2003 - KNM Steel Sdn Bhd

KNM GROUP BERHAD (521348-H)CONTENTS3 Notice of Annual General Meeting5Statement Accompanying the Notice ofAnnual General Meeting7 Corporate Structure8 Corporate Information9 Board of Directors12 Executive Chairman’s Statement14 Audit Committee Report17 Statement of Internal Control18 Corporate Governance Statement24 Financial Statements58 Share Price Information58 Investors’ Information61 List of PropertiesForm of Proxy2003 ANNUAL REPORT1

KNM GROUP BERHAD (521348-H)MAIN PRODUCTS OF KNM GROUP22003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTICE OF ANNUAL GENERAL MEETINGNOTICE IS HEREBY GIVEN THAT the Second Annual General Meeting of KNM Group Berhad will be held at theKristal Ballroom 2, Level 1, East Wing, Hilton Petaling Jaya, No 2 Jalan Barat, 46200 Petaling Jaya, Selangor DarulEhsan on 17 June 2004 at 3.00 p.m. for the following purposes:A G E N D A1. To receive and adopt the Audited Accounts for the year ended 31 December 2003together with the Reports of the Directors and Auditors thereon.2. To declare a first and final dividend of 5 sen per share tax exempt for the year ended 31December 20033. To approve the payment of Directors’ fees for the year ended 31 December 2003.4. To re-elect the following Director who retire in accordance with Section 129(6) of theCompanies Act, 1965 (“the Act”) and being eligible, has offered himself for re-election:4.1 YBhg. Dato’ Abdul Rani bin Mohd Razalli5. To re-elect the following Directors who retire in accordance with Article 132 of theCompany’s Articles of Association and being eligible, have offered themselves for reelection:5.1 Ir Lee Swee Eng5.2 Lee Hui Leong5.3 Sofiyan bin Yahya5.4 Gan Siew Liat5.5 Chew Fook Sin5.6 Lim Yu Tey5.7 YBhg. Dato’ Ab. Halim bin Mohyiddin5.8 Mohamed Tajudin bin Mohd Alias6. To re-appoint Messrs KPMG as the auditors of the Company and to authorise the Directorsto fix their remuneration.AS SPECIAL BUSINESSTo consider and if thought fit, pass the following Resolution as an Ordinary Resolution,with or without modifications:7. Authority to Allot and Issue SharesTHAT subject to the approval of the Securities Commission and any other regulatoryauthority, full authority be and is hereby given to the Directors pursuant to Section 132Dof the Companies Act, 1965 from time to time to issue and allot ordinary shares from theunissued capital of the Company upon such terms and conditions and at such times asmay be determined by the Directors provided always that the nominal value of theshares issued when aggregated with the nominal value of the shares which has beenissued during the previous 12 months does not exceed 10% of the nominal value of allthe shares in issue at the commencement of that period of 12 months and providedalways that the approval given by this resolution shall continue in force only until (a) theconclusion of the Annual General Meeting (“AGM”) commencing next after the date onwhich this approval was given, or (b) the expiration of the period within the next AGMafter that date is required by law to be held, whichever is the earlier.8. Any Other Ordinary BusinessTo transact any other ordinary business of which due notice shall have been given.Resolution OnProxy FormResolution No. 1Resolution No. 2Resolution No. 3Resolution No. 4Resolution No. 5Resolution No. 6Resolution No. 7Resolution No. 8Resolution No. 9Resolution No. 10Resolution No. 11Resolution No. 12Resolution No. 13Resolution No. 14Resolution No. 15By Order of the BoardChia Kwok Why (MAICSA 7005833)Yeoh Seng Chong (LS 006878)Company SecretariesSeri Kembangan,25 May 20042003 ANNUAL REPORT3

KNM GROUP BERHAD (521348-H)NOTICE OF ANNUAL GENERAL MEETINGNOTICE OF BOOK CLOSURENotice is hereby given that a first and final dividend of 5 sen per share tax exempt for the year ended 31 December2003, if approved by members at the Second Annual General Meeting, will be paid on 9 August 2004 to shareholderson the Record of Depositors at the close of business on 8 July 2004.A depositor shall qualify for entitlement to the dividend in respect of:(i)(ii)Shares transferred to the Depositor’s Securities Account before 12.30 p.m. on 8 July 2004 in respect of ordinaryshares; andShares bought on the Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of theBursa Malaysia Securities Berhad.EXPLANATORY NOTES ON SPECIAL BUSINESS:Resolution pursuant to Section 132(D) of the Companies Act 1965The Ordinary Resolution proposed under Resolution No. 14 above, if passed, will enable the Directors to issue up to10% of the issued share capital of the Company for the time being for such purposes as the Directors consider are inthe best interest of the Company. This authority, unless revoked or varied at a General Meeting, will expire at the nextAnnual General Meeting.Notes:1. A member entitled to attend and vote at the above Meeting is entitled to appoint one or more proxies to attendand vote in his/her stead.2. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Act shallnot apply to the Company.3. The instrument appointing a proxy or proxies must be in writing under the hand of the appointor or his/herattorney duly authorized in writing or if such appointee is a corporation, the instrument appointing a proxy orproxies must be executed under its common seal or under the hand of an officer or attorney of the corporationand must be deposited at the Registered Office of the Company at 15, Jalan Dagang SB 4/1, Taman SungaiBesi Indah, 43300 Seri Kembangan, Selangor Darul Ehsan, Malaysia, not less than 48 hours before the timeappointed for holding the meeting or any adjourned meeting.4. Where a member appoints more than 1 proxy, the appointments shall be invalid unless he/she specifies theproportions of his/her holdings to be represented by each proxy.42003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)STATEMENT ACCOMPANYINGTHE NOTICE OF ANNUAL GENERAL MEETING1. The names of the individuals who are standing for election or re-electionYBhg. Dato’ Abdul Rani bin Mohd RazalliIr Lee Swee EngLee Hui LeongSofiyan bin YahyaGan Siew LiatChew Fook SinLim Yu TeyYBhg. Dato’ Ab. Halim bin MohyiddinMohamed Tajudin bin Mohd Alias2. Details of attendance of existing Directors at Board Meetings for the financial year ended 31December 20032 Board meetings were held during the financial period under review. Details of attendance of the Directors atthe Board meetings are set out at page 19 of this Annual Report.3. Second Annual General Meeting of KNM Group BerhadPlace : Kristal Ballroom 2, Level 1, East Wing, Hilton Petaling Jaya, No 2 Jalan Barat, 46200 Petaling Jaya,Selangor Darul EhsanDate : 17 June 2004Time : 3.00 p.m.4. Further details of individuals who are standing for election or re-election as DirectorsNameYBhg. Dato’ AbdulRani bin MohdRazalli Ir. Lee Swee Eng Lee Hui Leong Sofiyan bin YahyaAge 73 48 48 47Nationality Malaysian Malaysian Malaysian MalaysianQualifications Details are set out on Details are set out on Details are set out on Details are set out onPage 9 of the Page 9 of the Page 9 of the Page 10 of theAnnual Report Annual Report Annual Report Annual ReportPosition on the Board of Directors Executive Chairman Managing Director Executive Director Executive DirectorOccupation Director Director Director DirectorWorking Experience Details are set out on Details are set out on Details are set out on Details are set out onPage 9 of the Page 9 of the Page 9 of the Page 10 of theAnnual Report Annual Report Annual Report Annual ReportOther Directorships of publiccompanies None None None NoneSecurities holding in the Companyand its subsidiaries (as at31 December 2003) None None None NoneFamily relationship with any Directorand/or major shareholder ofthe Company None Spouse of Gan Siew None NoneLiat, Executive DirectorAny conflict of interest that he haswith the Company None None None NoneList of convictions for offences withinthe past 10 years other than trafficoffences None None None None2003 ANNUAL REPORT5

KNM GROUP BERHAD (521348-H)STATEMENT ACCOMPANYINGTHE NOTICE OF ANNUAL GENERAL MEETINGName Gan Siew Liat Chew Fook Sin Lim Yu Tey YBhg. Dato’ Ab Mohamed TajudinHalim bin Mohyiddin bin Mohd AliasAge 43 48 63 58 65Nationality Malaysian Malaysian Malaysian Malaysian MalaysianQualifications Details are set out Details are set out Details are set out Details are set out Details are set outon Page 10 of the on Page 10 of the on Page 11 of the on Page 11 of the on Page 11 of theAnnual Report Annual Report Annual Report Annual Report Annual ReportPosition on the Board of Directors Executive Director Executive Director Senior Independent Non- Independent Non-Independent Non- Executive Director Executive DirectorExecutive DirectorOccupation Director Director Director Director DirectorWorking Experience Details are set out Details are set out Details are set out Details are set out Details are set outon Page 10 of the on Page 10 of the on Page 11 of the on Page 11 of the on Page 11 of theAnnual Report Annual Report Annual Report Annual Report Annual ReportOther Directorships of public companies None None None Details are set out Noneon Page 11 of theAnnual ReportSecurities holding in the Company andits subsidiaries (as at 31 December 2003) None None None None NoneFamily relationship with any Directorand/or major shareholder of theCompany a) Spouse of Brother-in-law of None None NoneIr. Lee Swee Eng, Gan Siew Liat,Managing Executive DirectorDirectorb) Sister-in-law ofChew Fook Sin,Executive DirectorAny conflict of interest that he has withthe Company None None None None NoneList of convictions for offences within thepast 10 years other than traffic offences None None None None None62003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)CORPORATE STRUCTURE2003 ANNUAL REPORT7

KNM GROUP BERHAD (521348-H)CORPORATE INFORMATIONBOARD OF DIRECTORSEXECUTIVE CHAIRMANYBhg. Dato’ Abdul Rani bin Mohd RazalliMANAGING DIRECTORIr. Lee Swee EngEXECUTIVE DIRECTORSLee Hui LeongSofiyan bin YahyaGan Siew LiatChew Fook SinSENIOR INDEPENDENT NON-EXECUTIVE DIRECTORLim Yu TeyINDEPENDENT NON-EXECUTIVE DIRECTORSYBhg. Dato’ Ab. Halim bin MohyiddinMohamed Tajudin bin Mohd AliasCOMPANY SECRETARIESChia Kwok WhyYeoh Seng ChongAUDIT COMMITTEEYBhg. Dato’ Ab. Halim bin MohyiddinChairmanLim Yu TeyMemberIr. Lee Swee EngMemberREMUNERATION COMMITTEEMohamed Tajudin bin Mohd AliasChairmanLim Yu TeyMemberIr. Lee Swee EngMemberNOMINATION COMMITTEE*Lim Yu TeyMemberYBhg. Dato’ Ab. Halim bin MohyiddinMemberMohamed Tajudin bin Mohd AliasMemberREGISTERED OFFICE15, Jalan Dagang SB4/1Taman Sungai Besi Indah43300 Seri KembanganSelangor Darul EhsanMalaysiaTel : 603-8946 3000Fax : 603-8943 4781WEBSITEwww.knm-group.comE-MAILknm@knm-group.comAUDITORSKPMGChartered AccountantsWisma KPMGJalan DungunDamansara Heights50490 Kuala LumpurMalaysiaTel : 603-2095 3388Fax : 603-2095 2138SHARE REGISTRARMalaysian Share Registration Services Sdn Bhd(378993-D)Level 26, Menara Multi PurposeCapital SquareNo. 8 Jalan Munshi Abdullah50100 Kuala LumpurMalaysiaTel : 603-2721 2222Fax : 603-2721 2530/2721 2531STOCK EXCHANGE LISTINGBursa Malaysia Securities BerhadStock Code 7164* The Chairman of the Nomination Committee has not been elected from amongst its members as the committeehas not held its first meeting.82003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)BOARD OF DIRECTORSYBHG. DATO’ ABDUL RANI BIN MOHD RAZALLI, aged 73, is a co-founder and Executive Chairman of KNM.He was appointed to the Board of KNM as Executive Chairman on 14 June 2003.He began his career with the Royal Customs and Excise Department of Malaysia as an Assistant Superintendent ofCustoms in 1953 and subsequently rose to the position of Deputy Director General of Customs, Malaysia until hisretirement in 1985. During his tenure, he represented Malaysian Customs at the Permanent Technical Committee ofthe Customs Cooperation Council in Brussels, Belgium. Up until 1995, he continued to represent Malaysia in theAsean Working Group on customs matters.After his retirement in 1985, he went into the freight forwarding, shipping agency and manufacturing businessesbefore establishing an investment holding company, Inter Merger Sdn Bhd in 1987. Through this company, hesubsequently co-founded and incorporated KNM Process Systems Sdn Bhd in 1990. YBhg. Dato’ Abdul Rani binMohd Razalli has successfully led KNM Process Systems Sdn Bhd to achieve and gain acceptance by its clients andindustrial regulatory authorities. He is also a director of a number of companies within the KNM Group and severalother private limited companies.He is deemed interested in KNM by virtue of his substantial shareholding in Inter Merger Sdn Bhd and Tegas KlasikSdn Bhd. He has no family relationship with any other director or major shareholder of KNM and has no conflict ofinterest with KNM.IR LEE SWEE ENG, aged 48, is a co-founder and Managing Director of KNM. He is responsible for overseeing thestrategic direction and management of the group operations. He was appointed to the Board of KNM as ManagingDirector on 14 June 2003.He graduated in 1979 with a Bachelor of Science (First Class Hons) in Mechanical Engineering from the University ofStrathclyde in Glasgow, Scotland. Upon his graduation, he served in several positions in Petroliam Nasional Bhd,including Production Engineer, Project Development Engineer, Resident Engineer and Project Leader. In 1986, hejoined John Brown E & C Inc as Project Engineer. In 1987, he joined Technip Geoproduction (Malaysia) Sdn Bhd asTechnical Manager and was appointed Director in 1988, and subsequently Managing Director the following year.He has been a Registered Professional Engineer since 1984 and a Fellow of the Institute of Engineers since 1993. In1996, he was appointed Council Member of the Federation of Malaysian Manufacturers (FMM) and in May 2000, hewas appointed an Executive Committee Member of the Malaysian Iron and Steel Industry Federation (MISIF). He is thefounding Chairman of the MISIF Boiler and Pressure Vessels Group and the Institution of Engineers, Malaysia Oil andGas Division. In May 2000, he was appointed to represent Malaysia as a Member of the International Council ofPressure Vessels Technology. He is also a director of a number of companies within the KNM Group and several otherprivate limited companies.He is deemed interested in KNM by virtue of his substantial shareholding in Inter Merger Sdn Bhd. He has no familyrelationship with any other director or major shareholder of KNM save for Gan Siew Liat, his spouse and Chew FookSin, his spouse’s brother-in-law and has no conflict of interest with KNM.LEE HUI LEONG, aged 48, is an Executive Director of KNM. His primary responsibilities are in operations, whichencompasses manufacturing and engineering. He has been with the KNM Group since 1992 and was appointed anExecutive Director on 14 June 2003.He graduated in 1978 with a Bachelor of Science (Hons) in Mechanical Engineering from the University of Strathclydein Glasgow, Scotland. Upon his graduation, he joined Mechmar Corporation Bhd as Engineer before his appointmentin 1989 as a director for a subsidiary company. He left Mechmar in 1992 to join the KNM Group.To date, he has accumulated 25 years of experience in the design, engineering and manufacturing of process plantequipment, particularly in the oil, gas and petrochemical industries. He takes an active role in the development of theprocess equipment industry, where he was the Chairman of the sub-committee for redrafting of Pressure Vessel Rulesand Regulations under the Department of Safety and Health, and sat on the committee for the drafting of standards fornon-destructive testing of pressure vessels under SIRIM. He is also a director of a number of companies within the KNMGroup.He is deemed interested in KNM by virtue of his substantial shareholding in Tegas Klasik Sdn Bhd. He has no familyrelationship with any other director or major shareholder of KNM and has no conflict of interest with KNM.2003 ANNUAL REPORT9

