Trusted ICT Security Solutions Provider by uoy21072

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									                                                                                                       S C A N A S S O C I AT E S B E R H A D ( 5 2 5 6 6 9 - P )
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                                                                                                                                                                    Trusted ICT Security Solutions Provider


                                                                                                                                                                    ANNUAL REPORT             2006

                                                                                                       ANNUAL REPORT 2006




SCAN ASSOCIATES BERHAD (525669-P)
(A Member of SCAN Group of Companies)
Level 8, Menara Naluri, 161-B, Jalan Ampang, 50450 Kuala Lumpur.
Tel : +603 2166 0020          Fax : +603 2166 1020
SCAN Indonesia                SCAN Dubai
Tel : +622 1719 2811          Tel : +971 4 2822522
CO r p O r at e V i s i O n a n d M i s s i O n




Our Vision
We aim to become a world class and trusted ICT Security Solutions Provider.


Our Mission
As a dedicated team of professionals, we shall add value to our clients in responsibly
securing their ICT infrastructure by using the best technology, processes and innovative
solutions and delivering world-class expertise, in accordance with international
standards.
CO n t e n t s




• Group Financial Highlights                                2
• Corporate Profile                                         3
• Core Business                                             4
• Corporate Structure                                       5
• Analysis of Shareholdings                                 6
• Corporate Information                                     8
• Profile of Directors                                      9
• Profile of Key Management                                12
• Awards and Achievements                                  13
• Corporate Calendar of Events                             14
• Corporate Social Responsibility Events                   16
• Chairman’s Statement                                     18
• Group Chief Executive Officer’s Statement                20
• Statement on Corporate Governance                        22
• Additional Compliance Information                        26
• Audit Committee Report                                   27
• Statement on Internal Control                            29
• Statement on Directors’ Responsibility                   30
• Financial Statements                                     31
• Notice of Annual General Meeting                         69
• Statement Accompanying
  Notice of Annual General Meeting                         72
• Proxy Form                                        Enclosed




                                                   
                                           Annual Report 2006
GrOup finanCial hiGhliGhts




                            
                  SCAN Associates Berhad
CO r p O r at e p r O f i l e




SCAN Associates Berhad (“SCAN”), incorporated on 9 September 2000, is Malaysia’s premier and trusted Information
and Communications Technology (“ICT”) security solutions provider. We achieved MSC-status in December 2002 and
were subsequently listed on the MESDAQ market of Bursa Malaysia Securities Berhad on 6 October 2006. SCAN is an
affiliated company of Commerce Asset Ventures Sdn Bhd (”CAV”), a wholly-owned venture capital arm of Bumiputra-
Commerce Holdings Berhad.
SCAN was co-founded by Prof. Dato’ Dr. Norbik Bashah Idris, Dato’ Nasri bin Nasrun and eight (8) other co-founders.
Prof. Dato’ Dr Norbik is one of the foremost ICT security experts in Malaysia. The Company originated from a research
group, led by Prof. Dato’ Dr Norbik, at Universiti Teknologi Malaysia, which had been conducting research in information
security and cryptography since 1996.
In 2004, Aminuddin Baki Esa was appointed Chief Executive Officer and Executive Director of SCAN, after he completed
a Management Buy-In exercise of the company, with the assistance of CAV. Before his appointment as CEO, Aminuddin
was the Executive Director of the company responsible in managing its operations.
With an initial paid-up capital of RM4.29 million, SCAN has since built a strong track record in both the public and
private sectors, and was appointed as the ICT security consultant to the Malaysian Government in 2000. Our current
paid-up capital is RM20 million, consisting 200 million ordinary shares of RM0.10 each.
With a solid track record of providing ICT security solutions and building our intellectual property, SCAN delivers
internationally recognised and enterprise-wide solutions and services.
SCAN is backed by relevant Malaysian Government Agencies, such as the Multimedia Development Corporation
Berhad (“MDeC”) and Malaysian Debt Ventures Berhad, to spearhead ICT security initiatives in Malaysia as well as
overseas. In addition, SCAN currently houses forty-eight (48) ICT security professionals, the highest concentration of
such professionals under one roof in Malaysia. SCAN has also made inroads into the international market especially
in Indonesia and the Middle East by leveraging on its knowledge capital, to provide leading-edge ICT security
solutions.
Currently, SCAN operates from four (4) different countries, i.e. Malaysia, Indonesia, Saudi Arabia and the United Arab
Emirates. We have a subsidiary company in Jakarta, Indonesia i.e. PT SCAN Nusantara. SCAN has also ventured into
Saudi Arabia to work with the respective business alliances there as their Principal Technology Partner. Meanwhile,
our partnership office in Dubai, explores ICT security opportunities in the Middle East and North Africa.
SCAN upholds trust as its fundamental value proposition in providing customer-centric solutions and services to the
growing regional and global markets, where we aim to be one of the leading global ICT security solutions provider.




                                                         
                                                 Annual Report 2006
CO r e b u s i n e s s


SCAN’s business is focussed on providing ICT security products and services. Since our incorporation, we have expanded
our products and services segments to six (6) core segments, namely:

•	    ICT	Security	Application	Systems	Development where we customise and integrate systems and applications such
      as Network Monitoring System, Intrusion Detection System, Web Integrity Checker, Vulnerability Scanning System,
      Intrusion Monitoring System, Firewalls and Honeypots to meet our clients’ requirements;

•	    ICT	Security	Application	Software	Packages such as encrypted email, secure data and secure email delivery. Products
      in this segment include TRUSTMatrix, a software which we fully-developed in-house and enables enterprise data
      privacy and protection, Mobile Payment System, Mobile Number Management System, GRiXDrive Secure Biometrix
      Flash Drive (USB), MatrixNet (a Public Key Infrastructure solution), DBCrypt and Secure Document Management
      System;

•	    ICT	Security	Consultancy on matters such as Security Policies & Framework Development, Business Continuity
      Management, ICT Security Posture Assessment, ICT Risk Assessment, ICT Security Incident Response, Enterprise
      Systems Control, Project Risk Management and the preparation for ICT Security Professional Certification for the
      internationally recognised ISO/IEC 27001:2005 for Information Security Management System;

•	    ICT	Security	Systems	Integration comprising two sub-components such as System Design and Implementation, and
      integration of third party software and hardware;

•	    Outsourcing	Services	or	Managed	Security	Services, where organisations outsource the job of monitoring, detecting,
      responding, managing and preventing any form of disruption to their ICT infrastructure, to SCAN; and

•	    Maintenance	and	ICT	Security	Training, whereby we maintain ICT security systems or devices be it software, hardware
      or systems errors as well as the provision of periodic patches and updates. Our ICT security training programme
      provides our clients with the most comprehensive, practical and latest ICT security updates and trends. Technical and
      Management courses are available for beginners, intermediate and advanced level staff.




                                                         
                                               SCAN Associates Berhad
CO r p O r at e s t r u C t u r e




                           SCAN ASSOCIATES BERHAD




                                    100 %         99 %




SCAN CRYPTO-TECH SDN BHD                                 PT SCAN NUSANTARA




                                            
                                    Annual Report 2006
a n a lYs i s O f s h a r e h O l D i n G s


tOp thirtY (0) sharehOlDers
as at 0 april 007

nO naMe                                                                shares        %

 1   AMINUDDIN BAKI @ SABTU BIN ESA                                  32,394,000   16.20
 2   NORBIK BASHAH BIN IDRIS                                         23,103,849   11.55
 3   COMMERCE ASSET VENTURES SDN BHD                                 17,999,460    9.00
 4   KOPERASI PERMODALAN FELDA BERHAD                                10,000,000    5.00
 5   CITIGROUP NOMINEES (ASING) SDN BHD                               9,621,000    4.81
     UBS AG SINGAPORE FOR PEARL CAPITAL VENTURES INC
 6   ECM LIBRA AVENUE NOMINEES (TEMPATAN) SDN BHD                     8,587,700    4.29
     PLEDGED SECURITIES ACCOUNT FOR SIVANANTHAN A/L K NATARAJA
 7   KENANGA NOMINEES (TEMPATAN) SDN BHD                              7,750,000    3.88
     KENANGA CAPITAL SDN BHD FOR MOHAMAD FAHIZUL BIN KHAIRI
 8   NAGENDRAN A/L C.NADARAJAH                                        6,600,000    3.30
 9   CITIGROUP NOMINEES (ASING) SDN BHD                               5,200,000    2.60
     UBS AG SINGAPORE FOR ABLELINK INVESTMENT LTD
10   ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD                        4,850,000    2.43
     PHEIM ASSET MANAGEMENT SDN BHD FOR EMPLOYEES PROVIDENT FUND
11   AMBANK (M) BERHAD                                                4,252,200    2.13
     PLEDGED SECURITIES ACCOUNT FOR NG CHONG YAU
12   HSBC NOMINEES (ASING) SDN BHD                                    3,550,000    1.78
     EXEMPT AN FOR CREDIT SUISSE (SG BR-TST-ASING)
13   AMBANK (M) BERHAD                                                3,358,000    1.68
     PLEDGED SECURITIES ACCOUNT FOR SOON FOOK KIAN
14   RIO VENTURE SDN BHD                                              2,930,000    1.47
15   CITIGROUP NOMINEES (ASING) SDN BHD                               2,920,500    1.46
     MERRILL LYNCH INTERNATIONAL
16   CHONG SAU WEI                                                    2,601,910    1.30
17   SHAHARIL BIN ABDUL MALEK                                         2,516,910    1.26
18   NOR RAMZANI BIN ABD RAHIM                                        2,388,910    1.19
19   EB NOMINEES (TEMPATAN) SDN BHD                                   2,380,000    1.19
     PLEDGED SECURITIES ACCOUNT FOR CHEW WENG KIT
20   MD NAZRI BIN AHMAD                                               2,267,910    1.13
21   EB NOMINEES (TEMPATAN) SDN BHD
     PLEDGED SECURITIES ACCOUNT FOR AMINUDDIN BAKI @ SABTU BIN ESA    2,155,910    1.08
22   NORZAKIMI BIN ZAHARI                                             2,155,910    1.08
23   HDM NOMINEES (TEMPATAN) SDN BHD                                  2,146,400    1.07
     PLEDGED SECURITIES ACCOUNT FOR DEVARAJAH A/L C NAVARATNAM
24   NIK KHAIRUL BIN RAJA ABDULLAH                                    2,120,347    1.06
25   CHONG SIEW KOK                                                   2,100,910    1.05
26   RAMLI BIN JA’AFAR                                                2,100,347    1.05
27   AMSEC NOMINEES (TEMPATAN) SDN BHD                                2,000,000    1.00
     PLEDGED SECURITIES ACCOUNT FOR CHAN NGAI CHI
28   AMSEC NOMINEES (TEMPATAN) SDN BHD                                1,594,500    0.80
     AMBANK (M) BERHAD FOR SIEW BOON YEONG
29   POOK MUN FEE                                                     1,500,000    0.75
30   AMSEC NOMINEES (TEMPATAN) SDN BHD                                1,500,000    0.75
     AMBANK (M) BERHAD FOR POOK MUN FEE




                                                  
                                        SCAN Associates Berhad
a n a lYs i s O f s h a r e h O l D i n G s



analYsis bY siZe Of sharehOlDinGs
as at 0 april 007

CateGOrY                                        nO Of hOlDers                 %           nO Of shares             %

Less than 100                                                  2            0.50                    100         0.00
100 - 1,000                                                   93           23.02                 80,800         0.04
1,001 - 10, 000                                              139           34.41                644,800         0.32
10, 001 - 100,000                                             94           23.27              3,984,200         1.99
100,001 to 9,999,999                                          72           17.82            111,792,791        55.90
10,000,000 * and above                                         4            0.99             83,497,309        41.75

tOtal                                                        0          00.00           00,000,000        00.00

* 5% of issued shares


substantial sharehOlDers’ sharehOlDinGs

                                                                          Direct                          indirect
substantial shareholders                                             shareholdings                    shareholdings
                                                                    no. of shares %                  no. of shares %

Aminuddin Baki @ Sabtu Bin Esa                              35,791,700          17.90                   –          –
Prof. Dato’ Dr. Norbik Bashah Bin Idris                     23,357,515          11.68         (1)
                                                                                                  231,711       0.12
Commerce Asset Ventures Sdn Bhd                             17,999,460           9.00                   –          –
Bumiputra-Commerce Holdings Berhad                                   –              –       (2)
                                                                                               17,999,460       9.00
Khazanah Nasional Berhad                                             –              –       (3)
                                                                                               17,999,460       9.00
Employees Provident Fund Board                                       –              –       (3)
                                                                                               17,999,460       9.00
Koperasi Permodalan Felda Berhad                            10,000,000           5.00                   –          –


(1)
      Deemed interested by virtue of his spouse’ shareholding.
(2)
      Deemed interested pursuant to Section 6A of the Companies Act, 1965 by virtue of its substantial shareholding in
      Commerce Asset Ventures Sdn Bhd.
(3)
      Deemed interested pursuant to Section 6A of the Companies Act, 1965 by virtue of their substantial shareholdings
      in Bumiputra-Commerce Holdings Berhad, which in turn has a substantial shareholding in Commerce Asset Ventures
      Sdn Bhd.


DireCtOrs’ sharehOlDinGs

                                                                          Direct                          indirect
Directors                                                            shareholdings                    shareholdings
                                                                    no. of shares %                  no. of shares %

Datuk Ir. Mohamed Al Amin Bin Abdul Majid                       60,000           0.03                   –          –
Lt. Gen. (R) Raja Dato’ Abdul Rashid Bin Raja Badiozaman             –              –                   –          –
Aminuddin Baki @ Sabtu Bin Esa                              35,791,700          17.90                   –          –
Prof. Dato’ Dr. Norbik Bashah Bin Idris                     23,357,515          11.68         (1)
                                                                                                  231,711       0.12
Dato’ Nasri Bin Nasrun                                               –              –                   –          –
Raja Shamsul Kamal Bin Raja Shahruzzaman                       259,000           0.13                   –          –
Mohd Jafni Bin Mohd Alias (Alternate Director to
  Raja Shamsul Kamal Bin Raja Shahruzzaman)                      16,000            0.01                –           –
Shaharil Bin Abdul Malek (Alternate Director to
  Prof. Dato’ Dr. Norbik Bashah Bin Idris)                   2,516,910             1.26                –           –

(1)
      Deemed interested by virtue of his spouse’ shareholding.




                                                         7
                                                 Annual Report 2006
CO r p O r at e i n f O r M at i O n


bOarD Of DireCtOrs
Datuk ir. Mohamed al amin                                lt. Gen. (r) raja Dato’ abdul rashid
 bin abdul Majid                                          bin raja badiozaman
Chairman/Independent Non-Executive Director              Deputy Chairman/Independent Non-Executive Director

aminuddin baki @ sabtu bin esa                           prof. Dato’ Dr. norbik bashah bin idris
Chief Executive Officer/Executive Director               Technical Director/Executive Director

Dato’ nasri bin nasrun                                   raja shamsul Kamal bin raja shahruzzaman
Non-Independent Non-Executive Director                   Non-Independent Non-Executive Director

Mohd Jafni bin Mohd alias                                shaharil bin abdul Malek
Alternate Director to Raja Shamsul Kamal                 Alternate Director to Prof. Dato’ Dr. Norbik Bashah
 bin Raja Shahruzzaman                                    bin Idris


auDit COMMittee                                             share reGistrars
lt. Gen. (r) raja Dato’ abdul rashid                        Symphony Share Registrars Sdn Bhd (378993-D)
 bin raja badiozaman                                        Level 26 Menara Multi-Purpose
Chairman/Independent Non-Executive Director                 Capital Square
                                                            8 Jalan Munshi Abdullah
Datuk ir. Mohamed al amin bin abdul Majid                   50100 Kuala Lumpur
Member/Independent Non-Executive Director                   Tel: 03-2721 2222
                                                            Fax: 03-2721 2530 / 31
Dato’ nasri bin nasrun
Member/Non-Independent Non-Executive Director
                                                            auDitOrs

COMpanY seCretaries                                         Khairuddin Hasyudeen & Razi (AF 1161)
                                                            B-5-7 Megan Avenue II
Mohamed faizal bin Kasim @ abdul aziz (LS 06978)            12 Jalan Yap Kwan Seng
Mah li Chen (MAICSA No. 7022751)                            50450 Kuala Lumpur
tan fong shian @ lim fong shian (MAICSA No. 7023187)        Tel: 03-2710 7717
                                                            Fax: 03-2710 7727

reGistereD OffiCe
                                                            prinCipal banKer
Level 8, Menara Naluri
161-B Jalan Ampang                                          Malayan Banking Berhad (3813-K)
50450 Kuala Lumpur                                          Menara Maybank
Tel: 03-2166 0020                                           100 Jalan Tun Perak
Fax: 03-2166 1020                                           50050 Kuala Lumpur
                                                            Tel: 03-2070 8833
                                                            Fax: 03-2070 2611
heaD/ManaGeMent OffiCe
Level 8, Menara Naluri                                      SPONSOR
161-B Jalan Ampang
50450 Kuala Lumpur                                          AmInvestment Bank Berhad (23742-V)
Tel: 03-2166 0020                                           (formerly known as AmMerchant Bank Berhad)
Fax: 03-2166 1020                                           22nd Floor Bangunan AmBank Group
Website: www.scan-associates.net                            55 Jalan Raja Chulan
                                                            50200 Kuala Lumpur
                                                            Tel: 03-2078 2633 / 44 / 55
                                                            Fax: 03-2070 8596




                                                       
                                             SCAN Associates Berhad
p r O f i l e O f D i r e C tO r s



                                Datuk ir. Mohamed al amin bin abdul Majid, a Malaysian aged 52, was appointed
                                Independent Non-Executive Chairman of the Board of Directors of the Company on 30
                                September 2005. He is also a member of its Audit Committee. Datuk Ir. Mohamed Al Amin holds
                                a Diploma in Technology from Oxford College of Further Education and a degree in Bachelor
                                of Science in Civil Engineering from the University of Aston, Birmingham, United Kingdom. He
                                began his career as a Project Engineer with the Perak State Development Corporation in 1979
                                and was subsequently made the Executive Director of its subsidiary, Maju Bangun Sdn Bhd,
                                two years later. In 1982, he set up his own business and is currently a director of several private
                                companies which are involved in a wide range of businesses such as construction, investment,
                                distributorship, general trading and project management. Datuk Ir. Mohamed Al Amin is also
                                the Chairman for various organisations such as the Chemical Industrial Council of Malaysia
                                (CICM), Nylex (Malaysia) Berhad and is currently the Chairman of the Small & Medium Industries
Development Corporation (SMIDEC). He is a Corporate Member of the Institute of Engineers Malaysia (MIEM) as well as the
Executive Chairman of Country View Berhad. He also sits on the board of various companies namely Ancom Berhad, Gabungan
Pemborong Bumiputra Perak Berhad and MCIS Zurich Insurance Berhad. Apart from the corporate sector, Datuk Ir. Mohamed
Al Amin is also active in the field of politics and voluntary organisations where he has previously served, amongst others, as
Head of Perak UMNO Youth and National UMNO Youth EXCO and Secretary of Badminton Association of Malaysia.


lt. Gen. (r) raja Dato’ abdul rashid bin raja badiozaman, a Malaysian aged 67, was
appointed Deputy Chairman and Independent Non-Executive Director of the Company on 30
September 2005. He is the Chairman of its Audit, Remuneration and Nomination Committees.
Lt. Gen. (R) Raja Dato’ Abdul Rashid graduated from Lancaster University, United Kingdom, with
a Masters Degree in International Relations and Strategic Studies. He served in the Malaysian
Armed Forces for more than 34 years until his retirement in 1995, as its Chief of Intelligence
Staff, a post he held for more than 7 years. Since his retirement in 1995, he has been active
in the corporate sector, being Chairman at The Ayer Molek Rubber Company Berhad to-date.
For the last 10 years, he has been Chairman of Desaru Development Corporation Sdn Bhd. He
currently sits on the Board of Directors of Lam Soon Sdn Bhd. In addition, he also holds the
position of Executive Chairman of MOCOM Corporation Sdn Bhd, a trading company and has
been the Executive Chairman at Realm Energy Sdn Bhd, a company principally involved in
Power Line Communications, since 2003. Apart from his roles in the corporate sector, Lt. Gen. (R) Raja Dato’ Abdul Rashid
occasionally writes on security issues for the media and has been invited as a guest lecturer at the Malaysian Police College
and the International Islamic University.


