number of shares in issue during the financial year of 174.083 million (2005 : 174.083 million). The comparatives basic loss per share has been restated to take into account the effect of prior year adjustments (Note 47) on loss for that year. 16. DIVIDEND PER SHARE There was no dividend declared, recommended or paid for the financial year ended 31 December 2006 (2005: Nil). 17. PROPERTY, PLANT AND EQUIPMENT

Group Cost or valuation At 1 January 2005 At cost At valuation : 1991 : 1997 Additions Disposals Written off Disposal of subsidiary company Exchange differences At 31 December 2005/ 1 January 2006 Additions Disposals Written off Reclassification At 31 December 2006 Representing: At cost At valuation: 1991 At 31 December 2006

Land and buildings RM000 145,386 13,096 200 158,682 3 - - (50,501) (24) 108,160 - (6) (365) - 107,789 94,693 13,096 107,789

Plant and machinery RM000 38,471 - - 38,471 111 (73) (49) (31,746) (3) 6,711 3,758 (92) (81) 58 10,354 10,354 - 10,354

Equipment, fittings, renovation, vehicles and others RM000 206,840 - - 206,840 4,035 (6,431) (2,391) (179,536) (7) 22,510 1,081 (1,566) (373) (58) 21,594 21,594 - 21,594

Capital work in progress RM000 243,053 - - 243,053 28,812 (1) (59) (270,643) (6) 1,156 116 - (149) - 1,123 1,123 - 1,123

Total RM000

633,750 13,096 200 647,046 32,961 (6,505) (2,499) (532,426) (40) 138,537 4,955 (1,664) (968) 140,860 127,764 13,096 140,860

7

Notes to The Financial Statements

17. PROPERTY, PLANT AND EQUIPMENT (CONT'D)

Group (cont'd) Accumulated depreciation and impairment At 1 January 2005 Depreciation charge for the year: Recognised in profit or loss (Note 11) Capitalised in construction costs (Note 27) Capitalised in Offshore Patrol Vessels expenditure (Note 27) Impairment loss recognised in profit or loss (Note 11) Disposals Written off Reversal on disposal of subsidiary company - impairment loss - depreciation Exchange differences At 31 December 2005/ At 1 January 2006 Depreciation charge for the year (Note 11) Impairment loss recognised in profit or loss (Note 11) Disposals Written off Reclassification Exchange differences At 31 December 2005 Representing: Accumulated depreciation Impairment loss At 31 December 2006 Net carrying amount At 31 December 2006 At 31 December 2005

Land and buildings RM000

Plant and machinery RM000

Equipment, fittings, renovation, vehicles and others RM000

Capital work in progress RM000

Total RM000

29,490 4,410 4,410 - - 12,800 - - (12,800) (3,921) (4) 29,975 2,366 36,835 (2) (231) - (3) 68,940 32,105 36,835 68,940 38,849 78,185

22,236 2,506 1,054 1,442 10 1,050 (39) (35) (1,050) (18,864) (2) 5,802 172 - (91) (78) (46) (1) 5,758 5,758 - 5,758 4,596 909

101,043 13,868 13,173 - 695 21,327 (3,486) (23) (21,327) (95,087) (5) 16,310 1,560 - (1,068) (282) 46 (5) 16,561 16,561 - 16,561 5,033 6,200

- - - - - - - - - - - - - - - - - - - - - - 1,123 1,156

152,769 20,784 18,637 1,442 705 35,177 (3,525) (58) (35,177) (117,872) (11) 52,087 4,098 36,835 (1,161) (591) - (9) 91,259 54,424 36,835 91,259 49,601 86,450



Notes to The Financial Statements

17. PROPERTY, PLANT AND EQUIPMENT (CONT'D) Analysis of land and buildings:Long term leasehold land and reclaimed land RM000

Group (Cont'd) Cost or valuation At 1 January 2005 At cost At valuation : 1991 : 1997 Additions Disposal of subsidiary company Exchange differences At 31 December 2005/1 January 2006 Disposals Written off Reclassification At 31 December 2006 Representing: At cost At valuation : 1991 At 31 December 2006

Short term leasehold land RM000

Yard development RM000

Buildings, jetties, slipways and roads RM000

Total RM000

2,853 13,096 - 15,949 - - - 15,949 - - - 15,949 2,853 13,096 15,949

- - 200 200 - - - 200 - (200) - - - - -

101,193 - - 101,193 3 (50,501) - 50,695 - - 5,550 56,245 56,245 - 56,245

41,340 - - 41,340 - - (24) 41,316 (6) (165) (5,550) 35,595 35,595 - 35,595

145,386 13,096 200 158,682 3 (50,501) (24) 108,160 (6) (365) - 107,789 94,693 13,096 107,789

Accumulated depreciation and impairment At 1 January 2005 Depreciation charge for the year Impairment loss recognised in profit or loss Reversal on disposal of subsidiary company - impairment loss - depreciation Exchange differences

1,786 259 - - - -

200 - - - - - 200 - - - (200) - - - - - - - - 9

16,271 2,804 12,800 (12,800) (3,921) - 15,154 1,168 28,268 - - 1,943 - 46,533 18,265 28,268 46,533 9,712 35,541

11,233 1,347 - - - (4) 12,576 1,006 7,598 (2) (31) (1,943) (3) 19,201 11,603 7,598 19,201 16,394 28,740

29,490 4,410 12,800 (12,800) (3,921) (4) 29,975 2,366 36,835 (2) (231) - (3) 68,940 32,105 36,835 68,940 38,849 78,185

At 31 December 2005/At 1 January 2006 2,045 Depreciation charge for the year 192 Impairment loss recognised in profit or loss 969 Disposals - Written off - Reclassification - Exchange differences - At 31 December 2005 Representing: Accumulated depreciation Impairment loss At 31 December 2006 Net carrying amount At 31 December 2006 At 31 December 2005 3,206 2,237 969 3,206 12,743 13,904

Notes to The Financial Statements

17. PROPERTY, PLANT AND EQUIPMENT (CONT'D) Analysis of equipment, fittings, renovation, vehicles and others are as follows: Office Equipment, fittings, renovation, vehicles Equipment and others Group (Cont'd) RM000 RM000 Cost At 1 January 2005 Additions Disposals Written off Disposal of subsidiary company Reclassification Exchange differences At 31 December 2005/1 January 2006 Additions Disposals Written off Reclassification At 31 December 2006 Accumulated depreciation and impairment At 1 January 2005 Depreciation charge for the year: Recognised in profit or loss Capitalised in Offshore Patrol Vessels expenditure Impairment loss recognised in profit or loss Disposals Written off Reversal on disposal of subsidiary company: - impairment loss - depreciation Exchange differences At 31 December 2005/At 1 January 2006 Depreciation charge for the year Disposals Written off Reclassification Exchange differences At 31 December 2005 Net carrying amount At 31 December 2006 At 31 December 2005 33,712 2,974 (8) - (26,836) 65 - 9,907 4 (47) (109) - 9,755 57,639 704 (43) (2,391) (47,749) (65) (6) 8,089 415 (78) (56) (58) 8,312

Barges and motor vehicles RM000 115,489 357 (6,380) - (104,951) - (1) 4,514 662 (1,441) (208) - 3,527

Total RM000 206,840 4,035 (6,431) (2,391) (179,536) - (7) 22,510 1,081 (1,566) (373) (58) 21,594

25,196 1,711 1,711 - - (5) - - (19,982) - 6,920 551 (32) (26) - - 7,413 2,342 2,987

27,454 5,401 4,706 695 - (30) (23) - (26,625) (4) 6,173 661 (57) (48) (66) (3) 6,660 1,652 1,916

48,393 6,756 6,756 - 21,327 (3,451) - (21,327) (48,480) (1) 3,217 348 (979) (208) 112 (2) 2,488 1,039 1,297

101,043 13,868 13,173 695 21,327 (3,486) (23) (21,327) (95,087) (5) 16,310 1,560 (1,068) (282) 46 (5) 16,561 5,033 6,200

70

Notes to The Financial Statements

17. PROPERTY, PLANT AND EQUIPMENT (CONT'D) Short term leasehold land RM000

Company Cost At 1 January 2005 At cost At valuation : 1997 At 31 December 2005/1 January 2006 Disposals Written off At 31 December 2006 Accumulated depreciation and impairment At 1 January 2005 Depreciation charge for the year (Note 11) At 31 December 2005/1 January 2006 Depreciation charge for the year (Note 11) Disposals Written off At 31 December 2006 Net carrying amount At 31 December 2006 At 31 December 2005

Furniture, fittings, tools, equipment and renovation RM000

Barges and motor vehicles RM000

Total RM000

- 200 200 - (200) - 200 - 200 - - (200) - - -

26 - 26 - (26) - 18 3 21 - - (21) - - 5

706 - 706 (498) - 208 394 70 464 132 (388) - 208 - 242

732 200 932 (498) (226) 208 612 73 685 132 (388) (221) 208 247

(a) Long term leasehold land, reclaimed land and building and short term leasehold land of the Group were revalued by the Directors in 1991 and 1997 respectively based on valuation carried out by independent professional valuers based on existing use basis and has not been revalued since. The Group does not adopt a policy of regular revaluation as required by FRS116, Property, Plant and Equipment and has availed itself to the transitional provision under IAS 16 (Revised): Property, Plant and Equipment. (b) A subsidiary of the Group, included within construction and shipbuilding segment, has engaged a firm of professionals to carry out a review of the recoverable amount of its property, plant and equipment during the financial year in relation to the Groups proposed restructuring scheme. The review led to a recognition of an impairment loss of RM36.8 million (included in Other Expenses) as disclosed in Note 11. The recoverable amount was based on comparison method, whereby the recent transactions and asking prices of similar properties in the locality are analysed for comparison purposes with adjustments made for differences in location, size, tenure, title restrictions if any and any other relevant characteristics to arrive at the market value, and the cost method of valuation entails separate valuations of the land and buildings to arrive at the market value of the subject property. The land is valued by reference to transactions of similar lands in the surrounding with adjustments made for differences in location, terrain, size and shape of the land, tenure, title restrictions, if any and other relevant characteristics. The buildings are valued by reference to their depreciated replacement costs, that is, the replacement cost new less an appropriate adjustment for depreciation or obsolescence to reflect the existing condition of the buildings at the date of valuations.

71

Notes to The Financial Statements

17. PROPERTY, PLANT AND EQUIPMENT (CONT'D) The land and building values are then summated to arrive at the market value of the subject. In the opinion of the Directors, due to absence of historical records, unreasonable expenses would be incurred in obtaining the original costs of the assets value in that financial year. Hence, the Group is not able to provide the carrying amounts of the revalued land and building had they been carried under the cost model.

(c) The long term leasehold land and the reclaimed land have an unexpired lease period of more than 50 years. (d) During the financial year, the Group acquired property, plant and equipment with an aggregate cost of RM 4.95 million (2005: RM32.96 million) of which RM0.13 million (2005: RM Nil) was acquired by means of hire purchase. (e) Net carrying amounts of property, plant and equipment held under hire purchase and finance lease arrangements are as follows:

Group 2006 RM'000 Barges and motor vehicles 738 2005 RM'000 867

Company 2006 RM'000 - 2005 RM'000 209

(f) Net carrying amounts of property, plant and equipment held pledged as securities for borrowings are as follows:

Group 2006 RM'000 Plant and machinery Leasehold land and buildings Yard development Buildings, jetties, slipways and roads 126 10,984 9,714 13,269 34,093 2005 RM'000 143 11,051 35,541 25,409 72,144

Company 2006 RM'000 - - - - - 2005 RM'000 - - - - -

D etails of the terms and conditions of the hire purchase and finance lease arrangements are disclosed in Note 35.

72

Notes to The Financial Statements

18. INVESTMENT PROPERTIES Group 2006 RM'000 At 1 January Prior year adjustments (Note 47) Effects of adopting FRS 140 Fair value adjustments (Note 11) Reclassified as held for sale Comprise: Buildings Freehold land Leasehold land 89,686 - 89,686 (26,620) 534 63,600 (57,100) 6,500 - 6,500 - 6,500 2005 RM'000 70,000 19,686 89,686 - - 89,686 - 89,686 52,800 34,320 2,566 89,686 Company 2006 RM'000 2,566 - 2,566 - 534 3,100 (3,100) - - - - - 2005 RM'000 - 2,566 2,566 - - 2,566 - 2,566 - - 2,566 2,566

Except for the freehold land amounting to RM6.5 million (2005: RM17.1 million), the above investment properties have been pledged to licensed banks to secure the term loans 2, 3, 5 and revolving credit facility as disclosed in Notes 33 and 34 to the financial statements. 19. INTANGIBLE ASSETS Negative goodwill RM000

Goodwill RM000 Cost At 1 January 2005 De-recognised on disposal subsidiary company Written off (Note 11) At 31 December 2005/At 1 January 2006 Written off (Note 11) At 31 December 2006 206,393 (2,866) (203,496) 31 (31) -

Total RM000

(49,128) 49,112 - (16) 16 -

157,265 46,246 (203,496) 15 (15) -

The Directors have carried out a review of the recoverable amount of the remaining goodwill as at 31 December 2006 based on its value in use and determined that the recoverable amount is RM Nil, which resulted in the amount of goodwill being written off.

73

Notes to The Financial Statements

20. DEFERRED ASSETS Group RM000 Cost At 1 January 2005 Written off (Note 11) At 31 December 2005 Accumulated amortisation At 1 January 2005 Charge for the year (Note 11) Written off (Note 11) At 31 December 2005 91,862 (91,862) -

24,694 3,951 (28,645) -

Deferred assets refer to the amount paid for the acquisition of the Rights under the Offshore Patrol Vessel Contracts plus interest expense capitalised until the Offshore Patrol Vessel Contracts started and is being amortised equally over 23 1/4 financial years commencing October 1998. In prior year, the amount was fully written off as the Directors were of the opinion that the acquisition of the Rights no longer exist, subsequent to the disposal of a subsidiary company. 21. DEFERRED EXPENDITURE Group RM000 At 1 January 2005 Additions Reclassification Written off (Note 11) At 31 December 2005 143,839 382 (735) (143,486) -

Deferred expenditure comprise of expenditure incurred for the purpose of securing future projects. The expenditure would be charged to the project account upon the successful procurement of the project concerned. Should the project be aborted, the related expenditure will be charged to the income statement in the financial year in which such decision is made. In prior year, the costs were written off due to significant uncertainty over its realisation in the future and there would be no economics benefits to be obtained thereafter.

7

Notes to The Financial Statements

22. INVESTMENTS IN SUBSIDIARY COMPANIES Company 2006 RM000 Unquoted shares, at cost Less: Accumulated impairment losses (Note 11) At 31 December 2005 301,867 (293,182) 8,685 2005 RM000 298,867 (262,726) 36,141

The cost of shares in a subsidiary company which are pledged to the financial institutions for banking facilities granted to the Company and a corporate shareholder are RM102,087,798 (2005: RM102,087,798) and RM6,380,487 (2005: RM6,380,487) respectively. Details of the subsidiaries, all of which were incorporated in Malaysia unless otherwise stated, are as follows: Proportion of Ownership Interest 2006 2005 % % 100 100 100 100 51 - 100 100 100 100 100 100 51 100 - 100

Name of Subsidiaries PSC Asset Holdings Sdn Bhd # Penang Shipbuilding and Construction Sdn Bhd # Sedap Development Sdn Bhd # Sedap Trading Sdn Bhd # Eagacorp Marine Sdn Bhd # Asia Coins Sdn Bhd # PSC Petroleum Sdn Bhd # Held by PSC Asset Holdings Sdn Bhd Desa PSC Sdn Bhd #

Principal Activities Property investment and management Heavy engineering construction, shiprepair and shipbuilding, contractor and a commissioned agent Property development Ceased operations Dormant Dormant Dormant

Construction and building contractor

75

Notes to The Financial Statements

22. INVESTMENTS IN SUBSIDIARY COMPANIES (CONT'D) Details of the subsidiaries, all of which were incorporated in Malaysia unless otherwise stated, are as follows: Proportion of Ownership Interest 2006 2005 % %

Name of Subsidiaries (cont'd) Held by Penang Shipbuilding & Construction Sdn Bhd PSC Tema Shipyard Limited # (Incorporated in Republic of Ghana) Dominion Defence & Industries Sdn Bhd # Perstim Industries Sdn Bhd # PSC Defence Technologies Sdn Bhd # Malaysian Heavy Industrial Group Sdn Bhd # PSC Navaltech Sdn Bhd # UMC Engineering Sdn Bhd # Tenaga PSC Sdn Bhd # PSC Crane-Systems Sdn Bhd # PSC Welding Services Sdn Bhd # PSC Marine & Shipping Sdn Bhd # Penang Shipbuilding & Construction (UK) Limited ## (Incorporated in United Kingdom) PSC Shipbuilding & Engineering Sdn Bhd # Marine Technology Industrial Park Sdn Bhd #

Principal Activities

60 100 99.87 100 60 100 51.3 100 100 100 100 100

60 100 99.87 100 60 100 51.3 100 100 90 100 100

Ship repairing, engineering and metalled activities, and fabrication and other activities in connection therewith Supply of equipment and machinery Investment holding Investment holding Investment holding Designing, planning, specifications drawing for constructions and other related activities Ceased operations Ceased operations Dormant Dormant Ceased operations Dormant

100 100

100 100 7

Dormant Dormant

Notes to The Financial Statements

22. INVESTMENTS IN SUBSIDIARY COMPANIES (CONT'D) Details of the subsidiaries, all of which were incorporated in Malaysia unless otherwise stated, are as follows: Proportion of Ownership Interest 2006 2005 % %

Name of Subsidiaries (cont'd) Held by Penang Shipbuilding & Construction Sdn Bhd (cont'd) PSC Marine Technology Academy Sdn Bhd # PSC Srijeluda Sdn Bhd # Marine Venture Capital Sdn Bhd # PSC Miri Sdn Bhd # Alpha Shanghai (M) Sdn Bhd # Frigate-In-Support Services Sdn Bhd # Held by Dominion Defence & Industries Sdn Bhd Burlington Capital Sdn Bhd # Burlington Engineering & Construction Sdn Bhd # Burlington Promotions & Publications Sdn Bhd # Burlington Plantations Sdn Bhd # Held by PSC Defence Technologies Sdn Bhd Aeromarine Maintenance Services Sdn Bhd # Atlas Defence Technology Sdn Bhd # PSC Bofors Defence Sdn Bhd #

Principal Activities

100 100 100 100 100 100

100 100 100 100 100 100

Dormant Dormant Dormant Dormant Dormant Dormant

60 60 100 100 70 70 51

60 60 100 100 70 70 51

Dormant Dormant Dormant Dormant

Marketing and distributing Exocet Weapon System Supply of electronics and system technology in relation to the shipping and marine industry Providing, supplying and servicing BOFORS weapons systems

77

Notes to The Financial Statements

22. INVESTMENTS IN SUBSIDIARY COMPANIES (CONT'D) Details of the subsidiaries, all of which were incorporated in Malaysia unless otherwise stated, are as follows: Proportion of Ownership Interest 2006 2005 % %

Name of Subsidiaries (cont'd) Held by PSC Defence Technologies Sdn Bhd (cont'd) Naval and Defence Communication System Sdn Bhd # C3I Systems Sdn Bhd # Integrated Navigation and Defence Systems Sdn Bhd # Held by PSC Marine & Shipping Sdn Bhd

Principal Activities

100 100 100

100 100 100

Design, manufacture, supply, integrate service and maintenance repair and overhaul of the communication systems and equipment Ceased operations Ceased operations

Johor Riau Ferry Services 100 Sdn Bhd # # Audited by firms other than Ernst & Young

100

Dormant

## Company which is not required by legislation to be audited in the country of incorporation. Management financial statements have been used for consolidation purposes and the Directors are of the opinion that its results are immaterial to the Group.