KNM GROUP BERHAD (521348-H)BOARD OF DIRECTORSSOFIYAN BIN YAHYA, aged 47, is an Executive Director of KNM. His primary responsibilities are in corporatebusiness development, which encompasses the overall strategic business development, planning and implementationof the KNM Group’s new businesses. He has been with the KNM Group since 1993 and was appointed an ExecutiveDirector on 14 June 2003.He graduated in 1979 with a Bachelor of Science (Hons) in Mechanical Engineering from City University, London.Upon his graduation, he joined Petroliam Nasional Bhd as an Engineer. He then joined Pappos Sdn Bhd as aMechanical Engineer in 1980 and had his first experience in fabrication of process equipment. In 1984, he joinedPipeline Construction Sdn Bhd as General Manager. In 1985, he joined Solus Oceaneering Sdn Bhd as AreaManager, East Malaysia. In 1986, he joined Oilfield Inspection Services Sdn Bhd as Chairman/Director. Oilfield isa leading company in South East Asia for non-destructive testing and inspection services.In his 24-year working career, he has accumulated vast technical, operational, marketing and management experience,particularly in the oil, gas and petrochemical industries. He has also accumulated extensive experience in developingand establishing international business networks, either through pursuing projects internationally or establishingrelationships and ventures with international companies in Malaysia. He was a member of the technical committeeformed by the Atomic Licensing Board to first review the Code of Practices for Radiation Protection in IndustrialRadiography. He is also a director of a number of companies within the KNM Group and several other private limitedcompanies.He is deemed interested in KNM by virtue of his substantial shareholding in Inter Merger Sdn Bhd and Tegas KlasikSdn Bhd. He has no family relationship with any other director or major shareholder of KNM and has no conflict ofinterest with KNM.GAN SIEW LIAT, aged 43, is an Executive Director of KNM. Her primary responsibilities are in human resourcesand administration. She has been with the KNM Group since 1990 and was appointed an Executive Director on 14June 2003.She was awarded a Certificate in Personal Management from the Malaysian Institute of Personnel Management, andcompleted a Dale Carnegie course in Effective Speaking and Human Relations at the Dale Carnegie Institute ofHouston in the United States of America. In 1990, she joined the Inter Merger Group as Administration Manager andwas appointed to the Board of a number of subsidiary companies within the Inter Merger Group. She is also a directorof a number of companies within the KNM Group and several other private limited companies.She is deemed interested in KNM by virtue of the substantial shareholding in Inter Merger Sdn Bhd by Ir Lee Swee Eng,her spouse. She has no other family relationship with any other director or major shareholder of KNM save for ChewFook Sin, her brother-in-law, and has no conflict of interest with KNM.CHEW FOOK SIN, age 48, is an Executive Director of KNM. His primary responsibilities are the Group’s domesticand international commercial activities. He has been with the KNM Group since 1993 and was appointed anExecutive Director on 14 June 2003.He graduated in 1987 with a Bachelor of Science in Electrical Engineering from the University of Arkansas, UnitedStates of America. Upon his graduation, he joined the Broadcasting Department of Malaysia and in 1990, joined theInter Merger Group as General Manager. He subsequently joined the KNM group as Procurement Manager in 1995,was promoted to Vice President (Manufacturing) in 1999 and subsequently rose to the position of Director of theCommercial Division of KNMPS in 2002. He is also a director of other companies within the KNM Group.He is deemed interested in KNM by virtue of the substantial shareholding in Inter Merger Sdn Bhd by Ir Lee Swee Eng,the spouse of Gan Siew Liat, his sister-in-law. He has no other family relationship with any other director or majorshareholder of KNM save for Gan Siew Liat, his sister-in-law and has no conflict of interest with KNM.102003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)BOARD OF DIRECTORSLIM YU TEY, aged 63, was appointed an Independent Non-Executive Director on 14 June 2003 and subsequently theSenior Independent Non-Executive Director on 19 November 2003.He graduated in 1972 with a Bachelor of Commerce from Nanyang University, Singapore. He started his career asa teacher in the government sector. Upon graduation, he ventured into the private sector. He joined Lam Soon (M) Bhdin 1974 and served in various senior positions until his retirement in 2003 as the Managing Director (Marketing andManufacturing). He has 30 years experience in Manufacturing, Marketing and Sales. He is a Chartered Member ofthe Royal Institute of Marketing, United Kingdom since 1989. He is a Board Member of several private limited companies.He has no family relationship with any other director or major shareholder of KNM and has no conflict of interest withKNM.YBHG. DATO’ AB HALIM BIN MOHYIDDIN, DPMS, aged 58, was appointed an Independent Non-ExecutiveDirector on 14 June 2003.He graduated in 1971 with a Bachelor of Economics (Accounting) from the University of Malaya. Upon graduation, hejoined University Kebangsaan Malaysia as a Faculty Member of the Faculty of Economics. In 1973, he obtained hisMasters of Business Administration from University of Alberta Edmonton, Alberta, Canada, and in 1975 he obtaineda postgraduate Diploma in Accountancy from University of Malaya. In 1977 he joined KPMG/ KPMG Desa Megat &Co and was made partner of the firm in 1985 until his retirement in 2001.He is currently Vice President of the Malaysian Institute of Certified Public Accountants (MICPA) and Chairman of theEducation and Training Committee of the Association. He sits on the Education Committee of the International Federationof Accountants (IFAC), and is also a Council Member of Malaysia Institute of Accountants (MIA) and Chairman of itsQualifying Examination Committee.In addition, he is a member of the Jawatankuasa Penilaian Program Kolej Professional Mara and has sat as a memberof Board Studies for accounting and business programme of Kolej Teknologi Mara, Universiti Utara Malaysia, UniversitiIslam Antarabangsa Malaysia and Universiti Tenaga Malaysia. He also holds the position as Adjunct Professor ofAccounting at Universiti Kebangsaan Malaysia.He holds directorships in Malaysian Association of Certified Public Accountants (a company limited by guarantee),Kumpulan Perangsang Selangor Berhad, HeiTech Padu Berhad, Arab-Malaysian Corporation Berhad, MCM TechnologiesBerhad, Utusan Melayu Malaysia Berhad, Digi.com Berhad, Idris Hydraulic (Malaysia) Berhad and Amway MalaysiaHoldings Berhad. He is also a director in several private limited companies.He has no family relationship with any other director or major shareholder of KNM and has no conflict of interest withKNM.MOHAMED TAJUDIN BIN MOHAMED ALIAS, aged 65, was appointed an Independent Non-Executive Directoron 14 June 2003.He graduated in 1975 with a Bachelor of Science (Honours) in Production Engineering and Production Managementfrom the University of Nottingham, United Kingdom. After joining the government sector upon graduation, he venturedinto the private sector in 1989 and was involved in mechanical systems. He obtained a Lead Assessor’s Certificate inQuality and later became a Quality adviser. In 1992, he joined Technological Acquisition Profiles Sdn Bhd, a firm ofquality systems consultants, efficiency engineers, safety and health advises works as well as environmental auditors.This organisation is a member of the Asian Centre for Organisational Development, Tokyo, an international networkfor efficiency engineering.He served in the Council of Institution of Engineers and its Executive Committee and was Honorary Secretary ofTechnical Association of Malaysia, Executive Committee Member of the Confederation of Scientific and TechnologicalOrganisation of Malaysia and SIRIM Committee on Environmental Performance Evaluation.On the international front, he is Senior Consultant to the Centre for Organisational Research, Brussels, PermanentRepresentative in South East Asia for the World Association of Small and Medium Enterprises, a Category II organisationwithin the United Nations systems. He was a representative of the New York College of Advanced Studies for Malaysia,Singapore, Brunei and Indonesia.He is also a Director of several other private limited companies.He has no family relationship with any other director or major shareholder of KNM and has no conflict of interest withKNM.Note:None of the Directors has been convicted for offences within the past 10 years other than traffic offences.2003 ANNUAL REPORT11

KNM GROUP BERHAD (521348-H)EXECUTIVE CHAIRMAN’S STATEMENTExecutive ChairmanYBhg. Dato’ Abdul Rani bin Mohd RazalliOn behalf of the Board of Directors, it givesme great pleasure to present the AnnualReport together with the Audited FinancialStatements of the Company and the Groupfor the financial year ended 31 December2003.Dear Valued ShareholdersEVENT HIGHLIGHTS IN 20032003 was in many respects a landmark year for the Company, one of which was its successful listing on the SecondBoard of the Bursa Malaysia Securities Berhad on 11 August. The strong fundamentals that have held the Group insuch good stead over the past years, coupled with strong public confidence in the oil and gas sector resulted in animpressive debut price of RM3.02, a 104% premium over our initial offer price of RM1.48.The Company’s listed status was achieved after 13 years of hard work, sacrifices and focused strategic management.The year also saw the commencement of operations of our fourth and largest fabrication shop in Changshu, China.The addition of 11,500 metric tonne per annum in manufacturing capacity substantially increased the Group’s totalcapacity from its current 4 fabrication shops to 28,500 metric tonnes per annum.In addition, on 31 October 2003, KNM Process Systems Sdn Bhd, a wholly-owned subsidiary of the Company,entered into an exclusive Joint Venture Agreement with C Engineering & Integrated (CEIS) LTD (“CEIS”), a whollyownedsubsidiary of Clough Engineering Ltd of Australia to form a joint venture alliance to provide integrated maintenanceand turnaround management services to the oil, gas and petrochemical industries in Malaysia and Brunei.I am pleased to report that the Group’s international reputation has flourished to an extent that we received orders froma long-standing international client for our Changshu fabrication shop even before the facility was commissioned.2003 also saw substantial growth and unprecedented interest in the oil, gas and petrochemical industries. Theperformance of the share prices of listed companies within or related to the oil and gas sector in the second half of2003 arguably resulted in the oil and gas sector emerging as Bursa Malaysia Securities Berhad’s new market leaderfor that period. Looking ahead, we expect the outlook for international and domestic oil, gas and petrochemicalindustries to remain positive, especially China and the Middle East, areas in which we have and are expected tocontinue to procure orders for our products and services.I wish to assure our valued shareholders that we are continuously exploring ways and means to further expand theGroup’s operations and enhance the value of theGroup.In 2003, the value of the Group’s internationaloperations outstripped its domestic projects for thefirst time in the Group’s history. With projects inevery continent, we are and intend to remain atruly global company.122003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)EXECUTIVE CHAIRMAN’S STATEMENTFINANCIAL HIGHLIGHTSThe Group achieved a post-acquisition turnoverof RM64.6 million for the financial year ended31 December 2003. No comparative figuresare available as the Group’s financial statementsare drawn up for the first time. The Group hasbeen in operation for only 8 months as at 31December 2003. Pre-tax post-acquisition profitis RM29.1 million while net post acquisitionprofit after tax is RM25.6 million.This performance was achieved on the back of more jobs being secured and recognised in the period under reviewand overall improvement in overhead costs control.DIVIDENDThe Board of Directors has recommended a first and final dividend of 5 sen tax exempt for the financial year ended 31December 2003 for approval of the shareholders at the Annual General Meeting.FUTURE PROSPECTS2004 is a year in which the world economy is expected to perform fairly strongly, barring unforeseen circumstancesthat may disrupt the anticipated cyclical recovery. Malaysia’s economy, which has enjoyed sustained growth duringsome difficult times, is also expected to experience accelerated growth of 5.5% to 6% as projected by our Government.Foreign direct investments are also expected to feature strongly in Malaysia in 2004, especially in the oil and gassector with the discovery of new oil fields offshore of Sabah and Terengganu and the proposed development ofmarginal oil fields.In line with these positive trends, we are implementing strategic business initiatives in expanding our business and tocontinuously improve our global market share for process equipment and storage facilities for the oil, gas andpetrochemical industries.CORPORATE GOVERNANCEAt KNM, we place great emphasis and recognition to ensure that our Group adheres to the highest standards ofcorporate governance and transparency in terms of corporate accountability to our shareholders. In achieving thisend, our Board of Directors will subject our corporate principles and practices to continuous review so that conscientiousaccountability for the Group’s effectiveness, operational efficiency and competitiveness will be sustained to enhancelong term shareholder value.APPRECIATIONI wish to pay tribute to all our employees who have rose and responded to the challenges faced during the year. Theirhard work and dedication in building the Group to what it is today is deeply appreciated.I also wish to thank our shareholders, business associates and clients for the continued confidence, support and trustthat they have placed in us. We will continue to strive towards the Group’s vision to become a top 10 manufacturer ofprocess equipment in the world.Lastly, my thanks also go to my colleagues onthe Board of Directors for their support andinvaluable guidance.YBHG. DATO’ ABDUL RANIBIN MOHD RAZALLIExecutive Chairman2003 ANNUAL REPORT13