                               aminuddin baki @ sabtu bin esa, a Malaysian aged 40, was appointed to the Board of
                               Directors of the Company on 1 October 2004. He is the Chief Executive Officer of SCAN Group
                               of companies. Encik Aminuddin, an accountant by profession started his career as an auditor
                               with a local medium size firm in 1992 before moving onto ICT Consultancy specialising in
                               Systems Implementation & Integration in 1994. In the beginning of his consultancy tenure, he
                               worked in various assignments especially with the DRB-HICOM Group and was instrumental
                               in the implementation of the SAP R/3 Solution in the Group since 1997. As Senior Manager of
                               Information Technology then, he was personally responsible in managing the implementation
                               of the same solution throughout Usahasama Proton-DRB Sdn Bhd (USPD) (currently known as
                               Proton Edar Sdn Bhd) involving more than 60 offices, sales & service branches in the Country.
                               In early 2001, Encik Aminuddin decided to leave Proton Edar and served as Project Director for
                               the MSC Telehealth Flagship, working closely with the Multimedia Development Corporation
and Ministry of Health and responsible in managing the implementation of the Telehealth Flagship. He then joined SCAN in
July 2003 as an external business consultant and was instrumental in streamlining the business processes and the operation
of the Group. Prior to his appointment in SCAN, Encik Aminuddin was also involved and served in various strategic initiatives
at National level including the Open Source Initiative for the Malaysian Public Sector. Currently, he serves as member of the
Board of Directors of PT SCAN Nusantara, MSC-Status GCI MSC and few others private limited Companies in Malaysia. He
also serves as the Certification Advisory Council Member in SIRIM, Knowledge Worker Consultative Member in Multimedia
Development Corporation and Government Relation Committee Member in PIKOM.




                                                             
                                                     Annual Report 2006
p r O f i l e O f D i r e C tO r s


                             Dato’ Dr. norbik bashah bin idris, a Malaysian aged 48, was appointed the Technical
                             Director of the Company on 9 September 2000. He is also a member of the Remuneration
                             Committee. Norbik graduated with Bachelor of Science Degree majoring in Computer Science in
                             1982 from the University of New South Wales in Australia. Later, he obtained a Masters Degree in
                             Computer Science from the University of Queensland Australia in 1985. In 1995, Norbik obtained
                             a Doctorate in Computer Security from the University of Wales in Cardiff, United Kingdom
                             and a Certificate in Software Engineering, Universite’ Thales Paris (formerly known as Campus
                             Thomson) in 1996. As a professional, Norbik obtained his certification as a CSSP as early as 1987
                             from the Computer Systems Security Professional Inc, Rhode Island USA, and more recently,
                             the CISSP (Certification for Information System Security Professional) from ISC2, Florida, USA.
                             His career started as an academician at UTM in 1983. In 2000, he was the visiting Lecturer to
                             University of Technology Petronas and University Tenaga Nasional in ICT Security & Software
Engineering. He was Professor and Director in the Centre for Advanced Software Engineering (CASE) between 1996 and 2004
where he was responsible for lecturing and supervision of Masters and PhD students. He was also an Adjunct Professor at
the International Islamic University Malaysia between 2001 and 2002 and was responsible for lecturing and examination
of post-graduate thesis. As one of the co-founders, he has contributed significantly to the growth and success of the SCAN
Group. With more than 20 years experience in the IT industry, his main responsibilities are to strategically engineer the SCAN
Group of companies to be a leading technology partner and in guiding and enabling its IT endeavours. He is also involved
in the overall management and development of the strategic direction of the SCAN Group of companies. Norbik is also an
Independent Director and a shareholder and director of SCAN Consulting Services Sdn Bhd.


Dato’ nasri bin nasrun, a Malaysian aged 38, is a co-founder and Non-Independent Non-
Executive Director of the Companies. He sits in both its Audit and Nomination Committees.
Dato’ Nasri graduated with an Advanced Diploma in Accountancy from Universiti Teknologi
Mara (UiTM) in Shah Alam in 1992. He is a Chartered Accountant by profession and a Member
of the Malaysian Institute of Accountants. His career started as an Audit Assistant at KPMG Desa
Megat & Co, Kuala Lumpur in 1992. In 1996, he joined Schlumberger Technical Services Inc, based
in Dubai, United Arab Emirates, as a Tax Accountant, responsible for its financial accounting
and regional consolidation. Subsequently in 1997, he was appointed Finance Manager in
Kumpulan Pinang Sdn Bhd, where he handled its group financial accounting. Thereafter, he
ventured into business by setting up Hijrah Solutions Sdn Bhd in 1997 and later co-founded
SCAN Associates Sdn Bhd in 2000, contributing significantly to the success of the SCAN Group.
Dato’ Nasri has more than 15 years of experience in finance and accounting. He currently holds
several directorships in several companies and is the Executive Chairman of Setegap Ventures Corporation Sdn Bhd and its
group of companies. He is also the Independent Non-Executive Director of MOL Access Portal Berhad.


                             raja shamsul Kamal bin raja shahruzzaman, a Malaysian aged 46, was appointed to
                           the Board of the Company on 1 October 2005 as a Non-Independent Non-Executive Director.
                           He is a member of both its Remuneration and Nomination Committees. He obtained a Bachelor
                           of Science degree, with Honours in Civil Engineering, from the University of Newcastle upon
                           Tyne, England. Raja Shamsul’s career started when he joined Shah Alam Properties Sdn Bhd as
                           a project engineer in 1984 to 1987. He subsequently joined Bank of Commerce Berhad in 1987
                           and held the position of Vice President & Group Head of its Corporate Banking Department,
                           before leaving the bank in 1991 to link up with Commerce-Asset Holdings Berhad. Since joining
                           Commerce-Asset Holdings Berhad, he has held several positions in the Group including being
                           its General Manager & Chief Executive Officer at Commerce Asset Leasing Sdn Bhd (1991 to
                           1996), General Manager at Commerce Asset Fund Managers Sdn Bhd (1996 to 1997) before
                           assuming his current position as Executive Director and Chief Executive Officer of Commerce
Asset Ventures Sdn Bhd. He also holds the position of Director at public-listed Carotech Berhad and Hovid Berhad.




                                                         0
                                                SCAN Associates Berhad
p r O f i l e O f D i r e C tO r s



                            Mohd Jafni bin Mohd alias, a Malaysian aged 41, was appointed as an alternate director
                            to Raja Shamsul Kamal bin Raja Shahruzzaman on 2 June 2006. An Accountant by profession,
                            Mohd Jafni studied the Chartered Institute of Management Accountants (CIMA) professional
                            accountancy qualification in the United Kingdom from 1986 to 1991. His career started in
                            1989 as a Junior Auditor for Bates & Dewell, an audit and tax consultancy in London, England.
                            Subsequently, he returned to Malaysia and joined Bank Bumiputra Berhad as an Accounts
                            Manager in 1991 where his main responsibilities were in banking and credit matters. In 1994,
                            he took up the role of Assistant Manager, Capital Markets at Commerce International Merchant
                            Bankers Berhad. His responsibilities were as financial advisor and arranger for private debt
                            securities as well as project financing. He later joined Commerce Asset Ventures Sdn Bhd in 2000
                            as a Manager, responsible for business development specialising in fund raising and investments.
                            In 2001, he was appointed as an Associate for CAV Private Equity Management Sdn Bhd and
was later appointed Associate Director. His current responsibilities are in fund and investment management.


shaharil bin abdul Malek, a Malaysian aged 35, was appointed as an alternate director
to Prof Dato’ Dr. Norbik Bashah bin Idris on 2 June 2006. He is a co-founder of the Company
and its Principal Technology Consultant as well as Chief Security Officer. Shaharil graduated
with a Bachelor of Science Degree in Computer Science from UTM in 1995. His career started
in 1995 where he worked as an Analyst Programmer at Mobikom Sdn Bhd. In 1996, he joined
Telekom Malaysia Berhad as Assistant Manager, responsible for network and systems design
and the implementation of a few mega projects. In 1998, as a Network Security Consultant at
the Malaysian Computer Emergency Response Team (MyCERT) under MIMOS Berhad, he was
in charge of Incident Response Handling for the Malaysian internet domain. Shaharil holds IT
security professional certifications such as the Certified Information System Security Professional
(CISSP) and the GIAC Security Essentials Certification (GSEC). As Principal Consultant at SCAN,
he assists the Technical Director on day-to-day technical operations of the SCAN Group and
is responsible for the management of SCAN’s Technical Division. Being Chief Security Officer, Shaharil is responsible for
the security of the Company’s ICT infrastructure and enforcing its security policy. He is also a Director of SCAN Consulting
Services Sdn Bhd.


Notes	to	Directors	Profile
1.    The Directors do not have any family relationship with each other and/or substantial shareholders of the Company.

2.    None of the Directors have any conflict of interest with the Company nor convicted for any offences within the past
      ten (10) years other than traffic offences, if any.

3.    The details of the Director’s attendance at board meetings and securities holdings are set out on page 23 of this
      Annual Report.




                                                          
                                                  Annual Report 2006
p r O f i l e O f K e Y M a n aG e M e n t


The profiles of aminuddin baki @ sabtu bin esa, prof. Dato’ Dr. norbik bashah bin idris and shaharil bin abdul Malek
who are the Directors of SCAN Associates are set out in Section Profile of Directors pages 9 to 11 of this Annual Report.

                        Khairil anuar bin haji aziz, a Malaysian, aged 40, is the Director of Sales, Marketing & Business
                        Development of the Company. He graduated with a Bachelor of Business Administration (Hons),
                        majoring in Marketing Management, from Coventry University, United Kingdom in 1993. He started
                        his career with the England National Health Service (NHS) in Wakefield, Northern England as part
                        of his degree course. Khairil Anuar joined the SCAN Group in May 2006 and is currently heading
                        the sales activities and strategic business development for SCAN Group.




                        haji ramlan bin rosli, a Malaysian, aged 47, is the Project Director of the Company. He graduated
                        in 1983 from Universiti Kebangsaan Malaysia with a Bachelor of Science Degree in Mathematics. He
                        joined the SCAN Group in 2002 and his main responsibilities are to oversee the project management
                        and delivery of all projects undertaken by the SCAN Group.




                        Mohamed faizal bin Kasim @ abdul aziz, a Malaysian, aged 36, is the Head of Corporate
                        Services Division of the SCAN Group of Companies. He graduated in 1995 from the International
                        Islamic University Malaysia, with a Degree in Law. In March 2005, Mohamed Faizal joined SCAN
                        Group as Head of Corporate Services Division, with the responsibilities of supervising and managing
                        matters related to legal, secretarial, human resources and administration.




                         Mohd abdul razak bin abdullah @ Zakaria, a Malaysian, aged 37, is the Head of Finance &
                         Accounts Division of the SCAN Group of Companies. He graduated in 1994 from the International
                         Islamic University Malaysia, with a Bachelor of Accounting (Hons) Degree. Mohd Abdul Razak is a
                         Chartered Accountant and is a member of the Malaysian Institute of Accountants since 1998. He
                         has been with the Group since September 2001.




                        halizawati binti Mohd halid, a Malaysian, aged 35, is currently the acting Head of Quality
                        Assurance Unit of the SCAN Group of Companies. She graduated from University Science of
                        Malaysia with a degree in Bachelor of Applied Science (Hons) Degree, minoring in Translation, in
                        1996. Halizawati joined the Group in January 2005, with the responsibilities of overseeing quality
                        and security activities involving Quality Management System (QMS) and Information Security
                        Management System (ISMS) and other continual improvement activities. She is also certified as a
                        Qualified Lead Auditor for BS 7799-2:2002.




                                                        
                                               SCAN Associates Berhad
awa r D s a n D aC h i e v e M e n t s



With us thriving towards delivering quality products and value-for-money services for our clients, we have garnered the
following accolades:

                                           •      Recipient of the 00 Company of the Year award from Commerce
                                                  asset ventures

                                           •      Recipient of the 00 frost and sullivan telecoms award for Managed
                                                  security service provider of the Year

                                           •      Certified isO/ieC 700:00 in information security Management
                                                  system since 00 (Upgraded from BS 7799:2002 in 2005)

                                           •      Awarded the MasterCard site Data protection (sDp) Compliance
                                                  Certificate in 00 for our security posture assessment (spa) module.
                                                  The SPA module is globally applicable and has met the stringent security
                                                  requirements and best practises of participating MasterCard acquiring
                                                  members, online merchants, member service providers and data security
                                                  vendors

                                           •      ICT security research findings have been acknowledged by Microsoft inc
                                                  and us homeland security agency


We have successfully developed and currently operate the largest Security Operations Centre in South East Asia covering
the monitoring and surveillance of more than 500 security devices for 170 organisations since year 2004.

In addition to the above accolades, we have also contributed actively in the following areas:

•     Active contributor to the Industry namely
      - Consultant to the development of various Standards and Guidelines for various Governments
      - Malaysian Public Sector Management of Information & Communications Technology Security Handbook (MyMIS)
      - Malaysian Public Sector ICT Risk Assessment Methodology (MyRAM)
      - Management of Information & Communications Technology Security Handbook for the Kingdom of Saudi Arabia

•     A member of various International Standards Development
      - ISO/IEC 1/SC27 WG1
      - ISO/IEC NP 18043 Information Technology – Deployment and operation of Intrusion Detection System
      - ISO/IEC NP 24762 – Guidelines for ICT disaster recovery services

•     Organiser and sponsor for various ICT Security competitions (i.e. “Capture the Flag” challenge, e-Forensics etc)
      - Hack-in-the-Box (HITB) Malaysia -- 2005 & 2006
      - Inter-varsity Hacking Competition-- from 2003 to 2006

•     Participated as speaker and trainer in various international conferences such as HITB, Microsoft, Black Hat, Bella etc
      in 2006




                                                          
                                                  Annual Report 2006
     CO r p O r at e C a l e n D a r O f e v e n t s




March – May 2006                            5  May 2006                                  14 – 16      May 2006
SCAN Sports Carnival                        Awarded Frost & Sullivan 2006 Telecoms       “Pameran Kecemerlangan Pendidikan
                                            Award for Best Managed Security              2006” at Putra World Trade Centre,
                                            Service Provider of the Year                 Kuala Lumpur




                         1  June 2006                              17  July 2006
                         Underwriting Agreement Signing            SCAN Blood Donation Drive at Level 9,
                         Ceremony between SCAN Associates          Menara Naluri
                         Berhad and AmInvestment Bank
                         Berhad




14–15         August 2006                   18 – 20    August 2006                        30   August 2006
IT Asia Event 2006 Jakarta exhibition at    SCAN Family Day at Cherating,                 SCAN Prospectus Launch at Marriott
Grand Melia Hotel, Jakarta                  Pahang                                        Hotel, Putrajaya




                                                          
                                                 SCAN Associates Berhad
     CO r p O r at e C a l e n D a r O f e v e n t s




1–3       September 2006                    5 September 2006                               21   September 2006
SCAN sponsoring and managing                SCAN Analyst Briefing at Equatorial            SCAN sponsoring prizes for Capture The
International Hacking Competition           Hotel, Kuala Lumpur                            Flag Competition at HITB Conference,
2006 at UiTM, Shah Alam                                                                    Kuala Lumpur




6   October 2006                            10   November 2006                             18 – 22         November 2006
Listing Day Ceremony at Bursa Malaysia      Hari Raya Aidilfitri Open House at             Gulf IT Exhibition (GITEX) in Dubai
Securities Berhad                           Menara Naluri, Jalan Ampang, Kuala
                                            Lumpur




                          8  December, 2006                     18 – 20        December, 2006
                          SIRIM-INDUSTRY Night 2006 for         National Career Carnival at International
                          Certified ISO 27001 in Information    Islamic University Malaysia (IIUM)
                          Security Management System




                                                           
                                                   Annual Report 2006
CO r p O r at e s O C i a l r e s p O n s i b i l i t Y e v e n t s


As a responsible corporate citizen, SCAN takes social obligations seriously. SCAN always believes in “giving from the heart”
and has continued to support educational and charitable causes.

In the education field, SCAN has provided a platform for students from various levels of studies to be exposed to the real
corporate IT world. Staff participated in lectures, seminars and knowledge-sharing talks to educate students on issues such
as ICT security which is SCAN’s business focus, as well as sharing ideas of building a successful ICT security company like
SCAN. The company’s consultants organised a hacking game at Sekolah Menengah Kebangsaan Damansara Utama, Petaling
Jaya, to give secondary school students a first-hand experience in the mazy world of computer hackers. The success of this
event has encouraged SCAN to organise similar competitions at university level.

Visits from various institutions of higher learning were organised at SCAN’s corporate headquarters. Students were encouraged
by SCAN’s success in the ICT security sector and have often used the company’s business model as a case study.

On the charitable front, SCAN brought the smiles out of more than 60 children from Persatuan Kebajikan Anak Pesakit HIV-
AIDS Nurul Iman Malaysia (PERNIM) and Pertubuhan Al-Khaadem by treating them to a pre-Hari Raya Aidilfitri shopping
spree at one of Kuala Lumpur’s premier shopping centres. The underprivileged children were later driven to SCAN’s breaking
of fast ceremony during which they were presented with “duit raya” and the gifts which they had selected earlier at the
shopping centre.

