A N N U A LR E P O R T2 0 0 3

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A N N U A LR E P O R T2 0 0 3

ANNUALREPORT2003

C O N T E N T S

Notice of Annual General Meeting

Corporate Information

Board of Directors

Chairman’s Statement

Corporate Governance Statement

Statement of Internal Control

Audit Committee

Five-Year Group Financial Highlights

Directors’ Report

Income Statements

Balance Sheets

Statements Of Changes In Equity

Cash Flow Statements

Notes To The Financial Statements

Statement By Directors

Statutory Declaration

Report Of The AuditorsStatement Of ShareholdingsStatement Of Shareholdings

Directors’ Shareholdings

Other Information

Property Held By A Subsidiary Of The Company

Proxy Form

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NOTICE IS HEREBY GIVEN that the Ninth Annual General Meeting of the Company will be held at Level 2, GrandSeasons Hotel, No. 72 Jalan Pahang, 53000 Kuala Lumpur, on Thursday, 28 August 2003 at 2.30 p.m. for the purposeof transacting the following businesses:

AGENDA1. To receive and adopt the Audited Financial Statements for the financial year ended 28 February 2003 together with

the Reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ fees for the year ended 28 February 2003.

3. To re-elect Mr Chan Teik Huat who retires pursuant to Article 82 of the Company’s Articles of Association.

4. To re-elect Encik Faris Bin Abdullah @ Patrick Chen Yee Ching who retires pursuant to Article 74 of the Company’s Articles of Association.

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

As Special Business :To consider and, if thought fit, to pass the following Ordinary Resolutions:

6. Authority to Directors to Allot and Issue Shares

“THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby authorized to issue shares in the Company at any time until the conclusion of the next Annual General Meeting and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued does not exceed 10 per centum of the issued share capital of the Company for the time being, subject always to the approval of all the relevant regulatory bodies having been obtained for such allotment and issue.”

7. Proposed Renewal Of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature

“THAT subject always to the Listing Requirements of the Kuala Lumpur Stock Exchange, approval be and is hereby given to the Company and its subsidiaries (“the Group”) to enter into recurrent related party transactions of a revenue or trading nature with those Related Parties as set out and described in section 2.2 of the Circular to Shareholders of the Company dated 6 August 2003 which are necessary for the Group’s day-to-day operations and are in the ordinary course of business made on an arm’s length basis and on normal commercial terms which are not more favourable to the related parties than those extended to the public and not to the detriment of the minority shareholders of the Company, AND THAT the Directors be and hereby authorised to complete and do all such acts and things (including executing such documents as may be required) to give effect to the transactions contemplatedand/or authorised by this ordinary resolution, AND FURTHER THAT such authority shall commence immediately upon the passing of this Ordinary Resolution and shall continue to be in force until:

a) the conclusion of the next Annual General Meeting (“AGM”) of the Company at which time it will lapse, unlessby a resolution passed at the meeting, the authority is renewed; or

b) the expiration of the period within which the next AGM after the date it is required to be held pursuant to Section143(1) of the Companies Act 1964 (“the Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

c) revoked or varied by resolution passed by the shareholders in general meeting; whichever is earlier.”

To consider and, if thought fit, to pass the following Special Resolution:

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION OF THE COMPANY

8. “THAT the amendments to the Articles of Association of the Company as set out in Appendix 1 of the Circular to Shareholders of the Company dated 6 August 2003 be and hereby approved and adopted.”

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NOTICE OF ANNUAL GENERAL MEETING

(Resolution 1)

(Resolution 2)

(Resolution 3)

(Resolution 4)

(Resolution 5)

(Resolution 6)

(Resolution 7)

(Resolution 8)

9. To transact any other business of the company for which due notice shall have been given

BY ORDER OF THE BOARD

KOO LAI KIMCompany Secretary

Kuala LumpurDate : 6 August 2003

NOTES ON APPOINTMENT OF PROXY

1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his stead. Aproxy need not be a member of the Company. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorized in writing or if such appointer is a corporation, under its common seal or the hand of its attorney.

2. All forms of proxy must be deposited at the Company’s Registered Office at Level 10, Grand Seasons Avenue, No. 72 Jalan Pahang, 53000 Kuala Lumpur, not less than 48 hours before the time appointed for holding of the Meeting or any adjournment thereof.

EXPLANATORY NOTES ON SPECIAL BUSINESS

1. Resolution 6 : Authority to Directors to Allot and Issue Shares

The Proposed Resolution 6, if passed, would enable the Directors to issue up to a maximum of 10% of the issued share capital of the Company as at the date of this Annual General Meeting for such purposes as the Directors consider would be in the best interest of the Company. This authority, unless revoked or varied by the Company at a General Meeting, will expire at the next Annual General Meeting.

2. Resolution 7 : Proposed Renewal of Shareholders’ Mandate for Recurrent Related PartyTransactions of a Revenue or Trading Nature

The Proposed Resolution 7 is to obtain shareholders’ mandate for the Company and its subsidiaries to enter intorecurrent related party transactions of a revenue or trading nature with those related parties as set out in Section 2.2of the Circular to Shareholders of the Company dated 6 August 2003 which are necessary for the Group’s day-to-day operations and are in the ordinary course of business made at arm’s length basis and on normal commercial terms which are not more favourable to the related parties than those extended to the public and are not to the detriment of the minority shareholders of the Company. If the Proposed Resolution 7 is passed at the forthcoming Annual General Meeting, the shareholders’ mandate shall commence immediately upon passing of this ordinaryresolution until the conclusion of the next Annual General Meeting (“AGM”) of the Company at which time it will lapse,unless by resolution passed at the meeting, the authority is renewed, or the expiration of the period within which the next AGM after the date it is required to be held pursuant to Section 143(1) of the Companies Act,1965 (the Act)(but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act) or revoked or varied byresolution passed by shareholders in general meeting, whichever is the earlier.

3. Resolution 8 : Proposed Amendments to the Articles of Association of the Company

The Proposed Resolution 8, if passed, will enhance the Company’s flexibility in the way the directors conduct their meetings. The Company proposes to introduce a new provision to the Articles of Association of the Company to providefor the conduct of Board Meetings via electronic means, which allows simultaneous or instantaneous transmission.

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

The Directors who are standing for re-election at the Ninth Annual General Meeting of the company are:-

Mr Chan Teik Huat Article 82 (Resolution 3)Encik Faris Bin Abdullah @ Patrick Chen Yee Ching Article 74 (Resolution 4)

The profile of the Directors standing for re-election for Resolutions 3 and 4 are shown on page 5 of the Annual Report2003. The securities holdings of the abovenamed Directors in the Company or it’s subsidiaries are disclosed in theDirectors’ Report on page 14 of the aforesaid Annual Report.

The details of the Directors’ attendance for Board Meetings are disclosed in the Corporate Governance Statement.

The Ninth (9th) Annual General Meeting of the Company will be held at Level 2, Grand Seasons Hotel, No. 72 JalanPahang, 50000 Kuala Lumpur on Thursday, 28 August 2003 at 2:30p.m.

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NOTICE OF ANNUAL GENERAL MEETING

DIRECTORSSharifah Noor Binti Syed Abdul Rahman Al-Attas

Dato’ Haji Man Bin Haji Mat

Chan Teik Huat

Faris Abdullah @ Patrick Chen Yee Ching

SECRETARYKoo Lai Kim (MIA 7849)

REGISTRARPFA Registration Service Sdn Bhd

1301 Level 13 Uptown 1

No 1, Jalan SS21/58

Damansara Uptown

47400 Petaling Jaya

Tel: 03-7725 4888

Fax: 03-7722 2311

REGISTERED OFFICELevel 10, Grand Seasons Avenue

No. 72, Jalan Pahang

53000 Kuala Lumpur

Tel: 03-2693 1828

Fax: 03-2691 2798

PRINCIPAL PLACE OF BUSINESS18.02, 18th Floor

100, Putra Place

50350 Kuala Lumpur

PRINCIPAL BANKERSHong Leong Bank Berhad

RHB Bank Berhad

AUDITORSErnst & Young

Chartered Accountant

INTERNAL AUDITORSKPMG

DOMICILEMALAYSIA

LEGAL FORMPUBLIC LIMITED COMPANY

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CORPORATE INFORMATION

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Puan Sharifah Noor Binti Syed Abdul Rahman Al-Attas, Independent Non-Executive Director, aged 47, wasappointed to the Board of Aktif Lifestyle Corporation Berhad on 6 September 2000 and was appointed as the Chairman on25 April 2003, she is also a member of the Audit Committee. She graduated from University Sains Malaysia in 1985 with aBachelor of Economics (Hons) degree. She then obtained a Diploma in Pengurusan Awam from Institute Tadbiran AwamNegara (INTAN) in 1987. She worked in the Prime Minister's Department before joining MITI and held the position ofAssistant Director. She was awarded the title of Ahli Mahkota Pahang (AMP) in 1990 by the Sultan of Pahang. Puan Sharifahis a member of Peniagawati since 1992 and is appointed as Vice President I in June 2003. She is the consultant for twoentreprenuer development programmes conducted by Kementerian Pembangunan Usahawan and KementerianPembangunan Luar Bandar. She is currently the Managing Director of NS Linencraft Sdn Bhd as well as a director of severalother private limited companies.

She does not have any family relationship with any Director and/or major shareholder of the Company nor has she any conflict of interest with the Company.

Dato' Haji Man Bin Haji Mat, Independent Non-Executive Director, Malaysian, aged 53, was appointed Director of AktifLifestyle Corporation Berhad on 8 November 1995 and the Chairman of the Audit Committee. He holds a diploma in PublicAdministration from Institute Teknologi MARA and holds a Bachelor of Business Administration degree from Ohio StateUniversity, United States of America. He was formerly with the Government and was the Assistant Director of the PublicServices Department Planning Unit before he opted for early retirement in 1978 to join the private sector. He worked forMatsushita Electric Co. (M) Berhad and East Asiatic Co (Malaysia) Berhad before joining Texchem Group of companies. Heis currently a Director of Wong Engineering Corporation Berhad, a company listed on the KLSE. He also sits on the boardof several other private limited companies.

