Chief Executive's Review

Extracted from Annual Report 2007

Dear Shareholder
We have exceeded our targets. Suffice to note, the year has been filled with exciting opportunities, meaningful developments and most importantly, significant results.

While it is natural for the Group to be faced with challenges in each passing year, I am glad to add that not only have we succeeded in overcoming them, but we have also found avenues to transform them into potential areas for growth. Overall, our constant drive for excellence has had a positive impact on all aspects of the Group.

Financial Performance

Our profit contribution this year is strong. The commitment to remain in the plantations sector and our ability to develop our latest and largest profit contributor, the 9 Heavy Industries Division, is proof that we are both a Group that is rich in business tradition and young in exploring new businesses. Having registered a pre-tax profit of RM829 million that far exceeds any other year, we have also surpassed our key performance indicators (KPI) for Government-Linked Companies (GLC).

With our expansion drive, our gearing has increased to 1.4 times as we have acquired more assets and increased our borrowings in order to take a stronger position in new businesses. The Board is aware of this, and we are taking measures to reduce our current gearing to a more acceptable level in relation to our growth strategy.

Our Heavy Industries Division has gone through a difficult journey these last few years. We have built today a Division that is at the forefront of the maritime sector providing solutions that will have ongoing results.

Our Plantation Division is doing very well with the current bullish market. I am confident that our average CPO price of RM2,279 per MT for the year will be breached in the coming financial year, given thinning supply and growing demand. This will motivate us to search for ways to improve our yield and strengthen our production capacity.

The Property Division has surpassed its targets. We are confident the property investment sector as well as our property development plans in our existing townships and greenfields will boost earnings for this Division in the long term.

Our Finance and Investment Division recorded a significant milestone with the successful entrance of the Bank of East Asia (BEA) into the Affin Group. This largest independent bank based out of Hong Kong with more than 200 branches worldwide, is set to boost Affin's leverage on the international banking scene while gaining from this alliance locally.

The Trading as well as Manufacturing & Services Divisions have performed satisfactorily and we will do much more to improve our return on investment in these Divisions.

Corporate Initiatives

At Boustead, we believe that it is only with change and growth, can we truly be able to reach our full potential. In tandem with this belief and our vision to strengthen our earnings, we have taken steps to grow our investments, restructure our ailing entities and when necessary discontinue businesses that do not contribute.

A notable initiative for the year was the successful listing of Malaysia's only Islamic plantation real estate investment trust in the capital market. The Al- Hadharah Boustead REIT is a reflection of how we have unlocked value while maintaining our plantation business. In its first year of operation the REIT has registered a significant profit of RM49 million and achieved a distribution to unitholders of 10.91 sen representing a yield of 11% over the IPO price.

We have improved the structure of our Finance & Investment Division having injected our investment in Boustead Naval Shipyard Sdn Bhd (BN Shipyard) and what was PSC Industries Berhad, now known as Boustead Heavy Industries Corporation Berhad (BHIC), into a new Division called Heavy Industries. More importantly, BHIC and BN Shipyard are on their way to focus on growing their respective businesses after we have put in place a solid balance sheet and positive shareholders' funds.

At the same time, we have acquired a majority stake in Royal & Sun Alliance Insurance (M) Berhad and renamed it BH Insurance (M) Bhd giving us the opportunity to grow the business. We are now in a position of strength to determine what we shall do with our various insurance

Over the years UAC Berhad has been a constant positive contributor to our earnings. We finally did what was an obvious progression by increasing our shareholding here and including this listed entity as a subsidiary.

We are clear that non-performers will not have a role in Boustead. With this, we have brought about a closure of Boustead Emasewa Sdn Bhd and the scaling down of the automobile division of Boustead Emastulin Sdn Bhd. We have also reached an agreement for the disposal of our less profitable plantation assets in Indonesia.

Outlook

I am confident that our core Divisions will continue with this momentum. Our Plantation Division still enjoys the sustained trend of increasing demand for palm oil. Industry experts remain optimistic that CPO prices are expected to trade at exceptionally high prices, given that it has surpassed RM4,000 per MT in 2008.

Heavy Industries is set to increase its scope in the maritime sector as we expand our ability to provide diversified solutions to three major streams of clientele namely naval and commercial ships as well as luxury yachts.

The Property Division will keep up its growth by focusing on all areas of this Division. In particular, we look forward to the launch of a 300 unit condominium project in Mutiara Damansara.

As for our Finance and Investment Division, we are in the midst of improving its structure, strengthening its core businesses while aiming for greater market share in the consumer, investment and Islamic banking segments.

The Trading as well as Manufacturing & Services Divisions will provide us with constant contribution as we review our business models here and improve its ability to contribute more significantly to the Group.

As I have noted on countless occasions, we are a Group that is aware of our obligation to enhance shareholder value. We trust the year under review had a significant impact towards this end.

It is my pleasure to present our detailed review on how each Division has performed. I am certain that these reviews will provide you with a clearer understanding on the progress and achievements of the respective Divisions. Thank you for remaining with us and we look forward to a better year ahead.

TAN SRI DATO' LODIN WOK KAMARUDDIN
Group Managing Director
29 February 2008