SCAN endeavours to play a significant role in helping to shape a better and more compassionate society. With an on-going
social programme in place, SCAN has made various contributions and donations in aid of the underprivileged and charitable
organisations.




                                      18   February 2006
                                      Hacking Game for Form 5 students of Sekolah
                                      Menengah Kebangsaan Damansara Utama
                                      (SMKDU), in conjunction with its ICT Day




                                      28     February 2006
                                      Briefing and knowledge-sharing event organised
                                      for students of Institut Komunikasi dan Elektronik
                                      Tentera Darat, Kem Sungai Besi, Kuala Lumpur




                                                         
                                                SCAN Associates Berhad
CO r p O r at e s O C i a l r e s p O n s i b i l i t Y e v e n t s




                           28     July 2006
                           Visit to SCAN Associates Berhad by students of
                           Masters in Entrepreneurship course, Universiti
                           Teknologi Malaysia




                           29   September 2006
                           Donated to the West Asian Humanitarian Fund,
                           which is backed by the Ministry of Foreign Affairs,
                           Malaysia




                           6  October 2006
                           Pre-Hari Raya Aidilfitri shopping spree with
                           children from Persatuan Kebajikan Anak Pesakit
                           HIV-AIDS Nurul Iman Malaysia (PERNIM) and
                           Pertubuhan Al-Khaadem




                           6  October 2006
                           Breaking of fast with children from Persatuan
                           Kebajikan Anak Pesakit HIV-AIDS Nurul Iman
                           Malaysia (PERNIM) and Pertubuhan Al-Khaadem




                           29   December 2006
                           Donated to the MSC Flood Victims Fund
                           2006, organised by Multimedia Development
                           Corporation (MDeC), and by the Ministry of
                           Science, Technology and Innovation.




                                                7
                                        Annual Report 2006
C h a i r M a n ’s s tat e M e n t


                                                  On behalf of the Board of Directors of SCAN Associates Berhad (SCAN), it
                                                  is my pleasure to present our first Annual Report and Financial Statements
                                                  of SCAN Group for the financial year ended 31 December 2006.

                                                  2006 was a historic year for the Group, in terms of corporate development,
                                                  profitability and growth especially in the overseas market despite intense
                                                  competition. Our success today is a testament of our maturing capability
                                                  to implement information security projects via team work, dedication
                                                  and sheer hard work.

                                                  hiGhliGhts Of COrpOrate DevelOpMent

                                                  SCAN marked the first of its many corporate milestones when it listed
                                                  in the MESDAQ Market of Bursa Malaysia on 6 October 2006. This was a
                                                  significant corporate development of the Group, since its incorporation
                                                  six years ago. Throughout this six-year journey, SCAN has grown from
                                                  strength to strength, not only in terms of manpower but also market
                                                  coverage, profitability and growth.

                                               From a staff strength of fifteen in 2000, SCAN has grown into an
                                               organization with more than one hundred and sixty people today.
                                               Operations-wise, we have established a firm presence in four countries;
                                               Indonesia, the United Arab Emirates, Saudi Arabia and Malaysia. We have
                                               also begun to carve our reputation in the outsourcing field by offering
                                               managed security services via three security operation centres. We were
awarded “Best Managed Security Service Provider in Malaysia” by Frost & Sullivan in May 2006. In terms of revenue, we have
also recorded an increase of more than 45% compared to that in 2005.

These significant achievements would not have been possible without the relentless contribution of staff, partners and
notably SCAN’s Board members, whom I hold in the highest esteem. My fellow Board members have given their continued
support and guidance to the Management to help us achieve our set targets and goals. To further strengthen the Board’s
composition, the Board welcomed En Shaharil bin Abdul Malek on the Board of Directors in 2006 as an alternate director
to YBhg Prof. Dato’ Dr Norbik Bashah Idris. En Shaharil, who is the Principal Technology Consultant and the Chief Security
Officer of the Company, is also one of the founding members of SCAN.

finanCial perfOrManCe

I am proud to highlight that, 2006 has been a momentous year with regards to profitability and growth.

The Group has achieved a turnover of RM38.1 million, an increase of about 47% compared to 2005. Profit after tax has
also increased to RM10.7 million from RM8.8 million in 2005, an increase of 21.6%. This overall healthy trend is due to the
significant contribution of the overseas market which contributed almost 50% of the turnover, outperforming our own
target of 30% which was set in early 2006.

The Group recorded a basic Earnings Per Share of 6.93 sen for the year ended 31 December 2006. The main contributors
were the Managed Security Services segment with a turnover of RM9.2 million, and Security System Integration, which
contributed RM9.5 million. In addition, the Consultancy Services segment continued to be our star performer of the year
by contributing a turnover of RM11.2 million. These three segments contributed a total of 79% of the turnover.

Our cashflow position has also improved significantly from RM4.3 million in 2005 to RM28.4 million in 2006. This reaffirms
that the Group’s financial position is getting stronger and firmer. In recognition of the Group’s commendable performance,
the Board recommends a first and final dividend in respect of the financial year ended 31 December 2006 of 1.25 sen per
share, tax exempt, amounting to RM2.5 million subject to the shareholders’ approval.




                                                        
                                               SCAN Associates Berhad
C h a i r M a n ’s s tat e M e n t



GrOup prOspeCts

2006 has indeed been a fruitful year for us and I am confident that the Group will continue to grow and prosper in the
future.

For 2007, SCAN will continue to solidify its overseas presence especially in the Middle East. The Group will continue to
explore and expand its market presence in the region by securing projects in other countries beyond Saudi Arabia and
the United Arab Emirates. In addition, the Group will continue to focus on its performing segments especially in Managed
Security Services.

In addition to Managed Security Services, SCAN is keen to explore opportunities in the Mobile Payment segment by using
its encryption technology to provide a secure mobile payment solution. This will propel the Group to a more predictable
income cycle compared to other ICT Companies.

a Measure Of GratituDe

First of all, I would like to extend my sincere appreciation to my colleagues on the Board for the dedicated support of the
Group. Their years of experience, insight and business acumen, participation at our Board meetings, as well as their healthy
regard towards good corporate governance and stakeholders’ interests in SCAN, provides easy direction and guidance for
the Management Team to execute its plans.

Secondly, my sincere and highest appreciation to the Management	Team led by the Executive Director and Chief Executive
Officer, En Aminuddin Baki Esa, for their tireless efforts and unwavering enthusiasm towards achieving the vision of the
Group and the goals of the businesses. This has translated into the historic achievements that SCAN has recorded during
the year.

I would also like to offer my sincere gratitude to all	SCAN	employees for their efforts and role as the pulse of the Group and
the catalyst of growth. I respect them for their dedication, commitment and hard work, especially in the ICT industry where
24 x 7 round-the-clock services are given.

Finally, I would like to offer a big thank you to our	shareholders for whom this annual report is addressed to. We duly
acknowledge your loyalty and belief in us. We look forward to your continued confidence, guidance and support through
the years to come.


Datuk ir. Mohamed al amin bin abdul Majid
Chairman




                                                           
                                                   Annual Report 2006
G r O u p C h i e f e x e C u t i v e O f f i C e r ’s s tat e M e n t


Dear Shareholders,

The year 2006 was a historical year for SCAN when we were successfully
listed on the MESDAQ market in October, and achieved good profitability
and growth compared to the previous year. Four of our revenue segments,
namely Managed Security Services, Consultancy Services, Security System
Integration and Security Application System Development Services contributed
more than RM34 million, or 90% to the Group’s turnover. In comparison,
the same four segments only contributed RM21 million in 2005. In other
words, these segments have contributed more than 60% to the Group’s
overall growth in 2006.

Compared to 2005, SCAN has recorded a profit growth of 21.6% in 2006
based on the audited profit after tax of RM10.7 million. This sterling
performance is attributed to the following factors:-

•     Overseas operations which have begun to reap the rewards, to the
      extent of even outperforming the set-target for the year;
•     The commitment, dedication, team work and hard work displayed
      by all parties, from the Board of Directors to each and every one of
      our shareholders; and
•     The warm reception from our customers for our services especially
      the Outsourcing Services, better known as the Managed Security
      Services.

Our overseas operations in Saudi Arabia and the United Arab Emirates contributed significantly to this remarkable growth.
In addition, our Indonesian operations have shown a positive turnaround sign by recording a much lower loss for the year
compared to 2005.

We have also implemented steps to counter the high risks of doing business overseas. For example, operational risks such
as entry visa sponsorships for the Middle East countries, especially Saudi Arabia can easily make or break our reputation,
image and project deliveries. Thus, having a strong and reliable partner in these countries will help mitigate unnecessary
business risks.

At the end of 2006, SCAN identified its second partner in Saudi Arabia, Versos, a company related to the Saudi Economic
Development Corporation as its potential partner for the Telecommunications sector. Our good relationship with the
Malaysian Multimedia Development Corporation, which is currently focusing its business development in the Middle East
market, further helps reduce the risks. To further minimise the Group’s risk exposure, SCAN has been very selective, focusing
only on the Government, Financial and Telecommunications sector in the Region.

In addition to Saudi Arabia and the United Arab Emirates, the Group has also explored the possibility of expanding its reach
to other Middle East countries such as Qatar, Oman and Syria. The Group is expected to reap its rewards in either one of
these countries in 2007.

The year 2006 was also a significant one for the Group due to the fact that the majority of our long-term contracts had
expired during the year. By September 2006, SCAN only had a contract order book of less than RM3 million left. However,
with perseverance, commitment and hard work from the team, the book order has been increased to approximately RM17
million by 31 December 2006. However, in spite of the considerable improvement to its order book, the Management is
fully aware that SCAN has yet to float on clear and calm waters due to the nature of the ICT business which has a long sales
cycle, and is contract-based and cyclical. If this is unchecked, the impact to the Group will be tremendous. Hence, strategic
measures have been initiated to overcome potential unpredictable future earnings.

At our Management Strategy Session last year, it was concluded that profitability has to be smoothened by balancing the
income generation between contract-based and transaction-based earnings. However, we cannot immediately discard the
contract-based income since the nature of the transaction-based earnings is such that it would require between two to
three years to grow and stabilise.




                                                         0
                                                SCAN Associates Berhad
G r O u p C h i e f e x e C u t i v e O f f i C e r ’s s tat e M e n t



In the long term, we are hopeful that the Group will generate the majority of its income from transaction-based contracts.
SCAN began its first transaction-based initiative with Managed Security Services which took two years to reach its steady
stage. By the end of 2006, these outsourcing services have contributed more than RM9 million in turnover or approximately
24% of total revenue for the Group. Year-on-year, these services contributed a growth percentage of more than 70%. As a
result of this success, SCAN has started its second transaction-based initiative called Secure Mobile Payment, capitalising on
the Group’s core expertise in encryption to provide secure e-commerce using mobile phones, at the end of 2006.

The plan to convert SCAN into a transaction-based earnings company was outlined in late 2006 under the new strategic
initiative called the Bull’s Eye Program, which outlines the growth plan of the Group for the next three years beginning 2007.
It is a structured program designed to propel SCAN to continuously sharpen its competitive edge and achieve world-class
status. This comprehensive Program has outlined five main thrusts :

•     Conduct benchmarking via certification and process improvement with the main intention of achieving excellent
      productivity and operational efficiency;
•     Promote continuous research & development;
•     Continue developing and enhancing the skills & knowledge of the employees as key assets of the Group;
•     Market expansion to more countries including the possibility of China & India; and
•     The diversification of income generation towards transaction-based contracts.

Pursuant to the first thrust, the Group has been accorded with the ISO 27001 certification for its Managed Security Services
and Software Development operations in December 2006. SCAN’s Managed Security Services was also named the winner for
the “Best Managed Security Service Provider in Malaysia for 2006” by Frost & Sullivan, beating three other companies, of
which two are multinationals.

We have also continued to enhance our human capital by sponsoring employees’ professional certifications with the relevant
ICT certification bodies. As of 31 December 2006, the Group had 42 individual certifications in various ICT fields. In addition,
SCAN has also sponsored a number of its employees to pursue academic excellence in post-graduate studies. We accord the
Group’s positive achievement and growth to the excellent contribution from all parties – the Board of Directors, Management
Team, Employees of the Group, Partners and of course, each and every one of you, our Shareholders. No plan can be crafted
and successfully executed without team work. With our positive and healthy cashflow position, we are in an ideal situation
to implement the new strategic direction as well as position ourselves towards becoming a globally competitive ICT Security
company. Hence, we appreciate and look to your continuous support and loyalty in this re-invention so that in the journey
ahead, we could better manage ourselves in overcoming challenges.

It is also worthy to note that whilst attaining the Group’s goals and objectives, we have never forgotten our responsibilities
towards the communities, especially the underprivileged. It is my aim that we should continue participating in the
communities via our corporate social responsibility programs. At the same time, we must ensure and safeguard your interests
as shareholders. As such, the Group takes this opportunity to reaffirm its commitment towards practicing good corporate
governance.

I would also like to take this opportunity to affirm my personal commitment in steering SCAN to a better position and
accelerating the implementation of the new strategic plan.

In conclusion, allow me to record my utmost appreciation and thank you to the Board of Directors for their guidance and
support; to my Management Team for being team players and their dedication to the Company; and to the employees of
the Group for their commitment and hard work, and to my lovely wife and family for their love and sacrifices.

Last but not least, to you, our shareholders, I personally thank you for your support, faith and trust in the Group.

Thank you.


aminuddin baki @ sabtu bin esa
Group Chief Executive Officer




                                                            
                                                    Annual Report 2006
stateMent On COrpOrate GOvernanCe


The Board acknowledges the importance of practising good corporate governance and is fully committed to the principles
of the Malaysian Code on Corporate Governance as well as the relevant provisions of the Bursa Malaysia Securities Berhad’s
Requirements.

The Board will ensure that the highest standard of corporate governance is practised throughout the Group in discharging
its responsibilities to protect and enhance shareholders value, protecting the interest of the minority shareholders as well
as managing the financial performance of the Group.


prinCiple stateMent

The Board is pleased to provide the following statements which set out how the Group will adopt the principle of self-
regulation which adheres closely to the Code.

board of Directors

i.	     The	Board

        The Group is led by experience Board members with high personal integrity, wide mix of knowledge, business
        acumen, management skills and industry expertise from various backgrounds. The Board takes overall responsibility
        for the strategic direction by identifying principle risks associated in running the business; and control of the Group
        by ensuring that appropriate systems are being implemented to manage such risks.

ii.	    Board	Balance

        The Board consists of eight (8) Directors; of which two (2) are Executive Directors, two (2) are Independent Non-Executive
        Directors, two (2) are Non-Independent Non-Executive Directors and two (2) are Alternate Directors.

        The Board exercises full control over the Group and monitors the management. The Executive Directors take overall
        responsibilities for the day-to-day operations of the Group and the implementation of the Board’s policies and
        decisions. The presence of Independent Non-Executive Directors added element of check and balance and play the
        central role of incorporating accountability by providing objective and independent views to the decision making
        process of the Board.

iii.	   Board	Committees

        The Board delegates specific responsibilities to Board Committees, namely Audit Committee, Nomination Committee,
        Remuneration Committee and Investment Committee so as to enhance business, operational and administration
        efficiency and effectiveness.

        The members of the committees would appoint the Chairman of the various committees. These committees have the
        authority to examine particular issues and report to the Board with recommendations. The ultimate responsibility for
        final decision on all matters rest with the Board.

        a.    Audit Committee

              Details of the Audit Committee are set out on pages 27 to 28 of this Annual Report.

        b.    Nomination Committee

              The Nomination Committee is responsible for recommending candidates for appointment as new Directors
              and Board member. The committee will also assess the effectiveness of the Board and Board committees.

              The committee members are:

              lt. Gen. (r) raja Dato’ abdul rashid bin raja badiozaman – Chairman
              Dato’ nasri bin nasrun
              raja shamsul Kamal bin raja shahruzzaman




                                                            
                                                   SCAN Associates Berhad
stateMent On COrpOrate GOvernanCe



             Primary duties, amongst others, are to assess and review the Board composition to ensure that it has suitable
             skills balance, experiences and expertise among the Board member and recommend to the Board, candidate
             for directorships and on Board Committees.

       c.    Remuneration Committee

             The Remuneration Committee is responsible for developing the remuneration policy for Executive Directors
             for the Board approval. The committee will also recommend remuneration packages and terms of employment
             of Executive Directors.

             The committee members are:

             lt. Gen. (r) raja Dato’ abdul rashid bin raja badiozaman – Chairman
             prof. Dato’ Dr. norbik bashah bin idris
             raja shamsul Kamal bin raja shahruzzaman

             The Remuneration Committee will gather comparative information on remuneration and conditions for services
             of comparable entity and review its directors’ fees of their competitiveness.

       d.    Investment Committee

             The Investment Committee is responsible for assessing the merits of Merger and Acquisition investments
             towards achieving the corporate objectives and thereafter recommending the same for Board approval. The
             committee of five (5) members is headed by Raja Shamsul Kamal bin Raja Shahruzzaman as the Chairman. The
             other committee members comprises of three (3) Board members and one (1) key management member of
             the Company.

iv.	   Board	Meetings

       During the financial year ended 31 December 2006, the Company held five (5) Board Meetings, four (4) meetings
       were conducted prior to listing while one (1) meeting was convened after the Company is listed. At these meetings,
       there were full financial and business review and discussion including trading performance to-date against the annual
       budget and financial plan previously approved by the Board.

       Details of Directors’ attendance are as follows:

       name of Director                                              Designation                      Meetings attended
       Datuk Ir. Mohamed Al Amin                                Chairman/ Independent                                  4/5
        bin Abdul Majid                                         Non-Executive Director
       Lt. Gen. (R) Raja Dato’ Abdul Rashid                 Deputy Chairman/Independent                                4/5
         bin Raja Badiozaman                                   Non-Executive Director
       Aminuddin Baki @ Sabtu bin Esa                           Chief Executive Officer/                               5/5
                                                                  Executive Director
       Prof. Dato’ Dr. Norbik Bashah bin Idris            Technical Director/Executive Director                        4/5
       Dato’ Nasri bin Nasrun                        Non-Independent Non-Executive Director                            5/5
       Raja Shamsul Kamal                            Non-Independent Non-Executive Director                            4/5
        bin Raja Shahruzzaman
       or his alternate Mohd Jafni
        bin Mohd Alias

v.	    Supply	of	Information

       Directors are provided with sufficient notices for each Board meeting and Board papers are distributed prior to the
       meetings to enable the Directors to review and consider the agenda items that will be discussed in the Board meeting.
       Items in the agenda cover areas of strategic, financial, operational and regulatory compliance matters. The issues are
       then deliberated and discussed thoroughly by the Board before decisions are made.




