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MISC Berhad 8178-H

Level 25, Menara Dayabumi, Jalan Sultan Hishamuddin, 50050 Kuala Lumpur, Malaysia

T 603 2273 8088 F 603 2273 6602

www.misc.com.my

MISC

Berh

ad

annual report 2007

annual report 2007

Going BeyondGreater global prominence

Every move we make is vision andforce personified.At MISC Berhad, we keep forging ahead; charting the waters of success. Fromour humble beginnings with a micro fleet of only five, we are now the world'slargest single owner-operator of LNG carriers. Through our partnerships andwith a core business in energy and logistics, we continue to sustain and buildour name – from our first deepwater facility, FPSO Kikeh, to our latest delivery ofLNG cargoes to a Scandinavian country, Norway. We are going places. Each stepis a positive step towards success and global prominence.

MISC Berhad:Expanding our reachto all corners of the globe

A Strategythat's paying off

Our goal is to achieve global championship in energy transportation and logistics services. With this focus, MISC has grown significantly. Our streamlined business has now paid off with MISC moving forward with an enhancedcompetitive edge.

Over the last three years, we have continuously built our assets. We are also increasing our focus in the construction ofdeepwater facilities, drydocking of large tankers and marine conversion of FPSOs and FSOs. As we transcend and aspireto create global prominence, we are supported by one unified synergy to be a: Visionary, Strategist, Partner,People Enhancer, Innovator, Educator and HSE Practitioner.

MISC is a Believer of innovation, strategic development, strong manpower and global vision.

RM2.9bRM11.2b RM18.6b RM27.9bTotal AssetsShareholders’ FundProfit Before TaxationRevenue

Petronas Twin Towers, Malaysia

Contents

Investors Report

004Current Year FinancialHighlights

0065-Year Financial Highlights

010Vision Statement

012MISC at a Glance

013In the News

014Fleet Strength

015Over 340 Ports in 69 Countries

018Group Structure

020Statistics on Shareholdings

021Share Performance

022Financial Calendar

Board & Management

023Corporate Information

024Directors’ Profile

028Senior Management

Corporate Accountability

034Chairman’s Statement

038Statement on CorporateGovernance

042Internal Control Statement

046Terms of Reference of theBoard Audit Committee

Chairman’s Statement page 034

PeopleDevelopment

p082

Sustaining OperationalGrowth

048President/CEO's Report

050• Segment Operations

066• Fleet Management

068• Human Resource

Management

070• Future Outlook

072Corporate Highlights

078Investor Relations

Human Capital

082People Development

084People Highlights

086Health, Safety & Environment

Corporate SocialResponsiblity

092MISC & Corporate SocialResponsibility

094Youth Development

Financials

097Financial Statements

President/CEO’s Report page 048

"With the business expansion and improvement

initiatives in place supported by the appropriate

human resource strategies, MISC is confident of

sustaining business growth and moving closer in

achieving its vision"

190Properties Owned by MISCBerhad & its Subsidiaries

194List of Vessels

204MISC Offices Aroundthe World

206Notice of AnnualGeneral Meeting

210Statement AccompanyingNotice of Annual GeneralMeeting

Form of Proxy

004current year financial highlights

Profitability (RM' million)Excluding the gain on disposal of ships of RM436.6 million for the current year,the financial year's profit before taxationwas RM2,493.7 million which was 7.6%lower than the preceding year’s profitbefore taxation of RM2,698.5 million(excluding gain on disposal of RM202.3million). The decrease in profit beforetaxation was mainly due to softening ofrates and increase in cost of operations.

Earnings Per Share (sen)Earning per share increased by 0.80 senor 1.1%.

Dividend Paid per Share (sen)Dividend paid per share as reflected inthe financial statement was at 30 sen pershare for the current year, comprising 20sen final dividend for FY 2005/2006, and10 sen interim dividend for FY2006/2007.

Balance Sheet (RM' million)Total assets increased by 1.2% toRM27,954.8 million from RM27,623.1million. The increase was mainly due tothe increase in ships, property, plant andequipment of RM1,086.9 andinvestments in jointly controlled entitiesof RM363.9 million. However, the saidincrease has been offsetted by thedecrease in current assets amounting toRM1,111.3 million.

Current YearFinancial Highlights

Shareholders' Funds (RM' million)Shareholders' funds increased by 2.7%to RM18,639.2 million from RM18,156.2million resulting from the additionalearnings retained for the financial year.

Debt/Equity Ratio (ratio)Debt/equity ratio increased marginally to0.37 from 0.36 due to the increase inGroup’s borrowings.

005current year financial highlights

Revenue

Profit before Taxation

Profitability (RM' million)

07 06 05 04 03

11,198.9 10,747.1 10,650.8 7,606.3 5,433.0

2,930.3 2,900.8 4,738.9 2,326.4 1,310.3

Earnings (sen per share)

* Adjusted for bonus Issue

07 06 05 04 03

Earnings per Share

Dividends per Share

76.7 75.9 128.1* 61.6* 35.2*

30.0 30.0 22.5* 15.0* 15.0*

Debt/Equity Ratio (ratio)

07 06 05 04 03

Total Assets

Shareholders' Funds

Balance Sheet (RM' million)

27,954.8 27,623.1 25,431.4 22,355.5 14,726.3

18,639.2 18,156.2 15,279.8 11,351.8 9,618.3

07 06 05 04 03

Total Debt/Equity

Net Debt/Equity

0.37 0.36 0.54 0.82 0.44

0.25 0.18 0.25 0.66 0.33

0065-year financial highlights

2007 2006 2005 2004 2003

RM’million** RM’million** RM’million RM’million RM’million

Revenue 11,198.9 10,747.1 10,650.8 7,606.3 5,433.0

Profit before taxation 2,930.3 2,900.8 4,738.9 2,326.4 1,310.3

Profit for the year attributable to equity holders of the Corporation 2,852.0 2,822.6 4,763.5 2,289.6 1,310.7

Taxation 33.4 30.2 18.9 7.1 (3.5)

Dividends 1,097.0 1,114.1 837.0 558.0 558.0

Earnings per share (sen)* 76.7 75.9 128.1 61.6 35.2

Return on assets (%) 12.3 12.8 22.5 14.2 10.5

Return on shareholders’ funds (%) 15.3 15.5 31.2 20.2 13.6

Profit before taxation as % of revenue 26.2 27.0 44.5 30.6 24.1

Profit for the year attributable to equity holders of the Corporation as % of revenue 25.5 26.3 44.7 30.1 24.1

Paid-up capital 3,719.8 3,719.8 1,859.9 1,859.9 1,859.9

Shareholders’ funds 18,639.2 18,156.2 15,279.8 11,351.8 9,618.3

Total assets 27,954.8 27,623.1 25,431.4 22,355.5 14,726.3

Total liabilities 9,074.2 9,182.2 9,876.1 10,752.5 5,032.9

Total borrowings 6,804.4 6,607.7 8,214.5 9,356.3 4,244.7

Capital expenditure 4,399.0 3,326.6 2,665.4 6,875.6 1,912.0

Net tangible assets per share (sen)* 473.1 460.2 382.2 278.9 248.3

Debt/equity ratio 0.37 0.36 0.54 0.82 0.44

Interest cover ratio 13.4 13.6 15.6 17.6 14.3

* Adjusted for bonus issue** The 2007 & 2006 audited summary data reflects the adoption of new and revised FRSs.

2006

2007

6,608

20058,215

20049,356

20034,245

6,804

Tota

l Bor

row

ings

(RM

'milli

on)

5-YearFinancialHighlights

2006

2007

2,823

20054,764

20042,290

20031,311

2,852

Prof

it fo

r the

Yea

r Att

ribut

able

to E

quity

Hol

ders

of t

he C

orpo

ratio

n (R

M'm

illion

)

2006

2007

16

200531

200420

200314

15

Retu

rn o

n Sh

areh

olde

rs’ F

unds

(%)

0075-year financial highlights

2007 2006 2005 2004 2003

RM’million RM’million RM’million*** RM’million*** RM’million***

Revenue 11,198.9 10,747.1 10,650.8 7,606.3 5,433.0

Profit before taxation 2,930.3 2,900.8 4,242.6 1,894.1 1,241.4

Profit for the year attributable to equity holders of the Corporation 2,852.0 2,822.6 4,272.3 1,857.2 1,241.7

Taxation 33.4 30.2 18.9 7.1 (3.5)

Dividends 1,097.0 1,114.1 837.0 558.0 558.0

Earnings per share (sen)* 76.7 75.9 114.9 49.9 33.4

Return on assets (%) 12.3 12.8 18.7 10.4 8.8

Return on shareholders’ funds (%) 15.3 15.5 25.2 13.7 10.3

Profit before taxation as % of revenue 26.2 27.0 39.8 24.9 22.8

Profit for the year attributable to equity holders of the Corporation as % of revenue 25.5 26.3 40.1 24.4 22.9

Paid-up capital 3,719.8 3,719.8 1,859.9 1,859.9 1,859.9

Shareholders’ funds 18,639.2 18,156.2 16,986.3 13,569.3 12,113.4

Total assets 27,954.8 27,623.1 27,142.4 24,584.5 17,231.2

Total liabilities 9,074.2 9,182.2 9,885.5 10,764.0 5,042.8

Total borrowings 6,804.4 6,607.7 8,214.5 9,356.3 4,244.7

Capital expenditure 4,399.0 3,326.6 2,665.4 6,875.6 1,912.0

Net tangible assets per share (sen)* 473.1 460.2 428.1 338.1 315.4

Debt/equity ratio 0.37 0.36 0.48 0.69 0.35

Interest cover ratio 13.4 13.6 15.0 16.8 22.8

*** The selected consolidated financial data for the years 2005, 2004 and 2003 have been restated forthe adoption of FRS121: The Effects of Changes in Foreign Exchange Rates. The restated selectedconsolidated financial data for the financial years 2005, 2004 and 2003 have not been audited andis presented solely for comparison purposes.

2006

2007

3,327

20052,665

20046,876

20031,912

4,399

Capi

tal E

xpen

ditu

re (R

M'm

illion

)

2006

2007

460

2005382

2004279

2003248

473

Net

Tan

gibl

e A

sset

s Pe

r Sha

re (s

en)

2006

2007

14

200516

200418

200314

13

Inte

rest

Cov

er R

atio

(no.

of t

imes

)

We believe that in order to see what theworld has to offer, one must travel. Andtravelled we have. Across oceans and seas, the Believer in us continue to explore the wonderful world of opportunities.

We never stop believing and wenever stop going forward, crossingall boundaries and traversing theworld’s unchartered waters.

VisionStatement

Mission Statement

To be the preferredprovider of world-classMaritime Transportationand Logistics Services

We are a logistics service provider, maritime transportation is our corebusiness and we support the nation’s aspiration to become a leadingmaritime nation.

Shared Values

LOYALTYLoyal to nation and corporation

INTEGRITYHonest and

upright

PROFESSIONALISMCommitted, innovative,

proactive and always striving for

excellence

COHESIVENESSUnited in purpose

Partner:Growing operationalstrength throughpartnership buildingThrough the close collaborations achieved in the successful completion ofvarious projects and ventures, MISC hasfurther solidified its belief in growingthrough partnerships.

012MISC at a glance

MISC at aGlanceMISC Berhad (MISC), a subsidiary of PETRONAS, is the leading internationalshipping line of Malaysia. The principal business of the Corporation consists ofship-owning, ship management and other related logistics and maritimetransportation services.

Since its establishment in 1968, MISC has developed into a sound, successful Corporation that continues to grow on the solid foundationupon which it was built. The public listing of its shares in 1987 and its current standing as one of the top five companies in terms ofmarket capitalisation as at June 2007 on the Main Board of Bursa Malaysia Securities Berhad further demonstrates its sound standingand viability. As a member of the PETRONAS Group, MISC is expected to benefit and further strengthen business synergies andeconomies of scale from related operations of its business.

Through the provision of reliable, efficient and competitive services, MISC has indeed become a truly international player. Its modern,well-diversified and relatively young fleet of more than 100 vessels with a combined tonnage of more than 8 million deadweight tonnesand land-based facilities managed by experienced personnel enable MISC to meet the various demands of its customers.

Through its wide network of shipping operations, all linked by the latest information and logistics systems support, MISC offers widegeographical coverage. This network also extends to many inland destinations and landlocked markets. Endowed with such diverseoperations, MISC offers total logistics solution to its customers.

awards picture from left to right:Finance Asia - Asia’s 5th Best Managed Company 2006, CILT Company of the Year 2006, The BrandLaureate - Best Brand for Transportation-Shipping 2006, Lloyd’sList Maritime Asia Award - LNG Operator of the Year 2006, Premier ICT Award 2006 - Private Sector Category

013in the news

In the News

AET bullish on cracking VLCC ‘top five’Lloyd’s List, 24 Aug 2006

AET is setting its sights on joining the topfive very large crude carrier owners, withplans to at least double its fleet.

Already the world's second largest owner and operator of Aframax tankers,the former American Eagle Tankers and now wholly owned unit of MISCwants to become a top player in theVLCC business.

MISC determined to retainLNG leadershipLloyd’s List, 19 Nov 2006

MISC Bhd, the shipping firm and theworld’s largest owner of liquefied naturalgas carriers is looking to broaden its baseof business beyond its parent to thirdparty contracts.

To date, they have successfully secured atotal of three third party LNG shippingcontracts. These include medium – termcharters with Gas de France and BG plusa long term charter for two newbuildingswith Yemen LNG.

MISC increases itsVLCC fleetThe Star, 6 Nov 2006

MISC: Full Sail AheadAsia Oil & Gas Monitor, 29 Nov 2006

MISC Bhd is investing 20 billion ringgit(USD5.5 billion) over the next five yearson a host of ships in a bid to become aglobal transportation company.

The company's order list includes seven liquefied natural gas (LNG) tankers, eight chemical tankers, nineAframax oil tankers and very large crudecarriers (VLCC) as well as one bigcontainer vessel.

Offshore business to make up6-7pc of revenue: MISCNew Straits Time, 30 Mar 2007

MISC Bhd expects its offshore business tomake up between 6 and 7 percent oftotal revenue over the next five years.

Through its subsidiary Malaysia Marineand Heavy Engineering Sdn Bhd (MMHE),MISC Bhd has landed themselves withcontracts to build FPSO vessels and afuture overseas job.

Growing deepwater sector aboon to MISCThe Star, 21 May 2007

MISC’s expansion into the floatingproduction systems (FPS) and floatingstorage and offloading vessels (FSO)business is gaining momentum.

MISC commences first HALAL expressservicesHalal Journal, 21 Sept 2006

MMHE equips itself tobecome full-fledgeddeepwater centreNew Straits Times, 4 Dec 2006

Auto logistics tie-upbetween MILS andBLGNew Straits Times, 25 Dec 2006

014fleet strength

Fleet Strength*

(as at 30 June 2007)

LNG CarriersAman Class 3Tenaga Class 5Puteri Class 5Puteri Satu Class 6Seri A Class 4Seri B Class 1

24

Petroleum TankersVLCC 9Aframax 31Product 5Long Range 2 (LR2) 1

46

Chemical TankersMelati Class 7Anggerik Class 4Semarak Class 2

13

ContainershipsAbove 5000 TEUs 23000-5000 TEUs 31000-3000 TEUs 8Below 1000 TEUs 8

21

* excluding in-chartered vessels and newbuildings

** including jointly owned FPSO

Offshore FloatingFacilitiesFPSO** 3FSO 3

6

OthersLPG 3Dry Bulk (Panamax) 1

4

015over 340 ports in 69 countries

Over 340 Ports in69 Countries

AlgeriaArzewBethioua

ArgentinaBahia BlancaRosarioSan LorenzoZona Comun

AustraliaAdelaideBellbayBrisbaneFreemantleGoveMelbourneNewcastlePort KemblaSydneyTorres StraitVaranus IslandWhitnell Bay

BahamasFreeport

BangladeshChittagong

BelgiumAntwerpGhentZeebrugge

BrazilBarcarenaMungubaParanaguaRecife

Rio GrandeSantosVila Do Conde

BruneiLumutSeria

BulgariaVarna

CanadaDuke PointMackayMontrealStag TerminalVancouver BC

ChinaBohai BZ TerminalChiwanDailanDongguanFangchengGuangzhouHuangpuHuizhouJiangyinJinzhouLanshanLianyungangMai LiaoMacauNantongNingboPanyu TerminalQingdaoRizhaoShanghaiShantou

ShekouUlsanYantianYantaiYizhengYingkouXiamenXijiang TerminalXiaohudaoXinshaTaicangTaizhouTianjinTianjinxingangZhangjiagangZhuhaiZhoushan

Costa RicaPunta Morales

DenmarkFredericia

Dominican RepublicSan Pedro De Macoris

EgyptAdabiyaAlexandriaDamiettaIdkuPort SaidSuez Canal

El SalvadorAcajutla

EstoniaTallinn

FranceBordeauxDunkirkFos-sur-merLaveraLe HarveMontoir de BretagneRouen

GermanyBrakeHamburg

GibraltarGibraltar

GreecePatras

Hong KongHong Kong

IndiaChennai CochinDahejHaziraHaldiaKandlaMarmagaoMumbaiMundraNew MangaloreNhava ShevaRatnagiriSikkaVisakhapatnam


IndonesiaArunBatamBadakBalikpapanBalongan TerminalBatam IslandBelawanBitungBlang LancangBontangCilacapDumaiExspan TerminalJabung TerminalJakartaKarimunKuala TanjungManggis BayNorth Pulau LautPadangSungai PakningSungai UdangSurubayaTaboneoTanjung BaraTanjung UbanTuban

IranAsaluyehBandar AbbasBandar KhomeiniBandar Mashahr

IraqUmm Qasr

ItalyBrindisiCagliariGenoa

Gioia TauroLa SpeziaLivornoPorto MargheraRavennaSarroch Oil Port

JamaicaKingston

JapanChitaChibaFuttsuHakataHatsukaichiHigashi OgishimaHimejiHiroshimaIshigakiKanakowaKawasakiKobeMizushimaKisarazuNagasakiNagoyaNakagusukuNegishiNiigataOgisjimaOsakaSakaiSenboku I & IISendaiShimizuShimotsuSodegauraTokyoYokkaichiYokohama

JordanAqaba

KenyaMombasa

KuwaitMina Al AhmadiShuaiba

LatviaVentspils

LithuaniaKlaipeda

LebanonJubail

MalaysiaBintuluKerteh TerminalKemamanKidurong Kota KinabaluKuantanKuchingKunakLabuanLahad DatuLumutMelakaMiriMuaraPasir GudangPenara TerminalPort DicksonPort KlangPraiSandakanSibu

Sungai UdangTanjung PelepasTanjung BinTanjong SulongTawau

MexicoCoatzacoalcos

NamibiaWalvis Bay

NetherlandsAmsterdamRotterdamScheveningenSt EustatiusVlissingen

New ZealandAucklandLytteltonNapierTaurangaWellington/Nelson

NigeriaBonny Island

NorwayHemmerfestRafnesSlagentangen

OmanQalhat

PakistanKarachiPort Qasim

Over 340 Ports in 69 Countries


PanamaPanama Canal

Papua New GuineaAlotauKimbeOro Bay

PhilippinesBataanBatangasBelanak TerminalCalbayogDanaoDavaoGingoogIliganIloiloManilaRoxas

PolandGdanskGdynia

Puerto RicoPonce

QatarRas Laffan

RomaniaConstanta

RussiaAstrakhanNovorossiysk

Saudi ArabiaJeddahRas TanuraYanbo

SingaporeSingapore

South AfricaCape TownDurban

South KoreaDaesanIncheonGwangyangKwangyangOnsanPyongtaekPusanTongyeongUlsanYeosu

SpainAlgecirasAvilesBilbaoBarcelonaCatagenaConventHuelvaLas PalmasSaguntoSanta Cruz TenerifeTarragona

Sri LankaColombo

SudanMarsa BashayerPort Sudan

TaiwanKaohsiungSuao

TaichungYung An

ThailandBenchamas TerminalLaem ChabangMap Ta PhutPlatong TerminalRayongSriracha

Trinidad & TobagoPoint Fortin

TunisiaLa Skhirra

TurkeyAliagaBosporus StraitDardanellesIzmirIstanbulMarmara Ereglisi

United Arab EmiratesBandar AbbasFujairahJebel AliSharjah

United KingdomFelix ToweIsle of GrainLiverpoolSouthamptonThamesport

United States ofAmericaBaltimoreBaton Rouge

Bayonne NJCharlestonCove PointDartmouth NSDelaware CityElba CharlesHonoluluHoustonIsabelLake CharlesNew OrleansNew YorkNorfolkPasadenaPoint ComfortPorland MESavannahSearsportTexas City

VenezuelaBorburata

VietnamCai LanHo Chi Minh CityRang Dong TerminalSu Tu DenVung Tau

Group StructureLNG Petroleum Offshore Marine &

Heavy Engineering

PETRONAS Tankers Sdn Bhd (Ship Management)

Puteri Firus Sdn Bhd(Shipowning)

Puteri Delima Sdn Bhd (Shipowning)

Puteri Intan Sdn Bhd(Shipowning)

Puteri Nilam Sdn Bhd (Shipowning)

Puteri Zamrud Sdn Bhd (Shipowning)

Puteri Delima Satu (L) Pte Ltd (Shipowning)

Puteri Firus Satu (L) Pte Ltd (Shipowning)

Puteri Nilam Satu (L) Pte Ltd (Shipowning)

Puteri Intan Satu (L) Pte Ltd (Shipowning)

Puteri Mutiara Satu (L) Pte Ltd (Shipowning)

Puteri Zamrud Satu (L) Pte Ltd (Shipowning)

MSE Holdings Sdn Bhd (Investment Holdings)

Malaysia Marine & Heavy Engineering Sdn Bhd (Ship Repair & Heavy Engineering)

MSE Corporation Sdn Bhd (Processing of Copper Grit)

MMHE-ATB Sdn Bhd (Process Equipment for Petrochemical, Oil & Gas and Power Generation Plants)

MMHE-SHI LNG Sdn Bhd (Maintenance, Repair & Refurbishment of LNG Carriers)

SBM Operacoes LTDA (Operations & Maintenance)

Techno Indah Sdn Bhd(Sludge Treatment)

Malaysia Tank Cleaning Company Sdn Bhd (Dormant)

MISC Tanker Holdings Sdn Bhd (Investment Holdings)

MISC Tanker Holdings (Bermuda) Ltd (Investment Holdings)

AET Tanker Holdings Sdn Bhd (Investment Holdings)

AET Petroleum Tanker (M) Sdn Bhd (Shipowning)

AET Shipmanagement (Singapore) Pte Ltd (formerly known as Eagle Shipmanagement Pte Ltd) (Ship Management)

AET Shipmanagement (Malaysia) Sdn Bhd (formerly known as ESPL Fleet Management Sdn Bhd) (Ship Management)

AET Tankers Pte Ltd (Commercial Operations & Chartering)

AET UK Limited (Commercial Operations & Chartering)

AET Holdings (L) Pte Ltd (Invesment Holdings)

AET Inc Limited(Shipowing & Operations)

Red Harbour Sdn Bhd(Shipowning )

American Marine & Offshore Services Ltd (Shipping Agent & Lightering)

MTL Petrolink Corp(Investment Holdings)

AET Agencies Inc(Property Owning)

AET Offshore Services Inc (formerly known as Pelican Offshore Services Co Inc) (Lightering Operations)

OMIP Inc (Ship Rental & Lightering Operations)

Offshore Marine Services Inc (Lightering Operations)

Harlink Inc (Lightering Operations)

Nuelink Inc(Lightering Operations)

Malaysia Deepwater Production Contractors Sdn Bhd (Operations & Maintenance of FPSO)

Malaysia Deepwater Floating Terminal (Kikeh) Ltd (FPSO Owner)

FPSO Ventures Sdn Bhd (Operations and Maintenance of Offshore Floating Terminals)

Offshore Marine Ventures Sdn Bhd (Chartering of Vessels)

SBM Systems Inc (FPSO Owner)

FPSO Brasil Venture S.A (formerly known as SBM Espirito Santo Inc) (Operations & Maintenance)

Brazilian Deepwater FloatingTerminals Limited (Construction of FPSO)

Brazilian Deepwater Production Limited (Chartering of FPSO)

Brazilian Deepwater Production Contractors Limited (Operations and maintenance of FPSO)

MISC Offshore Floating Terminals (L) Pte Ltd (FPSO Owner)

MISC Offshore Holdings (Brazil) Sdn Bhd (Investment Holdings)

MISC Nigeria Ltd (Ship Operating & Other Activities Related To Shipping)

100%

100%

100%

100%

100%

100%

100%

Bunga Kasturi (L) Pte Ltd (Shipowning)

100%

Asia LNG Transport Sdn Bhd (Shipowning/ Ship Management)

51%

Asia LNG Transport Dua Sdn Bhd (Shipowning/ Ship Management)

51%

100%

100%

60%

100%

100%

100%

100%

100%

100%

100%

89%

70%

100%

100%

100%

100%

100%

100%

100%

100%

Paramount Tankers Corp(Shipowning)

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

51%

51%

51%

49%

100%

100%

50%

49%

49%

49%

49%

100%

100%

100%

019group structure

OthersLiner & Integrated Logistics

Maritime Education

MISC Enterprises Holdings Sdn Bhd (Voluntary Liquidation)

Transware DistributionServices Pte Ltd (Warehousing)

Trans-ware Logistics (Pvt) Ltd (Inland Container Depot)

MISC Properties Sdn Bhd (Dormant)

MISC Capital (L) Ltd (Investment Holdings)

100%

MISC Ferry Services Sdn Bhd (Dormant)

100%

MISC Ship Management Sdn Bhd (Dormant)

100%

Malaysian Maritime Academy Sdn Bhd (Education & Training for Seaman & Maritime Personnel)

MISC International (L) Ltd (Investment Holdings)

SL-MISC International Line Co Ltd (Shipowning)

MISC Integrated Logistics Sdn Bhd (Integrated Logistics Services)

MILS – Seafrigo Sdn Bhd (Own, manage and operate a Cold Storage Logistics Hub)

MILS-SterilGamma Sdn Bhd (Sterilsation and fumigation facilities)

100%

MISC Haulage Services Sdn Bhd (Dormant)

100%

MISC Trucking and Warehousing Services Sdn Bhd (Dormant)

100%

100% 100%

100%

100%

100%

100%

60%

49%60%

BLG - MILS Logistics Sdn Bhd (Automotive Solutions)

KEER - MISC Logistics Co Ltd (Transport)

60%

50%

RAIS - MILS Logistics FZCO(Integrated Logistics Services)

50%

50%

25%

100%

MISC Agencies Sdn Bhd(Shipping Agent)

MISC Agencies (Netherlands) B.V. (Shipping Agent)

MISC Agencies (Japan) Ltd (Shipping Agent)

MISC Agencies (U.K.) Ltd (Shipping Agent)

MISC Agencies (Australia) Pty Ltd (Shipping Agent)

MISC Agencies (Singapore) Pte Ltd (Shipping Agent)

Leo Launches Pte Ltd (Launch Operator)

MISC Agencies (Sarawak) Sdn Bhd (Shipping Agent)

MISC Agencies (Thailand) Co Ltd (Shipping Agent)

MISC Agencies (Lanka) Pvt Ltd (Shipping Agent)

51%

100%

100%

100%

100%

100%

100%

65%

49%

40%

Note:Chemical Business is under MISC Berhad

020statistics on shareholdings

Statistics onShareholdingsas at 29 June 2007

Analysis of Shareholdings

Substantial Shareholders

Size of Shareholdings No. of Shareholders % of Shareholders No. of Shares % of Issued Share Capital

Less than 100 240 3.56 6,067 0.00 100 - 1,000 1,571 23.29 1,091,386 0.03 1,000 - 10,000 3,296 48.86 13,156,523 0.35 10,001 - 100,000 1,136 16.84 37,580,670 1.01 100,001 to less than 5% of issued shares 501 7.43 1,039,783,338 27.96 5% and above of issued shares 2 0.03 2,628,209,602 70.65

Total 6,746 100.00 3,719,827,586 100.00

Name of Shareholders No. of Shares %

Petroliam Nasional Berhad 2,322,512,920 62.44 Employees Provident Fund Board * 654,865,064 17.60

* inclusive of shares held through nominees.

30 Largest Shareholders

No. Name of Shareholders No. of Shares %

1. Cartaban Nominees (Tempatan) Sdn Bhd 2,322,512,920 62.44 Petroliam Nasional Berhad (Strategic INV)

2. Employees Provident Fund Board 305,696,682 8.22 3. Amanah Raya Nominees (Tempatan) Sdn Bhd 108,296,200 2.91

Skim Amanah Saham Bumiputera 4. Lembaga Kemajuan Tanah Persekutuan (FELDA) 85,207,500 2.29 5 State Financial Secretary Sarawak 61,333,334 1.65 6. Perbadanan Pembangunan Pulau Pinang 49,000,000 1.32 7. Valuecap Sdn Bhd 39,071,200 1.05 8. Lembaga Tabung Haji 30,831,514 0.83 9. Amanah Raya Nominees (Tempatan) Sdn Bhd 26,276,000 0.71

Amanah Saham Malaysia 10. Malaysia Nominees (Tempatan) Sendirian Berhad 24,762,400 0.67

Great Eastern Life Assurance (Malaysia) Berhad (PAR 1) 11. Citigroup Nominees (Asing) Sdn. Bhd. 24,552,153 0.66

Exempt AN for Mellon Bank (Mellon) 12. Amanah Raya Nominees (Tempatan) Sdn Bhd 20,392,500 0.55

Amanah Saham Wawasan 2020 13. Citigroup Nominees (Asing) Sdn Bhd 18,198,922 0.49

Exempt AN for Merrill Lynch Pierce Fenner & Smith Incorporated (Foreign) 14. HSBC Nominees (Asing) Sdn Bhd 18,166,512 0.49

Exempt AN for JPMorgan Chase Bank, National Association (U.S.A.) "15. Cartaban Nominees (Asing) Sdn Bhd 17,404,200 0.47

Exempt AN for RBC Dexia Investor Services Trust (Clients Account) 16. Kerajaan Negeri Pahang 17,163,600 0.4617. Permodalan Nasional Berhad 16,836,600 0.45 18. Cartaban Nominees (Asing) Sdn Bhd 15,165,200 0.41

Investors Bank And Trust Company for Ishares, Inc.19. Cimsec Nominees (Tempatan) Sdn Bhd 14,204,560 0.38

Security Trustee (KCW Issue 1)20. HSBC Nominees (Tempatan) Sdn Bhd 13,831,700 0.37

Nomura Asset Mgmt Malaysia for Employees Provident Fund21. Amanah Raya Nominees (Tempatan) Sdn Bhd 13,349,600 0.36

Amanah Saham Didik 22. Citigroup Nominees (Tempatan) Sdn Bhd 10,909,434 0.29

Exempt AN for Prudential Assurance Malaysia Berhad 23. SBB Nominees (Tempatan) Sdn Bhd 10,800,000 0.29

Employees Provident Fund Board 24. HSBC Nominees (Asing) Sdn Bhd 10,767,500 0.29

TNTC for Mondrian Emerging Markets Equity Fund L. P.25. Alliancegroup Nominees (Tempatan) Sdn Bhd 10,045,000 0.27

PHEIM Asset Management Sdn Bhd for Employees Provident Fund26. Mayban Nominees (Tempatan) Sdn Bhd 9,299,400 0.25

Mayban Trustees Berhad for Public Ittikal Fund (N14011970240)27. Cartaban Nominees (Tempatan) Sdn Bhd 8,929,000 0.24

Petronas for Petronas Retirement Benefit Scheme 28. HSBC Nominees (Asing) Sdn Bhd 7,352,300 0.20

BBH And Co. Boston for Vanguard Emerging Markets Stock Indexfund 29. HSBC Nominees (Asing) Sdn Bhd 7,306,100 0.20

BBH (LUX) SCA for Fidelity Funds Malaysia30. Citigroup Nominees (Tempatan) Sdn Bhd 6,613,800 0.18

ING Insurance Berhad (INV-IL PAR)

Total 3,324,275,831 89.37

021share performance

SharePerformanceas at 29 June 2007

Date Announcement

18.05.06 Joint Venture Agreementbetween MILS and Rais HassanSaadi L.L.C

07.06.06 Joint Venture Agreementbetween AET and GoldenEnergy Tanker HoldingsCorporation

09.06.06 Proposed acquisition of 49%interest in SBM Systems Inc andSBM Espirito Santo Inc

21.07.06 Two new charters and twocharter extensions for theexisting LNG carriers

02.08.06 Memorandum of Understandingbetween MISC and UniversitiTeknologi Malaysia

14.08.06 1st quarter results forFY2006/07

31.10.06 Order confirmation of fourAframax tanker newbuildingsand delivery of one very largecrude carrier

15.11.06 Joint Venture Agreementbetween MILS and BLGInternational Logistics GMBH &CO. KG

20.11.06 Sale and lease-back of 5Aframax tankers

23.11.06 2nd quarter results forFY2006/07

05.12.06 Order confirmation of twoAframax tanker newbuildings

28.02.07 3rd quarter results forFY2006/07

29.03.07 Joint Venture Agreementbetween MISC and SBM Holding Inc SA –BC10 Project, Brazil

25.04.07 FSO Abu Contract awarded to MISC

10.05.07 4th quarter results for FY2006/07

Source : Bursa Malaysia Berhad Source : Bloomberg

29.0

6.07

MISC Foreign Shares

31.0

3.06

20

40

60

80

0

Volume (shares in million) (RM)

3

6

9

12

0

28.0

4.06

31.0

5.06

30.0

6.06

31.0

7.06

31.0

8.06

29.0

9.06

31.1

0.06

30.1

1.06

29.1

2.06

31.0

1.07

28.0

2.07

30.0

3.07

30.0

4.07

31.0

5.07

Monthly Volume PX Low PX High

31.0

3.06

10

20

30

40

0

Volume (shares in million) (RM)

3

6

9

12

028

.04.

06

31.0

5.06

30.0

6.06

31.0

7.06

31.0

8.06

29.0

9.06

31.1

0.06

30.1

1.06

29.1

2.06

31.0

1.07

28.0

2.07

30.0

3.07

30.0

4.07

31.0

5.07

29.0

6.07

MISC Local Shares

022financial calendar

Financial Calendar2006 2007

QuarterlyResults

Aug

Quarter 1Results

InterimAnnounced

Quarter 2Results

Interim Paid

Quarter 3Results

Quarter 4Results

FinalAnnounced

AnnualReport Issued

FinalPayable

AnnualGeneralMeeting

14 23 28 10

Nov Feb May

Nov

23 22 10 30

Dec May Aug

25

Jul

Aug

Dividends

AnnualReport

AGM 16

023corporate information

ChairmanTan Sri Dato Sri Mohd Hassan bin Marican

President/ Chief Executive OfficerDato' Shamsul Azhar bin Abbas

DirectorsDato Sri Liang Kim Bang

Harry K Menon

Dato' Halipah binti Esa

Datuk Nasarudin bin Md Idris

Dato' Kalsom binti Abd Rahman

Dato' Dr. Wan Abdul Aziz bin Wan Abdullah *

Dato' Ibrahim Mahaludin bin Puteh(alternate Director to Dato’ Dr. Wan AbdulAziz bin Wan Abdullah)

Company SecretaryFina Norhizah binti Hj Baharu Zaman

Audit Committee MembersDato' Halipah binti Esa *(Chairman)Dato Sri Liang Kim Bang *Harry K Menon *Dato' Kalsom binti Abd Rahman*

* Independent Non-Executive Director

Registered OfficeLevel 25, Menara DayabumiJalan Sultan Hishamuddin50050 Kuala LumpurTel : +603 2273 8088Fax : +603 2273 6602Telex : Naline MA 30325

MA 32449Cable : MALAYASHIP KUALA LUMPURWeb : www.misc.com.my

AuditorsErnst & YoungLevel 23A, Menara MileniumJalan DamanlelaPusat Bandar Damansara50490 Kuala Lumpur

Principal BankersCIMB Bank BerhadMalayan Banking BerhadHongkong Bank Malaysia Berhad

Share RegistrarsSymphony Share Registrars Sdn BhdLevel 26, Menara Multi PurposeCapital SquareNo 8, Jalan Munshi Abdullah50100 Kuala LumpurTel : +603 2721 2222Fax : +603 2721 2531

Stock Exchange ListingThe Main Board of Bursa MalaysiaSecurities Berhad

CorporateInformation

Board of Directors

024directors' profile

Chairman

Directors’Profile

Tan Sri Dato Sri MohdHassan bin Marican

aged 54, is the President and ChiefExecutive Officer of Petroliam NasionalBerhad (PETRONAS). A Fellow of theInstitute of Chartered Accountants inEngland and Wales, as well as a member of the Malaysian Institute ofAccountants and the Malaysian Instituteof Certified Public Accountants. Hejoined PETRONAS in 1989 as Senior Vice President of Finance and wasappointed as President and ChiefExecutive Officer in February 1995.

Tan Sri Dato Sri Mohd Hassan is amember of the PETRONAS Board ofDirectors, and apart from MISC Berhad,he is also the Chairman of PETRONASGas Berhad, another public listedsubsidiary of PETRONAS, and Chairmanof Engen Limited, South Africa's leadingoil refining and marketing company, asubsidiary of PETRONAS.

Beyond PETRONAS, Tan Sri Dato SriMohd Hassan is a Board member of BankNegara Malaysia and a member of theBoard of Malaysia-Thailand JointAuthority, which oversees petroleumdevelopment in the overlapping areabetween Malaysia and Thailand. He isalso a member of the InternationalInvestment Council for the Republic ofSouth Africa.


President / Chief ExecutiveOfficer

Dato Sri Liang Kim Bang

aged 70, is an Independent Non-Executive Director of MISC Berhad since 1972. He studied at University of Malaya, Singapore, 1957-1961graduating with B.A. and B.A. (Hons)degrees and at University of Cambridge(Trinity College), England, 1962-1963 inPublic Administration.

He was also the former Sarawak StateFinancial Secretary.

He is the Non-Executive Chairman ofCMS Cement Sdn Bhd, CMS Wires SdnBhd and CMS Infra Trading Sdn Bhd. He is also a Non-Executive Director ofCahya Mata Sarawak Berhad, PPB Group Berhad, PPB Oil Palms Berhad,Rashid Hussain Berhad, CMS TrustManagement Berhad and Utama Banking Group Berhad.

He is also a member of the MISC BoardAudit Committee.

Dato' Shamsul Azhar bin Abbas

aged 55, is the President / ChiefExecutive Officer of MISC Berhad. He sitson the Board of MISC and is theChairman on the Boards of MISC's majorsubsidiaries. He is also the Chairman ofPETRONAS Maritime Services Sdn Bhd,AET Tanker Holdings Sdn Bhd, MalaysiaMarine and Heavy Engineering Sdn Bhd,MISC Integrated Logistics Sdn Bhd and aDirector on the Boards of Bintulu PortHoldings Berhad, NCB Holdings Bhd andThe London Steamship Owners' MutualInsurance Association Limited (London P & I Club) and Council Member ofAmerican Bureau of Shipping (ABS) andBureau Veritas.

Dato' Shamsul Azhar bin Abbas holds a degree in Political Science from ScienceUniversity of Malaysia, a Masters ofScience Degree (MSc.) in EnergyManagement from University ofPennsylvania, USA and a Technical Diplomain Petroleum Economics from InstituteFrancaise du Petrole (IFP), France.

He joined PETRONAS in 1975 and hasheld various senior managementpositions including Senior GeneralManager Corporate Planning andDevelopment Division, Vice PresidentPetrochemical Business, Vice President OilBusiness, Vice President Exploration andProduction Business and Vice PresidentLogistics & Maritime Business.

He was appointed as the ManagingDirector/Chief Executive Officer of MISC Berhad on 1 July 2004 and iscurrently a member of the PETRONASManagement Committee.


Harry K Menon

aged 57, is an Independent Non-Executive Director of MISC Berhad since2001. He is a Fellow of the Institute ofChartered Accountants in England andWales, as well as a member of theMalaysian Institute of Accountants andthe Malaysian Institute of Certified Public Accountants.

He spent 13 years in public practice atHanafiah Raslan & Mohamed, 7 years of which as a Partner. He joined PublicBank Berhad as General Manager andwas subsequently promoted to ExecutiveVice-President. After working with twopublic listed companies, he joinedPutrajaya Holdings Sdn Bhd as its ChiefOperating Officer from 1997 – 2000.

He is presently an Executive Director ofAWC Facility Solutions Berhad, Chairmanof Putrajaya Perdana Berhad and is aNon-Executive Director of SPK-SentosaCorporation Berhad, AKN MessagingTechnologies Berhad and SCICOM (MSC)Berhad as well as a Director of PutrajayaHoldings Sdn Bhd.

He is also a member of the MISC BoardAudit Committee.

Dato' Halipah binti Esa

aged 57, is an Independent Non-Executive Director of MISC Berhad since2004. She graduated from University ofMalaya with an honours degree majoringin Economics and later was conferred theMasters of Economics degree from thesame University.

