AR07 Mithril

CONTENTS

CORPORATE INFORMATION 2

CORPORATE STRUCTURE 3

NOTICE OF THE FIFTH ANNUAL MEETING 4

PROFILE OF DIRECTORS 7

CHAIRMAN’S STATEMENT 11

CORPORATE GOVERNANCE 13

DIRECTORS’ RESPONSIBILITY STATEMENT 17

AUDIT COMMITTEE REPORT 17

STATEMENT OF INTERNAL CONTROL 19

ADDITIONAL COMPLIANCE INFORMATION 20

DIRECTORS’ REPORT & FINANCIAL STATEMENTS 22

LIST OF PROPERTIES 80

ANALYSIS OF SHAREHOLDINGS 84

ANALYSIS OF WARRANT HOLDINGS 86

ANALYSIS OF RCSLS HOLDINGS 88

ANALYSIS OF ICULS HOLDINGS 90

FORM OF PROXY

MITHRIL BERHAD2

CORPORATE INFORMATION

Domicile : Malaysia

Legal Form & Place ofIncorporation

: A public listed company incorporated in Malaysia under the Companies Act, 1965 and limited by shares

Board of Directors : Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah - Executive ChairmanRazman Hafidz bin Abu Zarim - Managing Director / Chief Executive OfficerSim Lye Watt - Executive DirectorMuhamad Umar Swift - Non-Independent Non-Executive DirectorYeo Took Keat - Non-Independent Non-Executive DirectorAlan Hamzah Sendut - Independent Non-Executive DirectorDato’ Abdul Majid bin Mohamed - Independent Non-Executive DirectorOnn Kien Hoe - Independent Non-Executive Director

Secretaries : Lily Yin Kam MayYeo Took Keat

Audit Committee : Alan Hamzah Sendut - ChairmanDato’ Abdul Majid bin Mohamed - MemberOnn Kien Hoe - MemberYeo Took Keat - Member

Registrar & Transfer Office : Trace Management Services Sdn BhdSuite 20.03, 20th Floor, Menara MAANo. 12 Jalan Dewan Bahasa, 50460 Kuala LumpurTelephone No : 03-2141 3060Telefax No : 03-2141 3061

Registered Office : Suite 20.03, 20th Floor, Menara MAANo. 12 Jalan Dewan Bahasa, 50460 Kuala LumpurTelephone No : 03-2141 3060Telefax No : 03-2141 3061

Principal Place of Business : Suite 18.05, 18th Floor, Menara MAANo. 12 Jalan Dewan Bahasa, 50460 Kuala LumpurTelephone No : 03-2142 0366Telefax No : 03-2142 0533

Solicitors : Messrs Cheang & Ariff39 Court39 Jalan Yap Kwan Seng, 50450 Kuala LumpurTelephone No. : 03-2161 0803Telefax No. : 03-2161 4475

Auditors : Messrs Ernst & YoungLevel 23A, Menara MileniumJalan DamanlelaPusat Bandar Damansara, 50490 Kuala LumpurTelephone No. : 03-7495 8000Telefax No. : 03-7495 7981

Principal Bankers(In alphabetical order)

: Alliance Bank Malaysia BerhadMalayan Banking Berhad

Stock Exchange Listing : Bursa Malaysia Securities Berhad (“Bursa Securities”) Stock Number 8311

Website : http://www.mithril.com.my/

MITHRIL BERHAD3

MITHRIL BERHAD

100% MITHRIL CLAY MANUFACTURING BERHAD (Formerly known as TAJO BERHAD)

100% MITHRIL POLYMERS SDN BHD

CORPORATE STRUCTURE

100% MITHRIL CLAY INDUSTRIES SDN BHD

100% MITHRIL REALTY SDN BHD

100% MITHRIL MANAGEMENT SERVICES SDN BHD

100% MITHRIL FRP SDN BHD

100% MITHRIL MARKETING SDN BHD

100% MITHRIL PVC SDN BHD

100% MITHRIL FRP INDUSTRIES SDN BHD

100% MITHRIL SAFERAY SDN BHD

100% TAJO PROJECT MANAGEMENT SDN BHD

70% RESOLUTE OMEGA SDN BHD

100% PROMINENT LANDSCAPE SDN BHD

100% ALPHA GLOW SDN BHD

65% TAJO DEVELOPMENT SDN BHD

MITHRIL BERHAD4

NOTICE OF THE FIFTH ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the FIFTH ANNUAL GENERAL MEETING of the Company will be held at The Auditorium, Podium 1, Menara MAA, No. 12 Jalan Dewan Bahasa, 50460 Kuala Lumpur on Thursday, 29 November 2007 at 4.00 p.m. for the following purposes :-

AS ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the year ended 30 June 2007 together with the Reports of the Directors and the Auditors thereon.

2. To approve the payment of Directors’ fees amounting to RM118,000.00 for the period from 1 July 2007 until the forthcoming Annual General Meeting to be held in 2008 to be payable quarterly in arrears.

(Resolution 1)

3. To re-elect the following Directors of the Company who are retiring in accordance with Article 77 of the Company’s Articles of Association and who, being eligible, offer themselves for re-election :-

(i) Dato’ Abdul Majid bin Mohamed(ii) Onn Kien Hoe

(Resolution 2)(Resolution 3)

4. To re-elect the following Directors of the Company who are retiring in accordance with Article 83 of the Company’s Articles of Association and who, being eligible, offer themselves for re-election :-

(i) Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah(ii) Alan Hamzah Sendut

(Resolution 4)(Resolution 5)

5. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration.

(Resolution 6)

AS SPECIAL BUSINESS

6. To consider and, if thought fit, to pass the following resolutions as Ordinary/Special Resolutions :-

ORDINARY RESOLUTIONS

(a) Authority to allot and issue shares pursuant to the Employees’ Share Option Scheme (“ESOS”)

(Resolution 7)

“THAT pursuant to the Company’s ESOS as approved by Ordinary Resolution passed at the Extraordinary General Meeting of the Company held on 26 December 2003, the Directors of the Company be and are hereby empowered pursuant to Section 132D of the Companies Act, 1965 to allot and issue shares of the Company from time to time in accordance with the Scheme.”

(b) Proposed Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (“RRPTs”)

(Resolution 8)

“THAT the mandate granted by the shareholders of the Company on 30 November 2006 pursuant to paragraph 10.09 of the Listing Requirements of the Bursa Malaysia Securities Berhad (“Bursa Securities”), authorising the Company and its subsidiaries (“the Mithril Group”) to enter into the recurrent related party transactions of a revenue or trading nature which are necessary for the Mithril Group’s day-to-day operations as set out in Section 3.0 of Part A of the Circular to Shareholders (“the Circular”) dated 7 November 2007 with the related parties mentioned therein, be and is hereby renewed, as set out in Section 3.0 of Part A of the Circular with the related parties mentioned therein provided that :-

(a)

(b)

(c)

the transactions are in the ordinary course of business and are on terms which are not more favourable to the related parties than those generally available to the public and on terms not to the detriment of the minority shareholders of the Company;

the transactions are made at arm’s length and on normal commercial terms; and

disclosure will be made in the annual report providing the breakdown of the aggregate value of the transactions conducted pursuant to the mandate during the financial year, amongst others, based on the following information: -

(i) the type of the RRPTs made;(ii) the names of the related parties involved in each type of the RRPTs made and their

relationship with the Company.

MITHRIL BERHAD5

NOTICE OF THE FIFTH ANNUAL GENERAL MEETING( CONTINUED )

AND THAT authority conferred by such renewed and granted mandate shall continue to be in force (unless revoked or varied by the Company in general meeting), until

(i) the conclusion of the next Annual General Meeting (“AGM”) of the Company following the forthcoming AGM at which time it will lapse, unless by a resolution passed at that meeting or Extraordinary General Meeting whereby the authority is renewed; or

(ii) the expiration of the period within which the next AGM after the date it is required to be held pursuant to Section 143(1) of the Companies Act 1965 (“the Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(iii) revoked or varied by resolution passed by the shareholders in general meeting, whichever is earlier ;

AND THAT the Directors of the Company be authorised to complete and do all such acts and things (including executing such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this Ordinary Resolution.”

SPECIAL RESOLUTION

(c) Proposed Amendments to Articles of Association of the Company (Resolution 9)

“THAT the deletion, alterations, modifications and/or additions to the Articles of Association of the Company as set out under Section 1 of Part B of the Circular to Shareholders of the Company dated 7 November 2007 be and are hereby approved and adopted.”

By Order of the Board

YEO TOOK KEAT (MIA NO. 3308)LILY YIN KAM MAY (MAICSA NO. 0878038)Company Secretaries

Kuala Lumpur7 November 2007

NOTES: -

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

2. A member of the Company, who is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, may appoint one (1) proxy in respect of each securities account.

3. The instrument appointing a proxy, shall be in writing under the hand of the appointer or his attorney duly authorised in writing, and in the case of a corporation, either under seal or under hand of an officer or attorney duly authorised.

4. The instrument appointing a proxy must be deposited at the Company’s Registered Office, Suite 20.03, 20th Floor, Menara MAA, No. 12, Jalan Dewan Bahasa, 50460 Kuala Lumpur, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

5. Any alteration in the form of proxy must be initialed.

MITHRIL BERHAD6

NOTICE OF THE FIFTH ANNUAL GENERAL MEETING( CONTINUED )

6. Explanatory notes to Special Business of the Agenda 6 : -

(a) Authority to allot and issue shares in general pursuant to Employees’ Share Option Scheme (“ESOS”)

On 26 December 2003, the shareholders of the Company had approved the ESOS. The purpose of this ordinary resolution is to enable the Directors of the Company to allot shares to those employees and Executive Directors who have exercised their option under the Company’s ESOS.

(b) Proposed Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (“RRPTs”)

The Proposed Resolution 8, if passed, will empower the Company to conduct recurrent related party transactions of a revenue or trading nature which are necessary for the Group’s day-to-day operations, and will eliminate the need to convene separate general meetings from time to time to seek shareholders’ approval. This will substantially reduce administrative time, inconvenience and expenses associated with the convening of such meetings, without compromising the corporate objectives of the Group or adversely affecting the business opportunities available to the Group.

The detailed information on Recurrent Related Party Transactions is set out in Part A of the Circular dated 7 November 2007 which is dispatched together with this Annual Report.

(c) Proposed Amendments to Articles of Association of the Company

The Proposed Resolution 9, if passed, will update the Articles of Association of the Company to ensure continued compliance with the Listing Requirements of Bursa Securities and to further enhance the administration of the internal affairs of the Company as well as to streamline and add clarity to the Articles of Association.

MITHRIL BERHAD7

PROFILE OF DIRECTORS

Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah was appointed as the Executive Chairman to the Company’s Board of Directors on 12 November 2003. On 12 January 2007, he was appointed as a member of the Risk Management Committee of the Company. He currently sits on the Boards of Melewar Industrial Group Berhad, Melewar Group Berhad, Mithril Clay Manufacturing Berhad (formerly known as Tajo Berhad), MAA Holdings Berhad, Khyra Legacy Berhad, Melewar Group Berhad, The Melewar Corporation Berhad and several other private limited companies.

Tunku Yahaya graduated in 1983 with a Bachelor of Science (Hons) degree in Economics and Accountancy from The City University, London. That year in London, he joined Peat Marwick Mitchell & Co. In 1986, he obtained his Master of Science degree in Economics from Birkbeck College, University of London. Returning to Malaysia in 1986, he joined the advertising company, MZC - Saatchi & Saatchi. In 1988, he joined the management of the refurbished Central Market (KL) as Executive Director. In 1994, he was appointed to put into operation and manage the television station, MetroVision, as Managing Director. In 1997, he started the music recording label, Melewar Parallax Sdn Bhd.

Tunku Yahaya is the son of Tunku Tan Sri Abdullah ibni Almarhum Tuanku Abdul Rahman. He is an indirect substantial shareholder by virtue of his relationship with Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah, who has substantial interest in MAA Holdings Berhad via Khyra Legacy Berhad. His shareholding in the Company is disclosed in page 24 of the Directors’ Report.

Tunku Yahaya does not have any conflict of interest with the Company and has had no conviction for any offences within the past 10 years.

Tunku Yahaya @ Yahya bin Tunku Tan Sri AbdullahAged 46, MalaysianExecutive Chairman

Member of the Nomination CommitteeMember of the Remuneration CommitteeMember of the Risk Management CommitteeMember of the ESOS Committee

Razman Hafidz bin Abu Zarim was appointed as a Non-Independent Director to the Company’s Board of Directors on 12 November 2003, but subsequently was redesignated as an Independent Non-Executive Director on 19 August 2004.

On 12 January 2007, Razman was appointed as the Managing Director of Mithril Berhad and accordingly, became a Non-Independent Executive Director of the Company.

He sits on the Boards of Malaysian Oxygen Berhad, Courts Mammoth Berhad, Panasonic Manufacturing Malaysia Berhad, Yeo Hiap Seng (Malaysia) Berhad, Toyochem Corporation Berhad, eBworx Berhad and several other private limited companies.

Razman is a joint Honours degree holder in Economics and Accounting BSc (Econ), from University College, Cardiff, University of Wales. He is a Fellow member of the Institute of Chartered Accountants in England & Wales and a member of the Malaysian Institute of Accountants.

Razman began his career in 1977 with Touche Ross & Co., chartered accountants, in London. In 1984, he moved on to Hacker Young, another chartered accountancy firm based in London, where he was admitted as an Audit Partner in 1987. In 1989, Razman returned to Malaysia as an Audit Partner of Price Waterhouse (PW), an international public accountancy firm. In 1993, he was appointed the Partner-In-Charge of PW’s Management Consulting Practice and became an Executive Committee member. In 1994, he established Norush Sdn Bhd, an investment holding company and business advisory firm, where he remains as Chairman.

Razman does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the past 10 years.

Razman Hafidz bin Abu ZarimAged 52, MalaysianManaging Director/Chief Executive Officer

MITHRIL BERHAD8

PROFILE OF DIRECTORS( CONTINUED )

Yeo Took Keat was appointed as a Non-Independent Non-Executive Director to the Company’s Board of Directors on 12 November 2003. At present, he also sits on the Boards of MAA Holdings Berhad (MAAH), Malaysian Assurance Alliance Berhad (MAA Assurance), MAAKL Mutual Berhad, MAA Bancwell Trustee Berhad and several other private limited companies.

Yeo has vast experience in accounting and finance having served various capacities in insurance companies and audit firms upon completing his studies in 1980. He joined MAA Assurance in 1986 and has held several positions, the last of which was as Senior Vice President – Finance & Admin before his transfer to MAAH in May 2002 as the Group Chief Operating Officer.

Yeo is a Fellow of The Association of Chartered Certified Accountants, United Kingdom and a Member of the Malaysian Institute of Accountants. He is also an Executive Committee member of the Federation of Public Listed Companies Berhad and has contributed to the Working Groups on accounting standards led by the Malaysian Accounting Standards Board.

Yeo does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the past 10 years.

Yeo Took KeatAged 50, MalaysianNon-Independent Non-Executive Director

Member of the Audit CommitteeMember of the ESOS Committee

Onn Kien Hoe was appointed as an Independent Non-Executive Director to the Company’s Board of Directors on 12 January 2007. He was then appointed the Chairman of the Risk Management Committee, a member of the Audit Committee, a member of the Nomination Committee and a member of the Remuneration Committee on 12 January 2007. He currently sits on the Boards of Malaysian Merchant Marine Berhad, M3nergy Berhad, Nova MSC Berhad and several other private limited companies.

Onn completed his professional qualification with the Chartered Association of Certified Accountants in 1988, and has been in the accounting profession since then. He is also a member of the Malaysian Institute of Accountants and Malaysian Institute of Certified Public Accountants.

Onn joined Horwath (Kuala Lumpur Office), an international accounting firm, in 1994. He is currently the partner in charge of Horwath’s audit and assurance and corporate advisory departments. Onn has acted as a Special Administrator over several Danaharta cases, as well as having served as an examiner for the Malaysian Institute of Certified Public Accountants and as a member of the Interpretation Committee of the Malaysian Accounting Standards Board.

Onn does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the last ten (10) years.

Onn Kien HoeAged 42, MalaysianIndependent Non-Executive Director

Chairman of the Risk Management CommitteeMember of the Audit CommitteeMember of the Nomination CommitteeMember of the Remuneration Committee

MITHRIL BERHAD9


Sim Lye Watt was appointed as an Executive Director to the Company’s Board of Directors on 11 April 2005. At present, he is also the Chief Executive Officer and Executive Director of Mithril Clay Industries Sdn Bhd, a wholly-owned subsidiary of Mithril Berhad.

Before joining Mithril Clay Manufacturing Berhad (formerly known as Tajo Berhad), Sim was the Vice President – General Marketing at Malaysian Assurance Alliance Berhad.

Sim does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the past 10 years.

Sim Lye WattAged 62, MalaysianExecutive Director

Alan Hamzah Sendut was appointed as an Independent Non-Executive Director to the Company’s Board of Directors on 12 November 2003. He was then appointed Chairman of the Audit Committee and Chairman of the ESOS Committee on 12 January 2007.

Alan is also the Chairman of the Nomination Committee at Mithril Berhad.

Alan joined PriceWaterhouse London in 1982 where he subsequently qualified as a Chartered Accountant (ICAEW). He returned to Malaysia in 1986 where he held several finance positions with various subsidiaries of Shell Malaysia. Since 1992, Alan has been the Group Finance Director for several companies including CarnaudMetalbox Malaysia Sdn Bhd, Tractors Malaysia Holdings Berhad and Consolidated Plantations Berhad. In 2006, he was transferred to Sime Darby Berhad and as Director, Special Projects Division.

He holds a Bachelors Degree in Accountancy and Computer Science from the University of Wales, United Kingdom. By qualification, Alan is a Chartered Accountant and he is also a member of the Malaysian Institute of Accountants.

Alan does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the past 10 years.

Alan Hamzah SendutAged 47, MalaysianIndependent Non-Executive Director

Chairman of the Audit CommitteeChairman of the Nomination CommitteeMember of the Remuneration CommitteeMember of the Risk Management CommitteeChairman of the ESOS Committee

MITHRIL BERHAD10


Dato’ Abdul Majid bin Mohamed was appointed as an Independent Non-Executive Director to the Company’s Board of Directors on 13 December 2006. He was then appointed the Chairman of the Remuneration Committee, a member of the Audit Committee, a member of the Nomination Committee and a member of the Risk Management Committee on 12 January 2007. Prior to joining the Company, he held various senior ministerial positions and directorships in several private limited companies in Malaysia.

Amongst the positions held were Ambassador of Malaysia to Libya, Ambassador of Malaysia to the Republic of Korea, Ambassador of Malaysia to the Federal Republic of Germany, Ambassador of Malaysia to the United States of America and Deputy Secretary General with the Ministry of Foreign Affairs.

Dato’ Abdul Majid does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the past 10 years.

Dato’ Abdul Majid Bin MohamedAged 66, MalaysianIndependent Non-Executive Director

Chairman of the Remuneration CommitteeMember of the Audit CommitteeMember of the Nomination CommitteeMember of the Risk Management Committee

Muhamad Umar Swift was appointed as a Non-Independent Non-Executive Director to the Company’s Board of Directors on 12 October 2006.

At present, he is also the Chief Executive Officer/Group Managing Director of MAA Holdings Berhad.

Umar has more than 15 years experience in the areas of banking and financial services. He graduated with a Bachelor of Economics from the Monash University, Clayton, Australia, in December 1985 and started his career with Price Waterhouse, Chartered Accountants in January 1986. He began his career in the banking industry in November 1992 as Manager, Corporate Finance, for the Bank of Singapore (Australia) Limited where he held a number of positions before joining Gas Malaysia Sdn Bhd, in January 1996, as General Manager, Corporate Finance. He was promoted to Chief Executive Officer of Gas Malaysia in July 1997. He left Gas Malaysia in January 2002 to become a Practice Leader for the Utilities Business of Deloitte Consulting in Malaysia. He joined Maybank in April 2004, as Executive Vice President - Head, Enterprise Financial Services Group. In May 2006, Umar left Maybank and joined MAA Holdings Berhad as Deputy Chief Executive Officer. He was appointed as the Chief Executive Officer/Group Managing Director of MAA Holdings Berhad in September 2006.

Umar is an Associate of the Institute of Chartered Accountants in Australia, a member of AASA Certified Practising Accountant, a Fellow of Tax Institute of Australia and an Associate of the Institute of Securities Finance and Banking (ISFB) in Australia. He is also a Registered Accountant with the Malaysian Institute of Accountants.

Umar does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the past 10 years.

Muhamad Umar SwiftAged 43, BritishNon-Independent Non-Executive Director

MITHRIL BERHAD11

CHAIRMAN’S STATEMENT

On behalf of the Board of Directors, l am pleased to present to you the Annual Report of Mithril Berhad (“Mithril”) for the financial year ended 30 June 2007.

