SARAWAK ENTERPRISE

SARAWAK ENTERPRISECORPORATION BERHADCompany No. 007199-D • Incorporated in Malaysia


1st Floor, Wisma Naim,Lot 2679 Jalan Rock, 93200 Kuching, Sarawak.Tel: 6082-244000 Fax: 6082-248588Email: [email protected]

Menara Pehin Setia Raja in Mukah

1Laporan Tahunan 2003 Annual Report

CONTENTS

2 - 3 Group Corporate Structure

4 Corporate Information

5 Board of Directors

6 - 11 Directors’ Profile

12 - 17 Chairman’s Statement

18 Group Five-Year Financial Statistics, 1999-2003

19 Group Financial Highlights

20 - 21 Statement on Internal Control

22 - 26 Statement of Corporate Governance

27 - 30 Audit Committee Report

31 - 76 Financial Statements

77 List of Properties

78 Analysis of Shareholdings

79 Substantial Shareholders

79 Directors’ Shareholdings

80 - 81 List of Thirty Largest Shareholders

82 - 84 Notice of Annual General Meeting

85 Form of Proxy

ISI KANDUNGAN

2 - 3 Struktur Korporat Kumpulan

4 Maklumat Korporat

5 Lembaga Pengarah

6 - 11 Profil Para Pengarah

12 - 17 Penyata Pengerusi

18 Statistik Kewangan Kumpulan Lima Tahun, 1999-2003

19 Maklumat Penting Kewangan Kumpulan

20 - 21 Penyata Kawalan Dalaman

22 - 26 Penyata Urustadbir Korporat

27 - 30 Laporan Jawatankuasa Audit

31 - 76 Penyata Kewangan

77 Senarai Hartanah

78 Analisa Pegangan Saham

79 Pemegang-Pemegang Saham Utama

79 Pegangan Saham Para Pengarah

80 - 81 Senarai Tiga Puluh Pemegang Saham Terbesar

82 - 84 Notis Mesyuarat Agung Tahunan

85 Borang Proksi

CONTENTS / Isi Kandungan

2

GROUP CORPORATE STRUCTURE / Struktur Korporat Kumpulan

Laporan Tahunan 2003 Annual Report

Sarawak Electricity Supply Corporation

Sejingkat Power Corporation Sdn Bhd

Sarawak Power Generation Sdn Bhd

Sarawak Power Services Sdn Bhd

Sarwaja Timur Sdn Bhd

Jayalah Cemerlang Realty Sdn Bhd

Dunlop Agro-Management Sdn Bhd

Dunlop Properties Sdn Bhd

Dunlop Estates Holdings Sdn Bhd

Dasar Untung Sdn Bhd

Dectra Sdn Bhd

Boustead Bulking Sdn Bhd

Utility

Manufacturing& Property

InvestmentHolding &Related SupportServices

Others

100%

22.29%

45%

50.82%

100%

100%

77.71%

100%

100%

100%

100%

26.24%

25%

as at 23 April 2004 / pada 23 April 2004

SARAWAK ENTERPRISECORPORATION BERHAD (007199-D)


PPLS ManagementServices Sdn Bhd

PPLS PowerGeneration Sdn Bhd

SESCO EngineeringSdn Bhd

Sarwaja Engineering &Construction Sdn Bhd

Navosoft Sdn Bhd

Intrafix Sdn Bhd

Integrated Circuit DesignServices Sdn Bhd

Encorp Berhad

SESCO-EFACECSdn Bhd

Universal Cable(Sarawak) Sdn Bhd

SACOFA Sdn Bhd

Naungan PertiwiSdn Bhd

Curtin (Malaysia)Sdn Bhd

Sarawak MedicalCentre Sdn Bhd

Sarawak GasDistribution Sdn Bhd

Celcom Timur(Sarawak) Sdn Bhd

Great Wall PlasticIndustries Berhad

Enfari Sdn Bhd

49.18% 100%

100%

70%

100%

99.90%

100%

30%

26.40%

100%

100%

51%

35%

30%

40%

30%

28.93%

27.35%60%

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CORPORATE INFORMATION /Maklumat Korporat


DirectorsPara PengarahDato’ Mohamad Taha Bin Ariffin Chairman, Independent Non-Executive DirectorPengerusi, Pengarah Bebas Bukan Eksekutif

Datuk Wan Ali Tuanku YubiChief Executive Officer, Non-Independent Executive DirectorKetua Pegawai Eksekutif, Pengarah Eksekutif Bukan Bebas

Haji Idris Bin Haji BuangDirector, Senior Independent Non-Executive DirectorPengarah, Pengarah Kanan Bebas Bukan Eksekutif

Datuk Fong Joo ChungDirector, Non-Independent Non-Executive DirectorPengarah, Pengarah Bukan Bebas dan Bukan Eksekutif

Datu Wilson Baya DandotDirector, Non-Independent Non-Executive DirectorPengarah, Pengarah Bukan Bebas dan Bukan Eksekutif

Dato’ Chew Kong SengExecutive Director, Non-Independent Executive DirectorPengarah Eksekutif, Pengarah Eksekutif Bukan Bebas

Audit CommitteeJawatankuasa AuditHaji Idris Bin Haji Buang, Chairman Dato’ Mohamad Taha Bin Ariffin Dato’ Chew Kong Seng

Nomination CommitteeJawatankuasa PencalonanDato’ Mohamad Taha Bin Ariffin, ChairmanHaji Idris Bin Haji Buang Datu Wilson Baya Dandot

Remuneration CommitteeJawatankuasa GanjaranDato’ Mohamad Taha Bin Ariffin, ChairmanHaji Idris Bin Haji Buang Datuk Wan Ali Tuanku Yubi

Senior Independent Non-Executive DirectorPengarah Kanan Bebas Bukan EksekutifHaji Idris Bin Haji Buang

Company SecretarySetiausaha SyarikatLee Ying FongMAICSA No. 7002564

Registered Office / Head OfficePejabat Berdaftar / Ibu Pejabat1st Floor, Wisma NaimLot 2679, Jalan Rock 93200 KuchingTel: 6082-244 000Fax: 6082-248 588E-mail: [email protected]

Kuala Lumpur Office Pejabat Kuala LumpurSuite 19-01, 19th Floor Kompleks AntarabangsaJalan Sultan Ismail50250 Kuala LumpurTel: 603-2145 5888Fax: 603-2148 8080

Share RegistrarsPendaftar SahamSignet Share Registration Services Sdn BhdLevel 26, Menara Multi-Purpose Capital SquareNo.8, Jalan Munshi Abdullah50100 Kuala LumpurTel: 603-2721 2222Fax: 603-2721 2530/603-2721 2531

Bursa Malaysia Stock NumberNombor Stok Bursa MalaysiaSarawak 2356

International Securities Identification Number(ISIN)Nombor Identiti Sekuriti AntarabangsaMYL2356OO003

AuditorsJuruauditErnst & Young

Principal BankersBank-Bank Utama RHB Bank BerhadRHB Delta Finance BerhadAlliance Bank Malaysia BerhadAmMerchant Bank BerhadEON Bank Berhad

5

BOARD OF DIRECTORS / Lembaga Pengarah


Seated:

Dato’ Mohamad Taha Bin AriffinChairman, Independent Non-Executive DirectorPengerusi, Pengarah Bebas Bukan Eksekutif

Standing from left to right:






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DIRECTORS’ PROFILE / Profil Para Pengarah


DATO' MOHAMAD TAHA BIN ARIFFIN, a Malaysian aged 60, is the former Deputy State Secretary of Sarawak,a post which he held since 1992 after 19 years of service to the State. A lawyer by training, he obtained hisBachelor of Law (LLB) from the University of Leeds in the United Kingdom and was called to the English Bar in1973. He has attended the Programme for Management Development (PMD) from the renowned HarvardBusiness School in the United States of America. He is a Director of Utama Banking Group Berhad and UtamaMerchant Bank Berhad, the Chairman of several companies, which include Sarawak Enterprise CorporationBerhad, CMS Trust Management Berhad, CMS Dresdner Asset Management Sdn Bhd and Hock Seng Lee Berhadand sits on the Boards of several private companies in Malaysia. He is also the Deputy Chairman of YayasanBudaya Melayu Sarawak and Secretary-General of RISEAP (Regional Dakwah Institute of South East Asia and thePacific) and was a member of Majlis Perundingan Ekonomi Negara Kedua (MAPEN II) and a Vice President of theMalaysia Branch of the Royal Asiatic Society. He was appointed a Senator in November 2002 and resigned on 10March 2004.

Dato' Taha joined the Board of Sarawak Enterprise Corporation Berhad on 24 June 2000 and was appointedChairman of the Board on 1 August 2000. He is an Independent Non-Executive Director of the Company andhas attended all the five Board Meetings held in the year 2003. Currently, he is also a member of the AuditCommittee and Chairman of the Remuneration Committee and Nomination Committee.

Dato’ Mohamad Taha Bin AriffinChairman, Independent Non-Executive DirectorPengerusi, Pengarah Bebas Bukan Eksekutif


DATUK WAN ALI TUANKU YUBI, a Malaysian aged 54, joined the Board of Sarawak Enterprise CorporationBerhad on 24 May, 1999. He was Chairman of the Company from 12 October 1999 to 31 July 2000 and wassubsequently appointed as Chief Executive Officer on 1 November 2000. He is a Non-Independent ExecutiveDirector and has attended all the five Board Meetings held in the year 2003. Currently, he is also a member of theRemuneration Committee.

He holds a Bachelor of Economics degree (1973) and Diploma in Education (1974) from University of Malaya,Diploma in Commonwealth & Overseas Education (1981) and Master of Education (1983) from University ofBirmingham.

He started his career as an education officer at the Department of Education, Sarawak in March, 1974 and wassubsequently appointed Senior Education Officer. In 1984, he was transferred with approval of the Federal andState Governments to a promotional position as Principal Assistant Secretary (Contracts) at the State FinancialSecretary’s Office, Sarawak. In 1987 he served for a year as Resident, Limbang Division in Sarawak. Datuk WanAli was subsequently posted as Permanent Secretary, Ministry of Land Development in 1988 where he held theposition for four and a half years. After his stint in the said Ministry, he moved on to serve as the General Managerof the Land Custody and Development Authority in 1992. Datuk Wan Ali was transferred back to the State CivilService as the Deputy State Financial Secretary, Sarawak in 1994. He served as the State Financial Secretary ofSarawak from January 1995 to October 2000.

At present, Datuk Wan Ali also sits on the Boards of Cahya Mata Sarawak Berhad, Rashid Hussain Berhad andseveral private limited companies in Malaysia.


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HAJI IDRIS BIN HAJI BUANG, a Malaysian aged 50, joined the Board of Sarawak Enterprise Corporation Berhadon 24 June 2000. He is an Independent Non-Executive Director of the Company and has attended all the fiveBoard Meetings held in the year 2003. Currently, he is also a member of the Remuneration Committee,Nomination Committee and Chairman of the Audit Committee.

Haji Idris holds a Bachelor of Laws Degree with Honours from University Buckingham, England and a degree ofutter Barrister (Lincoln's Inn). He is currently the senior partner of Idris-Buang & Associates, a legal firm locatedin Kuching, Sarawak. He has been an advisory board member of Dewan Bandaraya Kuching Utara since 1992.On 12 July 2000, he was appointed as Political Secretary to YAB Chief Minister of Sarawak and on 9 August 2000,he was promoted to the position of Chief Political Secretary to YAB Chief Minister.

He also sits on the Boards of Hock Seng Lee Berhad, Amanah Saham Sarawak Berhad and several private limited companies.



DATUK FONG JOO CHUNG, a Malaysian aged 54, joined the Board of Sarawak Enterprise Corporation Berhadon 31 January 1996. He is a Non-Independent Non-Executive Director of the Company and has attended all thefive Board Meetings held in the year 2003.

He holds a Bachelor of Laws Degree with Honours from University of Bristol, England and is a Barrister-at-Law(Lincoln's Inn). He was the Honorary Secretary and Committee Member (1973-1994) and was the President (1983-1987) of the Advocates' Association of Sarawak, member of the High Court Rules Committee (1982-1988),Chairman of Kuching Rating Appeals Tribunal (1986-1992), member of the Council for Kuching City South (1981-1992) and Chairman of Inquiry Committee (1991-1992). He was in private law practice from December 1971 tillJuly 1992. He is currently the State Attorney-General of Sarawak, a position he holds since August 1992.

He also sits on the Boards of Encorp Berhad and several private limited companies wherein the State Governmentof Sarawak has interests.


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DATU WILSON BAYA DANDOT, a Malaysian aged 52, joined the Board of Sarawak Enterprise CorporationBerhad on 31 January 1996. He is a Non-Independent Non-Executive Director of the Company and has attended all the five Board Meetings held in the year 2003. Currently, he is also a member of the NominationCommittee.

He holds a Bachelor of Economics degree from the University of Western Australia and a Masters degree inDevelopment Economics from University of Sussex and has attended a Senior Executive Fellows Programme atJFK School of Government, Harvard University. He is currently the Deputy State Secretary Sarawak (Planning &Development). He was formerly the Director, State Planning Unit, Sarawak (1995-2000), DeputyDirector/Principal Assistant Director, State Planning Unit of Sarawak (1990-1994), Project Director for Kalaka-Saribas Integrated Agricultural Development Project, Ministry of Agriculture (1986-1989), PrincipalAssistant Secretary (1983-1985), SPU Economist for International Pepper Community Jakarta, Indonesia (1977-1983) and Assistant Secretary, State Planning Unit of Sarawak (1973-1977).

Datu Wilson also sits on the Boards of various private limited companies.



DATO' CHEW KONG SENG, a Malaysian aged 66, was appointed as Chief Executive Officer of SarawakEnterprise Corporation Berhad on 1 May 1999 and joined the Board on 24 June 2000. He resigned as ChiefExecutive Officer on 31 October 2000 and was subsequently appointed Executive Director of the Company on 1 November 2000. He is a Non-Independent Executive Director and has attended all the five Board Meetingsheld in the year 2003. Currently, he is also a member of the Audit Committee.

Dato' Chew is a Fellow of the Institute of Chartered Accountants in England and Wales as well as a member ofthe Malaysian Institute of Certified Public Accountants and the Malaysian Institute of Accountants. He worked inthe United Kingdom from 1964 until 1970 and returned to Malaysia to join Messrs Turquand, Young & Co. (now known as Ernst & Young). He held various senior positions in Messrs Ernst & Young and was ManagingPartner from 1990 to 1996. His long work experience in the accounting profession covers a wide variety of industries including banking and financial institutions, timber, manufacturing, trading and foreign investment.

Currently, he sits on the Boards of Great Wall Plastic Industries Berhad, Petronas Gas Berhad, Petronas DaganganBerhad, Industrial Concrete Products Berhad, Jaya Jusco Stores Berhad, Hong Leong Properties Bhd, PBA HoldingsBhd, Encorp Berhad and several private limited companies in Malaysia.


None of the Directors hold any shares in the Company or its subsidiaries or has any family relationshipwith any Director and/or substantial shareholder of the Company. None of the Directors has any conflictof interest with the Company or has had any convictions for offences within the past ten years.


On behalf of the Board of Directors of Sarawak EnterpriseCorporation Berhad ("SECB" or the "Company"), it is my pleasure topresent to you the Annual Report and Audited Financial Statements ofthe SECB Group (the "Group") and the Company for the financial yearended 31 December 2003.

CHAIRMAN’S STATEMENT / Penyata Pengerusi

Keuntungan sebelum cukaiberjumlah RM102.0 juta padatahun lalu mencatatkankenaikan yang memuaskanberbanding RM37.6 juta padatahun sebelumnya.

Profit before tax for the year ofRM102.0 million was a significantimprovement over that in 2002 ofRM37.6 million.

Dato’ Mohamad Taha Bin AriffinChairman / Pengerusi

Bagi pihak Lembaga PengarahSarawak Enterprise Corporation Berhad(“SECB” atau “Syarikat”), saya dengan besarhati membentangkan Laporan Tahunan danPenyata Kewangan Beraudit Syarikat danKumpulan untuk tahun kewangan yangberakhir pada 31 Disember 2003.


In spite of the adverse effects of Severe AcuteRespiratory Syndrome (“SARS”) and the Iraq War, theMalaysian economy continued to achieve a crediblerate of GDP growth estimated at 5.2%1 in 2003. Thesetwo factors did not have any direct impact on the businesses of the Group in 2003 as the Group has noinvestment in such affected sectors as tourism, transportation and retail business. Overall, the Groupand the Company had in fact recorded a better performance as compared to the preceding year.

FINANCIAL PERFORMANCE

The Group revenue increased from RM201.1 millionfor 2002 to RM265.1 million for 2003. This represented an increase of 32% from the precedingyear. Profit before tax for the year of RM102.0 millionwas a significant improvement over that in 2002 ofRM37.6 million. The Power and Utilities Segment wasconsistently the main contributor to this satisfactoryperformance.

REVIEW OF GROUP OPERATIONS

Investments

The income from investments for 2003 was mainlyderived from dividends and interest income. TheGroup continued to prospect for investment opportunities to complement its core activities so as toprocure a better return on its surplus funds.

In 2003, the Group entered into a joint venture agreement with Hualon Microelectronics Corporation,Taiwan and 1st Silicon (Malaysia) Sdn. Bhd. to undertake the business of integrated circuit designservices, including intellectual property licensing andoperation support. A joint venture company, IntegratedCircuit Design Services Sdn. Bhd., was incorporatedfor this purpose. The Group presently holds 30% equity interest in this newly incorporated joint venturecompany.

A provision of RM64.9 million was made for diminution in value of the investment in shares andIrredeemable Convertible Unsecured Loan Stocks(“ICULS”) of 1st Silicon (Malaysia) Sdn. Bhd. during theyear. This was recorded as an exceptional item in thefinancial statements. As at 31 December 2003, theGroup had a cumulative provision of RM131.9 millionfor diminution in value of the said investments in 1st Silicon (Malaysia) Sdn. Bhd.