                                                            
                                                    Annual Report 2006
stateMent On COrpOrate GOvernanCe


        The Chairman ensures that the Board has unrestricted access to timely and accurate information in carrying out
        their duties. The Board is always given access to seek advice and services of the Company Secretary for independent
        professional advice.

vi.	    Directors’	Training

        As of the date of this report, all Directors have attended the Mandatory Accreditation Programme (MAP) prescribed
        by Bursa Malaysia Securities Berhad except for one (1) Alternate Director who is scheduled to attend the MAP in May
        2007.

vii.	   Appointment	to	the	Board

        There is a formal and transparent procedure carried out for the appointment of new Directors to the Board. The Board
        consistently review the performance of its existing Directors as well as appointing new Directors, should the need
        arises. The Board itself functions as a Nomination Committee. During the financial year ended 31 December 2006,
        two (2) Alternate Directors i.e. Mohd Jafni bin Mohd Alias and Shaharil bin Abdul Malek, have been appointed to the
        Board of Directors.

viii.	 Re-election

        The Company’s Article of Association provides that one third (1/3) of the Directors, shall retire at least once in three
        (3) years and the retiring Director shall be eligible for re-election.

relation with shareholders and investors

Shareholders and investors are important constituents of the Group. The Group values the dialogue sessions between the
Group and its investors in order for them to have the clearest and most complete information of the Group’s performance and
financial position. Such information is communicated through the means of the Group’s annual reports, various disclosures
to Bursa Malaysia Securities Berhad, research papers and announcements made from time to time. Regular discussions were
also held between senior management and shareholders, selected investment analyst and investors.

The forthcoming Annual General Meeting (“AGM”) is the Group’s first AGM as a listed company. This provides the opportunity
for shareholders to raise any concern they may have on the Annual Report, Audited Financial Statements and corporate
developments in the Group, the resolutions being proposed and/or on the business of the Group. Shareholders who are
unable to attend are allowed to appoint proxies to attend and vote on their behalf. Members of the Board and the Auditor
of the Company will also be present to answer questions raised at the meeting.

accountability and audit

i.	     Financial	Reporting

        It is the aim of the Board that the financial reporting presents a balanced and meaningful assessment of the Group’s
        financial position and prospect primarily through its annual financial statements and quarterly financial results to
        its shareholders.

        In the preparation of the financial statements, the Group used appropriate accounting policies that are consistently
        apply and supported by reasonable judgments and estimates.

        The quarterly results were reviewed and approved by the Board before its release to Bursa Malaysia Securities
        Berhad.

ii.	    Internal	Control

        The Directors acknowledge their responsibility for the Group’s system of internal controls covers not only financial
        controls but include operational, compliance controls and risk management.

        The Statement of Internal Control furnished on page 29 of this Annual Report provides an overview of the state on
        internal controls within the Group.




                                                           
                                                  SCAN Associates Berhad
stateMent On COrpOrate GOvernanCe



iii.	   Relationships	with	Auditors

        The Company has always maintained a professional relationship with the Company’s external auditors towards
        ensuring compliance with the relevant accounting standards in Malaysia.

        The role of the Audit Committee in relation to the external auditors is described in the Audit Committee report as set
        out on pages 27 to 28 of this Annual Report.


DireCtOrs’ reMuneratiOn

All the Non-Executive Directors received fixed monthly fees. There was no meeting allowance paid during the financial
year.

The Directors are satisfied that the current level of remuneration is in line with the responsibilities expected in the Group.
The aggregate remuneration packages of the directors for the financial year ended 31 December 2006 are as follows:

                                                      salaries &     bonuses &          employer        benefits
Category                                   fees      allowances      incentives    provident fund        in Kind       total
                                         rM’000          rM’000         rM’000            rM’000        rM’000       rM’000

Executive Directors                            –               406           86                   74           18         584
Independent Non-Executive                     48                 –            –                    –            –          48
  Directors
Non-Independent Non-Executive                 48                 –             –                   –            –          48
  Directors

Total                                         96               406           86                   74           18         680



                                                   executive              independent                   non-independent
range of remuneration                              Directors    non-executive Directors            non-executive Directors

Below RM50,000                                             –                             2                                  2
RM50,001 – RM100,000                                       –                             –                                  –
RM100,001 – RM150,000                                      –                             –                                  –
RM150,001 – RM200,000                                      1                             –                                  –
RM200,001 – RM250,000                                      –                             –                                  –
RM250,001 – RM300,000                                      –                             –                                  –
RM300,001 and above                                        1                             –                                  –


stateMent Of COMplianCe with the best praCtiCes Of the CODe

This Statement on Corporate Governance is made in accordance with the resolution of the Board of Directors dated 15 May
2007.

The Directors of the Company are required to ensure that the financial statements for each financial year are properly drawn up
in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards in Malaysia
so as to give a true and fair view of the state of affairs of the Group and the Company as at end of the financial year.

The Directors are satisfied that in preparing the financial statements of the Group for the year ended 31 December 2006, the
Group had used appropriate accounting policies and applied them consistently, prudently and reasonably. The Directors also
considers that all applicable approved accounting standards are adhered to in the preparation of the financial statement.

The Directors have general responsibilities for taking such steps that are reasonably available to them to safeguard the
assets of the Group and to prevent and detect fraud and other irregularities.




                                                             
                                                     Annual Report 2006
aDDitiOnal COMplianCe infOrMatiOn


status of utilisation of listing proceeds

The status of utilisation of proceeds from the Rights Issue and Public Issue as at 31 March 2007 are as follows:

                                                                         total amount              amount            amount
                                                                          of proceeds      utilised to date        unutilised
                                                                               rM’000              rM’000            rM’000

Development expenditure                                                         13,000                 (964)          12,036
Overseas projects implementation                                                 3,500               (1,362)           2,138
Overseas expansion                                                               5,000                 (767)           4,233
Working capital                                                                  3,970               (3,970)               –
Listing expenses                                                                 1,875               (1,875)*              –

Total                                                                           27,345               (8,938)          18,407

*       The actual listing expenses amounted to RM2,017,988. The additional amount of RM142,988 was utilised from internally
        generated fund.

share buyback

During the financial year, the Company did not enter into any share buyback transactions.

Option or warrants

There were no Options or Warrants in issue during the financial year.

american Depository receipt (“aDr”) or Global Depository receipt (“GDr”) programme

During the financial year, the Company did not sponsor any ADR and GDR programme.

impositions of sanctions and penalties

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

non-audit fees

The amount of non-audit fees paid to the external auditors by the Group for the financial year amounting to RM1,642.00

profit estimates, forecast or projection

The Directors have voluntarily disclosed the consolidated profit forecast for the Group for the financial year ended 31
December 2006 on the Company’s prospectus dated 30 August 2006. The actual audited consolidated profit after taxation
and minority interest for the financial year was RM 10.667 million against the forecast of RM 10.001 million.

profit Guarantee

The Company did not issue any profit guarantee during the financial year.

Material Contract involving Directors and Major shareholders

There are no material contracts involving Directors and major shareholders during the financial year.

recurrent related party transactions of a revenue or trading nature

Details of Recurrent Related Party Transactions of a Revenue or Trading Nature is disclosed in Note 28 to the Financial
Statement on page 63.

revaluation policy

The Company did not revalue any of its property, plant and equipment.



                                                          
                                                 SCAN Associates Berhad
auDit COMMittee repOrt



The Board of Directors had, on 13 April 2006 approved the establishment of The Audit Committee to assist the Board to
fulfill their responsibilities of overseeing and reviewing the adequacy and integrity of the financial reporting process, the
system of internal control, the audit process and the Company or Group’s process for monitoring compliance with the laws
and regulations, code of conduct and best practices in corporate governance.

The Audit Committee comprises of three (3) members as follows:                                                 number of
                                                                                                        Meetings attended

Chairman:      lt. Gen. (r) raja Dato’ abdul rashid bin raja badiozaman                                                   1/1
               - Independent Non-Executive Director

Members:       Datuk ir. Mohamed al amin bin abdul Majid                                                                  1/1
               - Independent Non-Executive Director

               Dato’ nasri bin nasrun                                                                                     1/1
               - Non-Independent Non-Executive Director


terms of reference

1.	   Composition

      The Committee shall consist of at least three (3) members and not more than six (6) members from the Board. At
      least one member shall be well-versed and familiar in the financial field and preferably be a member of the Malaysian
      Institute of Accountants.

2.	   Chairman

      The Chairman shall be nominated by the Committee members.

3.	   Secretary

      The Secretariat of the Audit Committee is the Internal Audit Unit of the Company and shall be responsible, in conjunction
      with the Chairman, for drawing up the agenda and circulating it prior to each meeting.

      The Secretary shall also be responsible for keeping the minutes of the Committee and circulating them to the
      Committee members.

4.	   Meetings

      The Committee will meet as least four times in a year, with authority to convene additional meetings, as circumstances
      require. The quorum for a meeting shall be two (2) members, provided that the majority of the members present at
      the meeting shall be independent.

      The Committee can invite members of management, auditors or other related parties to the meetings to provide
      pertinent information, as necessary.

5.	   Rights	and	Authority

      The Committee has the authority to carry out or authorize investigations into any matters within its scope of
      responsibilities. It is empowered to:

      i.     Appoint, compensate, retain and oversee the work of any registered public accountant firm engaged by the
             Company or Group.

      ii.    Resolve any disagreement between management and auditors regarding financial reporting.




                                                           7
                                                   Annual Report 2006
auDit COMMittee repOrt


      iii.   Pre-approved all auditing and non-auditing activities to be carried out by the Internal Audit Unit.

      iv.    Appoint independent counsel, accountants or others to advise or assist the Committee in the course of
             investigation.

      v.     Seek any information required from external parties or employees/management.

      vi.    Meet with Company officers, external auditors, or outside counsels, as and when necessary.

6.	   Duties	and	Responsibilities

      The duties and responsibilities of the committee shall be:

      i.     Review the financial statements to ensure that the financial statements are prepared in accordance with the
             generally accepted accounting practices.

      ii.    Review the quarterly interim results, half yearly and the annual financials prior to filing with the regulators.

      iii.   Consider the effectiveness of the internal control systems.

      iv.    Propose system of risk management for safeguarding of company’s assets.

      v.     Review the internal audit program and results from the internal audit process.

      vi.    Review the external auditors’ proposed audit scope of works, including coordination of works with internal
             auditor.

      vii.   Review the effectiveness of the system of monitoring compliance with laws and regulations.


summary of activities of the audit Committee

The activities of the Audit Committee during the financial year were as follows:

1.    Reviewed the quarterly financial results announcements of the Group prior to the Board of Directors’ approval and
      releasing of the same to Bursa Malaysia Securities Berhad.

2.    Reviewed the audited financial results for the financial year ended 31 December 2006 prior to Board of Directors’
      approval and releasing the same to Bursa Malaysia Securities Berhad.

3.    Discussed and adopted the Internal Audit Charter and Terms of Reference.

4.    Discussed and approve the internal audit plan for the financial year ended 31 December 2007.


internal audit function

The internal audit function is undertaken by an Internal Audit Unit. The main task of this unit is to review the effectiveness of
the system of internal control in accordance with internal audit program that has been approved by the Audit Committee.




                                                           
                                                  SCAN Associates Berhad
stateMent Of internal COntrOl



The Board understands the importance of Malaysian Code of Corporate Governance and is pleased to present this Statement
of Internal Control of the Company and its subsidiaries (“the Group”) for the financial year ended 31 December 2006 with
respect to the state, nature and scope of the internal control of the Group during the financial year.

bOarD respOnsibilitY

The Board is responsible for the Group’s system of internal control which include the establishment of an appropriate control
environment and framework and for reviewing its adequacy and integrity. The Board ensures that the Management maintains
a sound system of internal controls and effective risk management policies to safe guard shareholders’ investments and
the Group’s assets.

The responsibility for reviewing the adequacy and integrity of the internal control system has been delegated to the Audit
Committee. The Committee obtains the assurance of the adequacy and integrity of the internal control system through
independent reviews conducted by the internal audit function, external auditors and Management.

The Board believes because of the inherent limitation in any system of internal control, it is not possible to eliminate entirely the
risk that may prevent the Group from achieving its business objectives but rather manage the risk within the Group acceptable
risk limit. The system, by its nature, can only give reasonable but not absolute assurance against any material misstatement
or loss due to material errors, poor decision-making judgement, human errors, losses, fraud or other irregularities.

The key elements of the Group Internal Control are:

•      Clearly defined delegation of responsibilities of the Board, Committee and Management of the Group including level
       of authorisation;

•      Clearly documented internal procedures for some identified critical processes;

•      Detailed budgeting process whereby subsidiary company prepares budgets for the coming year which are approved
       by their respective Board and endorsed by the Board of SCAN Associates;

•      Regular and comprehensive information provided to Board of Directors and Management, covering operational and
       financial performance;

•      Monitoring actual results against budget on a monthly basis. Significant variances are investigated and followed up,
       and if necessary, management actions are taken;

•      The certification programs i.e. Information Security Management System (ISMS) and Quality Management System
       (QMS), undertaken by the Company added credibility to the internal processes and further enhanced the system of
       internal control; and

•      Ongoing efforts for process improvement with aim for achieving the Company’s Mission Statement.

The Board recognises that the management of principal risks plays an important and integral role towards the achievement of
the Group’s corporate objectives which may have impact on the Group’s daily operations. As such, the Board is in the process
of establishing a risk management approach to identify the risk areas, the likelihood of such occurrence, the consequences
and the action plan to mitigate those risks. The risk management process would be an ongoing practice and is subject to
regular review by the Board.


internal auDit

The Audit Committee was established to assist and provide the Board with reasonable assurance in discharging their
responsibilities. Since listing, the Audit Committee has met twice and recommended to the Board on establishing an in-
house Internal Audit Unit. The Board has approved the Internal Audit Charter, Internal Audit Terms of Reference and Audit
Plan. Henceforth, the Audit Committee will convene quarterly meeting to advise the Board on findings and improvements
of the internal controls of the Group.


COnClusiOn

The Board is of the view that there is no significant weakness in the system of internal control of the Group for the financial
year ended 31 December 2006. Notwithstanding that, the Board will strive to continue taking the necessary measures to
strengthen its internal control system.


                                                              
                                                      Annual Report 2006
stateMent On DireCtOrs’ respOnsibilitY


The Directors are responsible for ensuring that the financial statements of the Group and the Company are drawn up in
accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so
as to give a true and fair view of the state of affairs of the Group and the Company at the financial year end and of the results
and cash flows of the Group and Company for the financial year.

In preparing the financial statements for the year ended 31 December 2006, the Directors have:

•     Adopted suitable accounting policies and applied them consistently;

•     Made judgements and estimates that are reasonable and prudent;

•     Ensure adoption of applicable approved accounting standards; and

•     Prepared the financial statements on a going concern basis, as the Board has reasonable expectations that the Group
      and Company have adequate resources to continue in operational existence for foreseeable future.

The Directors are responsible for ensuring that the Group and Company maintain proper accounting records that disclose
with reasonable accuracy the financial position of the Group and the Company, and which enables them to ensure that the
financial statements comply with the Companies Act, 1965.

The Directors also have the general responsibilities for taking such steps that are reasonably available to them to safeguard
the assets of the Group and the Company, and to prevent and detect fraud and other irregularities.

This statement is made in accordance with a resolution of the Board of Directors dated 23 April 2007.




                                                           0
                                                  SCAN Associates Berhad
finanCial stateMents




         DIRECTORS’ REPORT                             32

         STATEMENT BY DIRECTORS                        36

         STATUTORY DECLARATION                         36

         REPORT OF THE AUDITORS                        37

         CONSOLIDATED BALANCE SHEET                    38

         CONSOLIDATED INCOME STATEMENT                 39

         CONSOLIDATED STATEMENT OF CHANGES IN EQUITY   40

         CONSOLIDATED CASH FLOW STATEMENT              41

         BALANCE SHEET                                 42

         INCOME STATEMENT                              43

         STATEMENT OF CHANGES IN EQUITY                44

         CASH FLOW STATEMENT                           45

         NOTES TO THE FINANCIAL STATEMENTS             46
DireCtOrs’ repOrt


The Directors have pleasure in presenting their report together with the audited financial statements of the Group and of
the Company for the financial year ended 31 December 2006.


prinCipal aCtivities

The principal activities of the Company are providing information and communications technology (ICT) security solutions.
The principal activities of the subsidiary companies are described in Note 10 to the financial statements. There have been
no significant changes in the nature of these activities during the financial year.


results

                                                                                                    Group         Company
                                                                                                       rM             rM

Profit for the financial year                                                                    10,667,325      10,956,672

Attributable to:
Equity holders of the Company                                                                    10,667,325      10,956,672


DiviDenDs

The amount of dividends paid and proposed since the end of previous financial year were as follows:

                                                                                                                         rM

In respect of the financial year ended 31 December 2005 and paid on 19 May 2006                                    1,600,000


reserves anD prOvisiOn

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


issue Of shares anD Debentures

During the financial year, the following shares were issued:

  Date of             purpose of                Class of         number of
    issue                  issue                  share             shares          par value                 terms of issue

 9.5.2006             Bonus Issue       Ordinary shares           8,570,000               1.00              Other than cash
                                                                                                     (utilisation of reserve)

19.5.2006             Rights Issue      Ordinary shares           2,095,000               1.00                         Cash

3.10.2006             Public Issue      Ordinary shares          50,500,000               0.10                         Cash

The new ordinary shares issued during the financial year rank pari-passu in all respect with the existing ordinary shares of
the Company.

There were no debentures issued during the financial year.




                                                         
                                                SCAN Associates Berhad
DireCtOrs’ repOrt



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:

Aminuddin Baki @ Sabtu bin Esa
Prof. Dato’ Dr. Norbik Bashah bin Idris
Datuk Ir. Mohamed Al Amin bin Abdul Majid
Dato’ Nasri bin Nasrun
Lt. Gen (R) Raja Dato’ Abdul Rashid bin Raja Badiozaman
Raja Shamsul Kamal bin Raja Shahruzzaman
Mohd Jafni bin Mohd Alias                                                                    (Resigned and reappointed as
  (Alternate Director to Raja Shamsul Kamal bin Raja Shahruzzaman)                             alternate Director on 2.6.2006)
Shaharil bin Abdul Malek                                                                     (Appointed on 2.6.2006)
  (Alternate Director to Prof. Dato’ Dr. Norbik Bashah bin Idris)


DireCtOrs’ interest

In accordance with Article 88 of the Company’s Articles of Association, Dato’ Nasri bin Nasrun and Aminuddin Baki @ Sabtu
bin Esa retire at the forthcoming Annual General Meeting and being eligible, offer themselves for re-election.