REVIEW OF FINANCIAL PERFORMANCE

This year continued to be a challenging year for the Group.

For the financial year ended 30 June 2007, Mithril generated revenue of approximately RM48 million as compared to approximately RM65 million for the previous financial year. This represents a decrease of 26% as compared to the previous financial year. The decrease in revenue is mainly due to the following:

i) Lower sales value as a result of the strengthening of Ringgit Malaysia currency against the US Dollar, as the sales of polyurethane products (“PU”) are denominated in USD;

ii) Increase in competition particularly from China; andiii) Temporary cessation of production and sales of bricks as compared to the previous year.

The Group incurred a higher loss before taxation of approximately RM15 million as compared to approximately RM10 million as reported in previous financial year. The increase in loss before taxation is mainly due to the following:

i) Decrease in revenue as compared to previous financial year;ii) Rising raw material costs, in particular, the chemicals for the production of the PU;iii) Impairment in value and loss on disposal of idle factory amounting to approximately RM2 million; andiv) Write off of damaged and obsolete stocks amounting to approximately RM3.8 million.

REVIEW OF OPERATIONS

Mithril continues to focus on its core business activities i.e. manufacturing and investment properties. For the financial year ended 30 June 2007, the manufacturing division contributed approximately RM41 million or 85% of revenue and the investment properties division contributed approximately RM7 million or 15% of revenue.

The main contributor of the manufacturing division is the manufacturing and trading of PU which operates under its wholly-owned subsidiary, Mithril Saferay Sdn Bhd. The PU business continues to face the challenges of increasing chemical prices as a result of higher crude oil prices and the shortage of supply during the financial year under review. To mitigate the increase in prices of raw material, the Group has initiated the price adjustment to transfer a portion of the cost to the customers. Apart from the price adjustment, Mithril is currently in the process of relocating and centralising its production facilities under one roof to further improve its production capacity and efficiency.

As a result of a fire which damaged a section of the bricks plant in the previous financial year, the bricks business has temporarily ceased and therefore, did not contribute materially to the Group during the financial year under review.

The investment properties i.e. the two (2) office buildings (Menara MAA) in Kota Kinabalu and in Kuching continues to generate a stable source of rental income and cash flows to the Group.

FUTURE OUTLOOK

The Group expects the coming financial year to continue to be challenging. The Group is currently undertaking the following key initiatives to arrest the declining performance of the Group:

i) to dispose of non-core assets to fund the working capital of the Group;ii) to relocate and centralise the production facilities of the polyurethane manufacturing division to further improve the production

capacity and efficiency; andiii) to restructure the existing loans to reduce the gearing and interest expense.

MITHRIL BERHAD12

CHAIRMAN’S STATEMENT( CONTINUED )

ACKNOWLEDGEMENT AND APPRECIATION

On behalf of the Board of Directors, I would like to welcome Dato’ Abdul Majid bin Mohamed and Mr Onn Kien Hoe, the independent non-executive directors who were appointed on 13 December 2006 and 12 January 2007 respectively.

l would also like to take this opportunity to express my gratitude to my fellow directors, management and all members of the Mithril team for their dedicated efforts and valuable contributions to ensure the continued growth of the Group.

Finally, I would like to thank our valued shareholders, customers and business associates for the support, trust and confidence placed upon us.

TUNKU YAHAYA @ YAHYA BIN TUNKU TAN SRI ABDULLAHEXECUTIVE CHAIRMAN

MITHRIL BERHAD13

CORPORATE GOVERNANCE

The Board of Directors of Mithril Berhad is committed to implement the highest standards of corporate governance which is imperative for the enhancement of shareholders’ value and essential to warrant the stability and sustainability of the Company’s financial performance.

This Statement sets out the application of the principles of the Corporate Governance and compliance with the Best Practices of the Malaysian Code of Corporate Governance (“the Code”) by the Company.

The Board is pleased to present the following on the application of principles and compliance with the best practices as set out in the Code for the financial year ended 30 June 2007.

BOARD OF DIRECTORSThe Board is aware of its responsibility to ensure that all decisions to be made by the Group should take into consideration the effects on the shareholders including minority shareholders. The Board also acknowledges that it is the duty of the Board of Directors to act in the best interest of the Group and the Company at all times.

The Board has delegated specific responsibilities to 4 sub-committees namely the Audit Committee, the Nomination Committee, the Remuneration Committee and the Risk Management Committee. These Committees have the authority to examine particular issues and will report to the Board with their recommendations. The ultimate responsibility for the final decision on all matters, however, rests with the Board.

Board Composition and Balance

The composition of the Board reflects a balance with a mix of technical, administrative and business experiences that have been vital to the direction of the Group.

The Board currently has 8 members comprising the following : -• 1 Executive Chairman• 1 Managing Director/Chief Executive Officer• 1 Executive Director• 2 Non-Independent Non-Executive Directors• 3 Independent Non-Executive Directors

The profiles of the Directors are set out on pages 7 to 10 of this Annual Report.

There is a clear division of responsibility between the Chairman and Chief Executive Officer to ensure there is a balance of power and authority.

The Chairman is primarily responsible for the orderly conduct of Board Meetings and meetings of shareholders and to ensure that all Directors are properly briefed and supplied timely information on financial, operational, legal, regulatory, corporate and strategic matters. The Chief Executive Officer is responsible for the day-to-day management of the Group in ensuring that strategies, policies and matters approved by the Board and/or the respective Board Committees are effectively implemented. The separation of duties together with the ratio of Board membership between Executive and Non Executive Directors ensures that there is a balance of power and authority at the head of the Group.

Board meetings

The Board meets at least four (4) times each year with additional meetings being convened as and when necessary. During the financial year the Board met 10 times, where it deliberated and considered a variety of matters including the Group’s strategic plans, financial results, business acquisitions and management authority limits. In the intervals between Board meetings for exceptional matters requiring urgent decision, Board approvals are sought via circular resolutions, which are attached with sufficient information required to make an informed decision.

Details of the Board attendance at meetings for the financial year ended 30 June 2007 are set out below:

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CORPORATE GOVERNANCE( CONTINUED )

Directors DesignationNumber of meetings

attended

Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah Executive Chairman 10/10

Razman Hafidz bin Abu Zarim Managing Director/Chief Executive Officer 9/10

Sim Lye Watt Executive Director 8/10

Yeo Took Keat Non-Independent Non-Executive Director 10/10

Muhamad Umar Swift Non-Independent Non-Executive Director 8/8

Alan Hamzah Sendut Independent Non-Executive Director 8/10

Onn Kien Hoe Independent Non-Executive Director 4/4

Dato’ Abdul Majid bin Mohamed Independent Non-Executive Director 5/5

* Dato’ Abdul Majid bin Mohamed and Onn Kien Hoe were appointed on 13 December 2006 and 12 January 2007 respectively.

All Directors have complied with the minimum attendance at Board Meetings as stipulated in the Listing Requirements of the Bursa Securities Malaysia Berhad during the financial year.

Supply of Information

The Board is entitled to unrestricted, direct and timely access to all information necessary to facilitate them to perform their duties. All agenda and board papers containing information relevant to the business of the meeting including information on major financial, operational and corporate matters in relation to the activities and performance of the Group are provided to the Board members to enable them to participate at the Board meetings.

The Directors are regularly updated by the Company Secretary on new statutory requirements relating to the duties and responsibilities of Directors. All Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that Board procedures are followed.

Appointment and Re-election

In accordance with the Company’s Memorandum and Articles of Association, one third of the Board members (including Managing Director) are required to retire at every Annual General Meeting and, if they offer themselves for re-election, be subjected to re-election by shareholders.

Newly appointed Directors shall hold office until the next Annual General Meeting and shall then be eligible for re-election by the shareholders. All Directors shall retire from office at least once in every three (3) years but shall be eligible for re-election. Directors who are appointed before the next AGM will retire and be subject to re-election by shareholders at the next AGM.

In accordance with Section 129(6) of the Companies Act, 1965, Directors whose age are seventy years and above are required to submit themselves for re-appointment by shareholders annually.

The appointment of new Directors is the responsibility of the Board after considering recommendations of the Nomination Committee. The Nomination Committee was established by the Board on 10 December 2003, with the responsibilities of proposing new nominees for the Board including the Board’s committees and assessing the performance of each individual Director and overall effectiveness of the Board on an ongoing basis. The members of the Nomination Committee are:

1) Alan Hamzah Sendut (Chairman)2) Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah 3) Dato’ Abdul Majid bin Mohamed4) Onn Kien Hoe

Directors’ Training

The Board acknowledges that continuous education is vital in keeping abreast with changes in laws and regulations, business environment and corporate governance developments, besides enhancing professionalism and knowledge in enabling them to discharge their duties more effectively. Accordingly, the Group is committed to continuously provide pertinent educational programmes to the Board of Directors through internal and external means. All Directors receive updates from time to time on relevant new laws and regulations to enhance their business acumen and skills to meet changing commercial risks and challenges.

MITHRIL BERHAD15


Details of the seminars and training programmes attended by the Board members during the financial year ended 30 June 2007 are as follows:

• Corporate Fraud• Macro Economics: Malaysia Scenario 2006• Innovation and Branding• Talk on Macroeconomics - Local and Global• Financial Reporting Standards• Understanding Takaful• Macroeconomics

DIRECTORS’ REMUNERATION

A summary of the remuneration of the Directors for the period distinguished between Executive and Non-Executive Directors in aggregate, with categorisation into appropriate components and number of Directors are set out below:

Executive DirectorsRM

Non-Executive DirectorsRM

TotalRM

Fees* - 118,000 118,000

Salary and other emoluments* 873,477 - 873,477

TOTAL (RM) 873,477 118,000 991,477

* Included in the directors’ fees and salary and other emoluments are RM29,000 of directors’ fees and RM275,300 of salary and other emoluments respectively, paid and payable to directors who have resigned during the financial year.

Range of Directors’ RemunerationNumber of Executive

DirectorsNumber of Non-Executive

DirectorsTotal

0 – RM50,000 - 5 5

RM50,001 – RM100,000 - - -

RM100,001 – RM200,000 1 - 1

RM200,001 – RM300,000 1 - 1

RM300,001 – RM400,000 - - -

RM400,001 – RM500,000 1 - 1

The Remuneration Committee was established by the Board on 10 December 2003 with the main responsibility to recommend to the Board the remuneration of the Executive Directors in all its forms. The members of the Remuneration Committee are:

1) Dato’ Abdul Majid bin Mohamed (Chairman)2) Onn Kien Hoe3) Alan Hamzah Sendut4) Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah

INVESTORS’ RELATIONS AND SHAREHOLDERS’ COMMUNICATION

The Board recognises the importance to keep the shareholders and investors well-informed of all major developments of the Group on a timely basis. Public announcements are made to the Bursa Malaysia Securities Berhad (“Bursa”) in respect of the Group’s corporate proposals, financial reporting and other required announcements to facilitate the dissemination of information to the shareholders and investors. Apart from the mandatory announcements to the Bursa, the Group also maintains a corporate website (www.mithril.com.my) for public access of the Group information.

The Company’s AGM provides an opportunity for direct interaction with shareholders and investors where questions and concerns raised by the shareholders, on operations, financial performance and major developments of the Group could be addressed.

MITHRIL BERHAD16

ACCOUNTABILITY AND AUDIT

Financial Reporting

The Board aims to provide and present a balanced and meaningful assessment of the Group’s financial performance and prospects at the end of the financial year, primarily through the annual financial statements and quarterly announcements of the results to shareholders. The Board is assisted by the Audit Committee to oversee the Group’s financial reporting process and the quality of its financial reporting.

The Audit Committee holds quarterly meetings to review matters including the Group’s financial reporting, the audit plans for the year as well as to deliberate the findings of the internal and external auditors.

The Directors’ Responsibility Statement for preparing the financial statements is published on page 17 of this Annual Report.

Internal Control

The Board acknowledges the responsibility for maintaining a sound system of internal control, which covers not only financial controls but also the operational, compliance and risk management. The Board has established the Audit Committee, which is assisted by an independent internal audit function in the discharge of its duties and responsibilities.

The Group’s Statement of Internal Controls is set out on page 19 of this Annual Report.

Risk Management

The Board has established the Risk Management Committee to develop and implement a formal risk management policy for the Group. The implementation of the risk management program will ensure that the risk exposure of the Group will be managed more effectively.

The members of the Risk Management Committee are:

1) Onn Kien Hoe (Chairman)2) Dato’ Abdul Majid bin Mohamed3) Alan Hamzah Sendut4) Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah

Relationship With Auditors

The Company has established transparent and appropriate relationships with its auditors through its Audit Committee. The roles of the Audit Committee in relation to the auditors are described on pages 17 to 18 of the Annual Report.

Discussions are carried out between the Audit Committee with management on actions taken on issues identified by Board members or the external and internal auditors. The Committee has full access to the auditors, both external and internal who in turn have access at all times to the Chairman and members of the Committee.


MITHRIL BERHAD17

DIRECTORS’ RESPONSIBILITY STATEMENT

& AUDIT COMMITTEE REPORT

DIRECTORS” RESPONSIBILITY STATEMENT

The Directors are required by the Companies Act 1965 to prepare financial statements for each financial year, which gives a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year and of the results and the cash flows for the year then ended.

In preparing the financial statements, the Directors ensure that suitable accounting policies have been used and applied consistently and that reasonable and prudent judgements and estimates have been made. All applicable approved financial reporting standards in Malaysia have been complied with and the Directors confirm that the financial statements have been prepared on the going concern basis. In addition, the Directors also ensure that reasonable steps are taken to safeguard the assets of the Group.

The Directors are also responsible for ensuring proper accounting and other records and the registers required to be kept by the Companies Act 1965 have been properly kept in accordance with the provisions of the Act.

This statement is made in accordance with a resolution of the Board of Directors dated 2 October 2007.

AUDIT COMMITTEE REPORT

The Audit Committee was established by the Board of Directors on 10 December 2003.

COMPOSITION

The members of the Audit Committee who have served during the financial year ended 30 June 2007 are as follows:

MEMBERS Designation Directorship

Alan Hamzah Sendut Chairman Independent Non-Executive Director

Onn Kien Hoe Member Independent Non-Executive Director

Dato’ Abdul Majid bin Mohamed Member Independent Non-Executive Director

Yeo Took Keat Member Non-Independent Non-Executive Director

TERMS OF REFERENCE

Objective

The primary objective of the Audit Committee is to assist the Board in fulfilling its fiduciary responsibilities to the financial, accounting, management controls, financial reporting and business ethics practices of the Group and to ensure that such practices conform to the highest possible standards of corporate governance.

Membership

The Audit Committee shall be appointed by the Board from amongst the Directors and shall consist of not less than three (3) members, the majority of whom including the Chairman shall be Independent Non-Executive Directors.

The Chairman of the Committee shall be an Independent Non-Executive Director appointed by the Board.

At least one (1) member of the Committee shall be a member of the Malaysian Institute of Accountants, or a member of an approved Association of Accountants with a minimum of three (3) years experience.

No alternate director shall be appointed as a member of the Audit Committee. Any vacancy which affects the composition must be filled up within three (3) months.

Authority

The Committee is fully authorised by the Board to independently investigate without interference from any party, any activities within its terms of reference. It shall have: • full and unrestricted access to any information pertaining to the Group;• direct communication channels with both the external and internal auditors;• full access to any employee or member of the management; and• the resources which are required to perform its duties.

MITHRIL BERHAD18

AUDIT COMMITTEE REPORT

Responsibilities and Duties

The duties of the Committee shall be:• To consider the appointment and dismissal of the external auditor and the audit fee;• To review with the external auditor, the evaluation of the system of internal controls;• To discuss the nature and scope of the audit by the external auditor before commencement;• To discuss the outcome of the interim and final audits and any other matters;• To review the external auditors’ management letters and management’s response;• To review any financial information for publication, including quarterly and annual financial statements, before submission to the

Board;• To assess adequacy and relevance of scope, functions and resources of internal audit and necessary authority to carry out its

work;• To review the effectiveness of internal control systems and to consider major findings of internal investigations and management’s

response;• To review risk and corporate governance related issues;• To review related party transactions and situations where conflict of interests may arise including any transactions, procedures or

course of conduct that raise questions of management integrity; and • To perform any other functions as may be agreed upon by the Board.

Meetings and Attendance

Meetings shall be held not less than four (4) times a year. In order to form a quorum in respect of a meeting of the committee, the majority of members present must be independent Directors. The Committee may, as and when considered necessary, invite other Board members and request the presence of senior management members to attend the meetings.

During the financial year ended 30 June 2007, the Audit Committee held a total of 6 meetings and the attendance was as follows:

MEMBERS NUMBER OF MEETINGS ATTENDED

Alan Hamzah Sendut (Chairman) 5/6

Onn Kien Hoe 2/2

Dato’ Abdul Majid bin Mohamed 2/2

Yeo Took Keat 5/6

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

During the financial year ended 30 June 2007, the activities carried by the Audit Committee include:

• Reviewed the unaudited quarterly reports of the Group before recommending to the Board of Directors for their approval and release of the Group’s results to Bursa Securities;

• Reviewed with the external auditors on the audit planning memorandum of the Group for the financial year ended 30 June 2007;

• Reviewed with the external auditors the results and issues arising from the audit and their resolutions;• Reviewed with the internal auditors the internal audit plans, findings and recommendations; and• Reviewed with the external auditors the impact of new accounting standards on the Group’s performance and its state of

readiness.

MITHRIL BERHAD19

STATEMENT OF INTERNAL CONTROL

Board Responsibilities

The Board acknowledges its responsibilities for maintaining sound internal control systems to safeguard shareholders’ interests and the Group’s assets and for reviewing the adequacy and integrity of these systems. Such systems, however, are designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable rather than absolute assurance against material misstatement or loss. The process to identify, evaluate and manage the significant risks is a concerted and continuing effort throughout the financial year under review. The process is regularly reviewed by the Audit Committee and the Board of Directors of Mithril Berhad.

The Board confirms that the risk management process is an ongoing process to identify, evaluate and manage significant risks to effectively mitigate the risks that may impede the achievement of the Group’s business and corporate objectives. The Board reviews the process on a regular basis to ensure proper management of risks and measures are taken to mitigate any weaknesses in the control environment.

Risk Management

The Board has taken steps during the period to implement an ongoing process for identifying, evaluating, managing and reviewing any changes in the risks faced by the business in the Group. The risk management process involves the business and functional units of the Group in identifying significant risks impacting the achievement of business objectives of the Group. It also involves the assessment of the impact and likelihood of such risks and of the effectiveness of controls in place to manage them.

Steps are being taken to embed internal control and risk management further into the operations of the business and to deal with areas of improvement which come to the management’s and Board’s attention.

System of Internal Control

The system of internal control maintained by the Group serves to safeguard the assets of the Group, identify and manage risks affecting the Group, ensure compliance with statutory and regulatory requirements and ensure achievement of operational objectives.

The framework and key processes that the Board established in reviewing the adequacy and integrity of the systems of internal control include the following:

• In considering business proposals and operational issues, the Board evaluates risks involved and seeks expert advice, if necessary, to make an effective decision in the best interest of the Group.

• The Group has a management structure with defined responsibilities and appropriate reporting structure including proper approval and authority limits.

• The Group’s management meets regularly to review the operational and financial performance of the businesses in the Group and its subsidiaries, and to discuss key business, operational and management issues.

• The Board receives and reviews quarterly performance reports on the Group and its subsidiaries from the management, and discusses on significant business and risk issues.

For the financial year ended 2007, the internal audit function was performed by MAA Holdings Berhad, a substantial shareholder of the Company. The internal audit function reviewed the business processes to assess the effectiveness of the systems of internal control and highlighted significant risks impacting the Group with recommendation for improvement. The existing system of internal controls was satisfactory and has not resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group’s annual report.

MITHRIL BERHAD20

ADDITIONAL COMPLIANCE INFORMATION

1. Share Buyback During the financial year, there were no share buybacks by the Company.

2. American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) Programme During the financial year, the Company did not sponsor any ADR or GDR programmes.

3. Imposition of Sanctions/ Penalties There were no sanctions and/or penalties imposed on the group, directors or management by the relevant regulatory bodies.

4. Non-Audit Fees Non-audit fees payable to external auditors for the financial year ended 30 June 2007 was RM5,000.00.

5. Profit Estimate, Forecast and Projection This note is not applicable.

6. Profit Guarantee There were no profit guarantees given by the Company during the financial year.

7. Material Contracts There were no material contracts involving Directors and major shareholders for the financial year except for those disclosed

under the Recurrent Related Party Transactions.

8. Contracts Relating to Loans There were no contracts relating to loans by the Company and its subsidiaries during the financial year.

