Annual Report 2001 01 - National University of Singaporelibapps2.nus.edu.sg/nus_hl/granite2001.pdf27 February 2001 / 12.10 p.m. / 2nd Floor, Wisma Ekran, Jalan Parlimen, ... Mr Peter

'01Annual Repor t 2001

Granite Industries Berhad

22 33 55 66 88 1111 13131919 5151 5252 5555 5656

1616

Notice of Annual General MeetingNotice of Annual General Meeting

Statement Accompanying Notice

Corporate Information

Profile of Directors

Chairman's Statement

Report from the Audit Committee

Statement on Corporate Governance

Additional Disclosures

Reply

Form of Proxy

Analysis of Shareholdings

List of Properties Owned

Financial Statements

ContentsContents

Notice is hereby given that the 33rd Annual General Meeting of Granite Industries Berhad will be held at Ballroom I,

Santubong Kuching Resort, Jalan Santubong, 93748 Kuching, Sarawak on Thursday, 27 June 2002 at 11.30 a.m. for the

following purposes :-

Notes

1 A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy

need not be a member of the Company.

2 The instrument appointing a proxy or proxies, in the case of an individual shall be signed by the appointer or his attorney, and in the

case of a corporation, either under seal or under the hand of an officer or attorney duly authorised.

3 The instrument appointing a proxy or proxies must be deposited with the Company’s Share Registrars, Trace Management Services Sdn

Bhd, Suite 20.03, 20th Floor, Menara MAA, No 12 Jalan Dewan Bahasa, 50460 Kuala Lumpur, not less than 48 hours before the time for

holding the Meeting or any adjournment thereof.

4 Explanatory notes on Special Business :-

The proposed Resolution (7) if passed, will empower the Directors of the Company to issue and allot shares in the Company from time

to time and for such purposes as the Directors consider would be in the interest of the Company. This authority will, unless revoked or

varied by the Company in general meeting, expire at the next annual general meeting of the Company.

Notice of Annual General Meeting

2

1 ] To receive and adopt the Company’s Audited Accounts for the year ended 31 December 2001 together

with the Reports of the Directors and Auditors thereon.

2 ] To re-elect Tan Sri Dato’ Paduka (Dr) Ting Pek Khiing who retires pursuant to Articles 100 & 101 of

the Company’s Articles of Association and being eligible, offers himself for re-election.

3 ] To re-elect Senator Datuk William Lau Kung Hui who retires pursuant to Articles 100 & 101 of the

Company’s Articles of Association and being eligible, offers himself for re-election.

4 ] To re-elect Dato’ Mohammed Shukor bin Abdullah who retires pursuant to Articles 100 & 101 of the

Company’s Articles of Association and being eligible, offers himself for re-election.

5 ] To approve the payment of Directors’ fees.

6 ] To appoint Messrs Hanafiah Raslan & Mohamad as Auditors of the Company in place of the retiring

Auditors, Messrs Arthur Andersen & Co and to authorise the Directors to fix their remuneration.

Special Business

7 ] To consider and, if thought fit, pass the following ordinary resolution :-

“ THAT pursuant to Section 132D of the Companies Act, 1965, Articles of Association of the

Company and the Listing Requirements of the Kuala Lumpur Stock Exchange, the Directors be

and are hereby empowered to issue shares in the Company, at any time 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 pursuant to this Resolution does not

exceed 10% of the issued capital of the Company for the time being and that the Directors be and

are also empowered to obtain the approval from the Kuala Lumpur Stock Exchange for listing of and

quotation for the additional shares so issued and that such authority shall continue in force until the

conclusion of the next annual general meeting of the company. ”

8 ] To consider any other business for which due notice shall have been given.

By Order of the Board

YAP BEE LEE -Secretary

Kuala Lumpur -5 June 2002

Resolution 1

Resolution 2

Resolution 3

Resolution 4

Resolution 5

Resolution 6

Resolution 7

3

Statement Accompanying Notice ofThe 33rd Annual General Meeting of the Company

1 ] Directors who are standing for re-election at the 33rd Annual General Meeting of the Company are as follows:-

i] Tan Sri Dato' Paduka (Dr) Ting Pek Khiing

ii] Senator Datuk William Lau Kung Hui

iii] Dato' Mohammed Shukor bin Abdullah

2 ] A total of four (4) Board of Directors' Meeting were held during the financial year ended 31 December 2001, details

of which are as follow:-

Date of meeting / Time / Venue

27 February 2001 / 12.10 p.m. / 2nd Floor, Wisma Ekran, Jalan Parlimen, 50480 Kuala Lumpur.

18 October 2001 / 12.30 p.m. / 2nd Floor, Wisma Ekran, Jalan Parlimen, 50480 Kuala Lumpur.

9 November 2001 / 10.55 a.m. / 2nd Floor, Wisma Ekran, Jalan Parlimen, 50480 Kuala Lumpur.

29 December 2001 / 12.50 p.m. / Lawas Room, Santubong Kuching Resort, Jalan Santubong, 93748 Kuching, Sarawak.

Attendance of the Directors holding office at the end of the financial year ended is as follow:-

Name of Directors

Tan Sri Dato' Paduka (Dr) Ting Pek Khiing

Mr Peter Ling Ee Kong

Dato' Stanley Isaacs

Senator Datuk William Lau Kung Hui

Dato' Mohammed Shukor bin Abdullah

Mr Ting Sie Huoong

3 ] Details of the directors who are standing for re-election are as follows:-

Name particulars

Age

Nationality

Executive /

Non Executive

Independency

Present position

Qualification

Working experience

Tan Sri Dato' Paduka

(Dr) Ting Pek Khiing

57 years

Malaysian

Executive

Non-Independent Director

Executive Chairman

Self made businessman

25 years of experience in

construction, specialising

in the technology of using

wood-based pre-fabricated

standardised components

and has successfully

Senator Datuk William

Lau Kung Hui

52 years

Malaysian

Non-Executive

Independent Director

Director

Bachelor of Law Degree

(LL.B) (Hons)

Master of Law Degree (LL.M)

Senator Lau was called to the

English Bar by the Honourable

Society of Lincoln's Inn in July

1975. He has been the Senior

Partner of a law firm since

1977.

Dato' Mohammed Shukor

bin Abdullah

64 years

Malaysian

Non-Executive

Independent Director

Director

Ex-General of Malaysian

Armed Forces

Dato' Shukor is a retired

General in the Malaysian

Armed Forces.

No. of Meetings Attended

3/4

4/4

4/4

4/4

3/4

2/4

4

@By virtue of his interest in Granite, Tan Sri Dato' Paduka (Dr) Ting Pek Khiing is also deemed interested in the shares in the subsidiaries of

Granite to the extent that Granite has an interest.

* Deemed interested in the 15,000,000 Granite shares held by Equatorial Timber Marketing Sdn Bhd, a Company where he has substantial

interest and the 100,000 Granite shares held by Mr Ting Sie Huoong, his son.

Statement Accompanying Notice ofThe 33rd Annual General Meeting of the Company

3 ] Details of the directors who are standing for re-election (continue)

Name particulars

Working experience

Any other

directorship of

public companies

The securities

holdings in

Granite and its

subsidiaries@

The family

relationship with

any director and / or

major shareholder

of Granite

Any conflict of

interest that the

directors have

with Granite

Tan Sri Dato' Paduka

(Dr) Ting Pek Khiing

completed numerous

housing projects for the

Sarawak State Goverment

and resort hotels in Sarawak

and Pulau Langkawi.

Ekran Berhad

PWE Industries Berhad

Wembley Industries

Holdings Berhad

Granite Industries Bhd

Direct Interest

55,889,979 (25.06 %)

Indirect Interest*

15,100,000 (6.77 %)

Father of

Mr Ting Sie Huoong,

a Director of Granite

As disclosed in Notes 8 & 9

of the audited accounts for

the financial year ended

31 December 2001

Senator Datuk William

Lau Kung Hui

He also holds a number of

professional fellowships,

including fellowship of the

Chartered Institute of

Arbitrators of United Kingdom,

Singapore and Australia.

He was previously a Councillor

of the Sibu Municipal Council

for 18 years and has also sat on

the Council of Management of

the Malaysian Institute of

Arbitrators, Malaysia. He is also

a Supporting Member of the

London Maritime Arbitrators

Association. He was appointed

a Senator of the House of

Senate in September 1998.

He is the current President of

the Chartered Institute of

Transport, Malaysia.

Ekran Berhad

Subur Tiasa Holdings Berhad

Granite Industries Bhd

Direct Interest

100,000 (0.04 %)

None

None

Dato' Mohammed Shukor bin

Abdullah

Wijaya Baru Global Berhad

Wembley Industries Holdings

Berhad

None

None

None

Solicitors

Chor Pee Anwarul & Co

Advocates & Solicitors

Suite 8-16-6, Level 16

Menara Olympia

8 Jalan Raja Chulan

50200 Kuala Lumpur

Jeff Leong, Poon & Wong

Advocates & Solicitors

A-11-3A, Level 11

Megan Phileo Avenue

Jalan Yap Kwan Seng

50450 Kuala Lumpur

Principal Banker

Alliance Malaysia Bank Berhad

Stock Exchange Listing

The Main Board of the

Kuala Lumpur Stock Exchange

5


Executive Chairman


Non-Executive Director

Dato’ Stanley Isaacs



Independent Non-Executive Director

Dato’ Mohammed Shukor bin Abdullah


Mr Peter Ting Sie Huoong


Audit Committee


Chairman

Tan Sri Dato’ Paduka (Dr) Ting Pek Khiing


Company Secretary

Ms Yap Bee Lee

(MAICSA : 0864482)

Registered Office

Level 16, Wisma Ting Pek Khiing

No 1 Jalan Padungan

93100 Kuching, Sarawak

Tel (082) 236920 Fax (082) 236922

Share Registrars

Trace Management Services Sdn Bhd

Suite 20.03, 20th Floor, Menara MAA

No.12, Jalan Dewan Bahasa

50460 Kuala Lumpur

Tel (03) 21413060 Fax (03) 21413061

Auditors

Arthur Andersen & Co

Public Accountants

Level 23A Menara Milenium

Jalan Damanlela

Pusat Bandar Damansara

Damansara Heights

50490 Kuala Lumpur

Corporate Information

Board of Directors

6

Profile of the Board of Directors

TAN SRI DATO’ PADUKA (DR) TING PEK KHIING

A Malaysian, aged 57. He was appointed to the Board of Granite on 1 November 1995 as Executive Chairman. Tan Sri Ting, a

self-made businessman, has over 25 years of experience in construction, specialising in the technology of using wood-based

pre-fabricated standardised components and has successfully completed numerous housing projects for the Sarawak State

Government and resort hotels in Sarawak and Pulau Langkawi. He also sits on the boards of Ekran Berhad, PWE Industries

Berhad and Wembley Industries Holdings Berhad, all of which are listed on the Kuala Lumpur Stock Exchange, and several

private limited companies.

Tan Sri Ting is the father of Mr Ting Sie Huoong, a member of the Board. He is also a director and substantial shareholder of

Equatorial Timber Marketing Sdn Bhd, a substantial shareholder of Granite. He has no conflict of interest with Granite

other than disclosed in notes 8 & 9 of the Audited Accounts for financial year ended 31 December 2001 and has no

convictions for any offences within the last ten years.

PETER LING EE KONG

A Malaysian, aged 47. He was appointed to the Board of Granite on 1 November 1995 as a Non-Executive Director. He is

also a member of the Audit Commitee. Mr Peter Ling holds a Bachelor of Commerce (Honours) degree and a Master of

Business Administration degree from Dalhousie University, Canada which he obtained in 1981 and 1982 respectively. He is

also a qualified Chartered Accountant. He has several years of working experience with international audit firms including

Messrs Price Waterhouse in Wellington from 1987 to 1989. From 1989 to 1992, he was with Bumiputra Merchant Bankers

Berhad. He also sits on the boards of Ekran Berhad and Wembley Industries Holdings Berhad, both are listed on the Kuala

Lumpur Stock Exchange, and several private limited companies.