According to the Register of Directors’ Shareholdings, the beneficial interests of those who were Directors at the end of
financial year in the shares of the Company were as follows:-

                                                                     number of ordinary shares of rM0.0 each
                                                               balance as                                 balance as
                                                                      at*                                        at*
                                                                ..00      bought*           sold*    ..00
Direct interest

Aminuddin Baki @ Sabtu bin Esa                                          –       62,311,700        14,520,000      47,791,700
Prof. Dato’ Dr. Norbik Bashah bin Idris                        11,000,000       27,378,060        10,350,000      28,028,060
Datuk Ir. Mohamed Al Amin bin Abdul Majid                               –          125,000                 –         125,000
Raja Shamsul Kamal bin Raja Shahruzzaman                                –          125,000            66,000          59,000
Mohd Jafni bin Mohd Alias                                               –          125,000           109,000          16,000
Shaharil bin Abdul Malek                                        1,000,000        2,488,910           972,000       2,516,910


*     On 19 May 2006, the Company had sub-divided the nominal value of its shares from RM1.00 each to RM0.10 each.
      The number of shares as at 1 January 2006 has been sub-divided into number of shares of RM0.10 each to facilitate
      the calculation of number of shares held by the Directors during the financial year ended 31 December 2006.

By virtue of Prof. Dato’ Dr. Norbik Bashah bin Idris direct interest in the shares of the Company, he is also deemed to have
interest in the shares of all the subsidiary companies to the extent that the Company has an interest under Section 6A of
the Companies Act, 1965.

No other Directors at the end of the financial year held interest in shares of the Company and its related corporations during
the financial year.


DireCtOrs’ benefits

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or
objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of
the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than as
disclosed in Note 30 to the Financial Statements) by reason of a contract made by the Company or a related corporation
with the Director is a member, or with a company in which the Director has a substantial financial interest.




                                                           
                                                   Annual Report 2006
DireCtOrs’ repOrt


infOrMatiOn On the finanCial stateMents

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps:-

i)     to ascertain that 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 there were no bad debts to be written off and no allowance for doubtful
       debts was required; and

ii)    to ensure that any current assets which were unlikely to be realised in the ordinary course of business including their
       values as shown in the accounting records of the Group and of the Company have been written down to an amount
       which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:-

i)     which would render it necessary to write off any bad debts or to make any allowance for doubtful debts in the financial
       statements of the Group and of the Company; or

ii)    which would render the values attributed to current assets in the financial statements of the Group and of the Company;
       or

iii)   which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group
       and of the Company misleading or inappropriate.

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, in the opinion of the Directors, will or may affect the ability of the Group
and of the Company to meet its obligations as and when they fall due.

At the date of this report, there does not exist:-

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

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


Other statutOrY infOrMatiOn

The Directors state that:

At the date of this report, they are not aware of any circumstances not otherwise dealt with in this report or the financial
statements which would render any amount stated in the financial statements misleading.

In the opinion of the Directors:-

(i)    the results of 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;

(ii)   there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction
       or event of a material and unusual nature likely to affect substantially the results of operations of the Group and of
       the Company for the current financial year in which this report is made.


siGnifiCant event

The significant event during the financial year is disclosed in Note 32 to the financial statements.




                                                              
                                                     SCAN Associates Berhad
DireCtOrs’ repOrt



auDitOrs

The auditors, Messrs. Khairuddin, Hasyudeen & Razi, have expressed their willingness to continue in office.




Signed on behalf of the Board in accordance with a resolution of the Directors, dated 23 April 2007.




aMinuDDin baKi @ sabtu bin esa
Director




prOf. DatO’ Dr. nOrbiK bashah bin iDris
Director


Kuala Lumpur




                                                          
                                                  Annual Report 2006
stateMent bY DireCtOrs
PURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965

We aMinuDDin baKi @ sabtu bin esa and prOf. DatO’ Dr. nOrbiK bashah bin iDris, being two of the Directors
of SCAN ASSOCIATES BERHAD, do hereby state that, in the opinion of the Directors, the accompanying financial statements
set out on pages 38 to 68 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable MASB
approved accounting standards in Malaysia for Entities Other Than Private Entities so as to give a true and fair view of the
state of affairs of the Group and of the Company as at 31 December 2006 and of the results, the changes in equity and the
cash flows of the Group and of the Company for the financial year ended on that date.


Signed on behalf of the Board in accordance with a resolution of the Directors dated 23 April 2007




aMinuDDin baKi @ sabtu bin esa                                       prOf. DatO’ Dr. nOrbiK bashah bin iDris
Director                                                             Director




statutOrY DeClaratiOn
PURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965

I, aMinuDDin baKi @ sabtu bin esa, being the Director primarily responsible for the financial management of SCAN
ASSOCIATES BERHAD, do solemnly and sincerely declare that to the best of my knowledge and belief, the accompanying
financial statements set out on pages 38 to 68 are 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, 1960.


Subscribed and solemnly declared by                     )

aMinuDDin baKi @ sabtu bin esa                          )

at Kuala Lumpur in the                                  )

Federal Territory on 23 April 2007                      )
                                                                         aMinuDDin baKi @ sabtu bin esa


Before me,


pesuruhjaya sumpah
Mohd Khir b a. razak
w 0




                                                         
                                                SCAN Associates Berhad
repOrt Of the auDitOrs
TO THE MEMBERS OF SCAN ASSOCIATES BERHAD



We have audited the financial statements set out on pages 38 to 68 of SCAN ASSOCIATES BERHAD.

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 are properly drawn up in accordance with the provisions of the Companies Act, 1965 and
      applicable MASB approved accounting standards in Malaysia, for Entities Other Than Private Entities so as to give a
      true and fair view of:

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

      (ii)   the state of affairs of the Group and of the Company as at 31 December 2006 and of the results and the cash
             flows of the Group and of the Company for the financial year ended on that date;

and

(b)   the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company
      and by the 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’ reports thereon of the subsidiaries of which we have not
acted as auditors, as indicated in Note 10 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 material to the
consolidated financial statements and did not include any comment required to be made under Section 174(3) of the Act.




KhairuDDin hasYuDeen & raZi                                        ahmad shahrul hj Mohamed
af                                                             /0/0(J)
Chartered accountants                                              partner of the firm


Kuala Lumpur
Dated: 23 April 2007




                                                          7
                                                  Annual Report 2006
COnsOliDateD balanCe sheet
AS AT 31 DECEMBER 2006

                                                                            nOte        00          2005
                                                                                         rM            RM
finanCeD bY:

sharehOlDers’ eQuitY

Share capital                                                                  7   0,000,000     4,285,000
Share premium                                                                      ,,0             –
Other reserves                                                                        (,)      (28,283)
Retained earnings                                                                  ,0,0    16,157,727

                                                                                   ,0,    20,414,444


lOnG terM liabilitY
Borrowings                                                                     8    ,77,      285,827

                                                                                   ,0,    20,700,271


nOn-Current assets
Property, plant and equipment                                                  9    ,,     2,565,187
Development expenditure                                                       11            –             –
Fixed deposits with licensed banks                                            12    ,,     4,853,597
Other assets                                                                          07,       216,166

                                                                                   ,,     7,634,950


Current assets
Trade receivables                                                             13   ,0,77    11,534,940
Amount due from customers for contract work                                   14            –       349,747
Work-in-progress                                                                      ,707             –
Other receivables                                                             15    ,,7     2,479,958
Fixed deposits with licensed banks                                            12   ,7,7     4,023,361
Cash and bank balances                                                              ,0,       287,248

                                                                                   ,0,7    18,675,254


Current liabilities
Trade payables                                                                17    ,0,       122,255
Other payables                                                                18    ,0,0     1,708,115
Provision                                                                     19    ,,     1,402,475
Amount due to directors                                                       20       ,        15,230
Borrowings                                                                     8    ,,7       622,422
Tax payable                                                                            ,7       139,436
Dividends payable                                                                           –     1,600,000

                                                                                    ,70,0     5,609,933


net Current assets                                                                 ,,7    13,065,321

                                                                                   ,0,    20,700,271



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




                                                       
                                              SCAN Associates Berhad
COnsOliDateD inCOMe stateMent
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



                                                                            nOte         00          2005
                                                                                          rM            RM

Revenue                                                                       21   ,07,00     25,980,496

Cost of sales                                                                 22   (,7,0)   (9,157,328)

Gross profit                                                                       ,0,     16,823,168

Other income                                                                  23      ,       265,843

Administrative expenses                                                             (,07,7)   (7,827,580)

Other operating expenses                                                                     –      (500,000)

Profit from operations                                                             0,,77      8,761,431

Finance costs                                                                 24     (,)       (87,940)

Profit before taxation                                                        25   0,7,      8,673,491

Taxation                                                                      26      0,00       207,497

Profit for the financial year                                                      0,7,      8,880,988


Attributable to:
Equity holders of the Company                                                      0,7,      8,883,377
Minority interest                                                                           –         (2,389)

                                                                                   0,7,      8,880,988

earnings per share attributable to equity
holders of the Company (sen):

Basic, for profit for the financial year                                                  .          6.91

Diluted, for profit for the financial year                                                .          6.91



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




                                                        
                                                Annual Report 2006
COnsOliDateD stateMent Of ChanGes in eQuitY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

                                                     attributable to equity holders of the Company                Minority        total
                                                           non-Distributable         Distributable                interests      equity

                                                                Capital
                                         share        share redemption        Other     retained                                  total
                                        capital    premium      reserve     reserve     earnings          total                  equity
                                           rM           rM          rM          rM           rM             rM         rM           rM

Balance as at 1 January 2005          4,285,000           –         5,000         –     8,874,350 13,164,350          2,389 13,166,739
Foreign currency translation                  –           –             –   (33,283)            –     (33,283)            –    (33,283)
Minority interest written back                –           –             –         –         2,389       2,389        (2,389)         –
Profit for the financial year                 –           –             –         –     8,880,988   8,880,988             – 8,880,988
Dividend                                      –           –             –         –    (1,600,000) (1,600,000)            – (1,600,000)

Balance as at 31 December 2005        4,285,000           –         5,000   (33,283)   16,157,727    20,414,444          –    20,414,444

Issuance of shares
  - Bonus issue                       8,570,000          –         (5,000)      –      (8,565,000)         –             –             –
  - Rights issue                      2,095,000          –              –       –               –  2,095,000             –     2,095,000
  - Public issue                      5,050,000 20,200,000              –       –               – 25,250,000             –    25,250,000
  - Listing expenses                          – (2,017,988)             –       –               – (2,017,988)            –    (2,017,988)
Foreign currency translation                  –          –              – (58,240)              –    (58,240)            –       (58,240)
Profit for the financial year                 –          –              –       –      10,667,325 10,667,325             –    10,667,325

Balance as at 31 December 2006       20,000,000 18,182,012             –    (91,523)   18,260,052    56,350,541          –    56,350,541



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




                                                           0
                                                  SCAN Associates Berhad
COnsOliDateD Cash flOw stateMent
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



                                                                                 00           2005
                                                                                  rM             RM
Cash flOws frOM OperatinG aCtivities

Cash receipts from customers                                                7,7,0    28,129,416
Cash payments to suppliers                                                  (,0,)   (8,788,424)
Cash payments to employees and for administrative expenses                 (,777,)   (9,574,441)

Cash generated from operations                                                0,0      9,766,551

Other income received                                                          7,       260,843
Tax paid                                                                       (7,7)            –
Interest paid                                                                  (,)      (69,407)
Dividend paid                                                               (,00,000)            –
(Placement)/Withdrawal of fixed deposits                                    (,,7)    2,189,324

Net cash (used in)/generated from operating activities                      (,,)   12,147,311


Cash flOws frOM investinG aCtivities

Purchase of property, plant and equipment                                   (,0,)    (1,320,234)
Proceeds from disposal of property, plant and equipment                          ,          5,278
Advances from Directors                                                         ,          6,076

Net cash used in investing activities                                       (,0,)    (1,308,880)


Cash flOws frOM finanCinG aCtivities

Repayment to hire purchase liabilities                                       (,7)       (291,198)
Repayment of term loans                                                    (,,)    (10,892,512)
Drawdown of term loan                                                       ,0,7               –
Proceed from issuance of share capital                                     7,,000               –

Net cash provided by/(used in) financing activities                        ,7,0     (11,183,710)

net increase/(decrease) in cash and cash equivalents                       ,0,0       (345,279)

Cash and cash equivalents brought forward                                   ,0,0      4,655,888

Cash and cash equivalents carried forward                                  ,0,0      4,310,609

Cash anD Cash eQuivalents
Cash and bank balances                                                      ,0,        287,248
Fixed deposits with licensed banks                                         ,7,7      4,023,361

                                                                           ,0,0      4,310,609




                                                              
                                                      Annual Report 2006
balanCe sheet
AS AT 31 DECEMBER 2006

                                                                            nOte        00         2005
                                                                                         rM           RM
finanCeD bY:
sharehOlDers’ eQuitY
Share capital                                                                  7   0,000,000    4,285,000
Share premium                                                                      ,,0            –
Other reserves                                                                              –        5,000
Retained earnings                                                                  ,7,   17,195,469

                                                                                   7,7,   21,485,469


lOnG terM liabilitY
Borrowings                                                                     8    ,,     285,827

                                                                                   ,,7   21,771,296


nOn-Current assets
Property, plant and equipment                                                  9    ,,    2,430,306
Investments in subsidiaries                                                   10      7,0      376,202
Development expenditures                                                      11            –            –
Fixed deposits with licensed banks                                            12    ,7,    4,464,106

                                                                                   ,0,    7,270,614


Current assets
Trade receivables                                                             13   ,,   11,534,940
Amount due from customers for contract work                                   14            –      349,747
Work-in-progress                                                                      ,707            –
Other receivables                                                             15    ,00,7    2,330,765
Amount due from subsidiaries                                                  16    ,,    1,200,226
Fixed deposits with licensed banks                                            12   ,7,7    4,023,361
Cash and bank balances                                                              ,,0      241,740

                                                                                   ,,   19,680,779


Current liabilities
Trade payables                                                                17    ,0,      122,255
Other payables                                                                18    ,,77    1,667,770
Provision                                                                     19    ,,    1,402,475
Amount due to directors                                                       20       ,       15,230
Borrowings                                                                     8      ,7      232,931
Tax payable                                                                            ,7      139,436
Dividends payable                                                                           –    1,600,000

                                                                                    ,07,    5,180,097


NET CURRENT ASSETS                                                                 7,,   14,500,682

                                                                                   ,,7   21,771,296



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




                                                       
                                              SCAN Associates Berhad
inCOMe stateMent
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



                                                                            nOte         00          2005
                                                                                          rM            RM

Revenue                                                                       21   ,,     25,980,496

Cost of sales                                                                 22   (,,7)   (9,145,506)

Gross profit                                                                       ,7,0     16,834,990

Other income                                                                  23      ,7       265,505

Administrative expenses                                                             (,,)   (6,747,233)

Other operating expenses                                                                     –      (500,000)

Profit from operations                                                             0,7,      9,853,262

Finance costs                                                                 24       (,0)      (69,407)

Profit before taxation                                                        25   0,0,      9,783,855

Taxation                                                                      26       7,7         (8,669)

Profit for the financial year                                                      0,,7      9,775,186



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




                                                        
                                                Annual Report 2006
stateMent Of ChanGes in eQuitY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

                                                                 non-Distributable         Distributable

                                                                                Capital
                                                  share          share      redemption         retained
                                                 capital      premium           reserve        earnings          total
                                                    rM             rM               rM              rM             rM

Balance as at 1 January 2005                   4,285,000               –          5,000        9,020,283    13,310,283
Profit for the financial year                          –               –              –        9,775,186     9,775,186
Dividend                                               –               –              –       (1,600,000)   (1,600,000)

Balance as at 31 December 2005                 4,285,000               –          5,000       17,195,469    21,485,469

Issuance of shares
  - Bonus issue                                8,570,000              –          (5,000)      (8,565,000)            –
  - Rights issue                               2,095,000              –               –                –     2,095,000
  - Public issue                               5,050,000     20,200,000               –                –    25,250,000
  - Listing expenses                                   –     (2,017,988)              –                –    (2,017,988)
Profit for the financial year                          –              –               –       10,956,672    10,956,672

Balance as at 31 December 2006                20,000,000     18,182,012               –       19,587,141    57,769,153



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




                                                       
                                              SCAN Associates Berhad
Cash flOw stateMent
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



                                                                                 00           2005
                                                                                  rM             RM

Cash flOws frOM OperatinG aCtivities

Cash receipts from customers                                                7,0,    28,129,416
Cash payments to suppliers                                                  (,,)   (8,774,726)
Cash payments to employees and for administrative expenses                 (7,,7)   (7,910,349)

Cash generated from operations                                              ,,7     11,444,341

Other income received                                                                –       260,505
Tax paid                                                                        (,)            –
Interest received/(paid)                                                       ,7      (517,021)
Dividend paid                                                               (,00,000)            –
(Placement)/Withdrawal of fixed deposits                                    (,,00)    2,578,815

Net cash generated from operating activities                                  ,     13,766,640


Cash flOws frOM investinG aCtivities

Purchase of property, plant and equipment                                   (,77,0)    (1,162,196)
Proceeds from disposal of property, plant and equipment                          ,          5,278
Advances from directors                                                         ,          6,076

Net cash used in investing activities                                       (,,)    (1,150,842)

Cash flOws frOM finanCinG aCtivities

Repayment to hire purchase liabilities                                       (,7)       (291,198)
Repayment of term loans                                                      (,7)    (11,282,003)
Drawdown of term loan                                                       ,00,000               –
Proceed from issuance of share capital                                     7,,000               –
Advance to subsidiary companies                                            (,0,0)     (1,053,382)

Net cash provided by/(used in) financing activities                        ,0,0     (12,626,583)

net increase/(decrease) in cash and cash equivalents                       ,,         (10,785)

Cash and cash equivalents brought forward                                   ,,0      4,275,886

Cash and cash equivalents carried forward                                  ,,      4,265,101

Cash anD Cash eQuivalents
Cash and bank balances                                                      ,,0        241,740
Fixed deposits with licensed banks                                         ,7,7      4,023,361

                                                                           ,,      4,265,101




                                                              
                                                      Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

.   COrpOrate infOrMatiOn

     (a)   The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the
           MESDAQ Market of Bursa Malaysia Securities Berhad (Bursa Securities). The registered office of the Company is
           located at Level 8, Menara Naluri, 161-B, Jalan Ampang, 50450 Kuala Lumpur.

     (b)   The principal activities of the Company are providing information and communications technology (ICT)
           security solutions. The principal activities of the subsidiary companies are described in Note 10 to the financial
           statements. There have been no significant changes in the nature of these activities during the financial year.


.   basis Of preparatiOn Of the finanCial stateMents

     The financial statements comply with the provisions of the Companies Act, 1965 and applicable MASB Approved
     Accounting Standards in Malaysia for Entities Other Than Private Entities. At the beginning of the current financial
     year, the Group and the Company adopted new and revised FRSs which are mandatory for financial periods beginning
     on or after 1 January 2006 as described fully in Note 5.


