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>>> Chairman's Statements

(Extracted from Annual Report 2007/2008)

Dear Valued Shareholders,

the financial year ended 31 January 2008 (FY2008) was a challenging and trying year for the Group. In terms of revenue, the Group made a significant gain of RM40.1 million to RM398.9 million from RM358.8 million in the previous financial year ended 31 January 2007 (FY2007). Unfortunately, this did not translate to similar earnings performance for the Group. For FY2008, the Group registered a loss before tax of RM14.2 million compared to a profit before tax of RM1.2 million previously. In respect of the after tax position, the Group recorded a loss of RM9.8 million in FY2008 compared to a loss of RM7.9 million for FY2007 (after restatements).

OPERATIONS REVIEW

Automotive & Automotive Components Manufacturing (ACM)

ACM Malaysia
In the financial year under review, the Malaysian automotive industry continued its consolidation. The total industry volume (TIV) declined for the second consecutive calendar years from its highest ever achieved volume of 552,000 units in calendar year 2005, affected by fuel hikes, stringent car loan approvals and unprecedented low used car prices. TIV dropped from 491,000 units in calendar year 2006 to 487,000 units in 2007. Although the decline was marginal, the cut-backs in production by certain assemblers/manufacturers due to high carried over stocks had resulted in a significant double digit drop of 12.1% in total production volume, from 503,000 units in 2006 to 442,000 units in 2007.

Given the national scenario, our Malaysian ACM Division did not perform as expected during FY2008 with revenue for the Division only improved marginally by only 1.0% to RM162.5 million. Despite this, ACM Malaysia recorded a loss before tax of RM10.0 million in comparison to the profit before tax (PBT) of RM11.9 million in the previous financial year.

There are several reasons for the drop in profitability for the division. One of the main reasons for this is due to the significant increase in depreciation charge resulting from the introduction of three (3) new models during the financial year, namely Perodua Viva, Proton Persona, and Toyota Vios. Our capital expenditures for the projects involved were very significant with aggregate investments totaling RM46.3 million, mostly in terms of toolings which are unique to specific models. These additional capital expenditures translated into additional RM6.7 million depreciation charges for FY2008.

Another reason is due to the unfavourable product mix brought about by the phasing out of older models such as Perodua Kelisa and Proton Wira. This was made worse by the shrinking sales volume of Perodua Kancil after the introduction of Perodua Viva. These are the models that the Group enjoyed higher selling margins due to, in most cases, their toolings costs have been fully depreciated. Despite the existence of newer and/ or replacement models, whose components are also being supplied by the Group such as Perodua Viva and new Proton Saga, their production volumes have yet to reach a profitable level.

Furthermore, for FY2008, most of the existing models that we were supplying components to saw their sales volume declining compared to the previous financial year. Sales volume for Proton Waja, Proton Satria Neo and Proton Savvy declined whilst those for Proton Gen.2 did not perform as expected. Although, this was partly offset by the continuing brisk sales of Perodua MyVi and the well accepted Perodua Viva and Proton Persona, it did not manage to fully address the negative impact of the overall drop in volume for the other models.

ACM Thailand
For the calendar year 2007, Thailand's TIV dropped slightly to 631,000 units from the previous year of 682,000 units. Despite the marginal drop in domestic sales, the overall production recorded an 8.4% growth to 1.3 million units, driven by the increase in export volumes up to 673,000 units.

Ingress continues to benefit from our Thailand's operations with 38.5% of Group's revenue was generated from our Thailand's ACM operations during FY2008. Compared to the previous financial year, the Division's revenue continued its improvement registering an impressive 20.9% revenue growth. Despite the revenue improvement, ACM Thailand's PBT declined to RM1.0 million from RM4.4 million in FY2007. Our ACM Thailand operations are from two (2) subsidiaries namely Ingress Autoventures Co. Ltd (IAV) and Fine Components (Thailand) Co. Ltd. (FCT), a company which we acquired 100% of its equity during FY2007 and is involved in fine blanking and stamping activities for the automotive industry in Thailand.

For IAV, production volume declined slightly with total production dropping from 1.08 million units in FY2007 to 1.02 million units in FY2008. This was due to the fact that most of the models that we were supplying components to, suffered the decline in sales volume except for Honda Civic, Mitsubishi Triton and Ford Everest. Although the contributions from the newer models such as Ford/Mazda BT-50 and Honda City were significant, their production volumes were still below our expectation. On the positive side, revenue for ACM Thailand was boosted by the full year impact of the supply of components for Nissan Navara as well as the full year consolidation of the results from FCT.

