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ASTRAL SUPREME BERHAD(442371-A)

Unit 11-09, 9th Floor, The Boulevard, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur.Tel : 03-2288 1768 Fax : 03-2282 2768

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ContentsCorporate Information 1

Corporate Structure 2

Chairman’s Statement 3

Directors’ Profi les 6

Corporate Governance Statement 9

Statement On Internal Control 13

Audit Committee Report 14

Financial Statements 17

Properties Of The Group 74

Shareholding Statistics 75

Notice Of Annual General Meeting 78

Statement Accompanying Notice Of

Annual General Meeting 80

Proxy Form

1annual report 07

Registered Offi ce

No. 1-1, 1st Floor, Jalan 3/116D

Kuchai Entrepreneurs’ Park

58200 Kuala Lumpur

Tel : 03-7983 1088

Fax : 03-7984 9612

Corporate Offi ce

Unit 11-09, 9th Floor

The Boulevard, Mid Valley City

Lingkaran Syed Putra

59200 Kuala Lumpur

Tel : 03-2288 1768

Fax : 03-2282 2768

Main Business Offi ces

Kulim

Singatronics (Malaysia) Sdn Bhd

Lot 20, Kulim Industrial Estate

09000 Kulim, Kedah

Tel : 04-489 2288

Fax : 04-489 1088

Johor

S.G. Silk Screen Industries Sdn Bhd

No. 11, Jalan Firma 2

Kawasan Perindustrian Tebrau 1

81100 Johor Baru

Johor Darul Takzim

Tel : 07-355 4708

Fax : 07-355 4706

Cambodia

Sing Guan Silk Screen (Cambodia)

Co. Ltd.

#Trapeng Thloeng Village

Veng Sreng Street

Chom Chau Quarter Dangkar District

Phnom Penh

Kingdom of Cambodia

Board Of Directors

Dato’ Hilmi Bin Haji Abdul Rashid(Independent Non-Executive Chairman)

Cherng Chin Guan(Executive Director)

Wan Hung See(Executive Director)

Kang Ching Hong(Independent Non-Executive Director)

Siti Rohani binti A. Manan(Non-Independent Non-Executive Director)

Yeo Eng Hui(Independent Non-Executive Director)

Audit Committee

Dato’ Hilmi Bin Haji Abdul Rashid(Chairman)

Kang Ching Hong (Member)

Yeo Eng Hui (Member)

Nomination Committee

Yeo Eng Hui (Chairman)

Dato’ Hilmi Bin Haji Abdul Rashid(Member)

Kang Ching Hong (Member)

Remuneration Committee

Kang Ching Hong (Chairman)

Dato’ Hilmi Bin Haji Abdul Rashid(Member)

Cherng Chin Guan (Member)

Company Secretaries

Low Pooi Ming (MAICSA 7006832)

Lee Ming Leong (MAICSA 7006926)

Share Registrar

Symphony Share Registrars Sdn Bhd

Level 26, Menara Multi-Purpose

Capital Square

No. 8, Jalan Munshi Abdullah

50100 Kuala Lumpur

Tel : 03-2721 2222

Fax : 03-2721 2530

Auditors

SQ Morison

Principal Bankers of the Group

Malayan Banking Berhad

RHB Bank Berhad

EON Bank Berhad

United Overseas Bank (Malaysia) Berhad

Alliance Bank (Malaysia) Berhad

OCBC Bank (Malaysia) Berhad

Stock Exchange Listing

Second Board of the Bursa Malaysia

Securities Bhd

Place of Incorporation and Domicile

Malaysia

Stock Short Name

ASUPREM

Stock Code

7070

Sector

Industrial Products

Corporate Information

ASTRAL SUPREME BERHAD2

Group Structure 2007

ASTRAL SUPREME BERHAD

100%

Astral-GMO Sdn Bhd [3]

51%100%65.6%

19%S.G. Silk

Screen Industries Sdn Bhd [2]

Singatronics (Malaysia)

Sdn Bhd [1]

S.G. Graphic Sdn Bhd [4]

S.G. Global Holdings Pte Ltd [5]

K.S.G. Silk Screen Sdn Bhd [2]

Sing Guan Silk Screen (Cambodia) Co. Ltd [2]

11.4% 5% 100% 100% 99.4%

Sing Guan Silk Screen & Marketing Pte Ltd [6]

S.G. Silk Screen (Shanghai) Co Ltd [2]

100%

JC Equities Pte Ltd [5]

100% 100%

Notes:[1] Manufacture, Assembly and Export of Electronic and Electrical Consumer and Industrial Products

[2] Silk Screen Printing and Embroidery

[3] Trading of Electronic and Electrical Consumer and Industrial Products

[4] Desktop Prepress

[5] Investment Holding

[6] Marketing of Silk Screen Printing

3annual report 07

Chairman’s Statement

FINANCIAL OVERVIEW

For the year the Group recorded lower revenue of RM42.303 million, representing a decrease of 16.0% from revenue of RM50.363 million for the fi nancial year ended 31 December 2006.

