The short and long term ratings of MARC-1ID and AAAID (Islamic Debt) assigned to MISC Berhad’s (“MISC”) Murabahah Commercial Paper/Medium Term Notes (“MCP/MTN”) are underpinned by the Group’s solid operating fundamentals; its dominant position in the Malaysian shipping industry particularly the liquefied natural gas (“LNG”) segment; extensive global reach with the acquisition of American Eagle Tankers Inc. Ltd. (“AET”); sound financial profile characterised by improved profitability and low debt leverage; exceptional financial flexibility; and the strong support of its majority shareholder, Petroliam Nasional Berhad (“PETRONAS”).

With a diversified fleet of 107 vessels and two Floating, Production, Storage and Offloading (FPSO)/ Floating, Storage and Offloading (FSO) as at 31 December 2005, MISC is the dominant shipping and logistics services provider in Malaysia especially in the energy-based transportation sector. MISC also has the distinction of being the largest single owner/operator of LNG tankers in the world with a fleet of 20 tankers, which is expected to increase to 29 tankers by 2008. As the sole transporter of LNG from Malaysia (the world’s third largest LNG exporter), MISC is in a favourable position to benefit from the growing demand for LNG transportation given its long term contracts with PETRONAS’.

The AET acquisition helped to broaden the Group’s earnings base as evidenced by its second positive contribution to the Group’s revenue. The AET acquisition has put MISC in the position of having the second largest owner-operator Aframax fleet in the world, extending its market reach to the Atlantic Basin, complementing MISC’s existing presence in Europe, Mediterranean, Arabian Gulf and the Far East.

MISC achieved a record revenue of RM10.65 billion for financial year ended 31 March 2005 (FY2005); a 40.0% increase from the previous year on the back of historical high freight rates in most of the shipping segments; increase in capacity; and the maiden contribution of Malaysia Marine and Heavy Engineering (“MMHE”) to the Group’s revenue. The Group’s pre-tax profit achieved higher growth of 103.7% to RM4.74 billion in FY2005 attributed to the Group’s operational efficiency and cost management, strong second hand market and the timely disposal of 54 of its vessels under the Bulk, Liner and Chemical businesses. Operating profit margin of the Group (excluding the exceptional gains from the disposal of 54 vessels) was 30.4% as at FY2005. For the third quarter ended 31 December 2005, the operating profit margin (excluding the exceptional gains from the disposal of 4 bulk vessels) was 26.3%.

The Group’s cash flow position strengthened further over the last four years, underpinned by the relatively stable charter revenue stream from the LNG business. The balance sheet shows ample liquidity and the Group’s cash flow protection measures are capable of accommodating a reasonable degree of earnings volatility in the non-LNG shipping businesses.

MISC’s strong internal cash generation has reduced the need for excessive external financing to fund its capital expenditure program. The Group’s debt leverage of 0.53 times as at 31 March 2005 is considered low by shipping industry norms, as compared to the global industry average.

MISC enjoys exceptional financial flexibility, in the light of its substantial cash balance; its 62.44% ownership by PETRONAS; and superior access to capital markets (both local and international). Furthermore, the US Dollar denominated shipping revenue provides a natural hedge against exchange rate volatility in relation to the Group’s sizeable foreign currency debt obligations and USD-based capex programme.