.   Date authOrisatiOn Of issue

     The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the
     Directors on 23 April 2007.


.   finanCial risK ManaGeMent 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 risks. The Group operates within clearly defined guidelines
     that are approved by the Board and the Group’s policy is not to engage in speculative transactions.

     The main areas of financial risks faced by the Group and in respect of the major areas of treasury activity are set out
     as follows:-

     (a)   foreign currency risk

           The Group is exposed to foreign currency risk as a result of its normal operating activities, both external and
           intra-Group where the currency denomination differs from the local currency, Ringgit Malaysia (RM). The Group’s
           guidelines are to minimise the exposure of overseas operating activities to transaction risk by matching local
           currency income against local currency costs.

     (b)   interest rate risk

           The Group’s guideline is to borrow principally on the floating rate basis but to retain a proportion of fixed rate
           debt. The objectives for the mix between fixed and floating rate borrowings are set to reduce the impact of an
           upward change in interest rates while enabling benefits to be enjoyed if interest rates fall.

     (c)   Credit risk

           The credit risk is controlled by the application of credit approvals, limits and monitoring procedures. An internal
           credit review is conducted if the credit risk is material.

     (d)   Market risk

           For key product purchases, the Group establishes floating and fixed price levels that the Group considers
           acceptable and enters into physical supply or derivative agreements, where necessary, to achieve these levels.
           The Group does not face significant exposure from the risk from changes in debt and equity prices.




                                                        
                                               SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



     (e)    liquidity and cash flow risks

            The Group seeks to achieve a balance between certainty of funding even in difficult times for the markets of
            the Group and a flexible, cost-effective borrowing structure. This is to ensure that at the minimum, all projected
            net borrowings needs are covered by committed facilities. Also, the objective for debt maturity is to ensure that
            the amount of debt maturing in any one year is not beyond the Group’s means to repay and refinance.


.   ChanGes in aCCOuntinG pOliCies anD effeCts arisinG frOM aDOptiOn Of new anD reviseD frss

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

     FRS 2        Share-based Payment
     FRS 3        Business Combinations
     FRS 5        Non-current Assets Held for Sale and Discontinued Operations
     FRS 101      Presentation of Financial Statements
     FRS 102      Inventories
     FRS 108      Accounting Policies, Changes in Estimates and Errors
     FRS 110      Events after the Balance Sheet Date
     FRS 116      Property, Plant and Equipment
     FRS 121      The Effects of Changes in Foreign Exchange Rates
     FRS 127      Consolidated and Separate Financial Statements
     FRS 128      Investments in Associates
     FRS 131      Interests in Joint Ventures
     FRS 132      Financial Instruments: Disclosure and Presentation
     FRS 133      Earnings Per Share
     FRS 136      Impairment of Assets
     FRS 138      Intangible Assets
     FRS 140      Investment Property


     In addition, the Group has early adopted the following new and revised FRSs for the financial period beginning 1
     January 2006:

     FRS 117      Leases
     FRS 124      Related Party Disclosures

     The Group has not early adopted the deferred FRS 139 - Financial Instruments: Recognition and Measurement and
     the following FRSs and amendments that are mandatory for financial periods beginning on or after 1 January 2007:

     (i)    FRS 6: Exploration for and Evaluation of Mineral Resources
            FRS 6 is not relevant to the Group’s operations.

     (ii)   Amendment to FRS 119: Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures

            This amendment introduces the option of an alternative recognition approach for actuarial gains and losses
            arising from post-employment defined benefit plans. It may impose additional recognition requirements for
            multi-employer plans where insufficient information is available to apply defined benefit accounting. It also
            adds new disclosure requirements. As the Group does not intend to change the accounting policy adopted
            for recognition of actuarial gains and losses and does not participate in any multi-employer plans, adoption of
            this amendment will only impact the format and extent of disclosures presented in the financial statements.
            The Group will apply this amendment from financial periods beginning 1 January 2007.




                                                          7
                                                  Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

     The adoption of FRS 3, 5, 102, 108, 110, 116, 121, 124, 127, 128, 131, 132, 133, 136, 138 and 140 does not result in
     significant changes in accounting policies of the Group. The principal effects of the changes in accounting policies
     resulting from the adoption of the other new/revised FRSs are discussed below:

     (a)   frs : share-based payment

           This FRS requires an entity to recognise share-based payment transactions in its financial statements, including
           transactions with employees or other parties to be settled in cash, other assets, or equity instruments of the
           entity.

           During the current financial year, the Group is not involved in any share-based payment transactions.

     (b)   frs 0: presentation of financial statements

           The adoption of the revised FRS 101 has affected the presentation of minority interest, share of net profits
           after tax, results of associates and other disclosures. In the consolidated balance sheet, minority interests are
           now presented within total equity. In the consolidated income statement, minority interests are presented as
           an allocation of the total profit or loss for the period. A similar requirement is also applicable to the statement
           of changes in equity. FRS 101 also requires disclosure, on the face of the statement of changes in equity, total
           recognised income and expenses for the period, showing separately the amounts attributable to equity holders
           of the parent and to minority interest.

           The current period’s presentation of the Group’s financial statements is based on the revised requirements of
           FRS 101, with the comparatives restated to conform with the current period’s presentation.


.   siGnifiCant aCCOuntinG pOliCies

     All significant accounting policies set out below are consistent with those applied in the previous financial year.

     a)    basis of preparation

           The financial statements of the Group and of the Company comply with the provisions of the Companies Act,
           1965 and applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities.
           At the beginning of the current financial year, the Group and the Company adopted new and revised FRSs which
           are mandatory for financial periods beginning on or after 1 January 2006 as described fully in Note 5.

           The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest Ringgit
           except when otherwise indicated.

     b)    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.




                                                        
                                               SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



         (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, intra-group 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
                 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.

    c)   Development expenditure

         Development expenditure is charged to the income statement in the financial year in which it is incurred,
         except in so far as it relates to a clearly defined project which the benefit therefrom can be reasonably regarded
         as assured. The development expenditure is amortised in the income statement upon commencement of
         commercial production over a period of 5 years.

         The development expenditure of a project should only be recognised as an asset when all of the following
         criterias are met:

         (i)     the product or process is clearly defined and the costs attributable to the product or process can be
                 separately identified and measured reliably;

         (ii)    the technical feasibility of the product or process can be demonstrated;

         (iii)   the enterprise intends to produce and market, or use, the product or process;

         (iv)    the existence of a market for the product or process or, if it is to be used internally rather than sold, its
                 usefulness to the enterprise, can be demonstrated; and

         (v)     adequate resources exist, or their availability can be demonstrated, to complete the project and market
                 or use the product or process.

    d)   property, plant and equipment and depreciation

         Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The
         policy for the recognition and measurement of impairment losses is in accordance with Note 5(e).




                                                          
                                                  Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

         Research and development equipments in progress are not depreciated. The residual value and useful lives
         of property, plant and equipment are reviewed and adjusted in appropriate at each balance sheet date.
         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 rates:

         Computer equipments                                        33 1/3%
         Computer software                                          33 1/3%
         Office equipment                                               20%
         Furniture and fittings                                  20% - 25%
         Renovation                                                     20%
         Development assets                                         33 1/3%
         Air-conditioner                                                20%
         Motor vehicles                                                 20%
         Security operation centre                                      20%
         Research and development equipments                  20% - 33 1/3%

         Upon the disposal of an item of property, plant and equipment, the difference between the net disposal proceeds
         and the carrying amount is charged or credited to the income statement and the attributable portion of the
         revaluation surplus is taken directly to retained profits.

    e)   impairment of assets

         The carrying values of assets are reviewed for impairment when there is an indication that the assets might
         be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable
         amounts. The recoverable amount is the higher of an asset’s net selling price and its value in use, measured
         by reference to discounted future cash flows. Recoverable amounts are estimated for individual assets, or if it
         is not possible, for the cash-generating unit.

         An impairment loss is charged to the income statement immediately, unless the asset is carried at revalued
         amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of previously
         recognised revaluation surplus for the same asset.

         Subsequent increase in the recoverable amount of an asset is treated as reversal of the previous impairment
         loss and is recognised to the extent of the carrying amount of the asset that would have determined (net of
         amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the
         income statement immediately, unless the asset is carried at revalued amount.

    f)   financial instruments

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

         Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual
         arrangement. Interest, dividends and 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, deposit at call and short term highly liquid investments which have an insignificant risk of changes
                in value, net of outstanding bank overdrafts.

         (ii)   trade receivables

                Trade 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.




                                                      0
                                             SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



         (iii)   trade payables

                 Trade payables are stated at the fair value of the consideration to be paid in the future for goods and
                 services received.

         (iv)    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.

         (v)     equity instruments

                 Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the
                 period in which they are declared.

                 The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax.
                 Equity transaction costs comprise only those incremental external costs directly attributable to the equity
                 transaction which would otherwise have been avoided.

                 The consideration paid, including attributable transaction costs on repurchased ordinary shares of the
                 Company that have not been cancelled, are classified as treasury shares and presented as a deduction from
                 equity. No gain or loss is recognised in profit or loss on the sale, re-issuance or cancellation of treasury
                 shares. When treasury shares are reissued by resale, the difference between the sales consideration and
                 the carrying amount is recognised in equity.

         (vi)    Derivative financial instruments

                 Derivative financial instruments are not recognised in the financial statements.

    g)   assets acquired under hire-purchase and lease agreements

         The cost of property, plant and equipment acquired under hire purchase and finance lease arrangements
         which transfer substantially the risks and rewards of ownership to the Group are capitalised. The depreciation
         policy for these assets is similar to that of the Group’s property, plant and equipment depreciation policy.
         Outstanding obligation due under hire purchase and finance lease arrangements after deducting finance
         expenses are included as liabilities in the financial statements. Finance charges on hire purchase and finance
         lease arrangements are allocated to income statement over the period of the respective agreements.

         Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are
         charged as expenses in the period which they are incurred.

    h)   borrowing costs

         Interest costs on borrowings to finance the construction of property, plant and equipment, construction contracts
         and property development are capitalised as part of the cost of those assets during the period of time that is
         required to complete and prepare the assets for their intended use.

         All other borrowing costs are recognised as expense in the income statement in the period in which they are
         incurred.

    i)   income taxation

         Income tax on the profit or loss for the financial year comprises current and deferred tax. Current tax is the
         expected amount of income taxes payable in respect of the taxable profit for the financial year and is measured
         using the tax rates that have been enacted at the balance sheet date.




                                                         
                                                 Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

         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 not recognised if the temporary difference arises from goodwill or negative goodwill or from
         the initial recognition of an asset or liability in a transaction which is not a business combination and at the
         time of the transaction, affects neither accounting profit nor taxable profit.

         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 is the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the
         cost of the combination.

    j)   provisions

         Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable
         that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
         estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect
         the current best estimate. Where the effect of the time value of money is material, provisions are discounted
         using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting
         is used, the increase in the provision due to the passage of time is recognised as finance cost.

         Provision for restructuring costs is recognised when a detailed and formal restructuring plan has been approved,
         and the restructuring has either commenced or has been announced publicly. Costs relating to ongoing
         activities are not provided for.

    k)   employee benefits

         (i)     short term benefits

                 Wages, salaries, bonuses and social security contributions are recognised as an expense in the financial
                 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.

         (ii)    Defined Contribution plans

                 As required by law, companies in Malaysia make contributions to the Employees Provident Fund (“EPF”).
                 Such contributions are recognised as an expense in the income statement in the financial year to which
                 they relate. Once the contributions have been paid, the Company has no future obligations.

         (iii)   termination benefits

                 Employee termination benefits are recognised only either after an agreement is in place with the
                 appropriate employee representatives specifying the terms of redundancy or after individual employees
                 have been advised of the specific terms.

    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.



                                                       
                                              SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



         (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 except for exchange differences arising on monetary
                 items that form part of the Group’s net investment in foreign operation. Exchange differences arising on
                 monetary items that form part of the Group’s net investment in foreign operation, where that monetary
                 item is denominated in either the functional currency of the reporting entity or the foreign operation, are
                 initially taken directly to the foreign currency translation reserve within equity until the disposal of the
                 foreign operations, at which time they are recognised in profit or loss. Exchange differences arising on
                 monetary items that form part of the Group’s net investment in foreign operation, where that monetary
                 item is denominated in a currency other than the functional currency of either the reporting entity or
                 the foreign operation, are recognised in profit or loss for the period. Exchange differences arising on
                 monetary items that form part of the Company’s net investment in foreign operation, regardless of the
                 currency of the monetary item, are recognised in profit or loss in the Company’s financial statements or
                 the individual financial statements of the foreign operation, as appropriate.

                 Exchange differences arising on the translation of non-monetary items carried at fair value are included
                 in profit or loss for the period except for the differences arising on the translation of non-monetary items
                 in respect of which gains and losses are recognised directly in equity. Exchange differences arising from
                 such non-monetary items are also recognised directly in equity.

         (iii)   foreign Operations

                 The results and financial position of foreign operations that have a functional currency different from the
                 presentation currency (RM) of the consolidated financial statements are translated into RM as follows:

                 -    Assets and liabilities for each balance sheet presented are translated at the closing rate prevailing
                      at the balance sheet date;

                 -    Income and expenses for each income statement are translated at average exchange rates for the
                      year, which approximates the exchange rates at the dates of the transactions; and

                 -    All resulting exchange differences are taken to the foreign currency translation reserve within
                      equity.

    m)   revenue recognition

         Revenue from contract work/sale of solutions development is recognised on the percentage of completion
         method determined on the proportion of cost incurred to date against total estimated cost in cases where
         the outcome of the contract can be reliably estimated. In cases where the outcome of the contract cannot be
         reliably estimated, the revenue is recognised only to the extent of contract costs incurred that is probable will
         be recoverable. In all cases, anticipated losses are provided in full.




                                                         
                                                 Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

7.   share Capital

                                                                                      Group and Company
                                                                                      00         2005
                                                                                        rM          RM
     Authorised:
     Preference shares of RM1.00 each
     500,000 preference shares                                                            –      500,000
     Conversion into ordinary shares                                                      –     (500,000)

                                                                                          –            –


     Ordinary shares of RM1.00 each
     As at beginning of the financial year                                        ,000,000    4,500,000
     Conversion from 500,000 preference shares                                            –      500,000
     Created during the financial year                                           0,000,000            –
     Subdivided into RM0.10 each during the financial year                      (,000,000)           –

     As at end of the financial year                                                      –    5,000,000


     Ordinary shares of RM0.10 each
     As at beginning of the financial year                                               –             –
     250,000,000 shares subdivided from RM1.00 each during the financial year   ,000,000             –
     Created during the financial year                                                   –             –

     As at end of financial year                                                ,000,000             –


     Issued and paid-up:
     Ordinary shares of RM1.00 each
     As at beginning of the financial year                                        ,,000    4,285,000
     Issued during the financial year                                            0,,000            –
     Subdivided from RM1.00 each to RM0.10 each during the financial year       (,0,000)           –

     As at end of financial year                                                          –    4,285,000


     Ordinary shares of RM0.10 each
     As at beginning of the financial year
     Subdivided from RM1.00 each to RM0.10 each during the financial year       ,0,000             –
     Issued during the financial year                                            ,00,000             –

     As at end of financial year                                                0,000,000             –




                                                     
                                            SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



.   bOrrOwinGs

                                                                             Group                       Company
                                                                     00            2005         00             2005
                                                                      rM              RM           rM               RM
     Current secured:
     Term loans                                                ,07,         471,150       7,         81,659
     Hire purchase                                               ,7         151,272       ,7        151,272

                                                               ,,7         622,422       ,7        232,931


     Non-current secured:
     Term loans                                                ,,               –     ,,00              –
     Hire purchase                                               ,         285,827       ,        285,827

                                                               ,77,         285,827     ,,        285,827

                                                               ,7,         908,249     ,0,0        518,758


                                                                                                  Group and Company
                                                                                                  00         2005
                                                                                                    rM          RM

     Hire purchase liabilities
     minimum hire purchase payments
      - not later than 1 year                                                                  77,0        177,408
      - later than 1 year and not later than 2 years                                           0,        177,408
      - later than 2 years and not later than 5 years                                           ,7        155,107

                                                                                               ,        509,923
     Future finance charges on hire purchase                                                   (,)       (72,824)

     Present value of hire purchase                                                            ,7        437,099


     Present value of hire purchase liabilities
     minimum hire purchase payments
      - not later than 1 year                                                                  ,7        151,272
      - later than 1 year and not later than 2 years                                            ,0        151,272
      - later than 2 years and not later than 5 years                                           ,7        134,555

                                                                                               ,7        437,099


     The term loan is secured by the followings:
     (i)     fixed deposits amounting to RM529,757;
     (ii)    guarantee by ESCROW account amounting to 70% from credit facility;
     (iii)   standby letter of credit amounting to 30% of credit facility;
     (iv)    a corporate guarantee by the Company;
     (v)     assignment of proceeds from a contract between a third party and a subsidiary company;
     (vi)    irrevocable letter of instruction and undertaking;
     (vii)   a facility agreement; and
     (viii) joint and several guarantees by several Directors of the Company.

     The term loan bears interest within the range of 7.00% to 16.75% per annum.

