>>> Chairman's Statements

(Extracted from Annual Report 2008/2009)

Dear Valued Shareholders,

on behalf of the Board of Directors of Ingress Corporation Berhad, I am pleased to present our Annual Report for the Financial Year ended 31 January 2009 (FY2009).

FINANCIAL HIGHLIGHTS

FY2009 coincided with the global financial meltdown that has affected most of the major economies across the globe. Against this backdrop, however, the Group's revenue increased significantly to RM569.5 million or an increase of 42.8% compared to previous year's revenue of RM398.9 million. The increase in revenue was achieved through improvements by certain operating divisions, notably the Automotive Division ("ACM") in Malaysia, spurred on by the contributions from our new premium automotive dealership ("PAD") in BMW vehicles, which commenced its operations in the 1st quarter, as well as our wire harness operations.

In compliance with the Financial Reporting Standards ("FRS") 116, the Group revised the estimated useful lives of tooling equipment from five years to the expected production volume. The adoption of this new depreciation policy is more reflective of the actual future economic benefits of the respective tooling equipment. However, the revision has resulted in a one-off depreciation charge of RM45.6 million for FY2009. Accordingly, despite the increasing revenue, the Group recorded a larger loss before tax of RM42.4 million compared to a loss of RM14.2 million previously.

SUKUK AL-IJARAH AND PROPOSED GROUP-WIDE FINANCIAL RESTRUCTURING

Due to our rapid expansion for the past five years, the Group made substantial investments to fund the capital expenditures required. Nevertheless, we were unable to recoup all of the investments made as part of this capacity building exercise due to several reasons, not least being the realised sales volumes of certain models were much lower than the anticipated breakeven level. Furthermore, the recent adverse economic developments globally affecting most sectors of the economy, especially the automotive sector have further affected the financial performance of the Group.

As a result, the Group faced tight cash flow situation and funds available were insufficient to service the Group's respective debt obligations which necessitate a re-examination of the sources of cash flow to support the Group's debt commitments.

Included in the Group's borrowings are the RM160 million Sukuk Al-Ijarah Islamic papers which were issued in July 2004 through a special purpose vehicle, Ingress Sukuk Berhad. The Company continues to be in breach of two (2) covenants of the Sukuk, namely the debt-equity ratio and the permitted encumbrances limit. Additionally, Ingress was also unable to meet the deposit requirement into the Ijarah Service Reserve Account ("ISRA") by 9 April 2009 and 9 June 2009 for the first principal repayment of RM50 million due on 9 July 2009.

In March 2009, Ingress appointed PricewaterhouseCoopers Advisory Services Sdn Bhd (PwC) as our financial adviser to assist Ingress in restructuring the debts due to the Sukukholders as well as other lenders and creditors of the Ingress Group. The Company is currently seeking for an extension of time for a further six (6) months for the payment of the first Sukuk principal to enable the Company to formulate and finalise a comprehensive financial restructuring plan for the whole of the Ingress Group.

The main objective of the group-wide restructuring plan is to enable each of the Ingress Group of companies to continue its operations as a going concern and, in the medium to long term, enhance value for all stakeholders including the creditors and to ensure that the Group is able to meet its commitments to the creditors in an orderly manner.

Your Board would like to reassure you that we are committed to arriving at the optimal proposal for the exercise. We are confident that, whatever the outcome, this exercise will strongly benefit the Group in the long run and address the current weaknesses, if any, in the Group.

OPERATIONS REVIEW

ACM Malaysia

The global economic slowdown has severely affected the automotive industry. Big auto companies internationally have lobbied hard for governmental support without which their very survivability is in doubt. The automotive industry in the Asean region has not been spared, specifically in Malaysia, Thailand and Indonesia, which has impacted, directly and indirectly, our operations in this region.

Despite the overall slowdown in the sector, the total industry volume (TIV) for Malaysia improved 12.5% in the calendar year 2008, registering sales of 548,115 units of vehicles. This was mainly due to full year productions of the well-received new Persona and Saga models from Proton.

Following suit, our Malaysian ACM Division recorded an improved revenue to RM343.5 million mainly due to the contributions from our new operating units, the PAD as well as wire harness operations coupled to the continuing contributions from the brisk sales of the Perodua Myvi and Viva as well as Proton Persona and Saga and Toyota Vios . Despite the Division's increase in revenue, the Malaysian ACM Division recorded a loss before tax of RM24.4 million, mainly due to one-off depreciation charge arising from the Group's change in accounting policy as explained earlier.