She started her career with theAdministrative and Diplomatic Services in1973 as an Assistant Secretary in theEconomic Planning Unit (EPU) in thePrime Minister's Department andsubsequently held various other positionsin the EPU and became the DeputyDirector General Macro (1999-2004). She was Deputy Secretary General(Policy) in the Ministry of Finance from2004-2005 and subsequently becameDirector General, Economic PlanningUnit, Prime Minister’s Department in2005 before retiring in 2006.

Currently she is the Chairman ofPengurusan Aset Air Bhd and sits on theBoards of UDA Holdings Berhad,Cagamas SME Berhad and KLCCProperty Holdings Berhad.

She was recently appointed as Chairmanof the MISC Board Audit Committee.

Datuk Nasarudin bin Md Idris

aged 52, is a Non-Executive Director ofMISC Berhad since 2004. He graduatedfrom University of Malaya with aBachelor of Arts (Honours) in 1978, andjoined PETRONAS in the same year. Healso holds a Master of BusinessAdministration degree from Henley-TheManagement College, United Kingdomand a postgraduate diploma in PetroleumEconomics from College of PetroleumStudies, United Kingdom.

Since joining PETRONAS, he has heldvarious senior management positionswithin the PETRONAS Group, includingas the Senior General Manager, CorporatePlanning and Development, ExecutiveAssistant to the President, GeneralManager, Marketing, PETRONASDagangan Berhad, General Manager,Corporate Development Unit and GeneralManager, Group Strategic Planning.

He is currently the Vice President ofCorporate Planning and DevelopmentDivision, and is a member of theManagement Committee of PETRONAS.He serves on the Board of Directors ofPETRONAS and various other subsidiarieswithin the PETRONAS Group.

As of April 2007, Datuk Nasarudin wasappointed Group Chief Executive Officerof KLCC (Holdings) Sdn Bhd, a whollyowned subsidiary of PETRONAS involved in property development &investment holding.


Dato’ Kalsom binti AbdRahman

aged 58, is an Independent Non-Executive Director of MISC Berhad since2004. She holds a Bachelor of Economics(Honours) degree from University ofMalaya and a Master in BusinessAdministration (Finance) from Universityof Oregon, USA.

She had served in various capacities inthe Ministry of International Trade andIndustry (MITI) both at Headquarters andOverseas offices, the last post being theDeputy Secretary General (Industry).

She sits on the Boards of MalaysianIndustrial Development Finance Berhad(MIDF Berhad), MIDF Amanah AssetManagement Berhad (formerly known as Amanah SSCM Asset ManagementBerhad), Chemical Company of Malaysia(CCM Berhad), Lion Forest IndustriesBerhad (LFIB Berhad), ASEAN BintuluFertilizer Sdn Bhd, Amanah InternationalFinance Sdn Bhd, Inokom CorporationSdn Bhd, Hyumal Motor Sdn Bhd, andYoung Entrepreneurs Sdn. Bhd.

Currently, she is the Chairman of theExecutive Committee of Invest-In-PenangBerhad, and a member of theConsultative Committee of the GroupMotor Division of the Sime Darby Berhad.

Dato' Dr. Wan Abdul AzizWan Abdullah

aged 55, is an Independent Non-Executive Director of MISC Berhad since2006. He holds a Ph.D in Economics from University of Leeds, United Kingdom,a Masters in Philosophy in DevelopmentStudies from Institute of DevelopmentStudies, University of Sussex, UnitedKingdom and Bachelor in Economics(Honours) in Applied Economics fromUniversity of Malaya.

He began his career in 1975 with theMalaysian Administrative and DiplomaticService in the Economic Planning Unit(EPU), Prime Minister's Department as anAssistant Director and subsequently heldvarious other positions in EPU. He wasthe Deputy Secretary of Economics andInternational Division, Ministry of Finance(2001) and later became the DeputyDirector General (Macro), EPU andsubsequently the Deputy SecretaryGeneral of Treasury (Policy), Ministry ofFinance in 2005. He is currently theSecretary General of Treasury in theMinistry of Finance.

He also sits on several other Boards,including the Board of Federal LandDevelopment Authority (FELDA), MalaysiaAirlines System Berhad (MAS), KumpulanWang Amanah Persaraan (KWAP), InlandRevenue Board, PETRONAS, Kuala LumpurInternational Airport Berhad, CyberviewSdn Bhd, Bank Negara Malaysia,Multimedia Development Corporation,Syarikat Bekalan Air Selangor Sdn Bhdand Pembinaan PFI Sdn Bhd.

Dato’ Ibrahim Mahaludinbin Puteh

aged 55, was appointed as the AlternateDirector to Dato' Dr. Wan Abdul Aziz binWan Abdullah on 10 May 2007.

He holds a Bachelor of Arts (Honours)from University of Malaya and Master of Business Administration Degree fromUniversity of Manchester, United Kingdom.

He has served in various divisions at theMinistry of Finance since 1974 and hasextensive experience in banking andfinance. He had also served as SeniorAdviser to the Executive Director forSoutheast Asia at the World Bank Groupin Washington D.C. He is presently theDeputy Secretary General (Policy) in theMinistry of Finance.

He sits on the Boards of SyarikatPrasarana Negara Berhad, SME Bank,Bank Simpanan Nasional, TH TechnologiesSdn Bhd and TH Indopalms Sdn Bhd.

028senior management

SeniorManagement

Dato' Shamsul Azhar bin Abbasis the President / Chief Executive Officerof MISC Berhad.

He sits on the Board of MISC and is theChairman on the Boards of MISC's majorsubsidiaries. He is also the Chairman ofPETRONAS Maritime Services Sdn Bhd,AET Tanker Holdings Sdn Bhd, MalaysiaMarine and Heavy Engineering Sdn Bhd,MISC Integrated Logistics Sdn Bhd and aDirector on the Boards of Bintulu PortHoldings Berhad, NCB Holdings Bhd andThe London Steamship Owners' MutualInsurance Association Limited (London P & I Club) and Council Member ofAmerican Bureau of Shipping (ABS) andBureau Veritas.

Dato' Shamsul Azhar bin Abbas holds a degree in Political Science from Science University of Malaysia, a Masters of Science Degree (MSc.) inEnergy Management from University ofPennsylvania, USA and a TechnicalDiploma in Petroleum Economics fromInstitute Francaise du Petrole (IFP), France.

He joined PETRONAS in 1975 and hasheld various senior managementpositions including Senior GeneralManager Corporate Planning andDevelopment Division, Vice PresidentPetrochemical Business, Vice President OilBusiness, Vice President Exploration andProduction Business and Vice PresidentLogistics & Maritime Business.

He was appointed as the ManagingDirector/Chief Executive Officer of MISC Berhad on 1 July 2004 andcurrently a member of the PETRONASManagement Committee.

Zahar Mohd Hashim binZainuddin is the Vice President,Offshore Business.

He is a certified Marine Engineergraduated from South Shields Marine &Technical College in the United Kingdom.He is a member of the Malaysian Instituteof Certified Engineer and has attendedINSEAD Senior ManagementDevelopment Program.

He has over 25 years of experience inshipbuilding, ship operation and projectmanagement. He has served in variouscapacities in PETRONAS and MISCincluding Senior Manager LNG & TankerFleet Operations, FPSO Senior ProjectManager and General Manager OffshoreBusiness. He has also served more than10 years on overseas assignment withPETRONAS including heading the LNGfleet operations and technical liaisonoffice in Japan.

He currently sits as a board member for a few of MISC subsidiaries and jointventure companies. He is also Chairmanof the Technical Committee for theMalaysian Shipowners’ Association.

Gunaseharan A/L K Ganapathyis the Vice President, LNG Business.

He graduated with an MBA from theUniversity of Bath, U.K. He has alsocompleted the Qualifying Examination ofthe Institute of Chartered Shipbrokers,London. He serves on various Boards ofMISC's subsidiaries.

He joined MISC's shore services in 1992and was attached to the PetroleumServices. Three years later, he took up thepost of Project Manager of PetroleumServices and in 2000, he was appointedas General Manager, Petroleum Business.In 2002, he was assigned the additionalresponsibility of managing theCorporation's Chemical Business and wassubsequently redesignated as GeneralManager, Tanker Business.

He was appointed as Vice President ofthe LNG Business on 1 April 2005.

from left to right : Gunaseharan A/L Ganapathy,Dato’ Shamsul Azhar bin Abbas,Zahar Mohd Hashim bin Zainuddin


Hilmi bin Mohd Nashir is theManaging Director/Chief ExecutiveOfficer of MISC Integrated Logistics SdnBhd (MILS), a wholly-owned subsidiary ofMISC Berhad.

He graduated with an honours degree inEconomics majoring in AnalyticalEconomics from the University of Malaya.

Prior to joining MISC in April 2001 asGeneral Manager of MISC Trucking &Warehousing Sdn Bhd, he was with thePETRONAS Group for more than 20years, with multi roles and experienceranging from Project Evaluation, InternalAudit, Contract Management, VendorDevelopment, Treasury and ProjectManagement. In April 2002, he becamethe Chief Operating Officer of MISCHaulage Services Sdn Bhd before beingappointed to his current position in April 2005.

Wan Yusoff bin Wan Hamat is the Managing Director/Chief ExecutiveOfficer of Malaysia Marine and HeavyEngineering Sdn Bhd (MMHE).

He graduated with an Honours Degreein Engineering Production fromBirmingham University, United Kingdom.Prior to joining MISC in April 2005, he was seconded by PETRONAS toMMHE in May 2004 after servingPETRONAS Oil and Petrochemicalbusinesses for 27 years.

He has held various senior managementpositions in the development andoperation of refining and petchemventures including MTBE (M) Sdn Bhd,PETRONAS Penapisan (Terengganu) SdnBhd, PETRONAS Penapisan (Melaka) SdnBhd and Aromatics Malaysia Sdn Bhd. In1999 and thereafter, he assumed theposition of Managing Director and ChiefExecutive Officer of PETRONASPenapisan (Terengganu) Sdn Bhd.

Niels Kim Balling is the VicePresident, Liner Business.

He is educated in Maritime Law inDenmark, and has attended executivetraining at University of Wisconsin,Massachusetts Institute of Technologyand Stanford-NUS in Singapore.

He also serves on various Boards ofassociated companies and committeeswithin the Group. Prior to joining MISCin 2004 he was the Managing Directorof Econships Ltd, a managementconsulting practice serving amongstothers Fortune 50 companies andGovernment linked companies in Asia,within the energy, retail, transport andaerospace sectors. During his time withEconships Ltd, he was also projectleader for the Government study ondeveloping Hong Kong's maritimecluster. Prior to this Kim worked for anumber of years with Orient OverseasContainer Line and A.P. Moller, theparent company of Maersk. Kim wasalso active within the Council ofLogistics Management USA,International Chamber of Commerce,Pacific Basin Economic Council andserved on the advisory council for HongKong University, MBA faculty.

He is also a member of the WorldShipping Council and the InternationalCouncil of Container Operators.

from left to right : Hilmi bin Mohd Nashir, Wan Yusoff bin Wan Hamat,Niels Kim Balling


from left to right : Hor Weng Yew, Noraini binti Che Dan,Michael Ting Sii Ching

SeniorManagement

Hor Weng Yew is the Senior GeneralManager, Chemical Business.

He completed his Bachelor of Arts inEconomics from the National Universityof Singapore and obtained his MSc inShipping, Trade & Finance (Distinction)from the City University Business School, London.

He began his career with Neptune OrientLines Limited (NOL) in 1989 and wasinvolved in the strategy and businessplanning initiatives for AET, a subsidiaryof NOL, since its inception in 1994.

He joined the MISC Group in July 2003,following the acquisition of AET by MISC.He was later seconded to London to setup the MISC Regional Office.

Prior to his current position on 1September 2006, he was The Director ofthe Regional Business Directorate sinceJune 2005.

Noraini binti Che Dan is the VicePresident, Finance.

She graduated from University ofManchester with an honours degree inEconomics. She is a member of theMalaysian Institute of Accountants andMalaysian Institute of Certified PublicAccountants.

Prior to joining MISC, she served inPernas International Holdings Berhad for15 years in various capacities includingGroup General Manager Finance andChief Financial Officer.

Prior to the appointment as the VicePresident, Finance on 1 April 2005, shewas the General Manager of the samedivision.

She sits on the boards of LabuanReinsurance (L) Ltd and various MISCsubsidiaries and investment companies.

Michael Ting Sii Ching is the Vice President, Corporate Planning and Development.

He graduated with a Bachelor ofBusiness Administration degree (majoringin Accounting and ManagementInformation System) from Simon FraserUniversity, Canada.

Prior to joining MISC, he served theArthur Andersen / HRM BusinessConsulting Division for around 9 years asSenior Consulting Manager beforeleaving to join the Phileo Allied Group tohead its Corporate Finance Business Unitas General Manager / Executive Directorfor over 8 years. Subsequent to that, hestarted and managed his own Corporate,Management and Financial AdvisoryPractice for two and half years beforejoining MISC.

Prior to his appointment as the VicePresident, Corporate Planning andDevelopment on 1 April 2005, he wasthe General Manager of the same division.

He serves on the Boards of varioussubsidiaries of MISC Berhad and also sitson the Boards of TH Group Berhad andCB Industrial Product Holding Berhad.


Nordin bin Mat Yusoff is the VicePresident, Fleet Management Services.

He graduated from University ofGlasgow, Scotland with a degree in NavalArchitecture & Ocean Engineering and isa registered Professional Engineer withthe Board of Engineers, Malaysia.

He joined PETRONAS in 1989 and hasserved in various capacities in PETRONASCarigali Sdn Bhd and PETRONAS TankersSdn Bhd before joining MISC in 2001.

Prior to joining PETRONAS, he was withMalaysia Marine and Heavy EngineeringSdn Bhd and was involved in projectmanagement of various new shipbuildingand offshore structures fabrication works.

He currently sits as committee memberof various classification societies andinternational shipping organisations. Heis a Director of The Britannia SteamshipInsurance Association Limited and varioussubsidiaries of MISC Berhad. He is alsothe Chairman of the MalaysianShipowners' Association.

Prior to his appointment as VicePresident, Fleet Management Services on1 April 2005, he was the Senior GeneralManager of the same division.

Fina Norhizah binti Hj BaharuZaman is the Senior General Managerof Legal & Corporate Secretarial AffairsDivision and the Company Secretary ofMISC Berhad.

She obtained her Bachelor of Law degreefrom the University of Malaya in 1980and had started her legal career with theMalaysian Attorney General Chamberswhere she had served as a Senior FederalCounsel and as the Legal Advisor to theMinistry of Transport.

She did her Masters in Law (specialisingin maritime and shipping) at the LondonSchool of Economics, University ofLondon and had subsequently joined theInternational Islamic University, Malaysiain 1984 as a law lecturer.

She was admitted as an Advocate and Solicitor of the High Court of Malayain 1986.

She joined PETRONAS in 1990 and hadserved the PETRONAS Legal Departmentin several capacities. In 2000, she wasappointed as the General Manager(Legal) of the Logistics and MaritimeBusiness PETRONAS and as GeneralManager of the Legal and CorporateSecretarial Affairs Division of MISC.

Ahmad Hafifi bin Ibrahimis the Vice President, Human Resources Management.

He holds a Degree in Law from theUniversity of London, United Kingdomand a Certificate of Legal Practice fromthe University of Malaya.

He joined PETRONAS in January 1980and has held various positions incompany secretarial and legal servicesarea relating to exploration andproduction, manufacturing, sales andmarketing, property and projectmanagement. He was the CompanySecretary and General Manager,Commercial Division for PETRONAS Gas Berhad from 1995 to 1999. He was made Chief Executive Officer of Gas District Cooling (Holdings) Sdn Bhdfrom January 2000 to May 2005 beforeassuming his current position on 1 June 2005.

from left to right : Nordin bin Mat Yusoff,Fina Norhizah binti Hj Baharu Zaman, Ahmad Hafifi bin Ibrahim

We have made promises over the years. Promises thatwe continue to keep. As Strategists who want toincrease our scope and venture into greater profitablechannels, we aim to reach that complete goal. Wewant to be a global champion in energy transportationand logistics services and our strategic plans will lead usto greater heights of excellence.

Nothing is too hard apursuit; too impossiblea quest.

034

Chairman’sStatement

035chairman’s statement

On Behalf of theBoard of Directors, Iam pleased to presentthe Annual Report ofMISC Berhad (MISC) forthe financial year ended31 March 2007.

The year under review saw MISCoperating in a challenging marketenvironment characterised by softerfreight rates across most sectors due toovercapacity of tonnage and higheroperating cost as a result of persistentlyhigh bunker prices. MISC neverthelesswas able to rise to the challenge todeliver a satisfactory financial andoperational performance through strongbusiness partnerships, asset growth andfocused capability building initiatives.The long term LNG shipping contractscontinue to provide an effective cover forthe MISC Group against the volatility ofthe freight market which was prevalentduring the year. The year also sawenhanced returns from the heavyengineering business with the completionof major deepwater projects andincreased demand for high value marinerepair services.

Financial PerformanceAgainst this backdrop, MISC Groupgenerated a higher revenue ofRM11,198.9 million during the reviewperiod, an increase of 4.2% fromRM10,747.1 million recorded in theprevious period. Group profit before taxincluding exceptional gain wasRM2,930.3 million, marginally higherthan RM2,900.8 million before.

Earnings per share improved from 75.9sen to 76.7 sen while Net Tangible Assetsper share increased from RM4.60 toRM4.73. Debt to Equity ratio increasedmarginally from 0.36 times to 0.37 times.

DividendThe Board of Directors is recommendinga final dividend of 20 sen per share, taxexempt. Together with the interimdividend of 10 sen per share, tax exempt,declared and paid in December 2006,the total dividend for the financial yearwill be 30 sen per share, tax exempt.

Corporate DevelopmentMISC continue to anchor its vision ofbecoming "the preferred provider ofworld-class maritime transportationand logistics services" on its three corepillars of global energy shipping,capability driven heavy engineeringservices and ASEAN centric logisticsservices. These core pillars are supportedby continuous human resourcedevelopment emphasising on buildingleadership and capabilities.

The long term LNGshipping contractscontinue to provide aneffective cover for theMISC group againstvolatility of the freightmarket which wasprevalent during the year.


The Group’s chemicalshipping business willtake delivery of eightnew 38,000DWT chemical tankersby 2010.

During the year, MISC took delivery oftwo new LNG tankers, bringing its LNGfleet size to 23 tankers. The year alsosaw MISC securing a new medium termLNG shipping contract with BG Groupand extended a contract with Gaz deFrance (GdF).

AET continue to grow its fleet size bychartering-in four Aframax class tankersand took delivery of two Very LargeCrude Carrier (VLCC), increasing itsVLCC fleet to nine tankers.

Malaysia Marine and Heavy EngineeringSdn Bhd (MMHE) successfully completedand delivered FPSO Kikeh, the firstdeepwater Floating Production, Storageand Offloading (FPSO) facility to be builtin Malaysia. The completion of thefacility stands as a testimony to thesuccess of MMHE in building capabilityin the engineering and construction ofdeepwater facilities, a capabilitypreviously not available in Malaysia.In addition to FPSO Kikeh, MMHE alsocompleted and delivered two FloatingStorage and Offloading (FSO) facilities

namely FSO Cendor and FSO Abu.MMHE also embarked on its yardoptimization project aimed at increasingcapacity and efficiency to undertakemore deepwater works.

The Offshore Business Unit completedthe acquisition of 49% interest in FPSOBrasil, a deepwater FPSO currently inoperation in Brazil and acquired a 49%interest in FPSO Espirito Santo, anotherdeepwater FPSO, to be delivered in 2008.

The downcycle of the global linershipping business persisted during thefinancial year. Even with improved globaltrade volume, the liner businesscontinues to be impacted by softerfreight rates due to substantial capacitygrowth of larger TEU vessels and higheroperating costs. The downturn alsoaffected MISC Integrated Logistics SdnBhd (MILS) amidst its ongoing effort torestructure its haulage business and toenhance its capabilities to strengthen itsservice offerings.

Future OutlookAfter a strong growth of over 5 per centin 2006, the global economy is expectedto grow at a slower rate of about 4.5per cent in 2007 and 2008 amidstconcerns over persistently highcommodity prices and rising inflationarypressures. Against this background, thepresent global excess of vessel capacity isexpected to persist, exerting downwardpressure on freight rates. MISC willcontinue to enhance its capabilities andimprove its cost structures to meet thechallenges ahead, while leveraging onstrategic partnerships for businessgrowth opportunities.

The Group will maintain its capacity-ledgrowth strategy in its targeted energylogistics and transportation markets andthe delivery of another six LNG tankersbetween 2007 and 2009 will further


strengthen the Group’s global LNGshipping position. AET will continue toexpand its capacity with the contracteddelivery of eight Aframaxes and twoVLCCs. It will also strengthen its presencein the product tanker business segmentto capitalise on the increasing demandfor transportation of Clean PetroleumProducts (CPP). Moving forward, AET willcontinue to grow its fleet throughstrategic partnerships, joint ventures andin-charter arrangements in response tothe high asset price environment.

The chemical shipping market is expectedto remain promising driven by higherdemand for sophisticated chemicaltankers and the growing position of theMiddle East as a petrochemical producerand exporter. The Group’s chemicalshipping business will take delivery ofeight new 38,000 DWT chemical tankersby 2010 and will continue buildingeconomies of scale through newbuilds orin-charter programs to achieve globalreach trading capabilities in Asia, Europeand the Americas.

The Group expects to see further growthof its energy business with anticipated

international as well as domesticmaritime and academic institutions. Withthe business expansion and improvementinitiatives in place supported byappropriate human resource strategies,MISC is confident of sustaining businessgrowth and moving closer towardsachieving its vision.

AppreciationI would like to thank our shareholders,clients, affiliates and partners for theircontinued support and confidence inMISC. My appreciation also goes tothe Government of Malaysia andvarious regulatory bodies for theirsupport and assistance.

I would like to take this opportunity tothank Tan Sri Dato’ Seri Dr Hj Zainul AriffHj Hussain, for his invaluable service asan Independent Director for the pastseven years. I would also like to welcomeDato’ Dr. Wan Abdul Aziz Wan Abdullah,who was appointed as a new Boardmember in September 2006. To my otherfellow Board members, I wouldlike to express my gratitude for theirwise counsel in charting the Group’sdirection to ensure our continuedgrowth and success.

Finally, my sincere gratitude goes to theemployees of the MISC Group for theirloyalty, dedication and contributions.

Tan Sri Dato Sri Mohd Hassanbin MaricanChairman

higher contribution from the offshore andheavy engineering sectors on the back ofpositive market prospects for offshoreexploration and production activities,especially in the deepwater sector.

The liner business is expected to continuefacing a difficult year against excesstonnage, softer freight rates and escalatingoperating costs. Liner business willcontinue to focus on improving its costefficiencies and strengthening its yieldmanagement activities.

In meeting the challenges ahead, MISCwill continue to focus on human capitaldevelopment to drive and sustaincompetitive edge in achieving its businessobjectives. There will be greater emphasison building the required capabilities andcompetencies as well as to developtechnical, business and leadership skills.This effort will be complemented by theGroup’s education and training academy,Akademi Laut Malaysia (ALAM), that willcontinue to enhance its role to develophighly qualified and competent maritimeand shipping personnel for the Group,the nation and the industry throughstrategic alliances with world class

038statement on corporate governance

The Board ofDirectors(the Board) of MISC Berhadis committed to ensuringthat the highest standardsof corporate governance areapplied throughout theGroup. The Board fullysupports the principles ofCorporate Governance in theMalaysian Code of CorporateGovernance (the Code) andstrives to adopt the substancebehind corporate governanceprescriptions. The Board ispleased to disclose theGroup’s application of thePrinciples as set out in Part 1of the Code.

THE BOARD

An experienced and dedicated Board consisting of members witha wide range of financial, business and public service backgroundsleads and controls the Group effectively. The Group recognises thevital role played by the Board in the stewardship of its directionand operations, and ultimately the enhancement of long termshareholders' value. The Directors bring depth and diversity intheir expertise to the leadership of the challenging and highlycompetitive maritime and integrated logistics business.

The Board reserves material matters to itself for decision, whichincludes the overall Group strategies and directions, acquisitionsand divestment policies, approval of major capital expenditureprojects, plans and budgets and significant financial matters, aswell as human capital policies including succession planning fortop management.

Statement onCorporateGovernance


a. Board Compositioni The Board has a balanced composition of executive and

non-executive Directors. More than one third of theBoard are independent Directors, which is in compliancewith the Listing Requirements of Bursa MalaysiaSecurities Berhad.

The Board comprises eight Directors. The Chairman is aNon-Executive Director, whilst the President/ChiefExecutive Officer is an Executive Director. Five of theremaining six Directors are Independent Non-ExecutiveDirectors.

A brief profile of each Director is presented on pages 24to 27 of this Annual Report.

ii There is a clear division of responsibilities between theroles of the Chairman and the President/Chief ExecutiveOfficer to ensure a balance of power and authority.

The Chairman is primarily responsible for the orderlyconduct and working of the Board whilst the President/Chief Executive Officer is responsible for the overalloperations of the business organisational effectivenessand the implementation of the Board's strategies andpolicies. The President/Chief Executive Officer is assistedby the Management Committee in managing thebusiness on a day to day basis.

iii The five Non-Executive Directors are independent ofmanagement and free from any business or otherrelationships that could materially interfere with theexercise of their independent judgement. They have thecalibre to ensure that the strategies proposed by theManagement are fully deliberated and examined in thelong term interest of the Group, as well as theshareholders, employees and customers.

b. Board MeetingsBoard meetings are scheduled in advance at the beginning ofthe new financial year to enable Directors to plan ahead andfit the year’s meetings into their own schedules. The Boardmeets at least six times a year. Additional meetings are heldas and when required.

During the 12 months ended 31 March 2007, sevenmeetings of the Board were held.

Details of the attendance are as follows:

The agenda and a full set of Board papers for considerationare distributed well before meetings of the Board to ensurethat Directors have sufficient time to read and be properlyprepared for discussion at the meetings.

Comprehensive and balanced financial and non financialinformation are encapsulated in the papers covering amongstothers, strategic, operational, regulatory, marketing andhuman resource issues.

Minutes of the Board meetings which include a record of thedecisions and resolutions of the Board meetings are properlymaintained by the Company Secretary.

The Directors have unhindered access to the advice andservices of the Company Secretary who is responsible forensuring that Board meeting procedures are followed andthat applicable rules and regulations are complied with.

Board MeetingsMaximum

Meetings Possible toBoard of Directors Attended Attend

Tan Sri Dato Sri MohdHassan bin Marican 7 7Dato’ Shamsul Azharbin Abbas 7 7Dato Sri Liang Kim Bang 7 7Harry K Menon 7 7Dato Halipah binti Esa 5 7Datuk Nasarudin binMd Idris 6 7Dato’ Kalsom bintiAbd Rahman 5 7Dato’ Dr. Wan Abdul Azizbin Wan Abdullah(appointed on the Boardon 14 September 2006) 2 4


c. Appointment and Re-election of DirectorsIn accordance with the provision of the Corporation's Articlesof Association require that at least one third of the Directorsshall retire from office at least once every three years but shallbe eligible for re-election. Directors who are appointed by theBoard shall hold office until the next Annual General Meetingof the Corporation and shall then retire and be eligible for re-election by the shareholders.

d. Nomination CommitteeSince the composition of the Board of Directors comprisedmainly of Non-Executive Directors, the Board had for the pastyears assumed and functioned as a Nomination Committee.

This Committee is empowered to bring to the Board itsrecommendations on the appointment of new Executive andNon-Executive Directors and the re-election of Directors whoretire by rotation in accordance with the Corporation’sArticles of Association.

All members of the Board participate in assessing, identifying,recruiting, nominating, appointing and orienting suitablecandidates who can contribute effectively to the growth ofthe Corporation. Any Board member who has interest in anymatter raised by the Committee abstains himself from thedeliberations and voting.

The Committee also ensures that the Board has anappropriate balance of expertise and abilities. Theeffectiveness of the Board as a whole and the contribution ofeach Director are also assessed.

e. Directors' TrainingAll Directors have attended the Mandatory AccreditationProgramme (MAP) in compliance with the ListingRequirements of Bursa Malaysia Securities Berhad.

Directors are encouraged to attend continuous educationprogramme, talks, seminars, workshops, conferences and

other training programmes to enhance their skill andknowledge and to ensure Directors are kept abreast with newdevelopments in the business environment.

During the financial year, all the Directors have attended therelevant training programs to further enhance theirknowledge to enable them to discharge their duties andresponsibilities more effectively.

f. Remuneration CommitteeSince the composition of the Board of Directors comprisedmainly of Non-Executive Directors, the full Board had for thepast years assumed and functioned as a RemunerationCommittee. The committee decides on the remunerationpolicy and terms of conditions of service for the Group aswell as the remuneration of members of the ManagementCommittee and members of the Board. The Directors do notparticipate in the deliberations and voting on decisions inrespect of their own remuneration packages.

Matters concerning the remuneration of senior managementstaff of the company are considered by the ManagementDevelopment Committee.

In effect MISC has a Remuneration Committee at two levels.

ACCOUNTABILITY AND AUDIT

a. Audit CommitteeThe Audit Committee consists of four Independent Non-Executive Directors with Dato’ Halipah binti Esa as Chairman.The composition and Terms of Reference of the AuditCommittee are also provided on pages 46 to 47 of thisReport. The Audit Committee met four times during thefinancial year.

The External Auditor, the Vice President Finance, the GeneralManager of Internal Audit, the General Manager of ShipManagement Audit were in attendance at allthe meetings.


Details of attendance are provided below:

Audit Committee Attendance Record (1 April 2006 – 31 March 2007)

Members Meetings Attended Maximum Possibleto Attend

Dato' Halipah binti Isa 3 4

Dato Sri Liang Kim Bang 4 4

Harry K Menon 4 4

Dato' Kalsom binti Abd Rahman 1 1(appointed on the BAC on28 February 2007)

Harry K Menon, who possessed the stipulated accountancy qualification, was appointed as amember of the Audit Committee on 13 November 2001.

In addition to the duties and responsibilities set out in the Terms of Reference, the AuditCommittee also acts as a forum for discussion on internal control issues and contributes to theBoard's review of the effectiveness of the Company's internal control and risk managementsystem. The Audit Committee also conducts a review of the internal audit functions and ensuresthat no restrictions are placed on the scope of statutory audits and on the independence of theinternal audit functions.

The Audit Committee meets the external auditors to discuss the annual financial statements andtheir audit findings.

To manage confidentiality issues, the Board Audit Committee meetings are held on the same dayas the Board of Directors meetings. The minutes of the Board Audit Committee are formallytabled to the Board for noting and action, where necessary.

b. Internal ControlInformation on the Group's internal control is presented in the Statement on Internal Control setout on pages 42 to 45 of this Report.

c. Relationship with External AuditorsThe Board ensures that there are formal and transparent arrangements for the maintenance ofan objective and professional relationship with the external auditors.

d. Directors’ RemunerationCurrently, the annual fees of RM60,000.00 and RM36,000.00 are being paid to the Chairmanand all Non-Executive Directors respectively. In addition, for every meeting attended, a meetingallowance of RM400 is paid to each Director.

The Malaysian Code onCorporate Governance requires theBoard of Directors (Board) of public listedcompanies to maintain a sound system ofinternal control to safeguard shareholders'investment and the Group's assets.

042internal control statement

Bursa Malaysia Listing Requirements, Paragraph 15.27(b)requires the Board to make a statement about the state ofinternal control of the listed entity as a Group.

The Board of MISC Berhad (MISC) is committed to continuouslyimprove the Group’s system of internal control and is pleased toprovide the following statement.

Accountability of the Board

The Board of MISC acknowledges its overall responsibility forthe Group's system of internal control and its effectiveness tosafeguard the shareholders' investment and the Group's assets.This includes reviewing the strategic direction, financial,operational and compliance controls and the risk managementpolicies and procedures.

The Board defines risk parameters and standards guided by thecorporate objective to maximise long term shareholders' valuewhilst meeting the needs of the customers, employees and allrelated stakeholders. In discharging its stewardship responsibilities,the Board has defined the risk management framework toidentify the key risk areas, evaluate the impact and set broad

strategic policies relating to the risks and the relevant controlsthereof, of which details are set-out in the following pages.This is then delegated to the Management to implement theBoard’s direction and policies on risk and control.

It should be noted that the system of internal control is designedto manage and control risks appropriately rather than eliminatingthe risk of failure, to achieve business objectives. Accordingly,these internal controls systems can only provide reasonable andnot absolute assurance against material misstatement or loss orthe occurrence of unforeseeable circumstances.

The Board confirms that there is a continuous process foridentifying, evaluating and managing the significant risks facedby the Group, which has been in place for the financial yearunder review.

The process is regularly reviewed by the Board and is inaccordance with the guidance as contained in the publication –Statement on Internal Control : Guidance for Directors ofPublic Listed Companies.

Risk Management Framework

The Board has endorsed the establishment of a Risk AdvisoryGroup (RAG) and identified that MISC is exposed to four (4)major risk categories, namely Maritime Risk, Credit Risk, CountryRisk and Finance Risk.

Simultaneously, risk committee/councils were formed to manageeach risk category and be accountable to the RAG on any issuesand developments pertaining to the respective risk areas.

A proper risk management structure and reporting frameworkhas been established to ensure risks are being monitored,assessed and reviewed regularly as reflected below:

Internal ControlStatement


Note *: represented at PETRONAS respective councils

The RAG comprises certain members of the MC and isresponsible to oversee the overall risk management function inMISC and to advise the President / CEO and MC on issuesrelating to :

• policies, procedures and guidelines related to riskmanagement in line with market changes over time

• positions and exposures to ensure compliance with Grouppolicy and recommend corrective actions

• issues arising from business lines and recommend solutionsto management

• risk limits

The RAG is required to meet and update any risk managementissues on a regular basis to the President / CEO, MC and theBoard.

TheMaritime Risk Council (MRC) is responsible to ensurevarious maritime-related risks are identified and all necessarymeasures are in place for MISC to comply with the stringentinternational safety and environmental standards. Continualassessment and profiling is carried out to ensure preventive and

recovery measures are adequate in the challenging maritimeenvironment. The Council has developed the Maritime RiskManagement Framework and Guidelines in order to ensure thatmaritime risks are managed in a structured manner. Furtherimprovement actions have been identified for implementation toensure that the impact of maritime risk exposure can bemitigated or further reduced.

TheMISC Credit Committee (MCC) regularly reviews the creditrisk and advises on appropriate measures to improve existingcredit control procedures and practices and the quality of TradeAccounts Receivables. The MCC formulates its credit & tradingrisk based on the credit & trading operational guideline issued bythe PETRONAS Group’s Credit & Trading Risk Council (CTRC).The credit & trading risk framework and guidelines have beendeveloped to ensure all matters relating to credit & trading riskare being addressed accordingly.

MISC has a representative to PETRONAS Country Risk Councilwhich allows the company to leverage on resources of PetronasGroup in managing country risks. At the same time, MISC hasalso developed the Country Risk Management Framework andGuidelines as a guide in managing country risk. The frameworkand guidelines would facilitate a structured and consistentapproach in managing country risks.

The Group has financial risk guidelines for managing the Group'sforeign exchange, interest rate, liquidity, price and counter-partyrisks. The Group also leverages on PETRONAS Group resourcesvia the Finance Risk Council (FRC) when addressing/assessingfinancial risks. The FRC is a forum which proactively discusses,reviews and monitors finance risk exposure at Group level andmakes appropriate recommendations to companies within theGroup. It also fosters coordination of the Group Finance riskmanagement practices and approaches in accordance withestablished policies and guidelines.

MISC benefited from being part of the PETRONAS Group, whichhas an established Risk Management Committee, which defines,develops and recommends risk management strategies andpolicies for the PETRONAS Group. In addition, the RiskManagement Committee also coordinates group-wide riskmanagement in terms of building risk management awarenessand capabilities, monitoring the risk exposures and planningresponses to potential major risk events.

Boardof Directors(Board)

President/CEO

Risk AdvisoryGroup (RAG)

ManagementCommittee

(MC)

MISC CreditCommittee

(MCC)

Maritime RiskCouncil (MRC)

Finance RiskCouncil (FRC)*

Country RiskCouncil (CRC)*


Key ProcessesThe process of governing the effectiveness and integrity of thesystem of internal control is carried throughout the various areasas follows:-

1. The Board Audit Committee (BAC) operating within itsterms of reference andManagement Audit Committee(MAC) performs an important role in ensuring that thereare effective risk monitoring and compliance procedures toprovide the level of assurance required by the Board.

2. Senior Management sets the tone for an effective controlculture in the organisation through the company’s sharedvalues, developed to focus on the importance of these fourkey values:-

• Loyalty• Integrity• Professionalism• Cohesiveness

The importance of the shared values is manifested in theCorporation’s Code of Conduct for Officers and Staff which isissued to all staff upon joining. Employees are required to strictlyadhere to the Code in performing their duties.

3. MISC Group Internal Audit (GIA), reporting to the BAC,performs an independent scheduled audits within the Groupto evaluate and assess the effectiveness of risk management,internal controls and governance process. GIA also conductsadditional assurance assignments upon request by theManagement, MAC or BAC. The BAC reviews audit reportsand also conducts annual assessment on the adequacy ofGIA’s scope of work, functions and resources including itsannual audit plan and strategy.

Prior to submission to the BAC, GIA submits the findings andrecommendations on audit issues to the MAC for executivereviews. The deliberations and decisions are shared duringBAC meetings.

The key in solving lapses in internal controls is the executionof the Agreed Corrective Actions which are encompassed inthe audit reports. GIA monitors the status of theirimplementation through the Quarterly Audit Status Reportwhich is presented before the MAC and BAC half yearly.

The conducts of internal audit work is governed by theInternal Audit Charter and the Internal Audit CharterMemorandum.

4. The Ship Management Audit Division, which reportsregularly to the MAC and BAC, performs independentscheduled audits on the MISC Group vessels. The audits aredesigned to verify, evaluate and review the relevantmanagement system activities, relating results comply withthe planned arrangements and effective implementation.The audits are also designed to ensure vessels’ integrity ismaintained with on-going maintenance to enhance thesafety and reliability at all times.

MISC Group vessels are subject to stringent audits,vettings/inspections to meet various regulatory andcommercial requirements. These include vettings by oil majorsand audits by the Malaysian Maritime Authority and shipclassification societies to maintain international safety andsecurity management certification under the relevant Codes.

In addition, the Group is also subject to periodicmanagement reviews by our customers’ risk managemententities such as EXXON MOBIL, British Petroleum Plc (BP),Chevron Texaco, SHELL and Broken-Hill Properties (BHP).

The Ship Management Audit Division would submit itsfindings and recommendations on corrective actions ofeach ship audited to the respective Fleet Management. Themonitoring of follow-ups and the status of the correctiveactions is maintained on 2 monthly basis. On a quarterly aswell as annual basis, these findings are analysed andconsolidated reports are submitted to the MAC for review,comments and further actions. The BAC is also updated onthe status of the corrective action as appropriate.

5. There is a Corporate Health, Safety and Environment(CHSE) Division which drives various HSE sustainabilitypolicies & initiatives and defines the framework thatexemplifies the corporate’s effort to continuously meet legalcompliance as a minimum. CHSE also drives strategies andmonitors performance to ensure HSE risks are managed to aslow as reasonably practicable.


6. In addition to the CHSE, there is also a Corporate SecurityDivision (CSD) which maintains a clear policy, proceduresand framework with the aim to continuously monitoradherence to established industry security standards as wellas international security standards applicable under therelevant codes.

Other Significant Elements of Internal ControlSystems1. The Board reviews quarterly reports from Management on

key operating performance, legal, environmental andregulatory matters. Financial performance is deliberated bythe MC and also tabled to the Board on a quarterly basis.

2. Limits of Authority (LOA) manual provides a soundframework of authority and accountability within theorganisation and facilitates quality and timely corporatedecision making at the appropriate level in theorganisation’s hierarchy.

3. The Group performs a comprehensive annual budgetingand planning exercise including the development ofbusiness strategies for the next five years, and establishmentof performance indicators against which business units andsubsidiary companies can be evaluated. Variances against thebudget are analysed and reported internally on a monthlyand quarterly basis and reported quarterly to the Board. TheGroup’s strategic directions are also reviewed semi-annuallytaking into account changes in market conditions andsignificant business risks.

4. There is a clear procedure for investment appraisalincluding equity investment or divestment and capitalexpenditure. Tender Committees are established to ensuretender evaluation exercises are conducted in an effective,transparent and fair manner.

5. Information and Communications Technology (ICT) isextensively employed in MISC to automate work processesand to collect key business information. MISC’s informationand communication systems, which acts as an enabler toimprove business processes, work productivity and decisionmaking, are being implemented throughout the Group. AnInformation and Communications Technology SteeringCommittee (ICTSC) is established to provide strategicdirections and guidance to ICT initiatives. Progress of ICT

initiatives is monitored and reported at the ICTSC meetingsto ensure smooth implementation. System reviews areinitiated and conducted to confirm adequate controls arebeing established in order to adhere to the Company’sbusiness objectives, policies and procedures. Quarterlyreports presented to the Management and Board AuditCommittees and agreed corrective actions are taken toaddress any non-compliances.