9. Revaluation of Landed Properties There was no revaluation of landed properties during the financial year.

10. Recurrent Related Party Transactions The aggregate value of transactions conducted during the financial year in accordance with the Shareholders’ Mandate

obtained in the last annual general meeting held on 30 November 2006 were: -

No. Transacting Party Nature of TransactionRelated

PartyNature of Interest

Actual value of transactions from

1 July 2006 to30 June 2007

(RM)

1. Mithril Berhad Office rental charged by Mithril to MAA Assurance for rental of property known as Menara MAA KK situated at Kota Kinabalu, Sabah and for the total area built-up area of 189,727 sq. ft. at a rate of RM2.28 per sq. ft.

MAA Assurance

TYahaya is deemed interested in MAA Assurance by virtue of his relationship with TY who has substantial interest in MAA Assurance via MAAH.

YTK is representing the interest of MAAH.

MUS is representing the interest of MAAH.

5,200,000

2. Mithril Berhad Office rental charged by Mithril to MAA Assurance for renting of property known as Menara MAA Kuching situated at Kuching, Sarawak and for the total area of 50,653 sq. ft at a rental rate of RM2.63 sq. ft.

MAA Assurance




1,600,000

MITHRIL BERHAD21

ADDITIONAL COMPLIANCE INFORMATION

No. Transacting Party Nature of TransactionRelated

PartyNature of Interest

Actual value of transactions from

1 July 2006 to30 June 2007

(RM)

3. Mithril Berhad Office rental charged by Related Party to Mithril for an office space situated at Menara MAA, KL and for the total area of 3,880 sq. ft at a rental rate of RM3.40 per sq. ft.

MAAAssurance




158,304

Note:TYahaya is Tunku Yahaya @ Yahya bin Tunku Tan Sri AbdullahTY is Tunku Dato’ Ya’acob bin Tunku Tan Sri AbdullahYTK is Yeo Took KeatMUS is Muhamad Umar SwiftMAA Assurance is Malaysian Assurance Alliance BerhadMAAH is MAA Holdings Berhad

( CONTINUED )

MITHRIL BERHAD22

CONTENTS

DIRECTOR’S REPORT 23

STATEMENT BY DIRECTORS 26

STATUTORY DECLARATION 26

REPORT OF THE AUDITORS 27

INCOME STATEMENTS 28

BALANCE SHEETS 29

STATEMENTS OF CHANGES IN EQUITY 30

CASH FLOW STATEMENTS 32

NOTES TO THE FINANCIAL STATEMENTS 34

DIRECTORS’ REPORT & FINANCIAL STATEMENTS

MITHRIL BERHAD23

DIRECTORS’ REPORT

The directors hereby present their report together with the audited financial statements of the Group and of the Company for the financial year ended 30 June 2007.

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and property investment.

The principal activities of the subsidiaries are described in Note 14 to the financial statements. There have been no significant changes in the nature of the principal activities of the subsidiaries during the financial year.

RESULTS Group Company RM RM

Net loss for the year 15,174,299 1,262,271

Attributable to: Equity holders of the Company 15,174,299 1,262,271Minority interests - -

15,174,299 1,262,271

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

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature other than:

(a) the effects arising from the changes in accounting policies due to the adoption of the new and revised FRSs which has resulted in a decrease in the Group’s loss for the year by RM947,331 as disclosed in Note 2.3(e)(ii) to the financial statements; and

(b) the effects arising from changes in estimates where the estimated useful lives of moulds were revised resulting in a decrease of the Group’s loss for the year by RM225,049 as disclosed in Note 2.4 to the financial statements.

DIVIDEND

No dividend has been paid or declared by the Company since the end of the previous financial year.

The directors do not recommend the payment of any dividend in respect of the current financial year.

DIRECTORS

The names of the directors of the Company in office since the date of the last report and at the date of this report are:

Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah Razman Hafidz bin Abu Zarim Yeo Took Keat Alan Hamzah Sendut Sim Lye Watt Muhamad Umar Swift Dato’ Abdul Majid bin Mohamed (appointed on 13 December 2006)Onn Kien Hoe (appointed on 12 January 2007)Dato’ Narayanan a/l K.S.A Narayanan (resigned on 05 February 2007)Yeoh Hong Hwang (resigned on 13 December 2006)Rosli bin Ismail (resigned on 13 December 2006)

DIRECTORS’ BENEFITS

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate, other than those arising from the share options granted under the Employee Share Options Scheme.

Since the end of the previous financial year, no director has received nor become entitled to receive a benefit (other than benefits

MITHRIL BERHAD24

included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of full time employees of the Company as shown in Note 9 to the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares and options over shares in the Company and its related corporations during the financial year were as follows:

Number of Ordinary Shares of RM1 Each 1.7.2006 Acquired Sold 30.6.2007

The Company Direct Interest: Yeo Took Keat 100 - - 100

Indirect Interest: * Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah 36,608,739 - - 36,608,739

Number of Options Over Ordinary Shares of RM1 Each 1.7.2006 Granted Exercised 30.6.2007 The Company Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah 500,000 - - 500,000

* Deemed interested through shares held in MAA Holdings Berhad and MAA Credit Sdn. Bhd.

None of the other directors in office at the end of the financial year had any interests in shares in the Company or its related corporations during the financial year.

EMPLOYEE SHARE OPTIONS SCHEME

The Mithril Berhad Employee Share Options Scheme (“ESOS”) is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held on 26 December 2003.

The salient features of the scheme are disclosed in Note 30 to the financial statements.

OTHER STATUTORY INFORMATION

(a) Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

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

(b) At the date of this report, the directors are not aware of any circumstances which would render:

(i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

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

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.

DIRECTORS’ REPORT( CONTINUED )

MITHRIL BERHAD25

DIRECTORS’ REPORT

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

(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

(f) In the opinion of the directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and

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

AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors dated 2 October 2007.

Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah Razman Hafidz bin Abu Zarim

( CONTINUED )

MITHRIL BERHAD26

STATEMENT BY DIRECTORS & STATUTORY DECLARATION

STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965

We, Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah and Razman Hafidz bin Abu Zarim, being two of the directors of Mithril Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 28 to 79 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2007 and of the results and the cash flows of the Group and of the Company for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the directors dated 2 October 2007.

Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah Razman Hafidz bin Abu Zarim

STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965

I, Chong Kien Eng @ Teo Kien Eng, being the officer primarily responsible for the financial management of Mithril Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 28 to 79 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, l960.

Subscribed and solemnly declared by the abovenamed Chong Kien Eng @ Teo Kien Eng at Kuala Lumpur in the Federal Territory on 2 October 2007 Chong Kien Eng @ Teo Kien Eng

Before me,

MITHRIL BERHAD27

REPORT OF THE AUDITORS

REPORT OF THE AUDITORS TO THE MEMBERS OF MITHRIL BERHAD

We have audited the financial statements set out on pages 28 to 79. These financial statements are the responsibility of the Company’s directors.

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

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

In our opinion:

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

(i) the financial position of the Group and of the Company as at 30 June 2007 and of the results and the cash flows of the Group and of the Company for the year then ended; and

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

(b) the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

We have considered the financial statements and the auditors’ report thereon of the subsidiary of which we have not acted as auditors, as indicated in Note 14 to the financial statements, being financial statements that have been included in the consolidated financial statements.

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

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

Ernst & Young Pushpanathan a/l S.A. Kanagarayar AF: 0039 No.1056/03/09(J/PH) Chartered Accountants Partner

Kuala Lumpur, Malaysia2 October 2007

MITHRIL BERHAD28

INCOME STATEMENTS

INCOME STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007

Group Company Note 2007 2006 2007 2006 RM RM RM RM

Revenue 3 47,628,065 64,509,781 6,845,000 8,060,000Cost of sales 4 (40,885,951) (57,113,881) - -

Gross profit 6,742,114 7,395,900 6,845,000 8,060,000Other operating income 5 6,400,085 4,139,960 265,869 2,486,466Selling and marketing expenses (1,620,769) (2,282,626) - -Administrative expenses (19,155,583) (12,071,995) (3,059,586) (2,396,899)

Operating (loss)/profit (7,634,153) (2,818,761) 4,051,283 8,149,567Finance costs 6 (7,184,670) (8,065,409) (5,291,720) (5,501,005)

(Loss)/profit before tax 7 (14,818,823) (10,884,170) (1,240,437) 2,648,562Income tax expense 10 (355,476) 454,754 (21,834) (1,336,158)

(Loss)/profit for the year (15,174,299) (10,429,416) (1,262,271) 1,312,404

Attributable to:Equity holders of the Company (15,174,299) (10,429,416) (1,262,271) 1,312,404Minority interests - - - -

(15,174,299) (10,429,416) (1,262,271) 1,312,404

Loss per share attributable to equity holders of the Company (sen):Basic loss per share for the year 11 (14) (10)

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

MITHRIL BERHAD29

BALANCE SHEETS

BALANCE SHEETS AS AT 30 JUNE 2007

Group Company Note 2007 2006 2007 2006 RM RM RM RM (restated)

ASSETSNon-current assetsProperty, plant and equipment 12 51,859,196 59,037,008 7,587 9,709Prepaid lease payments 13 4,720,017 5,025,729 - -Investment in subsidiaries 14 - - 43,332,538 43,647,543Investment properties 15 100,000,000 100,340,000 100,000,000 100,000,000Goodwill on consolidation 16 16,815,128 16,815,128 - -Other investments 17 3,720 3,720 - -

173,398,061 181,221,585 143,340,125 143,657,252

Current assetsNon-current asset held for sale 18 340,000 - - -Inventories 19 13,762,695 20,206,814 - -Trade and other receivables 20 7,814,098 8,440,084 3,023,298 46,255Tax recoverable 209,959 377 209,582 -Cash and bank balances 22 15,116,135 9,213,241 14,288,353 8,193,264

37,242,887 37,860,516 17,521,233 8,239,519

TOTAL ASSETS 210,640,948 219,082,101 160,861,358 151,896,771

EQUITY AND LIABILITIESEquity atttributable to equity holders of the CompanyShare capital 30 109,976,472 109,976,472 109,976,472 109,976,472Share premium 80,339,088 80,339,088 80,339,088 80,339,088Revaluation reserves 31 14,858,647 27,423,866 - 13,056,000Equity components of: RCSLS 25 12,205,861 12,205,861 12,205,861 12,205,861 ICCPS 27 10,518,927 10,518,927 10,518,927 10,518,927 ICULS 28 46,031,405 46,031,405 46,031,405 46,031,405Accumulated losses (192,856,399) (190,965,634) (182,829,426) (194,623,155)

Total equity 81,074,001 95,529,985 76,242,327 77,504,598

Non-current liabilitiesBorrowings 23 79,929,992 72,962,980 66,955,049 58,529,851Deferred tax liabilities 32 838,826 1,358,137 669,825 470,821

80,768,818 74,321,117 67,624,874 59,000,672

Current liabilitiesBorrowings 23 25,118,900 23,274,888 1,200,000 -Trade and other payables 29 22,030,176 23,994,060 15,794,157 14,879,602Current tax payable 1,649,053 1,962,051 - 511,899

48,798,129 49,230,999 16,994,157 15,391,501

Total liabilities 129,566,947 123,552,116 84,619,031 74,392,173

TOTAL EQUITY AND LIABILITIES 210,640,948 219,082,101 160,861,358 151,896,771


MITHRIL BERHAD30

STATEMENTS OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007

Non-Distributable Equity Component of Irredeemable Cumulative Convertible Equity Share Share Revaluation Preference Component of Accumulated Capital Premium Reserves Shares Loan Stocks Losses Total Note RM RM RM RM RM RM RM (Note 30) (Note 31) (Note 27)

At 1 July 2005 107,684,072 80,339,088 80,000 10,518,927 59,222,312 (180,536,218) 77,308,181Issue of share capital 2,292,400 - - - - - 2,292,400Equity components of: RCULS 26 - - - - (276,243) - (276,243) ICULS 28 - - - - (708,803) - (708,803)Loss for the year - - - - - (10,429,416) (10,429,416)Revaluation surplus - - 27,343,866 - - - 27,343,866 At 30 June 2006 109,976,472 80,339,088 27,423,866 10,518,927 58,237,266 (190,965,634) 95,529,985 At 1 July 2006 109,976,472 80,339,088 27,423,866 10,518,927 58,237,266 (190,965,634) 95,529,985Effects of adopting FRS 140 - - (13,146,000) - - 13,146,000 - At 1 July 2006 (restated) 109,976,472 80,339,088 14,277,866 10,518,927 58,237,266 (177,819,634) 95,529,985Loss for the year - - - - - (15,174,299) (15,174,299)Realisation of revaluation reserve upon disposal of property, plant and equipment 31 - - (137,534) - - 137,534 -Reversal of deferred tax liabilities 32 - - 718,315 - - - 718,315 At 30 June 2007 109,976,472 80,339,088 14,858,647 10,518,927 58,237,266 (192,856,399) 81,074,001


MITHRIL BERHAD31

STATEMENTS OF CHANGES IN EQUITY

COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007

Non-Distributable Equity Component of Irredeemable Cumulative Convertible Equity Share Share Revaluation Preference Component of Accumulated Capital Premium Reserves Shares Loan Stocks Losses Total Note RM RM RM RM RM RM RM (Note 30) (Note 31) (Note 27)

At 1 July 2005 107,684,072 80,339,088 - 10,518,927 59,222,312 (195,935,559) 61,828,840Issue of share capital 2,292,400 - - - - - 2,292,400Equity components of: RCULS 26 - - - - (276,243) - (276,243) ICULS 28 - - - - (708,803) - (708,803)Profit for the year - - - - - 1,312,404 1,312,404Revaluation surplus - - 13,056,000 - - - 13,056,000 At 30 June 2006 109,976,472 80,339,088 13,056,000 10,518,927 58,237,266 (194,623,155) 77,504,598 At 1 July 2006 109,976,472 80,339,088 13,056,000 10,518,927 58,237,266 (194,623,155) 77,504,598Effects of adopting FRS 140 - - (13,056,000) - - 13,056,000 - At 1 July 2006 (restated) 109,976,472 80,339,088 - 10,518,927 58,237,266 (181,567,155) 77,504,598Loss for the year - - - - - (1,262,271) (1,262,271) At 30 June 2007 109,976,472 80,339,088 - 10,518,927 58,237,266 (182,829,426) 76,242,327


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MITHRIL BERHAD32

CASH FLOW STATEMENTS

CASH FLOW STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2007


CASH FLOWS FROMOPERATING ACTIVITIES(Loss)/profit before tax (14,818,823) (10,884,170) (1,240,437) 2,648,562Adjustments for: Depreciation of property, plant and equipment 7 5,886,472 4,506,150 2,122 911 Amortisation of prepaid lease payments 7 305,712 184,770 - - Amortisation of goodwill - 947,331 - - Interest expense 6 7,184,670 8,065,409 5,291,720 5,501,005 Interest income 5 (266,151) (155,939) (265,869) (142,381) Doubtful debts recovered 5 (38,000) - - (2,344,085) Allowance for doubtful debts 7 800,912 2,782,931 - - Reversal of provision for doubtful debts 7 - (8,220) - - Management fees from a subsidiary - - (45,000) (1,260,000) Write down of inventories 7 3,876,266 - - - Impairment losses: - Plant and machineries 7 - 1,691,346 - - - Land and buildings 7 843,984 46,593 - - Loss on disposal of property, plant and equipment 7 1,120,763 - - - Write-off of property, plant and equipment 7 11,364 - - - Writeback of over-provision of liabilities 5 1,831,306) - - - Impairment loss on unquoted investment 7 - - 515,001 - Provision for insurance claims 7 (1,966,072) (1,481,223) - -

Operating profit before working capital changes 1,109,791 5,694,978 4,257,537 4,404,012 Decrease in inventories 2,567,853 1,172,278 - - Decrease/(increase) in receivables 1,829,143 1,163,009 (2,977,043) 7,979,433 Increase/(decrease) in payables 933,337 2,112,811 25,644 (1,454,706) Development costs incurred and deferred (697,281) - - -

Cash generated from operations 5,742,843 10,143,076 1,306,138 10,928,739Taxes paid (679,052) (838,215) (544,311) (344,311)

Net cash generated from operating activities 5,063,791 9,304,861 761,827 10,584,428

CASH FLOWS FROMINVESTING ACTIVITIESInterest received 266,151 155,939 265,869 144,284Purchase of property, plant and equipment 12 (1,305,762) (4,314,899) - (10,620)Proceeds from disposal of property, plant and equipment 433,000 - - -Increase in investment in subsidiaries - - (199,996) -

Net cash (used in)/generated from investing activities (606,611) (4,158,960) 65,873 133,664

MITHRIL BERHAD33

CASH FLOW STATEMENTS


CASH FLOWS FROMFINANCING ACTIVITIESProceeds from term loans 13,727,803 5,138,970 17,040,975 -Repayment of hire purchase and lease financing (58,139) (542,461) - -Repayment of term loans (5,040,975) (564,804) 5,040,975) -Interest paid (7,449,430) (7,260,698) (6,732,611) (6,626,000)

Net cash generated from/ (used in) financing activities 1,179,259 (3,228,993) 5,267,389 (6,626,000)

NET INCREASE IN CASH AND CASH EQUIVALENTS 5,636,439 1,916,908 6,095,089 4,092,092CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,487,973 4,571,065 8,193,264 4,101,172

CASH AND CASHEQUIVALENTS AT END OF YEAR 22 12,124,412 6,487,973 14,288,353 8,193,264

Cash and cash equivalents comprise: Fixed deposits with licensed banks 14,090,000 6,950,000 14,090,000 6,950,000 Cash and bank balances 1,026,135 2,263,241 198,353 1,243,264 Bank overdrafts (2,991,723) (2,725,268) - -

12,124,412 6,487,973 14,288,353 8,193,264


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MITHRIL BERHAD34

NOTES TO THE FINANCIAL STATEMENTS - 30 JUNE 2007

1. CORPORATE INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Second Board of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Suite 20.03, 20th Floor, Menara MAA, No.12, Jalan Dewan Bahasa, 50460 Kuala Lumpur.

The principal activities of the Company are investment holding and property investments. The principal activities of the subsidiaries are described in Note 14 to the financial statements. There have been no significant changes in the nature of the principal activities of the subsidiaries during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 2 October 2007.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation

The financial statements comply with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia. At the beginning of the current financial year, the Group and the Company had adopted new and revised FRSs which are mandatory for financial periods beginning on or after 1 January 2006 as described fully in Note 2.3.

The financial statements of the Group and the Company have also been prepared on a historical basis, except for freehold land and plant and machineries included within property, plant and equipment and investment properties that have been measured at their fair values.

The financial statements are presented in Ringgit Malaysia (RM).

2.2 Summary of Significant Accounting Policies

(a) Subsidiaries and Basis of Consolidation

(i) Subsidiaries Subsidiaries are entities over which the Group has the ability to control the financial and operating policies

so as to obtain benefits from their activities.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

(ii) Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries

as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Company.

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

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

Any excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable

NOTES TO THE FINANCIAL STATEMENTS

MITHRIL BERHAD35

2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.2 Summary of Significant Accounting Policies (cont’d)

(a) Subsidiaries and Basis of Consolidation (cont’d)

(ii) Basis of Consolidation (cont’d)

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

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

(b) Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(c) Property, Plant and Equipment, and Depreciation

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

Subsequent to recognition, property, plant and equipment except for freehold land and plant and machineries are stated at cost less accumulated depreciation and any accumulated impairment losses.

Freehold land and plant and machineries are stated at revalued amount, which is the fair value at the date of the revaluation less any accumulated impairment losses. Fair value is determined from the market-based evidence by appraisal that is undertaken by professionally qualified valuers. Revaluations are performed every five (5) years to ensure that the fair value of a revalued asset does not differ materially from that which would be determined using fair values at the balance sheet date. Any revaluation surplus is credited to the revaluation reserve included within equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss to the extent of the decrease previously recognised. A revaluation deficit is first offset against unutilised previously recognised revaluation surplus in respect of the same asset and the balance is thereafter recognised in profit or loss. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal or retirement of an asset, any revaluation reserve relating to the particular asset is transferred directly to retained earnings.

Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, at the following annual rates:

Buildings 2% - 4%Plant and machinery 5% - 10%Moulds 10%Office equipment, furniture and fittings 10% - 20%Motor vehicles 20%Renovation 20%

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

NOTES TO THE FINANCIAL STATEMENTS( CONTINUED )

MITHRIL BERHAD36



(c) Property, Plant and Equipment, and Depreciation (cont’d)

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference if any, between the net disposal proceeds and the net carrying amount is recognised in profit or loss and the unutilised portion of the revaluation surplus on that item is taken directly to retained earnings.

(d) Investment Properties

Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value. Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued.

Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the year in which they arise.

A property interest under an operating lease is classified and accounted for as investment property on a property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year in which they arise.

