1. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS REPORT The directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 March 2007. PRINCIPAL ACTIVITIES The Company is principally engaged in the businesses of investment holding and the provision of management and administrative services to the subsidiaries. The principal activities of the subsidiaries are disclosed in Note 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. RESULTSTHE GROUP THE COMPANYRM RM(Loss)/Profit after taxation for the financial year(3,009,272)676,891 DIVIDENDS Since the end of the previous financial year, the Company paid a first and final dividend of 1% less 28% tax on the ordinary shares amounting to RM593,527 in respect of the previous financial year.For the current financial year, the directors recommend the payment of a first and final dividend of 1% less 27% tax on the ordinary shares amounting to RM601,776 to be approved by the shareholders at the forthcoming Annual General Meeting. RESERVES AND PROVISIONS All material transfers to or from reserves or provisions during the financial year are disclosed in the financial statements. ISSUES OF SHARES AND DEBENTURES During the financial year, (a)there were no changes in the authorised and issued and paid-up share capital of theCompany; and(b)there were no issues of debentures by the Company. Page 1

2. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS REPORT OPTIONS GRANTED OVER UNISSUED SHARES During the financial year, no options were granted by the Company to any person to take up any unissued shares in the Company. BAD AND DOUBTFUL DEBTS Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts.At the date of this report, the directors are not aware of any circumstances that would further require the writing off of bad debts, or additional allowance for doubtful debts in the financial statements of the Group and of the Company. CURRENT ASSETS Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ascertain that any current assets other than debts, which were unlikely to be realised in the ordinary course of business, including their values as shown in the accounting records of the Group and of the Company, have been written down to an amount which they might be expected so to realise.At the date of this report, the directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading. VALUATION METHODS At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. Page 2 3. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS REPORT CONTINGENT AND OTHER LIABILITIES The contingent liability of the Company is disclosed in Note 46 to the financial statements. At the date of this report, there does not exist:-(a)any charge on the assets of the Group and of the Company that has arisen since the end ofthe financial year which secures the liabilities of any other person; or(b)any contingent liability of the Group and of the Company which has arisen since the end ofthe financial year.No contingent or other liability of the Group and of the Company has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations when they fall due. CHANGE OF CIRCUMSTANCES At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE The results of the operations of the Group and of the Company during the financial year were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature.There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the operations of the Group and of the Company for the financial year.Page 3 4. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS REPORT DIRECTORS The directors who served since the date of the last report are as follows:-SIA KWEE MOW @ SIA HOK CHAI SIA TEONG HENG MUN CHONG SHING @ MUN CHONG TIAN DATO LIM PHAIK GAN DATO DR. NORRAESAH BT HAJI MOHAMAD DATO ZAINOL ABIDIN BIN HAJI A. HAMID AHMAD FIZAL BIN OTHMANPursuant to Section 129 of the Companies Act, 1965, Sia Kwee Mow @ Sia Hok Chai, Dato Lim Phaik Gan and Mun Chong Shing @ Mun Chong Tian retire at the forthcoming Annual General Meeting and offer themselves for re-appointment under the provisions of Section 129(6) of the said Act to hold office until the next Annual General Meeting of the Company.Pursuant to Article 77 of the Articles of Association of the Company, Ahmad Fizal bin Othman retires by rotation at the forthcoming Annual General Meeting and, being eligible, offers himself for re- election. DIRECTORS INTERESTS According to the register of directors shareholdings, the interests of directors holding office at the end of the financial year in shares in the Company during the financial year are as follows:- NUMBER OF ORDINARY SHARES OF RM1 EACH AT AT1.4.2006BOUGHT SOLD 31.3.2007 DIRECT INTERESTS SIA KWEE MOW @ SIA HOK CHAI 1,480,800--1,480,800 SIA TEONG HENG2,517,9922,260,000(100,000)4,677,992 MUN CHONG SHING @ MUN CHONG TIAN 21,782-- 21,782INDIRECT INTERESTS SIA KWEE MOW @ SIA HOK CHAI19,498,523-- 19,498,523 SIA TEONG HENG 19,498,523-- 19,498,523 By virtue of their interests in the Company, Sia Kwee Mow @ Sia Hok Chai and Sia Teong Heng are deemed to have interests in the shares in the subsidiaries to the extent of the Companys interest, in accordance with Section 6A of the Companies Act, 1965. Page 4 5. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS REPORT DIRECTORS INTERESTS (CONTD) None of the other directors holding office at the end of the financial year had any interest in shares of the Company or its related corporations during the financial year. DIRECTORS BENEFITS Since the end of the previous financial year, no director has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by directors as shown in the financial statements, or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest except for any benefits which may be deemed to arise from transactions entered into in the ordinary course of business with companies in which certain directors have substantial financial interests as disclosed in Note 45 to the financial statements.Neither during nor at the end of the financial year was the Company or its subsidiaries a party to any arrangements whose object is to enable the directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR The significant events during the financial year of the Company are disclosed in Note 51 to the financial statements.Page 5 6. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS REPORT AUDITORS The auditors, Messrs. Horwath, have expressed their willingness to continue in office.SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORS DATED 30 JULY 2007 Sia Kwee Mow @ Sia Hok Chai Mun Chong Shing @ Mun Chong TianPage 6 7. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P STATEMENT BY DIRECTORSWe, Sia Kwee Mow @ Sia Hok Chai and Mun Chong Shing @ Mun Chong Tian, being two of the directors of SBC Corporation Berhad, state that, in the opinion of the directors, the financial statements set out on pages 10 to 72 are drawn up in accordance with applicable MASB approved accounting standards in Malaysia for Entities Other Than Private Entities and the provisions of the Companies Act, 1965 so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 March 2007 and of their results and cash flows for the financial year ended on that date. SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORS DATED 30 JULY 2007 Sia Kwee Mow @ Sia Hok Chai Mun Chong Shing @ Mun Chong Tian STATUTORY DECLARATION I, Lee Yan Yaw, I/C No. 710315-10-5509, being the officer primarily responsible for the financial management of SBC Corporation Berhad, do solemnly and sincerely declare that the financial statements set out on pages 10 to 72 are, to the best of my knowledge and belief, correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.Subscribed and solemnly declared by Lee Yan Yaw, I/C No. 710315-10-5509, at Kuala Lumpur in the Federal Territory on this 30 July 2007Lee Yan Yaw Before meDatin Hajah Raihela Wanchik (W275) Commissioner for OathsPage 7 8. REPORT OF THE AUDITORS TO THE MEMBERS OF SBC CORPORATION BERHAD (Incorporated In Malaysia) Company No : 199310 - PWe have audited the financial statements set