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annual report 2011 www.bhic.com.my Boustead Heavy Industries Corporation Berhad 11106-V 17th Floor, Menara Boustead 69 Jalan Raja Chulan 50200 Kuala Lumpur Malaysia BOUSTEAD HEAVY INDUSTRIES CORPORATION BERHAD 11106-V

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Page 1: BOUSTEAD HEAVY INDUSTRIES CORPORATION BERHAD approval from Bursa Malaysia Securities Berhad for the listing of and ... Boustead Heavy Industries Corporation Berhad 2011 annual report

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www.bhic.com.my

Boustead Heavy Industries Corporation Berhad 11106-V

17th Floor, Menara Boustead69 Jalan Raja Chulan50200 Kuala LumpurMalaysia

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These competencies are applied as part of BHIC’s recruitment selection and staff performance management review, where our employees are expected to achieve the required proficiency level. Hence with the core competencies, BHIC is able to recruit and retain talent that fit into our work culture and expectations.

OUR CORE COMPETENCIES• BusinessAcumen

• ResultsDriven

• Collaboration&Networking

• CustomerFocus

• EffectiveCommunication

• PeopleDevelopment

• Belonging• Honour• Integrity• Commitment

OUR CORE VALUES

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Co

nte

nts

002 NoticeofAnnualGeneralMeeting

006 OurVisionandMission

007 BHICintheNews

008 LetterfromtheChairman

012 ManagingDirector’sStatement

032 CorporateSocialResponsibility

036 CorporateInformation

037 FinancialCalendar

038 Five-YearFinancialHighlights

040 BoardofDirectors

042 ProfileofDirectors

046 AuditCommitteeReport

050 StatementonCorporateGovernance

058 Directors’ResponsibilityStatement

059 StatementonInternalControl

063 AdditionalComplianceInformation

065 FinancialStatements

165 AnalysisofShareholdings

166 ListofTop30Holders

168 ListofPropertiesHeldbyBHICGroup

•ProxyForm

TheimageofatreeblendedinthewordGROWTHportraystheaspirationoftheGrouptocontinuegrowingwhilstupholdingitsresponsibilitiestotheenvironmentthatwelivein.OpportunitiesfortheGrouptogrowisanalogoustoexploringanopenseawithunlimitedhorizon,depictedbytheoceanbluecolouronthewordGROWTH.

Ourcorevalues–Belonging,Honour, Integrity,Commitment, thekeycatalystsofouraspiration,arerepresentedbythewhitebackgroundthatportraystheprinciplesthatwebelieveinandpracticeatalltimes.

Cover Rationale

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NOTICE IS HEREBY GIVEN THATtheFortiethAnnualGeneralMeetingof theCompanywillbeheldat4thFloor,MenaraBoustead, 69 JalanRajaChulan, 50200Kuala Lumpur onThursday,5April2012at10.00a.m.totransactthefollowingbusinesses:

AGENDA

1. ToreceivetheAuditedFinancialStatementsforthefinancialyearended31December2011andtheReportsofDirectorsandAuditorsthereon.

2. ToapprovethepaymentofDirectors’Feesinrespectofthefinancialyearended31December2011.

3. Tore-electDato’IshakBinOsmanwhoretiresinaccordancewithArticle

77oftheCompany’sArticlesofAssociation. 4. Tore-electDatukAzzatBinKamaludinwhoretiresinaccordancewith

Article77oftheCompany’sArticlesofAssociation. 5. Tore-appointMessrsErnst&YoungasAuditorsoftheCompanyand

authorisetheDirectorstodeterminetheirremuneration.

AS SPECIAL BUSINESS

Toconsiderandifthoughtfit,topassthefollowingresolutions:6. ORDINARY RESOLUTION – AUTHORITY TO ISSUE SHARES “THATsubjectalwaystotheCompaniesAct,1965andtheapprovalsof

therelevantauthorities,theDirectorsbeandareherebyempowered,pursuanttoSection132DoftheCompaniesAct,1965,toissuesharesintheCompanyfromtimetotimeatsuchprice,uponsuchtermsandconditions,forsuchpurposesandtosuchpersonorpersonswhomsoeverastheDirectorsmayintheirabsolutediscretiondeemfitprovidedthattheaggregatenumberofsharesissuedpursuanttothisResolutiondoesnotexceed10%oftheissuedsharecapitaloftheCompanyforthetimebeingandthattheDirectorsbeandarealsoempoweredtoobtaintheapprovalfromBursaMalaysiaSecuritiesBerhadforthelistingofandquotationfortheadditionalsharesso issuedandthatsuchauthorityshallcontinuetobe inforceuntil theconclusionofthenextAnnualGeneralMeetingoftheCompany.”

NoticeofAnnualGeneralMeeting

Ordinary Resolution 1

Ordinary Resolution 2

Ordinary Resolution 3

Ordinary Resolution 4

Ordinary Resolution 5

Ordinary Resolution 6

BousteadHeavyIndustriesCorporationBerhad2011annualreport

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

“THATsubjecttotheCompaniesAct,1965,theMemorandumandArticles

ofAssociationoftheCompanyandtheMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhad,approvalbeandisherebygiventotheCompanyanditsSubsidiariestoenterintoalltransactionsinvolvingtheRelatedPartiesasspecifiedinSection2.3oftheCirculartoShareholdersdated12March2012providedthatsuchtransactionsare:

(i) recurrenttransactionsofarevenueortradingnature; (ii) necessaryfortheday-to-dayoperations; (iii)carriedoutintheordinarycourseofbusinessonnormalcommercial

termswhicharenotmorefavourabletotheRelatedPartiesthanthosegenerallyavailabletothepublic;and

(iv)arenottothedetrimentoftheminorityshareholders. ANDTHATsuchapprovalshallcontinuetobeinforceuntil:

(a) theconclusionofthenextAnnualGeneralMeeting(AGM)oftheCompany,atwhichtimeitwilllapse,unlessbyaresolutionpassedatthesaidAGM,suchauthorityisrenewed;

(b) theexpirationof theperiodwithinwhich thenextAGMof theCompanyisrequiredtobeheldpursuanttoSection143(1)oftheAct(butshallnotextendtosuchextensionasmaybeallowedpursuanttoSection143(2)oftheAct);or

(c) revokedorvariedbyaresolutionpassedbytheShareholdersinaGeneralMeeting

whicheverisearlier.

ANDFURTHERTHATtheDirectorsoftheCompanybeandareherebyauthorised tocompleteanddoall suchactsand things (includingexecutingallsuchdocumentsasmayberequired)astheymayconsiderexpedientornecessarytogiveeffecttotheMandate.”

Ordinary Resolution 7

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8. ORDINARY RESOLUTION - PROPOSED PROVISION OF FINANCIAL ASSISTANCE

“THATapprovalbeand isherebygivenfor theCompanytoprovidefinancialassistanceamountinguptoRM60,000,000toPyrotechnicalOrdnanceMalaysiaSdnBhd,acompanywhichshallbeanassociatewith49%shareholdings,thedetailsofwhicharesetoutintheCirculartoShareholdersdated12March2012,andtoauthorisetheBoardofDirectorsoftheCompanytogiveeffecttotheproposedprovisionofthefinancialassistancewithfullpowerstodoallsuchactsastheymayconsidernecessaryorexpedientsoastogivefulleffecttothesamewithfurtherpowertoassenttoanycondition,modification,resolution,variation and/or amendment asmaybe requiredby the relevantauthorities,bodiesand/orparties.”

9. Totransactanyotherbusinessofwhichduenoticeshallhavebeen

received.

BY ORDER OF THE BOARD

SUZANA BINTI SANUDINLILYROHAYU BINTI AB. HAMID @ KASSIMSecretaries

KualaLumpurDate:12March2012

NoticeofAnnualGeneralMeeting

Ordinary Resolution 8

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NOTES:

1. Onlydepositorswhosenamesappear in theRecordofDepositorsasat30March2012beregardedasmembersandentitledtoattend,speakandvoteatthemeeting.

2. Amemberentitledtoattendandvoteatthemeeting isentitledtoappointnotmorethantwo(2)proxiestoattendandvoteinhis/herstead.Aproxymaybutneednotbeamemberof theCompanyandtheprovisionsofSection149(1)(b)oftheCompaniesAct,1965shallnotapply.

3. Whereamemberappointsmorethanone(1)proxy,theappointmentshallbe invalidunlesshe/shespecifiestheproportionsofhis/hershareholdingtoberepresentedbyeachproxy.

4. Whereamember isanauthorisednomineeasdefinedundertheSecuritiesIndustry(CentralDepositories)Act,1991, itmayappointone (1)butnotmorethantwo(2)proxiesinrespectofeachSecuritiesAccountitholdswithordinarysharesoftheCompanystandingtothecreditofthesaidSecuritiesAccount.

5. Theinstrumentappointingaproxyshallbeinwritingunderthehandof the appointer or of his/her attorneydulyauthorisedinwritingor, iftheappointer isacorporation,eitherunder itsCommonSealorunder thehandof itsofficerorattorneydulyauthorised.

6. TheinstrumentappointingaproxymustbedepositedattheRegisteredOfficeoftheCompany,17thFloor,MenaraBoustead,69JalanRajaChulan,50200KualaLumpurnotlessthanforty-eight(48)hoursbeforethetimeappointedforholdingthemeeting.

7. Explanatory notes on Special Business:

OrdinaryResolution6TheProposedResolution6,ifpassed,willgivetheDirectorsoftheCompany,fromthedateoftheaboveAnnualGeneralMeeting,authority to issueshares fromtheunissuedcapitaloftheCompanyforsuchpurposesastheDirectorsmaydeemfitand in the interestof theCompany. Theauthority,unless revokedorvariedby theCompany ingeneralmeeting,willexpireattheconclusionofthenextAnnualGeneralMeetingoftheCompany.

AsatthedateofthisNotice,nonewsharesintheCompanywere issuedpursuant to theauthoritygranted to theDirectorsattheThirty-NinthAnnualGeneralMeetingheldon6April2011andwhichwilllapseattheconclusionoftheFortiethAnnualGeneralMeeting.

TheauthoritywillprovideflexibilitytotheCompanyforanypossiblefundraisingactivities,includingbutnotlimitedtofurtherplacingofshares, forpurposeof fundingfutureinvestmentproject(s),workingcapitaland/oracquisitions.

OrdinaryResolution7TheproposedOrdinaryResolution7,ifpassed,willenabletheCompanyand/oritsSubsidiariestoenterintorecurrenttransactions involving the interestsofRelatedParties,whichareofarevenueortradingnatureandnecessaryforthe Group’s day-to-day operations, subject to thetransactionsbeingcarriedout in theordinarycourseofbusinessandontermsnottothedetrimentoftheminorityshareholdersoftheCompany.

OrdinaryResolution8The proposedOrdinary Resolution 8, if passed,willempower theCompany toprovide financialassistanceamountinguptoRM60,000,000toPyrotechnicalOrdnanceMalaysiaSdnBhd,acompanywhichshallbeanassociatewith49%shareholdings,thedetailsofwhicharesetoutintheCirculartoShareholdersdated12March2012.

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OurVisionandMission

VISIONTo Be A Leading Maritime and Defence Solutions Provider

MISSIONTo Provide Excellence in Quality and Timely Delivery of Products and Services and to Maximize Stakeholder Returns

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BHICintheNews

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LetterfromtheChairman

Dear Shareholders,Wehadabusyyearin2011,providingaspectrumofservicesandsolutionsacrossthemaritimevaluechain.Fromshipbuildingtorepairandmaintenanceofvesselsaswellasotherdefencerelatedservices,BousteadHeavyIndustriesCorporation(BHIC)isexpandingitsreachdespitethedifficulttimesthatareimpactingthemaritimesectorinMalaysiaandglobally.

Onthisnote,Iampleasedtopresenttoyouourannualreportforthefinancialyearended31December2011.

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ECONOMIC LANDSCAPE

AsMalaysiamarchestowardsbecomingahighincomenationbyyear2020,theGovernmenthasidentifiedfourpillarsasthefoundationforgrowthandthetransformationofMalaysiaintoadevelopedeconomy.Thesefourpillarsarethe1Malaysiaconcept,theGovernmentTransformationProgramme,theEconomicTransformationProgrammeandtheTenthMalaysiaPlan.

SuchsupportiveGovernmentinitiativescoupledwithstrongdomesticdemandwillcontinuetopropeltheMalaysianeconomyforward. Indeed, thenation’seconomyhasperformedreasonablywelldespitebroaderglobaleconomicuncertainty.

However,theEuropeanUnioncrisisandtheuncertaintyoftheAmericaneconomy,coupledwithamarketslowdowninChinaandIndia,hasimpactedthemaritimesector.Thedeclineininternationaltradealongwithanexcessinthenumberofshipshasresultedindownwardpressureontheglobalfreightmarket,castingashadowontheGroup’scommercialshipbuilding,oilandgas,andcharteringbusinesses.

FINANCIAL PERFORMANCE

Againstthischallengingbackdrop,theGroupclosedtheyearwithamodestaftertaxprofitofRM18million.Profit for theyearhasbeenadversely impactedbycostescalations incompletingcertaincommercialshipbuildingprojects,higherfinancechargesandlowercontributionofprofitsfromassociates.

Duringtheyearunderreview,wehavesteppedupeffortstocontaincosts,particularlycapitalexpenditure,whilereducingoperatingcostswithsuccessfuloptimisationplans.

DIVIDEND

InMarch2011,wepaidasingletierfirstinterimdividendof6.5%pershareforthefinancialyearended31December2011(2010:6.0%pershare).AsaGroupcommittedtodeliveringshareholdervalue,andgivenourresultsin2011,theBoardhasdeclaredasingletierfirstinterimdividendof6.0%pershareinrespectofthefinancialyearending31December2012.

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HUMAN CAPITAL

Tobeanactiveindustryplayerandmarketleader,theGrouprecognisestheimportanceofacquiringandretainingtherighttalentforthishighlyspecialisedfield.Weprideourselvesongivingouremployeesvariouspaths forprofessionaldevelopmentwithin theGroupbywayofdiverseprogrammesandcollaborationwithstrategicpartners.

TheGroupHumanCapitalDepartmentrecentlyrolledouttheBHICPerformanceDevelopmentReview,ahalf-yearlyexercisewhichaimstoassessouremployees’performance,strengthsandcompetenciesagainstagreedkeyperformanceindicatorsandjobdescriptions.Theprocessincludesthecommunicationoftheperformancereviewstothestafffordiscussiononpersonalandcareerdevelopmentneedsandupcomingworkplans.

TheGrouphasalso invested inthedevelopmentof itshumancapitalexternally.OnesuchexternalcollaborationistheVendorDevelopmentProgrammewhichaimstoassist,promoteanddevelopsmallandmediumentrepreneursasaneffective,reliableandcompetentfacilitatorandadvisor intheaspectsofmaritimedefenceandrelatedindustries.Additionally,theYoungEngineersScheme(YES)wasformalisedin2011toemployyoungengineeringgraduates.Thisprogrammeformspartofourtalentpooldevelopmentstrategywhereindividualswillbenurturedintodynamicprofessionals.

OUTLOOK

Thecountry’sgrossdomesticproductgrew5.2%inthefourthquarterof2011,whilefull-yeargrowthstoodat5.1%against7.2%in2010.Althoughdomesticdemandcontinuestodrivegrowth,thereareconcernsthatexternalheadwindscouldimpactourdomesticeconomy.Therefore,wearecautiousinourgrowthplans.

InDecember2011,ourassociatecompanyBousteadNavalShipyardSdnBhdreceivedaLetterofAwardtoconstructsixSecondGenerationPatrolVesselswithLittoralCombatCapabilities(SGPV-LCS).ThecontractfromtheMinistryofDefencecurrentlystandsatRM9billionandspansovertheperiodofthreeMalaysiaPlans.

TheseSGPV-LCSsarethemostsophisticatednavyshipstobebuiltinMalaysia.Theywillbeequippedwithsurfacetoairmissiles,surfacetosurfacemissiles,torpedolaunchingsystems,towedarraysonarandsurveillanceradar.Amongthefeaturesthathavebeenupgraded inthesevesselsarethepropulsionsystem, longrangesurveillancecapabilities includinganti-surface,anti-airandanti-submarinewarfarecapabilities–featuresnotavailableinthepreviousgenerationofpatrolvessels.

LetterfromtheChairman

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TheprojectwillensureasteadystreamofproceedstotheGroupandbodeswell forour longtermcapabilityandcapacityplans.Importantly,theprojectwillbringasignificantmultipliereffecttothenationaleconomyaswehavepledgedtouseupto60%localcontentintermsofmanpowerandmaterials.Inmoremacroterms,theprojectwillhaveasignificantandpositivespill-overeffectontheeconomiesoftheareas inwhichwework.LumutandPenangshouldbenefit inparticular,withenhancedemploymentprospectsandtheengagementoflocalfirmstoprovideproduct,serviceandskillssupport.

Duringthe11thLangkawiInternationalMaritimeandAerospaceExhibition2011(LIMA),wesignedseveralagreementswhichwillpavethewayforexpansion intheareasofaircraftmaintenance,repairandoverhaul,aswellasaerospaceelectronics.Thiswillbethecatalystforgrowthinourdefencerelatedprojects,andthesamethemewillfeatureinourstrategiesforourcommercialsectoractivities.

InSeptember2011,BHICannouncedthatarrangementshavecommencedforthereturntotheRepublicofGhanaofthe60%equityinterestinPSCTemaShipyardLimited.Thisisastrategicefforttodisposeofanon-coreassetwithaviewtoensuringthatourinvestmentsalwaysmeetwiththeGroup’sinternalrateofreturn.Discussionsarecurrentlyongoingandwehopetoconcludeourdivestmentduringthecourseof2012.

ACKNOWLEDGEMENT

OnbehalfoftheBoard,Iwouldliketoexpressourgratitudetoourshareholdersfortheirunwaveringsupportduring thischallengingyear.Aboveall,wemustconveyourdeepestappreciation to theGovernmentofMalaysiaanditsagenciesnamelytheMinistryofFinance,MinistryofDefence,theRoyalMalaysianNavyandtheMalaysianMaritimeEnforcementAgencyfortheirsteadfastsupport.Ifnotforthesekeyclients,itwouldhavecertainlybeenaharderyearforyourGroup.

AshipwithoutitscrewismeaninglessandImustrecordourthankstoouremployeeswhohaveplayedanimportantpartinkeepingtheGroupgoingduringthisyear.

Sincerely,

TAN SRI DATO’ CHE LODIN BIN WOK KAMARUDDIN

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ManagingDirector’sStatement

Dear Shareholders,Theyearunderreviewwas,toalargeextent,acontinuationof2010’son-goingeffortstowardsenhancingourcapabilitiesanddevelopingresources.Ourstrategywasunderpinnedbyselectiveinvestmentinhumancapitalassetsandrefinementstooursystems.Weaimtoestablishanintegratedplatformfordeeperrelationshipsandnurturealongterm,sustainablepresenceinthemaritimesector.

WewerehonouredbythepresenceofY.A.Bhg.TunDr.MahathirbinMohamadduringtherecently

heldLIMA.

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FINANCIAL PERFORMANCE

Forthefinancialyearunderreview,theGrouprecordedamodestprofitaftertaxofRM18millioncomparedwithRM80millionin2010.Thiswasmainlyduetolowerrevenuerecognisedforworksperformedonongoingmaintenance,repair&overhaul (MRO)services,whichformsthebulkof thesubsidiaries’activities.Wepreviouslyreportedthatourcommercialshipbuildingprojectswerehitbycostescalations.Withthecompletionanddeliveryofananchorhandlingtugsupplyvesselandthreechemicaltankers,aswellasthesubstantialcompletionofthetwoaccommodationbargesduringtheyear,significantportionoftheaddedcostswastakenupin2011.

Inadditiontothis,ourshareofprofitfromassociateswassmallerwiththecompletionoftheNewGenerationPatrolVesselsProject.

TheGroup’sgearingratioof0.88timesrosefromthepreviousfinancialyear(2010:0.47times)andthisisreflectedinthehigherfinancialcostsrecorded.Thenewborrowingswereutilisedtopurchasethethreechemicaltankersandtodevelopbusinessopportunitieswhichwebelievewillprovidepositivereturnsinthefuture.

Duringtheevent,thePrimeMinisterwasamongmanylocalandforeigndignitariesgivenin-depthupdatesonthedesignandcapabilitiesofthesix

LittoralCombatShipstobeconstructedbyBousteadNavalShipyardSdnBhd.

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SHIPBUILDINGC O M M E R C I A L

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In2011,BousteadPenangShipyardSdnBhdrecordedamilestonewhenitsuccessfullybuiltanddelivereditsfirstshipwithDP2requirements.The67.8metreanchorhandlingtugsupplyvessel isproofofourcapability inmeetingtheever increasinglysophisticatedneedsofourclients.

Followingcloseonitsheelswasourefforttobuildtwoaccommodationbargeswhicharecurrentlynearingcompletion.Theprocess involved loadingoneof the1,500 tonneaccommodationmoduleontoabargebeforeweldingthetwostructurestogether.Animagedepictingthisprocedurecanbefoundonpage14.Thismanoeuvre,closelymonitoredwithastrictcontrolofthe module’s al ignment and movement, tookapproximatelysixdays,andutilisedmorethan100stafftocomplete.

YourGroupislookingtoexpanditscommercialproductsportfolioto includesmallervesselssuchastugsandworkboats,seismicsurveyvesselsandsmallercrafts.Tothisend,BHIChasteamedupwithMacduffShipDesignLimitedtoensuretheneedsofexistingandpotentialclientsaremet.Macduff,aUKbasedcompany,willprovidethelatestdesignsforcommercialvesselssuchasharbour tugs,workboats,MultiMac’s,pilotvesselsandgeneralharboursupportcraftwhichwillbeconstructedatanyoneofourlocalyards.

BousteadHeavyIndustriesCorporationBerhad2011annualreport

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SHIPBUILDINGN A V A L

Artist impression of the Littoral Combat Ship.

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InDecember 2011, theGroup’s associatecompanyBousteadNavalShipyardSdnBhd(BNShipyard) received theLetterofAwardfrom the Government for the design,construct ion, equ ipp ing , insta l la t ion,integration, testsand trials,commissioninganddeliveryofsixSecondGenerationPatrolVesselswith Littoral Combat Capabilities(SGPV-LCS).TheseFrigateclassvesselswillhostadvanceddefencesystemswiththree-dimensionalwarfarecapabilities.Thesevesselsarebiggerandfasterandmoresophisticatedthanthefirstgenerationpatrolvessels.Thefocusin2012willbeonfinalisingthedetaileddesignsanddrawingswhileensuringthatBNShipyardisabletoexecutetheproject’ssupplychainprogrammeseamlessly.InFebruary2011,BNShipyardstrengtheneditsresource base by organizing an industrialbriefingtoarticulate thenation’saspirationsandobjectivesoftheSGPV-LCSproject tostakeholders.Thiseventwassupportedbymorethan650vendorsandrepresentativesfromtheMinistryofDefenceandtheRMN.

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Theseobjectivesincludeincreasinglocalcontentfromthe30%achievedduringthefirstpatrolvesselsprojecttoupto60%.Localcontent isdefinedassupplyandservicesobtainedfromMalaysiancompaniesintheareasofdesign,componentsmanufacturing,systemsinstallation,customisation,systems integrationandsoftwaredevelopment.To thisend,BNShipyarddevelopedtheMalaysianIndustryParticipationStrategytoidentifyandspearheadeffortstowardsachievingthistargetthrougheffectivetechnologytransfer,jointventuresaswellasresearchanddevelopment.Withthesuccessful implementationofthesestrategies,welookforwardtoanintegratedlogisticspackageforaneffectivethrough-lifesupportfortheSGPV-LCSfleet,whileenhancingthecompetencyof local industries,especially inhigh-technologyandvalueaddedareas.

Duringtheyear,BYOMarineSdnBhd(BYOMarine)madeheadwayinitsprojecttodelivertenfast interceptorcrafts (FIC) to theMalaysianMaritimeEnforcementAgency (MMEA).TheadvancedcompositestructureoftheFICshasmadeitpossibleforthedeliveryofoneofthefastestknownplatformsofitssize,andentailstheuseofnewtechnologyinMalaysia.ThefirstfourofthetenFICswereconstructedatourjointventurepartner’spremisesatIstanbul.Duringtheperiod,weensuredthattransferoftechnologywaseffected.WearegladtoreportthatBYOMarinerecentlyreceivedISOcertificationforitscapabilityintheconstructionofcompositeboatsofupto44metres,andfortheprovisionoftheassociatedaftersalessupport.

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In2011,threeboatswerecompletedandhandedovertoMMEA.On5December2011, theDeputyPrimeMinister launchedthefirstMalaysianbuiltFICatBYOMarine’spremisesinLangkawi.

Weareactivelymarketingthecrafttoothercountriesintheregion.TheGroup’sactiveparticipationinthe11thLangkawi International Maritime and AerospaceExhibition2011 (LIMA)provedbeneficial, sincewereceivedanumberofenquiriesfromvariousASEANandAfricannations.

