SPK Sentosa Cover 07.eps - I3investor

02 Corporate Information 03 Corporate Structure 04 Chairman’s Statement

10 Financial Highlights 11 Profile of Board of Directors

13 Statement on Corporate Governance 18 Statement on Internal Control

19 Statement of Directors’ Responsibility in Relation to the Financial Statements

20 Report on Audit Committee 23 Financial Statements

76 Bursa Securities Listing Requirements Compliance Information

77 Property of the Group 78 Analysis of Shareholdings 81 Notice of Annual General Meeting

86 Statement Accompanying Notice of Annual General Meeting

Proxy Form

CONTENTS

BOARD OF DIRECTORS

Gen. (R) Tan Sri Yaacob Bin Mat ZainChairman, Non-Executive andNon-Independent

Saiful Aznir Bin ShahabudinManaging Director, Executive andNon-Independent

Ir. Dr. Azman Bin AhmadDirector, Executive and Non-Independent

Dato’ Md Mydin Bin Md SheriffDirector, Non-Executive and Independent

Brig. Gen. (R) Dato’ Mohd Hashim BinHaji AbuDirector, Non-Executive and Independent

Krishnan a/l C.K MenonDirector, Non-Executive and Independent

AUDIT COMMITTEE

Krishnan a/l C.K MenonChairman, Non-Executive and Independent

Dato’ Md Mydin Bin Md SheriffNon-Executive and Independent

Brig. Gen. (R) Dato’ Mohd HashimBin Haji AbuNon-Executive and Independent

REMUNERATION COMMITTEE

Gen. (R) Tan Sri Yaacob Bin Mat ZainChairman, Non Executive andNon-Independent

Saiful Aznir Bin ShahabudinExecutive and Non-Independent

Krishnan a/l C.K MenonNon-Executive and Independent

NOMINATION COMMITTEE

Brig. Gen. (R) Dato’ Mohd HashimBin Haji AbuChairman, Non-Executive and Independent

Dato’ Md Mydin Bin Md SheriffNon-Executive and Independent

Krishnan a/l C.K MenonNon-Executive and Independent

COMPANY SECRETARY

Fateh Hanum Bte Khairuddin(LS 0009093)

AUDITORS

Ernst & YoungLevel 23A, Menara MileniumJalan DamanlelaPusat Bandar DamansaraDamansara Heights50490 Kuala Lumpur

REGISTRAR

Shareworks Sdn Bhd 10-1, Jalan Sri Hartamas 8, Sri Hartamas50480 Kuala LumpurTel: +603 6201 1120Fax: +603 6201 3121

REGISTERED OFFICE

13th Floor, Menara MBF(formerly known as Menara SPK)No. 22, Jalan Sultan Ismail50250 Kuala LumpurTel: +603 2148 1344Fax: +603 2144 5058

PRINCIPAL BANKERS

Alliance Bank Malaysia BerhadAffin Bank Berhad

STOCK EXCHANGE LISTING

Main Board ofBursa Malaysia Securities Berhad

02

Corporate Information

Annual Report 2007

Pembinaan SPK Sdn Bhdand its subsidiaries undertaking the following projects:

• Ambangan Heights Development

• Cahaya-SPK Development

• Al-Reem Development

• Boulevard Square Development

Nadaprise Sdn Bhdand its subsidiaries undertaking the following projects:

• Miri Crude Oil Terminal Rejuvenation Phase 2

• MDD 134 MLNG Dua Debottlenecking

• KR-1 Sewer System Modification

Corporate Structure

SPK-Sentosa Corporation Berhad (5347-X)

03

CONSTRUCTION 100%

OIL AND GAS 50%

Chairman’s Statement

04

Annual Report 2007

Dear valued shareholders,

On behalf of the Board of Directors, I am

pleased to present the Annual Report and

Audited Financial Statements of the

Company and the Group for the financial

year ended 31 December 2007.

THE YEAR IN PERSPECTIVEThe Malaysian economy strengthened further in 2007 registering a growth of 6.3% for theyear. The construction sector remained resilient with a growth of 4.6% mainly supported bythe implementation of various infrastructure projects under the Ninth Malaysia Plan. Themining sector expanded by 3.2% supported by the increase in crude oil output amidst thecommencement of production of Malaysia’s first deepwater oil field at Kikeh, Sabah in midAugust 2007.

With the strengthening of the construction sector and following the Group’s timely moveinto the oil and gas sector, I am pleased to say that 2007 has been a fruitful year for theGroup.

The year saw the Group successfully securing its first international contract for the design andconstruction of Phase 1 Plot 1 Zone B Residential, Commercial and Recreational Developmentin Al Reem Island, Abu Dhabi, United Arab Emirates valued at approximately AED 490.8million (equivalent to approximately RM427 million). I am also pleased to announce that theGroup’s venture into the oil and gas sector in late 2006 has come to fruition with several oiland gas contracts secured during the year. The Group managed to secure its maiden oil andgas contract, worth RM146.2 million, for the procurement, construction and commissioningof the Miri Crude Oil Terminal Rejuvenation Phase 2 project. The Group was also awarded aRM9.9 million contract for civil work for MLNG Dua Debottlenecking Project and a RM13.5million contract for procurement and construction of Drain Modification Project at PetronasPenapisan (Terengganu) Sdn Bhd.

In order to enhance its order book to achieve sustainable growth, the Group is aggressivelypursuing and bidding for new projects, both domestically and overseas. Given the Group’scommendable track record and strong financials coupled with the diverse range of serviceproviders under its stable, we are confident that the Group will be able to obtain significantcontracts in 2008, in both the construction and oil and gas sectors, which we believe willpropel the Group to the next phase of earnings growth.

Gen. (R) Tan Sri Yaacobbin Mat Zain

Chairman

Chairman’s Statement (cont’d)


05

Being ever mindful of the need to deliver long-term value to shareholders, we arecontinuously on the look out for good business opportunities to expand our core businessesand focus on quality earnings which will provide the Group with new sources of recurringincome. Taking cognisance of this, your Board is actively seeking new business ventureswhich will steer the Group towards a more promising and exciting future.

FINANCIAL REVIEWFor the financial year under review, revenue for the Group was marginally lower at RM124.5million compared to RM128.9 million previously. This is mainly due to lower volume ofconstruction work undertaken during the year as a result of the completion of substantiallyall its major construction contracts and the slower replenishment of its order book. However,the Group managed a profit before tax of RM16.7 million for 2007 against a profit before taxof RM2.3 million for the previous financial year. The profit for the year under review is mainlyattributable to a gain of RM20.3 million realised from the disposal of its 19-storey officebuilding, namely Menara SPK. Newly secured contracts undertaken by the Group have alsocontributed to the revenue and profit of the Group. This is however partially offset byoverheads and losses incurred by the investment holding division and other venturesundertaken by the oil and gas division which have yet to materialise.

The Group’s balance sheet remained strong with Net Tangible Assets at RM142.2 million andnet cash position increasing to RM89.7 million as at 31 December 2007.

REVIEW OF OPERATIONSDuring the year, the Group continued to perform steadily, focussing on completing contractsfrom its order book and executing new projects secured while tenaciously working hard toenhance its order book.


06

Annual Report 2007

Construction Division• Al Reem Development Project This project involving the design and construction of

two blocks of residential, commercial and recreational development of 44 storeys each in Al Reem Island, Abu Dhabi, is undertaken by SPK-Bina Puri JV, a 70:30 joint-venture between Pembinaan SPK Sdn Bhd and Bina Puri Holdings Bhd respectively. Since the commencement of the project in mid May 2007, construction has been progressing smoothly and we expect the project to complete on schedule within the agreed timeframe of 31 months. The successful implementation and completion of this maiden project will pave the way for the Group to gain a stronger foothold in the international market, particularly the Middle East.

• Sabah East-West Grid Interconnection This project, managed as a 50% joint venture with Transmission Technology Sdn Bhd, a subsidiary of Malaysian Resources Corporation Berhad, was completed and handed over to Sabah Electricity Sdn. Bhd. in November 2007.

• Sunway SPK Damansara Project involves the construction of 416 units of 2 1/2-storey link houses for the upmarket development located in the prime freehold area adjacent to Bandar Menjalara, Kuala Lumpur. The project was successfully completed and handed over to the client in May 2007.

• In-house construction work undertaken by the Group for its sister companies in respect of the phased property development in Sungai Petani, namely Ambangan Heights project and the phased development in Shah Alam, namely Cahaya SPK project, has also contributed positively to the Group’s earnings.

Oil and Gas Division• Miri Crude Oil Terminal Rejuvenation Project Phase 2 This RM146.2 million

contract which involves the procurement, construction and commissioning of Miri Crude Oil Terminal Rejuvenation Project - Phase 2 is undertaken by the Group’s subsidiary company, namely Rekayasa Industri Malaysia Sdn Bhd. Work on this project has commenced and we expect to complete and hand over the project within the agreed time frame.

• KR-1 Sewer System Modification Project This project which involves the construction and modification of oil and water separator system for Petronas Penapisan (Terengganu) Sdn Bhd has been substantially completed and is expected to be handed over by June 2008.

07



• MDD 134 MLNG Dua Debottlenecking Project This project involves the construction of civil and structural works for module 5 and non-module area for Malaysia LNG Dua Sdn Bhd. Construction is progressing as scheduled and we expect to complete the project within the agreed time frame.

As at 31 December 2007, the Group has outstanding unbilled order book of RM284.7million.

INDUSTRY OUTLOOKWhile moderation in growth is expected in the developed economies in 2008, growth isexpected to remain strong in Asia and other emerging economies. However, the globalgrowth outlook would be dependent on the length and depth of the US slowdown andextent of the impact of the financial market turbulence. Inflation is expected to remainelevated following sustained high oil and food prices. While these developments will have animpact on the Asian regional economies, the growth in the region will continue to besupported by strong domestic demand and high growth momentum in the large economiesin the region. Overall, the world economic growth is expected to moderate in 2008 to 3.7%(2007 : 4.7%)

Notwithstanding the external challenges, the Malaysian economy is expected to remain resilienton the back of well diversified and broad-based structure as well as strong macroeconomicfundamentals, which have strengthened over the years. Against this backdrop, the Malaysianeconomy is projected to expand by 5.0 to 6.0% in 2008, slower than last year’s 6.3%.

The construction sector is poised to strengthen further with a growth of 5.5% on the back ofongoing infrastructure projects and newly launched infrastructure projects under the NinthMalaysia Plan, in particular the development of growth corridors. Growth is expected toemanate from the implementation of major transport-related projects, namely the SecondPenang Bridge, Penang Monorail, Ipoh-Padang Besar Double Tracking Rail project and theextension of Ampang and Kelana Jaya Light Rail Transit lines. Efforts to develop SouthernJohor as one of the world’s largest integrated petroleum logistics hub and the ongoingNorthern Corridor Economic Region will further add impetus to the growth of theconstruction sector.


08

Annual Report 2007

As for the oil and gas sector, higher production of crude oil and natural gas is expected tosupport growth in the mining sector by 6%. Production of crude oil is expected to increasefollowing the completion of major maintenance and rejuvenation of several oil wells over thepast years. Production is envisaged to grow further with expanded capacity from the oil fieldsin Kikeh. Similarly, production of LNG is expected to increase on account of upgrading andexpansion of facilities in MLNG Dua plant in Bintulu. The increased activities for oil and gasexploration and production have spurred demand in oil and gas related industries whichaugurs well for the Group’s oil and gas support services.

PROSPECTS FOR 2008Given the much improved outlook forecasted for the construction sector and the stronggrowth expected in the oil and gas industry, 2008 is set to be a promising and exciting yearfor the Group to deliver a robust performance.

With the growing number of opportunities abroad, particularly the Middle East, growthprospects for 2008 and beyond appear promising. We will continue to venture aggressivelyinto the international market whilst strengthening our presence locally as a premierconstruction company.

We are optimistic of the prospects in the oil and gas industry over the next three to five yearsgiven the continuing high level of investment in exploration and production driven by highglobal energy prices and supply related constraints. The ongoing efforts by global oilproducers to bring more production on stream provide significant market opportunities forus with respect to our diverse oil and gas support services. The Group’s strategic alliance withinternationally renowned players, has positioned us well to transform growth opportunitiesinto tangible operating results.



09

Barring unforeseen circumstances, the Board is optimistic that the Group will be able todeliver a good performance for the coming financial year ending 31 December 2008. TheGroup will continuously strive to put in place strategic investment initiatives to expand anddiversify its core businesses with the view to enhancing shareholders’ value and achieving ahigher return on investment in the longer term.

DIVIDENDIn view of the need to conserve cash flows to put the Group on stronger footing to takeadvantage of the opportunities that would arise in the construction sector and the oil and gasindustry, the Board of Directors does not recommend the payment of any dividend for thefinancial year ended 31 December 2007.

ACKNOWLEDGEMENTOn behalf of my fellow Board members, I wish to express our sincere appreciation andgratitude to our valued shareholders, business associates, customers, bankers, sub-contractors, suppliers and regulatory authorities for their unwavering support and confidencein the Group’s endeavours and business activities. The Board would also like to thank theManagement and staff of the Group for their hard work, dedication and commitment inmaking 2007 another successful year for the Company and the Group. Last but not least, Iwould like to express my sincere appreciation to my fellow Board members for their tirelesssupport and invaluable contribution towards the Company and I look forward to theircontinued enthusiasm and cooperation as we strive to scale greater heights in the comingyear.

Financial HighlightsFive Year Group Financial Statistics

10

Annual Report 2007

(96,569)(699) (1,871) (6,610) (16,147) (7,055)

(103,179)

(103,179)

(4,291)

(60,666) (55,290) (61,521) (124,323) (76,013)(77.0)

2007 2006 2005 2004 2003RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 124,521 128,872 130,502 310,684 122,789Profit/(Loss) before tax 16,733 2,287 45,351 22,469Tax expenseProfit/(Loss) for the year 16,034 416 29,204 15,414Profit/(Loss) attributable to equity holders

of the Company 15,583 416 29,204 15,414Issued Share Capital 133,944 133,944 133,944 133,944 133,944Reserves 29,769 14,256 98,888 69,684Minority Interest 550 - - - -Total Equity 164,263 148,200 129,653 232,832 203,628Total Assets 224,929 203,490 191,174 357,155 279,641Total LiabilitiesEarnings/(Loss) per share (sen) 11.6 0.3 21.8 16.7Gross Dividend per share (sen) - - - - -Net Tangible Assets per share (RM) 1.06 0.97 0.83 0.92 0.65Net Assets per share (RM) 1.23 1.11 0.97 1.74 1.52

(560) (97,561)(2,566)

(180) (404)

(96,569)

SEGMENT REPORTING2007 2006 2005 2004 2003

RM’000 RM’000 RM’000 RM’000 RM’000

REVENUE

Construction 76,484 122,467 124,662 305,337 119,277Oil and Gas 44,791 - - - -Property and Investment Holding 3,246 6,405 5,840 5,347 3,512

124,521 128,872 130,502 310,684 122,789

PROFIT/(LOSS) BEFORE TAX

Construction 2,467 45,755 21,761Oil and Gas - - - -Property and Investment Holding 19,859 992 708

16,733 2,287 45,351 22,469

GEN. (R) TAN SRI YAACOBBIN MAT ZAIN

Chairman,

Non-Independent,Non-Executive Director,

Malaysian, Age: 72

DATO’ MD MYDIN BIN MDSHERIFF

Independent,Non-Executive Director,

Malaysian, Age: 61

BRIG. GEN. (R) DATO’MOHD HASHIM

BIN HAJI ABU


Malaysian, Age: 62

Y.Bhg. Gen. (R) Tan Sri Yaacob Bin Mat Zain, was appointed to the Board of Directors of SPK-Sentosa Corporation Berhad on 12 November 1997. He was the Chief of Defence Staff of theMalaysian Armed Forces, prior to his retirement in June 1993. Among the principalappointments held by him during his illustrious career in the Armed Forces included that ofthe Divisional Commander, Director of Military Intelligence, Chief of Army and subsequentlyChief of the Malaysian Armed Forces. Currently, Gen. (R) Tan Sri Yaacob Bin Mat Zain alsoserves on the Board of various public and private companies, namely Sharikat PermodalanKebangsaan Berhad, Affin Investment Bank Berhad, Mah Sing Group Berhad, FTEC ResourcesBerhad and NV Multi Corporation Berhad.

Gen. (R) Tan Sri Yaacob Bin Mat Zain does not have any family relationship with any Directorand/or major shareholder of the Company and has no conflict of interest with the Company.He has no conviction for any offences within the past 10 years.