As previously mentioned, our PAD for BMW vehicles, undertaken by our wholly-owned subsidiary Ingress Auto Sdn Bhd (Ingress Auto), was fully operational in the first quarter of FY2009. Vehicle sales as well as customers' response to the after sales service have been extremely encouraging thus far. In recognition of its outstanding performance, Ingress Auto was awarded the prestigious "Best Dealer Scorecard" and "Best After Sales Customer Satisfaction" by BMW Malaysia in its 2008 High Achievement Award.

In July 2008, Ingress CES Sdn Bhd became a 70% subsidiary of Ingress, a new joint venture with CES Co. Ltd. (Korea). This was with the intention of exploring medium-sized tools, dies and jigs design and fabrication opportunities within the region with the objective of rendering 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.

ACM Thailand

For Thailand, TIV for the calendar year 2008, dropped to 615,000 units from 631,000 units in the previous year. Total automotive production for Thailand on the other hand, recorded an increase of 8%, up to 1.4 million units from the previous year's overall production of 1.3 million units.

Ingress continues to benefit from our Thailand's operations with 27% of Group's revenue generated from our Thailand's ACM operations during FY2009. Revenue for the Division remained relatively flat, improving marginally to RM154.8 million. However, the Division recorded a loss before tax of RM2.3 million mainly due to the RM8 million one-off depreciation charge resulting from the change in the accounting policy on depreciation adopted by the Group.

During the financial year, sales of Mitsubishi Triton and the Ford/Mazda BT-50 were the major contributors to the revenue supported by the continuing sales of Ford Ranger/Mazda Fighter new models, Isuzu D-Max, Honda City, Jazz and Civic.

ACM Indonesia

In the calendar year 2008, Indonesia recorded its highest TIV in ten years with a TIV of 607,151 units, a significant increase of 40% compared to the previous year. This was the direct result from positive policy changes of the Indonesian Government in order to spur growth of the domestic economy, particularly the automotive sector, such as not imposing any import duties for materials and components imported from Japan, reducing the fuel prices, as well as reducing tax for change of car ownership.

In line with the improving industry for FY2009, revenue for ACM Indonesia increased 69.9%, albeit from a smaller base. This was helped by the commencement of mouldings for the new Daihatsu Luxio model in the last quarter of the financial year. Despite the increase in the production volumes, these were still below the breakeven level. Therefore, for FY2009 ACM Indonesia registered another loss, although at a much lower figure, an improvement of 45%.

Power Engineering and Railway Division (PER)

Revenue for PER in FY2009 decreased slightly to RM65.1 million from RM65.7 million recorded in FY2008. Profit before tax, however, dropped 68% to RM3.9 million mainly due to the lower contribution from our 49% associate Balfour Beatty Rail Sdn Bhd ("BBRail").

Main revenue contributors for the financial year were the transmission line projects from Gelang Patah to Perling in Johor as well as the Puchong Perdana projects. In addition, we also successfully completed transmission projects from Port Dickson to Linggi, Negeri Sembilan and substations projects in Ujong Pasir, Melaka and Plentong, Johor.

We are delighted to inform the shareholders, that the Division has secured the RM1.7 billion systems package for the Ipoh- Padang Besar Double Tracking Project. The project is awarded to Balfour Beatty Ansaldo Systems JV Sdn Bhd, of which BBRail holds 60% equity. The project involves the design, supply, signaling and communication for the new double track to be laid out, connecting Ipoh and Padang Besar, with BBRail providing its expertise for the electrification and the power supply. Engineering works on the project have already commenced in the second half of the year and the project is expected to be completed within five (5) years.

Others

During the financial year, the Group was also involved in the oil and gas sector providing engineering, fabrication and maintenance services, although we have ceased the operations of our sludge oil recovery services as well as our commodity trading activities. During the year, the Group successfully completed on time the fabrication of jacket and piles in Pasir Gudang, Johor for PC4 (Petronas) and B11 (Shell) off-shore sub-structure projects.

Revenues for FY2009 improved slightly to RM16.4 million compared to the previous year, although its contribution to the Group's revenue is still marginal. Despite the improving revenue, the Division registered a loss of RM16.4 million, compared to a loss of RM7.9 million previously. The loss was mainly the result of RM8.6 million provision made in respect of claims against a third party on work done for a fabrication project. Despite the provision, the Group will continue to pursue the matter, and the cases are currently being heard in the High Court.

FUTURE PROSPECTS

ACM Malaysia

Domestically, the Malaysian Automotive Association (MAA) is expecting softer sales in the calendar year 2009, with TIV forecast of 480,000, a reduction of 12.4% from the previous year, due to slower economic growth and unfavourable consumer sentiments. On the longer horizon, however, MAA expects motor vehicle sales to improve marginally to 490,000 units in 2010 and 505,000 in 2011.