1 TheSGPV-LCSindustrialbriefingwasofficiatedbytheDefenceMinister,Y.Bhg.Dato’SeriDr.AhmadZahidHamidi.

2 AerialshotofPENGGALANG13duringseatrial.3 LaunchingceremonyofPENGGALANG12,thefirstMalaysianbuiltFIC.4 ParticipantsataretreatconferringonriskmanagementtoolsandprocessestobeadoptedfortheSGPV-LCSproject.

3

1 2

4

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MAINTENANCE, REPAIR & OVERHAUL

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In 2011, we continued to leverage on ourMROcapabilitiesbyundertakingvariousprojectsthroughourGroupofcompanies.

BesidesshiprepairandmaintenanceworkattheBNShipyard,aconsiderablenumberofman-hourswerededicatedtotherefitofRMNvesselsandtheServiceLife Extension Programme (SLEP). In 2011, KDMAHAWANGSA,KDJEBAT,KDGANYANGandKDLAKSAMANAMUHAMMADAMINcompleted theirrefitsandwerehandedover, leavingtworemainingshipsattheyardundergoingtheprogramme.

In-servicesupport (ISS)ofnavalvessels isprimarilyprovided by BHIC Navaltech Sdn Bhd (BNT) andBousteadDCNSNavalCorporationSdnBhd(BDNC).BNTprovidesISSforvariousRMNvesselsstationedinLumut, Kuantan and Kota Kinabalu, while BDNCspecialises in repairsandmaintenancework for thenation’stwosubmarines,KDTUNKUABDULRAHMANandKDTUNRAZAK.

During the year, weaponry related repairs andmaintenance work were carried out by our twosubsidiaries,BHICBoforsAsiaSdnBhdandBHICDefenceTechservicesSdnBhd.Theformerprovidedthrough-lifesupport includingsparepartssupply,totalmaintenanceandtrainingforvarioustypesofBOFORSnavalguns,whereasthelatterspecialisesinprovidingweaponrysolutionstotheMalaysianArmy.

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BHICMSMSdnBhd(BHICMSM),ajointventurecompanywithintheGroup,providesrepairandmaintenanceservicesforMTUFriedrichshafenGmbH’sproducts,uptodepotlevel,forusersinMalaysiaandBruneiDarussalam.Forthefinancialyearunderreview,BHICMSMcompletedsomeworkfortheRMN.DominionDefenceIndustriesSdnBhd,atradingcompanybasedinLumut, inadditiontoitscoreactivitiesofservicingtherequirementsoftheMalaysianArmedForces,hasembarkedonvariouscommercialjobstobroadenitsrevenuebase.

BHICElectronicsandTechnologiesSdnBhd(BEAT)andAtlasDefenceTechnologySdnBhd(ADT),twoentitiesinvolvedinprovidingmaintenanceforelectronicssystems,successfullyundertookvarious repairsandmaintenanceprojects. Inaddition to this,BEATprovided trainingonHFScimitarRadioandDigitalRadioRelayatKemRegimenPerhubunganStrategikoftheArmedForces,atSungaiBuloh.

BEAT’sCalibrationLaboratorywasawardedtheAccreditationCertificateofISO/IEC17025bytheDepartmentofStandardsMalaysia. Inprioryears,ADThadcompletedthe installationandcommissioningoftheRMN‘sBridgeShiphandlingSimulator(BSS)forRMN’strainingcentre,KDPELANDOK,aswellastheActionSpeedTacticalTrainer(ASTT)fortheRMN’sMaritimeTacticalCentre,PUSTAKMAR.ADT iscurrentlysupplyingsparesandprovidingservices for theseproducts,whiledevelopingitsowncombatmanagementsystemfornichemarkets.

BousteadLangkawiShipyardSdnBhd(BLS)continuedtofocusonyachtrepairsaswellasservicingthelocalmarinesectorwhichincludesferriesandothercommercialvessels.

Inanefforttodiversifyitsbusinessportfolio,theGroupventuredintoaerospaceMROservicesthroughBHICAeroservicesSdnBhd(BHICAS).In2011,BHICASconcentratedonplanningandobtainingapprovalsfromrelatedagenciesbeforecommencingitssub-contractingworkfromEurocopterMalaysiaSdnBhdwhichisexpectedtotakeoffin2012.Thecompanyhassetupatemporaryfacility inTerminal3,SubangSkyparkwhilstapermanentMROCentre isbeingdevelopedinthenewSubangHelicopterCentre.

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1 RoyalMalaysianNavy’sAS555SNFennechelicopter.2 HeadofOperationsforBEATreceivingtheISO/IEC17025AccreditationCertificatefromtheDepartmentofStandardsMalaysia.

3 Oncompletionofgovernorinstallation,4.3mminjectiontimingand3linenotchmarksfortheunitinjectorsarecheckedforfinaladjustments.

4 Gunmaintenanceinprogress.

1

2 3

4

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MANUFACTURING & SERVICES

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TheGroup’smanufacturingarm,ContravesAdvancedDevicesSdnBhd (CAD),our jointventurecompanywithRheinmetallAirDefenceAG, performedwell despite the loomingEuropeaneconomiccrisis inthesecondhalfof the year. A signing ceremony for aManufacturing LicensingAgreementwithanAmerican company took place in 2011whereCADwas approvedas thecontractmanufacturerofthecompany’sproducts.

CADalsosuccessfullyinitiatedcustomerbasediversification, from industrial electronicsmanufacturingtohighervaluemanufacturingand systems integration activities for theaerospaceaswellasdefencemarkets.DuringtherecentLIMA,CADandRheinmetallDefenceElectronicsGmbHofGermanyenteredintoanagreementtomanufactureandsupplyCargoLoadingSystemAssembliesforAirbusA400M,A380 andA330 aircrafts.The agreementincludesacomprehensivetechnologytransferprogrammeand investment innewstate-of-the-art facilities for aerospaceelectronicsmanufacturing.

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InMay2011,BHICDefenceTechnologiesSdnBhdsignedaJointVenture&ShareholdersAgreementwithProkhasManagersSdnBhd,resultingintheincorporationofthejointventurecompany,PyrotechnicalOrdnanceMalaysiaSdnBhd.TheBentong-basedplantwillmanufactureanddistributedouble-basedartilleryandrocketpropellantstothelocaldefenceindustryonceitisfullyoperational.

Despitethedowncycleintheshippingindustry,BHICPetroleumSdnBhd’schemicaltanker,MTCHULAN1,successfullysecuredatimechartercontractwithAsahiTankerCoLtd,acharteringcompanyfromJapan.MTCHULAN2isexpectedtocommencecharteringinthenearfuture.

Another importantservicethatyourGroupoffers iseducationandtraining,whichisprimarilyprovidedbytheMarineTechnologyAcademy(MTA).Since1999,MTAhasbeenthefocaltraininggroundforstaffaswellasRMN’spersonnel.InarecentcollaborationwithUniversitiTeknologiMalaysia,33techniciansfromtheRoyalNavyofOmancompletedtheirtrainingwhere10wereawardedtheExecutiveDiplomainNavalEngineering,while23othersreceivedtheirexecutivecertificatesinNavalTechnology.Inadditiontothis,12officersfromtheRoyalNavyofOmanattendedtheEngineeringApplicationCoursewhichwasfullydevelopedanddeliveredbyMTA.

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1 TheChulantankersatsea.2 SigningceremonyoftheJointVentureAgreementbetweenProkhasManagersSdnBhdandBHICDefenceTechnologiesSdnBhd.

3 Studentscarryingoutpracticalactivitiesinthemechanicalworkshop.4 TheChiefofNavyvisitedCADinMay2011andtoureditsfacility.

2

31 4

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TRANSFORMATION INITIATIVES

TheBHICStrategicTransformationWorkPlanwasestablishedduringtheyear,markingthestartingpointinestablishingtherightfundamentalsfortheGroup.ThetransformationdrivefortheyearstartedoffwiththeManagingDirector’stownhallengagementinLumut,followedbyPulauJerejak,Langkawi,KotaKinabaluandtheGroup’sheadquartersinMenaraBoustead,KualaLumpur.ThisWorkPlanisanessentialelementofBHIC’sorganisationrebuildingprogrammethroughtheestablishmentofastructuredcommunicationsplatform.Theinitiativenowincludestheannouncementofnewstaff,birthdaysandcelebrationsaswellasstaffcirculars.AGroupPolicyTaskForcewassetuptointroduceBHIC’sPolicies,ProcessesandProcedures(BHIC-3P)andtocompileacomprehensiveBHICGroupPolicyManual.

TheGroupaimstoofferemployeesaclearandcrediblecareerpathwithenhancedevaluationprocessesandinitiativeswhichwillfocusontheprovisionofimprovedtraininganddevelopmentprogrammes.Thiswillhelp theGroupretain thecreamof thecropto realise itsstrategicobjectives.

BHIC’scorevaluesandcorecompetencieswerereemphasized,furtherdefinedandrolledoutviaaGroup-wideseriesoftownhallmeetingsinearly2011tocommunicatetheexpectedbehaviouralnormsforeveryonewithintheGroup.NewPerformanceDevelopmentReviewformswereintroducedandrolledout inNovember2011,accompaniedbya“competencydictionary”fordeliverables-basedassessments.Inadditiontothis,acomprehensivereviewofthecompensationandbenefitsstructurewaslaunchedinDecember2011toassistinrealisingsomeoftheidentifiedstrategicobjectivesoftheGroup.

DevelopingpotentialtalentisimportanttotheGroup.Tothisend,wesignedanagreementwithMIGHTMETEORAdvancedManufacturingSdnBhd,ahumancapitaldevelopmentcentreestablishedwithintheorganizationofMalaysianIndustry-GovernmentGroupforHighTechnology(MIGHT), tofacilitatethedevelopmentofnewcontributorstowardsourongoingcorporatesustainability.

Theagreementwasfor the intakeof freshtop-notchengineeringgraduatesfor theYoungEngineersScheme(YES).Afteranorientationphase inKualaLumpur, thesetraineeswere

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1 BrainstormingsessionduringBHICStrategicRetreat.2 Participantsattheretreatwerefurtherexplainedontheconceptsdiscussedduringthepreviousinformationsharingworkshop.

3 TheKualaLumpurtownhallmeetingwasheldinconjunctionwiththeHariRayacelebrationaspartoftheGroup’sinitiativetofosteracultureofbelonging.

4 OneofaseriesofinterdepartmentalmeetingsheldinLumuttodiscussmanpowerplanningandhumancapitaldevelopmentprogrammes.

12

3

4

stationedat theBNShipyard,where theyunderwentrigorousclassroom-basedandon-the-job training foradurationof12months.The initial intakeof19graduatessuccessfullyconcludedtheirtraininginAugust2011.

Aspartofthedrivetorwardsoperationalexcellence,theinternalStrategicManagementTeamconductedtrainingsessions tocoveraccident investigationand reporting,safety(hazardidentification,riskassessmentandcontrol),industrialengineering,positivecounselling,organisation-widemanpowerplanningandprocessmappingaswellasfacilitationofcontinuousimprovement(CI)projects.

Withitsyardsoperationsinmind,theBNShipyardembarkedonCIinitiativesincludingcreatinga“WarRoom”fordaily,weekly andmonthly operationsmeetings, kopitiamsessionsandCIcircles,monthly financialperformancereviewsaswellasarecognitionprogramme.

WiththisunrelentingfocusonCIprojects,thethreelocalshipyardshaveregisteredtangiblecostsavingsandprofitimprovements during the year under review andweanticipate the involvementofotherbusinessunits tocontinuetheirinitiativesorbegintheprocessofchallengingthestatusquo,withtheaimofsecuringbroadoperatingimprovements.

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PROSPECTS

ThemaritimesectorhasthepotentialofbeingasignificantdriverofMalaysia’seconomyasitpavesitswaytowardsbecomingafullydevelopednation.Thissectorcangeneratehigh-incomeandknowledge-basedactivities,whilecreatingemploymentopportunitieswithintheindustry.WehaveplayedourpartthebestwaypossiblesinceBHIC’srelisting,wehaveovercomelegacyissuesandarenowatthedawnofanewphase.Toreachthispoint,thedriveforoperationalefficiencywassupportedbytheimplementationofindustrybestpracticesandtheintroductionof integratedshipbuildingsoftware,coupledwithautomationofprocesses.Tomaintainourpositionasaleaderintheregionalmaritimeindustry,BHICwillcontinuefocusingongrowingthebreadthanddepthofourproductsandservices.

ThelaunchoftheMalaysianShipbuilding/ShipRepairIndustryStrategicPlan2020inDecember2011wasalsotimelyas itarticulatedthepotentialmarketthatcanbetappedbydomesticindustryplayers.Theplan is realistic in its targetsandshouldprovidean impetus forallstakeholderstocometogether,sinceitaimstogenerateRM6.35billioningrossnationalincomeandcreate55,000jobopportunitiesforthemaritimeindustry.

ManagingDirector’sStatement

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APPRECIATION

Wearedeeplyappreciativeoftheloyaltyandtrustofourshareholdersinus.WewouldalsoliketoexpressourgratitudetotheGovernmentofMalaysiaanditsagenciesfortheirunwaveringsupportandcooperationinthevariousaspectsofourbusiness.Ourthanksalsogoestoourcustomers,businesspartnersandregulatorybodiesandagencies.

Themanagementandemployeeshaveralliedstronglyduringthepastfinancialyearandwethankthemfortheirperseveranceandsacrifice.WeareconfidentthattheteamwillcontinuetoprovidetheirsupportandcommitmenttopropelBHIC’sgrowth.BHIC’ssuccesswouldnotbepossiblewithoutthehardworkandcommitmentfromallthepartiesabove.

Thankyou.

TAN SRI DATO’ SERI AHMAD RAMLI BIN HAJI MOHD NOR

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RESPONSIBILITYCORPORATESOCIAL

Asaresponsibleandcaringcorporatecitizen,weareawareoftheimportanceoflookingaftertheinterestsofouremployees,thecommunityandtheenvironment.AtBHIC,ourcorporatesocialresponsibility(CSR)initiativesareanongoingeffortthatwearefullycommittedtonurturinginordertocontinuemakingpositivecontributionstothecommunitiesinwhichweoperate.

VENDOR DEVELOPMENT

Wearededicatedtomaintainstrategicpartnershipswithourvendorsbyfacilitatingtheskillsdevelopmentofsmallandmediumsizeenterprisesintheareasofshipbuildingandshiprepairactivities,aswellassupplyandmanufacturingofmaritimedefencerelatedproducts.

TheGroupVendorDevelopmentDivision (GVDD)hasworkedcloselywithanumberofgovernmentbodies,particularlytheMinistryofInternationalTradeandIndustry,theEntrepreneurDevelopmentDepartmentandothergovernmentagenciessuchasKulimTechnologyParkCorporation(KTPC),TechnologyParkMalaysiaandSIRIMBerhad inrelationtoour long-termdevelopmentplanfor localvendors.GVDDhasfosteredrelationshipswithotherGovernmentLinkCompanies(GLCs)byattendingperiodicdiscussionsunderthepurviewoftheGLCVendorDevelopmentProgrammeCircle.ThepurposeofthesediscussionsistoformulateandstrategisefurtheradvancementsofthevendorsundereachGLC’sumbrella.

Duringtheyear,wecoordinatedtheparticipationofseveralvendorsinindustrialexhibitions,aswellasbriefingsinpreparationfortheupcomingSGPV-LCSproject.ThesebriefingsallowedBNShipyardtoidentifyseveralvendorsthatwereinneedofadditionaltrainingwhichiscrucialtothesuccessoftheproject.Subsequently,GVDDassistedinobtainingatraininggranttobearthecostsforeducationalprogrammes in theareasofprojectmanagement,businessstrategy,financialplanningandtheapplicationofadesignsoftware.

InJune2011,19participantsfrom10BNShipyardvendorstookpart inasixmonthBusinessCoachingandMentoringProgrammesponsoredbyKTPC.Theobjectivewastodevelopthebusinessmanagementcompetenciesofvendorsand increasetheircompetitiveness inthemarketplace.Theprogrammewassuccessfullyconcludedwithallparticipantsgraduating inDecember2011.

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GIVING BACK TO THE COMMUNITY AND EMPLOYEES

Over theyears, theGrouphascarriedoutandparticipated inaseriesofCSR initiativesencompassingawiderangeofactivities.Fromassistingtheunderprivilegedtocontributingtoworthycauses,enrichingthelivesofthelocalcommunitiesinwhichweoperateisthefocalpointofourCSRefforts.

OneofthekeycausessupportedbytheGroupisthewelfareofservicingandretiredpersonneloftheMalaysianArmedForcesandtheirfamilies.Towardsthisend,weprovideddonationstoconcernschampionedbyvarious foundations includingKelabVeteranKomandoMalaysia,Ex-IntelligenceAssociationofMalaysiaandJabatanHalEhwalVeteranATM.

TheGroupisalsoawareoftheimportanceoftakingstepstoimprovethequalityofeducation,asitcreatesasustainablefutureforindividualsandhasalong-termimpactonthecommunityatlarge.Inadditiontoprovidingdonationstolocalschools,ourMarineTechnologyAcademyhasbeenanapprovedtrainingproviderundertheNationalDualTrainingSystemsince2009.

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In2011,47BNShipyardstaffandstudents fromtheBousteadApprenticeDevelopmentProgramme,receivedcertificatesawardedbyJabatanPembangunanKemahiranMalaysia inaconvocationceremonyatLumut.ThestudentsweregraduatesofInstitutKemahiranBeliaNegaraKualaPerlis.

TheGrouprecognisestheimportanceofmaintaininggoodrelationswithourexternalstakeholdersincluding investors, localauthorities, themediaandbankers.To thisend,we invitedourstakeholderstotakepartinvariousevents,includingregularsitevisitsandengagementsessionstopromoteabetterunderstandingofourbusinesses.In2011,wejoinedothermembersoftheBousteadGroupfortheGLCOpenDayandicapital.bizBerhad’sInvestorDay.LIMA2011alsoprovidedanavenueforustodevelopnewrelationshipswithotherindustryplayers.Webenefittedfromthegoodrapportestablished,andlefttheexhibitionwithagreaterunderstandingofthesestakeholders’requirements.

Thekeytoacompetentandcommittedworkforceliesinaconduciveworkplace,whereprovidingopportunitiesfor learninganddevelopmentarecrucial.ThedevelopmentandexecutionoftheGroup-widetransformationinitiatives,whichincludetheBHICCoreValuesandCoreCompetencies,areguidedbythisprinciple.Toinculcatethistenetinouremployees,weestablishedtheNewPerformanceDevelopmentReviewwhichemphasisestheimportanceoflearningandgrowth.

Inordertodevelopourtalentpool,weparticipatedintheBarisanNasionalYouthJobFairsheldinSungaiPetani,KotaKinabaluandKualaLumpur.Judgingfromthelargecrowdatourboothandfromthenumberofpotentialjobseekerswhoregisteredwithus,thejobfairprovedtobeanexcellentplatformtomarket theavailablevacanciesandcreateawarenessaboutcareeropportunitieswithintheGroup.

Teamworkisessentialtotheformationofacapableandcompetentworkforce.Tothisend,weheldvariousinter-departmentalteambuildingeventsaswellasfamilydaysinLumutandKotaKinabalu.Severalinter-companyrecreationalandsportingactivitieswerealsoorganisedincludingfishingcompetitionsaswellasbowling,volleyballand futsal tournamentsheldatvariouslocationsnationwide.

Werealisethe importanceoftakingstepstopreserveandprotectourenvironmentand insupportofthis,wetookpartinanumberofinitiativestopromotesustainablepracticeswithintheGroup.BNShipyardparticipatedinthe‘LarianOzon’organizedbytheDepartmentofEnvironment,

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PerakBranch,andMajlisPerbandaranManjung.TenparticipantsfromvariousdepartmentsofBNShipyardtookpartintherun,whichaimedtoraiseawarenessontheimportanceoftheenvironmenttothewell-beingofthecommunity.

InJuly2011,BNShipyardwasinvitedbytheMalaysianProductivityCorporation (MPC) toparticipate in theQualityEnvironment (QE)5SRegionalConvention inLangkawi,competingagainstelevenothercompaniesfromtheNorthernregion.Theconventionrecognisedthesuccessfulimplementationofqualityenvironmentalpracticeswithinorganisations.BNShipyardreceivedaGoldMedalattheeventandwassubsequentlyinvitedtoparticipateintheNationalConvention.Atthenationallevel,BNShipyardwasoneof27companiesnationwidewhichreceivedaGoldMedal.Theachievementwasforthesuccessful implementationof5Sand itspositiveimpacton theenvironment,cost,staffmoraleandcustomersatisfaction.

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Y. Bhg. Tan Sri Dato’ Che Lodin Bin Wok KamaruddinChairman

Y. Bhg. Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Haji Mohd Nor (B)ExecutiveDeputyChairman/ManagingDirector

Y. Bhg. Datuk Azzat Bin KamaludinNon-IndependentNon-ExecutiveDirector

Y. Bhg. Dato’ Ishak Bin OsmanIndependentNon-ExecutiveDirectorMr. David William BerryNon-IndependentExecutiveDirector

Encik Abd Malik Bin A Rahman IndependentNon-ExecutiveDirector

BOARDOFDIRECTORS

AUDITORSErnst&YoungLevel23A,

MenaraMileniumJalanDamanlela

PusatBandarDamansara50490KualaLumpur

MalaysiaTel.No:03-74958000Fax.No:03-20959076

PRINCIPALPLACEOFBUSINESS17thFloor,MenaraBoustead

69JalanRajaChulan,50200KualaLumpurMalaysia

Tel.No:03-20787770Fax.No:03-20787768

REGISTRARTricorInvestorServicesSdnBhdLevel17,TheGardensNorthTower

MidValleyCity,LingkaranSyedPutra59200KualaLumpur,Malaysia

Tel.No:03-22643883Fax.No:03-22821886

SECRETARIESSuzanaBintiSanudin

LilyrohayuBintiAb.Hamid@Kassim

PRINCIPALBANKERSAffinBankBerhad

AllianceBankMalaysiaBerhadAmBank(M)BerhadAsianFinanceBankCIMBBankBerhad

HSBCBankMalaysiaBerhadMaybankInternational(L)Ltd.

STOCKEXCHANGELISTINGBursaMalaysiaSecuritiesBerhad

MainBoard

WEBSITEwww.bhic.com.my

REGISTEREDOFFICE

17thFloor,MenaraBoustead

69JalanRajaChulan

50200KualaLumpur

Malaysia

Tel.No:03-20787770

Fax.No:03-20787768

CorporateInformation

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FinancialYear

Results

AnnualReport

AnnualGeneralMeeting

Dividend

1Januaryto31December2011

FirstquarterAnnounced26May2011

Issued12March2012

Tobeheld5April2012

FirstinterimforFinancialYearEnded31December2011

FirstinterimforFinancialYearEnding31December2012

BookClosureDate10March2011

BookClosureDate9March2012

PaymentDate 24March2011

PaymentDate 26March2012

ThirdquarterAnnounced15November2011

SecondquarterAnnounced12August2011

FourthquarterAnnounced23February2012

FinancialCalendar

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2011 2010 2009 2008 2007

RM’000Revenue 544,133 649,797 543,851 496,259 117,153Profitbeforetaxation 1,700 95,054 94,876 134,681 474,890Profitaftertaxation 18,458 79,655 76,655 116,978 486,317Profitattributableto 12,782 69,806 76,280 115,120 485,469shareholdersShareholders’equity 427,057 430,304 375,231 312,529 200,885Totalequity 475,517 473,587 385,621 320,083 206,409Totalassets 1,158,449 1,017,235 581,310 465,109 341,067

2011 2010 2009 2008 2007

Sen per share Earningspershare 5.14 28.10 30.70 46.33 324.19Netdividendpershare 6.50 6.00 - 5.50 1.50Netassetspershare 1.72 1.73 1.51 1.26 0.84

Note:2007results includesthewaiverofRM393milliongivenbyfinancial institutionspursuanttoRestructuringScheme.

Five-YearFinancialHighlights

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Y.Bhg.LaksamanaMadyaTanSriDato’SeriAhmadRamliBinHajiMohdNor(B)ExecutiveDeputyChairman/ManagingDirector

Y.Bhg.TanSriDato’CheLodinBinWokKamaruddinChairman

Y.Bhg.DatukAzzatBinKamaludinNon-IndependentNon-ExecutiveDirector

BoardofDirectors

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Y.Bhg.Dato’IshakBinOsmanIndependentNon-ExecutiveDirector

Mr.DavidWilliamBerryNon-IndependentExecutiveDirector

EncikAbdMalikBinARahmanIndependentNon-ExecutiveDirector

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TanSriLodinwasappointedto theBoardon1January2008.He is theChairmanoftheRemunerationCommitteeandExecutiveCommittee.HeisalsotheDeputyChairman/GroupManagingDirectorofBousteadHoldingsBerhadandtheChiefExecutiveofLembagaTabungAngkatanTentera(LTAT).