KNM GROUP BERHAD (521348-H)AUDIT COMMITTEE REPORTMEMBERSHIPThe Audit Committee comprises the following members:Chairman - YBhg. Dato’ Ab. Halim bin Mohyiddin(Independent Non-Executive Director)Members - Lim Yu Tey(Senior Independent Non-Executive Director)Ir. Lee Swee Eng(Executive Director)TERMS OF REFERENCE1. Terms of MembershipThe Committee shall be appointed by the Board amongst their number and shall comprise not less than 3members, a majority of whom shall not be:1. Executive Directors of the Company or any related corporations;2. a spouse, parent, brother, sister, son, or adopted son or daughter or adopted daughter of an ExecutiveDirector of the Company or of any related corporations; or3. any person having a relationship which in the opinion of the Board, would interfere with the exercise ofindependent judgment in carrying out the functions of an Audit Committee.In addition, at least 1 of the members of the Committee must have the qualifications set out below:1. a member of the Malaysian Institute of Accountants (MIA), or if he is not a member of the MIA, at least therelevant working experience as set out in this Article 3; or2. passed the examinations specified in Part 1 of the 1 st Schedule in the Accountants Act, 1967, or a memberof one of the associations of accountants specified in Part II of the 1 st Schedule of the Accountants Act,1967; or3. a bachelor’s degree or master’s degree or doctorate in accounting or finance and at least 3 years’ postqualificationexperience in accounting or finance; or4. at least 7 years’ experience being a chief financial officer of a corporation or having the functions ofbeing primarily responsible for the management of the financial affairs of a corporation; or5. such other qualifications as may be prescribed by the Bursa Malaysia Securities Berhad or other regulatoryauthorities from time to time.The members of the Committee shall elect a Chairman from amongst their number who is not an ExecutiveDirector or employee of the Company or any related corporation.If a member of an Committee ceases to be a member which results in the number of members is reduced below3, the Board shall within 3 months of that event appoint such number of new members as may be required tomake up the minimum number.No alternate director may be appointed as a member of the Committee. The term of office and performance ofthe Committee and each member shall be reviewed by the Board at least once every 3 years.2. ObjectivesThe primary objectives of the Committee are to:1. provide assistance to the Board in fulfilling the Board’s fiduciary responsibilities on financial, accounting,management controls, financial reporting and business ethics practices of the Company, and to ensurethat such practices conform to the highest possible standards of corporate governance; and2. provide greater emphasis on the audit functions by serving as the focal point for communication betweennon-Committee Directors, the external auditors, internal auditors and the management in all matters relatingto financial accounting, reporting and controls and providing a forum for discussion that is independent ofthe management. It is the Board’s principal agent in ensuring the independence of the Company’s externalauditors, the objectivity of the Company’s internal auditors, the integrity of management and managementpolicies and the adequacy of disclosures to shareholders.142003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)AUDIT COMMITTEE REPORT3. AuthorityThe Committee is authorised by the Board to investigate any activity within its terms of reference and shall have:1. full and unrestricted access to any information pertaining to the Company and its subsidiary companies;2. direct communication channels with both the external auditors and internal auditors;3. full access to any employee or member of the management; and4. the resources which are required to perform its duties.The Committee is also authorised by the Board to obtain outside legal or other independent professional adviceit considers necessary and reasonable for the performance of its duties.4. ResponsibilitiesThe Committee is authorised by the Board to:1. investigate any matter within the scope of its terms of reference;2. have full and unrestricted access to any information in the Company;3. obtain independent professional advice, or other advice, wherever deemed necessary; and4. make recommendations for improvements in operating performance and management control arisingfrom internal and external audit recommendations.5. FunctionsIn fulfilling its primary objectives, the Committee shall undertake the following functions:5.1 In relation to external audit functions:5.1.1 to discuss with the external auditors, where necessary, the nature and scope of audit and the auditplan, and to ensure co-ordination of audit where more than one audit firm is involved;5.1.2 to review with the external auditors:5.1.2.1 audit reports prepared by the external auditors, the management letter and management’sresponse.5.1.3 to discuss any issues arising from the interim and/or final audit and any matters which the externalauditors may highlight, in the absence of management, where necessary;5.1.4 the resignation or dismissal of the external auditors of the Company;5.1.5 whether there is reason (supported by grounds) to believe that the Company’s external auditor is notsuitable for re-appointment; and5.1.6 recommend the nomination of a person(s) as external auditors.5.2 In relation to internal audit functions:5.2.1 to review the adequacy of the scope, functions and resources of the internal audit department andthe necessary authority to carry out its functions;5.2.2 to review and consider the scope and results of the internal audit plans, programs and processes orinvestigations undertaken;5.2.3 to consider any significant audit findings reported by the internal audit department and management’sresponses thereto, and to ensure appropriate corrective or preventive actions are taken on suchfindings; and5.2.4 to report regularly to the Board its activities, significant results and findings.5.3 In relation to corporate governance requirements:5.3.1 review the quarterly results and year-end financial statements prior to the approval of the Board,focusing particularly on:5.3.1.1 changes to or implementation of major accounting policies and practices;5.3.1.2 significant adjustments and unusual events arising from the audit; and5.3.1.3 compliance with accounting standards and other legal requirements.2003 ANNUAL REPORT15

KNM GROUP BERHAD (521348-H)AUDIT COMMITTEE REPORT5.3.2 review the recurrent related party transactions of a revenue or trading nature entered into by theCompany, to prescribe guidelines and review procedures in respect of such transactions and toascertain that such transactions are in compliance with the prescribed guidelines and reviewprocedures;5.3.3 review any related party transaction and conflict of interest situation that may arise within theCompany, including any transactions, procedures or course of conduct affecting the Company’smanagement;5.3.4 prepare the Audit Committee Report in accordance with the Listing Requirements and/or PracticeNotes of the Bursa Malaysia Securities Berhad and the Malaysian Code on Corporate Governancefor publication in the Company’s Annual Report.5.3.5 To report promptly to the Bursa Malaysia Securities Berhad any matter reported by the Committee tothe Board which has not been satisfactorily resolved and may result in a breach of the ListingRequirements and/or Practice Notes of the Bursa Malaysia Securities Berhad.5.4 Such other responsibilities, functions or assignments assigned by the Board.6. MeetingsIt is the commitment of the Board to ensure that the Committee meets at least 4 times a year, including additionalmeetings as the Chairman decides in order to fulfill its duties. The Chairman shall also convene a meeting of theCommittee if requested to do so by any Member, the management or the internal or external auditors to considerany matter within the scope of responsibilities of the Committee.The Head of Finance, the Head of Internal Audit and representatives of the external auditor are invited to attendmeetings of the Committee. The Committee may invite other Directors and employees to attend any of itsmeetings to assist in resolving and clarifying matters raised.7. Secretary to Audit Committee and MinutesThe Company Secretary shall be the secretary of the Committee and the minutes shall be circulated to allmembers of the Board as a reporting procedure.8. Activities during the YearDuring the financial year under review, the Committee:1. reviewed with the external auditor the results of the audit, audit reports and recommendations;2. reviewed and adopted the annual internal audit plan for 2004, including its scope and areas of audit;3. reviewed and deliberated on activities of audits conducted by the Internal Audit Department for the yearunder review;4. reviewed financial statements including quarterly financial announcements to the Bursa Malaysia SecuritiesBerhad and recommended the same for approval by the Board, upon being satisfied that, inter alia, thefinancial reporting and disclosure requirements of the relevant authorities had been complied with, includingdeliberation of any significant issues resulting from the audit of the financial statements by the externalauditors;5. reviewed significant accounting policies that were affected by the introduction of new Malaysian AccountingStandards;6. reviewed with the external auditors on audit strategy and scope for the statutory audit of the Company’saccounts for the financial year ended 31 December 20039. Details of AttendanceThe Committee had 2 meetings during the financial year under review. Details of each Committee member’sattendance are given below:MembershipNo. of Meetings AttendedYBhg. Dato’ Ab. Halim bin Mohyiddin 2Lim Yu Tey 2Ir. Lee Swee Eng 2162003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)STATEMENT OF INTERNAL CONTROLThe Board of Directors is committed to maintaining a sound system of internal control in the Groupand is pleased to provide the following statement of internal control that outlines the nature andscope of internal control of the Group during the year pursuant to Paragraph 15.27 (b) of theListing Requirements of the Bursa Malaysia Securities Berhad.INTERNAL CONTROL AND RISK MANAGEMENTThe Board is ultimately responsible for the Group’s system of internal controls and reviewing its effectiveness. Such asystem is designed to manage and reduce, rather than eliminate, the risk of failure to achieve business objectives andcan provide only a reasonable and not an absolute assurance against risk. The system of internal controls covers riskmanagement, financial, operational and compliance controls. On-going reviews are and will continuously be carriedout to ensure the effectiveness, adequacy and integrity of the system of internal controls in safeguarding the Group’sassets and shareholders’ investment in the Company. The Board also believes that the Group’s system of internalcontrol and risk management practices are vital to good corporate governance.The Board, through the Audit Committee and with the assistance of the Internal Audit Department continuously reviewsthe adequacy and integrity of the Group’s system of internal controls and management information systems to strengthenthe control environment, taking into account changes in the external and internal environment of the Group to complywith applicable laws, rules, regulations, guidelines and requirements.The Company initiated the development of a risk management framework internally in August 2003 and thereafterengaged a consultancy firm in March 2004 to put in place a structured risk management framework to reinforce thetone of risk awareness and control consciousness.The creation of a structured risk management framework is to identify the key risks facing the Group, the potentialimpact and likelihood of those risks occurring, the control effectiveness and the action plans being taken to managethose risks to desired levels.The key elements of the Group’s system of internal controls are set out below:• An organisational structure specifying lines of responsibility and delegation of authority.• Regular management meetings are conducted for performance review at certain operations level.• The Group Quality Assurance (QA) department conducts routine internal quality audits and ongoing monitoringto ensure operational processes are in accordance with the ISO9001 Quality Systems.• The Group Health, Safety and Environment (HSE) department carries out ongoing safety activities at all businessstages and fabrication shops.• Internal audit reviews of the systems of internal control.• The Audit Committee and Board review the operational and financial performance of the Group at quarterlyAudit Committee and Board meetings.The system of internal controls will continue to be reviewed, added to or updated in line with the changes in operatingenvironment.INTERNAL AUDIT FUNCTIONThe Group has an Internal Audit Department which is independent of the activities or operations of the subsidiaries anddepartments. The duties of the Internal Audit Department are to provide reasonable assurance in the effective executionof responsibilities of Audit Committee members by providing verifications, examinations and evaluations of the Group’ssystem of internal controls.The Internal Audit Department reports, from August 2003, directly to the Audit Committee on a quarterly basis,highlighting major weaknesses in control procedures of all auditable areas as set out in the Internal Audit Plan. Whereappropriate, relevant corrective and / or preventive actions will also be recommended for implementation in order tofurther strengthen the existing system of internal controls of the Company.ASSOCIATED COMPANIESThe Group’s system of internal controls incorporates its associated companies.WEAKNESSES IN INTERNAL CONTROLS THAT RESULT IN MATERIAL LOSSESThere were no material losses or contingencies requiring disclosure in the annual report under review as a result fromweaknesses in internal control.2003 ANNUAL REPORT17

KNM GROUP BERHAD (521348-H)CORPORATE GOVERNANCE STATEMENTThe Board is committed to ensure that the highest standards of corporate governance is practicedthroughout the Group to protect and enhance profitability and corporate accountability to realiseshareholder value as well as the interest of its other stakeholders.Following the above, the Board is pleased to report to shareholders the manner which the Company has in its opinionapplied the Principles of Corporate Governance and the extent of the Company’s compliance with the Best PracticesCode as set out in Part 1 and Part 2 respectively of the Malaysian Code on Corporate Governance (the Code) pursuantto Paragraph 15.26 of the Listing Requirements of the Bursa Malaysia Securities Berhad (the Listing Requirements).BEST PRACTICESSave for the exceptions set out below, the Company is, in the opinion of the Board, in substantial compliance upon andafter the quotation and listing of its shares on the Second Board of the Bursa Malaysia Securities Berhad on 11 August2003, with the Principles and Best Practices of the Code:The Board has considered the disclosure of details of the remuneration of each Director following Best PracticesProvision B.III against the compliance of a related disclosure required under the Listing Requirements, and is of the viewthat the transparency and accountability aspects of corporate governance as applicable to the Directors’ remunerationare adequately served by the “band disclosure” mode.CORPORATE GOVERNANCEThe Board has overall responsibility for corporate governance, strategic direction and overseeing the investments ofthe Company.Structure of the BoardThe Company is led and managed by an experienced Board, comprising members with a wide range of business,financial and technical backgrounds required for the management of the Group. All Board members participate fullyin decisions on key issues involving the Group and bring an independent judgment to bear on issues on strategy,performance, resources and standards of conduct.The wide spectrum of skills and experience gives added strength to the leadership, enabling the Company to rest firmlyin the charge of accountable and competent Board.The roles of the Chairman and the Managing Director are separate and each has a clearly accepted division ofresponsibilities to ensure a balance of power and authority.The Board comprises 9 members, 3 of which are Independent Non-Executive Directors, which complies with the onethirdrequirement for independent Directors to be on the Board. The profiles of each Director are presented on pages9 to 11 of this Annual Report. From the profiles, the Board has within its professionals drawn from varied backgrounds,bringing in-depth and diversity in experience and perspectives to the Group’s business operations.The role of Independent Non-Executive Directors is particularly significant as they provide unbiased and independentviews, advice and judgment to take into account interests not only of the Group but also of shareholders, employees,customers and other communities in which the Group conducts its business. The Independent Non-Executive Directorsensure that the strategies proposed by the management are fully deliberated and examined, taking into account thelong-term interests of all stakeholders, and contribute to the formulation of policy and decision-making through theirexpertise and experience.The concept of independence adopted by the Board is consistent with the definition of an independent director as setout in Paragraph 1.01 of the Listing Requirements.182003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)CORPORATE GOVERNANCE STATEMENTBOARD MEETINGSThere has been 2 meetings held in the current financial year. 1 of the 2 meetings was held immediately prior to thelisting of the Company on 11 August 2003.It is the commitment of the Board to:1. meet at least 4 times a year, including additional meetings as and when required;2. supply the Board and its committees with adequate information to enable them to discharge their responsibilities;and3. carry out a full appraisal of new investments and business proposals, reviews the management or performanceof the business of subsidiaries or existing investments and any other strategic issues that affect or may affect theGroup’s business.In the intervals between Board meetings, for matters requiring urgent Board decisions, Board approvals are soughtthrough circular resolutions which contain sufficient information required to make an informed decision.Where a potential conflict of interest arise in the Group’s investment, project or any transactions involving directors’interest, such director is required to declare his or her interest and abstain from further discussion and the decisionmaking process.The following is a record of attendance of the Board members:DirectorsNumber of Meetings AttendedYBhg. Dato’ Abdul Rani bin Mohd Razalli 2Ir Lee Swee Eng 2Lee Hui Leong 2Sofiyan bin Yahya 2Gan Siew Liat 2Chew Fook Sin 2Lim Yu Tey 2YBhg. Dato’ Ab. Halim bin Mohyiddin 2Mohamed Tajudin bin Mohd Alias 2SUPPLY OF INFORMATIONAll Directors are briefed by the use of papers to allow proper consideration of the matters on the agenda. The Boardpapers include the agenda and reports relevant to the issues of the meeting covering the areas of strategic, financialand operational matters. The Board may request for additional information to regular reporting as it requires. Themeeting agenda is designed to meet the Board’s objectives and all Directors have complete access to all relevantinformation. The Managing Director keeps the Board informed on a timely basis of all material matters affecting theGroup’s performance and major developments within the Group.The Board has delegated certain responsibilities to the Audit Committee, which operates within clearly defined termsof reference. The Chairman of this Committee reports the outcome of Audit Committee meetings to the Board.The Board is fully aware and acts on its specifically reserved matters for decision to ensure that the direction andcontrol of the Company is firmly in its hands. Such matters, outlined in the Company’s limits of authority, clearlyestablish the authorities of the Management and the Board.It is the intention of the Board that the Board will, for each financial year and in advance, approve the Company’splans and budgets including cash flow forecasts for the year and outlined projections for subsequent years, thepreparation of which is one of the key responsibilities of the Managing Director. These plans and budgets are preparedby the respective operating and support service units and reviewed by the Managing Director prior to seeking theBoard’s approval. The Board intends that both the Company’s management and the Board receive and review thebudget results on a periodic basis and that an in-depth explanation and presentation of the results and variancesagainst the budget are submitted by the Managing Director to the Board on a quarterly basis.The full Board as well as any members of the Board may in furtherance of their duties take independent professionaladvice if necessary, at the Company’s expense. All Directors have access to the advice and services of the CompanySecretaries who are responsible for ensuring that Board procedures are adhered to and that the applicable laws, rules,regulations, guidelines and requirements are complied with.2003 ANNUAL REPORT19