He does not have any family relationship with any Director and/or major shareholder of the Company nor has he any conflict of interest with the Company.

Mr. Chan Teik Huat, Non-Independent Executive Director, Malaysian, aged 63, has been a Director of Aktif LifestyleCorporation Berhad since 13 October 1995. Mr. Chan is an accountant by profession. He is a fellow of the Institute ofChartered Accountants in Australia and a member of the Malaysian Institute of Certified Public Accountants ("MICPA"), whichhe joined in August 1966 and July 1984 respectively. He also holds a Bachelor of Commerce degree from the University ofMelbourne, Australia. He was one of the two founder members of the accounting firm, Kassim Chan & Co., and was attachedto the firm for more than 18 years from 1967 to 1984. Mr. Chan currently also sits on the Board of Metroplex Berhad andAnglo-Eastern Plantations Plc.

Mr. Chan is the spouse of Mdm Lim Siew Kim, a substantial shareholder of Aktif Lifestyles Corporation Berhad. He is, byvirtue of Section 6A of the Companies Act, 1965, deemed to have substantial interest in the shares in the Company. Exceptfor certain recurrent related party transactions of revenue nature which are necessary for day-to-day operations of theCompany and its subsidiaries and for which he is deemed to be interested, there are no other business arrangements withthe Company in which he has personal interests.

Faris Bin Abdullah @ Patrick Chen Yee Ching, Non-Independent, Non-Executive Director, aged 44 was appointedto the Board of Aktif Lifestyle Corporation Berhad on the 25 April 2003. He is a lawyer by profession having been called tothe UK Bar (Gray’s Inn) in 1983 before returning to Malaysia where he practised as an Advocate and Solicitor until 1991. Mr Chen then joined the MBf group of companies as Head of Legal for 6 years before moving to the Philippines in 1997 tohead up MBf’s operations there as President and CEO of its public listed holding company until the end of 1999. Thereafterhe remained in the Philippines until December 2002 as Executive Director and CFO of a privately held group of companiesinvolved in US retail franchise brands before returning to and settling back in Malaysia.

He does not have any family relationship with any Director and/or major shareholder of the Company nor has he any conflict of interest with the Company

Attendance at Board Meeting Board Meeting

Puan Sharifah Noor Binti Syed Abdul Rahman Al-Attas* 4

Mr Chan Teik Huat* 4

YBhg Dato' Haji Man Bin Haji Mat* 4

Encik Faris Bin Abdullah @ Patrick Chen Yee Ching 1(Appointed wef 25/4/2003)

Mdm Lim Siew Kim (Resigned wef 25/4/2003) 1

Ms Susan Low Mei Wan (Resigned wef 24/4/2003) 3

Ms Anne Paw Swee Choo (Alternate Director) (Resigned wef 25/4/2003) 1

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BOARD OF DIRECTORS

On behalf of the Board of Directors of Aktif Lifestyle Corporation Berhad, I present herewith the Annual Report andFinancial Statements for the year ended 28 February 2003.

FINANCIALSTurnover for the Group decreased marginally to RM217.4 millions for the year under review compared to RM228.3 millionin the previous year. Net loss was also reduced to RM20.03 from RM23.4 million in the previous year. The smaller losswas achieved through slightly improved margins due to better control over markdowns and tighter control over expenditure,which was reduced to RM68.4 millions from RM72.2 millions in the previous year.

REVIEW OF OPERATIONSDuring the financial year, the Company undertook several rationalisation exercises by reducing floor space at some ofits operation locations, improving merchandise mix and tighter control over head office and other costs. These have contributed toward a reduction in operating losses despite a difficult retail environment due to stiff competition fromhypermarkets and other department stores.

To meet competition, the Company, through its subsidiary Retail Commercio Sdn Bhd, launched a new line of ladies garments and homes brand under the name “Zense” and opened its first specialty store at Jalan Telawi in Bangsar, KualaLumpur. The results have been promising and the Company is currently looking at expanding this concept through company-owned stores and at other retail outlets through franchising.

PROPOSED FINANCIAL RESTRUCTURINGIn view of its PN4 status, the Company has on 25 October 2002 appointed Southern Investment Bank Berhad as itsmerchant bankers/advisers to review the Company’s financial situation and formulate a proposal to restructure the Group.Under review is a scheme which would involve an injection of a viable business asset into the Company. Once thescheme proposal is ready, the Company would make an appropriate announcement of the details

PROSPECTSMalaysia’s GDP for 2002 reflected a growth of 4.2% compared to 0.4% in 2001 despite the threat of war in Iraqs .Forecasted growth for the forthcoming year, factoring in the impact of SARS, has been optimistically maintained at 4.5% despite a very difficult second quarter.

The Directors expect the current financial year to be extremely challenging especially with the recent outbreak of SARSwhich has adversely affected the retail sectors by more than 20% due to reduced tourist arrivals as well as domestic shoppers staying at home. With further tightening of control over costs and further rationalisation of merchandise mix, it isexpected that margins would further improve, thereby reducing the impact of lower sales.

Other areas which the Company is focusing on to differentiate the Aktif Lifestyle department stores from the new hypermarketconcept including offering better and more personalised service and creating a more intimate shopping environment.

ACKNOWLEDGEMENTSOn behalf of the Board of Directors, I am pleased to extend our sincere appreciation to our financiers, suppliers, business associates, customers and shareholders for their continuing support and to the Management and Staff of theGroup for their efforts and dedication in their service.

The Board would also like to extend its special thanks to Madam Lim Siew Kim, the outgoing founder Chairman for hercontributions to the Company since its inception, for her confidence in the new team, and for her continuing guidanceand support.

Puan Sharifah Noor Binti Syed Abdul Rahman Al- Attas Chairman

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CHAIRMAN’S STATEMENT

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The Board of Directors fully appreciates the importance of adopting the code of corporate governance within the group.As such the Board strives to adopt the substance and form behind the corporate governance prescriptions. The Boardis fully committed to the maintenance of corporate governance by implementing the prescriptions of the principles andbest practices as set out in Parts 1 and 2 of the Malaysian Code of Corporate Governance respectively. (The Code)

The Board is pleased to provide the following statement, which outlines the main corporate governance practices thatwere in place throughout the financial year, unless otherwise stated

Compliance StatementThe Group has complied throughout the year ended 28 February 2003 with all the best practices of corporate governance set out in Part 2 of the Code except for the following: -

• A formal enterprise risk management framework Committee is not established. The Group is in the process of setting up the Committee.

Principles StatementThe following statement sets out how the Company has applied the principles in Part 1 of the code.

A. Board of Directors The Group acknowledges the pivotal role played by the Board of Directors to lead and control the Company with the ultimate objective of realizing long-term shareholder value. To fulfill this role, the board is responsible for the overall corporate governance of the Group, including setting the strategic direction, establishing goals for the management and monitoring the achievement of these goals.

MeetingsThe Board meets at least four times a year at quarterly intervals with additional meetings convened when urgent and important decisions need to be taken between the scheduled meetings. During the financial year, four (4) meetings were held.

The Board receives documents on matters requiring its consideration to and in advance of each meeting. The Board papers are comprehensive and encompass both quantitative and qualitative factors so that informed decisions are made. All proceedings from the Board meetings are minuted and signed by the Chairman of the meeting. The number of meetings attended by the directors is shown on page 5 of the Annual Report.

Board BalanceAs at the date of this statement, the Board consists of 4 members; comprising the Independent Non-ExecutiveChairman, Independent Non-Executive Director, Non-Independent Non-Executive Director and Non-IndependentExecutive Director. The Board complies with paragraph 1.01 and 15.02 of the KLSE Listing Requirements whererequires that at least two directors or one third of the Board of Directors whichever is the higher, are IndependentDirectors.

There is a clear division of responsibility for the Directors. The Executive Director is responsible for implementing thepolicies and decision of the Board, overseeing the operations as well as coordinating the development and implementation of business and corporate strategies. The Independent Non-Executive Directors will provide independent judgement to the decision making of the Board and provide a capable check and balance for theExecutive Directors. The Non-Executive Directors contribute significantly in areas such as policy and strategy, performance monitoring, allocation of resources as well as improving governance and control.

The Chairman is responsible for running the Board and ensures that all Directors receive sufficient relevant information on financial and non-financial matters to enable them to participate actively in Board decisions.

The Board is satisfied that the current board composition fairly reflects the investment of minority shareholders in the Company.

B. Directors remunerationDetails of the Directors’ remuneration are set out on page 26 of the Annual Report.

C. Shareholder communicationThe Group values dialogue with investors and do this through the Annual Report and the Annual GeneralMeeting (AGM). The Group policy is to maintain an active dialogue with its shareholders with the intentionof giving shareholders a good understanding of the Group’s performance.

At each of the AGM, the Board presents the progress and performance of the business and encourages shareholdersto participate in the question and answer session. All the Directors are available to respond to shareholders’questions during the meeting. Where it is not possible to provide immediate answers, the Chairman will undertaketo furnish the shareholder with a written answer after the AGM.

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CORPORATE GOVERNANCE STATEMENT

While the Group endeavour to provide as much of information possible to its shareholders, it must also be wary ofthe legal and regulatory framework governing the release of material and price sensitive information. The guidelinesprovide for corporate disclosure which takes into account the prevailing legislative restrictions and requirements aswell as the investors’ needs for timely release of price sensitive information such as financial performance resultsand statements, material acquisitions, significant corporate proposals as well as other significant corporate events.

D. Accountability and AuditThe Board aim to provide a balanced assessment of the Group’s financial performance and prospects at the end ofthe financial year, primarily through the annual financial statements, quarterly announcement of results to shareholders as well as the Chairman’s statement and review of operations in the Annual Report. The Board is assisted by the Audit committee to oversee the Group’s financial reporting processes and quality of its financial reporting.

Statement of Directors’ responsibility for preparing the financial statements.The Directors are required by the Companies Act 1965 to prepare financial statements for each financial year which givea true and fair view of the state of affairs of the Group and their profit and loss and cashflows for the period then ended.

The Directors are satisfied that in preparing the financial statements of the Group, the Group has used theappropriate accounting policies and applied them consistently and have made reasonable and prudent judgementand estimates. The Directors also consider that all relevant approved accounting standards have been followed inthe preparation of these statements.