Walaupun terdapat kesan negatif akibat merebaknyaSindrom Pernafasan Akut yang Teruk (“SARS”) danperang di Iraq, ekonomi Malaysia terus mencapai peningkatan yang baik dengan kadar KDNK yangmembanggakan dalam anggaran 5.2%1 pada tahun2003. Kedua-dua faktor tersebut tidak menjejas secaralangsung prestasi urusniaga Kumpulan pada tahun2003. Ini adalah disebabkan Kumpulan tidak mempunyai pelaburan dalam sektor-sektor yang terlibat seperti pelancongan, pengangkutan dan perniagaan runcit. Pada keseluruhannya, Kumpulanini telah berjaya mencatat prestasi yang lebih baikberbanding tahun sebelumnya.

PRESTASI KEWANGAN

Pendapatan Kumpulan ini telah meningkat dariRM201.1 juta pada tahun 2002 kepada RM265.1 jutapada tahun 2003, iaitu peningkatan sebanyak 32%.Keuntungan sebelum cukai berjumlah RM102.0 jutapada tahun lalu mencatatkan kenaikan yangmemuaskan berbanding RM37.6 juta pada tahunsebelumnya. Segmen tenaga dan utiliti merupakanpenyumbang utama yang konsisten kepada prestasiyang memuaskan ini.

TINJAUAN OPERASI KUMPULAN

Pelaburan

Pendapatan utama dari pelaburan pada tahun 2003adalah daripada dividen dan faedah. Kumpulan sentiasa berusaha untuk mencari peluang-peluangpelaburan baru untuk membantu aktiviti-aktiviti utamabagi memperolehi pulangan yang lebih baik daripadasumber pendapatan yang sedia ada.

Dalam tahun 2003, Kumpulan ini telah memeteraiperjanjian usahasama dengan Hualon MicroelectronicsCorporation, Taiwan dan 1st Silicon (Malaysia) Sdn.Bhd. untuk mengendalikan urusniaga perkhidmatanmerekacipta litar bersepadu termasuk perlesenan hartaintelektual dan operasi sokongan. Sebuah syarikat usahasama iaitu Integrated Circuit Design ServicesSdn. Bhd. telah ditubuhkan untuk tujuan tersebut danKumpulan setakat ini mempunyai sebanyak 30%saham dalam syarikat usahasama tersebut.

14



Coal-fired Power Station, Kuching. Gas-fired Power Station, Bintulu.

Peruntukan sebanyak RM64.9 juta telah dibuat untuksusutnilai pelaburan dalam syer dan Stok PinjamanTidak Bercagar Boleh Tukar, Tak Boleh Tebus (“ICULS”)1st Silicon (Malaysia) Sdn. Bhd. sepanjang tahun tersebut. Ini telah dicatatkan sebagai butiran luar biasadalam penyata kewangan. Pada tahun berakhir 31 Disember 2003, Kumpulan ini telah membuatperuntukan terkumpul sebanyak RM131.9 juta bagitujuan tersebut.

Penjanaan Tenaga dan Utiliti

Segmen penjanaan tenaga sentiasa berusaha untukmenghasilkan pendapatan dan keuntungan yang konsisten bagi Kumpulan ini. Bagi tahun kewangan2003, jumlah jualan tenaga elektrik mencecah kepadaRM152.9 juta dan keuntungan sebelum cukaisebanyak RM 32.2 juta.

Syarikat bersekutu Kumpulan bagi utiliti iaituPerbadanan Perbekalan Lektrik Sarawak (“PPLS”) telahmenyumbang sebanyak RM104.3 juta keuntungansebelum cukai kepada Kumpulan. Bagi tahun sebelumini, PPLS telah menyumbang sebanyak RM64.9 jutakeuntungan sebelum cukai kepada Kumpulan.Peningkatan yang memberansangkan ini adalah disebabkan permintaan yang tinggi terhadap bekalanelektrik, terutama dari sektor perindustrian dan komersil.

Sebagai pembekal utama elektrik di Sarawak, PPLSkini dalam proses menambah unit penjanaan elektrikiaitu turbin penjana elektrik yang menggunakan batuarang yang berkuasa 2 x 55 MW di Kuching, Sarawak.Peningkatan kapasiti janakuasa ini adalah untukmenampung peningkatan permintaan dalam jangkamasa pendek dan membantu meningkatkan kawalanbekalan elektrik di Sarawak.

Power Generation and Utilities

The power generation segment continued to achieveconsistent revenue and profit for the Group. For thefinancial year 2003, sales amounting to RM152.9 million and profit before tax of RM32.2 million wereachieved.

The utilities associate of the Group, Sarawak ElectricitySupply Corporation (“SESCO”), contributed RM104.3million to the profit before tax of the Group. In the preceding year, SESCO contributed RM64.9 million tothe profit before tax of the Group. The better performance was mainly due to a higher demand forelectricity, particularly from the commercial andindustrial sectors.

SESCO, being the sole electricity distributor inSarawak, is in the process of planting up an additional2 x 55 MW coal-fired steam-turbine generating units inKuching, Sarawak. This additional generation capacityis to meet the projected demand growth in the nearfuture and help enhance the security of electricitysupply in Sarawak.


Manufacturing

The steel fabrication and manufacturing segment of theGroup suffered from the escalating steel price in theworld market and declining domestic demand for itsproducts. Export activities to neighboring countriesalso slowed down. In the face of these new challenges,this segment was only able to achieve a revenue ofRM28.9 million and profit before tax of RM1.5 millionfor the financial year 2003.

Property Development

The property development segment recorded a favorablerevenue of RM60.7 million andprofit before tax of RM7.6 million in 2003 as compared torevenue of RM1.4 million andloss before tax of RM0.8 millionin 2002.

The property development subsidiary, Jayalah CemerlangRealty Sdn. Bhd. (“JCR”) enteredinto a build and lease (“B&L”) concession agreement with theSarawak State Government todesign, construct and completea 12-storey office complex, namely Menara PehinSetia Raja, in Mukah, Sarawak. JCR had successfullycompleted the building in 2003. Upon completion, thebuilding was handed over to the State Government tobecome its regional administrative office complex tohouse all the State Government departments and related agencies in the Mukah Division. The B&Lcontract is for a concession period of ten years, duringwhich the State Government shall make ten annualinstallment payments to JCR as consideration for thedevelopment of the building. This will provide a stableincome stream to the Group for the next ten years.

Pengilangan Dan Pembuatan

Segmen pengilangan dan pembuatan telah mengalamikesan daripada kenaikan harga besi dan keluli yangmendadak di pasaran dunia dan penurunan permintaan domestik bagi produk tersebut. Aktiviti-aktiviti eksport ke negara jiran juga agak lembab. Namun demikian, segmen ini masih mampumencapai hasil jualan sebanyak RM28.9 juta dankeuntungan sebelum cukai sebanyak RM1.5 juta bagitahun kewangan 2003.

Hartanah

Segmen pembangunan hartanahtelah mencapai rekod pendapatansebanyak RM60.7 juta dan keuntungan sebelum cukaisebanyak RM7.6 juta bagi tahunkewangan 2003, berbanding pendapatan dan kerugian sebelumcukai berjumlah RM1.4 juta danRM0.8 juta pada tahun 2002.

Anak syarikat pembangunan hartanah, Jayalah Cemerlang RealtySdn. Bhd. (“JCR”) telah memeteraiperjanjian konsesi bina dan sewa

(“B&L”) dengan Kerajaan Negeri Sarawak bagi merekabentuk, membina dan menyiap kompleks pejabat 12 tingkat, Menara Pehin Setia Raja, di Mukah,Sarawak dan JCR telah berjaya menyiapkan bangunantersebut dalam tahun 2003. Bangunan tersebut telahpun diserahkan kepada Kerajaan Negeri untukdijadikan sebagai Kompleks Pejabat PentadbiranBahagian bagi kesemua jabatan kerajaan dan agensi-agensi yang berkaitan di Bahagian Mukah.

Perjanjian konsesi B&L adalah untuk tempoh masasepuluh tahun dan Kerajaan Negeri akan dalam tempoh masa tersebut membayar JCR secara ansurantahunan sebagai balasan pembinaan bangunan tersebut. Ini akan memberi aliran pendapatan yang stabil kepada Kumpulan untuk sepuluh tahun akandatang.

Menara Pehin Setia Raja, Mukah



JCR also owns a 30-storey officecomplex, Menara SarawakEnterprise, in the central businessdistrict of Johor Bahru. The commercial property market inMalaysia in general and Johorspecifically remained soft in2003. The occupancy rate ofMenara Sarawak Enterpriseremained at 45% as at the end of2003. JCR had intensified its promotion efforts to increase theoccupancy rate.

CORPORATE GOVERNANCE

The Board is committed toobserving the Malaysian Code of CorporateGovernance and Bursa Malaysia Securities Berhad‘s(“BMSB”) Listing Requirements and has workedtowards a high standard of corporate governancethroughout the Group, with a view to safeguard theassets and operations of the Group and enhance shareholder value.

In 2003, the Group established an Internal Audit Unitto replace its outsourced Internal Auditor. The function of the Internal Audit Unit is to review, makerecommendations and report on the efficiency andeffectiveness of the internal control system of theGroup.

DIVIDEND

The Board proposes to recommend a first and final dividend of 1.5 sen per share less income tax (28%) forthe financial year ended 31 December 2003, subjectto the approval of the shareholders at the forthcomingAnnual General Meeting to be held on 25 June 2004.

If approved by the shareholders, the total dividendpayment in respect of the financial year ended 31December 2003 will amount to RM12.6 million.

JCR juga mempunyai sebuah bangunan pejabat 30-tingkat iaituMenara Sarawak Enterprise terletak dipusat Bandar Johor Bahru. Pasaran hartanah komersil dan ruang pejabat diMalaysia secara umumnya dan diJohor khasnya masih agak lembabdalam tahun 2003. Kadar penyewaanbangunan tersebut masih dalam kadar45% pada penghujung tahun tersebut.JCR telah mengambil langkah untukmelipat gandakan usaha bagi memperhebatkan aktiviti promosiuntuk menambah kadar penyewaan.

URUSTADBIR KORPORAT

Lembaga Pengarah Sarawak Enterprise CorporationBerhad komited untuk memastikan tahap amalan danpermatuhan terhadap kod urustadbir korporat dansyarat-syarat penyenaraian Bursa Malaysia SecuritiesBerhad (“BMSB”) senantiasa dipertingkatkan dari masake semasa dalam keseluruhan Kumpulan ini bertujuanuntuk melindungi aset dan operasi Kumpulan dan jugamenambah nilai kepada pemegang saham.

Pada tahun 2003, Kumpulan ini telah menubuhkanUnit Audit Dalaman untuk mengambil alih tugas mengaudit operasi Kumpulan yang dahulunya dikendalikan oleh Juruaudit Luar. Fungsi Unit AuditDalaman ialah untuk menjalankan audit yang sistematik ke atas operasi Kumpulan, membuat cadangan dan laporan terhadap kecekapan dankeberkesanan tentang sistem kawalan dalamanKumpulan.

DIVIDEN

Lembaga Pengarah mencadangkan pembayaran dividen pertama dan muktamad sebanyak 1.5 sen setiap satu saham dan ditolak cukai pendapatan 28%untuk tahun kewangan 2003, tertakluk kepada kelulusan pemegang-pemegang saham dalamMesyuarat Tahunan Am (AGM) yang akan diadakanpada 25 Jun 2004.

Sekiranya diluluskan, jumlah pembayaran dividenuntuk tahun kewangan berakhir pada 31 Disember2003 ialah RM12.6 juta.

Menara Sarawak Enterprise, Johor Bahru.


BUSINESS OUTLOOK

The global economy continues to show positive signsof recovery. The world economy is projected to post ahigher growth of 4.1%2 in 2004 as compared to 3.2%2

in 2003. The outlook for the Malaysian economy isalso encouraging and a GDP growth between 6.0% to6.5%1 has been forecasted for 2004. As for Sarawak, aGDP growth of 6.0%3 is expected in 2004. The Boardis confident that with continued pro-business policiesof the Federal and State Governments, and the solidfoundation of the Group, SECB Group will continue toturn in a satisfactory performance in 2004.

The shareholders can rest assured that the Group willcontinue to seek new business opportunities and manage its resources prudently for long-term growth inshareholder value.

APPRECIATION

On behalf of the Board, I wish to record our appreciation to the Management and Staff of theGroup for their dedication, efforts and diligent contributions during the year. I am confident that ourexperienced and professional management team willcontinue to steer the SECB Group towards a betterfuture. I would also like to thank our valued shareholders, customers, business associates andbankers for their co-operation and continued support.

PAPARAN URUSNIAGA

Ekonomi global telah menunjukkan petanda-petandapemulihan yang positif secara berterusan dan ekonomidunia dianggarkan mencatat pertumbuhan sebanyak4.1%2 bagi tahun 2004, berbanding tahun 2003 yanghanya mencatatkan pertumbuhan 3.2%2. Paparanekonomi Malaysia adalah amat menggalakkan dan pertumbuhan KDNK dianggarkan dalam lingkungan6.0% dan 6.5%1 bagi tahun 2004.

Sementara di Sarawak, pertumbuhan KDNK dianggarkan sebanyak 6.0%3 untuk tahun yang sama.Pihak Lembaga Pengarah amat yakin dengan polisipro-perniagaan yang dipelopori oleh KerajaanPersekutuan dan Negeri dan asas yang kukuh,Kumpulan SECB akan terus mencatat prestasi yangmemuaskan bagi tahun 2004.

Lembaga Pengarah ingin memberi keyakinan kepadapemegang-pemegang saham, bahawa Kumpulan SECBakan terus berusaha untuk menerokai peluang-peluang perniagaan yang baru dan menguruskansegala sumbernya dengan bijaksana dan berhati-hatiuntuk pertumbuhan jangka panjang terhadap nilaipemegang saham.

PENGHARGAAN

Bagi pihak Lembaga Pengarah, saya ingin merakamkan setinggi-tinggi penghargaan kami kepadapihak pengurusan dan semua kakitangan KumpulanSECB atas dedikasi, usaha gigih dan sumbangantuan/puan sepanjang tahun. Saya yakin bahawa pihakpengurusan yang berpengalaman dan professionalakan terus memajukan Kumpulan SECB. Saya jugaingin berterima kasih kepada pemegang-pemegangsaham, pelanggan-pelanggan, rakan-rakan perniagaandan pihak bank di atas kerjasama dan sokongan yangberterusan.

Source: 1 Bank Negara Malaysia, Annual Report 20032 International Monetary Fund, World Economic Outlook,

11 September 20033 The Sarawak State Budget for 2004

Sumber: 1 Bank Negara Malaysia, Laporan Tahunan 20032 Tabung Kewangan Antarabangsa, Paparan Ekonomi

Dunia, 11 September 20033 Belanjawan Negeri Sarawak 2004

Dato’ Mohamad Taha Bin AriffinChairman / Pengerusi

18

GROUP FIVE-YEAR FINANCIAL STATISTICS, 1999-2003 / Statistik Kewangan Kumpulan Lima Tahun, 1999-2003


2003 2002 2001 2000 1999RM'000 RM'000 RM'000 RM'000 RM'000

PERFORMANCE / PENCAPAIAN

Revenue / Nilai dagangan 265,060 201,052 201,200 171,980 142,103 Profit before exceptional items /

Keuntungan sebelum butiran luar biasa 166,899 121,884 124,031 124,808 138,149 Exceptional items / Butiran luar biasa (64,900) (84,240) (2,802) (6,240) 127 Profit before taxation / Keuntungan sebelum cukai 101,999 37,644 121,229 118,568 138,276 Taxation / Cukai (23,624) (25,172) (21,680) (21,775) 3,224 Profit after taxation / Keuntungan selepas cukai 78,375 12,472 99,549 96,793 141,500 Minority interest / Kepentingan minoriti (10,061) (4,300) (3,901) (2,567) 964 Net profit for the year / Keuntungan bersih bagi tahun 68,314 8,172 95,648 94,226 142,464 Net dividends / Dividen bersih 12,639 12,639 25,278 25,278 42,130

ASSETS EMPLOYED / ASET DIPERGUNAKAN

Property, plant and equipment / Aset Tetap 511,211 534,741 555,253 595,950 601,777 Investments and goodwill / Pelaburan dan Ihsan 591,418 656,318 709,948 711,148 128,328 Long term receivable / Boleh diterima jangka panjang 108,106 41,399 20,784 - - Bank and cash balances / Wang tunai dan baki di bank 117,193 139,841 212,657 224,590 461,001 Other net current assets / (Liabilities) /

Aset / (Liabiliti) semasa bersih lain 90,634 101,964 72,574 58,621 73,584 Associated companies / Syarikat sekutu 1,730,053 1,660,490 1,759,520 1,695,464 1,630,808 Intangible assets / Aset tak ketara - - - - 519

Total / Jumlah 3,148,615 3,134,753 3,330,736 3,285,773 2,896,017

FINANCED BY / PERMODALAN

Shareholders' fund / Dana pemegang saham 2,844,789 2,789,114 2,960,851 2,865,049 2,796,908 Minority interests / Kepentingan minoriti 84,960 75,099 70,400 66,499 63,931 Long term liabilities / Liabiliti jangka panjang 201,549 251,949 289,383 352,575 35,178 Deferred taxation / Cukai tertunda 17,317 18,591 10,102 1,650 -

Total / Jumlah 3,148,615 3,134,753 3,330,736 3,285,773 2,896,017

SELECTED RATIOS / NISBAH KEWANGAN (%)

Net tangible assets per share / Aset ketara bersih sesaham (RM) 2.42 2.37 2.52 2.43 2.38

Net earnings per share / Pendapatan bersih sesaham - before exceptional items / 14.26 10.42 10.60 8.60 12.20

sebelum butiran luar biasa (Sen)- after exceptional items, taxation and minority interest/ 5.84 0.70 8.17 8.10 12.20

selepas butiran luar biasa, cukai dan kepentingan minoriti (Sen)

Gross dividend per share / Dividen kasar sesaham (Sen) 1.5 1.5 3.0 3.0 5.0

19

GROUP FINANCIAL HIGHLIGHTS / Maklumat Penting Kewangan Kumpulan


PROFIT AFTER TAXATIONKeuntungan Selepas Cukai


STATEMENT ON INTERNAL CONTROL / Penyata Kawalan Dalaman

INTRODUCTION

The Malaysian Code on Corporate Governance requires the Board to maintain a sound system of internal controlto safeguard shareholders’ investment and the Group’s assets. The Board is pleased to include a statement on thestate of the Group’s internal controls in accordance with paragraph 15.27 (b) of the Bursa Malaysia SecuritiesBerhad ("BMSB") Listing Requirements and as guided by the BMSB’s Statement on Internal Control Guidance forDirectors of Public Listed Companies ("the Guidance").