out on pages 10 to 72. The preparation of the financial statements is the responsibility of the Companys directors.It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report.We conducted our audit in accordance with approved standards on auditing in Malaysia. These standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. Our audit included examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. Our audit also included an assessment of the accounting principles used and significant estimates made by the directors as well as evaluating the overall adequacy of the presentation of information in the financial statements. We believe our audit provides a reasonable basis for our opinion.In our opinion,(a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable MASB approved accounting standards in Malaysia for Entities Other Than Private Entities so as to give a true and fair view of:-(i) the state of affairs of the Group and of the Company at 31 March 2007 and their results and cash flows for the financial year ended on that date; and(ii)the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of the Group and of the Company; and(b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company and by the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the said Act.We have considered the financial statements and the auditors reports thereon of the subsidiaries for which we have not acted as auditors, as indicated in Note 6 to the financial statements.Page 8 9. REPORT OF THE AUDITORS TO THE MEMBERS OF SBC CORPORATION BERHAD (CONTD) (Incorporated in Malaysia) Company No : 199310 - PWe are satisfied that the financial statements of the subsidiaries that have been consolidated with the Companys financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.The audit reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comments made under Section 174(3) of the said Act. Horwath Lee Kok Wai Firm No: AF 1018Approval No: 2760/06/08 (J) Chartered AccountantsPartnerKuala Lumpur30 July 2007 Page 9 10. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P BALANCE SHEETS AT 31 MARCH 2007THE GROUP THE COMPANY2007 20062007 2006NOTERM RM RM RM(Restated) NON-CURRENTASSETS Investment insubsidiaries 6 --210,990,785 211,064,785 Interest in associates7112,085,613111,816,402 2,400,000 2,400,000 Investment in jointventure8- -1,801,128 712,500 Property, plant andequipment98,549,543 8,242,6102,657 7,552 Investment properties 10 3,122,452 6,867,925 - - Land held for propertydevelopment1187,700,18887,090,675 -- Other assets12 220,30086,300 -- Goodwill onconsolidation1327,499,45127,317,640 -- 239,177,547241,421,552 215,194,570 214,184,837CURRENT ASSETS Inventories 14 726,148 1,283,422 -- Property developmentcosts1559,707,25755,130,848-- Receivables 1659,332,21542,574,730 479,393226,427 Amount owing bycontract customers 17 2,616,779 3,114,994 -- Amount owing bysubsidiaries 18 - - 58,919,70765,774,637 Amount owing byassociates 19 5,390,600 5,399,5342,50011,434 Amount owing byjoint venture20 280,727- 561,454 - Tax recoverable 21 1,367,292 1,551,2253,451,4743,206,127 Short-term depositswith licensed banks22 3,334,226 1,364,2251,239,2251,239,225 Cash and bankbalances 2313,918,913 9,205,230 12,077,3098,150,432 146,674,157119,624,20876,731,06278,608,282TOTAL ASSETS 385,851,704361,045,760 291,925,632 292,793,119 The annexed notes form an integral part of these financial statements. Page 10 11. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P BALANCE SHEETS AT 31 MARCH 2007 (CONTD)THE GROUP THE COMPANY2007 20062007 2006NOTERM RM RM RM(Restated) EQUITY AND LIABILITIES EQUITY Share capital24 82,435,000 82,435,00082,435,00082,435,000 Reserves 25130,690,786134,293,585 133,735,893 133,652,529TOTAL EQUITY 213,125,786216,728,585 216,170,893 216,087,529NON-CURRENTLIABILITIES ABBA Bonds26- 43,978,499 - 43,978,499 Long-term borrowings2733,939,06930,629,180 - - Deferred taxation 29 966,746 966,746 - -34,905,81575,574,425 - 43,978,499CURRENT LIABILITIES Amount owing to contract customers17 2,850,429 1,540,444-- Payables3042,512,89432,241,497 371,667244,765 Amount owing to subsidiaries18 - - 12,375,67418,082,756 Amount owing to associates193,378 16,711 -- Amount owing to a director31 1,867,680 1,867,6801,867,6801,867,680 Short-term borrowings 3214,874,44215,941,7795,000,0005,000,000 ABBA Bonds2648,683,146 2,478,450 48,683,1462,478,450 Bank overdrafts 3327,028,13414,656,1897,456,5725,053,440 137,820,10368,742,750 75,754,73932,727,091TOTAL LIABILITIES172,725,918144,317,17575,754,73976,705,590TOTAL EQUITY AND LIABILITIES385,851,704361,045,760 291,925,632 292,793,119 NET ASSETS PER ORDINARY SHARE (RM)34 2.592.63 The annexed notes form an integral part of these financial statements. Page 11 12. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P INCOME STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2007THE GROUP THE COMPANY2007 20062007 2006NOTERMRMRM RM(Restated)REVENUE 3577,102,94669,926,734 8,338,611 7,641,913COST OF SALES 36 (60,499,310)(56,847,233)--GROSS PROFIT16,603,63613,079,501 8,338,611 7,641,913OTHER INCOME 1,324,144 1,751,359 203,976-ADMINISTRATIVE EXPENSES(8,315,933) (7,142,456)(1,282,327) (1,154,115)OTHER EXPENSES(5,382,766) (1,262,033) (407,665) (289,792)FINANCE COSTS (6,705,397) (5,160,442)(5,868,501) (5,697,750)SHARE OF PROFITS OF ASSOCIATES269,211 103,008 --(LOSS)/PROFITBEFORE TAXATION37(2,207,105)1,368,937 984,094500,256INCOME TAXEXPENSE38(802,167) (321,740) (307,203) (350,436)(LOSS)/PROFITAFTER TAXATION (3,009,272)1,047,197 676,891149,820 ATTRIBUTABLE TO:- Equity holders of the Company (3,009,272)1,047,197 676,891149,820 (Loss)/Earnings pershare - basic 39 (3.7) sen 1.3 sen - diluted 39 N/AN/A Dividend per ordinary share - final 40 1 sen 1 sen The annexed notes form an integral part of these financial statements. Page 12 13. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2007SHARE SHARE RETAINED CAPITAL CAPITALPREMIUMPROFITSRESERVE TOTAL NOTERM RMRM RMRM THE GROUPBalance at 1.4.2005 - as previously reported 82,435,000 111,412,89524,959,4991,199,999 220,007,393 - prior year adjustments 49- - (3,732,478)- (3,732,478)- as restated82,435,000 111,412,89521,227,0211,199,999 216,274,915Loss after taxation for the financial year- - 1,047,197 -1,047,197Dividend 40 - -(593,527)- (593,527)Balance at 31.3.2006/ 1.4.2006 82,435,000 111,412,89521,680,6911,199,999 216,728,585Loss after taxation for the financial year- -(3,009,272)- (3,009,272)Dividend 40 - -(593,527)- (593,527)Balance at 31.3.2007 82,435,000 111,412,89518,077,8921,199,999 213,125,786 THE COMPANYBalance at 1.4.200582,435,000 111,412,89522,683,341- 216,531,236Profit after taxation for the financial year- -149,820- 149,820Dividend 40 - -(593,527)- (593,527)Balance at 31.3.2006/1.4.2006 82,435,000 111,412,89522,239,634 -216,087,529Profit after taxation for the financial year- -676,891- 676,891Dividend 40 - -(593,527)- (593,527)Balance at 31.3.2007 82,435,000 111,412,89522,322,998 -216,170,893 The annexed notes form an integral part of these financial statements.Page 13 14. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2007 THE GROUPTHE COMPANY2007 2006 2007 2006NOTERMRM RM RM(Restated) CASH FLOWS (FOR)/FROM OPERATING ACTIVITIES (Loss)/Profit before taxation (2,207,105)1,368,937984,094500,256 Adjustments for:- Amortisation of bondsexpenses277,770 279,708277,770279,708 Bad debts written off697,574--- Depreciation ofproperty, plantand equipment 580,160 424,6954,895 10,084 Interest expense/finance charges 6,564,396 5,058,6205,817,195 5,671,876 Impairment loss oninterest in anassociate - 549,434-- Impairment loss oninvestment properties 2,074,556 --- Impairment loss onland held for propertydevelopment 1,858,834 --- Investment insubsidiarieswritten off - -125,000- Loss/(Gain) on disposal ofinvestment properties 413,987(812,642) - - Waiver of debts (211,269) (448,845) (203,976) - Dividend income - - (5,000,000) (5,000,000) Gain on disposal ofproperty, plant andequipment(155,791) (132,283)-- Interest income (513,693) (261,016)(768,966)(1,214,091) Share of profits inassociates (269,211) (103,008) --Operating profit beforeworking capital changes 9,110,208 5,923,6001,236,012247,833 Decrease in inventories557,274 3,076,070 -- (Increase)/Decrease in propertydevelopment costs(4,273,713)6,171,242 - - Increase in receivables(17,243,790)(13,785,219)(252,966)(83,350) Increase/(Decrease) inpayables 10,272,117 2,695,419126,902 (11,362) Net decrease/(increase) in amountowing by contract customers 1,808,200(613,115) --CASH FROM OPERATIONS 230,296 3,467,997 1,109,548 153,121 Interest paid (2,077,587) (571,134) (1,330,386) (1,184,390) Net tax (paid)/refunded (618,234)4,734,735 797,450 6,441,353NET CASH (FOR)/FROM OPERATING ACTIVITIES CARRIED FORWARD (2,465,525)7,631,598577,012 5,410,084The annexed notes form an integral part of these financial statements.Page 14 15. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2007 (CONTD)THE GROUPTHE COMPANY 2007 2006 2007 2006NOTE RMRM RM RM (Restated) NET CASH (FOR)/FROM OPERATING ACTIVITIES BROUGHT FORWARD (2,465,525) 7,631,598577,012 5,410,084CASH FLOWS (FOR)/FROMINVESTIING ACTIVITIES Acquisition of joint venture - - (1,088,628)(712,500) Additional investment insubsidiaries (181,811)- -- Repayment from/(Advances to) subsidiaries- - 7,254,414 (3,466,050) Interest received 513,693 261,016369,482204,859 Dividends receivedfrom subsidiaries - - 3,650,000 3,600,000 Advances tojoint venture(280,727)-(561,454) - Incidental cost forinvestment properties(117,070) Payment for land heldfor development(2,468,347)(466,545) -- Purchase of property,plant and equipment 41 (1,204,262)(194,106) -- Purchase of investmentin subsidiaries - -(51,000)- Proceeds fromdisposal of property,plant and equipment170,264 132,370-- Proceeds fromdisposal of investmentproperties 1,374,000 4,211,187-- Investment in clubmembership (134,000)- -- Placement of cash insinking fund account (3,877,963)(4,097,229) (3,877,963) (4,097,229) Repayment fromassociates8,934 - 8,934-NET CASH (FOR)/FROM INVESTING ACTIVITIES(6,197,289)(153,307) 5,703,785 (4,470,920)BALANCE CARRIED FORWARD (8,662,814) 7,478,2916,280,797939,164 The annexed notes form an integral part of these financial statements.Page 15 16. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2007 (CONTD)THE GROUPTHE COMPANY2007 2006 2007 2006NoteRMRM RM RM(Restated) BALANCE BROUGHT FORWARD (8,662,814)7,478,2916,280,797939,164CASH FLOWS FORFINANCING ACTIVITIES Payment of bondsexpenses(59,932)(61,872)(59,932)(61,872) Repayment of bonds 26 (2,478,450) (2,478,450) (2,478,450) (2,478,450) Net repayment byassociates (13,333)(530,875) -- (Repayment to)/Advancesfrom subsidiaries - -(5,503,106) 2,927,198 Dividend paid toshareholders of thecompany(593,527) (593,527)(593,527) (593,527) Repayment of revolving credit (1,050,000) (1,600,000)- - Drawdown of term loans 6,400,068 3,600,000 - - Repayment of term loans (3,007,129) (2,077,764)- - Repayment of hirepurchase obligations (101,107)(72,630) --NET CASH FOR FINANCING ACTIVITIES(903,410) (3,815,118) (8,635,015)(206,651)NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (9,566,224)3,663,173(2,354,218)732,513CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR (12,209,846)(15,873,019) (3,786,895) (4,519,408)CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 42(21,776,070)(12,209,846) (6,141,113) (3,786,895) The annexed notes form an integral part of these financial statements.Page 16 17. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20071. GENERAL INFORMATIONThe Company is a public company limited by shares and is incorporated under theMalaysian Companies Act, 1965. The domicile of the Company is Malaysia. The registeredoffice, which is also the principal place of business, is at Wisma Siah Brothers, 74A, JalanPahang, 53000 Kuala Lumpur. The financial statements were authorised for issue by the Board of Directors inaccordance with a resolution of the directors dated 30 July 2007. 2. PRINCIPAL ACTIVITIESThe Company is principally engaged in the businesses of investment holding and theprovision of management and administrative services to the subsidiaries. The principalactivities of the subsidiaries are disclosed in Note 6 to the financial statements. There havebeen no significant changes in the nature of these activities during the financial year. 3. FINANCIAL RISK MANAGEMENT POLICIESThe Group's financial risk management policy seeks to ensure that adequate financialresources are available for the development of the Group's business whilst managing itsmarket, credit, liquidity and cash flow risks. The policies in respect of the major areas oftreasury activity are as follows:- (a)Market Risk(i)Foreign Currency Risk The Group is exposed to foreign exchange risk on investments and bankbalances that are denominated in foreign currencies. The Groups foreign currency transactions and balances are substantiallydenominated in Thai Baht. The Group does not seek to hedge this exposure as the Group is of theopinion that the fluctuations of the Thai Baht do not have a significantimpact on the financial statements. Page 17 18. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20073. FINANCIAL RISK MANAGEMENT POLICIES (CONTD)(a)Market Risk (Contd)(ii) Interest Rate Risk The Group obtains financing through bank borrowings and hire purchasefacilities. Its policy is to obtain the most favourable interest rates available. Surplus funds are placed with licensed financial institutions at the mostfavourable interest rates.(iii)Price Risk The Groups principal exposure to market risks arises mainly from changesin quoted equity prices. The Group does not use derivative instruments tomanage equity risk.(b)Credit RiskThe Group's exposure to credit risks, or the risk of counterparties defaulting, arises mainly from receivables. The maximum exposure to credit risks is represented by the total carrying amount of these financial assets in the balance sheet reduced by the effects of any netting arrangements with counterparties.The Group does not have any major concentration of credit risk related to any individual customer or counterparty.The Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis.(c)Liquidity and Cash Flow Risk The Group's exposure to liquidity and cashflow risks arises mainly from general funding and business activities. It practises prudent liquidity risk management by maintaining sufficient cash balances and the availability of funding through certain committed credit facilities.Page 18 19. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20074. BASIS OF PREPARATIONThe financial statements of the Group and of the Company are prepared under thehistorical cost convention and modified to include other bases of valuation as disclosed inother sections under significant accounting policies, and in compliance with applicableMASB approved accounting standards in Malaysia for Entities Other Than Private Entitiesand the provisions of the Companies Act, 1965. In the current financial year, the Company has adopted all the new and revised FinancialReporting Standards (FRS) issued by the Malaysian Accounting Standards Board whichare relevant to its operations and effective for financial periods beginning on or after 1January 2006. The adoption of these new and revised FRS does not have any material effects on thefinancial statements of the Company. The following FRS have been issued and are effective for financial periods beginning on orafter 1 October 2006 and will be effective for the Groups and the Companys financialstatements for the financial year ending 31 March 2008:- FRS 117 LeasesFRS 124 Related Party Disclosures The following revised FRS have been issued and are effective for financial periods beginningon or after 1 July 2007 and will be effective for the Groups and the Companys financialstatements for the financial year ending 31 March 2009:- FRS 107 Cash Flow StatementsFRS 111 Construction ContractsFRS 112 Income TaxesFRS 118 RevenueFRS 121 The Effects of Changes in Foreign Exchange RatesFRS 134 Interim Financial ReportingFRS 137 Provisions, Contingent Liabilities and Contingent Assets FRS 139 - Financial Instruments: Recognition and Measurement has been issued and theeffective date has yet to be determined by the MASB. This new standard establishesprinciples for recognising and measuring financial assets, financial liabilities and somecontracts to buy and sell non-financial items. The Group and the Company will apply thisstandard when it becomes effective. Page 19 20. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES(a)Critical Accounting Estimates And JudgementsEstimates and judgements are continually evaluated by the directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that affect the application of the Groups accounting policies and disclosures, and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below:-(i)Depreciation of Property, Plant and Equipment The estimates for the residual values, useful lives and related depreciationcharges for the property, plant and equipment are based on commercial andproduction factors which could change significantly as a result of technicalinnovations and competitors actions in response to the market conditions. The Group anticipates that the residual values of its property, plant andequipment will be insignificant. As a result, residual values are not beingtaken into consideration for the computation of the depreciable amount. Changes in the expected level of usage and technological development couldimpact the economic useful lives and the residual values of these assets,therefore future depreciation charges could be revised.(ii) Income Taxes There are certain transactions and computations for which the ultimate taxdetermination may be different from the initial estimate. The Grouprecognises tax liabilities based on its understanding of the prevailing tax lawsand estimates of whether such taxes will be due in the ordinary course ofbusiness. Where the final outcome of these matters is different from theamounts that were initially recognised, such difference will impact the incometax and deferred tax provisions in the period in which such determination ismade.(iii)Impairment of Assets When the recoverable amount of an asset is determined based on theestimate of the value-in-use of the cash-generating unit to which the asset isallocated, the Group is required to make an estimate of the expected futurecash flows from the cash-generating unit and also to apply a suitable discountrate in order to determine the present value of those cash flows. Page 20 21. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(a)Critical Accounting Estimates And Judgements (Contd)(iv) Property DevelopmentThe Group recognises property development revenue and expenses in theincome statement by using the stage of completion method. The stage ofcompletion is determined by the proportion that the property developmentcosts incurred for work performed to date bear to the estimated total propertydevelopment costs. Significant judgement is required in determining the stage of completion, theextent of the property development costs incurred, the estimated totalproperty development revenue and costs, as well as the recoverability of thedevelopment projects. In making the judgement, the Group evaluates basedon past experience and by relying on the work of specialists.(v)Construction Contracts Construction contracts accounting requires reliable estimation of the costs tocomplete the contract and reliable estimation of the stage of completion. (i)Contract RevenueConstruction contracts accounting requires that variation claims and incentive payments only be recognised as contract revenue to the extent that it is probable that they will be accepted by the customers. As the approval process often takes some time, a judgement is required to be made of its probability and revenue recognised accordingly. (ii) Contract CostsUsing experience gained on each particular contract and taking into account the expectations of the time and materials required to complete the contract, management estimates the profitability of the contract on an individual basis at any particular time.Page 21 22. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(a)Critical Accounting Estimates And Judgements (Contd)(vi) Allowance for Doubtful Debts of Receivables The Group makes allowance for doubtful debts based on an assessment ofthe recoverability of receivables. Allowances are applied to receivables whereevents or changes in circumstances indicate that the carrying amounts maynot be recoverable. Management analyses historical bad debt, customerconcentrations, customer creditworthiness, current economic trends andchanges in customer payment terms when making a judgement to evaluatethe adequacy of the allowance for doubtful debts of receivables. Where theexpectation is different from the original estimate, such difference will impactthe carrying value of receivables.(b)Financial InstrumentsFinancial instruments are recognised in the balance sheet when the Group and the Company has become a party to the contractual provisions of the instruments.Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as an expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity.Financial instruments are offset when the Group and the Company has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.Financial instruments recognised in the balance sheet are disclosed in the individual policy statement associated with each item. Page 22 23. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(c)Functional and Foreign Currency(i)Functional and Presentation Currency The functional currency of the Group is measured using the currency of theprimary economic environment in which the Group operates. The consolidated financial statements are presented in Ringgit Malaysia(RM) which is the parents functional and presentation currency.(ii) Transactions and Balances Transactions in foreign currency are converted into the respective functionalcurrencies on initial recognition, using the exchange rates approximatingthose ruling at the transaction dates. Monetary assets and liabilities at thebalance sheet date are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates thatexisted when the values were determined. All exchange differences are takento the income statement.(iii)Foreign Operations The results and financial position of all the Group entities that have afunctional currency different from the presentation currency are translated intothe presentation currency as follows:- (i) assets and liabilities for each balance sheet presented are translatedat the closing rate at the date of the balance sheet; (ii)income and expense for the income statement are translated at theaverage exchange rates for the year; and (iii) all resulting exchange differences are recognised as a separatecomponent of equity, as a foreign currency translation reserve. Ondisposal, accumulated translation differences are recognised in theconsolidated income statements as part of the gain or loss on sale. Page 23 24. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(d)Basis of ConsolidationThe consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries made up to 31 March 2007.A subsidiary is defined as an enterprise in which the Company has the power, directly or indirectly, to exercise control over the financial and operating policies so as to obtain benefits from its activities.All subsidiaries are consolidated using the purchase method. Under the purchase method, the results of subsidiaries acquired or disposed of are included from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries net assets are determined and these values are reflected in the consolidated financial statements. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.Intragroup transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.