Y.Bhg. Dato’ Md Mydin Bin Md Sheriff was appointed to the Board of Directors of SPK-Sentosa Corporation Berhad on 1 February 2003 as an Executive Director. On 31 January2005, he resigned as Executive Director. He was re-appointed on 21 February 2005 as Non-Executive Non-Independent Director and on 16 January 2008, he was re-designated asIndependent Non-Executive Director. He holds a Bachelor of Science in Biology andChemistry and Master of Arts in Science Education from Columbia University, United States ofAmerica. He has over 30 years of experience in educational and entrepreneurial developmentsectors with Majlis Amanah Rakyat (“MARA”), holding numerous posts such as ScienceLecturer, Principal, President of MARA Community College, Director of Secondary Educationand Vocational and Training Division, Deputy Director General and eventually DirectorGeneral of MARA from 11 November 2000 to 24 November 2002. He is currently the ChiefExecutive Officer of Inpens International College, Selangor.

Dato’ Md Mydin Bin Md Sheriff does not have any family relationship with any Directorand/or major shareholder of the Company and has no conflict of interest with the Company.He has no conviction for any offences within the past 10 years.

Y.Bhg. Brig. Gen. (R) Dato’ Mohd Hashim Bin Haji Abu was appointed to the Board ofDirectors of SPK-Sentosa Corporation Berhad on 26 March 2002. He was commissioned intothe Royal Engineer Regiment of the Malaysian Armed Forces in 1965 and has attended variouscourses in various military institutions in Australia, United States of America and UnitedKingdom. His last held position prior to his retirement was Chief Engineer in the MalaysianArmed Forces with the rank of Brigadier General. He currently serves on the board of AffinFund Management Berhad.

Brig. Gen. (R) Dato’ Mohd Hashim Bin Haji Abu does not have any family relationship withany Director and/or major shareholder of the Company and has no conflict of interest withthe Company. He has no conviction for any offences within the past 10 years.

Profile of Board of Directors


11

IR. DR. AZMANBIN AHMAD

Non-Independent,Executive Director,

Malaysian, Age: 46

SAIFUL AZNIR BINSHAHABUDIN

Non-Independent,Executive Director

(Managing Director),

Malaysian, Age: 48

KRISHNAN A/L C.K MENON


Malaysian, Age: 58

Ir. Dr. Azman Bin Ahmad was appointed to the Board of Directors of SPK-Sentosa CorporationBerhad on 24 February 2003. He is a qualified Civil Engineer, with a Bachelor of Engineering(Hons) Civil Degree from University of Adelaide, Australia and a Ph.D in Engineering fromUniversity of Malaya. He has 25 years of experience in the corporate and constructionindustry. He is currently the Executive Vice Chairman of the board of Sharikat PermodalanKebangsaan Berhad and is also a director of a few other private companies.

Ir. Dr. Azman Bin Ahmad has a family relationship with one of the Directors of the Companyas he is the brother-in-law to Saiful Aznir Bin Shahabudin and has no conflict of interest withthe Company. Ir. Dr. Azman Bin Ahmad has no conviction for any offences within the past 10years.

Saiful Aznir Bin Shahabudin was appointed to the Board of Directors of SPK-SentosaCorporation Berhad on 26 March 2002. He was appointed as Managing Director on 20 May2004. He qualified as a member of the American Institute of Certified Public Accountants, andis a member of the Malaysian Institute of Certified Public Accountants. He holds a Master ofBusiness Administration Degree from the University of Chicago and a Bachelor of BusinessAdministration Degree from Western Michigan University. Prior to his appointment, he wasthe Group Chief Executive Officer of Encorp Group Sdn Bhd. He holds no directorship in anyother listed company.

Saiful Aznir Bin Shahabudin has a family relationship with one of the Directors of theCompany as he is the brother-in- law to Ir. Dr. Azman Bin Ahmad and has no conflict ofinterest with the Company. He has no conviction for any offences within the past 10 years.

Krishnan a/l C.K Menon was appointed to the Board of Directors of SPK-Sentosa CorporationBerhad on 26 March 2002. He is a fellow of the Institute of Chartered Accountants (Englandand Wales), a Chartered Accountant (Malaysian Institute of Accountants) and a CertifiedPublic Accountant (Malaysian Institute of Certified Public Accountants). He currently serveson the Board of MISC Berhad, Scicom (MSC) Berhad, M3 Technologies (Asia) Berhad andPutrajaya Perdana Berhad.

Krishnan a/l C.K Menon does not have any family relationship with any Director and/or majorshareholder of the Company and has no conflict of interest with the Company. He has noconviction for any offences within the past 10 years.

Profile of Board of Directors (cont’d)

12

Annual Report 2007

The Company recognises that maintaining the trust and confidence of shareholders,employees, customers and other people with whom it interacts and does business, is crucialto the Company’s continued growth and success.

The Board of Directors thus is committed to direct and manage the Company towardsenhancing business prosperity and corporate accountability with the objective of realisingshareholders’ value, whilst taking into account the interests of other stakeholders.

Accordingly, the Company takes every step to ensure compliance to the principles of goodcorporate governance, to adhere to the Malaysian Code on Corporate Governance’s (the“Code”) best practices for companies and to fulfill the provisions of the listing requirements(the “Listing Requirements”) of Bursa Malaysia Securities Berhad (“Bursa Securities”).

BOARD OF DIRECTORS

Composition

The Board comprises a non-executive Chairman, a Managing Director, an executive directorand three (3) non-executive directors who are independent.

The Board consists of various professionals from diverse fields such as accountants andengineers and are persons of calibre and credibility with the necessary skill and experience toeffectively discharge the Board’s stewardship responsibilities in spearheading the Group’sgrowth and future direction.

The roles of the Chairman and the Managing Director are separate, each with clear divisionof responsibilities to ensure a balance of power and authority.

All independent directors are independent of the Management and free from any relationshipwhich could interfere with their independent judgment.

The profiles of the Directors are as set out on pages 11 to 12.

Duties of Directors

The Board takes full responsibility in ensuring the effective performance of the Group in allareas and guides the Group in achieving its short and long term objectives, advises andoversees the implementation of strategies and new business development as well asoverseeing the corporate development of the Group.

In furtherance of their duties, the directors have access to the advice and services of theCompany Secretary and to all information within the Company whether as a full Board or intheir individual capacity. Where necessary, the directors engage independent professionals foradvice on specialised issues at the Company’s expense to enable them to discharge theirduties with full knowledge of the cause and effect.

Board Meetings

The Board meets regularly at least once in three (3) months and additional meetings will beheld as and when required.

In advance of each Board meeting, the members of the Board are each provided with anagenda and a Board report containing information relevant to the business of the meeting,including information on major financial, operational and corporate matters as well asactivities and performance of the Company to enable them to discharge their duties in aproper and effective manner.

The Directors have access to the advice and services of the Company Secretary, who isresponsible for ensuring that Board meeting procedures are followed and that applicable rulesand regulations are complied with.

Statement on Corporate Governance


13

BOARD OF DIRECTORS (cont’d)

Board Meetings (cont’d)

The Company’s Memorandum and Articles of Association provides for the Chairman to havethe casting vote in the event when an equality of votes arises over an issue in question exceptin situation where only two (2) directors (including the Chairman) are present to constitutethe quorum.

The Board met five (5) times during the financial year ended 31 December 2007 and detailsof the attendance of the directors are set out in the Statement Accompanying Notice ofAnnual General Meeting on page 86.

Appointment and Re-election of Directors

Pursuant to Section 129(2) of the Companies Act, 1965, Directors who are of and over theage of seventy (70) years shall retire at every Annual General Meeting and may offerthemselves for re-appointment to hold office until the next Annual General Meeting.

In accordance with the Company’s Memorandum and Articles of Association, which is incompliance with Chapter 7 of the Listing Requirements, one-third (1/3) of the Directors shallretire from office at each Annual General Meeting and they can offer themselves for re-election. Directors who are appointed by the Board are subject to election by the shareholdersat the next Annual General Meeting held following their appointments.

Board Committees

The following committees have been established to assist the Board in the discharge of itsduties. Each committee operates under approved terms of reference or guidelines.

NOMINATION COMMITTEE

The Board has delegated to the Nomination Committee the responsibility for considering theappointment of Directors, for identifying and selecting potential new Directors and forproposing to the Board, the appointment of new Directors.

The Nomination Committee meets as and when required but not less than once a year, andis chaired by Y.Bhg. Brig. Gen.(R) Dato’ Mohd Hashim Bin Haji Abu and its members are Dato’Md Mydin Bin Md Sheriff and Krishnan a/l C.K Menon.

The Nomination Committee has written terms of reference as follows:

• To recommend to the Board of Directors candidates for all directorships to be filled.

• To consider in making its recommendations, candidates for directorships proposed by the Managing Director and, within the bounds of practicability, by any other senior executive or any Director or Shareholder.

• To recommend to the Board of Directors the nominee to fill seats or vacancies on Board Committees.

• To review, on an annual basis, the required mix of skills and experience and other qualities, including core competencies which, non-executive directors should have.

REMUNERATION COMMITTEE

Level and Make-Up of Remuneration

The full Board and/or Remuneration Committee determines the remuneration of eachDirector. It is the Remuneration Committee’s duty to ensure that the level of remuneration issufficient to attract and retain the Directors needed to run the Company successfully. TheExecutive Directors play no part in deciding their own remuneration and the respective Boardmembers abstain from all discussion pertaining to their remuneration.

Statement on Corporate Governance(cont’d)

14

Annual Report 2007

REMUNERATION COMMITTEE (cont’d)

Level and Make-Up of Remuneration (cont’d)

Directors’ fees are tabled to the Company’s shareholders for approval at the Company’sAnnual General Meeting.

The Remuneration Committee meets as and when required. It is responsible for all aspects ofremuneration and terms and conditions of service of the Directors.

The Remuneration Committee is chaired by Y.Bhg. Gen. (R) Tan Sri Yaacob Bin Mat Zain andits members are Saiful Aznir Bin Shahabudin and Krishnan a/l C.K Menon.

The Remuneration Committee has written terms of reference as follows:

• To review and assess the remuneration packages of the Directors in all forms, with or without other independent professional advice or other outside advice.

• To ensure the remuneration be sufficiently attractive and be able to retain directors required to run the Company and the business successfully.

• To structure the component parts of remuneration so as to link rewards to corporate and individual performance.

• To recommend to the Board of Directors the remuneration packages of the Directors.

• To act in line with the directions of the Board of Directors.

• To consider and examine such other matters within its authority as the Remuneration Committee considers appropriate.

Directors’ Remuneration

The breakdown of the remuneration for all the Directors of the Company for the financial yearended 31 December 2007 is as follows:

The above disclosure does not include the remuneration of two (2) of the Directors of theCompany as these directors are remunerated as directors of the holding company by theholding company, Sharikat Permodalan Kebangsaan Berhad.

Non - Executive RM’000

(a) Total RemunerationFees 62Salaries and other emoluments 15

77

Non - Executive

(b) Number of Directors whose remuneration falls within the band ofRM50,000 and below 4



15

DIRECTORS’ TRAINING

Having completed the Mandatory Accreditation Programme prescribed by Bursa Securities,the Directors continue to benefit from attending programmes and seminars accredited underBursa Securities’ Continuing Education Programme (“CEP”).

Directors are also encouraged to attend other professional programmes to stay abreast withcurrent issues arising from the ever-changing business environment within which theCompany and Group operate.

The Board acknowledges the amendments to the Listing Requirements via a letter dated 29September 2004 (“CEP Amendments”) which states that from the year 2005 onwards, theboard of directors of listed companies will assume the onus of determining or overseeing thetraining needs of their directors.

SHAREHOLDERS

The Group recognises the importance of accountability to its shareholders through propercommunication with shareholders. The Group adheres to the disclosure requirements of theBursa Securities and views the timely and equal dissemination of information to shareholdersas important. The Company reaches out to its shareholders through its distribution of annualreports.

The Annual General Meeting is the principal forum for dialogue with shareholders. Allshareholders are encouraged to attend the Company’s Annual General Meeting and toparticipate in the proceedings. Shareholders’ suggestions received during Annual GeneralMeetings are reviewed and considered for implementation, wherever possible. Everyopportunity is given to the shareholders to ask questions and seek clarification on the businessand performance of the Group.

CORPORATE SOCIAL RESPONSIBILITY

There were no corporate social responsibility activities or practices undertaken by theCompany.

ACCOUNTABILITY AND AUDIT

Financial Reporting

The Board aims to present a balanced, clear and meaningful assessment of the Company’sand Group’s financial positions and prospects in all their reports, to the shareholders,investors and regulatory authorities. This assessment is primarily provided in the AnnualReport through the Chairman’s Statement as well as through the quarterly announcements.

Internal Control

Information on the Group’s internal control is presented in the Statement on Internal Controlset out on page 18.

Relationship with Auditors

The external auditors report to members of the Company on their findings which are includedas part of the Company’s statutory financial statements. The Company maintains atransparent relationship with its external auditors in seeking professional advice and ensuringcompliance with the accounting standards in Malaysia.

The role of the Audit Committee in relation to the external auditors is set out in the Reporton Audit Committee on pages 20 to 22.


16

Annual Report 2007

STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE CODE

The Board considers that it has complied throughout the financial year with the Best Practicesas set out in the Code.

Statement made in accordance with the resolution of the Board of Directors dated 29 April2008.

Gen. (R) Tan Sri Yaacob Bin Mat ZainChairman



17

The Board has overall responsibility for the Group’s system of internal control and forreviewing its effectiveness whilst the role of management is to implement the Board’s policieson risk and control.

The system of internal control is designed to manage rather than eliminate the risk of failureto achieve business objectives and thus internal controls can only provide reasonable and notabsolute assurance against material misstatement or loss. It is possible that internal controlsystem can be circumvented or overridden. Moreover, because of changing circumstancesand conditions, the effectiveness of internal control system may vary over time. Hence thesystem of internal control cannot be expected to eliminate all the risks.

The Board confirms that there is a continuous process for identifying, evaluating andmanaging significant risks faced by the Group, which has been in place for the financial yearunder review and up to date of approval of the annual report and financial statements. Theprocess is regularly reviewed by the Board and accords with the guidelines for directors oninternal controls, the Statement on Internal Control : Guidance for Directors of Public ListedCompanies.

The Group has a defined delegation of authority with a clear line of responsibility andaccountability. It sets out the decisions that need to be taken and the appropriate approvingauthority at various levels of management including matters that require the Board’sapproval.

The Group performs regular reviews of business processes to assess the effectiveness andintegrity of its internal control system. To assist the Board in fulfilling its role, the AuditCommittee in its advisory capacity is established with specific terms of reference whichinclude the overseeing and monitoring of the Group’s financial reporting system and thereview of the effectiveness of the Group’s system of internal control periodically. The reviewcovers the financial, operational and compliance controls as well as risk management.

Statement made in accordance with the resolution of the Board of Directors dated 29 April2008.

Gen. (R) Tan Sri Yaacob Bin Mat ZainChairman

Statement on Internal Control

18

Annual Report 2007

The Directors are required to prepare financial statements which give a true and fair view of thefinancial position of the Group and the Company as at the end of each financial year and of theirresults and their cash flows for that year then ended.

The Directors confirm that in preparing the financial statements:

• the Group and the Company have used appropriate accounting policies which are consistently applied;

• reasonable and prudent judgments and estimates were made; and

• all applicable approved accounting standards in Malaysia have been followed.

The Directors further confirm that they are responsible for ensuring that the Company maintainsaccounting records that disclose with reasonable accuracy the financial position of the Group andthe Company, and which enable them to ensure that the financial statements comply with theCompanies Act, 1965.

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

Statement of Directors’ ResponsibilityIn Relation to the Financial Statements


19

No. of MeetingsMembers Attended

Krishnan a/l C.K Menon 5/5Saiful Aznir Bin Shahabudin 4/4(resigned on 1 October 2007)Brig. Gen. (R) Dato’ Mohd Hashim Bin Haji Abu 5/5General (R) Tan Sri Yaacob Bin Mat Zain 1/1(appointed on 1 October 2007 and resigned on 16 January 2008)Dato’ Md Mydin Bin Md Sheriff 0/0(appointed on 16 January 2008)

In line and in compliance with Paragraph 15.16 of the Listing Requirements, the Board ispleased to present a report on the Audit Committee:

MEMBERSHIP

The Audit Committee comprises three (3) members who are non-executive and independentdirectors. It is chaired by Krishnan a/l C.K Menon and its members are Y.Bhg. Brig. Gen. (R)Dato’ Mohd Hashim Bin Haji Abu and Y.Bhg. Dato’ Md Mydin Bin Md Sheriff.

Composition of Members

The Board elects the Audit Committee members from amongst themselves, comprising nofewer than three (3) directors, where all are non-executive and independent directors.

No alternate director of the Board has been appointed as a member of the Audit Committee.

If a member of the Audit Committee resigns, dies, or for any reason ceases to be a memberresulting in non-compliance to the composition criteria as stated above, the Board will withinthree (3) months of the event appoint such number of the new members as may be requiredto fill the vacancy.

The Chairman of the Audit Committee, elected from amongst the Audit Committee members,is an independent director approved by the Board of Directors. He is also a member of at leastone (1) of the appointed bodies prescribed in the Listing Requirements.

The Company Secretary is the Secretary to the Audit Committee.