The Group also recorded loss after taxation and minority interest of RM7.365 million for the fi nancial year ended 31 December 2007 compared to a profi t after taxation and minority interest of RM0.748 million for the fi nancial year ended 31 December 2006. The loss was mainly due to the effects of the weakening of the United States Dollar (“USD”) and the impact of the rising crude oil price on production cost.

GROUP OPERATIONS OVERVIEW

The year 2007 has been a challenging year for the Group in so many ways. During the past year, the Board ensured that the Group operated within the limits of the available resources.

a) Electronics Contract Manufacturing Division

The electronics contract manufacturing division recorded lower revenue of RM15.241 million for the fi nancial year ended 31 December 2007 as compared to RM22.959 million for the fi nancial year ended 31 December 2006. The decrease in revenue is mainly due to the expiry of a contract with a major customer which previously contributed half of Singatronics’ revenue. The division also recorded a loss of RM2.076 million for the fi nancial year ended 31 December 2007 when compared with a profi t of RM0.014 million in the previous year.

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of Astral Supreme Berhad and its Group of Companies for the fi nancial year ended 31 December 2007.

ASTRAL SUPREME BERHAD4

The Board will also continue to remain perceptive and will exploit feasible investment opportunities which could elevate the profi tability and prospects of the Group in order to enhance entity value.

Chairman’s Statement (cont’d)

a) Electronics Contract Manufacturing Division (Cont’d)

In the company’s bid to strengthen its marketing ability and to provide complete printed circuit board assembly services, Singatronics has at the beginning of the 2007 fi nancial year invested in a Surface Mount Technology (“SMT”) line. The installation of the SMT line was completed in the second quarter of the year. Since then, our marketing team has been actively pursuing and procuring new clients.

b) Silk Screen Printing and Embroidery Division

The year 2007 has not been easy for the textile industry with stiff competition and interrupted fabric delivery problems. The silk screen printing and embroidery division reported revenue of RM27.063 million for the fi nancial year ended 31 December 2007, representing a slight reduction of 1.2% from 2006’s revenue of RM27.404 million. However, the division recorded a loss of RM9.865 million during the year due to the weakening of the USD, the increase in the cost of raw materials, and higher depreciation and fi nance cost.

DIVIDEND

The Directors are not recommending any payment of fi nal dividend.

PROSPECT

Looking ahead, the Board anticipates that next year’s operations will be challenging in view of the stiff competitions and uncertainties in the economic condition locally and in the major markets. The outcome of the pending Free Trade Agreement (“FTA”) between Malaysia and the United States of America has yet to be seen but the Board is hopeful that the FTA may bring favorable effects on the Malaysian manufacturing industry.

The Group expects to focus and remain committed to grow its businesses to create value for its stakeholders. Future infrastructure is a critical area for the Group especially our electronic division. With growing demands for new services and technologies, the continuing provision of essential services will require expanding capital investment and the Board is paying great deal of attention to this matter.

5annual report 07

To our shareholders, I wish to extend my deepest appreciation for your trust and beliefs in ASB over the long period of time.

CORPORATE SOCIAL RESPONSIBILITY (“CSR”)

The Board acknowledges the importance of CSR and has always been mindful of its corporate social responsibilities towards the community and our environment. Recognizing our employees as an important asset to the Group coupled with the beliefs that CSR should fi rstly begin within the Group, we have always care and provided for the welfare of our employees by providing them a safe and healthy working environment.

The Group continues with its environmental management best practices with proper water treatment plants and waste management. The Board has pledged to continue to discharge our duties in manner so that we do not neglect our responsibility to the community and the environment.