Mr Peter Ling does not have any family relationship with any Director and/or major shareholder of the Company. He has no

conflict of interest with Granite and has no convictions for any offences within the last ten years.

DATO’ STANLEY ISAACS

A Malaysian, aged 60. He was appointed to the Board of Granite on 5 February 1999 as a Non-Executive Director. He is a

Barrister-at-Law by profession. Prior to joining the corporate sector, Dato' Isaacs served the Judicial and Legal Service

Malaysia for 23 years in various capacities. His earlier appointments include being a Magistrate, a Sessions Court Judge ,

Legal Adviser to the Ministry of Primary Industries while, in later years, he served as Deputy Public Prosecutor and Head of

Prosecution of the Attorney-General's Chambers Malaysia, Commissioner of Law Revision Malaysia, Parliamentary Draftmen

Malaysia and Head of Civil Division of the Attorney-General's Chambers Malaysia. Dato' Isaacs also sits on the boards of

Ekran Berhad and Wembley Industries Holdings Berhad, both are listed on the Kuala Lumpur Stock Exchange, and several

private limited companies.

Dato' Isaacs does not have any family relationship with any Director and/or major shareholder of the Company. He has no

conflict of interest with Granite and has no convictions for any offences within the last ten years.

7

Profile of the Board of Directors

SENATOR DATUK WILLIAM LAU KUNG HUI

A Malaysian, aged 52. He was appointed to the Board of Granite on 1 November 1995 as an Independent Non-Executive

Director. He is also a member of the Audit Committee. He is a law graduate from the London School of Economics and

Political Science of the University of London, United Kingdom with a Bachelor of Laws degree (LL.B (Hons)) in 1973 and a

Master of Law degree (LL.M) in 1974. He was called to the English Bar by the Honourable Society of Lincoln's Inn in July

1975. He has been the Senior Partner of a law firm since 1977. He also holds a number of professional fellowships, including

fellowship of the Chartered Institute of Arbitrators of United Kingdom, Singapore and Australia. He was previously a

Councillor of the Sibu Municipal Council for 18 years and has also sat on the Council of Management of the Malaysian

Institute of Arbitrators, Malaysia. He is also a Supporting Member of the London Maritime Arbitrators Association. He also

sits on the boards of Ekran Berhad and Subur Tiasa Holdings Berhad, both are listed on the Kuala Lumpur Stock Exchange,

and several private limited companies. He was appointed a Senator of the House of Senate in September 1998. He is the

current President of the Chartered Institute of Transport, Malaysia.

Datuk William Lau does not have any family relationship with any Director and/or major shareholder of the Company. He

has no conflict of interest with Granite and has no convictions for any offences within the last ten years.

DATO’ MOHAMMED SHUKOR BIN ABDULLAH

A Malaysian, aged 64. He was appointed to the Board of Granite on 11 May 1999 as an Independent Non-Executive

Director. He is also the Chairman of the Audit Committee. He is a retired General in the Malaysian Armed Forces. He also

sits on the Board of Wembley Industries Holdings Berhad and Wijaya Baru Global Berhad, both are listed on the Kuala

Lumpur Stock Exchange, and several private limited companies.

Dato' Mohammad Shukor does not have any family relationship with any Director and/or major shareholder of the

Company. He has no conflict of interest with Granite and has no convictions for any offences within the last ten years.

TING SIE HUOONG

A Malaysian, aged 31. He was appointed to the Board of Granite on 5 February 1999 as an Executive Director. He subsequently

became a Non-Executive Director with effect from July 2001. He graduated with a diploma of Business in Accounting from

New South Wales Technical and further Education Commission in 1992. Prior to his appointment, Mr Ting acted as the

General Manager of Santubong Kuching Resort, a hotel operated by a subsidiary of Granite. Currently, Mr Ting works as a

Project Manager in Ekran Berhad, overseeing the projects undertaken by Ekran Group in East Malaysia.

Mr Ting is the son of Tan Sri Dato' Paduka (Dr) Ting Pek Khiing, the Executive Chairman and substantial shareholder

of Granite. He has no conflict of interest with Granite except that which relates to his father, Tan Sri Ting as disclosed

above. He has no convictions for any offences within the last ten years.

8

Chairman's Statement

On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Accounts of Granite Industries

Berhad and the Group for the year ended 31 December 2001.

Financial Review

For the year ended 31 December 2001, the Group recorded a loss before taxation of RM31.029 million whilst the loss before

taxation for the Company amounted to RM47.935 million. The Group's loss before taxation and the Company's loss before

taxation were RM107.233 million and RM143.292 million respectively in the previous year.

The Group's loss in the current year is lower because in the previous year, there was a loss of RM39.503 million incurred by

the timber activity, higher provisions for doubtful debts of RM79.166 million and a loss on disposal of timber rights of

RM14.685 million.

The lower Company's loss in the current year is mainly due to lower provision for diminution in value of investments in

subsidiaries of RM45.234 million as compared with the previous year's provision of RM134.000 million.

Operational Review

For the year ended 31 December 2001, the hospitality business generated a turnover of RM32.262 million, a decline of

RM2.951 million or 8.4% over the previous year’s turnover of RM35.213 million.

2001 was a tough year for the tourism and the hospitality business. Starting the second quarter of 2001, many countries

including Malaysia suffered the negative impact of the declining US economy. This is further aggravated by the September

11 crisis in New York and the subsequent military actions by the U.S.A. and its coalition forces on Afghanistan. All these

events had badly affected the tourism and the hospitality business.

Corporate Development

Proposed Acquisitions of Bayou Bay Development Sdn Bhd, Tebrau Bay Sdn Bhd and Pang Hock Constructions Sdn Bhd

Last year it was reported that the Company had entered into two Sale and Purchase Agreements on 22 February 2001 to

acquire the entire equity interests in Bayou Bay Development Sdn Bhd ("BBDSB") and Tebrau Bay Sdn Bhd ("TBSB") for a

total purchase consideration of RM546,886,000 ("Proposed Acquisitions of BBDSB and TBSB") and the entire equity interest

in Pang Hock Constructions Sdn Bhd ("PHCSB") for a purchase consideration of RM84,530,000 ("Proposed Acquisition of

PHSB").

(The Proposed Acquisitions of BBDSB and TBSB and the Proposed Acquisition of PHCSB are collectively referred to as the

"Proposed Acquisitions")

9

Chairman's Statementcontinue

In addition, the Company also proposed to undertake the following:-

a] In connection with the Proposed Acquisitions of BBDSB and TBSB, the Company proposed to simultaneously dispose of

four wholly-owned subsidiaries, namely Mayshur Mutiara Sdn Bhd, Home and Hotel Holding Sdn Bhd, Accruvest Hotel

Management Sdn Bhd and Vital Orient Sdn Bhd as part payment in kind towards the Proposed Acquisitions of BBDSB

and TBSB ("Proposed Disposal of Hotel Companies").

b] Proposed waiver to the vendors of BBDSB and TBSB from the obligation to extend a mandatory take-over offer for the

remaining Granite shares not already held by them, following the Proposed Acquisitions ("Proposed Waiver").

c] Upon completion of the Proposed Acquisitions and the Proposed Disposal of Hotel Companies, one of the vendors of

BBDSB and TBSB shall undertake a proposed restricted offer for sale of rights to allotment of 111,500,000 new Granite

shares to the existing shareholders of the Company on a renounceable basis of one new Granite share for every two

existing Granite shares held ("Proposed ROS").

d] To write-off the entire accumulated losses of the Group as at 31 December 2000 against the Group’s share premium

account.

The Securities Commission ("SC") had, vide its letter dated 4 April 2002, given its approval for the above proposals except

that it had revised the purchase consideration for the Proposed Acquisitions of BBDSB and TBSB to RM453,179,000 to be

satisfied via the issuance of 361,684,286 new Granite shares at an issue price of RM0.70 each and the remaining RM200,000,000

by payment in kind via the Proposed Disposal of Hotel Companies.

The Foreign Investment Committee ("FIC") had also given its approval for the Proposed Acquisitions, the Proposed Disposal

of Hotel Companies and the Proposed ROS on 12 September 2001.

The SC had agreed to consider the application by the vendors of BBDSB and TBSB for the Proposed Waiver subject to the

conditions stated in its letter dated 4 April 2002, amongst which, approval to be obtained from shareholders of Granite by

poll at an Extraordinary General Meeting for the Proposed Waiver and competent independent advice is to be provided to

the shareholders of Granite.

The above proposals are now subject to the approval of the shareholders of Granite and an Extraordinary General Meeting

of the Company will be convened to table the proposals for the shareholders’ consideration.

Pursuant to the Proposed Acquisitions, Granite is now on course to becoming a property development cum construction

group. The contributions from the Proposed Acquisitions are expected to generate a stream of earnings to the Group in the

immediate and long term.

Proposed Disposals of Diamond League Sdn Bhd, Granite Hotels & Resorts Sdn Bhd and Kensen (China) Ltd

On 26 April 2002, the Company entered into a Deed of Sale cum Trust Deed with MDSB Sdn Bhd for the disposal of the

entire equity interests in Diamond League Sdn Bhd ("Proposed DLSB Disposal"), Granite Hotels & Resorts Sdn Bhd

("GHRSB") and Kensen (China) Limited ("KCL") for a cash consideration of RM50,000,000 (collectively the "Proposed

Disposals").

As part of the Proposed DLSB Disposal, Granite shall assign certain of its assets and liabilities with value totalling RM6,527,231

to DLSB ("Proposed Assignment").

10

Chairman's Statementcontinue

The Proposed Disposals and Proposed Assignment therefore represent an opportunity for the Company to further divest

(after the Proposed Disposal of Hotel Companies) its existing non complimentary assets/investments to the new property

development cum construction business and provide the funding to part finance the Proposed Acquisition of PHCSB, and

for working capital purposes for the new business.

The Proposed Disposals and Proposed Assignment are subject to the approvals of the FIC and the shareholders of Granite.

Proposed Capitalisation

On 26 April 2002, the Company via its subsidiary, Langkawi Airport Hotel Sdn Bhd ("LAHSB") entered into an Agreement

with Ekran Berhad ("Ekran") for the proposed capitalisation of a sum of RM4,999,998 from the amount owing by LAHSB to

Ekran into 4,999,998 new ordinary shares of RM1.00 each in LAHSB ("Proposed Capitalisation").

The Proposed Capitalisation will serve as part payment towards debt owing by LAHSB to Ekran. As at 31 March 2002,

LAHSB owed an aggregate debt sum of RM83,601,308 to Ekran and/or its subsidiaries. LAHSB is currently unable to repay

the debt which mainly arose from the cost of construction of Helang Convention Hotel which is owned by LAHSB. The

Proposed Capitalisation would enable the Group to relinquish the liabilities of LAHSB, as upon completion of Proposed

Capitalisation, LAHSB would become a 99.99% subsidiary of Ekran.

The Proposed Capitalisation is subject to the approval of the shareholders of Granite.

Prospects

Upon completion of the Proposed Acquisitions, the Company will be involved in construction and property development

with properties mainly located in Johor. The landbanks of BBDSB and TBSB which have been approved for a proposed

mixed development called the "Lembangan Tebrau Plentong Project" ("the Project") are situated within prime location and

in close proximity to other properties which are residential and commercial in nature. The Project forms part of the

Lembangan Tebrau Plentong Master Plan Development encompassing approximately 2,431.80 acres, undertaken by the

Johor State Government. It is surrounded by an integrated road system linking the various road arteries and major transportation

networks. In addition, the Proposed Acquisition of PHCSB would offer a readily available pool of skilled workforce as well as

other facilities to support and carry out development works under the Project.