     Interest rate on the hire purchase for the financial year ranges from 6% to 8% (2005: 6% to 7%)




                                                           
                                                   Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

.   prOpertY, plant anD eQuipMent

     Group

                                                                    COst
                                 balance as at                  write                     exchange       balance as at
                                     ..00    additions        off    Disposals        difference      ..00
                                          rM           rM        rM            rM                rM               rM

     Computer equipment             1,381,778      290,642    (17,996)             –              –         1,654,424
     Computer software                458,011      278,457          –              –              –           736,468
     Office equipment                 328,993      276,475    (24,407)        (1,020)             –           580,041
     Furniture and fittings           631,682    1,568,629   (119,936)             –          6,011         2,086,386
     Office renovation                201,748      484,459   (192,602)             –              –           493,605
     Development assets                17,200            –          –              –              –            17,200
     Air-conditioner                   29,641      246,622          –              –              –           276,263
     Motor vehicles                   996,447            –          –              –              –           996,447
     Security operation centre        617,414       24,219    (60,162)       (15,245)             –           566,226
     Research and development
       equipment                      375,816    1,916,909          –              –                –       2,292,725

                                    5,038,730    5,086,412   (415,103)       (16,265)         6,011         9,699,785


                                                           aCCuMulateD DepreCiatiOn
                                 balance as at                 write               exchange              balance as at
                                     ..00    additions       off   Disposals  difference              ..00
                                          rM           rM        rM          rM          rM                       rM

     Computer equipment               895,489      365,786     (13,413)            –                –       1,247,862
     Computer software                256,924      270,586           –             –                –         527,510
     Office equipment                 175,142      101,784     (19,532)         (357)               –         257,037
     Furniture and fittings           351,024      344,903   (100,141)             –              941         596,727
     Office renovation                136,668      118,987   (158,115)             –                –          97,540
     Development assets                17,198            –           –             –                –          17,198
     Air-conditioner                   16,373       49,034           –             –                –          65,407
     Motor vehicles                  394,283      199,289            –             –                –        593,572
     Security operation centre       195,077      122,869     (35,417)        (9,147)               –        273,382
     Research and development
       equipment                       35,365      92,642           –              –                –        128,007

                                   2,473,543     1,665,880   (326,618)        (9,504)             941      3,804,242


                                                                           CarrYinG value               Depreciation
                                                                          00        2005                      2005
                                                                            rM         RM                        RM

     Computer equipment                                             0,             486,289              438,725
     Computer software                                              0,             201,087              232,702
     Office equipment                                               ,00             153,851               61,902
     Furniture and fittings                                       ,,             280,658              117,931
     Office renovation                                              ,0              65,080               40,242
     Development assets                                                                      2                5,015
     Air-conditioner                                                0,              13,268                5,508
     Motor vehicles                                                 0,7             602,164              203,831
     Security operation centre                                      ,             422,337              121,013
     Research and development equipment                           ,,7             340,451               35,365

                                                                  ,,        2,565,187               1,262,234




                                                    
                                           SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



    Company

                                                                      COst
                                      balance as at                          write                     balance as at
                                          ..00      additions              off       Disposals      ..00
                                               rM             rM              rM               rM               rM

    Computer equipment                    1,381,778        290,642         (17,996)               –       1,654,424
    Computer software                       458,011        278,457               –                –         736,468
    Office equipment                        328,993        276,475         (24,407)          (1,020)        580,041
    Furniture and fittings                  471,778      1,199,722        (119,936)               –       1,551,564
    Office renovation                       201,748        484,459        (192,602)               –         493,605
    Development assets                       17,200              –               –                –          17,200
    Air-conditioner                          29,641        246,622               –                –         276,263
    Motor vehicles                          996,447              –               –                –         996,447
    Security operation centre               617,414         24,219         (60,162)         (15,245)        566,226
    Research and development
     equipment                              375,816      1,916,909               –                –       2,292,725

                                          4,878,826      4,717,505        (415,103)         (16,265)      9,164,963


                                                           aCCuMulateD DepreCiatiOn
                                      balance as at                     write               balance as at
                                          ..00      additions         off     Disposals  ..00
                                               rM             rM          rM            rM           rM

    Computer equipment                      895,489        365,786         (13,413)               –       1,247,862
    Computer software                       256,924        270,586               –                –         527,510
    Office equipment                        175,142        101,784         (19,532)            (357)        257,037
    Furniture and fittings                  326,001        289,364        (100,141)               –         515,224
    Office renovation                       136,668        118,987        (158,115)               –          97,540
    Development assets                       17,198              –               –                –          17,198
    Air-conditioner                          16,373         49,034               –                –          65,407
    Motor vehicles                          394,283        199,289               –                –         593,572
    Security operation centre               195,077        122,870         (35,417)          (9,147)        273,383
    Research and development
     equipment                               35,365         92,642               –                –         128,007

                                          2,448,520      1,610,342        (326,618)          (9,504)      3,722,740


                                                                          CarrYinG value               Depreciation
                                                                         00        2005                      2005
                                                                           rM         RM                        RM

    Computer equipment                                                 0,         486,289              438,725
    Computer software                                                  0,         201,087              232,702
    Office equipment                                                   ,00         153,851               61,902
    Furniture and fittings                                           ,0,0         145,777               94,227
    Office renovation                                                  ,0          65,080               40,242
    Development assets                                                                      2                5,015
    Air-conditioner                                                    0,          13,268                5,508
    Motor vehicles                                                     0,7         602,164              203,831
    Security operation centre                                          ,         422,337              121,013
    Research and development equipment                               ,,7         340,451               35,365

                                                                     ,,        2,430,306           1,238,530


    Included in the property, plant and equipment of the Group and of the Company are motor vehicles with carrying
    value of RM327,427 (2005: RM502,263) which were acquired under hire purchase arrangements.




                                                     7
                                             Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

0.   investMent in subsiDiaries

                                                                                                            Company
                                                                                                    00              2005
                                                                                                     rM                RM

      Unquoted shares, at cost                                                                   7,0          376,202


                                            Group’s
                                            effective
      name of                             interest (%)                                                       incorporated
      company                            00 2005          principal activities                                       in

      SCAN Crypto-Tech Sdn. Bhd.          00       100     The intended principal activity of                   Malaysia
                                                            the Company is the provision of
                                                            crypto solution and secure mobile
                                                            communications products and services.
                                                            The company has yet to commence its
                                                            operation since the date of incorporation

      *PT SCAN Nusantara                           99     The principal activity of the Company is            Indonesia
                                                            the provision of ICT Solutions

      * This subsidiary company is audited by other firm of Chartered Accountant.


.   DevelOpMent expenDiture

                                                                                                    Group and Company
                                                                                                    00         2005
                                                                                                      rM          RM

      Development expenditure                                                                  ,000,000         3,000,000
      Less: Amortisation of development expenditure                                           (,000,000)       (3,000,000)

                                                                                                        –                –


.   fixeD DepOsits with liCenseD banKs

      Fixed deposits amounted to RM6,315,868 (2005: RM4,853,597) of the Group and RM 5,786,111 (2005: RM4,464,106)
      of the Company are pledged on lien to bank as security for its banking facilities and contract received.

      Fixed deposits amounting to RM2,059,788 (2005: RM324,396) of the Company are held in trust under the name of
      several Directors.


.   traDe reCeivables

      Included in trade receivables of previous financial year was an amount due from a company, SCAN Consulting Services
      Sdn. Bhd. amounting to RM2,899,150 which a Director namely Prof. Dato’ Dr. Norbik Bashah bin Idris has an interest.




                                                          
                                                 SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



.   aMOunt Due frOM CustOMers fOr COntraCt wOrK

                                                                                                Group and Company
                                                                                                00         2005
                                                                                                  rM          RM

      Cost incurred on contract to date                                                   ,,7       31,500,592
      Attributable profits                                                                ,,7       31,294,020

                                                                                          7,0,       62,794,612
      Less: Progress billings                                                            (7,0,)     (62,444,865)

                                                                                                    –        349,747


      Advances received from customers as at financial year end amounted to Nil    (2005: RM817,285).


.   Other reCeivables

      Included in other receivables is an amount due from a company, SCAN Consulting Services Sdn. Bhd. amounting to
      RM 735,426 (2005: RM136,812) which a Director namely Prof. Dato’ Dr. Norbik Bashah bin Idris has an interest.


.   aMOunt Due frOM subsiDiaries

      The amount due from subsidiaries comprises of:

                                                                                                        Company
                                                                                                00              2005
                                                                                                 rM                RM

      SCAN Crypto-Tech Sdn. Bhd.                                                               7,70            6,990
      PT SCAN Nusantara                                                                    ,,        1,193,236

                                                                                           ,,        1,200,226


      The amount is unsecured, interest free and has no specific terms of repayment.


7.   traDe paYables

      Included in trade payables is an amount due to a company, SCAN Consulting Services Sdn. Bhd. amounting to
      RM155,913 (2005: Nil) which a Director namely Prof. Dato’ Dr. Norbik Bashah bin Idris has an interest.


.   Other paYables


                                                                         Group                          Company
                                                                  00            2005          00              2005
                                                                   rM              RM            rM                RM

      Advance from customers                                        –          817,285             –         817,285
      Other payables and accruals                           ,0,0          890,830     ,,77         850,485

                                                            ,0,0        1,708,115     ,,77        1,667,770




                                                        
                                                Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

.   prOvisiOn

      Provision for bonus:

                                                                                                   Group and Company
                                                                                                   00         2005
                                                                                                     rM          RM

      As at 1 January 2006                                                                    ,0,7          725,496
      Underprovision in prior year                                                                    –           18,009
      Additional provision during the financial year                                          ,07,00        1,800,000
      Utilised during the financial year                                                     (,,0)      (1,141,030)

                                                                                              ,,        1,402,475


      Provision for bonus is in respect of an extra amount of money to be given to staff as a productivity bonus that has
      been provided for during the financial year.


0.   aMOunt Due tO DireCtOrs

      The amount is unsecured, interest free and has no specific terms of repayment.


.   revenue

      Revenue represents the value of contract income recognised from the projects and the invoiced value of fees received
      from services rendered.


.   COst Of sales

                                                                          Group                           Company
                                                                   00            2005            00             2005
                                                                    rM              RM              rM               RM

      Cost of services rendered                             ,7,0        9,157,328     ,,7         9,145,506


.   Other inCOMe

                                                                          Group                           Company
                                                                   00            2005            00             2005
                                                                    rM              RM              rM               RM

      Fixed deposits interest income                           ,0          143,310         7,          143,110
      Other interest income                                    ,0          117,533         ,          117,395
      Gain on disposal of property, plant and equipment              –            5,000               –            5,000
      Others                                                   7,                –               –                –

                                                               ,          265,843         ,7          265,505




                                                        0
                                               SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



.   finanCe COsts

                                                                         Group                          Company
                                                                 00             2005           00             2005
                                                                  rM               RM             rM               RM

      Hire purchase interest                                   7,77            48,455        7,77           48,455
      Term loan interest                                      ,7                 –             –                –
      Bank charges                                             7,0            23,278        ,           16,054
      Other interest                                            ,             4,825         ,            4,825
      (Gain)/Loss on foreign exchange                        (7,)           11,382        ,7               73

                                                              ,            87,940        ,0           69,407


.   prOfit befOre taxatiOn

                                                                         Group                          Company
                                                                 00             2005           00             2005
                                                                  rM               RM             rM               RM

      Amortisation of development expenditure                       –          500,000              –          500,000
      Audit fees                                               ,00           11,500         ,000           11,000
      Depreciation                                          ,,0        1,262,234      ,0,        1,238,530
      Interest expenses
        - hire purchase                                        ,0           48,455         ,0           48,455
        - term loan                                           ,           83,678         ,0           83,678
        - (gain)/loss on foreign exchange                    (7,)          11,382         ,7               73
      Property, plant and equipment written off                ,           20,162         ,           20,162
      Office rental                                         ,0,          240,000        7,          240,000
      Staff loan written off                                        –          100,000              –          100,000
      Loss on disposal of property, plant and equipment         ,                –          ,                –


      and crediting:
      Interest income                                         7,          260,843        ,7          260,505
      Gain on disposal of property, plant and equipment             –            5,000              –            5,000


.   taxatiOn

                                                                         Group                          Company
                                                                 00             2005           00             2005
                                                                  rM               RM             rM               RM

      Current year’s provision                                 ,0            8,669         ,0             8,669
      Deferred taxation                                       (,)        (216,166)             –                 –
      Overprovision of taxation in prior year                (0,)               –       (0,)                –

                                                             (0,00)        (207,497)        (7,7)           8,669


      The Group’s effective tax rate is lower than the prima facie tax due to statutory income transferred to tax exempt
      account of approximately RM10,254,681 and the Company has been awarded the Multimedia Super Corridor status.
      This entitles the Company to tax exemption for five years commencing from 24 December 2002.




                                                        
                                                Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

      Subject to agreement with the Inland Revenue Board, the Company has unabsorbed business losses and unutilised
      capital allowances of RM265,800 (2005: RM265,800) and RM831,900 (2005: RM831,900) respectively. These amounts
      are available to be utilised upon cessation of the tax exempt period.

      The numerical reconciliation between the average effective tax rate and statutory tax rate are as follows:

                                                                            Group                             Company
                                                                    00              2005            00              2005
                                                                     rM                RM              rM                RM

      Profit before taxation                                 0,7,          8,673,491     0,0,          9,783,855

      Tax at the current income tax rate of 28%                ,0,0         2,428,577      ,0,7          2,739,479
      Tax effect in respect of:
       Overprovision of taxation in prior years                 (0,)                –        (0,)                –
       Expenses not deductible for tax purposes                  ,           552,883         7,           458,147
       Capital allowances utilised                              (,7)         (386,575)       (,7)         (386,575)
      Tax exempt income under pioneer status                  (,7,)       (2,802,382)     (,7,)       (2,802,382)

                                                                (0,00)         (207,497)        (7,7)             8,669


      The current taxation of the Company is principally in respect of interest income.


7.   earninGs per share

      a)    basic earnings per share

            The basic earnings per share is calculated by dividing the Group’s profit attributable to shareholders by the
            weighted average number of ordinary shares issued during the financial year. The weighted average number
            of ordinary shares in issue for 2005 has been adjusted for the right issue, subdivision of shares and public issue
            that were made in 2006.

                                                                                                              Group
                                                                                                      00              2005

            Profit attributable to shareholders (RM)                                           0,7,         8,883,377
            Weighted average number of ordinary shares in issue                               ,,7       128,550,000

            Basic earnings per share (sen)                                                             .              6.91


      b)    Diluted earnings per share

            Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
            outstanding to assume conversion of all dilutive potential ordinary shares. Since the Company has no dilutive
            potential ordinary shares, the diluted earnings per share has been calculated based on the consolidated profit
            attributable to shareholders of RM10,667,325 (2005: RM8,883,377) divided by the weighted average number
            of ordinary shares of RM0.10 each in issue of 153,835,479 (2005: 128,550,000).




                                                         
                                                SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



.   siGnifiCant relateD partY transaCtiOns

                                                                                                       Group and Company
                                                                                                       00         2005
                                                                                                         rM          RM

      Purchases of services from SCAN Consulting Services Sdn. Bhd.                                00,000                  –


      Interest income from Philip Mutual Berhad                                                      0,          105,820


      The nature of the relationship with the related party is as follows:-

      related parties                             nature of relationship

      SCAN Consulting Services Sdn. Bhd.          Prof. Dato’Dr. Norbik Bashah is a shareholder and Director of SCAN Consulting
                                                  Services Sdn. Bhd.

      Philip Mutual Berhad                        The spouse of Aminuddin Baki @ Sabtu bin Esa (shareholder and Director
                                                  of the Company) holds 30% shareholdings in Philip Mutual Berhad.


      The Directors are of the opinion that all the transactions above have been entered into in the normal course of
      business and have been established under terms and conditions that are not materially different from that obtainable
      in transactions with unrelated parties.


.   staff COsts

                                                                              Group                           Company
                                                                     00             2005             00             2005
                                                                      rM               RM               rM               RM

      Salaries, allowances and bonus                            ,,7        5,320,974       ,,7         4,781,722
      EPF contributions                                           70,7          675,347         70,7           675,347
      SOCSO contributions                                          7,00           42,979          7,00            42,979
      Other staff related expenses                                ,0          661,377         0,           661,377

                                                              0,0,77         6,700,677      0,0,         6,161,425


      The above is made up of direct and indirect staff costs which were classified as cost of services and administrative
      expenses respectively.

      The number of employees in the Group and Company at the end of the financial year were 189 (2005: 162) and 178
      (2005: 154) respectively.




                                                           
                                                   Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



0.   DireCtOrs’ reMuneratiOn

                                                                         Group                           Company
                                                                  00            2005            00             2005
                                                                   rM              RM              rM               RM

      Executive directors’ remuneration:
       - fees                                                        –                –              –                –
       - other emoluments                                      ,0          251,190        ,0          251,190

                                                               ,0          251,190        ,0          251,190


      Non-executive directors’ remuneration:
       - fees                                                   ,000           42,000         ,000           42,000
       - other emoluments                                            –          103,950              –          103,950

                                                                ,000          145,950         ,000          145,950


      Total Directors’ remuneration                            ,0          397,140        ,0          397,140
      Estimated money value of benefits-in-kind                 7,00           17,200         7,00           17,200

      Total directors’ remuneration including benefits-in-kind 7,70          414,340        ,70          414,340


      The number of directors of the Company whose total remuneration during the financial year fell within the following
      bands is analysed below:

                                                                                               number of Directors
                                                                                             00              2005

      Executive directors:
      Less than RM100,000                                                                        –                    1
      RM100,001 - RM200,000                                                                                          1
      RM200,001 – RM500,000                                                                                          –

      Non-executive directors:
      Less than RM100,000                                                                                            3
      RM100,001 - RM200,000                                                                      –                    1




                                                        
                                               SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



.   seGMental repOrtinG

                                     MalaYsia                    Overseas                   eliMinatiOns               COnsOliDateD
                                 00        2005             00       2005             00         2005           00      2005
                                  rM          RM               rM         RM               rM           RM              rM        RM

      COntinuinG OperatiOns

      revenue
      External sales        0,,    25,980,496    7,7,              –             –             – ,07,00       25,980,496

      TOTAL REVENUE         0,,    25,980,496    7,7,              –             –             – ,07,00       25,980,496


      result
      Segment results       0,7,0    17,089,011      ,,70             –             –             – ,,00 17,089,011
      Expenses              (,00,)   (7,249,622)    (,7,77)   (1,077,958)            –             – (,07,7) (8,327,580)

      OPERATING PROFIT                                                                                           0,,77     8,761,431

      Finance cost             (,0)      (87,940)     (,)             –             –             –      (,)      (87,940)

      Income tax                7,7        (8,669)       ,       216,166              –             –      0,00       207,497

      PROFIT FOR THE
        FINANCIAL YEAR                                                                                           0,7,     8,880,988


      Other infOrMatiOn

      Segment assets        ,7,    26,951,393    ,0,7       935,237     (,0,7)   (1,576,426) ,,0      26,310,204

      CONSOLIDATED TOTAL
       ASSETS                                                                                                    ,,0    26,310,204

      Segment liabilities    ,,7     5,473,414     ,0,0     1,622,572     (,,)   (1,200,226)    ,7,     5,895,760

      CONSOLIDATED TOTAL
       LIABILITIES                                                                                                ,7,     5,895,760

      CAPITAL EXPENDITURE            –             –              –             –             –             –             –             –

      DEPRECIATION           ,0,     1,238,530        ,        23,704              –             –     ,,0     1,262,234

      IMPAIRMENT LOSS                –             –              –             –             –             –             –             –


.   siGnifiCant events DurinG the finanCial Year

      On 10 March 2006, the Securities Commissions approved the proposed listing of SCAN Associates Berhad (SCAN
      Associates) to the MESDAQ Market of Bursa Malaysia Securities Berhad.

      In conjunction with, and as an integral part of the listing and quotation for the entire issued and paid-up share capital
      of SCAN Associates on the MESDAQ Market of Bursa Securities, the Company undertook a listing scheme which
      involved the following:




                                                               
                                                       Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

    (i)     bonus issue

            SCAN Associates undertook a bonus issue of 8,570,000 new ordinary shares of RM1.00 each to the existing
            shareholders of SCAN Associates on the basis of two (2) new ordinary shares for one (1) existing ordinary share
            held in SCAN Associates effected via capitalisation of the retained profits and capital redemption reserve. All
            the bonus issue shares rank pari-passu in all respects with the existing ordinary shares of SCAN Associates.