ACKNOWLEDGEMENT

On behalf of the Board of Directors, I wish to express our sincere appreciation to the management and all our employees for their diligence, dedication and strong commitment to the Group. I also extend my gratitude to all our valued customers, business partners and suppliers for their continued support and confi dence in the Group.

I would also like to thank the members of the Board for their continuing support and contributions to the Group.

DATO’ HILMI BIN HAJI ABDUL RASHIDIndependent Non-Executive Chairman

22 April 2008

ASTRAL SUPREME BERHAD6

Directors’ Profi les

Dato’ Hilmi was appointed to the Board of Directors of the Company on 12 September 2003 as Independent Non-Executive Director and was subsequently appointed as Independent Non-Executive Chairman on 27 February 2007. He is the Chairman of the Audit Committee and member for both the Nomination and Remuneration Committees.

Dato’ Hilmi holds a Master in Business Administration from Marshall University West Virginia, United States of America (“USA”) and Bachelor of Business Administration from Monmouth College, Illinois, USA. He was formerly an Assistant Manager of HSBC Bank Malaysia Bhd, Chairman of Penang Public Account Committee (PAC) and Youth Leader of United Malays National Organisation (“UMNO”), Kepala Batas Division. He is currently the Deputy Chairman of UMNO, Kepala Batas Division and the Chairman of PERDA (Penang Regional Development Authority). He is also a Director of AKN Technology Bhd.

Dato’ Hilmi attended all fi ve Board meetings held during the fi nancial year ended 31 December 2007.

Mr Cherng was appointed to the Board of Directors of the Company on 11 May 2006 as Executive Director and is a member of the Remuneration Committee.

He is a Chartered Accountant and an Associate Member of the Chartered Institute of Management Accountants and a Member of the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Taxation. He has more than 15 years of professional experiences in provision of public practice services and management experiences in diversifi ed industries.

Mr Cherng attended all fi ve Board meetings held during the fi nancial year ended 31 December 2007.

Ms Wan was appointed to the Board of Directors of the Company on 15 May 2006 as Executive Director.

Ms Wan completed her professional examinations of the Institute of Chartered Secretaries and Administrators in 1989. She began her career with Ernst & Young as a tax assistant in 1990. From 1994 to 2000, she was attached to merchant banks specializing in corporate fi nance, initial public offers, mergers and acquisitions and corporate restructuring. From 2000 to 2006, she was attached to consultancy fi rms providing corporate advisory services.

Ms Wan attended all fi ve Board meetings held during the fi nancial year ended 31 December 2007.

DATO’ HILMI BIN HAJI ABDUL RASHIDIndependent Non-Executive Chairman • Malaysian, aged 54

CHERNG CHIN GUANExecutive Director • Malaysian, aged 44

WAN HUNG SEEExecutive Director • Malaysian, aged 42

7annual report 07

YEO ENG HUIIndependent Non-Executive Director • Malaysian, aged 48

KANG CHING HONGIndependent Non-Executive Director • Malaysian, aged 40

SITI ROHANI BINTI A. MANANNon-Independent Non-Executive Director• Malaysian, aged 53

Mr Kang was appointed to the Board of Directors of the Company on 13 September 2005 as Independent Non-Executive Director. He is the Chairman of the Remuneration Committee and member for both the Audit and Nomination Committees.

Mr Kang is a Certifi ed Public Accountant (MICPA) and a member of the Malaysian Institute of Accountants (MIA). Mr Kang has more than 16 years’ experience in audit, accounting, management and corporate fi nance.

Mr Kang joined KPMG as an external auditor in 1989 before joining Arab Malaysia Corporation Berhad as a Corporate Service Manager in 1993. Since then, he has held Senior Corporate Planning and Executive Director positions in listed companies. Mr Kang has in-depth knowledge in the area of Debt Restructuring, Corporate Finance and Merger and Acquisitions.

Currently, Mr Kang is an Executive Director of a consultancy fi rm providing corporate advisory services.

Mr Kang attended four out of the fi ve Board meetings held during the fi nancial year ended 31 December 2007.

Puan Siti Rohani was appointed to the Board of Directors of the Company on 13 March 2006 as Non-Independent Non-Executive Director and she represents Lembaga Tabung Haji, a major shareholder of the Company.

Puan Siti Rohani holds a Bachelor of Economics from University of Malaya, Malaysia. From 1981 to 1984, Puan Siti Rohani was an Analyst (Economics) with Kompleks Kewangan (M) Bhd. In 1984, she joined Lembaga Tabung Haji as a Manager (Equity) and was subsequently promoted to Senior Manager (Investment Analysis) in 1993. In 1997, she became its General Manager (Investment Development) till present.