TanSriLodingraduatedfromTheUniversityofToledo,Ohio,USAwithaBachelorofBusinessAdministrationandMasterofBusinessAdministration.Hehasextensiveexperienceinnotonlymanagingaprovidentfundbutalsointheestablishment,restructuringandmanagementofvariousbusinessinterests ranging fromplantation, trading, financialservices,propertydevelopment,oilandgas,pharmaceuticalsandshipbuilding.TanSriLodinistheChairmanofPharmaniagaBerhadandJohanCeramicsBerhad.HeisalsotheDeputyChairmanofAffinHoldingsBerhadandsitsontheBoardsofBousteadPropertiesBerhad,UACBerhad,AffinBankBerhad,AffinIslamicBankBerhad,Affin InvestmentBankBerhad,AXAAFFINLife InsuranceBerhad,MHSAviationBerhad,FIDEForum,1MalaysiaDevelopmentBerhadandBadanPengawasPemegangSahamMinoritiBerhad.AmongthemanyawardsTanSriLodinreceivedto-date includetheChevalierDeLaLégionD’Honneur from theFrenchGovernment, theMalaysianOutstandingEntrepreneurshipAward, theDegreeofLawshonoriscausa from theUniversityofNottingham,UnitedKingdom,TheBrandLaureateBrandPersonalityAwardsandtheUiTMAlumnusofTheYear2010Award.

Hedoesnothaveanyfamily relationshipwithanyDirectorand/ormajorshareholderofBousteadHeavyIndustriesCorporationBerhadoranypersonalinterestinanybusinessarrangementinvolvingtheCompany,exceptthatheisalsotheChiefExecutiveofLTAT.

Y. Bhg. Tan Sri Dato’ Che Lodin Bin Wok Kamaruddin

Chairman62yearsofage,Malaysian

ProfileofDirectors

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TanSriRamliwasappointedtotheBoardon17August2005.HeisamemberoftheExecutiveCommittee.

TanSriRamligraduatedfromtheBrittaniaRoyalNavalCollegeDartmouth,UnitedKingdom.HeisalsoagraduateoftheIndonesianNavalStaffCollege,theUnitedStatesNavalWarCollegeandtheNavalPost-GraduateSchoolinMonterey. HeholdsaMastersDegree inPublicAdministrationfromtheHarvardUniversity,UnitedStates.HeservedtheRoyalMalaysianNavyfor34years,andretiredastheChiefoftheRoyalMalaysianNavyin1999.

TanSriRamlisitson theboardofAffin IslamicBankBerhad,MuhibbahEngineeringBerhad,FavelleFavcoBerhadandseveralotherprivatelimitedcompanies.TanSriRamlidoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdersofBousteadHeavyIndustriesCorporationBerhadoranypersonalinterestinanybusinessarrangementinvolvingtheCompany.

DatukAzzatwasappointed to theBoardon17August2005. He is theChairmanoftheNominatingCommitteeandamemberoftheAuditCommittee.

DatukAzzatisalawyerbyprofession,andisapartnerofthelawfirmofAzzat&Izzat.HeholdsdegreesinLawandInternationalLawfromtheUniversityofCambridgeandwasadmittedasaBarrister-at-LawoftheMiddleTemple,Londonin1970.PriortobeingadmittedasanadvocateandsolicitoroftheHighCourtofMalayain1979,heservedasanAdministrativeandDiplomaticOfficerwiththeMinistryofForeignAffairsinvariouscapacities.HewasamemberoftheSecuritiesCommissionfrom1993to1999.

DatukAzzatsitsontheBoardofBousteadHoldingsBerhad,KPJHealthcareBerhad,PulaiSpringsResortBerhad,VisdynamicsHoldingsBerhad,AxiataGroupBerhadandseveralotherprivatelimitedcompanies.

DatukAzzatdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdersofBousteadHeavyIndustriesCorporationBerhadoranypersonalinterestinanybusinessarrangementinvolvingtheCompany,otherthantherenderingofprofessionalservicestotheGroupwhichiscarriedoutintheordinarycourseofbusinessofAzzat&Izzat,ofwhichheisapartner.

Y. Bhg. Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Haji Mohd Nor (B)

ExecutiveDeputyChairman/ManagingDirector68yearsofage,Malaysian

Y. Bhg. Datuk Azzat Bin Kamaludin

Non-IndependentNon-ExecutiveDirector67yearsofage,Malaysian

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Mr.BerrywasappointedtotheBoardon23February2006.HeisamemberoftheExecutiveCommittee.

Mr.Berryhasoverfortyyearsexperienceinfinancialservices,thecommercialsector,andincorporateconsulting.HeheldvariousseniorpositionswithStandardCharteredMerchantBankinLondon,KualaLumpurandNairobi, includingapostingfrom1980to1983astheChiefExecutiveofCharteredMerchantBankersMalaysiaBerhad(nowknownasAffinInvestmentBankBerhad).From1998to2001,hewastheManagingDirectorofAffinFundManagementSdnBhd.From2002to2004,Mr.BerrywastheExecutiveDirectorandChiefExecutiveOfficerofCahyaMataSarawakBerhad.HealsoservedasaNon-ExecutiveDirectorofBousteadHoldingsBerhadfrom1990to2002.

Mr.BerryisamemberoftheBoardofGovernorsoftheMalaysianInstituteofCorporateGovernanceandaDirectoroftheMalaysian InvestorRelationsAssociation.

Mr.Berrydoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholderofBousteadHeavyIndustriesCorporationBerhad,oranypersonalinterest inanybusinessarrangement involvingtheCompanyother thanpreviouslyrenderingprofessionalservicestotheGroup,whichwascarriedoutintheordinarycourseofbusinessofColumbusCircleGovernanceSdnBhd.

Dato’IshakwasappointedtotheBoardon22January1998.HeisamemberoftheAuditCommittee,NominatingCommitteeandRemunerationCommittee.

Dato’ Ishak graduated from University ofMalaya with a degree inEconomics(Hons)majoringinAccountancyandholdsaMasterofBusinessAdministration inFinancefromLeuvenUniversity,Belgium.HestartedhisworkingcareerintheMinistryofFinance,MalaysiaandheldvariouspositionsintheMinistryduringhiseleven(11)yearswiththeGovernment.

Dato’IshakjoinedAmanahMerchantBankBerhadasSeniorManagerProjectFinance in1982andwassubsequentlypromotedtobeGeneralManagerBanking&AdvisoryService in 1984. In 1987, hemoved toKumpulanKewanganMalaysiaBerhad(KKMB),theholdingcompanyofAmanahMerchantBankasaSeniorGeneralManager-Operation.DuringhistenurewithKKMB,hesatonvariousBoardsnamely,AmanahMerchantBankBerhad,MalaysiaDiscountBerhad,AmanahInternational InsuranceBerhad,MalaysiaCreditFinanceBerhadandKKIndustriesBerhad.In1989,heassumedtheManagingDirector’spositioninMalaysiaCreditFinanceBerhad.

Dato’ Ishakdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdersofBousteadHeavyIndustriesCorporationBerhad,oranypersonalinterestinanybusinessarrangementinvolvingtheCompany.

Mr. David William Berry

Non-IndependentExecutiveDirector64yearsofage,NewZealanderandPermanentResidentofMalaysia

Y. Bhg. Dato’ Ishak Bin Osman

IndependentNon-ExecutiveDirector64yearsofage,Malaysian

ProfileofDirectors

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EncikMalikwasappointed to theBoardasan IndependentandNon-ExecutiveDirectorofBousteadHeavyIndustriesCorporationBerhadon1June2008.HeistheChairmanoftheAuditCommitteeandamemberoftheNominatingCommittee,RemunerationCommitteeandExecutiveCommittee.

EncikMalikisaCharteredAccountantmemberoftheMalaysianInstituteofAccountants (MIA). He isalsoaFellowof theAssociationofCharteredCertifiedAccountants(UK),amemberoftheMalaysianInstituteofCertifiedPublicAccountantsandaCertifiedFinancialPlanner(USA).HeisamemberofboththeMalaysianInstituteofManagementandCharteredManagementInstitute(UK).

EncikMalikheldvariousseniormanagementpositions inPeatMarwickMitchell(KPMG),EssoGroupofCompanies,ColgatePalmolive(M)Sdn.Bhd.,Amway(Malaysia)Sdn.Bhd.,FimaMetalBoxBerhadandGuinnessAnchorBerhad.HewastheGeneralManager,CorporateServicesofKelangMultiTerminalSdn.Bhd.(Westports)from1994until2003.

EncikMaliksitsontheBoardofAffinHoldingsBerhad,AffinInvestmentBankBerhad,CYLCorporationBerhad,InnityCorporationBerhad,LeeSweeKiatGroupBerhadandseveralprivatelimitedcompanies.

EncikMalikdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdersofBousteadHeavyIndustriesCorporationBerhad,oranypersonalinterestinanybusinessarrangementinvolvingtheCompany.

En. Abd Malik Bin A Rahman

IndependentNon-ExecutiveDirector63yearsofage,Malaysian

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AuditCommitteeReport

COMPOSITION OF MEMBERS

Chairman

EncikAbdMalikBinARahman(IndependentNon-ExecutiveDirector)

Members

Y.Bhg.DatukAzzatBinKamaludin(Non-IndependentNon-ExecutiveDirector)

Y.Bhg.Dato’IshakBinOsman(IndependentNon-ExecutiveDirector)

MEMBERSHIP

AccordingtotheListingRequirementsofBursaSecurities,theAuditCommitteeshallbeappointedbytheBoardofDirectors(Board)fromamongsttheDirectorsoftheCompanyanditsnumbershallnotbelessthanthree(3)members,allofwhomshallbeNon-ExecutiveDirectors,withamajoritybeing IndependentDirectors.ThemembersoftheAuditCommitteeshallelectaChairmanfromamongstthemselveswhoisanIndependentNon-ExecutiveDirector.

ThetermsofofficeandperformanceoftheCommitteeandeachofitsmembersshallbereviewedbytheBoardnolessthanonceeverythree(3)years.

TheCompanycompliedwiththesaid listingrequirementduringthefinancialyearended31December2011.

PRIMARY PURPOSES

TheAuditCommittee(Committee)shall:

1. ProvideassistancetotheBoardinfulfillingitsfiduciaryresponsibilitiesrelatingtothecompanyaccountsandpractices for theCompanyand itssubsidiaries(Group).

2. ImprovetheGroup’sbusinessefficiency,thequalityoftheaccountingfunction,thesystemofinternalcontrolsandauditfunctionandenhancetheconfidenceofthepublicintheGroup’sreportedresults.

3. Maintainthroughregularlyscheduledmeetings,adirectlineofcommunicationbetweentheBoard,theexternalauditorsandtheinternalauditors.

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4. Enhancetheindependenceofboththeexternaland internalauditors’functionsthroughactiveparticipationintheauditprocess.

5. S t reng then the ro l e o f t heIndependentDirectorsbygivingthemagreaterdepthofknowledgeastotheoperationsoftheGroupthroughtheirparticipationintheCommittee.

6. Act upon theBoard ofDirectors’requesttoinvestigateandreportonanyissuesorconcernswithregardtothemanagementoftheGroup.

AUTHORITY

TheCommitteeshall,inaccordancewiththeproceduredeterminedbytheBoardandat thecostof theCompanyhaveauthoritytoinvestigateanymatterwithinitstermsofreference,fullandunrestrictedaccesstoanyinformationpertainingtothe Company and all the resourcesrequired to perform its duties.TheC omm i t t e e s h a l l h a ve d i r e c tcommunication channels with theexternalauditorsandperson(s)carryingouttheinternalauditfunctionoractivityandbeabletoconvenemeetings/obtainindependent/external professional orotheradviceandtosecuretheattendanceofoutsiderswithrelevantexperienceandexpertiseifitconsidersnecessary.

FUNCTIONS AND DUTIES

Thefunctionsof theAuditCommitteeareasfollows:

1. In relation to the internal auditfunction:

a. Toreviewtheadequacyof thescope, functions,competencyand resourcesof the internalauditfunctionandensurethatithasthenecessaryauthoritytocarryoutitswork;and

b. To review the internal auditprogramme,processesandtheresults of the internal auditprogramme, processes orinvestigationsundertakenandascertainwhetheror not anyappropriateactionsaretakenonthe recommendations of theinternalauditfunction.

2. In relation to the external auditfunction:

a. To r e c ommen d t h e r e -appointment/nomination ofqualifiedauditorsastheexternalauditorandtoreviewanyletterofresignationfromtheexternalauditorsoftheCompany;

b. To meet with the externalauditorsat least twice ineachyear todiscussproblemsandreservations arising from theinterimandfinalaudits,andanyothermatter theauditorsmaywish to discuss (without thepresenceofmanagement);

c. To review with the externalauditors, the audit plan, thescope of audit and the auditreport , the audit fees, i tsindependenceandanyconflictsof interest and toassess theappropriateness of any otherprofessionalengagementsgiventotheexternalauditor;

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AuditCommitteeReport

d. Toreviewthequarterlyresultsa n d y e a r e n d f i n a n c i a lstatements,priortotheapprovalbytheBoard;and

e. Toreviewallareasofsignificantf i n a n c i a l r i s k a n d t h earrangementsinplacetocontainthoseriskstoacceptablelevelsandtoprovidean independentassessmentof theadequacy,reliabilityandeffectivenessofthe risk assessment processand r isk management andcorporategovernancesystemoftheGroup.

3. To rev iew any re la ted pa r t ytransactionandconflictof interestsituationsthatmayarisewithintheCompany/Group including anytransaction,procedureorcourseofconduct that raises questions ofmanagementintegrity.

4. Toreviewandevaluatethesystemof internal control within theCompanyand theGroupwith theinternalandexternalauditors.

5. TocarryoutanyotherfunctionthatmaybemutuallyagreeduponbytheCommitteeand theBoard,whichwouldbebeneficialtotheCompanyandensuretheeffectivedischargeof the Committee’s duties andresponsibilities.

6. ToreporttoBursaMalaysiaSecuritiesBerhad (BursaSecurities)onanymatterreportedbyittotheBoardoftheCompanywhichhasnotbeensatisfactorilyresolvedresultinginabreachoftheListingRequirementsofBursaSecurities.

MEETINGS

Meetings and Quorum

TheCommitteeshallmeetatleastfour(4)timesinayearsubjecttothequorumofatleasttwo(2)independentdirectorsormore frequently as circumstancesrequired or upon the request of anymember of theCommitteewith duenoticeofissuestobediscussedandshallrecorditsdeliberationsandconclusionsindischargingitsdutiesandresponsibilities.TheCommitteemay inviteanyBoardmemberoranymemberofmanagementoranyemployeeoftheCompanywhotheCommittee thinks fit to attend itsmeetingstoassistandtoprovidepertinentinformationasnecessary.

Procedures of Audit Committee

TheAuditCommitteemayregulate itsownprocedures,inparticular:

1. Thecallingofmeetings;

2. The notice to be given of suchmeetings;

3. Thevotingandproceedingsofsuchmeetings;

4. Thekeepingofminutes;and

5. The custody, product ion andinspectionofsuchminutes.

Secretary

The Company Secretary or otherappropriateseniorofficialshallbe theSecretarytotheAuditCommittee.

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SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

Duringthefinancialyearended31December2011,theactivitiesundertakenbytheCommitteeincludedthefollowing:

1. ReviewedthequarterlyfinancialstatementsoftheGroupbeforeapprovalbytheBoardforannouncementstotheBursaSecurities.

2. Reviewedtheyear-endfinancialstatementstogetherwithexternalauditors’managementletterinrelationtotheauditandaccountingissuesarisingfromtheauditandmanagement’sresponse.

3. Reviewedanddiscussedwiththeexternalauditorsontheirscopeofwork,auditplanandprocedures.

4. TwoprivatemeetingswiththeExternalAuditorsduringtheyearwithoutthepresenceofExecutiveDirectorsandManagement

5. Reviewedanddiscussedthemajorissuesraisedintheinternalauditreport,auditrecommendations,management’sresponseandactionstakentostrengthenthestateofinternalcontrolsintheCompany.

6. ReviewedtherelatedpartytransactionsandanyconflictofinterestsituationthatmayarisewithintheGroupandtoensurethatsuchtransactionsareundertakenatarms’length,onnormalcommercialtermswhicharenotmorefavourabletothe relatedparties than thosegenerallyavailable to thepublicandarenotdetrimentaltotheminorityshareholdersoftheCompany.

7. Reviewed and discussed major financial and risk issues arising frommanagement’svariousreports,initiatingfurtherstudieswhichdeemednecessaryandreportedtotheBoardonthefindingsof itsstudies,makingappropriaterecommendations.

During the financialyearended31December2011, therewere four (4)AuditCommitteemeetingsheld.ThedetailsofattendanceoftheCommitteemembersareasfollows:

Name of Directors Independent Attendance of Meetings

EncikAbdMalikBinARahman Yes 4/4

Y.Bhg.DatukAzzatBinKamaludin No 4/4

Y.Bhg.Dato’IshakBinOsman Yes 3/3(Appointed as member on 21 February 2011)

Mr.DavidWilliamBerry Yes 1/1(Resigned as Chairman and member on 21 February 2011)

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StatementonCorporateGovernance

The Code

TheBoardofDirectors (theBoard) iscommitted to ensuring the higheststandardsofcorporategovernancearepracticed throughout the BousteadHeavyIndustriesCorporationGroupofCompanies (Group)asa fundamentalpartofdischargingitsresponsibilitiestoprotectandenhanceshareholders’valueand the financialperformanceof theGroup.

SetoutbelowisthemannerinwhichtheGrouphasappliedtheprinciplesofgoodgovernanceandtheextenttowhich ithascompliedwiththebestpracticessetoutintheMalaysianCodeonCorporateGovernance(theCode).Theseprinciplesandbestpracticeshavebeenappliedandcompliedwiththroughouttheyearended31December2011.

BOARD OF DIRECTORS

Composition of the Board

TheBoardcurrentlyhassix(6)members,comprisingthree(3)ExecutiveDirectorsandthree (3)Non-ExecutiveDirectors.Two(2)oftheDirectorsareIndependentDirectors,incompliancetotheCodeandthe Listing Requirements of BursaMalaysia Securities Berhad (BursaSecurities) forone thirdofDirectorsto be independent. The balancedcombinationofqualifications,skillsandexperiencesoftheBoardisimportanttoensurethesuccessfuldirectionof theGroup.

A brief profile of each Director ispresented on page 42 to 45 of thisAnnualReport.

The Group practices a division ofresponsibilitybetween theChairmanandtheManagingDirectorandthereisabalanceofexecutive,non-executiveandindependentnon-executiveDirectors.TherolesoftheChairmanandManagingDirectorareseparateandclearlydefined,andareheldindividuallybytwopersons.TheChairmanisprimarilyresponsiblefortheorderlyconductandworkingoftheBoardwhilsttheManagingDirectorhastheoverall responsibilityfortheday-to-day running of the business andimplementationoftheBoard’sdecisions.

Y.Bhg.TanSriDato’CheLodinBinWokKamaruddin leads the Board as theChairmanoftheCompany.

The Board continues to give closeconsideration to itssize,compositionandspreadofexperienceandexpertisethat enables the Board to providee ffect ive leadersh ip as we l l asindependent judgementonbusinessdecisions,takingintoaccountlongterminterestsofshareholders,customers,suppliersandotherbusinessassociateswithwhom the Group conducts itsbusiness.

InaccordancewiththerequirementoftheCode,Y.Bhg.Dato’IshakBinOsmanhas been appointed as the SeniorIndependentNon-ExecutiveDirectortobeavailabletodealwiththeconcernsofvariousstakeholdersintheCompany.

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TheBoard issatisfiedthat thecurrentBoardcomposition fairly reflects theinterestsofminorityshareholderswithintheGroup.

Board Responsibilities

TheBoardisresponsibleforthecorporategovernancepracticesof theGroup. Itguidesandmonitorstheaffairsof theGrouponbehalfoftheshareholdersandretainsfullandeffectivecontrolovertheGroup.TheBoard’skeyresponsibilitiesreflecttherecommendationsprescribedbytheCode.TheseincludethereviewofthestrategicdirectionfortheGroupandoverseeingthebusinessoperationsoftheGroup,evaluatingwhetherthesearebeingproperlymanaged.

TheresponsibilityformattersmaterialtotheGroupisinthehandsoftheBoard,with no individual having unfetteredpowerstomakedecisions.Inperformingtheirduties, theBoardhaveaccesstotheadviceandservicesoftheCompanySecretariesandifnecessary,mayseekindependentprofessionaladviceabouttheaffairsoftheGroup.TheBoardhasaformalscheduleofmattersreservedtoitself fordecision, includingtheoverallGroupstrategyanddirection,acquisitionanddivestmentpolicy,approvalofmajorcapita l expenditure projects andsignificantfinancialmatters.

Board Meetings

Boardmeetingsareheldatquarterlyintervals with additional meetingsconvenedforparticularmatters,whennecessary.AllDirectorsarefullybriefedinadvanceofBoardmeetingson thematterstobediscussedandhaveaccessto any further information theymayrequire.The Board may, wheneverrequired,setupcommitteesdelegatedwithspecificpowersandresponsibilities.

The Company Sec r e t a r i e s a r eresponsible to ensure the Boardmeetingproceduresare followedandthatapplicablerulesandregulationsarecompliedwith.

The Memorandum and Articles ofAssociationoftheCompanyprovidesfortheChairmantohavethecastingvoteintheeventanequalityofvotesarisesoveranissueinquestion.

TheBoardmetforatotaloffive(5)timesduring the financial year ended 31December2011andtheattendanceofeachDirector isasstated in thetablebelow:

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StatementonCorporateGovernance

Name of Director Status of Independent Attendance Directorship of Meetings

Y.Bhg.TanSriDato’CheLodin ExecutiveChairman No 5/5BinWokKamaruddin

Y.Bhg.LaksamanaMadyaTanSri ExecutiveDeputy No 5/5Dato’SeriAhmadRamliBin Chairman/HajiMohdNor(B) ManagingDirector

Y.Bhg.DatukAzzatBin Non-Executive No 5/5Kamaludin Director

Mr.DavidWilliamBerry ExecutiveDirector No 5/5

Y.Bhg.Dato’IshakBinOsman Non-Executive Yes 5/5 Director

EncikAbdMalikBinARahman Non-Executive Yes 5/5 Director

Information for the Board

TheBoardisprovidedwithadequatereportsinatimelymannerpriortotheBoardmeetingstoenabletheDirectorstoobtainfurtherexplanations,wherenecessary.Thesereportsprovide informationongroupperformanceandmajoroperational,financialandcorporateissues.MinutesoftheBoardCommitteesarealsotabledattheBoardmeetingsforinformationanddeliberation.

TheBoardhasapprovedaprocedurefortheappointmentofindependentprofessionaladviser inappropriatecircumstances,attheCompany’sexpense.Beforeincurringsuchprofessional fees, theDirectorconcernedmustconsultwiththeExecutiveDeputyChairmanoftheBoardorwithtwootherdirectors,oneofwhomisNon-Executive.

DirectorshaveaccesstoallinformationwithintheCompany,whetherasafullBoardorintheirindividualcapacity,infurtheranceoftheirduties.

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Appointment and re-election of Directors

In accordance with the Company’sArticles of Association, al l newlyappointedDirectors shall retire fromofficebutshallbeeligibleforre-electionin the nextAnnualGeneralMeetingsubsequent to theirappointment.TheArticlesfurtherprovidethatatleastonethirdoftheremainingDirectorsshallbesubjecttore-electionbyrotationateachAnnualGeneralMeeting.

Directorsoverseventyyearsofagearerequired tosubmit themselves for re-appointmentannuallyinaccordancewithSection129(6)of theCompaniesAct,1965.

BOARD COMMITTEES

Audit Committee

TheAuditCommitteereviewsissuesofaccountingpolicyandpresentationforexternalfinancialreporting,monitorstheworkofthe internalaudit functionandensuresanobjectiveandprofessionalrelationship is maintained with theexternalauditors.TheAuditCommitteehasfullaccesstoboththeinternalandexternal auditorswho, in turn, haveaccessatall timestotheChairmanoftheAuditCommittee.

ThereportoftheAuditCommitteeissetoutonpages46 to49of theAnnualReport.

Nominating Committee

TheBoardhasestablishedaNominatingCommitteeconsistingof thefollowingNon-ExecutiveDirectors:

• Y.Bhg.DatukAzzatBinKamaludin–Chairman

• EncikAbdMalikBinARahman• Y.Bhg.Dato’IshakBinOsman

The functions of the NominatingCommitteeshallbeto:

(i) Recommend candidates for alldirectorships;

(ii) Recommendappointments to theBoardcommittees;

(iii) Annuallyreviewtherequiredmixofskills and experience and otherqualities,includingcorecompetenciesthat theNon-ExecutiveDirectorsshouldbringtotheBoard;and

(iv) Implementaprocess,tobecarriedout annually for assessing theeffectiveness of the Board as awhole,thecommitteesoftheBoardandforassessingthecontributionofeachindividualDirector.

TheBoardhasdirectaccesstotheadviceandservicesoftheCompanySecretarieswhoareresponsibleforensuringthatallappointmentsareproperlymadeandallnecessary information isobtainedfromDirectors,bothfortheCompany’sownrecordsandforthepurposesofmeetingtherequirementsoftheCompaniesAct,1965,theListingRequirementsofBursaSecur i t ies and other regu la tor yrequirements.

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StatementonCorporateGovernance

Uponappointment,eachDirectorwillreceiveinformationontheGroupwhichincludefinancial,corporate,businessandregulatoryinformationandtheirrole.InformationtotheBoardwillberegularlyupdatedthroughmeetingsorwrittencirculars. TheBoardisencouragedtoattendtrainingcoursesattheCompany’sexpensetoenabletheDirectorstoeffectivelydischargetheirduties.