7

Notes to The Financial Statements

22. INVESTMENTS IN SUBSIDIARY COMPANIES (CONT'D) (a) Acquisition of subsidiary companies I n prior year, the effect of acquisition of C3I Systems Sdn Bhd ("C3I"), Integrated Navigation And Defence Systems Sdn Bhd ("INDS") and Asia Coins Sdn Bhd ("AC") on the financial results of the Group were as follows:2005 RM000 Revenue Cost of sales Gross profit Administrative expenses Other expenses Loss before tax Increase in Groups net loss for the year 1,307 (1,095) 212 (15) (1,433) (1,236) (1,236)

In prior year,the effect of acquisition of C3I, INDS and AC on the financial position of the Group were as follows:Fair value recognised on acquisition RM000 Amount due from related company Cash and bank balances 30,053 50 30,103 (30,000) (459) (23) (1,064) (31,546) (1,443) (1,443)

Borrowing Trade payables Due to customers on contract Other payables

Net liabilities as at financial year end Increase in Groups net liabilities

There were no acquisitions in the financial year ended 31 December 2006 and subsequent to 31 December 2006.

79

Notes to The Financial Statements

22. INVESTMENTS IN SUBSIDIARY COMPANIES (CONT'D) (b) Disposals of subsidiary companies On 17 April 2006, AC ceased to be a wholly-owned subsidiary of the Company subsequent to the subscription of the new allotment of shares in AC by Boustead Naval Shipyard Sdn Bhd ("BNS") (formerly known as PSCNaval Dockyard Sdn Bhd), resulting in the dilution of the Companys effective interest from 100% to 0.20%. The subsidiary was previously reported under other operations segment. The effect of the disposal of AC on the financial results of the Group to the date of disposal were as follows (2005: disposal of BNS):- 2006 RM000 Revenue Cost of sales Gross profit Other income Administrative expenses Other expenses Operating loss Finance costs Loss before tax Income tax expense Loss for the year Minority interests - - - - - - - - - - - - - 2005 RM000 85,604 (101,157) (15,553) 20,389 (939) (1,384,726) (1,380,829) (30,255) (1,411,084) (147) (1,411,231) 87,095 (1,324,136)

T he effect of the disposal of AC on the financial position of the Group were as follows (2005: disposal of BNS): Property, plant and equipment Inventories Trade and other receivables Tax recoverable Cash and bank balances Trade and other payables Net due to customers on contract Borrowings Minority interests 2006 RM000 - - 30,000 - - 30,000 (13) - (30,000) - (30,013) 2005 RM000 379,377 13,489 167,781 3,975 195,008 759,630 (1,014,009) (197,753) (547,229) (241) (1,759,232)

0

Notes to The Financial Statements

22. INVESTMENTS IN SUBSIDIARY COMPANIES (CONT'D) (b) Disposals of subsidiary companies (Cont'd) 2006 RM000 Share of net liabilities Goodwill on consolidation Amount accounted for as associate company Share of post-acquisition loss of associate company Gain on disposal of subsidiary company (Note 9) Proceeds from disposal of subsidiary company Less : Set-off against term loan Less : Cash and cash equivalents disposed Net cash outflows from disposal of subsidiary company (13) - - - (13) 13 - - - - 2005 RM000 (999,602) (46,246) 53,579 (53,579) (1,045,848) 1,322,346 276,498 (276,498) (2,782) (2,782)

Subsequent to year end, the Group has disposed its entire equity interest in a wholly-owned subsidiary, FrigateIn-Support Services Sdn Bhd for a cash consideration of RM2.00. The disposal would not have any material efect on the earnings, net assets and share capital of the Group and of the Company for the financial year ended 31 December 2006. For the financial year ended 31 December 2006, the financial statements of the following subsidiary companies were commented as follows: (i) Penang Shipbuilding & Construction Sdn Bhd

Without qualifying their opinion, the auditors raised concern about the Companys ability to continue as going concern in view of the recurring losses and net capital deficiency as at 31 December 2006. The ability of the Company to continue as a going concern is dependent on the success of the approval and implementation of the proposed restructuring scheme (as disclosed in Note 6 to the financial statements), profitability and positive cash flow generated from future operations and financial support of the shareholders.

(ii) Sedap Development Sdn Bhd

Without qualifying their opinion, the auditors raised concern about the Companys ability to continue as going concern in view of the recurring losses and net capital deficiency as at 31 December 2006. The Company has agreed not to demand repayment of the amount (equivalent to the net capital deficiency) due from the subsidiary during the next twelve months from 31 December 2006.

(ii) PSC Tema & Shipyard Limited

Without qualifying their opinion, the auditors raised concern about the title to certain landed properties which were transferred to the company under a sale and purchase agreement with the Divestiture Implementation Committee (DIC) that remains to be perfected by the company, pending the final payment of the purchase consideration to DIC.

1

Notes to The Financial Statements

23. INVESTMENTS IN ASSOCIATE COMPANIES (CONT'D) Group 2006 RM000 Unquoted shares, at cost Share of post acquisition reserves At 31 December 2005 Less : Accumulated impairment loss At 31 December 2005 54,839 (54,839) - - - 2005 RM000 54,839 (54,829) 10 - 10 Company 2006 RM000 1,250 - 1,250 (1,250) - 2005 RM000 1,250 - 1,250 (1,250) -

Details of the associates, all of which were incorporated in Malaysia unless otherwise stated, are as follows: Proportion of Ownership Interest 2006 2005 % % 50.00 50.00

Held by the Company: Tohwa-Sedap Food Industry Sdn Bhd Held through subsidiaries:

Principal Activities Under liquidation

Boustead Naval Shipyard 20.77 20.77 Repair and maintenance of naval and merchant Sdn Bhd (formerly known ships, equipment and systems, fabrication of steels as PSC-Naval Dockyard structures and ship building Sdn Bhd) Penang Shipbuilding and 48.80 48.80 Investment holding Construction Holding (Thailand) Limited (Incorporated in Thailand) The financial statements of the above associates are coterminous with those of the Group. The summarised financial information of the associates are as follows: Assets and liabilities Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Results Revenue Profit/(loss) for the year 2006 RM000 368,666 609,510 978,176 1,510,574 4,000 1,514,574 117,875 456,936 2005 RM000 467,260 381,624 848,884 1,835,709 6,509 1,842,218 85,731 (1,411,228)

2

Notes to The Financial Statements

23. INVESTMENTS IN ASSOCIATE COMPANIES (CONT'D) The Group has discontinued the recognition of its share of losses of Boustead Naval Shipyard Sdn Bhd (formerly known as PSC-Naval Dockyard Sdn Bhd) because its share of losses of this associate has exceeded the Groups investment in the associate company. The Groups unrecognised share of results of this associate company for the current year and cumulatively were net profit of RM94.9 million (2005: net loss of RM179.4 million) and net loss of RM84.5 million (2005: net loss of RM179.4 million) respectively. Any future share of profits in associate companies would be utilised for offset against the unrecognised cumulative share of losses until the balance has become nil. Thereafter, the Group would only recognise the share of profits in the consolidated income statements.

24. OTHER INVESTMENTS Group 2006 RM000 Unquoted shares, at cost Quoted shares in Malaysia Others At 31 December 2005 Less : Accumulated impairment loss (Note 11) Market value of quoted shares in Malaysia 683 26 924 1,633 (1,607) 26 17 2005 RM000 683 26 924 1,633 (1,128) 505 14 Company 2006 RM000 - - 890 890 (890) - - 2005 RM000 - - 890 890 (445) 445 -

25. INVENTORIES 2006 RM000 Cost Raw materials Consumables Project inventories Net realisable value Consumables - 49 22 71 2,064 2,135

Group 2005 RM000 27 51 - 78 2,801 2,879

During the financial year, there was a reversal of a write-down of inventories of RM0.02 million (2005: RM0.03 million). The reversal arose from an increase in net realisable value as a result of utilisation of inventories for certain projects.

3

Notes to The Financial Statements

26. TRADE AND OTHER RECEIVABLES Group 2006 RM000 Trade receivables Third parties Associate companies Retention sums (Note 27) Less : Provision for doubtful debts - Third parties - Associate companies 118,411 23,432 3,899 145,742 (111,773) (1,624) (113,397) 32,345 - 31,249 31,249 1,684 282 135,239 168,454 - (29) (135,773) (135,802) 32,652 64,997 134,018 34,840 5,298 174,156 (112,244) (1,318) (113,562) 60,594 - 27,137 27,137 1,718 451 136,801 166,107 - - (134,907) (134,907) 31,200 91,794 - - - - - - - - 115,080 - 115,080 - - 19,051 134,131 (112,010) - (19,032) (131,042) 3,089 3,089 - - - - - - - - 2005 RM000 Company 2006 RM000 2005 RM000

Trade receivables, net Other receivables Amount due from related parties: Subsidiary companies Associate companies Deposits Prepayments Sundry receivables

117,946 621 118,567 - - 19,032 137,599 (112,478) - (19,032) (131,510) 6,089 6,089

Less : Provision for doubtful debts - Subsidiary companies - Associate companies - Other receivables

Other receivables, net

(a) Credit risk The Groups primary exposure to credit risk arises through its trade receivables. The Groups trading terms with its customers are mainly on credit, except for, where payment in advance is normally required prior to commencement of new projects. The credit period is generally for a period of a month, extending up to three months for major customers. The Group seeks to maintain strict control over its outstanding receivables and strives to minimise credit risk. Overdue balances are reviewed regularly by senior management. Trade receivables are non-interest bearing except for an amount of RM0.95 million (2005: RM0.35 million) due from associate companies which bears interest of 8.40% (2005: 8.40%) per annum.



Notes to The Financial Statements

26. TRADE AND OTHER RECEIVABLES (CONT'D) (b) Amount due from related parties Included in amount due from subsidiary companies is RM3.1 million (2005: RM5.4 million) which bears interest of 8.00% (2005: 8.00%) per annum. The amount is unsecured, repayable on demand and is to be settled in cash. Included in amount due from associate companies is RM31.2 million (2005: RM30.3 million) which bears interest of 5.90% (2005: 5.90%) per annum. The amount is unsecured, repayable on demand and is to be settled in cash. Subsequent to the financial year end, the entire amount was fully settled. The other amount due from related parties are non-interest bearing and are repayable on demand. All related parties receivable are unsecured and are to be settled in cash.

Further details on related party transactions are disclosed in Note 42. Other information on financial risks of other receivables are disclosed in Note 43. 27. DUE FROM/TO CUSTOMERS ON CONTRACTS Group 2006 RM000 Construction contract costs incurred to date Attributable profit Less: Progress billings Retention sums on contracts, included within trade receivables (Note 26) Due from customers on contracts Due to customers on contracts 151,799 11,998 163,797 (159,888) 3,909 3,899 4,283 (374) 3,909 2005 RM000 173,179 5,437 178,616 (174,940) 3,676 5,298 3,887 (211) 3,676

The costs incurred to date on construction contracts include the following charges made during the financial year: Group 2006 RM000 2005 RM000 705 1,442 1,093 4,867

Depreciation of property, plant and equipment (Note 17) - construction, shipbuilding and shiprepair - Offshore Patrol Vessels Operating lease: - minimum lease payment for plant and equipment Staff costs Amount of contract revenue and contract costs recognised in the financial year are as follows: Contract revenue Contract costs (included in costs of sales/direct costs)

- - 455 633

48,593 41,995

164,722 178,577

5

Notes to The Financial Statements

28. CASH AND BANK BALANCES Group 2006 RM000 Deposits with licensed banks Cash on hand and at banks 8,608 9,062 17,670 2005 RM000 4,916 12,634 17,550 Company 2006 RM000 - 26 26 2005 RM000 - 40 40

Deposits with licensed banks amounting to RM2.3 million (2005: RM2.5 million) are pledged for as securities for borrowings (Note 33) and performance guarantee facilities granted to the Group. For the purpose of the cash flow statements, cash and cash equivalents comprise the following as at the balance sheet date: Group Company 2006 RM000 2005 RM000 17,550 (34,900) (17,350) (2,525) (19,875) 2006 RM000 26 - 26 - 26 2005 RM000 40 - 40 - 40

Cash and bank balances Bank overdrafts (Note 33) Less : Deposits pledged

17,670 (37,531) (19,861) (2,304) (22,165)

29. NON-CURRENT ASSETS HELD FOR SALE Group 2006 RM000 Investment properties 57,100 2005 RM000 - Company 2006 RM000 3,100 2005 RM000 -

On 6 November 2006, a wholly-owned subsidiary, PSC Asset Holdings Sdn Bhd had entered into a Sales & Purchase agreement with Boustead Holdings Berhad to dispose three pieces of land together with buildings erected thereon, known as Menara PSCI for a cash consideration of RM54 million. The sale is subject to approvals from relevant authorities and shareholders as disclosed in Note 6 to the financial statements. The approvals obtained to date are disclosed in Note 46 to the financial statements.

Under the Proposed Debt Settlement, the Company's leasehold land is classified as Collateral Set-Off for Nonoperating Scheme Assets and would be offset against the Secured Creditors of the Company. The non-current assets held for sale have been pledged to licensed banks to secure the term loans 2, 3 and 5 and revolving credit facilities as disclosed in Note 33 to the financial statements.



Notes to The Financial Statements

30. SHARE CAPITAL Number of shares of RM 1 each 2006 000 Issued and fully paid Ordinary shares Authorised Ordinary shares 174,083 500,000 2005 000 174,083 500,000 Group and Company 2006 RM000 174,083 500,000 2005 RM000 174,083 500,000

31. OTHER RESERVES Foreign currency translation reserve RM000 (8,422) - (8,422) (20) (8,442) (79) (8,521)

Group At 1 January 2005 As previously stated Prior year adjustments (Note 47) At 1 January 2005 (restated) Foreign currency translation - Group At 31 December 2005/At 1 January 2006 Effects of adopting FRS 140 At 31 December 2006

Share premium RM000 70,243 - 70,243 - 70,243 - 70,243

Revaluation reserve RM000 - 10,841 10,841 - 10,841 (10,841) -

Total RM000 61,821 10,841 72,662 (20) 72,642 (10,920) 61,722 Share premium RM000

Company At 31 December 2005/At 31 December 2006 (a) Revaluation reserve

70,243

The revaluation reserve relates to the revaluation of properties prior to its reclassification as investment properties. Upon the adoption of FRS 140, Investment Property as at 1 January 2006, the revaluation reserve balance has been reversed.

(b) Exchange fluctuation reserve The exchange fluctuation reserve relates to exchange differences arising from translation of the financial statements of foreign operations whose functional currencies are different from that of the Groups presentation currency. It is also used to record the exchange differences arising from monetary terms which form part of the Groups net investment in foreign operations, where the monetary item is denominated in either functional currency of the reporting entity of the foreign operation.

7

Notes to The Financial Statements

32. MINORITY INTERESTS The minority shareholders share of loss in the subsidiary companies are limited to their share of the paid-up capital of the subsidiary companies. The balance of the losses will be borne by the Group until such time that the subsidiary companies are able to generate profits. The minority interests share of the profit/(loss) for the financial year and cumulative losses which are borne by the Group are RM0.2 million (2005: RM Nil) and RM0.1 million (2005: RM0.3 million) respectively.

33. BORROWINGS Group Short term borrowings Secured: Term loans (Note 34) Hire purchase and finance lease liabilities (Note 35) Bank overdrafts Revolving credits Unsecured: Term loans Bank overdrafts Bankers acceptance Trade financing facilities Long term borrowings Secured: Hire purchase and finance lease liabilities (Note 35) Unsecured: Term loans (Note 34) Total borrowings Term loans Hire purchase and finance lease liabilities (Note 35) Bank overdrafts Revolving credits Bankers acceptance Trade financing facilities 2006 RM'000 461,409 8,885 29,438 11,258 510,990 62,591 8,093 7,584 521 78,789 589,779 169 32 201 2005 RM'000 433,773 8,293 27,256 10,887 480,209 90,608 7,644 7,276 521 106,049 586,258 427 180 607 Company 2006 RM'000 231,300 - - - 231,300 23,456 - - - 23,456 254,756 - - - 2005 RM'000 218,138 41 - - 218,179 22,860 - - - 22,860 241,039 68 - 68

524,032 9,054 37,531 11,258 7,584 521 589,980

524,561 8,720 34,900 10,887 7,276 521 586,865

254,756 - - - - - 254,756

240,998 109 - - - - 241,107



Notes to The Financial Statements

33. BORROWINGS (CONT'D) T he bank overdrafts, revolving credits, bankers acceptance and trade financing facilities of the Group are secured by the following: (a) Pledge over a subsidiary companys deposits with licensed banks; (b) Legal charge over land and building; (c) Fixed and floating charge over assets; (d) Assignment of contract proceeds; (e) Sinking fund; (f) Corporate guarantee by the Company. Except for bank overdraft facilities, term loan and hire purchase/finance lease liabilities amounting to RM1.05 million (2005 : RM0.43 million), RM0.15 million (RM30.30 million), and RM0.26 million (2005 : RM0.69 million) respectively, the Group has defaulted in repayment for all the abovementioned bank borrowings and the lenders (also the Scheme Creditors under the Proposed Restructuring Scheme as disclosed in Note 6 to the financial statements) have taken legal action against the Group. Finance costs for the period from 1 September 2006 to 31 December 2006 for the Group and the Company amounting to RM17 million and RM7.7 million, respectively, have not been accrued for the year ended 31 December 2006 as the Directors are of the opinion that these finance costs will be waived by the lender banks pursuant to the Proposed Restructuring Scheme as set out in Note 6 to the financial statements. Other information on financial risks of borrowings are disclosed in Note 43.