(e) Construction Contracts

Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs.

Where the outcome of a construction contract cannot be reliably estimated, contract revenue is recognised to the extent of the contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

When the total of costs incurred on construction contracts plus, recognised profits (less recognised losses), exceeds progress billings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurred plus, recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts.

(f) Impairment of Non-Financial Assets

The carrying amounts of assets, other than investment properties, construction contract assets, inventories and non-current assets held for sale, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss.

For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date or more frequently when indicators of impairment are identified.

For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If


MITHRIL BERHAD37



(f) Impairment of Non-Financial Assets (cont’d)

this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present values using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset.

Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.

(g) Inventories

Inventories are stated at lower of cost and net realisable value. Cost is determined using the first in, first out method. The cost of raw materials comprises costs of purchase. The costs of finished goods and work-in-progress comprise costs of raw materials, direct labour, other direct costs and appropriate proportions of manufacturing production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(h) Financial Instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instruments.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual

arrangements. Interest, gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are recognised directly in equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

(i) Cash and Cash Equivalents For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank

and deposits at call, net of outstanding bank overdrafts.

(ii) Other Non-current Investments Non-current investments other than investments in subsidiaries and investment properties are stated at cost

less impairment losses. On disposal of investment, the difference between net disposal proceeds and its carrying amount is recognised in profit or loss.


MITHRIL BERHAD38



(h) Financial Instruments (cont’d)

(iii) Receivables Receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate

is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

(iv) Payables Payables are stated at the fair value of the consideration to be paid in the future for goods and services

received.

(v) Interest Bearing Loans and Borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly

attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

(vi) Convertible Loan Stocks and Preference Shares The Convertible Loan Stocks and Preference Shares are regarded as compound instruments, consisting of

a liability component and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for equivalent loan stocks and preference shares. The difference between the proceeds of issue of the convertible loan stocks and preference shares and the fair value assigned to the liability component, representing the conversion option is included in equity. The liability component is subsequently stated at amortised cost using the effective interest rate method until extinguished on conversion or redemption whilst the value of the equity component is not adjusted in subsequent periods. Attributable transaction costs are apportioned and deducted directly from the liability and equity component based on their carrying amounts at the date of issue.

Under the effective interest rate method, the interest expense on the liability component is calculated by applying the prevailing market interest rate for equivalent loan stocks and preference shares to the instrument at the date of issue. The difference between this amount and the interest paid is added to the carrying value of the convertible loan stocks and preference shares.

(vii) Equity Instruments Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period

in which they are declared.

(i) Leases

(i) Classification A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards

incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All lease that do not transfer substantially all risks and rewards are classified as operating leases, with the following exceptions:

- Property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease (Note 2.2(d)); and

- Land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease.

(ii) Finance Leases - the Group as Lessee Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of

their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company’s incremental borrowings rate is used. Any initial direct costs are also added to the carrying amount of such assets.


MITHRIL BERHAD39



(i) Leases (cont’d)

(ii) Finance Leases - the Group as Lessee (cont’d) Lease payments are apportioned between the finance costs and the reduction of the outstanding liability.

Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 2.2(c).

(iii) Operating Leases - the Group as Lessee Operating lease payments are recognised as an expense on a straight-line basis over the term of the

relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straightline basis.

In the case of a lease of land and buildings, the minimum lease payments or the upfront payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The upfront payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term.

(iv) Operating Leases - the Group as Lessor Assets leased out under operating leases are presented on the balance sheets according to the nature of

the assets. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease (Note 2.2(m)(ii)).

(j) Income Tax Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected

amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method. In principle, deferred tax liabilities are recognised for all

taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised as income or an expense and included in the profit or loss for the period, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of any excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the combination.

(k) Employee Benefits

(i) Short term benefits Wages, salaries and social security contributions are recognised as an expense in the year in which the

associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.


MITHRIL BERHAD40



(k) Employee Benefits (cont’d)

(ii) Defined contribution plan Defined contribution plans are post-employment benefit plans under which the Company pays fixed

contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in the profit or loss as incurred. As required by law, the Group make such contributions to the Employees Provident Fund (“EPF”).

(iii) Equity Compensation Benefits The Mithril Berhad Employee Share Options Scheme (“ESOS’’), an equity-settled share-based compensation

plan, allows the Group’s employees to acquire ordinary shares of the Company. No compensation cost or obligation is recognised as the ESOS were granted before 31 December 2004. When the options are exercised, equity is increased by the amount of the proceeds received, net of any directly attributable transaction costs.

(l) Foreign Currencies

(i) Functional and Presentation Currency The individual financial statements of each entity in the Group are measured using the currency of the primary

economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.

(ii) Foreign Currency Transactions In preparing the financial statements of the individual entities, transactions in currencies other than the

entity’s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period.

(m) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be measured reliably. The following specific recognition criteria must also be met before revenue is recognised:

(i) Sale of Goods Revenue is recognised net of sales taxes and upon transfer of significant risks and rewards of ownership

to the buyer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(ii) Rental Income Rental income from investment property is recognised on a straight-line basis over the term of the lease.

(iii) Management Fees Management fees are recognised when services are rendered.

(iv) Construction Contracts Revenue from construction contracts is accounted for by the stage of completion method as described in

Note 2.2(e).

(v) Interest Income Interest income is recognised on an accrual basis using the effective interest method.


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MITHRIL BERHAD41



(n) Non-current Assets Held for Sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a

sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary.

Immediately before classification as held for sale, the measurement of the non-current assets is brought up-to-date in accordance with applicable FRSs. Then, on initial classification as held for sale, non-current assets are measured in accordance with FRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in profit or loss.

2.3 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised Financial Reporting Standards (FRSs)

On 1 July 2006, the Group and the Company adopted the following new and revised FRSs mandatory for financial periods beginning on or after 1 January 2006:

FRS 2 Share-based PaymentFRS 3 Business CombinationsFRS 5 Non-current Assets Held for Sale and Discontinued OperationsFRS 101 Presentation of Financial StatementsFRS 102 InventoriesFRS 108 Accounting Policies, Changes in Accounting Estimates and ErrorsFRS 110 Events after the Balance Sheet DateFRS 116 Property, Plant and EquipmentFRS 121 The Effects of Changes in Foreign Exchange RatesFRS 127 Consolidated and Separate Financial StatementsFRS 128 Investment in AssociatesFRS 131 Interests in Joint VenturesFRS 132 Financial Instruments: Disclosure and PresentationFRS 133 Earnings Per ShareFRS 136 Impairment of AssetsFRS 138 Intangible AssetsFRS 140 Investment Property

In addition to the above, the Group has also taken the option of early adoption of the FRS 117 Leases, for the financial

period beginning 1 January 2006.

The adoption of the above FRSs does not result in significant changes in accounting policies of the Group. The principal changes in accounting policies and their effects resulting from the adoption of the new and revised FRSs are discussed below:

(a) FRS 3: Business Combinations, FRS 136: Impairment of Assets and FRS 138: Intangible Assets

The new FRS 3 has resulted in consequential amendments to two other accounting standards, FRS 136 and FRS 138. In accordance with the transitional provisions, FRS 3 has been applied for business combinations for which the agreement date is on or after 1 January 2006.

Prior to 1 July 2006, goodwill was amortised from the date of initial recognition on a straight-line basis over its estimated useful life of 20 years and at the each balance sheet date, the Group assessed if there was any indication of impairment of the cash-generating unit in which the goodwill is attached to. The adoption of FRS 3 and the revised FRS 136 has resulted in the Group ceasing annual goodwill amortisation. Goodwill is now carried at cost less accumulated impairment losses and is now tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired.

In accordance with the transitional provisions of FRS 3, the Group has applied the revised accounting policy for goodwill prospectively from 1 July 2006. The transitional provisions of FRS 3 also required the Group to eliminate the carrying amount of the accumulated amortisation at 1 July 2006 amounting to RM2,131,495 against the carrying amount of goodwill. The net carrying amount of goodwill as at 1 July 2006 of RM16,815,128 ceased to be amortised thereafter.


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2.3 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised Financial Reporting Standards (FRSs) (cont’d)

(a) FRS 3: Business Combinations, FRS 136: Impairment of Assets and FRS 138: Intangible Assets (cont’d)

Because the revised accounting policy has been applied prospectively, the change has had no impact on amounts reported for 2006 or prior periods. The effects on the consolidated balance sheet as at 30 June 2007 and consolidated income statement for the year ended 30 June 2007 are set out in Note 2.3(e)(i) and Note 2.3(e)(ii) respectively.

(b) FRS 5: Non-current Assets Held for Sale

Prior to 1 July 2006, non-current assets held for sale were neither classified nor presented as current assets or liabilities. There were no differences in the measurement of noncurrent assets held for sale and those for continuing use. Upon the adoption of FRS 5, noncurrent assets held for sale are classified as current assets and are stated at the lower of carrying amount and fair value less costs to sell.

(c) FRS 117: Leases

Prior to 1 July 2006, leasehold land held for own use were classified as property, plant and equipment and was stated at cost less accumulated depreciation and impairment losses. The adoption of the revised FRS 117 has resulted in a change in the accounting policy relating to the classification of leases of land and buildings. Leases of lands and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. Leasehold land held for own use is now classified as operating lease and where necessary, the minimum lease payments or the upfront payments made are allocated between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payments made for the leasehold land is now reflected as prepaid lease payments and amortised on a straight-line basis over the remaining lease terms.

The Group has applied the change in accounting policy in respect of leasehold land in accordance with the transitional provisions of FRS 117. At 1 July 2006, the unamortised amount of leasehold land is retained as the surrogate carrying amount of prepaid lease payments as allowed by the transitional provisions. The reclassification of leasehold land as prepaid lease payments has been accounted for retrospectively and as disclosed in Note 2.3(f), certain comparatives have been restated. The effects on the consolidated balance sheet as at 30 June 2007 are set out in Note 2.3(e)(i). There were no effects on the consolidated income statement for the year ended 30 June 2007 and the Company’s financial statements.

(d) FRS 140: Investment Property Prior to 1 July 2006, investment properties were stated at valuation. Revaluations were carried out at least once

every five years and any revaluation increase is taken to equity as a revaluation surplus. The investment properties were last revalued in 2006. Upon the adoption of FRS 140, investment properties are now stated at fair value and gains and losses arising from changes in fair values are recognised in profit or loss in the year in which they arise.

The Group has applied FRS 140 in accordance with the transitional provisions. The change in accounting policy has had no impact on amounts reported for 2006 or prior periods. Instead, the changes have been accounted for by restating the following opening balances of the Group and Company as at 1 July 2006:

As at 1.7.2006 Group Company RM RM

Decrease in revaluation reserves (Note 31) (13,146,000) (13,056,000)Increase in retained earnings 13,146,000 13,056,000

(e) Summary of effects of adopting new and revised FRSs on the current year’s financial statements

The following tables provide estimates of the extent to which each of the line items in the balance sheets and income statements for the year ended 30 June 2007 is higher or lower than it would have been had the previous policies been applied in the current year.


( CONTINUED )

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(e) Summary of effects of adopting new and revised FRSs on the current year’s financial statements (cont’d)

(i) Effects on balance sheets as at 30 June 2007

Increase/(Decrease)

FRS 3 FRS 5 FRS 117 FRS 140 Note Note Note Note 2.3 (a) 2.3 (b) 2.3 (c) 2.3 (d) TotalDescription of Change RM RM RM RM RM

Group

Property, plant and equipment - - (4,720,017) - (4,720,017)Prepaid lease payments - - 4,720,017 - 4,720,017Investment properties - (340,000) - - (340,000)Goodwill on consolidation 947,331 - - - 947,331Assets held for sale - 340,000 - - 340,000Revaluation reserves - - - (13,146,000) (13,146,000)Accumulated losses (947,331) - - 13,146,000 12,198,669

Company

Revaluation reserves - - - (13,056,000) (13,056,000)Accumulated losses - - - 13,056,000 13,056,000

(ii) Effects on income statements for the year ended 30 June 2007 Increase/(Decrease)

FRS 3 FRS 5 FRS 117 FRS 140 Note Note Note Note 2.3 (a) 2.3 (b) 2.3 (c) 2.3 (d) TotalDescription of Change RM RM RM RM RM

Group

Other expenses (947,331) - - - (947,331)

(f) Restatement of comparatives

The following comparative amounts have been restated as a result of adopting the new and revised FRSs:

Previously Increase/ Stated (Decrease) Restated FRS 117 Note 2.3 (c) RM RM RMDescription of Change

At 30 June 2006

GroupProperty, plant and equipment 64,062,737 (5,025,729) 59,037,008Prepaid lease payments - 5,025,729 5,025,729


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Accounting Standards and IC Interpretations Issued but Not Yet Effective

At the date of authorisation of these financial statements, the Group and the Company have not applied the following new FRSs, amendments to FRS and Issues Committee Interpretations (“IC Interpretations”) that have been issued but not yet effective:

FRSs, Amendments to FRS and IC Interpretations Effective forfinancialperiodsbeginning on orafter

FRS 124 Related Party Disclosures 1 October 2006

FRS 139 Financial Instruments: Recognition and Measurement Deferred indefinitely

FRS 6 Exploration for and Evaluation of Mineral Resources 1 January 2007

Amendment to FRS 1192004

Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures

1 January 2007

Amendment to FRS 121

The Effects of Changes in Foreign Exchange Rates - Investment in a Foreign Operations

1 July 2007

IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities

1 July 2007

IC Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments

1 July 2007

IC Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

1 July 2007

IC Interpretation 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment

1 July 2007

IC Interpretation 7 Applying the Restatement Approach under FRS 1292004 - Financial Reporting in Hyperinflationary Economies

1 July 2007

IC Interpretation 8 Scope of FRS 2 1 July 2007

The above FRSs, amendments to FRS and IC Interpretations are expected to have no significant impact on the financial statements of the Company upon their initial application.

2.4 Changes in Estimates

The revised FRS 116: Property, Plant and Equipment requires the review of the residual value and remaining useful life of an item of property, plant and equipment at least at each financial year end. The Group revised the estimated useful lives of moulds from four yachts to ten years with effect from 1 July 2006. The revisions were accounted prospectively as a change in accounting estimates and as a result, the depreciation charges of the Group for the current financial year have been reduced by RM225,049.

2.5 Significant Accounting Estimates and Judgements

(a) Critical Judgements Made in Applying Accounting Policies

The following are the judgements made by management in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements.


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2.5 Significant Accounting Estimates and Judgements (cont’d)

(a) Critical Judgements Made in Applying Accounting Policies (cont’d)

(i) Provision for obsolete and slow-moving inventories Inventories are stated at the lower of cost and net realisable value. The Group assesses slow-moving and

obsolete inventories on an annual basis. Significant judgement is required in determining the net realisable value of the slow-moving and obsolete inventories, which includes an estimation of the recoverable value from customers. In making the judgement, the Group relies on current market developments, evidence of demand for the slow-moving inventories as well as the ability to sell the inventories to willing customers at a discounted price.

As at the balance sheet date, the Group estimated a recoverable amount equivalent to 60% of the value of its slow-moving and obsolete inventories. In the event that the recoverable amount is 10% lower than management’s estimates, the Group’s loss before tax will increase by approximately RM680,000.

(ii) Determination of the Company’s functional currency under FRS 121 Functional currency is the currency of the primary economic environment in which the Group operates.

Upon adoption of the revised FRS 121 on 1 July 2006, the Group assessed and determined its functional currency to be Ringgit Malaysia (“RM”) on the basis that sales price of its products are influenced by RM and not United States Dollar (“USD”) and Great Britain Pound (“GBP”), which is the currency that the Group purchases some of its raw materials and invoices most of its customers. The Group’s sales price setting process is determined based on an analysis of costs and relevant margins based on RM. In addition, the effects of foreign exchange movements in other currencies are not passed on to the customers via price increases as any unfavourable impact arising from foreign exchange movements is absorbed by the Group.

3. REVENUE Group Company 2007 2006 2007 2006 RM RM RM RM

Sale of goods 40,539,965 55,404,981 - -Rental income from investment properties 6,800,000 6,800,000 6,800,000 6,800,000Construction contracts 288,100 2,304,800 - -Management fees from a subsidiary - - 45,000 1,260,000

47,628,065 64,509,781 6,845,000 8,060,000

4. COST OF SALES Group Company 2007 2006 2007 2006 RM RM RM RM

Cost of inventories sold 40,487,588 54,964,186 - -Construction contract costs 398,363 2,149,695 - -

40,885,951 57,113,881 - -


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5. OTHER OPERATING INCOME Group Company 2007 2006 2007 2006

RM RM RM RM

Interest income 266,151 155,939 265,869 142,381Fire insurance claim 3,890,349 2,376,068 - -Write back of overprovision of liabilities 1,831,306 - - -Doubtful debts recovered 38,000 - - 2,344,085Commission received - 1,000,000 - -Sundry income 374,279 607,953 - -

6,400,085 4,139,960 265,869 2,486,466

In the previous financial year, the Company recovered RM2,344,085 from the debts owing by a subsidiary, which was previously provided for.

6. FINANCE COSTS Group Company 2007 2006 2007 2006

RM RM RM RMInterest expense on: Term loans 977,497 805,517 211,137 - Lease 812,069 1,769,291 - - Bank overdrafts 103,441 160,292 - - RCSLS (Note 25) 3,660,782 3,520,721 3,660,782 3,520,721 RCULS (Note 26) - 57,055 - 57,055 ICCPS (Note 27) 96,438 126,086 96,438 126,086 ICULS (Note 28) 921,066 1,222,243 921,066 1,222,243 Other bank borrowings 613,377 404,204 - - Advance from a subsidiary - - 402,297 574,900

7,184,670 8,065,409 5,291,720 5,501,005

7. (LOSS)/PROFIT BEFORE TAX The following amounts have been included in arriving at the (loss)/profit before tax:

Group Company 2007 2006 2007 2006

RM RM RM RM

Auditors’ remuneration: - Statutory audit 125,000 148,000 40,000 31,200 - Other services 5,000 5,000 5,000 5,000Depreciation of property, plant and equipment (Note 12) 5,886,472 4,506,150 2,122 911Amortisation of prepaid lease payments (Note 13) 305,712 184,770 - -Write down of inventories 3,876,266 - - -Provision for insurance claims (1,966,072) (1,481,223) - -Impairment loss on unquoted investment (Note 14) - - 515,001 -Amortisation of goodwill (Note 16) - 947,331 - -Directors’ fees (Note 9) 118,000 108,000 118,000 108,000Rental of premises 1,170,889 1,032,144 158,304 152,541Realised loss on foreign exchange 516,519 9,079 - -Rental of land 20,400 20,400 - -Employee benefit expense (Note 8) 10,872,466 15,051,055 1,418,375 1,159,961


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7. (LOSS)/PROFIT BEFORE TAX (CONT’D) Group Company 2007 2006 2007 2006

RM RM RM RM

Write back of allowance for doubtful debts - (8,220) - -Bad debts written off 94,000 - - -Impairment losses:- Plant and machineries (Note 12) - 1,691,346 - -- Land and buildings (Note 12) 843,984 46,593 - -Loss on disposal of property, plant and equipment 1,120,763 - - -Write-off of property, plant and equipment 11,364 - - -Late interest charges 1,110,103 - - -Allowance for doubtful debts 800,912 2,782,931 - -

8. EMPLOYEE BENEFITS EXPENSE Group Company 2007 2006 2007 2006

RM RM RM RM

Wages and salaries 9,366,710 13,196,335 1,171,305 877,421Short term accumulating compensated absences - (37,490) - (11,959)Contributions to defined contribution plan 715,097 837,664 153,480 125,103Other benefits 790,659 1,054,546 93,590 169,396

10,872,466 15,051,055 1,418,375 1,159,961

Included in employee benefits expense of the Group and of the Company are executive directors’ remuneration amounting to RM940,677 (2006: RM958,408) and RM550,827 (2006: RM531,080) respectively as further disclosed in Note 9.

9. DIRECTORS’ REMUNERATION Group Company 2007 2006 2007 2006

RM RM RM RM

Directors of the CompanyExecutive: Salaries and other emoluments 773,710 682,000 487,452 438,000 Bonus - 37,667 - 32,000 Pension costs-defined contribution plan 99,767 93,141 63,375 61,080

873,477 812,808 550,827 531,080

Non-Executive: Fees 118,000 108,000 118,000 108,000 Other emoluments 40,500 22,000 40,500 22,000

158,500 130,000 158,500 130,000

1,031,977 942,808 709,327 661,080

Directors of the SubsidiariesExecutive: Salaries and other emoluments 60,000 120,000 - - Bonus - 10,000 - -Pension costs-defined contribution plan 7,200 15,600 - -

67,200 145,600 - -

1,099,177 1,088,408 709,327 661,080


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9. DIRECTORS’ REMUNERATION (CONT’D)

The number of directors of the Company whose total remuneration during the financial year fell within the following bands is as follows: Number of directors 2007 2006Executive directors:Below RM50,000 - 1RM50,001 - RM100,000 1 -RM100,001 - RM200,000 3 1RM200,001 - RM300,000 2 1RM300,001 - RM400,000 - 1

Non-executive directors:Below RM50,000 5 5

Executive directors of the Group and the Company have been granted the following number of options under the Employee Share Options Scheme:

Group and Company 2007 2006

At 1 July 2006/2005 1,250,000 1,250,000Resignation (750,000) -

At 30 June 500,000 1,250,000

The share options remain unexercised and had been granted on the same terms and conditions as those offered to other employees of the Group (Note 30(a)).