The Proposed Acquisitions therefore, are expected to contribute positively to Granite’s earnings and asset base in the long

term. It will enable the Group to have immediate access to landbank for future property development and investment.

Acknowledgements

I conclude by taking the opportunity to express my thanks and appreciation to my fellow members of the Board for their

guidance and contribution throughout the year. The commitment of the management and staff and continued support of

our business associates are also noted with thanks.

En. Sulaiman bin Yeop Mat Isa resigned as Director of the Company on 27 June 2001. On behalf of the Board, I would like to

place on record our thanks to En. Sulaiman for his service.

TAN SRI DATO’ PADUKA (DR) TING PEK KHIING

Executive Chairman

20 May 2002

11

Report from the Audit Committee

Members


Chairman






Terms of Reference

Composition

The Audit Committee shall consists of at least three (3) members to be appointed by the Board from amongst its members.

The majority of the members of the Audit Committee shall be Independent Non-Executive Directors.

At least one member of the Committee shall be a member of the Malaysian Institute of Accountants (MIA) or if he is not a

member of MIA, he must have at least 3 years working experience, and either must have passed the examinations specified in

Part I of the First Schedule of the Accountants Act, 1967 or a member of one of the associations of accountants specified in

Part II of the First Schedule of the Accountants Act, 1967. The Chairman of the Audit Committee shall be elected from

amongst the Committee Members and he shall be an Independent Director.

In the event of any vacancy in the Audit Committee resulting in the number of the members being reduced to below three,

the Company must fill the vacancy within three (3) months.

Meetings

The Audit Committee shall meet at least three (3) times a year although additional meetings may be called at any time as the

Committee deems necessary. The quorum for each meeting of the Audit Committee shall be two (2) members who are

Independent Non-Executive Directors.

The Committee may require the members of management, the internal auditor and representatives of the external auditors

to attend any of its meetings as it determines.

The Company Secretary shall be the Secretary to the Audit Committee.

Authority

The Audit Committee was appointed under Chapter 15, Part C, paragraph 15.10 of the Kuala Lumpur Stock Exchange

Listing Requirements. The Committee is given the authority to investigate any activity of the Company and its subsidiaries

and all employees shall be directed to cooperate as requested by members of the Committee.

Duties and Responsibilities

The Audit Committee shall assist the Board of Directors in fulfilling its fiduciary responsibilities as to accounting policies

and reporting practices of the Company and its subsidiaries and the sufficiency of auditing relating thereto.

12

Report from the Audit Committeecontinue

Duties and Responsibilities (cont'd)

The specific duties of the Audit Committee are as follows:-

1 ]

2 ]

3 ]

4 ]

5 ]

6 ]

7 ]

8 ]

9 ]

10]

Attendance at Meetings

During the financial year ended 31 December 2001, the Audit Committee held a total of five (5) meetings. Details of

attendance of the members of the Committee are as follows:-

Name of Committee Member



Mr Peter Ling Ee Kong*

Tan Sri Dato' Paduka (Dr) Ting Pek Khiing#

* Appointed as member of the Audit Committee on 29 March 2002

# Resigned as member of the Audit Committee on 29 March 2002

Activities

A summary of the activities performed by the Audit Committee during the financial year ended 31 December 2001 is as

follows:-

1 ]

2 ]

3 ]

4 ]

Internal Audit

The Company had out-sourced the internal audit function to an accounting firm which reports to the Audit Committee.

The firm would carry out internal audit review of the major operating units of the Group on a rotational basis to assess the

adequacy of internal controls as well as identify recommendations to strengthen the accounting and business control system

so as to foster a stronger management control environment.

To review the accounting policies adopted, any changes in accounting principles or practices and the level of prudence

applied in areas requiring judgement.

To review the external audit report on the financial statements.

To review with the external auditors, the overall scope of the external audit and discuss the results of their examination

and their evaluation of the internal control system.

To review the scope and results of the internal audit procedures.

To review the financial statements with management and the external auditors prior to them being approved by the full

Board.

To review interim financial information and press releases of financial content.

To review any significant transactions which are not a normal part of the Company's business.

To review any significant related party transactions that may arise within the Company or Group.

To recommend to the Board of Directors the appointment or termination of the external auditors.

Such other responsibilities as may agreed to between the Audit Committee and the Board of Directors.

No. of Meetings Atttended

5/5

5/5

-

3/5

Reviewed the Quarterly Results and Year End Audited Accounts of the Company with the external auditors prior to the

Board's approval of the accounts.

Ensured compliance with approved accounting standards in the preparation of the financial statements.

Ensured timely disclosure of the Quarterly Results and Year End Audited Accounts of the Company to the Kuala

Lumpur Stock Exchange ("KLSE").

Ensured that the transactions entered into by the Company and the Group are in compliance with requirements of the

KLSE, Securities Commission and other regulatory bodies.

13

Statement on Corporate Governance

The Board of Directors is accountable to the Company's shareholders for good corporate governance. The Board is aware

of the principles and best practices as set out in the Malaysian Code on Corporate Governance and have taken steps to

progressively implement them to promote good corporate governance within the Group.

The Board

Composition and Balance

The Board presently has six (6) members comprising an Executive Director, three (3) Non-Executive Directors and two (2)

Independent Non-Executive Directors. A brief description of each director is presented in the Profile of Directors. Collectively,

the Directors bring a balance of skills and experience appropriate to the business. The Executive Chairman, with the support

of other members of the Board and assisted by the management staff, has primary responsibilities for managing the Group’s

day to day operations. The Board also delegates certain of its responsibilities to the Audit Committee with clearly defined

terms of reference.

Supply of Information and Board Meetings

In order to discharge their duties, the Directors are provided with the agenda and a full set of Board papers prior to each

Board Meeting and are free to seek any further information they consider necessary.

During the financial year ended 31 December 2001, four (4) Board of Directors’ Meetings were held and details of the

Directors’ attendance are disclosed in page 3 herein. All Directors have access to the advice of the Company Secretary and

independent advisers where necessary.

Appointments to the Board and Re-election

The appointment of any additional Director is made as and when it is deemed necessary by the existing Board with due

consideration given to the mix of expertise and experience required for a balanced and effective Board. The Board itself

functions as the Nominating Committee.

In accordance with Articles 100 & 101 of the Articles of Association of the Company, at least one third of the Directors shall

retire by rotation at each Annual General Meeting and are eligible to offer themselves for re-election at the Annual General

Meeting. Directors who are appointed by the Board to fill a casual vacancy are subject to election by shareholders at the next

Annual General Meeting following their appointment. All directors shall also retire from office once at least in each three

years.

Director’s Training

All current directors have attended the Mandatory Accreditation Program organised by the Research Institute of Investment

Analysis Malaysia as required by the Kuala Lumpur Stock Exchange Listing Requirements.

14

Director's Remuneration

For the year under review, the aggregate of remuneration of Directors proposed/paid is as follows:-

Directors' Fees

Salaries

Allowances

Total

The total remuneration received by each of the two executive directors mentioned above amounted to RM85,845 and

RM72,405 respectively.

*During the period from 1 January 2001 to 30 June 2001, there were two salaried executive directors on the Board. With effect from 1 July 2001,

one of the executive directors had resigned while the other remained on the Board as non-executive director.

Communication with Shareholders and Investors

The Company recognises the importance of keeping shareholders and investors informed of all major developments

affecting the Company. The Company's annual reports contain comprehensive information pertaining to the Group, while

various disclosures on quarterly and annual results provide the shareholders and investors with financial information.

The principal forum for dialogue with shareholders is the Annual General Meeting, during which the shareholders are given

the opportunity to participate and pose questions to the Board regarding operational and financial information. Members

of the Board and the external auditors are available to respond to shareholders’ queries during the Annual General Meeting.

Accountability and Audit

Financial Reporting

In preparing the annual financial statements and quarterly announcements to shareholders, the Directors are responsible in

ensuring that the financial statements are prepared in accordance with the provisions of the Companies Act, 1965 and

applicable approved accounting standards in Malaysia to give a true and fair view of the state of affairs of the Group. Before

releasing to the KLSE, the financial results were reviewed by the Audit Committee and approved by the Board of Directors.

Internal Control

The Board is responsible for maintaining a sound system of internal control to safeguard shareholders' investment and the

Group's assets. The internal control system involves the various processes and procedures at appropriate levels of the

business. This is to ensure that all transactions are authorised and proper risk management and controls are in place to

safeguard the Company against material loss or fraud. In view of the continually evolving business environment that the

Group operates in, the internal control system can only provide reasonable and not absolute assurance against such loss or

fraud.

Executive Directors*

RM

10,000

148,250

-

158,250

Non-Executive Directors

RM

45,000

-

130,000

175,000

Statement on Corporate Governancecontinue

15

Statement on Corporate Governancecontinue

Internal Control (cont'd)

The hotel operations of the Group are guided by the following internal control measures:-

1] Policy and Procedures Manuals: Accounting Manual, Human Resources Manual and Operations Manual.

2] Yearly Business Plan and Operating Budget approved by the Board.

3] Monthly reports and review of the business performance to the Board.

4] Regular meetings by Management to review the business performance and the business plans and take proactive actions

to rectify the weaknesses.

Regular Board meetings were held to consider matters reserved for Board's decisions. The Audit Committee through its

quarterly meetings in reviewing the financial results of the Group would deliberate on issues raised by the external auditors

and highlight issues of concern to the Board for appropriate course of action. The Management is accountable to the Board

for compliance with applicable laws, regulations, rules, directives and guidelines. The Board reviews the state of internal

controls effected by the Management on an ongoing basis.

The Company had out-sourced the internal audit function to an accounting firm which reports to the Audit Committee. The

firm would carry out internal audit review of the major operating units of the Group on a rotational basis to assess the

adequacy of internal controls as well as identify recommendations to strengthen the accounting and business control system

so as to foster a stronger management control environment.

Relationship with Auditors

The Company has established transparent and appropriate relationships with the Company's auditors through the Audit

Committee. The external auditors, Arthur Andersen & Co has continued to report to the members of the Company their

findings which are included as part of the Company's financial reports with respect to each year's audit on the statutory

financial statements. From time to time, the auditors highlight to the Audit Committee and the Board of Directors on

matters that requires the Board's attention.

16

Additional Disclosures

Material Contracts Involving Directors and Substantial Shareholders

Save for the following, the Company has not entered into any other material contracts involving any of its Directors and

substantial shareholders’ interests:-

1] On 22 February 2001, the Company entered into a Sale and Purchase Agreement with KPRJ AstakaPuri Sdn Bhd

("KAPSB") and Asset Nusantara Sdn Bhd ("ANSB") for the proposed acquisitions of 100% equity interest in Bayou Bay

Development Sdn Bhd and Tebrau Bay Sdn Bhd respectively ("Proposed Acquisitions of BBDSB and TBSB").

In connection with the Proposed Acquisitions of BBDSB and TBSB, the Company proposed, to simultaneously undertake

disposals of four companies ("Consideration Companies") as mentioned in the Chairman’s Statement as part payment in

kind to ANSB towards the Proposed Acquisitions of BBDSB and TBSB ("Proposed Disposal of Hotel Companies").

On 30 March 2001, Ekran Berhad ("Ekran") announced that it had entered into a conditional sale and purchase

agreement with ANSB, whereby, upon completion of the Proposed Disposal of Hotel Companies, ANSB shall dispose of

the Consideration Companies to Ekran ("Proposed Sale by ANSB").

2] On 26 April 2002, the Company via its subsidiary, Langkawi Airport Hotel Sdn Bhd ("LAHSB") entered into an Agreement

with Ekran for the proposed capitalisation of a sum of RM4,999,998 from the amount owing by LAHSB to Ekran into

4,999,998 new ordinary shares of RM1.00 each in LAHSB ("Proposed Capitalisation").