34. TERM LOANS Group Secured: Term loan 1 Term loan 2 Term loan 3 Term loan 4 Term loan 5 Term loan 6 Term loan 7 Term loan 8 Term loan 9 Unsecured: Term loan 10 Term loan 11 Term loan 12 Term loan 13 Term loan 14 Term loan 15 Term loan 16 Total term loans Less : Amount due within 12 months Amount due after 12 months (Note 33) 9 2006 RM'000 176,391 5,832 39,303 76,742 22,513 24,972 66,467 49,077 144 461,441 14,889 1,652 26,921 10,562 3,578 4,989 - 62,591 524,032 (524,000) 32 2005 RM'000 166,265 5,498 42,726 72,766 21,890 15,114 63,013 46,375 306 433,953 14,889 1,652 25,534 10,562 3,351 4,620 30,000 90,608 524,561 (524,381) 180 Company 2006 RM'000 176,391 5,832 - - - - - 49,077 - 231,300 14,889 - - - 3,578 4,989 - 23,456 254,756 (254,756) - 2005 RM'000 166,265 5,498 - - - - - 46,375 - 218,138 14,889 - - - 3,351 4,620 - 22,860 240,998 (240,998) -

Notes to The Financial Statements

34. TERM LOANS (CONT'D) (a) The term loans obtained from the financial institutions are secured by the following: Term loan 1 A loan agreement, negative pledge, a pledge by the Company in respect of 13.2 million shares in a subsidiary company and personal guarantee by a former Director of the Company. Term loan 2 A first charge over the Companys land held under Pajakan Negeri. Term loan 3 A first charge over a subsidiary companys freehold land and building. Term loan 4 An assignment of sales proceeds of the construction of housing project in Albania by a subsidiary company and a letter of guarantee from the Company. Term loan 5 A second legal third party charge for RM18 million, ranking pari passu with the first party first fixed charge created by a bank over assets of the Group and corporate guarantee given by the Company. Term loan 6 A first charge on 2 pieces of land held under Pajakan Negeri. Term loan 7 A first charge over a subsidiary companys construction project in China. Term loan 8 A negative pledge in respect of 14 million shares in a subsidiary company. Term loan 9 Lien on fixed deposit for Cedis 1.0 billion (equivalent to RM420,000). Term loan 10 Negative pledge in respect of all the present and future assets of the Company. Term loan 11 Corporate guarantee given by the Company. Term loan 12 Corporate guarantee given by the Company. Term loan 13 Corporate guarantee given by the Company. Term loan 14 Clean basis. Term loan 15 Negative pledge on the assets of the Company. Term loan 16 Clean basis.

(b) The repayment schedule of the term loans are: Term loan 1 Restructured to be repaid over 5 years commencing April 2002. Term loan 2 Term loan 3 Term loan 4 Term loan 5

Restructured to be repaid over 5 years commencing September 2002. Restructured to be repaid by monthly instalment of RM250,000 with effect from May 2003 until the outstanding balance reduces to RM40 million and thereafter a bullet repayment will be made to settle the outstanding loan by 31 December 2004. Repayable over 7 years, on a tail-heavy basis with the first to commence at the end of 36 months from the first drawdown date i.e. February 1996. Restructured to be repaid by monthly instalments of RM250,000 with effect from May 2003 until the outstanding balance reduces to RM20 million and thereafter a bullet repayment will be made to settle the outstanding loan by 31 December 2004. Restructured to be repaid over 5 years commencing April 2002. At the end of the previous financial year, RM150.9 million has been offset against the term loan by way of foreclosure of 36 million ordinary shares of Boustead Naval Shipyard Sdn Bhd (formerly known as PSC-Naval Dockyard Sdn Bhd) pledged to the bank. 90

Term loan 6

Notes to The Financial Statements

34. TERM LOANS (CONT'D) (b) The repayment schedule of the term loans are: (cont'd) Term loan 7 Restructured to be repaid over 5 years commencing April 2002. Term loan 8 Restructured to be repaid over 4 years commencing May 2002. Term loan 9 Repayable by 36 equal monthly instalments from the date of drawdown. Term loan 10 Restructured to be repaid over 4 years commencing October 2002. Term loan 11 Restructured to be repaid over 4 years commencing October 2002.

Term loan 12 Restructured to be repaid over 5 years commencing April 2002. Term loan 13 Restructured to be repaid over 4 years commencing October 2002. Term loan 14 Restructured to be repaid over 19 quarterly principal repayments of RM315,000 per quarter and one final installment of the balance commencing from July 2002. Term loan 15 Restructured to be repaid over 12 equal quarterly instalments of RM392,667 each, commencing October 2002. Term loan 16 Repayable by bullet repayment at the end of 12 months from the date of drawdown. The Group has defaulted in repayment of all the term loans mentioned above except for term loan 9 and the lenders (also the Scheme Creditors under the Proposed Restructuring Scheme as disclosed in Note 6 to the financial statements) have taken legal action against the Group. As such, all these term loans are classified as short term.

Other information on financial risks of borrowings are disclosed in Note 43. 35. HIRE PURCHASE AND FINANCE LEASE LIABILITIES Group Future minimum lease payments: Not later than 1 year More than 1 year not later than 2 years More than 2 years not later than 5 years Less: Interest in suspense Analysis of present value of finance lease liabilities: Not later than 1 year More than 1 year not later than 2 years More than 2 years not later than 5 years Amount due within 12 months (Note 33) Amount due after 12 months (Note 33) 2006 RM'000 8,900 70 110 9,080 (26) 9,054 2005 RM'000 8,998 278 178 9,454 (734) 8,720

Company 2006 RM'000 - - - - - - 2005 RM'000 47 43 28 118 (9) 109

8,885 62 107 9,054 (8,885) 169 91

8,293 261 166 8,720 (8,293) 427

- - - - - -

41 40 28 109 (41) 68

Notes to The Financial Statements

35. HIRE PURCHASE AND FINANCE LEASE LIABILITIES (CONT'D) The Group has defaulted in the repayment of RM8.8 million (2005: RM8.0 million) of the abovementioned hire purchase and finance lease liabilities and the lenders (also the Scheme Creditors under the Proposed Restructuring Scheme as disclosed in Note 6 to the financial statements) have taken legal action against the Group. The Group has finance leases and hire purchase contracts for various items of property, plant and equipment (see Note 17 (e)). Other information on financial risks of hire purchase and finance lease liabilities are disclosed in Note 43. 36. TRADE AND OTHER PAYABLES Group Trade payables: Third parties Associate companies Affiliated companies Other payables: Amount due to related parties: Subsidiary companies Associate companies Accruals Provisions (Note 37) Sundry payables - 37,203 37,203 4,802 10,254 26,564 78,823 145,172 - 3,572 3,572 3,278 1,345 22,232 30,427 120,528 17,224 - 17,224 173 3,606 1,530 22,533 22,541 13,240 - 13,240 194 - 637 14,071 14,071 12,758 49,330 4,261 66,349 29,488 51,598 9,015 90,101 - - 8 8 - - - 2006 RM'000 2005 RM'000 Company 2006 RM'000 2005 RM'000

(a) Trade payables are non-interest bearing and the normal trade credit terms granted to the Group range from one month to three months. (b) Included in sundry payables of the Group and of the Company are RM0.1 million (2005: RM Nil) and RM0.1 million (2005: RM Nil) due to a firm connected to a director of the Company. (c) Amount due to related parties Included in amount due to associate companies is RM31.77 million (2005: Nil) which bears interest of 5.90% per annum and repayable on demand. The amount is unsecured and is to be settled in cash. Subsequent to the financial year end, the amount was fully settled. Amount due to other related parties are non-interest bearing and are repayable on demand. All other related parties receivable are unsecured and are to be settled in cash.

Further details on related party transactions are disclosed in Note 42. Other information on financial risks of trade and other payables are disclosed in Note 43.

92

Notes to The Financial Statements

37. PROVISIONS Group At 1 January Current year provision (Note 11) Reversal of provision At 31 December 2006 RM'000 1,345 10,254 (1,345) 10,254 2005 RM'000 935 410 - 1,345 Company 2006 RM'000 - 3,606 - 3,606 2005 RM'000 - - - -

Included in the Group is RM6.5 million (2005: RM Nil) in relation to the foreseeable loss for a freehold land of a subsidiary company, which had been pledged for banking facilities granted to a corporate shareholder, whereby an order for sale had been obtained. Included in the Group and the Company is provision for restructuring costs amounting to RM3.6 million (2005: RM Nil) and RM3.6 million (2005: RM Nil), respectively. The remaining balance is in respect of provision for project warranty which is based on 10% of value of work order, and is provided upon acceptance of completed work by customers. The warranty period ranges from 6 months to 12 months. 38. DEFERRED TAX Group At 1 January Recognised in income statement At 31 December 2006 RM'000 533 290 823 2005 RM'000 2,190 (1,657) 533 2006 RM'000 - - - Company 2005 RM'000 7,830 (7,830) -

The components and movements of deferred tax liabilities during the financial year are as follows: Property, plant and equipment Others Group RM000 RM000 At 1 January 2005 Recognised in income statement At 31 December 2005 / At 1 January 2006 Recognised in income statement Exchange differences At 31 December 2006 266 133 399 706 (63) 1,042 1,924 (1,790) 134 (353) - (219)

Total RM000 2,190 (1,657) 533 353 (63) 823 Others RM000 7,830 (7,830)

Company At 1 January 2005 Recognised in income statement At 31 December 2005

93

Notes to The Financial Statements

38. DEFERRED TAX (CONT'D) As at 31 December 2006, the estimated amount of deferred tax assets which have not been recognised in the Groups and Companys financial statements are as follows:Group Property, plant and equipment Unutilised tax losses Unabsorbed capital allowances 2006 RM'000 (4,960) (92,679) (30,524) (128,163) 2005 RM'000 29,357 (70,796) (29,916) (71,355) Company 2006 RM'000 - (954) (5,759) (6,713) 2005 RM'000 - (394) (5,759) (6,153)

The deductible temporary differences, unutilised tax losses and unabsorbed capital allowances above do not expire under current tax legislation. The potential deferred tax assets of the Group and of the Company have not been recognised as the Directors do not foresee that it is probable that there would be taxable profit available against which the deductible temporary differences could be utilised. The availability of the unutilised tax losses and unabsorbed capital allowances for offsetting against future taxable profits of the Company is subject to no substantial changes in the shareholding of the Company under Section 44(5A) and (5B) of Income Tax Act, 1967. 39. OPERATING LEASE ARRANGEMENTS The Group as lessee

The Group has entered into non-cancellable operating lease agreements for the use of land and buildings and equipment. These leases have an average life between 1 to 3 years with renewal option included in the contracts. There are no restrictions placed upon the Group by entering into the lease. The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the balance sheet date but not recognised as liabilities are as follows: Group Future minimum rentals payment: Not later than 1 year Later than 1 year and not later than 5 years 2006 RM'000 152 81 233 2005 RM'000 1,412 679 2,091

The lease payments recognised in profit or loss during the financial year is disclosed in Note 11.

9

Notes to The Financial Statements

40. CAPITAL COMMITMENTS Group Approved and contracted for: - Balance of unpaid share capital in a foreign subsidiary company - Purchase of shares in Tenaga PSC Sdn Bhd - Others 2006 RM'000 2005 RM'000 Company 2006 RM'000 2005 RM'000

4,131 1,000 175 5,306

4,446 1,000 175 5,621

- -

- - -

41. CONTINGENT LIABILITIES Group Unsecured: Corporate guaranteee to financial institutions on behalf of: - subsidiary companies* - associate companies** - third parties Corporate guaranteee to other corporations on behalf of subsidiary companies Amount under legal action and in dispute with suppliers Amount in dispute with a third party Tax liability under appeal not reflected in the financial statements Interest charged on the balance of unpaid capital of a foreign subsidiary company Secured: Shares of subsidiary company pledged for the banking facilities of a corporate shareholder 2006 RM'000 - 310,000 - - 4,000 - - - - 5,359 319,359 9,000 328,359 2005 RM'000 - 310,000 2,000 - 9,290 1,980 1,430 - 4,446 329,146 7,600 336,746 Company 2006 RM'000 388,572 310,000 - 366 - - - - - 698,938 - 698,938 2005 RM'000

330,980 310,000 2,000 1,466 - - - - - 644,446

- 644,446

* The guarantee shall be fully discharged upon completion of the proposed restructuring scheme as disclosed in Note 6 to the financial statements. ** Subsequent to the financial year end, the lenders have agreed to discharge the entire amount subject to the completion of administrative matters.

95

Notes to The Financial Statements

42. RELATED PARTY DISCLOSURES The Group and the Company had the following transactions with affiliated companies during the financial year: Group Group (a) Sales of goods/Rendering of services Associate companies (i) Subsidiary companies (ii) Affiliated companies * (i) (b) Purchases of goods/Rendering of services * Associate companies Affiliated companies * Firm connected to a director of the Company (iii) (iii) (iv) 36,474 - 25 1,051 8,910 139 - - 669 - 13,630 - - 334 - - 26 79 - 493 - 2006 RM'000 2005 RM'000 Company 2006 RM'000 2005 RM'000

- - -

Affiliated companies are companies within Boustead Holding Berhad and minority interests of certain subsidiary companies.

The Directors are of the opinion the above transactions are in the normal course of business and at terms mutually agreed between the parties. Information regarding outstanding balances arising from related party transactions as at 31 December 2006 are disclosed in Notes 26 and 36. 43. FINANCIAL INSTRUMENTS (a) Financial Risk Management Objectives and Policies The Groups financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Groups businesses whilst managing its risks. The Group operates within guidelines that are approved by the Board and the Groups policy is not to engage in speculative transactions.

(b) Foreign Exchange Risk The Group is exposed to foreign currency risk as a result of its normal operating activities, both external and intra-Group where the currency denomination differs from the local currency, Ringgit Malaysia (RM). The Groups policy is to minimise the exposure of overseas operating subsidiary companies/activities to transaction risk by matching local currency income against local currency costs. The currency giving rise to this risk is primarily Euro Dollar (Euro) and Great Britain Pound (GBP). Foreign exchange exposures are kept to an acceptable level.

9

Notes to The Financial Statements

43. FINANCIAL INSTRUMENTS (CONT'D) (b) Foreign Exchange Risk (Cont'd) The net unhedged financial assets and liabilities of the Group and of the Company that are not denominated in their functional currencies are as follows: Euro dollar RM'000 - 260 260 Sterling Pound RM'000 2,813 - 2,813 Total RM'000 2,813 260 3,073

Group At 31 December 2006 Trade payables Due from associate company At 31 December 2005 Trade payables Due from associate company

- 1,091 1,091

532 - 532

532 1,091 1,623

(c) Liquidity and cash flow risks The Group has a cash flow deficiency and had defaulted in the repayment of bank borrowings amounting to RM 588.5 million as at 31 December 2006. The Group has proposed to implement a restructuring scheme as stated in Note 6 to the financial statements.

(d) Interest Rate Risk The Groups policy is to borrow principally on the floating rate basis but to retain a proportion of fixed rate debt. The objectives for the mix between fixed and floating rate borrowings are set to reduce the impact of an upward change in interest rates while enabling benefits to be enjoyed if interest rates fall. The following tables set out the carrying amounts, the weighted average effective interest rates (WAEIR) as at the balance sheet date and the remaining maturities of the Groups and the Companys financial instruments that are exposed to interest rate risk: WAEIR % Within 1 Year RM000 1-2 Years RM000 2-5 Years RM000 Total RM000

At 31 December 2006 Group Floating rate Hire purchase and finance lease liabilities Revolving credits Term loans Bankers acceptance Bank overdrafts Trade financing facilities Amount due to associate company Amount due from associate company Cash and bank balances

Note

35 33 34 33 33 33 36 26 28

2.8% - 5.5% 7.05% 7.05% - 8.0% 6.5% 8.0% - 28.5% N/A 5.9% 5.9% 2.5% to 8.0%

(8,885) (11,258) (524,000) (7,584) (37,531) (521) (31,220) 31,770 8,608

(62) - (32) - - - - - -

(107) - - - - - - - -

(9,054) (11,258) (524,032) (7,584) (37,531) (521) (31,220) 31,770 8,608

97

Notes to The Financial Statements

43. FINANCIAL INSTRUMENTS (CONT'D) (d) Interest Rate Risk (Cont'd) WAEIR % Within 1 Year RM000 1-2 Years RM000 2-5 Years RM000 Total RM000

At 31 December 2006 Company Floating rate Term loans At 31 December 2005 Group Floating rate Hire purchase and finance lease liabilities Revolving credits Term loans Bankers acceptance Bank overdrafts Trade financing facilities Cash and bank balances Company Floating rate Term loans Hire purchase and finance lease liabilities (e) Credit risks

Note

34

8.25% to 9.0%

(254,756)

(254,756)

35 33 34 33 33 33 28 34 35

3.3% - 5.5% 7.05% 7.05% - 8.0% 6.5% 8.0% - 22.5% N/A 2.5% to 12.5% 8.0% to 9.0% 3.65%

(8,293) (10,887) (524,561) (7,276) (34,900) (521) 4,916 (240,998) (41)

(261) - - - - - - - (40)

(166) - - - - - - - (28)

(8,720) (10,887) (524,561) (7,276) (34,900) (521) 4,916 (240,998) (109)

The Group has credit policy for other debtors and monitor the exposure to credit risk on an ongoing basis. Credit evaluations are performed on trade customers. As at 31 December 2006, the maximum exposure to credit risk for the Group is the carrying amount of each financial asset.