BOARD RESPONSIBILITY

It is the Board’s view that the Group’s objectives, its internal organization and the environment in which it operates continuously evolve; and as a result, the risks that it faces also change. A sound system of internal control therefore depends on a thorough and regular evaluation of the nature and extent of the risks which maythreaten the Group’s continuous growth and financial viability.

The Board further believes that the Group’s system of internal control and risk management practices will contribute significantly to good corporate governance. The internal controls, financial or otherwise should provide reasonable assurance regarding the achievement of the Group’s objectives in:

• Effectiveness and efficiency of operations

• Reliability and transparency of financial information

• Compliance with applicable laws and regulations

• Safeguarding of the Group’s assets

• Realizing the Group’s strategic objectives

• Optimizing the returns to and protecting the interest of stakeholders (including shareholders, customers and

staff)

The Board further acknowledges its responsibility for maintaining a sound system of internal control. However, it recognizes that reviewing the Group’s system of internal control is a concerted and continuing process, designedto manage rather than eliminate the risk of failure to achieve the business objectives. As with any such system,controls can only provide reasonable but not absolute assurance against material misstatement, loss or fraud.

The Group’s system of internal control does not apply to associated companies as the Board does not have control over their operations.

RISK MANAGEMENT FRAMEWORK

During the financial year, the key risks related to the Group’s strategy and business plans were reviewed and considered by the Board and Management in their evaluation of these plans. On a daily basis, the responsibilityof managing risks of each business unit/department lies with the respective Heads of Business Unit/Department.During the management meetings, significant risks identified and the corresponding internal controls implemented were communicated to Senior Management. From time to time, the Board evaluated and managedthe key principal risks faced by the Group through the monitoring of the Group’s operations, performance andprofitability at its Board meetings.

The Management is in the process of putting in place a structured risk management framework and embeddingthe process throughout the Group. These initiatives will ensure that the Group has a formalized ongoing processto be applied consistently across the Group.


INTERNAL AUDIT FUNCTION

In September 2003, the Group has established an internal audit function, which reports to the Audit Committeeand to assist the Board in monitoring and managing risks and internal control. Prior to this, the internal audit function was undertaken by an outsourced independent firm of public accountants, Messrs Deloitte & ToucheManagement Solutions Sdn Bhd.

The internal audit function has the principal responsibility of carrying out audits on the operations within theGroup and provides appropriate input on good corporate governance to Management and Audit Committee. Theinternal audit function in accordance with its charter covers but is not confined to the following:-

• Appraising the adequacy and integrity of the internal control of the Group;

• Ascertaining the level of compliance with Group’s plans, policies, procedures and adherence to laws and regulations;

• Appraising the effectiveness of administrative and financial controls applied and the reliability and integrity of

data that is produced within the Group;

• Ascertaining the adequacy of controls for safeguarding the Group’s assets from losses of all kinds;

• Conducting special reviews or investigations requested by the Audit Committee;

• Ascertaining the effectiveness of Management in identifying principal risks and to manage such risks through appropriate systems of internal control set up by the Group;

• Appraising utilization of resources with regard to economy, efficiency and effectiveness.

The activities of the internal audit function carried out since its establishment were as follows:-

• Follow up and update of previous audit works carried out by Messrs Deloitte & Touche Management Solutions Sdn Bhd;

• Conduct additional review on selected business units/areas requested by Audit Committee;

• Review the related party transactions;

• Presentation of internal audit charter and audit plan for financial year 2004 for the Audit Committee’s

approval.

OTHER KEY ELEMENTS OF INTERNAL CONTROLS

An organizational chart and operating structures have been set up with clearly defined lines of authority, accountability and responsibilities of each business unit. Manuals on Group policies and procedures arereviewed regularly and updated when necessary.

Annual management plans and budgets are prepared at subsidiaries’ level before they are submitted to theHolding Company for review. The comprehensive and consolidated Group’s management plan and budget isthen presented to the Board for approval. Budgets prepared by the subsidiaries are closely monitored and explanations of variances are sought and incorporated into management reports, which are submitted to theHolding Company for reviewing the performance and results of the subsidiaries on a monthly basis.

CONCLUSION

There are no consequential material weaknesses identified during the year under review and as at the date of the annual report. Management has regularly reviewed and put in place appropriate action plans and measures to strengthen the Group’s internal controls.


STATEMENT OF CORPORATE GOVERNANCE / Penyata Urustadbir Korporat

The Board of Directors recognises that the practice of good corporate governance is fundamental in dischargingits duties and responsibilities to protect and enhance shareholders’ value and the financial performance of theCompany and Group, and has upheld good corporate governance practices.

The Board is pleased to report to shareholders the manner in which the Company has applied the Principles and complied with the Best Practices of the Malaysian Code on Corporate Governance during the financial year ended31 December 2003.

1. BOARD OF DIRECTORS

1.1 Composition of the Board

As at the date of this report, the Board comprises six members, two of whom are independent non-executive directors (being one-third of the Board membership), two executive directors and two non-independent non-executive directors.

A profile of each director is set out on pages 6 - 11 of this Annual Report.

1.2 Board Balance

The Company is steered by a strong and experienced Board under the leadership of an independent non-executive Chairman, Dato’ Mohamad Taha Bin Ariffin. The Management of the Company is headed by Datuk Wan Ali Tuanku Yubi, Chief Executive Officer/Director. There is a clear division of responsibilities between the Chairman and Chief Executive Officer to ensure a balance of power and authority. The Board is constituted of individuals with diverse backgrounds, extensive experience and expertise in the field of finance, corporate affairs, business and law. The non-executive directors have the necessary expertise to ensure that investment proposals and strategies proposed by Management are fully evaluated. The independent directors fulfill a pivotal role in corporate accountability and independence in judgement to safeguard the interests of minority shareholders.

Haji Idris Bin Haji Buang is the Senior Independent Non-Executive Director appointed by the Board to whom concerns may be conveyed.

1.3 Responsibilities of the Board

The Board is collectively responsible for the success of the Group and ensuring that its obligations to the Company’s shareholders are met. During the year, the Board had reviewed:-

• the strategic direction and business plan for the Group;• the funding strategy for the Company;• the adequacy of the Group’s internal control systems, identified and addressed principal risks in the

Group’s business through powers delegated to the Audit Committee.

1.4 Board Meetings

During the year under review, the Board met five (5) times. Issues deliberated at these meetings included the consideration of quarterly financial results, new investment and business proposals and review of the performance of the operating subsidiaries.


Details of attendance of the Directors at the Board Meetings are set out below:-

Name of Director No. of Meetings Attended

Dato’ Mohamad Taha Bin Ariffin 5Datuk Wan Ali Tuanku Yubi 5Dato’ Chew Kong Seng 5Datuk Fong Joo Chung 5Datu Wilson Baya Dandot 5Haji Idris Bin Haji Buang 5

1.5 Supply of Information

Prior to Board Meetings, information on financial, operational, legal, regulatory, corporate and strategic matters are provided to the Board members in the form of Board Papers or reports to enable the Board to make informed decisions. Whenever necessary, Senior Management and professional advisers are also invited to brief the Board on the matters being deliberated. Management ensures that all Directors have full access to information and are entitled to obtain full disclosure on matters put forward for their decision. Every Director has direct access to the advice and services of the Company Secretary.

1.6 Directors’ Training

There is currently no formal training programme for new Directors. All Directors of the Company have successfully completed the Mandatory Accreditation Programme conducted by the Research Institute of Investment Analysis Malaysia ("RIIAM"). The Directors will continue to undergo other relevant training programmes to further enhance their knowledge.

1.7 Re-Election

In accordance with the Company’s Articles of Association, one-third of the Directors retire by rotation at each Annual General Meeting and are eligible for re-election.

2. BOARD COMMITTEES

The Board has delegated certain functions and responsibilities to the Audit Committee, Nomination Committee and Remuneration Committee, which operate within clearly defined terms of reference. The Chairman of these Committees reports the outcome of the meetings to the Board.

• Audit Committee

The terms of reference of the Audit Committee are set out on pages 27 - 29 of this Annual Report.

• Nomination Committee

The members of the Committee comprise:-

Dato’ Mohamad Taha Bin Ariffin - Chairman, Independent Non-Executive DirectorHaji Idris Bin Haji Buang - Independent Non-Executive DirectorDatu Wilson Baya Dandot - Non-Independent Non-Executive Director

The Committee met twice during the year. The functions of the Committee include recommendations of new nominees to the Board, review and assessment of the contributions of each director.


• Remuneration Committee

The members comprise the following directors:-

Dato’ Mohamad Taha Bin Ariffin - Chairman, Independent Non-Executive DirectorHaji Idris Bin Haji Buang - Independent Non-Executive DirectorDatuk Wan Ali Tuanku Yubi - Non-Independent Executive Director

The Committee met twice during the year. The functions of the Committee include developing the remuneration policy, determining remuneration packages of the Group employees and recommending to the Board the remuneration package of the Executive Directors and Senior Management.

3. DIRECTORS’ REMUNERATION

Details of directors’ remuneration for the year ended 31 December 2003 are as follows:-

• Aggregate remuneration of Directors:

Salary/Fees Other Emoluments Total(Including bonus, allowances and benefits-in-kind)

RM’000 RM’000 RM’000

Executive Directors 476 187 663

Non-Executive Directors 216 - 216

• The number of Directors’ whose total remuneration falls within the following categories:

Executive Directors Salary/Fees Bonus Allowances Benefits-in-kind

<RM50,000 - 2 1 1

RM50,001 - RM100,000 - - 1 -

RM100,001 - RM150,000 1 - - -

RM350,001 - RM400,000 1 - - -

Non-Executive Directors Salary/Fees Bonus Allowances Benefits-in-kind

<RM50,000 3 - - -

RM50,001 - RM100,000 1 - - -



4. RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS

The Company recognises the importance of timely dissemination of information to the Company’s shareholders and investors and in this regard the Annual Report of the Company is sent to its shareholders at least 21 days before its Annual General Meeting ("AGM") in compliance with the Listing Requirements of the Bursa Malaysia Securities Berhad ("BMSB"). The AGM is the principal forum for dialogue with shareholders who are encouraged to raise questions and seek clarification on the operations and financial performance of the Group.

Timely announcements on the Group’s business, financial results and corporate proposals are also made to the public.

5. STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR PREPARING THE FINANCIAL STATEMENTS

The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year in accordance with applicable approved accounting standards such that the financial statements should give a true and fair view of the state of affairs of the Group and Company and the results and cashflows of the Group and the Company for the financial year.

In preparing the financial statements, the Directors have:

• Selected and adopted suitable accounting policies in accordance with approved applicable accounting standards in Malaysia;

• Applied consistently the adopted accounting policies;• Made judgments and estimates that are reasonable and prudent; and• Prepared the financial statements on the going-concern basis.

The Directors are also responsible for ensuring that proper accounting records are kept and that the financial statements disclose with reasonable accuracy the Company’s financial position, and are in compliance with the Companies Act, 1965.

The Directors have also taken reasonable steps to prevent and detect fraud and other irregularities and to safeguard the assets of the Group and the Company.

6. STATEMENT OF INTERNAL CONTROL

The Group’s Statement of Internal Control is set out on pages 20 and 21.

7. RELATIONSHIP WITH EXTERNAL AUDITORS

The role of the Audit Committee in relation to the external auditors is described on page 28.


8. ADDITIONAL COMPLIANCE INFORMATION

• Material Contracts

Save as disclosed hereunder, neither the Company nor any of its subsidiary companies had entered into any material contract which involved Directors’ and/or major shareholders’ interests, which were either still subsisting at the end of the financial year or which were entered into since the end of the previous financial year:-

Date of Agreement Company Transacting Nature Transaction Company amount for 2003

RM’000

17 October 2000 Sarawak Power SESCO Power Purchase 51,289Generation

Sdn Bhd

17 October 2000 Sejingkat Power SESCO Power Purchase 101,561Corporation

Sdn Bhd

9 September 2003 Jayalah Cemerlang Government Design & 59,325Realty Sdn Bhd of Sarawak Construction

of 12-Storey Office Complex

in Mukah

Note:

Sarawak Enterprise Corporation Berhad ("SECB") is 52.31% owned by the State Financial Secretary of Sarawak.SESCO is 45% owned by SECB and is a person connected to the State Financial Secretary of Sarawak.Sarawak Power Generation Sdn Bhd is a 100% owned subsidiary of SECB.Sejingkat Power Corporation Sdn Bhd is 50.82% owned by SECB and 49.18% owned by SESCO.Jayalah Cemerlang Realty Sdn Bhd is a 100% owned subsidiary of SECB.

• Sanctions/Penalties

There were no sanctions and/or penalties imposed on the Company, its Directors or Management by the regulatory authorities during the year under review.

• Non-Audit Fees

Non-audit fees of RM139,645 were paid to the external auditors for the financial year ended 31 December 2003.



AUDIT COMMITTEE REPORT / Laporan Jawatankuasa Audit

1. MEMBERS OF THE AUDIT COMMITTEE

Haji Idris Bin Haji Buang - Chairman and Independent Non-Executive DirectorDato’ Mohamad Taha Bin Ariffin - Independent Non-Executive DirectorDato’ Chew Kong Seng - Non-Independent Executive Director

2. TERMS OF REFERENCE OF AUDIT COMMITTEE

Policy

Sarawak Enterprise Corporation Berhad established its Audit Committee on 30 July 1994 with a view to ensure that internal and external audit functions are properly conducted, and that audit recommendations are being carried out effectively by all subsidiaries of the Sarawak Enterprise Corporation Berhad Group.

Objectives

The objectives of this policy are:

(a) to comply with Chapter 15 of the Listing Requirements of the Bursa Malaysia Securities Berhad;

(b) to relieve the full Board of Directors from detailed involvement in the review of the results of internal and external audit activities, and yet ensure that audit findings are brought up to the highest level for consideration.

Composition of Audit Committee

- Members

The Audit Committee is appointed by the Directors from amongst their number (pursuant to a resolution ofthe Board of Directors) which fulfils the following requirements:

(a) the Audit Committee shall be composed of no fewer than 3 members;

(b) a majority of the Audit Committee shall be Independent Directors; and

(c) at least one member of the Audit Committee:

(i) must be a member of the Malaysian Institute of Accountants; or

(ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years’working experience and:

(aa) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or

(bb) he must be a member of one of the associations of accountants specified in Part II of the 1st

Schedule of the Accountants Act 1967;

(d) No alternate director shall be appointed as a member of the Audit Committee.



- Chairman

The members of the Audit Committee shall elect a Chairman from among their number who shall be an Independent Director.

Functions of Audit Committee

The functions of the Audit Committee are as follows:

(1) review the following and report the same to the Board of Directors:

(a) with the external auditor, the audit plan;

(b) with the external auditor, his evaluation of the system of internal controls;

(c) with the external auditor, his audit report;

(d) the assistance given by the employees to the external auditor;

(e) the adequacy of the scope, functions and resources of the internal audit functions and that it has the necessary authority to carry out its work;

(f) the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;

(g) the quarterly results and year-end financial statements, prior to the approval by the Board of Directors, focusing particularly on:

(i) changes in or implementation of major accounting policy changes;

(ii) significant and unusual events; and

(iii) compliance with accounting standards and other legal requirements;

(h) any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity;

(i) any letter of resignation from the external auditors of the Company; and

(j) whether there is reason (supported by grounds) to believe that the Company’s external auditor is not suitable for re-appointment; and

(2) recommend the nomination of a person or persons as external auditors,

together with such other functions as may be determined by the Board of Directors.


Authority of Audit Committee

Wherever necessary and reasonable for the performance of its duties, the Audit Committee shall in accordance with a procedure to be determined by the Board of Directors and at the cost of the Company:

(a) have the authority to investigate any matter within its terms of reference;

(b) have the resources which are required to perform its duties;

(c) have full and unrestricted access to any information pertaining to the Company;

(d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any);

(e) obtain independent professional or other advice; and

(f) convene meetings with the external auditors, excluding the attendance of the executive members of the Audit Committee, whenever deemed necessary.

Meetings and Reporting Procedures

(a) The Audit Committee shall meet as often as the Chairman of the Committee deems necessary but not less than four times a year.

(b) In order to form a quorum in respect of a meeting of the Audit Committee, the majority of members of the Audit Committee present at the meeting must be Independent Directors.

(c) The Chairman of the Committee shall be entitled, where deemed appropriate, to invite any person(s) to meetings of the Audit Committee.

(d) The Secretary of the Committee is responsible for:

(i) sending out notices of meetings; and

(ii) preparing and keeping minutes of meetings.

(e) The Audit Committee meeting minutes are to be extended to the Board of Directors.