The Proposed Capitalisation will serve as part payment towards debt owing by LAHSB to Ekran. As at 31 March

2002, LAHSB owed an aggregate debt sum of RM83,601,308 to Ekran and/or its subsidiaries. LAHSB is currently unable

to repay the debt which mainly arose from the cost of construction of Helang Convention Hotel which is owned by

LAHSB.

The Proposed Disposal of Hotel Companies and Proposed Capitalisation are deemed related party transactions by virtue of

the following:-

a] Tan Sri Dato’ Paduka (Dr) Ting Pek Khiing ("Tan Sri Ting"), is a director and substantial shareholder of Granite and

Ekran. He is the beneficiary with regards to the Proposed Sale by ANSB.

b] Mr Ting Sie Huoong, a Director of Granite, is the son of Tan Sri Ting.

c] Senator Datuk William Lau Kung Hui and Dato’ Stanley Isaacs are Directors of Granite and Ekran.

d] Senator Datuk William Lau Kung Hui is a shareholder of Granite whilst Dato’ Stanley Isaacs and Mr Ting Sie Huoong

are shareholders of Ekran.

Tan Sri Ting, Senator Datuk William Lau Kung Hui, Dato’ Stanley Isaacs and Mr Ting Sie Huoong have abstained and will

continue to abstain from participating in all deliberations on the Proposed Disposal of Hotel Companies and Proposed

Capitalisation at the Board Meetings of Granite. Tan Sri Ting, Senator Datuk William Lau Kung Hui and Mr Ting Sie

Huoong will also abstain from voting in respect of their direct and/or indirect interests in Granite at the Extraordinary

General Meeting(s) to consider the resolutions on the Proposed Disposal of Hotel Companies and Proposed Capitalisation.

Additional Disclosurescontinue

Non Audit Fees

The non-audit fees paid to external auditors for the financial year ended 31 December 2001 are disclosed in Note 16 of the

financial statements.

Directors’ Responsibility Statement

In preparing the annual financial statements of the Company and its group ("the Group") for the financial year ended 31

December 2001, the Board of Directors is collectively responsible in ensuring that the annual financial statements are drawn

up in accordance with the requirements of the applicable approved accounting standards in Malaysia and the provisions of

the Companies Act, 1965.

The Board is satisfied that the financial reporting of the Group presents a true and fair view of the current position and

prospects of the Group.

17

2020 2323 2323 2424 2626 2727 28283131 3232 3333 3434

2929 3030

Directors' ReportDirectors' Report

Statement by Directors

Statutory Declaration

Auditors' Report

Consolidated Balance Sheet

Consolidated Income Statement

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Balance Sheet

Cash Flow Statement

Notes to the Financial Statements

Statement of Changes in Equity

Income Statement

FinancialStatementsFinancialStatements

20

The directors hereby submit their report together with the audited financial statements of the Group and the Company for

the financial year ended 31 December, 2001.

Principal Activities

The principal activity of the Company is investment holding.

The principal activities of the subsidiaries are described in Note 4 to the financial statements.

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

Results

Net loss for the year

Reserves and Provisions

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

consolidated statement of changes in equity.

Bad and Doubtful Debts

Before the income statements and balance sheets were made out, the directors took reasonable steps to ascertain that action

had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied

themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts.

At the date of this report, the directors are not aware of any circumstances that would render the amounts written off as bad

debts or provided for as doubtful debts in the financial statements of the Group and the Company inadequate to any

substantial extent.

Current Assets

Before the income statements and balance sheets were made out, the directors took reasonable steps to ensure that any

current assets which were unlikely to be realised in the ordinary course of business including their values as shown in the

accounting records of the Group and the Company have been written down to an amount which they might be expected so

to realise.

At the date of this report, the directors are not aware of any circumstances which would render the values attributed to the

current assets in the financial statements of the Group and the Company misleading.

Valuation Methods

At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the

existing method of valuation of assets or liabilities of the Group and the Company misleading or inappropriate.

Contigent and Other Liabilities

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

a] any charge on the assets of the Group or the Company which has arisen since the end of the financial year which secures

the liabilities of any other person; or

b] any contingent liability of the Group or the Company which has arisen since the end of the financial year.

Group

RM

31,568,743

Company

RM

47,934,974

Directors' Report

21

As at 31 December, 2001, the net current liabilities of the Group and the Company exceeded their current assets by

RM124,767,278 and RM36,529,839 respectively. In the opinion of the directors, the Group and the Company will not be

able to meet their obligations when they fall due unless the implementation of the Group’s proposed corporate exercise and

the disposal of a subsidiary that owns a hotel property to its contractor as disclosed in Notes 11, 21 and 22 in the financial

statements are successful.

Changes of Circumstances

At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the

financial statements of the Group or the Company which would render any amount stated in the financial statements

misleading.

Items of an Unusual Nature

The results of the operations of the Group and the Company during the financial year were not, in the opinion of the

directors, substantially affected by any item, transaction or event of a material and unusual nature.

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or

event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the

operations of the Group or the Company for the financial year in which this report is made.

Significant Events

The significant events during the financial year is as disclosed in Note 21 to the financial statements.

Subsequent Events

The subsequent events are as disclosed in Note 22 to the financial statements.

Directors

The directors who served since the date of the last report are:


Peter Ling Ee Kong

Dato’ Stanley Isaacs



Ting Sie Huoong

Sulaiman bin Yeop Mat Isa (resigned on 27 June, 2001)

Directors' Benefits

During and at the end of the financial year, no arrangements subsisted to which the Company or its subsidiaries is a party

with the object of enabling directors of the Company to acquire benefits by means of the acquisition of shares in or

debentures of the Company or any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than

benefits included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note

15 to the financial statements or the fixed salary of a full time employee of the Company) by reason of a contract made by

the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which

he has a substantial financial interest except for those benefits which may have arisen from transactions entered into in the

ordinary course of business between the Company or its related corporations and companies in which a director has a

substantial interest as shown in Note 23 to the financial statements.

Directors' Reportcontinue

22

Directors' Interest

According to the register of directors' shareholdings, the interests of directors in office at the end of the financial year in

shares in the Company and its related corporations during the financial year were as follows:

The Company

Direct



Ting Sie Huoong

Indirect


Ting Sie Huoong

By virtue of their interests in the shares in the Company, Tan Sri Dato' Paduka (Dr) Ting Pek Khiing and Ting Sie Huoong

are also deemed interested in the shares in the subsidiaries to the extent the 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.

Auditors

Arthur Andersen & Co. retire and have indicated their willingness to accept re-appointment.

Kuala Lumpur

27 April, 2002

1 Jan 2001

55,889,979

100,000

100,000

15,100,000

70,889,979

Bought

-

-

-

-

-

Sold

-

-

-

-

-

31 Dec 2001

55,889,979

100,000

100,000

15,100,000

70,889,979

Signed on behalf of the Board in accordance

with a resolution of the directors

TAN SRI DATO' PADUKA (DR) TING PEK KHIING

PETER LING EE KONG

Number of Ordinary Shares of 50 sen Each

Directors' Reportcontinue

23

We, TAN SRI DATO' PADUKA (DR) TING PEK KHIING and PETER LING EE KONG, being two of the directors of

GRANITE INDUSTRIES BERHAD, do hereby state that, in the opinion of the directors, the financial statements set out on

pages 26 to 50 give a true and fair view of the state of affairs of the Group and the Company as at 31 December, 2001 and of

their results and their cash flows for the year then ended and have been properly drawn up in accordance with the provisions

of the Companies Act, 1965 and applicable approved accounting standards in Malaysia.

Kuala Lumpur

Dated: 27 April, 2002

Signed on behalf of the Board in accordance

with a resolution of the directors


PETER LING EE KONG

Statutory Declaration

I, TAN SRI DATO' PADUKA (DR) TING PEK KHIING, the director primarily responsible for the financial management of

GRANITE INDUSTRIES BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 26 to 50

are, to the best of my knowledge and belief, correct, and I make this solemn declaration conscientiously believing the same

to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed


at Kuching in Sarawak on 27 April, 2002

Before me:

LO FONG MENG

Q 045

Commissioner for Oaths

Statement by Directors

24

To the Shareholders of

GRANITE INDUSTRIES BERHAD

We have audited the financial statements set out on pages 26 to 50. These financial statements are the responsibility of the

Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with 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 financial statement presentation. We believe that our audit provides a reasonable basis for our

opinion.

In our opinion:

1 ] the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and

applicable approved accounting standards in Malaysia and give a true and fair view of:

(i) the state of affairs of the Group and the Company as at 31 December, 2001 and of their results and their cash

flows 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

2 ] the accounting and other records and the registers required by the Act to be kept by the Company and 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' report of the subsidiary of which we have not acted as

auditors, as indicated in Note 4 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 in respect of

subsidiaries incorporated in Malaysia, did not include any adverse comment made under subsection (3) of Section 174 of the

Act.

Without qualifying our report, we draw attention to the financial statements which have been prepared on the assumption

that the Group and the Company will continue as a going concern. As at 31 December, 2001, the Group and the Company

have net current liabilities of RM124,767,278 and RM36,529,839 respectively. The ability of the Group and the Company to

continue as going concerns are dependent on the successful implementation of the corporate exercise of the Group and the

disposal of a subsidiary that owns a hotel property to repay the companies in which a director has substantial financial as

disclosed in Notes 11, 21 and 22 to the financial statements.

Auditors' Report

25

Abraham Verghese a/l T.V. Abraham

No. 1664/10/02(J)

Partner of the Firm

The financial statements of the Group and the Company do not include any adjustments relating to the amounts and

classification of assets and liabilities that might be necessary should the Group and Company be unable to continue as a

going concern.

Arthur Andersen & Co.

No. AF 0103

Chartered Accountants

27 April, 2002

Auditors' Reportcontinue

26

31 December 2001

Non-current Assets

Property, plant and equipment

Other investments

Current Assets

Inventories

Trade receivables

Other receivables

Cash and bank balances

Current Liabilities

Trade payables

Other payables

Taxation

Net Current Liabilities

Financed By

Share capital

Reserves

Shareholders' equity

The accompanying notes are an integral part of this balance sheet.

Note

3

5

7

8

9

10

11

12

2001

RM

310,893,902

4,253,500

315,147,402

273,029

3,829,194

20,654,944

4,323,777

29,080,944

7,475,287

127,524,321

18,848,614

153,848,222

(124,767,278)

190,380,124

111,500,000

78,880,124

190,380,124

2000

RM

337,455,958

4,147,250

341,603,208

287,881

5,275,929

21,157,742

4,948,096

31,669,648

7,729,485

125,028,877

18,563,055

151,321,417

(119,651,769)

221,951,439

111,500,000

110,451,439

221,951,439

Consolidated Balance Sheet

27

For the year ended 31 December 2001

Revenue

Other operating income

Purchase of finished goods

Changes in inventories

Staff costs

Depreciation

Other operating expenses

Loss from operations

Finance cost, net

Loss before taxation

Taxation


Loss per share (sen)

The accompanying notes are an integral part of this statement.