Puan Siti Rohani also sits on the Board of Directors of SDKM Fibres, Wires & Cables Bhd.

Puan Siti Rohani attended four out of the fi ve Board meetings held during the fi nancial year ended 31 December 2007.

Mr Yeo was appointed to the Board of Directors of the Company on 11 May 2006 as Independent Non-Executive Director. He is the Chairman of the Nomination Committee and member of the Audit Committee.

Mr Yeo holds a Master in Business Administration from Middlesex Business School, London. He is a member of the Malaysian Institute of Accountants (MIA), a Fellow member of the Chartered Association of Certifi ed Accountants, a council member of the Malaysian Institute of Taxation and Chairman of ACCA Public Practice Committee. He is the founding partner of an audit fi rm and has more than 20 years of experience in auditing, taxation and corporate matters.

Mr Yeo attended four out of the fi ve Board meetings held during the fi nancial year ended 31 December 2007.

All the Directors do not have any family relationship with any other Directors and/or the major shareholders of the Company. To date, there is no confl ict of interest between any of the Directors and the Company. None of the Directors have been convicted for any offence in the past ten years.

Corporate Statements

Corporate Governance Statement 9

Statement On Internal Control 13

Audit Committee Report 14

ASTRAL SUPREME BERHAD8

9annual report 07

The Board of Directors is fully committed to adopt good corporate governance and continuously aim at raising the standards of corporate governance throughout the Group as a fundamental part of discharging its responsibilities not only to protect and enhance shareholders’ value but to increase investor confi dence other than improving the performance of Astral Supreme Berhad.

The following statement, together with the other statements such as the Statement on Internal Control, explains the manner in which the Group has applied the principles of the Malaysian Code of Corporate Governance (“Code”) and its compliance with the Best Practice provisions of the Code throughout the year ended 31 December 2007.

1. THE BOARD OF DIRECTORS

The Board has the overall responsibility for the performance of the Group by maintaining full and effective control over strategic, fi nancial, operational, compliance and governance issues. The Board has within it, professionals drawn from various backgrounds, bringing depth and diversity in experience and perspectives to the Group’s business operations.

(a) Board Balance and Responsibilities

As at 31 December 2007, the Board comprises 6 Directors, with 2 Executive Directors, 1 Non-Independent Non-Executive Director and 3 Independent Non-Executive Directors. The Independent Non-Executive Directors, are independent of management and have no relationships which would interfere with the exercise of their independent judgement. The composition reflects more than one-third of its members who are independent.

The Board practises clear demarcation of duties, responsibilities and authority such that no individual or one small group of individuals dominates the Board’s decision making.

Together, the Directors provide a wide range of business and fi nancial expertise relevant to the Group, thus enabling an effective discharge of the functions of the Board. The Executive Directors are responsible for implementing policies of the Board, overseeing the Group’s operations and developing the Group’s business strategies.

During the fi nancial year ended 31 December 2007, the Board held fi ve meetings and the attendance of the Board members were as follows:-

Name of Directors Number of Board Meetings and Attendance

Dato’ Hilmi bin Haji Abdul Rashid 5/5Cherng Chin Guan 5/5Wan Hung See 5/5Kang Ching Hong 4/5Siti Rohani binti A. Manan 4/5Yeo Eng Hui 4/5

Prior to Board meetings, all Directors are provided with the agenda and a set of Board papers containing information relevant to the schedule of matters to be considered at the Board meetings. The Board papers are distributed in advance of meetings to enable thorough consideration of the issues facing the Board and to facilitate effi cient use of the meeting time. The Board also acknowledges that materials on certain reserved matters which are extremely sensitive in nature are only distributed during the respective meetings.

The Board is assisted by the Company Secretary who ensures that the Board is furnished with timely updates and information issued by the various regulatory authorities. Directors have direct access to the advice and services of the Company Secretary as well as access to all information within the Group, whether as a full Board or in their individual capacity, in discharging their duties.

The Board, whether as a full Board or in their individual capacity, may also obtain independent professional advice at the Company’s expense, where necessary, in order to discharge their duties.