3. DETAILS OF ATTENDANCE OF MEMBERS AT AUDIT COMMITTEE MEETINGS

The Audit Committee met five (5) times during the year. Details of attendance at the Audit Committee Meetings are as follows:-

Name of Member No. of Meetings Attended

Haji Idris Bin Haji Buang 5Dato’ Mohamad Taha Bin Ariffin 5Dato’ Chew Kong Seng 5



4. SUMMARY OF ACTIVITIES

During the year, the Audit Committee carried out its duties and responsibilities in accordance with its terms of reference. In performing its functions, the Committee reviewed the quarterly, half-yearly and year-end results prior to approval by the Board, related party transactions and internal audit reports of its operating subsidiaries. During the respective Board Meetings, the Chairman of the Audit Committee briefed the Board on issues deliberated at the Audit Committee Meetings and the recommendations of the Committee.

During the review of the Group’s year-end results, representatives of the external auditors, Messrs Ernst & Young, were invited to discuss the Group’s accounts, Management’s response to all pertinent issues and findings raised and noted by the external auditors during their audit of the accounts, together with recommendations in respect of their findings.

5. INTERNAL AUDIT FUNCTION

An Internal Audit Unit was established in September 2003 to carry out audits on the operations within the Group and to assist the Audit Committee in the discharge of its duties and responsibilities pertaining to risks and controls. The Head, Internal Audit reports to the Audit Committee.

The principal objective of the Internal Audit function is to provide assurance that the system of internal controls of the Group is operating satisfactorily and effectively by complying with the policies and procedures, applicable laws and regulations, assessment of risk and adequacy of risk management and corporate governance policy.

A summary of the activities undertaken by Internal Audit Department since its establishment is set out in the Statement of Internal Control of this Annual Report.


FINANCIAL STATEMENTS

32 - 35 Directors’ Report

36 Statement by Directors and Statutory Declaration

37 Auditors’ Report

38 Income Statements

39 Balance Sheets

40 - 41 Statements of Changes In Equity

42 - 43 Cash Flow Statements

44 - 76 Notes To The Financial Statements

PENYATA KEWANGAN

32 - 35 Laporan Para Pengarah

36 Penyata Para Pengarah dan Akuan Berkanun

37 Laporan Juruaudit

38 Penyata Pendapatan

39 Kunci Kira-Kira

40 - 41 Penyata Perubahan Dalam Ekuiti

42 - 43 Penyata Aliran Tunai

44 - 76 Nota-Nota Kepada Penyata Kewangan

Laporan Tahunan 2003 Annual Report32

DIRECTORS’ REPORT / Laporan Para Pengarah

The directors have pleasure in presenting their report together with the audited financial statements of the Groupand of the Company for the financial year ended 31 December 2003.

Principal activities

The principal activity of the Company is investment holding.

The principal activities of the subsidiaries and associates consist of:a) investment holdingb) generation, transmission, distribution and sale of electricityc) manufacture, fabrication, galvanising and sale of steel structuresd) property holding and development, construction and realtye) manufacturing and trading of plastic packaging productsf) provision, integration and maintenance of control instrumentation and SCADA systemsg) computer software developmenth) provision of integrated circuit design services, intellectual property licensing and operation support.

There have been no significant changes in the nature of these activities during the financial year.

ResultsGroup Company

RM'000 RM'000

Profit before taxation 101,999 63,235Taxation (23,624) (11,735)

Profit after taxation 78,375 51,500Minority interests (10,061) -

Net profit for the year 68,314 51,500

There were no material transfers to or from reserves or provisions during the financial year other than as disclosedin the Statements of Changes in Equity.

In the opinion of the directors, the results of the operations of the Group and of the Company during the financialyear were not substantially affected by any item, transaction or event of a material and unusual nature except asdisclosed in the financial statements.

Dividends

During the financial year, the Company paid a final dividend of 1.5 sen per share less tax at 28%, amounting toRM12,638,953, in respect of the previous financial year.

At the forthcoming Annual General Meeting, a final dividend in respect of the current financial year ended 31December 2003, of 1.5 sen less 28% taxation on 1,170,273,425 ordinary shares, amounting to a total dividend ofRM12,638,953 (1.08 sen net per share) will be proposed for shareholders' approval. The financial statements for thecurrent financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will beaccounted for in shareholders' equity as an appropriation of retained profits in the next financial year ending 31December 2004.


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:

Dato' Mohamad Taha Bin Ariffin - ChairmanDatuk Wan Abdul Kadir @ Wan Ali Bin Wan Yubi @ Tuanku YubiHaji Idris Bin Haji BuangDatuk Fong Joo ChungDatu Wilson Baya DandotDato' Chew Kong Seng @ Chew Kong Huat

In accordance with Article 82 of the Company's Articles of Association, Dato' Chew Kong Seng @ Chew Kong Huatand Datuk Fong Joo Chung retire by rotation at the forthcoming Annual General Meeting and, being eligible, offerthemselves for re-election.

Directors' benefits

Neither at the end of the financial year, nor at any time during the year, did there subsist any arrangement to whichthe Company was a party, whereby the directors might acquire benefits by means of acquisition of shares in ordebentures 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 any benefit(other than benefits included in the aggregate amount of emoluments received or due and receivable by thedirectors as shown in the financial statements or the fixed salary of a full-time employee of the Company) by reasonof a contract made by the Company or a related corporation with any director or with a firm of which the directoris a member or with a company in which the director has a substantial financial interest, except as disclosed in Note33 to the financial statements.

Directors' interests

None of the directors in office at the end of the financial year had any interest in shares, warrants or options in theCompany or its related corporations during the financial year.

Other statutory information

(a) Before the income statements and balance sheets of the Group and of the Company were made out, thedirectors took reasonable steps:(i) to ascertain that proper action has been taken in relation to the writing off of bad debts and the making

of provision for doubtful debts and satisfied themselves that all known bad debts had been written off andthat adequate provision had been made for doubtful debts; and

(ii) to ensure that current assets which were unlikely to realise their values as shown in the accounting recordsin the ordinary course of business had been written down to amounts which they might be expected so torealise.

(b) At the date of this report, the directors are not aware of any circumstances which would render:(i) the amount of bad debts written off or the amount of the provision for doubtful debts inadequate to any

substantial extent; and

(ii) the values attributed to current assets in the financial statements of the Group and of the Companymisleading.

(c) At the date of this report, the directors are not aware of any circumstances which have arisen which wouldrender adherence to the existing method of valuation of assets or liabilities of the Group and of the Companymisleading or inappropriate.

SARAWAK ENTERPRISECORPORATION BERHAD

Company No.: 007199-D • Incorporated In Malaysia


Other statutory information (cont’d.)

(d) At the date of this report, the directors are not aware of any circumstances which would render any amountstated in the financial statements misleading.

(e) As 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 liabilities of any other person; or

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

(f) In the opinion of the directors:(i) 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 will or may affect the ability of the Groupand of the Company to meet its obligations when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end ofthe financial year and the date of this report which is likely to affect substantially the results of theoperations of the Group or of the Company for the financial year in which this report is made.

Significant events

(a) Investment in Encorp Berhad

(i) Pursuant to a Voluntary Scheme of Arrangement (“the Scheme”) between Great Wall Plastic IndustriesBerhad (“GWPI”) and its shareholders involving Encorp Berhad (“Encorp”) under Section 176 of theCompanies Act, 1965 which was approved by the shareholders of GWPI at the Court Convened Meetingand Extraordinary General Meeting of GWPI held on 23 September 2002, the existing ordinary shares ofRM1.00 each in GWPI (“GWPI shares”) were exchanged for new ordinary shares of RM1.00 each inEncorp (“Encorp shares”) on the basis of one (1) new Encorp share for every one (1) existing GWPI shareafter the Bonus Issue by Encorp of 67,975,833 new Encorp shares on the basis of nine (9) new Encorpshares for every ten (10) existing Encorp shares held, credited as fully paid-up (“Bonus Issue”).

Upon completion of the Scheme and the Bonus Issue by Encorp, the percentage of shares held in Encorp byDasar Untung Sdn. Bhd. (“DUSB”), a wholly-owned subsidiary of the Company, was reduced to 10.74%(before full exercise of outstanding ESOS Options) and 10.37% (after full exercise of outstanding ESOSOptions) from its original shareholding of 30% in GWPI.

This transaction had been completed on 9 December 2002. The effect of this transaction was that theGroup had recorded an exceptional loss of RM15.1 million in the last financial year.

The listing status of Great Wall Plastic Industries Berhad was transferred to Encorp Berhad with effect from11 February 2003 pursuant to the Scheme of Arrangement as described above.

(ii) Subsequent to the transaction as mentioned in (i) above, DUSB had acquired an additional 35 millionordinary shares of RM1.00 each in Encorp for a total cash consideration of RM52.5 million or RM1.50 pershare.

With the aforesaid acquisition, DUSB's shareholding in Encorp had been increased to 26.4% comprising59,000,000 ordinary shares of RM1.00 each in Encorp.

The aforesaid acquisition, was approved by the Foreign Investment Committee (“FIC”) on 8 November2003.

DIRECTORS’ REPORT / Laporan Para Pengarah


Significant events (cont’d.)

(b) Investment in Integrated Circuit Design Services Sdn. Bhd.

On 16 September 2003, Dunlop Properties Sdn. Bhd. (“DPSB”), a wholly-owned subsidiary of SarawakEnterprise Corporation Berhad (“SECB”), entered into a joint venture agreement with Hualon MicroelectronicsCorporation, Taiwan and 1st Silicon (Malaysia) Sdn. Bhd. to engage in the business of integrated circuit designservices, intellectual property licensing and operation support (“the Business”). A joint venture company namely,Integrated Circuit Design Services Sdn. Bhd. (“ICDS”) was incorporated to undertake the Business. DPSB holds30% equity interest in ICDS comprising of 3,885,545 ordinary shares of RM1.00 each.

Controlling shareholder

The Directors regard the State Financial Secretary, Sarawak, a statutory corporation established under the StateFinancial Secretary (Incorporation) Ordinance of Sarawak, as the controlling shareholder of the Company.

Auditors

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors

Dato' Mohamad Taha Datuk Wan Abdul Kadir @ Wan AliBin Ariffin Bin Wan Yubi @ Tuanku YubiChairman Chief Executive Officer

Kuching, MalaysiaDate: 23 April 2004




Statement by Directors pursuant to Section 169 (15) of the Companies Act, 1965

We, Dato' Mohamad Taha Bin Ariffin and Datuk Wan Abdul Kadir @ Wan Ali Bin Wan Yubi @ Tuanku Yubi, beingtwo of the directors of Sarawak Enterprise Corporation Berhad, do hereby state that, in the opinion of the directors,the accompanying financial statements set out on pages 38 to 76 are drawn up in accordance with applicableApproved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true andfair view of the financial position of the Group and of the Company as at 31 December 2003 and of the results andthe cash flows of the Group and of the Company for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the directors

Dato' Mohamad Taha Datuk Wan Abdul Kadir @ Wan AliBin Ariffin Bin Wan Yubi @ Tuanku YubiChairman Chief Executive Officer


Statutory Declaration pursuant to Section 169 (16) of the Companies Act, 1965

I, Lee Meng Soon, being the person primarily responsible for the financial management of Sarawak EnterpriseCorporation Berhad, do solemnly and sincerely declare that the accompanying financial statements set out onpages 38 to 76 are in my opinion correct, and I make this solemn declaration conscientiously believing the same tobe true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Lee Meng SoonSubscribed and solemnly declared by theabovenamed Lee Meng Soonat Kuching in the State of Sarawakon 23 April 2004

Before me,

STATEMENT BY DIRECTORS / Penyata Para Pengarah


Report of the Auditors to the Members of Sarawak Enterprise Corporation Berhad

We have audited the accompanying financial statements set out on pages 38 to 76. These financial statements arethe responsibility of the Company's directors. Our responsibility is to express an opinion on these financialstatements based on our audit.

We have conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by the directors, as well as evaluating the overall presentation of the financialstatements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the financial statements have been properly drawn up in accordance with the provisions of the CompaniesAct, 1965 and applicable Approved Accounting Standards in Malaysia so as to give a true and fair view of:

(i) the financial position of the Group and of the Company as at 31 December 2003 and of the results andthe cash flows of the Group and of the Company for the year then ended; and

(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financialstatements; and

(b) the accounting and other records and the registers required by the Act to be kept by the Company and by itssubsidiaries for which we have acted as auditors have been properly kept in accordance with the provisions ofthe Act.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financialstatements of the Company are in form and content appropriate and proper for the purposes of the preparation ofthe consolidated financial statements and we have received satisfactory information and explanations required byus for those purposes.

The auditors' reports on the financial statements of the subsidiaries were not subject to any qualification and didnot include any comment required to be made under Section 174(3) of the Companies Act, 1965.

ERNST & YOUNG YONG VOON KARAF: 0039 1769/04/06 (J/PH)Chartered Accountants Partner




AUDITORS’ REPORT / Laporan Juruaudit


Group CompanyNote 2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

Revenue 3 265,060 201,052 48,658 49,568

Cost of sales (171,654) (111,313) - -

Gross profit 93,406 89,739 48,658 49,568

Other operating income 5,428 6,008 3 2,930Selling and distribution expenses (367) (256) - -Administrative expenses (7,456) (7,484) (2,582) (2,189)Other operating expenses (10,148) (9,510) (1,526) (2,681)

Profit from operations 80,863 78,497 44,553 47,628

Finance costs (21,098) (23,314) (18) (15)Share of results of associates 107,134 66,701 - -

Profit before exceptional items 166,899 121,884 44,535 47,613

Exceptional items 4 (64,900) (84,240) 18,700 (50,600)

Profit/(loss) before taxation 5 101,999 37,644 63,235 (2,987)

Taxation 6 (23,624) (25,172) (11,735) (12,448)

Profit/(loss) after taxation 78,375 12,472 51,500 (15,435)

Minority interest (10,061) (4,300) - -

Net profit/(loss) for the year 68,314 8,172 51,500 (15,435)

Earnings per ordinary share (sen) - basic 7 5.8 0.7

Dividends per share (sen) Proposed 8 1.5 1.5 1.5 1.5

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

INCOME STATEMENTS / Penyata Pendapatanfor the year ended 31 December 2003 / bagi tahun berakhir 31 Disember 2003




Group CompanyNote 2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

Non-current assets

Property, plant and equipment 9 511,211 534,741 21,137 19,118Investment in subsidiaries 10 - - 143,341 143,341Investment in associates 11 1,730,053 1,660,490 1,403,835 1,403,835Other investments 12 575,879 640,779 575,587 556,887Amounts due from subsidiary companies 13 - - 374,204 343,800Trade receivables 18 46,092 - - -Other receivable 19 62,014 41,399 62,014 41,399Goodwill on consolidation 14 15,539 15,539 - -

Current assets

Inventories 15 23,861 23,985 - -Development properties 16 104,560 125,902 - -Deferred charges 17 - 320 - -Trade receivables 18 17,316 7,274 - -Other receivables 19 7,232 6,705 1,702 2,453Amounts due from associates 13,607 12,256 - -Amounts due from subsidiary companies 13 - - 2,110 1,615Short-term deposits 20 101,319 125,451 49,187 77,281Cash and bank balances 15,874 14,390 1,717 2,207

283,769 316,283 54,716 83,556

Current liabilities

Trade payables 21 14,909 7,557 - -Other payables 22 7,415 12,794 775 2,392Short-term borrowings 23 49,273 52,512 - -Amounts due to subsidiary companies 13 - - 31,081 31,096Finance lease payables 24 - 140 - 104Current tax liability 145 275 - -Loans from an associate 25 4,200 1,200 - -

75,942 74,478 31,856 33,592

Net current assets 207,827 241,805 22,860 49,964

3,148,615 3,134,753 2,602,978 2,558,344

Financed by:

Share capital 26 1,170,273 1,170,273 1,170,273 1,170,273Reserves 27 1,674,516 1,618,841 1,415,388 1,376,527

Shareholders' equity 2,844,789 2,789,114 2,585,661 2,546,800

Minority interests 84,960 75,099 - -

Deferred and long-term liabilities 28 218,866 270,540 17,317 11,544

3,148,615 3,134,753 2,602,978 2,558,344


BALANCE SHEETS / Kunci Kira-Kiraas at 31 December 2003 / pada 31 Disember 2003


STATEMENTS OF CHANGES IN EQUITY / Penyata Perubahan Dalam Ekuitifor the year ended 31 December 2003 / bagi tahun berakhir 31 Disember 2003

Non-distributable Distributable

CapitalShare Share Capital redemption General Retained

Note capital premium reserves reserve reserves profits TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group

At 1 January 2002

As previously stated 1,170,273 844,505 237,254 17,639 34,181 656,999 2,960,851

Prior year adjustment 29 - - (150,105) - - - (150,105)

At 1 January 2002 1,170,273 844,505 87,149 17,639 34,181 656,999 2,810,746(restated)

Net profit for the year - - - - - 8,172 8,172

Dividend - - - - - (25,278) (25,278)

Transfer to capitalreserves - associate - - 28,492 - - (28,492) -

Transfer to generalreserves - associate - - - - 22,803 (22,803) -

Changes in groupstructure - associate - - 117,823 - - (122,349) (4,526)

At 31 December 2002 1,170,273 844,505 233,464 17,639 56,984 466,249 2,789,114

At 1 January 2003

As previously stated 1,170,273 844,505 385,446 17,639 56,984 466,249 2,941,096

Prior year adjustment 29 - - (151,982) - - - (151,982)

At 1 January 2003 1,170,273 844,505 233,464 17,639 56,984 466,249 2,789,114(restated)


Dividend - - - - - (12,639) (12,639)

Transfer to capitalreserves - associate - - 77,865 - - (77,865) -

Transfer to generalreserves - associate - - - - 5,306 (5,306) -

At 31 December 2003 1,170,273 844,505 311,329 17,639 62,290 438,753 2,844,789





Non-distributable Distributable

CapitalShare Share Capital redemption General Retained

Note capital premium reserves reserve reserves profits TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Company

At 1 January 2002 1,170,273 844,505 123,000 17,639 5,000 427,096 2,587,513

Loss for the year - - - - - (15,435) (15,435)