Note

13

14

15

16

17

18

19

2001

RM

35,262,159

1,041,914

(3,317,344)

(14,852)

(10,021,690)

(12,776,935)

(39,478,308)

(29,305,056)

(1,723,743)

(31,028,799)

(539,944)

(31,568,743)

14.2

2000

RM

56,561,188

872,932

(2,897,085)

(4,499)

(10,211,153)

(12,480,748)

(137,843,090)

(106,002,455)

(1,230,358)

(107,232,813)

(2,932,649)

(110,165,462)

49.4

Consolidated Income Statement

28


At 31 December 1999 as previously stated

Prior year adjustment (Note 20)

At 1 January 2000 as restated


Transfer to replacement reserve

Capital replacement,

substitutions and additions

Currency translation loss

As at 31 December 2000

At 1 January 2001


Transfer from replacement reserve

Currency translation loss

At 31 December 2001


Distributable

Replacement

reserve

RM

1,326,013

-

1,326,013

-

995,395

(1,246,542)

-

1,074,866

1,074,866

-

(1,074,866)

-

-

Accumulated

losses

RM

(206,921,660)

(11,031,742)

(217,953,402)

(110,165,462)

(995,395)

-

-

(329,114,259)

(329,114,259)

(31,568,743)

1,074,866

-

(359,608,136)

Total

RM

344,685,725

(11,031,742)

333,653,983

(110,165,462)

-

(1,246,542)

(290,540)

221,951,439

221,951,439

(31,568,743)

-

(2,572)

190,380,124

Exchange

fluctuation

reserve

RM

-

-

-

-

-

-

(290,540)

(290,540)

(290,540)

-

-

(2,572)

(293,112)

Share

premium

RM

438,781,372

-

438,781,372

-

-

-

-

438,781,372

438,781,372

-

-

-

438,781,372

Share

capital

RM

111,500,000

-

111,500,000

-

-

-

-

111,500,000

111,500,000

-

-

-

111,500,000

Non- distributable

Consolidated Statement of Changes In Equity

29


Cash Flows From Operating Activities


Adjustments for:

Loss on disposal of timber rights

Depreciation

Property, plant and equipment written off

Interest expense

Amortisation of timber rights

Pre-operating expenses written off

Provision for doubtful debts, net

Dividend income

Interest income

Write back of provision for diminution in value of investment

Provision for impairment in value of property, plant and equipment

Operating profit before working capital changes

Increase in receivables

Decrease in inventories

Increase in payables

Cash generated from operations

Taxes paid

Net cash generated from operating activities

Cash Flows From Investing Activities

Capital replacement, substitutions and additions

Interest received

Dividend received

Purchase of property, plant and equipment

Net cash used in investing activities

Net (decrease) /increase in cash and cash equivalents

Effects of exchange rate changes

Cash and cash equivalents at beginning of the year

Cash and cash equivalents at the end of the year

Cash and cash equivalents comprise:

Cash on hand and at banks

Deposits with licensed banks


2001

RM

(31,028,799)

-

12,776,935

-

1,728,989

-

-

8,813,128

-

(5,246)

(106,250)

14,628,406

6,807,163

(6,910,726)

14,852

559,388

470,677

(254,385)

216,292

-

5,246

-

(843,285)

(838,039)

(621,747)

(2,572)

4,948,096

4,323,777

1,353,525

2,970,252

4,323,777

2000

RM

(107,232,813)

14,685,935

12,480,748

2,067,363

1,246,437

1,763,692

22,754

79,166,684

(42,500)

(16,079)

-

3,263,193

7,405,414

(4,298,102)

4,499

4,543,897

7,655,708

(3,335,749)

4,319,959

(1,246,542)

16,079

30,600

(185,553)

(1,385,416)

2,934,543

(290,540)

2,304,093

4,948,096

2,271,096

2,677,000

4,948,096

Consolidated Cash Flow Statement

30

31 December 2001

Non-current Assets

Property, plant and equipment

Subsidiaries

Other investments

Current Assets

Other receivables

Cash and bank balances

Current Liabilities

Trade payables

Other payables

Net Current Liabilities

Financed By

Share capital

Reserves

Shareholders' equity

The accompanying notes are an integral part of this balance sheet.

Note

3

4

5

9

10

11

12

2001

RM

2,862,955

198,021,633

4,253,500

205,138,088

33,550

111,357

144,907

552,239

36,122,507

36,674,746

(36,529,839)

168,608,249

111,500,000

57,108,249

168,608,249

2000

RM

2,976,818

243,256,013

4,147,250

250,380,081

43,088

943,611

986,699

552,239

34,271,318

34,823,557

(33,836,858)

216,543,223

111,500,000

105,043,223

216,543,223

Balance Sheet

31


Revenue

Other operating income

Staff costs

Depreciation

Other operating expenses

Loss from operations

Finance cost, net


Taxation



Note

13

14

15

16

17

18

2001

RM

-

165,034

(342,863)

(118,862)

(47,617,034)

(47,913,725)

(21,249)

(47,934,974)

-

(47,934,974)

2000

RM

42,500

-

(580,792)

(171,160)

(141,336,076)

(142,045,528)

(1,246,437)

(143,291,965)

(46,749)

(143,338,714)

Income Statement

32


At 1 January 2000


At 31 December 2000


At 31 December 2001

The accompanying notes are an integral part of this statement

Share premium

RM

438,781,372

-

438,781,372

-

438,781,372

Accumulated

losses

RM

(190,399,435)

(143,338,714)

(333,738,149)

(47,934,974)

(381,673,123)

Share capital

RM

111,500,000

-

111,500,000

-

111,500,000

Total

RM

359,881,937

(143,338,714)

216,543,223

(47,934,974)

168,608,249

Non-distributable

Statement of Changes In Equity

33


Cash Flows From Operating Activities


Adjustments for:

Depreciation


Interest expense

Provision for doubtful debts, net

Provision for diminution in value of investments

Provision for impairment in value of leasehold land

Dividend income

Investment written off

Write back of provision for diminution in value of investments

Operating loss before working capital changes

(Increase)/decrease in receivables

Increase/(decrease) in payables

Cash (used in)/generated from operations

Taxes paid

Net cash (used in)/generated from operating activities

Cash Flows From Investing Activities

Purchase of property, plant and equipment

Dividend received

Net cash (used in)/generated from investing activity

Net (decrease) / increase in cash and cash equivalents

Cash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year

Cash and cash equivalents comprise:


Deposit with a licensed bank

The accompanying notes are an integral part of this statement

2001

RM

(47,934,974)

118,862

-

21,249

346,234

45,234,380

-

-

-

(106,250)

(2,320,499)

(336,696)

1,829,940

(827,255)

-

(827,255)

(4,999)

-

(4,999)

(832,254)

943,611

111,357

14,357

97,000

111,357

2000

RM

(143,291,965)

171,160

2,067,363

1,246,437

2,219,936

134,000,000

3,263,193

(42,500)

51

-

(366,325)

11,057,312

(9,920,564)

770,423

(34,849)

735,574

-

30,600

30,600

766,174

177,437

943,611

846,611

97,000

943,611

Cash Flow Statement

34

31 December 2001

1] Principal Activities and General Information

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are described in

Note 4. There have been no significant changes in the nature of these activities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main

Board of the Kuala Lumpur Stock Exchange. The principal place of business of the Company is located at Ground Floor ,

Wisma Ekran, Jalan Parlimen, 50480 Kuala Lumpur.

The number of employees in the Group and in the Company at the end of the financial year were 496 (2000 : 523) and 2

(2000 : 5) respectively.

2] Significant Accounting Policies

a] Basis of Accounting

The financial statements of the Group and the Company have been prepared under the historical cost convention unless

otherwise indicated in the accounting policies below and comply with the provisions of the Companies Act, 1965 and

applicable approved accounting standards in Malaysia.

b] Revenue Recognition

i]

ii]

iii]

iv]

c] Basis of Consolidation

Consolidated financial statements include the financial statements of the Company and all its subsidiaries. Subsidiaries

are those companies in which the Group has power to exercise control over the financial and operating policies so as to

obtain benefits therefrom. Companies acquired or disposed are included in the consolidated financial statements from

the date of acquisition or to the date of disposal. Subsidiaries are consolidated using the acquisition method of accounting.

Intragroup transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidated

financial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costs

cannot be recovered.

The difference between the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired

subsidiary at the date of acquisition is included in the consolidated balance sheet as goodwill or reserve arising on

consolidation and is amortised or credited to income statement over 25 years. Goodwill on consolidation is reviewed at

each balance sheet date and will be written down for impairment where it is considered necessary.

Notes to The Financial Statements

Sales of goods

Revenue relating to sales of goods is recognised net of discounts and returns, when services are rendered or when

transfer of risks and rewards has been completed.

Dividend income

Dividend income is recognised when the shareholder’s right to receive payment is established.

Revenue from hotel operations

The income from rental of hotel rooms, sale of food and beverage and other related income are recognised on accrual

basis.

Rental income

Rental income is recognised on accrual basis.

35

The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group’s share of its

net assets together with any unamortised balance of goodwill and exchange differences which were not previously

recognised in the consolidated income statement.

d] Investments

Investments in subsidiaries and other non-current investments are stated at cost less provision for any permanent

diminution in value. Such provision is made when there is a decline other than temporary in the value of investments and

is recognised as an expense in the period in which the decline occurred. On disposal of an investment, the difference

between net disposal proceeds and its carrying amount is charged or credited to the income statement.

e] Currency Conversion and Translation

Transactions in foreign currencies are converted into Ringgit Malaysia at rates of exchange ruling at the transaction

dates. Monetary assets and liabilities in foreign currencies at the balance sheet date are translated into Ringgit Malaysia at

rates of exchange ruling at that date. All exchange differences are taken to the income statement.

Financial statements of the foreign consolidated subsidiary is translated at year-end exchange rates with respect to the

assets and liabilities, and at exchange rates at the dates of the transactions with respect to the income statement. All

translation differences are taken to reserves.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the

Company and translated at the exchange rate ruling at the date of the transaction.

The principal exchange rate for every unit of foreign currency ruling at balance sheet date used is as follows:

United States Dollar

Hong Kong Dollar

f] Property, Plant and Equipment and Depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Freehold land is not depreciated. Leasehold land is depreciated over the period of the respective lease which ranges from

50 years to 897 years.

Depreciation of other property, plant and equipment is provided 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:

Buildings

Plant, equipment, fittings and motor vehicles

Bedding linen, cutlery and glassware

Bedding, linen, cutlery and glassware were capitalised as base stocks in the financial statements before the financial year

ended 31 December, 2000. In the previous financial year ended 31 December, 2001, the Company changed its accounting

policy to comply with the Malaysian Accounting Standards Board Standard 15 : Property, Plant and Equipment. The

effect of this change in accounting policy has resulted in the increase in accumulated depreciation in respect of prior

years which is disclosed in Note 20.

2001

3.8000

0.4870

2000

3.8000

0.4871

2% - 5%

10% - 25%

20%

Notes to The Financial Statementscontinue

36

The carrying values of property, plant and equipment are reviewed for impairment when there is an indication that the

assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable

amounts.

An impairment loss is charged to the income statement immediately, unless the asset is carried at revalued amount. Any

impairment loss of a revalued asset is treated as a revaluation decrease to the extent of previously recognised revaluation

surplus for the same asset.

Subsequent increase in the recoverable amount of an asset is treated as reversal of the previous impairment loss and is

recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and

depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately,

unless the asset is carried at revalued amount. A reversal of an impairment loss on a revalued asset is credited directly to

revaluation surplus. However, to the extent that an impairment loss on the same revalued asset was previously recognised

as an expense in the income statement, a reversal of that impairment loss is recognised as income in the income

statement.

g] Inventories

Inventories are stated at the lower of cost (determined on the first-in, first-out basis) and net realisable value.

h] Deferred Taxation

Deferred taxation is provided under the liability method for all material timing differences except where there is

reasonable evidence that these timing differences will not reverse.

i] Timber Rights

Timber rights are stated at cost less provision for diminution in value and amortised annually using the following:

~ equally over the tenure of the right of 14.5 years commencing 30 October, 1995; or

~ percentage of the volume of timber extracted compared to the total estimated value of timber available for extraction

whichever is higher over the period of the rights.

j] Pre-Operating Expenses

In previous financial year, the Group changed its accounting policy in order to comply with the Malaysian Accounting

Standards Board Standard 1 : Presentation of Financial Statements to recognise preliminary and pre-operating expenses

in income statements as incurred. Preliminary and pre-operating expenses previously capitalised in prior years were

expensed off to the income statement in the previous financial year.

k] Replacement Reserve

The replacement reserve account was previously maintained for the purpose of making capital replacement, substitutions

and additions to the furnishing and equipment of resorts in accordance with the terms of management agreements

entered into with operation of certain resorts. During the financial year, the amount has been fully transferred to

accumulated losses.

l] Trade and Other Receivables

Trade and other receivables are carried at anticipated realisable values. Bad debts are written off when identified. An

estimate is made for doubtful debts based on review of all outstanding amounts as at the balance sheet date.

m] Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and at banks and deposits at call which have an insignificant risk of

changes in value.