Corporate Governance Statement

ASTRAL SUPREME BERHAD10

Corporate Governance Statement (cont’d)

1. THE BOARD OF DIRECTORS (Cont’d)

(a) Board Balance and Responsibilities (Cont’d)

The Board has also set up and delegated specifi c responsibilities to three (3) sub-committees namely, Audit, Nomination and Remuneration Committee with a view to assist in fulfi lling its responsibilities. Each Committee comprises at least three (3) members and operates within clearly defi ned terms of reference. The Chairman of each Committee reports to the Board of the outcome of the meeting and such reports are incorporated in the Board meeting. Details of the respective sub-committees are set in the following pages:-

Name of Committee Page

Audit Committee 11Nomination Committee 11Remuneration Committee 11

(b) Re-election of Directors

The Articles of Association of the Company provide for all Directors to retire from offi ce once every 3 years but shall be eligible for re-election. A Director appointed to fi ll a vacancy on the Board is subject to re-election by shareholders at the Annual General Meeting after his/her appointment.

(c) Directors’ Training

All Directors of the Company have completed the Mandatory Accreditation Program (“MAP”). The Board members are encouraged to attend further seminars, conferences and training programmes to keep abreast with the development in the industry and the regulations of the relevant authorities. The Nomination Committee is tasked with the duty of recommending suitable orientation and training programmes to continuously train and equip the existing and new Directors.

During the year, the Directors attended seminars, training and workshops which were relevant such as Corporate Directors Training Programme, The National Accountants Conference 2007, Investors’ Relations : A Practical Approach, Bursa Malaysia – MAICSA Roadshow 2007 on “Updates on Listing

Requirements : Issues and Challenges”, 2007 Budget Talk, Tax Implications of 2008 Budget & Practical Application of the Latest Tax Developments, 15th Asean Federation of Accountants (AFA) Conference and Core Value, Purpose and Vision.

2. DIRECTORS’ REMUNERATION

The Company’s objective is to ensure that the level of remuneration is suffi cient to attract and retain Directors to run the Company successfully. The remuneration for Executive Directors takes into account the responsibility, contribution and performance of the individual. The Remuneration Committee is responsible for recommending to the Board the remuneration of executive directors in all its form. The Board as a whole determines the level of remuneration of non-executive and executive directors. The aggregate annual directors’ fees as recommended by the Board must be approved by the shareholders at the Annual General Meeting.

The aggregate remuneration of Directors of the Company for the fi nancial year ended 31 December 2007 categorised into appropriate components is as follows:-

Executive Non-Executive Directors Directors RM RM

Fees and Attendance Allowance - 157,000Salaries 276,000 -Defi ned Contribution Plan 33,120 -Other Benefi ts 17,400 -

Total 326,520 157,000 The number of Directors of the Company whose total

compensation falls within the following bands is as follows:-

Executive Non-Executive Directors Directors

Below RM50,000 - 4RM50,001 – RM100,000 - -RM100,001 – RM150,000 - -RM150,001 – RM200,000 2 -

11annual report 07

3. BOARD COMMITTEES

The Board has established the following Board Committees to assist the Board in executing its responsibilities:-

(a) Audit Committee

The composition and terms of reference of this Committee together with its report are presented in the Audit Committee Report on pages 14 to 16.

(b) Nomination Committee

The Committee’s primary responsibilities are to consider and recommend to the Board, candidates for directorships and to review the required mix of skills and experience which Non-Executive Directors should bring to the Board. The Committee is also responsible for the assessment of the effectiveness of the Board as a whole, the Committees of the Board and the contribution of each individual Director on an annual basis. The Nomination Committee met once during the fi nancial year.

(c) Remuneration Committee

The primary responsibilities of the Committee are to develop for the Board, the Group’s remuneration policy for Executive Directors, to recommend to the Board the remuneration packages and terms of employment of Executive Directors, and to administer the Company’s employees’ share option scheme. The Remuneration Committee met once during the fi nancial year.

4. ACCOUNTABILITY AND AUDIT

(a) Financial Reporting

The Board has endeavoured to ensure that the annual audited fi nancial statements and quarterly announcements of the Group’s results present a balanced and understandable assessment of the Group’s position and prospects. The Audit Committee assists the Board in reviewing all the information disclosed to ensure accuracy, adequacy and integrity prior to recommendation to the Board for approval.

(b) Internal Control

The Board recognises its responsibility for the Group’s system of internal controls and the need to review its adequacy and integrity regularly in order to safeguard the Group’s assets and therefore shareholders’ investments in the Group. However, this system, by its nature, can only provide reasonable but not absolute assurance against material errors, fraud or losses.