10. INCOME TAX EXPENSE Group Company 2007 2006 2007 2006

RM RM RM RM

Malaysian income tax:Income tax - 448,868 - 307,359Under/(over)provision in prior years 156,472 34,400 (177,170) 548,851

156,472 483,268 (177,170) 856,210Deferred tax (Note 32):Relating to origination and reversal of temporary differences 219,210 (938,022) 219,210 479,948Relating to changes in tax rates (16,689) - (16,689) -Overprovision in prior years (3,517) - (3,517) -

199,004 (938,022) 199,004 479,948

355,476 (454,754) 21,834 1,336,158

Income tax is calculated at the Malaysian statutory tax rate of 27% (2006: 28%) of the estimated assessable profit for the year. Taxation for small and medium scale Companies with paid-up capital of RM2,500,000 and below are calculated at the rate of 20% on chargeable income of up to RM500,000 (2006: RM500,000). For chargeable income in excess of RM500,000, the statutory tax rate of 27% is applicable. The statutory tax rate will be reduced to 26% from the current year’s rate of 27%, effective year of assessment 2008.


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10. INCOME TAX EXPENSE (CONT’D)

A reconciliation of income tax expense applicable to (loss)/profit before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:

Group Company 2007 2006 2007 2006

RM RM RM RM

(Loss)/profit before tax (14,818,823) (10,884,170) (1,240,437) 2,648,562

Taxation at Malaysian statutory tax rate of 27% (2006: 28%) (4,001,082) (3,047,568) (334,918) 741,597Effect of changes in tax rates on opening balance of deferred tax (16,689) - (16,689) -Effect of differential tax rate of 20% 413,307 (528) - -Effect of income not subject to tax 250,713 - - (479,948)Effect of expenses not deductible for tax purpose 348,435 641,389 39,488 47,426Deferred tax reversal in respect of loan stocks 514,640 478,232 514,640 478,232Deferred tax assets not recognised in respect of current year’s tax losses and unabsorbed capital allowances 2,853,069 1,443,292 - -Utilisation of previously unrecognised tax losses and unabsorbed capital allowances (159,872) (3,971) - -Overprovision of deferred tax in prior years (3,517) - (3,517) -Under/(over)provision of tax expense in prior years 156,472 34,400 (177,170) 548,851

Tax expense for the year 355,476 (454,754) 21,834 1,336,158

Tax savings during the financial year arising from:Utilisation of current year tax losses 651,505 21,941 651,505 319,057Utilisation of previously unrecognised tax losses 1,061,084 1,885 1,061,084 -

11. LOSS PER SHARE

(a) Basic Basic loss per share amounts are calculated by dividing loss for the year attributable to ordinary equity holders of the

Group by the weighted average number of ordinary shares in issue during the financial year.

Group 2007 2006

Loss attributable to ordinary equity holders of the Company (RM) (15,174,299) (10,429,416)Weighted average number of ordinary share in issue 109,976,472 109,013,676Basic loss per share (sen) (14) (10)

(b) Diluted The effects on the basic loss per share for the financial year arising from the assumed conversion of the RCSLS, ICCPS,

ICULS, Warrants B and ESOS, as disclosed in Note 25, 27, 28 and 30 is anti-dilutive. Accordingly, the diluted loss per share for the financial year has not been presented.


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12. PROPERTY, PLANT AND EQUIPMENT

Group Office Equipment, Land and Plant and Furniture Motor Buildings* Machinery Moulds and Fittings Vehicles TotalAt 30 June 2007 RM RM RM RM RM RM

Cost or ValuationAt 1 July 2006 At cost 1,380,415 343,218 14,136,325 4,617,646 1,023,088 21,500,692 At valuation 26,874,271 19,576,500 - - - 46,450,771 28,254,686 19,919,718 14,136,325 4,617,646 1,023,088 67,951,463Additions 154,300 217,333 586,482 347,647 - 1,305,762Disposals (2,210,000) (342,865) - - - (2,552,865)Write-off - - (13,647) (2,200) - (15,847) At 30 June 2007 26,198,986 19,794,186 14,709,160 4,963,093 1,023,088 66,688,513

Representing: At cost 1,534,715 217,686 14,709,160 4,963,093 1,023,088 22,447,742 At valuation 24,664,271 19,576,500 - - - 44,240,771 At 30 June 2007 26,198,986 19,794,186 14,709,160 4,963,093 1,023,088 66,688,513

Accumulated depreciation and impairmentAt 1 July 2006 456,482 78,228 5,540,798 2,433,510 405,437 8,914,455Depreciation charge for the year: Recognised in income statement 1,112,005 3,053,413 1,189,873 373,951 157,230 5,886,472 Capitalised in construction cost (Note 21) - - 187,991 - - 187,991Disposals (926,859) (72,243) - - - (999,102)Write-off - - (2,815) (1,668) - (4,483)Impairment losses recognised in income statement 843,984 - - - - 843,984 At 30 June 2007 1,485,612 3,059,398 6,915,847 2,805,793 562,667 14,829,317

Net carrying amountsAt cost 432,668 198,873 7,793,313 2,157,300 460,421 11,042,575At valuation 24,280,706 16,535,915 - - - 40,816,621 At 30 June 2007 24,713,374 16,734,788 7,793,313 2,157,300 460,421 51,859,196


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12. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Group Office Equipment, Land and Plant and Furniture Motor Buildings* Machinery Moulds and Fittings Vehicles TotalAt 30 June 2006 RM RM RM RM RM RM

Cost or ValuationAt 1 July 2005 36,237,995 48,089,389 10,830,641 4,545,114 509,130 100,212,269Additions 79,160 243,250 3,305,683 172,848 513,958 4,314,899Revaluation surplus 4,681,334 8,912,053 - - - 13,593,387Disposals - (26,420) - (4,650) - (31,070)Reclassifications - 95,665 - (95,665) - -Elimination of accumulated depreciation upon revaluation (12,743,803) (37,394,219) - - - (50,138,022) At 30 June 2006 28,254,686 19,919,718 14,136,324 4,617,647 1,023,088 67,951,463

Representing: At cost 1,380,415 343,218 14,136,324 4,617,647 1,023,088 21,500,692 At valuation 26,874,271 19,576,500 - - - 46,450,771 At 30 June 2006 28,254,686 19,919,718 14,136,324 4,617,647 1,023,088 67,951,463

Accumulated depreciation and impairmentAt 1 July 2005 12,165,552 34,359,724 3,663,910 2,077,817 227,805 52,494,808Depreciation charge for the year 988,140 1,495,808 1,536,888 365,640 119,674 4,506,150Disposals - (26,420) - - - (26,420)Impairment losses recognised in income statement 46,593 1,691,346 340,000 - - 2,077,939Reclassifications - (48,011) - (9,947) 57,958 -Elimination of accumulated depreciation upon revaluation (12,743,803) (37,394,219) - - - (50,138,022) At 30 June 2006 456,482 78,228 5,540,798 2,433,510 405,437 8,914,455

Net carrying amountAt cost 923,933 264,990 8,595,526 2,184,137 617,651 12,586,237At valuation 26,874,271 19,576,500 - - - 46,450,771 At 30 June 2006 27,798,204 19,841,490 8,595,526 2,184,137 617,651 59,037,008


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* Land and Buildings of the Group Freehold Land Buildings Renovation Total RM RM RM RMAt 30 June 2007

Cost or ValuationAt 1 July 2006 At cost - - 1,380,415 1,380,415 At valuation 7,490,000 19,384,271 - 26,874,271

7,490,000 19,384,271 1,380,415 28,254,686Additions - - 154,300 154,300Disposals - (2,210,000) - (2,210,000)

At 30 June 2007 7,490,000 17,174,271 1,534,715 26,198,986

Representing:At cost - - 1,534,715 1,534,715At valuation 7,490,000 17,174,271 - 24,664,271

7,490,000 17,174,271 1,534,715 26,198,986

Accumulated depreciation and impairmentAt 1 July 2006 - - 456,482 456,482Depreciation charge for the year 466,440 645,565 1,112,005Disposals - (926,859) - (926,859)Impairment losses - 843,984 - 843,984

At 30 June 2007 - 383,565 1,102,047 1,485,612

Net carrying amountAt cost - - 432,668 432,668At valuation 7,490,000 16,790,706 - 24,280,706

At 30 June 2007 7,490,000 16,790,706 432,668 24,713,374


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* Land and Buildings of the Group Freehold Land Buildings Renovation Total RM RM RM RMAt 30 June 2006

Cost or ValuationAt 1 July 2005 3,404,996 31,452,584 1,380,415 36,237,995Additions - 79,160 - 79,160Revaluation surplus 4,085,004 596,330 - 4,681,334Elimination of accumulated depreciation upon revaluation - (12,743,803) - (12,743,803)

At 30 June 2006 7,490,000 19,384,271 1,380,415 28,254,686

Representing:At cost - - 1,380,415 1,380,415At valuation 7,490,000 19,384,271 - 26,874,271

7,490,000 19,384,271 1,380,415 28,254,686

Accumulated depreciation and impairmentAt 1 July 2005 - 12,092,561 72,991 12,165,552Depreciation charge for the year - 604,649 383,491 988,140Impairment losses - 46,593 - 46,593Elimination of accumulated depreciation upon revaluation - (12,743,803) - (12,743,803)

At 30 June 2006 - - 456,482 456,482

Net carrying amountAt cost - - 923,933 923,933At valuation 7,490,000 19,384,271 - 26,874,271

At 30 June 2006 7,490,000 19,384,271 923,933 27,798,204


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12. PROPERTY, PLANT AND EQUIPMENT (CONT’D) OfficeCompany Equipment RMAt 30 June 2007

CostAt 1 July 2006/30 June 2007 10,620

Accumulated depreciationAt 1 July 2006 911Depreciation charge for the year (Note 7) 2,122

At 30 June 2007 3,033

Net carrying amountAt 30 June 2007 7,587

At 30 June 2006

CostAt 1 July 2005 -Additions 10,620

At 30 June 2006 10,620

Accumulated depreciationAt 1 July 2005 -Depreciation charge for the year (Note 7) 911

At 30 June 2006 911

Net carrying amountAt 30 June 2006 9,709

(a) Included in property, plant and equipment of the Group are plant and machinery with net carrying amount of RM5,245,441 (2006: RM6,295,906) held under hire purchase and finance lease arrangements.

(b) The net carrying amount of the Group’s property, plant and equipment pledged as securities for borrowings (Note 23) are land and buildings RM24,280,706 (2006: RM26,874,271).

(c) The net carrying amount of temporarily idle equipment of the Group amounted to RM6,999,303 (2006: RM317,997) and there are plans to use these equipment in the future.

(d) Details of independent professional valuations of property, plant and equipment owned by the Group as at 30 June 2007 are as follows:

Year of Description of Property, Valuation Basis of Valuationvaluation Plant and Equipment Amount RM

2006 Freehold land 7,490,000 Market value2006 Buildings 17,174,271 Market value2006 Plant and machinery 19,576,500 Market value

44,240,771


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(d) (cont’d)

Freehold land and buildings were last revalued on 30 June 2006 by PPC International Sdn. Bhd. (formerly known as Pakatan Property Consultancy Sdn. Bhd.). Valuations were made on the basis of market value for existing use basis. Market value is defined as the estimated amount for which the asset or an interest in a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion. Had the revalued property, plant and equipment been carried at historical costs the net carrying amount of these property, plant and equipment that would have been included in the financial statements of the Group as at 30 June would be as follows:

Group 2007 2006 RM RM

Freehold land 3,315,700 3,315,700Buildings 20,070,063 20,553,615Plant and machinery 18,884,588 21,559,056

13. PREPAID LEASE PAYMENTS

Long-Term Short-Term Short-Term Leasehold Leasehold Leasehold Land and Land andGroup Land Buildings Buildings Total RM RM RM RMAt 30 June 2007

At ValuationAt 1 July 2006 * 2,670,000 1,431,447 924,282 5,025,729Amortisation for the year (Note 7) (178,000) (29,373) (98,339) (305,712)

At 30 June 2007 2,492,000 1,402,074 825,943 4,720,017

At 30 June 2006

At Cost/ValuationAt 1 July 2005 1,082,250 1,419,328 787,249 3,288,827Revaluation surplus 1,662,388 40,724 218,560 1,921,672Amortisation for the year (Note 7) (74,638) (28,605) (81,527) (184,770)

At 30 June 2006 2,670,000 1,431,447 924,282 5,025,729

Representing:At valuation 2,670,000 1,431,447 924,282 5,025,729

* The Group has recognised the previously revalued land and buildings net of amortisation, as its surrogate cost as of 1 July 2006, in accordance with the provision of FRS 117.

(a) Leasehold land and building with an aggregate carrying value of RM4,720,017 (2006: RM5,025,729) are pledged as securities for borrowings (Note 23).

(b) Details of independent professional valuation of leasehold land and building owned by the Group as at 30 June 2007 are as follows:


MITHRIL BERHAD56

13. PREPAID LEASE PAYMENTS (CONT’D)

(b) (cont’d)

Year of Description of Property, Valuation Basis of Valuationvaluation Plant and Equipment Amount RM

2006 Short term leasehold land 2,670,000 Market value2006 Long term leasehold land and buildings 1,431,447 Market value2006 Short term leasehold land and buildings 924,282 Market value

5,025,729

Had the revalued leasehold land and building been carried at historical costs the net carrying amount of these leasehold land and building that would have been included in the financial statements of the Group as at 30 June would be as follows:


Short term leasehold land 946,398 980,175Long term leasehold land and buildings 1,361,350 1,390,723Short term leasehold land and building 607,383 705,722

14. INVESTMENT IN SUBSIDIARIES Company 2007 2006 RM RM

Unquoted shares at cost 43,847,539 43,647,543Less: Accumulated impairment losses (515,001) -

43,332,538 43,647,543

(a) Details of the subsidiaries, all of which are incorporated in Malaysia, are as follows:

Name of SubsidiariesEquity Interest

Held (%) Principal Activities

2007 2006

Held by the Company

Mithril Saferay Sdn. Bhd. * 100 100 Manufacturing and trading of polyurethane products

Mithril Clay Manufacturing Berhad (formerly known as Tajo Berhad) ∂

100 100 Investment holding and manufacturing and trading of bricks

Mithril FRP Industries Sdn. Bhd. 100 100 Manufacturing and trading of fibre reinforced plasticproducts and fabrication of luxury yachts

Mithril Management Services Sdn. Bhd. 100 100 Property management and related services

Mithril Marketing Sdn. Bhd. 100 100 Trading and distribution of bricks and building materials

Mithril Clay Industries Sdn. Bhd. 100 100 Property investment

Mithril PVC Sdn. Bhd. 100 100 Manufacturing and distribution of PVC products

Mithril Polymers Sdn. Bhd. 100 100 Dormant

Mithril Realty Sdn. Bhd. 100 100 Dormant

Mithril FRP Sdn. Bhd. 100 100 Dormant


MITHRIL BERHAD57

14. INVESTMENT IN SUBSIDIARIES (CONT’D)

(a) (cont’d)

Name of SubsidiariesEquity Interest

Held (%) Principal Activities

2007 2006

Held by Mithril Clay Manufacturing Berhad (formerly known as Tajo Berhad)

Prominent Landscape Sdn. Bhd. 100 100 Dormant

Tajo Project Management Sdn. Bhd. 100 100 Dormant

Alpha Glow Sdn. Bhd. ß 100 70 Dormant

Resolute Omega Sdn. Bhd. 70 70 Dormant

Tajo Development Sdn. Bhd. 65 65 Dormant

* Audited by firm of auditors other than Ernst & Young

∂ On 19 July 2007, Tajo Berhad, a wholly owned subsidiary of the Company, changed its name to Mithril Clay Manufacturing Berhad.

ß On 12th January 2007, the Company’s wholly owned subsidiary, Mithril Clay Manufacturing Berhad (formerly known as Tajo Berhad) acquired the remaining 30% equity interest of Alpha Glow Sdn. Bhd., a company incorporated in Malaysia, for a purchase consideration of RM1 from Aur Pelangi Sdn. Bhd., a company incorporated in Malaysia.

(b) During the financial year, the Company increased its investment in Mithril FRP Industries Sdn. Bhd. by RM99,998 (2006: NIL) and Mithril PVC Sdn. Bhd. by RM99,998 (2006: NIL) respectively.

(c) During the financial year, the Company made an allowance for diminution in value for Mithril Marketing Sdn. Bhd. of RM515,001 (2006: NIL).

15. INVESTMENT PROPERTIES

Group Company 2007 2006 2007 2006

RM RM RM RM

At 1 July 2006/2005 100,340,000 87,274,000 100,000,000 86,944,000Revaluation surplus - 13,066,000 - 13,056,000Reclassified to non-current asset held for sale (Note 18) (340,000) - - -

At 30 June 100,000,000 100,340,000 100,000,000 100,000,000

The following investment properties are held under lease terms:

Group Company 2007 2006 2007 2006

RM RM RM RM

Buildings 100,000,000 100,340,000 100,000,000 100,000,000


MITHRIL BERHAD58

15. INVESTMENT PROPERTIES (CONT’D)

Investment properties of the Group and Company with an aggregate carrying value of RM75,000,000 (2006: RM100,000,000) are pledged for RCSLS as referred to in Note 23.

Investment properties of the Company acquired on 17 February 2004 were last revalued on 19 June 2006 by an independent qualified valuer, Firdaus & Associates, Property Professionals Sdn. Bhd., using the comparison method. The comparison method entails comparing the value of the subject property with the value of comparable properties which had been sold, are being sold or being offered for sale and making adjustments for factors which affect value.

During the financial year, the investment property of the Group with a carrying value of RM340,000 (2006: RM340,000), which was last revalued on 8 August 2005 by an independent qualified valuer, Rahim & Co. using the comparison method, is reclassified as a non-current asset held for sale (Note 18).

16. GOODWILL ON CONSOLIDATION Group 2007 2006 RM RM

At 1 July 2006/2005 16,815,128 17,762,459Less: Amortisation of goodwill - (947,331)

At 30 June 16,815,128 16,815,128

The goodwill on consolidation is arising from the investment in Mithril Saferay Sdn. Bhd., a wholly owned subsidiary of the Company which mainly involved in the manufacturing and trading of polyurethane products. The evaluation of goodwill impairment test are based on the following key assumptions used in value-in-use calculations.

The recoverable amount of the CGU is determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a five-year period.

The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:

(i) Budgeted gross margin The basis used to determine the value assigned to the budgeted gross margin is the average gross margins achieved in

the year immediately before the budgeted year increased for expected efficiency improvements.

(ii) Growth rate Management has estimated a weighted average growth rate of 5% over the five-year period.

(iii) Discount rate The discount rate of 7% is used and it reflects specific risks relating to the business segment.

(iv) Selling price A one-off increase in selling price by an average of 7.5%.

Sensitivity to changes in assumptions

In the event that the average increase in selling price varies by 1% from the cash flow projections, it will result in an impairment loss of the goodwill by approximately RM1.9 million.

17. OTHER INVESTMENTS Group 2007 2006 RM RM

Quoted shares at cost, in Malaysia 7,177 7,177Less: Accumulated impairment losses (3,457) (3,457)

Total other investments 3,720 3,720

At market value 6,025 3,123


MITHRIL BERHAD59

18. NON-CURRENT ASSET HELD FOR SALE

The non-current asset held for sale is a leasehold land and building, comprising a two storey shop house, which was previously classified under investment properties (Note 15).

The property is pledged as security for short-term bank borrowings (Note 23).

19. INVENTORIES Group 2007 2006 RM RM

Cost:Raw materials 2,178,695 3,648,705Work-in-progress 8,206,449 11,364,298Consumables 21,046 108,078Finished goods 2,730,191 3,963,335

13,136,381 19,084,416

Net realisable value:Finished goods 626,314 1,122,398

13,762,695 20,206,814

The Group has written down damaged and obsolete inventories amounting to RM3,876,266 (2006: NIL) during the financial year. The amount written down has been included in administrative expenses.