KNM GROUP BERHAD (521348-H)CORPORATE GOVERNANCE STATEMENTRE-ELECTION OF DIRECTORSIn accordance with the Articles of Association of the Company, all Directors are required to seek re-appointment by theshareholders at the Second Annual General Meeting (AGM) after their appointment, and thereafter are subject toretirement by rotation. The Company’s Articles provide for all Directors to retire from office at least once every 3 years,but shall be eligible for re-election. Directors of the Company who are over 70 years old are required to submitthemselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, 1965.Particulars of the Directors of the Company standing for re-election at the Second AGM of the Company to be held on17 June 2004 are contained in the Notice of AGM.DIRECTORS’ TRAININGDuring the financial year, all Directors have attended and successfully completed the Mandatory Accreditation Programmeconducted by the Research Institute of Investment Analysis Malaysia (RIIAM), an affiliate company of the Bursa MalaysiaSecurities Berhad. It is the commitment of the Board to ensure that Directors receive further training from time to time,particularly on relevant new laws and regulations and changing commercial risks.DIRECTORS’ REMUNERATIONThe objective of the Group’s remuneration policy is to attract and retain the Directors required to lead and control theGroup effectively. The remuneration of each Director generally reflects the level of responsibility and commitment thatgoes with Board membership. In the case of Executive Directors, the remuneration policy is structured to link rewardsto the individual and Group performance. For Non-Executive Directors, the level of remuneration is reflective of theirexperience and level of responsibilities.The Remuneration Committee recommends to the Board the remuneration structure of the Executive Directors’ remunerationand the remuneration package for each Executive Director. The Committee also reviews and recommends for theBoard’s approval all other Directors’ fees/attendance fees. In addition, the Company reimburses reasonable expensesincurred by the Directors in the course of their duties as Directors. Non-Executive Directors are paid attendance fees foreach Board or Board Committee meetings they attend.The aggregate remuneration of Directors is categorised as follows:Directors’ Benefits OtherFees Salaries Bonuses in kind Emoluments Total(RM) (RM) (RM) (RM) (RM) (RM)Executive 108,000 1,012,872 202,190 112,032 7,000 1,442,094Non-Executive 54,000 – – – 6,000 60,000The number of directors of the Company whose total remuneration fall within the following band are as follows:Number of DirectorsRange of Remuneration Executive Non-ExecutiveUp to RM50,000.00 – 3RM200,000.00 to RM250,000.00 6 –RM250,001.00 to RM300,000.00 – –202003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)CORPORATE GOVERNANCE STATEMENTBOARD COMMITTEESThe Board has established and delegated certain responsibilities to Board Committees, which operate within clearlydefined terms of reference. These committees are:Audit CommitteePlease refer to the Audit Committee Report on pages 14 to 16 of this Annual Report.Nomination CommitteeIn compliance with the Listing Requirements, a Nomination Committee was set up by the Board on 5 August 2003. TheCommittee comprises 3 Independent Non-Executive Directors, who are:1. Lim Yu Tey (Senior Independent Non-Executive Director)2. YBhg. Dato’ Ab. Halim bin Mohyiddin (Independent Non-Executive Director)3. Mohamed Tajudin bin Mohd Alias (Independent Non-Executive Director)The Chairman of the Nomination Committee has not been elected from amongst its members as the Committee has notheld its first meeting.It is the commitment of the Board to ensure that the Committee meets once a year or when required to discharge itsprimary functions, which are to:(i)(ii)assess the suitability of individuals proposed by the Board by taking into account the individual’s skill, expertiseand/or experience as well as his other commitments, resources, time and effectiveness of the Board as a wholeon an ongoing basis; andin the event of any vacancy affecting the Board, review:(a)(b)the suitability of candidates proposed by the Board to fill vacancies on the Board arising from any resignation,dismissal or such other like causes; andrecommend to the Board the re-appointment of Executive Directors of the Company who are due forretirement by rotation.Remuneration CommitteeIn compliance with the Listing Requirements, a Remuneration Committee was set up by the Board on 5 August 2003.The Committee is made up of 2 Independent Non-Executive Directors and 1 Executive Director. The Committee meetsonce a year and when required to consider all aspects of the Executive Directors’ performance, employment, remunerationand incentives. Nevertheless, the determination of remuneration packages for Executive and Non-Executive Directorsis a matter of the Board as a whole and individuals are required to abstain from discussing their own remuneration.The primary functions of the Committee are to:(i)(ii)(iii)recommend the remuneration structure for Executive Directors, taking into consideration their individual performanceagainst their targets and responsibilities;recommend any benefits, emoluments, pension or incentive scheme entitlement, other bonuses, fees and expensesof executive directors and any compensation payable on the termination of such employment or service by theCompany and to review changes in policy, where necessary; andWhere required, review with the Executive Directors, their goals and objectives in assessing performance.The members are:1. Mohamed Tajudin bin Mohd Alias (Independent Non-Executive Director) - Chairman2. Lim Yu Tey (Senior Independent Non-Executive Director)3. Ir. Lee Swee Eng (Executive Director)2003 ANNUAL REPORT21

KNM GROUP BERHAD (521348-H)CORPORATE GOVERNANCE STATEMENTRELATIONS WITH SHAREHOLDERS AND INVESTORSThe Board recognises the importance of an effective communication channel between the Board, shareholders and thegeneral public. The annual reports, quarterly results, press releases and any announcements on material corporateevents or exercises are the primary modes of disseminating information on the Group’s business activities and financialperformance.The Company’s Annual General Meeting is an important mechanism in shareholder communication and provides anopportunity to investors to put questions to Directors. It is the commitment of the Board to present the progress andperformance of the Company at annual general meetings and provide shareholders the opportunity to seek information,explanations and clarifications on all matters tabled at Annual General Meetings prior to seeking approval by show ofhands from members and proxies on the passing of each resolution.It is the commitment of the Board to ensure that every item of special business included in the notice of Annual orExtraordinary General Meeting is accompanied by a full explanation of the effects of the proposed resolution.The external auditors are present to provide their professional and independent explanations and clarifications onissues and concerns raised by shareholders. The status of all resolutions proposed at Annual General Meetings aresubmitted to the Bursa Malaysia Securities Berhad at the end of the meeting day.In addition:1. it is the commitment of the Board to ensure that a press conference will be held immediately after an AnnualGeneral Meeting whereat the Directors advise members of the media of the resolutions passed, answer questionsand explain and clarify any issue on Group operations fielded by members of the media. However, anyinformation that may be regarded as material, undisclosed or price-sensitive will not be disclosed to any partyand such information would only be released after the Company has complied with the Corporate DisclosurePolicy set out in the Listing Requirements; and2. institutional investors and analysts are welcome and enjoy equal access and opportunity to meet members of theCompany’s management to seek and obtain information on the Group and its future directions, prospects, plansand outlook, subject always to the Listing Requirements.ACCOUNTABILITY AND AUDITFinancial ReportingStatement of Directors’ Responsibility in respect of Audited Financial Statements pursuant toParagraph 15.27(a) of the Listing RequirementsThe Board aims to provide shareholders with a balanced and understandable assessment of the Group’s financialposition and prospects, which gives an accurate view of the state of affairs of the Group as at the end of the financialyear.The Board is assisted by the Audit Committee in ensuring the reliability and integrity of the accounting and financialreporting systems of the Group. In addition, the Audit Committee reviews the annual financial statements and quarterlyfinancial reports before they are submitted to the Board for approval.Following the above, the Directors are satisfied that in preparing the financial statements of the Group for the yearended 31 December 2003, the Group has used the appropriate accounting policies and applied them consistentlyand prudently. The Directors also consider that all relevant accounting standards have been complied with in thepreparation of these financial statements.Internal ControlsThe Board recognises its responsibility for the Group’s internal control systems and reviewing its effectiveness. A soundsystem of internal controls is designed to manage and reduce the risk of failure to achieve business objectives andprovides reasonable assurance against material misstatement or loss.The Group’s Statement of Internal Control is set out in pages 17 of this Annual Report.Relationship with the AuditorsThe Audit Committee provides an independent channel of communication for the external and internal auditors. TheBoard ensures that an objective and professional relationship is maintained with the external auditors through the AuditCommittee which keeps under review the nature, scope and results of the external audit, its cost effectiveness and theindependence and objectivity of the auditors. The Audit Committee also reviews the scope of work and extent ofactivity of the internal audit.222003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)CORPORATE GOVERNANCE STATEMENTADDITIONAL COMPLIANCE INFORMATIONThe following additional information is provided in compliance with the Listing Requirements:1. Utilisation of proceedsAs at 31 December 2003, the proceeds raised by the Company from its floatation exercise have been utilised inthe following manner:TotalProceeds Utilised Unutilised(RM’000) (RM’000) (RM’000)Repayment of term loans 11,077 (10,874) 203Capital expenditure 8,190 (4,208) 3,982Listing expenses 1,500 (1,864) (364)Working capital 298 (298) –Total 21,065 (17,244) 3,8212. Share buybackThere was no share buyback by the Company during the financial year under review.3 Options, warrants or convertible securitiesNo options, warrants or convertible securities were issued by the Company during the financial year underreview.4. Imposition of sanctions and/or penaltiesThere was no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or managementby regulatory authorities.5. Non-audit feesDuring the financial year ended 31 December 2003, non-audit fees amounting to RM162,292.50 were paid toMessrs KPMG by the Company and subsidiaries for services rendered.6. Profit estimates, forecasts or projectionsThere was no profit estimates, forecasts, projections and/or unaudited results made public which have a deviationof 10% or more from the unaudited results.7. Profit guaranteesNo profit guarantees was given by the Company for the financial year under review.8. Material contractsNo material contracts were entered into by the Company and its subsidiaries involving Directors and substantialshareholders’ interests.9. Contracts related to loansThere was no contracts relating to a loan by the Company and its subsidiaries in respect of the preceding item.10. Revaluation of landed propertiesThe Company’s revaluation policy is disclosed in Note (f) to the financial statements and the Directors’ Report.2003 ANNUAL REPORT23

KNM GROUP BERHAD (521348-H)FINANCIAL STATEMENTS25 Directors’ Report30 Statement by Directors30 Statutory Declaration31 Report of the Auditors32 Balance Sheets33 Income Statements34 Statements of Changes in Equity35 Cash Flow Statements37 Notes to the Financial Statements242003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)DIRECTORS’ REPORTThe Directors have pleasure in submitting their report and the audited financial statements of the Group and of theCompany for the year ended 31 December 2003.PRINCIPAL ACTIVITIESThe Company is principally engaged in investment holding, whilst the principal activities of the subsidiaries are asstated in Note 26 to the financial statements.RESULTSGroupRM’000CompanyRM’000Net profit for the year 25,575 2,791The Group’s net profit for the year represents the results of the Group following the completion of the acquisition ofsubsidiaries on 2 May 2003.RESERVES AND PROVISIONSThere were no material transfers to or from reserves and provisions during the year.DIVIDENDNo dividend was paid during the year.The Directors recommend a final dividend of 5% tax exempt totaling RM2,200,000 in respect of the year ended 31December 2003.DIRECTORS OF THE COMPANYDirectors who served since the date of the last report are:Dato’ Abdul Rani bin Mohd. Razalli (appointed on 14.6.2003)Lee Swee Eng (appointed on 14.6.2003)Lee Hui Leong (appointed on 14.6.2003)Sofiyan bin Yahya (appointed on 14.6.2003)Gan Siew Liat (appointed on 14.6.2003)Chew Fook Sin (appointed on 14.6.2003)Dato’ Ab. Halim bin Mohyiddin (appointed on 14.6.2003)Lim Yu Tey (appointed on 14.6.2003)Mohamed Tajudin bin Mohamed Alias (appointed on 14.6.2003)Chen Fui Chin (resigned on 14.6.2003)Pang Siew Yin (resigned on 14.6.2003)2003 ANNUAL REPORT25