The Directors have overall responsibility for taking such steps as is reasonably open to them to safeguard the assets of the Group to prevent and detect fraud and other irregularities.

Internal ControlThe Group’s internal control statement is set out on pages 10.

Relationship With The AuditorsThe role of the Audit Committee in relation to the external auditors is described on page 12. A summary of theactivities of the Audit Committee during the year are set out on pages 11 and 12 of the Annual Report.

E. Additional Compliance InformationIn conformance with the Kuala Lumpur Stock Exchange Listing Requirements, the following information is provided:

Material Contracts Involving Directors and Substantial Shareholders’ InterestTo the best of the Board’s knowledge, there are no material contracts involving the Group with any of the major shareholders nor Directors in office as at 28 February 2003 except for those disclosed under Recurrent Related Party Transactions of a Revenue or Trading Nature.

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CORPORATE GOVERNANCE STATEMENT

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The Kuala Lumpur Stock Exchange’s Revamped Listing Requirements requires the Board of Directors of public listedcompanies to include in its annual report a statement about the state of internal control of the listed issuer as a group.The Board is committed to maintaining a sound system of internal control in the Group and is pleased to provide the following statement, which outlines the nature and scope of internal control of the Group during the year.

Board ResponsibilityThe Board of Directors acknowledges their responsibility for the Group’s system of internal control and for reviewing itsadequacy and integrity. Because of the limitations that are inherent in any system of internal control, it should be noted,that such systems are designed to manage, rather than eliminate, the risk of failure to achieve corporate objectives.Accordingly it can only provide reasonable but not absolute assurance against material misstatement or loss.

The Group had in place an on-going process for identifying, evaluating, monitoring and managing the significant risksfaced by the Group. This process is regularly reviewed by the Board, in accordance with the Statement on InternalControl and Guidance for Directors of Public listed Companies (the Internal Control Guidance)

Risk Management FrameworkThe Board fully supports the contents of the Internal Control Guidance and has extended the responsibilities of the AuditCommittee to include the work of monitoring all internal control on its behalf, including identifying risk areas and communicate to the Board of Directors the critical risksarea faced by the Group.

Internal Audit FunctionThe Group has outsourced the internal audit function toKPMG in 2001, as part of its internal audit strategy inorder to have an independent third party review of itsoperations. The Internal Audit was directed towardsselected risk areas of the operations and was carried outin accordance with the internal audit plan approved by theAudit Committee.

An internal audit report is submitted to the AuditCommittee on the compliance of Group’s policies andprocedures on a quarterly basis.

The Audit committee reviews and ensures that the riskmonitoring and compliance procedures are adequate and presents its findings to the Board on a quarterly basis.

Other Risks and Control ProcessesApart from the internal audit and risk management, otherrisks and control are described below• clearly defined delegation of responsibilities to the

Board of Directors and management of Head Office and Operating Units;

• clearly documented internal policies and procedures. These policies and procedures are subject to regularreview;

• regular and comprehensive reports to the Board on financial performance and key performance and risk indicators, this includes, amongst others, the monitoring of results against budget, with major variances being followed up and management actiontaken, where necessary;

• regular visits to operating units by the senior management

A number of minor internal control weaknesses wereidentified during the current financial year, all of whichhave been, or are being addressed. None of the weaknesses have resulted in any material losses thatwould require disclosure in the Company’s Annual Report.Management continues to take measures to strengthenthe control environment.

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STATEMENT OF INTERNAL CONTROL

Members and MeetingsThe Audit Committee held four (4) meetings during the year ended 28 February 2003. The members of the AuditCommittee and record of their attendance are as follows:

Name Designation No. of Meetings AttendedDato’ Haji Man Bin Mat Chairman of Audit Committee 4

Independent Non-Executive Director

Sharifah Noor binti Syed Abdul Independent Non-Executive Director 4Rahman Al-Attas

Chan Teik Huat Non-Independent Non-Executive Director 4

Terms Of ReferenceThe terms of reference of the Audit Committee are as follows:

MembershipThe members of the Audit Committee shall be appointed by the Board from amongst its members. It shall consist of at least three (3) members of whom a majority shall be Independent Non-Executive Directors. The AuditCommittee shall elect a Chairman from amongst its members who shall be an Independent Non-Executive Director. Noalternate director shall be appointed as a member of the Audit Committee.

At least one (1) member of the Committee:i. must be a member of the Malaysian Institute of Accountants (MIA); orii. if he is not a member of the MIA, he must have at least three (3) years working experience and :

• must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or• must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the

Accountant Act, 1967.iii. a degree/masters/doctorate in accounting or finance and at least 3 years’ post qualification experience in

accounting and finance; oriv. at least 7 years’ experience being a chief financial officer of a corporation or having the function of being primarily

responsible for the management of the financial affairs of the corporation.

If a member of the Audit Committee resigns or for any other reason ceases to be a member with the result that thenumbers of members is reduced to below three (3), the Board of Directors shall within three months (3) of that eventappoint such number of new members as may be required to make up the minimum number of three (3) members.

The term of office and performance of the Audit Committee and each of its members shall be reviewed by the Board atleast once every three years.

Meetings• The Committee shall meet at least four times a year, and at such times as and when necessary.• A quorum shall be two (2) members, a majority of whom must be independent non-executive directors.• The Committee may require any employee and a representatives of the external auditors to attend meetings.

The Head of Internal Audit function shall attend all meetings of the Committee. Other Board members and employees of the Company and external auditors (or their representatives) may all also attend upon the invitation of the Committee.

• The Committee shall cause minutes to be made in respect of the proceedings and resolutions of all its meetings.• The minutes of the meetings of the Committee shall be tabled at Board Meetings to inform the Board of the

activities of the Committee.• The Company Secretary shall be the Secretary of the Committee.

AuthorityThe Audit Committee is authorized by the Board :-• To investigate any activity within its term of reference; • To have the resources required to perform its duties;• To have full and unrestricted access to information about the Company and the Group;• To have unrestricted access to both the internal and external auditors and to all employees of the Group; and• To obtain external legal or other independent professional advice as necessary.

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AUDIT COMMITTEE

DutiesThe duties of the Committee are to:a) consider the appointment, resignation and dismissal of the external auditors and audit fee;b) review the nature and scope of the audit with external auditors before the audit commences; c) review the quarterly and annual financial statements of the Group, focusing on the matters set out below, and

thereafter to submit them to the Board:-i) any changes in accounting policies and practices;ii) significant and unusual events;iii) significant adjustment arising from the audit;iv) the going concern assumption;v) compliance with accounting standards and other legal requirements

d) discuss problems and reservations arising from the interim and final audits, and any matter the external auditors may wish to discuss;

e) review with the external auditors, their evaluation of the systems of internal controls;f) review the audit reports prepared by the external auditorsg) review the audit reports of the scope, functions and resources of the internal audit function, and that is has the

necessary authority to carry out its work;h) review the internal audit programme and results of the internal audit process and where necessary, ensure that

appropriate action is taken on the recommendations of the internal audit function;i) review any appraisal or assessment of the performance of members of the internal audit function;j) approve any appointment or termination of senior staff members of the internal audit function;k) be informed of any resignations of senior internal audit staff members and provide the resigning staff member

an opportunity to submit his reasons for resigning;l) consider any related party transactions and conflicts of interest situations that may arise within the Group;m) consider the major findings of internal investigations and management’s response;n) consider any other issues as may be designated by the Board from time to time

Summary of ActivitiesPursuant to the revamped Kuala Lumpur Stock Exchange Listing Requirements, public companies are required to adhere to basic principles and best practices of corporate governance. In line with the above, the following issues has come under the discussion and review of the audit committee meetings:-

a) The audited Financial Statements of the Group and the Company prior to the submission to the Board for their consideration and approval;

b) The quarterly unaudited financial result announcements before submission to the Board for their consideration and approval;

c) External auditors’ scope of work and audit plans for the year;d) The audit plans for the Group prepared by the internal auditor;e) The internal audit reports, recommendations and management’s response; andf) Better communication between the management and the audit committee and/or the board of directors;

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AUDIT COMMITTEE

2003 2002 2001 2000 1999

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

Turnover 217,439 228,308 251,717 287,418 293,201

(Loss)/Profit before taxation (22,872) (24,566) (18,976) (15,628) (16,497)

(Loss)/Profit after taxation before minority interest (21,046) (24,566) (19,216) (15,853) (16,604)

(Loss)/Profit attributable to shareholders (20,030) (23,451) (18,303) (15,234) (16,435)

Net dividend - - - - -

Balance Sheets

Fixed assets 13,567 21,143 27,560 34,659 41,313

Investment 1,198 1,034 2,835 2,974 2,976

Expenditure carried forward - 738 1,508 2,294 3,187

Current assets 53,613 60,037 74,641 110,853 125,502

Total assets 68,378 82,952 106,544 150,780 172,978

Current Liabilities (101,450) (92,428) (70,449) (101,702) (103,870)

Long term and deferred liabilities - (2,550) (23,555) (22,345) (26,653)

Total net assets (33,072) (12,026) 12,540 26,733 42,455

Financed By:

Share Capital 20,479 20,479 20,479 20,121 20,012

Capital reserves 15,262 15,262 15,262 15,190 15,168

(Accumulated loss) / Retained profit (69,490) (49,460) (26,009) (12,299) 2,935

Shareholders’ funds (33,749) (13,719) 9,732 23,012 38,115

Minority interest 677 1,693 2,808 3,721 4,340

(33,072) (12,026) 12,540 26,733 42,455

STATISTICS

Earnings per share (sen) (97.81) (114.51) (89.72) (75.94) (82.13)

Gross dividend per share (%) - - - - -

Net tangible assets backing per share (RM) (1.65) (0.71) 0.40 1.03 1.75

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FIVE - YEAR GROUP FINANCIAL HIGHLIGHTS

The directors present their report together with the audited financial statements of the Group and of the Company for thefinancial year ended 28 February 2003.

PRINCIPAL ACTIVITIESThe principal activity of the Company is that of an investment holding company.