AllDirectorsoftheCompanyhaveattendedtheMandatoryAccreditationProgrammeconductedbytheApprovedOrganiser.TheDirectorswillcontinuetoundergootherrelevanttrainingprogrammestofurtherenhancetheirknowledgeonacontinuousbasis incompliancewithparagraph15.08of theListingRequirementsofBursaSecuritiesontheContinuingEducationProgramme.ThedevelopmentandtrainingprogrammesattendedbytheDirectorsduringtheyearended31December2011aresetoutbelow.Course title/organiser Date

SustainabilityProgramforCorporateMalaysia(TradingServices&IndustrialProducts)byBursaMalaysia 23March2011

AssessingTheRiskandControlEnvironmentbyBursaMalaysia 24March2011

EconomicOutlookandImplicationsonFinancialandBanking 28March2011Industries–IsAnotherCrisisImminent?byAffinHoldingsBerhad

21stCenturyCorporation:DrivingSustainableLeadership& 6May2011InnovationbyMINDA/TalentCorporationMalaysia/GeneralElectric

RoleofAuditCommitteeinEnhancingAuditQuality 11May2011

CorporateGovernanceSymposiumbyEvolutionMindPower 23–25May2011

AffinHoldingsBerhad&BousteadHoldingsBerhadTalkSeries:- 26July2011(i)EconomicOutlookoftheBankingSector(ii)CompetitionAct2010&PersonalDataProtectionAct2010

CapitalMarketMasterplan–CorporateGovernanceDialogue 2August2011

AsianInstituteofFinance-TalkonRisk 28September2011

BHICStrategicManagementTraining 5October2011

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Course title/organiser Date

20Conversations@HarvardprogrambyLinkageAsia, 17–21OctoberSingapore 2011

7thTax&CorporateSeminarbyTricorTaxServicesSdnBhd 19October2011

CorporateGovernanceBlueprint2011&Director’sDutiesby 27October2011MICG&Mah-Kamariyah&PhilipKoh

ScrutinisingFinancialStatementFrauds&Detectionof 31October2011RedFlagsbyMICG

KeyAmendmentstoListingRequirement2011&Corporate 3November2011DisclosureGuide2011byTricorCorporateServicesSdnBhd

EconomicOutlookUncertaintiesConference 23November2011

Remuneration Committee

TheBoardhasestablishedaRemunerationCommitteeconsistingofthefollowingDirectors:• Y.Bhg.TanSriDato’CheLodinBinWokKamaruddin–Chairman• Y.Bhg.Dato’IshakBinOsman• EncikAbdMalikBinARahman

ThetermsofreferencefortheCommitteeareto:(i) RecommendtotheBoardthelevelofremunerationsufficienttoattractandretain

directors;(ii) RecommendtotheBoard, theremunerationofExecutiveDirectors inall its

forms,drawingfromoutsideadviceasnecessary;(iii) RecommendtotheBoard,thelevelofremunerationofNon-ExecutiveDirectors

toreflecttheexperienceandlevelofresponsibilitiesundertakenbytheparticularNon-ExecutiveDirectorconcerned;and

(iv) Reviewthelevelofremunerationofseniorexecutivemanagementteam.

Componentsofremunerationarestructuredsoastolinkrewardstocorporateandindividualperformance, inthecaseoftheExecutiveDirector. InthecaseofNon-ExecutiveDirectors,thelevelofremunerationreflectstheexperienceandlevelofresponsibilitiesundertakenbytheparticularNon-ExecutiveDirector.

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StatementonCorporateGovernance

AsummaryoftheremunerationoftheDirectorsforthefinancialyearended31December2011,distinguishingbetweenExecutiveandNon-ExecutiveDirectorsinaggregate,withcategorisation intoappropriatecomponentsandthenumberofDirectorswhoseremunerationfallsintoeachsuccessivebandisasfollows:

Executive Non-Executive Directors Directors Total (RM’000) (RM’000) (RM’000)

Fees 180 180 360Salary&Bonus 1,022 – 1,022EmployeeProvidentFundContribution 61 – 61Allowance 16 32 48

Total 1,279 212 1,491

Directors’Remuneration

Executive Non-ExecutiveRange Directors Directors Total

RM50,001–RM100,000 1 3 4RM300,001–RM350,000 1 – 1RM850,001–RM900,000 1 – 1

Total 3 3 6

INVESTOR AND SHAREHOLDER RELATIONS

TheGrouprecognises the importanceof timelyandthoroughdisseminationofinformation toshareholders. In this regard, theGroupstrictlyadheres to thedisclosurerequirementsofBursaSecuritiesandtheMalaysianAccountingStandardsBoard.TheAnnualReporthascomprehensiveinformationpertainingtotheGroup,whilevariousdisclosuresonquarterlyandannual resultsprovide investorswithfinancialinformation.TheAnnualGeneralMeetingistheprincipalforumfordialoguewiththeshareholders.Noticesof theAnnualGeneralMeeting and theAnnualReports are sent toshareholdersat leasttwenty-one(21)daysbeforethedateoftheAnnualGeneralMeeting.

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AteachAnnualGeneralMeeting, theBoard encourages shareholders toparticipate inthequestionandanswersession pertaining to the businessactivities of the Group. The GroupManagingDirectorisavailabletorespondtoshareholders’questionsduring themeeting. Where appropriate, theChairmanwillundertake toprovideawritten answer to any signif icantquestion, which cannot be readilyanswered. The Share Registrar isavailabletoattendtomattersrelatingtoshareholders’interests.

ACCOUNTABILITY AND AUDIT

Financial Reporting

In presenting the annual financials t a t e m e n t s a n d q u a r t e r l yannouncements of results to theshareholders,theBoardaimstopresenta ba lanced and unders t andab leassessmentoftheGroup’spositionandprospects.

Before the financialstatementsweredrawn up, the Board has taken thenecessary steps to ensure that theGrouphadadoptedall theapplicableaccountingpoliciesconsistently,andthatthepoliciesaresupportedbyreasonableandprudentjudgementsandestimates.All accounting standards,which theBoardconsiderstobeapplicable,havebeen fo l l owed , sub jec t t o anyexplanationsandmaterialdeparturesdisclosed in thenotesto thefinancialstatements.

The role of theAudit Committee inreviewingandreportingofthefinancialinformationoftheGroup isoutlined intheReportoftheAuditCommitteeintheAnnualReport.

Relationship with the Auditors

TheBoardhasestablishedaformalandtransparentrelationshipwiththeexternalauditors.Theappointmentoftheexternalauditors issubject to theapprovalofshareholders at theAnnual GeneralMeetingwhilst their remuneration isdeterminedbytheBoard. Therolesofboththeexternaland internalauditorsare further described in the AuditCommitteeReport.

Statement on Internal Control

TheinformationontheGroup’sinternalcontrolispresentedintheStatementonInternalControlintheAnnualReport.

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TheDirectorsarerequiredbytheCompaniesAct,1965topreparefinancialstatementsforeachyearwhichgiveatrueandfairviewofthestateofaffairsoftheGroupandoftheCompanyattheendofthefinancialyearandoftheirresultsandcashflowsforthefinancialyearthenended.

Inpreparingthesefinancialstatements,theDirectorshave:

• adoptedsuitableaccountingpoliciesandapplyingthemconsistently;

• madejudgementsandestimatesthatareprudentandreasonable;

• ensuredapplicableaccountingstandardshavebeenfollowed,subjecttoanymaterialdeparturesdisclosedandexplainedinthefinancialstatements;and

• prepared the financialstatementson thegoingconcernbasis,unless it isinappropriate topresumethat theGroupandtheCompanywillcontinue inbusiness.

TheDirectorsareresponsibleforensuringthattheCompanykeepsproperaccountingrecordswhichdisclosewithreasonableaccuracyatanytimethefinancialpositionoftheGroupandtheCompanyandwhichenablethemtoensurethatthefinancialstatementscomplywith theCompaniesAct,1965.TheDirectorshaveoverallresponsibilityfortakingsuchstepsthatarereasonablyopentothemtosafeguardtheassetsof theGroupand theCompany topreventanddetect fraudandotherirregularities.

Directors’ResponsibilityStatement

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StatementonInternalControl

TheBoardofDirectors (theBoard) ispleased to provide the fol lowingStatementon InternalControl,whichoutlinesthenatureandscopeofinternalcontrolsofBHICGroupanditsassociates(Group)duringtheyearunderreview,inaccordancetoParagraph15.26(b)oftheBursaMalaysiaSecuritiesBerhadMainMarketListingRequirements.

RESPONSIBILITY

TheBoard iscommittedtomaintainaneffectivesystemof internalcontrolstosafeguardshareholders’ investmentandtheGroup’sassets.

TheBoardaffirmsitsoverallresponsibilityfor the Group’s systems of internalcontrolsandforreviewingtheadequacyandeffectivenessoftheGroup’sinternalcontrol systems and managementinformationsystems, includingsystemsfor compliancewith applicable laws,regulat ions, rules, direct ives andguidelines.

Thereviewcoversfinancial,operationalandcompliancecontrolsoftheGroup.Inviewof the inherent limitations inanysystemofinternalcontrols,thesystemisdesignedtomanageratherthaneliminatetheriskoffailuretoachieveitscorporateobjectives. Accordingly, it can onlyprovide reasonable but not absoluteassuranceagainstmisstatementorloss.

INTERNAL CONTROL

Risk Management

The Group’s objectives, its internalorganisation, and theenvironment inwhich it operates are continuouslyevolvingand,asaresult,therisksitfacesare continuously changing. A soundsystemof internal controls thereforedepends on a thorough and regularevaluationofthenatureandextentoftheriskstowhichtheGroupisexposed.

The G roup ’s R i sk ManagementFrameworkprovidesamethodologytoidentify,evaluate,monitorandmanageall key risks facedby theGroup.TheFrameworkisdesignedtoachievetheseobjectives:

1. Communicate the vision, role,directionandprioritiestostaffandotherstakeholders;

2. Identify,assessandmanagerisksinaneffectiveandefficientmanner;

3. Enablesystematic risk reviewandreporting on key risks, existingcontrolmeasuresandanyproposedactionplans;and

4. Create a risk-aware culture andbuilding thenecessaryknowledgeforriskmanagementateverylevelofmanagement.

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StatementonInternalControl

During the year, risk owners haveperiodically reviewedtheeffectivenessofexistingcontrolsandstatusofactionplansdevelopedtomitigatesignificantrisks.Riskownersarethenrequiredtoreportonthestatusofriskswhicharerated‘extreme’and‘high’fordiscussionsamongtheseniormanagementat theGroup’smonthlymanagementmeetings.

In addition, risks which may havesignificant impact to the respectiveDivision,eitherinfinancialornon-financialterms,are‘escalated’totherespectiveDivisionHead forpromptdeliberationandaction,whererequired.

Engagementsessionswerecarriedoutwithbothriskownersandriskmanagersto further inculcatea riskawarenessculture,improveinformationcontainedintheriskregistersandtoobtainfeedbackforcontinuous improvementpurposes.Intheyearunderreview,riskmanagementtrainings,conductedbybothinternalandexternalexperiencedspeakers,werealso organised to communicate riskinformation and improve the r iskmanagementskillsofriskowners,riskmanagersandseniormanagement.

TheGroupwillcontinuetodevelopandimprove on i ts r isk managementpractices,which are consistentwithgoodcorporategovernance, toachievetheabovementionedobjectives.

Control Structure

TheBoardacknowledgesitsresponsibilitytomaintainastrongcontrolstructureandenvironmentfor theproperconductoftheGroup’sbusinessoperations.

WhilsttheBoardmaintainscontrolanddirection over appropriate strategic,financial,organisationalandcompliancei s s u e s , i t h a s d e l e g a t e d t h eimplementationofthesystemofinternalcontrolstotheexecutivemanagement,led by the Managing Director.TheManagingDirector,whoisempoweredtomanagethebusinessof theGroup,hasprimaryoperationalresponsibilityforthesystemofinternalcontrols.WiththeGroup’srecentbusinessexpansion,theBoard has established an ExecutiveCommittee(ExCo)toprovideassistancein the management of the Group.ComprisingoftheChairman,ManagingDi rector, Cha i rman of the Audi tCommitteeandtheExecutiveDirector,themembersmeetonceamonth toconsider,resolveandmanagestrategicandbusinessissuesfaced.

The Board convened meetings onquarterlybasis inordertomaintainfullandeffectivesupervision.TheManagingDirector,beingtheprincipalchannelofcommunicationbetweentheBoardandthe management , w i l l l ead thepresentationofBoardpapersandprovidecomprehensive explanation onmainissues.Inarrivingatanydecisionsbasedon recommendationsbymanagementand theAuditCommittee,a thoroughdeliberationanddiscussionbytheBoardisaprerequisite.

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TheManagingDirectorhasestablishedseveralmanagement committees toassessandstrengthencontrolswithinthe Group. The formation of thesemanagement committees allows theManagingDirector, togetherwithhisseniormanagementteam;toperiodicallyreviewbusiness units’ performance,identify and manage principal riskseffectively,toreviewtheadequacyandintegr ity of internal controls andmanagement informationsystems,andto develop and to regularly reviewbusiness strategy and operat ingproceduresandpolicies.

The senior management team isresponsiblefor:

1. The conduct andperformanceofbusinessunits;

2. Identification and evaluation ofsignificant risksapplicable to theirrespectiveareaofbusinesstogetherwith thedesign andoperationofsuitableinternalcontrols;

3. Ensuringthataneffectivesystemofinternalcontrolsisinplace;

4. Reviewingof internalaudit reportsandfollowinguponfindings;

5. Meetingdefinedreportingdeadlinesand ensuring compliance withpolicies,proceduresandregulatoryrequirements;

6. Submission,onamonthlybasis,ofmanagement repo r t s to theManagingDirector;

7. Submission,onayearlybasis,ofbudgets to be approved at theoperatingandBoardlevel;and

8. TheawardofmajorcontractsviaaTenderCommittee.

The mon i t o r i ng and r ev i ew ingarrangementsinplaceensuretimelyandrelevant twoway communication ofinformation,andtheBoardbelievesthatthispromotesadynamicandeffectivecontrolstructure.

Allemployeesarealsorequiredtoabidebyacodeofethicswhichdefine theethical standards and professionalconductatwork.Furthermore, learningand development programmes areestablishedtoensureallstaffiskeptuptodatewiththenecessarycompetenciestocarryouttheirresponsibilitiestowardsachievingtheGroup’sobjectives.

Organisational Structure

TheBoardhasimplementedadivisionalstructurefortheGroup.Clearlydefinedlinesofresponsibilityandauthoritylimitsatvariousmanagementlevelsprovideadocumented and auditable trail ofaccountability.Inaddition,theGrouphasvarioussupport functionscomprisingsecretarial,administration, legal,humanresource, supply chainmanagement,finance, strategic management andt ransformat ion , and in format iontechnologywhicharecentralised.ThisenhancestheGroup’sabilitytoachieveitsstrategicandoperationalobjectivesandmanageitssignificantrisks.

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StatementonInternalControl

Whistle-Blowing

TheGrouphasinplaceawhistleblowingpolicywhichprovidesemployeeswithwell-defined and accessible channelswithin theGroup, throughwhich theymay,inconfidence,raiseconcernsaboutpossibleimproprieties.Thisarrangementfacilitatesindependentinvestigationsforappropriateresolutions.

MONITORING AND REVIEW OF THE ADEQUACY AND INTEGRITY OF THE SYSTEM OF INTERNAL CONTROL

Theprocessesadoptedtomonitorandreviewtheeffectivenessofthesystemofinternalcontrolinclude:

• Management representation to theBoardbytheManagingDirectoronthecontrolenvironmentoftheGroupandhighlightofanyrelatedissues.

• Riskmanagement reporting to theBoardthroughtheAuditCommitteeontheriskprofilesoftheGroupandthe progress of action plans tomanageandmitigatetherisks.

• ReportofinternalcontrolreviewsbytheinternalauditfunctiontotheAuditCommitteeonaquarterlybasis.TheChairmanof theAuditCommitteeprovidestheBoardwithareportofallmeetingsoftheAuditCommittee.

INTERNAL AUDIT FUNCTION

TheinternalauditfunctionisprovidedbyGroup Internal Audit from BousteadHoldingsBerhad tosupport theAuditCommitteeandtheBoard inevaluatingand improving the riskmanagement,controlandgovernanceprocessesoftheGroup.The total cost incurred for theGroup’sinternalauditactivitiesinrespectof the financial year is approximatelyRM235,000.

CONCLUSION

TheeffectivenessoftheGroup’ssystemof internalcontrolswillcontinue tobereviewed and updated by the BoardthroughtheAuditCommitteeinlinewithchanges in theoperatingenvironment.TheBoardisoftheviewthatthecurrentsystemof internalcontrols is inplacethroughout theGroupandsufficient tosafeguardtheGroup’sinterests.

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AdditionalComplianceInformation

SANCTIONS AND /OR PENALTIES Therewerenopublicsanctionsand/orpenaltiesimposedontheCompanyandi t s Subs id i a r i es , D i rec to rs andmanagementbyanyregulatorybodiesduring the financial year ended 31December2011.

NON-AUDIT FEESThere isnonon-audit feespaid to theexternalauditorsbytheGroupandbytheCompanyforthefinancialyear.

SHARE BUY-BACKSTheCompanydidnotmakeanysharebuy-backduringthefinancialyear.

OPTIONS AND WARRANTSNooptionsandwarrantswereexercisedduringthefinancialyear.

AMERICAN DEPOSITORY RECEIPT (“ADR”) OR GLOBAL DEPOSITORY RECEIPT (“GDR”)TheCompanydidnotsponsoranyADRorGDRprogrammeduringthefinancialyear.

VARIATION IN RESULTSTherewasnomaterialvariationbetweentheauditedresultsforthefinancialyearended 31 December 2011 and theunauditedresultspreviouslyreleasedforthefinancialquarterended31December2011.

PROFIT GUARANTEEThe Company d id not make anyarrangementduring the financialyearwhichrequiresprofitguarantee.

MATERIAL CONTRACTS TherewerenomaterialcontractsenteredintobytheCompanyanditssubsidiarycompanies, involving Directors andsubstantial shareholders during thefinancialyear.

R E C U R R E N T R E L AT E D PA RTY TRANSACTIONS AttheAnnualGeneralMeetingheldon6April 2011, the Company obtained aShareholders’Mandate to allow theGroup toenter into recurrent relatedpartytransactionsofarevenueortradingnature.

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AdditionalComplianceInformation

Related Party

BousteadNavalShipyardSdn.Bhd.

Interested Director/ Interested Major Shareholder

TanSriDato’CheLodinBinWokKamaruddin

TanSriDato’SeriAhmadRamliBinHajiMohdNor

DatukAzzatBinKamaludin

BousteadHoldingsBerhad

LembagaTabungAngkatanTentera

Nature of Transaction

Provisionofshipbuilding,shiprepairworksandprovisionofrelatedservicesbyBousteadPenangShipyardSdn.Bhd.

ProvisionofshiprepairworksandrelatedservicesbyBHICNavaltechSdn.Bhd.

ProvisionofshiprepairworksandrelatedservicesbyBHICElectronicsandTechnologiesSdn.Bhd.

ProvisionofshiprepairworksandrelatedservicesbyBHICDefenceTechservicesSdn.Bhd.

ProvisionofshiprepairworksandrelatedservicesbyAtlasDefenceTechnologySdn.Bhd.

Saleofequipment&machineryforshiprelatedactivitiesbyDominionDefenceandIndustriesSdn.Bhd.

ProvisionofshiprepairworksandrelatedservicesbyBHICBoforsAsiaSdn.Bhd.

ProvisionofshiprepairworksandprovisionofrelatedservicesfromContravesAdvancedDevicesSdn.Bhd.

Value ofTransactionRM’000

91,858

4,580

23,649

1,172

1,791

13,832

1,333

5,277

InaccordancewithSection3.1.5ofPracticeNote12of theBursaMalaysiaSecuritiesBerhadListingRequirements,thedetailsofrecurrentrelatedpartytransactionsconductedduringthefinancialyearended31December2011pursuanttotheShareholders’Mandatearedisclosedasfollows:

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Directors’ report 66

Statement by directors 72

Statutory declaration 72

Independent auditors’ report 73

Income statements 75

Statements of comprehensive income 76

Statements of financial position 77

Statements of changes in equity 79

Statements of cash flows 81

Notes to the financial statements 84

fINaNcIal StatemeNtS

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Director’s Report

the directors have pleasure in presenting their report together with the audited financial statements of the Group and of the company for the financial year ended 31 December 2011.

PrinciPal activities

the principal activity of the company is investment holding.

the principal activities of the subsidiaries are described in Note 13 to the financial statements.

there have been no significant changes in the nature of the principal activities of the company and its subsidiaries during the year other than as disclosed in Note 13 to the financial statements.

Financial results

Group company rM’000 rM’000

Profit for the year 18,458 20,776

attributable to: Shareholders of the company 12,782 20,776 Non-controlling interests 5,676 –

18,458 20,776

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.

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dividends

the amount of dividends paid by the company since 31 December 2010 were as follows:

rM’000

In respect of the financial year ended 31 December 2011:

Single-tier first interim dividend of 6.5%, on 248,458,000 ordinary shares, declared on 21 february 2011 and paid on 24 march 2011 16,150

the directors do not propose the payment of any final dividend for the current financial year.

On 23 february 2012, the directors have declared a single-tier first interim dividend of 6.0% per share in respect of the financial year ending 31 December 2012 amounting to Rm14,907,000. the financial statements of the current year do not reflect this interim dividend which will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December 2012.

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:

tan Sri Dato’ che lodin Bin Wok Kamaruddin laksamana madya tan Sri Dato’ Seri ahmad Ramli Bin Haji mohd Nor (B) Datuk azzat Bin Kamaludin David William Berry Dato’ Ishak Bin Osman abd malik Bin a Rahman

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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.

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 7 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 35 to the financial statements.

directors’ interests

according to the register of directors’ shareholdings, the interests 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 rM1.00 each 1.1.2011 bought sold 31.12.2011

the company direct interest: tan Sri Dato’ che lodin Bin Wok Kamaruddin 2,000,000 – – 2,000,000laksamana madya tan Sri Dato’ Seri ahmad Ramli Bin Haji mohd Nor (B) 2,002,100 – – 2,002,100 Datuk azzat Bin Kamaludin 495,300 – – 495,300 abd malik Bin a Rahman 3,000 – – 3,000 Dato’ Ishak Bin Osman 10,000 – – 10,000

indirect interest:laksamana madya tan Sri Dato’ Seri ahmad Ramli Bin Haji mohd Nor (B) 11,200 – – 11,200 Dato’ Ishak Bin Osman 20 – – 20 abd malik Bin a Rahman 1,000 – – 1,000

Director’s Report

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directors’ interests (cont’d.)

number of ordinary shares of rM0.50 each 1.1.2011 bought sold 31.12.2011

immediate holding company boustead Holdings berhad direct interest:tan Sri Dato’ che lodin Bin Wok Kamaruddin 26,122,599 – (111,000) 26,011,599 Datuk azzat Bin Kamaludin 40,000 – – 40,000

number of ordinary shares of rM1.00 each 1.1.2011 bought sold 31.12.2011

related corporations Pharmaniaga berhad direct interest: tan Sri Dato’ che lodin Bin Wok Kamaruddin – 3,184,538 – 3,184,538 laksamana madya tan Sri Dato’ Seri ahmad Ramli Bin Haji mohd Nor (B) – 50,000 – 50,000 Datuk azzat Bin Kamaludin – 3,000 – 3,000

boustead Petroleum sdn. bhd. direct interest: tan Sri Dato’ che lodin Bin Wok Kamaruddin 5,916,465 – – 5,916,465

affin Holdings berhad direct interest: tan Sri Dato’ che lodin Bin Wok Kamaruddin 808,714 – – 808,714 Datuk azzat Bin Kamaludin 110,000 – – 110,000

number of redeemable preference shares of rM1.00 each 1.1.2011 bought sold 31.12.2011

related corporation boustead Petroleum sdn. bhd. direct interest: tan Sri Dato’ che lodin Bin Wok Kamaruddin 50 – – 50

None of the other director in office at the end of the financial year had any interest in shares in the company or its related corporations during the financial year.

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Director’s Report

directors’ interests (cont’d.)

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 statements of comprehensive income and statements of financial position 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.

(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 in the financial statements of the Group and of the company 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, 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.

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otHer statutory inForMation (cont’d.)

(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 as and when they fall due; and

(ii) the results of the operations of the Group and of the company for the financial year ended 31 December 2011 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 event

Significant event is as disclosed in Note 37 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 2 march 2012.

laksamana Madya tan sri dato’ seri ahmad ramli datuk azzat bin Kamaludin bin Haji Mohd nor (b)

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Statement by DirectorsPursuant to section 169(15) of the companies act, 1965

Statutory DeclarationPursuant to section 169(16) of the companies act, 1965

We, laksamana madya tan Sri Dato’ Seri ahmad Ramli Bin Haji mohd Nor (B) and Datuk azzat Bin Kamaludin, being two of the directors of Boustead Heavy Industries corporation Berhad do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 75 to 164 are drawn up in accordance with the provisions of the companies act, 1965 and financial Reporting Standards in malaysia so as to give a true and fair view of the financial position of the Group and of the company as at 31 December 2011 and of their financial performance and cash flows of the year then ended.

the information set out in Note 38 to the financial statements have been prepared in accordance with the Guidance on Special matter No.1, Determination of Realised and Unrealised Profits or losses in the context of Disclosure Pursuant to Bursa malaysia Securities Berhad listing Requirements, as issued by the malaysian Institute of accountants.