Dividend - - - - - (25,278) (25,278)

At 31 December 2002 1,170,273 844,505 123,000 17,639 5,000 386,383 2,546,800


Dividend - - - - - (12,639) (12,639)

At 31 December 2003 1,170,273 844,505 123,000 17,639 5,000 425,244 2,585,661


Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

Cash flows from operating activities

Profit/(loss) before taxation 101,999 37,644 63,235 (2,987)

Adjustments for:Share of results of associates (107,134) (66,701) - -Depreciation of property, plant and equipment 30,962 27,849 366 311Loss/(gain) on disposal of property, plant

and equipment 10 (2,863) - (2,844)Provision for slow-moving inventories

and inventories obsolescence (140) 70 - -Provision of doubtful debts less provision

no longer required 405 (164) - -Exceptional items 64,900 84,240 (18,700) 50,600Interest expenses 1,381 1,302 18 15Profit payments on BaIDS 19,632 21,876 - -Interest income (26,465) (27,643) (25,993) (26,761)Dividend income (165) (307) (22,665) (22,807)Unrealised loss on foreign exchange 34 119 - -

Operating profit/(loss) before workingcapital changes 85,419 75,422 (3,739) (4,473)

Development properties 21,342 (17,083) - -Inventories 264 (4,013) - -Receivables (55,712) (4,659) 595 379Payables 2,053 (9,784) (1,617) (8,896)Amount due from subsidiaries - - (30,914) (69,873)Amount due from associates (1,351) 4,274 - -Deferred charges 320 (320) - -

Cash from/(used in) operations 52,335 43,837 (35,675) (82,863)

Interest paid (1,381) (1,302) (18) (15)Taxes paid (1,461) (1,734) (1,350) (1,439)

Net cash from/(used in) operating activities 49,493 40,801 (37,043) (84,317)



CASH FLOW STATEMENTS / Penyata Aliran Tunaifor the year ended 31 December 2003 / bagi tahun berakhir 31 Disember 2003

Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

Cash flows from investing activities

Repayment of land premium - (6,479) - -Purchase of property, plant and equipment (7,444) (12,084) (2,385) (380)Subscription of additional shares in associate (3,885) (52,500) - -Interest received 4,141 7,028 5,378 6,146Dividend received 18,209 19,175 18,209 18,311Proceeds from disposal of property, plantand equipment 2 6,303 - 6,185Proceeds from issuance of shares in subsidiarycompany from minority shareholder - 400 - -

Net cash from/(used in) investing activities 11,023 (38,157) 21,202 30,262

Cash flows from financing activities

Loan from a corporate shareholder 8,000 13,000 - -Dividend paid (12,639) (25,278) (12,639) (25,278)Drawdown of bank borrowings - 4,933 - -Repayment of bank borrowings (6,713) (665) - -Repayment of bills payable (4,233) - - -Bankers’ acceptances obtained - 4,137 - -Repayment of finance lease payables (140) (822) (104) (115)Profit payments on BaIDS (19,746) (21,934) - -Repayment of BaIDS (45,000) (40,000) - -Repayment of loan from a corporate shareholder (2,700) (600) - -

Net cash used in financing activities (83,171) (67,229) (12,743) (25,393)

Net decrease in cash and cash equivalents (22,655) (64,585) (28,584) (79,448)

Cash and cash equivalents at thebeginning of the year 139,841 204,426 79,488 158,936

Cash and cash equivalents at the end of the year 117,186 139,841 50,904 79,488

Cash and cash equivalents are analysed as follows:

Short-term deposits 101,319 125,451 49,187 77,281Cash and bank balances 15,874 14,390 1,717 2,207Bank overdrafts (7) - - -

117,186 139,841 50,904 79,488






NOTES TO THE FINANCIAL STATEMENTS 31 December 2003

/ Nota-Nota Kepada Penyata Kewangan 31 Disember 2003

1. Corporate information

The principal activity of the Company is investment holding. The principal activities of the subsidiaries of theCompany are described in Note 10 to the financial statements. There have been no significant changes in thenature of these activities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed onthe Main Board of Bursa Malaysia Securities Berhad.

The registered office of the Company is located at 1st Floor Wisma Naim, Lot 2679 Rock Road, 93200 Kuching.

The financial statements of the Group and of the Company are expressed in Ringgit Malaysia.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolutionof the directors on 23 April 2004.

2. Significant accounting policies

(a) Basis of preparation

The financial statements of the Group and of the Company have been prepared under the historical costconvention except for the valuation of a landed property (unless as otherwise indicated in the significantaccounting policies).

The financial statements comply with the provisions of the Companies Act, 1965 and applicableApproved Accounting Standards in Malaysia.

During the financial year ended 31 December 2003, the Group and the Company adopted thefollowing Malaysian Accounting Standard Board (MASB) Standards for the first time:

MASB 25 Income TaxesMASB 27 Borrowing CostsMASB 29 Employee Benefits

The effects of adopting MASB 25 are summarised in the Statements of Changes in Equity and furtherinformation is disclosed in Note 29 to the financial statements. The adoption of MASB 27 and MASB 29have not given rise to any adjustments to the opening balances of retained profits of the prior andcurrent year or to changes in comparatives.

(b) Basis of consolidation

(i) Subsidiaries

The consolidated financial statements include the financial statements of the Company and all itssubsidiaries. Subsidiaries are those companies in which the Group has a long term equity interestand where it has power to exercise control over the financial and operating policies so as toobtain benefits therefrom.

Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisitionmethod of accounting, the results of subsidiaries acquired or disposed of during the year areincluded in the consolidated income statement from the effective date of acquisition or up to theeffective date of disposal, as appropriate. The assets and liabilities of a subsidiary are measured attheir fair values at the date of acquisition and these values are reflected in the consolidatedbalance sheet. The difference between the cost of an acquisition and the fair value of the Group’sshare of the net assets of the acquired subsidiary at the date of acquisition is included in theconsolidated balance sheet as goodwill or negative goodwill arising on consolidation.




2. Significant accounting policies (cont'd.)

(b) Basis of consolidation (cont'd.)

(i) Subsidiaries (cont'd.)

Intragroup transactions, balances and resulting unrealised gains are eliminated on consolidationand the consolidated financial statements reflect external transactions only. Unrealised lossesare eliminated on consolidation unless costs cannot be recovered.

The gain or loss on disposal of a subsidiary company is the difference between net disposalproceeds and the Group's share of its net assets together with any unamortised balance ofgoodwill and exchange differences which were not previously recognised in the consolidatedincome statement.

Minority interest is measured at the minorities' share of the post acquisition fair values of theidentifiable assets and liabilities of the acquiree.

(ii) Associates

Associates are those companies in which the Group has a long term equity interest and where itexercises significant influence over the financial and operating policies.

Investments in associates are accounted for in the consolidated financial statements by the equitymethod of accounting based on the audited or management financial statements of the associates.Under the equity method of accounting, the Group's share of profits less losses of associatesduring the year is included in the consolidated income statement. The Group's interest inassociates is carried in the consolidated balance sheet at cost plus the Group's share ofpost-acquisition retained profits or accumulated losses and other reserves as well as goodwill onacquisition.

Unrealised gains on transactions between the Group and the associates are eliminated to theextent of the Group's interest in the associates. Unrealised losses are eliminated unless costcannot be recovered.

The premium on acquisition represents the difference between the consideration paid for theshares in the associates and the value of attributable net assets acquired. Premium on acquisitionis not amortised but write-offs are made where in the opinion of the Directors, a permanentdiminution in value has occurred.

(c) Goodwill

Goodwill represents the excess of the cost of acquisition over the Group's interest in the fair value of theidentifiable assets less liabilities of a subsidiary or associate at the date of acquisition.

Goodwill is stated at cost less accumulated amortisation and impairment losses. The policy for therecognition and measurement of impairment losses is in accordance with Note 2(o). Goodwill arisingon the acquisition of subsidiaries is presented separately in the balance sheet while goodwill arising onthe acquisition of associates is included within the carrying amount of investment in associates.



(d) Investments in subsidiaries and associates

The Company's investments in subsidiaries and associates are stated at cost less impairment losses. Thepolicy for the recognition and measurement of impairment losses is in accordance with Note 2(o).

On disposal of such investments the differences between net disposal proceeds and their carrying amountsis charged or credited to the income statement.

Dividend income from investments in subsidiaries and associates is accounted for in the Company'sincome statement as and when received.

(e) Other investments

Other investments are held on a long-term basis. These are shown at cost unless in the opinion of thedirectors, there is a permanent diminution in value in which case provision is made for the diminutionin value.

Dividend income arising on these investments is taken to the income statement as and when received.

(f) 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 2(o).

No depreciation is provided on property, plant and equipment until it is put into use.

Long-term leasehold land and capital work-in-progress are not depreciated. Short-term leasehold landis depreciated over the period of the respective lease terms. Depreciation of other property, plant andequipment is provided for on a straight-line basis to write off the cost over the estimated useful life at thefollowing annual rates:

Buildings - 2% to 4%Plant, vehicles, furniture, fittings,

equipment and others - 4% to 50%

Upon the disposal of an item of property, plant and equipment, the difference between the net disposalproceeds and the carrying amount is recognised in the income statement.

Capital work-in-progress includes all direct expenses. Interest incurred on borrowings relating to work-in-progress is capitalised until the property, plant and equipment are ready for their intended use.

(g) Inventories and work-in-progress

Inventories are stated at the lower of cost and net realisable value.

Raw materials are stated at cost which includes the actual cost of purchase and incidentals in bringingthe raw materials to their present condition and location and are determined on a weighted averagebasis. Net realisable value represents the estimated selling price less all estimated costs to completionand costs to be incurred in marketing, selling and distribution. In arriving at the net realisable value,due provision is made for obsolete and slow moving items.

Work-in-progress and finished goods include cost of materials, direct labour and an appropriateproportion of fixed and variable factory overheads.







(h) Development properties

Development properties are stated at cost plus attributable profit less progress billings. However, thebook value of the development property in the financial statements includes freehold land which isstated at valuation when previously held as property, plant and equipment, and developmentexpenditure which includes borrowing costs incurred directly in the development of these properties.Accumulation of costs in property development projects do not cease even where the estimated futurerevenues realisable are lower than the carrying value of the projects. However, provision is made forforeseeable losses.

Profit on development properties is recognised on a percentage of completion method on all units thathave been sold. The percentage of completion is determined base on cost incurred to date over totalestimated cost.

(i) Construction contract

Where the outcome of a construction contract can be estimated reliably, contract revenue andcontract costs are recognised as revenue and expenses respectively by reference to the stage ofcompletion of the contract activity at the balance sheet date. The stage of completion is measured byreference to the proportion of contract costs incurred for work performed to date to the estimated totalcontract costs.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue isrecognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costsare recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss isrecognised as an expense immediately.

When costs incurred on construction contracts plus recognised profits (less recognised losses)exceeds progress billings, the balance is shown as amount due from customers on contracts. Whenprogress billings exceed costs incurred plus recognised profits (less recognised losses), the balance isshown as amount due to customers on contracts.

(j) Foreign currencies transactions

Transactions denominated in foreign currencies are recorded in Ringgit Malaysia at the rate ofexchange ruling on the dates of transactions. Assets and liabilities denominated in foreign currency atthe balance sheet date are translated to Ringgit Malaysia at the prevailing rates of exchange on thebalance sheet date. All exchange differences thus arising are dealt with in the income statement.

The principal exchange rates concerned ruling at balance sheets date used are as follows:

2003 2002RM RM

1 Australian Dollar 2.89 -1 United States Dollar 3.82 3.82100 Philippine Peso 6.95 7.06





(k) Income tax

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

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheetdate between the tax bases of assets and liabilities and their carrying amounts in the financialstatements. In principle, deferred tax liabilities are recognised for all taxable temporary differences anddeferred tax assets are recognised for all deductible temporary differences, unused tax losses andunused tax credits to the extent that it is probable that taxable profit will be available against which thedeductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred taxis not recognised if the temporary difference arises from goodwill or negative goodwill or from the initialrecognition of an asset or liability in a transaction which is not a business combination and at the timeof 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 isrealised or the liability is settled, based on tax rates that have been enacted or substantively enacted atthe balance sheet date. Deferred tax is recognised in the income statement, except when it arises froma transaction which is recognised directly in equity, in which case the deferred tax is also charged orcredited directly to equity, or when it arises from a business combination that is an acquisition, in whichcase the deferred tax is included in the resulting goodwill or negative goodwill.

Prior to the adoption of MASB 25 Income Taxes on 1 January 2003, deferred tax was provided for usingthe liability method in respect of significant timing differences and deferred tax assets were notrecognised unless there was reasonable expectation of their realisation. This change in accountingpolicy has been accounted for retrospectively and the effects of this change are disclosed in Note 29.

(l) Leases

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewardsincident to ownership. All other leases are classified as operating leases.

(i) Finance leases

Assets acquired by way of hire purchase of finance leases are stated at an amount equal to thelower of their fair values and the present value of the minimum lease payments at the inception ofthe leases, less accumulated depreciation and impairment losses. The corresponding liability isincluded in the balance sheet as borrowings. In calculating the present value of the minimumlease payments, the discount factor used is the interest rate implicit in the lease, when it ispracticable to determine; otherwise, the Group's incremental borrowing rate is used.

Lease payments are apportioned between the finance costs and the reduction of the outstandingliability. Finance costs, which represent the difference between the total leasing commitmentsand the fair value of the assets acquired, are recognised as an expense in the income statementover the term of the relevant lease so as to produce a constant periodic rate of charge on theremaining balance of the obligations for each accounting period.

The depreciation policy for leased assets is consistent with that for depreciable property, plant andequipment as described in Note 2(f).





(l) Leases (cont'd.)

(ii) Operating leases

Operating lease payments are recognised as an expense in the income statement on a straight-linebasis over the term of the relevant lease.

(m) Cash and cash equivalents

Cash comprises cash on hand, deposits held at call with banks, bank overdrafts and short-term highlyliquid investments that are readily convertible to known amounts of cash and which are subject to aninsignificant risk of changes in value.

For the purpose of the Cash Flow Statements, cash and cash equivalents include cash and bankbalances, short-term deposits and bank overdrafts.

(n) Revenue recognition

Revenue is recognised when it is probable that the economic benefits associated with the transactionwill flow to the enterprise and the amount of the revenue can be measured reliably. The followingspecific recognition criteria must also be met before revenue is recognised:

(i) Sales of electricity

Capacity charges and energy payments in relation to the sale of energy are recognised on anaccrual basis.

(ii) Sale of goods

Income from sales of goods is recognised when the goods are delivered and invoiced.

(iii) Interest income

Interest income is recognised on an accrual basis.

(iv) Dividend income

Dividend income is recognised when received.

(v) Construction contract

Revenue from construction contract is accounted for by the stage of completion method asdescribed in Note 2(i).

(vi) Revenue from maintenance charges and rental income

Revenue from maintenance charges and rental income is recognised on an accrual basis.

(vii) Development properties

Revenue from sale of development properties is accounted for by the stage of completion methodin respect of all building units that have been sold. The stage of completion is determined byreference to the cost incurred to date to the total estimated costs where the outcome of the projectscan be reliably measured.



(o) Impairment of assets

At each balance sheet date, the Group reviews the carrying amount of its assets to determine whetherthere is any indication of impairment. If any such indication exists, impairment is measured bycomparing the carrying values of the assets with their recoverable amounts. Recoverable amount is thehigher of net selling price and value in use, which is measured by reference to discounted future cashflows.

An impairment loss is recognised as an expense in the income statement immediately, unless the assetis carried at a revalued amount. Any impairment loss of a revalued asset is treated as a revaluationdecrease to the extent of any unutilised previously recognised revaluation surplus for the same asset.Reversal of impairment losses recognised in prior years is recorded when the impairment lossesrecognised for the asset no longer exist or have decreased.

(p) Employee benefits

(i) Short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in theyear in which the associated services are rendered by employees of the Group and of theCompany.

(ii) Deferred contribution plans

As required by law, the Group makes contribution to the Employees Provident Fund (“EPF”). Suchcontributions are recognised as an expense in the income statement as incurred.

(q) Financial instruments

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

Financial instruments are classified as assets, liabilities or equity in accordance with the substance ofthe contractual arrangement. Interest, dividends, gains and losses relating to financial instrumentsclassified as assets or liabilities are reported as income or expense. Distributions to holders of financialinstruments classified as equity are charged directly to equity. Financial instruments are offset when theGroup has a legally enforceable right to offset and intends to settle either on a net basis or to realise theassets and settle the liabilities simultaneously.

(i) Receivables

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 thebalance sheet date.

(ii) Payables

Payables are stated at cost which is the fair value of the consideration to be paid in the future forgoods and services received.




2. Significant accounting policies (cont’d.)

(q) Financial Instruments (cont'd.)

(iii) Interest-bearing borrowings

Interest-bearing bank loans and overdrafts are recorded at the amount of proceeds received, net oftransaction costs.

Borrowing costs directly attributable to the acquisition and construction of developmentproperties and property, plant and equipment are capitalised as part of the cost of those assets,until such time as the assets are ready for their intended use or sale. All other borrowing costs arecharged to the income statement as an expense in the period in which they are incurred.

(iv) Equity instruments

Ordinary shares are classified as equity.

The transaction costs of an equity transaction, other than in the context of a business combination,are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise onlythose incremental external costs directly attributable to the equity transactions which wouldotherwise have been avoided. Cost of issuing equity securities in connection with a businesscombination are included in the cost of acquisition.

Dividends on ordinary shares are recognised in the period in which they are declared.