The Board has put in place a risk assessment framework where principal risks are identifi ed and risk management activities are agreed upon and communicated to senior management. As part of the monitoring process, the Board is updated on the progress of such activities. The Board also reviews the principal risks and the associated risk management activities when necessary.

The Statement on Internal Control is set out on page 13 of this Annual Report.

(c) Relationship with External Auditors

The Board, through the Audit Committee, maintains a transparent relationship with the external auditors in seeking their professional advice toward ensuring compliance with the accounting standards and other related regulatory requirements.

5. RELATIONSHIP WITH SHAREHOLDERS

The Board encourages shareholders’ active participation at the Company’s Annual General Meeting and endeavours to ensure that all Board members are in attendance. The Board is supported by the auditors and other legal/fi nancial advisers, where applicable, who are also present at the Company’s Annual General Meeting.

In addition, the Company makes a timely release of the Group’s quarterly results within two months from the close of a particular quarter, as stipulated by the Listing Requirements of Bursa Malaysia Securities Berhad.

Corporate Governance Statement (cont’d)

ASTRAL SUPREME BERHAD12

Corporate Governance Statement (cont’d)

5. RELATIONSHIP WITH SHAREHOLDERS (Cont’d) Members of the public can obtain the full fi nancial

results and the Company’s announcements from Bursa Malaysia Securities Berhad’s website or the Company’s corporate offi ce.

The Board has identifi ed Mr Kang Ching Hong as the Independent Non-Executive Director to whom shareholders can address their concerns.

6. STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS

The Directors are required by the Companies Act, 1965 to prepare fi nancial statements for each fi nancial year which give a true and fair view of the state of affairs of the Group and the Company and their results and cash fl ows for the year. In preparing the fi nancial statements for the year ended 31 December 2007, the Directors have used appropriate accounting policies that are consistently applied, and made judgements and estimates that are reasonable and prudent.

The Directors are responsible for ensuring that proper accounting records are kept and which disclose with reasonable accuracy the fi nancial position of the Group and Company and to enable them to ensure that the fi nancial statements comply with the requirements of the Companies Act, 1965.

7. ADDITIONAL COMPLIANCE INFORMATION

(a) Share buybacks

There was no share buybacks by the Company during the fi nancial year.

(b) Options, warrants and convertible securities

The Company did not issue any options, warrants or convertible securities during the fi nancial year. There was no exercise of options, warrants or convertible securities during the fi nancial year.

(c) American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) Programme

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

(d) Imposition of sanctions and/or penalties

There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies.

(e) Non-audit fees

Non-audit fees paid and payable by the Group to the external auditors mainly for taxation advice and services were RM16,270 for the fi nancial year.

(f) Variance from unaudited results previously

announced

There is no variance of 10% or more between the audited results for the fi nancial year and the unaudited results previously announced. The Company did not make any release on profi t estimate, forecast or projections for the fi nancial year.

(g) Profi t Guarantee

There was no profi t guarantee subsisting during the fi nancial year.

(h) Material Contracts

There were no material contracts entered into by the Company and its subsidiaries involving Directors’ and major shareholders’ interests during the fi nancial year.

(i) Revaluation Policy

The Group does not adopt a policy on regular revaluation of its landed properties.

13annual report 07

Pursuant to Paragraph 15.27(b) of Bursa Malaysia Securities Berhad Listing Requirements, the Board of Directors of Astral Supreme Berhad is pleased to provide the following statement on the state of internal control of the Group for the fi nancial year ended 31 December 2007, which has been prepared in accordance with the Statement on Internal Control: Guidance for Directors of Public Listed Companies (“Internal Control Guidance”) issued by the Institute of Internal Auditors Malaysia and adopted by Bursa Malaysia Securities Berhad.

Board’s Responsibility

The Board recognises its responsibility for maintaining a sound system of internal controls and for reviewing its adequacy and integrity in order to safeguard the assets of the Group. Because of the limitations that are inherent in any systems of internal control, these systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

Risk Management and Internal Control Systems

The Group has an established and ongoing process for identifying, evaluating and managing the signifi cant risks faced, or potentially exposed to, by the Group. This process has been in place throughout the fi nancial year and up to the date of approval of the annual report. The adequacy and effectiveness of this process have been continually reviewed by the Board and are in accordance with the Internal Control Guidance.