Signed on behalf of the Board in accordance with a resolution of the directors dated 2 march 2012.

laksamana Madya tan sri dato’ seri ahmad ramli datuk azzat bin Kamaludin bin Haji Mohd nor (b)

I, ahmad Nordin Bin mohammad, being the officer primarily responsible for the financial management of Boustead Heavy Industries corporation Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 75 to 164 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 ahmad Nordin Bin mohammad at Kuala lumpur in the federal territory on 2 march 2012. ahmad nordin bin Mohammad

Before me,

r. vasugi ammal(No. W480)commissioner for OathsKuala lumpur

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Independent auditors’ Report to the members of Boustead Heavy Industries corporation Berhad (Incorporated in malaysia)

rePort on tHe Financial stateMents

We have audited the financial statements of Boustead Heavy Industries corporation Berhad, which comprise the statements of financial position as at 31 December 2011 of the Group and of the company, and the income statements, the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 75 to 163.

Directors’ responsibility for the financial statements

the directors of the company are responsible for the preparation of financial statements that give a true and fair view in accordance with financial Reporting Standards and the companies act, 1965 in malaysia and for such internal controls as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in malaysia. those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. the procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. an audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with financial Reporting Standards and the companies act, 1965 in malaysia so as to give a true and fair view of the financial position of the Group and of the company as at 31 December 2011 and of their financial performance and cash flows for the year then ended.

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Report on other legal and regulatory requirements

In accordance with the requirements of the companies act, 1965 in malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the act to be kept by the company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the act.

(b) We have considered the financial statements and the auditors’ report of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 13 to the financial statements, being financial statements that have been included in the consolidated financial statements that is indicated in Note 13 to the financial statements.

(c) 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.

(d) the auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the act.

otHer Matters

the supplementary information set out in Note 38 to the financial statements page 164 is disclosed to meet the requirements of Bursa malaysia Securities Berhad. the directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special matter No.1, Determination of Realised and Unrealised Profits of losses in context of Disclosure Pursuant to Bursa malaysia Securities Berhad listing Requirements, as issued by the malaysian Institute of accountants (“mIa Guidance”) and the directive of Bursa malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the mIa Guidance and the directive of Bursa malaysia Securities Berhad.

this report is made solely to the members of the company, as a body, in accordance with Section 174 of the companies act, 1965 in malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

ernst & young ahmad Zahirudin bin abdul rahim af: 0039 No. 2607/12/12(J) chartered accountants chartered accountant Kuala lumpur, malaysia 2 march 2012

Independent auditors’ Report to the members of Boustead Heavy Industries corporation Berhad (Incorporated in malaysia)

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Income Statementsfor the year ended 31 December 2011

Group company 2011 2010 2011 2010 note rM’000 Rm’000 rM’000 Rm’000 Revenue 4 544,133 649,797 33,386 6 Operating (costs)/income 5 (528,564) (570,912) (3,246) 18,386 Results from operations 15,569 78,885 30,140 18,392Interest income 1,930 605 – – finance costs 8 (16,290) (6,081) (9,364) (1,974)Share of results of associates 14 491 21,645 – – Profit before taxation 1,700 95,054 20,776 16,418 Income tax benefit/(expense) 16,758 (15,399) – – Profit for the year 18,458 79,655 20,776 16,418

attributable to: Shareholders of the company 12,782 69,806 20,776 16,418 Non-controlling interests 5,676 9,849 – – Profit for the year 18,458 79,655 20,776 16,418

earnings per share attributable to shareholders of the company (sen): Basic, for profit for the year 10 5.14 28.10

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

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Statements of comprehensive Income for the year ended 31 December 2011

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000 Profit for the year 18,458 79,655 20,776 16,418 foreign currency translation 201 286 – – total comprehensive income for the year, net of tax 18,659 79,941 20,776 16,418

attributable to: Shareholders of the company 12,903 69,980 20,776 16,418 Non-controlling interests 5,756 9,961 – – total comprehensive income for the year, net of tax 18,659 79,941 20,776 16,418

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

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Statements of financial Position as at 31 December 2011

Group company 2011 2010 2011 2010 note rM’000 Rm’000 rM’000 Rm’000 assets non-current assets Property, plant and equipment 12 228,119 93,553 – – Deferred tax assets 27 15,703 5,200 – – Investments in subsidiaries 13 – – 288,685 288,685 Investments in associates 14 196,780 196,289 – – Goodwill on consolidation 15 3,849 3,849 – – 444,451 298,891 288,685 288,685 current assets Inventories 16 41,150 33,888 – – trade and other receivables 17 280,681 435,336 232,552 52,922 amounts due from customers on contracts 18 89,836 145,789 – – tax recoverable 11,448 2,335 – – cash and bank balances 19 290,883 100,996 526 34 713,998 718,344 233,078 52,956 total assets 1,158,449 1,017,235 521,763 341,641

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Statements of financial Position as at 31 December 2011 (cont’d.)

Group company 2011 2010 2011 2010 note rM’000 Rm’000 rM’000 Rm’000 equity and liabilities equity attributable to shareholders of the company Share capital 20 248,458 248,458 248,458 248,458 exchange fluctuation reserve 21 (7,809) (7,930) – – Retained earnings 22 186,408 189,776 23,232 18,606 total shareholders’ funds 427,057 430,304 271,690 267,064 Non-controlling interests 48,460 43,283 – – total equity 475,517 473,587 271,690 267,064 non-current liabilities loans and borrowings 24 48,071 33,449 26,686 3,658 Deferred tax liabilities 27 1,409 3,963 – – 49,480 37,412 26,686 3,658 current liabilities amounts due to customers on contracts 18 38,832 29,489 – – Provisions 23 8,327 14,407 288 288 loans and borrowings 24 329,670 170,342 218,995 67,250 trade and other payables 28 254,200 279,451 4,104 3,381 tax payable 2,423 12,547 – – 633,452 506,236 223,387 70,919 total liabilities 682,932 543,648 250,073 74,577 total equity and liabilities 1,158,449 1,017,235 521,763 341,641

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

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Statements of changes in equity for the year ended 31 December 2011

attributable to equity holders of the company non- distributable distributable non- share other retained controlling total capital reserves earnings total interests equity note rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Group

at 1 January 2010 248,458 (8,104) 134,877 375,231 10,390 385,621 total comprehensive income for the year – 174 69,806 69,980 9,961 79,941transactions with owners Issue of shares by subsidiary to non-controlling interests – – – – 1,600 1,600 acquisition of non-controlling interests – – – – (262) (262)acquisition of subsidiary – – – – 21,594 21,594 Dividend on ordinary shares - Interim for the previous year 11 – – (14,907) (14,907) – (14,907) total transaction with owners – – (14,907) (14,907) 22,932 8,025 at 31 december 2010 248,458 (7,930) 189,776 430,304 43,283 473,587 at 1 January 2011 248,458 (7,930) 189,776 430,304 43,283 473,587 total comprehensive income for the year – 121 12,782 12,903 5,756 18,659 transactions with owners Issue of shares by subsidiary to non-controlling interests – – – – 396 396 Partial disposal of interest in a subsidiary – – – – 6 6 Dividend on ordinary shares - Interim 11 – – (16,150) (16,150) (981) (17,131) total transaction with owners – – (16,150) (16,150) (579) (16,729) at 31 december 2011 248,458 (7,809) 186,408 427,057 48,460 475,517

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attributable equity holders of the company distributable share retained total capital earnings equity note rM’000 rM’000 rM’000 company

at 1 January 2010 248,458 17,095 265,553 total comprehensive income for the year – 16,418 16,418 transactions with owners: Dividend on ordinary shares - Interim for the previous year 11 – (14,907) (14,907) – (14,907) (14,907) at 31 december 2010 248,458 18,606 267,064 total comprehensive income for the year – 20,776 20,776 transactions with owners: Dividend on ordinary shares - Interim 11 – (16,150) (16,150) total transaction with owners – (16,150) (16,150) at 31 december 2011 248,458 23,232 271,690

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

Statements of changes in equity for the year ended 31 December 2011 (cont’d.)

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Statements of cash fows for the year ended 31 December 2011

Group company 2011 2010 2011 2010 note rM’000 Rm’000 rM’000 Rm’000 cash flows from operating activities cash receipts from customers 720,092 133,214 – – cash paid to suppliers and employees (515,579) (195,397) (3,239) (1,648)(Payments)/receipts within the group (28) 2,643 (153,318) (46,655) Net cash generated from/(used in) operations 204,485 (59,540) (156,557) (48,303)Interest paid (16,690) (5,041) (8,710) (1,974)Income taxes paid (15,536) (16,578) – – Net cash generated from/(used in) operating activities 172,259 (81,159) (165,267) (50,277) cash flows from investing activities Interest received 1,930 605 7,136 6 Proceeds from disposal of property, plant and equipment 595 40 – – Purchase of property, plant and equipment (138,929) (9,573) – – acquisitions of subsidiaries 13 (a) – (22,845) – – additional investments in subsidiaries 13 (b) (594) (2,406) – – Proceeds from investment by non–controlling interest 396 1,604 – – Dividend from an associate – 2,700 – – - Net cash (used in)/generated from investing activities (136,602) (29,875) 7,136 6

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Statements of cash fows for the year ended 31 December 2011 (cont’d.)

Group company 2011 2010 2011 2010 note rM’000 Rm’000 rM’000 Rm’000 cash flows from financing activities Repayment of borrowings (24,298) (6,966) (5,059) (1,092) Proceeds from term loans/ revolving credits/ banker acceptances 195,327 180,394 179,832 66,000 Dividends paid – by the company (16,150) (14,907) (16,150) (14,907)– by subsidiary to non-controlling interests (981) – – – Net cash generated from financing activities 153,898 158,521 158,623 50,001

net increase/(decrease) in cash and cash equivalents 189,555 47,487 492 (270)effect of foreign exchange rate changes 251 (239) – – cash and cash equivalents at beginning of year 99,819 52,571 34 304 cash and cash equivalents at end of year 289,625 99,819 526 34

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Group company 2011 2010 2011 2010 note rM’000 Rm’000 rM’000 Rm’000 cash and cash equivalents at end of year comprise: Deposits with licensed banks 19 185,524 77,046 – – cash and bank balances 19 105,359 23,950 526 34 290,883 100,996 526 34 less: Bank overdraft 24 (1,258) (1,177) – – 289,625 99,819 526 34

as disclosed in Note 19 to the financial statements, certain fixed deposits totalling Rm24,223,000 (2010: Rm8,871,000) have been pledged to banks for banking facilities granted to certain subsidiaries and hence, are not available for general use.

the purchase of property, plant and equipment were by way of:

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000 cash 138,929 - - - Hire purchase 335 - - - total additions during the year 12 139,264 - - -

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

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Notes to the financial Statements31 December 2011

1. corPorate inForMation

the company is a public limited liability company, incorporated and domiciled in malaysia, and is listed on the main market of Bursa malaysia Securities Berhad. the registered office of the company is located at 17th floor, menara Boustead, 69, Jalan Raja chulan, 50200 Kuala lumpur.

the principal activity of the company is investment holding.

the principal activities of the subsidiaries are described in Note 13.

there have been no significant changes in the nature of the principal activities of the company and its subsidiaries during the year, other than as disclosed in Note 13. the immediate holding company is Boustead Holdings Berhad, a public company incorporated in malaysia and listed on the main market of Bursa malaysia Securities Berhad. the ultimate holding corporation is lembaga tabung angkatan tentera, a malaysian statutory body established under the tabung angkatan tentera act, 1973.

Related companies refer to companies within the Boustead Holdings Berhad group of companies.

affiliates are companies with common directors and/or shareholders.

2. suMMary oF siGniFicant accountinG Policies 2.1 basis of preparation

the financial statements of the Group and of the company have been prepared under the historical cost convention, unless otherwise indicated in the accounting policies below and comply with the provisions of the companies act, 1965 and financial Reporting Standards (fRSs) in malaysia. at the beginnng of the current financial year, the Group and the company adopted new and revised fRSs which are mandatory for financial periods beginning on or after 1 march 2010, 1 July 2010 and 1 January 2011 as described fully in Note 2.2 to the financial statements.

the financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. the financial statements are presented in Ringgit malaysia (“Rm”) and all values are rounded to the nearest thousand (Rm’000) except when otherwise indicated.

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2 suMMary oF siGniFicant accountinG Policies (cont’d.) 2.2 changes in accounting policies

the accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the Group and the company adopted the following new and amended fRS and Ic Interpretation mandatory for annual financial periods beginning on or after 1 march 2010, 1 July 2010 and 1 January 2011.

• FRS 1: First-time Adoption of Financial Reporting Standards • FRS 3: Business Combinations • FRS 7: Disclosures for First-time Adopters • FRS 127 Consolidated and Separate Financial Statements • Amendments to FRS 1: Additional Exemptions for First-time Adopters • Amendments to FRS 1: Limited Exemptions for First-time Adopters • Amendments to FRS 2: Share-based Payment • Amendments to FRS 2: Group Cash-settled Share-based Payment Transactions • Amendments to FRS 5: Non-current Assets Held for Sale and Discontinued Operations • Amendments to FRS 7: Improving Disclosures about Financial Instruments • Amendments to FRS 132: Classification of Rights Issues • Amendments to FRS 138: Intangible Assets • Amendments to IC Interpretation 9: Reassessment of Embedded Derivatives • IC Interpretation 4: Determining Whether an Arrangement contains a Lease • IC Interpretation 12: Service Concession Arrangements • IC Interpretation 16: Hedges of a Net Investment in a Foreign Operation • IC Interpretation 17: Distributions of Non-cash Assets to Owners • IC Interpretation 18: Transfers of Assets from Customers • Improvements to FRSs issued in 2010

adoption of the above standards and interpretations did not have any significant effect on the financial performance and position of the Group and of the company, except for the following: Revised fRS 3 Business combinations and amendments to fRS 127 consolidated and Separate financial Statements

the revised fRS 3 introduces a number of changes in accounting for business combinations occurring after 1 July 2010. these changes impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results.

the revised fRS 3 continues to apply the acquisition method to business combinations but with some significant changes. all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the statement of comprehensive income. there is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. all acquisition-related costs are expensed.

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2 suMMary oF siGniFicant accountinG Policies (cont’d.) 2.2 changes in accounting policies (cont’d.)

Revised fRS 3 Business combinations and amendments to fRS 127 consolidated and Separate financial Statements (cont’d.)

Under the revised fRS127, minority interest is referred to as non-controlling interest. the amendments to fRS 127 require that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as an equity transaction. therefore, such transactions will no longer give rise to a change in goodwill, nor will they give rise to a gain or loss. further, losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. Prior to 1 January 2011, the allocation of such losses to non-controlling interests would cease when the carrying amount of the non-controlling interests is nil. the subsequent profits attributable to the non-controlling interests would not be added to the carrying amount of the non-controlling interest until all the previous losses have been made good. amendments to fRS 7: Improving Disclosures about financial Instruments

the amended standard requires enhanced disclosure about fair value measurement and liquidity risk. fair value measurements related to items recorded at fair value are to be disclosed by source of inputs using a three level fair value hierarchy (level 1, level 2 and level 3), by class, for all financial instruments recognised at fair value. a reconciliation between the beginning and ending balance for level 3 fair value measurements is required. any significant transfers between levels of the fair value hierarchy and the reasons for those transfers need to be disclosed. the amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management. the fair value measurement disclosures are presented in Note 29(d). the liquidity risk disclosures are not significantly impacted by the amendments and are presented in Note 29(b). Presentation of Segment Information

the Group’s segment information has been presented under three operating segments namely, heavy engineering, manufacturing, and chartering.

Notes to the financial Statements31 December 2011

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2 suMMary oF siGniFicant accountinG Policies (cont’d.) 2.3 standards and interpretations issued but not yet effective

Malaysian Financial reporting standards

On 19 November 2011, the malaysian accounting Standards Board (“maSB”) issued a new maSB approved accounting framework, the malaysian financial Reporting Standards (“mfRS framework”).

the mfRS framework is to be applied by all entities Other than Private entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of mfRS 141 agriculture and Ic Interpretation 15 agreements for construction of Real estate, including its parent, significant investor and venturer.

the Group will be required to prepare financial statements using the mfRS framework in its first mfRS financial statements for the year ending 31 December 2012. In presenting its first mfRS financial statements, the Group will be required to restate the comparative financial statements to amounts reflecting the application of mfRS framework. the majority of the adjustments required on transition will be made, retrospectively, against opening retained profits.

the Group has established a project team to plan and manage the adoption of the mfRS framework.

the Group has not completed its assessment of the financial effects of the differences between financial Reporting Standards and accounting standards under the mfRS framework. accordingly, the consolidated financial performance and financial position as disclosed in these financial statements for the year ended 31 December 2011 could be different if prepared under the mfRS framework.

the Group considers that it is achieving its scheduled milestones and expects to be in a position to fully comply with the requirements of the mfRS framework for the financial year ending 31 December 2012.

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.4 basis of consolidation

the consolidated financial statements comprise the financial statements of the company and its subsidiaries as at and for the year ended 31 December of each year. Interests in associates are equity accounted.

the financial statements of the subsidiaries are prepared for the same reporting period as the company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. the existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls an entity.

In the company’s separate financial statements, investments in subsidiaries are accounted for at cost less any impairment charges. Dividends received from subsidiaries are recorded as a component of revenue in the company’s separate financial statements.

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.

acquisitions of subsidiaries are accounted for using the acquisition method of accounting. the identifiable assets acquired and the liabilities assumed are measured at their fair values at the acquisition date. acquisition costs incurred are expensed and included in administrative expenses. the difference between these fair values and the fair value of the consideration (including the fair value of any pre-existing investment in the acquiree) is goodwill or a discount on acquisition. the accounting policy for goodwill is set out in Note 2.7. Discount on acquisition which represents negative goodwill is recognised immediately as income in profit or loss.

In business combinations achieved in stages, previously held equity interest in the acquiree is remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss. for each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at the acquisition date either at fair value or at the proportionate share of the acquiree’s identifiable net assets.

Notes to the financial Statements31 December 2011

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.4 basis of consolidation (cont’d.)

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to the owners of the company, and are presented separately in the consolidated income statement and within equity in the consolidated statement of financial position, separately from shareholders’ equity. losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.

changes in the Group’s equity interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their respective interests in the subsidiary. any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in shareholders’ equity.

If the Group lose control over a subsidiary, at the date the Group lose control, it:

- Derecognises the assets (including goodwill) and liabilities of the subsidiary at their respective carrying amounts;

- Derecognises the carrying amount of any non-controlling interest; - Derecognises the cumulative translation differences recorded in equity; - Recognises the fair value of the consideration or distribution received; - Recognises the fair value of any investment retained; - Recognises any surplus or deficit in profit or loss; and - Reclassifies the parent’s share of components previously recognised in other

comprehensive income to profit or loss or retained earnings, as appropriate.

2.5 currency conversion

the Group’s consolidated financial statements are presented in Ringgit malaysia (Rm), which is also the functional currency of the company. all transactions are recorded in Ringgit malaysia. each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

(a) Foreign currency transactions

transactions in foreign currencies are measured in the respective functional currencies of the company and its Subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those prevailing at the transaction dates. monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing at the end of the reporting period.

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.5 currency conversion (cont’d.)

(a) Foreign currency transactions (cont’d.)

Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. the foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income. exchange differences arising from such non-monetary items are also recognised directly in other comprehensive income.

(b) consolidated financial statements

for consolidation purposes, the assets and liabilities of foreign operations are translated into Rm at the rate of exchange prevailing at the end of the reporting period and their profit or loss are translated at the exchange rates prevailing at the date of transactions. the exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular operation is recognised in profit or loss.

2.6 Property, plant and equipment

all property, plant and equipment are initially recorded at cost. certain land are subsequently shown at valuation less subsequent depreciation and impairment loss.

the directors have not adopted a policy of regular valuation, and have applied the transitional provisions of IaS 16 (Revised) Property, Plant and equipment which permits those assets to be stated at their prevailing valuations less accumulated depreciation. the valuations were determined by independent professional valuers on the open market basis, and no later valuations were recorded. all other property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment losses.

Notes to the financial Statements31 December 2011

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.6 Property, plant and equipment (cont’d.)

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. the carrying amount of the replaced part is derecognised. all other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

the assets are depreciated on a straight-line basis to write off the cost of the assets to their residual values, over the term of their estimated useful lives as follows:

long term leasehold lands and reclaimed land 74 to 99 years Buildings, jetties, slipways and roads 3% - 10% Plant and machinery 5% - 20% equipment, fittings, renovation and others 7% - 50% Barges and motor vehicles 5% - 25% Vessels 4%

capital work-in-progress consist of assets under construction/installation for intended use as production facilities. the amount is stated at cost and not depreciated until the asset is fully completed and brought into use.

the carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. the residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

an item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised and it is taken directly to retained earnings.

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2 suMMary oF siGniFicant accountinG Policies (cont’d.) 2.7 Goodwill

Goodwill is initially measured at cost. following initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortised, but instead, it is reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired.

for the purpose of impairment testing, goodwill is allocated to the related cash-generating units (“cGU”) monitored by management. Where the recoverable amount of the cGU is less than its carrying amount including goodwill, an impairment loss is recognised in the profit or loss. an impairment loss recognised for goodwill is not reversed in subsequent periods.

Where goodwill forms part of a cGU and part of the operation within that cGU is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operation disposed of and the portion of the cGU retained.

Goodwill and fair value adjustments arising from the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.5.

2.8 impairment of non-financial assets

the Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

an asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. for the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows cGU.

In assessing value in use, the estimated future cash flows expected to be generated by the asset 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 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.

Notes to the financial Statements31 December 2011

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.8 impairment of non-financial assets (cont’d.)

Impairment losses are recognised in profit or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. a previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. that increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period.

2.9 associates

an associate is defined as a company, not being a subsidiary or an interest in a joint venture, in which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not in control or joint control over those policies.

Investments in associates is accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates is carried in the consolidated statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates, less distribution received and less any impairment in value of individual investments.

the consolidated income statement reflects the share of the associates’ results after tax. Where there has been a change recognised directly in the equity of associates, the Group recognises its share of such changes. Unrealised gains or losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. When the Group’s share of losses exceeds its interest in an associate, the Group does not recognise further losses except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.9 associates (cont’d.)

the most recent available financial statements of associates 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 period. Where necessary, adjustments are made to the financial statements of the associate to ensure consistency of the accounting policies used with those of the Group.

after application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on its investment in its associate. the Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the ‘share of profit of an associate’ in the income statement.

an associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence. Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. In the company’s separate financial statements, investment in associates are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is charged or credited to profit or loss.

2.10 Financial assets

financial assets are recognised when, and only when, the Group and the company become a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. the Group and the company determine the classification of their financial assets at initial recognition, and the category includes loans and receivables. the Group does not have any financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets.

Notes to the financial Statements31 December 2011

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.10 Financial assets (cont’d.)

loans and receivables

financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. the Group’s and the company’s loans and receivables comprise receivables, deposits, cash and bank balances.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current.

a financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

all regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the company commit to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the market place concerned.

2.11 impairment of financial assets

the Group and the company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.

trade and other receivables and other financial assets carried at amortised cost

to determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. for certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.11 impairment of financial assets (cont’d.)

trade and other receivables and other financial assets carried at amortised cost (cont’d.)

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has occurred, the amount of the loss is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. the impairment loss is recognised in profit or loss.

the carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. the amount of reversal is recognised in profit or loss.

2.12 cash and cash equivalents

cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. these also include bank overdrafts that form an integral part of the Group’s cash management.

2.13 construction contracts

Where the outcome of a construction contract 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 the proportion of contract costs incurred for work performed to date to the estimated total contract costs. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable. contract costs are recognised as expense 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.

Notes to the financial Statements31 December 2011

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.13 construction contracts (cont’d.)

contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

When the total of costs incurred on construction contracts 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.

2.14 inventories

Inventories are stated at the lower of cost and net realisable value, cost being principally determined on a weighted average method and includes all incidental costs incurred in acquiring the inventories and bringing them to their present location and condition.

the cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and an appropriate proportion of production overheads. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.

2.15 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

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2 suMMary oF siGniFicant accountinG Policies (cont’d.) 2.16 Financial liabilities

financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provision of the financial instrument. the Group determines the classification of financial liabilities at initial recognition.

a financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. Other financial liabilities

the Group’s and the company’s other financial liabilities include trade payables, other payables and loans and borrowings.

trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

for other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

2.17 borrowing costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

all other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the company incurred in connection with the borrowing of funds.