KNM GROUP BERHAD (521348-H)DIRECTORS’ REPORTThe holdings and deemed holdings in the ordinary shares of the Company and of its related corporations (other thanwholly-owned subsidiaries) of those who were Directors at year end as recorded in the Register of Directors’ Shareholdingsare as follows:Shareholdings in whichDirector has direct interestNumber of Ordinary SharesAt1.1.2003/Date ofAtAppointment Bought Sold 31.12.2003Interest of Dato’ Abdul Ranibin Mohd. Razalli in:Perkasa Sistem Sdn. Bhd. 74,000 – – 74,000IM Bina Sdn. Bhd. 180,001 – – 180,001Interest of Lee Swee Eng in:Perkasa Sistem Sdn. Bhd. 15,000 – – 15,000Interest of Sofiyan bin Yahya in:Perkasa Sistem Sdn. Bhd. 11,000 – – 11,000Shareholdings in whichDirector has indirect interestInterest of Dato’ Abdul Ranibin Mohd. Razalli in:The Company – 32,920,000 (6,004,000) 26,916,000Inter Merger Sdn. Bhd. 3,000,000 – – 3,000,000IM Bina Sdn. Bhd. 799,999 – – 799,999Interest of Sofiyan bin Yahya in:The Company – 32,920,000 (6,004,000) 26,916,000Inter Merger Sdn. Bhd. 3,000,000 – – 3,000,000IM Bina Sdn. Bhd. 799,999 – – 799,999Interest of Lee Swee Eng in:The Company – 32,920,000 (6,004,000) 26,916,000Inter Merger Sdn. Bhd. 3,000,000 – – 3,000,000IM Bina Sdn. Bhd. 799,999 – – 799,999Interest of Lee Hui Leong in:The Company – 4,247,091 (1,000,000) 3,247,091Interest of Gan Siew Liat in:The Company – 32,920,000 (6,004,000) 26,916,000Inter Merger Sdn. Bhd. 3,000,000 – – 3,000,000IM Bina Sdn. Bhd. 799,999 – – 799,999Interest of Chew Fook Sin in:The Company – 32,920,000 (6,004,000) 26,916,000Inter Merger Sdn. Bhd. 3,000,000 – – 3,000,000IM Bina Sdn. Bhd. 799,999 – – 799,999262003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)DIRECTORS’ REPORTBy virtue of their interests in the Company, Dato’ Abdul Rani bin Mohd. Razalli, Lee Swee Eng, Sofiyan bin Yahya, GanSiew Liat and Chew Fook Sin are also deemed to have interests in the subsidiaries during the financial year to theextent that the Company has an interest.None of the other Directors holding office at 31 December 2003 had any interest in the ordinary shares of theCompany and of its related corporations during the financial year.DIRECTORS’ BENEFITSSince the end of the previous financial year, no Director of the Company has received nor become entitled to receiveany benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable bycertain Directors as shown in the financial statements or the fixed salaries of full time employees of the Company or ofrelated corporations) by reason of a contract made by the Company or a related corporation with the Director or witha firm of which the Director is a member, or with a corporation in which the Director has a substantial financial interest,other than as disclosed in Note 21 to the financial statements.There were no arrangements during and at the end of the financial year which had the object of enabling Directors ofthe Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any otherbody corporate.ISSUE OF SHARES AND DEBENTURESDuring the financial year, the Company:(i)(ii)(iii)(iv)(v)increased its authorised share capital from RM100,000 comprising 100,000 ordinary shares of RM1.00 eachto RM50,000,000 comprising 50,000,000 ordinary shares of RM1.00 each by the creation of an additional49,900,000 ordinary shares of RM1.00 each.issued 28,253,182 new ordinary shares of RM1.00 each at an issue price of RM1.21 per share for the acquisitionof the entire issued and paid-up share capital of KNM Process Systems Sdn. Bhd. comprising 5,000,000ordinary shares of RM1.00 each for a purchase consideration of RM34,186,350.issued 4,666,816 new ordinary shares of RM1.00 each at an issue price of RM1.00 per share for cash pursuantto the rights issue to shareholders who were registered with the Company on 18 June 2003, in proportion ofapproximately 165 new ordinary shares for every 1,000 ordinary shares then held.issued 4,400,000 new ordinary shares of RM1.00 each at an issue price of RM1.48 per share for cash pursuantto a private placement.issued 6,680,000 new ordinary shares of RM1.00 each at an issue price of RM1.48 per share for cash pursuantto a public issue.There were no other changes in the issued and paid-up share capital of the Company during the financial year.OPTIONS GRANTED OVER UNISSUED SHARESNo options were granted to any person to take up unissued shares of the Company during the year.2003 ANNUAL REPORT27

KNM GROUP BERHAD (521348-H)DIRECTORS’ REPORTSIGNIFICANT EVENTS DURING THE YEARIn conjunction with, and as an integral part of the listing and quotation of the entire issued and paid-up share capitalof the Company on the Second Board of the Bursa Malaysia Securities Berhad, the Company undertook a restructuringscheme.For details, refer to Note 23 to the financial statements.SIGNIFICANT EVENTS SUBSEQUENT TO THE BALANCE SHEET DATEOn 27 February 2004, the Company proposed to undertake the following proposals:(i) Proposed Private Placement of up to 5,060,000 new ordinary shares of RM1.00 each, representing up to 10%of the issued and paid-up share capital of the Company at an issue price of RM3.50 each.(ii)(iii)(iv)Proposed Bonus Issue of up to 27,830,000 new ordinary share of RM1.00 each, on the basis of one (1) newordinary share of RM1.00 each for every two (2) existing ordinary shares of RM1.00 each.Proposed Share Split of one (1) existing ordinary shares of RM1.00 each into two (2) new ordinary shares ofRM0.50 each.Proposed Employees’ Share Option Scheme for eligible employees and Directors of the Company and itssubsidiaries (“ESOS”), not exceeding 15% of issued and paid up capital of the Company at any one time.(v) Proposed increase in the authorised share capital of the Company from RM50,000,000 comprising 50,000,000ordinary shares of RM1.00 each to RM200,000,000 comprising 400,000,000 ordinary shares of RM0.50each.OTHER STATUTORY INFORMATIONBefore the financial statements of the Group and of the Company were made out, the Directors took reasonable stepsto ascertain that:(i)(ii)all known bad debts have been written off and adequate provision made for doubtful debts, andall current assets have been stated at the lower of cost and net realisable value.At the date of this report, the Directors are not aware of any circumstances:(i)(ii)(iii)(iv)that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in theGroup and in the Company inadequate to any substantial extent, orthat would render the value attributed to the current assets in the Group and in the Company financial statementsmisleading, orwhich have arisen which render adherence to the existing method of valuation of assets or liabilities of theGroup and of the Company misleading or inappropriate, ornot otherwise dealt with in this report or the financial statements, that would render any amount stated in thefinancial statements of the Group and of the Company misleading.282003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)DIRECTORS’ REPORTAt the date of this report, there does not exist:(i)(ii)any charge on the assets of the Group or of the Company that has arisen since the end of the financial year andwhich secures the liabilities of any other person, orany contingent liability in respect of the Group or of the Company that has arisen since the end of the financialyear.No contingent liability or other liability of any company in the Group has become enforceable, or is likely to becomeenforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors,will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when theyfall due.In the opinion of the Directors, other than the acquisition of subsidiaries, the results of the operations of the Group andof the Company for the financial year ended 31 December 2003 have not been substantially affected by any item,transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in theinterval between the end of that financial year and the date of this report.AUDITORSThe auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.Signed in accordance with a resolution of the Directors:Dato’ Abdul Rani bin Mohd. RazalliLee Swee EngKuala Lumpur,Date: 23 March 20042003 ANNUAL REPORT29

KNM GROUP BERHAD (521348-H)STATEMENT BY DIRECTORSPURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965In the opinion of the Directors, the financial statements set out on pages 32 to 57 are drawn up in accordance with theprovisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to give atrue and fair view of the state of affairs of the Group and of the Company at 31 December 2003 and of the results oftheir operations and cash flows for the year ended on that date.Signed in accordance with a resolution of the Directors:Dato’ Abdul Rani bin Mohd. RazalliLee Swee EngKuala Lumpur,Date: 23 March 2004STATUTORY DECLARATIONPURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965I, Tung Kai Shek, the officer, primarily responsible for the financial management of KNM Group Berhad, dosolemnly and sincerely declare that the financial statements set out on pages 32 to 57 are, to the best of my knowledgeand belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue ofthe provisions of the Statutory Declarations Act, 1960.Subscribed and solemnly declared by the above named in Kuala Lumpur on 23 March 2004.Tung Kai ShekBefore me:302003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)REPORT OF THE AUDITORSTO THE MEMBERS OF KNM GROUP BERHAD(Company No.: 521348-H)We have audited the financial statements set out on pages 32 to 57. The preparation of the financial statements is theresponsibility of the Company’s Directors. Our responsibility is to express an opinion on the financial statements basedon our audit.We conducted our audit in accordance with approved Standards on Auditing in Malaysia. These standards requirethat we plan and perform the audit to obtain all the information and explanations which we consider necessary toprovide us with evidence to give reasonable assurance that the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements.An audit also includes an assessment of the accounting principles used and significant estimates made by the Directorsas well as evaluating the overall adequacy of the presentation of information in the financial statements. We believeour audit provides a reasonable basis for our opinion.In our opinion:(a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965and applicable approved accounting standards in Malaysia so as to give a true and fair view of:i) the state of affairs of the Group and of the Company at 31 December 2003 and the results of theiroperations and cash flows for the year ended on that date; andii)the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statementsof the Group and of the Company; and(b)the accounting and other records and the registers required by the Companies Act, 1965 to be kept by theCompany and its subsidiaries of which we have acted as auditors have been properly kept in accordance withthe provisions of the said Act.The subsidiary in respect of which we have not acted as auditors is identified in Note 26 to the financial statements andwe have considered its financial statements and the auditors’ report thereon.We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’sfinancial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidatedfinancial statements and we have received satisfactory information and explanations required by us for those purposes.The audit reports on the financial statements of the subsidiaries were not subject to any qualification and did notinclude any comment made under subsection (3) of Section 174 of the Act.KPMGFirm Number: AF 0758Chartered AccountantsChan Kam ChiewPartnerApproval Number: 2055/06/04(J)Kuala Lumpur,Date: 23 March 20042003 ANNUAL REPORT31

KNM GROUP BERHAD (521348-H)BALANCE SHEETSAT 31 DECEMBER 2003GroupCompanyNote 2003 2003 2002RM’000 RM’000 RM’000Property, plant and equipment 2 82,831 – –Investments in subsidiaries 3 – 34,686 –Amount due from subsidiaries 5 – 18,588 –Current Assets82,831 53,274 –Inventories 6 6,490 – –Trade and other receivables 7 79,397 3,001 –Cash and cash equivalents 8 4,942 43 –90,829 3,044 –Current LiabilitiesTrade and other payables 9 8,090 132 8Borrowings (secured) 10 63,514 – –Taxation 4,184 15 –75,788 147 8Net Current Assets/(Liabilities) 15,041 2,897 (8)97,872 56,171 (8)Financed /(Represented) by:Capital and ReservesShare capital 11 44,000 44,000 –Reserves 34,955 12,171 (8)Long Term and Deferred Liabilities78,955 56,171 (8)Borrowings (secured) 10 13,500 – –Deferred taxation 13 5,417 – –18,917 – –97,872 56,171 (8)The financial statements were approved and authorised for issue by the Board of Directors on 23 March 2004.The notes set out on pages 37 to 57 form an integral part of, and should be read in conjunction with, these financialstatements.322003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)INCOME STATEMENTSFOR THE PERIOD/YEAR ENDED 31 DECEMBER 2003GroupCompanyNote 2003 2003 2002RM’000 RM’000 RM’000RevenueContract revenue 64,626 – –Dividend income – 3,000 –Contract costs recognised as an expense (44,242) – –Gross Profit 20,384 3,000 –Administration expenses (9,880) (455) (3)Other operating expenses (2,871) – –Other operating income 1,887 204 –Operating Profit/(Loss) 14 9,520 2,749 (3)Financing costs 16 (1,440) – –Interest income 146 57 –Negative goodwill 20,829 – –Profit/(Loss) before Taxation 29,055 2,806 (3)Tax expense 17 (3,480) (15) –Net Profit/(Loss) for the Year 25,575 2,791 (3)Basic earnings per ordinary share (sen) 18 101.26Dividend per ordinary share - tax exempt (sen) 19 5 5 NilThe notes set out on pages 37 to 57 form an integral part of, and should be read in conjunction with, these financialstatements.2003 ANNUAL REPORT33

KNM GROUP BERHAD (521348-H)STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2003NonDistributable DistributableShare Share Retainedcapital premium profits TotalGroup RM’000 RM’000 RM’000 RM’000At 1 January 2003 – * – (8) (8)Issuance of shares 44,000 11,252 – 55,252Expenses not recognised inincome statement- Listing expenses – (1,864) – (1,864)Net profit for the year – – 25,575 25,575At 31 December 2003 44,000 9,388 25,567 78,955CompanyNote 11At 1 January 2002 – * – (5) (5)Issuance of shares – * – – –Net loss for the year – – (3) (3)At 31 December 2002/1 January 2003 – * – (8) (8)Issuance of shares 44,000 11,252 – 55,252Expenses not recognised in income statement- Listing expenses – (1,864) – (1,864)Net profit for the year – – 2,791 2,791At 31 December 2003 44,000 9,388 2,783 56,171Note 11 Note 12* issued and fully paid up share capital of RM2The notes set out on pages 37 to 57 form an integral part of, and should be read in conjunction with, these financialstatements.342003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)CASH FLOW STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003Cash Flows from OperatingActivitiesGroupCompanyNote 2003 2003 2002RM’000 RM’000 RM’000Profit/(loss) before tax 29,055 2,806 (3)Adjustments for:Negative goodwill (20,829) – –Depreciation 1,355 – –Dividend income – (3,000) –Interest expense 1,428 – –Interest income (146) (57) –Unrealised foreign exchange gain 119 – –Operating profit/(loss) before workingcapital changes 10,982 (251) (3)(Increase)/Decrease in working capital:Inventories (1,490) – –Trade and other receivables (2,554) (3,001) 3Trade and other payables (8,104) 124 –Cash used in operations (1,166) (3,128) –Income taxes paid (2,358) – –Interest paid (2,292) – –Interest received 146 57 –Net Cash Used in Operating Activities (5,670) (3,071) –Cash Flows from Investing ActivitiesAcquisition of subsidiaries,net of cash acquired 27 1,422 (500) –Increase in pledged deposit placedwith licensed bank (50) – –Dividend received – 3,000 –Advances to subsidiary companies – (18,588) –Purchase of property, plant and equipment (i) (8,492) – –Net Cash Used in Investing Activities (7,120) (16,088) –Cash Flows from Financing ActivitiesNet proceeds from bills payable (8,992) – –Repayment of hire purchase liabilities (1,624) – –Proceeds from term loan 10,329 – –Repayment of term loan (16,299) – –Interest expenses (799) – –Proceeds from issuance of shares 19,202 19,202 –Net Cash Generated from FinancingActivities 1,817 19,202 –2003 ANNUAL REPORT35

KNM GROUP BERHAD (521348-H)CASH FLOW STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003GroupCompanyNote 2003 2003 2002RM’000 RM’000 RM’000Net (Decrease)/Increase inCash and Cash Equivalents (10,973) 43 –Cash and Cash Equivalentsat Beginning of Year (ii) – – –Cash and Cash Equivalentsat End of Year (ii) (10,973) 43 –i) Purchase of property, plant and equipmentDuring the year, the Group acquired property, plant and equipment with an aggregate cost of RM9,599,000, ofwhich RM1,107,000 was acquired by means of hire purchases.ii)Cash and cash equivalentsCash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts:GroupCompany2003 2003 2002RM’000 RM’000 RM’000Cash and bank balances 2,080 43 –Deposits with licensed banks(excluding deposits pledged) 2,812 – –Bank overdrafts (15,865) – –(10,973) 43 –The notes set out on pages 37 to 57 form an integral part of, and should be read in conjunction with, these financialstatements.362003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20031. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies are adopted by the Group and the Company and are consistent with thoseadopted in previous years.(a)Basis of AccountingThe financial statements of the Group and of the Company are prepared on the historical cost basis exceptas disclosed in the notes to the financial statements and in compliance with the provisions of the CompaniesAct, 1965 and applicable approved accounting standards in Malaysia.(b)Basis of ConsolidationSubsidiaries are those enterprises controlled by the Company. Control exists when the Company has thepower, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtainbenefits from its activities. The financial statements of subsidiary companies are included in the consolidatedfinancial statements from the date that control effectively commences until the date that control effectivelyceases. Subsidiaries are consolidated using the acquisition method of accounting.A subsidiary is excluded from consolidation when either control is intended to be temporary if the subsidiaryis acquired and held exclusively with a view of its subsequent disposal in the near future and it has notpreviously been consolidated or it operates under severe long term restrictions which significantly impairits ability to transfer funds to the Company. Subsidiaries excluded on these grounds are accounted for asinvestments.Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of during theyear are included from the date of acquisition or up to the date of disposal. At the date of acquisition, thefair values of the subsidiaries’ net assets are determined and these values are reflected in the Group’sfinancial statements. The difference between the acquisition cost and the fair values of the subsidiaries’ netassets is reflected as goodwill or negative goodwill as appropriate.Intragroup transactions and balances and the resulting unrealised profits are eliminated on consolidation.Unrealised losses resulting from intragroup transactions are also eliminated unless cost cannot be recovered.(c)SubsidiariesInvestment in subsidiaries is stated at cost in the Company, less impairment loss where applicable.(d)AssociatesAssociates are those enterprises in which the Group has significant influence, but not control, over thefinancial and operating policies.The consolidated financial statements include the total recognised gains and losses of associates on anequity accounted basis from the date that significant influence effectively commences until the date thatsignificant influence effectively ceases.Unrealised profits arising on transactions between the Group and its associates which are included in thecarrying amount of the related assets and liabilities are eliminated partially to the extent of the Group’sinterests in the associates. Unrealised losses on such transactions are also eliminated partially unless costcannot be recovered.Investment in associated companies is stated at cost in the Company, less impairment loss where applicable.2003 ANNUAL REPORT37