20. TRADE AND OTHER RECEIVABLES Group Company 2007 2006 2007 2006

RM RM RM RMTrade receivablesThird parties 7,374,695 10,046,855 - -Construction contracts: Due from customers (Note 21) 697,281 - - -

8,071,976 10,046,855 - -Less: Allowance for doubtful debts (3,643,288) (2,994,904) - -

Trade receivables, net 4,428,688 7,051,951 - -

Other receivablesDeposits 527,109 686,010 - -Prepayments 175,125 248,432 66,124 46,255Amount due from subsidiaries - - 2,952,274 -Other receivables 2,683,176 1,511,238 4,900 -

3,385,410 2,445,680 3,023,298 46,255Less: Allowance for doubtful debts - (1,057,547) - -

3,385,410 1,388,133 3,023,298 46,255

7,814,098 8,440,084 3,023,298 46,255

(a) Credit risk

The Group’s normal trade credit term ranges from 60 to 120 (2006: 60 to 120) days. Other credit terms are assessed and approved on a case-by-case basis. The Group has no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of debtors except for a subsidiary, Mithril FRP Industries Sdn. Bhd. which is exposed to credit risks of advances given to a single supplier, T.E.C Marine Mouldings Ltd, with an outstanding balance of RM1,750,794 (2006: NIL). Trade receivables are non-interest bearing.


MITHRIL BERHAD60

20. TRADE AND OTHER RECEIVABLES (CONT’D)

(b) Amount due from subsidiaries

Amount due from subsidiaries are non-interest bearing and are repayable on demand. These amounts are unsecured and are to be settled in cash.

21. DUE FROM A CUSTOMER ON CONTRACTS Group 2007 2006 RM RM

Construction contract costs incurred to date 3,245,339 2,149,695Attributable profits 44,842 155,105

3,290,181 2,304,800Less: Progress billings (2,592,900) (2,304,800)

Due from a customer on contracts (Note 20) 697,281 -

The costs incurred to date on construction contracts include the following charges made during the financial year:


Depreciation of plant and equipment (Note 12) 187,991 413,040Rental expense for factory 126,000 -

22. CASH AND CASH EQUIVALENTS Group Company 2007 2006 2007 2006

RM RM RM RM

Cash on hand and at banks 1,026,135 2,263,241 198,353 1,243,264Fixed deposits with licensed banks 14,090,000 6,950,000 14,090,000 6,950,000

Cash and bank balances 15,116,135 9,213,241 14,288,353 8,193,264Bank overdrafts (Note 23) (2,991,723) (2,725,268) - -

Cash and cash equivalents 12,124,412 6,487,973 14,288,353 8,193,264

Included in cash and cash equivalents of the Group is an amount of RM9,900,000 (2006: RM6,950,000) held as sinking fund

for the purpose of redemption of the RCSLS on maturity date and therefore restricted from use in other operations.

The weighted average interest rates and the average maturities of fixed deposits at the balance sheet date were as follows:

2007 2006 Weighted Weighted Average Average Average Average Interest Rates Maturities Interest Rates Maturities % Days % DaysGroup:Licensed banks 3.13 30 3.20 30

Company:Licensed banks 3.13 30 3.20 30


MITHRIL BERHAD61

23. BORROWINGS

Group Company 2007 2006 2007 2006

RM RM RM RMShort Term Borrowings

Secured:Bank overdrafts (Note 22) 2,991,723 2,725,268 - -Trust receipts 862,817 - - -Bill discount 1,716,970 2,893,959 - -Bankers’ acceptances 3,778,000 6,777,000 - -Term loans 9,763,846 7,797,486 1,200,000 -Hire purchase and finance lease payables (Note 24) 5,896,246 2,977,094 - -

25,009,602 23,170,807 1,200,000 -

Unsecured:Hire purchase and finance lease payables (Note 24) 109,298 104,081 - -

109,298 104,081 - -

25,118,900 23,274,888 1,200,000 -

Long Term Borrowings

Secured:Term loan 10,800,000 - 10,800,000 -Hire purchase and finance lease payables (Note 24) 12,874,803 14,237,650 - -RCSLS (Note 25) 47,650,550 45,759,768 47,650,550 45,759,768

71,325,353 59,997,418 58,450,550 45,759,768

Unsecured:Hire purchase and finance lease payables (Note 24) 100,140 195,479 - -ICCPS (Note 27) 800,936 1,205,226 800,936 1,205,226ICULS (Note 28) 7,703,563 11,564,857 7,703,563 11,564,857

8,604,639 12,965,562 8,504,499 12,770,083

79,929,992 72,962,980 66,955,049 58,529,851

Total Borrowings

Bank overdrafts (Note 22) 2,991,723 2,725,268 - -Trust receipts 862,817 - - -Bill discount 1,716,970 2,893,959 - -Bankers’ acceptances 3,778,000 6,777,000 - -Term loan 20,563,846 7,797,486 12,000,000 -Hire purchase and finance lease payables (Note 24) 18,980,487 17,514,304 - -RCSLS (Note 25) 47,650,550 45,759,768 47,650,550 45,759,768ICCPS (Note 27) 800,936 1,205,226 800,936 1,205,226ICULS (Note 28) 7,703,563 11,564,857 7,703,563 11,564,857

105,048,892 96,237,868 68,155,049 58,529,851


MITHRIL BERHAD62

23. BORROWINGS (CONT’D)

Group Company 2007 2006 2007 2006

RM RM RM RM

Maturity of borrowings (excluding hire purchase and finance leases):

Within one year 19,113,356 20,193,713 1,200,000 -More than 1 year and less than 2 years 1,200,000 - 1,200,000 -More than 2 years and less than 5 years 10,904,499 12,770,083 10,904,499 12,770,0835 years and more 54,850,550 45,759,768 54,850,550 45,759,768

86,068,405 78,723,564 68,155,049 58,529,851

The weighted average effective interest rates at the balance sheet date for borrowings, excluding hire purchase and finance lease payables, were as follows:

Group Company 2007 2006 2007 2006

% % % %

Bank overdrafts 7.9 7.2 - -Trust receipts 8.0 - - -Bill discount 10.3 10.3 - -Bankers’ acceptances 5.2 5.1 - -Term loans 7.4 10.0 5.6 -RCSLS 8.0 8.0 8.0 8.0ICCPS 8.0 8.0 8.0 8.0ICULS 8.0 8.0 8.0 8.0

(i) The bank overdrafts, trust receipts, bill discount and bankers’ acceptances are secured by the following:

(a) a debenture over the fixed and floating assets of a subsidiary;

(b) a fixed legal charge over the landed properties of a subsidiary; and

(c) a corporate guarantee by the Company.

(ii) The term loans are secured by the following:

(a) a debenture over the assets of subsidiaries; and

(b) an investment property.

(iii) The finance lease is secured by the fixed assets of a subsidiary.

Included in the Group’s borrowings is an amount of RM27,334,895 (2006: RM25,009,025) due to a related party, MAA Credit Sdn. Bhd..


MITHRIL BERHAD63

24. HIRE PURCHASE AND FINANCE LEASE PAYABLES Group 2007 2006 RM RM

Minimum lease payments:Not later than 1 year 7,376,225 4,806,115Later than 1 year and not later than 2 years 2,791,050 2,745,474Later than 2 years and not later than 5 years 8,194,010 8,219,462Later than 5 years 5,893,420 8,613,460

24,254,705 24,384,511Less: Future finance charges (5,274,218) (6,870,207)

Present value of finance lease liabilities 18,980,487 17,514,304

Present value of finance lease liabilities:Not later than 1 year 6,005,544 3,081,175Later than 1 year and not later than 2 years 1,632,834 1,505,094Later than 2 years and not later than 5 years 5,941,832 5,355,653Later than 5 years 5,400,277 7,572,382

18,980,487 17,514,304Less: Amount due within 12 months (Note 23) (6,005,544) (3,081,175)

Amount due after 12 months (Note 23) 12,974,943 14,433,129

The hire purchase and lease liabilities bore interest at the rate of 7.03% (2006: 7.03%) per annum at the balance sheet date.

25. REDEEMABLE CONVERTIBLE SECURED LOAN STOCKS (“RCSLS”)

On 6 April 2004, the Company issued 59,000,000 of 3% 8-year Redeemable Convertible Secured Loan Stocks (“RCSLS”) at a nominal amount of RM1.00 each to raise funds to partly finance the Restructuring Exercise, for the acquisition of the investment properties and Mithril Saferay Sdn. Bhd., and for working capital purposes. The terms of the RCSLS are as follows:

(a) Conversion rights - the registered holders of the RCSLS will have the option at any time during the conversion period to convert the RCSLS at the conversion rate into new ordinary shares of RM1.00 each in the Company.

(b) Conversion rate - on the basis of RM1.00 nominal amount of RCSLS for 1 new ordinary share of RM1.00 in the Company.

(c) Conversion period - period commencing from the beginning of the second year to the end of the eighth year, during which the RCSLS may be converted into new shares of the Company at the option of the registered holders.

(d) All outstanding RCSLS will be redeemed at the end of the eighth year at the nominal amount of RM1.00 per RCSLS.

(e) The RCSLS bear interest at 3% per annum payable annually in arrears on 5 April, where payment had been made on 4 April 2007 with the next payment due on 5 April 2008.

(f) The new ordinary shares to be allotted and issued upon conversion of the RCSLS will rank pari passu in all respects with the existing ordinary shares of the Company including rights to dividends, rights, allotments or other distributions except that the new shares so allotted shall not be entitled to any dividends, rights, allotments or other distributions declared, made or paid to shareholders the entitlement date for which is before the date of allotment of the new shares.

(g) The RCSLS are secured by the Deed of Assignment and Security Deed of Assignment on twenty-nine subsidiary parcels of commercial/ office space together with 195 units of basement car park bays within an 11-storey office building with 3 basement car parks known as “Menara MAA” located in Kota Kinabalu as disclosed in Note 15.

Up until 29 May 2007, the RCSLS were also secured by all the subsidiary parcels within eight levels of commercial/office space forming part of an 11-storey office building with a basement floor and an open-air carpark known as “Menara MAA” located in Kuching.


MITHRIL BERHAD64

25. REDEEMABLE CONVERTIBLE SECURED LOAN STOCKS (“RCSLS”) (CONT’D)

The proceeds received from the issue of the RCSLS have been split between the liability component and the equity component, representing the fair value of the conversion option. The RCSLS are accounted for in the balance sheets of the Group and of the Company as follows:

2007 2006 RM RM

Nominal value 59,000,000 59,000,000Less: Unamortised discount (11,349,450) (13,240,232)

Amount included within long term borrowings (Note 23) 47,650,550 45,759,768

The amount recognised in the balance sheets of the Group and of the Company may be analysed as follows:

2007 2006 RM RMLiability component at the date of issue:Nominal value of loan stocks 59,000,000 59,000,000Equity component, net of deferred tax (12,205,861) (12,205,861)Deferred tax liability (4,746,724) (4,746,724)

42,047,415 42,047,415

Interest expense recognised in income statement:At 1 July 2006/2005 7,630,600 4,109,879Recognised during the year (Note 6) 3,660,782 3,520,721

At 30 June 2007/2006 11,291,382 7,630,600

Interest accrued:At 1 July 2006/2005 (3,918,247) (2,148,247)Accrued during the year (1,770,000) (1,770,000)

At 30 June 2007/2006 (5,688,247) (3,918,247)

Liability component at 30 June 2007/2006 (Note 23) 47,650,550 45,759,768

Interest expense on the RCSLS is calculated on the effective yield basis by applying the interest rate of 8% (2006: 8%) for an

equivalent loan stock to the liability component of the RCSLS. 2007 2006

RM RMEquity componentAt 1 July 2006/2005 12,205,861 12,205,861

At 30 June 2007/2006 12,205,861 12,205,861

26. REDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (“RCULS”)

On 15 March 2004, the Company issued 30,500,000 of 1% 5-year Redeemable Convertible Unsecured Loan Stocks (“RCULS”) at a nominal amount of RM1.00 each to partly finance the Restructuring Exercise relating to the acquisition of a subsidiary, Mithril Saferay Sdn. Bhd. The terms of the RCULS are as follows:

(a) Conversion rights - the registered holders of the RCULS will have the option at any time during the conversion period to convert the RCULS at the conversion rate into new ordinary shares of RM1.00 each in the Company.


MITHRIL BERHAD65

26. REDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (“RCULS”) (CONT’D)

(b) Conversion rate - on the basis of RM1.00 nominal amount of RCULS for 1 new ordinary share of RM1.00 in the Company.

(c) Conversion period - period commencing from the date of issuance to the end of the fifth year, during which the RCULS may be converted into new shares of the Company at the option of the registered holders.

(d) All outstanding RCULS will be redeemed at the Company’s sole option from the beginning of the second year to the end of the fifth year, otherwise at the end of the fifth year, the RCULS will be converted into new shares of the Company at the nominal amount of RM1.00 each.

(e) The new ordinary shares to be allotted and issued upon conversion of the RCULS will rank pari passu in all respects with the existing ordinary shares of the Company including rights to dividends, rights, allotments or other distributions except that the new shares so allotted shall not be entitled to any dividends, rights, allotments or other distributions declared, made or paid to shareholders, the entitlement date for which is before the date of allotment of the new shares.

On 20 February 2006 the balance of 856 RCULS of RM1.00 each were redeemed and the RCULS Trust Deed was retired after the conversion of 1,371,900 RCULS of RM1.00 each to ordinary shares of Mithril Berhad of RM1.00 each on 22 August 2005.

The proceeds received from the issue of the RCULS have been split between the liability component, representing the fair value of the conversion option. The RCULS are accounted for in the balance sheets of the Group and of the Company as follows:

2007 2006 RM RM

Nominal value - 1,372,756Less: Unamortised discount - (276,243)

- 1,096,513

Less: Converted to new ordinary share capital of RM1.00 each of the Company during the year Nominal value of loan stocks - (1,371,900) Equity component, net of deferred tax - 276,071

- (1,095,829)

Redemption of loan stock of RM1.00 each of the Company during the year Nominal value of loan stocks - (856) Equity component, net of deferred tax - 172

- (684)

Amount included within long term borrowings - -


2007 2006 RM RMLiability component at 1 July 2006/2005Nominal value of loan stocks - 1,372,756Equity component, net of deferred tax - (276,243)Deferred tax liability - (83,268)

- 1,013,245


MITHRIL BERHAD66

26. REDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (“RCULS”) (CONT’D)

2007 2006 RM RM

Less: Converted to new ordinary share capital of RM1.00 each of the Company during the year Nominal value of loan stocks - (1,371,900) Equity component, net of deferred tax - 276,071

- (1,095,829)

Redemption of loan stock of RM1.00 each of the Company during the year Nominal value of loan stocks - (856) Equity component, net of deferred tax - 172

- (684)

Interest expense recognised in income statement:At 1 July 2006/2005 - 1,705,648Recognised during the year (Note 6) - 57,055Effect of conversion of RCULS - (1,361,841)

At 30 June 2007/2006 - 400,862

Interest accrued:At 1 July 2006/2005 - (314,694)Accrued during the year - (2,900)

At 30 June 2007/2006 - (317,594)

Liability component at 30 June 2007/2006 - -

Equity componentAt 1 July 2006/2005 - 276,243Effect of conversion of 1,371,900 RCULS, net of deferred tax - (276,071)Effect of redemption of 856 RCULS, net of deferred tax - (172)

At 30 June 2007/2006 - -

Interest expense on the RCULS is calculated on the effective yield basis by applying the interest rate of 8% (2006: 8%) for an

equivalent loan stock to the liability component of the RCULS.

27. IRREDEEMABLE CUMULATIVE CONVERTIBLE PREFERENCE SHARES (“ICCPS”) Number of Shares Amount 2007 2006 2007 2006

Units Units RM RM

Authorised:At 30 June 13,306,270 13,306,270 13,306,270 13,306,270

Issued and fully paid:At 30 June 12,518,187 12,518,187 12,518,187 12,518,187


MITHRIL BERHAD67

27. IRREDEEMABLE CUMULATIVE CONVERTIBLE PREFERENCE SHARES (“ICCPS”) (CONT’D)

On 12 March 2004, the Company issued 13,306,270 of 4% 5-year Irredeemable Cumulative Convertible Preference Shares (“ICCPS”) at a nominal amount of RM1.00 each with an issue price of RM3.36 each, to raise funds to partly settle amounts owing to the Scheme Creditors pursuant to the Debt Settlement and Restructuring Agreement. The terms of the ICCPS are as follows:

(a) Conversion rights - the registered holders of the ICCPS will have the option at any time during the conversion period to convert the ICCPS at the conversion rate into new ordinary shares of RM1.00 each in the Company.

(b) Conversion rate - on the basis of RM1.00 nominal amount of ICCPS for 1 new ordinary share of RM1.00 in the Company.

(c) Conversion period - convertible at any time after the date of issue of ICCPS until the end of the fifth year, during which the ICCPS may be converted into new shares of the Company at the option of the registered holders.

(d) All outstanding ICCPS will be automatically converted into new shares of the Company at the end of the fifth year at the nominal amount of RM1.00 per ICCPS.

(e) The ICCPS bear dividend at 4% on par value of RM1.00 per annum payable annually in arrears on 11 March, with the next payment due on 11 March 2008.

(f) The new ordinary shares to be allotted and issued upon conversion of the ICCPS will rank pari passu in all respects with the existing ordinary shares of the Company including rights to dividends, rights, allotments or other distributions except that the new shares so allotted shall not be entitled to any dividends, rights, allotments or other distributions declared, made or paid to shareholders, the entitlement date for which is before the date of allotment of the new shares.

(g) The ICCPS will rank in priority to the shares of the Company in respect of return of capital on liquidation or otherwise for the par value of the ICCPS plus any arrears in dividends, whether declared or not, provided that there shall be no further right to participate in the surplus assets or profits of the Company.

The proceeds received from the issue of the ICCPS have been split between the liability component and the equity component, representing the fair value of the conversion option. The ICCPS are accounted for in the balance sheets of the Group and of the Company as follows:

2007 2006 RM RM


Amount included within long term borrowings (Note 23) 800,936 1,205,226


Liability component at the date of issueNominal value of loan stocks 12,518,187 12,518,187Equity component, net of deferred tax (10,518,927) (10,518,927)Transfer from reserves 21,897 21,897

2,021,157 2,021,157

Interest expense recognised in income statement:At 1 July 2006/2005 324,500 198,414Recognised during the year (Note 6) 96,438 126,086

At 30 June 2007/2006 420,938 324,500


MITHRIL BERHAD68

2007 2006 RM RMInterest accrued:At 1 July 2006/2005 (1,140,431) (639,861)Accrued during the year (500,728) (500,570)

At 30 June 2007/2006 (1,641,159) (1,140,431)

Liability component at 30 June 2007/2006 (Note 23) 800,936 1,205,226

Equity componentAt 1 July 2006/2005 10,518,927 10,518,927

At 30 June 2007/2006 10,518,927 10,518,927

Interest expense on the ICCPS is calculated on the effective yield basis by applying the coupon interest rate of 8% (2006: 8%) for an equivalent loan stock to the liability component of the ICCPS.

28. IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (“ICULS”)

On 6 April 2004, the Company issued 60,700,000 of 8% 5-year Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) at a nominal amount of RM1.00 each to raise funds to partly finance the Restructuring Exercise, for the acquisition of MAA buildings and a subsidiary, Mithril Saferay Sdn. Bhd., and for working capital purposes. The terms of the ICULS are as follows:

(a) Conversion rights - the registered holders of the ICULS will have the option at any time during the conversion period to convert the ICULS at the conversion rate into new ordinary shares of RM1.00 each in the Company.

(b) Conversion rate - on the basis of RM1.00 nominal amount of ICULS for 1 new ordinary share of RM1.00 in the Company.

(c) Conversion period - period commencing from the beginning of the second year to the end of the fifth year, during which the ICULS may be converted into new shares of the Company at the option of the registered holders.

(d) All outstanding ICULS will be automatically converted into new shares of the Company at the end of the fifth year at the nominal amount of RM1.00 per ICULS.

(e) The ICULS bear interest at 8% per annum payable annually in arrears on 5 April, where payment had been made on the 4 April 2007 with the next payment due on 5 April 2008.

(f) The new ordinary shares to be allotted and issued upon conversion of the ICULS will rank pari passu in all respects with the existing ordinary shares of the Company including rights to dividends, rights, allotments or other distributions except that the new shares so allotted shall not be entitled to any dividends, rights, allotments or other distributions declared, made or paid to shareholders, the entitlement date for which is before the date of allotment of the new shares.