ACM Indonesia
Domestic vehicle sales in Indonesia in the calendar year 2007 rebounded from a significant drop of 40.3% in calendar year 2006. TIV increased 35.9% to 433,000 from the previous year's figure of 319,000, due to improving market condition as well as the effects of the fuel price increase instituted by the Indonesian Government in 2006 has been factored into by the general populace.

In line with the improving industry for FY2008, revenue for ACM Indonesia increased 37.0%, albeit from a smaller base. The revenue improvement was also attributable to the full year impact of the supply of glass guides for the new Daihatsu Terios. Even though production volumes increased, these were still below the breakeven level. Therefore, for FY2008 ACM Indonesia still registered another loss.

Power Engineering and Railway (PER)
PER continued its improvement in FY2008 with revenue increasing marginally from RM63.7 million in FY2007 to RM65.8 million in FY2008. Despite this modest revenue improvement, PBT significantly increased from RM0.9 million in FY2007 to RM12.3 million in FY2008. This positive development was mainly due to higher margin projects being undertaken by the Group as well as the contribution from our associate Balfour Beatty Rail Sdn Bhd (BBRail) which is involved in rail electrification.

Main revenue contributors were the substation projects in Plentong and Ujong Pasir, Melaka as well as the transmission line projects from Hutan Melintang to Bagan Datoh in Perak, Kampung Repah to Kelemak in Melaka. In addition, we also completed capacitor bank project in Prai, Pulau Pinang and was involved as an acknowledged tower supplier for the Government Integrated Radio Network (GIRN) project.

We are also pleased to report to the shareholders that our associate company Balfour Beatty Rail Sdn Bhd, successfully completed the Rawang-Ipoh double tracking rail electrification project in December 2007.

OTHERS

Other than ACM and PER, Ingress is also involved in oil and gas sector with one subsidiary providing engineering, fabrication and maintenance services for the oil and gas industry in Malaysia as well as another company in providing sludge oil recovery services. We also have a trading unit involved in commodity trading in Indonesia. For FY2008, contribution from this unit is still marginal with only 3.5% revenue contribution.

For FY2008 our engineering and fabrication unit managed to complete a fabrication project in Gamusut, Johor. For our tank cleaning unit, we have brought back our automated tank cleaning machine from Indonesia to Malaysia, subsequent to which we have demonstrated the capabilities of our machine to several potential customers.

FINANCIAL PERFORMANCE REVIEW

For the financial year under review, the Ingress Group recorded a loss after tax of RM9.8 million in comparison to a loss after tax of RM7.9 million (after restatements) previously on the back of RM398.9 million in revenue. In terms of revenue, we are very pleased that the Group continues its growth recording its highest ever level for the forth straight financial years. The ACM Division remains the main revenue generator, contributing 80.0% of the Group's consolidated revenue, with PER contributing 16.5%.

The increase in revenue was achieved through improvements by most operating divisions, namely from ACM Malaysia (increase by 21%), ACM Thailand (increased by 22%) as well as our PER Division (increased by 19%).

The increase in revenue, however, did not improve the profitability for the Group. The Group registered a loss before and after tax of RM14.2 million and RM9.8 million, respectively. There are several reasons for this, but the main ones are due to the start-up costs associated with the introduction of new models during the financial year, namely Perodua Viva, Proton Persona, Toyota Vios as well as Nissan Navara and Ford Everest.

The second major reason is due to the change in product mix brought about by the phasing out of older models and the declining sales volume of the others. Despite the existence of newer and/or replacement models, their production volumes have yet to reach the breakeven level. We also had to contend with downward price adjustments for models such as Perodua MyVi, Honda City and Honda Jazz after their production volumes exceeded forecast much earlier than anticipated.

Sukuk Al-Ijarah
In July 2004, Ingress, through a special purpose vehicle (SPV), Ingress Sukuk Berhad, issued RM160 million Sukuk Al-Ijarah Islamic papers, issued mainly in order to fund the expansion of our Bukit Beruntung plant as well as retire the borrowings of our ACM Malaysia operations. At issuance the Sukuk was A+IS rated by Malaysian Rating Corporation Berhad.