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003(e)Goodwill or Negative GoodwillGoodwill or negative goodwill represents the excess or deficit of the cost of acquisition over the fair valuesof the net identifiable assets acquired.Goodwill or negative goodwill is immediately recognised in the income statements.(f)Property, Plant and EquipmentProperty, plant and equipment are stated at cost less accumulated depreciation and accumulated impairmentlosses where applicable.The Group’s revalues its property comprising land and buildings every 5 years and at shorter intervalswhenever the fair value of the revalued assets is expected to differ materially from their carrying value.Other property, plant and equipment and additions to the land and buildings subsequent to their revaluationare stated in the financial statements at cost.Surpluses arising from revaluation are dealt with in the revaluation reserve account. Any deficit arising isoffset against the revaluation reserve to the extent of a previous increase for the same property. In all othercases, a decrease in carrying amount is charged to the income statements.DepreciationLeasehold land is amortised in equal instalments over the period of the respective leases which range fromfifty to ninety nine years while buildings are depreciated on a straight-line basis over the shorter of 50years or the lease period. The straight-line method is used to write off the cost of the other assets over theterm of their estimated useful lives at the following principal annual rates:Plant and machinery 10% - 25%Motor vehicles 20%Furniture, fittings and equipment 10%(g)Hire PurchaseProperty, plant and equipment acquired under hire purchase agreements are capitalised at their purchasecost and depreciated on the same basis as owned assets. The corresponding obligations relating to theremaining capital payments are treated as a liability. Finance charges are charged to the income statementover the hire purchase periods on the sum of digits method.(h)InventoriesInventories comprise raw materials, tools and consumables which are stated at the lower of cost and netrealisable value. Cost is determined on a first-in-first-out basis and includes the cost of direct materials andincidental costs in bringing these inventories to their present location and condition.(i)Trade and Other ReceivablesTrade and other receivables are stated at cost less allowance for doubtful debts.(j)Amount Due from Contract CustomersAmount due from contract customers on construction contracts is stated at cost plus attributable profits lessforeseeable losses and less progress billings. Cost includes the cost of materials, subcontract fees, directexpenses and a proportion of direct overheads. Where progress billings exceed the aggregate amountdue from contract customers plus attributable profits less foreseeable losses, the net credit balance on allsuch contracts is shown in trade and other payables as amount due to contract customers.382003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003(k)Capitalisation of Borrowing CostsBorrowing costs incurred on gross amount due from contract customers are capitalised. The amount ofborrowing costs eligible for capitalisation is the actual borrowing cost incurred on borrowings madespecifically for the purpose of financing gross amount due from contract customers.Capitalisation of borrowing costs will cease when the assets are ready for their intended use.(l)Cash and Cash EquivalentsCash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquidinvestments which have an insignificant risk of changes in value. For the purpose of the cash flowstatement, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.(m)ImpairmentThe carrying amount of the Group’s assets, other than inventories (refer Note 1(h)), assets arising fromconstruction contracts, deferred tax assets and financial assets (other than investments in subsidiaries andassociates), are reviewed at each balance sheet date to determine whether there is any indication ofimpairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment lossis recognised whenever the carrying amount of an asset or the cash-generating unit to which it belongsexceeds its recoverable amount. Impairment losses are recognised in the income statement, unless theasset is carried at a revalued amount, in which case the impairment loss is charged to equity.The recoverable amount is the greater of the asset’s net selling price and its value in use. In assessing valuein use, estimated future cash flows are discounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money and the risks specific to the asset. For anasset that does not generate largely independent cash inflows, the recoverable amount is determined forthe cash-generating unit to which the asset belongs.In respect of other assets, an impairment loss is reversed if there has been a change in the estimates usedto determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’scarrying amount does not exceed the carrying amount that would have been determined, net of depreciationor amortisation, if no impairment loss had been recognised. The reversal is recognised in the incomestatement, unless it reverses an impairment loss on a revalued asset, in which case it is taken to equity.(n)Employee BenefitsObligations for contributions to defined contribution plans are recognised as an expense in the incomestatement as incurred.(o)LiabilitiesBorrowings and trade and other payables are stated at cost.2003 ANNUAL REPORT39

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003(p)Income TaxTax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in theincome statement except to the extent that it relates to items recognised directly in equity, in which case itis recognised in equity.Current tax expense is the expected tax payable on the taxable income for the year, using tax ratesenacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respectof previous years.Deferred tax is provided, using the liability method, on temporary differences arising between the taxbases of assets and liabilities and their carrying amounts in the financial statements. Temporary differencesare not recognised for goodwill not deductible for tax purposes and the initial recognition of assets orliabilities that at the time of the transaction affects neither accounting nor taxable profit. The amount ofdeferred tax provided is based on the expected manner of realisation or settlement of the carrying amountof assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will beavailable against which the asset can be utilised.(q)Foreign Currency(i)Foreign currency transactionsTransactions in foreign currencies are translated to Ringgit Malaysia at rates of exchange ruling atthe date of the transactions. Monetary assets and liabilities denominated in foreign currencies at thebalance sheet date are translated to Ringgit Malaysia at the foreign exchange rates ruling at thatdate. Foreign exchange differences arising on translation are recognised in the income statement.(ii)Financial statements of foreign operationsThe Group’s foreign operations are not considered an integral part of the Company’s operations.Accordingly, the assets and liabilities of foreign operations, including goodwill and fair valueadjustments arising on consolidation, are translated to Ringgit Malaysia at exchange rates ruling atthe balance sheet date. The revenues and expenses of foreign operations are translated to RinggitMalaysia at average exchange rates applicable throughout the year. Foreign exchange differencesarising on translation are recognised directly in equity.The closing rates used in the translation of foreign currency monetary assets and liabilities are asfollows:2003 20021USD RM3.80 RM3.801SGD RM2.23 RM2.171EUR RM4.77 RM3.961RMB RM0.46 RM0.471CAD RM2.93 RM2.41(r)Derivative Financial InstrumentsThe Group uses derivative financial instruments, including forward foreign exchange contracts, to hedgeits exposure to foreign exchange risk arising from operational activities.Derivative financial instruments (used for hedging purposes) are accounted for on an equivalent basis asthe underlying assets, liabilities or net positions. Any profit or loss arising is recognised on the same basisas that arising from the related assets, liabilities or net positions.402003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003(s)Revenuei) Construction contractsRevenue from fixed price construction contracts is recognised on the percentage of completionmethod, measured by reference to completion of a physical proportion of the contract work.When the outcome of a construction contract cannot be estimated reliably, revenue is recognisedonly to the extent of contract costs incurred that is probable to be recoverable and contract costs arerecognised as an expense in the period in which they are incurred.An expected loss on a contract is recognised immediately in the income statement.ii)Dividend incomeDividend income is recognised when the right to receive payment is established.(t)Interest IncomeInterest income is recognised in the income statement as it accrues, taking into account the effective yieldon the asset.(u)Financing CostsAll interest and other costs incurred in connection with borrowings, other than that capitalised in accordancewith Note 1(k), are expensed as incurred. The interest component of hire purchase payments is recognisedin the income statement so as to give a constant periodic rate of interest on the outstanding liability at theend of each accounting period.2. PROPERTY, PLANT AND EQUIPMENTLong term Short term Furniture,Group leasehold leasehold Plant and Motor fittings andland land Buildings machinery vehicles equipment TotalCost RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000Acquisition of subsidiaries 8,651 2,255 41,534 38,949 1,840 5,584 98,813Additions – – 4,725 3,447 428 999 9,599Disposals – – – (14) – (8) (22)At 31 December 2003 8,651 2,255 46,259 42,382 2,268 6,575 108,390Accumulated depreciationAcquisition of subsidiaries 349 14 1,711 16,766 956 1,929 21,725Charge for the year 80 30 503 2,606 206 420 3,845Disposals – – – (8) – (3) (11)At 31 December 2003 429 44 2,214 19,364 1,162 2,346 25,559Net book valueAt 31 December 2003 8,222 2,211 44,045 23,018 1,106 4,229 82,831Accumulated depreciation above includes the accumulated depreciation prior to acquisition by the Company inthe year.2003 ANNUAL REPORT41

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20032.1 Depreciation charge for the year is allocated as follows:Group2003RM’000Income statement (Note 14) 1,355Amount due from contract customers (Note 7.2) 2,4903,8452.2 SecurityCertain leasehold land and buildings of the Group costing RM32,287,000 are charged to certain licensedbanks to secure credit facilities granted to a subsidiary (Note 10).2.3 Assets under hire purchaseThe net book values of property, plant and equipment acquired under hire purchase agreements are asfollows:Group2003RM’000Plant and machinery 5,518Motor vehicles 5476,0652.4 TitleThe land title of a long term leasehold land costing RM1,258,000 is pending issuance by the authorities.3. INVESTMENTS IN SUBSIDIARIESCompany2003 2002RM’000 RM’000Unquoted shares - at cost 34,686 –Details of the subsidiaries are shown in Note 26 to the financial statements.422003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20034. INVESTMENTS IN ASSOCIATESGroup2003RM’000Unquoted shares - at cost –The associates, all of which are incorporated in Malaysia, are as follows:EffectiveOwnershipInterestName of Company Principal Activities 2003KNM-DP Fabricators Sdn. Bhd. Fabrication and maintenance of 28%process equipment, storage tanks,modular assemblies and steelstructural components for oil, gasand petrochemical industriesSubsidiary of KNM-DP Fabricators Sdn. Bhd.KNM-DP Harta Bina Sdn. Bhd. Dormant 65%The Group’s share of the cumulative losses of KNM-DP Fabricators Sdn. Bhd. and its subsidiary, KNM-DP HartaBina Sdn. Bhd. amounting to RM42,000 has not been recognised in the Group’s income statement using equityaccounting because the Group’s share of losses of these associates exceeded the carrying amount of its investmentsin the associates.5. AMOUNT DUE FROM SUBSIDIARIESThe amount due from subsidiaries relates to advances, is unsecured, interest free and is not repayable within thenext twelve months except in so far as such repayment will not adversely affect the ability of the respectivecompanies to meet their liabilities when due.6. INVENTORIESGroup2003RM’000Raw materials 3,743Tools and consumables 2,7476,4902003 ANNUAL REPORT43

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20037. TRADE AND OTHER RECEIVABLESGroupCompany2003 2003 2002RM’000 RM’000 RM’000Trade receivables 20,818 – –Amount due from contract customers 56,683 – –Subsidiary – 3,000 –Other receivables, deposits and prepayments 1,896 1 –79,397 3,001 –7.1 Trade receivablesIncluded in trade receivables are contract advances to related companies of RM2,962,000.7.2 Other receivables, deposits and prepaymentsIncluded in other receivables, deposits and prepayments of the Group is a deposit of RM165,000 (2002– RM165,000) paid for the acquisition of landAmount due from contract customersGroup2003RM’000Aggregate costs incurred to date 255,041Add: Attributable profits 87,671342,712Less: Progress billings (286,029)Amount due from contract customers 56,683The above amounts include amounts incurred prior to acquisition by the Company.Additions to aggregate costs incurred during the year include:Group2003RM’000Depreciation (Note 2) 2,490Hire of plant and machinery 374Interest expenses - bills payable 1,663Rental of premises 278Rental of machinery 24Staff costs 347Interest was capitalised at an average rate of 7.0% per annum.442003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20037.3 SubsidiaryThe amount due from subsidiary is non-trade related, unsecured, interest free and has no fixed terms ofrepayment.7.4 Other receivables, deposits and prepaymentsIncluded in other receivables, deposits and prepayments of the Group is rental deposit for building ofRM165,000 paid to the holding company.8. CASH AND CASH EQUIVALENTSGroupCompany2003 2003 2002RM’000 RM’000 RM’000Cash and bank balances 2,080 43 –Deposits with licensed banks 2,862 – –4,942 43 –Deposits of the Group amounting to RM50,000 are placed with licensed banks as security for credit facilitiesgranted to a subsidiary.9. TRADE AND OTHER PAYABLESGroupCompany2003 2003 2002RM’000 RM’000 RM’000Trade payables 5,750 – –Other payables and accrued expenses 2,340 132 88,090 132 810. BORROWINGS (SECURED)Group2003RM’000Current:Bank overdrafts 15,865Bills payable 40,173Hire purchase liabilities 2,013Term loan 5,46363,514Non-current:Hire purchase liabilities 2,448Term loan 11,05213,50077,0142003 ANNUAL REPORT45