Despite the less than ideal current economic scenario, we are expecting positive contributions to the Group's revenues from the new Proton Exora launched in April 2009, whose sales is extremely encouraging at the moment, coupled with the attractive package offered by Proton. We also eagerly anticipating the launch of the new MPV by Perodua expected in the 4th quarter of FY2010, which we believe will also be well received by the public.

In addition to that, the coming year will be the first full year contribution from our PAD helmed by Ingress Auto. Based on its outstanding performance previously, we are confident Ingress Auto will continue to do well.

ACM Thailand

For the calendar year 2009, Thailand's production, the combination between both the domestic and exported products is projected to drop significantly to 1.1 million vehicles, down 24% from the previous year. This is reflective of the domestic economy which is expected to remain flat for the year and, more pertinently, the overall state of the global economy and in particular due to large portion of the vehicles produced in Thailand is exported.

Despite the industry slowdown, our ACM Thailand's revenue next year is expected to further improve from the contribution of two (2) new projects expected to be on stream in the current financial year, namely the EGR pipe for Mitsubishi's new model as well as sash for a new Ford/Mazda vehicle. Additionally, we are expecting our current production models of Ford Ranger/Fighter, Mitsubishi Triton, Isuzu D-Max, Honda City and Honda Jazz to continue performing admirably in the marketplace.

ACM Indonesia

For Indonesia, a significant contraction to the domestic sales is expected. TIV for the calendar year 2009 is expected to drop 34% to 400,000 units. Despite this, the revenue for the Division is expected to remain flat with production for Suzuki continuing to be the main contributor.

New ACM Venture

In March 2009, Ingress signed a joint venture agreement with Mayur Industries Ltd, of India with the joint venture company to be formed is expected to be operational by the end of the current financial year. With the formalisation of the joint venture, it is envisaged that it will pave the way for more substantial involvement of the Group to tap the huge potential in the Indian automotive sector.

PER

We are expecting continuing significant contribution from our PER Division for FY2010. Current secured contracts in hand are valued at RM90.8 million, out of which RM65.1 million is expected to be recognised in the current FY2010. Focus will continue to be made on substation and transmission line projects with the view of expanding our offering into more value-added services.

The systems works for the Ipoh-Padang Besar Double Tracking Project is already on-going and is expected to be completed within five (5) years. We expect the project to significantly improve the Group's profitability in the next few financial years for duration of the project.

Others

We have seen some positive developments for the Division, and going forward, we are expecting a more substantial contribution from the Division. Going forward, amongst others, we have secured an RM20 million jacket and topside fabrication contract for Tangga Barat, maintenance contracts with Petronas Pernapisan Melaka as well as the recurring piping and rehabilitation award by Petronas Gas Malaysia for next three (3) to four (4)years.

Dividends

The Board appreciates the continuing support of the shareholders. However, in view of the present financial position of the Group and the Sukuk issues, for the financial year ended 31 January 2009, your Board of Directors do not recommend any dividends to be paid.

ACKNOWLEDGEMENTS

In times like these, we are grateful for the continuing support we have received from so many quarters. These include our various stakeholders, clients, bankers, bondholders, government authorities and agencies. Not to be forgotten are our shareholders and our growing list of business associates particularly in Malaysia, Thailand, Indonesia, Japan, Korea and India. Your support and confidence in our ability to deliver has made all the difference in this challenging year.

I would like to express my sincere thanks to members of the Board for their tireless dedication and commitment towards Ingress' success. My fellow members on the Board have always been generous in lending their support and sharing their knowledge and wise counsel. Particularly, on behalf of the other Board members, I would like to thank Encik Ramli Napiah who retired as a Director after the Company's last Annual General Meeting. His contributions to the Group are immeasurable during his tenure as a Board member, and we would like to wish him all the best.

At the same time, on behalf of the Board, I am pleased to welcome Encik Ahmad Khudus Mohd Naaim who was appointed to the Board as an Independent Non-Executive Director on 10 September 2008. We look forward to benefiting from his fresh insights and contributions to the Company.

Last but not least, my sincere gratitude to the management and staff for their endeavour, contribution and dedication to the Group throughout this difficult period, reflective, amongst others, from the record number of "kaizen" (cost reduction and efficiency proposals) submitted by the staff. Their contributions and support during this challenging time were most appreciated.

Thank you.

Dato' Nasir bin Yusoff
Chairman