3. Revenue

Revenue of the Group and of the Company consists of the following:

Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

Construction contract 57,615 - - -Dividend income 165 307 22,665 22,807Interest income 24,248 25,168 25,993 26,761Sales of electricity 152,850 142,511 - -Manufacturing, fabrication, galvanising

and sale of steel structures 28,855 31,674 - -Others 1,327 1,392 - -

265,060 201,052 48,658 49,568

4. Exceptional items

Loss resulting from the VoluntaryScheme of Arrangement as describedin Note 34 (a) - (15,120) - -

(Provision)/write-back on provisionfor diminution in value of- quoted shares - (2,120) - -- unquoted shares and unquoted irredeemable

convertible loan stocks (a) (64,900) (67,000) 18,700 (50,600)

(64,900) (84,240) 18,700 (50,600)






4. Exceptional items (cont'd.)

(a) This represents the total provision for diminution in value of the Group's investments in 1st Silicon(Malaysia) Sdn. Bhd. (“1st Silicon”) to reflect the Group's notional proportionate share of the write-downeffected by 1st Silicon.

5. Profit/(loss) before taxationGroup Company

2003 2002 2003 2002RM'000 RM'000 RM'000 RM'000

(a) This is stated:

After charging:

Auditors' remuneration- current year 100 99 51 50- under/(over)provision in prior year 1 (4) 1 -Depreciation of property, plant and

equipment 30,962 27,849 366 311Directors' remuneration 1,375 1,355 879 860Hire of plant and machinery 33 55 - -Interest expenses- bank borrowings 357 691 14 -- leases 5 67 4 15- others 1,019 544 - -Profit payments on BaIDS 19,632 21,876 - -Provision for slow-moving inventories

and inventories obsolecence - 70 - -Provision for doubtful debts

less provision no longer required 405 - - -Rental of land and building 1,116 972 360 303Exceptional items (Note 4) 64,900 84,240 - 50,600Loss on disposal of property, plant

and equipment 10 - - -Loss on foreign exchange- realised 15 2 - -- unrealised 34 119 - -


5. Profit/(loss) before taxation (cont’d.)Group Company

2003 2002 2003 2002RM'000 RM'000 RM'000 RM'000

After crediting:

Exceptional items (Note 4) - - 18,700 -Gain on disposal of property, plant and equipment - 2,863 - 2,844Interest income- subsidiary companies - - 3,454 1,593- fixed deposits 4,105 7,001 1,924 4,553- others 22,360 20,642 20,615 20,615Dividends (gross)- unquoted associate - - 22,500 22,500- other investments

- unquoted - 125 - 125- quoted 165 182 165 182

Rental income 1,204 843 - -Provision for doubtful debt less provision no longer required - 164 - -Provision for inventories obsolescence no longer required 140 - - -

Note:

Analysis of directors' remuneration

Directors of the Company- emoluments 620 601 620 601- fees 295 295 216 216- benefits-in-kind 43 52 43 43

958 948 879 860

Other directors- emoluments 320 295 - -- fees 97 112 - -

417 407 - -

1,375 1,355 879 860



5. Profit/(loss) before taxation (cont’d.)

The number of Directors of the Company whose total remuneration falls within the following categories:

Executive Directors Salary/Fees Bonus Allowances Benefit-in-kind

<RM50,000 - 2 1 1RM50,001 - RM100,000 - - 1 -RM100,001 - RM150,000 1 - - -RM350,001 - RM400,000 1 - - -

Non-executive Directors

<RM50,000 3 - - -RM50,001 - RM100,000 1 - - -

Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

(b) Employee information

Salaries, wages and bonus 11,011 10,745 1,542 1,386Provident fund contributions 1,231 1,072 221 171Social security organisation contributions 105 99 6 5Other staff related expenses 25 19 4 -

Total staff costs (including executive directors) 12,372 11,935 1,773 1,562

2003 2002 2003 2002Number of employees atthe end of the year 449 398 29 24

6. TaxationGroup Company

2003 2002 2003 2002RM'000 RM'000 RM'000 RM'000

Tax expense for the year:Malaysian income tax 1,568 1,913 5,962 6,217Real property gains tax - 143 - 143

Deferred tax:Relating to origination and reversal

of temporary differences (Note 28) (1,274) 8,489 5,773 5,772

Share of taxation of associates 23,366 14,036 - -

(Over)/underprovided in prior years:Malaysian income tax (36) 591 - 316

23,624 25,172 11,735 12,448







6. Taxation (cont’d.)

Income tax is calculated at the Malaysian statutory tax rate of 28% (2002: 28%) of the estimated assessableprofit for the year.

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate toincome tax expense at the effective income tax rate of the Group and of the Company is as follows:

2003 2002RM'000 RM'000

Group

Profit before taxation 101,999 37,644

First RM100,000 at tax rate of 20% (25) -Taxation at Malaysian statutory tax rate of 28% (2002: 28%) 28,595 10,541Expenses not deductible for tax purposes 22,346 30,172Income not subject to tax (7,192) (7,334)Utilisation of previously unrecognised tax losses and

unabsorbed capital allowances (7,758) (6,037)Utilisation of deferred tax asset arising during the year (10,838) (229)Deferred tax assets not recognised during the year 677 415Overprovision of taxation in prior years (2,181) (2,499)Real property gains tax - 143

Tax expense for the year 23,624 25,172

Company

Profit/(loss) before taxation 63,235 (2,987)

Taxation at Malaysian statutory tax rate of 28% (2002: 28%) 17,706 (836)Expenses not deductible for tax purposes 1,156 15,535Income not subject to tax (7,127) (2,710)Underprovision of taxation in prior years - 316Real property gains tax - 143

Tax expense for the year 11,735 12,448




6. Taxation (cont’d.)Group Company

2003 2002 2003 2002RM'000 RM'000 RM'000 RM'000

Tax losses are analysed as follows:

Tax savings recognised during the year arising from:

Utilisation of tax losses brought forwardfrom previous years 1,503 670 - -

Unutilised tax losses carried forward 13,670 18,864 3,351 3,351

Unabsorbed capital allowances areanalysed as follows:

Tax savings recognised during the year arising from:

Utilisation of unabsorbed capitalallowances brought forward fromprevious years 570 - - -

Unabsorbed capital allowances carried forward 131,635 129,424 294 294

Unutilised reinvestment allowances carried forward 8,297 3,380 - -

Unutilised investment allowances carried forward 458,690 181,000 - -

As at 31 December 2003, the deferred tax assets are not recognised as the availability of future taxable profit(against which the unutilised tax losses, unabsorbed capital allowances, reinvestment allowances andinvestment allowances may be absorbed) cannot be determined with certainty.

During the year, a subsidiary of the Group has been granted an investment incentive (Investment Allowance)following the approval of the Approved Service Project Status under Schedule 7B of the Income Tax Act,1967.

7. Earnings per share - basic

Basic earnings per share of RM1 each is calculated based on the consolidated profit attributable toshareholders of the Company of RM68,313,862 (2002: RM8,171,179) on 1,170,273,425 ordinary shares(2002: 1,170,273,425) in issue during the year.




8. Dividend

Group and Company2003 2002

RM'000 RM'000

Proposed final dividendof 1.5 sen (2002: 1.5 sen) per shareless tax at 28% 12,639 12,639

At the forthcoming Annual General Meeting, a final dividend in respect of the current financial year ended 31December 2003, of 1.5 sen less 28% taxation on 1,170,273,425 ordinary shares, amounting to a totaldividend of RM12,638,953 (1.08 sen net per share) will be proposed for shareholders' approval. The financialstatements for the current financial year do not reflect this proposed dividend. Such dividend, if approved bythe shareholders, will be accounted for in shareholders' equity as an appropriation of retained profits in thenext financial year ending 31 December 2004.

9. Property, plant and equipment

Plants, vehicles,furniture,fittings,

equipment CapitalLeasehold and work-in-

land Buildings others progress TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000

Cost

At 1 January 2003 36,382 131,601 482,194 7,017 657,194Additions 2,298 315 4,690 141 7,444Disposals - - (31) - (31)Transfer - - 7,017 (7,017) -

At 31 December 2003 38,680 131,916 493,870 141 664,607

Accumulated Depreciation

Depreciation charge for 2002 335 3,586 23,928 - 27,849

At 1 January 2003 901 17,578 103,974 - 122,453Depreciation charge for the year 335 3,593 27,034 - 30,962Disposals - - (19) - (19)

At 31 December 2003 1,236 21,171 130,989 - 153,396

Net book value

At 31 December 2003 37,444 110,745 362,881 141 511,211

At 31 December 2002 35,481 114,023 378,220 7,017 534,741

9. Property, plant and equipment (cont'd.)Plants, vehicles,

furniture,Long fittings,

leasehold equipmentland and others Total

RM'000 RM'000 RM'000Company

Cost

At 1 January 2003 17,386 2,439 19,825Additions 2,298 87 2,385

At 31 December 2003 19,684 2,526 22,210

Accumulated Depreciation

Depreciation charge for 2002 - 311 311

At 1 January 2003 - 707 707

Depreciation charge for the year - 366 366

At 31 December 2003 - 1,073 1,073

Net book value

At 31 December 2003 19,684 1,453 21,137

At 31 December 2002 17,386 1,732 19,118

Analysis of leasehold landGroup

2003 2002RM'000 RM'000

CostLong-term leasehold land 33,628 31,330Short-term leasehold land 5,052 5,052

38,680 36,382




10. Investment in subsidiaries

Company2003 2002

RM'000 RM'000

Unquoted shares, at cost 224,991 224,991Less: Accumulated impairment losses (81,650) (81,650)

143,341 143,341

Details of the subsidiaries, all of which are incorporated in Malaysia, are shown below:

Name of Subsidiaries Principal activities Equity interest2003 2002

% %Direct subsidiaries of the Company:

Sarawak Power Generation Sdn. Bhd. Power generation 100.00 100.00Sejingkat Power Corporation Sdn. Bhd. Power generation 50.82 50.82Sarwaja Timur Sdn. Bhd. Manufacture, fabrication,

galvanising and sale ofsteel structures 77.71 77.71

Jayalah Cemerlang Realty Sdn. Bhd. Construction contract,property holding anddevelopment 100.00 100.00

Dasar Untung Sdn. Bhd. Investment holding 100.00 100.00Dunlop Agro-Management Sdn. Bhd. Investment holding 100.00 100.00Dunlop Estates Holdings Sdn. Bhd. Investment holding 100.00 100.00Dunlop Properties Sdn. Bhd. Investment holding 100.00 100.00Sarawak Power Services Sdn. Bhd. Dormant 100.00 100.00

Subsidiary of Sarwaja Timur Sdn. Bhd.:

Sarwaja Engineering &Construction Sdn. Bhd. Undertake engineering

and construction projects 100.00 100.00

Subsidiary of Sarwaja Engineering & Construction Sdn. Bhd.:

Naungan Pertiwi Sdn. Bhd. Dormant 60.00 60.00

Subsidiary of Dunlop Properties Sdn. Bhd.:

Intrafix Sdn. Bhd. Dormant 100.00 100.00

Subsidiary of Jayalah Cemerlang Realty Sdn. Bhd.:

Navosoft Sdn. Bhd. Computer software development 99.90 -




11. Investment in associatesGroup Company

2003 2002 2003 2002RM'000 RM'000 RM'000 RM'000

Quoted shares in Malaysia- At cost 90,900 - - -Share of post-acquisition reserves 1,361 - - -

92,261 - - -

Unquoted shares in Malaysia- At cost 1,407,740 1,494,755 1,403,835 1,403,835Share of post-acquisition reserves 230,052 165,735 - -

1,637,792 1,660,490 1,403,835 1,403,835

1,730,053 1,660,490 1,403,835 1,403,835

Market value of quoted shares 56,935 - - -

The Group's interest in the associates is analysed as follows:-

Group2003 2002

RM'000 RM'000Quoted shares

Share of net assets 105,788 -Discount on acquisition (13,527) -

92,261 -Unquoted shares

Share of net assets 818,399 841,097Premium on acquisition 819,393 819,393

1,637,792 1,660,490

1,730,053 1,660,490




11. Investment in associates (cont'd.)

Details of the associates, all of which are incorporated in Malaysia, are shown below:

Name of Associates Principal activities Equity interest2003 2002

% %Associates of the Company:

Sarawak Electricity Supply Generation, transmission,Corporation distribution and sale of

electricity 45.00 45.00

+ Dectra Sdn. Bhd. Provision, integration andmaintenance of controlinstrumentation andSCADA systems 26.24 26.24

Associate of Dasar Untung Sdn. Bhd.:

Encorp Berhad Investment holding,construction,manufacturing andtrading of plasticpackaging products 26.40 26.40

Associate of Sejingkat Power Corporation Sdn. Bhd.:

+ Gobel Industry Sdn. Bhd. Coal mining, sales of coal,and provision oftransportation, manpowersupply and machineryservices 20.00 20.00

Associate of Jayalah Cemerlang Realty Sdn. Bhd.:

Navosoft Sdn. Bhd. Dormant - 50.00

Associate of Dunlop Properties Sdn. Bhd.:

+ Integrated Circuit Design Services Provision of integratedSdn. Bhd. circuit design services,

intellectual propertylicensing and operationsupport 30.00 -

All the companies are audited by Ernst & Young, Malaysia except for those marked + which are audited by other firms.




12. Other investments

Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

At cost:

- Quoted shares and warrants ofcorporations in Malaysia- shares 68,270 68,270 3,870 3,870- loan stocks and warrants 1 1 - -

68,271 68,271 3,870 3,870

Less: Provision for diminution in value (65,293) (65,293) (1,183) (1,183)

2,978 2,978 2,687 2,687

- Unquoted shares of corporations 115,741 115,741 15,740 15,740

- Unquoted irredeemableconvertible unsecuredloan stocks 589,060 589,060 589,060 589,060

Less: Provision for diminution in value (131,900) (67,000) (31,900) (50,600)

572,901 637,801 572,900 554,200

Total 575,879 640,779 575,587 556,887

At market value:

- Quoted shares and warrantsof corporations in Malaysia- shares 5,433 4,054 4,592 3,774- loan stocks and warrants - 1 - -

5,433 4,055 4,592 3,774

The investment in unquoted shares includes the investment by a subsidiary company in 100,000,000ordinary shares of RM1 each in 1st Silicon (Malaysia) Sdn. Bhd., a company engaged in the production ofsemiconductor fabricated wafers.

The investment in unquoted irredeemable convertible unsecured loan stocks represents the subscription bythe Company for RM589,000,000 nominal amount of 3.5% irredeemable convertible unsecured loan stocks2001/2011 issued by 1st Silicon (Malaysia) Sdn. Bhd. on 19 January 2001.

The Directors are of the opinion that a provision of RM197.2 million (2002: RM132.3 million) for the Groupis adequate to take into account the extent of a permanent diminution in value which may have arisen inrespect of the investments.







13. Amounts due from/(to) subsidiary companiesCompany

2003 2002RM'000 RM'000

Interest-free loan to a subsidiary company 98,469 98,469

Amounts due from subsidiary companies

- interest-bearing 57,584 34,994- interest-free 306,261 297,952

363,845 332,946Less: Provision for doubtful debts (86,000) (86,000)

277,845 246,946

Amounts due after 1 year (374,204) (343,800)

Amounts due within 1 year 2,110 1,615

Amounts due to subsidiary companies- interest-free (31,081) (31,096)

The amounts due from/(to) subsidiary companies are unsecured and have no fixed terms of repayment.Interest is charged on the interest-bearing portion of amounts due from subsidiary companies at rates rangingfrom 4.5% to 8.0% (2002: 4.5% to 8.0%) per annum.

14. Goodwill on consolidationGroup

2003 2002RM'000 RM'000

Arising from acquisition of subsidiaries, at cost 15,539 15,539

15. InventoriesGroup

2003 2002RM'000 RM'000

At cost:Finished goods 867 1,778Raw materials 21,299 20,157Work-in-progress 1,673 2,375Inventories in transit 207 -

24,046 24,310

Less: Provision for slow-moving inventoriesand inventories obsolescence (185) (325)

23,861 23,985




16. Development propertiesGroup

2003 2002RM'000 RM'000

Freehold land, at valuation 5,372 5,372Development expenditure 133,128 154,470Attributable profits recognised 16,663 16,663

155,163 176,505

Less: Progress billings (50,603) (50,603)

104,560 125,902

17. Deferred charges

This represented expenses incurred for the purpose of developing a software to be sold to a company.

18. Trade receivablesGroup

2003 2002RM'000 RM'000

Trade receivables 65,884 9,345Less: Provision for doubtful debts (2,476) (2,071)

63,408 7,274

Represented by:

Not later than 1 year 17,316 7,274Later than 1 year and not later than 2 years 5,761 -Later than 2 years and not later than 5 years 17,285 -Later than 5 years 23,046 -

63,408 7,274

Analysed as:

Due within 12 months 17,316 7,274Due after 12 months 46,092 -

63,408 7,274

The Group's normal trade credit term ranges from 14 days to 60 days (2002: 14 days to 60 days). Other creditterms are assessed and approved on a case-by-case basis.

Included in trade receivables of the Group is an amount due from the Sarawak State Government ofRM57,615,580 (2002: Nil) which is receivable over a period of ten years and yields interest at a rate of 8.9%per annum.

The Group has no significant concentration of credit risk that may arise from exposures to a single debtor or togroups of debtors.


19. Other receivables

Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

Deposits 276 273 111 95Prepayments 636 572 - 4Sundry receivables 66,918 45,687 62,196 42,188Current tax assets 1,416 1,572 1,409 1,565

69,246 48,104 63,716 43,852

Less: Amount receivables after 12 months (a) (62,014) (41,399) (62,014) (41,399)

7,232 6,705 1,702 2,453

(a) This represents the interest receivable on investment in 1st Silicon (Malaysia) Sdn. Bhd. irredeemableconvertible unsecured loan stocks (“ICULS”). The issuer of the ICULS had opted to defer payment ofinterest due pursuant to the provisions of the subscription agreement.