Meetings

During the financial year ended 31 December 2007, the members of the Audit Committeemet five (5) times, on 27 February 2007, 22 March 2007, 25 May 2007, 17 August 2007 and15 November 2007 respectively.

The details of attendance are as follows:

The Audit Committee meetings are scheduled to be conducted at least four (4) timesannually, or more frequently as circumstances dictate. In addition, the Chairman may call foradditional meetings at any time at the Chairman’s discretion.

In the absence of the Chairman, the other independent director will be the Chairman for thatmeeting.

Representatives of the external auditors may be required to be in attendance at meetings atleast twice a year, without any executive Board members present, where matters relating tothe audit of the statutory financial statements and/or external auditors are to be discussed.

Other directors, officers and employees of the Company and/or Group may be invited toattend, except for those portions of the meetings where their presence is consideredinappropriate, as determined by the Audit Committee.

Report on Audit Committee

20

Annual Report 2007

Minutes of each meeting shall be kept and distributed to each member of the AuditCommittee and also to the other members of the Board of Directors. The Audit CommitteeChairman shall report on each meeting to the Board of Directors.

Terms of Reference

The principal objective of the Audit Committee is to assist the Board of Directors indischarging its statutory duties and responsibilities relating to accounting and reportingpractices of the Group specifically in the following areas:

• To review the maintenance and control of an effective accounting system;

• To review the Group’s public accountability and compliance with the laws and regulations;

• To ensure the adequacy of internal and external audit procedures;

• To evaluate the quality and suitability of external auditors, make recommendations concerning their appointment and remuneration, to consider the nomination and to review any letter of resignation of a person or persons as external auditors;

• To provide liaison between the external auditors, the management and the Board of Directors and also to review the assistance given by the management to the external auditors;

• To review the findings of the internal and external auditors;

• To review the quarterly results and annual financial statements before submission to the Board of Directors;

• To review any related party transactions and conflict of interest situation that may arise within the Group including any transaction, procedure or course of conduct that raises questions of management integrity;

• To report its findings on the financial and management performance, and other material matters to the Board of Directors;

• To act in line with the directions of the Board of Directors; and

• To consider and examine such other matters as the Audit Committee deems appropriate.

In addition to the duties and responsibilities set out under its Terms of Reference, the AuditCommittee also acts as a forum for discussion of internal issues and contributes to the Board’sreview of the effectiveness of the Group’s internal control and risk management systems. TheAudit Committee’s functions will also include a review of the internal audit functions i.e. itsauthority, resources and scope of work. It will ensure that no restrictions are placed on thescope of statutory audits and on the independence of the internal audit functions.

Scope of Authority

The Audit Committee shall, in accordance with procedures determined/to be determined bythe Board of Directors and at the expense of the Company:

• have the authority to investigate any activity within its terms of reference. All employees shall be directed to co-operate as requested by members of the Audit Committee;

• have full and unrestricted access to all information and/or documents required to perform its duties as well as to the internal and external auditors and senior managementof the Company and Group;

Report on Audit Committee (cont’d)


21

Scope of Authority (cont’d)

• obtain other independent professional advice or other advice and to secure the attendance of outsiders with relevant experience and expertise if it considers necessary;

• convene meetings with the external auditors, without the attendance of the executive member of the Audit Committee, whenever deemed necessary; and

• be able to make relevant report when necessary to the relevant authorities if a breach of the Listing Requirements occurred.

Activities

During the year under review, the Audit Committee met with due notices of meetings issuedand with agendas planned and itemised in order for issues raised to be discussed in a focusedand detailed manner.

The reviews of the Group’s quarterly reports were held before the Board meetings at whichthe reports were to be approved. The Chairman of the Committee briefed the Board on issuesand recommendations of the Committee thereon during the Board meetings.

The Committee had also met with the external auditors and discussed the audit of theCompany and the Group. In a meeting held subsequent to the financial year, the Committeereviewed the draft audited financial statements of the Company and the Group for thefinancial year ended 31 December 2007. The financial statements had been authorised forissue by the Board in accordance with a resolution of Directors on 29 April 2008.

The Committee carried out reviews on related party transactions within the Company and theGroup and also considered and deliberated on issues arising from the Listing Requirements.

INTERNAL AUDIT FUNCTION

The Audit Committee is aware of the fact that an independent and adequately resourcedinternal audit department is essential to assist in obtaining the assurance it requires regardingthe effectiveness of the system of internal control. The internal audit function of the Group isoutsourced to a firm of qualified professionals. The role of the internal audit function is toprovide independent and objective reports on the organisation’s management, records,accounting policies and controls to the Board. The internal audits will include evaluation ofthe processes by which significant risks are identified, assessed and managed and ensuringthat instituted controls are appropriate and effectively applied and that risk exposures areconsistent with the Company’s risk management policy.

Report on Audit Committee (cont’d)

22

Annual Report 2007

FINANCIALSTATEMENTS

24 Directors’ Report 27 Statement by Directors 27 Statutory Declaration

28 Report of the Auditors 29 Income Statements

30 Balance Sheets 31 Consolidated Statement of Changes in Equity

32 Company Statement of Changes in Equity

33 Consolidated Cash Flow Statement 34 Company Cash Flow Statement

35 Notes to the Financial Statements

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2007.

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and the provision of management services to the subsidiaries.

The principal activities of the subsidiaries are as disclosed in Note 15 to the financial statements.

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

RESULTS

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

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

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:

Gen. (R) Tan Sri Yaacob bin Mat ZainBrig. Gen. (R) Dato’ Mohd Hashim bin Haji AbuDato’ Md Mydin bin Md SheriffIr. Dr. Azman bin AhmadSaiful Aznir bin ShahabudinKrishnan a/l C.K Menon

DIRECTORS’ BENEFITS

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as disclosed in Note 8 to the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

Directors’ Report

24

Annual Report 2007

Group CompanyRM’000 RM’000

Profit for the year, attributable to:Equity holders of the Company 15,583 5,514Minority interests 451 -

16,034 5,514

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares in related corporations during the financial year were as follows:

By virtue of his interests in shares in Sharikat Permodalan Kebangsaan Berhad, Saiful Aznir bin Shahabudin is also deemed interested in shares of the Company and all the Company's subsidiaries to the extent the holding company has an interest.

None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.

EMPLOYEE SHARE OPTIONS SCHEME

The SPK-Sentosa Corporation Berhad Employee Share Options Scheme (“ESOS”) is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held on 20 May 2004. The ESOS was implemented on 28 June 2004 and is to be in force for a period of 5 years from the date of implementation.

The salient features and other terms of the ESOS are disclosed in Note 26 to the financial statements.

No options have been granted to employees and directors since its implementation.

OTHER STATUTORY INFORMATION

(a) Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

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

(b) At the date of this report, the directors are not aware of any circumstances which would render:

(i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and

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

Directors’ Report (cont’d)

SPK-SENTOSA CORPORATION BERHAD (5347-X)

25

Number of Ordinary Shares of RM1 Each1 January 31 December

2007 Acquired Sold 2007

Holding Company -Sharikat Permodalan Kebangsaan Berhad

Gen. (R) Tan Sri Yaacob bin Mat Zain- direct 1,000 - - 1,000

Ir. Dr. Azman bin Ahmad- direct 1,000 - - 1,000

Saiful Aznir bin Shahabudin- direct 1,000 - - 1,000- indirect 18,797,830 16,027 - 18,813,857

Fellow Subsidiary - Sunshine Bonus Sdn. Bhd.

Ir. Dr. Azman bin Ahmad- direct 49,999 - - 49,999

OTHER STATUTORY INFORMATION (cont’d)

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

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated 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 or 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 or of the Company which has arisen since the end of the financial year.

(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 Group or of the Company to meet their 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 of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.

SIGNIFICANT EVENTS

Significant events are disclosed in Note 34 to the financial statements.

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 dated 29 April 2008.

GEN. (R) TAN SRI YAACOB BIN MAT ZAIN SAIFUL AZNIR BIN SHAHABUDIN

Directors’ Report (cont’d)

26

Annual Report 2007

We, GEN. (R) TAN SRI YAACOB BIN MAT ZAIN and SAIFUL AZNIR BIN SHAHABUDIN, being two of the directors of SPK-SENTOSA CORPORATION BERHAD, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 29 to 75 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2007 and of the results and the 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 dated 29 April 2008.

GEN. (R) TAN SRI YAACOB BIN MAT ZAIN SAIFUL AZNIR BIN SHAHABUDIN

I, CHUNG KOK PENG, being the officer primarily responsible for the financial management of SPK-SENTOSA CORPORATION BERHAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 29 to 75 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared bythe abovenamed CHUNG KOK PENG atKuala Lumpur in the Federal Territoryon 29 April 2008 CHUNG KOK PENG

Before me,

Mohd Radzi bin YasinCommissioner for Oaths

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

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


27

We have audited the financial statements set out on pages 29 to 75. These financial statements are the responsibility of the Company’s directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report.

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

In our opinion:

(a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Financial Reporting 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 2007 and of the results and the 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 financial statements; and

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

We have considered the financial statements and the auditors’ reports thereon of the subsidiary of which we have not acted as auditors, as indicated in Note 15 to the financial statements, being financial statements that have been included in the consolidated financial statements.

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

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

ERNST & YOUNG WONG KANG HWEEAF: 0039 No. 1116/01/10(J)Chartered Accountants Partner

Kuala Lumpur, Malaysia29 April 2008

Report of the AuditorsTo the Members of SPK-Sentosa Corporation Berhad(Incorporated in Malaysia)

28

Annual Report 2007

Group Company2007 2006 2007 2006

Note RM’000 RM’000 RM’000 RM’000

Revenue 3 124,521 128,872 8,695 28,650Other income 4 23,010 1,246 939 58Construction contract costs - -Cost of goods sold - - -Cost of services rendered - -Direct operating expenses

of investment property - -Impairment of investment in

a subsidiary - - -Administrative expensesOther expenses -

Operating profit 13,406 3,041 7,392 10,428Finance costs 5Share of loss of associates - - -Share of profit/(loss) of jointly

controlled entities 3,608 - -

Profit before tax 6 16,733 2,287 7,225 9,701Tax expense 9

Profit for the year 16,034 416 5,514 2,112

Attributable to:Equity holders of the Company 15,583 416 5,514 2,112Minority interests 451 - - -

16,034 416 5,514 2,112

Basic earnings per shareattributable to equity holdersof the Company (sen) 10 11.63 0.31

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

(112,329) (113,710)(3,242)(1,295) (1,094)

(1,114) (2,067)

(15,678)(12,857) (4,074) (2,242) (2,580)

(3,288) (6,132) (22)

(187) (739) (167) (727)(94)

(15)

(699) (1,871) (1,711) (7,589)

Income StatementsFor The Year Ended 31 December 2007

29


Annual Report 2007

Balance SheetsAs At 31 December 2007

30


Group Company

(70)(21,541) (37,124) (68,816) (74,330)

2007 2006 2007 2006Note RM’000 RM’000 RM’000 RM’000

ASSETSNon-current assetsProperty, plant and equipment 11 1,517 2,065 384 458Prepaid land lease payments 13 1,529 1,551 1,529 1,551Goodwill 14 22,018 18,500 - -Investments in subsidiaries 15 - - 115,352 114,352Investments in jointly controlled entities 16 16,941 11,738 - -Investments in associates 17 - - - -Deferred tax assets 18 - 110 - -

42,005 33,964 117,265 116,361

Current assetsTrade and other receivables 19 93,237 75,888 64,303 6,311Cash and bank balances 21 89,687 35,638 856 556

182,924 111,526 65,159 6,867Investment property held for sale 12 - 58,000 - -

182,924 169,526 65,159 6,867

TOTAL ASSETS 224,929 203,490 182,424 123,228

EQUITY AND LIABILITIESEquity attributable to equity

holders of the CompanyShare capital 26 133,944 133,944 133,944 133,944Share premium 26 51,380 51,380 51,380 51,380Foreign currency translation reserve 27 - - -Accumulated losses

163,713 148,200 116,508 110,994

Minority interests 550 - - -

Total equity 164,263 148,200 116,508 110,994

Non-current liabilitiesBorrowings 22 - 54 - -Deferred revenue 24 505 562 505 562Deferred tax liabilities 18 12 1,367 - -

517 1,983 505 562

Current liabilitiesBorrowings 22 6,457 60 - -Trade and other payables 25 52,884 53,072 65,411 11,672Current tax payable 808 175 - -

60,149 53,307 65,411 11,672

Total liabilities 60,666 55,290 65,916 12,234

TOTAL EQUITY ANDLIABILITIES 224,929 203,490 182,424 123,228

Minority TotalAttributable to Equity Holders Interests EquityNon-Distributable

ForeignCurrency

Share Share Translation AccumulatedCapital Premium Reserve Losses Total

(Note 26) (Note 26) (Note 27)RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2006 133,944 51,380 - 129,653 - 129,653Effects of adopting

FRS 140 (Note 2.2(f)) - - - 18,131 18,131 - 18,131

133,944 51,380 - 147,784 - 147,784Profit for the year - - - 416 416 - 416

At 31 December 2006 133,944 51,380 - 148,200 - 148,200

At 1 January 2007 133,944 51,380 - 148,200 - 148,200Profit for the year - - - 15,583 15,583 451 16,034Acquisition of

subsidiaries (Note 15(b)) - - - - - 99 99Foreign currency translation:- Jointly controlled entity - - - -

At 31 December 2007 133,944 51,380 163,713 550 164,263

(55,671)

(37,540)

(37,124)

(37,124)

(70) (70) (70)

(70) (21,541)

Consolidated Statement of Changes in EquityFor The Year Ended 31 December 2007


31


Company Statement Of Changes In EquityFor The Year Ended 31 December 2007

32


Non-Distributable

Share Share Accumulated TotalCapital Premium Losses Equity

(Note 26) (Note 26)RM’000 RM’000 RM’000 RM’000

At 1 January 2006 133,944 51,380 108,882Profit for the year - - 2,112 2,112

At 31 December 2006 133,944 51,380 110,994

At 1 January 2007 133,944 51,380 110,994Profit for the year - - 5,514 5,514

At 31 December 2007 133,944 51,380 116,508

(76,442)

(74,330)

(74,330)

(68,816)

Annual Report 2007

Consolidated Cash Flow StatementFor The Year Ended 31 December 2007

33



2007 2006Note RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 16,733 2,287Adjustments for:

Amortisation of prepaid land lease payments 6 22 22Impairment of goodwill 6 1,086 -Bad debts written off 6 94 -Provision for doubtful debts 6 120 151Depreciation of property, plant and equipment 6 373 316Reversal of provision for doubtful debts 4 -Reversal of overaccrual of costs 4 -Deferred revenue earned 4Interest expense 5 187 739Interest income 4Share of loss of associates 94 -Share of (profit)/loss of jointly controlled entities 15Gain on disposal of property, plant and equipment 4 -Gain on disposal of investment property 4 -Property, plant and equipment written off 6 623 27

Operating (loss)/profit before working capital changes 2,589(Increase)/decrease in trade and other receivables 3,616Decrease in trade and other payables

Cash (used in)/generated from operations 596Interest paidTaxes paid

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 1,666 875Proceeds from disposal of investment property 78,320 -Proceeds from disposal of property, plant and equipment 103 -Purchase of property, plant and equipment 11(Advances to)/distribution from jointly controlled entities 1,000Acquisition of shares in jointly controlled entities -Net cash inflow arising from acquisition of subsidiaries 15(b) 150 -

Net cash generated from investing activities 78,451 1,348

CASH FLOW FROM FINANCING ACTIVITIES

Repayment of hire purchase financingDrawdown of short term borrowings 6,434 -

Net cash generated from/(used in) financing activities 6,317

NET INCREASE/(DECREASE) IN CASH AND CASHEQUIVALENTS 54,049

CASH AND CASH EQUIVALENTS AT BEGINNINGOF FINANCIAL YEAR 35,638 38,923

CASH AND CASH EQUIVALENTS AT END OFFINANCIAL YEAR 21 89,687 35,638

(2)(405)

(57) (57)

(1,526) (911)

(3,608)(103)

(20,320)

(6,689)(12,553)

(8,098) (5,609)

(27,340)(285) (912)

(3,094) (4,212)

(30,719) (4,528)

(145) (527)(1,061)

(582)

(117) (105)

(105)

(3,285)

Company Cash Flow StatementFor The Year Ended 31 December 2007

34


2007 2006Note RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 7,225 9,701Adjustments for:

Amortisation of prepaid land lease payments 6 22 22Depreciation of property, plant and equipment 6 81 81Deferred revenue earned 4Dividend income 3Interest expense 5 167 727Interest income 4 -Impairment of investment in a subsidiary 6 - 15,678Waiver of amount due from a subsidiary 6 1 4

Operating loss before working capital changes (Increase)/decrease in receivables 17,600Increase/(decrease) in payables 53,739

Cash used in operationsInterest paid

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment 11 -Acquisition of a subsidiary 15(b)(i) -Net dividend received 5,694 19,548Interest received 882 -

Net cash generated from investing activities 5,569 19,548

NET INCREASE/(DECREASE) IN CASH AND CASHEQUIVALENTS 300

CASH AND CASH EQUIVALENTS AT BEGINNINGOF FINANCIAL YEAR 556 1,305

CASH AND CASH EQUIVALENTS AT END OFFINANCIAL YEAR 21 856 556

(57) (57)(7,800) (27,150)

(882)

(1,243) (994)(57,598)

(36,176)

(5,102) (19,570)(167) (727)

(5,269) (20,297)

(7)(1,000)

(749)

Annual Report 2007

1. CORPORATE INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Board of Bursa Malaysia Securities. The registered office of the Company is located at 18th Floor, Menara SPK, No. 22, Jalan Sultan Ismail, 50250 Kuala Lumpur.