(f) Fair Values The carrying amounts of the following financial assets and liabilities approximate their fair values due to the relatively short term maturity of these financial instruments: deposits, cash and bank balances, receivables and payables (excluding non-trade amounts due to/from group companies) and short term borrowings. It is not practical to estimate the fair values of the non current unquoted investments of the Company because of the lack of quoted market prices and the inability to estimate fair values without incurring excessive costs. However, the Company believes that the carrying amounts represent recoverable values.

9

Notes to The Financial Statements

44. SEGMENT INFORMATION Segment information is presented in respect of the Groups business segments. The business segment is based on the Groups management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments (other than investment property) and related revenue, loans and borrowings and related expenses, corporate assets (primarily the Companys headquarters) and head office expenses, and tax assets and liabilities. Transfer prices between business segments are in the normal course of business and at terms mutually agreed between the parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation. Business segments The Group comprises the following main business segments:

Business segment Shiprepair and maintenance related activities

Business activity Supplying of electronics and system technology in relation to the shipping and marine industry, marketing and distributing Exocet Weapon System, providing, supplying and servicing BOFORS weapon systems, design, manufacture, supply, integrate service and maintenance repair and overhaul of the communication systems and equipment. Heavy engineering construction, shiprepair and shipbuilding, contractor and a commission agent. Property holding. Supplying of equipment and machinery in relation to naval ships. Investment holding.

Construction and shipbuilding related activities Investment property Trading Other operations

The Groups businesses are substantially operating in Malaysia. Hence, no disclosure of geographical segments are being presented.

99

44. SEGMENTAL INFORMATION (CONT'D)

Business Segments

The following table provides an analysis of the Groups revenue, results, assets and liabilities and other information by business segment:

2006 30,873 - 30,873 3,872 244 (48,967) 1,764 2,897 31 1,578 83 (9,805) 15 17,720 4,687 27,196 334 17,720 - 4,687 - 27,196 - - 334 - (334) (334) (334) -

Shiprepair and maintenance related activities RM000 Construction and shipbuilding RM000 Investment property RM000 Trading RM000 Eliminations RM000 Other operations RM000 Consolidated RM000

Revenue External revenue Inter-segment sales

80,476 - 80,476

Notes to The Financial Statements

100

Results Segment results Interest income

(50,759) 2,137 (1,188) (49,810) (40,104) (89,914) (3,343) (93,257)

Unallocated corporate expenses

Operating loss Finance costs

Loss before tax Income tax expense

Loss for the year

44. SEGMENTAL INFORMATION (CONT'D)

2006

Shiprepair and maintenance related activities RM000 Construction and shipbuilding RM000 Investment property RM000 Trading RM000 Consolidated RM000 Other operations RM000

Assets Segment assets Unallocated assets 29,402 202,312 96,059 55,558 9,674 8,474 199,167 3,145

Total assets

Liabilities Segment liabilities Unallocated liabilities 14,975 105,572 6,712 5,327 7,430

140,016 600,363 740,379

Total liabilities

Notes to The Financial Statements

101 306 202 - - 1,078 - (5,834) - - 6 - - 61 19 - -

Other information Capital expenditure Depreciation and amortisation Impairment losses recognised in profit or loss 4,376 723 - 456 3,155 36,835 1 34 - 122 47 -

- 139 -

4,955 4,098 36,835

Other significant non-cash expenses: Provision for doubtful debts Bad debts written off Debt waiver Impairment of other investments

- - (3,306) 445

1,445 227 (9,140) 445

44. SEGMENTAL INFORMATION (CONT'D)

2005 115,964 - 115,964 76,250 5,485 10,929 994 (38,659) 48,758 27,492 5,412 73 829 10,100 - 994 - (38,659)

Shiprepair and maintenance related activities RM000 Construction and shipbuilding RM000 Investment property RM000 Trading RM000 170,963 - 170,963 Eliminations RM000 Consolidated RM000 Other operations RM000

Revenue External revenue Inter-segment sales

Results Segment results Interest income Unallocated corporate expenses (204,754) 3,982 (155,596) 61 1,216 15 359 19 (149,240) 16

(493) -

(508,508) 4,093 (13,964) (518,379) (101,026) (59) (619,464) (235) (619,699)

Notes to The Financial Statements

102

Operating loss Finance costs Share of loss in associate companies

Loss before tax Income tax expense

Loss for the year

44. SEGMENTAL INFORMATION (CONT'D) Shiprepair and maintenance Construction related and activities shipbuilding RM000 RM000 Investment property RM000 Trading RM000 Consolidated RM000 Other operations RM000

2005 Assets Segment assets Unallocated assets 32,955 20,341 84,955 1,295 8,461 4,856 292,776 119,908 590,776 710,684 154,834 71,403 11,346 18,149 288,687 4,089

Liabilities Segment liabilities Unallocated liabilities

Total liabilities

Notes to The Financial Statements

Other information Capital expenditure Depreciation and amortisation Impairment losses recognised in profit or loss 32,612 15,144 35,177 318 3,333 - 2 38 - 29 37 -

- 85 445

32,961 18,637 35,622

103 - 597,350 106,624 - - 3,951 64,694 157,095 4,150 16,153 - - 2,101 - -

Other significant non-cash expenses: Deferred assets written off Deferred expenditure written off Provision for doubtful debts Bad debts written off Goodwill written off

- - - - -

- - 9,160 - 187,344

3,951 662,044 274,980 4,150 203,497

Notes to The Financial Statements

45. SIGNIFICANT EVENTS During the financial year, the following events have occurred: (a) On 30 August 2006, Bursa Malaysia Securities Berhad had approved an extension till 31 December 2006 for the Company to submit its Regularisation Plan in relation to its PN 17 status, to the authorities. (b) On 17 October 2006, the High Court of Malaya granted an order pursuant to Sections 176(1) and 176(10) of the Companies Act, 1965 upon application made by the Company and its subsidiary company, Penang Shipbuilding & Construction Sdn Bhd (PSCSB). Pursuant to the Order: (i) The Company may proceed to convene various meetings of its members and both the Company and PSCSB may proceed to convene meetings of certain creditors of both the companies for the purpose of considering and if thought fit, approving (with or without modification) the proposed schemes of arrangement pursuant to section 176(1) of the Companies Act, 1965; and (ii) All further proceedings in any action, or proceedings against the company and PSCSB including but not limited to winding up, execution and arbitration proceedings already commenced against them, are restrained and stayed for a period of 9 months effective 17 October 2006 up to 16 July 2007. (c) On 6 November 2006, the Company announced that its wholly owned subsidiary, PSC Asset Holdings Sdn Bhd had entered into a Sales & Purchase agreement with Boustead Holdings Berhad to dispose of three pieces of land together with buildings erected thereon, known as Menara PSCI for a cash consideration of RM54 million. The sale is subject to approvals from relevant authorities and shareholders (Proposed Disposal). (d) On 21 December 2006, the Company had submitted its Proposed Restructuring Scheme to the Securities Commission as set out in Note 6 to the financial statements. 46. SUBSEQUENT EVENTS (a) Subsequent to the financial year end, the relevant approvals for the Proposed Restructuring Scheme have been obtained except for: - the confirmation of the High Court of Malaya for the Proposed Capital Reduction and the Proposed Share Premium Account Cancellation pursuant to Section 64 and 60 of the Act, as well as the requisite sanction of the High Court of Malaya for the proposal Debt Settlement pursuant to Section 176 of the Act; and - the Bursa Securities for the listing of and quotation for the Settlement Shares and Rights Shares to be issued pursuant to the Proposed Restructuring Scheme on the Main Board of Bursa Securities. The details of the approvals obtained are as follows: On 19 March 2007, the Securities Commission (SC) had approved the Proposed Disposal and Proposed Restructuring Scheme subject to the following conditions: (i) the Company should rectify and obtain approval for the unapproved structure together with the certificate of fitness within 12 months from the date of the SCs approval for the Proposed Disposal and Proposed Restructuring Scheme; (ii) the Company should make quarterly announcement to Bursa Malaysia on the status of such rectification or application; and

10

Notes to The Financial Statements

46. SUBSEQUENT EVENTS (CONT'D) (iii) the Company and Affin Investment should update the SC on the status of such rectification or application when the quarterly announcement is made; - Affin Investment and the Company should inform the SC upon completion of the Proposed Disposal and Proposed Restructuring Scheme; and - Affin Investment and the Company should fully comply with the relevant requirements in the Policies and Guidelines on the Issue/Offer of Securities pertaining to the implementation of the Proposals. The SC, vide the same letter, approved the Proposed Restructuring Scheme under the Guidelines on the Acquisition of Interests, mergers and takeover by Local and Foreign Interests. (b) On 26 March 2007, the Scheme Creditors of the Company and PSCSB and shareholders of the Company had approved all the resolutions set out in the Notices of the Court-Convened Meeting and Extraordinary General Meeting dated 1 March 2007. 47. COMPARATIVES The comparatives figures were audited by another firm of chartered accountants other than Ernst & Young. (a) Prior year adjustments

During the financial year, the Group has made the following prior year adjustments: (i) In year ended 31 December 1996, the Company had entered into a Sale and Purchase Agreement with a third party for the disposal of a piece of land held by the Company for a total consideration of RM5.9 million. As at financial year ended 31 December 2005, RM3.4 million had been received. Provision for doubtful debts amounting to RM2.5 million has accounted for as an adjustment against the opening balance as at 1 January 2005. (ii) In year ended 31 December 1998, a subsidiary company had entered into a Sale and Purchase Agreement with a third party for the disposal of a piece of land held by the subsidiary company for a total consideration of RM15.2 million. As at year ended 31 December 2005, RM1.0 million had been received. The balance of amount outstanding of RM14.2 million was provided for as doubtful debt in year ended 31 December 2005. As at 31 December 2006, the titles to both pieces of land above still remain with the Company and the subsidiary company respectively as FIC approval has not been obtained. In this respect, the Directors of the Company are of the opinion that the disposal have not been legally effected and have therefore re-instated the land as a prior year adjustment to the investment property account. Similarly, the recognition of gain/ loss arising from the disposals in 1996 and 1998 respectively were reversed and the accumulated losses balance restated.

(b) Adoption of FRS 140 Investment Property The Group now measures all investment property at fair value with any change therein recognised in the income statement. The change in accounting policy has been applied in accordance with the transitional provisions of FRS 140. This change in accounting policy has no impact on the amounts reported in 2005 or prior periods. Instead, the changes have been accounted for by restating the opening balances of the Group as at 1 January 2006 as follows.

105

Notes to The Financial Statements

47. COMPARATIVES (CONT'D) As a result of the prior year adjustments, the changes in the comparatives are as follows: Consolidated Statements of Changes in Equity Group At 1 January 2005 As previously stated Prior year adjustments At 1 January 2005 (restated) At 1 January 2006 As previously stated Prior year adjustments, as at 1 January 2005 At 1 January 2006 (restated) Prior year adjustment At 1 January 2006 (restated) Effects of adoption of FRS 140 At 1 January 2006 (restated) Balance Sheets Investment Properties RM000 70,000 19,686 - 89,686 Other Payables RM000 32,835 (1,000) (4,980) 26,855 Tax payable RM000 3,043 (496) - 2,547 Group 2005 RM000 Revaluation Reserve RM000 - 10,841 10,841 - 10,841 10,841 - 10,841 (10,841) - Accumulated Losses RM000 (131,600) (4,859) (136,459) (680,290) (4,859) (685,149) 15,200 (669,949) (15,779) (685,728)

Group At 1 January 2005 As previously stated Prior year adjustments Re-instatement of balances At 1 January 2005 (restated)

Effects on loss for the year: Loss before prior year adjustments Prior year adjustment Loss for the year

(548,690) 15,200 (533,490)

10

Notes to The Financial Statements

47. COMPARATIVES (CONT'D) As a result of the prior year adjustments, the changes in the comparatives are as follows: Investment Properties RM000 - 2,566 2,566 Accumulated Losses Total RM000 (23,672) 2,566 (21,106)

Company At 1 January 2005 As previously stated Prior year adjustments At 1 January 2005 (restated)

For the Company, the prior year adjustment does not affect the results for the financial year ended 31 December 2005. The following comparative figures have been reclassified to conform with current financial years presentation to reflect the nature of the balances/accounts: As previously stated RM000 As restated RM000

Group Income Statement Other income Administrative expenses Other expenses Exceptional items Balance Sheets Assets Investment properties Trade and other receivables Equity and liabilities Revaluation reserve Accumulated losses Trade and other payables Tax payable Borrowings

Adjustments RM000

46,787 (3,575) (104,407) (476,985)

1,322,346 (97,628) (1,686,503) 476,985

1,369,133 (101,203) (1,790,910) -

70,000 56,038 - (680,290) (90,753) (3,043) (581,884)

19,686 35,756 (10,841) 10,341 (29,775) 496 (4,981)

89,686 91,794 (10,841) (669,949) (120,528) (2,547) (586,865)

107

Notes to The Financial Statements

47. COMPARATIVES (CONT'D) As previously stated RM000 (58) (2,339) (418,171) - (456,372) (14,112) (241,066) As restated RM000 (1,452) (419,116) - 2,566 (453,806) (14,071) (241,107)

Company Income Statement Administrative expenses Other expenses Exceptional items Balance Sheet Assets Investment properties Equity and liabilities Accumulated losses Trade and other payables Borrowings

Adjustments RM000 (1,394) (416,777) 418,171 2,566 2,566 41 (41)

10

Analysis of Shareholdings

As at 24 April 2007 Authorised Share Capital Paid-Up Share Capital Class of Shares Voting rights : RM500,000,000 : RM174,083,348 : Ordinary shares of RM1.00 each : One vote per ordinary share

ANALYSIS OF SHAREHOLDINGS BY RANGE GROUPS Size of Shareholdings Shareholdings Shareholdings Percentage (%) 0.00 0.29 5.07 12.43 35.14 47.07 100.00 No. of Shareholders 19 1,146 1,753 689 91 3 3,701 Shareholders Percentage (%) 0.51 30.96 47.37 18.62 2.46 0.08 100.00

Less than 100 shares 100 - 1,000 shares 1,001 - 10,000 shares 10,001 to 100,000 shares 100,001 to less than 5% of issued shares 5% and above of issued shares TOTAL

568 503,332 8,826,772 21,632,108 61,177,472 81,943,096 174,083,348

LIST OF SUBSTANTIAL SHAREHOLDERS No. of Shares Direct % Boustead Holdings Berhad Lembaga Tabung Angkatan Tentera Tan Sri Dato' Amin Shah Bin Haji Omar Shah Business Focus Sdn Bhd Telekom Malaysia Berhad 56,577,100 - 3,764,400 15,505,544 13,887, 396 32.5 - 2.16 8.91 7.98 No. of Shares Indirect % - 56,577,100^ 16,515,544* - - 32.5 9.49 -

DIRECTORS' SHAREHOLDINGS No. of Shares Direct % Laksamana Madya (Rtd) Dato' Seri Ahmad Ramli Bin Haji Mohd Nor Tn. Hj. Mohd Noordin Bin Abdullah
Notes: ^ - Deemed interest by virtue of its substantial shareholding in Boustead Holdings Berhad. * - Deemed interest by virtue of his substantial shareholding in Business Focus Sdn Bhd, Pilot Lead Investments Limited and Modalshah (M) Sdn Bhd.