In March 2008, the Trustee for the Sukuk issued a notice (“Notice”) to Ingress for breaching the two (2) financial covenants which stipulated that the Group's debt-to-equity ratio must not exceed 1.75 times and encumbrances (except those specifically permitted in the Ijarah Agreement) must not exceed 20% of the consolidated net tangible assets. Ingress was given 4 months to remedy the said breaches.

Your Board would like to reassure you that we are making all the necessary arrangements to resolve the issue. We have informed the Trustee that we are working closely with our financial adviser to finalise a re-financing plan for the Sukuk. Concurrently, we are also seeking indulgence from the Sukukholders. We are confident that the Company will be able to implement the re-financing plan within the necessary time period.

Dividends
In respect of the previous financial year ended 31 January 2007, the Company paid out tax exempt interim dividend of 3 sen per share, on 29 January 2007 as well as a final ordinary tax exempt dividend of 4 sen, paid out on 15 August 2007, bringing the total ordinary tax exempt dividends paid out for FY2007 to 7 sen per share.

Nevertheless, for the financial year ended 31 January 2008, your Board of Directors do not recommend any dividends to be paid. This is due to the amount of investments carried out during the financial year as well as to fund identified investments in the near term which necessitated funds to be allocated. Furthermore, under the terms of the Sukuk, the Company is presently not in the position to pay any dividends for the financial year under review until the issues are resolved.

FUTURE PROSPECTS

ACM Malaysia
The domestic automotive market has shown positive development in the second half of the calendar year 2007 and is expected to continue this improvement into the calendar year 2008 as market conditions and consumer sentiments continue to remain favourable. The introduction of new models by the various car manufacturers is expected to sustain vehicle sales in the calendar year 2008. MAA is expecting a marginal improvement in the local automotive industry with domestic sales, represented by TIV, forecast to reach 510,000 units for the calendar year 2008, an increase of 4.7% from 487,000 units in the calendar year 2007.

Despite the moderate improvement in the industry, we are expecting ACM Malaysia to be the main driver for revenue growth for the Group in the current financial year. For the current financial year FY2009, two (2) additional ACM units will be operational, namely the wire harness operations and our BMW dealership.

In respect of our traditional components, we are expecting good demands for the new Proton Persona and Saga models, which will positively affect the revenue contribution from Proton. In addition, Perodua will continue to be main revenue generator for the Division and we are predicting the continuing good demands for Perodua Myvi and Viva.

Our entry into the wire harness operations, a high-valued and essential component for every vehicle, resulted from the desire to further strengthen our revenue base. Our production of wire harness is located in our new rented facility in Pengkalan Chepa, We are happy to report that we have been awarded the contract to supply of wire harness for Persona and Gen 2 facelift models by Proton, whose supply is expected to commence in the 2nd quarter of the financial year ending 31 January 2009.

Meanwhile, Ingress Auto, our subsidiary operating our BMW 4S Centre, has begun its operations beginning 1 March 2008, despite the centre was only official launched on 29 March 2008. Our BMW 4S Centre is strategically located in a prime location fronting Mutiara Damansara and next door to Taman Tun Dr Ismail, Kuala Lumpur. We are the only authorised BMW dealer to cater for the needs of BMW owners as well as potential owners in the Petaling Jaya and Damansara areas. Since the opening of our showroom, Ingress Auto has made significant progress notching sales on average about 40 cars a month.

ACM Thailand
For the calendar year 2008, Thailand's production, the combination between both the domestic and exported products is projected to marginally increase to 1.36 million vehicles from 1.30 million units in the previous year. For the domestic market, TIV is expected to improve slightly to 660,000 from 631,000 vehicles sold in the calendar year 2007. Exports are also expected to record marginal growth of 4% in the calendar year 2008 to 700,000 vehicles compared to 673,000 previously.

In line with the continuing expansion of the industry, our ACM Thailand is also projecting further improvement in our production volume. We are expecting continuing good sales volume for Mitsubishi Triton, Ford/Mazda BT-50. In addition, ACM Thailand is also projecting robust sales for Honda Civic and City, which will improve our performance in the coming year.