6. The professionalism and competency of staff are enhancedthrough a structured training and development programand potential entrants/candidates are subject to a stringentrecruitment process. A performance management systemis in place, with established key performance indicators (KPIs)to measure staff performance and the performance reviewis conducted on an annual basis. Action plans to addressstaff developmental requirements are prepared andimplemented timely. This is to ensure that staff are able todeliver their KPIs so that the company can meet its futuremanagement requirements.

The Board does not regularly review the internal control systemof its associated companies joint ventures and jointly controlledentities, as the Board does not have any direct control overtheir operations. Notwithstanding, the group’s interests areserved through representation on the board of the respectiveassociated companies and receipt and review of managementaccounts and inquiries thereon. These representations alsoprovide the Board with information for timely decision makingon the continuity of the Group's investments based on theperformance of the associated companies, joint ventures andjointly controlled entities.

There were no material losses incurred during the current financialyear as a result of weaknesses of internal control. Managementwould continue to take measures to strengthen the Group’scontrol environment.

This statement is made in accordance with the resolution of theBoard of Directors dated 10th May 2007.

046terms of reference of the board audit committee

3. Chairman of Board Audit CommitteeThe members of the Committee shall elect a Chairman fromamong their number who shall be an Independent Director.

4. Attendance at MeetingsThe President/CEO, the Vice President Finance, the GeneralManager Internal Audit and representative of the externalauditors shall normally attend meetings. However, at leastonce a year the Committee shall meet with the externalauditors without any Executive Board member present.

The General Manager Internal Audit shall be the Secretary ofthe Committee.

A quorum shall be two members.

5. Frequency of MeetingsMeetings shall be held not less than three times a year. Theexternal auditors may request a meeting if they consider thatone is necessary.

6. AuthorityThe Committee is authorised by the Board to investigate anyactivity within its Terms of Reference. It is authorised to seekany information it requires from any employee and allemployees are directed to co-operate with any request madeby the Committee.

The Committee is authorised by the Board to obtain outsidelegal or other independent professional advice and to securethe attendance of outsiders with relevant experience andexpertise if it considers this necessary.

Terms of Referenceof the Board AuditCommitteeBoard Audit Committee Members

Dato' Halipah binti Esa (Chairman)Dato Sri Liang Kim BangHarry K MenonDato' Kalsom binti Abd Rahman

1. ConstitutionThe Board Audit Committee ("Committee") was establishedon 28 June 1993.

2. MembershipThe Committee shall be appointed by the Board fromamongst its directors and shall consist of not less than threemembers with the majority being Independent Directors.

At least one member of the Committee must be a member ofthe Malaysian Institute of Accountants (MIA) or have at least3 years working experience and have passed theexaminations specified in Part 1 of the 1st Schedule of theAccountants Act 1967 or be a member of one of theassociations of accountants specified by Part II of the 1stSchedule of the Accountants Act 1967.

No Alternate Director can be appointed a member ofthe Committee.

047terms of reference of the board audit committee

7. DutiesThe duties of the Committee shall include the following:

• review the following and report to the Boardof Directors:-

a. with the external auditors, the audit plan;

b. with the external auditors, their evaluation of thesystem of internal controls;

c. with the external auditors, their audit report;

d. the assistance and co-operation given by theemployees of the Corporation to the externalauditors;

e. the adequacy of the scope, functions and resources ofthe internal audit functions and that it has thenecessary authority to carry out its work;

f. the internal audit programme, processes, the resultsof the internal audits, processes or investigationundertaken and whether or not appropriate action istaken on the recommendations of the internal auditfunctions;

g. the quarterly results and year end financialstatements, prior to the approval by the Board ofDirectors, focusing particularly on:-

i. changes in or implementation of major accountingpolicy changes;

ii. significant and unusual events; andiii. compliance with accounting standards and other

legal requirements;

h. any related party transaction and conflict of interestsituation that may arise within the Corporation orGroup including any transaction, procedure orcourse of conduct that raise questions ofmanagement integrity;

i. any letter of resignation from the external auditors;and

j. whether there is any reason (supported by grounds) tobelieve that the Corporation’s external auditors arenot suitable for re-appointment; and

k. recommend the nomination of a person or persons asexternal auditors.

8. Reporting ProceduresThe Secretary shall circulate the minutes of meetings of theCommittee to all Members of the Board.

048

President / CEO’sReport

049

For thefinancial yearended 31stMarch 2007,the shipping industrycontinued to bechallenging withincreasing operatingcosts and softeningfreight rates particularlyin the liner business.World Gross DomesticProduct (GDP) growthimproved slightly in2006 despite high oilprices and risinginterest rates. Thecontinued globaleconomic growthsustained the demandfor energy especiallyoil and gas.

049president/CEO’s report

The growth in global LNG trade demandcontinued to support the growing LNGshipping tonnage. As expected, theslower global oil demand growth dueto high oil prices and excess capacityof petroleum tankers exerted downwardpressure on the overall petroleum freightrates. The chemical shipping marketremained robust throughout the yeardue to increased global chemicalseaborne trade driven mainly by newpetrochemical plants in the MiddleEast and the introduction of newregulation requiring tankers withhigher specification.

MISC’s offshore and heavy engineeringbusinesses benefited from the rapidgrowth in the oil & gas upstreamExploration and Production (E&P)activities through its progressivecapability development. Leveraging onstrategic partnerships, offshore businessenhanced its position by offering moreeffective solutions for domestic andinternational small field and deepwateroffshore projects. Our heavy engineering

arm, MMHE produced a record profitfor the year as a result of its refocusedstrategic direction and successfulimplementation of its capabilitybuilding initiatives.

The liner shipping market continuedto experience cyclical downturn onthe back of softening freight rates,overcapacity and increased operatingcost. However, the redesigning of ournetwork enabled Liner business toenhance its cost efficiency and improveits yield management activities toremain competitive. In response to thehighly challenging domestic logisticsenvironment, MILS rationalised itshaulage business and developed newfacilities to improve its service offerings.

Leveraging on strategicpartnerships, offshorebusiness enhanced itsposition by offering moreeffective solutions fordomestic and internationalsmall field and deepwateroffshore projects.


Storage and Regasification Unit (FSRU),and Compressed Natural GasCarriers (CNGC).

MISC continued to support PETRONAS’Global LNG business expansion strategywith the delivery of its 23rd LNG carrier,Seri Angkasa in January 2007. SeriAngkasa was delivered to MLNG tocommence its twenty-year time chartercontract. MLNG also renewed its chartercontracts for Tenaga Tiga and TenagaLima for fifteen years commencing May

The global LNG shipping industrycontinued to be robust during the yearunder review with the strong Global LNGtrade demand growth of 10.6% ascompared to 8.8% growth in theprevious year. The World LNG fleet grewby 14.4% despite high newbuildingprices, boosting the global fleet size to222 vessels in 2006. The LNG shippingmarket is evolving towards leveraging ontechnology as a competitive advantage,hence many LNG shipping players areexploring new technological innovationssuch as the development of ShuttleRegassification Vessel (SRV), Floating

LNG ShippingBusiness

The year under reviewalso witnessed MISC’sfirst third party contractinvolving a new LNGcarrier, Seri Anggunwhich commencedmedium termemployment withBG Group inNovember 2006.

051LNG Shipping Business

and July 2006 respectively. Similarly,charter contracts for Aman Bintulu andAman Hakata were also extended to 2028.

The year under review also witnessedMISC's first third party contract involvinga new LNG carrier, Seri Anggun whichcommenced medium term employmentwith BG Group in November 2006.Subsequently, BG Group awarded asimilar contract for another new LNGcarrier of the same class which will bedelivered in December 2007. In addition,MISC enhanced further its relationshipwith Gaz de France (GdF) with anextension of its charter party contractfor Tenaga Satu for another yearstarting April 2007 with option fortwo more years.

During the year, 21.5% of MISC'srevenue and 44.9% of MISC's operatingprofit was derived from LNG ShippingBusiness.

To keep pace with the evolutionof technology in the LNG shippingindustry, MISC is partnering with aleading provider of floating productionfacilities for a joint development ofa FSRU and with a technology developerin exploring CNGC potentials.

The demand outlook for LNG shipping isexpected to remain strong in the comingyears, as LNG trade is forecast to doublein 2015 supported by the increasingsupply from new LNG liquefaction plantsin Oman, Australia, Nigeria, Trinidad &Tobago, Qatar, Norway and Russia;coupled with increasing demand forcleaner fuels mainly from Europe, Japan,Korea, China and India. In realising itsaspiration to be a global leader in LNGtransportation, MISC will apply a threepronged strategy to continually providePETRONAS its LNG transportation andlogistics needs, secure third party longterm contracts and leverage on synergiesbetween different business units.

LNG trade is forecast todouble in 2015 supportedby the increasing supplyfrom new LNG liquefactionplants in Oman, Australia,Nigeria, Trinidad & Tobago,Qatar, Norway and Russia.

Hemiji Castle, Japan

ALGERIA

EUROPE

EGYPT

NIGERIA

YEMEN

TURKEY

MEXICO

USA

JAPAN

TAIWAN

SOUTH KOREA

MALAYSIA

AUSTRALIAExisting Routes

Future Routes

TRINIDAD &TOBAGO


The overall freight rates in the petroleumshipping industry were under pressuredue to slower global oil demand growthespecially from North America andChina. However, the weakening of oilprices from previous highs assisted thedemand for oil to remain buoyant.The delivery growth of newbuildings washigher than the scrapping rate of oldtonnages. As a result, petroleum tankerfreight rates were softer especially in theAframax segment.

PetroleumShipping Business

A joint venture withRestis Group wasestablished to co-ownten new Aframaxtankers contracted atSungdong Yard withdeliveries between2009 and 2011. Thisventure will furtherenhance AET's positionin the Aframax Europemarket.

President & CEO of AET, En. Amir Azizan at the Launching of AET’s new corporate identity.

053petroleum shipping business

two tankers, AET has a product tankerfleet of ten.

In the year under review, 33% of MISC'srevenue and 42.7% of its operatingprofit were derived from the petroleumshipping business.

The short term outlook for petroleumshipping business will however remainchallenging. The high influx of newbuildsand extended phase-out of ageingtankers will generate excess capacity,exerting further downward pressureon VLCC and Aframax freight rates.However, the anticipated high demandfor transportation of Clean PetroleumProducts (CPP) in the medium term willprovide positive prospect in the producttanker segment. In facing the challengesand opportunities ahead, MISC willstrengthen its global leadership positionin the Aframax tanker market; developitself as a significant global owneroperator of VLCCs and further capitaliseon opportunities in product tankerbusiness segment. These strategies willfurther enhance MISC's presence as aleading petroleum tanker operator in theAtlantic basin market and in the MiddleEast markets.

Earlier in the year, a joint venture withRestis Group was established to co-ownten new Aframax tankers contracted atSungdong Yard with deliveries between2009 and 2011. This venture will furtherenhance AET’s position in the AframaxEurope market. AET also contracted sixAframax tankers at Tsuneishi shipyardwith deliveries between 2009 and2010. This will be part financed throughsale and lease-back arrangements forfive of its older Aframax tankers. Thisarrangement will enable AET tocontinue operating these tankers whilstre-investing the capital released in newertonnage. AET also grew its Aframax fleetby in-chartering four additional tankersthus enhancing its Aframax critical massto forty eight (thirty one owned). Duringthe year, AET took delivery of twoVLCCs, Bunga Kasturi Tiga and BungaKasturi Empat bringing its VLCC fleet toten tankers (nine owned).

Leveraging on its existing strength ofservice offerings, AET also expanded itspresence in product tanker services.Two MISC chemical tankers which weresubject to trading restriction due to newregulations were converted into producttankers in December 2006. With these

The anticipated highdemand for transportationof Clean PetroleumProducts (CPP) in themedium term will providepositive prospect in theproduct tanker segment.

Big Ben, United Kingdom


The year 2006 witnessed firm freightrates for the chemical shipping market.Demand for chemical tankers increasedon the back of considerable growth ofnew petrochemical plant capacityin the Middle East and heightenedpetrochemical trading activities. On thesupply side, growth in chemical tankertonnage was balanced by new deliveriesand the restriction of lower specificationtankers due to the revised MARPOLAnnex II Regulation.

ChemicalShipping Business

During the year, MISCalso successfullyrenewed nine Contractsof Afreightment (COA)with ExxonMobil,PETRONAS TradingCorporation, Kuok Oils& Grains Pte Ltd andIffcochart Limited.

055chemical shipping business

The outlook for chemical shippingindustry is encouraging with higherdemand for more sophisticated chemicaltankers and the development ofpetrochemical plants in the Middle East.In response to this positive outlook,MISC will continue developing itspresence in the niche market segmentsof chemical and vegetable oiltransportation by building economies ofscale either through newbuilds or incharter programs. With theimplementation of the growth strategyfor the chemical shipping business,MISC will have global reach capabilitiestrading in Asia, Europe and the Americasand establish itself to be a leader in theglobal chemical tanker market.

As highlighted last financial year, six ofMISC’s single hull chemical tankers wererestricted from transporting vegetable oilfrom January 2007 as stipulated byMARPOL Annex II Regulation. Inmaintaining the trading opportunities ofthese tankers, MISC chartered out fourof the single hull Anggerik class tankersto Bryggen Shipping AS for five yearscommencing August 2006 andconverted the two Semarak class tankersto product tankers trading under AET.During the year, MISC also successfullyrenewed nine Contracts of Afreightment(COA) with ExxonMobil, PETRONASTrading Corporation, Kuok Oils & GrainsPte Ltd and Iffcochart Limited; extendedone COA with Tenaga Nasional Berhad(TNB) and secured seven new contractswith Golden Hope Berhad, FR8Navigation, Wilmar Trading Pte Ltd andIOI Loders Crocklaan.

MISC's chemical shipping business is arelatively small contributor to MISC'soperating results, accounting for 4.8% ofMISC's revenue in 2007 and 3.8% of itsoperating profit.

Taj Mahal, India


With demand for hydrocarbons risingsteadily and reserves declining, oil andgas companies are increasing theirupstream E&P activities. The high oil pricehas spurred the demand for offshoredeepwater and small field developmentespecially for projects involvingFPSO/FSOs for the next 5 years. Asia isexpected to outpace other regions indeepwater offshore developmentespecially in Malaysia and Chinawhile other countries in the region

will be focusing on shallow waterprospects. This demand presents anattractive opportunity for MISC toenhance its offshore business byoffering comprehensive solutions foroffshore development.

During financial year 2006/2007, MISCcompleted and delivered its second FSOfacility, which was converted at MMHE,for deployment in Cendor field, offshoreKerteh, Terengganu. FSO Cendor is on a

Offshore Business

High oil price hasspurred the demand foroffshore deepwater andsmall field developmentespecially for projectsinvolving FPSO/FSOsfor the next 5 years.

057offshore business

two year lease contract with Petrofac,Malaysia to support the early productionsystem with future extension option. InMarch 2007, MISC delivered anotherFSO facility, FSO Abu to Abu Clusterfield, Terengganu to begin a ten-yearlease contract with PETRONAS CarigaliSdn Bhd (PCSB). These deliveries markedthe commitment MISC has in growing itsoffshore business and supporting thedevelopment of marginal fields in Malaysia.

In line with the growth of deepwater E&Pactivity in Malaysia, MISC was involved inthe construction of FPSO Kikeh forMurphy Sabah Oil Ltd. FPSO Kikeh, a jointventure project with Single BuoyMoorings Inc (SBM), which had beenconverted successfully at MMHE, wasdelivered to its designated location,offshore Sabah and is expected toproduce first oil in July 2007. The jointventure is a significant breakthrough forMISC into deepwater FPSO design,engineering and construction as well asoperation and maintenance.Strengthening further on the strategicpartnership with SBM, in November2006, MISC acquired a 49% equity stakein another SBM’s deepwater FPSO project,FPSO Espirito Santo which will bedelivered to the BC10 field, offshore

Brazil in November 2008 on a fifteen-year contract with SHELL. In supportingthe strategy to grow regionally andinternationally, MISC, partnering withother regional players had alsoparticipated in bidding for otherFPSO/FSO projects in Asia.

In 2007, Offshore Business contributed2% of MISC's revenue and 1.1% of itsoperating profit.

The demand outlook for FPSO/FSO isrobust as market drivers for offshore E&Pactivities will remain strong especially inAsia. MISC will place priority insupporting Malaysian small fielddevelopment through cost effectivesolutions and asset optimisation. MISCwill also strive to form strategic alliancesand deepwater technology acquisition aswell as carrying out feasibility studies onother potential floating facilities. Inpositioning itself as the preferredoffshore floating solutions providerin the region, MISC is committed toensure the required capabilities areinstitutionalised within the organisation.

FPSO Kikeh, a joint ventureproject with the Single BuoyMoorings Inc (SBM) is asignificant breakthrough forMISC into deepwater FPSOdesign, engineering andconstruction as well asoperation and maintenance.

National Congress Building, Brazil


The growth in global energy demand ledto increased E&P spending which had apositive impact on demand for offshorefloaters and structures. The rise inoffshore E&P activities led to high rigutilization, earning higher day rates, partof which went towards repairs of rigs.

However, our ship repair business wasaffected by the phasing-out of the singlehull tankers and the emergences of low-cost ship repair centres in China, Vietnamand Indonesia. The weakened freightmarkets also resulted in postponement ofship repair work.

Marine &Heavy EngineeringBusiness

The delivery of thedeepwater FPSO Kikehmarked MMHE’ssuccess in undertakinglarger deepwaterMarine Conversionprojects.

059marine & heavy engineering business

During the year under review, MMHEaccounted for 12% of MISC's revenueand 6% operating profits. MMHEsuccessfully completed three topsidefabrication projects namely the E11PB,Kikeh DTU and Ledang Anoa topsides.Two turret fabrication projects werecompleted and delivered to Australia andBrazil field development. MMHE alsocompleted two FSO projects, FSO Cendorand FSO Abu, and one deepwater FPSOproject, FPSO Kikeh, for MISC within theperiod. The delivery of the deepwaterFPSO Kikeh marked MMHE's success inundertaking larger deepwater MarineConversion projects. These projectssignify the capability of MMHE inparticipating in offshore heavyengineering deepwater projects.

To strengthen its Marine Repair business,MMHE formed a strategic partnershipwith Samsung Heavy Industries Co Ltd(SHI) in April 2006. The resultant jointventure company, MMHE-SHI LNG SdnBhd (MSLNG), provides maintenance andrefurbishment services to LNG

shipowners. In its initial year, MSLNGsuccessfully completed the repair of sixLNG carriers. In addition, MMHE alsocompleted high value marine repairs fornine LNG carriers, seventeen petroleumtankers, four chemical tankers and sixdrilling rigs.

The capability building initiative whichcontinued throughout financial year2006/2007 focused on strengtheningbusiness processes and improvingproductivity. The implementation ofprocurement and subcontractingcapability exercise resulted in a totalsavings of RM19 million. In its effort tobuild capabilities and facilities fordeepwater projects, MMHE embarkedon its yard optimisation initiative. Theyard optimisation initiative commencedin December 2006 with the developmentof the Cutting and Assembly workshopaimed at meeting the requirement oflarge deepwater projects. This optimisationinitiative will not only increase itsproductivity but will also position MMHEas a leading regional shipyard.

Global demand for deepwater oil & gasfacilities will remain strong due toincreasing spending in E&P. Capitalisingon the positive market prospects in thissector, MMHE expects to focus itsbusiness on high value marine repairsand on enhancing its engineering designand project management capabilities forconstruction and conversion of oil andgas support vessels as well as focusingon oil and gas deepwater engineeringsolution. Coupled with the yardoptimisation initiative, MMHE is setto achieve its vision of becoming theregional hub for engineering andconstruction of deepwater facilitiesand high value marine repairs.

The capability buildinginitiative, an implementationof procurement andsubcontracting capabilityexercise resulted in a totalsavings of RM19 million.

Sydney Opera House, Australia


As expected, the global liner shippingindustry experienced a market downturnduring the financial year. Though globaltrade volumes increased by 7.1%compared to 6.8% growth in theprevious year, the liner shipping industryremained challenging throughout theyear. The liner trade was plagued byovercapacity due to delivery of larger TEUvessels, higher bunker prices andoperating costs.

Freight rates for the Asia/Europe servicesaw substantial decrease in the first halfbut improved considerably towards endof second half of the year after a lowbase due to ongoing strong cargovolumes. As member of the Grand

Liner ShippingBusiness

A new service, HalalExpress wassuccessfully launchedand acceptedfavourably by themarket with the aim totap the growingdemand for halalproducts in the MiddleEast and IndianSubcontinent.

061liner shipping business

tap the growing demand for halalproducts in Middle East and IndianSubcontinent. Whilst the South Africaservice generated reasonable gains, thedomestic Perdana service managed tobreak-even despite operationalchallenges within the consortium.

During this challenging year, the linerbusiness nevertheless progressedfurther with its cost efficiency initiatives.MISC continued to reduce unit costthrough in chartering of tonnage. Thedisposal of the ageing Bunga Pelangiwas subsequently replaced with a similarsize vessel in chartered at attractiveterms. To strengthen the front lineoperations, MISC integrated its linerbusiness with MISC Agencies. During thisprocess, MISC formed a strategicpartnership with CargoSmart to furtherimprove its CRM efforts and providee-business solutions to liner customers.

The business outlook for liner shippingwill continue to be challenging in thecoming year due to overcapacity with

the delivery of newbuildings furtherpressuring freight rates. MISC's strategyis to focus on long haul routes bystrengthening its position in theEast-West trade with a focus on theEuropean markets. MISC will alsostrive to maintain a position in allianceswhere it is a core partner, and establishitself as a leading player in the Halalsupply chain solution.

Alliance, MISC injected three 5,334 TEUships to improve overall scale efficiencyunder a vessel swap arrangement for itstwo 7,943 TEU newbuildings, the BungaSeroja Series which were deliveredduring the year.

The Australia trade remained weak dueto low freight rates and temporary lossof Australian coastal cargoes due to anew entrant trying to re-establish as adomestic Australian operator whichlater failed. The New Zealand servicewas poor due to overcapacity but thenew enlarged consortium enhancedMISC services through competitiveproduct and cost.

The Intra Asia services continued to bea difficult market. MISC restructured itsservices and entered into an alliancewith Orient Overseas Container Line(OOCL) and TSK Line Agencies (TSK)for greater efficiency. A new service,MISC Liner Halal Express wassuccessfully launched and acceptedfavorably by the market with the aim to

Windmill, Netherlands


The Malaysian general logistics industryremained highly competitive andchallenging mainly due to overcrowdingof players providing similar services. Thehaulage industry continued to strugglewith low rates and rising operating costresulting in many players restructuringtheir haulage business. During the year,MILS restructured its haulage businesswhilst continuing to provide transportservices as part of its total logistics andsupply chain solutions.

The globalisation of markets significantlyincreased the demand for the movementof merchandise, goods and services inthe supply chain and logistics sector.Capitalizing on this trend, MILS will boostits position as a niche logistics playerespecially on the provision of value-added logistics services with thecompletion of MILS Logistics Hub (MLH)in Pulau Indah. The 3-phase developmentof the MLH, upon completion, will resultin the formation of a 90,000 square

IntegratedLogistics Business

MILS will boost itsposition as a nichelogistics playerepecially on theprovision of value-added logisticsservices with thecompletion of MILSLogisitcs Hub (MLH)in Pulau Indah.

063integrated logistics business

metres multi modular storage andprocessing facility. Awarded FreeCommercial Zone status, MLH will alsoprovide services including regionalstorage and distribution, VendorManaged Inventory (VMI), light assemblyand other core logistics solution services.

Leveraging on its strategic partnershipwith SterilGamma Sdn Bhd, MILS will beable to operate sterilisation andfumigation facilities at MLH. Through itsjoint venture with ETB Seafrigo, one ofEurope’s largest cold storage specialists,MILS will offer total cold chain logisticssolutions with the development of coldand chilled facilities at MLH. The facilitywill be MILS’ first halal hub supported bythe MISC Liner Halal Express Services,thus creating a hub and spoke networkfor halal products. In line with MILS’strategy to strengthen its automotivesupply chain and logistics capabilities, ajoint venture was formed with BLGInternational Logistics GmbH to offercustom-made solutions to theautomotive industry by providing a fullrange of automotive logistics services.

MILS is establishing a logistics hub toservice its customers in Middle East andAfrica through its joint venture companyMISC-Rais LLC.

The outlook for the regional logisticsmarket is positive due to the rapid growthin consumer markets and liberalisationof trade. Moving forward, MILS willfocus its efforts in the Oil & Gas, FastMoving Consumer Goods (FMCG),Automotive and Public Sector businesssegments. MILS will also replicate MLHbusiness model and capabilities to otherdistribution centres in the region. Inview of the strategic partnerships anddevelopment of MLH capabilities, MILSis set to achieve its aspirations as thepreferred partner in supply chainsolutions and logistics services.

Moving forward, MILS willfocus its efforts in the Oil& Gas, Fast MovingConsumer Goods (FMCG),Automotive Public Sectorbusiness segments.

Burj Al Arab, Dubai, United Arab Emirates


With global fleet growing in significantnumbers, regulations becoming morestringent and the evolvement of marinetechnology, the development of skilledand competent maritime and shippingpersonnel continued to be critical. In itsrally to meet the demand, Akademi LautMalaysia (ALAM) continued to engage itskey role as a centre in providing excellent

maritime education and trainingprograms through the continuousdevelopment of its curriculum andcourse offerings, acquisition of state ofthe art facilities and collaboration withhighly regarded maritime institutions.

Maritime Education

A Memorandum ofUnderstanding (MOU)was signed with theUnited States MerchantMarine Academy(USMMA) whichprovides abenchmarkingcapability for theenhanced curriculadeveloped in ALAM.

065maritime education

During the year under review, ALAMdeveloped strategic alliances withreputable academic and maritime traininginstitutions in an effort to continuouslyupgrade its capabilities and quality of itsmaritime education and training. AMemorandum of Understanding (MOU)was signed with the United StatesMerchant Marine Academy (USMMA)which provides a benchmarking capabilityfor the enhanced curricula developed inALAM. ALAM also has an affiliation withSouthshields Maritime College, whichis a United Kingdom maritime traininginstitute that specialises in providingseafarers with marine steam engineeringexpertise that is required for theoperation of most LNG carriers. Insupporting MISC's growth in the energysector in general and offshore businessin particular, an academic collaborationwith STC Group, The Netherlands wasdeveloped to improve the maritimelogistics and offshore basic trainingprogram. Locally, ALAM also signedMOUs with several higher technicallearning institutions including Universityof Technology Malaysia (UTM), InstitutePetroleum Technology of PETRONAS(INSTEP), University Technology of

PETRONAS (UTP) and SIRIM, with theaim of enhancing the training curriculafor the development of managementtrainees for Fleet Management Servicesand junior engineers for OffshoreBusiness Unit.

ALAM, in the pursuit to position itselfas the regional training hub for LNG,Petroleum and Chemical shippingpersonnel, continued to enhance itsfacilities with the acquisition of a seriesof simulators and the latest DistributedControl System. ALAM signed anagreement with Teledata Marine SystemsPte Ltd to develop the world’s firste-Learning package on LNG ShippingCargo Operations which is expected tobe launched in mid 2007. To add to theeventful year, ALAM's LNG simulatortraining syllabus was adopted by IMOas its model course. ALAM also createdhistory when the first eighteen Malaysianfemale cadets enrolled in its cadetshipprogram in July 2006. ALAM is nowbeing recognized not only as a maritimetraining centre but also as a businesspartner to the regional shipping and oil& gas players.

Going forward, ALAM's focus will be toproduce highly qualified and competentgraduates. The strategy to furtherdevelop and upgrade its curriculum andinfrastructure and to continue leverageon strategic alliances with leadingmaritime academies will better positionALAM to become a world class maritimeeducation and training institution withcapabilities in Energy shipping, shore-based maritime management andoffshore safety administration.


Significant growth in the global fleetwhere large numbers of LNG, petroleumand chemical tankers will be delivered upto 2011 and the enhancement of marinetechnology have shaped the shippingindustry to be constantly challenged withshortage of competent and qualifiedpersonnel. The shortage led to rampantmovement of personnel within theindustry and called for a strategicretention programme.

In MISC, the substantial fleet expansionplan demanded a larger pool ofcompetent seafarers with the requisiteleadership skills, mindset and behavioursto meet the dynamic industry challenges.

FleetManagement

In strengthening FMS'capabilites in emergingshipping and marineengineeringtechnologies, MISCinitiated steps tocooperate with UTMand ALAM on researchand advancetechnology transferprogrammes.

067fleet management

Fleet Management Services (FMS)capability building programme hasprogressed into the ‘solution design’stage. In this phase, focus was put onfive capability areas: maintenance,procurement, fuel efficiency, dry dockingand crew management.

In strengthening FMS’ capabilities inemerging shipping and marineengineering technologies, MISC initiatedsteps to cooperate with UTM and ALAMon research and advance technologytransfer programmes. The cooperationhad produced several initiatives duringthe year including the "Post GraduateProfessional Certificate Programme" andestablishment of the Marine TechnologyResearch and Database which will befurther continued to provide enhancedcapability for FMS in ensuring a poolof highly competent seafarers andfleet managers.

Focusing on enhancement of integrationand effective relationship between seaand shore staff, FMS continued with its

Senior Officers’ Management Forums forshipboard management. Four sessionswere conducted during the financial yearinvolving more than half of senior MISC'sship officers.

With the continuous implementation ofcapability building initiatives, focused onthe development of qualified andtechnologically savvy ship personnel, andthe committment to producing leaderswith the right mindset who will steer theorganisation, FMS is poised to supportMISC's business requirements. Thecapability driven FMS will not onlyprovide cost effective but alsocompetitive edge services to bring MISCto greater heights in facing the evolvingshipping and maritime industry.

FMS Initiativesof the Year

FMS Capability BuildingProgrammes

Senior Officers’ ManagementForums

UTM & ALAM Post GraduateProfessional CertificateProgrammes

Marine Technology Research &Database Setup


Recognising the importance of and needfor competent and committed humancapital to drive and sustain competitiveedge in achieving business targets, MISCimplemented several strategies andinitiatives with greater emphasis primarilyon areas of intensifying sourcing andbroadening talent sources; attracting theright talents; developing technical,business and leadership skills; andretaining talent.

During the year, MISC intensified itsintake of management trainees toeighty seven in various engineering,finance and business disciplines andexposed them to on-the-job trainingand guidance, in order to groom themto be future leaders in the organisation.In addition, forty five tertiary educationsponsorships were granted to selectedstudents to pursue undergraduatecourses in technical disciplines such

HumanResourceManagement

MISC also executedstructured executiveand managementdevelopmentprogrammes andcreated cross-postingopportunities within theGroup to provide jobenrichment foremployees.

069human resource management

as Naval Architecture, MarineEngineering and Mechanical Engineering,and in Finance, Accountancy andBusiness Administration.

To provide the executives with the rightskills and competencies at thedevelopmental stage of their career,MISC Skill Group Development frameworkwas instituted. In addition, the secondmentoring programme for sessionfinancial year 2006 till 2008 whichinvolved thirty six junior executives wasconducted to ensure right developmentof leadership skills in their early yearswith the organisation.

MISC also executed structured executiveand management developmentprogrammes and created cross-postingopportunities within the Group toprovide job enrichment for employees.An assessment centre was established toidentify potential leaders where throughDevelopment Workshops, theirleadership development and career pathwill be charted. Relevant ‘conditioning’programmes e.g. Leadership Excellenceat PETRONAS (LEAP) were conducted to

equip and prepare existing/new leadersin all aspects when assuming leadershippositions. To support continuousemployee education, Staff EducationEnhancement Programme (SEEP) wasimplemented commencing with oneexecutive sponsored to pursue Master ofBusiness Administration (MBA) in Financeat Harvard Business School. LeadershipOpportunity Matching (LOM), an exerciseto identify potential leaders and matchthem with opportunities within theorganisation, is ongoing to supportMISC's succession plan.

MISC Employee Tracking Mindset Surveywas conducted early in the year with theaim of understanding employeesand their motivation level. Severalmindset intervention programmes basedon the influence model were implementedto improve the mindset level and sustainthe change momentum. As part of thetalent retention strategy, MISC is reviewingits reward strategy by conductingindustry-specific total remunerationsurvey. The performance based culturewas further strengthened through

implementation of Individual PerformanceContracts (IPC) for all executives.

In meeting the challenges ahead, MISCwill continue to focus on human capitaldevelopment through continuousimplementation of suitable programmes.With the appropriate human resourcestrategies and initiatives in place, MISCis set to achieve its vision to be a globalchampion within the maritimetransportation and logistics business.


The shipping downcycle which started inlate financial year 2005/2006 continuedduring the year under review. It isanticipated that this trend will remainthroughout most of the coming year dueto significant vessel supply/demandimbalance and volatility of energy prices.With the ever changing and challengingshipping market, MISC will focus onstrengthening its strategic partnershipsfor business opportunities, growing itsasset size at the right price andimproving its cost effectiveness. MISCwill also look at inorganic growthopportunities as an alternative to buildcritical mass and expand global coverage.

Future OutlookMISC will continue its growth strategiesto be a global champion in energytransportation and logistics services byexpanding its LNG, petroleum andchemical shipping businesses. In view ofthe challenging shipping industry, MISCwill continue to be responsive to marketdevelopments and proactively strategiseto react to the dynamic market situation.Leveraging on present businesspartnerships, MISC will grow its thirdparty LNG business by sourcing andsecuring new long term contractsthrough tender and direct negotiations.The petroleum shipping business willdefend its global leadership position inthe Aframax tanker market and furthercapitalise on the opportunities withinproduct tanker market. The chemicalshipping business will continue todevelop its presence in the niche marketsegments of chemical and vegetable oiltransportation by seizing the opportunities

With the ever changingand challengingshipping market,MISC will focus onstrengthening itsstrategic partnershipsfor businessopportunities, growingits assets size at theright price andimproving its costeffectiveness.

071future outlook

presented by the substantial growth ofnew petrochemical plants in the MiddleEast and the ever growing palm oilshipping business from Asia.

The outlook for offshore and heavyengineering businesses is encouraging asthe increased global demand for energywill spur oil and gas fields developmentglobally. Continuous development ofsmall and deepwater offshore fields willincrease as relatively high fuel pricesrender the development of such fields tobe economically viable. MISC will focusits efforts in capturing a significantportion of the requirements for domesticand regional offshore floating facilities.Capitalising on the positive marketprospects of this sector, MMHE willcontinue to develop its competencies incompleting the oil & gas facilities atworld class standards. With its yardoptimisation initiative, MMHE willtransform itself into a regional hub forengineering and construction ofdeepwater facilities and high valuemarine repairs.

In the short to medium term, Linerbusiness will continue to be challengingdue to oversupply of capacity which isexpected to put downward pressure onthe freight rates. Liner business willfocus on rebalancing its asset portfoliomix, improving cost efficiencies andstrengthening its yield managementinitiatives. The new MLH in Pulau Indahwill position MISC as one of the premierlogistics companies with state of the artfacilities. MISC will continue to integrateits Liner business with MILS indeveloping an ASEAN centric liner andlogistics business.

Despite the challenging marketenvironment, with the support ofqualified leaders, institutionalisedcapabilities and entrepreneurial mindsetand behaviors, MISC will deliver worldclass performance, build better resilienceand grow in size. With its strategies inplace, MISC will move forward to achieveits vision of becoming "the preferredprovider of world-class maritimetransportation and logistics services".

On behalf of the Management, I wouldlike to thank all our staff for theirdedication and commitment towardsrealising our vision; our valued andsupportive clients and partners; theGovernment and its Agencies; and lastbut not least our stakeholders andshareholders for their trust and support.

I would also wish to express mygratitude to the Chairman, Board ofDirectors and Board Audit Committeefor their guidance and assistancethroughout the year.

Dato’ Shamsul Azharbin AbbasPresident/Chief Executive OfficerKuala Lumpur

072corporate highlights

CorporateHighlights06-07

2006 : June2 JOINT VENTURE BETWEEN AET AND

GOLDEN ENERGY TANKER HOLDINGS

CORPORATION

AET entered into a 50:50 joint venture

agreement with Golden Energy Tanker

Holdings Corporation (a subsidiary of the

Restis Group, one of the largest shipping

companies in Greece) with the purpose of

owning and operating Aframax crude oil

tankers. The JV company intends to own

and operate up to ten Aframax tankers.

8 MISC ACQUIRES STAKE IN FPSO

BRASIL

MISC acquired a 49% stake in the owning

and operating companies of FPSO Brasil, a

Very Large Crude Carrier sized FPSO

facility, presently located on the Roncador

offshore field in the State of Rio De

Janeiro, Brazil. The remaining stake in

FPSO Brasil is owned by SBM Holdings Inc.

15 MISC ORDERS FOUR CHEMICAL

TANKERS

In addition to the current four chemical

tanker newbuildings, MISC exercised its

full option of ordering another four

38,000 DWT chemical tankers from STX

Shipbuilding Co.

20 MISC AND DNV TO DEVELOP FLEET

CAPABILITY PROGRAMME

MISC signed a Consultancy Service

Agreement with Det Norske Veritas (DNV)

in which DNV will work together with

MISC's Fleet Management Services (FMS)

to determine the industry’s best practice

and develop the most effective fleet

capability solutions for MISC.

i

ii

iii

iv

i. 15 June 06 - MISC orders four chemical tankersii. 20 June 06 - MISC and DNV to develop fleet

capability programmeiii. 14 Aug 06 - 37th Annual General Meetingiv. 03 Aug 06 - MISC signs MOU with UTM for maritime

industry capability buildingv. 15 Sept 06 - MMHE completes the construction of Kikeh

DTU Truss Spar


2006 : July17 MISC/JLT CO-HOST LNG INSURANCE

SEMINAR

MISC Berhad and Jardine Lloyd Thompson

Sdn Bhd (JLT) co-hosted a two day LNG

Seminar entitled "A World Leader in

the field of LNG Transportation". The

seminar was aimed at creating a

discussion platform for all parties involved

in the LNG transportation insurance

industry to share their concerns,

knowledge and to better appreciate the

risks involved in LNG transportation.

19 BUNGA KEKARAS RESCUES

TSUNAMI VICTIMS

The crew of MISC's 30,000 MT Product

tanker, Bunga Kekaras orchestrated the

rescue of 4 fishermen whose boat had

capsized in the tsunami hit in Indonesia.

The vessel, which was anchored at Cilacap,

Indonesia, had steamed out to sea after

tsunami alerts were being broadcasted by

regional tsunami alert centres.

24 MISC SIGNS TWO NEW CHARTERS

AND TWO CHARTER EXTENSIONS FOR

ITS EXISTING LNG CARRIERS

MISC Berhad signed two new charterparty

agreements with Malaysia LNG Sdn Bhd

(MLNG) in respect of two existing

Liquefied Natural Gas (LNG) carriers,

Tenaga Tiga and Tenaga Lima. MISC also

signed with MLNG extensions for two

current charterparty agreements in respect

of two existing LNG carriers, Aman Hakata

and Aman Bintulu.

2006 : August3 MISC SIGNS MoU WITH UTM FOR

MARITIME INDUSTRY CAPABILITY

BUILDING

MISC Berhad and Universiti Teknologi

Malaysia (UTM) signed a Memorandum

of Understanding (MoU) to cooperate in

the development of capabilities and

expertise and in the promotion of research

activities in the maritime, shipping and

offshore industry in Malaysia. The joint

undertaking is expected to generate

substantial benefits not only for the two

organisations, but also Malaysia’s

maritime, shipping and offshore industry.

4 SENIOR OFFICERS MANAGEMENT

FORUM

The Senior Officers Management forum,

an event that brings together MISC

officers, expatriate senior officers and

MISC shore staff as well as manning

agents and ALAM representatives was

held for the third time. The aim of the

forum is to share business and performance

expectations as well as enhance

integration and foster better relationships.

14 MISC’s 37th ANNUAL GENERAL

MEETING

Close to 300 shareholders attended MISC's

37th Annual General Meeting at the

Crowne Plaza Mutiara Hotel in Kuala

Lumpur, where members approved a final

dividend of 20 sen per share tax exempt.

Together with the interim dividend of 10

sen per share, the total dividend for FY

2005/2006 is 30 sen per share.

17 1st QUARTER ANALYSTS' BRIEFING

54 analysts and investors attended MISC's

1st Quarter Analysts' Briefing for the new

financial year. The briefing is part of the

Group's Corporate Governance practice,

enabling investors to be updated on the

latest information on the Group's business

performance and developments.

2006 : September15 MMHE COMPLETES THE CONSTRUCTION

OF KIKEH DTU TRUSS SPAR

Malaysia Marine and Heavy Engineering

Sdn Bhd (MMHE) completed the

construction of the first deepwater

structure Kikeh DTU Truss Spar, for

Malaysia's maiden deepwater oil/gas

exploration field. The project is the first

application of Spar Technology in this

region, and the first outside the Gulf of

Mexico. With the successful completion

of this deepwater structure, MMHE is

moving aggressively to be one of the

leading players in deepwater structures

and FPSO and FSO conversion.