The holding and ultimate holding company is Sharikat Permodalan Kebangsaan Berhad, which is incorporated in Malaysia and produces financial statements available for public use.

The principal activities of the Company are investment holding and the provision of management services to the subsidiaries. The principal activities of the subsidiaries are as disclosed in Note 15. There have been no significant changes in the nature of these principal activities during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 29 April 2008.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation

The financial statements comply with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards (“FRSs”) in Malaysia.

The financial statements of the Group and of the Company have also been prepared on a historical basis, except for investment property in the previous financial year that has been measured at its fair value.

The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM’000).

The Malaysian Accounting Standards Board has issued FRS 6: Exploration for and Evaluation of Mineral Resources and Amendment to FRS 1192004 : Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures which are effective for annual periods beginning on or after 1 January 2007. Both FRS 6 and Amendment to FRS 1192004 are not applicable to the Group or the Company.

2.2 Summary of Significant Accounting Policies

(a) Subsidiaries and Basis of Consolidation

(i) SubsidiariesSubsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

(ii) Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Company.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intragroup balances, transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances.

Notes to the Financial Statements31 December 2007


35

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

2.2 Summary of Significant Accounting Policies (cont’d)

(a) Subsidiaries and Basis of Consolidation (cont’d)

(ii) Basis of Consolidation (cont’d)Acquisitions of subsidiaries are accounted for using the purchase method. The purchase method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition.

Any excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill.

Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in profit or loss.

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since then.

(b) Associates

Associates are entities in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not in control or joint control over those policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in associate is carried in the consolidated balance sheet at cost adjusted for post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of the net profit or loss of the associate is recognised in the consolidated profit or loss. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes.

In applying the equity method, unrealised gains and losses on transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the associate. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associate. The associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profit or loss in the period in which the investment is acquired.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any long-term interests that, in substance, form part of the Group’s net investment in the associates, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

The most recent available audited financial statements of the associates are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminous with those of the Group, the share of results is arrived at from the last audited financial statements available and management financial statements to the end of the accounting period. Uniform accounting polices are adopted for like transactions and events in similar circumstances.

In the Company’s separate financial statements, investments in associates are stated at cost less impairment losses.

On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

Notes to the Financial Statements (cont’d)31 December 2007

36

Annual Report 2007



(c) Jointly Controlled Entites

The Group has interests in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.

Investments in jointly controlled entities are accounted for in the consolidated financial statements using the equity method of accounting as described in 2.2(b).

In the Company’s separate financial statements, investments in jointly controlled entities are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts are included in profit or loss.

(d) Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Prior to 1 January 2006, goodwill was amortised on a straight-line basis over its estimated useful life of 20 years and at each balance sheet date, the Group assessed if there was any indication of impairment of the cash-generating unit in which the goodwill is attached to. The adoption of FRS 3 and the revised FRS 136 has resulted in the Group ceasing annual goodwill amortisation. Goodwill is now carried at cost less accumulated impairment losses and is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired.

In the previous financial year, in accordance with the transitional provisions of FRS 3, the Group has applied the revised accounting policy for goodwill prospectively from 1 January 2006. The transitional provisions of FRS 3 also required the Group to eliminate the carrying amount of the accumulated amortisation at 1 January 2006 amounting to RM16,009,000 against the carrying amount of goodwill. The net carrying amount of goodwill as at 1 January 2006 of RM18,500,000 ceased to be amortised thereafter.

(e) Plant and Equipment and Depreciation

All items of plant and equipment are initially recorded at cost. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Subsequent to recognition, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation of plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, at the following annual rates:

Motor vehicles 20%Office equipment and computers 10% - 25%Furniture and fittings 10% - 20%



37


2.2 Summary of Significant Accounting Policies (cont’d))

(e) Plant and Equipment and Depreciation (cont’d)

The residual values, useful life and depreciation method are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of plant and equipment.

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in profit or loss.

(f) Investment Property

Investment property is a property which is held either to earn rental income or for capital appreciation or for both. Such property is measured initially at cost, including transaction costs. Subsequent to initial recognition, investment property is stated at fair value. Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued.

Gains or losses arising from changes in the fair value of an investment property are recognised in profit or loss in the year in which they arise.

Investment property is derecognised when either it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year in which they arise.

Prior to 1 January 2006, investment property was stated at cost and was not separately classified but was presented as part of property, plant and equipment. Upon the adoption of FRS 140 at 1 January 2006, investment property is then stated at fair value and gain or loss arising from a change in fair value is recognised in profit or loss in the year in which it arises.

In the previous financial year, the Group has applied FRS 140 in accordance with the transitional provisions. The change in accounting policy has been accounted for by restating the following opening balances of the Group as at 1 January 2006:

(g) Construction Contracts

Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs.

Where the outcome of a construction contract cannot be reliably estimated, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are 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 is recognised as an expense immediately.

When the total of costs incurred on construction contracts plus, recognised profits (less recognised losses), exceed progress billings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts.

As at1.1.2006RM’000

Increase in investment property (Note 12) 58,000Decrease in property, plant and equipment (Note 11) Increase in retained earnings 18,131Increase in deferred tax liabilities (Note 18) 1,350

(38,519)


38

Annual Report 2007



(h) Income Tax

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

Deferred tax is provided for, using the liability method. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised as income or an expense and included in the profit or loss for the period, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of any excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over the cost of the combination.

(i) Leases

(i) ClassificationA lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not transfer substantially all the risks and rewards are classified as operating leases.

(ii) Finance Leases - the Group as LesseeAssets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets.

Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

The depreciation policy for leased assets is consistent with that for depreciable plant and equipment as described in Note 2.2(e).

(iii) Operating Leases - the Group as LesseeOperating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

In the case of a lease of land, the up-front payments made represent prepaid lease payments and are amortised on a straight-line basis over the lease term.



39



(i) Leases (cont’d)

(iv) Operating Leases - the Group as LessorAssets leased out under operating leases are presented on the balance sheets according to the nature of the assets. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease (Note 2.2(k)(iv)). Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

(j) Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(k) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Construction ContractsRevenue from construction contracts is accounted for by the stage of completion method as described in Note 2.2(g).

(ii) Sale of GoodsRevenue is recognised net of sales taxes and upon transfer of significant risks and rewards of ownership to the buyer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(iii) Maintenance IncomeMaintenance income is recognised when services are rendered.

(iv) Rental IncomeRental income from investment property is recognised on a straight-line basis over the term of the lease.

(v) Interest IncomeInterest income is recognised on an accrual basis using the effective interest method.

(vi) Dividend IncomeDividend income is recognised when the right to receive payment is established.

(vii) Management FeesManagement fees are recognised when services are rendered.

(l) Employee Benefits

(i) Short Term BenefitsWages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.


40

Annual Report 2007



(l) Employee Benefits (cont’d)

(ii) Defined Contribution PlansDefined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in the profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (“EPF”).

(iii) Share-based CompensationThe SPK-Sentosa Corporation Berhad Share Options Scheme (“ESOS”), an equity-settled, share-based compensation plan, allows the Group’s employees to acquire ordinary shares of the Company. The total fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in the share option reserve within equity over the vesting period and taking into account the probability that the options will vest. The fair value of share options is measured at grant date, taking into account, if any, the market vesting conditions upon which the options were granted but excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable on vesting date.

At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable on vesting date. It recognises the impact of the revision of original estimates, if any, in the profit or loss, and a corresponding adjustment to equity over the remaining vesting period. The equity amount is recognised in the share option reserve until the option is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will be transferred directly to retained earnings.

The proceeds received net of any directly attributable transaction costs are credited to equity when the options are exercised.

(m) Impairment of Non-financial Assets

The carrying amounts of assets, other than investment property held for sale, construction contract assets and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss.

For goodwill, the recoverable amount is estimated at each balance sheet date or more frequently when indicators of impairment are identified. For the purpose of impairment testing of goodwill, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (“CGU”) to which the asset belongs to. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

An impairment loss is recognised in profit or loss in the period in which it arises.

Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognisedin profit or loss.



41



(n) Provisions

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

(o) Foreign Currencies

(i) Functional and Presentation CurrencyThe individual financial statements of each entity in the Group are measured using the currency of the primary economic investment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company's functional currency.

(ii) Foreign Currency TransactionsIn preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.

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

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

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

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

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

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


42

Annual Report 2007



(p) Financial Instruments

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

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends and gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are recognised directly in equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

(i) Cash and Cash EquivalentsFor the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank and deposits at call which have an insignificant risk of changes in value.

(ii) Trade ReceivablesTrade receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

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

(iv) Interest-Bearing BorrowingsAll borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing borrowings are subsequently measured at amortised cost using the effective interest method.

(v) Equity InstrumentsOrdinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

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

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

(q) Non-current Assets Held for Sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary.

Immediately before classification as held for sale, the measurement of the non-current assets is brought up-to-date in accordance with applicable FRSs. Then, on initial classification as held for sale, non-current assets are measured in accordance with FRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in profit or loss.



43


2.3 Standards, Amendments to FRSs and Issues Committee Interpretations (“IC Interpretations”) Issued but Not Yet Effective

At the date of authorisation of these financial statements, the following FRSs, amendments to FRSs and IC Interpretations were issued but not yet effective and have not been applied by the Group and the Company:

FRSs, Amendments to FRSs and IC Interpretations Effective for financial periodsbeginning on or after

FRS 139: Financial Instruments - Recognition and Measurement DeferredFRS 107: Cash Flow Statements 1 July 2007FRS 111: Construction Contracts 1 July 2007FRS 112: Income Taxes 1 July 2007FRS 118: Revenue 1 July 2007FRS 120: Accounting for Government Grants and Disclosure 1 July 2007

of Government Assistance FRS 134: Interim Financial Reporting 1 July 2007FRS 137: Provisions, Contingent Liabilities and Contingent Assets 1 July 2007Amendment to FRS 121: The Effects of Changes in Foreign Exchange Rates 1 July 2007

- Net Investment in a Foreign OperationIC Interpretation 1: Changes in Existing Decommissioning, Restoration 1 July 2007

and Similar Liabilities IC Interpretation 2: Members’ Shares in Co-operative Entities and 1 July 2007

Similar InstrumentsIC Interpretation 5: Rights to Interests arising from Decommissioning, 1 July 2007

Restoration and Environmental Rehabilitation FundsIC Interpretation 6: Liabilities arising from Participating in a Specific 1 July 2007

Market - Waste Electrical and Electronic EquipmentIC Interpretation 7: Applying the Restatement Approach under FRS 1292004 1 July 2007

- Financial Reporting in Hyperinflationary EconomiesIC Interpretation 8: Scope of FRS 2 1 July 2007

The above new and revised FRSs, amendments to FRSs and IC Interpretations are expected to have no significant impact on the financial statements of the Group and the Company upon their initial application expect for the following:

(a) Amendment to FRS 121: The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation

This amendment requires that where an entity has a monetary item that forms part of its net investment in a foreign operation, the exchange differences arising from such monetary items should always be recognised in equity in the consolidated financial statements and should not be dependent on the currency of the monetary item. Prior to this amendment, exchange differences arising on a monetary item that forms part of the Group’s net investment in a foreign operation are recognised in equity in the consolidated financial statements only when that monetary item is denominated either in the functional currency of the reporting entity or the foreign operation. The Group will apply this amendment from financial periods beginning 1 January 2008. As it is not possible to reasonably estimate the exchange rates applicable to such monetary items for future periods, the directors are therefore unable to determine if the initial adoption of this amendment will have a material impact on the consolidated financial statements for the financial year ending 31 December 2008.

The Group and the Company is exempted from disclosing the possible impact, if any, to the financial statements upon the initial application of FRS 139.


44

Annual Report 2007


2.4 Significant Accounting Estimates and Judgements

Key Sources of Estimation Uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) Impairment of goodwillThe Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value-in-use of the cash-generating units (“CGU”) to which goodwill is allocated. Estimating a value-in-use amount requires management to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill as at 31 December 2007 was RM22,018,000 (2006: RM18,500,000). Further details are disclosed inNote 14.

(ii) Construction contractsThe Group recognises construction contracts revenue and expenses in the income statement by using the stage of completion method. The stage of completion is determined by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs.

Significant judgement is required in determining the stage of completion, the extent of the contract costs incurred, the estimated total contract revenue and costs, as well as the recoverability of the projects. In making the judgement, the Group evaluates based on past experience and by relying on the work of specialists.

A 10% increase or decrease in the estimated total contract costs would result in a decrease or increase of approximately 30% and 15% respectively in contract revenue recognised for the year.

(iii) Deferred tax assetsDeferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The total carrying value of the unrecognised tax losses and capital allowances of the Group and the Company was RM60,731,000 (2006: RM55,387,000) and RM27,582,000 (2006: RM29,064,000) respectively.

3. REVENUE



45

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Construction contracts 116,763 116,694 - -Sale of goods 4,031 - - -Maintenance income 481 5,773 - -Rental income from investment property 3,246 6,405 - -Dividend income from subsidiaries - - 7,800 27,150Management fees from subsidiaries - - 895 1,500

124,521 128,872 8,695 28,650


46

Annual Report 2007

5. FINANCE COSTS

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Interest expense on:Borrowings 265 900 167 727Hire purchase liabilities 20 12 - -

285 912 167 727Less: Interest expense capitalised

in costs of constructioncontracts (Note 20) - -

187 739 167 727

(98) (173)

6. PROFIT BEFORE TAX

The following amounts have been included in arriving at profit before tax:

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Employee benefits expense (Note 7) 6,793 3,638 700 604Non-executive directors’

remuneration (Note 8) 77 68 77 68Auditors’ remuneration:

- statutory audits 120 72 20 12- under/(over)provision in prior years 14 -- other services 5 5 5 5

Amortisation of prepaid landlease payments (Note 13) 22 22 22 22

Impairment of goodwill (Note 14) 1,086 - - -Impairment of investment in a subsidiary - - - 15,678Depreciation of property,

plant and equipment (Note 11) 373 316 81 81Property, plant and equipment written off 623 27 - -Bad debts written off 94 - - -Provision for doubtful debts 120 151 - -Waiver of amount due from a subsidiary - - 1 4Foreign exchange loss 253 - - -Liquidated ascertained damages 633 - - -Operating leases:

- minimum lease payments for equipment 44 20 - -- minimum lease payments for premises 441 111 - -

(3) (3)

4. OTHER INCOME

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Interest income 1,526 911 882 -Gain on disposal of investment property 20,320 - - -Gain on disposal of property, plant and equipment 103 - - -Reversal of provision for doubtful debts 2 - - -Reversal of overaccrual of costs 405 - - -Deferred revenue earned 57 57 57 57Foreign exchange gain 25 - - -Miscellaneous 572 278 - 1

23,010 1,246 939 58



47

7. EMPLOYEE BENEFITS EXPENSE

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Wages and salaries 5,536 2,806 618 534Contributions to defined contribution plan 638 405 74 62Social security contributions 43 35 2 2Other benefits 576 392 6 6

6,793 3,638 700 604

8. DIRECTORS’ REMUNERATION

The number of directors of the Company whose total remuneration during the year fell within the band below is:

The other directors of the Company, who are also directors of the holding company, are remunerated by the holding company.

Group Company

Number of Directors

2007 2006 2007 2006RM’000 RM’000 RM’000 RM’000

Directors of the Company

Non-executive directors’remuneration (Note 6):Fees 62 53 62 53Other emoluments 15 15 15 15

Total directors’ remuneration 77 68 77 68

2007 2006

Non-executive directors:Below RM50,000 4 4


48

Annual Report 2007

9. TAX EXPENSE

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Income tax:Current year 176 2,048 1,711 7,602Overprovision in prior years -

1,399 1,711 7,589

Real property gains tax 1,001 - - -

Deferred tax (Note 18):Relating to origination and reversal of

temporary differences 76 258 - -Relating to changes in tax rates 2 - - -Underprovision in prior years 19 214 - -

97 472 - -

Total tax expense 699 1,871 1,711 7,589

(575) (649) (13)

(399)

Current income tax is calculated at the Malaysian statutory tax rate of 27% (2006: 28%) of the estimated assessable profit for the year. Current income tax for certain subsidiaries with paid-up capital of RM2,500,000 and below are calculated at 20% (2006: 20%) for the first RM500,000 (2006: RM500,000) of chargeable income and 27% (2006: 28%) on the subsequent chargeable income for the year. The statutory tax rate will be reduced to 26% from the current year’s rate of 27%, effective year of assessment 2008 and to 25% in subsequent years. The computation of deferred tax as at 31 December 2007 has reflected these changes.