No. of Shares Indirect % - - -

1,000 100

# #

# - Negligible.

109

Analysis of Shareholdings

As at 24 April 2007 List Of Thirty Largest Shareholders Holder Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 BOUSTEAD HOLDINGS BERHAD Account Non-Trading RHB NOMINEES (TEMPATAN) SDN BHD Telekom Malaysia Berhad ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD Alliance Merchant Nominees (Tempatan) Sdn Bhd for Business Focus Sdn Bhd ABDUL RADZIM BIN ABDUL RAHMAN ZAKARIA BIN MERANUN AIBB NOMINEES (TEMPATAN) SDN BHD Danaharta Managers Sdn Bhd for Elegant Residence (M) Sdn Bhd KAMARUDIN BIN MERANUN QUEK LENG CHAN AIBB NOMINEES (TEMPATAN) SDN BHD Danaharta Managers Sdn Bhd for Atlantic Range (M) Sdn Bhd NOR ASHIKIN BINTI KHAMIS TRACTORS MALAYSIA HOLDINGS BERHAD CITIGROUP NOMINEES (ASING) SDN BHD Exempt An for Merrill Lynch Pierce Fenner & Smith Incorporated (Foreign) HLB NOMINEES (ASING) SDN BHD Pledged Securities Account for Hussein Adam Ali Ibrahim (SIN 606032) CARTABAN NOMINEES (ASING) SDN BHD Credit Industriel ET Commercial, Singapore for Eng Hueng Fook Henry CIMSEC NOMINEES (TEMPATAN) SDN BHD Danaharta Urus Sdn Bhd for Business Focus Sdn Bhd (Misi Asiam S/B) HLG NOMINEE (ASING) SDN BHD Commerzbank (Sea) Ltd for Rheinmetall Defence Electronics GMBH 110 No. of Shares 56,227,100 % 32.30

13,887,396

7.98

11,828,600

6.79

8,665,900 6,119,400 2,948,500

4.98 3.52 1.69

2,931,800 2,000,000 1,761,800

1.68 1.15 1.01

1,749,700 1,718,000 1,600,000

1.01 0.99 0.92

1,580,000

0.91

1,540,000

0.88

1,535,940

0.88

1,504,000

0.86

Analysis of Shareholdings

As at 24 April 2007 List Of Thirty Largest Shareholders Holder Name 17 18 19 20 21 22 23 24 25 26 27 28 29 30 B & A FAMILY HOLDINGS SDN BHD HLB NOMINEES (TEMPATAN) SDN BHD Pledged Securities Account for Dato Amin Shah Bin Haji Omar Shah (PST 4449-5) JERNEH INSURANCE BHD Shareholders Funds Account HLB NOMINEES (TEMPATAN) SDN BHD Pledged Securities Account for Modalshah (M) Sdn Bhd (PST 4449-5A) AIBB NOMINEES (TEMPATAN) SDN BHD Danaharta Managers Sdn Bhd for Lee Choong Lim @ Lee Tin Fook HOR YIN KIN TA NOMINEES (TEMPATAN) SDN BHD Pledged Securities Account for Oh Kim Sun INTER-PACIFIC EQUITY NOMINEES (ASING) SDN BHD Kim Eng Securities Pte Ltd for Sabco Investment Pte Ltd AIBB NOMINEES (TEMPATAN) SDN BHD Low Khian Seng (D04) CITIGROUP NOMINEES (TEMPATAN) SDN BHD Pledged Securities Account for Albert Neo Po Soon (472160) TA NOMINEES (TEMPATAN) SDN BHD Pledged Securities Account for Riedzuan Bin Abdullah SMA GLOBAL PTY LTD HDM NOMINEES (ASING) SDN BHD UOB Kay Hian Pte Ltd for Tan Mong Tong ANWAR SYAHRIN BIN ABDUL AJIB No. of Shares 1,500,000 1,480,000 % 0.86 0.85

1,157,500

0.66

1,000,000

0.57

968,300

0.56

873,700 765,200

0.50 0.44

744,000

0.43

537,400

0.31

530,000

0.30

500,000

0.29

500,000 500,000

0.29 0.29

495,000 129,149,236

0.28 74.19

111

List of Properties Held by PSCI Group

Location

Description

Area

Tenure

Age

Net Book Value RM'000

PSC INDUSTRIES BERHAD PM242, Lot No. 5203 Mukim of Bukit Katil District of Melaka Tengah Melaka PSC ASSET HOLDINGS SDN BHD Menara PSCI 39 Jalan Sultan Ahmad Shah Pulau Pinang PENANG SHIPBUILDING & CONSTRUCTION SDN BHD Pajakan Negeri No. 649 Lot No 3222 Mukim 13 Daerah Timur Laut Pulau Pinang HSD 6981 Lot 9777 Mukim 13 Daerah Timur Laut Pulau Pinang HSD 124733 Lot No PT15804 Mukim Tanjung Tualang Daerah Kinta Perak HS(D) 16204, PT8711 Mukim Lumut Daerah Manjung Perak SEDAP DEVELOPMENT SDN BHD Geran 16228,16312 to 16326,16780 Lot Nos. 142 to 146, 148 to 151, 182, 183, 186, 187, 327, 328, 334 and 427 Town Area XIX (19), District of Melaka Tengah Melaka

Vacant industrial land

2.737 hectares

Leasehold expiring on 24/05/2091

12 years

3,100

21 storey office building with 5 storey annexed car park

6,672 sq. m.

Freehold

13 years

54,000

Shipyard

20.21 acres

Leasehold expiring on 24/01/2072

35 years

32,210

Reclaimed land for the extension of the area of the shipyard Malaysia Army Equipment & Vehicle Testing Site

19.00 acres

Leasehold expiring on 24/01/2072

35 years

1,757

135 acres

Leasehold expiring on 09/09/2102

5 years

1,760

Marine Industry Land

307,560 sq. m.

Leasehold expiring on 18/10/2099

6 years

Vacant land with buildings on site which are constructed and occupied by tenants

11,018.03 sq. m.

Freehold

9 years

6,500

112

Company No. 11106-V The Companies Act, 1965 PUBLIC COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF PSC INDUSTRIES BERHAD (Company No. 11106-V) TABLE A 1. The regulations in Table A in the Fourth Schedule to the Act shall not apply to the Company except so far as the same are repeated or contained in these Articles. INTERPRETATION 2. In these Articles the words standing in the first column of the Table next hereinafter contained shall bear the meanings set opposite to them respectively in the second column thereof, if not inconsistent with the subject or context.

Appendix 1

Table A excluded

Definition

WORDS Articles Authorised Nominee Beneficial Owner

MEANINGS The Articles of Association as originally framed or as altered from time to time by special resolution. A person who is authorised to act as nominee as specified under the Rules. In relation to Deposited Securities, the ultimate owner of the Deposited Securities who is the person who is entitled to all rights, benefits, powers and privileges and is subject to all liabilities, duties and obligations in respect of, or arising from, the Deposited Securities and does not include a nominee of any description. The specified time and date set by the Company for the purpose of determining entitlements to dividends, interest, new securities or other distributions or rights of holders of its securities. Bursa Malaysia Securities Berhad (Company No. 635998-W) Bursa Malaysia Depository Sdn Bhd (Company No. 165570-W) The Securities Industry (Central Depositories) Act, 1991, or any statutory modification, amendment or re-enactment thereof for the time being in force. PSC Industries Berhad (Company No. 11106-V). A holder of a Securities Account as hereinafter defined. A security in the Company standing to the credit of a Securities Account of the Depositor and includes securities in the Securities Account that is in suspense subject to the provisions of the Central Depositories Act and the Rules. The Directors for the time being of the Company. Bursa Securities Listing Requirements including any amendment to the Listing Requirements that may be made from time to time, including Practice Notes and other relevant requirements issued by Bursa Securities from time to time. Any day on which the stock market of Bursa Securities is open for trading in securities. Any person(s) for the time being holding shares in the Company and whose name(s) appears in the Register of Members and includes a Depositor whose name(s) appears on the Record of Depositors and who shall be treated as if he was a Member pursuant to Section 35 of the Central Depositories Act but excludes Depository in its capacity as a bare trustee. The Registered Office for the time being of the Company.

Books closing date Bursa Securities Depository Central Depositories Act Company Depositor Deposited Security

Directors Listing Requirements

Market Days Member(s)

Office

Company No. 11106-V Record of Depositors Registrar Rules Seal Secretary Securities Securities Account A record provided by the Depository to the Company under Chapter 24.0 of the Rules. Any persons appointed to perform the duties of the Registrar of the Company. The Rules of Depository. The common seal of the Company. Any person appointed to perform the duties of the Secretary of the Company including an assistant or deputy secretary or any person appointed temporarily. Refers to debentures, stocks, shares, bonds of the Company and includes any right or option in respect thereof and any interest in unit trust schemes. An account established by the Depository for a Depositor for the recording of deposit of securities and for dealing in such securities by the Depositor, as defined in the Central Depositories Act and/or the Rules. The Companies Act, 1965 and any statutory modification, amendment or re-enactment thereof for the time being in force concerning companies and affecting the Company.

The Act

Expressions referring to writing shall, unless the contrary intention appears, be construed as including references to printing, lithography, photography, and other modes of representing or reproducing words in a visible form. Words importing the singular number only shall include the plural number and vice versa. Words importing the masculine gender only shall include the feminine gender. Words importing persons shall include corporations and companies. Subject as aforesaid words or expressions contained in these Articles shall be interpreted in accordance with the provisions of the Interpretation Act, 1967 and of the Act as in force at the date on which these Articles become binding on the Company. SHARES 3. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, and subject to the provisions of these Articles and the Act and to the provisions of any resolution of the Company, every issue of shares or options in the Company shall be approved by the Members in general meeting and such shares may be issued by the Directors, who may allot, or otherwise dispose of such shares to such persons, on such terms and conditions, with such preferred, deferred or other special rights, and subject to such restrictions and at such times as the Directors may determine but the Directors in making any issue of shares shall comply with the following conditions:(a) no shares shall be issued at a discount except in compliance with the provisions of section 59 of the Act; (b) in the case of shares of any class, other than ordinary shares, no special rights shall be attached until the same have been expressed in these Articles; (c) no issue of shares shall be made which will have the effect of transferring a controlling interest in the Company to any person, company or syndicate without the prior approval of the Members of the Company in general meeting; and (d) no Director shall participate in a share scheme for employees unless the Members in general meeting have approved the allotment to be made to such Director. 4. The Company must ensure that all new issues of securities for which listing is sought are made by way of crediting the Securities Accounts of the allottees with such securities save and except where it is specifically exempted from compliance with section 38 of the Central Depositories Act, in which event it shall so similarly be exempted from compliance with the Listing Requirements. For this purpose, the Company must notify Depository of the names of the allottees and all such particulars required by Depository, to enable Depository to make the appropriate entries in the Securities Accounts of such allottees. Issue of New Securities Allotment of shares

Company No. 11106-V 5. The Company must not cause or authorise its registrars to cause the Securities Accounts of the allottees to be credited with the additional securities until after the Company has filed with Bursa Securities an application for listing of such additional securities and has been notified by Bursa Securities that they have been authorised for listing. Subject to the provisions of the Act, the Central Depositories Act, and the Rules, the Company must allot securities and despatch notices of allotment to allottees and application for quotation of its securities within such period as prescribed under the Listing Requirements. The certificates of title to share, stock, debentures, debenture stock, notes and other securities shall be issued under the seal of the Company with security features and of such size as prescribed by the Bursa Securities and all such certificates shall be signed by at least one Director and the Secretary or in lieu of the Secretary by such other person as the Directors may appoint for the purpose. It shall be sufficient evidence that the seal has been duly affixed to any such certificate and signed as aforesaid if a facsimile of the signature of a Director and of the Secretary appears thereon. Subject to the Act, any preference shares may with the sanction of an ordinary resolution, be issued on the terms that they are, or at the option of the Company are or will be liable, to be redeemed and the Company shall not issue preference shares ranking in priority to the preference shares already issued, but may issue preference shares ranking equally therewith. Preference shareholders shall have the same rights as ordinary shareholders as regards to receiving notices, reports and audited accounts, and attending general meetings of the Company and shall also have the right to vote at any meeting convened in each of the following circumstances:a) when the dividend or part of the dividend on the preference shares is in arrears for more than six (6) months; b) on a proposal to reduce the Companys share capital; c) on a proposal for the disposal of the whole of the Companys property, business and undertaking; d) on a proposal that affects rights attached to the preference shares; e) on a proposal to wind up the Company; and f) 9. during the winding up of the Company. Repayment of preference capital Crediting of Securities Account Allotment and dispatch of notice for an issue Certificates

6.

7.

8.

Rights of preference shareholders

Notwithstanding Article 11 hereof, the repayment of preference share capital other than redeemable preference shares, or any alteration of preference shareholders rights shall only be made pursuant to a special resolution of the preference shareholders concerned, provided always that where the necessary majority for such a special resolution is not obtained at the meeting, consent in writing, if obtained from the holders of three-fourths (3/4) of the preference capital concerned within two (2) months of the meeting, shall be as valid and effectual as a special resolution carried at the meeting.

10. Subject to the provisions of section 65 of the Act, all or any of the rights, privileges or conditions for the time being attached or belonging to any class of shares for the time being forming part of the share capital of the Company may from time to time be modified, affected, varied, extended or surrendered in any manner with the consent in writing of the holders of not less than threefourths (3/4) of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the Members of that class. To every such separate meeting all the provisions of these Articles as to general meetings of the Company shall mutatis mutandis apply, but so that the necessary quorum shall be two (2) Members of the class holding or representing by proxy, one-third (1/3) of the share capital paid or credited as paid on the issued shares of the class, and every holder of shares of the class in question shall be entitled on a poll to one (1) vote for every such share held by him. To every such special resolution the provisions of section 152 of the Act shall with such adaptation as are necessary apply. 11. The Company may pay a commission to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in the Company, provided that the rate per cent or the amount of procuring or agreeing to procure subscriptions, whether absolute or conditional, of the commission paid or agreed to be paid shall be disclosed in the manner required by the Act, that such commission shall not exceed ten per cent (10%) of the price at which such shares are issued, or an amount equivalent to such percentage, and that the requirements of section 58 of the Act shall be observed. Subject to the provisions of section 54

Modification of class rights

Commission and Brokerage

Company No. 11106-V of the Act, such commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in one way and partly in the other. The Company may also on any issue of securities pay such brokerage as may be lawful. 12. No person shall be recognised by the Company as holding any share upon any trust, and the Company shall not be bound by or be required in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any other rights in respect of any share other than an absolute right to the entity thereof in the registered holder except only as by these Articles otherwise provided for or as by the Act or the Rules required or pursuant to any order of the Court. The Company may by notice in writing, require any Member of the Company, within such reasonable time as is specified in the notice:a) to inform the Company whether he holds any voting shares in the Company as beneficial owner, Authorised Nominee or as trustee; and b) if he holds them as trustee or Authorised Nominee, to indicate so far as he can, the persons for whom he holds them by name and by other particulars sufficient to enable those persons to be identified and the nature of their interest 14. The Company shall have the power, subject to and in accordance with the provisions of the Act and any rules, regulations and guidelines thereunder issued by Bursa Securities and any other relevant authorities in respect thereof for the timebeing in force, to purchase its own shares and thereafter to deal with the shares purchased in accordance with the provisions of the Act and any rules, regulations and guidelines thereunder issued by Bursa Securities and any other relevant authorities in respect thereof. LIEN 15. The Company shall have a first and paramount lien upon all shares (not being a fully paid-up share) registered in the name of any Member, for his debts, liabilities and engagements whether the period for the payment, fulfillment or discharge thereof, shall have actually arrived or not, and such lien shall extend to all dividends from time to time declared in respect of such shares, but the Directors may at any time declare any share to be wholly or in part exempt from the provision of this Article. The Companys lien, if any, on shares and dividends from time to time declared in respect of such shares, shall be restricted to unpaid calls and instalments upon the specific shares in respect of which such money are due and unpaid, and to such amounts as the Company may be called upon by law to pay and has paid in respect of the shares of the Member or deceased Member. The Directors may sell any shares subject to such lien at such time or times and in such manner as they think fit, but no sale shall be made until such time as the money in respect of which such lien exists or some part thereof are or is presently payable or a liability or engagement in respect of which such lien exists is liable to be presently fulfilled or discharged, and until a demand and notice in writing stating the amount due or specifying the liability or engagement and demanding payment or fulfillment or discharge thereof, and giving notice of intention to sell in default, shall have been served on such Member or the persons (if any) entitled by transmission to the shares, and default in payment, fulfillment or discharge shall have been made by him or them for fourteen (14) days after such notice. To give effect to any sale the Directors may authorise some person to transfer the shares sold to the purchaser and may enter the purchasers name in the register as holder of the shares, and the purchaser shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale and the remedy of the holder of such shares or of any person claiming under or through him in respect of any alleged irregularity or invalidity, shall be against the Company. The net proceeds of any such sale shall be applied in or towards satisfaction of the amount due to the Company, or of the liability or engagement, as the case may be, and the balance (if any) shall be paid to the Member or the person (if any) entitled by transmission to the shares so sold. No Member shall be entitled to receive any dividend or to exercise any privileges as a Member until he has paid all calls for the time being due and payable on every share held by him, together with interest and expenses (if any). Company to have a paramount lien Shares buyback Trusts not to be recognised

13.

Information of Shareholding

16.

Enforcing lien by sale

17.

Evidence

18.

Application of proceeds Member not entitled to dividend or to vote until calls paid

19.

Company No. 11106-V CALLS ON SHARES 20. The Directors may, subject to the provisions of these Articles, from time to time make such calls upon the Members in respect of all moneys unpaid on their shares (whether on account of nominal value of the shares or by way of premium) as they think fit, provided that fourteen (14) days notice at least is given of each call and each Member shall be liable to pay the amount of every call so made upon him to the persons by the instalments (if any) and at the times and places appointed by the Directors. A call may be revoked or postponed as the Directors may determine. Directors may make call

21. A call shall be deemed to have been made at the time when the resolution of the Directors authorising such call was passed. 22. If before or on the day appointed for payment thereof a call or instalment payable in respect of a share is not paid, the person from whom the same is due shall pay interest on the amount of the call or instalment at such rate not exceeding ten per cent (10%) per annum as the Directors shall fix from the day appointed for payment thereof to the time of actual payment, but the Directors may waive payment of such interest wholly or in part.

Call Unpaid call

23. Any sum which by the terms of allotment of a share is made payable upon allotment or at any fixed date, whether on account of the amount of the share or by way of premium, shall, for all purpose of these Articles, be deemed to be a call duly made and payable on the date fixed for payment, and in case of non-payment the provisions of these Articles as to payment of interest and expenses, forfeiture and the like, and all the relevant provisions of these Articles, shall apply as if such sum were a call duly made and notified as hereby provided. 24. The Directors may, from time to time, make arrangements on the issue of shares for a difference between the holders of such shares in the amount of calls to be paid and in the time of payment of such calls. 25. The Directors may, if they think fit, receive from any Member willing to advance the same, all or any part of the money uncalled and unpaid upon any shares held by him, and upon all or any part of the money so advanced may (until the same would, but for the advance, become payable) pay interest at such rate (unless the Company in general meeting shall otherwise direct) as may be agreed upon between the Directors and the Member paying the sum in advance, in addition to the dividend payable upon such part of the share in respect of which such advance has been made as is actually called up. Such capital paid on shares in advance of calls shall not, whilst carrying interest, confer a right to participate in profits. Except in liquidation, sums paid in advance of calls shall not, until the same would but for such advance have become payable, be treated as paid-up on the shares in respect of which they have been paid. TRANSFER OF SECURITIES 26. The instrument of transfer of any securities shall be executed by or on behalf of the transferor and transferee, and the transferor shall be deemed to remain the holder of the securities until the name of the transferee is entered in the Record of Depositors in respect thereof. 27. Depository may refuse to register any transfer of Deposited Securities that does not comply with the Central Depositories Act and the Rules, no securities shall in any circumstances be transferred to any infant, bankrupt or person of unsound mind.

Automatic call

Payment of calls Advance on call

Transferors Right Refusal to register transfers Closing of registers

28. The registration of transfers may be closed at such times and for such periods as the Directors may from time to time determine, provided it shall not be closed for more than thirty (30) days in any year. The Company shall give Bursa Securities prior written notice of the period of the intended suspension or closure and the purposes thereof, which notice shall be at least ten (10) market days or such number of days as may be prescribed by Bursa Securities. In relation to the suspension or closure, the Company shall give written notice in accordance with the Rules to prepare the appropriate Record of Depositors. 29. The transfer of any listed securities or class of listed securities of the Company which have been deposited with Depository, shall be by way of book entry by Depository in accordance with the Rules and, notwithstanding sections 103 and 104 of the Act, but subject to subsection 107C(2) of the Act, and any exemption that may be made from compliance with subsection 107C(1) of the Act, the Company shall be precluded from registering and effecting any transfer of such listed securities.