20 MISC COMMENCES FIRST HALAL

SERVICE TO NORTHPORT

MISC launched its latest liner service, the

"MISC Halal Express", with the call of

MISC's Bunga Delima to Northport.

The first service of its kind, MISC’s HALAL

Express has set the stage for Malaysia to

take the lead and play a more prominent

role in its efforts to become a global

HALAL hub.

23 FSO CENDOR RECEIVES FIRST OIL

MISC’s FSO Cendor received its first oil

from a mobile offshore production unit

(MOPU) via a flexible submarine pipeline.

The Cendor field is located in Block

PM304, offshore Terengganu, Malaysia

and operated by Petrofac Malaysia Ltd,

together with Petronas Carigali, Kuwait

Foreign Petroleum Exploration Company

(Kufpec) and PetroVietnam Investment

Development Company (PIDC) as its

development partners.

v


2006 : October3 MISC HOLDS BUKA PUASA

GATHERING WITH ORPHANS FROM

SEKENDI ORPHANAGE

MISC staff gathered together for a Buka

Puasa gathering with the orphans from

Asrama Kebajikan Anak-Anak Yatim

Sekendi, Selangor. About 80 children

from the orphanage received Hari Raya

goodie bags while the orphanage

received a cash donation from MISC to

upgrade its facilities.

31 DELIVERY OF MISC’S 8TH VLCC TANKER

MISC Berhad took delivery of its eighth

Very Large Crude Carrier (VLCC), Bunga

Kasturi Tiga. The coming into service of

the VLCC enabled MISC to expand beyond

its existing capabilities by capitalising on

the rapidly growing global oil and gas

market. The continuous expansion of

MISC’s Petroleum fleet under AET provides

MISC with the critical mass it requires to

better serve its customers globally.

2006 : November6 MISC IS NAMED LNG OPERATOR OF

THE YEAR FOR SECOND CONSECUTIVE

YEAR

MISC Berhad was once again voted LNG

Operator of the Year at the 8th Lloyd's

List Maritime Asia Awards, held in Kuala

Lumpur. This is the second consecutive

year MISC bagged the award that honours

the best in the Asian Maritime Industry.

13 AET COMPLETES SALE AND

LEASEBACK AGREEMENTS

AET successfully completed the sale and

lease-back of four of its Aframax tankers

and signed a further deal to sell an

additional vessel, also to be leased-back.

This is to realise high capital value through

sale and lease-back arrangements which

allows AET to continue operating these

tankers whilst re-investing the capital

released in newer tonnage.

i

ii

i. 06 Nov 06 - MISC named LNG Operator ofthe Year

ii. 22 Dec 06 - MILS and BLG to provideautomotive logistics

iii. 15 Jan 07 - Naming ceremony of Seri Angkasaiv. 26 Jan 07 - Naming ceremony of Bunga

Seroja Dua

iii


27 MISC HOLDS FIRST NAMING

CEREMONY OF LNG VESSEL IN

MALAYSIAN WATERS

Malaysia Marine and Heavy Engineering

Sdn Bhd (MMHE) successfully completed a

post gas trial inspection and final docking

works on a Liquefied Natural Gas (LNG)

carrier at its shipyard in Pasir Gudang,

Johor. The vessel was named Seri Anggun

at a naming ceremony held at the shipyard.

Seri Anggun is the first LNG vessel to be

named in Malaysia and its entry into

MISC's LNG fleet further strengthened

MISC's position as the world's largest

single owner and operator of LNG carriers.

2007 : January8 MISC WINS THE BRANDLAUREATE

AWARD

MISC was awarded the BrandLaureate

Award and named as Malaysia’s best

shipping brand. The BrandLaureate

Awards is organised by Asia Pacific

Brands Foundation (APBF), which was

set up in 2004 to promote good branding

practices and branding excellence in local

industries. The BrandLaureate Awards

recognises the best brands from Malaysia

and Asia Pacific.

15 SERI ANGKASA IS MISC’S 23RD

LNG CARRIER

MISC held the naming ceremony of its

23rd LNG carrier, at Malaysia Marine and

Heavy Engineering (MMHE) Yard in Pasir

Gudang, Johor, where Seri Angkasa

successfully completed her post gas trial

inspection and final docking works. The

145,000 cubic metre Seri Angkasa is the

fourth of five new "Seri A Class" LNG

carriers that has been ordered by MISC

from Samsung Heavy Industries (SHI).

26 NAMING CEREMONY OF BUNGA

SEROJA DUA

MISC received its second Ultra Large

Containership (ULCS) of 7943 TEUs from

Daewoo Shipbuilding and Marine

Engineering (DSME). Bunga Seroja Dua

joined its sister vessel, Bunga Seroja Satu

as the largest Malaysian registered

container vessel to date. The vessel is

318m in length, 43m in breadth and

24.5m in depth. She joins MISC's fleet as

its 21st container vessel.

2006 : December5 MISC SEALINER SYSTEMS WINS

PREMIER ICT AWARD

MISC Berhad's Container Shipping System

(also known as SEALINER System) clinched

the Premier Information Technology

Award 2006 (APTM 2006) for the private

sector this year. The system provides MISC

customers with end-to-end functionalities

ranging from order processing, order

fulfillment, operations and finance to

transport their shipments through a

reliable and extensive network of fixed

routes to their destinations.

6 MISC EXPANDS FLEET WITH ORDER OF

TWO NEW AFRAMAXES

MISC, through its subsidiary AET, ordered

two new 107,500 DWT Aframax tankers

from Tsuneishi Corporation of Japan.

The increase in Aframax fleet size is

aimed at replacing disposed tonnage and

expanding the company's fleet capacity

with modern tankers.

6 MISC IS NAMED CILT COMPANY OF

THE YEAR

MISC was announced as Company of the

Year by Chartered Institute of Logistics &

Transport (CILT), a global professional

body, established with the aim to spread

logistics and transport knowledge, and to

be a source of authoritative views for

communication to governments, industry

and the community. CILT has offices

around the world, including in Malaysia.

22 MISC INTEGRATED LOGISTICS TO

PROVIDE AUTOMOTIVE LOGISTICS IN

MALAYSIA

MISC Integrated Logistics (MILS) formed a

joint venture with Germany’s BLG

International Logistics GmbH, a wholly-

owned subsidiary of BLG AG, to

collaborate in the provision of Automotive

Logistics in Malaysia. The tie-up will

leverage on the strengths of MILS as a

leading supply chain and logistics provider

in the Malaysian market and BLG as the

leading European automotive and

automobile logistics provider. BLG’s

collaboration with MILS will be their first

venture in South East Asia.

iv


2007 : February2 MILS WINS GOLD AWARD IN SAFETY

MILS was awarded the Gold Award for

Safety in the Logistics category at the

Anugerah Cemerlang Keselamatan dan

Kesihatan Pekerjaan Kebangsaan 2006

awards ceremony, organised by the

Occupational Health and Safety Council of

the Human Resource Ministry.

16 MISC DONATES TO HELP REBUILD

TWO FLOOD AFFECTED SCHOOLS

IN JOHOR

MISC Berhad, assisted with the re-building

of two flood-affected schools in Johor by

contributing school supplies furniture and

electronic goods to Sekolah Kebangsaan

Kangka Tebrau and Sekolah Agama

Kangka Tebrau. MISC also provided school

uniforms to students whose houses were

affected by the flood.

23 MISC CO-ORGANISES FIRST MARINE

SCIENCE TECHNOLOGY SEMINAR

(MARSTEC 2007)

MISC Berhad and Universiti Teknologi

Malaysia jointly organised the first Marine

Science and Technology Seminar

(MARSTEC 2007). With the theme of

"Enhancing Malaysia's Competitiveness in

the Maritime Industry" the two-day

seminar, a first of its kind in Malaysia, was

aimed at enlightening participants on

some of the latest development in marine

technology as well as provide insights into

the business challenges currently faced by

the maritime industry.

i. 02 Feb 07 - MILS wins gold award insafety

ii. 29 Mar 07 - Naming ceremony ofFPSO Kikeh

iii. 12 Apr 07 - Naming ceremony of BungaKasturi Empat

i

ii

iii


23 MISC AND UTM SIGNS

MEMORANDUM OF AGREEMENT

FOR PROFESSORSHIP CHAIR

MISC and UTM signed a Memorandum of

Agreement (MoA) for the establishment

of a Professorship Chair in Marine

Technology at UTM, to bridge the gap

between what the academic institution is

offering and the maritime industry’s needs

for qualified personnel and technological

advancement to meet the present and

future challenges. The signing is part of

MISC's Memorandum of Understanding

with UTM, signed in August 2006, which

was aimed to develop capabilities,

expertise and research activities in the

maritime, shipping and offshore industry

in Malaysia

2007 : March20 MISC WINS HSBC AWARD

MISC was awarded the "Best Global Deal

Initiated from Malaysia" by HSBC Bank

Malaysia Berhad in recognition for the

successful implementation of HSBC Cash

Management solution (HSBCnet) to cater

for MISC's global banking transactions.

29 MMHE CONSTRUCTS MALAYSIA’S

FIRST DEEPWATER FPSO

MMHE completed the construction of the

first Malaysian deepwater FPSO facility,

marking a significant progress in the

development of the country’s deepwater

engineering and construction capability.

Named, FPSO Kikeh, the facility is owned

by Malaysian Deepwater Floating Terminal

Ltd (MDFT), a joint venture between MISC

and Single Buoy Mooring (SBM). FPSO

Kikeh will be moored on the Kikeh field

(1320m) located 120 km northwest of

Labuan, Offshore Sabah.

29 JOINT VENTURE (JV) AGREEMENT

BETWEEN MISC BERHAD AND SBM

HOLDINGS INC SA

MISC entered into an 'own, operate and

manage' JV agreement with SBM for the

management of an FPSO tanker facility for

Shell Brasil Ltda (the operator of a

production sharing contract with

PETROLEO BRASILEIRO S.A. – PETROBRAS

and BC-10 Holding Ltda) for a contractual

period of 15 years.

2007 : April11 MISC’S FIRST SERI B CLASS LNG

VESSEL IS NAMED

MISC’s first Seri B vessel of its 5th class

LNG carriers, the 152,300 cubic metres

Seri B Class. The vessel was named Seri

Bakti by YBhg. Puan Sri Datin Sri Noraini

Mohd. Yusoff, wife of the Chairman of

MISC, YBhg. Tan Sri Dato Sri Mohd.

Hassan Marican, at a ceremony in

Nagasaki, Japan.

12 MISC'S 9th VLCC BUNGA KASTURI

EMPAT IS NAMED

MISC's 9th VLCC, Bunga Kasturi Empat

was named by YBhg. Puan Sri Datin Sri

Noraini Mohd. Yusoff at a naming

ceremony in the USC Ariake Shipyard in

Japan. In addition to this, MISC also has

two more VLCC newbuildings with USC,

one to be delivered later this year and the

sixth and final one, sometime in mid 2008.

10 MILS SIGNS MOU WITH HALAL

INDUSTRY DEVELOPMENT CORP

MILS signed an MOU with Halal Industry

Development Corporation (HDC) to

collaborate on activities related to MILS

Halal Chain and the halal logistics

industry. Through this collaboration, MILS

aims to develop and exhibit Malaysia as a

pioneering Halal shipping and logistics

hub for goods, services and technologies

related to the global halal industry.

2007 : May7 MILS WINS BEST HALAL-RELATED

SERVICE PROVIDER

MISC Integrated Logistics (MILS) was

awarded the "Best Halal-Related Service

Provider" by the Halal Journal, in

conjunction with the 2nd World Halal

Forum (WHF). The award is a positive

reflection of MILS excellence in providing

Halal Logistics Services to its customers.

2007 : June3 FSO ABU RECEIVES FIRST OIL

FSO Abu received its first oil from a fixed

platform production facility. The Abu field

is located in Block PM318, offshore

Terengganu, Malaysia and operated by

Petronas Carigali and Newfield Exploration

on a 50:50 joint venture.

4 TENAGA SATU UNLOADS MAIDEN

CARGO IN NORWAY

MISC's LNG Carrier, Tenaga Satu made

its maiden call to the Snohvit LNG export

facility in Norway, its first call to a

Norwegian plant. The vessel, carrying

LNG from Egypt, unloaded the cargo at

the liquefaction plant in Melkoya. The

LNG cargo is acquired from Gaz de

France, a partner in the Snohvit consortium.

The Tenaga Satu, is currently under

medium-term charter with Gaz de France.

.

Investor Relations

During the financial year, MISC's activeinvestor relations efforts include:

• Timely announcements of itsquarterly results as per BursaMalaysia's Listing Requirements.

• Quarterly analysts' briefings wherein-depth explanation on the Group'sresults, market conditions, long-termprospects and strategies wereelaborated on.

• Feature presentations at half andfull year analysts' briefings on itspetroleum shipping, heavy engineering,chemical shipping and offshorebusiness units as part of its effort ineducating the investing public on theGroup's business and operations.Moving forward presentations fromother businesses will be featured tomatch their developments andaccretive initiatives.

• Comprehensive annual reviews withrating agencies, namely, Moody'sInvestor's Service, Standard & Poor'sand Malaysian Rating CorporationBhd (MARC), together with quarterlydialogue sessions via in-housemeetings/telephone conferences toreview announced results.

• Participation in InternationalInvestment Conferences and Non-Deal Roadshows (NDRs) for bothEquity and Fixed Income markets.The Group participated in four NDRsduring the financial year, meetingfund managers and buy-side analysts.

• Regular dialogues with institutionalinvestors and investment analystsvia one-on-one meetings andconference calls.

MISC is committed in ensuring timely dissemination of materialinformation that is complete, transparent and credible to themarket about its operations, financial conditions, businessstrategies and future prospects. Its objective is to ensure fairand accurate representation of the Group, so that existing andpotential investors can make properly informed investmentdecisions, and other stakeholders can have a balancedunderstanding of the Group and its objectives.

The investor relations programmecontinues to be an integral part ofMISC's commitment towards effectivecommunication with shareholders,investors and the investment communityat large and to maintain high standardsof corporate governance. The Group willcontinue to take a proactive approach incommunicating with the investingcommunity by having a dedicated investorrelations team to attend to enquiries inan informative, timely and professionalmanner and to drive an extensiveinvestors outreach programme.

079investors relations

In line with the efforts forgreater transparency,extensive information aboutthe Group’s performanceand activities can beobtained from its AnnualReports and website –www.misc.com.my

The Annual Reports are sent toshareholders, stakeholders andbond holders.

The Group's "Corporate Disclosure Policiesand Procedures" identify the followingManagement Personnel responsible forInvestor Relations Activities.

Dato' Shamsul Azhar bin AbbasPresident/Chief Executive Officer

Mr. Michael Ting Sii ChingVice President, Corporate Planningand Development

Pn. Noraini Che DanVice President, Finance

Ms. Adelene AlvisseSenior Manager, Investor Relations

MISC aims to build and maintainimproved transparency with the investingcommunity by keeping thecommunication channels open and beingmore accessible. Such efforts will becontinuously enhanced to maintain theGroup's corporate credibility and tostrengthen investor confidence withgreater corporate transparency.

Enquiries about the Group can bedirected to:

[email protected]

As a global energy transportation leader, we assessprospects like mental surveyors, thinking beyond to moveahead. To pursue different yet untapped pathways, we actas Value Practitioners, equipping ourselves with capabilitybuilding, technology transfers and many more hands-ontraining modules that help build our strength of will.

The greatest successis to discoverpathways that othersdo not seek.

082people development

Our people are the primaryasset of the Group. Theyact as the engine ofgrowth that propels MISCin its journey towardsGlobal Championship.

To ensure that MISC continues to havean abundant pool of leaders, sustainingthe development of human capital is avital aspect of the Group’s strategy toachieve our vision of being a preferredprovider of world-class maritimetransportation and logistics services.People Development in MISC continuesto focus on the Triple Plus element asoutlined in our Corporate Agenda to bea Global Champion:

1. Leadership Development

Mentoring: Inspiring thedevelopment of future leaders

With the successful implementation ofthe pilot Mentoring programme in late2006, the second round of theprogramme was launched in early 2007,

involving 25 Managers and above whohave volunteered to be Mentors, and36 Mentees. The second round of theprogramme will run through till 2009.

The long-term objective of Mentoring isto support the triple plus elementsespecially in leadership development andchanging the mindset of MISC staff.

The Mentoring Programme hascontributed to the increase of the qualityof our human capital through knowledgesharing. Through the 2 year programme,we have fostered a learning culture inMISC, where there is a passion for thesharing of knowledge and theestablishment of developmentalrelationships. MISC staffs are in a lifelongprocess of self-development, and thesharing of experience and insightsbetween the current and future leadersof the company contributes to theoverall development of the staff on apersonal as well as professional level.

Ongoing Leadership Programmes

MISC continues to provide the followingtraining and development programmesfor staff in order to increase theirleadership potential:

PeopleDevelopmentSustaining the Growth of Quality Human Capital

Corporate Development ProgrammesExecutive Development Programme (EDP)

First Line Managers

Business Management Excellence

Managing Motivation PerformanceImprovement (MMPI)

Management Development Programme(MDP)

Insead – Senior Management DevelopmentProgramme (SMDP)

Leadership Performance ManagementProgrammesManaging Your Career

Managing Career Development

Leadership in Service Excellence

Leadership Dimension in Action

Personal Renewal Workshop

Value of Integrity

Strategic Innovative Leadership

Leadership Coaching Skill for Impact

Influencing Your Results

Strategic Management & BusinessIntelligence

These ongoing programmes are designedto ensure readiness of the leaders toassume higher positions and also toequip them with necessary skills tooutperform. The Corporate DevelopmentProgrammes have been incorporated asMISC Career Management Framework.

083people development

Value PractitionerLiving the Brand –Proactive, Committed,ReliableOur brand implementation exercise is asynchronised internal and externalenhancement effort. The exerciseencourages everyone at MISC to shareideas, build partnerships and showcaseMISC as the preferred employer of choice.

2. Capability Building

Developing local capability is crucial inkeeping the Group on par with thecompetition as we explore new frontiersin the industry.

During the year, we continued our effortsof last year, building human capitalcapabilities via the following – criticalinstitutional capabilites identificationwhich include leadership performance,strategic planning, business building,fleet management and maritimemanagement; pilot capability efforts inFMS and MMHE; and a collaborativeeffort with Des Norske Veritas (DNV).

resources and capabilities, relevantagencies and institutions in Malaysia.

3. Mindset and BehaviourChange

Mindset and behaviour change ofemployees is a prerequisite to drive theorganisation's aspiration to become aGlobal Champion by 2010 aligning tothe Corporate Agenda.

In order to measure the level of mindsetand behaviour of all levels of staff withinMISC group, MISC Employee TrackingSurvey (METS) 2006 survey was carriedout from May till June, with the findingsproviding better understanding of thecurrent mindset level at MISC.

Task Forces and Focus Groups wereformed comprising of Executives,Managers and Senior Management levelto identify symptoms/root causes, issuesand intervention plans.

There will be another mindset surveywhich is planned sometime in March /April 2008 to assess the mindset at alllevels and to ensure all staff share thesame aspirations of the Group and readyto brave the challenges of becoming aGlobal Champion.

Understanding the crucial need forcapability building to increasemaketability and competetiveness, MISChas added two additional capabilityinitiatives to our corporate agenda:

Technology Transfer throughSmart Partnerships

MISC/SBM JV, MDFT’s successfulconstruction of Malaysia's first deepwaterFPSO, FPSO Kikeh was made possiblethrough the smart partnership betweenMISC, SBM and MMHE. Detailedengineering design by SBM in Hollandand Monaco was done with a provisionfor technology transfer for trainees fromMISC and MMHE.

This sharing of technology mega structuraleffort by PETRONAS, MISC and MMHE,marked a new high for MISC. Madepossible via a technology transfer betweenMMHE and SBM, the MISC team ofexperts rose to the challenge and havethus further developed their expertise indeepwater constructional engineering.

Enhancing Research andDevelopment

MISC and UTM signed a Memorandumof Agreement (MoA) for the establishmentof Professorship Chair in MarineTechnology at UTM. The ProfessorshipChair will be tasked to bridge the gapbetween what the academic institution isoffering and the maritime industry'sneeds for qualified personnel andtechnological advancement to meet thepresent and future challenges. It is hopedthat the establishment of the Chairwould further enhanced the research inMaritime Technology, which wouldbenefit the maritime sector in Malaysia.

To complement the Professorship Chair,MISC has sponsored the development ofMarine Technology Research andDevelopment Database at UTM. Thisdatabase captures the information onongoing projects, facilities, available

Work-Life Balance :Body, Mind and Spirit

MISC cares about work-life balanceand promotes physical and mentaldevelopment in support of theirprofessional development. We believethat strong partnerships within theGroup is fostered not only throughworking relationships but throughoutside activities such as sports, gamesas well as community services.

During the past year, MISC staffparticipated in various internal andexternal sporting events:

Mini Sports DayWorld Maritime Day SportsCarnivalPETRONAS Family CarnivalKuala Lumpur Hockey LeagueSelangor Premier FootballLeaguePETRONAS’ Sports andRecreational Club MiniSports Day

084people highlights

Celebrating Partnerships :A tradition of recognition

In MISC’s journey towards success, werecognise the crucial part played by ouremployees, the people who are thebackbone of the entire organisation.This year, in continuing with our

tradition of celebrating ourpartnership with loyal and

dedicated employees, a total of193 employees were awardedthe 35, 30, 25, 20 and 15years long service awardsrespectively. We also saw 21

employees receive the MISC

Retirement Awards, all of whom haveserved MISC well throughout their yearswith the Company. This year also saw theLong Service Awards create anothermilestone as we included in ourcelebrations, the staff of ALAM and AET.Although the awards can never comparewith the dedication and hard work thatour people has put into the growth ofthe Group, the celebration is our smallway of thanking our employees andrecognising the positive contributionsthat they have made to the Group.

PeopleHighlights

a total of

193employeesawarded

085people highlights

Education Excellence Award :Strengthening closerrelationships between theManagement, staff and theirfamilies.

As part of the Corporation’s continuouseffort to strengthen and encouragestrong partnerships betweenthe Management and thestaff, MISC annuallyholds the EducationExcellence Award. Theaward celebrates theachievements of thechildren of MISC staffin their UPSR, PMR andSPM examinations. It isour way of saying

'thank you' to our staff fortheir continual commitmentand dedication, as well asto their family members fortheir encouraging support.Now in its third year, the

creation of the EducationExcellence Awards helps in

developing and strengthening

celebratingthe achievementsof the childrenof MISC staff

the bond between MISC and thepeoplebehind the Corporation, by recognisingthe dedication and contribution of ourpeople and at the same time, appreciatingthe outstanding achievement of the staffchildren, the youth of the nation.

086health, safety and environment

MISC is determined in sustaining itsfuture growth through expandedcapabilities and targeted innovations torise above its competition for a greaterglobal prominence. The Health, Safety& Environment (HSE) fraternity withinMISC Group distinctively contributedtowards this notion as reflected in theHSE Performance for Financial Year (FY)2006/2007.

In assessing the performance of thecurrent year against FY2005/2006,collectively, MISC achieved a markedimprovement of 23% for Lost Time InjuryFrequency (LTIF), and an impressive 37%improvement in Total Recordable CaseFrequency (TRCF) – a laudable

achievement by each OPU’s HSE entityand its management, along with theguidance and championing of initiativescomplemented by Corporate HSE (CHSE).

At the forefront of the operations inmaritime transportation, MISC FleetManagement Services (FMS) and AETShipmanagement have both shownsignificant progress in the reductionof injuries to those onboard thecontainerships, LNG, chemical, andpetroleum tankers.

For the FY2006/2007, FMS’s LTIF raterecorded an improvement of 27% whilstTRCF improved by 14% as compared tolast year's. Meanwhile, AET's LTIF for

Health, Safety andEnvironment

MISC achieved amarked improvementof 23% for Lost TimeInjury Frequency (LTIF),and an impressive 37%improvement in TotalRecordable CaseFrequency (TRCF)


fuel-saving measures and reducingenvironmental pollution. All ships willeventually be required to implement therecommended course of actions aspromulgated by FMS.

FMS also demonstrated proactive valuesin sustaining high quality levels andconformance to HSE legal requirementsas adopted by International and NationalRegulators. This was achieved throughthe management system standards ofISO on Environment & Quality, and ISMCode on Safety & Environment, besidesthe Tanker Management and SelfAssessment (TMSA) guidelines and othermarine-related requirement.

Internal analysis, evaluations and reviewsof FMS HSE performance, including theutilisation of HSEMS Self AssessmentChart and external feedbacks, providethe avenues for FMS towards globalleadership in ship management. Thecustomers’ safety performancemeasurement instruments such as TMSAare guidelines for FMS’ continuousimprovement and focus on customers’HSE expectations.

On the other hand, AET witnessed anexciting change with the rebrandingexercise that reflects its milestones andsuccessful achievement from a regionalto a global player in FY2006/2007. The

FY2006/2007 showed a significant36% improvement against FY2005/2006,whereas its TRCF revealed a massive53% improvement.

The FMS Safety Campaign was launchedon 3 April 2006 with the slogan 'ZeroIncident Zero Accident (ZIZA) – Make ItSafe in MISC'. New initiatives wereintroduced throughout the campaign tomitigate risks at an 'As Low asReasonably Practicable' (ALARP) level.Programmes under the campaign includesafety incentives to ship staff, publicationof safety handbooks and safety posters,and the quarterly issue of ZIZA Bulletin.

One of the objectives of the campaignis to sustain the safety culture onboardall ships. Through the 'Ziza Campaign', 13ships had maintained 3-year ZIZA SafetyPerformance, 7 ships maintained 2-yearZIZA Safety Performance and 13 shipsachieved 1-year ZIZA Safety Performance.

Analysis and findings from investigationsare shared with all staff and crew toheighten their safety awareness withthe lessons learnt. In addition to theSafety Alerts, Safety Advisories andSafety Reminders have been introducedas communication tools for quickinformation sharing amongst the MISCseafaring community. The MISC FuelEfficiency Campaign was launched inAugust 2006 with the objectives of

rebranding has brought about four newcore values, namely Excellence,Partnership, Responsibility and Innovation.

The core values define the seriouscommitment for continual improvementon Health, Safety and Environmentprotection to meet the industry demandand expectation.

During the year under review, AETascertained its proactiveness by engagingin ISO 9001 and ISO 14001 in a move tofurther enhance high quality standardsand compliance to international andnational requirements on HSE.

Malaysia Marine and Heavy EngineeringSdn Bhd (MMHE)’s LTIF rating forFY2006/2007 showed an improvementof 13% against FY2005/2006, whilstits TRCF was at an all time high of 52%improvement. 5.5 million manhoursworked with zero LTI was achievedfor Kikeh DTU Spar project while theKikeh FPSO project accomplished morethan 7.2 million manhours worked withzero LTI.

MMHE had 10 sessions of roadshowon their 'U-See U-Act' (UCUX)programme since April 2006 and the'Safety Advisory Chit / Summonses'(SAC/SU) had also been successfullyconducted in the month of February &March 2007. The participants were fromforeman level and above. The objective isto get greater involvement from the LineManagement in UCUX programme andenforcement of Safety Rules andRegulations at site through SAC/SU.

MMHE had also embarked on theRespiratory Protection Awareness Month(RPAM), in February 2007. The programmeincluded health talks by an IndustrialHygienist, an Occupational Health Doctorand respiratory protection equipmentexperts, together with safety talks atproject sites delivered by the Quality,Health, Safety & Environment (QHSE)department. The RPAM programme wastargeted on employees involved inactivities such as welding, painting andblasting, which produce airbornecontaminants that have potential adversehealth effects.

A total of 28 in-house courses wereconducted involving 2,407 attendeesand 2,085.5 man/days by internal andexternal instructors. Meanwhile, 7,284


AET made the most of its HSEManagement System (HSEMS) SelfAssessment Chart gap analysis studyas a tool and guiding principle to be aglobal leader in petroleum transportation.To further complement the gap analysisstudy, the TMSA approach was alsoutilised to allow the identification ofcomprehensive HSE requirements as wellas the enhancement of existing policiesand frameworks in tandem with theeight elements of the HSEMS.

Similar to FMS, AET has established twoelectronic bulletins, namely the Healthand Environmental Bulletins, forpromulgation to its fleet of vessels inorder to promote Health andEnvironmental awareness to all onboard.

The LTIF rating for projects and assetmanagement under the OffshoreBusiness Unit (OBU) performed wellconsidering there was only one LTI casefor FY2006/2007. TRCF marked animpressive 40% against the past year’s.The FPSO Project BC 10, another JointVenture with SBM, has establishedhazard management process and actionplans that incorporate high degree ofsafety design integrity to support theentire construction phase in KeppelSingapore and the expected operationsconditions in offshore Brazil. OBU,together with MMHE as its contractor,performed tank cleaning and disposal ofsludge at the Johor anchorage for therecently purchased three old crude oiltankers. The above tasks were completedin compliance with all DOE requirements.


employees of subcontractors attendedthe MMHE HSE induction/ refreshercourses in line with the mandatoryrequirement prior commencing work inMMHE. Evacuation, fire and rescue drillswere conducted on a monthly basis withthe expectation to maintain emergencyresponse team’s state of preparedness. Atotal of 22 drills were conducted tocontinuously test on the effectiveness ofthe emergency response, including an oilspill drill conducted at waterfront (sea) ofDry Dock 2.

A QHSE Week 2006 was held from 9th to 15th December 2006with the objective to provide awareness on Quality, Health, Safetyand Environment to the MMHE community. Several activities wereheld such as:

• QHSE Week 2006 Best Awards. Presented to the best workshop, project, and divisionthat managed to fulfill all the HSE criteria for HSE effort and management

• QHSE exhibition participated by the various government bodies and privateagencies and suppliers

• Blood donation drive by MMHE, 'Work Given-Out' staff (those employed throughManning Agencies) and subcontractor workers

• QHSE talks by Occupational Health Doctor including various authorities

• QHSE quiz participated by 18 teams from all MMHE’s business/service units

• HSE Explorace carried out for the first time in MMHE that tested not only theknowledge and skills on health, safety, and environmental issues, but also thephysical and mental fitness of each participant

MMHE received a company-widecertification of ISO 9001:2000 fromLloyd's Register Quality Assurance Ltd(LRQA) on 29 October 2006. An awardwas also received from Sarawak ShellBerhad for the completion of E11PBproject with Zero LTI for more than onemillion manhours worked.

After attaining a significant improvementin FY2005/2006, MISC IntegratedLogistics Sdn Bhd (MILS) repeated itsremarkable track record in FY2006/2007with a marked improvement of 54% forthe LTIF whilst TRCF was improved by42% as compared to last year.

MILS had undertaken several newinitiatives to mitigate HSE risks, whichinclude the development of their Drug &Alcohol policy that entailed a Drug &Alcohol screening for all new recruitmentand existing staff. In addition, a 'ZeroAccident, Zero Fatality Campaign' wasalso carried out with the Road TransportSafety (RTS) training for sub-contractorsat Penang, Johor and Kuantan respectively.The programme consisted of VehicleManagement Training, Journey


Management, Driver Management andRoad Transport Safety modules. On topof that, MILS also had the Safety Passportprogramme rolled-out at Port Klang,Melaka and Kerteh. 132 drivers fromInland Distributors (ID), PetronasDagangan Berhad (PDB), and MILSattended the Safety Passportprogramme, which consists of DefensiveDriving Training, Basic First Aid, BasicHSE, Fire Fighting and MILS emergencyprocedure, including theft and robbery.In the area of Contractor Management,

MILS carried out an initiative educatingthe contractors and subcontractors alikeon the Self Assessment programme viapresentation and other means ofcommunication. HSE contractors' auditswere also conducted to monitor theimplementation of the ContractorManagement initiative.

The hard work paid off when MILS wonthe Gold Awards for the 'AnugerahCemerlang Keselamatan dan KesihatanPekerja 2006' from the Department ofOccupational Safety & Health, (DOSH)Malaysia. Accreditations by SIRIM forOHSAS 180001 & EMS 140001, andfrom Lloyd's for ISO 9001:2000 werereceived accordingly for all MILS' regionaland administrative offices nationwide.

There was a considerable progress inthe HSE Performance of Akademi LautMalaysia (ALAM) for FY2006/2007in comparison with FY2005/2006,whereby an improvement of 14% wasrecorded for LTIF.

ALAM had undertaken several newinitiatives such as ALAM-wide onsiteHSE Inspection where a total of 12inspections were completed; ALAM-wide"Basic Risk Factors" Survey in whichfindings were to be used for the nextFinancial Year HSE Plan; conducted thefirst ever Fire Drill involving BOMBA;conducted many firsts ever at ALAMwith regard to HSE initiatives in orderto further improve their HSEMS(e.g Drug Test, Health Talk, Road SafetyTalk, etc); and last but not least, ALAM'sfirst ever ‘Hazards Register’ wassuccessfully documented.

At the PETRONAS Group HSE Forum2006 held in Jakarta, ALAM receivedthe Special Award for the first non-plantOPU to effectively implement the HSEMS.Subsequent to the above, ALAM wascited as a role model in recognition of its'Drug/Alcohol Abuse Management' at

Institusi Pengajian Tinggi Swasta (IPTS)by the Melaka state government viaJabatan Keselamatan dan KesihatanPekerja Negeri Melaka. ALAM's guidelineswere also taken up to provide as samplesfor other IPTS.

Championing efforts at the corporatelevel, CHSE has provided stewardshipand support for several programmes atHQ and down at the operations level. Injust two years upon its inception, CHSEunit has progressed remarkably well -advancing from establishing thealignment towards PETRONAS HSEstandards and requirements, to a moreproactive role in ensuring that all initiativesand targets for all OPUs are met, andthat all intervention plans are carried outas intended.

With the end in mind to sustain thefuture growth of HSE through expandedcapabilities and targeted innovations,several other initiatives were undertakenincluding the facilitation of a dialoguesession between the HSE Managers andY.Bhg. Dato' President. The move toeffect the dialogue session is a showcase


MILS was awarded theGold Awards for the‘Anugerah CemerlangKeselamatan danKesihatan Pekerja 2006’from the Department ofOccupational Safety &Health, (DOSH) Malaysia.

of HSE leadership and commitment fromthe Top Management, in which there areno holds barred where HSE is concerned.

To advocate a healthy lifestyle byexercising regularly, the first ever MISCWalkathon was organised. The eventwhich was held at the Lake Gardens on17th March 2007 helped to promotetogetherness at home and also in theworkplace as the participation was openedto all staff as well as family members.

Revisions of the MISC Policy Statementon Health, Safety and Environmenttogether with the MISC Policy Statementon Drug and Alcohol were successfullycarried out and disseminated withinthe MISC group of companies uponcompletion. A 'Drug AwarenessCampaign' was held in conjunctionwith the launching of the revised policy,

to educate employees on the hazardsand effects of drug abuse and thehindrance it posed towards achievingsafe and productive work operations.

Now a permanent event in the annualHSE plan, a Blood Donation Drive wasconducted under a 'Bring a New DonorCampaign' with the intention to reachout to new donors via the regulars,subsequently increasing the percentageof successful donations to 72% incomparison with 55% from the previousdrive. Other programmes on the LossPrevention section include CancerAwareness, Paper Recycling, ChemicalHealth Risk Assessment, BehavioralSafety and a series of the HSE Excellenceworkshops, as a continuation to lastfinancial year’s initiatives to educateMISC staff on HSE Awareness.

MISC has also undertaken theimplementation of a structured andintegrated Skill Group DevelopmentProgramme in HSE. Staff under this skillgroup will benefit from the enhancement

programmes designed for the expansionof HSE capabilities within MISC HSEfraternity. Several training programmeshave also been conducted throughInstitut Teknologi Petroleum PETRONAS(INSTEP) and other external trainers, suchas the Tripod Incident InvestigationMethodology, Permit-to-Work, Hazardsand Effects Management Process (HEMP),Indoor Air Quality Assessment and theHSE Tier-3 Assurance.

In its entirety, HSE in MISC Group hasgone beyond its conservative scope andchartered course in order to becomeprominent in the global arena. Recognisingthe effect that HSE Performance has inthe bottomline of all businesses and alsoin securing new business deals, theleadership and commitment of the MISCmanagement has provided assurance toall stakeholders that HSE risks aremitigated to an 'As Low as ReasonablyPracticable' (ALARP) level.

092MISC & corporate social responsibility

MISC &Corporate SocialResponsibilityDoing Our Part in Community Building

We have over theyears implementedand extended ourexpertise to help buildthe nation. Our openand transparentbusiness practicesare a testament ofour commitment tooperate ethically whilstcontributing to thenation’s economicdevelopment.

Lending our hands to those in need


Youth development is our contribution toboth industry sustenance and nationbuilding, whilst our community effortsare an extension of our caring fortitudeas a global player that is still veryMalaysian at heart. It is an ongoingeffort on our part, one in which weapproach with pride and confidencethat our actions will help map the futureof Malaysia's development – both froma professional viewpoint as well asvia the provision of a global ready andable workforce.

Our CSR infused business culture

During the year, MISC's CSR-relatedprogrammes continued to focus onyouth development. As we envisionourselves to be a maritime nation, weare also committed towards theprovision of efficient human capital tosupport this vision.

This year also marked a paradigm shiftin the way we extend our assistance.We are now looking at developinguniversity scholars into prepared andable 'real world' ready individuals. We

have noticed a flux in the current localgraduates scenario, where there areissues raised in regards to their generallacklustre performance or personalityupon graduation. We wish to help preparethem to be more industry ready andadapt to the changes and progression ofthe job market.

For the year, our focus onCSR was divided into twomain areas of development:

• Youth Development• Community Corporate

Responsibility

Developing today’s youth for tomorrow’s leaders – MISC’s scholars

As we do so, our actions improvethe quality of life for the people ofMISC as well as the community andsociety at large.

At MISC, we understand that CSR isbeyond philanthropy and public relations.We see the bigger picture, where ourCSR efforts will provide both qualitativeand quantitative long-term growth forthe Group, shareholders and stakeholdersalike. By educating the nation throughmaritime education and sponsorships;imparting positive market skills anddevelopment to university scholars viaour 'Navigate Your Career' programme;and by being in essence a caringcorporate citizen, our CSR framework isdedicated towards two main vital MISCagendas – Youth Development andCommunity Corporate Responsibility.


We play a different part in the scheme ofthings; ours is a CSR approach basedmore on development – educational andpersonal career development.

1. ALAM – the region’s nervecentre for maritimeexcellence

From our initial Nautical Cadet Programmein 1979, MISC has spurred on as thecurrent leader in maritime education inMalaysia. Our incessant drive to build amaritime nation continued with ourfocus on our very own maritime trainingacademy, Akademi Laut Malaysia (ALAM).A wholly owned subsidiary, ALAM wasinjected with RM6.6 million to furthermaintain and equip the academy withthe latest technological equipment andfacilities. During the year, a recordnumber of 378 cadets joined ALAM’sfraternity, marking a 56% increase inenrolment. We believe this is the result ofincreased interest in the possibilities of amaritime career on the seven seas.

The latest additions of the simulationsystem modules and increase in trainingberths onboard most MISC ships havealso assisted our graduates, makingthem industry ready and renowned assome of the most in demand seafarersin the region. Our proactive stance inmaritime education continues to lead usto push the need for greater maritimeeducation throughout Malaysia andSouth East Asia.

2. Cadet SponsorshipProgramme

Investment comes in various forms,both quantitative and qualitative. In ourcase, we embrace the qualitative aspectby empowering our youth with thecapabilities and expertise to enjoy ahealthy, robust international career asa seafarer.

For the year under review, more thanRM14 million was invested to ourCadet Sponsorship Programme whichamounted to a sponsorship of 95% ofALAM's current scholars. The programmeis structured to equip the cadets withtechnological, technical and practicaltraining that will incite excellence in theirfuture work environment.

The programme, which has garneredincreased recognition by students,parents and affiliates globally, hasencouraged an upturn in prospectivestudent applications annually. Itsregimented training modules havehelped build the Malaysian maritimeindustry, and to date, a large numberof Malaysian captains in the industryare ALAM scholars. Subsequently, ourscholastic approach churns a positivespin from qualitative to quantitativeeconomic attributes. This continuesto be our mission, and it is one in whichwe approach with a sense of prideand accomplishment.

3. MISC EducationSponsorship Programme

This year, our educational fundingprogrammes in human capital

YouthDevelopmentWe believe that inorder to help build aprogressive nation, wehave to play our role,both big and small insocial development.

Gearing students for the years ahead, ensuring a journey of integrity, vision & promise


development continued with sponsorshipsextended to 52 candidates, both forchildren of MISC staff as well asnationwide. Selected based on theirexemplary performances in education,the provision allowed the students tofurther their education both locallyand abroad in courses relevant to MISC’sbusiness such as Naval Architecture,Marine Engineering, Offshore Engineering,Transport & Logistics, MechanicalEngineering, Electrical Engineering, CivilEngineering, Accounting and Economics.

4. Navigate Your Career –our latest fundamentalCSR infused programme

The general tame reputation and volatilityin the skilled performance of local entrylevel graduates into the marketplace hasled us to develop a new programme inyouth development. One in which we arehopeful will help boost and encourage amore vibrant and industry ready localgraduate workforce.