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 200310.1 Debt repayment scheduleUnder 1 - 2 2 - 5Group Total 1 year years years2003 RM’000 RM’000 RM’000 RM’000Bank overdrafts 15,865 15,865 – –Bills payable 40,173 40,173 – –Hire purchase liabilities 4,461 2,013 1,350 1,098Term loan 16,515 5,463 1,217 9,83577,014 63,514 2,567 10,93310.2 The bank overdrafts and bills payable of the Group are secured by way of legal charges over certain longterm leasehold land and buildings of the Group.The bank overdrafts and bills payable are subject to interest ranging 1.25% to 1.50% per annum abovethe lenders’ base lending rate or discount rate.10.3 The term loans of the Group are secured by way of fixed charges over certain land use rights’ building andmachineries of a subsidiary.The term loans are repayable on agreed yearly installment over periods commencing from 2004 to 2010.The term loans are subject to interest ranging 4.78% to 5.18% per annum.10.4 In connection with the bank overdrafts and bills payable facilities granted by licensed banks, the subsidiaryhas agreed on the following significant covenants, among others:i) the shareholders’ funds of the subsidiary shall not be less than RM40,000,000 throughout theduration of the lending;ii)iii)iv)not to declare and pay any dividend without the prior consent from the lenders and consent shall notbe unreasonably withheld by the lenders;not to create any new charges or provide additional securities in favour of other lenders withoutconsent which would not be unreasonably withheld by the lenders;the ratio of total debt to tangible net worth shall not exceed 3 : 1 at any time;v) the ratio of cash flow to annual interest requirements shall not fall at any time below 2 : 1; andvi)not to change the subsidiary’s financial year, nature of business, control ownership, shareholders,directors and corporate structure or enter into any partnership, profit sharing or royalty agreementwhereby the subsidiary’s income or profit is, or might be, shared with any other parties or enter intoany management contract whereby the subsidiary’s business and operations are managed by otherparties without prior consent from the lenders.462003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 200310.5 Hire purchase liabilitiesHire purchase liabilities are subject to interest at rates ranging from 3.80% to 4.55% per annum.Hire purchase liabilities are payable as follows:Group2003RM’000Payments Interest PrincipalLess than one year 2,304 291 2,013Between one andfive years 2,663 215 2,4484,967 506 4,46111. SHARE CAPITALGroup and Company2003 2002RM’000 RM’000Authorised:Ordinary shares of RM1 eachAt 1 January 100 100Increased during the year 49,900 –At 31 December 50,000 100Issued and fully paid:Ordinary shares of RM1 eachAt 1 January – * – *Issued during the year pursuant to:- Acquisition of a subsidiary 28,253 –- Rights issue 4,667 –- Private placement 4,400 –- Public issue 6,680 –At 31 December 44,000 – ** Comprised 2 ordinary shares of RM1.00 each.12. RETAINED PROFITS (DISTRIBUTABLE)Subject to agreement by the Inland Revenue Board, the Company has sufficient tax exempt income to frank all ofits retained profits at 31 December 2003 if paid out as dividends.2003 ANNUAL REPORT47

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 200313. DEFERRED TAXATIONThe recognised deferred tax assets and liabilities are as follows:Group2003RM’000Property, plant and equipment- capital allowance 3,752- revaluation 3,035Allowances (1,370)5,417The Group’s deferred tax liability on revaluation relates to revaluation of certain land and buildings in certainsubsidiaries prior to the acquisition by the Company.No deferred tax has been recognised for the following item:Group2003RM’000Unutilised tax losses 2,284The unutilised tax losses do not expire under current tax legislation except for unutilised tax losses of RM1,795,000,which relates to a subsidiary in China that will expire after 5 years under China’s legislation. Deferred tax assetshave not been recognised in respect of the above because it is not probable that future taxable profit will beavailable against which the Group can utilise the benefits.14. OPERATING PROFIT/(LOSS)Operating profit/(loss) is arrived at after charging:GroupCompany2003 2003 2002RM’000 RM’000 RM’000Auditors’ remuneration 54 10 1Depreciation 1,355 – –Directors’ emoluments:- Remuneration 581 265 –- Fees 73 73 –Rental of premises 666 – –Rental of equipment 114 – –and after crediting:Gain on foreign exchange - unrealised 119 – –Rental income of building 320 – –The estimated monetary value of Directors’ benefits-in-kind of the Group is RM11,000.482003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 200315. EMPLOYEE INFORMATIONGroupCompany2003 2003 2002RM’000 RM’000 RM’000Staff costs 12,952 265 –Staff costs include contributions to Employees Provident Fund of RM1,108,000 for the Group and RM29,000(2002 – Nil) for the Company.The number of employees of the Group and of the Company at the end of the year was 512 and 6 (2002 – Nil).16. FINANCING COSTSGroup2003RM’000Interest payable on:Bank overdrafts 629Term loan 502Hire purchase 2971,428Bank and other charges 121,44017. TAX EXPENSEGroupCompany2003 2003 2002RM’000 RM’000 RM’000Income tax expense – current year 2,887 15 –Deferred tax expenseOrigination of temporary differences 593 – –3,480 15 –Reconciliation of effective tax expenseProfit/(Loss) before tax 29,055 2,806 (3)Income tax using Malaysian tax rate (28%) 8,135 786 (1)Non-deductible expenses 998 69 1Tax exempt income – (840) –Tax incentive (460) – –Effect of tax loss not recognised 639 – –Negative goodwill (5,832) – –3,480 15 –2003 ANNUAL REPORT49

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 200318. EARNINGS PER ORDINARY SHARES - GROUPThe calculation of basis earnings per share is based on the net profit attributable to ordinary shareholders ofRM25,575,000 and weighted average number of ordinary shares outstanding during the year of 25,256,000.Weighted average number of ordinary shares2003RM’000Issued ordinary shares at beginning of the year – *Effect of shares issued in May 2003 18,577Effect of shares issued in June 2003 2,429Effect of shares issued in August 2003 4,250* issued and fully paid up share capital of RM2.25,25619. DIVIDENDThe proposed final dividend of 5% tax exempt totaling RM2,200,000 has not been accounted for in the financialstatements.20. COMMITMENTSGroup2003RM’000Capital commitments:Property, plant and equipmentContracted but not provided for in the financial statements 2,322Authorised but not contracted for 6,1118,43321. RELATED PARTIESControlling related party relationships are as follows:i) The holding companies as disclosed in Note 25.ii) Its subsidiary companies as disclosed in Note 26.iii) The shareholders of the ultimate holding company, Dato’ Abdul Rani bin Mohd. Razalli, Lee Swee Engand Sofiyan bin Yahya.502003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003Significant transactions with related parties other than those disclosed elsewhere in the financial statements areas follows:Group2003RM’000Holding company:Inter Merger Sdn. Bhd.Rental of premises 602Administrative charges 368Associate:KNM-DP Fabricators Sdn. Bhd.Contract billings payable 5,174Rental income receivable (320)Related companies:Inter Merger Trading Sdn. Bhd.Purchase of materials 370IM Bina Sdn. Bhd.Manpower supply payable 37Contract billings payable 1,392Inter Merger Realty & Development Sdn. Bhd.Administrative cost payable 141Balances with subsidiaries, associates and related companies at the balance sheet date are as disclosed inNotes 5 and 7.These transactions have been entered into in the normal course of business and have been established undernegotiated terms.22. FINANCIAL INSTRUMENTSFinancial risk management objectives and policiesExposure to credit, interest rate, liquidity and foreign currency risks arises in the normal course of business. TheGroup monitors the interest rate trend and currency exchange rate on an ongoing basis. Based on the analysisof the market situation and taking into consideration the advice of the Group’s key bankers, the Group determinesand varies the risk management objectives and tolerance limits.Credit riskThe Group’s primary exposure to credit risk arise through its receivables. The management has an informalcredit policy in place and the exposure to credit risk is monitored on an ongoing basis.The Group also places excess funds with reputable licensed financial institutions. The management is of the viewthat credit risk exposure to licensed financial institutions is minimal.Concentration of credit risk arises from exposures to trade receivables from sale of the Group’s products forwhich risk of non-payment is affected by economic changes in the oil and gas industry. The maximum exposureto credit risk for the Group is represented by the carrying amount of the receivables presented in the balancesheet.2003 ANNUAL REPORT51

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003Interest rate riskThe Group’s exposure to interest rate risk mainly arises through its fixed deposits and borrowings. The Groupdoes not hedge its interest rate risk.Effective interest rates and repricing analysisIn respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicatestheir effective interest rates at the balance sheet date and the periods in which they reprice or mature, whicheveris earlier.Effectiveinterest Within 1 – 5Group rates Total 1 year years2003 % RM RM RMFinancial assetFixed deposits 2.76 2,862 2,862 –Financial liabilitiesBank overdrafts 7.48 15,865 15,865 –Bills payable 7.60 40,173 40,173 –Term loan 5.18 16,515 16,515 –Foreign currency riskThe Group’s exposure to foreign currency risk is mainly from contract revenue, purchases and borrowingsdenominated in US Dollars. The Group does not view the exposure to US Dollars to be significant given thecurrent peg.A subsidiary’s financial statements are denominated exclusively in Chinese Renminbi. The Group does not viewthe exposure to Chinese Renminbi to be significant.Exposure to foreign currency risk is monitored on an ongoing basis. The Group hedges its foreign currency riskof its trade balances denominated in foreign currency.Liquidity riskPrudent liquid risk management implies maintaining sufficient cash and the availability of funding through anadequate amount of committed credit facilities.Fair valuesRecognised financial instrumentsAt balance sheet date, the carrying amounts of trade and other receivables, short term borrowings, trade andother payables approximate fair value due to the relatively short term nature of these financial instruments. Inrespect of amount due from subsidiary companies, a reasonable estimate of fair value could not be made as thefinancial instrument has an unspecified period of repayment. The carrying amounts of the long term loansapproximate fair values as they are subject to variable interest rates which in turn approximate the current marketinterest rates for similar loans at balance sheet date.522003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003Unrecognised financial instrumentsThe contracted amount and fair value of the financial instruments not recognised in the balance sheet of theGroup as at 31 December 2003 is:2003 2003Contracted FairAmount ValueRM’000 RM’000Forward foreign exchange contracts 10,051 10,10823. SIGNIFICANT EVENTS DURING THE YEARKNM Group Berhad (“KNM”) underwent the following restructuring exercise upon obtaining the approval of therelevant authorities and shareholders.(i)Acquisition of KNM Process Systems Sdn. Bhd. (“KNMPS”)On 2 May 2003, the Company acquired the entire issued and paid-up share capital of KNMPS, comprising3,100,000 ordinary shares of RM1.00 each, for a purchase consideration of RM34,186,350 which wassatisfied by the issuance of 28,253,182 new ordinary shares of RM1.00 each of the Company at an issueprice of RM1.21 per ordinary share.(ii)Acquisition of KNM International Sdn. Bhd. (“KNMI”)On 2 June 2003, the Company acquired the entire issued and paid-up share capital of KNMI fromKNMPS, comprising 500,002 ordinary shares of RM1.00 each for cash consideration of RM500,002from KNMPS.(iii)Rights issue to the existing shareholders of KNMRights issue of 4,666,816 new ordinary shares of RM1.00 each for cash at an issue price of RM1.00 perrights issue on 18 June 2003.(iv)Placement of sharesPlacement of 4,400,000 new ordinary shares of RM1.00 each for cash at an issue price of RM1.48 perordinary share.(v)Public issuePublic issue of 6,680,000 new ordinary shares of RM1.00 each for cash to the Malaysian public at anissue price of RM1.48 per ordinary share.2003 ANNUAL REPORT53

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 200324. SEGMENT INFORMATIONSegment information is presented in respect of the Group’s geographical segments. The primary format,geographical segments, is based on the Group’s management and internal reporting structure. Inter-segmentpricing is determined based on negotiated terms.The Group operates only in a business segment. Accordingly, information by business segments is not presented.Segments results, asset and liabilities include items directly attributable to a segment as well as those that can beallocated on a reasonable basis.Segment capital expenditure is the total cost incurred during the period to acquire segment assets that areexpected to be used for more than one period.The segments are operated in both local and China markets.In presenting information on the basis of geographical segments, segment revenue is based on the geographicallocation of assets.There are no comparative figures for the segment information as this is the first set of consolidated financialstatements prepared by the Group.Geographical segments Malaysia China Total2003 2003 2003RM’000 RM’000 RM’000Revenue 61,784 2,842 64,626Segment result 19,279 1,105 20,384Allocated expenses (8,072) (2,792) (10,864)Operating profit/(loss) 11,207 (1,687) 9,520Interest expenses (1,036) (404) (1,440)Interest income 127 19 146Unallocated negative goodwill 20,829Profit before taxation 29,055Tax expense (3,480)Net profit for the year 25,575Segment assets 141,699 31,961 173,660Segment liabilities 66,427 18,677 85,104Unallocated liabilities 9,601Total liabilities 94,705Other informationCapital expenditure 4,284 5,315 9,599Depreciation 3,147 698 3,845542003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 200325. HOLDING COMPANIESThe holding company and ultimate holding company are Inter Merger Sdn. Bhd. and Perkasa Sistem Sdn. Bhd.respectively, both companies are incorporated in Malaysia.26. SUBSIDIARIESThe principal activities of the subsidiaries, their places of incorporation and the interests of KNM Group Berhadare as follows:EffectiveCountry of OwnershipName of Company Principal Activities Incorporation Interest2003 2002Subsidiaries of the CompanyKNM Process Systems Design, manufacture, assembly Malaysia 100% –Sdn. Bhd.and commissioning of processequipment, pressure vessels,heat exchangers, skid mountedassemblies, process pipesystems, storage tanks,specialised structural assembliesand module assemblies for theoil, gas and petrochemicalindustries.KNM International Sdn. Provision of management, Malaysia 100% –Bhd.technical advisory, licenceand trademark services tointernational related companiesand related internationalinvestmentSubsidiaries of KNM Process Systems Sdn. Bhd.KNM OGPET (East Fabrication and maintenance Malaysia 100% –Coast) Sdn. Bhd. of oil, gas and petrochemicalprocess equipmentDuraton Engineering Provision of project Malaysia 100% –Sdn. Bhd.management and technicalservicesPerwira Awan Sdn. Bhd. Property investment Malaysia 100% –2003 ANNUAL REPORT55

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003EffectiveCountry of OwnershipName of Company Principal Activities Incorporation Interest2003 2002Subsidiary of KNM International Sdn. Bhd.KNM Overseas Investment holding Malaysia 100% –(China) Sdn. Bhd.Subsidiary of KNM Overseas (China) Sdn. Bhd.KNM Special Process Design, manufacture, assembly, China 100% –Equipmentcommissioning and maintenance(Changshu) Co. Ltd.* of process equipment, pressurevessels, heat exchanges, skidmounted assemblies, process pipesystems, storage tanks, specialisedstructural assemblies and moduleassemblies for the oil, gas andpetrochemical industries within theChina market* Audited by another firm of accountants.27. ACQUISITION OF SUBSIDIARIESOn 2 May 2003, the Company acquired KNM Process Systems Sdn Bhd. (refer to Note 23).The acquisition was accounted for using the acquisition method of accounting. For the eight (8) months ended31 December 2003, the subsidiaries contributed a net profit of RM4,955,000 to the consolidated net profit forthe year, as follows:Income statement:8 monthsended31December2003RM’000Revenue 64,626Operating costs (56,206)Profit before taxation 8,420Tax expense (3,465)Increase in the Group’s net profit at the end of financial year 4,955562003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003The acquisition had the following effect on the Group’s assets and liabilities as at 31 December 2003.Balance sheet:2003RM’000Property, plant and equipment 82,831Current assets 90,786Current liabilities (75,641)Long term and deferred liabilities (18,917)Increase in the Group’s net assets 79,059The fair values of assets and liabilities assumed in the acquisition of KNM Process Systems Sdn. Bhd. and thecash flow effects are as follows:2003RM’000Non-current assetsProperty, plant and equipment 77,088Current assets 86,481Current liabilities (94,431)Long term and deferred liabilities (14,123)Net assets 55,015Negative goodwill on acquisition (20,829)34,186Purchase consideration satisfied by way of issuance of shares (34,186)–Cash acquired 1,422Net cash inflow 1,42228. COMPARATIVE FIGURESThere are no comparative figures for the consolidated financial statements as this is the first set of consolidatedfinancial statements prepared by the Group.2003 ANNUAL REPORT57