The principal activities of the subsidiaries are the operation of supermarkets and departmental stores; operation of bakeriesand food court; operation of specialty retail stores; and retailing of electrical and electronic household appliances.

There have been no significant changes in the nature of these activities during the financial year except that:(i) a subsidiary, Aktif-Sunway Sdn. Bhd., has ceased the operation of supermarkets.(ii) a subsidiary, Retail Commercio (M) Sdn. Bhd., has changed its principal activity from the provision of factoring services to

operation of specialty retail stores.

RESULTSGroup Company

RM RMLoss after taxation (21,046) (38)Minority interests 1,016 -Loss for the year (20,030) (38)

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

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were notsubstantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDThe directors do not recommend any dividend for the year ended 28 February 2003.

DIRECTORSThe names of the directors of the Company in office since the date of the last report and at the date of this report are:

Chan Teik HuatDato' Haji Man Bin Haji MatSharifah Noor Binti Syed Abdul Rahman Al-AttasFaris Bin Abdullah@Patrick Chen Yee Ching (appointed on 25 April 2003)Susan Low Mei Wan (resigned on 24 April 2003)Lim Siew Kim (resigned on 25 April 2003)Paw Swee Choo (Alternate director to Lim Siew Kim) (resigned on 25 April 2003)

DIRECTORS' BENEFITSNeither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which theCompany was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures ofthe Company or any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive benefits (other than benefitsincluded in the aggregate amount of emoluments received or due and receivable by the directors shown in the Note 7 to thefinancial statements or the fixed salary of a full-time employee of the Company), by reason of a contract made by the Companyor a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantialfinancial interest, except as disclosed in Note 29 to the financial statements.

DIRECTORS' INTERESTSAccording to the register of directors' shareholdings, the interests of directors in office at the end of the financial year in sharesin the Company and its related corporations during the financial year were as follows:

Number of Ordinary Shares of RM1 Each1 March 28 February

2002 Bought Sold 2003The Company

Direct interestLim Siew Kim 1,518,784 - - 1,518,784Chan Teik Huat 4,000 - - 4,000Dato' Haji Man Bin Haji Mat 7,000 - - 7,000Paw Swee Choo 1,000 - - 1,000

Indirect interestLim Siew Kim 6,908,464 - 663,000 6,245,464Chan Teik Huat 6,908,464 - 663,000 6,245,464

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

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DIRECTORS' REPORT

EMPLOYEE SHARE OPTION SCHEME ("ESOS")The Company's ESOS which was in force for a period of 5 years from 29 December 1997 expired on 28 December 2002.There was no exercise of the options during the year in respect of the option brought forward from the previous financialyear of 1,519,000, to take up unissued new ordinary shares of RM1.00 each at an option price of RM1.20.

OTHER STATUTORY INFORMATION(a) Before the income statements and balance sheets of the Group and of the Company were made out, the directors

took reasonable steps:(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of

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

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

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

Company inadequate to any substantial extent; and(ii) the values attributed to the current assets in the financial statements of the Group and of the Company

misleading.

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

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report orfinancial statements of the Group and of the Company which would render any amount stated in the financialstatements misleading.

(e) As at the date of this report, there does not exist:(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year

which secures the liabilities of any other person; or(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

(f) In the opinion of the directors:(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of

twelve months after the end of the financial year which will or may affect the ability of the Group or of theCompany to meet their obligations when they fall due; and

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

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

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

CHAN TEIK HUAT FARIS BIN ABDULLAH@PATRICK CHEN YEE CHING

Kuala Lumpur, Malaysia30 June 2003

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DIRECTORS' REPORT

Group Company

2003 2002 2003 2002

Note RM'000 RM'000 RM'000 RM'000

Revenue 4 217,439 228,308 8 10

Cost of sales (174,855) (183,082) - -

Gross profit 42,584 45,226 8 10

Other operating income 4,410 4,578 - -

Gain on disposal of discontinuing operations 5 652 - - -

Administrative expenses (58,938) (63,874) (30) (31)

Distribution costs (6,723) (5,700) - -

Other operating expenses (2,801) (2,609) (54) (37)

Loss from operations 6 (20,816) (22,379) (76) (58)

Finance costs 8 (2,055) (2,186) - -

Share of results from associates (1) (1) - -

Loss before taxation (22,872) (24,566) (76) (58)

Taxation 9 1,826 - 38 -

Loss after taxation (21,046) (24,566) (38) (58)

Minority interests 1,016 1,115 - -

Net loss for the year (20,030) (23,451) (38) (58)

Basic loss per share (sen) 10 (97.81) (114.51)

For the Year Ended 28 February 2003

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

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INCOME STATEMENTS

Group Company2003 2002 2003 2002

Note RM'000 RM'000 RM'000 RM'000NON-CURRENT ASSETS

Property, plant and equipment 11 13,567 21,143 - -

Investments in subsidiaries 12 - - 18,415 18,415

Investments in associates 13 - 205 - -

Other investments 14 1,198 829 806 806

Deferred expenditure 15 - 738 - -

14,765 22,915 19,221 19,221

CURRENT ASSETS

Inventories 16 25,406 32,381 - -

Trade receivables 17 752 347 - -

Other receivables 18 13,161 14,382 7,050 7,098

Cash and bank balances 19 14,294 12,927 10 9

53,613 60,037 7,060 7,107

CURRENT LIABILITIES

Borrowings 20 21,519 23,912 - -

Trade payables 22 41,387 45,191 - -

Other payables 23 32,945 17,703 19 16

Tax payable 192 215 73 73

Dividend payable 24 5,407 5,407 - -

101,450 92,428 92 89

NET CURRENT(LIABILITIES)/ASSETS (47,837) (32,391) 6,968 7,018

(33,072) (9,476) 26,189 26,239

FINANCED BY :Share capital 25 20,479 20,479 20,479 20,479

Reserves 26 (54,228) (34,198) 5,710 5,748

Shareholders' equity (33,749) (13,719) 26,189 26,227

Minority interests 677 1,693 - -

(33,072) (12,026) 26,189 26,227

Borrowings 20 - 319 - -

Deferred taxation 27 - 2,231 - 12

- 2,550 - 12

(33,072) (9,476) 26,189 26,239

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BALANCE SHEETSAs At 28 February 2003

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

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

GROUP

Non-Distributable

Share Share Merger Reserve on Accumulated

Capital Premium Reserve Consolidation Losses Total

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

At 1 March 2001 20,479 4,371 10,833 58 (26,009) 9,732

Loss for the year - - - - (23,451) (23,451)

At 28 February 2002 20,479 4,371 10,833 58 (49,460) (13,719)

Loss for the year - - - - (20,030) (20,030)

At 28 February 2003 20,479 4,371 10,833 58 (69,490) (33,749)

COMPANY

Non-

Distributable Distributable

Share Share Retained

Capital Premium Profits Total

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

At 1 March 2001 20,479 4,371 1,435 26,285

Loss for the year - - (58) (58)

At 28 February 2002 20,479 4,371 1,377 26,227

Loss for the year - - (38) (38)

At 28 February 2003 20,479 4,371 1,339 26,189

STATEMENTS OF CHANGES IN EQUITYFor the Year Ended 28 February 2003

Group Company

2003 2002 2003 2002

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

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before taxation (22,872) (24,566) (76) (58)

Adjustment for :

Amortisation of deferred expenditure 738 770 - -

Bad debts written off 9 - - -

Depreciation of property, plant and equipment 6,522 6,946 - -

Property, plant and equipment written off 102 - - -

Loss on disposal of property, plant and equipment 6 11 - -

Provision for doubful debts 876 - - -

Impairment of property, plant and equipment 200 - - -

Impairment of investments 380 1,800 - -

Provision for slow moving inventories 544 - - -

Dividend income (8) (7) (8) (7)

Interest income (78) (47) - (3)

Gain on disposal of discontinuing operation (Note 5) (652) - - -

Interest expense 2,055 2,186 - -

Share of results from associates 1 1 - -

Write back of management fees payable - (1,697) - -

Write back of overprovision for rental payable - (77) - -

Operating loss before working capital changes (12,177) (14,680) (84) (68)

Decrease in inventories 5,135 10,940 - -

(Increase)/decrease in receivables (69) 5,030 48 (370)

Increase/(decrease) in payables 11,438 4,328 3 (4)

Cash generated from /(used in) operations 4,327 5,618 (33) (442)

Interest paid (2,055) (2,186) - -

Taxes (paid)/recovered (428) (113) 26 (11)

Net cash generated from/(used in) operating activities 1,844 3,319 (7) (453)

CASH FLOW STATEMENTSFor the Year Ended 28 February 2003

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

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

Group Company

2003 2002 2003 2002

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

CASH FLOWS FROM INVESTING ACTIVITIES

Dividend received 8 7 8 7

Interest received 78 47 - 3

Proceeds from disposal of property, plant and equipment 56 4 - -

Proceeds from disposal of discontinued operation (Note 5) 3,500 - - -

Purchase of investments (545) - - -

Purchase of property, plant and equipment (862) (544) - -

Net cash generated from/(used in) investing activities 2,235 (486) 8 10

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of term loans (933) (933) - -

Repayment of revolving credits (300) (500) - -

Repayment of hire purchase payables (72) (114) - -

Net cash used in financing activities (1,305) (1,547) - -

NET INCREASE/(DECREASE) IN

CASH AND CASH EQUIVALENTS 2,774 1,286 1 (443)

CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 11,520 10,234 9 452

CASH AND CASH EQUIVALENTS

AT END OF YEAR (NOTE 19) 14,294 11,520 10 9

CASH FLOW STATEMENTSFor the Year Ended 28 February 2003

1. Corporate InformationThe principal activity of the Company is that of an investment holding company.

The principal activities of the subsidiaries are the operation of supermarkets and departmental stores; operation ofbakeries and food court; operation of specialty retail stores; and retailing of electrical and electronic householdappliances.

There have been no significant changes in the nature of these activities during the financial year except that:(i) a subsidiary, Aktif-Sunway Sdn. Bhd., has ceased the operation of supermarkets.(ii) a subsidiary, Retail Commercio (M) Sdn. Bhd., has changed its principal activity from the provision of factoring

services to operation of specialty retail stores.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Second Board of the Kuala Lumpur Stock Exchange. The registered office of the Company is located at Level 10,Grand Seasons Avenue, No 72, Jalan Pahang, 53000 Kuala Lumpur.