Bedding, linen,

cutlery and

glassware

RM

8,022,260

9,518

8,031,778

7,575,757

223,598

-

7,799,355

232,423

446,503

223,253

Plant, equipment,

fittings and

motor vehicles

RM

55,370,826

741,526

56,112,352

41,748,335

4,575,456

-

46,323,791

9,788,561

13,622,491

4,524,830

Land and building*

RM

378,877,765

92,241

378,970,006

55,490,801

7,977,881

14,628,406

78,097,088

300,872,918

323,386,964

7,732,665

Total

RM

442,270,851

843,285

443,114,136

104,814,893

12,776,935

14,628,406

132,220,234

310,893,902

337,455,958

12,480,748

Buildings

RM

274,822,447

92,241

274,914,688

45,649,156

6,514,655

14,628,406

66,792,217

208,122,471

229,173,291

6,516,282

Long term

leasehold land

RM

102,229,707

-

102,229,707

9,841,645

1,463,226

-

11,304,871

90,924,836

92,388,062

1,216,383

Freehold land

RM

1,825,611

-

1,825,611

-

-

-

-

1,825,611

1,825,611

-

Total

RM

378,877,765

92,241

378,970,006

55,490,801

7,977,881

14,628,406

78,097,088

300,872,918

323,386,964

7,732,665

37

3] Property, plant and equipment

Group

Cost

At 1 January 2001

Additions

At 31 December 2001

Accumulated Depreciation and

Impairment Losses

At 1 January 2001

Charge for the year

Impairment losses

At 31 December 2001

Net Book Value

At 31 December 2001

At 31 December 2000

Depreciation charge for 2000

* Land and Building

Cost

At 1 January 2001

Additions

At 31 December 2001


Impairment Losses

At 1 January 2001

Charge for the year

Impairment losses

At 31 December 2001

Net Book Value

At 31 December 2001

At 31 December 2000



38

Company

Cost

At 1 January 2001

Additions

At 31 December 2001


Impairment Losses

At 1 January 2001

Charge for the year

At 31 December 2001

Net Book Value

At 31 December 2001

At 31 December 2000


a ] Included in property, plant and equipment of the Group and the Company are fully depreciated assets which are still in

use costing RM10,412,319 (2000 : RM10,585,238) and RM219,654 (2000 : Nil) respectively.

b] Included in the long term leasehold land of the Group and the Company is an amount of RM2,855,409 (2000 :

RM2,960,760) of which the legal ownerships have not been transferred to the Company. The directors are in the process

of settling these issues with the relevant parties.

Plant, equipment,

fittings and

motor vehicles

RM

358,734

4,999

363,733

342,706

13,121

355,827

7,906

16,028

40,632

Long term

leasehold land

RM

6,526,386

-

6,526,386

3,565,596

105,741

3,671,337

2,855,049

2,960,790

130,528

Total

RM

6,885,120

4,999

6,890,119

3,908,302

118,862

4,027,164

2,862,955

2,976,818

171,160


39

4 ] Subsidiaries

Unquoted shares at cost

Less : Provision for diminution in value

Details of the subsidiaries are as follows:

Name of company

Kensen (China) Ltd.*

Langkawi Airport Hotel Sdn. Bhd.

Diamond League Sdn. Bhd.

Equatorial Timber Moulding Sdn. Bhd.

Accruvest Hotel Management Sdn. Bhd.

Home and Hotel Holding Sdn. Bhd.

Vital Orient Sdn. Bhd.

Mashyur Mutiara Sdn. Bhd.

Mashyur Mutiara Travel and Tours Sdn. Bhd.

Granite Hotels & Resorts Sdn. Bhd.

* Audited by a firm of auditors other than Arthur Andersen & Co.

Country of

incorporation

Hong Kong

Malaysia

Malaysia

Malaysia

Malaysia

Malaysia

Malaysia

Malaysia

Malaysia

Malaysia

Principal Activities

Dormant

Resort business

Investment holding

Dormant

Investment holding

and rental of property

Resort business

Resort business

Resort business

Dormant

Managing and

marketing of hotels

and resorts

2000

100

100

100

100

100

100

100

100

100

100

2001

100

100

100

100

100

100

100

100

100

100

Equity interest (%)

2001RM

498,959,159

(300,937,526)

198,021,633

2000RM

498,959,159

(255,703,146)

243,256,013

Company


2001RM

-

-

-

-

-

2000RM

2,400

20,354

22,754

(22,754)

-

Group

2001RM

174,999

98,030

273,029

2000RM

218,457

69,424

287,881

Group

2001RM

3,500

8,751,000

-

8,754,500

(4,501,000)

4,253,500

5,070

2000RM

3,500

8,751,000

-

8,754,500

(4,607,250)

4,147,250

4,125

Company2001RM

3,500

8,751,000

22,570,983

31,325,483

(27,071,983)

4,253,500

5,070

2000RM

3,500

8,751,000

22,661,929

31,416,429

(27,269,179)

4,147,250

4,125

Group

40

5 ] Other Investments

At cost

Quoted shares

Unquoted shares

Other investment

Less:

Provision for diminution in value

Total

Market value of quoted shares

Other investment represents the amounts incurred in the supply of machines and provision of various services in respect

of an amusement centre project in Harbin, Heilongjiang Province, the People’s Republic of China under an agreement

dated 15 May, 1993 as varied by a supplemental agreement dated 28 June, 1994. In consideration of the investment as

aforesaid, the Company is entitled to receive an annual management fee equivalent to a certain percentage of the amount

by which revenue of the amusement centre project exceeds the business tax paid or incurred by the project and a service

fee to be mutually agreed for the various services provided. The investment amount is repayable to the Company in 6

equal half yearly instalments commencing from 1 August, 1997. Full provision was made against the investment cost as

the amusement centre in Harbin had been closed down.

6 ] Pre-operating expenses

Preliminary expenses

Pre-operating expenses

Less:

Write off (Note 2(j))

7 ] Inventories

At cost:

Food, beverages and cigarettes

General supplies


41

8] Trade receivables

Trade receivables

Less :

Provision for doubtful debts

Included in trade receivables of the Group is an amount of RM76,640,123 (2000 : RM76,596,030) due from companies

in which a director, Tan Sri Dato’ Paduka (Dr) Ting Pek Khiing, has substantial financial interests in respect of which

provision for doubtful debts of RM76,616,149 (2000 : RM76,572,056) has been made.

9 ] Other receivables

Due from subsidiaries

Director related balances

Amount receivable on cancellation

of a sale and purchase agreement

Proceed receivable from disposal

of timber rights

Others

Less : Provision for doubtful debts

The amounts due from subsidiaries are unsecured, interest free and have no fixed terms of repayment.

The director related balances relate to amounts due from companies in which a director, Tan Sri Dato’ Paduka (Dr) Ting

Pek Khiing, has substantial interest and persons deemed connected to the said director. These amounts have been fully

provided for as doubtful debts.

Amount receivable on cancellation of a sale and purchase agreement relates to the purchase of a leasehold property by

the Company, whereby the vendor failed to complete the transfer of the property. This amount has been fully provided

for as doubtful debts.

10 ] Cash and bank balances


Deposits with licensed banks

2001RM

-

-

-

2000RM

58,732

(58,732)

-

Company2001RM

84,896,858

(81,067,664)

3,829,194

2000RM

85,645,052

(80,369,123)

5,275,929

Group

2001RM

20,661,934

1,804,950

5,044,821

-

383,273

(27,861,428)

33,550

2000RM

20,653,487

1,750,256

5,044,821

-

50,986

(27,456,462)

43,088

Company2001RM

-

3,966,220

5,044,821

20,000,000

2,039,587

(10,395,684)

20,654,944

2000RM

-

4,412,570

5,044,821

20,000,000

1,423,619

(9,723,268)

21,157,742

Group

2001RM

14,357

97,000

111,357

2000RM

846,611

97,000

943,611

Company2001RM

1,353,525

2,970,252

4,323,777

2000RM

2,271,096

2,677,000

4,948,096

Group


42

Included in deposits with licensed banks of the Group and the Company is an amount of RM430,600 (2000 :

RM427,000) and RM97,000 (2000 : RM97,000) respectively which are pledged to banks for banking facilities granted to

certain subsidiaries.

11 ] Other payables

Due to subsidiaries

Due to companies in which a director

has substantial financial interest

Due to a director

Sundry payables

Accruals

The amounts due to companies in which a director, Tan Sri Dato’ Paduka (Dr) Ting Pek Khiing, has substantial financial

interest relate mainly to the construction costs of a hotel property currently owned by Langkawi Airport Hotel Sdn. Bhd.

and payment on behalf for the acquisition of a leasehold land in prior years. The management has entered into an

agreement to dispose this hotel property to its contractor as a full settlement of construction costs as disclosed in Note

22.

The companies in which a director, Tan Sri Dato’ Paduka (Dr) Ting Pek Khiing, has substantial financial interest have

agreed that the demand for payment will only be made after twelve months from the date of this report or after the

finalisation of the transactions as disclosed in Note 22, whichever is earlier. These amounts are unsecured and interest

free except for the amount of RM26,716,083 (2000: RM28,209,020) and Nil (2000 : RM618,317) which bears interest

ranges from 8% to 10% (2000 : 8%) per annum for the Group and the Company respectively.

12] Share capital

Authorised :

As at 1 January / 31 December

Issued and fully paid:

As at 1 January / 31 December

2001RM

30,952,748

181,966

-

3,416,060

1,571,733

36,122,507

2000RM

29,053,179

618,317

-

2,873,840

1,725,982

34,271,318

Company

2001RM

-

111,015,236

319,879

13,358,278

2,830,928

127,524,321

2000RM

-

108,813,970

248,960

12,933,537

3,032,410

125,028,877

Group

2001RM

500,000,00

111,500,000

2000RM

500,000,00

111,500,000

Amount2001

1,000,000,000

223,000,000

2000

1,000,000,000

223,000,000

Number of Ordinary Shares

of RM0.50 Each


43

2001RM

148,250

10,000

-

158,250

175,000

333,250

2000RM

264,000

20,000

22,000

306,000

160,000

466,000

Company

2001RM

148,250

10,000

-

158,250

175,000

333,250

2000RM

264,000

20,000

22,000

306,000

160,000

466,000

Group

13] Revenue

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

Sale of timber

Hotel revenue

Rental income

Dividend income

14] Other operating income

Included in other operating income are:

Write back of provision for

doubtful debts

Write back of provision for

diminution in value of investments

Rental income

15] Directors' remuneration

Included in the staff costs and other operating expenses of the Group and the Company are directors’ remuneration as

follows:

Directors of the Company

Executive:

Salaries and other emoluments

Fees

Bonus

Non-Executive:

Fees and allowances

Total

2001RM

-

-

-

-

-

2000RM

-

-

-

42,500

42,500

Company

2001RM

-

32,262,159

3,000,000

-

35,262,159

2000RM

18,305,829

35,212,859

3,000,000

42,500

56,561,188

Group

2001RM

58,732

106,250

-

2000RM

-

-

-

Company

2001RM

194,120

106,250

160,733

2000RM

73,904

-

120,508

Group


The number of directors of the Company whose total remuneration during the year fall within the following bands is as

follows:

Executive directors:

RM50,001 – RM100,000*

RM100,001 – RM150,000

RM150,001 – RM200,000

Non-Executive directors:

Below RM50,000

RM50,001 – RM100,000

* During the period from 1 January, 2001 to 30 June, 2001, there were two salaried executive directors on the Board of

Directors (“Board”). With effect from 1 July, 2001, one of the executive directors resigned while the other executive

director remained on the Board as a non-executive director.