Notes to the financial Statements31 December 2011

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2 suMMary oF siGniFicant accountinG Policies (cont’d.) 2.18 employee benefits

Short term benefits such as wages, salaries, bonuses and social security contributions are recognised as expenses in the period in which the associated services are rendered by employees of the Group. 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. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

as required by law, the Group and the company make contributions to the employees Provident fund in malaysia. Some of the Group’s foreign subsidiaries make contributions to their respective countries’ statutory pension schemes. Such contributions are recognised as an expense in the period in which the related service is performed. the Group pays termination benefits in cases of termination of employment. termination benefits are recognised as a liability and an expense when the Group has a detailed formal plan for the termination and is without realistic possibility of withdrawal.

2.19 leases (a) Finance lease

a lease is recognised as a finance lease if it transfers substantially to the Group all risks and rewards of ownership. finance leases are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. any initial direct costs are also added to the amount capitalised. lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. finance charges are charged to profit or loss. contingent rents, if any, are charged as expenses in the periods in which they are incurred.

leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.19 leases (cont’d.) (b) operating lease

leases of assets under which substantial risks and rewards incidental to ownership are retained by the lessor are classified as operating leases.

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. the aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

2.20 revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable. the following specific revenue recognition criteria must also be met before revenue is recognised.

(a) sale of goods

Revenue from sale of goods and services is recognised upon transfer of significant risks and rewards of ownership to the buyer and when the goods and services are delivered.

(b) rendering of services

Revenue from rendering of services are recognised as and when the services are rendered.

(c) construction contracts

contract revenues and profits on long term construction contracts are accounted for under the accounting policy disclosed in Note 2.13.

(d) interest income

Interest income is recognised on an accrual basis using the effective interest method.

Notes to the financial Statements31 December 2011

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.20 revenue (cont’d.)

(e) dividend income

Dividend income is recognised in the income statement as and when declared or right to receive payment is established.

(f) chartering income

chartering income represents the time charter equivalent of income from its various ship chartering activities. the revenue is recognised on a time proportion basis.

2.21 income taxes

Income tax recognised in 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 year and is measured using the tax rates that have been enacted or substantively enacted by the reporting date. current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

- where deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.21 income taxes (cont’d.)

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

– where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

– in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

the carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Notes to the financial Statements31 December 2011

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2 suMMary oF siGniFicant accountinG Policies (cont’d.)

2.22 segment reporting

for management purposes, the Group is organised into operating segments based on their activities, products and services which are independently managed by the segment managers responsible for the performance of the respective segments under their charge. the respective segment managers report directly to the Group’s chief operating decision maker who regularly reviews the segment results in order to allocate resources to the segments and to assess the segment performance. additional disclosures on each of these segments are shown in Note 31.

2.23 share capital and share issuance expenses

an equity instrument is any contract that evidences a residual interest in the assets of the Group and the company after deducting all of its liabilities. Ordinary shares are equity instruments.

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period that they are declared. the attributable incremental transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax.

3. siGniFicant accountinG estiMates and JudGeMents

the preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. the key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) 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 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 could 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.

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3. siGniFicant accountinG estiMates and JudGeMents (cont’d.) (ii) construction contracts

When the outcome of long term contract can be determined reliably, the Group recognises construction revenue and costs 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 costs. In making these judgements, the Group evaluates by relying on past experience and the work of internal specialists.

the Group records the unapproved variation orders as and when it is probable that the customer will approve the variation order and the amount of revenue arising from the variation order can be measured reliably.

(iii) 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 determinations are made.

(iv) deferred tax assets

Deferred tax assets are recognised for all unused tax losses, unused tax credits and unabsorbed capital allowances to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

assumptions about generation of future taxable profits depend on management’s estimates of future cash flows. these depend on estimates of future production and sales volume, operating costs, capital expenditure, dividends and other capital management transactions. Judgement is also required about application of income tax legislation. these judgements and assumptions are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the statement of financial position and the amount of unrecognised tax losses and unrecognised temporary differences.

Notes to the financial Statements31 December 2011

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3. siGniFicant accountinG estiMates and JudGeMents (cont’d.) (iv) deferred tax assets (cont’d.)

as disclosed in Note 27, the total carrying value of recognised tax losses, tax credits and capital allowances of the Group was Rm14,294,000 (2010: Rm1,237,000) and the unrecognised tax losses, tax credit and capital allowances of the Group was Rm7,451,000 (2010: Rm20,595,000).

(v) Provision for warranty

the Group recognises provision for warranty for the goods sold to customer. the provision for warranty is made in respect of potential reworks or replacement of defective products sold to an end customer. the provision is made based on the management’s best estimate on past experience of the expected level of defects and their associated remediation costs to customer.

(vi) impairment of goodwill

Goodwill is tested for impairment annually and at other times when such indicators exist. this requires an estimation of the value in use of the cash-generating units to which goodwill is allocated.

When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. further details of the carrying value, the key assumptions applied in the impairment assessment of goodwill is given in Note 15.

(vii) impairment of loans and receivables

the Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. to determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtors and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. the carrying amount of the Group’s loans and receivables at the reporting date is disclosed in Note 17.

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4. revenue Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Heavy engineering contracts 320,298 418,315 – – Rendering of services 137,135 171,758 – – manufacturing 69,921 27,732 – – Sale of goods 15,057 31,986 – – chartering income 963 – – – Interest income 169 6 7,136 6 Dividend income – – 26,250 – Others 590 – – –

544,133 649,797 33,386 6

5. oPeratinG costs/(incoMe) Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Raw materials and consumables 40,493 120,384 – – construction contract costs (Note 18) 318,796 327,556 – – changes in inventories of finished goods and work in progress (298) (4,209) – – finished goods and work in progress purchases 43,901 25,818 – – employee benefits expense (Note 6) 82,356 68,378 1,185 705 Non-executive directors’ remuneration (Note 7) 212 235 212 235 Depreciation of property, plant and equipment (Note 12) 9,470 3,816 – – Gain on disposal of property, plant and equipment (145) (40) – – Property, plant and equipment written off 12 – – – Waiver of debts from subsidiaries – – – (20,460)Reversal provision for liquidated accertained damages (Note 23) – (2,148) – –Provision for liquidated ascertained damages (Note 23) 7,133 – – –Other operating costs 26,634 31,122 1,849 1,134

528,564 570,912 3,246 (18,386)

Notes to the financial Statements31 December 2011

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5. oPeratinG costs/(incoMe) (cont’d.) Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Other operating costs include: auditors’ remuneration: auditors of the company Statutory audit – current year 345 314 90 70 – underprovision in prior year – 12 – – Other auditors Statutory audit – current year 170 144 – – – underprovision in prior year 10 – – – Gain on disposal of investment – (1) – – Inventories written down 774 2,602 – – Net (gain)/loss on foreign exchange: – realised (392) 516 146 – – unrealised 1,449 5,820 356 – Net impairment of receivables: – third parties 1,427 733 – – Operating leases: – minimum lease payments for land and buildings 2,321 2,931 – – – minimum lease payments for plant and equipment 1,947 4,667 – – Provision for warranty (Note 23) 660 1,398 – – Reversal of provision for warranty (Note 23) (2,584) (278) – –Receivables written off – 31 – – Rental income from: – shipyard (300) (479) – –

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6. eMPloyee beneFits exPense Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Wages and salaries 59,844 49,021 700 371 Social security contribution 1,030 740 4 5Defined contribution plan 6,584 5,724 108 115 Others 14,898 12,893 373 214

82,356 68,378 1,185 705

Included in employee benefits expense of the Group and of the company are executive directors’ remuneration amounting to Rm1,279,000 (2010: Rm326,000) and Rm196,000 (2010: Rm109,000), respectively as further disclosed in Note 7.

7. directors’ reMuneration

the details of remuneration receivable by directors of the company during the year are as follows:

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

executive directors’ remuneration (Note 6): fees 180 96 180 96 Salary 945 161 – – allowances 16 13 16 13 Bonus 77 44 – – Defined contribution plan 61 12 – –

1,279 326 196 109

Notes to the financial Statements31 December 2011

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7. directors’ reMuneration (cont’d.) Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Non-executive directors’ remuneration (Note 5): fees 180 192 180 192 allowances 32 43 32 43

212 235 212 235

total directors’ remuneration (Note 35(b)) 1,491 561 408 344

the number of directors of the company whose total remuneration during the financial year fell within the following bands is analysed below:

2011 2010

executive directors: Rm50,001 – Rm100,000 1 1 Rm251,001 – Rm300,000 – 1 Rm300,001 – Rm350,000 1 – Rm850,001 – Rm900,000 1 – Non-executive directors:Rm50,001 – Rm100,000 3 4

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8. Finance costs Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Interest expense on: term loans 2,408 1,366 642 275 Hire purchase and finance lease liabilities 14 4 – – Bankers’ acceptance – 44 – – Revolving credits 13,745 4,530 8,607 1,699Others 11,296 137 115 –

27,463 6,081 9,364 1,974less: Interest capitalised in capital work–in–progress (Note 12 (f)) (11,173) – – –

finance cost recognised in the income statement 16,290 6,081 9,364 1,974

Notes to the financial Statements31 December 2011

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9. incoMe tax (beneFit)/exPense major components of income tax expenses

the major components of income tax expense for the years ended 31 December 2011 and 2010 are:

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

statement of comprehensive income: current income tax: malaysian income tax 6,592 19,178 – –

Overprovision in prior years: malaysian income tax (10,320) (1,808) – –

total income tax (3,728) 17,370 – –

Deferred tax (Note 27): Relating to origination and reversal of temporary differences (12,763) (1,971) – – Overprovision in prior years (267) – – –

total deferred tax (13,030) (1,971) – –

Income tax (benefit)/expense recognised in profit or loss (16,758) 15,399 – –

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9. incoMe tax (beneFit)/exPense (cont’d.) Reconciliation between tax expense and accounting profit

the reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the years ended 31 December 2011 and 2010 are as follows:

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Profit before taxation 1,700 95,054 20,776 16,418

taxation at malaysian statutory tax rate of 25% (2010: 25%) 425 23,764 5,194 4,105 expenses not deductible for tax purposes 8,225 2,306 1,369 1,010 Income not subject to tax (11,412) (216) (6,563) (5,115)Benefits from previously unrecognised tax losses and capital allowances (3,286) (4,861) – – Share of results of associates (123) (5,411) – – Deferred tax assets not recognised in respect of current year’s tax losses and unabsorbed capital allowances – 1,625 – – Overprovision of tax expense in prior years (10,320) (1,808) Overprovision of deferred tax expense in prior years (267) – – –

Income tax (benefit)/expense recognised in profit or loss (16,758) 15,399 – –

Domestic current income tax is calculated at the statutory tax rate of 25% (2010: 25%) of the estimated assessable profit for the year. the corporate tax rate applicable to the Ghana subsidiary of the Group is based on statutory tax rate of 25% (2010: 25%).

During the financial year, certain subsidiaries were granted an exemption in respect of its statutory derived income from maintenance and in-service support activities of the vessels.

Notes to the financial Statements31 December 2011

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10. earninGs Per sHare

Basic earnings per share amount is calculated by dividing profit for the year attributable to ordinary equity holders of the company by weighted average number of ordinary shares in issue during the financial year:

Group 2011 2010 rM’000 Rm’000

Profit for the year attributable to shareholders of the company 12,782 69,806

‘000 ‘000

Weighted average number of ordinary shares in issue 248,458 248,458

sen sen

Basic earnings per share for: Profit from operations attributable to shareholders of the company 5.14 28.10

11. dividends Gross dividend dividend amount per ordinary share 2011 2010 2011 2010 rM’000 Rm’000 sen sen

in respect of financial year 2010:Single-tier first interim dividend of 6% paid on 8 april 2010 – 14,907 – 6.0

in respect of financial year 2011:Single-tier first interim dividend of 6.5% paid on 24 march 2011 16,150 – 6.5 –

On 23 february 2012, the directors have declared a single-tier first interim dividend of 6% per share in respect of the financial year ending 31 December 2011 amounting to Rm14,907,000. the financial statements of the current year do not reflect this interim dividend which will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December 2011.

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12. ProPerty, Plant and eQuiPMent

equipment, fittings, renovation, motor capital land and Plant and vehicles and work-in- buildings* machinery others** progress total rM’000 rM’000 rM’000 rM’000 rM’000

Group

cost at 31 december 2009 and 1 January 2010 118,318 20,137 29,877 1,814 170,146 additions 28 2,887 6,612 46 9,573 acquisition of subsidiary 10,940 15,872 23,696 – 50,508 Disposals – – (137) – (137)Written off (4,812) – – – (4,812)Reclassification – 942 – (942) –

at 31 december 2010 124,474 39,838 60,048 918 225,278 additions 89 3,283 50,369 85,523 139,264 Disposals – – (1,278) – (1,278)Written off – – (119) – (119)Reclassification – 10 219 (229) – classification from construction work-in-progress – – – 7,024 7,024capitalisation in construction work-in-progress – (500) (407) – (907)

at 31 december 2011 124,563 42,631 108,832 93,236 369,262

Notes to the financial Statements31 December 2011

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12. ProPerty, Plant and eQuiPMent (cont’d.)

equipment, fittings, renovation, motor capital land and Plant and vehicles and work-in- buildings* machinery others** progress total rM’000 rM’000 rM’000 rM’000 rM’000

Group (cont’d.)

accumulated depreciation and impairment at 31 december 2009 and 1 January 2010 71,228 4,954 17,078 – 93,260Depreciation charge for the year: 2,532 1,808 3,884 – 8,224– Recognised in profit or loss (Note 5) 955 890 1,971 – 3,816– capitalised in construction costs (Note 18) 1,577 918 1,913 – 4,408

acquisition of a subsidiary 4,294 11,897 19,016 – 35,207 Disposals – – (137) – (137)Written off (4,812) – – – (4,812)exchange differences (3) (7) (7) – (17)

at 31 december 2010 73,239 18,652 39,834 – 131,725 Depreciation charge for the year: 2,651 2,766 4,965 – 10,382 – Recognised in profit or loss (Note 5) 2,442 2,616 4,412 – 9,470 – capitalised in construction costs (Note 18) 209 150 553 – 912

Disposals – – (828) – (828)Written off – – (107) – (107)exchange differences (5) (14) (10) – (29)

at 31 december 2011 75,885 21,404 43,854 – 141,143

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12. ProPerty, Plant and eQuiPMent (cont’d.)

equipment, fittings, renovation, motor capital land and Plant and vehicles and work-in- buildings* machinery others** progress total rM’000 rM’000 rM’000 rM’000 rM’000

Group (cont’d.)

representing: accumulated depreciation 39,051 21,404 43,854 – 104,309 accumulated impairment 36,834 – – – 36,834

at 31 december 2011 75,885 21,404 43,854 – 141,143

net carrying amount at 31 december 2011 48,678 21,227 64,978 93,236 228,119

at 31 December 2010 51,235 21,186 20,214 918 93,553

Notes to the financial Statements31 December 2011

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12. ProPerty, Plant and eQuiPMent (cont’d.)

* land and buildings of the Group comprise: long term buildings, leasehold yard jetties, and reclaimed develop- slipways land ment and roads total rM’000 rM’000 rM’000 rM’000

Group

cost

at 31 december 2009 and 1 January 2010 15,951 59,464 42,903 118,318 additions – – 28 28 acquisition of a subsidiary 1,281 – 9,659 10,940 Written off – (4,812) – (4,812)

at 31 december 2010 17,232 54,652 52,590 124,474 additions – – 89 89

at 31 december 2011 17,232 54,652 52,679 124,563

accumulated depreciation and impairment

at 31 december 2009 and 1 January 2010 3,753 44,946 22,529 71,228 Depreciation charge for the year: 188 1,074 1,270 2,532

– Recognised in profit or loss 188 599 168 955 – capitalised in construction costs – 475 1,102 1,577

acquisition of a subsidiary 89 – 4,205 4,294 Written off – (4,812) – (4,812)exchange differences – – (3) (3)

at 31 december 2010 4,030 41,208 28,001 73,239 Depreciation charge for the year: 201 1,075 1,375 2,651

– Recognised in profit or loss 201 970 1,271 2,442 – capitalised in construction costs – 105 104 209

exchange differences – – (5) (5)

at 31 december 2011 4,231 42,283 29,371 75,885

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12. ProPerty, Plant and eQuiPMent (cont’d.)

* land and buildings of the Group comprise:

buildings, long term jetties, leasehold yard slipways and reclaimed develop- and land ment roads total rM’000 rM’000 rM’000 rM’000

Group (cont’d.)

cost (cont’d.)

representing: accumulated depreciation 3,263 14,015 21,773 39,051 accumulated impairment 968 28,268 7,598 36,834

at 31 december 2011 4,231 42,283 29,371 75,885

net carrying amount at 31 december 2011 13,001 12,369 23,308 48,678

at 31 December 2010 13,202 13,444 24,589 51,235

Notes to the financial Statements31 December 2011

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12. ProPerty, Plant and eQuiPMent (cont’d.)

** equipment, fittings, renovation, motor vehicles and others of the Group comprise:

equipment, fittings, renovation, vehicles vessels total

rM’000 rM’000 rM’000

Group (cont’d.)

cost

at 31 december 2009 and 1 January 2010 29,877 – 29,877 additions 6,612 – 6,612 acquisition of a subsidiary 23,696 – 23,696 Disposal (137) – (137)

at 31 december 2010 60,048 – 60,048 additions 3,848 46,521 50,369 Disposal (1,278) – (1,278)Written off (119) – (119)Reclassification 219 – 219 capitalisation in construction work–in–progress (407) – (407)

at 31 december 2011 62,311 46,521 108,832

accumulated depreciation and impairment

at 31 december 2009 and 1 January 2010 17,078 – 17,078 Depreciation charge for the year: 3,884 – 3,884

– Recognised in profit or loss 1,971 – 1,971 – capitalised in construction costs 1,913 – 1,913

acquisition of a subsidiary 19,016 – 19,016 Disposal (137) – (137)exchange differences (7) – (7)

at 31 december 2010 39,834 – 39,834

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12. ProPerty, Plant and eQuiPMent (cont’d.)

** equipment, fittings, renovation, motor vehicles and others of the Group comprise:

equipment, fittings, renovation, vehicles vessels total

rM’000 rM’000 rM’000

Group (cont’d.)

accumulated depreciation and impairment (cont’d.) at 31 december 2010 39,834 – 39,834 Depreciation charge for the year: 4,715 250 4,965

– Recognised in profit or loss 4,162 250 4,412 – capitalised in construction costs 553 – 553

Disposal (828) – (828)Written off (107) – (107)exchange differences (10) – (10)

at 31 december 2011 43,604 250 43,854

net carrying amount

at 31 december 2011 18,707 46,271 64,978

at 31 December 2010 20,214 – 20,214

(a) the net carrying amounts of property, plant and equipment held under hire purchase and finance lease arrangements are as follows:

Group 2011 2010 rM’000 Rm’000

motor vehicles 370 108

Details of the terms and conditions of the hire purchase and finance lease arrangements facility are disclosed in Note 26.

Notes to the financial Statements31 December 2011

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12. ProPerty, Plant and eQuiPMent (cont’d.) (b) Included in the buildings, jetties, slipways and roads are certain properties with net book value

of Ghana cedi 1,887,872 equivalent to Rm7,134,636 (2010: Ghana cedi 1,905,670 equivalent to Rm7,169,975) acquired from the Divestiture Implementation committee (“DIc”) under a sale and purchase agreement dated 8 November 1996. title to these properties remain to be perfected by the subsidiary at the reporting date.

(c) long term reclaimed land and long term leasehold land of the Group have not been revalued since they were revalued in 2006. the directors have not adopted a policy of regular revaluations of such assets and no later valuation has been recorded. as permitted under the transitional provisions of IaS16 (Revised) Property, Plant and equipment, these assets continue to be stated at their 2006 valuation less accumulated depreciation.

(d) equipments with carrying value of Rm8,600,000 (2010: Rm9,300,000) are secured against the term loan as disclosed in Note 24(a).

(e) completed and incompleted vessels with total carrying value of Rm92,261,000 (2010: Nil) are secured against the revolving credit and term loan as disclosed in Note 24 (b).

(f) Included in the capital work-in-progress is interest expense amounting to Rm11,173,000 (2010: Nil) which is being capitalised as disclosed in Note 8.

13. investMents in subsidiaries company 2011 2010 rM’000 Rm’000

Unquoted shares, at cost 581,867 581,867 less: accumulated impairment losses (293,182) (293,182)

288,685 288,685

the cost of shares in a subsidiary of Rm2,636,000 (2010: Rm2,636,000) is pledged to the financial institutions for banking facilities granted to a former corporate shareholder.

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13. investMents in subsidiaries (cont’d.) Details of the subsidiaries, all of which were incorporated in malaysia unless otherwise stated, are as follows: Proportion of ownership interest name of subsidiaries 2011 2010 Principal activities % %

BHIc asset Holdings Sdn. Bhd. 100 100 ceased operations (“BHIc asset”)

Boustead Penang Shipyard Sdn. Bhd. 100 100 Heavy engineering, ship repair (“BP Shipyard”) and shipbuilding, fabrication of steel structures and platforms, marine engineering, oil and gas fabrication, hook up and commissioning

Sedap Development Sdn. Bhd. 100 100 ceased operations Sedap trading Sdn. Bhd. 100 100 Dormant

eagacorp marine Sdn. Bhd. *** – 51 Dormant

BHIc Petroleum Sdn. Bhd. 100 100 Provision of engineering services for oil and gas industry and chartering ships and vesselsHeld by bHic asset:Desa BHIc Sdn. Bhd. 100 100 ceased operations

Held by bP shipyard: PSc tema Shipyard limited 60 60 Heavy engineering, ship repair (Incorporated in the Republic and fabrication of Ghana) * Dominion Defence & Industries 100 100 Supply and services of marine Sdn. Bhd. (“Dominion Defence”) and naval defence related products Perstim Industries Sdn. Bhd. 99.93 99.87 Investment holding

BHIc Defence technologies 100 100 Investment holding Sdn. Bhd. (“BHIc Defence”)

Notes to the financial Statements31 December 2011

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13. investMents in subsidiaries (cont’d.) Details of the subsidiaries, all of which were incorporated in malaysia unless otherwise stated, are as follows: (cont’d.)

Proportion of ownership interest name of subsidiaries 2011 2010 Principal activities % %

Held by bP shipyard: (cont’d.) malaysian Heavy Industry Group 60 60 Investment holding Sdn. Bhd.

BHIc Navaltech Sdn. Bhd. 100 100 In-service support for the maintenance, services and supply of spare parts for vessels Umc engineering Sdn. Bhd. 99.99 99.99 Dormant tenaga PSc Sdn. Bhd. 100 100 Dormant PSc Welding Services Sdn. Bhd. ** 100 100 Dormant PSc marine & Shipping Sdn. Bhd. 100 100 Dormant (“PSc marine”) PSc Shipbuilding and engineering 100 100 Dormant Sdn. Bhd. marine technology Industrial Park 100 100 Dormant Sdn. Bhd. ** PSc-marine technology academy 100 100 Dormant Sdn. Bhd. PSc Srijeluda Sdn. Bhd. ** 100 100 Dormant

marine Venture capital Sdn. Bhd. 100 100 Provision of chartering of ships and vessels PSc miri Sdn. Bhd. 100 100 Provision of chartering of ships and vessels alpha Shanghai (m) Sdn. Bhd. ** 100 100 Dormant

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13. investMents in subsidiaries (cont’d.) Details of the subsidiaries, all of which were incorporated in malaysia unless otherwise stated, are as follows: (cont’d.) Proportion of ownership interest name of subsidiaries 2011 2010 Principal activities % %

Held by dominion defence: Burlington capital Sdn. Bhd.@ 60 60 Dormant

Burlington engineering & construction 60 60 Dormant Sdn. Bhd.@ Burlington Promotions & Publications 100 100 Dormant Sdn. Bhd. Burlington Plantations Sdn. Bhd.@ 100 100 Dormant

Held by bHic defence: BHIc Defence techservices 100 100 Provision for maintenance and Sdn. Bhd. services for arsenal, missiles and other defence related products

atlas Defence technology Sdn. Bhd. 70 70 Supply of electronics and system technology to defence related industry BHIc Bofors asia Sdn. Bhd. 51 51 Providing, supplying and servicing BOfORS weapons systems Naval and Defence communication 100 100 Provision for maintenance and System Sdn. Bhd. services for telecommunication systems BHIc electronics and technologies 100 100 Provision for maintenance and Sdn. Bhd. services for defence weapons and related products Integrated Navigation and Defence 100 100 ceased operations Systems Sdn. Bhd. BHIc aeroServices Sdn. Bhd. 51 100 Dormant (formerly known as PSc-crane

Systems Sdn. Bhd.)