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

2007 2006RM’000 RM’000

Group

Profit before tax 16,733 2,287

Taxation at Malaysian statutory tax rate of 27% (2006: 28%) 4,518 640Effect of different tax rates at 20% for the first RM500,000 of

chargeable incomeEffect of changes in tax rates on opening balance of deferred tax 2 -Income not subject to taxIncome subject to real property gains tax of 5% -Expenses not deductible for tax purposes 1,230 1,184Utilisation of previously unrecognised tax losses -Utilisation of previously unrecognised unabsorbed capital allowances -Deferred tax assets not recognised during the year 1,349 523Overprovision of tax expense in prior yearsUnderprovision of deferred tax in prior years 19 214

Tax expense for the year 699 1,871

(47) (40)

(548) (1)(4,485)

(740)(24)

(575) (649)



49

9. TAX EXPENSE (cont’d)

10. BASIC EARNINGS PER SHARE

Group

The earnings per share is calculated by dividing profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year.

Tax savings during the financial year arising from:

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Utilisation of current yeartax losses 900 679 - -

Utilisation of previouslyunrecognised tax losses 740 - 373 -

2007 2006RM’000 RM’000

Company

Profit before tax 7,225 9,701

Taxation at Malaysian statutory tax rate of 27% (2006: 28%) 1,951 2,716Expenses not deductible for tax purposes 133 4,498Utilisation of previously unrecognised tax losses -Deferred tax assets not recognised during the year - 388Overprovision of tax expense in prior years -

Tax expense for the year 1,711 7,589

(373)

(13)

2007 2006

Profit for the year attributable to ordinary equityholders of the Company (RM’000) 15,583 416

Weighted average number of ordinary shares in issue (’000) 133,944 133,944Basic earnings per share (sen) 11.63 0.31


50

Annual Report 2007

11. PROPERTY, PLANT AND EQUIPMENT

OfficeEquipment,Computers,

Motor FurnitureVehicles and Fittings Total

Group RM’000 RM’000 RM’000

At 31 December 2007

CostAt 1 January 2007 605 4,506 5,111Additions - 145 145DisposalsAcquisition of subsdiaries (Note 15(b)) 103 612 715Write off -

At 31 December 2007 355 4,424 4,779

Accumulated depreciation and impairmentAt 1 January 2007 595 2,451 3,046Depreciation charge for the year (Note 6) 2 371 373DisposalsAcquisition of subsdiaries (Note 15(b)) 103 309 412Write off -

At 31 December 2007 347 2,915 3,262

Net carrying amountAt 31 December 2007 8 1,509 1,517

(353) (3) (356)

(836) (836)

(353) (3) (356)

(213) (213)

OfficeEquipment,

Building on Computers,Freehold Freehold Motor Furniture

Land Land Vehicles and Fittings TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000

At 31 December 2006

CostAt 1 January 2006 10,800 39,458 594 13,355 64,207Effects of adopting FRS 140 (Note 2.2(f)) - -

- - 594 13,355 13,949Additions - - 11 516 527Write off - - -

At 31 December 2006 - - 605 4,506 5,111

(10,800) (39,458) (50,258)

(9,365) (9,365)



51

11. PROPERTY, PLANT AND EQUIPMENT (cont’d)

OfficeEquipment,

Building on Computers,Freehold Freehold Motor Furniture

Land Land Vehicles and Fittings TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000

At 31 December 2006

Accumulated depreciation and impairmentAt 1 January 2006 - 11,739 586 11,482 23,807Effects of adopting FRS 140 (Note 2.2(f)) - - -

- - 586 11,482 12,068Depreciation charge for the year (Note 6) - - 9 307 316Write off - - -

At 31 December 2006 - - 595 2,451 3,046

Net carrying amountAt 31 December 2006 - - 10 2,055 2,065

(11,739) (11,739)

(9,338) (9,338)


Furnitureand Fittings

Company RM’000

At 31 December 2007

CostAt 1 January 2007 841Additions 7

At 31 December 2007 848

Accumulated depreciation and impairmentAt 1 January 2007 383Depreciation charge for the year (Note 6) 81


Net carrying amountAt 31 December 2007 384


52

Annual Report 2007

11. PROPERTY, PLANT AND EQUIPMENT (cont’d)

13. PREPAID LAND LEASE PAYMENTS

12. INVESTMENT PROPERTY HELD FOR SALE

The investment property of the Group in the previous financial year comprised freehold land and building and was pledged to a financial institution for bank overdraft facility of the Company, which was not utilised as at 31 December 2006, and bank guarantee facility granted to a subsidiary. The Group, via Kumpolan Kemajuan Raya Sdn. Bhd. entered into a conditional sale and purchase agreement for the disposal of the investment property in the previous financial year and the disposal was completed during the financial year as disclosed in Note 34(b).


Furnitureand Fittings

Company RM’000

At 31 December 2006

CostAt 1 January/31 December 2006 841

Accumulated depreciation and impairmentAt 1 January 2006 302Depreciation charge for the year (Note 6) 81


Net carrying amountAt 31 December 2006 458

Group and Company2007 2006

RM’000 RM’000

At 1 January 1,551 1,573Amortisation for the year (Note 6)

At 31 December 1,529 1,551

(22) (22)



53

14. GOODWILL

GroupRM’000

CostAt 1 January 2006 112,538Effects of adopting FRS 3 (Note 2.2(d)) (16,009)

At 31 December 2006 and 1 January 2007 96,529Acquisition of subsidiaries (Note 15(b)) 4,604

At 31 December 2007 101,133

Accumulated amortisation and impairmentAt 1 January 2006 94,038Effects of adopting FRS 3 (Note 2.2(d)) (16,009)

At 31 December 2006 and 1 January 2007 78,029Impairment loss recognised in profit or loss (Note 6) 1,086

At 31 December 2007 79,115

Net carrying amountAt 31 December 2006 18,500

At 31 December 2007 22,018

(a) Impairment loss recognised

The management of the Company has carried out impairment test review for goodwill based on the recoverable amount of each cash-generating unit (“CGU”). The recoverable amount of a CGU has been determined based on a value-in-use calculation using cash flow projections based on financial budgets approved by the executive directors covering a period of three years. The discount rate applied to cash flow projections of the Group’s CGUs is 13.6%.

The impairment test review has led to the recognition of impairment loss for goodwill of the trading and supply of oil and gas materials, products and equipment unit amounting to RM1,086,000 as the unit is unable to secure significant orders due to its limited product representation in the industry.

(b) Impairment test for goodwill

(i) Allocation of goodwillGoodwill has been allocated to the Group’s CGUs identified according to business segment as follows:

2007 2006RM’000 RM’000

Construction 18,500 18,500Engineering, procurement, construction and

commissioning in oil and gas industry 702 -Oil and gas support services 2,816 -

22,018 18,500


54

Annual Report 2007

14. GOODWILL (cont’d)

(b) Impairment test for goodwill (cont’d)

(ii) Key assumptions used in value-in-use calculationThe following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill.

• Budgeted gross marginThe basis used to determine the value assigned to the budgeted gross margins is the average gross margins achieved in the year immediately before the budgeted year increased for expected efficiency improvements.

• Discount rateThe discount rates used are pre-tax and reflect specific risks relating to the industry.

• Bond rateThe bond rates used are the yield on a 3-year Malaysian government bond rate at the beginning of the budgeted year.

(iii) Sensitivity to changes in assumptionsWith regard to the assessment of value-in-use of the Group’s CGUs, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying values of the units to materially differ from their recoverable amounts.

(a) Details of the subsidiaries, all of which are incorporated in Malaysia, are as follows:

Proportion ofName of Subsidiaries Principal Activities Ownership Interest

*

2007 2006% %

Held by the Company:

Pembinaan SPK Sdn. Bhd. Investment holding and 100 100provision of civil contract services

Nadaprise Sdn. Bhd. Investment holding 50 -

Kumpolan Kemajuan Property investment and 100 100Raya Sdn. Bhd. rental of property

Sentosa Sales Sdn. Bhd. Dormant 100 100

15. INVESTMENTS IN SUBSIDIARIES

Company2007 2006

RM’000 RM’000

Unquoted shares at cost 211,017 210,017Less: Accumulated impairment losses

115,352 114,352

(95,665) (95,665)

15. INVESTMENTS IN SUBSIDIARIES (cont’d)

(a) (cont’d)



55

Proportion ofName of Subsidiaries Principal Activities Ownership Interest

2007 2006% %

Held by Pembinaan SPK Sdn. Bhd.:

Aspirasi Sama Sdn. Bhd. Investment holding 100 100

Golden Eastern Empire Sdn. Bhd. Investment holding 100 100

IASB Construction Sdn. Bhd. General contracting 100 100

Projek Hospital Temerloh Sdn. Bhd. Design, construct, equip 100 100and commission HospitalTemerloh, Pahang

Komunikasi SPK Sdn. Bhd. Design, supply, construct, 100 100test and commission the275kV Transmission Projectfor Sabah East-West GridInterconnection via a 50:50joint venture with TransmissionTechnology Sdn. Bhd.

SPK Middle East Sdn. Bhd. Dormant 100 100

Held by Nadaprise Sdn. Bhd.:

Rekayasa Industri Malaysia Sdn. Bhd. Engineering and construction 70 -works

Simfoni Temasek Sdn. Bhd. Design and supply of 100 -engineering equipment orsystems and services to theoil and gas industry

Marzy Niaga Sdn. Bhd.** Trading and supply of oil and 51 -gas materials, products andequipment

Ombak Sepakat Sdn. Bhd. Investment holding 87.5 -

* Shareholding held by the Company is 50% plus 1 share.** Audited by a firm other than Ernst and Young.

(b) Acquisition of subsidiaries

(i) On 5 February 2007, the Company completed the acquisition of 1,000,000 ordinary shares of RM1 each in Nadaprise Sdn. Bhd. (“Nadaprise”) representing 50% of the issued and paid-up share capital of Nadaprise for a cash consideration of RM1,000,000 and the subsequent subscription for 1 new ordinary share of RM1 each in Nadaprise at par;

(ii) On 11 October 2007, the Group via Nadaprise acquired 87,500 ordinary shares of RM1 each in Ombak Sepakat Sdn. Bhd. (“OSSB”), representing 87.5% of the issued and paid-up share capital of OSSB, for a total cash consideration of RM87,500; and

(iii) On 12 November 2007, the Group via Nadaprise completed the acquisition of 70,000 ordinary shares of RM1 each in Simfoni Temasek Sdn. Bhd. (“STSB”), representing 70% of the issued and paid-up share capital of STSB, for a total cash consideration of RM70,000. Prior to the acquisition, STSB is a 30% associate of Nadaprise. The acquisition has resulted in STSB becoming a wholly-owned subsidiary of Nadaprise.

The acquired subsidiaries have contributed the following results to the Group:

If the acquisition had occurred on 1 January 2007, the Group’s revenue and profit for the year would have been RM124,676,000 and RM15,792,000 respectively.

The assets and liabilities arising from the acquisition are as follows:

The cash inflow on acquisition is as follows:


56

Annual Report 2007

15. INVESTMENTS IN SUBSIDIARIES (cont’d)

2007RM’000

Revenue 44,791Loss for the year (3,824)

2007RM’000

Purchase consideration satisfied by cash 1,157Cash and cash equivalents of subsidiaries acquired

Net cash inflow of the Group

(1,307)

(150)

Fair value Acquiree’srecognised on carryingacquisition amount

RM’000 RM’000

Plant and equipment 303 303Investments in associates 94 94Trade and other receivables 3,183 3,183Tax recoverable 106 106Cash and bank balances 1,307 1,307

4,993 4,993

Hire purchase liabilities 26 26Trade and other payables 8,293 8,293Deferred tax liabilities 8 8Current tax payable 14 14

8,341 8,341

Fair value of net liabilitiesLess: Minority interests

Group’s share of net liabilitiesGoodwill on acquisition (Note 14) 4,604

Total cost of acquisition 1,157

(3,348)(99)

(3,447)

Details of the jointly controlled entities, all of which are incorporated in Malaysia unless otherwise stated, are as follows:



57

16. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES

Group2007 2006

RM’000 RM’000

Unquoted shares at cost 837 -Share of post-acquisition reserves 21,605 17,975Arising from acquisition of subsidiaries -Foreign currency translation reserve -

22,117 17,975Less: Accumulated distributionAdvances to jointly controlled entities 1,061 -

16,941 11,738

(255)(70)

(6,237) (6,237)

Name of Jointly Proportion ofControlled Entities Principal Activities Ownership Interest

2007 2006% %

Held by Komunikasi SPK Sdn. Bhd.:

TTSB - SPK Consortium* Design, supply, construct, 50 50test and commission the275kV Transmission Projectfor Sabah East - West GridInterconnection

Held by Pembinaan SPK Sdn. Bhd.:

SPK - Bina Puri JV* Undertake the construction contract 70 -for the execution and implementationof Phase 1 Plot 1 Zone B Residential,Commercial and RecreationalDevelopment of Al Reem Island,Abu Dhabi, United Arab Emirates


Red Sea Ventures Sdn. Bhd.# Investment holding and 50 -management services

Wood Group Production Participate in the business of oil and 67.5 -Facilities (Malaysia) Sdn. Bhd.**# gas, petrochemical, liquefied natural

gas, power generation and refiningindustries

Held by Ombak Sepakat Sdn. Bhd.:

ThyssenKrupp Xervon Provision of support services to the 51 -Corp Sdn. Bhd.# oil and gas, petrochemical,

industrial and power generationsectors, and in the main supplyingservices

* Unincorporated partnership.** Profits and losses sharing will be on a 49% basis.# Based on unaudited management financial statements.

2007 2006RM’000 RM’000

Assets and liabilitiesCurrent assets 89,228 63,189Non-current assets 2,182 21

Total assets 91,410 63,210

Current liabilities, representing total liabilities

ResultsRevenue and other income 49,332 71,562Expenses, including finance costs and taxation

(75,552) (51,472)

(45,724) (71,577)

16. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES (cont’d)

As at the end of the financial year, the project undertaken by TTSB-SPK Consortium has been completed, with settlement of the contract subject to negotiations. The project undertaken by SPK-Bina Puri JV is ongoing.

The Group’s share of the assets, liabilities, income and expenses of the jointly controlled entities is as follows:

Details of the associates, which are incorporated in Malaysia, are as follows:

17. INVESTMENTS IN ASSOCIATES


58

Annual Report 2007

Group

Group

Proportion ofName of Associates Principal Activities Ownership Interest

2007 2006% %


Awan Inspirasi Holdings Sdn. Bhd. Investment holding 49 -(formerly known as Century CoastSdn. Bhd.)

Held by Awan Inspirasi Holdings Sdn. Bhd.:

Awan Inspirasi Global (L) Bhd Provision of offshore leasing services 100 -

Awan Inspirasi Sdn. Bhd. Provision of offshore aviation 100 -support services

Held by Simfoni Temasek Sdn. Bhd.:

Maces International Sdn. Bhd. Exploration and development in the 30 -specialty oilfield chemicals industryin the United Arab Emirates

2007 2006RM’000 RM’000

Unquoted shares at cost 49,000 -Share of post-acquisition reserves -

- -

(49,000)



59

17. INVESTMENTS IN ASSOCIATES (cont’d)

The summarised financial information of the associates are as follows:

18. DEFERRED TAX

Group2007 2006

RM’000 RM’000

At 1 January 1,257Effects of adopting FRS 140 (Note 2.2(f)) - 1,350

1,257 785Recognised in income statement (Note 9) 97 472Acquisition of subsidiaries (Note 15(b)) 8 -Crystallised upon disposal of investment property -

At 31 December 12 1,257

Presented after appropriate offsetting as follows:Deferred tax assets -

Deferred tax liabilities:Subject to income tax 12 17Subject to real property gains tax - 1,350

12 1,367

12 1,257

(565)

(1,350)

(110)

Group2007 2006

RM’000 RM’000

Assets and liabilities

Current assets 1,621 -Non current assets 1,042 -

Total assets 2,663 -

Current liabilities, representing total liabilities 1,003 -

ResultsRevenue - -Loss for the year -(940)

18. DEFERRED TAX (cont’d)

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

Deferred tax liabilities of the Group:


60

Annual Report 2007

Property,Plant and Investment

Equipment Property TotalRM’000 RM’000 RM’000

At 1 January 2007 - 1,350 1,350Crystallised upon disposal

of investment property -Acquisition of subsdiaries 8 - 8Recognised in income statement 4 - 4

At 31 December 2007 12 - 12

At 1 January 2006 - - -Effects of adopting FRS 140 (Note 2.2(f)) - 1,350 1,350

At 31 December 2006 - 1,350 1,350

(1,350) (1,350)

Property, HirePlant and Purchase

Equipment Liabilities Provisions TotalRM’000 RM’000 RM’000 RM’000

At 1 January 2007Recognised in income statement 58 20 15 93

At 31 December 2007 - - - -

At 1 January 2006Recognised in income statement 11 473 472

At 31 December 2006

(58) (20) (15) (93)

(46) (31) (488) (565)(12)

(58) (20) (15) (93)

Deferred tax assets of the Group:

Deferred tax liabilities of the Company:Property, Plant and Equipment

RM’000

At 1 January 2007 10Recognised in income statement

At 31 December 2007 -

At 1 January 2006 10Recognised in income statement -


(10)

The unused tax losses and unabsorbed capital allowances are available for offsetting against future taxable profits of the Company and of the respective subsidiaries subject to no substantial changes in shareholdings of the Company and those subsidiaries under the Income Tax Act, 1967 and guidelines issued by the tax authority.