Transfer of securities

Company No. 11106-V 30. Subject to the provisions of the Central Depositories Act and the Rules, every instrument of transfer shall be in writing and in the form approved in the Rules and shall be presented to the Depository with such evidence (if any) as the Depository may require to prove the title of the intending transferor and that the intended transferee is a qualified person. TRANSMISSION OF SECURITIES 31. In the case of the death of a Member, the legal personal representative or representatives, the executors or administrators of the deceased, shall be the only person recognised by the Company as having any title to his securities. Any person becoming entitled to securities in consequence of the death or bankruptcy of a Member may, subject to the Rules and Article 31 hereof, transfer the securities to himself or to some other person nominated by him as the transferee but nothing herein contained shall release the estate of a deceased from any liability in respect of any shares which had been held by him. Transmission Instrument of Transfer

32. Any person becoming entitled to securities in consequence of the death or bankruptcy of a Member, may, upon such evidence being produced as may from time to time properly be required by the Rules and subject as hereinafter provided, elect either to be registered himself as holder of the securities or to have some other person nominated by him registered as the transferee thereof, but the Depository shall in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the securities by that Member before his death or bankruptcy. Provided always that where the securities is a deposited securities, a transfer of the securities may be subject to the Rules carried out by the person(s) becoming so entitled. 33. A person entitled to securities by transmission shall be entitled to receive, and may give a discharge for, any dividends or other moneys payable in respect of the securities, but he shall not be entitled in respect of it to receive notice of or to attend or vote at meetings of the Company or, save as aforesaid, to exercise any of the rights or, privileges as a Member unless and until he shall become a Member in respect of the securities. If the person becoming entitled elects to have the securities transferred to him, the aforesaid notice shall be given to the Depository and subject to the Rules, a transfer of the securities may be carried out by the person becoming so entitled. TRANSMISSION OF SECURITIES TO/FROM BRANCH REGISTER 34. Where :(a) the securities of the Company are listed on another stock exchange; and (b) the Company is exempted from compliance with section 14 of the Central Depositories Act or section 29 of the Securities Industry (Central Depositories) (Amendment) Act 1998, as the case may be, under the Rules in respect of such securities, the Company shall, upon request of a securities holder, permit a transmission of securities held by such securities holder from the register of holders maintained by the Registrar of the Company in the jurisdiction of the other stock exchange, to the register of holders maintained by the Registrar of the Company in Malaysia and vice versa provided that there shall be no change in the ownership of such securities. FORFEITURE OF SHARES 35. If any Member fails to pay the whole or any part of any call or instalment of a call on or before the day appointed for the payment thereof, the Directors may at any time thereafter, during such time as the call or instalment or any part thereof remains unpaid, serve a notice on him or on the person entitled to the share by transmission requiring him to pay such call or instalment or such part thereof as remains unpaid, together with interest at such rate not exceeding ten per cent (10%) per annum or at such rate as the Directors shall determine, and any expenses that may have accrued by reason of such non-payment. The notice shall name a further day (not earlier than the expiration of fourteen (14) days from the date of the notice) on or before which such call or instalment, or such part as aforesaid, and all interest and expenses that have accrued by reason of such non-payment, are to be paid. It shall also name the place where payment is to be made, and shall state that, in the event of nonpayment at or before the time and at the place appointed, the shares in respect of which such call was made will be liable to be forfeited.

Death or bankruptcy of a Member

Person entitled to receive and give discharge for dividends

Transmission of securities from Foreign Register

Notice to pay calls

36.

Form of notice

Company No. 11106-V 37. If the requirements of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Directors to that effect. A forfeiture of shares shall include all dividends in respect of the shares not actually paid before the forfeiture notwithstanding that they shall have been declared. 38. When any share has been forfeited in accordance with these Articles, notice of the forfeiture shall forthwith be given to the holder of the share or to the person entitled to the shares by transmission, as the case may be, and an entry of such notice having been given, and of the forfeiture with the date thereof, shall forthwith be made in the Record of Depositors opposite to the share. Shares forfeiture

Notice of forfeiture

39. Notwithstanding any such forfeiture as aforesaid, the Directors may, at any time before the forfeited share has been otherwise disposed of, annul the forfeiture upon the terms of payment of all calls and interest due thereon and all expenses incurred in respect of the share and upon such further terms (if any) as they shall see fit. 40. Every share which shall be forfeited may be sold, re-allotted or otherwise disposed of, either to the person who was before forfeiture the holder thereof or entitled thereto, or to any other person upon such terms and in such manner as the Directors shall think fit, and the Directors may, if necessary, authorise some person to transfer the same to such other person as aforesaid. Subject to any lien for sums not presently payable, if any, any residue of the proceeds of sale of shares which are forfeited and sold or disposed of, after the satisfaction of the unpaid calls and accrued interest and expenses, shall be paid to the person whose shares have been forfeited, or his executors, administrators, or assignees or as he directs.

Directors may allow forfeited share to be redeemed Forfeited shares may be sold or reallotted

41. A shareholder whose shares have been forfeited shall cease to be a Member but shall notwithstanding, be liable to pay to the Company all calls made and not paid on such shares at the time of forfeiture, and interest thereon at such rate not exceeding ten per cent (10%) per annum to the date of payment, in the same manner in all respects as if the shares had not been forfeited, and to satisfy all (if any) the claims and demands which the Company may have enforced in respect of the shares at the time of forfeiture, without any deduction or allowance for the value of the shares at the time of forfeiture. 42. The forfeiture of a share shall involve the extinction, at the time of forfeiture, of all interest in and all claims and demands against the Company in respect of the share, and all other rights and liabilities incidental to the share as between the shareholder whose share is forfeited and the Company, except only such of those rights and liabilities as are by these Articles expressly saved, or as are by the Act, the Central Depositories Act and the Rules, given or imposed in the case of past Members. A statutory declaration in writing that the declarant is a Director or Secretary of the Company, and that a share has been duly forfeited in pursuance of these Articles, and stating the date upon which it was forfeited, shall, as against all persons claiming to be entitled to the share adversely to the forfeiture thereof, be conclusive evidence of the facts therein stated, and such declaration, together with the receipt of the Company for the consideration (if any), given for the share on the sale or disposition thereof, shall constitute a good title to the share, and such person shall be registered as the holder of the share and shall be discharged from all calls made prior to such sale or disposition, and shall not be bound to see the application of the purchase money (if any), nor shall his title to the share be affected by any act, omission or irregularity relating to or connected with the proceedings in reference to the forfeiture, sale, re-allotment or disposal of the share. CONVERSION OF SHARES INTO STOCK 44. (1) The Company may by ordinary resolution passed at a general meeting convert any paid-up shares into stock and reconvert any stock into paid-up shares of any denomination.

Arrears to be paid notwithstanding forfeiture

Forfeiture of shares shall involve extinction of interest in and claims against Company Evidence of forfeiture and validity of sale

43.

Conversion of shares into stock and reconversion Shareholders of stock may transfer their interests

(2) The holders of stock may transfer the same or any part thereof in the same manner and subject to the same Articles as and subject to which the shares from which the stock arose might previously to conversion have been transferred or as near thereto as circumstances admit; but the Directors may from time to time fix the minimum amount of stock transferable and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the nominal amount of the shares from which the stock arose.

Company No. 11106-V (3) The holders of stock shall according to the amount of the stock held by them have the same rights, privileges and advantages as regards dividends, voting at meetings of the Company and other matters as if they held the shares from which the stock arose, but no such privilege or advantage (except participation in the dividends and profits of the Company and in the assets on winding up) shall be conferred by any such amount of the stock which would not if existing in shares have conferred that privilege or advantage. (4) Such of the Articles of the Company as are applicable to paid-up shares shall apply to stock, and the words shares and shareholders therein include stock and stockholder. Participation in dividends and profits

Provision applicable to paid-up shares apply to stock

ALTERATION OF CAPITAL 45. The Company may from time to time by ordinary resolution increase the share capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe. Power to increase capital Offer of unissued shares

46. Subject to any direction to the contrary that may be given by the Company in general meeting, all new shares or other convertible securities from time to time to be created shall, before they are issued be offered to such persons, as at the date of the offer, are entitled to receive notices from the Company of general meetings in proportion, as nearly as the circumstances admit, to the amount of the existing shares or securities to which they are entitled. The offer shall be made by notice specifying the number of shares or securities offered, and limiting a time within which the offer, if not accepted, shall be deemed to be declined, and, after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares or securities offered, the Directors may dispose of those shares or securities in such manner as they think most beneficial to the Company. The Directors may likewise also dispose of any new shares or securities which (by reason of the ratio which the new shares or securities bear to shares or securities held by persons entitled to an offer of new shares or securities) cannot, in the opinion of the Directors, be conveniently offered under this Article. 47. Notwithstanding the foregoing and subject to the Act and the Listing Requirements, the Company must ensure that it shall not issue any shares or convertible securities if the nominal value of the those shares or convertible securities, when aggregated with the nominal value of any such shares or convertible securities issued during the preceding twelve (12) months, exceeds ten per cent (10%) of the nominal value of the issued and paid-up capital of the Company, except where the shares or convertible securities are issued with the prior approval of the shareholders in general meeting of the precise terms and conditions of the issue. The Company may by ordinary resolution:(a) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; or (b) sub-divide its share capital or any part thereof into shares of smaller amount than is fixed by the Memorandum and Articles of Association and the Act; provided that in the sub-division the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived and so that as between the resulting shares one or more of such share may, by the resolution by which such sub-division is effected, be given any preference or advantage as regards dividend, return of capital, voting or otherwise over the others or any other of such shares, and (c) cancel any shares not taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled. 49. Except so far as otherwise provided by the conditions of issue or by these Articles, any capital raised by the creation of new shares shall be considered as part of the original capital, and shall be subject to the provisions herein contained with reference to payment of calls and instalments, transfer and transmission, forfeiture, lien, surrender and otherwise. Unless otherwise provided in accordance with these Articles the new shares shall be Ordinary Shares. The Company may by special resolution reduce its share capital and any capital redemption reserve fund or any share premium account in any manner authorised and subject to any conditions prescribed by the Act.

Issue of securities

48.

Company may alter its capital in certain ways

Capital raised by the creation of new shares

50.

Reduction of capital

Company No. 11106-V GENERAL MEETINGS 51. An annual general meeting of the Company shall be held in accordance with the provisions of the Act. All general meetings other than the annual general meetings shall be called extraordinary general meetings. All general meetings shall be held at such time and place as the Directors shall determine. Every notice of an annual general meeting shall specify the meeting as such and every meeting convened for passing a special resolution shall state the intention to propose such resolution as a special resolution. The Directors may whenever they so decide by resolution convene an extraordinary general meeting of the Company. In addition, an extraordinary general meeting shall be convened on such requisition as referred to in section 144 of the Act, or if the Company makes default in convening a meeting in compliance with a requisition received pursuant to section 144, a meeting may be convened by the requisitionists themselves in the manner provided in section 144 of the Act. Subject to the provision of the Act relating to special resolutions and special notice and the Listing Requirements, the notices convening meetings shall specify the place, day and hour of the meeting, and shall be given to all shareholders at least fourteen (14) days before the meeting or at least twenty-one (21) days before the meeting where any special resolution is to be proposed or where it is an annual general meeting. Any notice of a meeting called to consider special business shall be accompanied by a statement regarding the effect of any proposed resolution in respect of such special business. At least fourteen (14) days notice or twenty-one (21) days notice in the case where any special resolution is proposed or where it is the annual general meeting, of every such meeting shall be given by advertisement in at least one nationally circulated Bahasa Malaysia or English daily newspaper and in writing to each stock exchange upon which the company is listed in the daily press. General meeting

52.

Extraordinary general meeting

53.

Notice of meeting

54. (1) The Company shall request the Depository in accordance with the Rules, to issue a Record of Depositors to whom notices of general meetings shall be given by the Company. (2) The Company shall also request the Depository in accordance with the Rules, to prepare a Record of Depositors as at the latest date which is reasonably practicable which shall in any event be not less than three (3) market days before the general meeting (hereinafter referred to as the General Meeting Record of Depositors). (3) Subject to the Securities Industry (Central Depositories) (Foreign Ownership) Regulations 1996 (where applicable) and notwithstanding any provision in the Act, a Depositor shall not be regarded as a Member entitled to attend any general meeting and to speak and vote thereat unless his name appears in the General Meeting Record of Depositors. 55. All business shall be special that is transacted at an extraordinary general meeting, and also all that is transacted at an annual general meeting, with the exception of declaring a dividend, the consideration of the financial statements, balance sheets, and reports of the Directors and auditors, Directors fees, the election of Directors in the place of those retiring, and the appointment and fixing of the remuneration of the auditors. PROCEEDINGS AT GENERAL MEETING 56. No business shall be transacted at any general meeting unless a quorum of Members is present at the time when the meeting proceeds to business. Save as herein otherwise provided, two (2) Members present in person or by proxy, or in the case of corporations which are Members, present by their representatives appointed pursuant to the provisions of these Articles and entitled to vote shall be a quorum. If within half (1/2) an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of Members, shall be dissolved; in any other case it shall stand adjourned to the same day in the next week at the same time and place, or to such other day and at such other time and place as the Directors may determine but if a quorum is not present within half (1/2) an hour at any adjourned meeting the Member or Members present shall be a quorum. The Chairman (if any) of the Board of Directors shall preside as Chairman at every general meeting of the Company. If there is no such Chairman or Deputy Chairman, or if at any meeting neither the Chairman nor the Deputy Chairman is present within fifteen (15) minutes after the time appointed for holding the meeting, or if neither of them is willing to act as chairman, the Directors present shall choose one (1) of their number to act, or if one (1) Director only is present he shall preside as chairman if willing to act. If no Director is present, or if each of the Directors

Record of Depositors

Special business

Quorum

57.

When quorum not present

58.

Chairman of general meeting

Company No. 11106-V present declines to take the chair, the persons present and entitled to vote on a poll shall elect one (1) of their number to be chairman. The election of the Chairman shall be by a show of hands. 59. The Chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for thirty (30) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 60. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result on the show of hands) demanded:(a) by the Chairman; (b) by at least three (3) Members present in person or by proxy or by attorney or in the case of a corporation by a representative; (c) by a Member or Members present in person or by proxy or by attorney or in the case of a corporation by a representative and representing not less than one-tenth (1/10) of the total voting rights of all the Members having the right to vote at the meeting; or (d) by a Member or Members present in person or by proxy or by attorney or in the case of a corporation by a representative holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid-up equal to not less than one-tenth (1/10) of the total sum paid-up on all the shares conferring that right. Unless a poll is so demanded, a declaration by the Chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. The demand for a poll may be withdrawn. 61. If a poll is duly demanded, it shall be taken in such manner and either at once or after an interval or adjournment or otherwise as the Chairman directs, and the result of the poll shall be the resolution of the meetings at which the poll was demanded, but a poll demanded on the election of a Chairman or on a question of adjournment shall be taken forthwith. The demand for a poll shall not prevent the continuance of a meeting for a transaction of any business other than the question on which the poll has been demanded. The Chairman of the meeting may (and if so directed by the meeting shall) appoint scrutineers and may in addition to the powers of adjourning meetings contained in Article 60 adjourn the meeting to some place and time fixed for the purpose of declaring the result of the poll. 62. In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a second or casting vote in addition to any other vote he may have. VOTES OF MEMBERS 63. Subject to any rights or restrictions for the time being attaching to any class or classes of shares, at meetings of Members or of classes of Members, each Member entitled to vote may vote in person or by proxy or by attorney or being a corporation is represented by a representative and on a show of hands. On resolution to be decided on a show of hands, every person present who is a Member, whether a holder of ordinary shares or preference shares, who is personally present and entitled to vote, or a proxy or an attorney or being a corporation is represented by an authorised representative of a Member, shall have one (1) vote. On resolution to be decided on a poll, every Member present in person or by proxy or by attorney or other duly authorised representative for a corporation shall have one (1) vote for every such share he holds. 64. Where the capital of the Company consists of shares of different monetary denominations, voting rights shall be prescribed in such a manner that a unit of capital in each class, when reduced to a common denominator, shall carry the same voting power when such right is exercisable. Right to vote Poll to be taken Power to adjourn general meeting

Voting on resolution

Chairman to have casting votes

Shares of different monetary denominations

Company No. 11106-V 65. A Member who is of unsound mind or whose person or estate is liable to be dealt with in any way under the law relating to mental disorder may vote, whether on a show of hands or on a poll, by his committee or by such other person who properly has the management of his estate, and any such committee or other person may vote by proxy or attorney and any such committee or other person entitled under this Article hereof to vote, may vote at any general meeting in respect thereof in the same manner as if he was the registered holder of such shares provided that at least forty-eight (48) hours before the time of holding the meeting or adjourned meeting, as the case may be at which he proposes to vote, he shall satisfy the Directors of his right to vote unless the Directors shall have previously admitted his right to vote at such meeting in respect thereof. 66. Subject to Article 54, no Member shall be entitled to be present and to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the Company have been paid. 67. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the Chairman of the meeting, whose decision shall be final and conclusive. 68. The instrument appointing a proxy shall be in writing (in the common or usual form) under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised. The Directors may but shall not be bound to require evidence of the authority of any such attorney or officer. A proxy may but need not be a Member of the Company and the provisions of section 149(1)(b) of the Act shall not apply to the Company. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. 69. A Member may appoint not more than two (2) proxies to attend the same meeting. Where a Member appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy. Where a Member of the Company is an authorised nominee as defined under the Central Depositories Act, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account. 70. The instrument appointing a proxy shall be in common or usual form as the Directors may approve. The proxy form must be in the manner which allows members of the Company to indicate how he/she would like his/her proxy to vote in relation to each resolution. 71. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited by hand at or by facsimile transmission to the Office of the Company, or at such other place within Malaysia as is specified for that purpose in the notice convening the meeting, not less than fortyeight (48) hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposed to vote and in default the instrument of proxy shall not be treated as valid. Members of unsound mind

No Member to vote whilst calls unpaid Votes to be taken as Chairman shall direct Proxy to be in writing

Number of proxy

Form of proxy

Instrument appointing proxy to be deposited

72. Every power, right or privilege herein given in these presents to any Member of the Company to convene, attend, vote and in any way take part in any meeting of the Company, may be exercised in the event of such Member being out of Malaysia, by any attorney, whether a Member of the Company or not, duly appointed by such Member for the purpose, by a power of attorney produced at the Office of the Company during business hours not less than two (2) clear days before the same is acted on. And any vote given or things done by such attorney shall be valid notwithstanding the previous death of the Member giving such power of attorney or revocation of such power of attorney by other means provided no intimation in writing of such death or revocations shall have been received at the Office of the Company before such vote is given or thing done. 73. A vote given in accordance with the terms of an instrument of proxy or attorney or authority shall be valid, notwithstanding the previous death or unsoundness of mind of the principal or revocation of the instrument of proxy or of the authority under which the instrument of proxy was executed, or the transfer of the share in respect of which the instrument of proxy is given, if no intimation in writing of such death, unsoundness of mind, revocation or transfer as aforesaid has been received by the Company at the Office before the commencement of the meeting or adjourned meeting or in the case of poll before the time appointed for the taking of the poll, at which the instrument of proxy is used.