(e)Goodwill On ConsolidationGoodwill on consolidation represents the excess of the fair value of the purchase consideration over the Group's share of the fair values of the identifiable net assets of the subsidiaries at the date of acquisition.Goodwill is measured at cost less accumulated impairment losses, if any. The carrying value of goodwill is reviewed for impairment annually. The impairment value of goodwill is recognised immediately in the consolidated income statement. An impairment loss recognised for goodwill is not reversed in a subsequent period.If, after reassessments, the Group's interest in the fair values of the identifiable net assets of the subsidiaries exceeds the cost of the business combinations, the excess is recognised immediately in the consolidated income statement.Page 24 25. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(f)Investments(i)Investments in Subsidiaries, Associates and Joint Ventures Investments in subsidiaries, associates and joint ventures are stated at costin the balance sheet of the Company and are reviewed for impairment at theend of the financial year if events or changes in circumstances indicate thattheir carrying values may not be recoverable. On the disposal of the investments in subsidiaries, associates and jointventures, the difference between the net disposal proceeds and the carryingamount of the investments is taken to the income statement.(ii) Investments in Club Membership The investment in club membership is stated at cost and is reviewed forimpairment at the end of the financial year if events or changes incircumstances indicate that its carrying value may not be recovered.(g)AssociatesAn associate is an entity in which the Company has a long-term equity interest and where it exercises significant influence over the financial and operating policies.The investments in associates in the consolidated financial statements are accounted for under the equity method, based on the financial statements of the associates made up to 31 March 2007. The Company's share of the post acquisition profits of the associates is included in the consolidated income statement and the Company's interest in associates is stated at cost plus the Company's share of the post- acquisition retained profits and reserves.Unrealised gains on transactions between the Company and the associates are eliminated to the extent of the Company's interest in the associate. Unrealised losses are eliminated unless cost cannot be recovered.Page 25 26. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(h)Investment in Joint Venture A joint venture represents a business arrangement formed under contract with athird party to undertake specific projects. The investment in the joint venture is accounted for using the proportionateconsolidation method whereby assets, liabilities and the income statement of thejoint venture are consolidated in the Group's financial statements in theproportion of the Group's interest in the venture. (i)Property, Plant and Equipment Property, plant and equipment, other than freehold land, are stated at cost less accumulated depreciation and impairment loss, if any. Freehold land is stated at cost and is not depreciated.Depreciation is calculated under the straight-line method to write off the cost of the assets over their estimated useful lives. Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal annual rates used for this purpose are:-Building Remaining useful life of 20 years Plant and machinery, construction machinery and equipment, formwork, scaffoldings and containers5% - 25% Office renovation, office equipment, computers, furniture and fittings, tools and sales office5% - 20% Motor vehicles20%The depreciation method, useful life and residual values are reviewed, and adjusted if appropriate, at each balance sheet date to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of the property, plant and equipment.An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from derecognition of the asset is included in the income statement in the year the asset is derecognised.(j)Land Held for Property DevelopmentLand held for property development is carried at cost less any accumulated impairment losses. Where land held for property development had previously been recorded at a revalued amount, the revalued amount is retained as its surrogate cost.Page 26 27. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD) (j)Land Held for Property Development (Contd)Land held for property development is classified as non-current asset where no development activities are carried out or where development activities are not expected to be completed within the normal operating cycle.Costs associated with the acquisition of land include the purchase price of the land, professional fees, stamp duties, commissions, conversion fees and other relevant levies. Pre-acquisition costs are charged to the income statement as incurred unless such costs are directly identifiable to the consequent property development activity.Land held for property development is transferred to current asset when development activities have commenced and where it can be demonstrated that the development activities can be completed within the normal operating cycle.(k)Impairment of AssetsThe carrying values of assets, other than those to which FRS 136 - Impairment of Assets does not apply, are reviewed at each balance sheet date for impairment when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The recoverable amount of the assets is the higher of the assets' net selling price and their value-in-use, which is measured by reference to discounted future cash flow.An impairment loss is charged to the income statement immediately unless the asset is carried at its revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of a previously recognised revaluation surplus for the same asset.In respect of assets other than goodwill, and when there is a change in the estimates used to determine the recoverable amount, a subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately, unless the asset is carried at its revalued amount. A reversal of an impairment loss on a revalued asset is credited directly to the revaluation surplus. However, to the extent that an impairment loss on the same revalued asset was previously recognised as an expense in the income statement, a reversal of that impairment loss is recognised as income in the income statement. Page 27 28. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(l) Assets under Hire PurchaseProperty, plant and equipment acquired under hire purchase are capitalised in the financial statements and are depreciated in accordance with the policy set out in Note 5(i) above. Each hire purchase payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. Finance charges are allocated to the income statement over the periods of the respective hire purchase agreements.(m)Investment PropertiesInvestment properties are property held either to earn rental income or for capital appreciation or for both. Investment properties are stated at cost less accumulated depreciation and impairment losses, if any, consistent with the accounting policy for property, plant and equipment as stated in the financial statements.Investment properties are derecognised when they have either been disposed of or when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal.On the derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount is charged to the income statement.(n)InventoriesInventories are stated at the lower of cost and net realisable value. The unsold completed properties are stated at the lower of cost and net realisable value. For finished goods and work-in-progress, cost includes direct labour and appropriate production overheads.The cost of unsold completed properties comprises the relevant cost of land, development expenditure and related interest cost incurred during the development period.In arriving at net realisable value, due allowance is made for all damaged, obsolete and slow-moving items. Page 28 29. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(o)Property Development CostsProperty development costs comprise costs associated with the acquisition of land and all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities.Property development costs that are not recognised as an expense are recognised as an asset and carried at the lower of cost and net realisable value.When the financial outcome of a development activity can be reliably estimated, the amount of property revenues and expenses recognised in the income statement are determined by reference to the stage of completion of development activity at the balance sheet date.When the financial outcome of a development activity cannot be reliably estimated, the property development revenue is recognised only to the extent of property development costs incurred that will be recoverable. The property development costs on the development units sold are recognised as an expense in the period in which they are incurred.Where it is probable that property development costs will exceed property development revenue, any expected loss is recognised as an expense in the income statement immediately, including costs to be incurred over the defects liability period.(p)Progress Billings/Accrued BillingsIn respect of progress billings:-(i)where revenue recognised in the income statement exceeds the billings topurchasers, the balance is shown as accrued billings under current assets;and(ii) where billings to purchasers exceed the revenue recognised to the incomestatement, the balance is shown as progress billings under current liabilities.(q)Amount Owing By/To Contract CustomersThe amount owing by/to contract customers is stated at cost plus profits attributable to contracts in progress less progress billings and allowance for foreseeable losses, if any. Cost includes direct materials, labour and applicable overheads.Page 29 30. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(r)ReceivablesReceivables are carried at anticipated realisable value. Bad debts are written off in the period in which they are identified. An estimate is made for doubtful debts based on a review of all outstanding amounts at the balance sheet date.(s)Cash and Cash EquivalentsCash and cash equivalents comprise cash in hand, bank balances, demand deposits, deposits pledged with financial institutions, bank overdrafts and short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.(t)PayablesPayables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.(u)Interest-bearing BorrowingsInterest-bearing bank loans and overdrafts are recorded at the amount of proceeds received, net of transaction costs.Borrowing costs directly attributable to the acquisition and construction of development properties and property, plant and equipment are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use or sale. Capitalisation of borrowing costs is suspended during extended periods in which active development is interrupted.All other borrowing costs are charged to the income statement as an expense in the period in which they are incurred.(v)BondsBonds issued by the Company and the Group are initially recognised based on proceeds received, net of issuance expenses incurred and are adjusted in subsequent years for amortisation of premium and/or accretion of discount to maturity, using the effective yield method. The premium amortised and/or discount accreted is recognised in the income statement over the period of the bonds.Page 30 31. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(w)Income TaxesIncome taxes on the profit or loss for the financial year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted or substantially enacted at the balance sheet date.Deferred taxation is provided in full, using the liability method, on all material temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from goodwill or excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over the business combination costs or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantially enacted at the balance sheet date.Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly to equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over the business combination costs. The carrying amounts of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred tax assets to be utilised.Page 31 32. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(x)Equity InstrumentsOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.Dividends on ordinary shares are recognised as liabilities when approved for appropriation.(y)Employee Benefits(i)Short-term Benefits Wages, salaries, paid annual leave, bonuses and social security contributionsare recognised as an expense in the year in which the associated servicesare rendered by employees of the Group. Short-term accumulatingcompensated absences such as paid annual leave are recognised whenservices are rendered by employees that increase their entitlement to futurecompensated absences, and short-term non-accumulating compensatedabsences such as sick leave are recognised when the absences occur.(ii) Defined Contribution Plans The Groups contributions to a defined contribution plan are charged to theincome statement in the period to which they relate. Once the contributionshave been paid, the Group has no further liability in respect of the definedcontribution plan. A foreign subsidiary of the Group makes contributions to itsrespective countrys pension schemes. Such contributions are recognised asan expense in the income statement as incurred.(z)Contingent Liabilities and Contingent AssetsA contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that an outflow of economic resources will be required or the amount of obligation cannot be measured reliably.A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.Page 32 33. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(z)Contingent Liabilities and Contingent Assets (Contd)A contingent asset is a probable asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Company.(aa) Revenue Recognition(i)Construction Contracts Revenue on contracts is recognised on the percentage of completionmethod unless the outcome of the contract cannot be reliably determined,in which case revenue on contracts is only recognised to the extent ofcontract costs incurred that are recoverable. Foreseeable losses, if any,are provided for in full as and when it can be reasonably ascertained thatthe contract will result in a loss. The stage of completion is determined based on surveys of work performed.(ii) Property Development Revenue from property development is recognised from the sale ofcompleted and uncompleted development properties.Revenue from the sale of completed properties is recognised when the sale iscontracted.Revenue on uncompleted properties contracted for sale is recognised basedon the stage of completion method unless the outcome of the developmentcannot be reliably determined in which case the revenue on the developmentis only recognised to the extent of development costs incurred that arerecoverable. The stage of completion is determined based on the proportion that thedevelopment costs incurred for work performed to date bear to the estimatedtotal development costs.(iii)Revenue from Sale of Goods Sales are recognised upon delivery of goods and customers acceptance,and where applicable, net of returns and trade discounts. Page 33 34. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20075. SIGNIFICANT ACCOUNTING POLICIES (CONTD)(aa) Revenue Recognition (Contd)(iv) Revenue from Services Revenue is recognised upon rendering of services and when the outcome ofthe transaction can be estimated reliably. In the event the outcome of thetransaction could not be estimated reliably, revenue is recognised to theextent of the expenses incurred that are recoverable.(v)Management Fee and Administrative Charges Management fee and administrative charges are recognised on an accrualbasis.(vi) Rental Income Rental income is recognised on an accrual basis.(vii)Dividend Income Dividend income from investments is recognised when the right to receivepayment is established. (viii) Interest IncomeInterest income is recognised on an accrual basis, based on the effectiveyield on the investment.Interest income on late payment is recognised on a receipt basis.