In addition, the Board has also engaged an independent fi rm of consultants to assist in reviewing and appraising the internal control system within the Group so as to ensure that the Group’s system of internal control is effective and adequate. Based on an internal audit plan presented to and approved by the Audit Committee, scheduled internal audits were carried during the fi nancial year. Accordingly, the fi ndings of the internal audits, including the recommended corrective actions, were presented directly to the Audit Committee.

The key elements of the Group’s Internal Control are described below:

• Clearly defi ned responsibilities and lines of authorities for committees of the Board and operating units.

• The Audit Committee reviews and holds discussions on the action taken on internal control issues identifi ed in the reports generated from the internal audit function.

• Regular and comprehensive information provided to management and the Board of Directors, encompassing fi nancial and operational performance and key business indicators, for effective monitoring and decision making.

• Regular and open communication between management, internal auditors and the Board of Directors on matters relating to risk and control.

• Annual budgets prepared by management are discussed and subsequently approved by the Board. Information on actual performance against the budget is provided to the Board on a quarterly basis.

• In relation to the Group’s businesses of garment printing, design and embroidery services, manufacturing and assembly of electrical and electronic products, control on quality of the manufacturing and assembly process is implemented in accordance to Certifi ed Quality System and in compliance with the MS ISO 9001:2000 Quality Management System requirements.

• Regular visits to operating units by members of the Board and senior management.

During the fi nancial year, the internal auditors has identifi ed and reported some minor internal control weaknesses together with recommendation on corrective actions to be taken. All minor internal control weaknesses have been or are being addressed. The Board is of the opinion that none of the weaknesses have resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group’s annual report.

ASB’s internal control system does not apply to its associate company which falls within the control of its majority shareholder(s) of the associate company. This statement is issued in accordance with a resolution of the Directors dated 22 April 2008.

Statement On Internal Control

ASTRAL SUPREME BERHAD14

Audit Committee Report

I. MEMBERS

The Audit Committee comprises the following members:

Chairman

Dato’ Hilmi bin Haji Abdul Rashid (Independent Non-Executive Chairman)

Members

Mr. Kang Ching Hong (Independent Non-Executive Director)

Mr. Yeo Eng Hui (Independent Non-Executive Director)

II. TERMS OF REFERENCE OF THE COMMITTEE

The following is the Terms of Reference of the Committee, as approved by the Board of Directors on 26 February 2008, in compliance with the amendments to the Listing Requirements of Bursa Malaysia Securities Berhad which took effect on 28 January 2008.

1. Constitution

The Committee was established by the Board on 2 November 1998.

2. Membership and Meetings

The Committee shall be appointed by the Board from amongst the directors of the Company and shall consist of not less than three (3) members. All members of the Committee must be non-executive directors, with a majority being independent directors and at least one member of the Committee shall be a member of the Malaysian Institute of Accountants or one of the associations of accountants specifi ed in Part II of the 1st Schedule of the Accountants Act 1967 or must have passed the examinations specifi ed in Part I of the 1st Schedule of the Accountants Act 1967. The Chairman of the Committee shall be an independent non-executive director appointed by the Board and the Secretary of the Committee shall be the Company Secretary.

The Audit Committee shall meet at least four (4) times a year, although additional meetings may be convened at any time at the discretion of the Chairman of the Committee. Other members of the Board and employees may attend the meetings upon the invitation of the Committee. At least once a year, the Committee shall meet the external auditors, without the presence of any other directors and employees of the Company. The external auditors and internal auditors may request for a meeting if they consider that it is necessary.

All or any members of the Committee may participate in a meeting of the Committee by means of a conference telephone or any communication equipment which allows all persons participating in the meeting to hear each other. A person so participating shall be deemed to be present in person at the meeting and shall be entitled to vote or be counted in a quorum accordingly.

The quorum of all meetings of the Committee shall be two (2) and the majority of members present must be independent directors. Any decision shall be by a simple majority. The Chairman of the Committee shall report on each meeting to the Board.

The Secretary of the Committee shall give notice of the meeting including the agenda together with all relevant documents to all members of the Committee prior to the meeting. Minutes of each meeting shall be kept and distributed to each member of the Committee and of the Board. Any persons who may be required to attend shall also be notifi ed by the Secretary accordingly.