The Company has a potential tax refund due of RM7,602,000 under Section 110 of the Income Tax Act, 1967 (“the Act”) in relation to the dividend income received by the Company which is not presently accounted for. This tax refund arises from the utilisation of the Company’s previously unutilised business losses against its dividend income pursuant to the Special Provision relating to Section 60FA of the Act. The recoverability under Section 110 of the Act of the tax paid is subject to approval by the Inland Revenue Board.

19. TRADE AND OTHER RECEIVABLES



61

18. DEFERRED TAX (cont’d)

Deferred tax assets of the Company:

Deferred tax assets have not been recognised in respect of the following items:

ProvisionsRM’000

At 1 January 2007Recognised in income statement 10

At 31 December 2007 -

At 1 January 2006Recognised in income statement -

At 31 December 2006

(10)

(10)

(10)

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Unused tax losses 59,962 54,765 27,582 28,960Unabsorbed capital allowances 769 622 - 104

60,731 55,387 27,582 29,064

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Trade receivablesThird parties 22,605 4,509 - -Holding company - 687 - -Fellow subsidiaries 29,498 21,394 - -Jointly controlled entity of holding company 92 14,485 - -Construction contracts:

Due from customers (Note 20) 16,585 9,598 - -Retention sums (Note 20) 12,064 17,085 - -

80,844 67,758 - -Less: Provision for doubtful debts - third parties - -

Trade receivables, net 80,477 67,509 - -

(367) (249)

19. TRADE AND OTHER RECEIVABLES (cont’d.)

20. DUE FROM/(TO) CUSTOMERS ON CONTRACTS

The costs incurred to date on construction contracts include interest expense capitalised during the financial year of RM98,000 (2006: RM173,000) (Note 5).

(a) Credit risk

The Group’s primary exposure to credit risk arises through its trade receivables. The Group’s trading terms with its customers are mainly on credit, except for tenants of investment property, where payment in advance is normally required or payment within 7 days of billing. The credit period is generally for a period of one month, extending up to three months for major customers. The Group seeks to maintain strict control over its outstanding receivables to minimise credit risk. Overdue balances are reviewed regularly by senior management. The Group has no significant concentration of credit risk that may arise from exposures to a single debtor or to groups of debtors. Trade receivables are non-interest bearing.

(b) Amount due from related parties

Amount due from all related parties are non-interest bearing and are repayable on demand. These amounts are unsecured and are to be settled in cash.

Further details on related party transactions are disclosed in Note 31.

Other information on financial risks of receivables are disclosed in Note 32.


62

Annual Report 2007

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Other receivablesAmount due from related parties:

Subsidiaries - - 63,668 6,071Fellow subsidiaries - 185 - -Associates 944 - - -Jointly controlled entities 1,253 - - -Corporate shareholder of a subsidiary 367 - - -

Sundry receivables 687 379 - -Interest receivable 594 734 - -Deposits and prepayments 423 109 2 2Tax recoverable 8,839 6,972 633 238

13,107 8,379 64,303 6,311Less: Provision for doubtful debts - related parties - - -

Other receivables, net 12,760 8,379 64,303 6,311

93,237 75,888 64,303 6,311

(347)

Group2007 2006

RM’000 RM’000

Construction contract costs incurred to date 529,044 453,511Attributable profits 33,065 28,895

562,109 482,406Less: Progress billings

10,394 8,889

Due from customers on contracts (Note 19) 16,585 9,598Due to customers on contracts (Note 25)

10,394 8,889

Retention sums on contracts included within trade receivables (Note 19) 12,064 17,085

(551,715) (473,517)

(6,191) (709)



63

21. CASH AND CASH EQUIVALENTS

22. BORROWINGS

Cash at bank and deposits with licensed banks which are pledged to banks for credit facilities granted to the Group are asfollows:

Included in cash at banks is an amount of RM2,193,000 (2006: Nil) held as sinking fund for borrowings disclosed inNote 22.

Other information on financial risks of cash and cash equivalents are disclosed in Note 32.

The revolving credit is secured by assignment of contract proceeds of a subsidiary to the bank and corporate guarantee granted by the Company.

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Cash on hand and at banks 12,968 5,022 856 556Deposits with licensed banks 76,719 30,616 - -

Cash and bank balances 89,687 35,638 856 556

Group2007 2006

RM’000 RM’000

Cash at banks - 34Deposits with licensed banks 44,390 29,446

Group2007 2006

RM’000 RM’000

Short term borrowings:

Secured:Revolving credit 6,434 -Hire purchase liabilities (Note 23) 23 60

6,457 60

Long term borrowings:

Secured:Hire purchase liabilities (Note 23) - 54

6,457 114

23. HIRE PURCHASE LIABILITIES

The hire purchase contracts of the Group are for motor vehicles.

Other information on financial risks of hire purchase liabilities are disclosed in Note 32.

24. DEFERRED REVENUE

Deferred revenue represents lease rental received in advance for the sub-lease of a petrol kiosk site for a period of 30 years.The lease rental is recognised on a straight-line basis over the period of the lease.

25. TRADE AND OTHER PAYABLES


64

Annual Report 2007

Group2007 2006

RM’000 RM’000

Future minimum lease payments:Not later than 1 year 24 66Later than 1 year and not later than 2 years - 29Later than 2 years and not later than 5 years - 28

Total future minimum lease payments 24 123Less: Future finance charges

Present value of finance lease liabilities 23 114

Analysis of present value of finance lease liabilities:Not later than 1 year 23 60Later than 1 year and not later than 2 years - 27Later than 2 years and not later than 5 years - 27

23 114Less: Amount due within 12 months (Note 22)

Amount due after 12 months (Note 22) - 54

(1) (9)

(23) (60)

Group and Company2007 2006

RM’000 RM’000

Total lease rental received 1,700 1,700Recognised in income statement

505 562

(1,195) (1,138)

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Trade payablesThird parties 33,616 44,078 - -Fellow subsidiaries 125 3,449 - -Related companies 1,049 577 - -Construction contracts:

Due to customers (Note 20) 6,191 709 - -

40,981 48,813 - -

25. TRADE AND OTHER PAYABLES (cont’d)

(a) Trade payables are non-interest bearing and the normal trade credit terms granted to the Group range from one month to three months.

(b) Trade amounts due to related companies comprise:

(c) Amount due to jointly controlled entity represents the share of losses in excess of the Group’s cost of investment in the jointly controlled entity.

(d) Amounts due to all related parties are non-interest bearing and are repayable on demand. These amounts are unsecured and are to be settled in cash.

Further details on related party transactions are disclosed in Note 31.

Other information on financial risks of payables are disclosed in Note 32.

26. SHARE CAPITAL AND SHARE PREMIUM



65

Group2007 2006

RM’000 RM’000

Amount due to a company in which a director of asubsidiary has substantial financial interest - 352

Amount due to a company in which a director of theCompany has substantial financial interest 225 225

Corporate shareholder of a subsidiary 824 -

1,049 577

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Other payablesAmounts due to related parties:

Holding company 3,268 74 3,268 74Subsidiaries - - 62,100 11,545Fellow subsidiaries - 245 - -Jointly controlled entity 22 - - -

Sundry payables 2,407 1,890 - 35Refundable deposits 62 1,916 - -Accruals 6,144 134 43 18

11,903 4,259 65,411 11,672

52,884 53,072 65,411 11,672

Number of Share TotalOrdinary Capital Share CapitalShares of (Issued and Share and ShareRM1 Each Fully Paid) Premium Premium

‘000 RM’000 RM’000 RM’000

At 1 January/31 December 2006/At 1 January/31 December 2007 133,944 133,944 51,380 185,324

26. SHARE CAPITAL AND SHARE PREMIUM (cont’d)

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

Employee Share Options Scheme

The SPK-Sentosa Corporation Berhad Employee Share Options Scheme (“ESOS”) is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held on 20 May 2004. The ESOS was implemented on 28 June 2004 and is to be in force for a period of 5 years from the date of implementation.

The salient features of the ESOS are as follows:

(i) The ESOS Committee appointed by the Board of Directors to administer the ESOS, may from time to time grant options to eligible employees of the Group to subscribe for new ordinary shares of RM1 each in the Company (“SPK-Sentosa Shares”).

(ii) Subject to the discretion of the ESOS Committee, any employee whose employment has been confirmed and any executive director who is involved in the day-to-day management and on the payroll of the Group, shall be eligible toparticipate in the ESOS.

(iii) The total number of shares to be issued under the ESOS shall not exceed in aggregate 10% of the issued and paid-up share capital of the Company at any point in time during the tenure of the ESOS and out of which not more than 50% of the shares shall be allocated, in aggregate, to directors and senior management. In addition, not more than 10% of the shares available under the ESOS shall be allocated to any eligible individual director or employee who, either singly or collectively through his/her associates, holds 20% or more of the issued and paid-up capital of the Company.

(iv) The option price for each share shall be the weighted average of the market price as quoted in the Daily Official Listissued by Bursa Malaysia Securities (“Bursa Malaysia”) for the 5 market days immediately preceding the date on which the option is granted less, if the ESOS Committee shall so determine at their discretion, a discount of not more than 10% or the par value of the shares of the Company of RM1, whichever is higher.

(v) The options may be exercised in respect of all or any part of the new SPK-Sentosa Shares comprised in the option provided that the number of new SPK-Sentosa Shares of which such option may be exercised shall be in multiples of and not less than 100 of the shares of the Company or such number of shares as may be traded under the “board lot” as determined by Bursa Malaysia from time to time. Such partial exercise of the option shall not preclude the employee from exercising the option as to the balance of the new SPK-Sentosa shares comprised in the option.

(vi) All new ordinary shares issued upon exercise of the options granted under the ESOS will rank pari passu in all respects with the existing ordinary shares of the Company other than as may be specified in a resolution approving the distribution of dividends prior to their exercise dates.

No options have been granted to employees and directors since its implementation.

27. FOREIGN CURRENCY TRANSLATION RESERVE

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operation of a jointly controlled entity whose functional currency is different from that of the Group’s presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group’s net investment in the foreign operation of the jointly controlled entity, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation.


66

Annual Report 2007

2007 2006 2007 2006‘000 ‘000 RM’000 RM’000

Number of OrdinaryShares of RM1 Each Amount

Authorised share capitalAt 1 January/31 December 200,000 200,000 200,000 200,000



67

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Unsecured:Corporate guarantees given to banks for

credit facilities granted to subsidiaries - - 24,109 21,798Corporate guarantees given to

banks in respect of credit facilitiesutilised by a jointly controlled entity 34,696 - 34,696 -

Legal claim 539 539 539 539

Group2007 2006

RM’000 RM’000

Approved and contracted for:Procurement of materials 25,063 -

28. CONTINGENT LIABILITIES

29. COMMITMENT

On 23 November 1995, a former employee of the Company (“Claimant”) had vide an Industrial Court case commenced legal proceedings against the Company for constructive dismissal. The Claimant claimed for reinstatement without loss of benefits, monetary or otherwise together with arrears of wages from the date of dismissal, i.e. 3 October 1994 to the date of reinstatement. On 4 August 1999, the Claimant proposed a settlement amount of RM539,000, which was rejected by the Company. On 11 July 2003, the Industrial Court dismissed the claim. The Claimant subsequently filed an application for judicial review in the Kuala Lumpur High Court (“High Court”) on 23 August 2003 and holds the Company and the Industrial Court Malaysia as the respondents. The hearing by the High Court which was fixed to be heard on 1 March 2007 has been postponed by the High Court to 26 November 2008.

No provision has been made for the above claim as the directors, based on legal advice, are of the opinion that possibility of the claim crystallising is remote.

30. OPERATING LEASE ARRANGEMENTS

(a) The Group as lessee

The Group has entered into non-cancellable operating lease agreements for the use of premises and certain equipments. These leases have an average life of between 2 and 5 years with no purchase option nor escalation clauses included in the contracts. The leases for equipments have terms of renewal but the leases for buildings have no such terms. These leases include fixed rentals over the lease periods. There are no restrictions placed upon the Group by entering into these leases and no arrangements have been entered into for contingent rental payments.

The Group also leases certain premises and equipments under cancellable operating lease agreements. The Group is required to give notice for the termination of those agreements and the period of notice range between 7 days and 3 months.

(b) The Group as lessor

The Group has entered into cancellable operating lease agreements on its investment property. These leases have an average life of between 1 and 3 years and have terms of renewal in the contracts. The tenants are required to give a three-month notice for the termination of the agreements.

31. RELATED PARTY DISCLOSURES

(a) In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year:

30. OPERATING LEASE ARRANGEMENTS (cont’d)

(a) The Group as lessee (cont’d)

The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the balance sheet date but not recognised as liabilities are as follows:

* Related companies are companies within the Sharikat Permodalan Kebangsaan Berhad group.


68

Annual Report 2007

2007 2006RM’000 RM’000

Group

Management fees paid to the holding company 895 1,500

Related companies:*Rental of investment property: (i) 293 927- Holding company 156 260- Fellow subsidiaries 137 667

Construction work performed for: (ii) 75,571 117,796- Fellow subsidiaries 57,335 43,814- Jointly controlled entity of holding company 18,236 73,982

Cost of services paid to a fellow subsidiary (iii) 42 500

Company

Management fees paid to the holding company 895 1,500

Group2007 2006

RM’000 RM’000

Future minimum lease payments:Not later than 1 year 686 47Later than 1 year and not later than 5 years 316 124

1,002 171

32. FINANCIAL INSTRUMENTS

(a) Financial Risk Management Objectives and Policies

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its interest rate risk (both fair value and cash flow), foreign currency risk, liquidity risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. It is and has been throughout the financial year under review, the Group's policy that no trading in derivative financial instruments shall be undertaken.

(b) Interest Rate Risk

Cash flow interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest-bearing financial assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s interest-bearing financial assets are mainly short term in nature and have been mostly placed in fixed deposits.

The Group’s interest rate risk arises primarily from interest-bearing borrrowings. Borrowings at floating rates expose the Group to cash flow interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group manages its interest rate risk exposure by maintaining a mix of fixed and floating rate borrowings.

31. RELATED PARTY DISCLOSURES (cont’d)

(a) (cont’d)

(i) The rental of investment property were made according to the rates and conditions offered to the major tenants of the Group, except that a longer credit period of up to six months is normally granted.

(ii) The construction work performed for related companies were made based on the direct costs incurred plus margins ranging from 3% to 10% depending on the nature of the work performed. The charges are substantially in line with those offered to the major customers of the Group, except that a longer credit period of up to six months is normally granted.

(iii) The cost of services paid to a fellow subsidiary was made according to the prices and conditions offered by the fellow subsidiary to its major customers, except that a longer credit period of up to six months is normally granted.

Information regarding outstanding balances arising from related party transactions as at 31 December 2007 are disclosed in Note 19 and Note 25.

(b) Compensation of key management personnel

The remuneration of directors and other members of key management personnel during the financial year were as follows:



69

Group Company2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Short term employee benefits 833 875 77 68Post-employment benefits

- defined contribution plan 91 97 - -

924 972 77 68

32. FINANCIAL INSTRUMENTS (cont’d)

(b) Interest Rate Risk (cont’d)

The following tables set out the carrying amounts, the weighted average effective interest rates (“WAEIR”) as at the balance sheet date and the remaining maturities of the Group’s financial instruments that are exposed to interest rate risk:

(c) Foreign Currency Risk

The Group is exposed to transactional currency risk through sales and purchases that are denominated in currencies other than the functional currency of the Group. The currencies giving rise to this risk are primarily United States Dollars, Indonesian Rupiah, Singapore Dollars, Australian Dollars and British Sterling Pounds. The Group is also exposed to foreign currency risk through its investment in a jointly controlled entity which carries out its operations with transactions that are denominated in Arab Emirates Dirham. Foreign exchange exposures in transactional currencies other than the functional currency of the Group are kept to an acceptable level.