16] Other operating expenses

Included in other operating expenses are:

Auditors’ remuneration

Current year

Underprovision in prior year

Other services


Intangible assets written off

Provision for doubtful debts

Loss on disposal of timber rights

Provision for impairment in value

of property, plant and equipment

Provision for diminution in value

of investments

Rental of office premises

Rental of equipment

Rental of land

Management fees paid to resort operators

Amortisation of timber rights

Realised loss on foreign exchange, net

44

2000

-

1

1

3

1

2001

2

-

-

3

1

Number of directors

2000RM

24,000

-

-

2,067,363

-

2,219,936

-

3,263,193

134,000,000

186,240

-

-

-

-

75,850

2001RM

24,000

-

224,795

-

-

404,966

-

-

45,234,380

186,240

-

-

-

-

2,854

Company

2001RM

121,870

5,320

236,585

-

-

9,007,248

-

14,628,406

-

186,240

49,119

-

1,544,854

-

16,793

2000RM

132,000

-

-

2,067,363

22,754

79,166,684

14,685,935

3,263,193

-

186,420

69,484

5,467,456

1,849,263

1,763,692

27,092

Group


45


16] Finance cost, net

Interest expense

Interest income

18] Taxation

Current year provision

Underprovision in prior years

The taxation of the Group is in relation to a profit making subsidiary.

There is no tax charge for the year as the Company is in a tax loss position.

As at 31 December, 2001, the Group and the Company have unabsorbed tax losses of approximately RM27,589,000

(2000 : RM30,355,000) and RM9,192,000 (2000 : RM9,192,000) respectively and unutilised capital allowances of

approximately RM23,416,000 (2000 : RM20,909,000) and RM531,000 (2000 : RM531,000) respectively which can be

used to offset future taxable profits subject to agreement with the Inland Revenue Board.

As at 31 December, 2001, the Company has a potential deferred tax benefit of approximately RM2,720,000 (2000 :

RM2,737,000), arising principally from tax losses carried forward and unutilised capital allowances carried forward, the

effects of which are not included in the financial statements as there is no assurance beyond any reasonable doubt that

future taxable income will be sufficient to allow the benefit to be realised.

19] Loss per share

The loss per share of the Group is calculated by dividing the net loss for the year of RM31,568,743 (2000 :

RM110,165,462) by the weighted average number of ordinary shares in issue during the financial year of 223,000,000

(2000 : 223,000,000).

20] Prior year adjustment

The prior year adjustment made last year represents the effect of the change in accounting policy for bedding, linen,

cutlery and glassware as referred to in Note 2(f). This change in accounting policy has been accounted for

retrospectively and has the effect of increasing the accumulated losses brought forward of the Group for the year ended

31 December, 2000 by RM11,031,742.

2001RM

21,249

-

21,249

Company2001RM

1,728,989

(5,246)

1,723,743

2000RM

1,246,437

(16,079)

1,230,358

2000RM

1,246,437

-

1,246,437

Group

2000RM

-

46,749

46,749

2001RM

-

-

-

Company2001RM

539,844

100

539,944

2000RM

2,885,000

47,649

2,932,649

Group

46

21] Significant Events

On 22 February, 2001, the Company entered into the following agreements as part of its corporate exercise:

i] A Sale and Purchase Agreement with KPRJ Astakapuri Sdn. Bhd. ("KAPSB") and Aset Nusantara Sdn. Bhd. ("ANSB")

for the proposed acquisition of 100% equity interests in Bayou Bay Development Sdn. Bhd. ("BBDSB") and Tebrau

Bay Sdn. Bhd. ("TBSB") for a total purchase consideration of RM546,886,000 ("Proposed BBDSB and TBSB

Acquisitions"). Both of these companies are incorporated in Malaysia and are involved in property development

activities.

ii] A Sale and Purchase Agreement with Properties Watch Sdn. Bhd. ("PWSB"), Phang Piow @ Pang Choo Ing and Pang

Tin @ Pang Yon Tin for the proposed acquisition of 100% equity interest in Pang Hock Constructions Sdn. Bhd.

("PHCSB") for a purchase consideration of RM84,530,000 ("Proposed PHCSB Acquisition"). PHCSB is incorporated

in Malaysia and is involved in construction activities.

(The Proposed BBDSB and TBSB Acquisitions and the Proposed PHCSB Acquisition are herein collectively referred to as

the "Proposed Acquisitions").

In connection with the Proposed Acquisitions, the Company proposes to simultaneously undertake the following

disposals by Diamond League Sdn. Bhd., of its four wholly-owned subsidiaries for a total consideration of

RM200,000,000, as part payment in kind towards the Proposed Acquisitions:

a] Proposed disposal of the entire issued and paid-up share capital of Mashyur Mutiara Sdn. Bhd. ("MMSB")

comprising 75,441,000 ordinary shares of RM1.00 each in MMSB;

b] Proposed disposal of the entire issued and paid-up share capital of Home and Hotel Holding Sdn. Bhd. ("HHSB")

comprising 56,629,000 ordinary shares of RM1.00 each in HHSB;

c] Proposed disposal of the entire issued and paid-up share capital of Accruvest Hotel Management Sdn. Bhd.

("AHMSB") comprising 93,707,000 ordinary shares of RM1.00 each in AHMSB; and

d] Proposed disposal of the entire issued and paid-up share capital of Vital Orient Sdn. Bhd. ("VOSB") comprising

57,925,000 ordinary shares of RM1.00 each in VOSB.

(The above disposals are herein collectively referred to as the "Proposed Disposals").

The purchase considerations for the Proposed Acquisitions will be satisfied as follows:

i] RM200 million as payment in kind from the Proposed Disposals and the issuance of 495,551,429 ordinary shares of

RM0.50 each by the Company at RM0.70 per share for the Proposed BBDSB and TBSB Acquisitions.

ii] RM25 million cash payment and the issuance of 85,042,857 new ordinary shares of the Company at RM0.70 per

share for the Proposed PHCSB Acquisition.


47

21] Significant Events (cont'd)

Upon completion of the above Proposed Acquisitions, KAPSB and ANSB will collectively own approximately 54% of the

equity interest in the Company and according to Part II of the Malaysian Code on Take-Overs and Mergers 1998

("Code"), KAPSB and ANSB are required to undertake a mandatory general offer on the remaining shares in the

Company not owned by them. They will apply for a waiver from the obligations to undertake a mandatory general offer

under Practice Note 2.9.1 of the Code from the Securities Commission ("SC") ("Proposed Waiver") after the approval of

the shareholders of the Company, by poll for the Proposed Waiver, has been obtained and other conditions under the

said practice note have been met. The proposed Acquisitions will be completed after the approval of the SC has been

obtained for the Proposed Waiver.

KAPSB shall undertake a proposed restricted offer for sale of rights to allotment of 111,500,000 new ordinary shares of

RM0.50 each in the Company to the existing shareholders of the Company on the basis of one ordinary share for every

two existing ordinary shares held ("Proposed ROS") after the completion of the Proposed Acquisitions.

In addition, the Company also proposes to write off the entire accumulated losses of the Company against the

Company’s share premium account ("Proposed Write-Off ").

The Foreign Investment Committee had on 21 September, 2001 approved the Proposed Acquisitions, Proposed

Disposals and Proposed ROS.

The SC had on 4 April, 2002 approved the Proposed BBDSB and TBSB Acquisitions with a revised purchase

consideration of RM453,179,000 to be satisfied by an issuance of 361,684,286 new ordinary shares of RM0.50 each in

the Company at an issue price of RM0.70 per new share and the balance of RM200,000,000 to be satisfied through the

payment in kind via the Proposed Disposals. The Proposed PHCSB Acquisition, the Proposed Disposals and the

Proposed ROS were subsequently approved by the SC as proposed.

The Proposed Acquisitions, the Proposed Disposals and the Proposed Waiver are now subject to the approvals of the

shareholders of the Company and other relevant authorities. The Proposed Write-Off is subject to the approvals of the

shareholders of the Company and the High Court.

22] Subsequent Events

On 26 April, 2002, the Company entered into a Deed of Sale cum Trust Deed to dispose of the entire equity interests in

Diamond League Sdn. Bhd. (the disposal excludes the investments in the subsidiaries that form part of the Proposed

Disposals as disclosed in Note 21), Granite Hotels & Resorts Sdn. Bhd. and Kensen (China) Ltd and the assignment of

assets and liabilities of the Company for a total cash consideration of RM50,000,000.

On 26 April, 2002, the Company and Langkawi Airport Hotel Sdn. Bhd. ("LAH") entered into a subscription agreement

with Ekran Berhad ("Ekran"), a company in which Tan Sri Dato’ Paduka (Dr) Ting Pek Khiing has a substantial interest,

wherein Ekran shall subscribe for 4,999,998 new ordinary shares in LAH of RM1.00 each by way of a capitalisation of a

sum of RM4,999,998 from the amount due by LAH to Ekran.



48

23] Significant Related Party Transactions

Income

Sale of timber to Equatorial Timber Marketing Sdn. Bhd.

Expense

Purchase of timber from Ekran Project Management Sdn. Bhd.

Rental expense payable to Ekran Berhad

Interest expense payable to Ekran Berhad

Extraction cost payable to Equatorial Timber Marketing Sdn. Bhd.

The transactions above were transacted with companies in which a director, Tan Sri Dato’ Paduka (Dr) Ting Pek Khiing,

has substantial financial interests.

The directors are of the opinion that all the transactions above have been entered into in the normal course of business

and have been established on terms and conditions that are not materially different from that obtainable in transactions

with unrelated parties.

Balances

Due from - Trade

Equatorial Timber Marketing Sdn. Bhd.*

Ekran Project Management Sdn. Bhd.*

Balances

Due from - Non-Trade


Ekran Berhad*

Equatorial Timber Industries Sdn. Bhd+

Aquabeat Langkawi Sdn. Bhd.*

Langkasuka Resort Sdn. Bhd.*

Ekran Services Inc.*

Saeaga Airlines Sdn. Bhd.*

Utacom Sdn. Bhd.*

Wembley Industries Holdings Berhad*

PWE Industries Berhad*

Sastep Sdn. Bhd.*

Ting Sie Chuong@

2001

RM

-

2,991,275

186,240

1,707,740

-

2000

RM

18,305,829

-

186,240

1,246,437

1,402,496

Group

Group Company

2001

RM

-

-

5,191

-

-

169,346

1,627,697

2,898

419

-

-

-

-

-

2000

RM

76,088,265

23,974

262,861

-

9,023

1,547,892

1,371,410

2,898

419

2,296

-

356

1,810

380,120

2001

RM

76,616,149

23,974

183,245

5,635

9,023

1,693,522

2,415,966

2,898

538

2,593

764

1,054

1,810

-

2000

RM

-

-

7,760

-

-

25,597

581,818

2,898

419

-

-

-

-

-

49

Balances

Due to - Non-Trade


Equatorial Timber Marketing Sdn. Bhd.*

Ekran Berhad*

Langkasuka Resort Sdn. Bhd.*

Due to - Non-Trade

Germila Sdn. Bhd.+

Wembley Industries Holdings Berhad


Puan Sri Datin Paduka Wong Sui Chuo#

Ting Sie Huoong

*

#

+

@

24] Commitments

Contracted commitment for investment

by a subsidiary

The contracted commitment for investment by a subsidiary relates to contracts to invest a total sum of USD10,900,100

in five amusement centre projects in the People’s Republic of China. The directors, supported by legal advice, are of the

opinion that the capital commitment is not expected to materialise as the other party to the contracts had not fulfilled

certain terms of the contracts precedent to the investment by the subsidiary.