The numbers of employees in the Group at the end of the financial year were 934 (2002: 1,055). There was noemployee in the Company during the year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of thedirectors on 30 June 2003.

2. Fundamental Accounting ConceptAs at 28 February 2003, the Group recorded negative shareholders fund of RM33.7 million and its current liabilitiesexceeded its current assets by RM47.8 million.

The financial statements of the Group and the Company have been prepared on a going concern basis which assumes that the Group and the Company will continue in operational existence for the foreseeable future and having adequate funds to meet their obligations as and when they fall due. The validity of this assumption isdependent upon the continued support from the shareholders, bankers and creditors of the Group and the Companyand the formulation of a tenable restructuring scheme as well as its successful and timely implementation.

The financial statements of the Group and the Company do not include any adjustments relating to the recoverabilityand reclassification of recorded assets amounts or to amounts and classification of liabilities that may be necessaryif the Company and the Group is unable to continue as a going concern.

As the directors are optimistic with regard to the formulation and outcome of the restructuring scheme, they believethat it is appropriate for these financial statements of the Company and of the Group to be prepared on a goingconcern basis.

3. Significant Accounting Policies(a) Basis of Preparation

The financial statements of the Group and of the Company have been prepared under the historical costconvention and comply with the provisions of the Companies Act, 1965 and applicable Approved AccountingStandards in Malaysia.

(b) Basis of Consolidation(i) Subsidiaries

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

Subsidiaries are consolidated using the acquisition method of accounting except for Aktif Lifestyle StoresSdn. Bhd. which is consolidated on the merger method of accounting in accordance with MalaysianAccounting Standard No. 2, Accounting for Acquisitions and Mergers.

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

(i) Subsidiaries (Cont’d)Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. The assets and liabilities of a subsidiary are measured at their fair value at the date of acquisition and these value are reflected in the consolidated balance sheet. The difference between the cost of an acquisition and 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 good will or negative goodwill arising on consolidation.

Under the merger method of accounting, the results of the subsidiary company are included in the consolidated financial statements as if the subsidiary has been owned by the Company throughout the year in which it has been in operations. The difference between the nominal value of the shares issued and the attributable nominal value of the subsidiary company's share capital is accounted for as merger reserve or deficit, as appropriate.

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 gain or loss on disposal of a subsidiary company is the difference between net disposal proceeds and the Group's share of its net assets together with any unamortised balance of goodwill which were not previously recognised in the consolidated income statement.

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

(ii) AssociatesAssociates are those companies in which the Group has a long term equity interest and where it exercises significant influence over the financial and operating policies.

Investments in associates are accounted for in the consolidated financial statements by the equity method ofaccounting based on the audited or management financial statements of the associates. Under the equitymethod of accounting, the Group's share of profits less losses of associates during the year is included in theconsolidated income statement. The Group's interest in associates is carried in the consolidated balance sheetat cost plus the Group's share of post-acquisition retained profits or accumulated losses and other reserves aswell as goodwill on acquisition.

Unrealised gains on transactions between the Group and the associates are eliminated to the extent of theGroup's interest in the associates. Unrealised losses are eliminated unless cost cannot be recovered.

(c) Investment in Subsidiaries and AssociatesThe Company's investments in subsidiaries and associates are stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(k).

On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is recognised in the income statement.

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

(d) Property, Plant and Equipment and DepreciationProperty, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(k).

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

Leasehold improvements 8% to 15%Plant and machinery 10%Furniture and equipment 12%Fixtures and fittings 12%Motor vehicles 20%Buildings 2%

No depreciation is provided for capital work-in-progress.

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

(e) InventoriesInventories, which consist mainly of trading merchandise, are stated at the lower of cost and net realisable value.

Cost comprises the weighted average cost of merchandise arrived at using the Retail Inventory method.Weighted average cost includes related charges incurred in purchasing such merchandise.

Net realisable value represents the estimated selling price less all estimated costs to be incurred in marketing,selling and distribution.

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

(g) LeasesA lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incident to ownership. All other leases are classified as operating leases.

(i) Finance leasesAssets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower oftheir fair values and the present value of the minimum lease payments at the inception of the leases, lessaccumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factorused is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company’sincremental borrowing rate is used.

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

The depreciation policy for leased assets is consistent with that for depreciable property, plant andequipment as described in Note 3(d).

(ii) Operating leasesOperating lease payments are recognised as an expense in the income statement on a straight-line basisover the term of the relevant lease.

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

(h) Provisions for LiabilitiesProvisions for liabilities are recognised when the Group has a present obligation as a result of a past event andit is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date andadjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

(i) Deferred TaxDeferred taxation is provided for by the liability method for all timing differences except where there is reasonableevidence that these timing differences will not reverse in the foreseeable future. Deferred tax benefits are onlyrecognised when there is a reasonable expectation of realisation in the near future.

(j) Revenue RecognitionRevenue is recognised when it is probable that the economic benefits associated with the transaction will flowto the enterprise and the amount of the revenue can be measured reliably.

(i) Sale of goodsRevenue relating to sale of goods is recognised net of sales taxes and discounts upon the transfer of risksand rewards.

(ii) Dividend incomeDividend income is recognised when the right to receive payment is established.

(iii) Revenue from factoring servicesService fees upon acceptance of the factored invoices and initial payment charges are recognised on anaccrual basis.

(iv) Interest incomeInterest is recognised on a time proportion basis that reflects the effective yield on the asset.

(k) Impairment of AssetsAt each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication of impairment. If any such indication exists, impairment is measured by comparing thecarrying values of the assets with their recoverable amounts. Recoverable amount is the higher of net sellingprice and value in use, which is measured by reference to discounted future cash flows.

An impairment loss is recognised as an expense in the income statement immediately. Reversal of impairmentlosses recognised in prior years is recorded when the impairment losses recognised for the asset no longer existor have decreased.

(l) Financial InstrumentsFinancial instruments are recognised in the balance sheet when the Group has become a party to the contractualprovisions of the instrument.

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

(i) Other Non-Current InvestmentsNon-current investments other than investments in subsidiaries and associates are stated at cost lessimpairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(k).

On disposal of an investment, the difference between net disposal proceeds and its carrying amount is recognised in the income statement.

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

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

(iii) Trade PayablesTrade payables are stated at cost which is the fair value of the consideration to be paid in the future forgoods and services received.

(iv) Interest-Bearing BorrowingsInterest-bearing bank loans are recorded at the amount of proceeds received, net of transaction costs. All borrowing costs are recognised as an expense in the income statement as an expense in the periodin which they are incurred.

(iv) Equity InstrumentsOrdinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in theperiod in which they are declared.

(m) Affiliated CompanyAffiliated company is a company, not being a subsidiary or an associate in which one or more of the directors have a significant equity interest or exercise significant influence.

4. RevenueRevenue of the Group and of the Company consists of the following:

Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000Operation of supermarkets,

departmental stores and bakeries 217,428 228,162 - -

Dividend income 8 10 8 10

Factoring services 3 136 - -217,439 228,308 8 10

5. Discontinuing OperationsDuring the year, one of the subsidiary company, Aktif Sunway Sdn. Bhd. ceased its supermarket operations.Subsequently, the subsidiary company entered into a sale agreement on 24 January 2003 to dispose of itsinventories and plant and equipment for a total cash consideration of RM3,500,000. The disposal was completed onthat date.

The revenue and results of the operations were as follows:Financial Financial

period yearended ended

24.1.2003 28.2.2002RM'000 RM'000

Revenue 9,292 11,626Operating costs (9,827) (11,855)Loss from operations (535) (229)Finance costs (161) (266)Loss before taxation (696) (495)Taxation - (58)Loss after taxation (696) (553)

The effect of the disposal of the operations on the results of the Group is as follows:24.1.2003

RM'000Plant and equipment 1,552Inventories 1,296

2,848Gain on disposal 652Total consideration 3,500Satisfied by cash 3,500

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

6. Loss from OperationsLoss from operations is stated after charging/(crediting):

Group Company2003 2002 2003 2002

RM'000 RM'000 RM'000 RM'000Staff costs 16,809 17,363 - -

Amortisation of deferred expenditure 738 770 - -

Auditors' remuneration

- current year 96 86 3 3

- overprovision in prior year - (4) - -

Bad debts written off 9 - - -

Depreciation of property, plant and equipment 6,522 6,946 - -

Property, plant and Equipment written off 102 - - -

Directors' remuneration (Note 7) 180 176 10 6

Loss on disposal of property, plant and equipment 6 11 - -

Rental of equipment 23 46 - -

Rental of premises 25,511 29,588 - -

Provision for doubtful debts 876 - - -

Impairment of property, plant and equipment (Note 11) 200 - - -

Impairment of investments 380 1,800 - -

Provision for slow moving inventories 544 - - -

Dividend income (8) (7) (8) (7)

Income from rental of premises (2,293) (1,986) - -

Interest income from

- short-term deposits (73) (47) - (3)

- related companies (5) - - -

Write back of management fees payable - (1,697) - -

Write back of overprovision for rental payable - (77) - -

Doubtful debts recovered (1,311) - - -

7. Directors' RemunerationGroup Company

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

Directors of the CompanyExecutive:

Salaries and other emoluments 162 162 - -

Benefits-in-kind 8 8 - -

170 170 - -

Non-executive:

Fees 10 6 10 6

Total 180 176 10 6

Analysis excluding benefits-in-kind:

Total executive director's remuneration excluding benefits-in-kind 162 162 - -

Total non-executive directors' remuneration excluding benefits-in-kind 10 6 10 6

Total directors' remuneration excluding benefits-in-kind 172 168 10 6

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

7. Directors' Remuneration (Cont’d)The number of directors of the Company whose total remuneration during the year fell within the following bands isanalysed below:

Number of Directors2003 2002

Executive directors:

RM150,000 - RM200,000 1 1

Non-executive directors:

Below RM50,000 2 2

8. Finance Costs2003 2002

RM'000 RM'000

Overdraft 62 47

Term loans 1,780 1,950

Other bank borrowings 202 165

Hire purchase contracts 11 24

2,055 2,186

9. TaxationGroup Company

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

Tax expense for the year:

Under/(over) provided in prior years 405 - (26) -

Deferred taxation overprovided

in prior years (Note 27) (2,231) - (12) -

(1,826) - (38) -

There is no tax charge for the Group for the current financial year as the Group is in a tax loss position. The tax expense for the Group is in respect of additional assessment on prior years, arising from non-deductibility of certain income.