Power of Attorney

Validity of vote given under proxy

Company No. 11106-V 74. A corporation may by resolution of its Directors or other governing body, if it is a Member of the Company, authorise such person as it thinks fit to act as its representative either at a particular general meeting or at all general meetings of the Company or of any class of Members and a person so authorised shall be in accordance with his authority and until his authority is revoked by the corporation, be entitled to exercise the same powers on behalf of the corporation as the corporation could exercise if it were an individual Member of the Company. DIRECTORS APPOINTMENT, ETC. 75. The first Directors shall be Mr Low Kiok Boo and Mr Chan Taw Fah. 76. Until otherwise determined by general meeting the number of Directors shall not be less than two (2) nor more than fifteen (15) but in the event of any casual vacancy occurring and reducing the number of Directors below the aforesaid minimum the continuing Director or Directors may, except in an emergency, act only for the purpose of increasing the number of Directors to such minimum number or to summon a general meeting of the Company. 77. At the first annual general meeting of the Company all the Directors shall retire from office, and at the annual general meeting in every subsequent year one-third (1/3) of the Directors for the time being, or if their number is not three (3) or a multiple of three (3), then the number nearest one-third (1/3) shall retire from office provided always that all Directors shall retire from office once at least in each three (3) years, but shall be eligible for re-election. An election of Directors shall take place every year. 78. A retiring director shall be eligible for re-election. 79. The Directors to retire in every year shall be those who have been longest in office since their last election, but as between person who become Directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. 80. No person not being a retiring Director shall be eligible for election to the office of Director at any general meeting unless a Member intending to propose him for election has, at least eleven (11) clear days before the meeting, left at the Office of the Company a notice in writing duly signed by the nominee, giving his consent to the nomination and signifying his candidature for the office, or the intention of such Member to propose him for election, provided that in the case of a person recommended by the Directors for election, nine (9) clear days notice only shall be necessary, and notice of each and every candidature for election to the Board of Directors shall be served on the registered holders of shares at least seven (7) days prior to the meeting at which the election is to take place. 81. A motion for the appointment of two (2) or more persons as Directors by a single resolution shall not be made at any general meeting unless a resolution that it shall be so made has first been agreed to by the meeting without any vote being given against it; and any resolution moved in contravention of this provision shall be void. 82. The Company at the meeting at which a Director so retires may fill the vacated office by electing a person thereto, and in default the retiring Director shall if offering himself for re-election and not being disqualified under the Act from holding office as a Director be deemed to have been re-elected, unless at that meeting it is expressly resolved not to fill the vacated office, or unless a resolution for the re-election of that Director is put to the meeting and lost. 83. The Directors shall have power at any time, and from time to time, to appoint any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors, but so that the total number of Directors shall not at any time exceed the number fixed in accordance with these Articles. Any Director so appointed shall hold office only until the next following annual general meeting and shall then be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation at that meeting. 84. The Company may by ordinary resolution, of which special notice is given, remove any Director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead; the person so appointed shall be subject to retirement at the same time as if he had become a Director on the day on which the Director in whose place he is appointed was last elected a Director. Determination of Director to retire Notice of candidate as a Director Directors Number of Directors Corporate Representative

Retirement of Directors

Appointment of Directors to be voted on individually Filling of vacancy

Casual vacancy or additional appointment

Removal of Directors

Company No. 11106-V 85. The fees payable to the Directors shall from time to time be determined by the Company in general meeting, and such fees shall be divided among the Directors in such proportions and manner as that Directors may determine provided always that:(a) fees payable to Directors who hold no executive office in the Company shall be paid by a fixed sum and not by a commission on or percentage of profits or turnover; (b) fees payable to Directors shall not be increased except pursuant to a resolution passed at a general meeting, where notice of the proposed increase has been given in the notice convening the meeting; (c) any fee paid to an Alternate Director shall be such amount as shall be agreed between himself and the Director nominating him and shall be paid out of the remuneration of the latter. 86. The Directors may also be paid all travelling, hotel, and other expenses properly incurred by them in attending and returning from meeting of the Directors or any committee of the Directors or general meetings of the Company or in connection with the business of the Company. Any Director or who serves on any committee or who otherwise performs services which in the opinion of the Directors are outside the scope of the ordinary duties of a Director, may be paid such extra remuneration. 87. If by arrangement with the Directors, any Director shall perform or render any special duties outside his ordinary duties as a Director in particular without limiting to the generality of the foregoing if any Director being willing shall be called upon to perform extra services or to make any special exertions in going or residing away from his usual place of business or residence for any of the purposes of the Company or in giving special attention to the business of the Company as a member of a committee of Directors, the Directors may pay him special remuneration, in addition to his Directors fees, and such special remuneration may be by way of a fixed sum, or otherwise as may be arranged provided that the special remuneration payable to Non-Executive Director shall not by way of a commission on or percentage of profits or turnover. 88. A Director of the Company may be or become a Director or other officer of, or otherwise interested in, any company promoted by the Company or in which the Company may be interested as shareholder or otherwise, and no such Director shall be accountable to the Company for any remuneration or other benefits received by him as a Director or officer of, or from his interest in, such other company unless the Company otherwise directs. 89. A Director shall not be required to hold any qualification shares. A Director who is not a member of the Company shall nevertheless be entitled to attend and speak at general meetings or meetings of the holders of any class of shares. 90. The office of Director shall become vacant if the Director during his term of office:(a) ceases to be a Director by virtue of the Act; (b) becomes bankrupt or makes any arrangement or composition with its creditors generally; (c) becomes prohibited from being a Director by reason of any order made under the Act; (d) becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the law relating to mental disorder; (e) resigns his office by notice in writing to the Company; or (f) is removed by a resolution of the Company in general meeting and in the case of an alternate or substitute Director by a resolution of the Directors. (g) If absent from more than 50% of the total Board of Directors meetings held during a financial year unless an exemption or waiver is obtained from the Bursa Securities. POWERS AND DUTIES OF DIRECTORS 91. The business of the Company shall be managed by the Directors who may pay all expenses incurred in promoting and registering the Company, and may exercise all such powers of the Company as are not, by the Act or by these Articles, required to be exercised by the Company in general meeting, subject, nevertheless, to any of these Articles, to the provisions of the Act, and to such regulations, being not inconsistent with these Articles or provisions of the Act, as may General powers of the Company vested in Directors Reimbursement Directors fee

Special remuneration

Director may hold other office

Qualification of Directors Office of Directors vacated in certain cases

Company No. 11106-V be prescribed by the Company in general meeting; but no regulation made by the Company in general meeting shall invalidate any prior act of the Directors which would have been valid if that regulation had not been made. 92. The Directors shall not without the prior approval of the Company in general meeting: (a) carry into effect any proposal or execute any transaction for the acquisition of an undertaking or property of a substantial value, or the disposal of a substantial portion of or a controlling interest in the Companys undertaking or property; (b) exercise any power of the Company to issue shares unless otherwise permitted under the Act; (c) subject to Section 132E of the Act, enter into any arrangement or transaction with a Director of the Company or its holding Company or with a person connected with such a Director to acquire from or dispose to such Director or person any non-cash assets of the requisite value as stated in the Act; and (d) issue warrants as call options on such terms and subject to such conditions which may be recommended by the Directors which confers a right to subscribe for new shares of the Company. 93. The Directors may exercise all the powers of the Company to borrow or raise money for the purpose of the Companys or any of its related corporations businesses on such terms as they think fit and may secure the repayment of the same by mortgage or charge upon the whole or any part of the Companys undertaking and property (both present and future) including its uncalled or unissued capital and may issue bonds, debentures and other securities whether charged upon the whole or part of the assets of the Company or otherwise but the Directors shall not borrow any money or mortgage or charge any of the Companys or any of the subsidiary companies undertaking, property or any uncalled capital or to issue debentures and other securities whether outright or as security for any debt, liability or obligation of an unrelated third party. 94. The Directors may establish or arrange any contributory or non-contributory pension or superannuation scheme for the benefit of, or pay a gratuity, pension or emolument to any person who is or has been employed by or in the service of the Company or any subsidiary of the Company, or to any person who is or has been a Director or other officer of and holds or has held salaried employment in the Company or any such subsidiary, and the widow, family or dependants of any such person. The Directors may also subscribe to any association or fund which they consider to be for the benefit of the Company or any such subsidiary or any such persons as aforesaid and make payments for or towards any hospital or scholastic expenses and any Director holding such salaried employment shall be entitled to retain any benefit received by him hereunder subject only, where the Act requires, to proper disclosure to the Members and the approval of the Company in general meeting. 95. The Directors may exercise all the powers of the Company in relation to any official seal for use outside Malaysia and in relation to branch register. 96. The Directors may from time to time by power of attorney appoint any corporation, firm or person or body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities, and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Directors may think fit and may also authorise any such attorney to delegate all or any of the powers, authorities, and discretions vested in him. 97. Any Director with the approval of the majority of Directors may appoint any person (whether a Member of the Company or not) to be an Alternate or Substitute Director in his place during such period as he thinks fit. Any person while he so holds office as an Alternate or Substitute Director shall be entitled to notice of meetings of the Directors and to attend and vote thereat accordingly, and to exercise all the powers of the appointer in his place. An Alternate or Substitute Director shall not require any share qualification, and shall ipso facto vacate office if the appointer vacates office as a director or removes the appointee from office. Any appointment or removal under this regulation shall be effected by notice in writing under the hand of the director making the same. Director's borrowing powers Power of Directors

Power to maintain pension fund

Branch registers Directors may appoint attorneys

Appointment of Alternate Directors

Company No. 11106-V 98. All cheques, promissory notes, drafts, bills of exchange, and other negotiable instruments, and all receipts for money paid to the Company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, in such manner as the Directors from time to time by resolution determine. 99. A Director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office and shall not make use of any information acquired by virtue of his position to gain directly or indirectly an improper advantage for himself or for any other person or to cause detriment to the Company. 100. Every Director shall give notice to the Company of such events and matter relating to himself as may be necessary or expedient to enable the Company and its officers to comply with the requirements of the Act. 101. Subject always to the provisions of the Act, a Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his office of Director for such period and on such terms (as to remuneration and otherwise) as the Directors may determine and no Director or intending Director shall be disqualified, by his office, from contracting with the Company either with regard to his tenure of any such other office or place of profit or as vendor, purchaser or otherwise, nor shall any such contract, or any contract or arrangement entered into by or on behalf of the Company which a Director is in any way interested, be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relationship thereby established. 102. Any Director may act by himself or his firm in a professional capacity for the Company and he and his firm shall be entitled to remuneration for his or his firms professional services as if he was not a Director, provided that nothing herein contained shall authorise a Director or his firm to act as auditor of the Company and provided further that such shall be at normal commercial terms. 103. The Directors shall cause minutes to be made for the purpose:(a) of all appointments of officers to be engaged in the management of the Companys affairs; (b) of names of Directors present at each meeting of Directors and of any committee of Directors and of the Company in general meeting; and (c) of all resolutions and proceedings at all meetings of the Company and of any class of Members, of the Directors and of committee of Directors. Such minutes shall be signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting and if so signed, shall be conclusive evidence without any further proof of the facts thereon stated. Keeping of Registers Execution of negotiable instruments and receipts for money paid Discharge of duties

Notice of disclosures Power of Directors to hold offices of profit and to contract with Company

Director may act in his professional capacity Minutes to be made and when signed by Chairman to be conclusive evidence

104. The Directors shall duly comply with the provisions of the Act and in particular the provisions in regard to keeping a Register of Directors and Secretaries, a Register of Members, a Register of Charges, a Register of Directors Shareholdings, Register of Debenture Holders, Register of Substantial Shareholders and Register of Option Holders and in regard to the production and furnishing of copies of such Registers. PROCEEDINGS OF DIRECTORS 105. The Directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit. A meeting of the Directors may be held anywhere in the world. Any Director may at any time and the Secretary shall on the requisition of any of the Directors, summon a meeting of the Directors. The Directors may hold a meeting of Directors at two (2) or more venues within or outside Malaysia using any technology that gives the Directors as a whole a reasonable opportunity to participate. A minute of the proceedings of such meeting is sufficient evidence of the proceedings to which it relates. 106. The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors and unless so fixed shall be two (2). 107. It shall not be necessary to give any Director or Alternate Director who has not got an address in Malaysia, registered with the Company, notice of a meeting of the Directors. Unless otherwise determined by the Directors from time to time, notice of all Directors meetings shall be given to

Meetings

Quorum Notice of Directors Meeting

Company No. 11106-V all Directors and their alternates who have a registered address in Malaysia. Except in the case of an emergency, reasonable notice of every Directors meeting shall be given in writing. The Director may waive notice of any meeting and any such waiver may be retroactive. The notice of each Directors meeting shall be deemed to be served if a properly stamped letter containing the notice is posted or the notice is sent by hand, facsimile transmission, electronic mail or other electronic communications to the Directors. 108. Subject to these Articles, any question arising at any meeting of Directors shall be decided by a majority of votes and a determination by a majority of Directors shall for all purposes be deemed a determination of the Directors. In case of an equality of votes and subject to Article 106 the Chairman of the meeting shall have a second or casting vote. Where two (2) Directors form a quorum, the Chairman of the meeting at which only such a quorum is present, or at which only two (2) Directors are competent to vote on the question at issue, shall not have a second or casting vote. 109. A Director shall not vote in respect of any contract or proposed contract or arrangement in which he has, directly or indirectly, an interest and if he shall do so his vote shall not be counted. 110. Every Director shall comply with the provisions of Sections 131 and 135 of the Act in connection with the disclosure of his shareholding and interest in the Company and his interest in any contract or proposed contract with the Company and in connection with the disclosure, every director shall state the fact and the nature, character and extent of any office or possession of any property whereby whether directly or indirectly duties or interests might be created in conflict with his duty or interest as a Director of the Company. 111. The remaining Directors may continue to act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the minimum number fixed by or pursuant to the Articles of the Company as the necessary quorum of Directors, the remaining Directors or Director may, except in an emergency, act only for the purpose of increasing the number of Directors to that minimum number, or to summon a general meeting of the Company, but for no other purpose. 112. The Directors may elect a Chairman or a Deputy Chairman of their meetings and determine the period for which he is to hold office, but if no such Chairman is elected, or if at any meeting the Chairman or Deputy Chairman is not present within fifteen (15) minutes after the time appointed for holding the meeting, the Directors present may choose one (1) of their Members to be the Chairman of the meeting. 113. The Directors may establish any committees, local boards or agencies comprising one (1) or more persons for managing any of the affairs of the Company, either in Malaysia or elsewhere, and may lay down, vary or annul such rules and regulations as they may think fit for the conduct of the business thereof, and may appoint any person or persons to be the member or members of any such committee or local board or agency and may fix their remuneration and may delegate to any such committee or local board or agency any of the powers, authorities and discretions vested in the Directors, with power to sub-delegate, and may authorise the member of members of any such committee or local board or agency or any of them, to fill any vacancies therein, and to act notwithstanding vacancies, and any such appointment of delegation may be made upon such terms and subject to such conditions as the Directors may think fit, and the Directors may remove any person or persons so appointed, and may annul or vary any such delegation, but no person or persons dealing in good faith and without notice of any such annulment or variation shall be affected thereby. Where two (2) persons form a quorum, the Chairman of a meeting of any such committee of local board or agency at which only such a quorum is present, or at which only two (2) persons are competent to vote in the question at issue, shall not have a casting vote. 114. A committee may elect a Chairman of its meetings; if no such Chairman is elected, or if at any meeting the Chairman is not present within fifteen (15) minutes after the time appointed for holding the meeting, or is unwilling to act the Members present may choose one (1) of their Members to be the Chairman of the meeting. 115. Subject to any rules and regulations made pursuant to Article 113 and the Listing Requirements, a committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the Members present, and in the case of an equality of votes the Chairman shall have a second or casting vote. Directors power to vote