            Upon the completion of the Bonus Issue, the issued and paid-up capital of SCAN Associates increased from
            RM4,285,000 to RM12,855,000 comprising of 12,855,000 ordinary shares of RM1.00 each.

            The Bonus Issue was completed on 9 May 2006.

    (ii)    rights issue

            Upon completion of the Bonus Issue, SCAN Associates undertook a Rights Issue of 2,095,000 new ordinary
            shares of RM1.00 each at RM1.00 each per share to all the existing shareholders of SCAN Associates. The Rights
            Issue was undertaken on the basis of approximately point one six (0.16) new ordinary share for every existing
            one (1) ordinary share in SCAN Associates.

            Upon the completion of the Rights Issue, the issued and paid-up capital of SCAN Associates increased from
            RM12,855,000 to RM14,950,000 comprising of 14,950,000 ordinary shares of RM1.00 each.

            The Rights Issue was allotted on 19 May 2006.

    (iii)   sub-division

            The par value of RM1.00 per ordinary share of SCAN Associates was sub-divided into ten (10) ordinary shares
            of RM0.10 each. Consequently, the number of issued and paid-up share capital of SCAN Associates increased
            from 14,950,000 ordinary shares of RM1.00 each to 149,500,000 ordinary shares of RM0.10 each.

            The sub-division was completed on 19 May 2006.

    (iv)    public issue

            The Public Issue of 50,500,000 new ordinary shares at an issue price of RM0.50 per share and was allocated and
            allotted in the following manner:

            (a)   Malaysian public

                  10,000,000 Public Issue Shares were made available for application by Malaysian citizens, companies,
                  societies, co-operatives and institutions, of which at least 30% is to be set aside strictly for Bumiputera
                  individuals, companies, societies, co-operatives and institutions.

            (b)   eligible employees, Directors and business associates of the Group

                  20,000,000 Public Issue Shares were reserved for the eligible employees, Directors and the business
                  associates (which include the suppliers, sales agents and customers) of the Group.

                  13,500,000 Public Issue Shares were allocated to the eligible employees and Directors of the Group based
                  on the following criterias as approved by the Company’s Board of Directors: -

                  (a)   At least eighteen (18) years old;
                  (b)   Job position;
                  (c)   Length of service; and
                  (d)   Performance

                  Prospectus of the Company in regards of the above was issued on 30 August 2006.

                  The Company was successfully listed on the MESDAQ market on 6 October 2006.




                                                         
                                                SCAN Associates Berhad
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006



.   finanCial instruMents

      (a)   interest rate risk

            The interest rate risk that financial instruments’ values will fluctuate as a result of changes in market interest
            rates and the effective weighted average interest rates on classes of financial assets and financial liabilities are
            as follows:

            GrOup

            00                                                                                                       effective
                                                                                                                   interest rate
                                          less than                                 More than                        during the
                                              year    to  years    to  years      years           total    financial year
                                                rM             rM             rM          rM              rM                  %

            financial assets
            Fixed deposits with
              licensed banks            ,7,7      ,,              –             –    ,,        .00 - .70

            financial liabilities
            Term loan                    ,,7      ,,0       7,              –     ,0,       7.00 - .7
            Hire purchase                  ,7         ,0        ,7              –       ,7        .00 - 7.


            2005

            Financial assets
            Fixed deposits with
              licensed banks              4,023,361      4,853,597             –             –      8,876,958        2.00 - 3.70

            Financial liabilities
            Term loan                       471,150             –              –             –        471,150       7.00 - 16.75
            Hire purchase                   151,272       151,272        134,555             –        437,099        6.00 - 7.26


            COMpanY

            00

            financial assets
            Fixed deposits with
              licensed banks            ,7,7      ,7,               –            –    ,,7        .00 - .70

            financial liabilities
            Term loan                      0,        7,       ,7              –     ,0,       7.00 - .7
            Hire purchase                  ,7         ,0        ,7              –       ,7        .00 - 7.


            2005

            Financial assets
            Fixed deposits with
              licensed banks              4,023,361      4,464,106              –            –      8,487,467        2.00 - 3.70

            Financial liabilities
            Term loan                        81,659             –              –             –         81,659       7.00 - 16.75
            Hire purchase                   151,272       151,272        134,555             –        437,099        6.00 - 7.26




                                                           7
                                                   Annual Report 2006
nOtes tO the finanCial stateMents
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006

      (b)   Credit risk

            The Group’s credit risk is primarily attributable to trade receivables. The Group trades only with recognised and
            creditworthy third parties. In addition, receivable balances are monitored on an ongoing basis and the Group’s
            exposure to bad debts is not significant.

      (c)   fair values

            The carrying amount for financial assets and liabilities with maturity of less than one year are assumed to
            approximate their fair values.

            The carrying amount of financial liabilities with maturity of more than one year at the balance sheet date are
            set out below:

                                                                             Group                            Company
                                                                Carrying                fair     Carrying              fair
                                                                amount               values      amount             values
                                                                     rM                 rM            rM               rM

            Borrowings
             - Term Loan                                        2,576,255       2,304,396        1,222,170        1,148,807
             - Finance Lease                                      134,555         112,330          134,555          112,330
            Amount due from subsidiary                                  –               –        2,244,566        2,244,566


            In estimating the fair values of non-current trade creditors, borrowings, loan from related party and loan to a
            subsidiary, the discounted cash flow method was applied using current market interest rates available to the
            Group.


.   COMparative fiGures

      The presentation and classification of items in the current financial statements have been consistent with the previous
      financial statements except for the following:

                                                                            Group                        Company
                                                                                       as                                as
                                                                               previously                        previously
                                                               as stated        reported         as stated        reported
                                                                     rM               rM               rM               rM

      balance sheet
      Deposits, cash and bank balances                                  –       9,164,206                 –       8,729,207
      Fixed deposits with licensed banks
        - Non-current                                           4,853,597                 –      4,464,106                –
        - Current                                               4,023,361                 –      4,023,361                –
      Cash and bank balances                                      287,248                 –        241,740                –


      income statement
      Administrative expenses                                   7,827,580       7,846,113        6,747,233        6,768,185
      Finance cost                                                 87,940          69,407           69,407           48,455




                                                         
                                                SCAN Associates Berhad
nOtiCe Of annual General MeetinG



nOtiCe is herebY Given that the Sixth Annual General Meeting of SCAN ASSOCIATES BERHAD will be held at
Ballroom, Mezzanine Floor, Hotel Equatorial Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on Thursday, 21 June
2007 at 10.30 a.m. for the following purposes:

aGenDa

As	Ordinary	Business

1.    To receive the Audited Financial Statements for the financial year ended 31 December 2006           Ordinary Resolution 1
      together with the Reports of Directors and Auditors thereon.

2.    To approve a tax exempt first and final dividend of 12.5% (1.25 sen per share) in respect of        Ordinary Resolution 2
      the financial year ended 31 December 2006.

3.    To re-elect the following Directors, who retire pursuant to Article 88 of the Articles of
      Association of the Company:

      3.1    Dato’ Nasri Bin Nasrun                                                                       Ordinary Resolution 3

      3.2   Aminuddin Baki @ Sabtu Bin Esa                                                                Ordinary Resolution 4

4.    To approve the sum of RM96,000 being the Directors’ Fees for the financial year ended 31            Ordinary Resolution 5
      December 2006.

5.    To re-appoint Messrs Khairuddin Hasyudeen & Razi as Auditors of the Company and to                  Ordinary Resolution 6
      authorise the Directors to fix their remuneration.

As	Special	Business

6.    To consider and, if thought fit, pass the following resolutions:

      6.1   AUTHORITY TO ALLOT SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT,                      Ordinary Resolution 7
            1965

            “THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and
            are hereby empowered to allot and issue shares in the Company, at any time, at such
            price, until the conclusion of the next Annual General Meeting and upon such terms
            and conditions and for such purposes as the Directors may, in their absolute discretion,
            deem fit, provided that the aggregate number of shares does not exceed 10% of the
            issued share capital of the Company at the time of issue and THAT the Directors be
            and are also empowered to obtain the approval for the listing of and quotation for
            the additional shares so issued, subject to the Companies Act, 1965, the Articles of
            Association of the Company and approval from the Bursa Malaysia Securities Berhad
            and other relevant bodies where such approval is necessary.”

      6.2   PROPOSED SHAREHOLDERS’MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS                        Ordinary Resolution 8
            OF A REVENUE OR TRADING NATURE

            “THAT subject to the Listing Requirements of the Bursa Malaysia Securities Berhad for
            the MESDAQ Market, approval be and are hereby given to SCAN Associates Berhad
            (“SCAN”) and/or its subsidiaries to enter into recurrent transactions with related parties,
            as set out in Section 2.3, Part A of the Circular to Shareholders dated 30 May 2007,
            which are necessary for SCAN and/or its subsidiaries’ day-to-day operations subject
            to the following:

            (i)    the transactions are in the ordinary course of business and are on terms not more
                   favourable to the related parties than those generally available to the public;




                                                           
                                                   Annual Report 2006
nOtiCe Of annual General MeetinG


           (ii)    the shareholders’ mandate is subject to annual renewal and disclosure is made
                   in the annual report on the breakdown of aggregate value of the transactions
                   conducted pursuant to the shareholders’ mandate during the financial year;
                   and

           (iii)   the Directors be and are hereby authorised to complete and do all such acts
                   (including executing such documents as may be required) to give effect to the
                   transactions contemplated and/or authorised by this Ordinary Resolution.

           THAT such approval shall continue to be in force until :

           (a)     the conclusion of the next Annual General Meeting (“AGM”) of the Company
                   following this Sixth AGM, at which time it will lapse, unless by a resolution passed
                   at the said AGM, such authority is renewed; or

           (b)     the expiration of the period within which the next AGM of the Company is
                   required to be held pursuant to Section 143(1) of the Act (but shall not extend
                   to such extension as may be allowed pursuant to Section 143(2) of the Act); or

           (c)     revoked or varied by resolution passed by the shareholders in a general
                   meeting,

           whichever is the earlier.”

     6.3   PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION                                             Special Resolution

           “THAT the alterations, modifications and/or additions to the Articles of Association of
           the Company as set out in Appendix I of the Circular to Shareholders dated 30 May
           2007 be and are hereby approved.”


BY ORDER OF THE BOARD


MOHAMED FAIZAL BIN KASIM @ ABDUL AZIZ (LS 006978)
MAH LI CHEN (MAICSA 7022751)
TAN FONG SHIAN @ LIM FONG SHIAN (MAICSA 7023187)


COMPANY SECRETARIES


Kuala Lumpur
30 May 2007

notes:
1.   A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote
     in his/her stead. If a member appoints two (2) proxies, the appointment shall be invalid unless he/she specifies the
     proportion of his/her holdings to be represented by each proxy. A proxy may but need not be a member of the
     Company. If the proxy is not a member, he/she need not be an advocate, an approved company auditor or a person
     approved by the Registrar of Companies.
2.   The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney or if such
     appointor is a corporation under its common seal or the hands of its attorney.
3.   The instrument appointing a proxy must be deposited at the Company Secretary’s Office at C15-1, Level 15, Tower C,
     Megan Avenue II, 12 Jalan Yap Kwan Seng, 50450 Kuala Lumpur not less than forty-eight (48) hours before the time
     for the holding of the Annual General Meeting or any adjournment thereof.




                                                          70
                                                 SCAN Associates Berhad
nOtiCe Of annual General MeetinG



explanatory note on the special business

Ordinary resolution 7
authority to allot shares pursuant to section D of the Companies act, 
The proposed Ordinary Resolution 7, if passed, will empower the Directors of the Company, from the date of the Annual
General Meeting, to issue shares (other than bonus or rights issue) of the Company up to and not exceeding in total 10%
of the issued share capital of the Company at the time of issue for such purpose as they considered would be in the best
interest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the next Annual General
Meeting of the Company.

Ordinary resolution 
proposed shareholders’ Mandate for recurrent related party transactions of a revenue or trading nature
The proposed Ordinary Resolution 8, if passed, will allow the Company and/or its subsidiaries to enter into recurrent related
party transactions of a revenue or trading nature and in the ordinary course of business which are necessary for the day-to-
day operations. The details of this proposal are set out in Part A of the Circular to Shareholders dated 30 May 2007.

special resolution
proposed amendments to the articles of association
The proposed Special Resolution is to amend the Company’s Articles of Association in line with the Listing Requirements
of the Bursa Malaysia Securities Berhad for the MESDAQ Market. The details of the Proposed Amendments to the Articles of
Association are set out in Part B of the Circular to Shareholders dated 30 May 2007.

statement accompanying the notice of annual General Meeting
(Pursuant to Rule 8.36 of the Listing Requirements of Bursa Malaysia Securities Berhad for the MESDAQ Market)

further Details of Directors who are standing for re-election as Directors
The details of the Directors who are standing for re-election at the Annual General Meeting are set out in “Profile of Directors”
section appearing on pages 9 to11 of this Annual Report and their securities in the Company and its subsidiaries are presented
in the “Directors’ Shareholdings” section appearing on page 7 of this Annual Report. No individual other than the retiring
Directors is seeking election as a Director at the Annual General Meeting of the Company.
No notice of nomination has been received todate from any member nominating any individual for election as a Director
at the Annual General Meeting of the Company.




                                                            7
                                                    Annual Report 2006
stateMent aCCOMpanYinG nOtiCe Of annual General MeetinG


.   Directors standing for re-election

     In accordance with Article 88 of the Company’s Articles of Association, at least one-third of the Directors for the time
     being shall retire from office provided that all Directors, shall retire from office once at least in every three years but
     shall be eligible for re-election.

     The Directors standing for re-election at the Sixth Annual General Meeting of the Company are as follows:-

     i.    Dato’ Nasri bin Nasrun
     ii.   Aminuddin Baki @ Sabtu bin Esa


.   Details of attendance of Directors at board Meetings

     A total of five (5) Boards Meetings were held during the financial year ended 31 December 2006. Details of Attendance
     of Directors holding office at the financial year are as follows:

     Directors                                                                         attendance
     Datuk Ir. Mohamed Al Amin bin Abdul Majid                                              4/5
     Lt. Gen. (R) Raja Dato’ Abdul Rashid bin Raja Badiozaman                               4/5
     Aminuddin Baki @ Sabtu bin Esa                                                         5/5
     Prof. Dato’ Dr. Norbik Bashah bin Idris                                                4/5
     Raja Shamsul Kamal bin Raja Shahruzzaman                                               4/5
     Dato’ Nasri bin Nasrun                                                                 5/5


.   the place, date and time of the meeting.

     The Sixth Annual General Meeting of SCAN ASSOCIATES BERHAD will be held at Ballroom, Equatorial Hotel on Thursday,
     21 June 2007 at 10.30 a.m.


.   further details of Directors who are standing for re-election.

     Further details of the Directors who are standing for re-election are set out in the Directors’ Profile Section pages 9 to
     11 of this Annual Report; while their securities holdings (where applicable) are set out in the Analysis of Shareholdings
     “Directors’ Shareholdings” section appearing on page 7 of this Annual Report.




                                                         7
                                                SCAN Associates Berhad
                                                                                                    sCan assOCiates berhaD
                                                                                                                                   (525669-P)
                                                                                                                (Incorporated in Malaysia)

    fOrM Of prOxY                                                                                                                                             CDS Account No. (i) ..................................................................

                                                                                                                                                              No. of Shares held ..................................................................

    *I/We ................................................................................................................. NRIC No./Company No ...................................................................
                                                   (FULL NAME IN BLOCK CAPITALS)

    of ............................................................................................................................................................................................................................................
                                                                                                                                    (FULL ADDRESS)

    being a member/members of SCAN ASSOCIATES BERHAD (525669-P), hereby appoint ......................................................................

    .............................................................................................................................................................................................................................................................................. ,
                                                                                                               (FULL NAME IN BLOCK CAPITALS)

    NRIC No. .......................................................................... of ........................................................................................................................................... ,
                                                                                                                                                                                       (FULL ADDRESS)

    ..................................................................................................................................................................................................................................................

    or failing *him/her, ......................................................................................................................................................................................................... ,
                                                                                                                                        (FULL NAME IN BLOCK CAPITALS)

    NRIC No. .......................................................................... of ........................................................................................................................................... ,
                                                                                                                                                                                       (FULL ADDRESS)

    ..................................................................................................................................................................................................................................................
    or failing *him/her, *the Chairman of the Meeting as *my/our proxy to attend and vote on *my/our behalf at the Sixth Annual
    General Meeting of the Company to be held at Ballroom, Mezzanine Floor, Hotel Equatorial Kuala Lumpur, Jalan Sultan Ismail,
    50250 Kuala Lumpur on Thursday, 21 June 2007 at 10.30 a.m. and at any adjournment thereof.

                                                                                                                                                                                           fOr                                                aGainst
      Ordinary Resolution 1
      Ordinary Resolution 2
      Ordinary Resolution 3
      Ordinary Resolution 4
      Ordinary Resolution 5
      Ordinary Resolution 6
      Ordinary Resolution 7
      Ordinary Resolution 8
      Special Resolution
    (Please indicate with an “X” in the appropriate boxes on how you wish your vote to be cast. Unless voting instructions are indicated in the
    space above, the proxy will vote as he/she thinks fit.)
    (i)
        Applicable to shares held through a nominee account.
    * Delete where applicable
                                                                                                                                                                        For appointment of two proxies, percentage if
    Signed this ................................ day of .............................................. 2007                                                             shareholdings to be represented by the proxies:
                                                                                                                                                                                       No. of shares     Percentage
                                                                                                                                                                        Proxy 1
    ................................................................................                                                                                    Proxy 2
    Signature/Common Seal of Member                                                                                                                                     Total                                100%
    Notes:
    1.            A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his/her stead. If
                  a member appoints two (2) proxies, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to
                  be represented by each proxy. A proxy may but need not be a member of the Company. If the proxy is not a member, he/she need
                  not be an advocate, an approved company auditor or a person approved by the Registrar of Companies.
    2.            The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney or if such appointor is a
                  corporation under its common seal or the hands of its attorney.
    3.            The instrument appointing a proxy must be deposited at the Company Secretary’s Office at C15-1, Level 15, Tower C, Megan Avenue
                  II, 12 Jalan Yap Kwan Seng, 50450 Kuala Lumpur not less than forty-eight (48) hours before the time for the holding of the Annual
                  General Meeting or any adjournment thereof.
✄
Fold this flap for sealing




Then fold here




                                                                 AFFIX
                                                                 STAMP



                                Company Secretary
                             sCan associates berhad (525669-P)
                              C15-1, Level 15, Tower C,
                                  Megan Avenue II,
                              12 Jalan Yap Kwan Seng,
                               50450 Kuala Lumpur




1st fold here

								
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