2003 2002RM'000 RM'000

Tax Losses:

Tax savings recognised during the year arising from:

Utilisation of tax losses brought forward from previous years 360 -

Unutilised tax losses carried forward 17,235 13,504

Unutilised capital allowances carried forward 3,949 3,317

10.Basic Loss Per ShareBasic loss per share is calculated by dividing the net loss for the year by the number of ordinary shares in issueduring the financial year.

Group2003 2002

RM'000 RM'000Net loss for the year 20,030 23,451

Number of ordinary shares in issue

shares in issue ('000) 20,479 20,479

Basic loss per share (sen) 97.81 114.51

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

11.Property, Plant and Equipment

GROUP Furniture Capital

Leasehold Plant and and Fixture Motor work-in-Improvements Machinery Equipment and Fittings Vehicles Buildings progress Total

Cost RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At 1 March 2002 25,267 6,894 19,514 14,858 1,024 209 41 67,807

Additions - - 403 402 57 - - 862

Disposals (1,076) (1,926) (400) (769) (98) - - (4,269)

Written off - - (275) - - - - (275)

Reclassification - - 275 (275) - - - -

At 28 February 2003 24,191 4,968 19,517 14,216 983 209 41 64,125

Accumulated Depreciation and Impairment Loss

At 1 March 2002 21,451 3,665 11,328 9,287 918 15 - 46,664

Charge for the year 1,794 628 2,312 1,687 97 4 - 6,522

Disposals (800) (1,022) (250) (489) (94) - - (2,655)

Written off - - (173) - - - - (173)

Impairment losses 148 - 52 - - - - 200

Reclassification - - 157 (157) - - - -

At 28 February 2003 22,593 3,271 13,426 10,328 921 19 - 50,558

Net Book Value

At 28 February 2003 1,598 1,697 6,091 3,888 62 190 41 13,567

At 28 February 2002 3,816 3,229 8,186 5,571 106 194 41 21,143

Depreciation chargefor 2002 2,037 660 2,300 1,774 171 4 - 6,946

Included in property, plant and equipment are motor vehicles and furniture and equipment acquired under hire purchasecontracts with an aggregate net book value of RM57,600 (2002:RM271,972).

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

12. Investments in SubsidiariesCompany

2003 2002RM RM

Unquoted shares, at cost 18,415 18,415

The details of the subsidiaries, which are all incorporated in Malaysia, are as follows:

Name of Subsidiaries Equity Interest Held (%) Principal2003 2002 Activities

Aktif Lifestyle Stores Sdn. Bhd. 100 100 Operation of

supermarkets and

departmental stores

• Aktif-Sunway Sdn. Bhd. 80 80 Operation of

departmental stores

• Retail Commercio (M) Sdn. Bhd. 100 100 Operation of specialty

retail stores

• Dolce Carlotta (M) Sdn. Bhd. 80 80 Dormant

• Octon Electronics Sdn. Bhd. 64.5 64.5 Retailing of electrical

and electronic

household appliances

• Tioman Duty Free Sdn. Bhd. 100 100 Dormant

• Aktif Lifestyle Duty Free Sdn. Bhd. 100 100 Dormant

• Sunbeam Bakeries Sdn. Bhd. 100 100 Operation of bakeries

and food courts

• Subsidiary companies held through Aktif Lifestyle Stores Sdn. Bhd.A

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3

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

13. Investments in Associates

Group 2003 2002

RM RMShare of net tangible assets 204 205

Less: Impairment losses (204) -

- 205

The Group's investment in associated companies is analysed as follows:

Cost of investments 1,965 1,965

Premium on acquisition transferred to reserves (1,752) (1,752)

Share of post acquisition losses (9) (8)

204 205

Less: Impairment losses (204) -

- 205

The details of the associated companies, which are all incorporated in Malaysia, are as follows:

Name of Associates Equity Interest Held (%) Principal

2003 2002 Activities

* Hopemark (M) Sdn. Bhd. 49 49 Investment holding

* Aktif Lifestyle Promotion Sdn. Bhd. 49 49 Dormant

* Poplar Textiles Sdn. Bhd. 49 49 Dormant

* Associated companies held through Aktif Lifestyle Stores Sdn. Bhd.

14. Other InvestmentsCompany Group

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

Quoted share

- At cost 1,374 829 806 806

- Less: Impairment losses (176) - - -

1,198 829 806 806

Unquoted shares

- At cost 1,800 1,800 - -

- Less: Impairment losses (1,800) (1,800) - -

- - - -

Total 1,198 829 806 806

Market value of quoted shares 1,136 519 741 500

15. Deferred ExpenditureGroup

2003 2002RM'000 RM'000

New brand development:

- At beginning of year 738 1,508

- Amortisation during the year (738) (770)

- At end of year - 738

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

16. InventoriesGroup

2003 2002RM'000 RM'000

Trade merchandise, at net realisable value 25,406 32,381

The cost of inventories recognised as an expense during the financial year in the Group amounted toRM174,747,000 (2002: RM182,839,000).

17. Trade ReceivablesGroup

2003 2002RM'000 RM'000

Trade receivables 863 458

Factored receivables - 27,264

Retention sums - (11,416)

Interest in suspense - (7,548)

863 8,758

Less: Provision for doubtful debts (111) (8,411)

752 347

The Group's normal trade credit term ranges from 2 to 20 days. Other credit terms are assessed and approved ona case-by-case basis.

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

18. Other ReceivablesGroup Company

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

Due from subsidiaries - - 7,022 7,096

Due from associates 522 520 - -

Due from affiliated companies 1,122 2,196 - -

Deposits 8,486 8,405 1 1

Non-merchandise inventories 1,095 1,098 - -

Prepayments 935 914 26 -

Tax recoverable 177 93 - -

Sundry receivables 1,700 1,156 1 1

14,037 14,382 7,050 7,098

Less: Provision for doubtful debts (876) - - -

13,161 14,382 7,050 7,098

Factored receivables 25,953 - - -

Retention sums (11,416) - - -

Interest in suspense (7,548) - - -

6,989 - - -

Less: Provision for doubtful debts (6,989) - - -

- - - -

Total 13,161 14,382 7,050 7,098

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

18. Other Receivables (Cont’d)The amount due from affiliated companies is unsecured, has no fixed term of repayment and bears interest at 10% (2002: 10%) per annum.

Affiliated companies refer to companies within the Metroplex group of companies.

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

The amounts due from subsidiaries, associates and affiliated companies are unsecured, interest-free and have nofixed term of repayment.

19. Cash and Cash EquivalentsGroup Company

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

Cash on hand and at banks 7,394 2,927 10 9

Deposit with licensed banks 6,900 10,000 - -

Cash and bank balances 14,294 12,927 10 9

Less: Bank overdrafts (Note 20) - (1,407) - -

Cash and cash equivalents 14,294 11,520 10 9

20. BorrowingsGroup

2003 2002RM'000 RM'000

Short Term BorrowingsUnsecured:

Term loans 20,311 20,933

Bank overdrafts (Note 19) - 1,407

Revolving credits 1,200 1,500

Hire purchase payables (Note 21) 8 72

21,519 23,912

Long Term BorrowingsUnsecured:

Term loans - 311

Hire purchase payables (Note 21) - 8

- 319

Total BorrowingsTerm loans 20,311 21,244

Bank overdrafts - 1,407

Revolving credits 1,200 1,500

Hire purchase payables (Note 21) 8 80

21,519 24,231

Maturity of borrowings:

(excluding hire purchase)

Within one year 21,511 23,840

More than 1 year and less than 2 years - 311

21,511 24,151

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

20. Borrowings (Cont’d)The average effective interest rates at the balance sheet date for borrowings, excluding hire purchase payables, were as follows:

2003 2002% %

Bank overdrafts 9.25 9.25

Revolving credits 7.30 7.30

Term loans 8.90 8.90

The bank overdrafts and revolving credits are guaranteed by the Company.The Group has defaulted in the repayment of its term loans and these borrowings are expected to be restructured.

21. Hire Purchase PayablesGroup

2003 2002RM'000 RM'000

Minimum lease payments:Not later than 1 year 9 87

Later than 1 year and not later than 2 years - 9

9 96

Less: Future finance charges (1) (16)

Present value of finance lease liabilities 8 80

Present value of finance lease liabilities:Not later than 1 year 8 72

Later than 1 year and not later than 2 years - 8

8 80

Analysed as:Due within 12 months (Note 20) 8 72

Due after 12 months (Note 20) - 8

8 80

The hire purchase liabilities bore interest at the balance sheet date of between 6% to 6.15% (2002: 6% to 6.15%)per annum.

22.Trade PayablesThe normal trade credit terms granted to the Group range from 30 to 90 days.

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

23.Other PayablesGroup Company

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

Due to subsidiaries - - 4 2

Due to affiliated companies 18,759 8,279 - -

Sundry payables 7,004 5,728 2 2

Accruals 6,592 2,356 13 12

Deposits 590 607 - -

Amount due to a licensed bank - 733 - -

32,945 17,703 19 16

The amounts due to subsidiaries and affiliated companies are unsecured, have no fixed repayment term and bear interest at 10% (2002: 10%) per annum, arose mainly from intercompany advances, management fees, rental of premises, expenses paid on behalf, concessionaire fees and trade transactions which are negotiated on abasis determined with the Group.

Affiliated companies refer to companies within the Metroplex group of companies.