20. Short-term deposits

Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

Deposits placed with:

- a licensed bank related to a substantialshareholder of the Company - 54,992 - 52,773

- merchant banks 11,838 4,373 11,838 4,123- other licensed banks 76,536 52,798 25,404 8,097- a licensed finance company 8,725 11,322 7,725 10,322- discount houses 4,220 1,966 4,220 1,966

101,319 125,451 49,187 77,281

Included in deposits placed with other licensed banks are amounts pledged as security for the following:

Group2003 2002

RM'000 RM'000

Bank guarantee facilities 441 676Islamic debt securities 28,769 29,859

29,210 30,535

The average effective interest rates and the average maturity of deposits at balance sheet date range from2.62% to 3.70% (2002: 2.50% to 3.59%) per annum and 30 days to 365 days (2002: 14 days to 365 days)respectively.






21. Trade payables

The normal trade credit term granted to the Group ranges from 14 days to 90 days.

22. Other payablesGroup Company

2003 2002 2003 2002RM'000 RM'000 RM'000 RM'000

Other payables 2,461 4,253 12 50Accruals 4,935 8,008 744 1,809Dividend payables 19 533 19 533

7,415 12,794 775 2,392

23. Short-term borrowingsGroup

2003 2002RM'000 RM'000

Bills payable - unsecured 1,760 5,993Bank overdrafts - secured 7 -Current portion of long-term loans - secured (Note 28 (i)) 506 1,519Current portion of Islamic debt securities (Note 28 (ii)) 47,000 45,000

49,273 52,512

The bank overdrafts and term loans are secured by way of a first fixed charge over the land and buildings andby way of a debenture covering a first fixed and floating charge over the entire assets of a subsidiary company.During the year, the subsidiary company has fully settled two of the term loans.

The bank overdrafts and bills payable bear interest at rates of 0.75% to 1% (2002: 0.75% to 1%) per annumabove the bankers' base lending rates. The term loan bears interest at a fixed rate of 7% per annum.

The amount pledged on the assets of the Group as securities for the bank overdrafts and term loans is RM57.4million (2002: RM62.9 million).

24. Finance lease payablesGroup Company

2003 2002 2003 2002RM'000 RM'000 RM'000 RM'000

Lease payments:

Due within 1 year - 145 - 108Future finance charges on finance leases - (5) - (4)

- 140 - 104

Representing lease liabilities:

Current - 140 - 104

The lease liabilities bore interest of between 4.95% to 7.00% per annum.

25. Loans from an associateGroup

2003 2002RM'000 RM'000

Due within 1 year 4,200 1,200Due after 1 year (Note 28) 13,500 11,200

17,700 12,400

The loans from an associate are unsecured and bear interest rate of 6.0% per annum.

One of the loans is repayable semi-annually up to a maximum tenure of 5 years with effect from 14 March2002. The other loans is repayable semi-annually after the final drawdown up to a maximum tenure of 7years.

26. Share capitalGroup and Company

2003 2002RM'000 RM'000

Authorised:

1,500,000,000 (2002: 1,500,000,000) ordinaryshares of RM1 each 1,500,000 1,500,000

Issued and fully paid:

1,170,273,425 (2002: 1,170,273,425) ordinaryshares of RM1 each 1,170,273 1,170,273

27. ReservesGroup Company

2003 2002 2003 2002RM'000 RM'000 RM'000 RM'000

Non-distributable:Share premium 844,505 844,505 844,505 844,505Capital reserves 311,329 233,464 123,000 123,000Capital redemption reserve 17,639 17,639 17,639 17,639

1,173,473 1,095,608 985,144 985,144

Distributable:General reserves 62,290 56,984 5,000 5,000Retained profits 438,753 466,249 425,244 386,383

501,043 523,233 430,244 391,383

1,674,516 1,618,841 1,415,388 1,376,527

Movements in reserves are shown in the Statements of Changes in Equity.

Note:(i) The Company has estimated tax credits balance of RM64.7 million as at 31 December 2003 (2002:

RM68.4 million), subject to agreement by the tax authorities.

(ii) The Company has a tax exempt account balance of RM92.3 million (2002: RM85.6 million) available fordistribution as tax exempt dividends.







28. Deferred and long-term liabilities

Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

Long term loans - secured (i) 49 5,749 - -Islamic debt securities (ii) 188,000 235,000 - -Deferred taxation (iii) 17,317 18,591 17,317 11,544Loans from an associate (Note 25) 13,500 11,200 - -

218,866 270,540 17,317 11,544

(i) Long-term loans - securedGroup

2003 2002RM'000 RM'000

Amount due within 1 year (Note 23) 506 1,519

Between 1 and 2 years 49 1,519Between 2 and 5 years - 1,519After 5 years - 2,711

Amount due after 1 year 49 5,749

555 7,268

(ii) Islamic debt securities

This represents Al-Bai Bithaman Ajil Islamic Debt Securities (“BaIDS”) of nominal amounts ofRM160,000,000 and RM195,000,000 respectively issued on 15 December 2000 by two subsidiaries ofthe Group to a licensed bank, the primary subscriber. Each issue is secured by a security trust deed, acharge in escrow over certain landed property or assignment of certain lease, as applicable, a first legalcharge over designated accounts of the subsidiary and assignment of rights, titles and interests of themonies standing to the credit of these accounts, assignment of rights over specified licence, agreementsand insurances, and a deed of debenture creating a first fixed and floating charge over present and futureassets of the subsidiary.

The amount charged on the assets of the Group as security for the BaIDS in issue is RM539.6 million(2002: RM555.9 million).

The BaIDS are redeemable annually in stages over 6 and 9 years respectively commencing 12 monthsfrom the issue date. Profit is payable on the nominal amounts of the BaIDS in tranches at rates of 4.5% to7.2% per annum and 4.5% to 8.25% per annum respectively.


28. Deferred and long-term liabilities (cont’d.)

(ii) Islamic debt securities (cont’d.)

The BaIDS are redeemable as follows:Group

2003 2002RM'000 RM'000

Redeemable within 1 year (Note 23) 47,000 45,000

Between 1 and 2 years 52,000 47,000Between 2 and 5 years 106,000 132,000After 5 years 30,000 56,000

Redeemable after 1 year 188,000 235,000

235,000 280,000

(iii) Deferred tax liability

Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000

At 1 January 18,591 10,102 11,544 5,772Recognised in the income statement (Note 6) (1,274) 8,489 5,773 5,772

At 31 December 17,317 18,591 17,317 11,544

The components and movements of deferred tax liabilities during the financial year are as follows:

Deferred tax arising from

AcceleratedInterest capital

receivable allowances TotalRM'000 RM'000 RM'000

Group

At 1 January 11,544 7,047 18,591Recognised in the income statement 5,773 (7,047) (1,274)

At 31 December 17,317 - 17,317

Company

At 1 January 11,544 - 11,544Recognised in the income statement 5,773 - 5,773

At 31 December 17,317 - 17,317






29. Changes in accounting policies and prior year adjustment

During the financial year, the Group and the Company applied three new MASB Standards, namely MASB 25Income Taxes, MASB 27 Borrowing Costs and MASB 29 Employee Benefits which became effective from 1January 2003, and accordingly modified certain accounting policies. The application of the new standardshave not resulted in any prior year adjustments except for MASB 25 with respect to an associate's provisionfor deferred tax liability.

The change in accounting policy by the associate has been applied retrospectively and the Group's reservesand comparatives have been restated. The effects of the change in accounting policy are as follows:

Group2003 2002

RM'000 RM'000

Effects on reserves:

At 1 January, as previously stated 385,446 237,254Share of taxation of associates (151,982) (150,105)

At 1 January, restated 233,464 87,149

Comparative amount for the Group as at 31 December 2002 has been restated as follows:

Previouslystated Adjustment Restated

Group

Investment in associates 1,812,472 (151,982) 1,660,490

30. Capital commitments

Group2003 2002

RM'000 RM'000

Capital expenditure approved by the Board:- contracted for 43 25,453

Analysed as follows:- property, plant and equipment 43 214- development expenditure - 25,239

43 25,453

31. Controlling shareholder

The Directors regard the State Financial Secretary, Sarawak, a statutory corporation established under theState Financial Secretary (Incorporation) Ordinance of Sarawak, as the controlling shareholder of theCompany.




32. Segmental reporting

Short andlong term Property Power Manu-investment development generation facturing Total

RM’000 RM’000 RM’000 RM’000 RM’000

31.12.2003

Revenue

Total sales 22,704 60,651 152,850 28,855 265,060

Results

Segment operating profit 18,503 7,590 52,137 2,633 80,863Finance costs (18) - (19,917) (1,163) (21,098)Share of associates’ result 107,134 - - - 107,134Exceptional items (64,900) - - - (64,900)

Profit before taxation 60,719 7,590 32,220 1,470 101,999

Income taxes (30,697) - 7,083 (10) (23,624)

Profit after taxation 30,022 7,590 39,303 1,460 78,375

Minority interest - - (9,822) (239) (10,061)

Profit attributable to shareholders 30,022 7,590 29,481 1,221 68,314

Other information

Segment assets 137,738 166,631 528,953 54,741 888,063Associated company 1,730,034 - 10,613 3,013 1,743,660Other investment 575,879 - - - 575,879Goodwill on consolidation 15,539 - - - 15,539Current tax assets 1,416 - - - 1,416

Total assets 2,460,606 166,631 539,566 57,754 3,224,557


32. Segmental reporting (cont'd.)

Short andlong term Property Power Manu-

investment development generation facturing TotalRM’000 RM’000 RM’000 RM’000 RM’000

Other information (cont'd.)

Segment liabilities 805 5,412 10,615 5,492 22,324Associated company - - 4,200 13,500 17,700Bank borrowings - - 235,000 2,322 237,322Current tax liabilities - 1 143 1 145Deferred tax liability 17,317 - - - 17,317

Total liabilities 18,122 5,413 249,958 21,315 294,808

Depreciation 421 125 28,055 2,361 30,962

31.12.2002

Revenue

Total sales 25,475 1,392 142,511 31,674 201,052

Results

Segment operating profit 23,562 (793) 51,101 4,627 78,497Finance costs (14) - (22,159) (1,141) (23,314)Share of associates’ result 66,701 - - - 66,701Exceptional items (84,240) - - - (84,240)

Profit/(loss) before taxation 6,009 (793) 28,942 3,486 37,644Income taxes (22,090) (279) (2,717) (86) (25,172)

Profit/(loss) after taxation (16,081) (1,072) 26,225 3,400 12,472Minority interest - - (3,657) (643) (4,300)

Profit/(loss) attributableto shareholders (16,081) (1,072) 22,568 2,757 8,172




32. Segmental reporting (cont'd.)

Short andlong term Property Power Manu-investment development generation facturing Total

RM’000 RM’000 RM’000 RM’000 RM’000

Other information

Segment assets 128,580 130,229 555,840 63,946 878,595Associated company 1,672,726 - 20 - 1,672,746Other investment 640,779 - - - 640,779Goodwill on consolidation 15,539 - - - 15,539Current tax assets 1,572 - - - 1,572

Total assets 2,459,196 130,229 555,860 63,946 3,209,231

Segment liabilities 986 1,300 11,454 6,752 20,492Associated company - - 5,400 7,000 12,400Bank borrowings - - 280,000 13,260 293,260Current tax liabilities 3 7 179 86 275Deferred tax liability 11,544 - 7,047 - 18,591

Total liabilities 12,533 1,307 304,080 27,098 345,018

Depreciation 318 108 25,228 2,195 27,849

Notes:

(i) The Group's investments in associates are principally in Sarawak Electricity Supply Corporation, whoseprincipal activities are generation, transmission, distribution and sale of electricity, and in Encorp Berhad,whose principal activities are investment holding, construction, manufacturing and trading of plasticpackaging products.

(ii) The Group operates principally within Malaysia and accordingly, no geographical segment informationis prepared.

(iii) The inter-segment transactions were carried out on the terms and conditions obtainable in transactionswith unrelated parties unless otherwise stated.




33. Significant related party transactionsGroup Company

2003 2002 2003 2002RM'000 RM'000 RM'000 RM'000

Sales to an associate (168,303) (155,249) - -Sales to companies in which an

associate has significant influence (1,308) - - -Interest income earned from

subsidiary companies - - (3,454) (1,593)Interest income from fixed deposits

placed with a licensed bank relatedto a substantial shareholder of the Company (1,032) (2,942) (972) (2,871)

Interest income earned from acompany in which the Company hasa substantial interest (20,615) (20,615) (20,615) (20,615)

Construction revenue from theSarawak State Government (57,616) - - -

Interest charged to the Sarawak State Government (1,709) - - -Services received from an associate 11,364 11,735 - -Purchases from an associate 226 1,030 - -Purchases from a company in which

an associate has significant influence 2,254 286 - -Rental paid to an associate 500 500 - -Interest charged by an associate 1,019 544 - -Insurance charged by an associate shareholder 3,387 553 98 100

The above transactions were entered into in the normal course of business and were transacted on normalcommercial terms.

34. Significant events

(a) Investment in Encorp Berhad

(i) Pursuant to a Voluntary Scheme of Arrangement (“the Scheme”) between Great Wall PlasticIndustries Berhad (“GWPI”) and its shareholders involving Encorp Berhad (“Encorp”) underSection 176 of the Companies Act, 1965 which was approved by the shareholders of GWPI atthe Court Convened Meeting and Extraordinary General Meeting of GWPI held on 23 September2002, the existing ordinary shares of RM1.00 each in GWPI (“GWPI shares”) were exchanged fornew ordinary shares of RM1.00 each in Encorp (“Encorp shares”) on the basis of one (1) newEncorp share for every one (1) existing GWPI share after the Bonus Issue by Encorp of 67,975,833new Encorp shares on the basis of nine (9) new Encorp shares for every ten (10) existing Encorpshares held, credited as fully paid-up (“Bonus Issue”).

Upon completion of the Scheme and the Bonus Issue by Encorp, the percentage of shares held inEncorp by Dasar Untung Sdn. Bhd. (“DUSB”), a wholly-owned subsidiary of Sarawak EnterpriseCorporation Berhad, was reduced to 10.74% (before full exercise of outstanding ESOS Options)and 10.37% (after full exercise of outstanding ESOS Options) from its original shareholding of30% in GWPI.

This transaction had been completed on 9 December 2002. The effect of this transaction was thatthe Group had recorded an exceptional loss of RM15.1 million in the last financial year.

The listing status of Great Wall Plastic Industries Berhad was transferred to Encorp Berhad witheffect from 11 February 2003 pursuant to the Scheme of Arrangement as described above.




34. Significant events (cont’d.)

(a) Investment in Encorp Berhad (cont’d.)

(ii) Subsequent to the transaction as mentioned in (i) above, DUSB had acquired an additional 35million ordinary shares of RM1.00 each in Encorp for a total cash consideration of RM52.5million or RM1.50 per share.

With the aforesaid acquisition, DUSB's shareholding in Encorp had been increased to26.4% comprising 59,000,000 ordinary shares of RM1.00 each in Encorp.

The aforesaid acquisition, was approved by the Foreign Investment Committee (“FIC”) on 8November 2003.

(b) Investment in Integrated Circuit Design Services Sdn. Bhd.

On 16 September 2003, Dunlop Properties Sdn. Bhd. (“DPSB”), a wholly-owned subsidiary of SarawakEnterprise Corporation Berhad (“SECB”), entered into a joint venture agreement with HualonMicroelectronics Corporation, Taiwan and 1st Silicon (Malaysia) Sdn. Bhd. to engage in the business ofintegrated circuit design services, intellectual property licensing and operation support (“the Business”).A joint venture company namely, Integrated Circuit Design Services Sdn. Bhd. (“ICDS”) wasincorporated to undertake the Business. DPSB holds 30% equity interest in ICDS comprising of 3,885,545ordinary shares of RM1.00 each.

35. Financial Instruments

(a) Financial risk management objectives and policies

The Group's financial risk management policy seeks to ensure that adequate financial resources areavailable for the development of the Group's businesses whilst managing its interest rate, foreignexchange, liquidity and credit risks.

(b) Interest rate risk

The Group's primary interest rate risk relates to interest-bearing assets and debts. The investment infinancial assets are not held for speculative purposes but have been mostly placed in fixed deposits oroccasionally, in loan stocks which yield better returns than cash at bank.

The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rateborrowings. The Group actively reviews its debt portfolio, taking into account the investment holdingperiod and nature of its assets. This strategy allows it to capitalise on cheaper funding in a low interestrate environment and achieve a certain level of protection against rate hikes.

The information on maturity dates and effective interest rates of financial assets and liabilities aredisclosed in their respective notes.

(c) Foreign exchange risk

The Group is exposed to various currencies mainly Australian Dollar, United States Dollar andPhilippine Peso.

Foreign exchange exposures are kept to an acceptable level.




35. Financial Instruments (cont’d.)

(d) Liquidity risk

The Group actively manages its debt maturity profile, operating cash flows and the availability offunding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overallprudent liquidity management, the Group maintains sufficient levels of cash or cash convertibleinvestments to meet its working capital requirements. In addition, the Group strives to maintainavailable banking facilities of a reasonable level to its overall debt position. As far as possible, the Groupraises committed funding from both capital markets and financial institutions and prudently balances itsportfolio with some short term funding so as to achieve overall cost effectiveness.

(e) Credit risk

Credit risks, or the risk of counterparties defaulting, is controlled by the application of credit approvals,limits and monitoring procedures. Credit risks are minimised and monitored via strictly limiting theGroup's associations to business partners with high creditworthiness. Trade receivables are monitoredon an ongoing basis via Group management reporting procedures.

The Group does not have any significant exposure to any individual customer or counterparty nor doesit have any major concentration of credit risk related to any financial instruments.

(f) Fair values

The fair values of the financial instruments are the amount at which the instruments could be exchangedin a current transaction between willing parties, other than in a forced sale.

The carrying amounts of the financial assets and liabilities such as trade and other receivables, fixeddeposits, cash at bank, amount due to bankers, trade and other payables approximate their fair valuedue to their relatively short term maturity.

The carrying amounts of other investments are stated at cost less provision for diminution in value. Thefair values of these investments are expected to be at or above their carrying amounts.