Furthermore, for the current financial year FY2009, another milestone for ACM Thailand will be reached with the commencement of the supplies for new Honda Jazz and new Honda City as well as the supply of sash and mouldings for a new Mitsubishi model. With these new additions, we are confident that FY2009 will be better for our Thailand operations compared to FY2008.

ACM Indonesia
The automotive industry in Indonesia is predicted to improve 5% with the TIV improving 10% from 487,000 in the calendar year 20007 to 510,000 units in the calendar year 2008.

In addition to the better outlook of the industry, better performance is also expected this coming year, supported by the full year impact of the supplies for Mitsubishi Canter and Daihatsu Terios. In addition, the performance will also be supported by the commencement of supplies of mouldings for a new Daihatsu model which is expected to begin in the last quarter of FY2009.

New ACM Ventures
Ingress needs to continuously improve itself by enhancing its engineering capabilities to remain competitive in this challenging climate. One of the most crucial capabilities in component manufacturing is the knowledge in the assembly and inspection of tools, dies, jigs and fixtures. Accordingly, in April 2008 Ingress formed a joint-venture company with CES Co. Ltd, of South Korea with the intention of exploring medium-sized tools, dies and jigs design and fabrication opportunities within the region. Although the venture is still in pre-operating stage at the moment, we are confident that this venture will render us more competitive in embarking on new projects domestically or internationally in the future. We are also optimistic that it will be able to reduce our investment costs for new projects, the significant portion of which are made-up of toolings and jigs costs.

Furthermore, in March 2007 Ingress signed Memorandum of Understanding (MOU) agreements with two Indian companies as well as a Technical Assistance Agreement (TA) with one of them, Mayur Industries Ltd, of India (Mayur). Unfortunately, one of these potential ventures did not materialise.

The TA we signed is in respect of the assistance given by us to Mayur on a project currently undertaken by them to supply mouldings to Suzuki Maruti of India. Additionally, we are also in advanced discussion with them on the future directions of our collaborations. The outcome of our discussions with Mayur will be notified to the shareholders.

PER
For the FY2009, we are expecting significant contribution from our PER Division. For our power engineering division, current secured contracts in hand are valued at RM72.2 million, which include RM46.6 million worth of contracts carried forward from FY2008. Focus will continue to be made on substation and transmission line projects with the view of expanding our offering into more value-added services.

After our successful completion of the Rawang-Ipoh rail electrification project, the Division is doubling their efforts to secure similar additional contracts, amongst them is the Ipoh-Padang Besar rail electrification project. Although the contract has yet to be awarded, with our track record in completing the successful Rawang-Ipoh project, we are confident we have a good chance of securing the job.

OTHERS

With the view to capitalise on the vast potential of the business in Malaysia, we have brought back our sludge oil recovery equipment from Indonesia to Malaysia. Subsequent to the relocation, we have been on intensive marketing drive to secure new contracts here in Malaysia and are happy to report that our efforts have been rewarded. We have secured contracts from Exxon Mobil, Port Dickson. At the same time, our team is intensifying their efforts pursuing additional contracts from Petronas Pernapisan Melaka as well from Terengganu Crude Oil Terminals.

CONCLUSION

In summary, FY2008 was a very challenging and difficult year for us. Despite the difficulties there are positive developments we can draw from this. Our revenue continues to improve year by year. This shows that we are not standing still and our customers' trusts in us remain as strong as ever. Our product offerings keep on expanding whilst still remaining focused on our core expertise in the automotive components manufacturing as well as power engineering and rail electrification. We are optimistic that in the coming financial year, further improvements will be delivered by our ACM and PER operations based on the secured contracts already in hand at the moment.

We strongly believe that the difficulties we faced are only temporary and in due time, the investments we made during these past years will be bear fruition. Nevertheless, your Board will ensure that difficulties we experienced will be learnt and any mistakes made will not be repeated.

ACKNOWLEDGEMENT

On behalf of the Board of Directors, I would like to express my sincere appreciation and admiration to our industry leaders and business associates particularly in Malaysia, Thailand, Indonesia and Japan for their confidence and trust in us. My special thanks to the staff and management for their relentless commitment and contribution. To our shareholders, we wish to put on record our heartfelt appreciation for your faith in us in good and bad times and we will continue to hold you in high regards.

I also take this opportunity to thank the members of the Board for their dedication and untiring effort to build Ingress to what it is today.

Dato' Nasir bin Yusoff
Chairman