24.Dividend PayableDuring the financial year ended 28 February 1996, the directors of a subsidiary company, Aktif Lifestyle Stores Sdn. Bhd. ("ALS"), declared a dividend of 46.08%, less tax at 30%, amounting to RM10,000,000 to be paid after the financial year ended 28 February 1998 to ALS' then existing shareholders prior to it being acquired by the Company.The dividend has not yet been paid by ALS as at 28 February 2003

The portion of the above dividend payable to Yaohan Japan Corporation ("YJC"), one of the then existingshareholders of ALS, was RM4,593,548.

ALS has made a claim against YJC amounting to approximately RM25,943,000 for certain losses incurred by ALS between 1990 and 1997 when YJC was managing its operations. In view of the said claim, the directors ofALS are of the opinion that the above net dividend of RM4,593,548 is no longer payable to YJC and the same has accordingly been written back to the accumulated loss of ALS in the financial year ended 28 February 2001.

Included in the remaining RM5,406,452 dividend payable are amount payable to certain directors of Aktif Lifestyle Corporation Berhad and affiliated companies of RM1,070,968 and RM3,964,516 respectively.

25.Share CapitalNumber of Ordinary AmountShare of RM1 Each

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

Authorised:

At 1 March / 28 February 200,000 200,000 200,000 200,000

Issued and fully paid:

At 1 March / 28 February 20,479 20,479 20,479 20,479

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

26.Share Capital

Group Company

2003 2002 2003 2002

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

Reserves are made up :

Distributable Reserve

(Accumulated losses)/Retained profits (69,490) (49,460) 1,339 1,377

Non-distributable Reserves

Share premium 4,371 4,371 4,371 4,371

Merger reserve 10,833 10,833 - -

Reserve on consolidation 58 58 - -

15,262 15,262 4,371 4,371

(54,228) (34,198) 5,710 5,748

Subject to approval by the Inland Revenue Board, the Company has sufficient tax credits under Section 108 of the

Income Tax Act, 1967 to distribute all of its retained profits as dividends without having to incur any additional

tax liability.

27.Deferred Taxation

Group Company

2003 2002 2003 2002

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

At 1 March 2002 2,231 2,231 12 12

Overprovided in prior years (Note 9) (2,231) - (12) -

At 28 February 2003 - 2,231 - 12

28. Operating Lease Commitments

Future minimum rentals under non-cancellable operating leases are as follows:

Group

2003 2002

RM'000 RM'000

Amount repayable:

Within 1 year 18,212 5,479

Between 2 to 5 years 28,190 7,527

After 5 years - 3,296

46,402 16,302

In addition, a subsidiary company has a lease commitment, based on 5.85% of monthly gross revenue, which

expires in June 2003. From 1 July 2003 to 31 December 2005, the lease commitment based on 5.85% of monthly

gross revenue or RM239,587, whichever is higher.

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

29. Significant Related Party Transactions

Significant transactions undertaken with related parties during the financial year are as follows:

Group

2003 2002

RM'000 RM'000

With affiliated companies

Rental payable on premises to:

- Metroplex Holdings Sdn. Bhd. (10,292) (11,001)

- Konsortium Enterprises Sdn. Bhd. (15) (36)

- Prominview Sdn. Bhd. (141) (135)

Service charge on premises payable to Metroplex Holdings Sdn. Bhd. (2,592) (2,589)

Professional fees payable to Binalita Sdn. Bhd. (72) (72)

Sales of merchandise to:

- Ekabina Sdn. Bhd. 39 23

- Konsortium Enterprises Sdn. Bhd. 12 17

- Metroplex Berhad 3 35

- Metroplex Holdings Sdn. Bhd. 14 26

- Metroplex Project Management Sdn. Bhd. - 16

- Metroplex Trading Sdn. Bhd. - 160

- Prominview Sdn. Bhd. 9 2

- Others - 9

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 those obtainable

in transactions with unrelated parties.

30. Contingent Liabilities (Unsecured)

(a) Corporate guarantees

Group

2003 2002

RM'000 RM'000

Unsecured:

Guarantees to banks on behalf of a subsidiary company 21,515 29,178

(b) Litigation

As disclosed in the financial statements of the Group for the year ended 28 February 2002, a subsidiary

company is being sued for a total sum of RM9,170,000 for terminating a lease agreement. The subsidiary

company's solicitors are of the opinion that the claim is without merit as the lease is void and/or deemed

terminated by reason of frustration and/or misrepresentation by the landlord. The Plaintiff has issued an

amended statement of claim to the Company for a revised total sum of RM19,483,000 and in response, the

subsidiary company has filed its defense and counter-claim. The case is now pending hearing by the court.AN

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

31. ComparativesComparatives are not disclosed for certain information relating to financial instruments as permitted by MASB 24: Financial Instruments: Disclosure and Presentation upon first application.

32. Financial Instruments(a) Financial Risk Management Objectives and Policies

The Group financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group's businesses whilst managing its interest rate, liquidity and credit risks. The Group operates within clearly defined guidelines that are approved by the Board and the Group's policyis not to engage in speculative transactions.

(b) Interest Rate RiskThe Group's primary interest rate risk relates to interest-bearing debt, as the Group had no substantiallong-term interest-bearing assets as at 28 February 2003. The investment in financial assets are mainly short term in nature and they are not held for speculative purposes but have been mostly placed in fixed depositswhich yield better returns than cash at bank.

(c) Liquidity RiskThe Group actively manages its debt maturity profile, operating cash flows and the availability of funding soas to ensure that all repayment and funding needs are met.

(d) Credit RiskCredit risk or the risk of counterparties defaulting is minimised and monitored via strictly limiting the Group’s associations to business partners with high creditworthiness. Trade receivables are monitored on an ongoingbasis via Group management reporting procedures. The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to anyfinancial instruments.

(e) Fair ValuesThe aggregate net fair values of financial assets and financial liabilities which are not carried at fair value on the balance sheet of the Group and of the Company as at the end of the financial year are represented asfollows:

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

32. (e) Fair Values (Cont’d)

Group Company

Carrying Carrying

Amount Fair Value Amount Fair Value

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

Financial Assets

At 28 February 2003:

Investment in quoted shares 1,198 1,136 806 741

Amount due from subsidiaries - - 7,022 *

Amount due from associates 2 * - -

Amount due from affiliated companies 1,122 * - -

Financial Liabilities

At 28 February 2003:

Amount due to subsidiaries - - 4 *

Amount due to affiliated companies 18,759 * - -

* It is not practical to estimate the fair values of amounts due to/from subsidiaries, associates and affiliated

companies due principally to a lack of fixed repayment terms and without incurring excessive costs.

The following methods and assumptions are used to estimate the fair values of the following classes of

financial instruments:

(i) Cash and Cash Equivalents, Trade and Other Receivables/Payables and Short Term Borrowings .

The carrying amounts approximate fair values due to the relatively short term maturity of these financial

instruments.

(ii) Marketable Securities

The fair value of quoted shares is determined by reference to stock exchange quoted market bid prices

at the close of the business on the balance sheet date.

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

33.Segment Information

Operation of supermarkets,

departmental stores, bakeries and Investment Factoring

specialty retail stores holding services Eliminations Consolidated

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000RevenueExternal sales 217,428 228,162 8 10 3 136 - - 217,439 228,308

Inter-segment sales 22,323 27,337 - - - - (22,323) (27,337)

Total revenue 239,751 255,499 8 10 3 136 (22,323) (27,337) 217,439 228,308

ResultSegment results (23,815) (21,125) (76) (58) 1,089 (135) 1,334 (1,061) (21,468) (22,379)

Gain on disposal of discontinued operation 652 -

Loss from operations (20,816) (22,379)

Finance cost (2,055) (2,186)

Share of results of associates (1) (1)

Taxation 1,826 -

Loss after taxation (21,046) (24,566)

Minority interests 1,016 1,115

Loss for the year (20,030) (23,451)

AssetsSegment assets 67,533 81,812 845 817 - 323 68,378 82,952

Investments in associates - 205 - - - - - 205

Consolidated total assets 68,378 82,952

LiabilitiesSegment liabilities 101,358 94,716 92 101 - 161 101,450 94,978

Consolidated total liabilities 101,450 94,978

Other InformationCapital expenditure 862 544 - - - - 862 544

Depreciation 6,522 6,913 - - - 33 6,522 6,946

Amortisation 738 770 - - - - 738 770

Impairment losses 580 - - - - - 580 -

Non-cash expenses other than depreciation, amortisation andimpairment losses 1,430 1,811 - - 102 - 1,532 1,811

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NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 28 February 2003

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We, CHAN TEIK HUAT and FARIS BIN ABDULLAH@PATRICK CHEN YEE CHING, being two of the directors of AKTIF

LIFESTYLE CORPORATION BERHAD, do hereby state that, in the opinion of the directors, the accompanying financial

statements set out on pages 16 to 39 are drawn up in accordance with applicable Approved Accounting Standards in

Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the

Group and of the Company as at 28 February 2003 and of the results and the cash flows of the Group and of the

Company for the year then ended.

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

CHAN TEIK HUAT FARIS BIN ABDULLAH@

PATRICK CHEN YEE CHING

Kuala Lumpur, Malaysia

30 June 2003

I, KOO LAI KIM, being the officer primarily responsible for the financial management of AKTIF LIFESTYLE CORPORATION

BERHAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 16 to 39 are

in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of

the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by

the abovenamed KOO LAI KIM

at Kuala Lumpur in the Federal Territory

on 30 June 2003

KOO LAI KIM

Before me,

STATEMENT BY DIRECTORSPURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965

PURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965STATUTORY DECLARATION

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We have audited the accompanying financial statements set out on pages 16 to 39. These financial statements are theresponsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements basedon our audit.

We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree 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 significantestimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believethat our audit provides a reasonable basis for our opinion.

As detailed in Note 24 to the financial statements, a subsidiary company made a claim against Yaohan JapanCorporation ("YJC") for certain past losses incurred and has written back in the financial year ended 28 February 2001net dividend of RM4,593,548 payable to YJC, a former shareholder of the subsidiary company.

We had in our auditors' report for the financial year ended 28 February 2001 and 2002 expressed our view that the appropriateness of writing back the dividend payable to YJC is dependent on the success of the subsidiary company inits claim against YJC and the agreement by YJC that the dividend payable be utilised as a partial set-off against theamount claimed. In respect of the financial year ended 28 February 2003, we remain unable to ascertain the outcomeand quantum of the claim by the subsidiary company against YJC and whether YJC will be agreeable to the set-off.