36. Comparative figures

The presentation and classification of items in the current year financial statements have been consistent withthe previous financial year except that certain comparative amounts have been adjusted as a result of changesin accounting policies as disclosed in Note 2 and Note 29.




LIST OF PROPERTIES as at 31 December 2003

/ Senarai Hartanah pada 31 Disember 2003



Description and Location Date of Tenure Land Approximate NetAcquisition/ Area Age of Book ValueRevaluation Building RM’000

of Land

1.Land* with a 30-storey September 1991 Freehold Land 1.3 acres. 5 years 104,560office tower PTB 19155 RemainingNo. 5, Jalan Bukit saleable/Meldrum Tanjong Puteri lettable area80300 Johor Bahru of about

203,872 sq ft

2.Commercial land for June 1997 Leasehold 45,198 N/A 19,684development at Lot 4563, land sq metres4564, 4568, 4569, 4572 to4578 (11 parcels)Block 18, Salak LandDistrict, Medan Niaga,Petra Jaya, Kuching

3.Land built with a steel May 1996 Leasehold 17.8 acres 7 years 19,511fabrication & galvanizing land expiringplant Lot 342, MTLD in 2049Jalan Kampung SejingkatOff Jalan Bako 93050Kuching

4.Land built with power January 1996 Leasehold 126.1 6 years 93,051station at Block 5, land expiring hectaresLot 885, MTLD in 2061Kampung Goebilt,Kuching

* The land on which the 30-storey office tower stands was revalued in 1983 by a company which subsequentlybecame a wholly-owned subsidiary of the Company in 1991. Other than the above, the Group has not revaluedany of its landed properties.


Class of Share : Ordinary Share of RM1.00 each

Voting Right : 1 vote per share

No. of % of No. of % ofHolders Holders Shares Share

LARGEST SHAREHOLDERS 30 0.17 1,021,414,391 87.28

SIZE OF HOLDINGS1 - 99 191 1.11 8,955 0.00100 - 1,000 5,010 29.04 4,810,241 0.411,001 - 10,000 9,831 56.99 42,000,215 3.5910,001 - 100,000 2,015 11.68 53,873,644 4.60100,001 - Less than 5% of issued shares 202 1.17 382,406,457 32.685% and above of issued shares 2 0.01 687,173,913 58.72

Total 17,251 100.00 1,170,273,425 100.00

LOCATION OF SHAREHOLDERS

Malaysia 13,204 76.54 1,050,415,043 89.76Singapore 455 2.64 5,143,378 0.44Foreign 3,592 20.82 114,715,004 9.80

Total 17,251 100.00 1,170,273,425 100.00

CATEGORY OF SHAREHOLDERS

Bumiputra individuals 266 1.54 1,754,722 0.15Chinese individuals 10,713 62.10 80,879,234 6.91Other individuals 352 2.04 1,283,267 0.11Nominee Companies 1,651 9.57 249,625,655 21.33M'sian Corporate/Government Agencies/ Inst. 222 1.29 716,872,165 61.26Singaporeans 455 2.64 5,143,378 0.44Foreigners 3,592 20.82 114,715,004 9.80

Total 17,251 100.00 1,170,273,425 100.00

ANALYSIS OF SHAREHOLDINGS as at 26 April 2004

/ Analisa Pegangan Saham pada 26 April 2004


SUBSTANTIAL SHAREHOLDERS as at 26 April 2004

/ Pemegang-Pemegang Saham Utama pada 26 April 2004



Substantial Shareholders Direct Indirect

No. of Shares % No. of Shares %

State Financial Secretary, Sarawak 612,173,913 52.31 - -

Multi-Purpose Holdings Berhad 229,504,792 19.61 59,596,000 (a) 5.09

Quantum Aspects Sdn Bhd - - 289,100,792 (b) 24.70

Dynamic Icon Sdn Bhd - - 289,100,792 (c) 24.70

Dimensi Nada Sdn Bhd - - 289,100,792 (c) 24.70

Lim Tiong Chin - - 289,100,792 (c) 24.70

Dato' Surin Upatkoon - - 289,100,792 (d) 24.70

Tham Ka Hon - - 289,100,792 (d) 24.70

Goh Thian Joe - - 289,100,792 (e) 24.70

Lim Bian Yong - - 289,100,792 (e) 24.70

Tan Heng Kok - - 289,100,792 (e) 24.70

Datuk Lim Thian Kiat 110,000,000 9.40 - -

(a) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through subsidiarycompanies of Multi-Purpose Holdings Berhad ("MPHB"), and Magnum Corporation Berhad, anassociated company of MPHB.

(b) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through Multi-PurposeHoldings Berhad.

(c) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through QuantumAspects Sdn Bhd ("QASB").

(d) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through Dynamic IconSdn Bhd.

(e) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through Dimensi NadaSdn Bhd.

As per the Register of Directors’ Shareholdings, none of the Directors of the Company has any interest in shares,direct or indirect, in the Company or its related corporations.

DIRECTORS’ SHAREHOLDINGS as at 26 April 2004

/ PEGANGAN SAHAM PARA PENGARAH pada 26 April 2004


NAME SHAREHOLDING PERCENTAGE

STATE FINANCIAL SECRETARY SARAWAK 612,173,913 52.31

MAYBAN NOMINEES (TEMPATAN) SDN BHD 75,000,000 6.41PLEDGED SECURITIES ACCOUNT FOR

MULTI-PURPOSE HOLDINGS BHD (N8888894174J)

SOUTHERN NOMINEES (TEMPATAN) SDN BHD 56,000,000 4.79PLEDGED SECURITIES ACCOUNT FOR

MULTI-PURPOSE HOLDINGS BERHAD (DYNAMIC PEARL)

ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 48,000,000 4.10BAYERISCHE LANDESBANK LABUAN FOR

MULTI-PURPOSE HOLDINGS BERHAD

MULTI-PURPOSE HOLDINGS BERHAD 42,504,792 3.63

EMPLOYEES PROVIDENT FUND BOARD 41,591,900 3.55

JB NOMINEES (ASING) SDN BHD 19,511,000 1.67PLEASANT FINANCIAL LIMITED

ALLIANCEGROUP NOMINEES (ASING) SDN BHD 17,000,000 1.45BAYERISCHE LANDESBANK LABUAN FOR

MULTI-PURPOSE (GUERNSEY) LIMITED

DB (MALAYSIA) NOMINEE (ASING) SDN BHD 16,295,497 1.39UBS AG SINGAPORE FOR PACIFIC INVESTMENT FUND

MARINCO HOLDINGS SDN BHD 12,472,000 1.07

ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 10,000,000 0.86BAYERISCHE LANDESBANK LABUAN FOR

MARINCO HOLDINGS SDN. BHD.

LIM THIAN KIAT 9,458,000 0.81

KUEH OOI VOON 8,995,000 0.77

AMSEC NOMINEES (TEMPATAN) SDN BHD 8,000,000 0.68AMBANK BERHAD FOR MULTI-PURPOSE HOLDINGS BHD

JB NOMINEES (ASING) SDN BHD 5,562,000 0.48MAGNUM (GUERNSEY) LIMITED

OSK NOMINEES (TEMPATAN) SDN BERHAD 5,000,000 0.43PLEDGED SECURITIES ACCOUNT FOR

ABDUL HAMED BIN SEPAWI

LIST OF THIRTY LARGEST SHAREHOLDERS as at 26 April 2004

/ Senarai Tiga Puluh Pemegang Saham Terbesar pada 26 April 2004


NAME SHAREHOLDING PERCENTAGE

AMMB NOMINEES (TEMPATAN) SDN BHD 4,153,789 0.36PLEDGED SECURITIES ACCOUNT FOR

STABOC MARKETING SDN BHD (BK 6/320-4)

BEH ENG PAR 3,046,000 0.26

LIM TIAN KEONG 2,815,000 0.24

CITICORP NOMINEES (ASING) SDN BHD 2,760,200 0.24CBNY FOR DFA EMERGING MARKETS FUND

BUMIPUTRA-COMMERCE NOMINEES (TEMPATAN) SDN. BHD. 2,614,000 0.22PLEDGED SECURITIES ACCOUNT FOR

A.A. ANTHONY SECURITIES SDN. BHD. (2555 PENG)

AMSEC NOMINEES (TEMPATAN) SDN BHD 2,600,000 0.22FRASER SECURITIES PTE LTD FOR GAN SUAT LUI (16045)

MAYBAN NOMINEES (ASING) SDN BHD 2,494,000 0.21DBS BANK FOR FULLERTON (PRIVATE) LIMITED (200757)

HSBC NOMINEES (TEMPATAN) SDN BHD 2,482,900 0.21HSBC (M) TRUSTEE BHD FOR

THE HWANG DBS SELECT OPPORTUNITY FUND (3969)

HSBC NOMINEES (ASING) SDN BHD 2,139,400 0.18TNTC FOR SHENTON ASIA PACIFIC FUND

JB NOMINEES (TEMPATAN) SDN BHD 2,020,000 0.17PLEDGED SECURITIES ACCOUNT FOR

MCC CREDIT SDN BHD

ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,911,000 0.16ABU TALIB BIN OTHMAN

HSBC NOMINEES (TEMPATAN) SDN BHD 1,662,000 0.14HSBC (MALAYSIA) TRUSTEE BERHAD FOR

AMANAH SAHAM SARAWAK

MULTI-PURPOSE INSURANS BHD 1,652,000 0.14

MAYBAN SECURITIES NOMINEES (TEMPATAN) SDN BHD 1,500,000 0.13PLEDGED SECURITIES ACCOUNT FOR

SOO KEE LING (REM 169)

TOTAL 1,021,414,391 87.28




NOTICE OF ANNUAL GENERAL MEETING/ Notis Mesyuarat Agung Tahunan

NOTICE IS HEREBY GIVEN that the Thirty-Seventh Annual General Meeting of Sarawak Enterprise CorporationBerhad will be held at Kenyalang Room, Lobby Floor, Hilton Kuching, Jalan Tunku Abdul Rahman, 93100 Kuching,Sarawak on 25 June 2004 at 11.00 a.m.

AGENDA

1. To receive and consider the Audited Financial Statements for the year ended 31 December 2003 together withthe Report of the Directors and the Auditors thereon.

2. To declare a final dividend of 1.5 sen gross per share less income tax, in respect of the year ended 31 December2003.

3. To approve the payment of Directors' fees of RM216,000/- in respect of the year ended 31 December 2003.(2002:RM216,000/-)

4. To re-elect Directors retiring in accordance with Article 82 of the Company's Articles of Association:-(a) Dato' Chew Kong Seng(b) Datuk Fong Joo Chung

5. To re-appoint Messrs Ernst & Young as auditors of the Company and to authorise the Directors to fix theirremuneration.

AS SPECIAL BUSINESS:-

6. To consider and if thought fit, to pass the following Ordinary Resolution:-

"THAT, subject always to the Companies Act, 1965, the Articles of Association of the Company and theapprovals of the relevant governmental and/or regulatory authorities, the Directors be and are herebyempowered, pursuant to Section 132D of the Companies Act, 1965, to issue shares in the Company from timeto time and upon such terms and conditions and for such purposes as the Directors may deem fit provided thatthe aggregate number of shares issued pursuant to this resolution does not exceed ten per centum (10%) of thetotal issued capital of the Company and that such authority shall continue in force until the conclusion of thenext Annual General Meeting of the Company."

7. To transact any other business for which due notice shall have been given in accordance with the Articles ofAssociation of the Company and the Companies Act, 1965.

NOTICE OF DIVIDEND PAYMENT

NOTICE IS HEREBY GIVEN THAT subject to the approval of the shareholders at the Annual General Meeting, afinal dividend of 1.5 sen gross per share less income tax, will be paid on 26 July 2004 to shareholders on theRegister of Members and Record of Depositors at the close of business on 30 June 2004.

DIRECTORS’ REPORT / Laporan Jawatankuasa Audit




A Depositor shall qualify for entitlement only in respect of :-

(a) shares deposited into the depositor's securities account before 12.30 p.m. on 28 June 2004 (in respect ofshares which are exempted from mandatory deposit);

(b) shares transferred into the depositor's securities account before 4.00 p.m. on 30 June 2004 in respect ofordinary transfers;

(c) shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the rules of theBursa Malaysia Securities Berhad.

Shareholders are reminded that pursuant to the Securities Industry (Central Depositories) (Amendment) (No. 2) Act,1998 which came into effect on 1 November 1998, all shares not deposited with Malaysian Central Depository SdnBhd by 12.30 p.m. on 1 December 1998 and not exempted from mandatory deposit, have been transferred to theMinister of Finance (“MOF”). Accordingly, the dividend for such undeposited shares will be paid to MOF.

BY ORDER OF THE BOARD

LEE YING FONGCompany Secretary

31 May 2004

NOTES:

(1) A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965, shall not apply

to the Company.

(2) To be valid, the Form of Proxy, duly completed and signed before a witness, must be deposited at the registered office of the Company,

1st Floor, Wisma Naim, Lot 2679, Jalan Rock, 93200 Kuching, Sarawak, not less than 48 hours before the time set for holding the meeting.

(3) A member who is an authorised nominee may appoint one (1) proxy in respect of each securities account it holds with ordinary shares

standing to the credit of the said securities account.

(4) A member other than an authorised nominee shall be entitled to appoint not more than two (2) proxies to attend and vote at the same meeting.

(5) Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holding to be

represented by each proxy.

(6) If the appointor is a corporation, the Form of Proxy must be executed either under its Common Seal or under the hand of an officer or attorney

duly authorised.

(7) Shareholders are reminded that pursuant to the Securities Industry (Central Depositories) (Amendment) (No. 2) Act, 1998 which came into

effect on 1 November 1998, all shares not deposited with Malaysian Central Depository Sdn Bhd by 12.30 p.m. on 1 December 1998 and not

exempted from mandatory deposit, have been transferred to the Minister of Finance ("MOF"). Accordingly, only the MOF is eligible to attend

the meeting in respect of such undeposited shares.


EXPLANATORY NOTE ON SPECIAL BUSINESS

Resolution No. 6 (Ordinary)

The Ordinary Resolution proposed under item (6), if passed, will empower the Directors to allot and issue shares inthe Company up to an amount not exceeding in total 10% of the issued share capital of the Company for suchpurposes as they consider would be in the interest of the Company. This authority, unless revoked or varied at ageneral meeting, will expire at the next Annual General Meeting of the Company.

Statement Accompanying Notice of Annual General Meeting of the Company

(1) Names of Individuals who are standing for re-election

Dato' Chew Kong SengDatuk Fong Joo Chung

Both the directors retire by rotation under Article 82 of the Company's Articles of Association.

(2) Details of Attendance of Directors at Board Meetings

A total of five (5) Board Meetings were held from 1 January 2003 to 31 December 2003. Details of attendanceof the Directors are set out in the Statement of Corporate Governance on pages 22 to 26 of the AnnualReport.

(3) Thirty-Seventh Annual General Meeting

Date : 25 June 2004Time : 11.00 a.m.Venue : Kenyalang Room, Lobby Floor, Hilton Kuching, Jalan Tunku Abdul Rahman, 93100 Kuching, Sarawak

(4) Further details of Directors who are standing for re-election

Details of Directors who are standing for re-election are set out in the Directors' Profile appearing on pages 6 to11 of the Annual Report.

NOTICE OF ANNUAL GENERAL MEETING/ Notis Mesyuarat Agung Tahunan


FORM OF PROXY / BORANG PROKSI



I/We (full name in block capitals)

identity card no./company registration no.

of

being a member/members of SARAWAK ENTERPRISE CORPORATION BERHAD (007199-D), hereby appoint

of

or failing him

of

as my/our proxy/proxies to vote on my/our behalf at the Thirty-Seventh Annual General Meeting of the Company to beheld at Kenyalang Room, Lobby Floor, Hilton Kuching, Jalan Tunku Abdul Rahman, 93100 Kuching, Sarawak on25 June 2004 at 11.00 a.m. and at any adjournment thereof.

My/Our proxy is to vote as indicated below :-

NO. RESOLUTIONS *FOR *AGAINST

1 To adopt the Audited Financial Statements

2 To declare a final dividend of 1.5 sen gross per share less income tax

3 To approve the Directors' fees of RM216,000/-

4 To re-elect Directors retiring in accordance with Article 82 of theCompany's Articles of Association:-

(a) Dato' Chew Kong Seng

(b) Datuk Fong Joo Chung

5 To re-appoint auditors

6 To authorise the Directors to allot and issue shares pursuant to Section132D of the Companies Act, 1965

* Please indicate with an "X" how you wish your vote to be cast. If no specific direction as to voting is given, the proxywill vote or abstain at his/her discretion.

As witness my/our hand(s) this day of 2004

Signature of Shareholder Signature of Witness

Number of Shares held Name of Witness

CDS Account Number

NOTES :-(1) A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965, shall not

apply to the Company.(2) To be valid, the Form of Proxy, duly completed and signed before a witness, must be deposited at the registered office of the Company, 1st

Floor, Wisma Naim, Lot 2679, Jalan Rock, 93200 Kuching, Sarawak, not less than 48 hours before the time set for holding the meeting.(3) A member who is an authorised nominee may appoint one (1) proxy in respect of each securities account it holds with ordinary shares

standing to the credit of the said securities account.(4) A member other than an authorised nominee shall be entitled to appoint not more than two (2) proxies to attend and vote at the same

meeting.(5) Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holding to

be represented by each proxy.(6) If the appointor is a corporation, the Form of Proxy must be executed either under its Common Seal or under the hand of an officer or

attorney duly authorised.(7) Any alteration in this form must be initialled.

Menara Pehin Setia Raja in Mukah



1st Floor, Wisma Naim,Lot 2679 Jalan Rock, 93200 Kuching, Sarawak.Tel: 6082-244000 Fax: 6082-248588Email: [email protected]

Documents

SARAWAK ENTERPRISE