Malaysian graduates have been citicisedas of late for their lack of interpersonaland professional skills. This has led to adire need for entry level job placementsfor them with most companies – local andmultinational giving top priority to morerounded and well development privatetertiary scholars.

On that basis, we have devised the'MISC CSR Programme – Navigate YourCareer’. Developed to encourage amindset change for local undergraduates,the programme is set for initial launch inJuly 2007 in various universities acrossthe nation. A 3-part programme –Educate, Engage & Expose – ‘NavigateYour Career’ is geared to enhanceemployment awareness via guidanceinitiatives to impart soft skills and insightsinto career opportunities possible

2007 saw us continueon with our pledge toextend our hands tothe needy.

Throughout the year, monies as wellas educational gifts and provisionswere extended to various members ofthe community and charitable causes.Institutions of higher learning andmaritime-related organisations were alsopart and parcel of our continual charityprogrammes, either co-organised byMISC or through other worthy avenues.

As a group that has seen Malaysiaflourish and bloom, we believe thatwe play a pivotal role in the country’sdevelopment and sustenance. This isour part of nation building, and it is arole that we take seriously. We are proudof our efforts and view each effort as aventure to develop stronger relationshipswith all. People are the essence of acountry and through our labours; we aimto continue to build a thriving nation ofproud, intellectual, positive Malaysians.

Our caring fortitude

through the right attitude and personain the workplace. The CSR programme isinclusive of road shows, online resourcecentre and practical attachment modules.

We believe that our latest effort in socialdevelopment will help create a morebuoyant local graduate pool in the nearfuture, establishing a global ready teamof professionals in the process. Still in itspreliminary stage of development, welook forward to further development inthe ensuing years.

CommunityCorporateResponsibility

Our mind mapping strategies and Innovator zealcontinue to reveal a long universal link across theglobe. With partnerships on almost every corner ofthe earth, our ideas have taken flight from paperinto a real feasible global master plan.

We never lose sight ofthe bigger picture –the Globe

97heuwhoe

FinancialStatements

098Directors’ Report

102Statement by Directors and

Statutory Declaration

103Report of the Auditors

104Income Statements

105Balance Sheets

107Statements of Changes

in Equity

110Cash Flow Statements

111Notes to the Financial

Statements

098directors' report

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Corporationfor the financial year ended 31 March 2007.

Principal ActivitiesThe principal activities of the Corporation consist of shipowning, ship operating, other activities related to shipping services and owningand operating offshore floating services.

The principal activities of the subsidiaries are described in Note 37 to the financial statements.

There have been no significant changes in the nature of the principal activities during the financial year.

ResultsGroup Corporation

RM'000 RM'000

Profit for the year 2,896,930 3,700,744

Attributable to:Equity holders of the Corporation 2,852,025 3,700,744Minority interests 44,905 –

2,896,930 3,700,744

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in thefinancial statements.

In the opinion of the directors, the results of the operations of the Group and of the Corporation during the financial year were notsubstantially affected by any item, transaction or event of a material and unusual nature other than:

a. the effects arising from the changes in accounting policies due to the adoption of the new and revised FRSs which has resulted in anincrease in the Group's and the Corporation's profit for the year by RM178,800,000 and RM233,464,000 (including the effectsarising from changes in estimates as disclosed in b. below) respectively as disclosed in Note 2.3(h)(ii) to the financial statements; and

b. the effects arising from changes in estimates where the residual values of ships were revised resulting in an increase in the Group'sand the Corporation's profit for the year by RM159,100,000 and RM101,393,000 respectively as disclosed in Note 2.4 to thefinancial statements.

Directors' Report


DividendsThe amount of dividends paid by the Corporation since 31 March 2006 were as follows:

RM'000

In respect of the financial year ended 31 March 2006 as reported in the directors' report of that year:Final tax exempt dividend of 20 sen per share, paid on 30 August 2006 727,975

In respect of the financial year ended 31 March 2007:Interim tax exempt dividend of 10 sen per share, paid on 22 December 2006 368,991

At the forthcoming Annual General Meeting, the following tax exempt dividend will be proposed for shareholders' approval in respect ofthe financial year ended 31 March 2007:

RM'000

Final tax exempt dividend of 20 sen per share 743,966

The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by theshareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 March 2008.

DirectorsThe names of the directors of the Corporation in office since the date of the last report and at the date of this report are:

Tan Sri Dato Sri Mohd Hassan bin MaricanDato' Shamsul Azhar bin AbbasDato Sri Liang Kim BangHarry K. MenonDato' Halipah binti EsaNasaruddin bin Md IdrisDato' Kalsom binti Abd RahmanDato' Dr Wan Abdul Aziz bin Wan Abdullah (appointed on 14 September 2006)Dato' Ibrahim Mahaludin bin Puteh (appointed on 10 May 2007, alternate to

Dato' Dr Wan Abdul Aziz bin Wan Abdullah)Tan Sri Dato' Seri Dr Hj Zainul Ariff bin Hj Hussain (resigned on 1 January 2007)

Directors' BenefitsNeither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Corporation wasa party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Corporation or anyother body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits includedin the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full–time employee of theCorporation as shown in Note 7 to the financial statements) by reason of a contract made by the Corporation or a related corporationwith any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.


Directors' InterestsAccording to the register of directors' shareholdings, the interests of directors in office at the end of the financial year in shares in theCorporation and its related corporations during the financial year were as follows:

Number of Ordinary Shares of RM1 Each1 April 31 March

2006 Bought Sold 2007

The CorporationDirectDato Sri Liang Kim Bang 304,000 – – 304,000IndirectDato Sri Liang Kim Bang 136,000 – – 136,000

Fellow Subsidiary – PETRONAS Dagangan BerhadDirectTan Sri Dato Sri Mohd Hassan bin Marican 2,000 – – 2,000

Fellow Subsidiary – PETRONAS Gas BerhadDirectTan Sri Dato Sri Mohd Hassan bin Marican 5,000 – – 5,000Dato' Kalsom binti Abd Rahman – 1,000 – 1,000Nasaruddin bin Md Idris 3,000 – – 3,000

Fellow Subsidiary – KLCC Property Holdings BerhadDirectTan Sri Dato Sri Mohd Hassan bin Marican 50,000 – – 50,000

None of the other directors in office at the end of the financial year had any interest in shares in the Corporation or its relatedcorporations during the financial year.

Other Statutory Informationa. Before the income statements and balance sheets of the Group and of the Corporation 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 doubtfuldebts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made fordoubtful debts; and

ii. to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinarycourse 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 Groupand of the Corporation inadequate to any substantial extent; and

ii. the values attributed to the current assets in the financial statements of the Group and of the Corporation misleading.

c. At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to theexisting method of valuation of assets or liabilities of the Group and of the Corporation misleading or inappropriate.

Directors' Report (cont'd)


Other Statutory Information (cont'd)d. At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial

statements of the Group and of the Corporation which would render any amount stated in the financial statements misleading.

e. As at the date of this report, there does not exist:

i. any charge on the assets of the Group or of the Corporation which has arisen since the end of the financial year which securesthe liabilities of any other person; or

ii. any contingent liability of the Group or of the Corporation 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 monthsafter the end of the financial year which will or may affect the ability of the Group or of the Corporation to meet their obligationswhen they fall due; and

ii. no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year andthe date of this report which is likely to affect substantially the results of the operations of the Group or of the Corporation forthe financial year in which this report is made.

Significant EventsSignificant events during the financial year are disclosed in Note 40 to the financial statements.

AuditorsThe 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 10 May 2007.

Tan Sri Dato Sri Mohd Hassan bin Marican Dato' Shamsul Azhar bin Abbas

102statement by directors and statutory declaration

We, Tan Sri Dato Sri Mohd Hassan bin Marican and Dato' Shamsul Azhar bin Abbas, being two of the directors of MISC Berhad,do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 104 to 189 are drawn up inaccordance with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia so as to give a trueand fair view of the financial position of the Group and of the Corporation as at 31 March 2007 and of the results and the cash flows ofthe Group and of the Corporation for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the directors dated 10 May 2007.

Tan Sri Dato Sri Mohd Hassan bin Marican Dato' Shamsul Azhar bin Abbas

I, Noraini binti Che Dan, being the officer primarily responsible for the financial management of MISC Berhad, do solemnly andsincerely declare that the accompanying financial statements set out on pages 104 to 189 are in my opinion correct, and I make thissolemn 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 theabovenamed Noraini binti Che Dan atKuala Lumpur in Wilayah Persekutuanon 10 May 2007 Noraini binti Che Dan

Before me,

Haron Hashim (W 128)Commissioner of Oath

Statement by DirectorsPursuant to Section 169(15) of the Companies Act, 1965

Statutory DeclarationPursuant to Section 169(16) of the Companies Act, 1965

103report of the auditors

We have audited the financial statements set out on pages 104 to 189. These financial statements are the responsibility of theCorporation's directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you,as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to anyother person for the content of this report.

We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overallpresentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

a. the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicableFinancial Reporting Standards in Malaysia so as to give a true and fair view of:

i. the financial position of the Group and of the Corporation as at 31 March 2007 and of the results and the cash flows of theGroup and of the Corporation for the year then ended; and

ii. the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and

b. the accounting and other records and the registers required by the Act to be kept by the Corporation and by its subsidiaries of whichwe have acted as auditors have been properly kept in accordance with the provisions of the Act.

We have considered the financial statements and the auditors' reports thereon of the subsidiaries of which we have not acted asauditors, as indicated in Note 37 to the financial statements, being financial statements that have been included in the consolidatedfinancial statements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of theCorporation are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statementsand we have received satisfactory information and explanations required by us for those purposes.

The auditors' reports on the financial statements of the subsidiaries were not subject to any qualification material to the consolidatedfinancial statements and did not include any comment required to be made under Section 174(3) of the Act.

Ernst & Young Habibah bte AbdulAF: 0039 No. 1210/05/08(J)Chartered Accountants Partner

Kuala Lumpur, Malaysia10 May 2007

Report of the Auditorsto the Members of MISC Berhad(Incorporated in Malaysia)

104income statements

Group Corporation

2007 2006 2007 2006RM'000 RM'000 RM'000 RM'000

Note (restated) (restated)

Revenue 3 11,198,945 10,747,080 4,355,482 4,824,679

Cost of sales (7,779,198) (7,326,051) (3,822,813) (4,028,558)

Gross profit 3,419,747 3,421,029 532,669 796,121

Gain on disposal of ships 436,559 202,325 131,915 202,325

Other operating income 4 303,345 383,190 3,473,359 999,912

General and administrative expenses (909,224) (784,588) (391,064) (376,279)

Operating profit 5 3,250,427 3,221,956 3,746,879 1,622,079

Finance costs 8 (347,757) (348,398) (46,135) (18,901)

Share of (loss)/profit of associates (491) 15,404 – –

Share of profit of jointly controlled entities 28,131 11,830 – –

Profit before taxation 2,930,310 2,900,792 3,700,744 1,603,178

Taxation 9 (33,380) (30,190) – (18,197)

Profit for the year 2,896,930 2,870,602 3,700,744 1,584,981

Attributable to:

Equity holders of the Corporation 2,852,025 2,822,573 3,700,744 1,584,981

Minority interests 44,905 48,029 – –

2,896,930 2,870,602 3,700,744 1,584,981

Basic earnings per share attributable to equity

holders of the Corporation (sen) 10 76.7 75.9

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

Income Statementsfor the year ended 31 March 2007

105balance sheets

Balance Sheetsas at 31 March 2007

Group Corporation

2007 2006 2007 2006RM'000 RM'000 RM'000 RM'000


Non-Current AssetsShips 12 21,034,467 19,963,021 8,592,410 7,122,515

Property, plant and equipment 12 843,227 827,770 90,131 321,943

Investment properties 13 49,500 53,800 49,500 53,800

Intangible assets 14 1,041,424 1,037,585 – –

Investments in subsidiaries 15 – – 6,716,259 3,647,632

Investments in associates 16 2,685 12,290 – 8,314

Investments in jointly controlled entities 17 503,358 139,476 – –

Other investments 18 236,077 235,577 51,141 50,568

Deferred tax assets 29 2,941 1,151 – –

23,713,679 22,270,670 15,499,441 11,204,772

Current AssetsInventories 19 262,974 243,500 103,090 85,491

Trade and other receivables 20 1,721,703 1,679,379 1,012,199 3,290,868

Marketable securities 22 851 3,587 851 3,587

Cash, deposits and bank balances 23 2,217,564 3,425,969 735,116 487,600

4,203,092 5,352,435 1,851,256 3,867,546

Non-current assets classified as held for sale 24 38,015 – 172,618 –

4,241,107 5,352,435 2,023,874 3,867,546

Current LiabilitiesTrade and other payables 25 2,205,615 2,507,542 2,670,723 1,974,176

Borrowings 26 495,252 609,748 97,065 –

2,700,867 3,117,290 2,767,788 1,974,176

Net Current Assets/(Liabilities) 1,540,240 2,235,145 (743,914) 1,893,370

25,253,919 24,505,815 14,755,527 13,098,142

106balance sheets

Group Corporation

2007 2006 2007 2006RM'000 RM'000 RM'000 RM'000


EquityEquity attributable to equity holders of the Corporation

Share capital 27 3,719,828 3,719,828 3,719,828 3,719,828

Other reserves 28 1,121,422 2,348,423 127,049 1,073,206

Retained profits 13,797,911 12,087,955 10,905,284 8,301,50618,639,161 18,156,206 14,752,161 13,094,540

Minority Interests 241,435 284,686 – –18,880,596 18,440,892 14,752,161 13,094,540

Non-Current LiabilitiesBorrowings 26 6,309,140 5,997,910 – –

Deferred tax liabilities 29 64,183 67,013 3,366 3,602

25,253,919 24,505,815 14,755,527 13,098,142


Balance Sheetsas at 31 March 2007 (cont'd)

107consolidated statement of changes in equity

Consolidated Statement of Changes in Equityfor the year ended 31 March 2007

<------ Attributable to Equity Holders of the Corporation ------> Minority TotalShare Interests Equity

Capital <-Non-distributable-> DistributableOrdinary Share Other Retained

Shares Premium Reserves Profits TotalNote RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At 1 April 2005

As previously stated 1,859,914 460,882 106,221 12,852,789 15,279,806 275,484 15,555,290

Effects of adopting

FRS 121 28 – – 2,849,280 (1,096,235) 1,753,045 (4,963) 1,748,082

At 1 April 2005 (restated) 1,859,914 460,882 2,955,501 11,756,554 17,032,851 270,521 17,303,372

Currency translation differences:

Group 28 – – (586,161) – (586,161) (15,454) (601,615)

Associates 28 – – 1,232 – 1,232 – 1,232

Jointly controlled

entities 28 – – (194) – (194) – (194)

– – (585,123) – (585,123) (15,454) (600,577)

Transfer from reserves

to retained profits 28 – – (21,955) 21,955 – – –

Net expense recognised

directly in equity – – (607,078) 21,955 (585,123) (15,454) (600,577)

Profit for the year – – – 2,822,573 2,822,573 48,029 2,870,602

Total recognised income

and expense for the year – – (607,078) 2,844,528 2,237,450 32,575 2,270,025

Bonus issue 1,859,914 (460,882) – (1,399,032) – – –

Dividends 11 – – – (1,114,095) (1,114,095) (14,893) (1,128,988)

Acquisition of a subsidiary – – – – – (3,517) (3,517)

At 31 March 2006 3,719,828 – 2,348,423 12,087,955 18,156,206 284,686 18,440,892

108consolidated statement of changes in equity

Consolidated Statement of Changes in Equityfor the year ended 31 March 2007 (cont'd)

<------ Attributable to Equity Holders of the Corporation ------> Minority TotalShare Interests Equity

Capital <-Non-distributable-> DistributableOrdinary Share Other Retained

Shares Premium Reserves Profits TotalNote RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At 1 April 2006

As previously stated 3,719,828 – 23,150 13,309,578 17,052,556 298,882 17,351,438

Effects of adopting

FRS 121 28 – – 2,325,273 (1,221,623) 1,103,650 (14,196) 1,089,454

At 1 April 2006 (restated) 3,719,828 – 2,348,423 12,087,955 18,156,206 284,686 18,440,892

Effects of adopting FRS 3 – – – 65 65 – 65

3,719,828 – 2,348,423 12,088,020 18,156,271 284,686 18,440,957

Currency translation

differences:

Group 28 – – (1,273,372) – (1,273,372) 24,932 (1,248,440)

Associates 28 – – 207 – 207 – 207

Jointly controlled

entities 28 – – 996 – 996 – 996

– – (1,272,169) – (1,272,169) 24,932 (1,247,237)

Transfer to reserves from

retained profits 28 – – 45,168 (45,168) – – –

Net expense recognised

directly in equity – – (1,227,001) (45,168) (1,272,169) 24,932 (1,247,237)

Profit for the year – – – 2,852,025 2,852,025 44,905 2,896,930

Total recognised income

and expense for the year – – (1,227,001) 2,806,857 1,579,856 69,837 1,649,693

Dividends 11 – – – (1,096,966) (1,096,966) (17,764) (1,114,730)

Acquisition of subsidiaries – – – – – (95,324) (95,324)

At 31 March 2007 3,719,828 – 1,121,422 13,797,911 18,639,161 241,435 18,880,596


109statements of changes in equity

Statements of Changes in Equityfor the year ended 31 March 2007

ShareCapital <-- Non-Distributable --> Distributable

Ordinary Share Other RetainedNote Shares Premium Reserves Profits TotalNote RM'000 RM'000 RM'000 RM'000 RM'000

At 1 April 2005

As previously stated 1,859,914 460,882 35,217 9,963,036 12,319,049

Effects of adopting FRS 121 28 – – 1,536,018 (733,384) 802,634

At 1 April 2005 (restated) 1,859,914 460,882 1,571,235 9,229,652 13,121,683

Currency translation differences 28 – – (498,029) – (498,029)

Net expense recognised directly in equity – – (498,029) – (498,029)

Profit for the year – – – 1,584,981 1,584,981

Total recognised income and expense for the year – – (498,029) 1,584,981 1,086,952

Bonus issue 1,859,914 (460,882) – (1,399,032) –

Dividends 11 – – – (1,114,095) (1,114,095)

At 31 March 2006 3,719,828 – 1,073,206 8,301,506 13,094,540

At 1 April 2006

As previously stated 3,719,828 – 35,217 9,119,310 12,874,355

Effects of adopting FRS 121 28 – – 1,037,989 (817,804) 220,185

At 1 April 2006 (restated) 3,719,828 – 1,073,206 8,301,506 13,094,540

Currency translation differences 28 – – (946,157) – (946,157)

Net expense recognised directly in equity – – (946,157) – (946,157)

Profit for the year – – – 3,700,744 3,700,744

Total recognised income and expense for the year – – (946,157) 3,700,744 2,754,587

Dividends 11 – – – (1,096,966) (1,096,966)

At 31 March 2007 3,719,828 – 127,049 10,905,284 14,752,161


110cash flow statements

Group Corporation

2007 2006 2007 2006Note RM'000 RM'000 RM'000 RM'000

Cash receipts from customers 11,274,148 10,907,229 4,856,846 4,990,322

Cash paid to suppliers and employees (7,607,139) (6,238,566) (3,917,840) (3,930,352)

Cash from operations 3,667,009 4,668,663 939,006 1,059,970

Taxation paid (33,379) (9,644) – –

Net cash generated from operating activities 3,633,630 4,659,019 939,006 1,059,970

Net cash (used in)/generated from investing activities 30 (3,609,544) (2,640,635) 354,115 (1,873,911)

Net cash used in financing activities 31 (1,045,121) (2,920,123) (1,047,014) (1,537,407)

Net (decrease)/increase in cash and cash equivalents (1,021,035) (901,739) 246,107 (2,351,348)

Cash and cash equivalents at beginning of financial year 3,425,969 4,373,775 487,600 2,850,711

Currency translation differences (187,370) (46,067) 1,409 (11,763)

Cash and cash equivalents at end of financial year 2,217,564 3,425,969 735,116 487,600

Cash and cash equivalents comprise:

Cash, deposits and bank balances 23 2,217,564 3,425,969 735,116 487,600


Cash Flow Statementsfor the year ended 31 March 2007

111notes to the financial statements

1. Corporate Information

The Corporation is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Board ofBursa Malaysia Securities. The registered office of the Corporation is located at Level 25, Menara Dayabumi, Jalan SultanHishamuddin, 50050 Kuala Lumpur.

The holding and ultimate holding company of the Corporation is Petroliam Nasional Berhad, a company incorporated and domiciledin Malaysia.

The principal activities of the Corporation consist of shipowning, ship operating, other activities related to shipping services andowning and operating offshore floating services. The principal activities of the subsidiaries are described in Note 37.

There have been no significant changes in the nature of the principal activities during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on10 May 2007.

2. Significant Accounting Policies

2.1 Basis of Preparation

The financial statements comply with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards inMalaysia ("FRS"). At the beginning of the current financial year, the Group and the Corporation had adopted new and revised FRSswhich are mandatory for financial periods beginning on or after 1 January 2006 as described fully in Note 2.3.

The financial statements of the Group and of the Corporation have also been prepared on a historical cost basis unless otherwiseindicated in the accounting policies below.

The functional currency of the Corporation and certain subsidiaries is United States Dollar ("USD"). The financial statements arepresented in Ringgit Malaysia ("RM") in compliance with FRSs and all values are rounded to the nearest thousand (RM'000) exceptwhen otherwise indicated.

2.2 Summary of Significant Accounting Policies

a. Subsidiaries and Basis of Consolidation

i. SubsidiariesSubsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtainbenefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertibleare considered when assessing whether the Group has such power over another entity.

In the Corporation's separate financial statements, investments in subsidiaries are stated at cost less impairment losses. Ondisposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profitor loss.

Notes to the Financial Statements31 March 2007


2. Significant Accounting Policies (cont'd)

2.2 Summary of Significant Accounting Policies (cont'd)

a. Subsidiaries and Basis of Consolidation (cont'd)

ii. Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Corporation and its subsidiaries as at thebalance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Corporation.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continueto be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intragroupbalances, transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted in theconsolidated financial statements for like transactions and events in similar circumstances.

Acquisitions of subsidiaries are accounted for using the purchase method. The purchase method of accounting involvesallocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumedat the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date ofexchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directlyattributable to the acquisition.

Any excess of the cost of the acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities andcontingent liabilities represents goodwill.

Any excess of the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over thecost of acquisition is recognised immediately in profit or loss.

When the merger method is used, the cost of investment in the Corporation's book is recorded at the nominal value ofshares issued and the difference between the carrying value of the investment and the nominal value of shares acquired istreated as merger reserve or merger deficit. The results of the companies being merged are included as if the merger hadbeen effected throughout the current and previous years.

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. It is measured atthe minorities' share of the fair value of the subsidiaries' identifiable assets and liabilities at the acquisition date and theminorities' share of changes in subsidiaries' equity since then.

b. Associates

Associates are entities in which the Group has significant influence and that is neither a subsidiary nor an interest in a jointventure. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not incontrol or joint control over those policies.

Notes to the Financial Statements31 March 2007 (cont'd)




b. Associates (cont'd)

Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting.Under the equity method, the investment in associate is carried in the consolidated balance sheet at cost adjusted for post-acquisition changes in the Group's share of net assets of the associate. The Group's share of the net profit or loss of theassociate is recognised in the consolidated profit or loss. Where there has been a change recognised directly in the equity of theassociate, the Group recognises its share of such changes. In applying the equity method, unrealised gains and losses ontransactions between the Group and the associate are eliminated to the extent of the Group's interest in the associate. Afterapplication of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss withrespect to the Group's net investment in the associate. The associate is equity accounted for from the date the Group obtainssignificant influence until the date the Group ceases to have significant influence over the associate.

Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of theGroup's share of the net fair value of the associate's identifiable assets, liabilities and contingent liabilities over the cost of theinvestment is excluded from the carrying amount of the investment and is instead included as income in the determination ofthe Group's share of the associate's profit or loss in the period in which the investment is acquired.

When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any long-term intereststhat, in substance, form part of the Group's net investment in the associate, the Group does not recognise further losses, unlessit has incurred obligations or made payments on behalf of the associate.

The most recent available audited financial statements of the 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 isarrived at from the last audited financial statements available and management financial statements to the end of theaccounting period. Uniform accounting policies are adopted for like transactions and events in similar circumstances.

In the Corporation's separate financial statements, investments in associates are stated at cost less impairment losses. Ondisposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profitor loss.

c. Jointly Controlled Entities

The Group has an interest in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangementwhereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is ajoint venture that involves the establishment of a separate entity in which each venturer has an interest.

Investments in jointly controlled entities are accounted for in the consolidated financial statements using the equity method ofaccounting as described in Note 2.2(b).

In the Corporation's separate financial statements, investments in jointly controlled entities are stated at cost less impairmentlosses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included inprofit or loss.




d. Intangible Assets

i. GoodwillGoodwill acquired in a business combination is initially measured at cost being the excess of the cost of businesscombination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is notamortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstancesindicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amountof goodwill relating to the entity sold.

ii. Other Intangible AssetsIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in abusiness combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets arecarried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangibleassets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basisover the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangibleasset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful lifeare reviewed at least at each balance sheet date.

Intangible assets with indefinite useful lives are not amortised but tested for impairment annually or more frequently ifthe events or changes in circumstances indicate that the carrying value may be impaired either individually or at thecash-generating-unit level. The useful life of an intangible asset with an indefinite life is also reviewed annually to determinewhether the useful life assessment continues to be supportable.

e. Ships, Property, Plant and Equipment, and Depreciation

All ships, property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset's carryingamount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated withthe item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part isderecognised. All other repairs and maintenance are charged to the income statement during the financial period in which theyare incurred.

Subsequent to recognition, ships, property, plant and equipment except for freehold land, ships under construction, systemswork in progress and construction in progress are stated at cost less accumulated depreciation and any accumulatedimpairment losses.

Long term leasehold and foreshore land of a subsidiary have not been revalued since they were revalued in 1988. The directorshave not adopted a policy of regular revaluations of such assets and no later valuation has been recorded. As permitted underthe transitional provisions of IAS 16 (Revised): Property, Plant and Equipment, these assets continue to be stated at their originalvaluation less accumulated depreciation and impairment losses.





e. Ships, Property, Plant and Equipment, and Depreciation (cont'd)

Freehold land has an unlimited useful life and therefore is not depreciated. Leasehold land is depreciated on a straight-line basisover the period of the respective leases which range from 60 to 99 years. Ships under construction, systems work in progressand construction in progress are not depreciated as these assets are not available for use.

Depreciation of ships under construction commences from the date of delivery of the ships. Depreciation of ships in operation,property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value overthe estimated useful life, at the following annual rates:

Ships constructed (including floating solutions assets) 5 – 20 yearsShips purchased Remaining useful lifeBuildings 2% – 7%Containers 8% – 15%Motor vehicles 10% – 33.3%Furniture, fittings and equipment 10% – 33.3%Computer software and hardware 15% – 33.3%Plant and machinery 10% – 20%Tugboats, engines and pushers 6.7% – 20%Drydocks and waste plant 2% – 10%

The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount,method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of thefuture economic benefits embodied in the ships, property, plant and equipment.

Ships, property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from itsuse or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in profit orloss and the unutilised portion of the revaluation surplus is taken directly to retained profits.

f. Investment Properties

Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Suchproperties are measured at cost, including transaction costs.

Freehold land and building of the Corporation have not been revalued since they were revalued in 1984. The directors have notadopted a policy of regular revaluations of such assets and no later valuation has been recorded.

Depreciation of investment properties is provided for on a straight-line basis at 2% per annum.

Investment properties are derecognised when either they have been disposed of or when the investment property ispermanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on theretirement or disposal of an investment property are recognised in profit or loss in the year in which they arise.




g. Construction Contracts

Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised asrevenue and expenses respectively by using the stage of completion method. The stage of completion is measured by referenceto 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 reliably estimated, contract revenue is recognised to the extent ofcontract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in whichthey are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as anexpense immediately.

When the total of costs incurred on construction contracts plus, recognised profits (less recognised losses), exceeds progressbillings, 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.

h. Impairment of Non-financial Assets

The carrying amounts of assets, other than construction contract assets, inventories, deferred tax assets and non-current assetsheld for sale, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any suchindication exists, the asset's recoverable amount is estimated to determine the amount of impairment loss.

For goodwill, the recoverable amount is estimated at each balance sheet date or more frequently when indicators of impairmentare identified.

For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless theasset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverableamount is determined for the cash-generating-unit ("CGU") to which the asset belongs to. Goodwill acquired in a businesscombination is, from the acquisition date, allocated to each of the Group's CGUs, or groups of CGUs, that are expected tobenefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned tothose units or groups of units.

An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs to sell and its value in use. In assessingvalue in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflectscurrent market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of anasset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of anygoodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit orgroups of units on a pro-rata basis.

An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount,in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does notexceed the amount held in the asset revaluation reserve for the same asset.





h. Impairment of Non-financial Assets (cont'd)

Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill isreversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since the lastimpairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverableamount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisationor depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an assetother than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal istreated as a revaluation increase.

i. Inventories

Inventories which comprise bunkers, lubricants, spares, raw materials and consumable stores are held for own consumption andare stated at the lower of cost and net realisable value. Cost is arrived at on the weighted average basis and comprises thepurchase price and other direct charges.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to makethe sale.

j. Financial Instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions ofthe instrument.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement.Interest, dividends and gains and losses relating to a financial instrument classified as a liability, are reported as expense orincome. Distributions to holders of financial instruments classified as equity are recognised directly in equity. Financialinstruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or torealise the asset and settle the liability simultaneously.

i. Cash and Cash EquivalentsFor the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank, deposit atcall and short term highly liquid investments which have an insignificant risk of changes in value, net of outstandingbank overdrafts.

ii. Other Non-current InvestmentsNon-current investments other than investments in subsidiaries, associates, jointly controlled entities and investmentproperties are stated at cost less impairment losses. On disposal of an investment, the difference between net disposalproceeds and its carrying amount is recognised in profit or loss.

iii. Marketable SecuritiesMarketable securities are carried at the lower of cost and market value, determined on an aggregate basis. Cost isdetermined on the weighted average basis while market value is determined based on quoted market values. Increases ordecreases in the carrying amount of marketable securities are recognised in profit or loss. On disposal of marketablesecurities, the difference between net disposal proceeds and the carrying amount is recognised in profit or loss.




j. Financial Instruments (cont'd)

iv. Trade and Other ReceivablesTrade and other receivables are carried at anticipated realisable values. Bad debts are written off when identified. Anestimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

v. Trade and Other PayablesTrade and other payables are stated at the fair value of the consideration to be paid in the future for goods andservices received.

vi. Interest Bearing Loans and BorrowingsAll loans and borrowings are initially recognised at the fair value of the consideration received less directly attributabletransaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortisedcost using the effective interest method.

vii. Non-convertible Cumulative Redeemable Preference Shares ("NCRPS")The NCRPS are recorded at the amount of proceeds received, net of transaction costs.

The NCRPS are classified as non-current liabilities in the balance sheet and the preferential dividends are recognised asfinance costs in profit or loss in the period in which they are incurred.

viii.Equity InstrumentsOrdinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in whichthey are declared.

The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transactioncosts comprise only those incremental external costs directly attributable to the equity transaction which would otherwisehave been avoided.

ix. Derivative Financial InstrumentsDerivative financial instruments are not recognised in the financial statements.

Interest rate swap contracts:Net differentials in interest receipt and payments arising from interest rate swap contracts are recognised as interest incomeor expense in the profit or loss over the period of contract.

Forward bunkers contract:Upon settlement, the forward bunkers contract is recognised as expense in the profit or loss.





k. Leases

i. ClassificationA lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental toownership. All leases that do not transfer substantially all the risks and rewards are classified as operating leases.

ii. Operating Leases – the Group as LesseeOperating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. Theaggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on astraight-line basis.

An up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term.

iii. Operating Lease – the Group as LessorAssets leased out under operating leases are presented on the balance sheet according to the nature of the assets. Rentalincome from operating leases is recognised on a straight-line basis over the term of the relevant lease (Note 2.2 (q)(vi)). Initialdirect costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased assetand recognised on a straight-line basis over the lease term.

l. Borrowing Costs

Borrowing costs comprise debts issuance costs and interest costs. Borrowing costs directly attributable to the acquisition,construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get readyfor their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for theirintended use. Investment income earned on the temporary investment of specific borrowings pending their expenditure onqualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

m. Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of incometaxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at thebalance sheet date.

Deferred tax is provided for, using the liability method. In principle, deferred tax liabilities are recognised for all taxabletemporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses andunused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporarydifferences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary differencearises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not abusiness combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability issettled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognisedas income or an expense and included in the profit or loss for the period, except when it arises from a transaction which isrecognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a businesscombination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of anyexcess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities overthe cost of the combination.




n. Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflowof resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can bemade. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect ofthe time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, therisks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised asfinance cost.

Provision for warranty is made based on service histories to cover the estimated liability that may arise during the warrantyperiod. Any surplus provision will be written back at the end of the warranty period while additional provision is made as andwhen necessary.

o. Employee Benefits

i. Short Term BenefitsWages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associatedservices are rendered by employees. Short term accumulating compensated absences such as paid annual leave arerecognised when services are rendered by employees that increase their entitlement to future compensated absences. Shortterm non-accumulating compensated absences such as sick leave are recognised when the absences occur.

ii. Defined Contribution PlansDefined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separateentities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not holdsufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Suchcontributions are recognised as an expense in the profit or loss as incurred. As required by law, companies in Malaysia makesuch contributions to the Employees Provident Fund ("EPF"). Some of the Group's foreign subsidiaries also makecontributions to their respective countries' statutory pension schemes.

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





p. Foreign Currencies

i. Functional and Presentation CurrencyThe individual financial statements of each entity in the Group are measured using the currency of the primary economicenvironment in which the entity operates ("the functional currency"). The functional currency of the Corporation and certainsubsidiaries is United States Dollar ("USD"). The financial statements are presented in Ringgit Malaysia ("RM"), incompliance with FRSs.

ii. Foreign Currency TransactionsIn preparing the financial statements of the individual entities, transactions in currencies other than the entity's functionalcurrency ("foreign currencies") are recorded in the functional currencies using the exchange rates prevailing at the dates ofthe transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the ratesprevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies aretranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured interms of historical cost in a foreign currency are not translated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included inprofit or loss for the period except for exchange differences arising on monetary items that form part of the Group's netinvestment in foreign operation. Exchange differences arising on monetary items that form part of the Group's netinvestment in foreign operation, where that monetary item is denominated in either the functional currency of the reportingentity or the foreign operation, are initially taken directly to the currency translation reserve within equity until the disposal ofthe foreign operation, at which time they are recognised in profit or loss. Exchange differences arising on monetary itemsthat form part of the Group's net investment in foreign operation, where that monetary item is denominated in a currencyother than the functional currency of either the reporting entity or the foreign operation, are recognised in profit or loss forthe period. Exchange differences arising on monetary items that form part of the Corporation's net investment in foreignoperation, regardless of the currency of the monetary item, are recognised in profit or loss in the Corporation’s financialstatements or the individual financial statements of the foreign operation, as appropriate.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss forthe period except for the differences arising on the translation of non-monetary items in respect of which gains and lossesare recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directlyin equity.

iii. Foreign OperationsThe results and financial position of foreign operations that have a functional currency different from the presentationcurrency ("RM") of the consolidated financial statements are translated into RM as follows:

• Assets and liabilities for each balance sheet presented are translated at the closing rate prevailing at the balance sheetdate;

• Income and expenses for each income statement are translated at average exchange rates for the year, whichapproximates the exchange rates at the dates of the transactions; and

• All resulting exchange differences are taken to the currency translation reserve within equity.

Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 April 2006 are treated asassets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations andtranslated at the closing rate at the balance sheet date. Goodwill and fair value adjustments which arose on the acquisitionof foreign subsidiaries before 1 April 2006 are deemed to be assets and liabilities of the parent company and are recorded inRM at the rates prevailing at the date of acquisition.




q. Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can bereliably measured. The following specific recognition criteria must also be met before revenue is recognised:

i. Freight IncomeFreight receivable and the relevant discharge costs of cargoes loaded onto ships up to the balance sheet date are accrued forin the financial statements.

ii. Charter IncomeThe results of ships employed and voyage charter and that of other services rendered are accounted for on a time accrual basis.

iii. Lightering IncomeIncome on lightering charges is recognised on percentage of completion of voyages calculated on a discharge-to-dischargebasis. The voyage revenue is recognised evenly over the period from a vessel's departure from its previous discharge point toits projected departure from its next discharge point.

iv. Other Shipping Related IncomeRevenue from services rendered is recognised net of service taxes and discounts as and when the services are performed.

v. Construction ContractsRevenue from construction contracts is accounted for by the stage of completion method as described in Note 2.2(g).

vi. Rental IncomeRental income from investment property is recognised on a straight-line basis over the term of the lease. The aggregate costof incentives provided to lessee is recognised as a reduction of rental income over the lease term on a straight-line basis.

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

viii.Dividend IncomeDividend income is recognised when the Group's right to receive payment is established.

r. Non-current Assets Held for Sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transactionrather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset isavailable for immediate sale in its present condition subject only to terms that are usual and customary.

Immediately before classification as held for sale, the measurement of the non-current assets is brought up-to-date inaccordance with applicable FRSs. Then, on initial classification as held for sale, non-current assets are measured in accordancewith FRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in profit or loss.





s. Repairs and Maintenance

Repairs and maintenance costs are recognised in profit or loss as incurred. Drydocking expenditure is capitalised and depreciatedover a period of 30 months or the period until the next drydocking date, whichever is shorter.

2.3 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs

On 1 April 2006, the Group and the Corporation adopted the following FRSs mandatory for financial periods beginning on or after1 January 2006:

FRS 2 Share-based PaymentFRS 3 Business CombinationsFRS 5 Non-current Assets Held for Sale and Discontinued OperationsFRS 101 Presentation of Financial StatementsFRS 102 InventoriesFRS 108 Accounting Policies, Changes in Accounting Estimates and ErrorsFRS 110 Events After the Balance Sheet DateFRS 116 Property, Plant and EquipmentFRS 121 The Effects of Changes in Foreign Exchange RatesFRS 127 Consolidated and Separate Financial StatementsFRS 128 Investments in AssociatesFRS 131 Interests in Joint VenturesFRS 132 Financial Instruments: Disclosure and PresentationFRS 133 Earnings Per ShareFRS 136 Impairment of AssetsFRS 138 Intangible AssetsFRS 140 Investment Property

At the date of authorisation of these financial statements, the following FRSs, amendments to FRSs and Interpretations were issuedbut not yet effective and have not been applied by the Group and the Corporation:

FRS 117 LeasesFRS 124 Related Party DisclosuresFRS 139 Financial Instruments: Recognition and MeasurementFRS 6 Exploration for and Evaluation of Mineral ResourcesAmendment to FRS 1192004 Employee Benefits – Actuarial Gains and Losses, Group Plans and DisclosuresAmendment to FRS 121 The Effects of Changes in Foreign Exchange Rates – Net Investment in a Foreign OperationIC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar LiabilitiesIC Interpretation 2 Members' Shares in Co-operative Entities and Similar InstrumentsIC Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation FundsIC Interpretation 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic EquipmentIC Interpretation 7 Applying the Restatement Approach under FRS 1292004 – Financial Reporting in Hyperinflationary EconomicsIC Interpretation 8 Scope of FRS 2

The above FRSs, amendments to FRSs and Interpretations are expected to have no significant impact on the financial statements ofthe Group and the Corporation upon their initial application.

The Group and the Corporation are exempted from disclosing the possible impact, if any to the financial statements upon the initialapplication of FRS 117, 124 and 139.



2.3 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs (cont'd)

The adoption of FRS 2, 102, 108, 110, 127, 128, 132 and 133 does not result in significant changes in accounting policies of theGroup. The principal changes in accounting policies and their effects resulting from the adoption of the other new and revised FRSsare discussed below:

a. FRS 3: Business Combinations, FRS 136: Impairment of Assets and FRS 138: Intangible Assets

The new FRS 3 has resulted in consequential amendments to two other accounting standards, FRS 136 and FRS 138. Inaccordance with the transitional provisions, FRS 3 has been applied for business combinations for which the agreement date ison or after 1 April 2006.

i. GoodwillPrior to 1 April 2006, goodwill was amortised on a straight-line basis over its estimated useful life which ranged from 5 to 20years and at each balance sheet date, the Group assessed if there was any indication of impairment of the cash-generating-unit in which the goodwill is attached to. The adoption of FRS 3 and the revised FRS 136 has resulted in the Group ceasingannual goodwill amortisation. Goodwill is now carried at cost less accumulated impairment losses and is tested forimpairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired.

In accordance with the transitional provisions of FRS 3, the Group has applied the revised accounting policy for goodwillprospectively from 1 April 2006. The transitional provisions of FRS 3 also required the Group to eliminate the carryingamount of the accumulated amortisation at 1 April 2006 amounting to RM164,165,000 against the carrying amount ofgoodwill. The net carrying amount of goodwill as at 1 April 2006 of RM741,167,000 ceased to be amortised thereafter.