23] Significant Related Party Transactions (cont'd)


Group Company

2001

RM

-

-

(171,951)

-

-

-

(34,160)

-

-

2000

RM

(66,123,448)

(483,791)

(42,724,820)

(166,927)

(20,000)

(142)

(216,040)

(214,800)

(2,000)

2001

RM

(69,719,163)

-

(41,124,569)

(161,505)

(20,000)

-

(151,192)

(166,686)

(2,000)

2000

RM

-

-

(618,316)

-

-

-

(34,160)

-

-

Companies of which certain directors of the Company, Tan Sri Dato’ Paduka (Dr) Ting Pek Khiing and Ting Sie

Huoong have substantial financial interests.

Puan Sri Datin Paduka Wong Sui Chuo is the spouse and mother to the directors of the Company, Tan Sri Dato’

Paduka (Dr) Ting Pek Khiing and Ting Sie Huoong respectively.

Companies of which Puan Sri Datin Paduka Wong Sui Chuo is a director.

Ting Sie Chuong is the son and brother to the directors of the Company, Tan Sri Dato’ Paduka (Dr) Ting Pek Khiing

Group

2001

RM

41,420,380

2000

RM

41,420,380

50

25] Contigent Liability (unsecured)

The Company has a contingent liability amounting to approximately RM1,551,000 (2000 : RM1,551,000) being the

balance not accrued for in the financial statements relating to a disputed liability under a sale and purchase agreement

of a development property disposed in prior years. The directors are of the opinion that the Company will not be liable

for this amount.

26] Segmental Analysis

By activities

2001

Timber

Hospitality

Investment holding and rental of property development

Entertainment and leisure

2000

Timber

Hospitality

Investment holding and rental of property development

Entertainment and leisure

Segmental analysis by geographical location is not prepared due to the fact that the Group’s activities are predominantly

conducted in Malaysia.

The directors are of the opinion that all inter-segment transactions have been entered into in the normal course of

business and have been established on terms and conditions that are not materially different from that obtainable in

transactions with unrelated parties.

Loss before

taxation

RM

-

(2,318,531)

(28,707,971)

(2,297)

(31,028,799)

(39,503,741)

(38,931,276)

(28,761,676)

(36,120)

(107,232,813)

Revenue

RM

-

32,262,159

3,000,000

-

35,262,159

18,305,829

35,212,859

3,042,500

-

56,561,188

Total assets

employed

RM

-

298,490,809

45,737,397

140

344,228,346

21,203,004

343,958,747

8,110,770

335

373,272,856


51

List of Properties Owned

As at 31 December 2001

Location & Description

of Property

Equatorial Timber Moulding

Sdn Bhd

Land and factory building at

Jalan Keluli, Pending Industrial Area,

Kuching

Mashyur Mutiara Sdn Bhd

Land and hotel building at

Sheraton Langkawi Beach

Resort, Teluk Nibong,

07000 Langkawi, Kedah

Accruvest Hotel Management

Sdn Bhd

Land and building at Kuala

Muda, Padang Matsirat,


Home & Hotel Holding Sdn Bhd


Santubong Kuching Resort,

Kuala Muda, Jalan Santubong,

93748 Kuching, Sarawak

Vital Orient Sdn Bhd


Manikar Beach Resort,

Jalan Manikar,

87014 WP Labuan

Langkawi Airport Hotel

Sdn Bhd

Hotel building at Hotel Helang,

Lot 274, Mukim Padang

Matsirat, Jalan Lima,


Tenure

Leasehold

expiring in 2039

Leasehold

expiring in 2045

Leasehold

expiring in 2084

Leasehold

expiring in 2087

Provisional

Lease

for 60 years

Leasehold

expiring in 2890

Leasehold

Expiring in 2091

Leasehold *

Land Area

(Sq.Metre)

14, 734

12,704

183, 426

197, 723

135, 080

15, 891

54, 849

16, 900

Usage

Industrial

Industrial

Hotel

College

Hotel

Hotel

Hotel

Hotel

Net Book

Value

RM'000

921

52, 869

34, 242

53, 983

30, 000

62, 314

Age of

Building

18 years

11 years

11 years

9 years

10 years

4.5 years

Date of

Acquisit

October

1995

October

1995

October

1995

October

1995

October

1995

June

1997

* In process of entering lease agreement with Langkawi Development Authority

52

Analysis of Shareholdings

As at 6 May 2002

Authorised Capital : RM500,000,000

Issued and paid-Up Capital : RM111,500,000

Class of Shares : Ordinary Shares of RM0.50 each

Voting Rights : One vote per Ordinary Share

Distribution of Shareholdings

Holdings

Less than 1,000

1,000 to 10,000

10,001 to 100,000

100,001 to less than 5% of issued shares

5% and above of issued shares

Total

Thirty Largest Shareholders

Name

1] See Hoy Chan Properties Sdn Bhd

2] Kuala Lumpur City Nominees (Tempatan) Sdn Bhd

(Alpha Grace Sdn Bhd)

3] CIMB Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Tan Sri Dato' Paduka (Dr) Ting Pek Khiing)

4] AllianceGroup Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Ting Pek Khiing)

5] Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Summit Agriculture Sdn Bhd)

6] OSK Nominees (Tempatan) Sdn Bhd

(OSK Capital Sdn Bhd for Ting Pek Khiing)

7] AllianceGroup Nominees (Tempatan) Sdn Bhd

(Alliance Merchant Nominees (Tempatan) Sdn Bhd for Ting Pek Khiing)

8] Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Rainforest Enterprise Sdn Bhd)

9] PAB Nominees (Tempatan) Sdn Bhd


10] EB Nominees (Tempatan) Sdn Bhd

(EON Bank Berhad)

11] See Hoy Chan Properties Sdn Bhd

12] Public Nominees (Tempatan) Sdn Bhd


No. of Holders

68

18,643

1,401

115

4

20,231

Total Holdings

14,160

51,831,398

35,408,016

74,976,758

60,769,668

223,000,000

% of

Issued Capital

0.00

23.25

15.88

33.62

27.25

100.00

No. of Shares

17,463,000

15,589,668

10,000,000

7,480,000

6,500,000

6,500,000

6,280,000

6,000,000

3,279,979

2,726,000

2,661,000

2,500,000

% of

Issued Capital

7.83

6.99

4.48

3.35

2.91

2.91

2.81

2.69

1.47

1.22

1.19

1.12

53

Analysis of Shareholdingscontinue

As at 6 May 2002

Name

13] Sunny Khoo

14] Sinaco Sdn Bhd

15] Teo Soo Cheng Sdn Bhd

16] Lim Seng Chee

17] Kuala Lumpur City Nominees (Tempatan) Sdn Bhd

(Upen Nominees (Tempatan) Sdn Bhd)

18] AFB Nominees (Tempatan) Sdn Bhd


19] Ahmad Bin Abdul Rashid

20] Pengkalen Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Sistem Etika Sdn Bhd)

21] Ultimate Strategies Sdn Bhd

22] Rainforest Enterprise Sdn Bhd

23] Aristo Corporation Sdn Bhd

24] Ching Kwong Yew

25] Cartaban Nominees (Asing) Sdn Bhd

(SSBT Fund SW6A for California Public Employees Retirement System)

26] Tank Dai Con

27] TA Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Mak Ngia Ngia @ Mak Yoke Lum)

28] A.A Assets Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Aspek Elit Sdn Bhd)

29] Dato' Lee Yew Hean

30] Loh Kiu Seng

Total

No. of Shares

1,540,000

1,327,000

1,180,000

1,037,000

1,023,000

1,000,000

1,000,000

1,000,000

1,000,000

732,000

722,000

676,000

668,000

632,000

629,000

627,000

626,000

526,000

102,924,647

% of

Issued Capital

0.69

0.59

0.52

0.46

0.45

0.44

0.44

0.44

0.44

0.32

0.32

0.30

0.29

0.28

0.28

0.28

0.28

0.23

46.02

Substantial Shareholders

(as defined under Section 69D of the Companies Act, 1965)

Name


See Hoy Chan Properties SB & Associates

Equatorial Timber Marketing Sdn Bhd

Alpha Grace Sdn Bhd

No of Shares

55,889,979

30,124,000

15,000,000

15,589,668

No of Shares

15,100,000

-

-

-

% of

Issued Capital

25.06

9.06

6.73

6.99

% of

Issued Capital

6.77

-

-

-

Direct Indirect

54

Analysis of Shareholdingscontinue

As at 6 May 2002

Directors' Interest

Direct Indirect

Name


Dato' Stanley Isaacs


Peter Ling Ee Kong


Ting Sie Huoong

Notes

(1) Deemed interested in the 15,000,000 Granite shares held by Equatorial Timber Marketing Sdn Bhd ("ETM"), a company where he is a

substantial shareholder and the 100,000 Granite shares held by Mr Ting Sie Huoong, his son.

(2) Deemed interested in the 55,889,979 Granite shares held by his father, Tan Sri Dato' Paduka (Dr) Ting Pek Khiing and the 15,000,000

Granite shares held indirectly by Tan Sri Ting via ETM.

No of Shares

55,889,979

-

100,000

-

-

100,000

No of Shares

15,100,000

-

-

-

-

70,889,979

% of

Issued Capital

25.06

-

0.04

-

-

0.04

% of

Issued Capital

6.77

-

-

-

-

31.79

(1)

(2)

55

FORM OF PROXY

I/We

of

being a member/members of GRANITE INDUSTRIES BERHAD hereby appoint

of

or failing him/her

of

or failing him/her, the Chairman of the Meeting as my/our proxy to vote and act for me/us on my/our behalf at the 33rd

Annual General Meeting of the Company to be held at Ballroom I, Santubong Kuching Resort, Jalan Santubong, 93748

Kuching, Sarawak on Thursday, 27 June 2002 at 11:30 a.m. and at any adjournment thereof.

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

Resolution For Against

No. 1 To receive and adopt the Reports and Audited Accounts.

No. 2 To re-elect Tan Sri Dato' Paduka (Dr) Ting Pek Khiing as Director.

No. 3 To re-elect Senator Datuk William Lau Kung Hui as Director.

No. 4 To re-elect Dato' Mohammed Shukor bin Abdullah as Director.

No. 5 To approve the payment of Directors' fees.

No. 6 To appoint Messrs Hanafiah Raslan & Mohamad as Auditors of the Company.

No. 7 To authorise Directors to allot and issue shares.

(Please indicate with an 'X' in the spaces provided 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.)

Number of Shares Held

Dated this day of 2002.

Signature

Notes1. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy need not be a

member of the Company.

2. Where a member appoints two or more proxies, the appointments shall be invalid unless he specifies the proportion of his holdings to be represented by

each proxy.

3. The Form of Proxy, in the case of an individual shall be signed by the appointer or his attorney, and in the case of a corporation, either under seal or under

the hand of an officer or attorney duly authorised.

4. The Form of Proxy must be deposited with the Company's Share Registrars, Trace Management Services Sdn Bhd, Suite 20.03, 20th Floor, Menara

MAA, No 12 Jalan Dewan Bahasa, 50460 Kuala Lumpur, not less than 48 hours before the time for holding the Meeting or any adjournment thereof.

5. Any alteration in this form must be initialled.

Granite Industrie Berhad 8256-A

(Incorporated in Malaysia)

Trace Management Services Sdn Bhd

Suite 20.03, 20th Floor, Menara MAA

No.12, Jalan Dewan Bahasa

50460 Kuala Lumpur

stamp

fold here

fold here

Documents

Annual Report 2001 01 - National University of Singaporelibapps2.nus.edu.sg/nus_hl/granite2001.pdf27 February 2001 / 12.10 p.m. / 2nd Floor, Wisma Ekran, Jalan Parlimen, ... Mr Peter