Notes to the financial Statements31 December 2011

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13. investMents in subsidiaries (cont’d.) Details of the subsidiaries, all of which were incorporated in malaysia unless otherwise stated, are as follows: (cont’d.) Proportion of ownership interest name of subsidiaries 2011 2010 Principal activities % %

Held by bHic defence: (cont’d.) Boustead DcNS Naval corporation 60 60 Vessel maintenance Sdn. Bhd. BYO marine Sdn. Bhd. * 51 51 construction of vessels

contraves advanced Devices 51 51 manufacturing of electronic Sdn. Bhd. (“caD”) * products BHIc mSm Sdn. Bhd. (“BHIc mSm”) 60 60 Provision for maintenance and repair of mtU products Held by Psc Marine: Johor Riau ferry Services 100 100 Dormant Sdn. Bhd. ** Held by cad: contraves Sdn. Bhd. * 100 100 Property rental

* audited by firms other than ernst & Young ** In members’ voluntary liquidation *** Struck off by companies commission of malaysia (“ccm”) on 22 July 2010 @ application has been made with ccm for strike off

(a) acquisitions of subsidiaries

In the previous financial year, BHIc Defence a wholly-owned subsidiary of the company had,

(i) on 13 august 2010 acquired 2,550,000 ordinary shares of Rm1.00 each representing a 51% equity interest in contraves advanced Devices Sdn Bhd (“caD”) from Rheinmetall air Defence aG (“RHaD”) for Rm25,900,000. the remaining 49% is retain by RHaD.

(ii) on 5 October 2010, subscribed 6,000 ordinary shares of Rm1.00 each representing a 60%

equity interest in a newly incorporated subsidiary BHIc mSm Sdn Bhd (“BHIc mSm”). BHIc mSm is a joint venture company with mtU Services (malaysia) Sdn Bhd.

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13. investMents in subsidiaries (cont’d.)

(a) acquisitions of subsidiaries (cont’d.)

total cost of business combination of caD

the total cost of the business combination in the previous financial year is as follows:

rM’000

cash paid 25,852 Direct attributable professional fees 469

cost of business combination (Note 15) 26,321

the effect of the acquisition on cash flows is as follows: total cost of business combination (Note 15) 26,321 less: cash and cash equivalents of subsidiary acquired (Note 15) (3,476)

Net cash outflow on acquisition 22,845

the effect of acquisition of caD group on the financial results of the Group in the previous financial year is as follows:–

Group 2010 rM’000

Revenue 27,732 Operating costs (26,082)

Results from operations 1,650 finance cost (22)

Profit before taxation 1,628 taxation (831)

Profit after taxation 797 less: non-controlling interests’ share of profit (390)

Increase in Group’s profit 407

Notes to the financial Statements31 December 2011

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13. investMents in subsidiaries (cont’d.)

(a) acquisitions of subsidiaries (cont’d.)

the effect of acquisition of caD group on the financial position of the Group in the previous financial year is as follows:–

Group 2010 rM’000

Property, plant and equipment 14,984 Inventories 28,667 trade and other receivables 17,679 cash and bank balances 4,093 trade and other payables (18,404)tax payable (170) Deferred tax liabilities (815) Other bank borrowings (1,177)

Net assets as at financial year 44,857 less: non-controlling interest’ share of net assets (21,980)

Increase in Group’s net assets 22,877

(b) additional investments in subsidiaries

the company through its wholly-owned subsidiaries, BP Shipyard and BHIc Defence, subscribed additional equity interest in the following companies by way of cash:

number of shares amount 2011 2010 2011 2010 ’000 ‘000 rM’000 Rm’000

BHIc mSm Sdn. Bhd.* 594 6 594 6 Boustead DcNS Naval corporation – 2,400 – 2,400 Sdn. Bhd.

594 2,406 594 2,406

* the additional equity interest arose pursuant to an issue of shares by BHIc mSm Sdn. Bhd. on a pro-rata basis to its shareholders.

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13. investMents in subsidiaries (cont’d.)

(b) additional investments in subsidiaries (cont’d.)

the Group also subscribed to the additional equity interest in the following companies by way of debt capitalisation:

number of shares amount 2011 2010 2011 2010 ’000 ‘000 rM’000 Rm’000

Perstim Industries Sdn. Bhd. 26,156 - - 26,156 BHIc Defence - 36,479 - 36,479 BHIc electronics and technologies Sdn. Bhd. - 2,320 - 2,320 BP Shipyard - 120,000 - 120,000

26,156 158,799 26,156 158,799

(c) Partial disposal of interest in subsidiary

On 25 april 2011 and 30 October 2011, the company through its wholly-owned subsidiary, BHIc Defence had disposed 49% equity interest in BHIc aeroServices Sdn. Bhd. (formerly known as PSc-crane Systems Sdn. Bhd.) with cash consideration of Rm1,900 to eurocopter malaysia Sdn. Bhd. and Rm3,000 to Prestige Pillar Sdn. Bhd.

14. investMents in associates Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Unquoted shares, at cost 54,840 54,840 1,250 1,250 cumulative share of post acquisition profits 141,449 122,504 – – Share of current year’s post acquisition profits 491 21,645 – –

196,780 198,989 1,250 1,250 less: accumulated impairment losses – – (1,250) (1,250) Dividend paid – (2,700) – –

196,780 196,289 – –

Notes to the financial Statements31 December 2011

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14. investMents in associates (cont’d.)

Details of the associates, all of which were incorporated in malaysia unless otherwise stated, are as follows:

Proportion of ownership interest name of associates 2011 2010 Principal activities % %

Held by the company: tohwa-Sedap food Industry Sdn. Bhd. 50.00 50.00 Under liquidation

Held through the subsidiary: Perstim industries sdn. bhd.:Boustead Naval Shipyard 20.77 20.77 construction, repair andSdn. Bhd. (“BN Shipyard”) maintenance of naval ships, weapons and electronics, design and engineering, fabrication of steel structures and commercial shipbuilding

Held through the subsidiary: bHic defence technologies sdn. bhd.: Pyrotechnical Ordnance malaysia 50.00 – Dormant Sdn. Bhd.

Held through the subsidiary:bP shipyard: Penang Shipbuilding and construction 48.80 48.80 Dormant Holding (thailand) limited (Incorporated in thailand)

Held through the associate: subsidiaries of bn shipyard: Boustead langkawi Shipyard Sdn. Bhd. 20.76 20.74 Repair and maintenance of (formerly known as boats and yachts Wavemaster-langkawi Yacht centre Sdn. Bhd.)

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14. investMents in associates (cont’d.)

Details of the associate, all of which were incorporated in malaysia unless otherwise stated, are as follows (cont’d.):

Proportion of ownership interest name of associates 2011 2010 Principal activities % %

BN Shiprepair Sdn. Bhd. 20.76 20.74 ceased operations

BN It Sdn. Bhd. @ 20.76 20.74 ceased operations

Boustead Yachts Sdn. Bhd. 20.76 20.74 Repair and maintenance of vessels, boats and yachts

asia coins Sdn. Bhd. @ 20.70 20.70 ceased operations

@ application has been made with ccm for strike off

the financial year-end of the above associate are coterminous with that of the Group.

the summarised financial information of the associates are as follows: 2011 2010 rM’000 Rm’000

assets and liabilities current assets 1,432,074 351,912 Non-current assets 341,936 790,001

total assets 1,774,010 1,141,913

current liabilities 1,591,616 912,271 Non-current liabilities 17,675 67,289

total liabilities 1,609,291 979,560

resultsRevenue 505,414 710,984 Profit for the year 2,366 104,362

Notes to the financial Statements31 December 2011

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14. investMents in associates (cont’d.)

On 29 July 2011, BHIc Defence subscribed 1 ordinary share of Rm1.00 each representing a 50% equity interest in a newly incorporated company, Pyrotechnical Ordnance malaysia Sdn. Bhd.

15. Goodwill on consolidation Group 2011 2010 rM’000 Rm’000

arising from consolidation 3,849 3,849

the current and previous year’s goodwill on consolidation arose from the acquisition of 51% equity interest in contraves advanced Devices Sdn. Bhd. (“caD”), in prior year.

the fair values of the identifiable assets and liabilities of caD as at the date of acquisition were:

Fair carrying value amount rM’000 rM’000

Property, plant and equipment 15,301 15,301trade and other receivables 13,818 13,818 Inventories 24,457 24,457 cash and bank balances 3,476 3,476

57,052 57,052

trade and other payables (11,589) (11,589) Provision for taxation (687) (687) Deferred tax liability (714) (714)

(12,990) (12,990)

Net identifiable assets 44,062 44,062

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15. Goodwill on consolidation (cont’d.)

Goodwill arising on acquisition

rM’000

fair value of net identifiable assets 44,062 less: Non-controlling interests (21,590)

Group’s interest in fair value of net identifiable assets 22,472 Goodwill on consolidation 3,849

cost of business combination (Note 13) 26,321

Goodwill is allocated for impairment testing purposes to the individual entity which is also the cash-generating units (“cGU”). the recoverable amount is determined based on a value in use calculation using cash flow projections approved by the entity’s board of directors covering a five-year period. the projections reflect management expectation of revenue growth, operating cost and margins based on their recent experience. Discount rate applied to the cash flow projections are derived from the cGU’s pre-tax weighted average cost of capital plus a reasonable risk premium at the date of assessment of the cGU.

a pre-tax discount rate of 10% and a terminal growth rate of 2% have been applied in the value in use calculations. Based on the sensitivity analysis performed, management believes that no reasonably possible changes in base case key assumptions would cause the carrying values of the cGU to exceed its recoverable amounts.

16. inventories Group 2011 2010 rM’000 Rm’000

at cost consumables 13,339 4,370Work in progress 4,379 4,551 Raw materials 19,127 21,133finished goods 4,305 3,834

41,150 33,888

Notes to the financial Statements31 December 2011

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17. trade and otHer receivables Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

trade receivables third parties 50,643 261,654 – – Due from related parties: affiliates 2,806 651 – – associates 133,219 118,948 – –

186,668 381,253 – –

less: allowance for impairment – third parties (9,263) (8,293) – – – associates (721) (486) – –

(9,984) (8,779) – –

trade receivables, net 176,684 372,474 – –

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17. trade and otHer receivables (cont’d.) Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

other receivables Due from related parties: Subsidiaries – – 224,747 45,120 associates 29 28 – –

29 28 224,747 45,120 Deposits 85,472 42,361 7,786 7,786Prepayments 4,860 874 – – Sundry receivables 14,141 20,119 19 16

104,502 63,382 232,552 52,922

less: allowance for impairment – associates (28) (28) – – – Other receivables (477) (492) – –

(505) (520) – –

Other receivables, net 103,997 62,862 232,552 52,922

total trade and other receivables 280,681 435,336 232,552 52,922

total trade and other receivables 280,681 435,336 232,552 52,922 add: cash and bank balances (Note 19) 290,883 100,996 526 34 less: Prepayment (4,860) (874) – –

total loans and receivables 566,704 535,458 233,078 52,956

Notes to the financial Statements31 December 2011

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17. trade and otHer receivables (cont’d.)

(a) the ageing analysis of the Group’s trade receivables is as follows: Group 2011 2010 rM’000 Rm’000

Neither past due nor impaired 37,554 22,732

1 to 30 days past due not impaired 20,295 24,725 31 to 60 days past due not impaired 16,758 23,610 61 to 90 days past due not impaired 27,467 5,281 91 to 120 days past due not impaired 9,425 224,634 more than 121 days past due not impaired 65,178 71,389

139,123 349,639 Impaired 9,991 8,882

186,668 381,253

the Group has trade receivables amounting to Rm139,123,000 (2010: Rm349,639,000) that are past due at the reporting date but not impaired. the total amount that are past due but not impaired are unsecured in nature.

Receivables that are neither past due nor impaired

trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group.

None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.

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17. trade and otHer receivables (cont’d.) (a) the ageing analysis of the Group’s trade receivables is as follows (cont’d.):

Receivables that are impaired

the Group’s trade receivables that are impaired at the end of the financial year and the movement of the allowance accounts used to record the impairment are as follows:

Group 2011 2010 rM’000 Rm’000

trade receivables-nominal value 9,991 8,882less: allowance for impairment (9,984) (8,779)

7 103

movement in allowance accounts: Group 2011 2010 rM’000 Rm’000

at 1 January 8,779 7,569charge for the year 2,209 738 Reversal of impairment loss (782) (5) foreign exchange differences (222) 277 acquisition of a subsidiary – 200

at 31 December 9,984 8,779

trade receivables that are individually determined to be impaired at end of the financial year relate to debtors that are in significant difficulties and have defaulted on payments. these receivables are not secured by any collateral or credit enhancements.

Notes to the financial Statements31 December 2011

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17. trade and otHer receivables (cont’d.) (b) credit risk

the Group’s primary exposure to credit risk arises through its trade receivables. the Group’s trading terms with its customers are mainly on credit. the credit period is generally for a period of 30 days (2010: 30 days), extending up to 90 days (2010: 90 days) 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.

(c) trade receivables

trade receivables are non-interest bearing.

(d) amounts due from related parties

the related parties balances bear weighted average effective interest rate of 5% per annum (2010: Nil) and are repayable on demand. all related parties receivables are unsecured and are to be settled in cash.

18. aMounts due FroM/(to) custoMers on contracts Group 2011 2010 rM’000 Rm’000

construction contract costs incurred to date 1,171,283 880,219 attributable profits less losses 47,090 38,531

1,218,373 918,750 less: Progress billings (1,167,369) (802,450)

51,004 116,300

amounts due from customers on contracts 89,836 145,789 amounts due to customers on contracts (38,832) (29,489)

51,004 116,300

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18. aMounts due FroM/(to) custoMers on contracts (cont’d.) the costs incurred to date on construction contracts include the following charges made during the financial year:

Group 2011 2010 rM’000 Rm’000

Depreciation of property, plant and equipment (Note 12) 912 4,408 Operating lease: – minimum lease payment for plant and equipment 3,549 3,994 employee benefits expense 13,953 11,312

No interest expenses being capitalised in construction work-in-progress as the borrowings are drawdown for general purpose.

amount of contract revenue and contract costs recognised in the financial year are as follows:

Group 2011 2010 rM’000 Rm’000

contract revenue * 331,338 418,315

construction contract costs (Note 5) 318,796 327,556

* the contract revenue is derived from heavy engineering works and rendering of services.

Notes to the financial Statements31 December 2011

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19. casH and banK balances Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Deposits with licensed banks 185,524 77,046 – – cash on hand and at banks 105,359 23,950 526 34

290,883 100,996 526 34 less: Deposits pledged (24,223) (8,871) – –

266,660 92,125 526 34

Deposits with licensed banks amounting to Rm24,223,000 (2010: Rm8,871,000) are pledged as security for performance guarantee facilities granted to the Group.

Other information on financial risks of cash and bank balances are disclosed in Note 29.

20. sHare caPital number of shares of rM1. each Group and company 2011 2010 2011 2010 ‘000 ‘000 rM’000 Rm’000

authorised: as at 1 January/31 December 500,000 500,000 500,000 500,000

issued and fully paid ordinary shares: as at 1 January/31 December 248,458 248,458 248,458 248,458

the holders of ordinary shares are entitled to receive dividends as and when declared by the company. all ordinary shares carry one vote per share without restrictions and rank equally with regard to the company residual assets.

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21. excHanGe Fluctuation reserve

rM’000

Groupat 1 January 2010 (8,104) foreign currency translation 174

at 31 December 2010 (7,930) foreign currency translation 121

at 31 december 2011 (7,809)

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 Group’s presentation currency. It is also used to record the exchange differences arising from monetary terms which form part of the Group’s net investment in foreign operations, where the monetary item is denominated in either functional currency of the reporting entity or the foreign operation.

22. retained earninGs

Under the single tier system which came into effect from the year of assessment 2008, companies are not required to have tax credits under Section 108 of the Income tax act, 1967 for dividend payment purposes. Under this system, all the company’s retained earnings are distributable by way of dividend and tax on the company’s profit is the final tax and dividend distributed to shareholders will be exempted from tax.

Notes to the financial Statements31 December 2011

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23. Provisions liquidated ascertained directors’ damages/ fee warranties others total rM’000 rM’000 rM’000 rM’000

Group at 1 January 2010 216 1,464 13,683 15,363 additional provision (Note 5) 288 1,398 – 1,686 Reversal of provision (Note 5) – (278) (2,148) (2,426) Utilisation of provision (216) – – (216)

at 31 december 2010 288 2,584 11,535 14,407 additional provision 288 660 7,133 8,081 Reversal of provision (Note 5) – (2,584) – (2,584) Utilisation of provision (288) – (11,289) (11,577)

at 31 december 2011 288 660 7,379 8,327

directors’ fee rM’000

company at 1 January 2010 216 additional provision 288 Utilisation of provision (216)

at 31 december 2010 288 additional provision 288 Utilisation of provision (288)

at 31 december 2011 288

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23. Provisions (cont’d.)

(a) Provision for liquidated ascertained damages

the provision for liquidated ascertained damages is based on the approved contract terms and is computed on the agreed penalty charges per delay multiplied by the number of days delayed.

(b) Provision for warranties

the provision for warranties are made in respect of potential reworks or replacement of defective products sold to an end customer which arose from a batch of production or services rendered to them. the provision is made based on the management’s best estimate on past experience of the expected level of defects and their associated remediation costs to customer.

24. loans and borrowinGs Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

short term borrowings secured: Hire purchase and finance lease liabilities (Note 26) 100 53 – – term loans (Note 25) 9,153 2,217 6,492 – Revolving credits 41,683 3,066 36,189 –

50,936 5,336 42,681 –

unsecured: term loans (Note 25) 7,476 7,313 1,314 1,250 Bank overdraft 1,258 1,177 – – Bankers’ acceptances – 516 – – Revolving credits 270,000 156,000 175,000 66,000

278,734 165,006 176,314 67,250

Notes to the financial Statements31 December 2011

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24. loans and borrowinGs (cont’d.)

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

total: term loans (Note 25) 16,629 9,530 7,806 1,250 Hire purchase and finance lease liabilities (Note 26) 100 53 – – Bank overdraft 1,258 1,177 – – Bankers’ acceptances – 516 – – Revolving credits 311,683 159,066 211,189 66,000

329,670 170,342 218,995 67,250

long term borrowings secured:

Hire purchase and finance lease liabilities (Note 26) 250 54 – – term loans (Note 25) 30,332 8,429 24,342 –

30,582 8,483 24,342 –

unsecured: term loans (Note 25) 17,489 24,966 2,344 3,658

total: term loans (Note 25) 47,821 33,395 26,686 3,658 Hire purchase and finance lease liabilities (Note 26) 250 54 – –

48,071 33,449 26,686 3,658

total borrowings: term loans (Note 25) 64,450 42,925 34,492 4,908 Hire purchase and finance lease liabilities (Note 26) 350 107 – – Bank overdraft 1,258 1,177 – – Bankers’ acceptances – 516 – – Revolving credits 311,683 159,066 211,189 66,000

377,741 203,791 245,681 70,908

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24. loans and borrowinGs (cont’d.)

the term loans, bankers’ acceptances and revolving credits facilities granted to the Group and the company are unsecured except for the following:–

(a) a term loan of a subsidiary which is secured against equipment as disclosed in Note 12(d); (b) a term loan and a revolving credit faciilty of the company which is secured against vessels of

certain subsidiaries as disclosed in Note 12(e); and (c) a revolving credit facility of a subsidiary which is secured against project proceeds.

Other information on financial risks of loans and borrowings are disclosed in Note 29.

25. terM loans Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

unsecured: term loan 24,965 32,279 3,658 4,908 less: amount due within 12 months (Note 24) (7,476) (7,313) (1,314) (1,250)

amount due after 12 months (Note 24) 17,489 24,966 2,344 3,658

secured: term loan 39,485 10,646 30,834 – less: amount due within 12 months (Note 24) (9,153) (2,217) (6,492) –

amount due after 12 months (Note 24) 30,332 8,429 24,342 –

total: term loan 64,450 42,925 34,492 4,908 less: amount due within 12 months (Note 24) (16,629) (9,530) (7,806) (1,250)

amount due after 12 months (Note 24) 47,821 33,395 26,686 3,658

Notes to the financial Statements31 December 2011

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25. terM loans (cont’d.)

the remaining maturities of the term loans as at 31 December 2011 and 31 December 2010 are as follows:

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

On demand or within 1 year 16,629 9,530 7,806 1,250 more than 1 year and less than 2 years 16,803 10,137 7,875 1,314 more than 2 years and less than 5 years 31,018 23,258 18,811 2,344

64,450 42,925 34,492 4,908

26. Hire PurcHase and Finance lease liabilities Group 2011 2010 rM’000 Rm’000

Future minimum lease payments: Not later than 1 year 115 57 later than 1 year but not later than 2 years 85 42 later than 2 years but not later than 5 years 187 13 more than 5 years 8 –

395 112less: future finance charges (45) (5)

350 107

analysis of present value of finance lease liabilities: Not later than 1 year 100 53 later than 1 year not later than 2 years 74 41 later than 2 years but not later than 5 years 169 13 more than 5 years 7 –

350 107 amount due within 12 months (Note 24) (100) (53)

amount due after 12 months (Note 24) 250 54

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26. Hire PurcHase and Finance lease liabilities (cont’d.) the hire purchase is secured by a charge over the leased assets (Note 12(a)). these obligations are secured by a charge over the leased assets (Note 12). the average discount rate implicit in the leases is 2.87% per annum. (2010: 2.81% per annum). these obligations are denominated in the respective functional currencies of the relevant entities in the Group.

27. deFerred taxation Group 2011 2010 rM’000 Rm’000

at 1 January (1,237) –acquisition of a subsidiary – 714 Recognised in income statement (Note 9) (13,030) (1,971) exchange differences (27) 20

at 31 December (14,294) (1,237)

Presented after appropriate offsetting as follows: Deferred tax assets (15,703) (5,200) Deferred tax liabilities 1,409 3,963

(14,294) (1,237)

the components and movements of deferred tax (assets)/liabilities of the Group during the financial year are as follows:

unused capital unused allowance tax losses others total rM’000 rM’000 rM’000 rM’000

deferred tax assets at 1 January 2010 – – – – Recognised in income statement – – (5,200) (5,200)

at 31 December 2010 – – (5,200) (5,200)Recognised in income statement 210 (14,615) 3,902 (10,503)

at 31 december 2011 210 (14,615) (1,298) (15,703)

Notes to the financial Statements31 December 2011

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27. deFerred taxation (cont’d.) Property, plant and equipment others total rM’000 rM’000 rM’000

deferred tax liabilities at 1 January 2010 – – – Recognised in income statement 3,244 (15) 3,229 acquisition of a subsidiary – 714 714 exchange differences 14 6 20

at 31 December 2010 3,258 705 3,963 Recognised in income statement (2,523) (4) (2,527)exchange differences (31) 4 (27)

at 31 december 2011 704 705 1,409

the estimated amount of net deferred tax assets which have not been recognised in the Group’s and the company’s financial statements as at reporting dates are as follows:

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

temporary differences arising from: – unused tax losses (2,111) (11,932) (47) (47) – unabsorbed capital allowances (957) (8,662) – – – others (4,383) (1) – –

(7,451) (20,595) (47) (47)

the unutilised tax losses and unabsorbed capital allowances of the Group and of the company are available for offset against future taxable profits subject to guidelines issued by the tax authority.

Deferred tax assets have not been recognised in respect of the above items as it is not probable that future taxable profits will be available against which they may be utilised.

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28. trade and otHer Payables

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

trade payables third parties 53,129 62,763 – – Due to related parties: affiliates – 1,314 – – corporate shareholders of subsidiaries 50,631 107,542 – – associates – 29 – –

103,760 171,648 – –

other payables Due to related parties: Subsidiaries – – 2,374 2,335 Holding company 2,629 2,657 329 194 associates 1,807 1,679 – –

4,436 4,336 2,703 2,529 accruals 124,905 89,641 1,298 636 Sundry payables 21,099 13,826 103 216

150,440 107,803 4,104 3,381

total trade and other payables 254,200 279,451 4,104 3,381

total trade and other payables 254,200 279,451 4,104 3,381 add: loans and borrowings (Note 24) 377,741 203,791 245,681 70,908

total financial liabilities carried at amortised costs 631,941 483,242 249,785 74,289

Notes to the financial Statements31 December 2011

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28. trade and otHer Payables (cont’d.) (a) trade payables are non-interest bearing and the normal trade credit terms granted to the Group

range from 30 to 90 days (2010: 30 to 90 days).

(b) Due to related parties

the related parties balances bear weighted average effective interest rate of 5% per annum (2010: Nil) and are repayable on demand. all other related parties payable are unsecured and are to be settled in cash.

further details on related party transactions are disclosed in Note 35.

Other information on financial risks of trade and other payables are disclosed in Note 29.

29. Financial risK ManaGeMent obJectives and Policies

the Group is exposed to a variety of financial risks, including interest rate, credit, liquidity and cash flow risks. the Group’s overall financial risk management objective is to ensure that the Group creates value for its shareholders while minimising the potential adverse effects on the performance of the Group.

the Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the company’s managing Director, executive Director and chief financial Officer. the audit committee provides independent oversight to the effectiveness of the risk management process.

(a) interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the company’s financial instruments will fluctuate because of changes in market interest rates.

the Group’s and the company’s exposure to interest rate arises primarily from their loans and borrowings and, loans at floating rates given to related parties.

the Group’s policy is to manage interest cost using a mix of fixed and floating rate debts. the company’s loans at floating rate given to related parties form a natural hedge for its non-current floating rate bank loan. the Group finances its operations through operating cash flows and borrowings. the Group’s policy is to derive the desired interest rate profile through a mix of fixed and floating rate banking facilities.

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29. Financial risK ManaGeMent obJectives and Policies (cont’d.)