Because the revised accounting policy has been applied prospectively, the change has had no impact on amounts reportedfor financial year ended 31 March 2006 or prior periods. The effects on the consolidated balance sheet as at 31 March 2007and consolidated income statement for the year ended 31 March 2007 are set out in Note 2.3(h)(i) and Note 2.3(h)(ii)respectively. This change has no impact on the Corporation's financial statements.

ii. Excess of Group's interest in the net fair value of acquiree's identifiable assets, liabilities and contingentliabilities over cost (previously known as negative goodwill)Prior to 1 April 2006, negative goodwill was amortised over the weighted average useful life of the non-monetary assetsacquired, except to the extent it relates to identified expected future losses as at the date of acquisition. In such cases, it wasrecognised in profit or loss as those expected losses were incurred. Under FRS 3, any excess of the Group's interest in the netfair value of acquiree's identifiable assets, liabilities and contingent liabilities over cost of acquisitions, after reassessment, isnow recognised immediately in profit or loss. In accordance with transitional provisions of FRS 3, the negative goodwill as at1 April 2006 of RM65,000 was derecognised with a corresponding increase in retained profits.

Because the revised accounting policy has been applied prospectively, the change has had no impact on amounts reportedfor financial year ended 31 March 2006 or prior periods. The effects on the consolidated balance sheet as at 31 March 2007and consolidated income statement for the year ended 31 March 2007 are set out in Note 2.3(h)(i) and Note 2.3(h)(ii)respectively. This change has no impact on the Corporation's financial statements.





a. FRS 3: Business Combinations, FRS 136: Impairment of Assets and FRS 138: Intangible Assets (cont'd)

iii. Accounting for acquisitionsPrior to 1 April 2006, the Group did not recognise separately the acquiree's contingent liabilities at the acquisition date aspart of allocating the cost of a business combination. Upon the adoption of FRS 3, contingent liabilities are now separatelyrecognised, provided their fair value can be measured reliably. In addition, the Group was previously allowed to recogniserestructuring provisions in connection with an acquisition regardless of whether the acquiree had recognised such provisions.Upon the adoption of FRS 3, the Group is now permitted to recognise such provisions only when the acquiree has, at theacquisition date, an existing liability for restructuring recognised in accordance with FRS 137. The change did not affect thefinancial statements of the Group and the Corporation.

iv. Other intangible assetsPrior to 1 April 2006, all intangible assets were considered to have a finite useful life and were stated at cost lessaccumulated amortisation and impairment losses. Upon the adoption of FRS 138, the useful lives of intangible assets arenow assessed at the individual asset level as having either a finite or indefinite life. In accordance with the transitionalprovisions of FRS 138, the change in the useful life assessment from finite to indefinite is made on a prospective basis.

Other intangible assets of the Group comprise of fair value of time charter hire contracts, based on valuations performed byan independent professional valuer, and is considered to have finite useful lives and therefore, continue to be stated at costless accumulated amortisation and impairment losses. The change did not affect the financial statements of the Group andthe Corporation.

b. FRS 5: Non-current Assets Held for Sale and Discontinued Operations

Prior to 1 April 2006, non-current assets held for sale were neither classified nor presented as current assets. There were nodifferences in the measurement of non-current assets held for sale and those for continuing use. Upon the adoption of FRS 5,non-current assets held for sale are classified as current assets and are stated at the lower of carrying amount and fair valueless costs to sell.

The Group has applied FRS 5 prospectively in accordance with the transitional provisions. The effects on the balance sheetsas at 31 March 2007 and income statements for the year ended 31 March 2007 are set out in Note 2.3(h)(i) and Note 2.3(h)(ii)respectively.

c. FRS 101: Presentation of Financial Statements

Prior to 1 April 2006, minority interests at the balance sheet date were presented in the consolidated balance sheet separatelyfrom liabilities and equity. Upon the adoption of the revised FRS 101, minority interests are now presented within total equity. Inthe consolidated income statement, minority interests are presented as an allocation of the total profit or loss for the year. Asimilar requirement is also applicable to the statement of changes in equity. The revised FRS 101 also requires disclosure, on theface of the statement of changes in equity, total recognised income and expenses for the year, showing separately the amountsattributable to equity holders of the Corporation and to minority interests.

Prior to 1 April 2006, the Group's share of taxation of associates and jointly controlled entities accounted for using the equitymethod was included as part of the Group's income tax expense in the consolidated income statement. Upon the adoption ofthe revised FRS 101, the share of taxation of associates and jointly controlled entities are now included in the respective sharesof profit or loss reported in the consolidated income statement before arriving at the Group's profit or loss before tax.




c. FRS 101: Presentation of Financial Statements (cont'd)

Because the revised accounting policy has been applied prospectively, the change has had no impact on amounts reported forfinancial year ended 31 March 2006 or prior periods. The effects on the consolidated balance sheet as at 31 March 2007 andconsolidated income statement for the year ended 31 March 2007 are set out in Note 2.3(h)(i) and Note 2.3(h)(ii) respectively.These changes in presentation have no impact on the Corporation's financial statements.

d. FRS 116: Property, Plant and Equipment

Prior to 1 April 2006, drydocking expenditure was recognised in profit or loss as incurred. Upon the adoption of FRS 116,drydocking expenditure are capitalised and depreciated over a period of 30 months or the period until the next drydocking date,whichever is shorter.

Because the revised accounting policy has been applied prospectively, the change has had no impact on amounts reported forfinancial year ended 31 March 2006 or prior periods. The effects on the balance sheets as at 31 March 2007 and incomestatements for the year ended 31 March 2007 are set out in Note 2.3(h)(i) and Note 2.3(h)(ii) respectively.

e. FRS 121: The Effects of Changes in Foreign Exchange Rates

i. Change in functional currencyPrior to 1 April 2006, the financial records of the Corporation, and all its subsidiaries, other than overseas subsidiaries, weremaintained in Ringgit Malaysia ("RM"), and reported in the financial statements using the same currency. Upon the adoptionof FRS 121, it has been determined that the functional currency of the Corporation and several subsidiaries are United StatesDollar ("USD") and as such, all transactions should be recorded in USD. This change in accounting policy has beenaccounted for retrospectively and as disclosed in Note 2.3(i), certain comparatives have been restated. The effects on thebalance sheets as at 31 March 2007 and income statements for the year ended 31 March 2007 are set out in Note 2.3(h)(i)and Note 2.3(h)(ii) respectively.

ii. Goodwill and fair value adjustmentsPrior to 1 April 2006, goodwill arising on the acquisition of a foreign operation and fair value adjustments to the carryingamounts of assets and liabilities arising on such an acquisition were deemed to be assets and liabilities of the parentcompany and were translated using the exchange rate at the date of acquisition. Upon the adoption of the revised FRS 121,goodwill and fair value adjustments arising on the acquisition of a foreign operation are now treated as assets and liabilitiesof the foreign operation and are translated at the closing rate. In accordance with the transitional provisions, the Group hasapplied this change in accounting policy prospectively to all acquisitions occurring after 1 April 2006. The change did notaffect the financial statements of the Group and the Corporation.





f. FRS 131: Interests in Joint Ventures

Prior to 1 April 2006, the Group's share of profit of jointly controlled entities accounted for using the equity method wasincluded as part of the Group's share of profit of associates in the consolidated income statement. Upon the adoption of FRS131, the share of profit of jointly controlled entities accounted for using the equity method are now included in the respectiveshare of profit or loss of jointly controlled entities.

In addition, prior to 1 April 2006, the Group's investments in jointly controlled entities accounted for using the equity methodwas included as part of the Group's share of investments in associates in the consolidated balance sheet. Upon the adoption ofFRS 131, the Group's investments in jointly controlled entities accounted for using the equity method are now included in therespective investments in jointly controlled entities.

These changes in presentation have been applied retrospectively and as disclosed in Note 2.3(i), certain comparatives havebeen restated. The effects on the consolidated balance sheet as at 31 March 2007 and consolidated income statement for theyear ended 31 March 2007 are set out in Note 2.3(h)(i) and Note 2.3(h)(ii) respectively. There changes in presentation have noimpact on the Corporation's financial statements.

g. FRS 140: Investment Property

Prior to 1 April 2006, investment properties were classified as property, plant and equipment and stated at the revalued amountin 1984. Upon the adoption of FRS 140, investment properties are now reclassified from property, plant and equipment andremains stated at the revalued amounts.

These changes in presentation have been applied retrospectively and as disclosed in Note 2.3(i),certain comparatives have beenrestated. The effects on the balance sheets as at 31 March 2007 are set out in Note 2.3(h)(i). There were no effects on theincome statements for the year ended 31 March 2007.

h. Summary of effects of adopting new and revised FRSs on the current year's financial statements

The following tables provide estimates of the extent to which each of the line items in the balance sheets and income statementsfor the year ended 31 March 2007 is higher or lower than it would have been had the previous policies been applied in thecurrent year.


2.Si

gn

ific

ant

Acc

ou

nti

ng

Polic

ies

(co

nt'

d)

2.3

Ch

ang

esin

Acc

ou

nti

ng

Polic

ies

and

Effe

cts

Ari

sin

gfr

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Ad

op

tio

no

fN

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Ss(c

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Sum

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yo

fef

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so

fad

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tin

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dre

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dFR

Sso

nth

ecu

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tye

ar's

fin

anci

alst

atem

ents

(co

nt'

d)

i.Ef

fect

so

nb

alan

cesh

eets

asat

31M

arch

2007

NotestotheFinancialStatements

31March2007(cont'd)

Incr

ease

/(D

ecre

ase)

FRS

3FR

S3

FRS

5FR

S10

1FR

S11

6FR

S12

1FR

S13

1FR

S14

0N

ote

No

teN

ote

No

teN

ote

No

teN

ote

No

teD

escr

ipti

on

of

chan

ge

2.3(

a)(i

)2.

3(a)

(ii)

2.3(

b)

2.3(

c)2.

3(d

)/2.

42.

3(e)

(i)

2.3(

f)2.

3(g

)To

tal

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

Gro

up

Ship

s–

––

–(3

04,2

12)

(41,

671)

––

(345

,883

)Pr

oper

ty,p

lant

and

equi

pmen

t–

–37

,710

––

(16,

525)

–49

,500

70,6

85In

vest

men

tpr

oper

ties

––

––

–(1

5,35

1)–

(49,

500)

(64,

851)

Inta

ngib

leas

sets

(57,

868)

47–

––

48,3

28–

–(9

,493

)In

vest

men

tsin

asso

ciat

es–

––

––

–50

3,35

8–

503,

358

Inve

stm

ents

injo

intly

cont

rolle

den

titie

s–

––

––

107

(503

,358

)–

(503

,251

)O

ther

inve

stm

ents

––

––

–4,

573

––

4,57

3N

on-c

urre

ntas

sets

held

for

sale

––

(37,

710)

––

894

––

(36,

816)

Def

erre

dta

xlia

bilit

ies

––

––

–(3

38)

––

(338

)O

ther

rese

rves

––

––

13,6

34(1

,382

,630

)–

–(1

,368

,996

)Re

tain

edpr

ofits

(57,

868)

47–

–(3

15,9

00)

1,38

2,96

3–

–1,

009,

242

Min

ority

inte

rest

s–

––

–(1

,946

)(2

0,31

6)–

–(2

2,26

2)To

tale

quity

(57,

868)

47–

(241

,435

)(3

04,2

12)

(19,

983)

––

(623

,451

)


2.Si

gn

ific

ant

Acc

ou

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Polic

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(co

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2.3

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31M

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2007

(co

nt'

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Incr

ease

/(D

ecre

ase)

FRS

3FR

S3

FRS

5FR

S10

1FR

S11

6FR

S12

1FR

S13

1FR

S14

0N

ote

No

teN

ote

No

teN

ote

No

teN

ote

No

teD

escr

ipti

on

of

chan

ge

2.3(

a)(i

)2.

3(a)

(ii)

2.3(

b)

2.3(

c)2.

3(d

)/2.

42.

3(e)

(i)

2.3(

f)2.

3(g

)To

tal

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

Co

rpo

rati

on

Ship

s–

––

–(1

44,0

00)

484,

958

––

340,

958

Prop

erty

,pla

ntan

deq

uipm

ent

––

169,

384

––

3,78

7–

49,5

0022

2,67

1In

vest

men

tpr

oper

ties

––

––

–(1

5,35

1)–

(49,

500)

(64,

851)

Inve

stm

ents

insu

bsid

iarie

s–

––

––

386,

063

––

386,

063

Non

-cur

rent

asse

tshe

ldfo

rsa

le–

–(1

69,3

84)

––

(29,

212)

––

(198

,596

)O

ther

inve

stm

ents

––

––

–4,

561

––

4,56

1D

efer

red

tax

liabi

litie

s–

––

––

(338

)–

–(3

38)

Reta

ined

prof

its–

––

–(1

50,4

53)

740,

448

––

589,

995

Oth

erre

serv

es–

––

–6,

453

94,0

20–

–10

0,47

3


2.Si

gn

ific

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Acc

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Polic

ies

(co

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2.3

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Polic

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fin

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(co

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ii.Ef

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so

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com

est

atem

ents

for

the

year

end

ed31

Mar

ch20

07

Incr

ease

/(D

ecre

ase)

FRS

3FR

S3

FRS

5FR

S10

1FR

S11

6FR

S12

1FR

S13

1FR

S14

0N

ote

No

teN

ote

No

teN

ote

No

teN

ote

No

teD

escr

ipti

on

of

chan

ge

2.3(

a)(i

)2.

3(a)

(ii)

2.3(

b)

2.3(

c)2.

3(d

)/2.

42.

3(e)

(i)

2.3(

f)2.

3(g

)To

tal

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

Gro

up

Reve

nue

––

––

–25

,638

––

25,6

38C

ost

ofsa

les

––

––

317,

846

(87,

075)

––

230,

771

Gen

eral

and

adm

inis

trat

ive

expe

nses

57,8

68(4

7)30

5–

–(7

9,11

3)–

–(2

0,98

7)O

ther

oper

atin

gin

com

e–

––

––

5,35

2–

–5,

352

Ope

ratin

gpr

ofit

(57,

868)

47(3

05)

–(3

17,8

46)

197,

178

––

(178

,794

)Fi

nanc

eco

sts

––

––

–31

7–

–31

7Sh

are

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31March2007(cont'd)


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i. Restatement of comparativesThe following comparative amounts have been restated as a result of adopting the new and revised FRSs:

PreviouslyStated Increase/(Decrease) Restated

FRS 121 FRS 131 FRS 140Note Note Note

2.3(e)(i) 2.3(e)(i) 2.3(f) 2.3(g)Description of change RM'000 RM'000 RM'000 RM'000 RM'000

At 1 April 2005

GroupOther reserves 106,221 2,849,280 – – 2,955,501Retained profits 12,852,789 (1,096,235) – – 11,756,554

CorporationOther reserves 35,217 1,536,018 – – 1,571,235Retained profits 9,963,036 (733,384) – – 9,229,652

At 31 March 2006

GroupShips 18,912,009 1,051,012 – – 19,963,021Property, plant and equipment 842,351 39,219 – (53,800) 827,770Investment properties – – – 53,800 53,800Investments in associates 151,766 – (139,476) – 12,290Investments in jointly controlled entities – – 139,476 – 139,476Other investments 236,462 (885) – – 235,577Other reserves 23,150 2,325,273 – – 2,348,423Retained profits 13,309,578 (1,221,623) – – 12,087,955Minority interests 298,882 (14,196) – – 284,686Deferred tax liabilities 67,115 (102) – – 67,013

CorporationShips 7,026,237 96,278 – – 7,122,515Property, plant and equipment 336,517 39,226 – (53,800) 321,943Investment properties – – – 53,800 53,800Investments in subsidiaries 3,561,981 85,651 – – 3,647,632Investments in associates 8,505 (191) – – 8,314Other investments 51,499 (881) – – 50,568Other reserves 35,217 1,037,989 – – 1,073,206Retained profits 9,119,310 (817,804) – – 8,301,506Deferred tax liabilities 3,704 (102) – – 3,602





i. Restatement of comparatives (cont'd)

PreviouslyStated Increase/(Decrease) Restated

FRS 121 FRS 131 FRS 140Note Note Note

2.3(e)(i) 2.3(e)(i) 2.3(f) 2.3(g)Description of change RM'000 RM'000 RM'000 RM'000 RM'000

GroupFor the year ended 31 March 2006Revenue 10,766,426 (19,346) – – 10,747,080Cost of sales 7,168,638 157,413 – – 7,326,051Gross profit 3,597,788 (176,759) – – 3,421,029Gain on disposal of ships 244,257 (41,932) – – 202,325Other operating income 262,788 120,402 – – 383,190General and administrative expenses 756,170 28,418 – – 784,588Operating profit 3,348,663 (126,707) – – 3,221,956Finance costs 343,566 4,832 – – 348,398Share of profit from associates 27,234 – (11,830) – 15,404Share of profit from jointly controlled entities – – 11,830 – 11,830Profit before taxation 3,032,331 (131,539) – – 2,900,792Taxation 29,843 347 – – 30,190Profit for the year 3,002,488 (131,886) – – 2,870,602Basic earnings per share (sen) 79.3 (3.4) – – 75.9

CorporationFor the year ended 31 March 2006Revenue 4,839,284 (14,605) – – 4,824,679Cost of sales 3,970,452 58,106 – – 4,028,558Gross profit 868,832 (72,711) – – 796,121Gain on disposal of ships 244,257 (41,932) – – 202,325Other operating income 892,071 107,841 – – 999,912General and administrative expenses 297,217 79,062 – – 376,279Operating profit 1,707,943 (85,864) – – 1,622,079Finance costs 18,838 63 – – 18,901Profit before taxation 1,689,105 (85,927) – – 1,603,178Taxation 17,850 347 – – 18,197Profit for the year 1,671,255 (86,274) – – 1,584,981



2.4 Changes in Estimates

The revised FRS 116: Property, Plant and Equipment requires the review of the residual value and remaining useful life of ships,property, plant and equipment at least at each financial year end. The Group revised the residual value of ships with effect from 1April 2006. The revision was accounted for prospectively as a change in accounting estimates and as a result, the depreciationcharges of the Group and of the Corporation for the current financial year have been reduced by RM159,100,000 andRM101,393,000 respectively.

2.5 Significant Accounting Estimates and Judgements

a. Critical Judgements Made in Applying Accounting Policies

The following are the judgements made by management in the process of applying the Group's accounting policies that havethe most significant effect on the amount recognised in the financial statements.

i. Classification between investment properties and property, plant and equipmentThe Group has developed certain criteria based on FRS 140 in making judgement whether a property qualifies as aninvestment property. Investment property is a property held to earn rentals or for capital appreciation or both.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is heldfor administrative purposes. If these portions could be sold separately (or leased out separately under finance lease), theGroup would account for the portion separately. If the portions could not be sold separately, the property is an investmentproperty only if an insignificant portion is held for administrative purposes. Judgement is made on an individual propertybasis to determine whether ancillary services are so significant that a property does not qualify as investment property.

ii. Operating lease commitments – the Group as lessorIt is in the ordinary course of business that the Group enters into lease arrangements with related and third parties on itsships. Some of the lease arrangements may be extended to a longer period of time, covering substantially the useful life ofthe ships concerned. The Group has determined that it retains all the significant risks and rewards of ownership of theseships, and the ships are recognised and classified as part of non-current assets of the Group and the Corporation.

b. Key Sources of Estimation Uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that havea significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial yearare discussed below.

i. Impairment of goodwillThe Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value inuse of the cash-generating-units ("CGU") to which goodwill is allocated. Estimating a value in use amount requiresmanagement to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discountrate in order to calculate the present value of those cash flows. The carrying amounts of goodwill as at 31 March 2007 wereRM773,109,000 (2006: RM741,167,000). Further details of the impairment loss recognised are disclosed in Note 14(a).



ii. Impairment of ships, property, plant and equipmentDuring the financial year, the Group has recognised impairment loss in respect of property, plant and equipment. The Groupcarried out the impairment test based on a variety of estimation including the value in use of the CGU to which ships,property, plant and equipment are allocated. Estimating the value in use requires the Group to make an estimate of theexpected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present valueof those cash flows. The carrying amount of ships, property, plant and equipment of the Group as at 31 March 2007 wereRM21,034,467,000 (2006: RM19,963,021,000) and RM843,227,000 (2006: RM827,770,000) respectively. Further details ofthe impairment loss recognised are disclosed in Note 12(e).

iii. Depreciation of shipsThe cost of ships is depreciated on a straight-line basis over the assets' useful lives. Management estimates the useful lives ofthese ships to be 20 years. This is a prudent life expectancy applied in the shipping industry. Changes in the expected level ofusage and regulations could impact the economic useful lives and the residual values of these assets, therefore futuredepreciation charges could be revised. A 10.00% increase in the average useful lives of these assets from management'sestimates would result in approximately 6.07% increase in profit for the year.

iv. Deferred tax assetsDeferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent that it isprobable that taxable profit will be available against which the losses and capital allowances can be utilised. Significantmanagement judgement is required to determine the amount of deferred tax assets that can be recognised, based upon thelikely timing and level of future taxable profits together with future tax planning strategies. The total carrying value ofrecognised tax losses and capital allowances of the Group was RM20,752,000 (2006: RM17,739,000) and the unrecognisedtax losses and capital allowances of the Group was RM579,114,000 (2006: RM467,091,000).

3. Revenue

Group Corporation2007 2006 2007 2006

RM'000 RM'000 RM'000 RM'000

Freight income 3,707,287 3,927,803 3,374,172 3,650,012Charter and lightering income 5,787,986 5,385,994 790,711 1,001,326Other shipping related income 544,091 460,711 190,599 173,341Non-shipping income 1,159,581 972,572 – –

11,198,945 10,747,080 4,355,482 4,824,679

Non-shipping income mainly represents revenue generated from shipbuilding, repairing and heavy engineering work.


2.5 Significant Accounting Estimates and Judgements (cont'd)

b. Key Sources of Estimation Uncertainty (cont'd)


4. Other Operating Income


RM'000 RM'000 RM'000 RM'000

Interest income:Subsidiaries – – 90,066 72,820Deposits 110,886 121,733 17,423 50,421

Dividend income on equity investments:Subsidiaries – – 1,681,579 363,131Quoted in Malaysia 22,867 15,293 12,039 2,140Unquoted in Malaysia 2,706 1,197 2,706 1,130Unquoted outside Malaysia 143 – – –

Rental income:Subsidiaries – – 277 6,994Others 2,671 3,217 375 1,997

Exchange gain:Realised 80,871 45,303 54,398 46,375Unrealised 32,494 64,076 25,235 34,490

Management services:Subsidiaries – – 57,429 63,234Others 85 284 85 284

Gain on disposal of:Property, plant and equipment 24,816 71,926 11,360 30,666Subsidiary – – 1,338,205 324,163Associates – 24,626 – –Other investments 177 1,088 177 –

Gain on liquidation of a subsidiary – – 174,725 –Write back of provision for doubtful debts 1,181 1,137 – –Reversal of writedown of inventories 6,038 392 6,038 –Miscellaneous:

Subsidiaries – – 245 –Others 18,410 32,918 997 2,067

303,345 383,190 3,473,359 999,912



5. Operating Profit

The following amounts have been included in arriving at operating profit:


RM'000 RM'000 RM'000 RM'000

Amortisation of intangible assets 28,168 70,425 – –Auditors' remuneration:

Auditors of the Corporation:Statutory audits 1,705 1,395 550 500Other services 888 994 787 889

Other auditors:Statutory audits 386 604 – –Other services 130 430 109 418

Charter hire expense 1,633,730 1,275,578 984,571 1,071,294Drydocking expense – 168,535 – 91,589Impairment loss in goodwill 2,325 – – –Inventories used 1,556,418 1,442,010 691,632 719,276Exchange loss:

Realised 22,913 76,766 7,439 65,990Unrealised 17,912 8,008 12,851 7,622

Operating lease rental 707 373 – –Provision for doubtful debts 26,537 15,517 9,042 10,194Bad debts written off 891 1,730 765 61Rental of equipment 205,328 150,885 191,636 124,909Rental of land and buildings 22,405 19,932 12,437 12,570Ships, property, plant and equipment:

Depreciation (Note 12) 1,360,837 1,426,477 437,258 519,665Written off 14,798 139 12,599 –Impairment loss (Note 12) 1,943 9,600 – –

Staff costs (Note 6) 851,481 695,850 301,960 248,617


6. Staff Costs


RM'000 RM'000 RM'000 RM'000

Wages, salaries and bonuses 731,925 583,548 235,953 187,682Termination benefits 2,440 4,408 – 882Social security costs 1,522 1,759 737 696Contributions to defined contribution plan 26,061 28,031 10,146 12,229Other staff related expenses 89,533 78,104 55,124 47,128

851,481 695,850 301,960 248,617

Included in staff costs of the Group and of the Corporation are executive directors' remuneration amounting to RM4,278,000(2006: RM2,143,000) and RM1,208,000 (2006: RM874,000) respectively as further disclosed in Note 7.

7. Directors' Remuneration


RM'000 RM'000 RM'000 RM'000

Executive directors' remuneration:Fees 315 245 – –Other emoluments 3,963 1,898 1,208 874

4,278 2,143 1,208 874Non-executive directors' remuneration:

Fees 1,445 1,583 347 330Total directors' remuneration 5,723 3,726 1,555 1,204Estimated money value of benefits-in-kind 1,078 686 47 29Total directors' remuneration including benefits-in-kind 6,801 4,412 1,602 1,233

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


RM'000 RM'000 RM'000 RM'000

Executive:Salaries and other emoluments 797 646 797 646Bonus 135 – 135 –Fees 171 102 – –Defined contribution plan 276 228 276 228Estimated money value of benefits-in-kind 47 29 47 29

1,426 1,005 1,255 903Non-Executive:

Fees 347 330 347 3301,773 1,335 1,602 1,233



The number of directors of the Corporation whose total remuneration during the financial year fell within the following bands isanalysed below:

Number of Directors2007 2006

Executive directors:RM900,001 – RM1,500,000 1 1

Non-Executive directors:RM1 – RM50,000 7 5RM50,001 – RM100,000 1 2

8. Finance CostsGroup Corporation

2007 2006 2007 2006RM'000 RM'000 RM'000 RM'000

Interest expense:Subsidiaries – – 56,734 52,221Third parties 374,985 379,481 – –

Islamic Private Debt Securities 1,002 301 1,002 301Non-convertible Cumulative Redeemable Preference

Shares dividend 1,084 2,434 – –Total interest expense 377,071 382,216 57,736 52,522

Less: Interest expense capitalised in qualifying assets:Ships under construction (29,314) (33,818) (11,601) (33,621)

Net interest expense 347,757 348,398 46,135 18,901

9. TaxationGroup Corporation

2007 2006 2007 2006RM'000 RM'000 RM'000 RM'000

Current income tax:Malaysian income tax 32,426 29,627 – 18,197Foreign tax 5,695 3,990 – –

(Over)/underprovision in prior years:Malaysian income tax (333) 1,267 – –Foreign tax 31 283 – –

Deferred tax:Relating to origination and reversal of temporary differences (2,734) 67 – –Relating to changes in tax rates (1,783) – – –Transfer to deferred tax (Note 29) 210 (8,350) – –(Over)/underprovision in prior years (132) 3,306 – –

33,380 30,190 – 18,197

Domestic current income tax is calculated at the statutory tax rate of 27% (2006: 28%) of the estimated assessable profit for thefinancial year. The domestic statutory tax rate will be reduced to 26% from the current rate of 27%, effective year of assessment2008. The computation of deferred tax as at 31 March 2007 has reflected these changes.

7. Directors' Remuneration (cont’d)

9. Taxation (cont'd)

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense atthe effective income tax rate of the Group and of the Corporation is as follows:


RM'000 RM'000 RM'000 RM'000

Profit before taxation 2,930,310 2,900,792 3,700,744 1,603,178

Taxation at Malaysian statutory tax rate of 27% (2006: 28%) 791,184 812,222 999,201 448,890

Effect of changes in tax rates on opening balance of deferred tax (1,783) – (132) –

Effect of different tax rates in other countries 10,411 42,905 – –

Income not subject to tax:

Tax exempt shipping income (1,028,102) (774,115) (221,276) (258,597)

Other tax exempt income (124,092) (398,946) (945,359) (252,501)

Expenses not deductible for tax purposes 362,860 396,657 119,957 122,150

Utilisation of previously unrecognised tax losses,

capital allowances and reinvestment allowances (42,528) (62,721) (13,746) (41,745)

Utilisation of reinvestment allowances during the year (4,895) – – –

Deferred tax (over)/under provided in prior years (132) 3,306 – –

Deferred tax assets not recognised during the year 70,759 9,332 61,355 –

Income tax (over)/under provided in prior years (302) 1,550 – –

Taxation for the year 33,380 30,190 – 18,197

Tax exempt shipping income is derived from the operations of the Group's sea-going Malaysian registered ships under Section 54Aof the Malaysian Income Tax Act, 1967 and ships registered outside Malaysia under tax jurisdictions of other countries.

The Corporation has sufficient tax exempt income to frank the payment of dividend out of its entire retained profits as at 31 March2007, subject to an agreement with Inland Revenue Board.




10. Earnings per Share

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of theCorporation by the weighted average number of ordinary shares in issue during the financial year.

Group2007 2006

Profit attributable to equity holders of the Corporation (RM'000) 2,852,025 2,822,573Weighted average number of ordinary shares in issue ('000) 3,719,828 3,719,828Basic earnings per share (sen) 76.7 75.9

Diluted earnings per share are not presented as there were no potential dilutive ordinary shares outstanding as at 31 March 2007.

11. DividendsDividends

Recognised in Year2007 2006

RM'000 RM'000

In respect of financial year:31 March 2005:Final tax exempt dividend of 20 sen per share – 371,365Special tax exempt dividend of 20 sen per share – 371,365

– 742,73031 March 2006:Interim tax exempt dividend at 10 sen per share – 371,365Final tax exempt dividend at 20 sen per share 727,975 –

727,975 371,36531 March 2007:Interim tax exempt dividend at 10 sen per share 368,991 –

1,096,966 1,114,095

At the forthcoming Annual General Meeting, the following tax exempt dividend will be proposed for shareholders' approval inrespect of the financial year ended 31 March 2007:

RM'000Final tax exempt dividend of 20 sen per share 743,966

The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by theshareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 March 2008.



31March2007(cont'd)

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12. Ships, Property, Plant and Equipment (cont'd)

a. Certain properties were revalued by the directors in 1988 based on valuations carried out by firms of professional valuers toreflect the market values then. Surpluses on revaluation were taken to the revaluation reserve on that date. The net book valueof revalued properties, had the assets been carried at cost less depreciation, is as follows:

Group2007 2006

RM'000 RM'000

Long term leasehold and foreshore land – 1988 7,474 7,726

b. Included in long term leasehold land of the Group is the carrying value of a long term leasehold and foreshore land of asubsidiary of RM54,217,000 (2006: RM55,592,000) which cannot be disposed off, charged or subleased without the priorconsent of the Johor State Government.

c. The net carrying amounts of ships, property, plant and equipment pledged as securities for borrowings (Note 26) are as follows:

Group2007 2006

RM'000 RM'000

Ships 4,169,022 3,297,472Property, plant and equipment 52,932 56,009

4,221,954 3,353,481

d. Borrowing costs capitalised during the financial year for ships under construction of the Group and of the Corporationamounted to RM29,314,000 (2006: RM33,818,000) and RM11,601,000 (2006: RM33,621,000) respectively, as disclosedin Note 8.

e. The Group has carried out a review of the recoverable amount of its ships, property, plant and equipment during the financialyear. The review led to the recognition of an impairment loss of RM1,943,000 (2006: RM9,600,000) as disclosed in Note 5. Therecoverable amount was based on value in use and was determined at the cash-generating-unit ("CGU") of each asset. Indetermining value in use for the CGU, the cash flows were discounted at a rate determined by management on a pre-tax basis.



13. Investment Properties

Group and CorporationFreehold Freehold

Land Building TotalRM'000 RM'000 RM'000

ValuationAt 1 April 2005 – – –Transfer from property, plant and equipment 35,293 53,207 88,500Currency translation differences (975) (1,469) (2,444)At 31 March 2006 34,318 51,738 86,056Currency translation differences (2,247) (3,388) (5,635)At 31 March 2007 32,071 48,350 80,421

Accumulated depreciationAt 1 April 2005 – – –Transfer from property, plant and equipment – 32,311 32,311Depreciation charge for the year – 853 853Currency translation differences – (908) (908)At 31 March 2006 – 32,256 32,256Depreciation charge for the year – 811 811Currency translation differences – (2,146) (2,146)At 31 March 2007 – 30,921 30,921

Net carrying amountAt 31 March 2006 34,318 19,482 53,800

At 31 March 2007 32,071 17,429 49,500

Fair value – 31 March 2007 33,043 17,957 51,000

Investment properties were revalued by the directors in 1984 based on valuations carried out by firms of professional valuers toreflect the market values then. Surpluses on revaluation were taken to the revaluation reserve on that date. The net book value ofthe revalued properties, had the assets been carried at cost less depreciation, is as follows:

Group2007 2006

RM'000 RM'000

Freehold land – 1984 818 818Freehold buildings – 1984 2,901 3,047

3,719 3,865


14. Intangible Assets

GroupReserve Other

arising on intangibleconsolidation Goodwill assets Total

RM'000 RM'000 RM'000 RM'000

CostAt 1 April 2005 and 31 March 2006 (234) 905,332 504,463 1,409,561Effects of adopting FRS 3 234 (164,165) – (163,931)Additional investment in a subsidiary – 82,595 – 82,595Currency translation differences – (48,328) – (48,328)At 31 March 2007 – 775,434 504,463 1,279,897

Accumulated amortisation and impairmentAt 1 April 2005 (122) 121,865 179,808 301,551Amortisation (47) 42,300 28,172 70,425At 31 March 2006 and 1 April 2006 (169) 164,165 207,980 371,976Effects of adopting FRS 3 169 (164,165) – (163,996)Amortisation – – 28,168 28,168Impairment loss recognised in income statement – 2,325 – 2,325At 31 March 2007 – 2,325 236,148 238,473

Net carrying amount

At 31 March 2006 (65) 741,167 296,483 1,037,585

At 31 March 2007 – 773,109 268,315 1,041,424



14. Intangible Assets (cont'd)

Other intangible assets relate to fair value of time charter hire contracts based on valuations performed by an independentprofessional valuer, and are amortised over the time charter period of the vessels.

Impairment test for Goodwill and Investment in Subsidiaries

a. Impairment loss recognised

The Group has carried out a review of the recoverable amount of its investments in subsidiaries and goodwill during thefinancial year. The review led to the recognition of an impairment loss of RM2,325,000 (2006: RM Nil) as disclosed in Note 5.The recoverable amount was based on value in use and was determined at the cash-generating-unit ("CGU") of each individualsubsidiaries. In determining value in use for the CGU, the cash flows were discounted at a rate determined by management on apre-tax basis.

b. Allocation of goodwill

Goodwill has been allocated to the Group's CGU identified according to business segment as follows:

2007 2006RM'000 RM'000

Energy related shipping 689,795 738,122Other energy businesses 82,594 –Integrated liner logistics – 2,325Non-shipping 720 720

773,109 741,167

c. Key assumptions used in value in use calculations

The recoverable amount of a CGU is determined based on value in use calculations using cash flow projections based onfinancial budgets approved by management covering a five-year period. The discount rate used is based on the pre-tax weightedaverage cost of capital determined by the management.


15. Investments in Subsidiaries

Corporation2007 2006

RM'000 RM'000

Unquoted shares at cost 5,351,746 2,679,299Loans and advances to subsidiaries 1,364,513 968,333

6,716,259 3,647,632

Included in unquoted shares is preference shares of RM2,630,236,000 (2006: RM303,289,000) which bear interest at rates rangingfrom 5.00% to 7.50% (2006: 7.50%) per annum.

The loans and advances to subsidiaries are unsecured, bear interest at rates ranging from 3.25% to 7.00% (2006: 3.09% to 7.00%)per annum and are not repayable within 12 months from the balance sheet date.

Details of the subsidiaries are disclosed in Note 37.

16. Investments in Associates


RM'000 RM'000 RM'000 RM'000

Unquoted shares in Malaysia, at cost 681 – – –Unquoted shares outside Malaysia, at cost 4,407 12,176 – 8,314

5,088 12,176 – 8,314Share of post-acquisition(losses)/profits (620) 387 – –Share of other post-acquisition reserves (1,152) (945) – –

3,316 11,618 – 8,314Less: Accumulated impairment losses (1,214) – – –

2,102 11,618 – 8,314Represented by:Share of net assets 2,102 11,618 – 8,314Loans to an associate 583 672 – –

2,685 12,290 – 8,314

Notes to the Financial Statements31 March 2007 (cont’d)


16. Investments in Associates (cont'd)

The loans to an associate is unsecured, interest-free, and have no fixed term of repayment.

The summarised financial information of the associates are as follows:

2007 2006RM'000 RM'000

Assets and liabilitiesCurrent assets 15,511 37,966Non-current assets 7,121 8,634Total assets 22,632 46,600

Current liabilities 12,243 8,336Non-current liabilities 1,940 1,049Total liabilities 14,183 9,385

ResultsRevenue 8,474 11,697(Loss)/profit for the year (327) 1,275

Details of the associates are disclosed in Note 38.

17. Investments in Jointly Controlled Entities

Group2007 2006

RM'000 RM'000

Unquoted shares in Malaysia, at cost 6,246 –Unquoted shares outside Malaysia, at cost 159,814 19,604

166,060 19,604

Share of post-acquisition profits 47,913 20,149Share of other post-acquisition reserves (801) 195

47,112 20,344213,172 39,948

Represented by:Share of net assets 213,172 39,948Loans to jointly controlled entities 290,186 99,528

503,358 139,476

The loans to jointly controlled entities are unsecured, bear interest at rates ranging from 5.50% to 7.00% (2006: 7.00%), and haveno fixed term of repayment except for loan to KEER-MISC Logistics Co Ltd. amounting to RM95,265,000 (2006: RM99,528,000)which is repayable by June 2010.


17. Investments in Jointly Controlled Entities (cont'd)

The Group's aggregate share of the current assets, non-current assets, current liabilities, non-current liabilities, income and expensesof the jointly controlled entities are as follows:

2007 2006RM'000 RM'000

Assets and liabilitiesCurrent assets 88,814 33,749Non-current assets 429,344 64,314Total assets 518,158 98,063

Current liabilities 49,307 44,784Non-current liabilities 255,679 13,331Total liabilities 304,986 58,115

ResultsRevenue 209,610 68,137Expenses 181,479 56,307

Details of the jointly controlled entities are disclosed in Note 39.



18. Other Investments


RM'000 RM'000 RM'000 RM'000

Unquoted shares at cost 41,330 43,280 38,956 37,529Less: Provision for diminution in value (1,370) (1,394) – –

39,960 41,886 38,956 37,529Quoted shares at cost 196,117 193,691 12,185 13,039

236,077 235,577 51,141 50,568

Market value of quoted shares 278,448 235,313 25,713 24,042

19. Inventories


RM'000 RM'000 RM'000 RM'000

Cost:Bunkers, lubricants and consumable stores 183,641 182,143 42,609 58,053Spares 66,127 42,778 60,481 23,249Raw materials 13,206 14,390 – –

262,974 239,311 103,090 81,302

Net realisable value:Bunkers, lubricants and consumable stores – 1,148 – 1,148Spares – 3,041 – 3,041

262,974 243,500 103,090 85,491


20. Trade and Other Receivables


RM'000 RM'000 RM'000 RM'000

Trade receivablesThird parties 1,109,115 1,089,904 428,710 398,701Subsidiaries – – 159,608 205,612Holding company 9,762 1,099 17 116Fellow subsidiaries 53,846 145,023 20,784 112,582Associates 7,614 3,116 7,614 3,434Jointly controlled entities 3,945 3,857 3,945 28Due from customers on contracts (Note 21) 302,853 287,428 – –

1,487,135 1,530,427 620,678 720,473

Less: Provision for doubtful debts:Third parties (72,676) (87,948) (39,688) (32,889)Subsidiaries – – (2,011) (2,214)Fellow subsidiaries (2,071) (761) – –Associates (87) (96) (87) (96)

(74,834) (88,805) (41,786) (35,199)Trade receivables, net 1,412,301 1,441,622 578,892 685,274

Other receivablesAmount due from related parties:

Subsidiaries – – 326,260 2,479,357Holding company – 732 – –Fellow subsidiaries 290 (15) 290 –Associates 502 – 161 –Jointly controlled entities 4,771 – – –

5,563 717 326,711 2,479,357Deposits 6,077 5,672 1,534 1,629Prepayments 64,635 40,204 8,810 4,699Others 235,177 193,909 98,277 122,137

311,452 240,502 435,332 2,607,822

Less: Provision for doubtful debts:Others (2,050) (2,745) (2,025) (2,228)

Other receivables, net 309,402 237,757 433,307 2,605,5941,721,703 1,679,379 1,012,199 3,290,868



20. Trade and Other Receivables (cont'd)a. Credit risk

The Group's primary exposure to credit risk arises through its trade receivables. The Group's trading terms with its customers aremainly on credit, except for new customers, where payment in advance is normally required. The Group's normal trade creditterms ranges from 7 to 90 days (2006: 7 to 90 days). Other credit terms are assessed and approved on a case-by-case basis andeach customer has a maximum credit limit. Credit risk is also monitored and assessed in the Management Credit Committeemeetings held at least once in every 2 months which comprises senior management team members of the Group. In view of theaforementioned and the fact that the Group's trade receivables relate to a large number of diversified customers, there is nosignificant concentration of credit risk. Trade receivables are non-interest bearing.

b. Amount due from group companies

The amounts due from holding company, fellow subsidiaries and subsidiaries are unsecured, interest-free and have no fixedterms of repayment except for the amount due from AET Holdings (L) Pte. Ltd. amounting to RM Nil (2006: RM168,951,000)which bears interest at rates ranging from 5.47% to 5.79% (2006: 3.09% to 5.47%) per annum and amount due from PuteriIntan Satu (L) Private Limited amounting to RM62,200,000 (2006: RM66,510,000) which bears interest rate of 4.50% (2006:4.50%) per annum.

c. Amount due from associates

The amounts due from associates are unsecured, interest-free and have normal credit terms which ranges from 15 to 30 days(2006: 15 to 30 days).

d. Amount due from jointly controlled entities

The amounts due from jointly controlled entities are unsecured, interest-free and have normal credit terms which ranges from 15to 30 days (2006: 15 to 30 days).