The proceeds received from the issue of the ICULS have been split between the liability component and the equity component, representing the fair value of the conversion option. The ICULS are accounted for in the balance sheets of the Group and of the Company as follows:

2007 2006 RM RM


7,703,563 11,776,554


MITHRIL BERHAD69

28. IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (“ICULS”) (CONT’D)

2007 2006 RM RMLess: Converted to new ordinary share capital of RM1.00 each of the Company during the year Nominal value of loan stocks - (920,500) Equity component, net of deferred tax - 708,803

- (211,697)

Amount included within long term borrowings (Note 23) 7,703,563 11,564,857


2007 2006 RM RM

Liability component at the date of issue:Nominal value of loan stocks 59,779,500 60,700,000Equity component, net of deferred tax (46,031,405) (46,740,208)Deferred tax assets 5,428,808 5,428,808

19,176,903 19,388,600

Less: Converted to new ordinary share capital of RM1.00 each of the Company during the year Nominal value - (920,500) Equity component, net of deferred tax - 708,803

- (211,697)

Interest expense recognised in income statement:At 1 July 2006/2005 3,048,295 1,826,052Recognised during the year (Note 6) 921,066 1,222,243

At 30 June 2007/2006 3,969,361 3,048,295

Interest accrued:At 1 July 2006/2005 (10,660,341) (5,893,720)Accrued during the year (4,782,360) (4,766,621)

At 30 June 2007/2006 (15,442,701) (10,660,341)

Liability component at 30 June (Note 23) 7,703,563 11,564,857

Equity componentAt 1 July 2006/2005 46,031,405 46,740,208Effect of conversion of 920,500 ICULS, net of deferred tax - (708,803)

At 30 June 2007/2006 46,031,405 46,031,405

Interest expense on the ICULS is calculated on the effective yield basis by applying the coupon interest rate of 8% (2006: 8%) for an equivalent loan stock to the liability component of the ICULS.


MITHRIL BERHAD70

29. TRADE AND OTHER PAYABLES

Group Company 2007 2006 2007 2006

RM RM RM RM

Trade payablesThird parties 2,753,476 3,556,561 - -Construction contracts: Advances received 4,818,862 1,978,080 - -

7,572,338 5,534,641 - -

Other payablesAccruals 6,889,342 9,108,859 5,661,683 5,141,726Other payables 7,568,496 9,350,560 549,654 479,115Due to subsidiaries - - 9,582,820 9,258,761

14,457,838 18,459,419 15,794,157 14,879,602

22,030,176 23,994,060 15,794,157 14,879,602

(a) Trade payables

Trade payables are non-interest bearing and the normal trade credit terms granted to the Group range from one month to three months.

(b) Amount due to subsidiaries

The amount due to subsidiaries are unsecured and non-interest bearing except for an amount of RM402,297 (2006: RM574,900) bearing an interest rate of 8% (2006: 8% to 10%). These amounts are repayable in demand and are to be settled in cash.

Other information on financial risks of other payables are disclosed in Note 36.

30. SHARE CAPITAL

Number of Ordinary Shares of RM1 each Amount 2007 2006 2007 2006

Units Units RM RM

Authorised:At 30 June 2007/2006 500,000,000 500,000,000 500,000,000 500,000,000

Issued and fully paid:At 1 July 2006/ 1 July 2005 109,976,472 107,684,072 109,976,472 107,684,072Issued during the year:- Pursuant to the Conversion RCULS (Note 26) - 1,371,900 - 1,371,900- Pursuant to the Conversion ICULS (Note 28) - 920,500 - 920,500

109,976,472 109,976,472 109,976,472 109,976,472

(a) Employee Share Options Scheme (“ESOS”)

The Mithril Berhad Employees Share Options Scheme (“ESOS”) is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held on 26 December 2003.


MITHRIL BERHAD71

30. SHARE CAPITAL (CONT’D)

(a) Employee Share Options Scheme (“ESOS”) (cont’d)

The salient features of the scheme are as follows:

(a) Eligible employees are those full time and confirmed employees or Executive Directors of the Company or of a subsidiary company, who are confirmed and with at least six months of continuous service in the Group prior to the date of offer; and employees or Executive Directors of the Company or of a subsidiary company who are serving under fixed term contracts of employment who have served for at least six continuous months and the contracts must be a duration for at least two years;

(b) The employees to whom the options have been granted are not eligible to participate in more than one employees’ share option scheme implemented by any company within the Group;

(c) The maximum number of ordinary shares of the Company to be issued under the scheme shall not exceed 10% of the issued and paid-up share capital of the Company at the date of offer;

(d) The option is for a period of five years and is subject to an extension period of not more than five years commencing from the day after the expiration of the original five year period;

(e) The price at which the eligible employees are entitled to exercise the options shall be subject to a discount of not more than 10% of the weighted average market price of the shares for the five market days preceding the date of offer subject to the provision that the option price per share shall not be less than the par value of the shares;

(f) The options granted can be exercised subject to the following maximum percentages:

Maximum percentage of options exercisable within each particular year of the scheme Number of shares Year 1 Year 2 Year 3 Year 4 Year 5 comprised in Options granted

Below 10,000 40% 60% - - -10,000 to 100,000 40% 30%* 30%** - -Above 100,000 40% 20% 20% 20% -

* 30% or 6,000 new shares whichever is higher** 30% or the remaining number of new shares under the part of option unexercised

(g) The new shares to be allotted upon the exercise of any option will, upon allotment and issue, rank pari passu in all respects with the then existing issue shares including rights to dividends, rights, allotments or other distributions except that the new shares so allotted shall not be entitled to any dividends, rights, allotments or other distributions declared, made or paid to shareholders, the entitlement date (namely the date as at the close of business on which shareholders must be registered in order to be entitled to any dividends, rights, allotments or other distributions) for which is before the date of allotment of the new shares.

The number of ESOS options granted and remain unexercised by the eligible employees is as fellows:

Exercise Number of share options Price 2007 2006 RM Units Units

At 1 July 2006/2005 2,237,000 2,243,000Resignations (1,019,000) (6,000) At 30 June 2007/2006 1.00 1,218,000 2,237,000


MITHRIL BERHAD72

30. SHARE CAPITAL (CONT’D)

(b) Warrants The movement of Warrants during the financial year is as follows:

Movement during the year Number of WarrantsGrant date At beginning (Exercised)/ At end of year Expired of year2007Warrants B12 March 2004 27,414,753 - 27,414,7536 April 2004 5,272,027 - 5,272,027

32,686,780 - 32,686,780

2006Warrants B12 March 2004 27,414,753 - 27,414,7536 April 2004 5,272,027 - 5,272,027

32,686,780 - 32,686,780

31. REVALUATION RESERVES Company 2007 2006 RM RM

At 1 July 2006/2005 13,056,000 13,056,000Effects of adopting FRS 140 (13,056,000) -

At 30 June 2007/2006 - 13,056,000

Revaluation reserves include the cumulative net change, net of deferred tax effects, arising from the revaluation of freehold land, short term leasehold land, long term and short term leasehold land and buildings, buildings, plant and machinery and investment properties above their cost.

Long term Short term Short term Leasehold Leasehold Freehold Leasehold Land and Land and Plant and Investment Land Land Building Building Buildings Machinery Properties Total RM RM RM RM RM RM RM RM

Group

At 1 July 2006As previously stated 3,880,754 1,196,919 359,655 157,363 99,025 8,594,237 13,135,913 27,423,866Effects of adopting FRS 140 - - - - - - (13,146,000) (13,146,000)Reversal of deferred tax liabilities 204,251 465,468 - - 38,509 - 10,087 718,315Realisation of revaluation reserve from disposal of property, plant and equipment - - - - (137,534) - - (137,534)

At 30 June 2007 4,085,005 1,662,387 359,655 157,363 - 8,594,237 - 14,858,647

At 1 July 2005 - - - - - - 80,000 80,000Revaluation increase, net of deferred tax 3,880,754 1,196,919 359,655 157,363 99,025 8,594,237 13,055,913 27,343,866

At 30 June 2006 3,880,754 1,196,919 359,655 157,363 99,025 8,594,237 13,135,913 27,423,866


MITHRIL BERHAD73

32. DEFERRED TAX LIABILITIES

Group Company 2007 2006 2007 2006

RM RM RM RM

At 1 July 2006/2005 1,358,137 1,058,967 470,821 (9,127)Recognised in income statement (Note 10) 199,004 (938,022) 199,004 479,948Recognised in equity (718,315) 1,237,192 - -

At 30 June 2007/2006 838,826 1,358,137 669,825 470,821

Presented after appropriate offsetting as follows:Deferred tax assets (3,076,115) (4,289,862) (2,283,005) (3,238,160)Deferred tax liabilities 3,914,941 5,647,999 2,952,830 3,708,981

838,826 1,358,137 669,825 470,821

The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:

Deferred Tax Liabilities of the Group:

Property, Plant and Equipment RCULS RCSLS Total RM RM RM RM

At 1 July 2006 1,682,142 - 3,707,265 5,389,407Recognised in income statement 257 - (756,408) (756,151)Recognised in equity (718,315) - - (718,315)

At 30 June 2007 964,084 - 2,950,857 3,914,941

At 1 July 2005 1,068,094 83,268 4,197,467 5,348,829Recognised in income statement (623,144) (83,268) (490,202) (1,196,614)Recognised in equity 1,237,192 - - 1,237,192

At 30 June 2006 1,682,142 - 3,707,265 5,389,407

Deferred Tax Assets of the Group: Unutilised Tax Losses and Allowance Unabsorbed for Doubtful Capital Debts Allowances ICULS Total RM RM RM RM

At 1 July 2006 (778,599) (14,511) (3,238,160) (4,031,270)Recognised in income statement - (280,079) 1,235,234 955,155

At 30 June 2007 (778,599) (294,590) (2,002,926) (3,076,115)

At 1 July 2005 - - (4,289,862) (4,289,862)Recognised in income statement (778,599) (14,511) 1,051,702 258,592

At 30 June 2006 (778,599) (14,511) (3,238,160) (4,031,270)


MITHRIL BERHAD74

32. DEFERRED TAX LIABILITIES (CONT’D)

Deferred Tax Liabilities of the Company:

Property, Plant and Equipment RCULS RCSLS Total RM RM RM RM

At 1 July 2006 1,716 - 3,707,265 3,708,981Recognised in income statement 257 - (756,408) (756,151)

At 30 June 2007 1,973 - 2,950,857 2,952,830

At 1 July 2005 - 83,268 4,197,467 4,280,735Recognised in income statement 1,716 (83,268) (490,202) (571,754)

At 30 June 2006 1,716 - 3,707,265 3,708,981

Deferred Tax Assets of the Company:

Unutilised Tax Losses ICULS Total RM RM RM

At 1 July 2006 - (3,238,160) 3,238,160)Recognised in income statement (280,079) 1,235,234 955,155 At 30 June 2007 (280,079) (2,002,926) (2,283,005) At 1 July 2005 - (4,289,862) (4,289,862)Recognised in income statement - 1,051,702 1,051,702 At 30 June 2006 - (3,238,160) (3,238,160)

Deferred tax assets have not been recognised in respect of the following items in loss making subsidiaries due to their inability to achieve significant taxable profits for offset in the near future:


Unused tax losses 71,707,798 66,672,883Unabsorbed capital allowances 25,486,178 20,624,737Other temporary differences 1,403,065 1,324,619

98,597,041 88,622,239

The availability of the unused tax losses and unabsorbed capital allowances for offsetting against future taxable profits of the respective subsidiaries are subject to no substantial changes in shareholdings of the Company and those subsidiaries under Section 44(5A) and (5B) of Income Tax Act, 1967.

33. OPERATING LEASE ARRANGEMENTS

(a) The Group as lessee

The operating lease commitment is in respect of the rented factories and store. The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the balance sheet date but not recognised as liabilities is as follows:


MITHRIL BERHAD75

33. OPERATING LEASE ARRANGEMENTS (CONT’D)

(a) The Group as lessee (cont’d)

Group Company 2007 2006 2007 2006

RM RM RM RM

Future minimum lease payments:Within one year 686,778 747,951 158,304 152,541More than one year 770,796 396,732 118,728 277,032

1,457,574 1,144,683 277,032 429,573

(b) The Group as lessor

The Company has entered into non-cancellable operating lease agreements on its investment properties portfolio. These leases have remaining non-cancellable lease terms for an approximately 1 year and 8 months. The future minimum lease payments receivable under non-cancellable operating leases contracted for as at the balance sheet date but not recognised as receivables, are as follows:

Group and Company 2007 2006 RM RM

Within one year 6,800,000 6,800,000More than one year 4,533,336 11,333,336

11,333,336 18,133,336

34. CONTINGENT LIABILITY

Company 2007 2006 RM RM

Unsecured:Corporate guarantee given to a bank for credit facilities granted to a subsidiary, Mithril Saferay Sdn. Bhd. 13,500,000 13,500,000


MITHRIL BERHAD76

35. SIGNIFICANT RELATED PARTY TRANSACTIONS

In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year:

Group Company 2007 2006 2007 2006

RM RM RM RM

Rental expenses paid to a corporate shareholder, Malaysian Assurance Alliance Berhad 158,304 152,541 158,304 152,541Rental income received from a corporate shareholder, Malaysian Assurance Alliance Berhad (6,800,000) (6,800,000) (6,800,000) (6,800,000)Management fees received from a subsidiary company, Mithril Saferay Sdn. Bhd. - - - (1,200,000)Management fees received from a subsidiary company, Mithril Management Services Sdn. Bhd. - - (45,000) (60,000)Short term loan granted by and fully paid to a corporate shareholder, MAA Credit Sdn. Bhd. 5,221,226 - 5,221,226 -Insurance claim received from a corporate shareholder, Malaysian Assurance Alliance Berhad (5,837,645) (3,857,292) - -Interests charged by a corporate shareholder, MAA Credit Sdn. Bhd. 3,616,224 2,497,139 180,251 -

The directors are of the opinion that all transactions above had been entered into in the normal course of business and had been established on terms and conditions that were not materially different from those obtainable in transactions with unrelated parties.

36. FINANCIAL INSTRUMENTS

(a) Financial Risk Management Objectives and Policies

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks. The Board reviews and agrees policies for managing each of these risks and they are summarised below. It is, and has been throughout the year under review, the group’s policy that no trading in derivative financial instruments shall be undertaken.

(b) Interest Rate Risk

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest-bearing financial assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s interest-bearing financial assets are mainly short term in nature and have been mostly placed in fixed deposits or occasionally, in short term commercial papers.

The Group’s primary interest rate risk relates to interest bearing debts. This risk is mitigated by the Groups investments in rental yielding investment properties and the issuance of convertible financial instruments.

The information on maturity dates and effective interest rates of financial assets and liabilities are disclosed in their respective notes.


MITHRIL BERHAD77


36. FINANCIAL INSTRUMENTS (CONT’D)

(c) Foreign Exchange Risk

The Group is exposed to transactional currency risk primarily through sales and purchases that are denominated in a currency other than functional currency of the operations to which they relate. The currencies giving rise to this risk are United States Dollars (“USD”) and Great Britain Pounds (“GBP”).

(d) Liquidity Risk

The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meets its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both capital markets and financial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness.

(e) Credit Risk

The Group’s credit risk is primarily attributable to trade receivables. The Group trades only with recognised and creditworthy third parties. It is the Group policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Trade receivables are monitored on an ongoing basis via Group management reporting procedures.

The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial assets except for a subsidiary, Mithril FRP Industries Sdn. Bhd. which is exposed to credit risks of advances given to a single supplier, T.E.C Marine Mouldings Ltd., with an outstanding balance of RM1,750,794 (2006: NIL).

(f) Fair Values

The carrying amounts of financial assets and liabilities of the Group and of the Company at the balance sheet date approximated their fair values except for the followings:

Group Company Carrying Carrying Note Amount Fair Value Amount Fair Value RM RM RM RM

Financial Assets

At 30 June 2007Quoted investment 17 3,720 6,025 - -

At 30 June 2006Quoted investment 17 3,720 3,123 - -

Financial Liabilities

At 30 June 2007Fixed rate term loan 12,000,000 11,160,166 12,000,000 11,160,166Hire purchase and finance lease payables 24 18,980,487 16,014,245 - -

At 30 June 2006Hire purchase and finance lease payables 24 17,514,304 16,130,141 - -

The following methods and assumptions were used to estimate the fair values of the following classes of financial

instruments:

( CONTINUED )

MITHRIL BERHAD78


36. FINANCIAL INSTRUMENTS (CONT’D)

(f) Fair Values (cont’d)

(i) Cash and Cash Equivalents, Trade and Other Receivables/Payables and Short Term Borrowings

The carrying amounts approximate their fair values due to the relatively short term maturity of these financial instruments.

(ii) Borrowings

The fair value of borrowings is estimated using discounted cash flow analysis, based on prevailing lending rates for similar types of lending, borrowing and leasing arrangements.

37. SEGMENTAL INFORMATION

The Group which is located in Malaysia is organised into four major business segments:

(i) Manufacturing - manufacturing of bricks and polyurethane products (ii) Trading - Trading and distribution of bricks and building materials; (iii) Investment holding (iv) Property management and others.

Other business segments include property management and related services, none of which are of a sufficient size to be reported separately.

The directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties.

Retailing / Manufacturing Trading Investment Others Elimination Consolidated RM’000 RM’000 RM’000 RM’000 RM’000 RM’00030 June 2007

RevenueExternal sales 40,794 34 6,800 - - 47,628Inter-segment sales 4 - 45 - (49) -

Total revenue 40,798 34 6,845 - (49) 47,628

ResultsSegment results (12,450) (108) 4,521 403 - (7,634)Finance costs (7,185)Taxation (355)

Net loss for the year (15,174)

AssetsConsolidated total assets 83,905 319 114,576 11,841 - 210,641

LiabilitiesConsolidated total liabilities 45,103 8,684 75,036 744 - 129,567

Other Segmental InformationCapital expenditure 44,595 187 8 11,789 - 56,579Depreciation 5,027 79 2 778 - 5,886Impairment losses 844 - - - - 844

( CONTINUED )

MITHRIL BERHAD79


37. SEGMENTAL INFORMATION (CONT’D)

Retailing / Manufacturing Trading Investment Others Elimination Consolidated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2006

RevenueExternal sales 55,016 2,694 6,800 - - 64,510Inter-segment sales 2,470 - 1,260 - (3,730) -

Total revenue 57,486 2,694 8,060 - (3,730) 64,510

ResultsSegment results (8,448) 2,188 3,596 (155) - (2,819)Finance costs (8,065)Taxation 455

Net loss for the year (10,429)

AssetsConsolidated total assets 80,859 465 125,072 12,686 - 219,082

LiabilitiesConsolidated totalliabilities 48,223 7,957 65,200 2,172 - 123,552

Other Segmental InformationCapital expenditure 4,185 119 11 - - 4,315Depreciation 4,616 73 1 - - 4,690Impairment losses 1,738 - - - - 1,738

( CONTINUED )

MITHRIL BERHAD80

LIST OF PROPERTIES

Title/LocationDescription/Existing Use

Approximate ageof building years/

Tenure

Land area/Built-up area

sq. ft

NBV as at30.06.07

RM

Date ofacquisition/

last evaluation

Registered under Mithril Berhad

Menara MAA, No. 6,Lorong Api-Api88000 Kota Kinabalu,Sabah

Under Master Title No.Town Lease017545265,District of Kota Kinabalu,Sabah

Twenty Nine (29)subsidiary parcels

of commercial/office space with

195 units ofbasement car parkbays forming part

of a 11 storey office building with 3-

basement car park

8/Leasehold

expiring on 31December 2086

47,145.85/189,727

75,000,000 2004

Menara MAA, Lot No. 86,Section 53,Jalan Ban Hock93100 KuchingSarawak

Under Master Title No.1LCLS125386Kuching Town Land District,Sarawak

Eight (8)Subsidiary parcels

of commercial/office space

forming part of a 11 storey office

building withbasement floor and

an open-air car park

10/Leasehold expiring

28 April 2051

56,005/50,653

25,000,000 2004

Registered under Mithril Clay Manufacturing Berhad (Formerly known as Tajo Berhad)

Lot PTD 7273,Mukim of SedenakDistrict of Johor BahruJohor Darul Takzim

Batu 35 1/2, Jalan Air HitamBukit Batu, 81000 KulaiJohor Darul Takzim

Industrial land with office building,

canteen, quarters and guard house

22/Leaseholdexpiring on

14 January 2022

130,680/12,650

401,519 1991


Batu 35 1/2, Jalan Air HitamBukit Batu, 81000 KulaiJohor Darul Takzim

Industrial land NIL/Leaseholdexpiring on

14 January 2022

435,600 1,338,341 1991


Quarry land Nil/Leaseholdexpiring on

14 January 2022

1,611,729/Nil

752,140 1991

Lot 225, Jalan Kampong TuiMukit Bukit Kepong84030 MuarJohor Darul Takzim

Factory 6/Not applicable

Nil/204,698

13,995,132 2001

Lot 9381 (MLO 2201),Mukim of Sri MedanDistrict of Batu PahatJohor Darul Takzim

Quarry land Nil/Freehold

387,991/Nil

2,700,000 1991

MITHRIL BERHAD81



Tenure


sq. ft

NBV as at30.06.07

RM

Date ofacquisition/

last evaluation

Registered under Mithril Clay Industries Sdn. Bhd.