(a) interest rate risk (cont’d.) the following tables set out the carrying amounts, the weighted average effective interest rates

(“WaeIR”) and the remaining maturities of the Group’s financial asset/(liabilities) as at reporting date:

waeir within 1 1 – 2 2 – 5 % year years years total Group note rM’000 rM’000 rM’000 rM’000

at 31 december 2011

Fixed rate

term loans 25 5.42% (6,001) (6,175) (5,584) (17,760)Hire purchase and finance lease liabilities 26 2.87% (100) (244) (6) (350)Deposits with licensed banks 19 2.31% 185,524 – – 185,524 Floating rate term loans 25 3.55% (10,628) (10,629) (25,433) (46,690)Bank overdraft 24 7.85% (1,258) – – (1,258)Revolving credits 24 4.88% (311,683) – – (311,683)

Notes to the financial Statements31 December 2011

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29. Financial risK ManaGeMent obJectives and Policies (cont’d.)

(a) interest rate risk (cont’d.)

the following tables set out the carrying amounts, the weighted average effective interest rates (“WaeIR”) and the remaining maturities of the Group’s financial asset/(liabilities) as at reporting date: (cont’d.)

waeir within 1 1 – 2 2 – 5 % year years years total Group note rM’000 rM’000 rM’000 rM’000

at 31 december 2010

Fixed rate

term loans 25 5.40% (5,394) (6,001) (11,539) (22,934)Hire purchase and finance lease liabilities 26 2.72% (53) (41) (13) (107)Deposits with licensed bank 19 2.43% 77,046 – – 77,046 Floating rate term loans 25 4.46% (4,136) (4,136) (11,719) (19,991)Banker acceptances 24 4.03% (516) – – (516)Bank overdraft 24 7.30% (1,177) – – (1,177)Revolving credits 24 4.58% (159,066) – – (159,066)

company

at 31 december 2011 Fixed rate

term loan 25 5.05% (1,314) (1,383) (961) (3,658)

Floating rate

term loan 25 2.70% (6,492) (6,492) (17,850) (30,834)Revolving credit 24 4.78% (211,189) – – (211,189)

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29. Financial risK ManaGeMent obJectives and Policies (cont’d.)

(a) interest rate risk (cont’d.)

the following tables set out the carrying amounts, the weighted average effective interest rates (“WaeIR”) and the remaining maturities of the Group’s financial asset/(liabilities) as at reporting date: (cont’d.)

waeir within 1 1 – 2 2 – 5 % year years years total company note rM’000 rM’000 rM’000 rM’000

at 31 december 2010 Fixed rate

term loan 25 5.05% (1,250) (1,314) (2,344) (4,908)

Floating rate

Revolving credit 24 4.52% (66,000) – – (66,000)

Interests on borrowings that are subject to floating rate are contractually repriced within a year. Interests on financial instruments at fixed rates are fixed until the maturity of the instruments. the other financial instruments of the Group and the company that are not included in the above tables are not subject to interest rate risks.

Sensitivity analysis for interest rate risk at the reporting date, if interest rates had been 50 basis points lower/higher, with all other

variables held constant, the Group and the company’s profit net of tax would have been Rm1,349,000 (2010: Rm678,000) and Rm908,000 (2010: Rm248,000) higher/lower respectively, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings. the assumed movement in basis points for interest rate sensitivity analysis is based on a prudent estimate of the current market environment.

Notes to the financial Statements31 December 2011

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29. Financial risK ManaGeMent obJectives and Policies (cont’d.)

(b) liquidity and cash flow risks

liquidity risk is the risk that the Group or the company will encounter difficulty in meeting financial obligations due to shortage of funds. the Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

the Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure as far as possible, that it will have sufficient liquidity to meet its liability as and when they fall due.

analysis of financial instruments by remaining contractual maturities

the table below summarises the maturity profile of the Group’s and the company’s liabilities at the reporting date based on contractual undiscounted repayment obligations.

2011 on demand or within one to one year five years total rM’000 rM’000 rM’000

Group

Financial liabilities

trade and other payables (Note 28) 254,200 – 254,200 loans and borrowings 331,794 53,848 385,642

total undiscounted financial liabilities 585,994 53,848 639,842

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29. Financial risK ManaGeMent obJectives and Policies (cont’d.)

(b) liquidity and cash flow risks (cont’d.)

2011 on demand or within one to one year five years total rM’000 rM’000 rM’000

company

Financial liabilities

trade and other payables (Note 28) 4,104 – 4,104 loans and borrowings 219,912 31,279 251,191

total undiscounted financial liabilities 224,016 31,279 255,295

2010 on demand or within one to one year five years total rM’000 rM’000 rM’000

Group

Financial liabilitiestrade and other payables (Note 28) 279,451 – 279,451 loans and borrowings 171,614 34,759 206,373

total undiscounted financial liabilities 451,065 34,759 485,824

company Financial liabilities trade and other payables (Note 28) 3,381 – 3,381 loans and borrowings 67,469 3,795 71,264

total undiscounted financial liabilities 70,850 3,795 74,645

Notes to the financial Statements31 December 2011

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29. Financial risK ManaGeMent obJectives and Policies (cont’d.)

(c) credit risk

the Group seeks to invest cash assets safely and profitably. the Group also seeks to control credit risk by setting counterparty limits, obtaining bank guarantees where appropriate; and ensuring that sale of products and services are made to customers with an appropriate credit history, and monitoring customers’ financial standing through periodic review and credit checks at point of sales. the Group considers the risk of material loss in the event of non-performance by a financial counterparty to be unlikely.

as at 31 December 2011 and 31 December 2010, the maximum exposure to credit risk for the Group is presented by the carrying amount of each class of financial assets recognised in the statements of financial position.

credit risk concentration profile the Group determines concentrations of credit risk by monitoring the country and industry

sector profile of its trade receivables on an going basis. the credit risk concentration profile of the Group’s and the company’s trade receivables at the reporting date are as follows:

Group 2011 2010 rM’000 % of total Rm’000 % of total

by country:

malaysia 169,277 96% 365,475 98%Others 7,407 4% 6,999 2%

176,684 100% 372,474 100%

by industry sector: Heavy engineering contracts 119,786 68% 116,053 31%Rendering of services 24,178 13% 238,709 64%Sales of goods 22,561 13% 130 0%manufacturing 10,159 6% 17,582 5%

176,684 100% 372,474 100%

financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 17. Deposits with banks and other financial institutions and that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.

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29. Financial risK ManaGeMent obJectives and Policies (cont’d.)

(d) Fair values of financial instruments

Determination of fair value

financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value the following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value.

note

trade and other receivables 17 amounts due from affiliates, subsidiaries and associates 17 loans and borrowings (current) 24 loans and borrowings (non-current) 24 trade and other payables 28 amounts due to affiliates, corporate shareholders of subsidiaries, associates, subsidiaries and holding company 28

the carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the reporting date.

the carrying amount of the current portion of borrowings are reasonable approximations of fair values due to the insignificant impact on discounting.

the fair value of current loans and borrowings are estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending or borrowing arrangements at the reporting date.

(e) 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 Group’s policy is to minimise the exposure of overseas operating subsidiaries/activities to transaction risk by matching local currency income against local currency costs. the currencies giving rise to this risk are primarily the US Dollar and euro. foreign exchange exposures are kept to an acceptable level.

Notes to the financial Statements31 December 2011

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29. Financial risK ManaGeMent obJectives and Policies (cont’d.)

(e) Foreign exchange risk (cont’d.)

Sensitivity analysis for foreign exchange risk the following table demonstrates the sensitivity of the Group’s profit net of tax to a reasonably possible change in the USD and euro exchange rates against the respective functional currencies of the Group’s entities, with all other variables held constant.

Profit net of tax Profit net of tax Group company Group company 2011 2011 2010 2010 rM’000 rM’000 Rm’000 Rm’000

USD/Rm – strengthened 5% 2,004 – 1,677 – – weakened 5% (2,004) – (1,677) – euro/Rm – strengthened 5% 5,877 – 3,389 – – weakened 5% (5,877) – (3,389) –

30. caPital ManaGeMent

the primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholders value.

the Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. to maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2011 and 31 December 2010.

the Group monitors capital using a gearing ratio, which is derived by dividing the amount of borrowings over shareholders’ equity. at the reporting date, the Group’s gearing ratio is 0.88 times (2010: 0.47 times). the Group’s policy is to keep gearing within manageable levels.

With respect to banking facilities that the Group has with certain financial institutions and the Group is committed to ensure that the maximum gearing ratio limit of 1.5 times calculated by dividing the amount of borrowings over the aggregate of the equity held by shareholders is complied with at all times.

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31. seGMental inForMation

for management purposes, the Group’s business is organised on the activities, products and services. for each of the segments, the Group managing Director reviews the internal management reports on a quarterly basis, at least. the following summary describes the operations of each of the Group’s segments:

• Heavy engineering – The business units under this segment are principally engaged in shipbuilding and maintenance, repair and overhaul (mRO) of commercial vessels and Navy’s patrol vessels;

• Manufacturing – The business unit under this segment is principally engaged in the manufacturing of electronic products; and

• Chartering – The business units under this segment is principally engaged in the chartering of chemical tankers.

the Group operates primarily in malaysia. transfer pricing between operating segments are on arms length basis.

Included in the heavy engineering segment, the revenue of approximately Rm398,254,000 is derived from one major customer whereas in the manufacturing segment, approximately Rm6,000,000 is derived from the same customer.

transfer pricing between operating segments are on arms length basis. Inter-segment revenues are eliminated at consolidation level. the Group practices central fund management where surplus funds within the Group are on-lent, and the interest charge arising from such arrangements are eliminated in full.

Notes to the financial Statements31 December 2011

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31. seGMental inForMation (cont’d.)

management monitors the operating results of the three Divisions for the purposes of making decisions about resource allocation and performance assessment. Segment result is evaluated based on operating profit or loss set out in the following table:

Heavy Manufactu- engineering ring chartering total rM’000 rM’000 rM’000 rM’000

as at 31 december 2011 revenue external revenue 473,249 69,921 963 544,133

results Segment results-external 18,465 3,243 (6,139) 15,569 Interest income 1,930 – – 1,930 finance costs (16,226) (63) (1) (16,290)Share of results in associates 491 – – 491

Profit before taxation 4,660 3,180 (6,140) 1,700Income tax benefit 16,758

Profit for the year 18,458

During the financial year, no inter-segment sales was recorded. In the previous financial year, the Group was principally engaged in the heavy engineering segment within malaysia. the other segments are not reportable segments to be disclosed under the requirement of fRS 8.

No geographical information is disclosed as the contribution to the Group is not significant under the requirement of fRS 8.

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32. 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 of between 1 to 3 years with renewal options included in the contracts.

the future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the reporting date but not recognised as liabilities are as follows:

Group 2011 2010 rM’000 Rm’000

Future minimum rental payments: Not later than 1 year 2,243 1,577 later than 1 year but not later than 5 years 2,693 715

4,936 2,292

the lease payments recognised in profit or loss during the financial year are disclosed in Notes 5 and 18.

33. caPital coMMitMents

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

approved but not contracted for: – Property, plant and equipment 23,722 31,868 21 78 approved and contracted for: – Property, plant and equipment 2,618 12,456 – –

Notes to the financial Statements31 December 2011

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34. continGent liabilities

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

unsecured: Performance guarantee to other corporation on behalf of a subsidiary – – – 4,107

35. related Party disclosures (a) significant related party transactions other than those disclosed elsewhere in the financial

statements are as follows: Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

interest income Subsidiaries – – 6,967 – dividend income Subsidiary – – 26,250 –

sales of goods/ rendering of services associates 143,650 195,562 – –

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35. related Party disclosures (cont’d.) (a) significant related party transactions other than those disclosed elsewhere in the financial

statements are as follows: (cont’d.) Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Purchases of goods/ rendering of services Immediate holding company 580 796 313 245 Related companies 5,603 8,341 148 65 associates 2,184 70 – – Professional fees paid to firm connected to a Director of the company – 25 – – interest expense paid to: Subsidiaries – – 115 – corporate shareholders of subsidiaries 60 99 – –

the directors are of the opinion the above transactions are in the normal course of business and at standard commercial terms mutually agreed between the parties.

Information regarding outstanding balances arising from related party transactions as at 31 December 2011 are disclosed in Notes 17 and 28.

Notes to the financial Statements31 December 2011

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35. related Party disclosures (cont’d.)

(b) compensation of key management personnel

the remuneration of directors and other members of key management during the year was as follows:

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

Wages and salaries 6,835 5,093 – – Defined contribution plan 729 541 – – Benefit–in-kind 3 10 – – Others 910 677 408 344

8,477 6,321 408 344

Included in the total key management personnel are:

Directors’ remuneration (Note 7) 1,491 561 408 344

36. autHorisation oF Financial stateMent For issue

the financial statements for the year ended 31 December 2011 were authorised for issue in accordance with a resolution of the directors on 2 march 2012.

37. siGniFicant event

On 14 January 2011, certain wholly-owned subsidiaries of the company, BHIc Petroleum Sdn. Bhd. (“BP”), marine Venture capital Sdn. Bhd. (“mVc”) and PSc miri Sdn. Bhd. (“PSc”) entered into three separate Deed of Novations (“Deeds”) with the Gagasan Group, namely Gagasan SaB Sdn. Bhd. (“GS”), Gagasan Sembilan Sdn. Bhd. (“GSem”) and Gagasan Penang Sdn. Bhd. (“GP”).

the Deeds are executed to enable Gagasan Group to release and discharge its rights and obligations under the original shipbuilding contract dated 21 february 2007 entered into between the Boustead Penang Shipyard Sdn. Bhd. (“BPS”) and Gagasan carriers Sdn. Bhd. (“Gc”), in which Gc subsequently assigned and novated the vessels to GS, GSem and GP.

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38. disclosure oF realised and unrealised unaPProPriated ProFits

On 25 march 2010, Bursa malaysia Securities Berhad (Bursa malaysia) issued a directive to all listed issuers pursuant to Paragraphs 2.06 and 2.23 of Bursa malaysia main market listing Requirements. the directive requires all listed issuers to disclose the breakdown of the unappropriated profit or accumulated losses as at the end of the reporting period, into realised and unrealised profits or losses.

the breakdown of the retained earnings of the Group and of the company as at 31 December 2011, into realised and unrealised profits, pursuant to Bursa malaysia Securities Berhad’s Directive Ref: lD26/10 dated 20 December 2010 is tabulated below:

Group company 2011 2010 2011 2010 rM’000 Rm’000 rM’000 Rm’000

total retained profits of the company and its subsidiaries: Realised 11,514 25,411 23,232 18,606 Unrealised 11,292 (7,167) – – total share of retained profits from associates: Realised 144,640 144,125 – – Unrealised – 24 – –

167,446 162,393 23,232 18,606consolidated adjustments 18,962 27,383 – –

total group retained profits as per consolidated financial statements 186,408 189,776 23,232 18,606

the determination of realised and unrealised profits is compiled based on Guidance of Special matter No.1, Determination of Realised and Unrealised Profits or losses in the context of Disclosure Pursuant to Bursa malaysia Securities Berhad listing Requirements, issued by the malaysian Institute of accountants on 20 December 2010.

the disclosure of realised and unrealised profits above is solely for complying with the disclosure requirements stipulated in the directive of Bursa malaysia and should not be applied for any other purposes.

Notes to the financial Statements31 December 2011

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Analysis of ShareholdingsAs at 31 January 2012

Authorised Share Capital : RM500,000,000Paid-Up Share Capital : RM248,457,614Class of Shares : Ordinary Shares of RM1.00 eachVoting Rights : One vote per ordinary share

ANALYSIS BY SIZE OF HOLDINGS

Size of Shareholdings No. of holders % No. of Shares %

1 – 99 810 22.45 15,988 0.01100 – 1,000 953 26.41 650,176 0.261,001 – 10,000 1,391 38.55 6,077,703 2.4510,001 – 100,000 373 10.34 11,486,720 4.62100,001 – 12,422,879 (*) 79 2.19 48,479,579 19.5112,422,880 and above (**) 2 0.06 181,537,448 73.15 TOTAL 3,608 100.00 248,457,614 100.00

* Less than 5% of issued shares ** 5% and above of issued shares

LIST OF SUBSTANTIAL SHAREHOLDERS

Size of Shareholdings No. of Share % No. of Share % Direct Indirect Boustead Holdings Berhad 161,497,448 65.0 – –Lembaga Tabung Angkatan Tentera 20,250,000 8.15 161,497,448 65.0

DIRECTORS’ SHAREHOLDING

Size of Shareholdings No. of Share % No. of Share % Direct Indirect Y. Bhg. Tan Sri Dato’ Che Lodin Bin Wok Kamaruddin 2,000,000 0.80 – –Y. Bhg. Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Haji Mohd Nor (B) 2,002,100 0.80 11,200*1 #Y. Bhg. Datuk Azzat Bin Kamaludin 495,300 0.20 – –Y. Bhg. Dato’ Ishak Bin Osman 10,000 # 20*2 –Encik Abd Malik Bin A Rahman 3,000 # 1,000*3 #

Notes:-

*1 Deemed interest by virtue of shares held by his daughter.*2 Deemed interest by virtue of shares held by his son.

*3 Deemed interest by virtue of shares held by his spouse.# Negligible.

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List of Top 30 HoldersAs at 31 January 2012

No. Name of shareholders No. of shares % 1 BOUSTEAD HOLDINGS BERHAD 161,497,448 64.999 ACCOUNT NON-TRADING

2 LEMBAGA TABUNG ANGKATAN TENTERA 20,250,000 8.150

3 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 3,500,000 1.408 EMPLOYEES PROVIDENT FUND BOARD (NOMURA)

4 AMANAHRAYA TRUSTEES BERHAD 3,053,700 1.229 PUBLIC ISLAMIC OPTIMAL GROWTH FUND

5 AMANAHRAYA TRUSTEES BERHAD 2,951,000 1.187 PUBLIC SOUTH-EAST ASIA SELECT FUND

6 TAN HAN CHONG 2,272,000 0.914

7 AMANAHRAYA TRUSTEES BERHAD 2,144,900 0.863 PUBLIC ISLAMIC SECTOR SELECT FUND

8 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 2,000,000 0.804 PLEDGED SECURITIES ACCOUNT FOR AHMAD RAMLI BIN MOHD NOR (8029256)

9 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 2,000,000 0.804 PLEDGED SECURITIES ACCOUNT FOR PERAMJEET SINGH A/L GIAN SINGH (8029243)

10 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 2,000,000 0.804 PLEDGED SECURITIES ACCOUNT FOR CHE LODIN BIN WOK KAMARUDDIN (8029271)

11 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,965,700 0.791 PLEDGED SECURITIES ACCOUNT FOR LEAN MENG SEONG (8029269)

12 DB (MALAYSIA) NOMINEE (TEMPATAN) SENDIRIAN BERHAD 1,657,600 0.667 MIDF AMANAH ASSET MANAGEMENT BERHAD FOR LEMBAGA TABUNG HAJI (JG283)

13 AMANAHRAYA TRUSTEES BERHAD 1,272,800 0.512 PUBLIC ISLAMIC EQUITY FUND

14 RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD 1,216,400 0.489 PLEDGED SECURITIES ACCOUNT FOR NORAZLAN BIN MOHAMAD NORDIN (CEB)

15 HSBC NOMINEES (ASING) SDN BHD 1,034,600 0.416 EXEMPT AN FOR BNP PARIBAS WEALTH MANAGEMENT SINGAPORE BRANCH (A/C CLIENTS-FGN)

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No. Name of shareholders No. of shares % 16 AMANAHRAYA TRUSTEES BERHAD 957,300 0.385 AFFIN ISLAMIC EQUITY FUND

17 RHB NOMINEES (TEMPATAN) SDN BHD 922,179 0.371 TELEKOM MALAYSIA BERHAD

18 B & A FAMILY HOLDINGS SDN BHD 900,000 0.362

19 TA NOMINEES (TEMPATAN) SDN BHD 889,000 0.357 PLEDGED SECURITIES ACCOUNT FOR CHOW KWAI PING

20 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 810,000 0.326 EXEMPT AN FOR MERRILL LYNCH PIERCE FENNER & SMITH INCORPORATED (LOCAL RESIDENT)

21 LAI YOON KEE 612,900 0.246

22 CIMSEC NOMINEES (TEMPATAN) SDN BHD 563,000 0.226 CIMB BANK FOR LEAN MENG SEONG (MY0505)

23 HSBC NOMINEES (TEMPATAN) SDN BHD 561,400 0.225 HSBC (M) TRUSTEE BHD FOR PERTUBUHAN KESELAMATAN SOSIAL (CIMB-P 6939-404) 24 HDM NOMINEES (ASING) SDN BHD 543,500 0.218 UOB KAY HIAN PTE LTD FOR WONG SIEW KIM (MARGIN)

25 AMANAHRAYA TRUSTEES BERHAD 542,800 0.218 DANA ISLAMIAH AFFIN

26 AZZAT BIN KAMALUDIN 495,300 0.199

27 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 495,000 0.199 PLEDGED SECURITIES ACCOUNT FOR NOOR AZMAN @ NOOR HIZAM B MOHD NURDIN (8037673)

28 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 494,200 0.198 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) (NOMURA)

29 RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD 485,000 0.195 PLEDGED SECURITIES ACCOUNT FOR NOOR AZMAN @ NOOR HIZAM B MOHD NURDIN (CEB)

30 MAYBAN NOMINEES (TEMPATAN) SDN BHD 467,500 0.188 MAYBAN TRUSTEES BERHAD FOR PB ASEAN DIVIDEND FUND (270334)

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Location Description Areas Tenure Age Net book value RM’000

BOUSTEAD PENANG SHIPYARD SDN BHD

Pajakan Negeri No. 649 Shipyard 20.21 Leasehold 40 years 31,869Lot No. 3222 Mukim 13 acres expiring onDaerah Timur Laut 24/01/2072Pulau Pinang HSD 6981 Reclaimed land 19.00 Leasehold 40 years 1,621Lot No. 9777 Mukim 13 for the extension acres expiring on Daerah Timur Laut of the area of 24/01/2072Pulau Pinang the shipyard HSD 124733 Malaysia Army 135.00 Leasehold 10 years 1,668Lot No. PT15804 Equipment & acres expiring onMukim Tanjung Tualang Vehicle Testing 09/09/2102Daerah Kinta, Perak Site HS(D) 16204 ,PT8711 Marine industry 307,560 Leasehold 11 years -Mukim Lumut land square expiring onDaerah Manjung, Perak metres 18/10/2099

CONTRAVES ADVANCED DEVICES SDN BHD AND CONTRAVES SDN BHD

HSM 1988 PT2809 Industry land 6,626.322 Leasehold 38 years 5,218Mukim Bukit Baru and factory square expiring onDaerah Melaka Tengah building metres 30/05/2072Melaka HSM 4436 PT 7169 Industry land 2,936 Leasehold 3 years 1,166Mukim Bukit Baru square expiring onDaerah Melaka Tengah metres 30/05/2072Melaka

List of PropertiesHeld by BHIC Group

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No. of ordinary shares held:

CDS Account No:

Proportion of First Proxy: __________%shareholdings to be Second Proxy: _______%represented by proxies

Contact No.:

NOTES

1. Only depositors whose names appear in the Record of Depositors as at 30 March 2012 be regarded as members and entitled to attend, speak and vote at the meeting.

2. A member entitled to attend and vote at the meeting is entitled to appoint not more than two (2) proxies to attend and vote in his/her stead. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply.

3. Where a member appoints more than (1) proxy, the appointment shall be invalid unless he/she specifies the proportions of his/her shareholding to be represented by each proxy.

4. Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint one (1) 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.

5. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under its Common Seal or under the hand of its officer or attorney duly authorised.

6. 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.

Proxy FormI/We _________________________________________________________________________________________________

(FULL NAME IN CAPITAL LETTERS)

of ___________________________________________________________________________________________________(FULL ADDRESS)

being (a) member(s) of BOUSTEAD HEAVY INDUSTRIES CORPORATION 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 Fortieth Annual General Meeting of the Company to be held at 4th Floor, Menara Boustead, Jalan Raja Chulan, 50200 Kuala Lumpur on Thursday, 5 April 2012 at 10.00 a.m and at any adjournment thereof and to vote as indicated below:-

No. Resolution For Against

Ordinary Resolution 1 To receive the Audited Financial Statements for the financial year ended 31 December 2011 and the Reports of Directors and Auditors thereon.

Ordinary Resolution 2 To approve the payment of Directors’ Fees in respect of financial year ended 31 December 2011.

Ordinary Resolution 3 To re-elect Dato’ Ishak Bin Osman.

Ordinary Resolution 4 To re-elect Datuk Azzat Bin Kamaludin.

Ordinary Resolution 5 To re-appoint Messrs. Ernst & Young as Auditors of the Company and authorise the Directors to determine their remuneration.

Ordinary Resolution 6 Authority to Issue Shares.

Ordinary Resolution 7 Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions.

Ordinary Resolution 8 Proposed Provision of Financial Assistance

Dated this ___________ day of ___________ 2012

Signature of Member/Common Seal

BOUSTEAD HEAVY INDUSTRIES CORPORATION BHD(11106-V) (Incorporated in Malaysia)

Number of shares

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The Company Secretary

Boustead Heavy Industries Corporation Berhad

17th Floor, Menara Boustead

No. 69, Jalan Raja Chulan

50200 Kuala Lumpur

MALAYSIA

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