21. Due from/(to) Customers on Contracts

Group2007 2006

RM'000 RM'000

Construction contract costs incurred and recognised profits to date 3,188,587 2,202,867Less: Progress billings (2,975,176) (1,975,192)

213,411 227,675

Due from customers on contracts (Note 20) 302,853 287,428Due to customers on contracts (Note 25) (89,442) (59,753)

213,411 227,675

Advances received on contracts (Note 25) 1,456 1,196

The costs incurred to date on construction contracts include the following charges made during the financial year:

Group2007 2006

RM'000 RM'000

Depreciation of plant and equipment 18,981 17,306

22. Marketable Securities

Group and Corporation2007 2006

RM'000 RM'000

Shares quoted in Malaysia, at cost 851 3,587

Market value of quoted shares 1,026 3,587

23. Cash, Deposits and Bank Balances


RM'000 RM'000 RM'000 RM'000

Deposits with licensed banks 849,360 2,757,570 272,558 339,197Cash and bank balances 1,368,204 668,399 462,558 148,403

2,217,564 3,425,969 735,116 487,600



24. Non-Current Assets Classified as Held for Sale


RM'000 RM'000 RM'000 RM'000

Land and buildings 38,015 – 172,618 –

These represent carrying values of properties owned by the Group with the intention of disposing off in the immediate future.Included in the assets for the Corporation are properties that are intended to be disposed off within the Group. The carryingamounts of the assets immediately before reclassification are not materially different from their fair value.

25. Trade and Other Payables


RM'000 RM'000 RM'000 RM'000

Trade payablesThird parties 931,006 845,980 529,650 568,418Subsidiaries – – 149,659 102,762Holding company 21,186 263 21,186 263Fellow subsidiaries 6,099 88,476 2,150 17,312Associates 2,530 2,458 2,530 2,458Jointly controlled entities 3 236 3 31Construction contracts:

Due to customers (Note 21) 89,442 59,753 – –Advances received (Note 21) 1,456 1,196 – –

1,051,722 998,362 705,178 691,244Other payablesAmount due to related parties:

Subsidiaries – – 1,831,557 1,049,599Holding company 48,897 51,360 – –Fellow subsidiaries 2,213 17,070 – –

51,110 68,430 1,831,557 1,049,599Accruals and provisions 315,190 312,763 14,073 102,628Others 787,593 1,127,987 119,915 130,705

1,153,893 1,509,180 1,965,545 1,282,9322,205,615 2,507,542 2,670,723 1,974,176


25. Trade and Other Payables (cont'd)

a. Trade payables

Trade payables are non-interest bearing and the normal trade credit terms granted to the Group ranges from 14 to 90 days(2006: 14 to 90 days).

b. Amount due to group companies

The amounts due to holding company, fellow subsidiaries and subsidiaries are unsecured, interest-free and have no fixed termsof repayment, except for an amount due to MISC Capital (L) Limited and AET Inc. Limited of RM917,800,000 (2006:RM1,012,551,000) and RM656,070,000 (2006: RM Nil) which bears interest at rates ranging from 5.00% to 6.13% (2006:5.00% to 6.13%) and 5.00% to 6.13% (2006: Nil) per annum respectively.

c. Amount due to associates

The trade amounts due to associates have a normal credit term which ranges from 15 to 30 days (2006: 15 to 30 days).

d. Amount due to jointly controlled entities

The trade amounts due to jointly controlled entities have a normal credit term which ranges from 15 to 30 days(2006: 15 to 30 days).

e. Other payables, accruals and provision

Included in other payables is amount due to deconsolidated subsidiaries amounting to RM2,926,000 (2006: RM3,072,000).The amount due is unsecured, interest-free and repayable upon completion of the liquidation exercise.

The Group gives approximately one year warranty on certain products and undertakes to repair or replace items that fail toperform satisfactorily. A provision has been recognised at the financial year end on expected warranty claims based on pastexperience of the level of repairs and returns.



26. Borrowings


RM'000 RM'000 RM'000 RM'000

Short Term BorrowingsSecured:Term loans

Fixed rate 164,399 85,177 – –Floating rate 186,414 199,478 – –

350,813 284,655 – –Unsecured:Term loans

Fixed rate 12,608 164,500 – –Floating rate 34,766 160,593 – –

Islamic Private Debt Securities Al Murabahah Medium Term Notes 97,065 – 97,065 –144,439 325,093 97,065 –495,252 609,748 97,065 –

Long Term BorrowingsSecured:Term loans

Fixed rate 2,166,400 1,309,012 – –Floating rate 363,909 588,891 – –

2,530,309 1,897,903 – –Unsecured:Term loans – Floating rate – 37,202 – –US Dollar Guaranteed Notes 3,771,725 4,031,517 – –

3,771,725 4,068,719 – –7.50% Non-convertible Cumulative Redeemable

Preference Shares ("NCRPS") of USD1.00 each 7,106 31,288 – –6,309,140 5,997,910 – –

Total BorrowingsTerm loans 2,928,496 2,544,853 – –Islamic Private Debt Securities Al Murabahah Medium Term Notes 97,065 – 97,065 –US Dollar Guaranteed Notes 3,771,725 4,031,517 – –

6,797,286 6,576,370 97,065 –NCRPS 7,106 31,288 – –

6,804,392 6,607,658 97,065 –


26. Borrowings (cont'd)

The secured term loans are secured by mortgages over certain ships, property, plant and equipment together with charteragreements, insurance of the relevant ships, property, plant and equipment. The carrying value of the ships, property, plant andequipment pledged is stated in Note 12(c).

NCRPS

The 7.50% NCRPS of USD1.00 each issued to minority shareholders of certain subsidiaries shall confer the holders the followingrights and privileges:

a. The right to receive out of profit for the year of the subsidiaries a cumulative preferential dividend on each preferential dividendshare at a net of 7.50% (2006: 7.50%) per annum;

b. The NCRPS shall rank pari passu with the ordinary shares in all respects except that the NCRPS shall rank in priority with regardto dividend payment of the subsidiaries;

c. The NCRPS shall not entitle its holder thereof to participate in the profits or surplus assets of the subsidiaries;

d. The NCRPS shall not be converted to ordinary shares of the subsidiaries; and

e. The NCRPS shall be redeemed at any time at par together with a sum equal to arrears of the preferential dividend thereon aftera period of ten years from the date of issue on 1 July 1997, extendable for a period of five years subject to the approval of thepreference shareholders.

27. Share Capital

Number of OrdinaryShares of RM1 Each Amount

2007 2006 2007 2006'000 '000 RM'000 RM'000

Authorised*:At 1 April 2006/2005 5,000,000 5,000,000 5,000,000 5,000,000At 31 March 5,000,000 5,000,000 5,000,000 5,000,000

Issued and fully paid*:At 1 April 2006/2005 3,719,828 3,719,828 3,719,828 3,719,828At 31 March 3,719,828 3,719,828 3,719,828 3,719,828

* Included in the authorised, issued and fully paid share capital is one preference share of RM1 (2006: RM1). The preferenceshareholder is not entitled to any dividend nor to participate in the capital distribution upon dissolution of the Corporation butshall rank for repayment in priority to all other shares. Other rights and restrictions attached to the preference share are set outin Article 3B of the Corporation’s Articles of Association.



28. Other Reserves

Other Capital CurrencyRevaluation Capital Capital Statutory Redemption Translation

Reserve Reserve Reserve Reserve Reserve Reserve TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

GroupAt 1 April 2005As previously stated 35,272 1,185 41,479 23,060 – 5,225 106,221Effects of adopting FRS 121 – – – – – 2,849,280 2,849,280At 1 April 2005 (restated) 35,272 1,185 41,479 23,060 – 2,854,505 2,955,501Currency translation

differences:Group – – – – – (586,161) (586,161)Associates – – – – – 1,232 1,232Jointly controlled entities – – – – – ( 194) (194)

Transfer to retained profits – – ( 137) (21,818) – – (21,955)At 31 March 2006 35,272 1,185 41,342 1,242 – 2,269,382 2,348,423

At 1 April 2006As previously stated 35,272 1,185 41,342 1,242 – (55,891) 23,150Effects of adopting FRS 121 – – – – – 2,325,273 2,325,273At 1 April 2006 (restated) 35,272 1,185 41,342 1,242 – 2,269,382 2,348,423Currency translation

differences:Group – – – – – (1,273,372) (1,273,372)Associates – – – – – 207 207Jointly controlled entities – – – – – 996 996

Transfer from retained profits – – – – 45,168 – 45,168At 31 March 2007 35,272 1,185 41,342 1,242 45,168 997,213 1,121,422

CorporationAt 1 April 2005As previously stated 35,217 – – – – – 35,217Effects of adopting FRS 121 – – – – – 1,536,018 1,536,018At 1 April 2005 (restated) 35,217 – – – – 1,536,018 1,571,235Currency translation

differences – – – – – (498,029) (498,029)At 31 March 2006 35,217 – – – – 1,037,989 1,073,206

At 1 April 2006As previously stated 35,217 – – – – – 35,217Effects of adopting FRS 121 – – – – – 1,037,989 1,037,989At 1 April 2006 (restated) 35,217 – – – – 1,037,989 1,073,206Currency translation

differences – – – – – (946,157) (946,157)At 31 March 2007 35,217 – – – – 91,832 127,049



28. Other Reserves (cont'd)

The nature and purpose of each category of reserves are as follows:

a. Revaluation Reserve

Revaluation reserve represents surplus arising from the revaluation of certain freehold land and buildings of the Corporationin 1984.

b. Capital Reserve

Capital reserve represents reserve arising from bonus issue in subsidiaries.

c. Other Capital Reserve

Other capital reserve represents the Group's share of its subsidiary's reserve.

d. Statutory Reserve

Statutory reserve is maintained by an overseas associate in accordance with the laws of the country.

e. Capital Redemption Reserve

Capital redemption reserve represents reserve created upon the redemption of preference shares in a subsidiary.

f. Currency Translation Reserve

Currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements ofthe Corporation and foreign operations whose functional currencies are different from that of the Group's presentation currency.

29. Deferred Tax


RM'000 RM'000 RM'000 RM'000

At 1 April 65,862 70,941 3,602 3,704Recognised in income statement (Note 9)

In Malaysia (4,649) 3,373 – –Outside Malaysia 210 (8,350) – –

Currency translation differences (181) (102) (236) (102)At 31 March 61,242 65,862 3,366 3,602


29. Deferred Tax (cont'd)


RM'000 RM'000 RM'000 RM'000

Presented after appropriate offsetting as follows:Deferred tax assets (2,941) (1,151) – –Deferred tax liabilities 64,183 67,013 3,366 3,602

61,242 65,862 3,366 3,602

The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:

Deferred Tax Liabilities of the Group:

AcceleratedCapital Revaluation

Allowances of Land Others TotalRM'000 RM'000 RM'000 RM'000

At 1 April 2006 68,961 3,547 – 72,508Recognised in income statement:

In Malaysia (2,942) – 19 (2,923)Outside Malaysia 32 – 242 274

Currency translation differences – (181) – (181)At 31 March 2007 66,051 3,366 261 69,678

At 1 April 2005 80,772 3,649 903 85,324Recognised in income statement:

In Malaysia (3,389) – (909) (4,298)Outside Malaysia (8,422) – 6 (8,416)

Currency translation differences – (102) – (102)At 31 March 2006 68,961 3,547 – 72,508



29. Deferred Tax (cont'd)

Deferred Tax Assets of the Group:

Tax Lossesand

UnabsorbedOther Capital

Payables Allowances Others TotalRM'000 RM'000 RM'000 RM'000

At 1 April 2006 (1,359) (4,967) (320) (6,646)Recognised in income statement:

In Malaysia (1,153) (538) (35) (1,726)Outside Malaysia 66 (98) (32) (64)

At 31 March 2007 (2,446) (5,603) (387) (8,436)

At 1 April 2005 (9,236) (4,967) (180) (14,383)Recognised in income statement:

In Malaysia 7,811 – (140) 7,671Outside Malaysia 66 – – 66

At 31 March 2006 (1,359) (4,967) (320) (6,646)

Deferred tax liabilities of the Corporation arises from revaluation of properties:

2007 2006RM'000 RM'000

At 1 April 2006/2005 3,602 3,704Currency translation differences (236) (102)At 31 March 2007/2006 3,366 3,602

Deferred tax assets have not been recognised in respect of the following items:


RM'000 RM'000 RM'000 RM'000

Unused tax losses 542,715 408,885 466,064 289,674Unabsorbed capital allowances 36,399 58,206 – –Others 12,106 19,675 – –

591,220 486,766 466,064 289,674

The unused tax losses of the Corporation relate to the loss making non-resident ships and can be utilised to offset against futuretaxable profits.

Deferred tax assets have not been recognised for certain subsidiaries as these subsidiaries have a recent history of losses.


30. Cash Flows from Investing Activities


RM'000 RM'000 RM'000 RM'000

Purchase of ships, property, plant and equipment (4,399,022) (3,326,557) (3,169,519) (2,403,856)Purchase of additional shares in subsidiaries (181,664) (49,318) (181,664) –Acquisitions of associates and jointly controlled entities (119,969) (12,305) – (8,314)Investments in subsidiaries (2,700) – – –Repayment of loans from subsidiaries, net of issuance – – 607,232 (403,077)Drawdown of loans from a subsidiary – – 823,640 –Dividends received from

Quoted investments 22,867 16,555 12,012 2,085Unquoted investments 2,849 – 1,684,285 364,261

Redemption of preference shares from a subsidiary – – 24,530 –Proceeds from disposal of ships, property, plant and equipment 954,390 476,377 266,467 449,878Proceeds from disposal of marketable securities 2,011 – 2,011 –Proceeds from liquidation of a subsidiary – – 177,501 –Proceeds from disposal of associates – 173,385 – –Interest received 111,694 81,228 107,620 125,112Net cash (used in)/generated from investing activities (3,609,544) (2,640,635) 354,115 (1,873,911)

31. Cash Flows from Financing ActivitiesGroup Corporation

2007 2006 2007 2006RM'000 RM'000 RM'000 RM'000

Drawdown of term loans 1,134,192 88,176 – –Drawdown of Islamic Private Debt Securities 96,087 – 96,087 –Repayment of term loans (599,013) (1,118,858) – –Loans to a jointly controlled entity (254,754) – – –Repayment of loans from associates and jointly controlled entities 64,184 – – –Repayment of Islamic Private Debt Securities – (400,000) – (400,000)Dividends paid to shareholders of Corporation (1,096,966) (1,114,095) (1,096,966) (1,114,095)Dividends paid to minority shareholders of subsidiaries (17,764) (14,893) – –Repayment of preference shares (23,507) – – –Interest paid (347,580) (360,453) (46,135) (23,312)Net cash used in financing activities (1,045,121) (2,920,123) (1,047,014) (1,537,407)



32. Significant Related Party Transactions

In addition to related party disclosures elsewhere in the financial statements, set out below are other significant related partytransactions. The directors are of the opinion that the transactions below have been entered into in the normal course of businessand have been established on terms and conditions that are not materially different from that obtainable in transactions withunrelated parties, unless otherwise stated.


RM'000 RM'000 RM'000 RM'000

Related partiesa. Provision of shipping and shipping related services

Charter hire revenue 2,587,510 3,045,791 445,029 923,130Forwarding charges 71,594 48,131 – –Warehouse service 13,237 13,909 – –Haulage service 63,198 57,917 – –Fabrication contract service 154,741 188,063 – –

b. Purchase of goods and servicesPurchase of bunkers, lubricants and spare parts 316,077 188,382 126,687 160,847Purchase of service for repairs, conversion of ships and drydocking – – 158,538 185,404Purchase of crew service 5,761 9,135 – –Net transfer of ships – – 592,207 1,992,049Purchase of information technology services 19,391 11,236 19,391 11,236Management fee 6,131 6,819 – –Manpower fee 9,696 2,149 9,696 2,149


33. Commitments

a. Capital Commitments


RM'000 RM'000 RM'000 RM'000

Capital expenditureApproved and contracted for:

Ships, property, plant and equipment 4,942,942 5,846,145 3,241,445 5,463,746Technology projects 26,680 27,754 26,680 27,754Investments – 117,033 – 117,033

4,969,622 5,990,932 3,268,125 5,608,533Approved but not contracted for:

Ships, property, plant and equipment 6,973,584 2,438,802 6,435,068 2,297,597Technology projects 9,524 12,190 9,524 12,190Investments 20 380 20 –

6,983,128 2,451,372 6,444,612 2,309,78711,952,750 8,442,304 9,712,737 7,918,320

b. Non-Cancellable Operating Lease Commitments – Group as Lessee


RM'000 RM'000 RM'000 RM'000

Future minimum rentals payable:Not later than 1 year 822,072 506,463 319,783 289,097Later than 1 year and not later than 5 years 1,601,471 781,884 566,611 461,388Later than 5 years 347,537 144,268 112,069 144,268

2,771,080 1,432,615 998,463 894,753



34. Contingent Liabilities


Unsecured RM'000 RM'000 RM'000 RM'000

Letters of guarantee issued in respect of banking facilitiesextended to third party agents 25,181 26,744 7,955 12,505

Indemnity provided in respect of banking facilities extendedto subsidiaries – – 5,472,574 6,055,591

Bank guarantees extended to customers for performancebond on contracts 225,831 150,560 – –

251,012 177,304 5,480,529 6,068,096

35. Segment Information

a. Reporting Format

The primary segment reporting format is determined to be business segments as the Group's risks and rates of return areaffected predominantly by differences in services produced. Secondary information is reported geographically. The operatingbusinesses are organised and managed separately according to the nature of the service provided, with each segmentrepresenting a strategic business unit that serves different markets.

b. Business segments

During the financial year, management has decided to change the composition of the segments to better reflect the nature ofits businesses. The Group is organised on a worldwide basis into four major business segments:

i. Energy related shipping – the provision of liquefied natural gas ("LNG") services, petroleum tanker services, and chemicaltanker services;

ii. Other energy businesses – operation and maintenance of offshore floating facilities, and shipbuilding, repairing and heavyengineering works;

iii. Integrated liner logistics – comprises liner services, haulage, trucking and warehousing and agency businesses;

iv. Non-shipping – fleet management services, marine education and training, and other diversified businesses.


35.

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RM

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35. Segment Information (cont'd)

c. Geographical Segments

Although the Group's four major business segments are managed on a worldwide basis, they operate in five principalgeographical areas of the world. In Malaysia, its home country, the Group's areas of operations are principally energy relatedshipping, other energy businesses, integrated liner logistics and non-shipping.

The Group also operates energy related shipping and integrated liner logistics in other regions in the world as follows:

• Asia and Africa• Europe• Australasia• The United States of America

The UnitedAsia and States of

Africa Malaysia Europe Australasia America ConsolidatedRM'000 RM'000 RM'000 RM'000 RM'000 RM'000

31 March 2007Revenue 730,302 4,983,753 1,908,965 826,292 2,749,633 11,198,945Segment assets 1,344,973 17,788,882 1,290,066 405,112 7,125,753 27,954,786Capital expenditure 543 3,964,493 190 650 433,146 4,399,022

31 March 2006Revenue 2,045,744 4,437,793 1,363,612 692,683 2,207,248 10,747,080Segment assets 1,740,722 19,655,748 1,120,707 385,893 4,720,035 27,623,105Capital expenditure 77,500 3,154,343 288 173 94,253 3,326,557

d. Allocation Basis and Transfer Pricing

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated ona reasonable basis. Unallocated items comprise mainly corporate assets, liabilities and expenses.

Transfer prices between business segments are set on an arm's length basis in a manner similar to transactions with thirdparties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminatedon consolidation.


36. Financial Instruments

a. Financial Risk Management Objectives and Policies

The Group's financial risk management policy seeks to ensure that adequate financial resources are available for thedevelopment of the Group's businesses whilst managing its interest rate risks (both fair value and cash flow), foreign currencyrisk, liquidity risk, credit risk and bunkers price risk. The Board reviews and agrees policies for managing each of these risks andthey are summarised below. It is, and has been throughout the year under review, the Group's policy that no trading ofspeculative nature in derivative financial instruments shall be undertaken.

b. Interest Rate Risk

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes inmarket interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changesin market interest rates. As the Group has no significant interest-bearing financial assets, the Group's income and operatingcash flows are substantially independent of changes in market interest rates. The Group's interest-bearing financial assets aremainly short term in nature and have been mostly placed in time deposit and overnight placement.

The Group's interest rate risk arises primarily from interest-bearing borrowings. Borrowings at floating rates expose the Group tocash flow interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group'sinterest rate risks arise from the volatility of the benchmark interest rates both in Ringgit and US Dollar (which are its mainborrowing currencies). The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings.The Group manages this by keeping 90% or more of its borrowings at fixed rates of interest. To manage this mix in a cost-efficient manner, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, thedifference between fixed and floating rate interest amounts calculated by reference to an agreed-upon notional principalamount. As at balance sheet date, the Group had entered into interest swaps with the following notional principal amountand maturities:

Notional Amount2007 2006

RM'000 RM'000

More than 5 years 1,415,730 –

The fixed interest rates relating to interest rate swaps at the balance sheet date is 5.09% (2006: Nil).



36.

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36. Financial Instruments (cont'd)

c. Foreign Currency Risk

The Group is exposed to transactional currency risk primarily through sales and purchases that are denominated in a currencyother than the functional currency of the operations to which they relate. The currencies giving rise to this risk are primarilyRinggit Malaysia ("RM"), Sterling Pound ("GBP"), Australian Dollar ("AUD"), Euro ("EUR") and Singapore Dollar ("SGD").Foreign exchange exposures in transactional currencies other than functional currencies of the operating entity are kept to anacceptable level. Approximately 29.61% of Group's sales are denominated in currencies other than the unit's functionalcurrency of the operating unit making the sale, whilst almost 64.92% of costs are denominated in the unit's functional currency.

The Group maintains a natural hedge, wherever possible, by borrowing in the currency of the country in which the property orinvestment is located or by borrowing in currencies that match the future revenue stream to be generated from its investments.

The net unhedged financial receivables and payables of the Group companies and that of the Corporation that are notdenominated in their functional currencies are as follows:

Net Financial Receivables/(Payables) Held in Non-Functional CurrenciesUnited

Ringgit States Sterling Australian SingaporeFunctional Currency Malaysia Dollar Pound Dollar EURO Dollar Totalof Group Companies RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At 31 March 2007Ringgit Malaysia – 99,273 948 (1) 19,110 (4,097) 115,233United States Dollar (378,856) – 36,162 5,066 31,804 5,614 (300,210)

(378,856) 99,273 37,110 5,065 50,914 1,517 (184,977)

At 31 March 2006Ringgit Malaysia – 10,427 2,661 26 2,600 (58) 15,656United States Dollar (404,108) – 27,190 8,837 15,780 7,733 (344,568)

(404,108) 10,427 29,851 8,863 18,380 7,675 (328,912)

Functional Currencyof Corporation

At 31 March 2007United States Dollar (347,071) – 42,281 5,066 39,718 7,478 (252,528)

At 31 March 2006United States Dollar (411,400) – 31,910 9,303 35,698 7,782 (326,707)



c. Foreign Currency Risk (cont'd)

The cash and bank balances of the Group companies and that of the Corporation that are not denominated in their functionalcurrencies are as follows:

Cash and bank balances Held in Non-Functional CurrenciesUnited

Ringgit States Sterling Australian SingaporeFunctional Currency Malaysia Dollar Pound Dollar EURO Dollar Totalof Group Companies RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At 31 March 2007Ringgit Malaysia – 7,993 – – – – 7,993United States Dollar 307,260 – 9,407 3,928 11,466 8,492 340,553

307,260 7,993 9,407 3,928 11,466 8,492 348,546

At 31 March 2006Ringgit Malaysia – 32,514 699 – – 27,608 60,821United States Dollar 1,197,080 – 1,081 9,392 48,410 270 1,256,233

1,197,080 32,514 1,780 9,392 48,410 27,878 1,317,054

Functional Currencyof Corporation

At 31 March 2007United States Dollar 150,426 – 5,061 3,733 9,334 5,180 173,734

At 31 March 2006United States Dollar 437,076 – 30 9,392 44,996 – 491,494

d. Liquidity Risk

As at 31 March 2007, the Group had at its disposal cash and short term deposits amounting to RM2,217,564,000 (2006:RM3,425,969,000).

As at 31 March 2007, the Corporation has unutilised Murabahah Commercial Paper/Medium Term Notes Programmeamounting to RM900,000,000 which could be used for working capital purposes.

The Group's holdings of cash and short term deposits, together with committed funding facilities and net cash flow fromoperations, are expected to be sufficient to cover its cash flow needs (excluding merger and acquisition activities) in the nextfinancial year. Any shortfall and additional cash requirements arising from the Group's merger and acquisition activities can bemet by additional financing. The Group's strong balance sheet provides it with financial flexibility in determining the optimumfinancing source. The various options, among others, include bank borrowings, bonds issuance and structured financing.



e. Credit Risk

The Group's credit risk is primarily attributable to trade receivables. The Group trades only with recognised and creditworthythird parties. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verificationprocedures. In addition, receivable balances are monitored on an ongoing basis and the Group's exposure to bad debts isnot significant.

The credit risk of the Group's other financial assets, which comprise cash and cash equivalents, marketable securities andnon-current investments, arises from default of the counterparty, with a maximum exposure equal to the carrying amount ofthese financial assets.

The Group does not have any significant exposure to any individual customer or counterparty nor does it have any majorconcentration of credit risk related to any financial assets.

f. Bunkers Price Risk

Bunkers price risk is the risk that the future bunkers price will flutuate because of the effects of demand, supply and politicalclimates. The Group's profit are affected by changes in the price of bunkers. The Group manages this risk by entering intoforward contracts for the price of bunkers for a 6 month period.

g. Fair Values

The carrying amounts of financial assets and liabilities of the Group and of the Corporation at the balance sheet dateapproximated their fair values except for the following:

Group CorporationCarrying CarryingAmount Fair Value Amount Fair Value

Note RM'000 RM'000 RM'000 RM'000

At 31 March 2007Non-current quoted shares 18 196,117 278,448 12,185 25,713Non-current unquoted shares 18 39,960 * 38,956 *Forward bunkers contract 36(f) – 1,657 – 1,657Fixed rate:

Term loans 26 (2,343,407) (2,246,429) – –Islamic Private Debts Securities 26 (97,065 ) (97,633) (97,065) (97,633)US Dollar Guaranteed Notes 26 (3,771,725 ) (3,892,172) – –

Interest rate swap 36(b) – (10,630) – –

At 31 March 2006Non-current quoted shares 18 193,691 235,313 13,039 24,042Non-current unquoted shares 18 41,886 * 37,529 *Fixed rate:

Term loans 26 (1,558,689) (1,254,038) – –US Dollar Guaranteed Notes 26 (4,031,517) (4,120,752) – –

* The fair value of non-current unquoted shares is not disclosed as it is not practicable to determine the fair value withsufficient reliability.




g. Fair Values (cont'd)

The methods and assumptions used by management to determine fair values of financial instruments other than those whosecarrying amounts reasonably approximate their fair values are as follows:

i. Non–current quoted sharesFair value of these non-current quoted shares is determined by reference to stock exchange quoted market bid prices onthe balance sheet date.

ii. Forward bunkers contractFair value is estimated as the difference between the hedged bunker price and average market price multiplied by theunutilised hedged bunker units.

iii. Term loans and Islamic Private Debts SecuritiesFair value has been determined using discounted estimated cash flows. The discount rates used are the current marketincremental lending rates for similar types of borrowing.

iv. US Dollar Guaranteed NotesFair value is determined by reference to stock exchange quoted market prices on the balance sheet date.

v. Interest rate swapThe fair value of the interest rate swap is the amount that would be payable or receivable upon termination of theposition at the balance sheet date, and is calculated as the difference between the present value of the estimated futurecash flows at the contracted rate compared to that calculated at the market rate at the balance sheet date.

37. Subsidiaries and Activities

Country of Principal Effective Interest (%)Name of Company Incorporation Activities 2007 2006

PETRONAS Tankers Sdn. Bhd. Malaysia Investment 100 100holding andprovision of

managementservices

Puteri Intan Sdn. Bhd. Malaysia Shipping 100 100

Puteri Delima Sdn. Bhd. Malaysia Shipping 100 100

Puteri Nilam Sdn. Bhd. Malaysia Shipping 100 100

Puteri Zamrud Sdn. Bhd. Malaysia Shipping 100 100

Puteri Firus Sdn. Bhd. Malaysia Shipping 100 100

MISC Ship Management Sdn. Bhd. Malaysia Dormant 100 100



37. Subsidiaries and Activities (cont'd)


MISC Enterprises Holdings Sdn. Bhd. Malaysia In-liquidation 100 100

MISC Properties Sdn. Bhd. Malaysia Dormant 100 100

MISC Information Technology Sdn. Bhd. Malaysia In-liquidation 100 100

MSE Holdings Sdn. Bhd. Malaysia Investment 100 65holding

Malaysia Marine and Heavy Engineering Sdn. Bhd. Malaysia Shipbuilding, 100 65ship repairing

andengineering

works

MMHE-SHI LNG Sdn. Bhd. Malaysia Ship repairing 70 –and

engineeringworks

MSE Corporation Sdn. Bhd. Malaysia Processing 100 65of copper

grit

Techno Indah Sdn. Bhd. Malaysia Sludge 100 65disposal

management

MMHE-ATB Sdn. Bhd. Malaysia Process 60 58equipment

forpetrochemical,

oil and gasand powergeneration

plants

Malaysia Tank Cleaning Company Sdn. Bhd. Malaysia Dormant 100 65

MISC Agencies Sdn. Bhd. Malaysia Shipping 100 100agent and

warehousing




MISA (B) Sdn. Bhd. Brunei In-liquidation 100 100Darussalam

MISC Agencies (Trengganu) Sdn. Bhd. Malaysia In-liquidation 100 100

MISC Agencies (Sarawak) Sdn. Bhd. Malaysia Shipping 65 65agent

MISC Agencies (Netherlands) B.V. * Netherlands Shipping 100 100agent

MISC Agencies (Australia) Pty. Ltd. # Australia Shipping 100 100agent

MISC Agencies (U.K.) Ltd. * United Shipping 100 100Kingdom agent

MISC Agencies (Japan) Ltd. * Japan Port and 100 100general agent

MISC Agencies (Singapore) Private Limited * Singapore Shipping 100 100agent

Leo Launches Private Limited * Singapore Launch 51 51operator

MISC Ferry Services Sdn. Bhd. Malaysia Dormant 100 100

MISC Integrated Logistics Sdn. Bhd. Malaysia Integrated 100 100logisticsservices

MISC Haulage Services Sdn. Bhd. Malaysia Dormant 100 100

MISC Trucking and Warehousing Services Sdn. Bhd. Malaysia Dormant 100 100

MILS – Seafrigo Sdn. Bhd. Malaysia Own, 60 –manage and

operate acold storagelogistic hub





MILS – SterilGamma Sdn. Bhd. Malaysia Sterilisation 60 –and fumigation

facilities

Asia LNG Transport Sdn. Bhd. Malaysia Shipowning 51 51and ship

management

Asia LNG Transport Dua Sdn. Bhd. Malaysia Shipowning 51 51and ship

management

Malaysian Maritime Academy Sdn. Bhd. Malaysia Education 100 100and trainingfor seamen

and maritimepersonnel

Puteri Intan Satu (L) Private Limited Malaysia Shipping 100 100

Puteri Delima Satu (L) Private Limited Malaysia Shipping 100 100

Puteri Nilam Satu (L) Private Limited Malaysia Shipping 100 100

Puteri Zamrud Satu (L) Private Limited Malaysia Shipping 100 100

Puteri Firus Satu (L) Private Limited Malaysia Shipping 100 100

Puteri Mutiara Satu (L) Private Limited Malaysia Shipping 100 100

MISC Tanker Holdings Sdn. Bhd. Malaysia Investment 100 100holding

MISC Tanker Holdings (Bermuda) Limited Bermuda Investment 100 100holding

AET Tanker Holdings Sdn. Bhd. Malaysia Investment 100 100holding

AET Petroleum Tanker (M) Sdn. Bhd. Malaysia Shipowning 100 100

AET Shipmanagement (M) Sdn. Bhd. Malaysia Ship 100 100(formerly known as ESPL Fleet Management managementSdn. Bhd.)




AET Shipmanagement (Singapore) Pte. Ltd. Singapore Ship 100 100(formerly known as Eagle Shipmanagement managementPte. Ltd.)#

AET Holdings (L) Pte. Ltd. Malaysia Investment 100 100holding

AET Inc. Limited Bermuda Shipowning 100 100and

operations

AET Tankers Pte. Ltd. Singapore Commercial 100 100operation and

chartering

AET UK Limited United Kingdom Commercial 100 100operation and

chartering

American Marine and Offshore Services Limited Cayman Islands Shipping 100 100agent

and lightering

AET Offshore Services Company Inc. The United Lightering 100 100(formerly known as Pelican Offshore States of AmericaServices Company, Inc.)

AET Agencies Inc. The United Property 100 100States of America owning

MTL Petrolink Group The United Investment 100 100States of America holding

OMIP Inc. The United Ship rental 100 100States of America services and

lightering

Offshore Marine Services, Inc. The United Lightering 100 100States of America

Harlink, Inc. The United Lightering 100 100States of America





Nuelink, Inc. The United Lightering 100 100States of America

MISC International (L) Limited Malaysia Investment 100 100holding

MISC Offshore Floating Terminals (L) Limited Malaysia Operating 100 100and

maintainingfloating

production,storage andoff-loading

("FPSO")facility

MISC Capital (L) Limited Malaysia Special 100 100purpose

vehicle forissuance of

US DollarGuaranteed

Notes

MISC Offshore Holdings (Brazil) Sdn Bhd Malaysia Investment 100 –holding

M.I.S.C. Nigeria Limited Nigeria Dormant 60 60

FPSO Ventures Sdn. Bhd. Malaysia Operating 51 51and

maintainingFPSO

facility

Offshore Marine Ventures Sdn. Bhd. Malaysia Owning 51 51and

chartering ofsupportvessels

Malaysia Deepwater Floating Terminal (Kikeh) Limited Malaysia FPSO 51 51owner




Malaysia Deepwater Production Contractors Sdn. Bhd. Malaysia Operating 51 51and

maintainingFPSO

facility

* Audited by firms of auditors other than Ernst & Young# Audited by affiliates of Ernst & Young Malaysia

38. Associates and Activities


BLG MILS Logistics Sdn. Bhd. Malaysia Automative 60 –solutions and

relatedintegrated

logisticservices

RAIS – MILS Logistic FZCO United Arab Integrated 50 –Emirates logistics

services

MISC Agencies (Thailand) Company Limited Thailand Shipping 49 49agent

MISC Agencies Lanka (Pvt) Limited Sri Lanka Shipping 40 40agent and

freightforwarding

services

Transware Logistics (Pvt) Ltd. Sri Lanka Inland 25 25container

depot

The financial statements of the above associates are coterminous with those of the Group.



39. Jointly Controlled Entities and Activities


Red Harbour Sdn. Bhd. Malaysia Shipowning 51 –

Transware Distribution Services Pte. Ltd. Singapore Warehousing 50 50

Transasia Pool Pte. Ltd. Singapore Ship 50 50management

KEER – MISC Logistics Co Ltd. Sudan Transportation 50 50

Paramount Tankers Corp. Republic of Shipowning 50 –the Marshall

Island

SL-MISC International Line Co. Limited Sudan Shipowning 49 49

SBM Systems Inc Switzerland FPSO owner 49 –

FPSO Brasil Venture S.A. Switzerland Operating 49 –(formerly known as SBM Espirito Santo Inc.) and

maintainingFPSO

facility

SBM Operacoes Limitada Brazil Operating 49 –and

maintainingFPSO

facility

The financial statements of the above jointly controlled entities are coterminous with those of the Group, except for TranswareDistribution Services Pte. Ltd., Transasia Pool Pte. Ltd., Paramount Tankers Corp., SL-MISC International Line Co. Ltd, SBM SystemsInc., FPSO Brasil Venture S.A. (formerly known as SBM Espirito Santo Inc.), and SBM Operacoes Limitada which have financialyears ended 31 December. For the purpose of applying the equity method of accounting, the audited financial statements upto the year ended 31 December 2006 have been used and management accounts up to 31 March 2007 have been used for thetransactions between 1 January 2007 to 31 March 2007, except for Paramount Tankers Corp. which uses management accountsup to 31 March 2007.


40. Significant Events

a. On 2 June 2006, AET Inc. Limited ("AET"), a wholly-owned subsidiary of the Corporation had entered into a joint ventureagreement with Golden Energy Tanker Holdings Corporation ("Golden Energy"), a subsidiary of the Restis Group, incorporatedin Republic of the Marshall Island, for the establishment of a joint venture company for the purpose of acquisition, ownership,operation and charter of crude oil tankers for the business of marketing and transporting crude oil.

The joint venture company with a paid up capital of USD250,000 (RM863,000) has been incorporated with AET and GoldenEnergy having 50% equity respectively in the joint venture company.

b. On 9 June 2006, the Corporation had completed the proposed acquisition of the 49% interest in SBM Systems Inc. and SBMEspirito Santo Inc. collectively known as FPSO Brasil companies for the purpose of owning and operating of the FPSO Brasil atthe final purchase price of USD103,776,417 (RM358,340,000).

c. On 24 September 2006, a wholly-owned subsidiary of the Corporation, MISC Integrated Logistics Sdn. Bhd. (“MILS”) hadentered into a joint venture agreement with Rais Hassan Saadi LLC for the establishment of a joint venture company, namelyRAIS - MILS Logistic FZCO ("RAIS"). MILS subscribed for 50% equity interest in RAIS for a total cash consideration of RM480,960.

d. On 14 November 2006, a wholly-owned subsidiary of the Corporation, MISC Integrated Logistics Sdn. Bhd. (“MILS”) hadentered into a joint venture agreement with BLG International Logistics GMBH & CO. KG., a subsidiary of BLG AG, incorporatedin Germany for the establishment of a joint venture company, namely BLG MILS Logistics Sdn. Bhd. for the purpose of offeringintegrated automotive logistics services in Malaysia.

The joint venture company was incorporated with a paid up capital of RM500,000 with MILS holding 60% equity whilst theremaining 40% equity is owned by BLG International Logistics GMBH & CO. KG.

e. On 17 November 2006, AET Petroleum Tanker (M) Sdn Bhd (“AETP”), a wholly-owned subsidiary of the Corporation, acquired2 shares for RM1.00 each in Red Harbour Sdn. Bhd. (“Red Harbour”), a company incorporated in Malaysia, for a totalconsideration of RM2.00 representing 100% equity interest. On 16 January 2007, Red Harbour issued 6,331,228 shares forRM1.00 each to AETP. After the share issue, AETP retained 51% equity in Red Harbour whilst the remaining 49% equity isowned by Champ International Inc., a company incorporated in Republic of the Marshall Island.

f. On 27 March 2007, the Corporation entered into a joint venture agreement with SBM Holding Inc S.A. ("SBM") for the purposeof owning, operating and managing a Floating Production Storage and Offloading ("FPSO") tanker facility for Shell Brasil Ltda,the operator of a production sharing contract with PETROLEO BRASILEIRO S.A. – PETROBRAS and BC-10 block located in theCampos Basin, offshore Brazil, for a contractual period of 15 years.