KNM GROUP BERHAD (521348-H)SHARE PRICE INFORMATION2003 August September October November DecemberHigh 4.18 4.62 4.92 4.74 4.40Low 3.00 3.52 3.40 4.16 4.08Volume 35,077,600 9,100,456 4,987,400 1,134,800 487,000INVESTORS’ INFORMATIONAS AT 7 MAY 2004ORDINARY SHARE DISTRIBUTION SCHEDULE AS AT 7 MAY 2004No. of Total %Holders Holdings Holdings558 LESS THAN 1000 505,400 1.15%350 1000 TO 10000 1,304,600 2.97%58 10,001-100,000 1,581,426 3.59%25 100,001 TO LESS THAN 11,422,674 25.96%5% OF ISSUED SHARES3 5% AND ABOVE OF ISSUED 29,185,900 66.33%994 44,000,000 100.00%* for Direct Interest of the directors only.30 LARGEST SHAREHOLDERS AS AT 7 MAY 2004HoldingsNo. ofName and Address Shares %1 INTER MERGER SDN BHD 23,668,909 53.79%2 TEGAS KLASIK SDN BHD 3,247,091 7.38%3 HSBC NOMINEES (TEMPATAN) SDN BHD(FOR OSK-UOB SMALL CAP OPPORTUNITY UNIT TRUST) 2,269,900 5.16%4 UNIVERSAL TRUSTEE (MALAYSIA) BHD(FOR SBB PREMIUM CAPITAL FUND) 2,183,000 4.96%582003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)INVESTORS’ INFORMATIONAS AT 7 MAY 2004HoldingsNo. ofName and Address Shares %5 SBBAM NOMINEES (TEMPATAN) SDN BHD(FOR EMPLOYEES PROVIDENT FUND BOARD) 1,014,600 2.31%6 LEMBAGA TABUNG ANGKATAN TENTERA 850,000 1.93%7 CARTABAN NOMINEES (ASING) SDN BHDCREDIT SUISSE SINGAPORE 780,000 1.77%(FOR PREMIER WEALTH INVESTMENTS LTD)8 HSBC NOMINEES (TEMPATAN) SDN BHDHSBC (M) TRUSTEE BHD(FOR OSK-UOB EQUITY TRUST) 729,200 1.66%9 UNIVERSAL TRUSTEE (MALAYSIA) BHD(FOR SBB DANA AL-AZAM) 600,000 1.36%10 MAYBAN NOMINEES (TEMPATAN) SDN BHDMALAYSIAN TRUSTEE BHD 600,000 1.36%(FOR MAYBAN SMALLCAP TRUST FUND)11 HSBC NOMINEES (TEMPATAN) SDN BHD(FOR OSK-UOB KIDSAVE TRUST) 584,000 1.33%12 HSBC NOMINEES (ASING) SDN BHD(FOR GENESIS MALAYSIA MAJU FUND LTD) 525,900 1.20%13 UNIVERSAL TRUSTEE (MALAYSIA) BHD(FOR SBB DANA AL-IHSAN) 432,500 0.98%14 HSBC NOMINEES (ASING) SDN BHDBOB HK FOR SERIES I-ASIAN CAPITAL GROWTH (GSI ASIA FUND) 412,000 0.94%15 WONG LAY FONG 404,100 0.92%16 UNIVERSAL TRUSTEE (MALAYSIA) BHD(FOR SBB RETIREMENT BALANCE FUND) 350,000 0.80%17 BUMIPUTRA-COMMERCE TRUSTEE BERHAD(FOR AMANAH SAHAM DARUL IMAN) 339,000 0.77%18 MAYBAN SECURITIES NOMINEES (TEMPATAN) SDN BHD(FOR LING KWONG LAI) 311,400 0.71%19 UNIVERSAL TRUSTEE (MALAYSIA) BHD(FOR SBB CRYSTAL EQUITY FUND) 300,000 0.68%20 OOI CHEOW HAR 257,000 0.58%21 HSBC NOMINEES (ASING) SDN BHD(FOR BOB HK BRANCH FOR DRESDNER RCM NEW TIGER 210,000 0.48%SELECTIONS FUND LIMITED (MALAYSIA SUB FD)2003 ANNUAL REPORT59

KNM GROUP BERHAD (521348-H)INVESTORS’ INFORMATIONAS AT 7 MAY 2004HoldingsNo. ofName and Address Shares %22 BUMIPUTRA-COMMERCE TRUSTEE BERHAD(FOR AMANAH SAHAM DARUL IMAN) 180,000 0.41%23 BUMIPUTRA-COMMERCE TRUSTEE BERHAD(FOR AMANAH SAHAM DARUL IMAN) 159,000 0.36%24 HSBC NOMINEES (TEMPATAN) SDN BHD(FOR MAYBAN ETHICAL TRUST FUND) 152,200 0.35%25 HSBC NOMINEES (TEMPATAN) SDN BHD(FOR MAYBAN VALUE TRUST FUND) 138,600 0.32%26 KHATIJAH BINTI ARIPIN 120,000 0.27%27 CHONG THIM SIN @ CHONG KAM SOOI 110,300 0.25%28 TAN CHAI HOON 110,000 0.25%29 HSBC NOMINEES (ASING) SDN BHD 71,000 0.16%BOB HK FOR ASIAN SMALL COMPANIES FUND (SERIES I)30 CITICORP NOMINEES (TEMPATAN) SDN BHD 70,000 0.16%PLEDGED SECURITIES ACCOUNT(FOR VIJAY KISHU TIRATHRAI)SUBSTANTIAL SHAREHOLDERS AS AT 7 MAY 2004(in accordance with the Company’s register of substantial shareholders)No. of Ordinary Shares of RM1.00 eachDirect % Indirect %1. Inter Merger Sdn Bhd 23,668,909 53.79 3,247,091 * 7.382. Tegas Klasik Sdn Bhd 3,247,091 7.38 – –3. HSBC Nominees (Tempatan) Sdn Bhd(For OSK-UOB Small Cap Opportunity Trust) 2,269,900 5.16 – –* Deemed interested by virtue of its substantial shareholding in Tegas Klasik Sdn Bhd(section 6A of the Companies Act, 1965)DIRECTORS’ SHAREHOLDINGS AS AT 7 MAY 2004Number of Ordinary Shares of RM 1.00 eachName of Directors Direct Indirect %YBhg. Dato’ Abdul Rani bin Mohd Razalli None 26,916,000 61.17Ir. Lee Swee Eng None 26,916,000 61.17Lee Hui Leong None 3,247,091 7.38Sofiyan bin Yahya None 3,247,091 7.38Gan Siew Liat None 26,916,000 61.17Chew Fook Sin None 26,916,000 61.17Lim Yu Tey None None Not applicableYBhg. Dato’ Ab. Halim bin Mohyiddin None None Not applicableMohamed Tajudin bin Mohd Alias None None Not applicable602003 ANNUAL REPORT

KNM GROUP BERHAD (521348-H)LIST OF PROPERTIES HELD BY THE GROUPAS AT 31 DECEMBER 2003Audited NetApproximate Acquisition Book ValueRegistered/ Existing Built-up Age of Revaluation As AtBeneficial Location Use Tenure Land Area Area the Building Date 31.12.2003ownerRM’000KNMPS Lot PT 523, HS(D) 30213, Fabrication – – 9,113 – – 8,668Mukim Tanjong Minyak, Plant and m 2District Melaka Tengah,OfficeMelakaBuildingLot PT 7552, HS(D) 17934, Fabrication – – 13,751 – – 13,186Mukim Sungai Karang, Plant and m 2District Kuantan,OfficePahang Darul MakmurBuildingPASB Lot PT7552, HS(D) 17934, Land 66 years 36,420 – – – 4,038Mukim Sungai Karang (Industrial) (leasehold) m 2District Kuantan,Expires onPahang Darul Makmur 1 June 2064KNMPS Lot PT 523, HS(D)30213, Land 99 years 18,268 – – – 1,886Mukim Tanjong Minyak, (Industrial) (leasehold) m 2District Melaka Tengah,Expires onMelaka 28 May 2094Lot PT 522, HS(D) 30212, Land 99 years 5,145 – – – 456Mukim Tanjung Minyak, (Industrial) (leasehold) m 2District Melaka Tengah,Expires onMelaka 28 May 2094Lot PT 521, HS(D) 30211, Land 99 years 5,972 – – – 557Mukim Tanjung Minyak, (Industrial) (leasehold) m 2District Melaka Tengah,Expires onMelaka 28 May 2094Plot1, being part of parent Land 60 years 13,400 – – – 1,216Lots 124 and 128, (Industrial) (leasehold) m 2Block 20, Kemena Land[IndividualDistrict at Kidurongtitle has notIndustrial Area (KINDA),been issued]Bintulu, SarawakPlot1, being part of parent Building 60 years – 2,800 – – 6,760Lots 124 and 128, (Industrial) (leasehold) m²Block 20, Kemena Land[IndividualDistrict at Kidurongtitle has notIndustrial Area (KINDA),been issued]Bintulu, SarawakPM 372 Lot 2136 (PT 787), Building 99 years – 111 – – 72Mukim Tanjung Minyak, (Residential) (leasehold) m²District of Melaka Tengah,Expires onMelaka 10 May 20932003 ANNUAL REPORT61

KNM GROUP BERHAD (521348-H)LIST OF PROPERTIES HELD BY THE GROUPAS AT 31 DECEMBER 2003Audited NetApproximate Acquisition Book ValueRegistered/ Existing Built-up Age of Revaluation As AtBeneficial Location Use Tenure Land Area Area the Building Date 31.12.2003ownerRM’000KNMPS (Con’t) PM 423 Lot 2132 (PT 791), Building 99 years – 111 – – 72Mukim Tanjung Minyak, (Residential) (leasehold) m²District of Melaka Tengah,Expires onMelaka 10 May 2093PM 339 Lot 2170 (PT 719), Building 99 years – 250 – – 91.2Mukim Tanjung Minyak, (Residential) (leasehold) m²District of Melaka Tengah,Expires onMelaka 10 May 2093PM 340 Lot 2171 (PT 720), Building 99 years – 113 – – 73.4Mukim Tanjung Minyak, (Residential) (leasehold) m²District of Melaka Tengah,Expires onMelaka 10 May 2093PM 341 Lot 2172 (PT 721), Building 99 years – 113 – – 73.4Mukim Tanjung Minyak, (Residential) (leasehold) m²District of Melaka Tengah,Expires onMelaka 10 May 2093KNMSPEC Jiangsu Province Changshu Land 50 years 33,537 – – – 2,265Economic Development Area (Industrial) (leasehold) m²”Chang Rang Guo Yong (2002)Expires onZi No. 192” 9 July 2052Definition:Jiangsu Province Changshu Factory 50 years – 17,320 – – 15,064Economic Development Area and (leasehold) m²”Chang Rang Guo Yong (2002) Office Expires onZi No. 192" Building 9 July 2052KNMPS - KNM Process Systems Sdn BhdPASB - Perwira Awan Sdn BhdKNMSPEC - KNM Special Process Equipment (Changshu) Co Ltd622003 ANNUAL REPORT

KNM GROUP BERHAD(Incorporated in Malaysia under the Companies Act, 1965)(Company No.: 521348-H)PROXY FORMI / We,.........................................................................................................................................................of ................................................................................................................................................................being a member/members of KNM GROUP BERHAD hereby appoint .................................................................of ................................................................................................................................................................or failing him/her, .........................................................................................................................................of ................................................................................................................................................................as my/our proxy/proxies to vote on my/our behalf of the Company to be held on 17 June 2004 at 3.00 p.m. at KristalBallroom 2, Level 1, East Wing, Hilton Petaling Jaya, No 2 Jalan Barat, 46200 Petaling Jaya, Selangor Darul Ehsanand at any adjournment thereof.Resolution onNo. Resolutions Proxy Form For Against1. To receive and adopt the Audited Accounts for the yearended 31 December 2003 together with the Reports ofthe Directors and Auditors thereon. Resolution No. 12. To declare a first and final dividend of 5 sen per sharetax exempt for the year ended 31 December 2003 Resolution No. 23. To approve the payment of Directors’ fees for the yearended 31 December 2003. Resolution No. 34. To re-elect the following Director who retire in accordancewith Section 129(6) of the Companies Act, 1965 (“the Act”)and being eligible, has offered himself for re-election:4.1 YBhg. Dato’ Abdul Rani bin Mohd Razalli Resolution No. 45. To re-elect the following Directors who retire in accordancewith Article 132 of the Company’s Articles of Associationand being eligible, have offered themselves for re-election:5.1 Ir Lee Swee Eng Resolution No. 55.2 Lee Hui Leong Resolution No. 65.3 Sofiyan bin Yahya Resolution No. 75.4 Gan Siew Liat Resolution No. 85.5 Chew Fook Sin Resolution No. 95.6 Lim Yu Tey Resolution No. 105.7 YBhg. Dato’ Ab. Halim bin Mohyiddin Resolution No. 115.8 Mohamed Tajudin bin Mohd Alias Resolution No. 126. To re-appoint Messrs KPMG as the auditors of the Companyand to authorise the Directors to fix their remuneration Resolution No. 137. To authorize the Directors to issue and allot ordinary sharespursuant to Section 132D Resolution No. 14✄

* Please indicate (x) in the appropriate box against each resolution how you wish your vote to be cast. If nospecific director as to voting is given, the proxy will vote or abstain from voting at his / her discretion.Dated this .............. day of ............................ , 2004.................................................................Signature of Shareholder or Common SealNO. OF SHARES HELDNotes:1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead.A proxy need not be a member of the Company. However, in accordance with Section 149 of the CompaniesAct, 1965 a member shall not be entitled to appoint a person who is not a member of the Company as his proxyunless that person is a qualified legal practitioner, approved company auditor or a person approved by theRegistrar of Companies in a particular case.2. The Proxy Form must be deposited with the Company Secretaries at the registered office of the Company at No.15 Jalan Dagang SB 4/1, Taman Sungei Besi Indah, 43300 Seri Kembangan, Selangor, not less than 48 hoursbefore the time appointed for holding the meeting or any adjourned meeting.3. Where the Proxy Form is executed by a corporation, it must be either under its Common Seal or under the handof an officer or attorney duly authorised.4. Any alteration in this form must be initialed.