C.T. 4750 Lot 1130,Mukim of Bukit KepongDistrict of Muar,Johor Darul Takzim

Agricultural land Nil/Freehold

218,756/Nil

243,400 1996

C.T. 4751 Lot 1131,Mukim of Bukit KepongDistrict of Muar, Johor Darul Takzim


218,756/Nil

243,400 1996



218,756/Nil

243,400 1996



112,646/Nil

124,990 1996



198,578/Nil

220,785 1996

HS (M) 150 Lot MLO 206,Mukim of Bukit KepongDistrict of Muar, Johor Darul Takzim


187,492/Nil

242,788 1996

GM 168 Lot 1238,Mukim of Bukit KepongDistrict of Muar, Johor Darul Takzim


112,161/Nil

124,446 1996



95,714/Nil

124,295 1996



263,901Nil

293,980 1996

Grant 15643 Lot 223,Mukim of Bukit Kepong,District of Muar, Johor Darul Takzim


262,132/Nil

324,660 1996

Grant 15644 Lot 224,Mukim of Bukit KepongDistrict of Muar, Johor Darul Takzim


68,870/Nil

77,173 1996

LIST OF PROPERTIES( CONTINUED )

MITHRIL BERHAD82




Tenure


sq. ft

NBV as at30.06.07

RM

Date ofacquisition/

last evaluation

Grant 031523 Lot 225,Mukim of Bukit KepongDistrict of Muar, Johor Darul Takzim

Lot 225, Jalan Kampong TuiMukim Bukit Kepong84030 Muar, Johor Darul Takzim

Part agricultural landand part industrial

land

Nil/Freehold

2,480,886/Nil

2,440,000 1996

GM 533 Lot 194,Mukim of Bukit KepongDistrict of Muar,Johor Darul Takzim


71,297/Nil

86,683 1996

Registered under Mithril Saferay Sdn. Bhd.

PT 7003 No. HS (D) LM 3/84Mukim of Asam KumbangDistrict of Larut dan MatangNegeri Perak Darul Ridzuan

No. 8A, Jalan Damai,Kampung Boyan34000 Taiping Negeri Perak Darul Ridzuan

Industrial landwith storage

yard


3 January 2014

21,367/20,240

568,858 2003

PT 4192 No. HS (D) LM 5130Mukim of Asam KumbangDistrict of Larut dan MatangNegeri Perak Darul Ridzuan

Lot 2286, Lorong 1,Kampung Boyan34000 Taiping, Negeri Perak Darul Ridzuan

Industrial land withfactory building

13/Leasehold

expiring on 29November 2053

31,799/20,786

1,980,323 2000

Lot 4193 No. HS (D) LM 5750Mukim of Asam KumbangDistrict of Larut dan MatangNegeri Perak Darul Ridzuan


Industrial land withStorage building


22 July 2054

25,156/38,322

1,506,970 2000

PT 496 No. HS (D) LM 844/84Mukim of Asam KumbangDistrict of Larut dan MatangNegeri Perak Darul Ridzuan


Industrial land withStorage building


29 May 2014

16,282/17,212

257,085 2000

MITHRIL BERHAD83



Tenure


sq. ft

NBV as at30.06.07

RM

Date ofacquisition/

last evaluation

PT 3642, No. H.S. (D) LM 934/88Mukim of Asam KumbangDistrict of Larut dan Matang,Negeri Perak Darul Ridzuan

PT 3642, Jalan Perusahaan34600 Kamunting, Taiping, Negeri Perak Darul Ridzuan

Industrial land withfactory building


13 June 2087

87,120/24,607

710,356 2000

PT 9278, No. H.S. (D) LM 2146/89 Mukim of Asam KumbangDistrict of Larut dan Matang,Negeri Perak Darul Ridzuan

No. 5, Jalan Medan,34000 Taiping, Negeri Perak Darul Ridzuan

2 storey shop lot 12/Leasehold expiring on

25 July 2088

1,200/1,200

340,000 2002


MITHRIL BERHAD84

ANALYSIS OF SHAREHOLDINGS

MITHRIL BERHAD (Company No.: 577765-U)STATISTICS OF SHAREHOLDINGS AS AT 28 SEPTEMBER 2007

Authorised Share Capital RM513,306,270

Issued and Paid Up Capital RM109,976,472

Class of Shares Ordinary Shares of RM1.00 each

Voting Rights 1 Vote Per Ordinary Share

Number of Shareholders 9,204

Analysis of Shareholdings

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

Less than 100 4,910 53.35 98,507 0.09

100 – 1,000 1,366 14.84 570,630 0.52

1,001 – 10,000 1,907 20.72 9,170,181 8.34

10,001 – 100,000 903 9.81 30,212,976 27.47

100,001 and below 5% of issued shares

116 1.26 36,150,874 32.87

5% and above of issued shares 2 0.02 33,773,304 30.71

TOTAL 9,204 100.00 109,976,472 100.00

List of Top Thirty Shareholders

Name No. of shares held % of issued capital

1. MAA Holdings Berhad 33,773,304 30.71

2. MAA Credit Sdn Bhd 2,835,435 2.58

3. Affin Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Chung Chee Yang

2,500,000 2.27

4. BSN Merchant Bank Bhd 1,767,419 1.61

5. AMSEC Nominees (Asing) Sdn Bhd Beneficiary : AMFraser Securities Pte Ltd for Ramesh s/o Pritamdas

Chandiramani

1,600,000 1.45

6. Yek Chong 960,900 0.87

7. CIMSEC Nominees (Tempatan) Sdn Bhd Beneficiary : BC Trustee Advisory for Hasnur Rabiain bin Ismail

950,000 0.86

8. RHB Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for See Thoo Chan

840,000 0.76

9. Public Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Khoo Mow Song

600,000 0.55

10. Teh Choo Khim 600,000 0.55

11. Chung Soo Mai 550,000 0.50

12. AMSEC Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Azmi bin Luddin

500,000 0.45

13. Chang Nyen Seng 500,000 0.45

14. HLB Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Hwang Then Foo @ Ng Thiam

Hock

500,000 0.45

15. PM Securities Sdn Bhd Beneficiary : IVT

500,000 0.45

16. Tan Chuan Kiang @ Chin Shian Chang 500,000 0.45

17. Tan Heng Lam 500,000 0.45

MITHRIL BERHAD85

Name No. of shares held % of issued capital

18. Ong Gik Lan @ Ong Gaik Lan 450,000 0.41

19. Tan Kuan Lee 450,000 0.41

20. Lew Yoon 400,000 0.36

21. Quek Phaik Im 400,000 0.36

22. Lie Poo Hon 380,000 0.35

23. Hong Yeam Wah 370,000 0.34

24. Loh Kew @ Law Kon Yew 368,900 0.34

25. Mah Siew Seong 365,000 0.33

26. Inter-Pacific Equity Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Ahmad Jalini bin Mohamed

Kamsan

330,000 0.30

27. CIMSEC Nominees (Tempatan) Sdn Bhd Beneficiary : CIMB Bank for Linda Ooi Lie Na

328,900 0.30

28. Yong Hon Chong 314,000 0.29

29. Hee Khim Hong 303,000 0.28

30. Cheong Fook Chee 300,000 0.27

TOTAL 54,736,858 49.77

ANALYSIS OF SHAREHOLDINGS( CONTINUED )

MITHRIL BERHAD86

ANALYSIS OF WARRANT HOLDINGS

MITHRIL BERHAD (Company No.: 577765-U)STATISTICS OF WARRANT HOLDERS AS AT 28 SEPTEMBER 2007

Number of warrants issued 38,270,780

Number of warrant exercised 5,584,000

As at 28 September 2007 32,686,780

Number of warrant holders 2,055

Analysis of Warrant Holdings

Size of Warrant HoldingsNo. of

Warrant Holders% of

Warrant HoldersNo. of

Warrants% of

Issued Warrants

Less than 100 223 10.85 10,000 0.03

100 – 1,000 1,366 66.47 583,086 1.78

1,001 – 10,000 309 15.04 1,075,361 3.29

10,001 – 100,000 135 6.57 5,000,373 15.30

100,001 and below 5% of is-sued shares

17 0.83 5,127,933 15.69


TOTAL 2,055 100.00 32,686,780 100.00

List of Top Thirty Warrant Holders

Name No. of warrants held

% of issued warrants

1. CIMSEC Nominees (Tempatan) Sdn Bhd Beneficiary : Danaharta Managers Sdn Bhd

9,398,700 28.75

2. MAA Holdings Berhad 5,186,386 15.87

3. MAA Credit Sdn Bhd 2,835,435 8.67

4. BSN Merchant Bank Bhd 1,767,419 5.41

5. HSBC Nominees (Asing) Sdn Bhd Beneficiary : Exempt An for Credit Suisse

1,702,087 5.21

6. Teh Teaw Kee 878,300 2.69

7. RHB Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for See Thoo Chan

840,000 2.57

8. Chin Kiam Hsung 475,200 1.45

9. CIMSEC Nominees (Tempatan) Sdn Bhd Beneficiary : BC Trustee Advisory for Hasnur Rabiain bin Ismail

333,333 1.02

10. Koh Chin Liang 320,000 0.98

11. Ching Kean Lam 282,600 0.86

12. Chin Kian Fong 275,800 0.84

13. TA Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Tan Tian Sheu

243,500 0.74

14. Inter-Pacific Equity Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Teng Hock Heng

204,600 0.63

15. RHB Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Tan Yee Ming

200,000 0.61

16. TCL Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Chin Kiam Hsung

198,200 0.61

17. TA Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Teh Teoh Guan

171,400 0.52

MITHRIL BERHAD87

Name No. of warrants held

% of issued warrants

18. Low Yoke Choo 158,200 0.48

19. OSK Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Yap Kum Seng

150,000 0.46

20. Pang Swee Chien 144,800 0.44

21. Pong Pei Ching 130,000 0.40

22. OSK Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Tan Gaik Suan

122,000 0.37

23. HDM Nominees (Asing) Sdn Bhd Beneficiary : UOB Kay Hian Pte Ltd for Lee Kah Kiam

100,000 0.31

24. Khaled Kamel Ahmad Khader 100,000 0.31

25. Koh Cheng Kiat 100,000 0.31

26. Low Kuan Mun 100,000 0.31

27. Niap Kim Lock @ Andrew Niap Kim Fook 100,000 0.31

28. RHB Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Chin Kiam Hsung

100,000 0.31

29. Teh Teaw Kee 99,700 0.31

30. TA Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Teh Teaw Kee

99,600 0.30

TOTAL 26,817,260 82.04

ANALYSIS OF WARRANT HOLDINGS( CONTINUED )

MITHRIL BERHAD88

ANALYSIS OF RCSLS HOLDINGS

MITHRIL BERHAD (Company No.: 577765-U)STATISTICS OF RCSLS HOLDERS AS AT 28 SEPTEMBER 2007

Number of RCSLS issued 59,000,000

Number of RCSLS exercised NIL

Class of Loan Stock RCSLS of RM1.00 each

As at 28 September 2007 59,000,000

Number of RCSLS Holders 3,956

Analysis of RCSLS Holdings

Size of RCSLS HoldingsNo. of

RCSLS Holders% of

RCSLS HoldersNo. of

RCSLS% of

Issued RCSLS

Less than 100 2 0.05 100 0.00

100 – 1,000 2,143 54.17 2,091,400 3.54

1,001 – 10,000 1,391 35.16 5,523,500 9.36

10,001 – 100,000 393 9.93 8,263,800 14.01


25 0.63 6,169,100 10.46


TOTAL 3,956 100.00 59,000,000 100.00

List of Top Thirty RCSLS Holders

Name No. of RCSLS held % of issued RCSLS

1. Malaysian Assurance Alliance Berhad 36,952,100 62.63

2. Low Hong Kooi 700,000 1.19

3. Neo Say Yeow 696,600 1.18

4. Looi Lei Chow 680,000 1.15

5. Khoo Yee Kew @ Khoo Ai Kiew 650,000 1.10

6. Charles Yii 340,000 0.58

7. Young Swee Choon 311,500 0.53

8. RHB Capital Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Hiew Kat Kee

311,100 0.53

9. Chong Kam Thai 221,100 0.37

10. Mayban Nominees (Tempatan) Sdn Bhd Beneficiary : DBS Bank for David Rashid bin Ghazalli

200,000 0.34

11. MAA Bancwell Trustee Berhad Beneficiary : MAAKER Fund

184,000 0.31

12. Liew Shin Choy 180,000 0.31

13. Ong Siow Teck 174,000 0.29

14. Tan Yoek Tin 165,000 0.28

15. Lim Kiat Hua 140,000 0.24

16. Lim Chin Seng 134,500 0.23

17. Public Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Loh You Fong

121,000 0.21

MITHRIL BERHAD89

ANALYSIS OF RCSLS HOLDINGS( CONTINUED )

Name No. of RCSLS held % of issued RCSLS

18. Loh Yin San 120,000 0.20

19. Lim Kwong Mee @ Ling Diong Ming 114,800 0.19

20. Ong Swee Keng 111,000 0.19

21. JF Apex Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Voon Sze Lin

107,800 0.18

22. Public Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Hiew Kat Kee

105,300 0.18

23. Chong Mei Key 101,100 0.17

24. Gan Poh Chin 100,100 0.17

25. Tam Chia Li 100,100 0.17

26. Tam Mao Hing 100,100 0.17

27. Lee Yew Lee 100,000 0.17

28. MAA Corporate Advisory Sdn Bhd 100,000 0.17

29. Song Chen Kiow 100,000 0.17

30. Ang Bu Han 91,000 0.15

TOTAL 43,512,200 73.75

MITHRIL BERHAD90

ANALYSIS OF ICULS HOLDINGS

MITHRIL BERHAD (Company No.: 577765-U)STATISTICS OF ICULS HOLDERS AS AT 28 SEPTEMBER 2007

Number of ICULS issued RM60,700,000

Number of ICULS exercised RM920,500

Class of Loan Stock ICULS of RM1.00 each

As at 28 September 2007 59,779,500

Number of ICULS Holders 5,289

Analysis of ICULS Holdings

Size of ICULS HoldingsNo. of ICULS

Holders% of ICULS

HoldersNo. of ICULS

% of Issued ICULS

Less than 100 2 0.04 100 0.00

100 – 1,000 2,723 51.48 2,566,300 4.29

1,001 – 10,000 2,009 37.98 8,214,100 13.74

10,001 – 100,000 531 10.04 11,660,200 19.51


22 0.42 5,610,300 9.38


TOTAL 5,289 100.00 59,779.500 100.00

List of Top Thirty ICULS Holders

Name No. of ICULS held % of issued ICULS

1. Malaysian Assurance Alliance Berhad 30,326,000 50.73

2. Melewar Group Berhad 3,753,100 6.28

3. Wong Shak On 300,000 0.50

4. Sim Lian Hing 290,600 0.49

5. MAA Bancwell Trustee Berhad Beneficiary : MAAKER Fund

200,000 0.33

6. Mayban Nominees (Tempatan) Sdn Bhd Beneficiary : DBS Bank for David Rashid bin Ghazalli

200,000 0.33

7. Chow Wah Hing @ Lim Chung Shien 180,000 0.30

8. Tan Beng Huat @ Tan Beng Sim 175,000 0.29

9. Tai Yoon Voon 171,000 0.29

10. Kok Mee Eng 161,000 0.27

11. Chan Kit Peng 160,000 0.27

12. Yoon Koh Fong 150,000 0.25

13. Lim Kiat Hua 140,000 0.23

14. Tan Paik Sim @ Tan Phaik Im 140,000 0.23

15. HLG Nominee (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Toh Poey Gee

127,900 0.21

16. Arthur Lawrance Pharamond 122,000 0.20

17. Public Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Hiew Yoke Kuen

120,000 0.20

MITHRIL BERHAD91

ANALYSIS OF ICULS HOLDINGS( CONTINUED )

Name No. of ICULS held % of ICULS capital

18. Teh Kah Hua @ Teh Kah Hah 110,000 0.18

19. Heng Kiok Ngan 108,000 0.18

20. Choong Fook Hing 102,000 0.17

21. Ong Tai Poh 101,000 0.17

22. Loh Nyet Mee 100,700 0.17

23. MAA Bancwell Trustee Berhad 100,500 0.17

24. Chua Wee Poh 100,000 0.17

25. TA Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Nai Eng Seng

100,000 0.17

26. Tee Jen Tong 100,000 0.17

27. Chua Say Yong 98,000 0.16

28. Ang Bu Han 91,000 0.15

29. Mayban Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Hwang Then Foo @ Ng Thiam

Hock

90,100 0.15

30. Mayban Nominees (Tempatan) Sdn Bhd Beneficiary : Pledged Securities Account for Ong Poh Tine

88,700 0.15

TOTAL 38,006,600 63.58

THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK



I/We NRIC No./Co. No./CDS No. : (Full Name in block letters)

of (Full address)being a member/members of MITHRIL BERHAD hereby appoint the following person(s) :-

Name of proxy, NRIC No. & Address No. of shares to be represented by proxy

1.

2.

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us and my/our behalf at the Fifth Annual General Meeting of the Company to be held at the Auditorium, Podium 1, Menara MAA, No. 12 Jalan Dewan Bahasa, 50460 Kuala Lumpur on Thursday, 29 November 2007, at 4.00 p.m. My/our proxy is to vote as indicated below :-

FIRST PROXY SECOND PROXY

For Against For Against

Resolution 1 To approve the payment of Directors’ fees for the period from 1 July 2007 until the forthcoming Annual General Meeting to be held in 2008 to be payable quarterly in arrears.

To re-elect the following Directors of the Company who are retiring pursuant to Article 77 of the Company’s Articles of Association :-

Resolution 2 (i) Dato’ Abdul Majid bin Mohamed

Resolution 3 (ii) Onn Kien Hoe

To re-elect the following Directors of the Company who are retiring pursuant to Article 83 of the Company’s Articles of Association :-

Resolution 4 (i) Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah

Resolution 5 (ii) Alan Hamzah Sendut

Resolution 6 To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration.

Resolution 7 To authorise the Directors to issue shares in the Company pursuant to the Employees’ Share Option Scheme.

Resolution 8 To approve the Shareholders’ Mandate for Recurrent Related Party Transactions.

Resolution 9 To approve the amendments to Articles of Association of the Company.

(Please indicate with a “ ” or “X” in the space provided how you wish your vote to be cast. If no instruction as to voting is given, the proxy will vote or abstain from voting at his/her discretion).

Dated this day of 2007 Signature/Common Seal

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

the Company.2. A member of the Company, who is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, may appoint one (1) proxy in respect

of each securities account.3. The instrument appointing a proxy, shall be in writing under the hand of the appointer or his attorney duly authorised in writing, and in the case of a corporation, either under

seal or under hand of an officer or attorney duly authorised.4. The instrument appointing a proxy must be deposited at the Company’s Registered Office, Suite 20.03, 20th Floor, Menara MAA, No.12, Jalan Dewan Bahasa, 50460 Kuala

Lumpur, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.5. Any alteration in the form of proxy must be initialed.6. Explanatory notes to Special Business of the Agenda 6 : -

(a) Authority to allot and issue shares in general pursuant to Employees’ Share Option Scheme (“ESOS”) On 26 December 2003, the shareholders of the Company had approved the ESOS. The purpose of this ordinary resolution is to enable the Directors of the Company

to allot shares to those employees and Executive Directors who have exercised their option under the Company’s ESOS.

(b) Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (“RRPTs”) The Proposed Resolution 8, if passed, will empower the Company to conduct recurrent related party transactions of a revenue or trading nature which are necessary

for the Group’s day-to-day operations, and will eliminate the need to convene separate general meetings from time to time to seek shareholders’ approval. This will substantially reduce administrative time, inconvenience and expenses associated with the convening of such meetings, without compromising the corporate objectives of the Group or adversely affecting the business opportunities available to the Group.

The detailed information on Recurrent Related Party Transactions is set out in Part A of the Circular dated 7 November 2007 which is dispatched together with this Annual Report.

(c) Proposed Amendments to Articles of Association of the Company The Proposed Special Resolution 9, if passed, will update the Articles of Association of the Company to ensure continued compliance with the Listing Requirements

of Bursa Securities and to further enhance the administration of the internal affairs of the Company.

FORM OF PROXY(please refer to the notes below)

No. of ordinary shares heldMITHRIL BERHAD(577765-U)

Fold here

Fold here

The SecretaryMITHRIL BERHADSuite 20.03, 20th Floor, Menara MAANo. 12, Jalan Dewan Bahasa50460 Kuala Lumpur

NOTICEThere will be no distribution of door gifts

Documents

AR07 Mithril