The net unhedged financial assets and financial liabilities of the Group companies that are not denominated in their functional currencies are as follows:


70

Annual Report 2007

Arab United BritishEmirates States Indonesian Singapore Australian SterlingDirham Dollars Rupiah Dollars Dollars Pounds TotalRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Net Financial Assets/(Liabilities) Held in Non-Functional Currencies

Functional Currency of Groupcompanies

At 31 December 2007Ringgit Malaysia 740 45 100

At 31 December 2006Ringgit Malaysia - - - - - - -

(204) (141) (78) (262)

WithinNote WAEIR 1 year 1-2 years 2-3 years 3-4 years Total

% RM’000 RM’000 RM’000 RM’000 RM’000

At 31 December 2007

Group

Fixed rateCash and bank balances 21 3.43 76,719 - - - 76,719Hire purchase liabilities 23 3.92 23 - - - 23

Floating rateRevolving credit 22 8.55 6,434 - - - 6,434

At 31 December 2006

Group

Fixed rateCash and bank balances 21 3.06 30,616 - - - 30,616Hire purchase liabilities 23 3.17 60 27 25 2 114

Floating rateRevolving credit 22 - - - - - -

32. FINANCIAL INSTRUMENTS (cont’d)

(d) Liquidity Risk

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

(e) Credit Risk

The Group’s credit risk is primarily attributable to trade receivables. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis and the Group's exposure to bad debts is not significant. Since the Group trades only with recognised and creditworthy parties, there is no requirement for collateral.

The credit risk of the Group’s other financial assets, which comprise cash and cash equivalents and non-current investments, arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these financial assets.

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

(f) Fair Values

The carrying amounts of financial assets and liabilities of the Group and of the Company at the balance sheet date approximate their fair values except for the following:

33. SEGMENT INFORMATION

The Group is organised into three major business segments:

(i) Construction - construction of buildings and infrastructure works.

(ii) Oil and gas - provision of offshore and onshore support services to the oil and gas industry which include engineering, procurement, construction and commissioning (“EPCC”) for petrochemicals and oil and gas facilities, operations and maintenance services, development and redevelopment and/or management of oil and gas brownfields and refineries and trading and supply of oil and gas materials, products and equipment.

(iii) Property and investment holding - property investment, rental of property and investment holding.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Transfer prices between business segments are set on an arm's length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.



71

Group CarryingAmount Fair Value

Note RM’000 RM’000

At 31 December 2007:

Hire purchase liabilities 23 23 20

At 31 December 2006:

Hire purchase liabilities 23 114 110

33. SEGMENT INFORMATION (cont’d)


72

Annual Report 2007

Propertyand

Oil InvestmentConstruction and Gas Holding Eliminations Consolidated

RM’000 RM’000 RM’000 RM’000 RM’000

31 December 2007

RevenueExternal sales 76,484 44,791 3,246 - 124,521Inter-segment sales 2,471 - 1,347 -

Total revenue 78,955 44,791 4,593 124,521

ResultsOperating profit 18,855 - 13,406Finance costsShare of loss of associates - - -Share of profit/(loss) of jointly

controlled entities 4,702 - - 3,608

Profit before tax 16,733Tax expense

Profit for the year 16,034

Assets and LiabilitiesSegment assets 153,654 41,725 12,609 - 207,988Investments in jointly

controlled entities 16,371 570 - - 16,941

Total assets 224,929

Segment liabilities,representing total liabilities 37,936 18,740 3,990 - 60,666

Other InformationCapital expenditure 43 12 90 - 145Depreciation 172 75 126 - 373Amortisation - - 22 - 22Impairment losses

recognised in profit or loss - 1,086 - - 1,086Non-cash expenses other than

depreciation and amortisation 633 282 555 - 1,470

(3,818)

(3,818)

(4,434) (1,015)(187)

(94) (94)

(1,094)

(699)



73

33. SEGMENT INFORMATION (cont’d)

Propertyand

InvestmentConstruction Holding Eliminations Consolidated

RM’000 RM’000 RM’000 RM’000

31 December 2006

RevenueExternal sales 122,467 6,405 - 128,872Inter-segment sales - 1,651 -

Total revenue 122,467 8,056 128,872

ResultsOperating profit 2,494 547 - 3,041Finance costsShare of loss of jointly controlled entities - -

Profit before tax 2,287Tax expense

Profit for the year 416

Assets and LiabilitiesSegment assets 125,356 66,396 - 191,752Investments in jointly controlled entities 11,738 - - 11,738

Total assets 203,490

Segment liabilities, representing total liabilities 50,950 4,340 - 55,290

Other InformationCapital expenditure 175 352 - 527Depreciation 168 148 - 316Amortisation - 22 - 22Non-cash expenses other than

depreciation and amortisation - 178 - 178

(1,651)

(1,651)

(739)(15) (15)

(1,871)

34. SIGNIFICANT EVENTS

(a) On 21 November 2006, the Company entered into a share sale and purchase agreement with Zulkifli bin Yusof for the acquisition of 1,000,000 ordinary shares of RM1 each in Nadaprise Sdn. Bhd. (“Nadaprise”), representing 50% equity interest of the issued and paid-up share capital of Nadaprise for a cash consideration of RM1,000,000. The acquisition was completed during the financial year together with the subscription for one new ordinary share of RM1 each in Nadaprise at par value.

(b) On 21 December 2006, the Group, via Kumpolan Kemajuan Raya Sdn. Bhd., entered into a conditional sale and purchase agreement with Nadin Properties Sdn. Bhd. for the disposal of the investment property for a total cash consideration of RM80,000,000. The disposal was completed during the financial year.

(c) On 12 March 2007, the Group, via Nadaprise, subscribed for 337,500 new ordinary shares of RM1 each and 183,750 new preference shares of RM1 each, representing 67.5% and 49% respectively of the total issued and paid-up share capital of Wood Group Production Facilities (Malaysia) Sdn. Bhd. (“Wood Group Malaysia”). The principal activity of Wood Group Malaysia is participating in the business of oil and gas, petrochemical, liquefied natural gas, power generation and refinery industries.

(d) On 23 April 2007, the Group, via Pembinaan SPK Sdn. Bhd. (“PSPK”), entered into a Joint Venture Agreement with Bina Puri Holdings Bhd. (“Bina Puri”) to form an unincorporated joint venture known as SPK-Bina Puri JV for the purpose of jointly accepting an award of contract for the execution and implementation of Phase 1 Plot 1 Zone B Residential, Commercial and Recreational Development of Al Reem Island, Abu Dhabi, United Arab Emirates for a total contract value of AED490,779,000. The participation of the parties in the SPK-Bina Puri JV in respect of the contract and works under the Al Reem Project are as follows:PSPK : 70%Bina Puri : 30%

(e) On 16 July 2007, the Group, via Simfoni Temasek Sdn. Bhd. (“STSB”) entered into a Memorandum of Understanding (“MOU”) with Maces Sdn. Bhd. and Dominion Estate Sdn. Bhd. to collaborate in the exploration and development in the specialty oilfield chemicals industry in the United Arab Emirates by setting up a joint venture company. Pursuant to the MOU, STSB acquired 1 ordinary share of RM1 each in Maces International Sdn. Bhd. (“MISB”) for a cash consideration of RM1 and subsequently subscribed for 2 new ordinary shares of RM1 each at par in MISB, representing 30% equity interest of the issued and paid-up share capital of MISB.

(f) On 30 July 2007, the Group, via Nadaprise, subscribed for 3,000,000 new preference shares of RM0.01 each in Rekayasa Industri Malaysia Sdn. Bhd. (“Rekayasa”) at a subscription price of RM1 per share via the capitalisation of advances made to Rekayasa by Nadaprise.

On 10 September 2007, Nadaprise entered into an agreement with P.T. Rekayasa Industri (“Rekin”), a company incorporated in Indonesia, whereby Nadaprise agreed to grant an option to Rekin to acquire 900,000 preference shares of RM0.01 each in Rekayasa, which represents 30% of the issued and paid-up preference share capital of Rekayasa, at RM1 per share. The option is exercisable over a period of 3 years from the date of the agreement. The option has not been exercised during the financial year.

(g) On 22 August 2007, the Group, via Nadaprise, entered into a Share Sale and Purchase Agreement with Total Oil Technologies Sdn. Bhd. for the acquisition of 35,000 ordinary shares of RM1 each in STSB for a total cash consideration of RM35,000. Subsequently on 11 October 2007, Nadaprise entered into another Share Sale and Purchase Agreement with Mohammed Nadim Khan Bin Mohd Aslam Khan for the acquisition of 35,000 ordinary shares of RM1 each in STSB for a total cash consideration of RM35,000. The acquisitions were completed during the financial year and STSB is now a wholly-owned subsidiary of Nadaprise.

(h) On 23 August 2007, the Group, via Nadaprise, entered into two separate Share Sale and Purchase Agreements with third parties for the acquisition of 75,000 ordinary shares of RM1 each in Ombak Sepakat Sdn. Bhd. (“OSSB”) for a total cash consideration of RM75,000. Subsequently on 5 October 2007, Nadaprise entered into another Share Sale and Purchase Agreement with another third party for the acquisition of 12,500 ordinary shares of RM1 each in OSSB for a total cash consideration of RM12,500. The acquisitions were completed during the financial year.

OSSB has a 51% jointly controlled entity, ThyssenKrupp Xervon Corp Sdn. Bhd., which is in the business of supplying support services to the oil and gas, petrochemical, industrial and power generation sectors.


74

Annual Report 2007

34. SIGNIFICANT EVENTS (cont’d)

(i) On 22 October 2007, the Group, via Nadaprise, acquired 1 ordinary share of RM1 each in Awan Inspirasi Holdings Sdn. Bhd. (“AIHSB”) for a cash consideration of RM1 and subsequently on 24 October 2007, Nadaprise subscribed for 48,999 new ordinary shares of RM1 each at par in AIHSB, representing 49% equity interest of the issued and paid-up share capital of AIHSB. On the same date, 100,000 ordinary shares of RM1 each in Awan Inspirasi Sdn. Bhd. (“AISB”), representing the entire issued and paid-up capital of AISB were transferred to AIHSB for a consideration of RM100,000. On 26 October 2007, AIHSB acquired 1 ordinary share of USD1 each in Awan Inspirasi Global (L) Bhd (“AIGB”), representing the entire issued and paid-up capital of AIGB, for a cash consideration of USD1.



75

1. RECURRENT RELATED PARTY TRANSACTIONS (RRPT) OF REVENUE NATURE

The breakdown of the aggregate value of transactions conducted pursuant to the shareholders’ mandate for RRPT of revenue or trading nature during the financial year ended 31 December 2007 is set out in the financial statements on page 68.

The Company had, at the Annual General Meeting held on 24 April 2007, obtained the existing shareholders’ mandate for RRPT and will be seeking a renewal of the mandate on RRPT at its forthcoming Annual General Meeting scheduled to be held on 11 June 2008.

2. MATERIAL CONTRACTS

There were no material contracts entered into by the Company and its subsidiaries involving directors’ and major shareholders’ interests which were still subsisting at the end of the financial year under review or if not then subsisting, entered into since the end of the previous financial year.

3. UTILISATION OF PROCEEDS

There were no utilised proceeds raised from any proposal.

4. SHARE BUY-BACK

There were no share buy-backs during the financial year ended 31 December 2007.

5. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES EXERCISED

There were no options, warrants or convertible securities exercised during the financial year ended 31 December 2007 as the Company has not issued any options, warrants or convertible securities.

6. AMERICAN DEPOSITORY RECEIPT (ADR) OR GLOBAL DEPOSITORY RECEIPT (GDR) PROGRAMME

The Company did not sponsor any ADR or GDR programme during the financial year under review.

7. SANCTIONS AND/OR PENALTIES IMPOSED

There were no public sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by any relevant regulatory body during the financial year under review.

8. VARIATION IN RESULTS

There were no variations between the audited results for the financial year ended 31 December 2007 and the unaudited results for the fourth quarter ended 31 December 2007 of the Group. There were no profit estimate, forecast or projection announced during the financial year under review.

9. PROFIT GUARANTEE

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

10. NON-AUDIT FEES

The amount of non-audit fees paid to the External Auditors by the Group for the financial year ended 31 December 2007 amounted to RM46,000.

11. REVALUATION POLICY ON LANDED PROPERTIES

The Group has not adopted a policy of regular revaluation of its landed property as at the end of the financial year ended 31 December 2007.

Bursa Securities Listing RequirementsCompliance Information

76

Annual Report 2007

Location Bandar Menjalara Kepong, Kuala Lumpur

Description H.S. (D) 51604P.T. 44668, Mukim of Batu

Date of Acquisition 20 January 1986

ApproximateAge of Buildings (Years) -

Tenure Leasehold - expires in Year 2077

Land Area (sq. ft.) 36,010

Existing Use Petrol Kiosk

Net Book Value (RM’000) 1,529

The Property of the Groupas at 31 December 2007


77

Analysis of Shareholdingsas at 15 April 2008

78

Annual Report 2007

Authorised Capital : RM200,000,000Issued and Fully Paid-up Capital : RM133,944,468Class of Shares : Ordinary Share of RM1.00 eachVoting Rights : One Vote per Ordinary Share

STATEMENT OF SHAREHOLDINGS

DISTRIBUTION OF SHAREHOLDINGS

SUBSTANTIAL SHAREHOLDERS

DIRECTORS’ SHAREHOLDINGS

Saiful Aznir Bin Shahabudin is deemed a substantial shareholder in the Company by virtue ofSection 6A(4) of the Companies Act, 1965 through his 99.99% interest in Gerak Jaguh Sdn.Bhd., which in turn has a direct equity of 22.73% in Sharikat Permodalan Kebangsaan Berhad.

Apart from Saiful Aznir Bin Shahabudin, the other directors do not hold any shares in theCompany.

%No. of % of No. of of shares

Size of holdings holders holders shares issued

1,000 and below 939 30.37 768,540 0.571,001 - 10,000 1,714 55.43 7,129,560 5.3210,001 - 100,000 382 12.35 11,865,327 8.86100,001 to less than 5% of issued shares 55 1.78 19,407,772 14.495% and above of issued shares 2 0.06 94,773,269 70.76

3,092 100.00 133,944,468 100.00

No. of % ofName of shareholders shares held shareholdings

1. Sharikat Permodalan Kebangsaan Berhad 84,711,327 63.242. Perbadanan Kemajuan Negeri Kedah 10,061,942 7.51

94,773,269 70.75


1. Sharikat Permodalan Kebangsaan Berhad 84,711,327 63.2436

2. Perbadanan Kemajuan Negeri Kedah 10,061,942 7.5120

3. SPK Securities Sdn Bhd 3,072,868 2.2941

4. CIMSEC Nominees (Tempatan) Sdn. Bhd. 2,004,600 1.4966CIMB Bank for Hamid Bin Mohd Sidek

5. Inter-Pacific Equity Nominees (Tempatan) Sdn. Bhd. 1,414,700 1.0562Pledged Sec A/C – Lai Poon Chong @ Lai Poong Chong

6. Raslan Loong Executives & Managers Sdn. Bhd. 1,355,635 1.0121Exempted Trustee Account –SPK Scheme of Arrangement

7. Md Nahar Bin Noordin 1,100,000 0.8212

8. RHB Capital Nominees (Tempatan) Sdn. Bhd. 579,100 0.4323Pledged Sec A/C for Teh Swee Heng

9. Mayban Securities Nominees (Tempatan) Sdn. Bhd. 446,900 0.3336Pledged Sec A/C for Kesvaran S/O TP Murugasu

10. Abdullah Bin Mohamad Noor 391,400 0.2922

11. AIBB Nominees (Tempatan) Sdn. Bhd. 373,200 0.2786Pledged Sec A/C – Mohd Dzaki @ Mohd Zaki Bin Jaafar

12. Citigroup Nominees (Tempatan) Sdn. Bhd. 331,307 0.2473Pledged Sec A/C for Quah Hoe Phang @ Stephen Quah

13. Tan Chin Wui 300,000 0.2240

14. Citigroup Nominees (Asing) Sdn. Bhd. 293,000 0.2187Exempt AN for Citibank NA, Singapore (Julius Baer)

15. HDM Nominees (Tempatan) Sdn. Bhd. 292,000 0.2180Pledged Securities Account for Goh Seng Guan

16. Tan Siew Yong 286,475 0.2139

17. MIDF Amanah Investment Nominees (Tempatan) Sdn. Bhd. 281,000 0.2098Pledged Securities Account for Khong Sau Ping

18. Tajul Rahim Bin Mohd Tahir 279,000 0.2083

19. AIBB Nominees (Tempatan) Sdn. Bhd. 276,200 0.2062Pledged Sec A/C for Norazlina Binti Awang

20. Citigroup Nominees (Asing) Sdn. Bhd. 274,000 0.2046CBNY for DFA Emerging Markets Small Cap Series

Analysis of Shareholdings (cont’d)as at 15 April 2008


79

Thirty (30) Largest Shareholders

Analysis of Shareholdings (cont’d)as at 15 April 2008

80

Annual Report 2007


21. Wai Chiew Yoong 272,000 0.2031

22. HDM Nominees (Tempatan) Sdn. Bhd. 268,800 0.2007Pledged Securities Account for Ng Kum Seng

23. AIBB Nominees (Tempatan) Sdn. Bhd. 252,300 0.1884Pledged Sec A/C for Latifah Binti Abdul Hamid

24. Citigroup Nominees (Tempatan) Sdn. Bhd. 250,000 0.1866Pledged Sec A/C – Lai Poon Chong @ Lai Poong Chong

25. RHB Nominees (Tempatan) Sdn. Bhd. 250,000 0.1866Pledged Securities Account for Bok Soon Boey

26. AIBB Nominees (Tempatan) Sdn. Bhd. 225,000 0.1680Pledged Securities Account for Tan Siew Booy

27. Wong Seng Chan 200,000 0.1493

28. RHB Nominees (Tempatan) Sdn. Bhd. 200,000 0.1493Pledged Sec A/C for Maszura Binti Kamaruddin

29. Cheang Yoke Chun 190,000 0.1418

30. TA Nominees (Tempatan) Sdn. Bhd. 186,000 0.1389Pledged Sec A/C for Riedzuan Bin Abdullah

110,418,754 82.4360

Thirty (30) Largest Shareholders

NOTICE IS HEREBY GIVEN that the Forty Fifth (45th)Annual General Meeting of SPK-SENTOSA CORPORATIONBERHAD (“the Company”) will be held at the Ballroom,Equatorial Hotel, Jalan Sultan Ismail, 50250 KualaLumpur on Wednesday, 11 June 2008 at 10.00 a.m. forthe transaction of the following business:

AGENDA

As Ordinary Business1. To receive and adopt the Audited Financial Statements for the year ended 31 December

2007 and the Directors’ and Auditors’ Reports thereon. Resolution 1

2. To approve the payment of Directors’ Fees. Resolution 2

3. To re-elect as Director the following persons who retire pursuant to Article 105 of the Company’s Articles of Association:

(a) Dato’ Md Mydin Bin Md Sheriff Resolution 3(b) Ir. Dr. Azman Bin Ahmad Resolution 4

4. To consider and if thought fit, pass the following Ordinary Resolution:

“THAT Gen. (R) Tan Sri Yaacob Bin Mat Zain, retiring pursuant to Section 129(6) of the Companies Act, 1965, be re-appointed as a Director of the Company to hold office as a Director of the Company until the conclusion of the next annual general meeting (“AGM”) of the Company.” Resolution 5

5. To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration. Resolution 6

As Special BusinessTo consider and if thought fit, pass the following Ordinary and Special Resolutions:

Ordinary Resolution6. Authority To Issue Shares Pursuant To Section 132D of the Companies Act, 1965

Resolution 7

“THAT pursuant to Section 132D of the Companies Act, 1965 (“Act”), the Directors be and they are hereby authorised to issue shares in the Company at any time until the conclusion of the next AGM and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued does not exceed 10 per centum (10%) of the issued share capital of the Company for the time being, subject always to the approvals of all relevant Regulatory Authorities being obtained for such issue and allotment.”

Ordinary Resolution7. Proposed Renewal Of The Shareholders’ Mandate For Recurrent Related Party

Transactions Of A Revenue Or Trading Nature Entered Into And/Or To Be Entered Into With Sharikat Permodalan Kebangsaan Berhad (“SPK”) And/Or Its Subsidiaries (“SPK Group”) And Persons Connected With The SPK Group (Including Saiful Aznir Bin Shahabudin And Ir. Dr. Azman Bin Ahmad)

Resolution 8

Notice of Annual General Meeting


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“THAT, subject to the Act, the Memorandum and Articles of Association of the Company and the Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”), approval be and is hereby given to the Company and/or its subsidiary companies (“Group”) to enter into all arrangements and/or transactions, involving the interests of Directors, major shareholders or persons connected with Directors and/or major shareholders of the Company and/or its subsidiary companies (“Related Parties”), as detailed in section 2.1.3 of Part A of the Circular to Shareholders of the Company dated 20 May 2008, provided that such arrangements and/or transactions are:

(i) recurrent transactions of a revenue or trading nature;

(ii) necessary for the day-to-day operations; and

(iii) carried out in the ordinary course of business and made at arm’s length on the Group’s normal commercial terms and on terms not more favourable to the Related Parties than those generally available to the public and are not detriment to the minority shareholders of the Company (“Mandate”),

AND THAT the authority conferred by this resolution will commence immediately upon passing of this Ordinary Resolution and will continue in force until:

(a) the conclusion of the next AGM of the Company following the general meeting at which such Mandate was passed, at which time it will lapse, unless by a resolution passed at a general meeting whereby the authority is renewed; or

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

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

AND FURTHER THAT the Directors of the Company and/or any one of them be authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions as contemplated and/or authorised by this Resolution.”

Ordinary Resolution 8. Proposed Renewal Of The Shareholders’ Mandate For Recurrent Related Party

Transactions Of A Revenue Or Trading Nature Entered Into And/Or To Be Entered Into With Ideal Appraisal Sdn Bhd And/Or Its Subsidiaries (“IASB Group”) And Persons Connected With The IASB Group Resolution 9

“THAT, subject to the Act, the Memorandum and Articles of Association of the Company and the Listing Requirements, approval be and is hereby given to the Company and/or its subsidiary companies (“Group”) to enter into all arrangements and/or transactions, involving the interests of Directors, major shareholders or persons connected with Directors and/or major shareholders of the Company and/or its subsidiary companies (“Related Parties”), as detailed in section 2.1.3 of Part A of the Circular to Shareholders of the Company dated 20 May 2008, provided that such arrangements and/or transactions are:

(i) recurrent transactions of a revenue or trading nature;

(ii) necessary for the day-to-day operations; and

(iii) carried out in the ordinary course of business and made at arm’s length on the Group’s normal commercial terms and on terms not more favourable to the Related Parties than those generally available to the public and are not detriment to the minority shareholders of the Company (“Mandate”),

Notice of Annual General Meeting (cont’d)

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Annual Report 2007

AND THAT the authority conferred by this resolution will commence immediately upon passing of this Ordinary Resolution and will continue in force until:

(a) the conclusion of the next AGM of the Company following the general meeting at which such Mandate was passed, at which time it will lapse, unless by a resolution passed at a general meeting whereby the authority is renewed; or

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

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

AND FURTHER THAT the Directors of the Company and/or any one of them be authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions as contemplated and/or authorised by this Resolution.”

Ordinary Resolution9. Proposed Renewal of Share Buy-Back Mandate Resolution 10

“THAT subject to the provisions under the Act, the Companies Regulations 1966, the Memorandum and Articles of Association of the Company, the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and the approvals of all relevant and/or regulatory authorities (if any), approval be and is hereby given to the Company to purchase and/or hold such number of ordinary shares of RM1.00 each in the Company (“Proposed Renewal of Share Buy-Back Mandate”), as detailed in Part B of the Circular to Shareholders of the Company dated 20 May 2008, as may be determined by the Directors of the Company from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the interest of the Company, provided that the aggregate number of ordinary shares which may be purchased pursuant to this resolution does not exceed ten per cent (10%) of the total issued and paid-up share capital of the Company at the time of purchase;

AND THAT the maximum amount of funds to be allocated by the Company for the purpose of the Proposed Renewal of Share Buy-Back Mandate shall not exceed the Company’s share premium account and retained profits account;

AND THAT authority be and is hereby given to the Directors of the Company to decide at their discretion, as may be permitted and prescribed by the Act and/or the rules, regulations, guidelines, requirements and/or orders of Bursa Securities and any other relevant authorities for the time being in force, to:

(a) cancel the shares so purchased; or

(b) retain the shares in treasury (“treasury shares”); or

(c) retain part of the shares so purchased as treasury shares and cancel the remainder;

AND THAT in respect of the shares retained in treasury, authority be and is hereby given to the Directors of the Company to subsequently:

(a) distribute the treasury shares as dividends to shareholders, such dividends to be known as share dividends; or

(b) resell the treasury shares on the market of Bursa Securities, in accordance with the relevant rules of Bursa Securities.



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AND THAT the authority conferred by this resolution will be effective immediately upon passing of this Resolution and will expire at:

(a) the conclusion of the next AGM of the Company, at which time the said authority will lapse unless by an ordinary resolution passed at a general meeting of the Company, the authority is renewed, either unconditionally or subject to conditions;

(b) the expiration of the period within the next AGM of the Company is required by law to be held; or

(c) revoked or varied by an ordinary resolution passed by the shareholders in a general meeting;

whichever occur first and in any event, in accordance with the provisions of the Listing Requirements issued by Bursa Securities and/or other relevant governmental and/or regulatory authorities (if any);

AND THAT the Directors of the Company be and are hereby authorised with full power to assent to any modifications and/or amendments as may be required by any relevant authorities as they may deem fit and to enter into all transactions, arrangements or agreements as may be necessary or expedient in order to give full effect to the Proposed Renewal of the Share Buy-Back Mandate.”

Special Resolution10. Proposed Amendments to the Articles of Association of the Company

Resolution 11“THAT the additions, deletions, alterations, variations and modifications to the Articles ofAssociation of the Company as set out in Appendix I of the Circular to Shareholders dated 20 May 2008 be and are hereby approved.”

11. To transact any other business of which due notice shall have been given.

By Order of the Board

FATEH HANUM BTE KHAIRUDDIN (LS 0009093)Company Secretary

Kuala Lumpur20 May 2008

NOTES:

1. A member of the Company entitled to attend this meeting may appoint a proxy or proxies instead of him. A proxy need not be a member of the Company.

2. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if such appointer is a corporation under its common seal, or the hand of its attorney.

3. This instrument appointing a proxy must be deposited at the Registered Office of the Company at 13th Floor, Menara MBF (formerly known as Menara SPK), No. 22, Jalan Sultan Ismail, 50250 Kuala Lumpur at least forty eight (48) hours, i.e. on or before 9 June 2008, at 10.00 a.m. before the time appointed for holding the meeting or adjourned meeting.


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Annual Report 2007

EXPLANATORY NOTES ON SPECIAL BUSINESS:

1. The proposed Ordinary Resolution under item 6 if passed, is to give the Directors of the Company flexibility to issue and allot shares for such purposes as the Directors in their absolute discretion consider to be in the interest of the Company without having to convene a general meeting. This authority will expire at the next AGM of the Company.

2. The proposed adoption of the Ordinary Resolutions under items 7 and 8 is to renew the shareholders’ mandate granted by the shareholders of the Company at the Forty Fourth (44th) AGM held on 24 April 2007. The proposed renewal of the shareholders’ mandate will enable the Company and its subsidiaries to enter into any of the recurrent related party transactions of a revenue or trading nature which are necessary for the Group’s day-to-day operations, subject to the transactions being in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.

3. The proposed Ordinary Resolution under item 9 if passed, will empower the Directors of the Company to purchase its own shares on Bursa Securities up to ten per cent (10%) of the issued and paid up share capital of the Company. This authority, unless revoked or varied by the Company at a general meeting, will expire at the next AGM of the Company.

4. The proposed Special Resolution under item 10 if passed, will render the Articles of Association of the Company to be in line with the recent amendments required under the Listing Requirements and the Companies (Amendments) Act 2007.

Further information is set out in the Circular to Shareholders dated 20 May 2008, dispatched together with the Company’s 2007 Annual Report.



85

Directors who are standing for re-election or re-appointment at the 45th AnnualGeneral Meeting

Pursuant to Article 105 of the Company’s Articles of Association

• Dato’ Md Mydin Bin Md Sheriff • Ir. Dr. Azman Bin Ahmad

Pursuant to Section 129(6) of the Companies Act, 1965

• Gen. (R) Tan Sri Yaacob Bin Mat Zain

Details of Directors who are standing for re-election or re-appointment

Details of the above Directors who are standing for re-election or re-appointment are set outin Profile of the Board of Directors appearing on pages 11 to 12 and their shareholdinginformation, if any, are listed on page 78 of this Annual Report.

Details of attendance of Directors at Board Meetings

There were five (5) Board Meetings held during the financial year ended 31 December 2007.Details of attendance of the Directors are set out below:

Statement Accompanying Notice ofAnnual General MeetingPursuant to paragraph 8.28(2) of the Listing Requirements

86

Annual Report 2007

No. of BoardMeetings

Directors Held Attendance

(a) Gen. (R) Tan Sri Yaacob Bin Mat Zain 5 5(b) Dato’ Md Mydin Bin Md Sheriff 5 4(c) Brig. Gen. (R) Dato’ Mohd Hashim Bin Haji Abu 5 5(d) Ir. Dr. Azman Bin Ahmad 5 4(e) Saiful Aznir Bin Shahabudin 5 5(f) Krishnan a/l C.K Menon 5 5

Details of place, date and time of Board Meetings

All Board Meetings during the financial year ended 31 December 2007 were held at 18thFloor, Menara SPK, No. 22, Jalan Sultan Ismail, 50250 Kuala Lumpur. The date and time ofthe Board Meetings held were as follows:

Date of Meeting Time

27 February 2007 10.30 a.m.22 March 2007 10.30 a.m.25 May 2007 10.30 a.m.17 August 2007 10.00 a.m.15 November 2007 10.30 a.m.

1. To receive and adopt the Audited Financial Statements for the year ended 31 December 2007 and the Directors’ and Auditors’ Reports thereon.

Resolution 12. To approve the payment of Directors’ Fees. Resolution 23. To re-elect as Director the following persons who retire pursuant to Article

105 of the Company’s Articles of Association: • Dato’ Md Mydin Bin Md Sheriff Resolution 3• Ir. Dr. Azman Bin Ahmad Resolution 4

4. To re-appoint Gen. (R) Tan Sri Yaacob Bin Mat Zain who retires pursuant to Section 129(6) of the Companies Act, 1965, to hold office as a Director of the Company until the conclusion of the next annual general meeting of the Company. Resolution 5

5. To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration. Resolution 6As Special BusinessOrdinary Resolution

6. Authority under Section 132D of the Companies Act, 1965 for the Directors to issue shares. Resolution 7As Special BusinessOrdinary Resolution

7. Proposed renewal of the shareholders’ mandate for recurrent related party transactions of a revenue or trading nature entered into and/or to be entered into with Sharikat Permodalan Kebangsaan Berhad (“SPK”) and/or its subsidiaries (“SPK Group”) and persons connected with the SPK Group(including Saiful Aznir Bin Shahabudin and Ir. Dr. Azman Bin Ahmad).

Resolution 8As Special BusinessOrdinary Resolution

8. Proposed renewal of the shareholders’ mandate for recurrent related party transactions of a revenue or trading nature entered into and/or to be entered into with Ideal Appraisal Sdn Bhd and/or its subsidiaries (“IASB Group”) and persons connected with the IASB Group. Resolution 9As Special BusinessOrdinary Resolution

9. Proposed renewal of share buy-back mandate. Resolution 10As Special BusinessSpecial Resolution

10. Proposed amendments to the Articles of Association of the Company.Resolution 11

(Please indicate with an “X” in the space provided on how you wish your votes to be cast. If you do not do so, the proxy will

vote or abstain from voting at his discretion).

Dated this day of 2008

Signature(s) of member(s)

Notes:

1. A member of the Company entitled to attend the meeting may appoint a proxy or proxies to vote instead of him. A

proxy need not be a member of the Company.

2. The instrument appointing a proxy must be in writing under the hand of the appointer or his attorney duly authorised

in writing or if such appointer is a corporation, under its common seal or the hand of its attorney.

3. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 13th Floor, Menara MBF

(formerly known as Menara SPK), No. 22, Jalan Sultan Ismail, 50250 Kuala Lumpur at least forty eight (48) hours,

i.e. on or before 9 June 2008 at 10.00 a.m., before the time appointed for holding the meeting or adjourned meeting.

Proxy Form No. of Shares Held

SPK-SENTOSA CORPORATION BERHAD(Company No: 5347-X)

(Incorporated in Malaysia)

I/We, ofbeing a member of SPK-SENTOSA CORPORATION BERHAD, hereby appoint

ofor failing him/her,of

as my/our proxy to vote for me/us on my/our behalf at the Forty Fifth (45th) Annual GeneralMeeting of the Company to be held at the Ballroom, Equatorial Hotel, Jalan Sultan Ismail,50250 Kuala Lumpur on Wednesday, 11 June 2008 at 10.00 a.m. and at any adjournmentthereof.

NO. RESOLUTIONS FOR AGAINST

amit

y60

3-91

72 8

430

THE SECRETARYSPK-SENTOSA CORPORATION BERHAD (5347-X)

13th Floor, Menara MBF(formerly known as Menara SPK),No. 22, Jalan Sultan Ismail,50250 Kuala Lumpur

AFFIXSTAMPHERE

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