3. Authority

The Committee is authorised by the Board and at the cost of the Company to:-

a) investigate any matter within its terms of reference;

b) have the resources which are required to perform its duties;

c) have full and unrestricted access to any information pertaining to the Company and the Group;

15annual report 07

II. TERMS OF REFERENCE OF THE COMMITTEE (Cont’d)

3. Authority (Cont’d)

d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity;

e) obtain independent professional or other advice; and

f) convene meetings with the external auditors, internal auditors or both, excluding the attendance of the other directors and employees of the Company, whenever deemed necessary.

Notwithstanding the above, the Committee does not have executive powers and shall report to the Board on matters considered and its recommendations thereon, pertaining to the Company and the Group.

4. Responsibility

Where the Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the Listing Requirements of Bursa Malaysia Securities Berhad, the Committee has the responsibility to promptly report such matter to Bursa Malaysia Securities Berhad.

5. Review of the Committee

The term of offi ce and performance of the Committee and each of its members shall be reviewed by the Board at least once every three (3) years to determine whether the Committee and its members have carried out their duties in accordance with their terms of reference.

6. Duties

The duties of the Committee are to:-

a) consider the appointment, resignation and dismissal of the external auditors and the audit fee;

b) review the nature and scope of the audit with the internal and external auditors before the audit commences;

c) review the quarterly and annual fi nancial statements of the Group, focusing on the matters set out below, and thereafter to submit them to the Board:-(i) any changes in accounting policies and

practices;(ii) signifi cant and unusual events;(iii) signifi cant adjustments arising from the

audit;(iv) the going concern assumption;(v) compliance with accounting standards and

other legal requirements.

d) discuss problems and reservations arising from the interim and fi nal audits, and any matter the external auditors may wish to discuss;

e) review with the external auditor, his evaluation of the system of internal controls;

f) review the audit reports and management letters prepared by the external auditors, the major fi ndings and management’s responses thereto;

g) with regards to internal audit function:-(i) review the adequacy of the scope,

functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work;

(ii) review the internal audit programme and results of the internal audit process and where necessary, ensure that appropriate action is taken on the recommendations of the internal audit function;

(iii) review any appraisal or assessment of the performance of members of the internal audit function;

(iv) approve any appointment or termination of senior staff members of the internal audit function;

(v) be informed of any resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning;

Audit Committee Report (cont’d)

ASTRAL SUPREME BERHAD16

6. Duties (Cont’d) (vi) consider the appointment, resignation

and dismissal of the internal audit service provider (where the internal audit function is outsourced);

h) consider any related party transactions and confl ict of interest situations that may arise within the Group;

i) consider the major fi ndings of internal investigations and management’s response;

j) review the assistance given by the Group’s employees to the auditors; and

k) consider any other issues as may be designated by the Board from time to time.

III. SUMMARY OF ACTIVITIES

The Audit Committee carried out the following activities during the fi nancial year:-

1. Reviewed the quarterly and annual fi nancial statements prior to presentation for the Board’s approval.

2. Reviewed with the external auditors their audit plan prior to the commencement of audit.

3. Discussed and reviewed the annual fi nancial statements with the external auditors including signifi cant issues and fi ndings arising from the audit.

4. Discussed with the external auditors their evaluation of the system of internal controls of the Group.

5. Considered the change of external auditors and audit fee.

6. Reviewed and discussed the internal audit reports with the internal auditors and management at its quarterly meetings and appraised management’s responses to the key audit observations and recommendations.

Audit Committee Report (cont’d)

IV. INTERNAL AUDIT FUNCTION

The Board has outsourced the internal audit function. The Internal Auditors report directly to the Audit Committee. The Internal Auditors undertake internal audit function based on the audit plan that is reviewed and approved by the Audit Committee. The audit plan covers:-

• risk evaluations;• review of adequacy, integrity and effectiveness of

system of internal controls;• review of extent of compliance with the Group’s

policies and procedures and regulatory requirements; and

• review of key business processes with the objective of improving the Group’s operations.

During the fi nancial year, the Internal Auditors reviewed the inventory management and procurement processes of three subsidiaries.

Further information on the internal audit function is set out in the Statement on Internal Control.

V. DETAILS OF ATTENDANCE

The Audit Committee met fi ve times during the fi nancial year and details of attendance are as follows:-

Directors Number of meetings attended

Dato’ Hilmi Bin Haji Abdul Rashid 5/5Kang Ching Hong 4/5Yeo Eng Hui 4/5