The following three Bermudan joint venture companies have been incorporated, with the proposal for MISC holding 49% andSBM holding 51% equity interest:

i. Brazilian Deepwater Floating Terminals Limited, for the purpose of undertaking the engineering, procurement,construction and installation of the FPSO;

ii. Brazillian Deepwater Production Production Limited, for the purpose of chartering the FPSO; and

iii. Brazilian Deepwater Production Contractors Limited, for the purpose of undertaking the operation and maintenanceof the FPSO.

The FPSO with a storage capacity of 1.9 million bbls is to be named "FPSO Espirito Santo".

190properties owned by MISC Berhad and its subsidaries

ApproxTenure & Age of Net Book

Year Lease Area in Existing Bldg/Land ValueNo Location Description Expires sq ft Use (years) RM'000

Malaysia

1. No.2 Jalan Conlay Land Freehold 63,600 Rented 33 32,07150450, Kuala Lumpur

2. Wisma MISC Office Building Freehold 262,500 Rented 31 17,430No.2 Jalan Conlay50450, Kuala Lumpur

3. Lot 23 Lebuh Land, Office Leasehold 2,221,560 Cargo Cum, 16 59,267Sultan Mohamad 1, Building, Warehouse, 2089 Office ComplexBandar Sultan Sulaiman Workshop, Repair & Container Yard42008 Port Klang Shed & Container YardSelangor Darul Ehsan

4. No. 7 Lorong Merpati 1 Double Storey Freehold 4,117 Vacant 24 103Jalan Bukit Sekilau Semi-DetachedTaman Tas Mahkota House25200 Kuantan,Pahang Darul Makmur

5. Blok-H, Tgkt. 7 Unit No.1 Apartment Freehold 1,300 Vacant 27 153Mount Pleasure Apartment12000 Batu FeringghiPulau Pinang

6. Lot 33835 (Title No. PN26618) Land & Leasehold/ 1,119,492 Vacant Land 16 12,343Mukim Kapar, Daerah Klang Container Yard 2087 & ContainerSelangor Darul Ehsan Yard

7. Lot PLO 137 & 138 Land, Office Leasehold/ 894,287 Cargo Cum, 14 20,661Tebrau II Industrial Estate Building, Warehouse, 2023 Office ComplexJohor Darul Takzim Workshop, Repair & Container

Shed & Container Yard Yard

8. Plot 2 P.T. 2113 Land & Leasehold/ 241,326 Office 15 1,831Air Keroh Industrial Estate Container 2091 Building &Melaka Container Yard Container Yard

Properties Owned by MISC Berhadand its Subsidiaries31 March 2007




Malaysia (cont'd)

9. Lot 568-615 Mukim 16 Land, Office Freehold 752,752 Cargo Cum, 15 30,649Daerah Seberang Perai Utara Building, Warehouse, Office ComplexPulau Pinang Workshop, Repair & Container

Shed & Container Yard Yard

10. PLO 516, Jalan Keluli 3 Land, Office Leasehold/ 217,800 Office Building 12 3,543Kaw. Perindustrian Building, 2025 & ContainerPasir Gudang, Mukim Plentong & Container Yard YardJohor Darul Takzim

11. Precint 3.8, Seksyen 14 Land Leasehold/ 107,413 Vacant 11 14,415Shah Alam 2099 LandSelangor Darul Ehsan

12. Lot 36, Seksyen 7, Fasa 1A Land Leasehold/ 1,725,978 Vacant 11 18,662Pulau Indah Industrial Park 2097 Land(West Port), Pelabuhan KlangSelangor Darul Ehsan

13. Tingkat Bawah dan Tgkt 1 Office Premises Leasehold/ 6,000 MISA KK 13 1,232Wisma Takada 2092 OfficeJalan Gaya, Lorong EWAN88000 Kota Kinabalu

14. Lot 1411, Section 66, Land Leasehold/ 227,296 Vacant 10 4,185Tanah Daerah Pekan Kuching 2055 Land

15. Lot 2115, Section 66, Land Leasehold/ 85,987 Vacant 10 4,021Tanah Daerah Pekan Kuching 2046 Land

16. No. 18, Jln. Tengku 3 Storey Leasehold/ 1,800 Rented 10 968Ampuan Zabedah G 9/G, Shop Office 2094Section 9, Shah AlamSelangor Darul Ehsan

17. Sebahagian dari Lot PT 4593 Land, Office Leasehold/ 47,522 Office Building 7 10,760Kawasan Perindustrian Kerteh Building & 2060 & WarehouseMukim Kerteh, 24300 Kemaman WarehouseTerengganu Darul Iman


Approx ApproxTenure & Age of Net Book


Malaysia (cont'd)

18. Lot 154, Plot 3, Land Leasehold/ 217,800 Vacant 6 1,325Kaw. Perindustrian Kidurong, 2062 LandBintulu Sarawak

19. PTD 22805 Land, Shipyard Leasehold/ 5,307,573 Shiprepair, 33 323,058Mukim Plentong, Warehouse, 2040 ShipbuildingJohor Bahru, Workshops & & EngineeringJohor Darul Takzim Office Buildings Fabrication Yards

AncillaryFacilities &

Office Buildings

20. PTD 65616 4 Storey Leasehold/ 698,354 Staff Quarters 28 3,174Mukim Plentong, Residential 2044Johor Bahru, FlatsJohor Darul Takzim

21. PTD 65615 Land Leasehold/ 169,928 Vacant N/A –Mukim Plentong, 2044Johor Bahru,Johor Darul Takzim

22. PTD 65617 Land Leasehold/ 374,093 Vacant N/A –Mukim Plentong, 2044Johor Bahru,Johor Darul Takzim

23. PTD 65618 4 Storey Leasehold/ 588,050 Staff Quarters 28 –Mukim Plentong, Residential 2044Johor Bahru, FlatsJohor Darul Takzim

24. PTD 65619 4 storey Leasehold/ 130,485 Staff Quarters 28 –Mukim Plentong, Residential 2044Johor Bahru, FlatsJohor Darul Takzim

25. Open Yard 1203, Warehouse Leasehold/ 4,048 Warehousing 0 385Phase 1, Kemaman Supply Base, 2009 & Storage24007 Kemaman,Terengganu Darul Iman

Properties Owned by MISC Berhadand its Subsidiaries31 March 2007 (cont'd)




United Kingdom

26. 305, The Collonades Apartment Leasehold/ 1,200 Owner's use 15 2,927Porchester Square, Bayswater 2073London W2 6AS

27. Town Quay Wharf Office Building Leasehold/ 10,000 MISC Europe 13 4,305Barking Essex 2990 Office &London MISAL Office

Australia

28. 447, Kent Street Land & Building (including Freehold 1,012 Owner 13 1,442Sydney Australia 15 basement carparks) sq meters Occupied

29. Suite 40, Albert Square Land & Building (including Freehold 371 Owner 28 2,25137-39 Albert Road 2 basement carparks) sq meters OccupiedMelbourne 3004Australia

United States of America

30. Galveston, Land & Office Owned 290,415 Workboats, 38 2,749Texas, USA Dockage

Ltrg SupportOperation

Netherlands

31. Westplein 6-7, 3016 Office Building Freehold 8,083 MISAN Head 28 1,829BM Rotterdam, Holland Office

Total 575,739

194list of vessels

List of Owned and In-Chartered Vessels by Type/Category No DWT GRT

LNG CarriersAman Class 3 32,877 49,071Tenaga Class 5 359,885 402,550Puteri Class 5 367,595 431,031Puteri Satu Class 6 456,409 566,644Seri "A" Class 4 333,682 382,916Seri "B" Class 1 90,065 105,335

24 1,640,513 1,937,547Petroleum TankersCrude Oil Tankers – VLCC 9 2,736,256 1,432,591Crude Oil Tankers – Aframax 31 3,203,353 1,755,420Long Range 2 (LR2) 1 104,385 53,483Product 5 68,050 46,316

46 6,112,044 3,287,810

In-Chartered - Petroleum Tankers 19 1,928,837 1,049,964

Chemical TankersMelati Class 7 224,174 155,088Anggerik Class 4 119,877 73,812Semarak Class 2 31,998 19,902

13 376,049 248,802

In-Chartered - Chemical Tankers 3 59,322 34,770

ContainershipsAbove 5000 TEUs 2 207,490 179,5523000 – 5000 TEUs 3 161,866 132,5431000 – 3000 TEUs 8 193,059 154,216Below 1000 TEUs 8 80,539 71,812

21 642,954 538,123

In-Chartered - Containerships 13 525,231 470,972

OthersLPG 3 10,264 10,799Dry Bulk (Panamax) 1 73,127 38,972

4 83,391 49,771

List of Vessels30 June 2007

195list of vessels

No DWT GRT

Total MISC Vessel (Owned) 108 8,854,951 6,062,053

Total In-Chartered 35 2,513,390 1,555,706

Total MISC Vessel (Including In-Chartered) 143 11,368,341 7,617,759

Offshore Floating Facilites No DWT bbls

Floating Production Storage and Offloading (FPSO) 3 615,768 4,319,000Floating Storage and Offloading (FSO) 3 244,790 1,652,631

Total Offfshore Floating Facilites 6 860,558 5,971,631

Newbuildings No DWT GRT

LNG Carriers 5 375,200 –Petroleum Tankers – VLCC 2 597,000 –Petroleum Tankers – Aframax 8 859,000 –Chemical Tankers 8 304,000 –

Total Newbuildings 23 2,135,200 –

Under Conversion No DWT bbls

FPSO* 1 270,000 –

* jointly owned

196list of vessels

LNG Carriers Built DWT GRT

Aman Class1. Aman Bintulu 1993 10,975 16,3992. Aman Sendai 1997 10,951 16,3363. Aman Hakata 1998 10,951 16,336

32,877 49,071

Tenaga Class4. Tenaga Satu 1982 71,814 80,5105. Tenaga Dua 1981 72,087 80,5106. Tenaga Tiga 1981 72,083 80,5107. Tenaga Empat 1981 71,818 80,5108. Tenaga Lima 1981 72,083 80,510

359,885 402,550

Puteri Class9. Puteri Intan 1994 73,519 86,20510. Puteri Delima 1995 73,519 86,20511. Puteri Nilam 1995 73,519 86,21112. Puteri Zamrud 1996 73,519 86,20513. Puteri Firus 1997 73,519 86,205

367,595 431,031

Puteri Satu Class14. Puteri Intan Satu 2002 75,849 94,43015. Puteri Delima Satu 2002 75,929 94,43016. Puteri Nilam Satu 2003 76,124 94,44617. Puteri Zamrud Satu 2004 76,144 94,44618. Puteri Firus Satu 2004 76,124 94,44619. Puteri Mutiara Satu 2005 76,239 94,446

456,409 566,644Seri A Class

20. Seri Alam 2005 83,482 95,72921. Seri Amanah 2006 83,400 95,72922. Seri Anggun 2006 83,396 95,72923 Seri Angkasa 2007 83,404 95,729

333,682 382,916Seri B Class

24. Seri Bakti 2007 90,065 105,33590,065 105,335

Total LNG Carriers 1,640,513 1,937,547

List of Vessels30 June 2007 (cont'd)

197list of vessels

Petroleum Tankers Built DWT GRT

VLCC1. Bunga Kasturi 2003 299,999 157,2002. Bunga Kasturi Dua 2005 300,542 157,2003. Bunga Kasturi Tiga 2006 300,397 157,2004. Bunga Kasturi Empat 2007 300,325 157,2005. Eagle Valencia 2005 306,998 160,0466. Eagle Venice 2005 306,998 160,0467. Eagle Vienna 2004 306,999 161,2338. Eagle Virginia 2002 306,999 161,2339. Eagle Vermont 2002 306,999 161,233

2,736,256 1,432,591

Aframax10. Bunga Kelana Satu 1997 105,884 57,01711. Bunga Kelana Dua 1997 105,976 57,01712. Bunga Kelana 3 1998 105,784 57,01713. Bunga Kelana 4 1999 105,815 57,01714. Bunga Kelana 5 1999 105,788 57,01715. Bunga Kelana 6 1999 105,811 57,01716. Bunga Kelana 7 2004 105,194 58,19417. Bunga Kelana 8 2004 105,174 58,19418. Bunga Kelana 9 2004 105,200 58,19419. Bunga Kelana 10 2004 105,274 58,19420. Bunga Kenanga 2000 73,096 40,03721. Eagle Albany 1998 107,160 57,92922. Eagle Anaheim 1999 107,160 57,92923. Eagle Atlanta 1999 107,160 57,92924. Eagle Augusta 1999 105,345 58,15625. Eagle Austin 1998 105,426 58,15626. Eagle Baltimore 1996 99,405 57,45627. Eagle Beaumont 1996 99,448 57,45628. Eagle Birmingham 1997 99,343 57,45629. Eagle Boston 1996 99,328 57,45630. Eagle Charlotte 1997 107,169 57,94931. Eagle Columbus 1997 107,166 57,94932. Eagle Otome 1994 95,663 52,50433. Eagle Phoenix 1998 106,127 56,34634. Eagle Subaru 1994 95,676 52,50435. Eagle Tacoma 2002 107,123 58,16636. Eagle Toledo 2003 107,092 58,16637. Eagle Trenton 2003 107,123 58,16638. Eagle Tucson 2003 107,123 58,16639. Eagle Tampa 2003 107,123 58,16640. Quasar 1989 97,197 52,500

3,203,353 1,755,420

198list of vessels

Petroleum Tankers Built DWT GRT

LR240. Eagle Milwaukee 1987 104,385 53,483

104,385 53,483Product41. Bunga Kasai 1994 4,999 3,58142. Bunga Kerayong 1994 18,130 12,99443. Bunga Kekaras 1995 29,990 20,37844. Bunga Kemiri 1995 9,932 5,78245. Pernas Rantau 1994 4,999 3,581

68,050 46,316

Total Petroleum Tankers (Owned) 6,014,847 3,235,310

In-CharteredVLCC1. Camden 1995 298,306 156,802Aframax2. Eagle Auriga 1993 102,352 55,9623. Eagle Carina 1992 95,639 52,5044. Eagle Centaurus 1992 95,644 52,5045. Eagle Corona 1993 95,634 52,5046. Glenross 1993 90,679 53,1357. Lochness 1994 90,607 53,1358. Genmar Ajax 1996 96,183 53,8299. Sanko Brave 2003 105,672 56,17210. Sanko Bright 2003 105,745 56,17211. Stavanger Bay 2003 105,744 56,17212. CV Stealth 2005 104,499 58,14813. Sanko Blossom 2005 105,699 56,17214. CS Stealth 2006 104,592 58,44615. MT Intrepid Reliance 2006 104,403 56,57316. Eagle Stealth 2001 105,322 56,34617. Feng Huang Zhou 2006 110,485 56,573Shuttle18. Kazan City 1996 5,760 4,40819. Samara City 1993 5,872 4,407

1,928,837 1,049,964

Total Petroleum Tankers (Including In-Chartered) 8,040,881 4,377,774


199list of vessels

Chemical Tankers Built DWT GRT

Melati Class1. Bunga Melati Satu 1997 32,127 22,2542. Bunga Melati Dua 1997 32,169 22,2543. Bunga Melati 3 1999 31,983 22,1164. Bunga Melati 4 1999 31,967 22,1165. Bunga Melati 5 1999 31,975 22,1166. Bunga Melati 6 2000 31,981 22,1167. Bunga Melati 7 2000 31,972 22,116

224,174 155,088

Anggerik Class8. MT Varden (ex-Bunga Anggerik) 1989 29,995 18,4539. MT Skarven ( ex-Bunga Cenderawasih) 1990 29,928 18,45310. MT Stolzen (ex-Bunga Mawar) 1990 29,974 18,45311. MT Karven (ex-Bunga Tanjung) 1991 29,980 18,453

119,877 73,812

Semarak Class12. Bunga Semarak 1990 15,999 9,95113. Bunga Siantan 1991 15,999 9,951

31,998 19,902

Total Chemical Tankers (Owned) 376,049 248,802

In-Chartered1. Bunga Kantan Satu 2005 19,774 11,5902. Bunga Kantan Dua 2005 19,774 11,5903. Bunga Kantan Tiga 2005 19,774 11,590

59,322 34,770

Total Chemical Tankers (Including In-Chartered) 435,371 283,572

200list of vessels

Containership Built DWT GRT

Above 5000 TEUs1. Bunga Seroja Satu 2006 103,717 89,7762. Bunga Seroja Dua 2007 103,773 89,776

207,490 179,552

3000 - 5000 TEUs3. Bunga Pelangi Dua 1995 65,318 53,3794. Bunga Raya Satu 1998 48,304 39,5825. Bunga Raya Dua 1998 48,244 39,582

161,866 132,543

1000 - 3000 TEUs6. Bunga Bidara 1990 23,518 17,2157. Bunga Delima 1990 23,584 17,2158. Bunga Kenari 1991 23,576 17,2159. Bunga Terasek 1991 24,073 17,21510. Bunga Teratai 1998 24,613 21,33911. Bunga Teratai Dua 1998 24,554 21,33912. Bunga Teratai Tiga 1998 24,580 21,33913. Bunga Teratai Empat 1998 24,561 21,339

193,059 154,216

Below 1000 TEUs14. Bunga Mas Lima 1997 8,991 8,95715. Bunga Mas Enam 1997 8,668 8,95716. Bunga Mas Tujuh 1997 9,039 8,95717. Bunga Mas Lapan 1998 8,665 8,95718. Bunga Mas 9 1998 12,250 9,38019. Bunga Mas 10 1998 12,288 9,38020. Bunga Mas 11 1998 10,325 8,61221. Bunga Mas 12 1999 10,313 8,612

80,539 71,812

Total Containership (Owned) 642,954 538,123


201list of vessels

Containership Built DWT GRT

In-Chartered1. OOCL China 1996 67,625 67,4272. OOCL California 1995 67,765 66,0463. OOCL Britain 1996 67,625 66,0464. Northern Divinity 1997 44,700 36,6065. Conti Singa 1996 44,585 42,3366. Sinotran Shanghai 2005 37,800 28,1507. Nordwelle 2005 34,741 26,6118. Theodore Storm 2004 33,297 28,0009. Marvel 1994 6,500 5,40310. Lucien GA 2002 17,124 14,19311. MISC Merlion 1990 56,030 49,87412. Sky Venus 1983 38,351 33,40513. Vin Pioneer 1998 9,088 6,875

525,231 470,972

Total Containership (Including In-Chartered) 1,168,185 1,009,095

202list of vessels

Others Built DWT GRT

LPG1. Pernas Butane 1991 2,213 2,3522. Konsep Maju 1995 4,999 4,9513. Bunga Kekwa 1995 3,052 3,496

10,264 10,799Dry Bulk (Panamax)4. Bunga Saga 9 1999 73,127 38,972

73,127 38,972

Total Others 83,391 49,771

Year CapacityOffshore Floating Facilities Converted DWT (bbls)

Floating Production Storage and Offloading (FPSO)1. Bunga Kertas 2003 87,768 619,0002. Brasil* 2002 255,000 1,700,0003. Kikeh 2007 273,000 2,000,000

615,768 4,319,000Floating Storage and Offloading (FSO)4. Angsi 2005 64,950 472,6315. Cendor 2006 89,920 590,0006. Abu Cluster 2006 89,920 590,000

244,790 1,652,631Total Offshore Floating Facilities 860,558 5,971,631

Storage

* jointly owned


203list of vessels

ExpectedCommitted Newbuildings Delivery DWT GRT

LNG Carriers1. Hull 1591 2007 81,600 –2. Hull 2221 2007 73,400 –3. Hull 2222 2008 73,400 –4. Hull 2223 2008 73,400 –5. Hull 2224 2008 73,400 –

375,200 –Petroleum Tankers - VLCC1. VLCC H078 2007 298,500 –2. VLCC H079 2008 298,500 –

597,000 –Petroleum Tankers - Aframax1. HN S2232 2007 107,000 –2. HN S2233 2007 107,000 –3. HN1423 2009 107,500 –4. HN1424 2010 107,500 –5. HN1425 2010 107,500 –6. HN1426 2010 107,500 –7. HN1457 2011 107,500 –8. HN1458 2011 107,500 –

859,000 –Chemical Tankers1. HN2044 2007 38,000 –2. HN2045 2007 38,000 –3. HN2046 2007 38,000 –4. HN2047 2007 38,000 –5. HN2048 2009 38,000 –6. HN2049 2009 38,000 –7. HN2050 2009 38,000 –8. HN2051 2009 38,000 –

304,000 –

Total Newbuildings 2,433,700 –

Expected CapacityUnder Conversion Completion DWT (bbls)

Floating Production Storage and Offloading (FPSO)1. Espirito Santo* 2008 270,000 2,020,200

Total New Conversion 270,000 2,020,200

* jointly owned

204MISC offices around the world

KEER – MISC Logistics Co LtdNo. 20, Street 17Al Amarat, Khartoum, SudanTel : 249-183-574-550/51Fax : 249-183-561-717

Malaysia DeepwaterFloating Terminal(Kikeh) LtdLevel 28, Menara DayabumiJalan Sultan Hishamuddin50050 Kuala LumpurMalaysiaTel : 603-2275-3402Fax : 603-2275-2953

Malaysia DeepwaterProduction ContractorsSdn BhdSuite 2.03, 2nd FloorMenara SPK, No.22Jalan Sultan Ismail50520 Kuala LumpurMalaysiaTel : 603-2142-1211Fax : 603-2145-2700

Malaysia Marineand Heavy EngineeringSdn BhdPLO 3, Jalan PekelilingP.O. Box 7781700 Pasir GudangJohor, MalaysiaTel : 607-251-2111Fax : 607-251-3997

Malaysia MaritimeAcademy Sdn BhdP.O. Box 31Kuala Sungai Baru78207 MelakaMalaysiaTel : 606-387-6201Fax : 606-387-6700

Asia LNG TransportSdn BhdAsia LNG TransportDua Sdn BhdLevel 28, Menara DayabumiJalan Sultan Hishamuddin50050 Kuala LumpurMalaysiaTel : 603-2275-3255Fax : 603-2275-3209

AET Shipmanagement(Singapore) Pte Ltd1 HarbourFront Avenue#11-01, Keppel Bay TowerSingapore, 098632Tel : 65-6100-2288Fax : 65-6345-1133

BLG-MILS LogisticsSdn Bhd c/o MISCIntegrated LogisticsSdn BhdLot 88077Jalan Perigi Nenas 7/1Taman PerindustrianPulau Indah, 42907Pelabuhan KlangSelangor Darul EhsanMalaysiaTel : 603-3161-2400

(Hunting Line)Fax : 603-3161-2500

FPSO Ventures Sdn BhdSuite 2.03, 2nd FloorMenara SPK, No. 22Jalan Sultan Ismail50250 Kuala LumpurMalaysiaTel : 603-2145-2600Fax : 603-2145-2700

AET Offshore Services Inc1301 Pelican Island-2Galveston, Texas 77554, USATel : 1-832-615-2000Fax : 1-713-622-2256

AET Shipmanagement(Malaysia) Sdn BhdLevel 11, Menara DayabumiJalan Sultan Hishamuddin50050 Kuala LumpurMalaysiaTel : 603-2267-4800Fax : 603-2273-0608

AET Tankers Pte Ltd1 HarbourFront Avenue#11-01, Keppel Bay TowerSingapore 098632Tel : 65-6100-2288Fax : 65-6345-1133

AET UK LimitedSuite 8.02, Exchange Tower1 Harbour Exchange SquareLondon E14, 9GEUnited KingdomTel : 44-20-7536-5880Fax : 44-20-7538-5561

MISC OfficesAround the World

MISC Head OfficeLevel 25, Menara DayabumiJalan Sultan Hishamuddin50050 Kuala LumpurorPO Box: 1037150712 Kuala LumpurMalaysiaTel : 603-2273-8088Fax : 603-2273-6602http://www.misc.com.my

MILS-Seafrigo Sdn Bhdc/o MISC IntegratedLogistics Sdn BhdLot 88077Jalan Perigi Nenas 7/1Taman PerindustrianPulau Indah, 42907Pelabuhan KlangSelangor Darul EhsanMalaysiaTel : 603-3161-2400


MILS-SterilGamma Sdn Bhdc/o MISC IntegratedLogistics Sdn BhdLot 88077Jalan Perigi Nenas 7/1Taman PerindustrianPulau Indah, 42907Pelabuhan KlangSelangor Darul EhsanMalaysiaTel : 603-3161-2400


MISC Agencies Sdn Bhd(Port Klang)Lot 23, Leboh SultanMohamed 1, KawasanPerusahaan PKNS Fasa 2Bandar Sultan SuleimanPelabuhan UtaraP.O. Box 146, 42009Pelabuhan KlangSelangor Darul EhsanMalaysiaTel : 603-3176-5753Fax : 603-3176-6289

205MISC offices around the world

MISC Agencies (UK) LtdQuayside House13 Town Quay WharfAbbey Road, Barking EssexIG11 7 AT, United KingdomTel : 44-20-8591-3232Fax : 44-20-8507-1624

MISC Integrated LogisticsSdn BhdLot 88077Jalan Perigi Nenas 7/1Taman PerindustrianPulau Indah, 42907Pelabuhan KlangSelangor Darul EhsanMalaysiaTel : 603-3161-2400


MISC LNG Liason Office –JapanNisseki Yokohama Building1-1-8 Sakuragi-choNakaku 231-0062, JapanTel : 81-45-680-2280Fax : 81-45-680-2284

MMHE-SHI LNG Sdn Bhdc/o Malaysia Marine andHeavy Engineering Sdn BhdPLO 3, Jalan PekelilingP.O Box 7781700 Pasir GudangJohor, MalaysiaTel : 607-251-2111Fax : 607-251-3997

MMHE-ATB Sdn Bhdc/o Malaysia Marineand Heavy EngineeringSdn BhdPLO 3, Jalan PekelilingP.O Box 7781700 Pasir GudangJohor, MalaysiaTel : 607-251-2111Fax : 607-251-3999

MISC Agencies (Japan) LtdKoizumi Building5th Floor, 29-1 NishigotandaI-Chrome, Shinigawa-kuTokyo 141-00, 31, JapanTel : 81-3-5496-2361Fax : 81-3-5496-2320

MISC Agencies Lanka(Pvt) LtdLevel 7, Valiant Towers46/7, Nawam MawathaP.O. Box 795, Colombo 2Sri LankaTel : 94-11-234-8933-8

(6 lines)Fax : 94-11-234-8931/2

MISC Agencies(Netherlands) BVWestplein 6-7, 3016 BMRotterdam, NetherlandsTel : 31-10-209-2222Fax : 31-10-209-2299

MISC Agencies (Sarawak)Sdn BhdNo. 1, 1st Floor, BintuluParkcity Commercial CentreBintulu, 97012 SarawakMalaysiaTel : 0686-318-311/312/313Fax : 0686-311-326

MISC Agencies (Singapore)Pte Ltd1 HarbourFront Avenue#11-05/09, Keppel Bay TowerSingapore 098632Tel : 65-6220-1522Fax : 65-6271-0817

MISC Agencies (Thailand)Co LtdGreen Tower, 4th Floor3656/9-10, Rama 4 RoadKlong Toey, Bangkok 10110ThailandTel : 66-2-367-3558/3581Fax : 66-2-367-3586/3587

MISC Agencies Sdn Bhd(Johor)1st Floor, Complex MISCPLO 137 & 138Jalan Angkasa Mas UtamaKawasan PerindustrianTebrau II 81100 Johor BahruJohor, MalaysiaTel : 607-3513-684Fax : 607-3513-695/696

MISC Agencies Sdn Bhd(Penang)Suite No 5, Level 14NB Tower 2, 5050, JalanBagan Luar, 12000Butterworth PenangMalaysiaTel : 604-3236-969Fax : 604-3329-608

MISC Agencies Sdn Bhd(Pahang)No B4, Upper FloorJalan Gebeng 2/6Gebeng Industrial Estate26080 KuantanPahang Darul MakmurMalaysiaTel : 609-5833-557Fax : 609-5833-550

MISC Agencies Sdn Bhd(Sabah)Ground Floor, Wisma TakadaJalan Gaya, 88000Kota Kinabalu, SabahMalaysiaTel : 088-212-070Fax : 088-234-445/

088-269-880

MISC Agencies (Australia)Pty LtdSuite 40, Albert Square37-39 Albert RoadMelbourne, Victoria 3004AustraliaTel : 61-3-9862-6200Fax : 61-3-9867-6167

MMHE-TurkmenistanAshgabat OfficeLevel 6, 126 Garagum BankBuilding, TurkmenbashyShayoly, Ashgabat 744000TurkmenistanTel : 607-251-2111Fax : 607-251-3999

PETRONAS TankersSdn BhdLevel 28, Menara DayabumiJalan Sultan Hishamuddin50050 Kuala LumpurMalaysiaTel : 603-2275-2465Fax : 603-2275-3229

RAIS – MILS Logistics FZCOPlot No. W40B, Dubai AirportFree ZoneP.O.Box 7 Dubai, U.A.E.Tel : 9714-299-4476Fax : 9714-299-4432

Transware DistributionServices Pte Ltd9 Gul CircleSingapore 629565Tel : 65-6861-1757Fax : 65-6862-5639

Trans-ware Logistics(Pvt) Ltd150, 150/1, PamunugamaRoad Tudella, Ja-ElaSri LankaTel : 94-1-232-577Fax : 94-1-232-588

206notice of annual general meeting

Notice ofAnnual GeneralMeeting

As Ordinary Business1. To receive and adopt the audited financial statements for the financial year ended 31 March 2007 and the Reports of the Directors

and Auditors thereon.

2. To declare a final dividend of 20 sen per share (Malaysian Income Tax exempted) in respect of the financial year ended 31March 2007.

3. To re-elect Dato' Dr. Wan Abdul Aziz bin Wan Abdullah who retires in accordance with Article 95 of the Articles of Association of theCompany and being eligible offer himself for re-election.

4. To re-elect the following Directors who retire by rotation in accordance with Article 97 of the Articles of Association of the Companyand being eligible offer themselves for re-election:

Dato' Shamsul Azhar bin AbbasDatuk Nasarudin bin Md IdrisDato' Kalsom binti Abd Rahman

5. To approve the payment of Directors' fees for the financial year ended 31 March 2007.

6. To re-appoint Messrs Ernst & Young as auditors of the Company and to authorise the Directors to fix their remuneration.

7. As Special BusinessTo consider and if thought fit, to pass the following resolutions:

a) Section 129(2) and (6) of the Companies Act, 1965"That Dato Sri Liang Kim Bang, a Director who retires pursuant to Section 129(2) of the Companies Act, 1965 be and ishereby re-appointed as Director of the Company to hold office until the conclusion of the next Annual General Meeting ofthe Company."

NOTICE IS HEREBY GIVEN that the Thirty-Eighth (38th)Annual General Meeting of Members of MISC Berhad willbe held on 16 August 2007 at 11.00 am at Ballroom 1,Level 2, Nikko Hotel Kuala Lumpur, 165, Jalan Ampang50450 Kuala Lumpur for the following purposes:


b) Proposed Amendments to the Articles of Association of the Company"That the proposed amendments to the Articles of Association of the Company as contained in Appendix I of the Annual Reportbe and are hereby approved"

8. To transact any other ordinary business of which due notice has been given.

Notice of Dividend Entitlement and PaymentNotice is hereby given that subject to the approval of Members at the Annual General Meeting on 16 August 2007, a final dividend of20 sen per share (Malaysian Income Tax exempted) in respect of the financial year ended 31 March 2007 will be paid on 30 August 2007to Depositors whose names appear in the Record of Depositors on 17 August 2007.

A depositor shall qualify for entitlement to the dividend only in respect of:i. shares transferred into the Depositor's securities account before 4.00 p.m. on 17 August 2007 in respect of ordinary transfers; and

ii. shares bought on Bursa Malaysia on a cum entitlement basis according to the Rules of Bursa Malaysia.

By Order of the Board

Fina Norhizah binti Baharu ZamanCompany Secretary (LS 01571)

Kuala LumpurDate: 25 July 2007

NOTESProxy

1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and, on a poll, to vote in his stead. A proxy may but

need not be a member of the Company and a member may appoint any person to be his proxy without limitation and the provisions of Section

149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

2. In the case of a Corporate Body, the proxy appointed must be in accordance with its Memorandum and Articles of Association and the instrument

appointing a proxy shall be given under the Company's Common Seal or under the hand of an officer or attorney duly authorised.

3. The form of proxy must be deposited at the Registrar of the Company, Symphony Share Registrars Sdn Bhd (378993-D) at Level 26, Menara Multi

Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia not less than 48 hours before the time appointed for holding

the Meeting.

4. Explanatory Notes on Special Business

a) Section 129(6) of the Companies Act, 1965The re-appointment of Dato Sri Liang Kim Bang, as Director of the Company persuant to Section 129(6) of the Companies Act, 1965 shall take

effect if the proposed Resolution has been passed by a majority of not less than three-fourths (3/4) of such members as being entitled to vote in

person or, where proxies are allowed, by proxy, at a general meeting of which not less than 21 days' notice specifying the intention to propose

the resolution as special resolution has been duly given.

b) Proposed Amendments to the Articles of Association of the CompanyThe proposed resolution is to amend the Articles of Association of the Company to be in line with the recent amendments of the Listing

Requirements of Bursa Malaysia Securities Berhad.


"Approved Market Place" means a stockexchange which is specified to be an approvedmarket place in the Securities Industry (CentralDepositories) (Exemption) (No. 2) Order 1998.

DeletedInterpretation

Existing Article Amended ArticleArticle No.

3. In a distribution of capital in a winding up ofthe Company, the Preference Shareholdershall be entitled to repayment of the capitalpaid up on the preference share in priorityto any repayment of capital to any othermember. The preference share shall conferno other right to participate in the capital orprofits of the Company.

DeletedArticle 3B (3) – Shares

Subject to the Act, the provision of theseArticles and the Requirements of the Exchange,the Company shall have the power to issuepreference shares on such terms and conditionsand carrying such rights or restrictions providedthat the total nominal of the issued preferenceshares shall not exceed the total nominal valueof the issued ordinary shares at any time. TheCompany shall not, unless with the consent ofexisting preference shareholders at a classmeeting, issue preference shares ranking inpriority to the preference shares already issuedbut may issued preference shares rankingequally therewith.

Subject to the Act, the provision of theseArticles and the Requirements of the Exchange,the Company shall have the power to issuepreference shares on such terms and conditionsand carrying such rights or restrictions. TheCompany shall not, unless with the consent ofexisting preference shareholders at a classmeeting, issue preference shares ranking inpriority to the preference shares already issuedbut may issued preference shares rankingequally therewith.

Article 6A (a) – Shares

1. Where:

a) The securities of a company are listed onan Approved Market Place; and

b) Such company is exempted fromcompliance with section 14 of theCentral Depositories Act or section29 of the Securities Industry (CentralDepositories) (Amendment) Act 1998,as the case may be, under the Rules ofthe Central Depository in respect of

Where:

a) The securities of a company are listedon another stock exchange; and

b) Such company is exempted fromcompliance with section 14 of the CentralDepositories Act or section 29of the Securities Industry (CentralDepositories) (Amendment) Act 1998,as the case may be, under the Rules of theCentral Depository in respect of such

Transmission of Securitiesfrom Foreign Register

Article 44A

Appendix IProposed Amendments to The Articles of Association

Notice of Annual General Meeting (cont'd)


Existing Article Amended ArticleArticle No.

b) The Company shall also request theCentral Depository in accordancewith the Rules, to issue a Record ofDepositors, as at a date not less than 3Market Days before the general meeting(hereinafter referred to "the GeneralMeeting Record of Depositors").

b) The Company shall also request theCentral Depository in accordancewith the Rules, to issue a Record ofDepositors, as at the latest datewhich is reasonably practicablewhich shall in any event be not lessthan 3 Market Days before the generalmeeting (hereinafter referred to as "theGeneral Meeting Record of Depositors").

Article 58A(b) –General Meeting

such securities, such company shall,upon request of a securities holder, permit atransmission of securities held by suchsecurities holder form the register of holdersmaintained by the registrar ofthe company in the jurisdiction of theApproved Market Place (hereinafter referredto as "the Foreign Register") to the registerof holders maintained by the registrar of thecompany in Malaysia (hereinafter referred toas "the Malaysia Register") provided thatthere shall be no change in the ownership ofsuch securities.

2. For the avoidance of doubt, nocompany which fulfils the requirementsof subparagraphs (1)(a) and (b) aboveshall allow any transmission of securitiesfrom the Malaysian register into theForeign Register.

securities, such company shall, upon requestof a securities holder, permit a transmissionof securities held by such securities holderform the register of holders maintained bythe registrar of the company in thejurisdiction of the other stock exchange tothe register of holders maintained by theregistrar of the company in the jurisdictionof the other stock exchange to theregister of holders maintained by theregistrar of the company in Malaysia andvice versa provided that there shall be nochange in the ownership of such securities.

Deleted

On a resolution to be decided on a showof hands, a holder of ordinary shares orpreference shares who is personally presentand entitled to vote shall be entitled to 1 vote.

New Provision –Article 73B

All the Directors of the company shall benatural persons.

DeletedArticle 80A – Directors

210statement accompanying notice of annual general meeting

Notice ofAnnual GeneralMeeting

Statement Accompanying

Pursuant To Paragraph 8.28(2) of the ListingRequirements of the Bursa Malaysia Securities Berhad

1. The profiles of the Directors who are standing for re-election as in Agenda 3 of the Notice of Annual General Meeting are set outon pages 024 to 027 of this Annual Report.

2. The details of the Directors' securities holdings in the Company are set out in page 100 of this Annual Report. None of the Company'sDirectors hold any interests in the Company's subsidiaries.

3. Details of Directors' Fees for the Financial Year ended 31 March 2007 are as follows:

Annual Board BAC BAC TotalFees Attendance Annual Attendance

Fees Fees Fees

Tan Sri Dato Sri Mohd Hassan bin Marican 60,000 2,800 – – 62,800

Dato Sri Liang Kim Bang 36,000 2,800 8,400 1,600 48,800

Harry K Menon 36,000 2,800 8,400 1,600 48,800

Dato' Halipah binti Esa 36,000 2,000 9,300 1,200 48,500

Datuk Nasarudin bin Md Idris 36,000 2,400 – – 38,400

Dato' Kalsom binti Abdul Rahman 36,000 2,000 2,100 400 40,500

Dato' Dr. Wan Abdul Aziz bin Wan Abdullah(appointed w.e.f 14 September 2006) 19,677 800 – – 20,477

Tan Sri Dato' Seri Dr Hj Zainul Ariff binHj Hussain (resigned w.e.f 1 January 2007) 27,000 1,600 9,000 800 38,400

MISC Berhadform of proxy

Form of ProxyI/Weofbeing a member/members of the abovenamed Company, hereby appoint

and/orofand failing the abovenamed proxies, the Chairman of the meeting as my/our proxy to vote for me/us and on my/our behalf at the Thirty-Eighth Annual General Meeting of the Company to be held at Ballroom 1, Level 2, Nikko Hotel Kuala Lumpur, 165, Jalan Ampang 50450Kuala Lumpur on 16 August 2007 at 11.00 a.m. and at any adjournment thereof, on the following resolutions referred to in the noticeof Annual General Meeting:

Ordinary Resolution For Against

1 To receive and adopt the audited financial statements for the financial year ended31 March 2007 and the Reports of the Directors and Auditors thereon.

2 To declare a final dividend of 20 sen per share (tax exempt) in respect of thefinancial year ended 31 March 2007.

3 To re-elect Dato’ Dr. Wan Abdul Aziz bin Wan Abdullah who retires in accordance withArticle 95 of the Articles of Association of the Company and being eligible offer himselffor re-election.

4 To re-elect the following directors who retire by rotation in accordance with Article 97of the Articles of Association of the Company and being eligible offer themselvesfor re-election:• Dato’ Shamsul Azhar bin Abbas• Datuk Nasarudin bin Md Idris• Dato’ Kalsom binti Abd Rahman

5 To approve the payment of Directors’ Fees for the financial year ended 31 March 2007.6 To re-appoint Messrs Ernst & Young as auditors of the Company and to authorise the

Directors to fix their remuneration.

Special Resolution

7 To re-appoint Dato Sri Liang Kim Bang as Director of the Company, who retirespursuant to Section 129(2) of the Companies Act, 1965.

8 To approve the Proposed Amendments to the Articles of Association of the Company.

Unless voting instructions are indicated in the spaces above the proxy will vote as he thinks fit.

No. of shares held

Signed this day of 2007Signature/Common Seal of Appointor

Note:1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and, on a poll, to vote instead of him. A proxy may but need not

be a member of the Company and a member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(b) of the CompaniesAct, 1965 shall not apply to the Company.

2. In the case of a Corporate Body, the Proxy appointed must be in accordance with its Memorandum and Articles of Association, and the instrument appointinga proxy shall be given under the Company's Common Seal or under the hand of an officer or attorney duly authorised.

3. This form of proxy must be deposited at the Registrar of the Company, Symphony Share Registrars Sdn Bhd (378993-D) at Level 26, Menara Multi Purpose,Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia, not less than forty-eight hours before the time appointed for holding the Meeting.

Symphony Share Registrars Sdn Bhd

Level 26, Menara Multi PurposeCapital SquareNo 8, Jalan Munshi Abdullah50100 Kuala Lumpur

Stamp

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