Except for the write back of the dividend payable of RM4,593,548 referred to above, in our opinion:(a) the financial statements have been properly drawn up in accordance with the provisions of the Companies

Act, 1965 and applicable Approved Accounting Standards in Malaysia so as to give a true and fair view of:(i) the financial position of the Group and of the Company as at 28 February 2003 and of the results and the cash

flows of the Group and of the Company for the year then ended; and(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and

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

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 theconsolidated financial statements and we have received satisfactory information and explanations required by us forthose purposes.

Our Auditors' Reports on the financial statements of the subsidiary companies were not subject to any qualification anddid not include any comment required to be made under Section 174(3) of the Companies Act, 1965 except for thefinancial statements of Aktif Lifestyle Stores Sdn. Bhd. with regards to the write back of the dividend payable directly tothe accumulated loss as detailed in Note 24.

Without qualifying our opinion, we draw attention to Note 2 to the financial statements. As at 28 February 2003, the Grouprecorded negative shareholders fund of RM33.7 million and its current liabilities exceeded its current assets by RM47.8million. These factors, along with others matters as set forth in Note 2 raise uncertainty as to the ability of the Companyand the Group to continue as a going concern. The ability of the Company and the Group to continue as a going concernis dependent on the formulation of a tenable restructuring scheme as well as its successful and timely implementation.

ERNST & YOUNG See Huey BengAF: 0039 1495/03/05(J)Chartered Accountants PartnerKuala Lumpur, Malaysia30 June 2003

REPORT OF THE AUDITORSTO THE MEMBERS OF AKTIF LIFESTYLE CORPORATION BERHAD

Authorised Share Capital : RM200,000,000

Issued & Fully Paid-up Capital : RM20,479,000

Class of Shares : Ordinary Shares of RM1.00 each

Voting Rights : One vote per ordinary share

Analysis of Shareholdings

Size of Holdings No. of % No. of %

Shareholders Shares held

Less than 100 18 1.34 385 0.00

100 to 1,000 777 57.64 776,110 3.79

1,001 to 10,000 500 37.09 1,679,505 8.20

10,001 to 100,000 39 2.89 983,190 4.80

100,001 to less than 5% of issued shares 9 0.67 3,627,810 17.71

5% and above of issued shares 5 0.37 13,412,000 65.50

TOTAL 1,348 100.00 20,479,000 100.00

SUBSTANTIAL SHAREHOLDERSAS AT 30 JUNE 2003 (as per Register of Substantial Shareholders)

No. of ordinary shares of RM1.00 each held

Name Direct % Indirect %

Madam Lim Siew Kim(2)

1,518,784 7.42 6,245,464(1) 30.50

Mr Chan Teik Huat(2)

4,000 0.02 6,245,464(1) 30.50

Metroplex Group Sdn Bhd 5,265,464 25.71 - -

Permodalan Nasional Berhad 3,028,000 14.79 - -

Yaohan Japan Corporation Berhad 1,999,752 9.76 - -

In-Receivership

AEH Capital Sdn Bhd 1,600,000 7.81 - -

Note:

(1) Deemed interested by virtue of their interests in Metroplex Group Sdn Bhd, Focus Park Sdn Bhd and Metroplex

Berhad.

(2) Madam Lim Siew Kim is the wife of Mr Chan Teik HuatAN

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STATEMENT OF SHAREHOLDINGSAS AT 30 JUNE 2003

LIST OF TOP 30 LARGEST SHAREHOLDERS AS AT 30 JUNE 2003

No. of % of

THIRTY LARGEST SHAREHOLDERS Shares held Issued Capital

1. METROPLEX GROUP SDN BHD 5,265,464 25.71

2. PERMODALAN NASIONAL BERHAD 3,028,000 14.79

3. YAOHAN JAPAN CORPORATION 1,999,752 9.76

In-Receivership

4. AEH CAPITAL SDN BHD 1,600,000 7.81

5. LIM SIEW KIM 1,518,784 7.42

6. FOCUS PARK SDN BHD 645,810 3.15

7. TAN CHING CHING 438,000 2.14

8. POO CHOO @ ONG POO CHOI 403,000 1.97

9. LIM SIEW SOOI 389,000 1.90

10. JF APEX NOMINEES (TEMPATAN) SDN BHD

Qualifier: Pledged Securities Account for Lee Chui Lan 384,000 1.88

11. ONG HAR HONG 383,000 1.87

12. SUNFAME ENTERPRISE SDN BHD 381,000 1.86

13. JF APEX NOMINEES (TEMPATAN) SDN BHD

Qualifier: Pledged Securities Account for Metroplex Berhad 316,000 1.54

14. TAN HAN CHUAN 288,000 1.41

15. NORAZIZAN BIN MD ALI 89,000 0.43

16. SUHAIMI BIN PADLUL 65,000 0.32

17. OOI KIM KHOON 61,000 0.30

18. HSBC NOMINEES (ASING) SDN BHD

Qualifier: AAB SG BR for Oriental Orchid Limited 52,000 0.25

19. PAB NOMINEE (TEMPATAN) SDN BHD

Qualifier: Pledged Securities Account for PTB Asset Management Sdn Bhd (BSNC – Jalan Ipoh) 43,000 0.21

20. CHUN POOH TIAM 35,000 0.17

21. CHONG THIAM THAI 35,000 0.17

22. KONG SAU KIAN 32,000 0.16

23. LEE YU LEONG 29,000 0.14

24. YEE FOOK LEONG 28,000 0.14

25. CHIN LEE TECK 27,000 0.13

26. CHEN CHONG ON 25,000 0.12

27. TAN CHENG YAN 22,000 0.11

28. SIN LEN MOI 22,000 0.11

29. SIAU FART JUM 20,000 0.10

30. JB NOMINEES (TEMPATAN) SDN BHD 20,000 0.10

Qualifier: Pledged Securities Account for Ch’ng Kee Guan

TOTAL 17,644,810 86.16

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STATEMENT OF SHAREHOLDINGSAS AT 30 JUNE 2003

STATEMENT OF DIRECTORS’ SHAREHOLDINGS (as per Register of Directors’ Shareholdings)

No. of ordinary shares of RM1.00 each held

Name Direct % Indirect %

Sharifah Noor Binti Syed Abdul Rahman Al-Attas - - - -

Chan Teik Huat 4,000 0.02 6,245,464(1) 30.50

Dato’ Haji Man Bin Haji Mat 7,000 0.03 - -

Faris Bin Abdullah @ Patrick Chen Yee Ching - - - -

Notes:

(1) Deemed interested by virtue of his interests in Metroplex Group Sdn Bhd, Focus Park Sdn Bhd and Metroplex Berhad.

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DIRECTORS’ SHAREHOLDINGSAS AT 30 JUNE 2003

Material Contracts

There were no material contracts involving the Company and its subsidiaries with directors’ and major shareholders’interest, either still subsisting at end of the financial year or, if not then subsisting, entered into since the end of the financialyear ended 28 February 2003.

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OTHER INFORMATION

Location Description/ Date of Approximate Tenure Net Net Book

Existing Use Acquisition Age of lettable Value

Building Area (RMí000)

(Year) (sq. ft)

1 Lot 10058 1 unit 27.5.1996 4 Freehold 1,232 189.2

Jalan Awan Pintal, Condominium/

Taman Yarl, Vacant

Mukim Petaling,

Kuala Lumpur

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PROPERTY HELD BY A SUBSIDIARY OF THE COMPANYAs At 28 February 2003

FORM OF PROXY FOR 9TH ANNUAL GENERAL MEETING

I/We ________________________________________________________________________________________

of __________________________________________________________________________________________

being a *member/members of Aktif Lifestyle Corporation Berhad, hereby appoint *The Chairman of The Meeting or

_____________________________________________________________________________________________

of ___________________________________________________________________________________________

or failing him/her,––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––-

of___________________________________________________________________________________________

as *my/our proxy to attend and vote for *me/us on *my/our behalf at the 9th Annual General Meeting of the Companyto be held at Level 2 Grand Seasons Hotel, No. 72 Jalan Pahang, 50000 Kuala Lumpur on Thursday, 28 August 2003at 2.30 p.m. and at any adjournment thereof.

I/We hereby indicate with an “X” in the space provided below how I/we wish my/our votes to be cast on the resolutions specified in the Notice of Meeting.

NO. RESOLUTION FOR AGAINST

1 To receive and adopt the Audited Financial Statements and Reports

2 To approve the payment of Directors’ fees

3 To re-elect Mr Chan Teik Huat as Director

4 To re-elect Encik Faris Bin Abdullah @ Patrick Chen Yee Ching as Director

5 To re-appoint Messrs Ernst & Young as Auditors of the Company

6 As special business, to approve the ordinary resolution pursuant to Section132D of the Companies Act, 1965

7 As special business, to approve the ordinary resolution on the Proposed Renewal and Proposed New Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading nature

8 As special business, to approve the special resolution on the Proposed Amendments to the Articles of Association of the Company

Subject to any voting instructions so given, the proxy will vote, or abstain from voting, on the resolutions as *he /shemay think fit.

Signature ___________________________________________________________ (If shareholder is a corporation, this part should be executed under seal)

Dated this __________day of ____________________2003.

Notes :-1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member

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

2. All forms of proxy must be deposited at the Company’s Registered Office at Level 10, Grand Seasons Avenue, No. 72 Jalan Pahang, 53000Kuala Lumpur, not less than 48 hours before the time appointed for the holding of the Meeting or any adjournment thereof.

3. Any alternation in this form must be intialled.

*Delete where not applicable

(Please use block letters)

(Full Address)

(Full Address)

(Full Address)

(Please use block letters)

(Please use block letters)

NUMBER OF SHARES HELD

Aktif Lifestyle Corporation Berhad

Level 10, Grand Seasons Avenue

72, Jalan Pahang

53000 Kuala Lumpur

Please Affix Stamp Here

Fold Here

Fold Here

AKT IF L I FESTYLE CORPORAT ION BERHAD (289534-K )