Restriction on voting Disclosure of interest by Directors

Number reduced below quorum

Chairman

Committees

Chairman of committee

Meetings of committee

Company No. 11106-V 116. All acts done by any meeting of the Directors or of a committee of Directors or by any person acting as a Director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any such Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director. 117. A resolution in writing signed by a majority of all Directors shall be as valid and effectual as if it had been passed at a meeting of the Directors duly called and constituted; provided that where a Director has an alternate, then such resolution may also be signed by such alternate. All such resolutions shall be described as Directors Circular Resolution and shall be forwarded or otherwise delivered to the Secretary without delay, and shall be recorded by him in the Companys Minutes Book. Any such resolution may consist of several documents in the like form, each signed by one or more Directors. Any such document may be accepted as sufficiently signed by a Director if transmitted to the Company by any technology purporting to include a signature and/or electronic or digital signature of the Director. 118. Notwithstanding any provisions to the contrary contained in these Articles but subject to the law, all or any of the Directors or members of any committee of the Directors may participate at a meeting of the Directors or that committee by means of telephone or video conferencing or by means of other communication equipment whereby all persons participating in the meeting are able to hear each other and be heard for the entire duration of the meeting. A person so participating shall be deemed to be present in person and shall be entitled to vote or be counted in a quorum accordingly. Any meeting held in such manner shall be deemed to be held at such place as shall be agreed upon by the persons attending the meeting or where the largest group of those participating is assembled or, if there is no such group, where the Chairman of the meeting then is. MANAGING DIRECTORS AND/OR EXECUTIVE DIRECTORS 119. The Directors may from time to time appoint any one (1) or more of their body to be Managing Director or Deputy Managing Director and/or Executive Directors. If the appointment is for a fixed term, that term shall not exceed three (3) years, and upon such conditions as the Directors think fit, and may vest in such Managing Director or Deputy Managing Director and/or Executive Directors the power hereby vested in the Directors generally as they may think fit, but provided always that such Managing Director, Deputy Managing Director and/or Executive Directors shall be subject to the control of the Directors. 120. A Managing Director or Deputy Managing Director and/or Executive Directors shall, while he continues to hold that office, be subject to retirement by rotation, and he shall be reckoned as a Director for the purpose of determining the rotation of retirement of Directors or in fixing the number of Directors to retire and subject to provisions of any contract between him and the Company shall, be subject to the same provisions as to resignation and removal as the other Directors of the Company and if he ceases to hold the office of Director for any cause shall ipso facto and immediately cease to be a Managing Director or Deputy Managing Director and/or Executive Directors. 121. A Managing Director or Deputy Managing Director and/or Executive Directors shall, subject to the terms of any agreement entered into in any particular case, receive such remuneration (whether by way of salary, commission, or participation in profits or partly in one way and partly in another) as the Directors may determine. Such remuneration may not include a commission on or a percentage of turnover. 122. The Directors may entrust to and confer upon a Managing Director or Deputy Managing Director and/or Executive Directors any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit, and either collaterally with or to the exclusion of their own powers, and may from time to time revoke, withdraw, alter, or vary all or any of those powers. ASSOCIATE DIRECTORS 123. The Directors may from time to time appoint any person to be an associate director and may from time to time cancel any such appointment. The Directors may fix, determine and vary the powers, duties and remuneration of any person so appointed, but a person so appointed shall not be required to hold any shares to qualify him for appointment nor have any right to attend or vote at any meeting of Directors except by the invitation and with the consent of the Directors. Appointment of associate directors Appointment of Managing Director and/ or Executive Directors Validity of acts where appointment defective Resolutions in writing signed by Directors effective

Participation in meetings by way of telephone and video conferencing

Position of Managing Director and/ or Executive Directors

Remuneration of Managing Director and/ or Executive Director Powers

Company No. 11106-V AUTHENTICATION OF DOCUMENTS 124. Any Director or the Secretary or any person appointed by the Directors for the purpose shall have power to authenticate any documents effecting the constitution of the Company and any resolution passed by the Company or the Directors and any books, records, documents and accounts relating to the business of the Company, and to certify copies thereof or extracts there from as true copies or extracts; and where any books, records, documents or accounts are kept elsewhere than in the Office, the local manager or other officer of the Company having custody thereof shall be deemed to be a person appointed by the Directors as aforesaid. 125. A document purporting to be a copy of a resolution of the Directors or any extract from the minutes of a meeting of the Directors which is certified as such in accordance with the provisions of Article 124, shall be conclusive evidence in favour of all persons dealing with the Company upon the faith thereof that such resolution has been duly passed or, as the case may be, that such extract is a true and accurate record of a duly constituted meeting of the Directors. SECRETARY/JOINT SECRETARIES 126. The Secretary/Joint Secretaries shall in accordance with the Act be appointed by the Directors for such term, at such remuneration, and, upon such conditions as they may think fit, and any Secretary/Joint Secretaries so appointed may be removed by them. SEAL 127. The Directors shall provide for the safe custody of the Seal, which shall only be used pursuant to the authority of the Directors or of a committee of the Directors authorised by the Directors in their behalf. The Directors may from time to time make such regulations as they think fit determining the persons and the number of such persons in whose presence the Seal shall be affixed and unless otherwise so determined, every instrument to which the Seal is affixed shall be signed by a Director and shall be countersigned by the Secretary or by a second Director or by some other person appointed by the Directors for the purpose. 128. For purpose of sealing share certificates to be issued by the Company, the Company shall have a duplicate common seal which shall be an exact replica of its common seal with the addition on the face of it of the words Share Seal and a certificate sealed with such duplicate seal bearing the authographic or facsimile signature of a Director, countersigned by the Secretary or by a second Director or by some other person appointed by the Director for the purpose, shall be deemed to be sealed with the Seal. 129. The Company may exercise the power conferred by the Act with regard to having an official seal for use abroad and such powers shall be vested in the Directors. ACCOUNTS 130. The Directors shall cause proper accounting and other records to be kept and shall distribute copies of the balance sheets and other documents as required by the Act and shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounting and other records of the Company or any of them shall be opened to the inspection of Members not being Directors and no Member (not being a Director) shall have any right of inspecting any account or book or paper of the Company except as conferred by statute or authorised by the Directors or by the Company in general meeting. 131. The Directors shall from time to time in accordance with section 169 of the Act and the Listing Requirements, cause to be prepared and laid before the Company in general meeting such profit and loss accounts, balance sheets and reports as are referred to in the said section and the Listing Requirements. The interval between the close of a financial year of the Company and the issue of the annual audited accounts, the Directors and Auditors reports shall not exceed four (4) months. A copy of the annual report including such document shall not less than twenty-one (21) days before the date of the meeting, provided always that it shall not exceed six (6) months from the close of a financial year of the Company be sent to every Member of, and to every holder of debentures of the Company under the provisions of the Act or of these Articles. The requisite number of copies of each of such document as may be required by Bursa Securities or such other stock exchange, if any, upon which the Companys securities may be listed, shall at the same time be likewise sent to Bursa Securities and such other stock exchange, if any, provided that these Articles shall not require a copy of these documents to be sent to any person of whose Accounts to be kept Manner in which Seal is to be affixed Secretary/ Joint Secretaries Authentication of documents

Conclusive evidence of resolutions and extract of minutes of meetings

Share Seal

Power to have Seal for use abroad

To whom copies of profit and loss accounts may be sent

Company No. 11106-V address the Company is not aware, but any Member to whom a copy of these documents has not been sent shall be entitled to receive a copy, free of charge on application at the Office. DIVIDENDS AND RESERVES 132. The Company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the Directors. 133. The Directors may from time to time pay to the Members such interim dividends as appear to the Directors to be justified by the profits of the Company. 134. No dividend shall be paid otherwise than out of profits of the Company except pursuant to section 60 of the Act nor shall any dividend bear interest against the Company. 135. The Directors may, before recommending any dividends, set aside out of the profits of the Company such sums as they think proper as reserves which shall, at the discretion of the Directors, be applicable for any purpose at which the profits of the Company may be properly applied, and pending any such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments (other than shares in the Company) as the Directors may from time to time think fit. The Directors may also without placing the same to reserve carry forward any profits which they may think prudent not to divide. 136. Subject to the rights of persons, if any, entitled to shares with special rights as to dividend, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares in respect whereof the dividend is paid, but no amount paid or credited as paid on a share in advance of calls shall be treated for the purposes of this regulation as paid on the shares. All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued on terms providing that it shall rank for dividend as from a particular date that share shall rank for dividend accordingly. 137. The Directors may deduct from any dividend payable to any Member all sums of money, if any, presently payable by him to the Company on account of calls or otherwise in relation to the shares of the Company. 138. All dividends unclaimed for one (1) year after having been declared shall be dealt with by the Company in accordance with the provisions of the Unclaimed Moneys Act, 1965. 139. Any general meeting declaring a dividend or bonus may direct payment of such dividend or bonus wholly or partly by the distribution of specific assets and in particular of paid-up shares, debentures or debenture stocks of any other company or in any one (1) or more of such ways and the Directors shall give effect to such resolution, and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient, and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees as may seem expedient to the Directors. 140. (a) Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque or warrant sent through the post direct to the registered address of the holder. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. (b) Subject to the provisions of the Act, the Central Depositories Act and the Rules, the Listing Requirements and/or regulatory authorities, payment of dividend may be made by direct transfer or such other mode of electronic means to the bank account of the holder whose name appear in the Record of Depositors or, if a person is entitled thereto in consequence of the death or bankruptcy of the holder, to such person or to the bank account of such person by writing direct. The payment of any dividend by such electronic means shall constitute good discharge to the Company in respect of the dividend represented thereby regardless of any discrepancy given by the Member in the details of the bank account(s). Declaration of dividend Interim dividend No interest on unpaid dividend Payment of dividends

Dividend pay equally

Debts may be deducted Unclaimed Dividends Dividend in specie

Payment by post and discharge Payment by electronic means and discharge

Company No. 11106-V CAPITALISATION OF PROFITS 141. The Company in general meeting may upon the recommendation of the Directors resolve that it is desirable to capitalise any part of the amount for the time being standing to the credit of any of the Companys reserve accounts or to the credit of the profit and loss account or otherwise available for distribution, and accordingly that such sum be set free for distribution amongst the Members who would have been entitled thereto if distributed by way of dividend and in the same proportions on conditions that the same be not paid in cash but be applied either in or towards paying up any amounts for the time being unpaid on any shares held by such Members respectively or paying up in full unissued shares or debentures of the Company to be allotted and distributed, credited as fully paid up to and amongst such Members in the proportion aforesaid, or partly in the one way and partly in the other, and the Directors shall give effect to such resolution. A share premium account and a capital redemption reserve may, for the purpose of this regulation, be applied in accordance with section 60(3) of the Act. 142. Whenever such a resolution as aforesaid shall have been passed the Directors shall make all appropriations and applications of the undivided profits resolved to be capitalised thereby, and all allotments and issues of fully paid shares or debentures, if any, and generally shall do all acts and things required to give effect thereto, with full power to the Directors to make such provision by payment in cash or otherwise as they think fit for the case of shares or debentures becoming distributable in fractions, and also to authorise any person to enter on behalf of all the Members entitled thereto into an agreement with the Company providing for the allotment to them respectively, credited as fully paid up, of any further shares or debentures to which they may be entitled upon such capitalisation, or (as the case may require) for the payment up by the Company on their behalf, by the application thereto of their respective proportions of the profits resolved to be capitalised, of the amounts or any part of the amounts remaining unpaid on their existing shares, and any agreement made under authority shall be effective and binding on all such Members. LANGUAGE 143. Where any accounts, minutes books or other records required to be kept by the Act are not kept in the Malay or English Language, the Directors shall cause a true translation of such accounts, minutes books and other records to be made from time to time at intervals of not more than seven (7) days and shall cause such translation to be kept with the original accounts, minutes book and other records required by the Act to be kept. NOTICES 144. A notice may be given by the Company to any Member either personally or by sending it by post or by courier to him at his registered address as appearing in the Record of Depositors. Where a notice is sent by post or by courier, service of the notice shall be deemed to be effected by properly addressing, preparing and posting a letter containing the notice, and to have been effected in the case of a notice of a meeting on the day after the date of its posting, and in any other case at the time at which the letter would be delivered in the ordinary course of post. The accidental omission to give any notice of any meeting to or the non-receipt of any such notice by any of the Members shall not invalidate the proceedings at any general meeting or any resolution passed thereat. 145. A notice may be given by the Company to the persons entitled to a share in consequence of the death or bankruptcy of a Member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or assignee of the bankrupt, or by any like description, at the address, if any within Malaysia supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred. 146. (1) Notice of every general meeting shall be given in any manner herein before specified to:(a) every Member with a registered address in Malaysia or an address for service of notice in Malaysia; How notices to be served to Members Translation Power to capitalise

Effect of resolution to capitalise

Notice to persons entitled by transmission

Persons entitled to notice

(b) every person entitled to a share in consequence of the death or bankruptcy of a Member who, but for his death or bankruptcy, would be entitled to receive notice of the meeting; (c) the Auditor for the time being of the Company; and

Company No. 11106-V (d) Bursa Securities and the other stock exchange, if any, on which the shares of the Company are listed. (2) Except as aforesaid no other person shall be entitled to receive notices of general meetings. Persons bound by notice

147. Every person who by operation of law, transfer, transmission or other means whatsoever shall become entitled to any share, shall be bound by every notice issued in respect of such share, including notices issued to such person or persons whose names were, prior to his name, entered in the Record of Depositors as the registered holder of such share. WINDING UP 148. If the Company is wound up, the liquidator may, with the sanction of a special resolution of the Company, divide amongst the Members in kind the whole or any part of the assets of the Company (whether they consist of property of the same kind or not) and may for that purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how the division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of any such assets in trustees upon trusts for the benefit of the contributories as the liquidator, with the like sanction, thinks fit, but so that no Member shall be compelled to accept any shares or other securities whereon there is any liability. 149. If the Company shall be wound up, the Members of each class of shareholders shall be entitled to participate equally in direct proportion to the nominal value of their shares, provided that if the share capital of the Company is divided into different classes the rights of each class in a liquidation shall be in accordance with the terms of the issue of the shares of that class. 150. On the voluntary liquidation of the Company, no commission or fee shall be paid to the liquidator unless it shall have been approved by Members. The amount of such payment shall be notified to all Members at least seven (7) days prior to the meeting at which the commission or fee is to be considered. INDEMNITY 151. Every Director, Managing Director, agent, auditor, secretary, and other officer for the time being of the Company shall be indemnified out of the assets of the Company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application under the Act in which relief is granted to him by the Court in respect of any negligence, default breach of duty or breach of trust. SECRECY 152. No Member shall be entitled to require discovery of any information respecting any detail of the Companys trade or any matter which may be in the nature of a trade secret, mystery of trade or secret process which may relate to the conduct of the business of the Company and which in the opinion of the Directors it will be inexpedient in the interest of the Company to communicate to the public save as may be authorised by law. EFFECT OF THE LISTING REQUIREMENTS 153. (1) Notwithstanding anything contained in these Articles, if the Listing Requirements prohibit an act being done, the act shall not be done. (2) Nothing contained in these Articles prevents an act being done that the Listing Requirements require to be done. (3) If the Listing Requirements require an act to be done or not to be done, authority is given for that act to be done or not to be done (as the case may be). (4) If the Listing Requirements require these Articles to contain a provision and they do not contain such a provision, these Articles are deemed to contain that provision. (5) If the Listing Requirements require these Articles not to contain a provision and they contain such a provision, these Articles are deemed not to contain that provision.

Distribution of assets in specie

Indemnify

Liquidators Commission

Indemnity

Secrecy

Effect of the Listing Requirements of Bursa Securities

Company No. 11106-V (6) If any provision of these Articles is or becomes inconsistent with the Listing Requirements, these Articles are deemed not to contain that provision to the extent of the inconsistency. (7) Notwithstanding anything contained in these Articles, nothing herein contained shall prevent the Directors from applying to Bursa Securities for a waiver from compliance or observance of any of the Listing Requirements. In the event the compliance or observance of such Listing Requirements are waived by Bursa Securities, the Company shall not be required to comply with any of the articles relating to those Listing Requirements in respect of which compliance or observance has been waived by Bursa Securities. (8) For the purpose of this article, unless the context otherwise requires, Listing Requirements includes any amendment to the Listing Requirements that may be made from time to time. Compliance with Statutes, Regulations and Rules

154. The Company shall comply with the provisions of the relevant governing statutes, regulations and rules as may be amended, modified or varied from time to time, or any other directive or requirement imposed by Bursa Securities, Approved Market Place, the Depository and other appropriate authorities to the extent required by law, notwithstanding any provisions in these Articles to the contrary.

Company No. 11106-V

PSC INDUSTRIES BERHAD (11106-V)

(Incorporated in Malaysia)

Number of shares held

PROXY FORM Number of shares held

I/We _______________________________________________________________________________________________ (FULL NAME IN CAPITAL LETTERS) of _________________________________________________________________________________________________ (FULL ADDRESS) being a member/members of PSC Industries Berhad, hereby appoint _________________________________________ (FULL NAME IN CAPITAL LETTERS) of _________________________________________________________________________________________________ (FULL ADDRESS) or failing him/her ____________________________________________________________________________________ (FULL NAME IN CAPITAL LETTERS) of _________________________________________________________________________________________________ (FULL ADDRESS) or failing him/her, the Chairman of the Meeting as my/our proxy to vote for my/our behalf at the Thirty-Fifth Annual General Meeting of the Company to be held at 4th Floor, Menara Boustead, Jalan Raja Chulan, 50200 Kuala Lumpur on Wednesday, 27 June 2007 at 10.00 a.m. and at any adjournment thereof. FOR Ordinary Resolution 1 Ordinary Resolution 2 Ordinary Resolution 3 Ordinary Resolution 4 Ordinary Resolution 5 Ordinary Resolution 6 Ordinary Resolution 7 Special Resolution 1 Special Resolution 2 Receive the Audited Financial Statements for the year ended 31 December 2006 Approval of Directors Fees Re-elect Tuan Haji Mohd Noordin Bin Abdullah Re-elect Encik Idris Bin Zakaria Appointment of Messrs. Ernst Young as Auditors Authority to Issue Shares Renewal of Shareholders Mandate and Additional Shareholders Mandate for Recurrent Related Party Transactions Amendments to Articles of Association of the Company Change of Companys Name AGAINST

Please indicate with a X in the space above on how you wish to cast your vote. In the absence of specific directions, your proxy will vote or abstain as he/she thinks fit.

Signed this _______________ day of __________________, 2007. ____________________________________ Signature of shareholder or Common Seal
Notes: 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company. 2. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing. If the appointer is a Corporation, the Form of Proxy must be executed under its Common Seal or under the hand of its officer or attorney duly authorised. 3. The instrument appointing a proxy must be deposited at the Registered Office of the Company, 17th Floor, Menara Boustead, 69 Jalan Raja Chulan, 50200 Kuala Lumpur not less than forty-eight hours before the time appointed for holding the meeting.

STAMP

The Company Secretary PSC Industries Berhad 17th Floor, Menara Boustead 69, Jalan Raja Chulan 50200 Kuala Lumpur

moving forward

for a better and prosperous future