(ab) Segmental InformationSegment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of property, plant and equipment (net of accumulated depreciation, where applicable), other investments, inventories, receivables, and cash and bank balances. Most segment assets can be directly attributed to the segments on a reasonable basis. Segment assets and liabilities do not include income tax assets and liabilities respectively. Segment revenues, expenses and results include transfers between segments. The prices charged on intersegment transactions are based on normal commercial terms. These transfers are eliminated on consolidation. Page 34 35. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20076. INVESTMENT IN SUBSIDIARIESTHE COMPANY 2007 2006RM RM Unquoted shares, at cost 210,990,785211,064,785 Details of the subsidiaries, which are all incorporated in Malaysia, are as follows:- Name of CompanyEffective Equity Interest Principal2007 2006Activities % % Syarikat Siah Brothers100 100General buildingTrading Sdn. Bhd.contractor and investment holding.Syarikat Siah Brothers100 100Building and civilConstruction Sdn. Bhd. engineering works. Lifeplus - Siah Brothers Trading- 100Under members JV Sdn. Bhd.voluntary liquidation. Siah Brothers Enterprise- 100Under membersSdn. Bhd. *voluntary liquidation. Siah Brothers Land100 100Investment holding.Sdn. Bhd. Seri Ampangan Realty100 100Property development.Sdn. Bhd. Sinaran Naga Sdn. Bhd.100 100Property development. Siah Brothers Development - 100Under membersSdn. Bhd. *voluntary liquidation. Tiara Development - 100Under membersSdn. Bhd. *voluntary liquidation. SBC Homes Sdn. Bhd.*- 100Under members Voluntary liquidation. Mixwell (Malaysia)100 100Property development.Sdn. Bhd.Page 35 36. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20076. INVESTMENT IN SUBSIDIARIES (CONTD)Name of CompanyEffective Equity InterestPrincipal2007 2006 Activities % % Winsome Ventures -100Under membersSdn. Bhd.voluntary liquidation. Siah Brothers Properties100 100Investment holding.Sdn. Bhd.* Aureate Construction100 100Property investment.Sdn. Bhd.* SBC Leisure Sdn. Bhd.*100 100Property development. SBC Towers Sdn. Bhd.* 100 100Property development. Siah Brothers Project-100Under membersManagement Sdn. Bhd.*voluntary liquidation. Siah Brothers Industries100 100Investment holding.Sdn. Bhd. * South-East Best 100 100Property development.Sdn. Bhd. Gracemart Resources 100 100Property development.Sdn. Bhd. Sutrati Development Sdn. Bhd.-100Under members voluntary liquidation. Masahmura Sdn. Bhd.*100 51 Manufacturing of material handling equipment and metal frames. Masahmura Sales & 100 51 Trading of lightService Sdn. Bhd.industrial handling equipment and metal frames. Kiara Amalan Sdn. Bhd.*51- Dormant. *Not audited by Messrs. Horwath. Page 36 37. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20077. INTEREST IN ASSOCIATESTHE GROUPTHE COMPANY2007 2006 2007 2006RM RM RMRM Unquoted shares, at cost 2,720,001 3,600,0012,400,0002,400,000Impairment loss - (880,000) --2,720,001 2,720,0012,400,0002,400,000Unquoted shares, atgroup cost 91,618,314 91,618,314 - -Share of postacquisition reserves 17,747,298 17,478,087 - - 112,085,613111,816,4022,400,0002,400,000 THE GROUP 2007 2006RM RMThe interest in associates comprises:- Groups share of net tangible assets- at cost66,069,643 65,800,432- at fair value45,952,003 45,952,003Groups share of intangible assets 63,967 63,967 112,085,613 111,816,402 Details of the associates, which are all incorporated in Malaysia, are as follows:-Effective EquityPrincipalName of CompanyInterestActivities 2007 2006% % Ligamas Sdn. Bhd.# 50.050.0Property development. Varich Industries50.050.0Dormant.Sdn. Bhd.* Paling Industries Sdn. Bhd.# 40.040.0Manufacturing of plastic building materials.Page 37 38. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20077. INTEREST IN ASSOCIATES (CONTD)Details of the associates, which are all incorporated in Malaysia, are as follows:-Effective EquityPrincipalName of CompanyInterestActivities 2007 2006% % Pasti Bumi Sdn. Bhd.* ## 19.619.6Sales of plastic building materials. Liga Canggih Sdn. Bhd.*##40.040.0Dormant. Sri Berjaya Development33.333.3Investment andSdn. Bhd.*development oflanded properties. Sri Rawang Properties22.222.2Investment in propertiesSdn. Bhd.*and rubber estates. Sam & Lau Plantation - 50.0Under membersSdn. Bhd.*###voluntary liquidation. *The results of these associates have not been equity accounted as the amounts involved are insignificant. #The share of results of these associates is based on the latest available unaudited management financial statements made up to 31 March 2007. ## Held by Paling Industries Sdn. Bhd. ###Held by South-East Best Sdn. Bhd. The summarised financial information of the associates are as follows:- THE GROUP 2007 2006 RMRMAssets and liabilitiesTotal assets149,845,853 143,650,486Total liabilities16,653,11610,429,579 ResultsRevenue54,261,99844,690,040Profit for the year 299,07247,200Page 38 39. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20078. INVESTMENT IN JOINT VENTURETHE COMPANY 2007 2006RM RMUnquoted shares, at cost1,801,128712,500 Details of the joint venture, which is incorporated in Thailand, are as follows:- Name of CompanyEffective Equity InterestPrincipal2007 2006 Activities % % Tri-Development Co., Ltd 5050 Property development. The share of results of the joint venture is based on the unaudited financial statementsmade up to 31 March 2007.The Groups aggregate share of the current assets, non-current assets, current liabilities,non-current liabilities, income and expenses of the joint venture is as follows:- 20072006 RMRMAssets and liabilitiesNon-current assets591,715-Current assets9,220,742 805,280 Total assets9,812,457 805,280 Non-current liabilities -Current liabilities(4,256,916) (93,595) Total liabilities(4,256,916) (93,595) ResultsRevenue 17,761,423 -Other income62,923 -Expenses, including finance costs and taxation (13,993,150)(143)Page 39 40. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20079. PROPERTY, PLANT AND EQUIPMENT TRANSFER TOAT DEVELOPMENT DEPRECIATION AT 1.4.2006ADDITIONS DISPOSALS COST CHARGE31.3.2007RMRMRMRMRM RM (Note 15)THE GROUP NET BOOK VALUE Freehold land and building 4,690,317-- (302,696) -4,387,621Building 2,003,119-- - (100,156)1,902,963Plant and machinery, construction machinery andequipment, formwork, scaffoldings and containers 28,728 538,417- -(39,879) 527,266Office renovation, office equipment, computers,furniture and fittings, tools and sales office950,131 609,845 (14,472) - (292,337)1,253,167Motor vehicles570,31556,000(1) - (147,788)478,526 Total8,242,610 1,204,262(14,473) (302,696) (580,160)8,549,543 Page 40 41. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20079. PROPERTY, PLANT AND EQUIPMENT (CONTD) ATACCUMULATED NET BOOKCOSTDEPRECIATIONVALUE RMRMRMAT 31.3.2007 Freehold land4,387,621-4,387,621Building 2,003,119(100,156)1,902,963Plant and machinery, construction machineryand equipment, formwork, scaffoldings and containers 9,202,410 (8,675,144) 527,266Office renovation, office equipment, computers, furniture and fittings, tools and sales office5,384,005 (4,130,838) 1,253,167Motor vehicles 2,106,298 (1,627,772) 478,526 Total 23,083,453(14,533,910) 8,549,543AT 31.3.2006 Freehold land4,690,317-4,690,317Building 2,003,119-2,003,119Plant and machinery, construction machineryand equipment, formwork, scaffoldings and containers 8,663,993 (8,635,265)28,728Office renovation, office equipment, computers, furniture and fittings, tools and sales office4,886,531 (3,936,400) 950,131Motor vehicles 2,145,096 (1,574,781) 570,315 Total 22,389,056(14,146,446) 8,242,610 ATDEPRECIATION AT1.4.2006 CHARGE31.3.2007 RM RMRMTHE COMPANY NET BOOK VALUE Office equipment, computers, furniture and fittings7,551 (4,895) 2,656Motor vehicles 1 - 17,552 (4,895) 2,657 Page 41 42. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 20079. PROPERTY, PLANT AND EQUIPMENT (CONTD) ATACCUMULATEDNET BOOKCOST DEPRECIATIONVALUE RM RM RMAT 31.3.2007Office equipment, computers, furnitureand fittings 370,553 (367,897)2,656Motor vehicles 376,950 (376,949)1747,503 (744,846)2,657 AT 31.3.2006Office equipment, computers, furnitureand fittings 370,553 (363,002)7,551Motor vehicles 376,950 (376,949)1747,503 (739,951)7,552 The net book value of the motor vehicles of the Group acquired under hire purchase termsamounted to RM341,449 (2006 - RM449,135) at the balance sheet date. 10.INVESTMENT PROPERTIESTHE GROUP 20072006 RM RM(Restated) At cost:- Freehold land106,688106,688- Building 6,761,2378,565,0376,867,9258,671,725 Addition during the financial year117,070 -Disposed of during the financial year(1,787,987)(1,803,800)Impairment loss(2,074,556)-3,122,4526,867,925 Page 42 43. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200711.LAND HELD FOR PROPERTY DEVELOPMENT THE GROUP 2007 2006RM RM (Restated) At 1 April 87,090,67593,764,081 Additions during the year 2,468,347 466,545 Disposal- (1,640,541) Impairment loss(1,858,834)- Transfer to property development costs (Note 15)- (5,499,410) At 31 March87,700,18887,090,675 Land held for property development comprises:-Freehold land, at cost 30,406,09832,264,932Leasehold land, at cost47,565,80047,565,800Development expenditure 9,728,290 7,259,94387,700,18887,090,675 Included in land held for property development are leasehold land amounting toRM8,620,889 (2006 - RM8,550,889) and RM39,442,632 (2006 - Nil) charged to a financialinstitution for the issuance of the ABBA Bonds granted to the Company and for the bankingfacilities granted to the Group, respectively. 12.OTHER ASSETS THE GROUP2007 2006 RM RMAt costQuoted shares in Malaysia12,30012,300Investment in club membership 208,00074,000 220,30086,300 Market value of quoted shares 10,8908,370 Page 43 44. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200712.OTHER ASSETS (CONTD)Investments in quoted shares are carried at cost and are written down to market valueonly when the directors are of the opinion that the diminution in value is permanent. 13.GOODWILL ON CONSOLIDATIONTHE GROUP2007 2006 RM RM At 1 April 27,317,640 27,317,640Arising from acquisition of subsidiaries181,811 - At 31 March27,499,451 27,317,640 14.INVENTORIESTHE GROUP2007 2006 RM RM Unsold completed properties, at cost 726,1481,283,422 None of the inventories is carried at net realisable value. 15.PROPERTY DEVELOPMENT COSTSTHE GROUP20072006 RMRMBalance at 1 April- land 37,976,712 31,334,481- development costs 120,913,208 77,920,310 158,889,920109,254,791Costs incurred during the year:- transferred from land held for property development (Note 11) -5,499,410- transferred from property, plant and equipment (Note 9) 302,6961,142,821- land200,046 -- development costs38,669,473 42,992,898 Balance carried forward 198,062,135158,889,920 Page 44 45. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200715.PROPERTY DEVELOPMENT COSTS (CONTD)THE GROUP2007 2006 RM RM Balance brought forward 198,062,135158,889,920 Development costs of completedprojects during the year:- land(595,650) -- development costs (8,149,608) - (8,745,258) - Sub-total 189,316,877158,889,920 Cost recognised as an expense in the incomestatement:- previous year(103,759,072) (54,509,104)- current year(34,536,432) (49,249,968)- cost recognised for completed project 8,685,884 -(129,609,620)(103,759,072) Balance 31 March 59,707,257 55,130,848 Cumulative revenue recognised in incomestatement 158,034,674118,845,219Cumulative billings to purchasers(168,857,826)(118,845,219) Progress billings (Note 30) (10,823,152)- Net balance48,884,105 55,130,848 Included in development expenditure is interest expense capitalised during the financial yearamounting to RM1,161,691 (2006 - RM1,820,090). Leasehold land of a subsidiary costing RM8,147,752 (2006 - RM7,674,555) is charged to alicensed bank for a term loan facility granted to the subsidiary. The foreign currency exposure profile of the property development costs is as follows:- THE GROUP20072006 RMRM Thai Baht- 131,603 Page 45 46. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200716.RECEIVABLESTHE GROUP THE COMPANY2007 20062007 2006 RMRMRMRM Trade receivables 62,106,277 46,168,072 - -Retention receivable 2,313,9192,376,762 - - Total trade receivables 64,420,196 48,544,834 - -Allowance fordoubtful debtsAt 1 April(13,466,689)(13,466,689)- -Written off 273,234 - - - At 31 March (13,193,455)(13,466,689)- - Net trade receivables 51,226,741 35,078,145 - - Other receivables,deposits andprepayments 11,605,596 10,996,707 2,832,130 2,579,164Allowance fordoubtful debts (3,500,122)(3,500,122) (2,352,737) (2,352,737) Net other receivables,deposits andprepayments8,105,4747,496,585 479,393 226,427 Total receivables 59,332,215 42,574,730 479,393 226,427 The foreign currency exposure profile of the receivables is as follows:- THE GROUP 2007 2006RM RMThai Baht6,486,019430,725 Included in trade receivables at the balance sheet date are the following amounts:- 2007 2006RM RM Related party:- Ligamas Sdn. Bhd.4,675,505*4,923,055 *Sabah State Government29,209,37818,054,059 *relates to retention receivable. Page 46 47. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200716.RECEIVABLES (CONTD) The amount owing by the Sabah State Government is in respect of the construction of anoffice building for the Land and Survey Department (Jabatan Tanah dan Ukur) for a value ofRM29,069,000. Upon the completion of the office building, the entire trade receivables duefrom the Sabah State Government will be set off against an equivalent amount owing to theSabah State Government, the details of which are disclosed in Note 27 to the financialstatements. Details of the related party relationship and the nature of the transactions and balances areset out in Note 45 to the financial statements. Included in other receivables is an amount of RM1,070,828 (2006 - RM1,070,828) due fromsub-contractors for the purchase of building materials. The amount owing is unsecured,interest-free, and is to be repaid through deductions against future claims for work to beperformed by the sub-contractors. Credit terms of trade receivables range from 14 to 90 days. 17.AMOUNT OWING BY/(TO) CONTRACT CUSTOMERSTHE GROUP20072006 RMRM Amount owing by contract customersContract costs incurred to date92,297,78179,943,257Attributable profits 10,857,531 6,327,355 103,155,312 86,270,612Progress billings(100,538,533) (83,155,618) Amount owing by contract customers2,616,7793,114,994 Amount owing to contract customersContract costs incurred to date106,690,901 75,241,385Attributable profits12,699,528 10,587,249 119,390,429 85,828,634Progress billings(122,240,858) (87,369,078) Amount owing to contract customers (2,850,429)(1,540,444)Page 47 48. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200718.AMOUNT OWING BY/(TO) SUBSIDIARIES THE COMPANY2007 2006 RM RMAmount owing by:Non-trade- Interest-bearing -12,403,758- Interest-free 58,919,70753,370,879 58,919,70765,774,637 Amount owing to:Non-trade- Interest-free 12,375,67418,082,756 The above amounts owing are unsecured and not subject to fixed terms of repayment. Inthe previous financial year, the interest-bearing amounts were subject to interest rate of8.5% per annum. 19.AMOUNT OWING BY/(TO) ASSOCIATESThe amounts owing are unsecured, interest-free and not subject to fixed terms of repayment. 20.AMOUNT OWING BY JOINT VENTUREThe amount owing is non-trade in nature, unsecured, interest-free and not subject to fixedterms of repayment. 21.TAX RECOVERABLESubject to agreement with the tax authorities, the Company has tax recoverable ofRM1,514,357 and RM1,937,117 at the balance sheet date in respect of the financial yearsended 31 March 1997 to 31 March 2000 and 31 March 2006 to 31 March 2007 respectively.At the date of this report, the amount is still pending agreement with the tax authorities. Page 48 49. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200722.SHORT-TERM DEPOSITS WITH LICENSED BANKSThe weighted average effective interest rates of deposits at the balance sheet date were asfollows:-THE GROUP THE COMPANY2007 200620072006 %% % % Licensed bank 4.24 2.81 2.30 2.30Deposits of the Group and the Company have maturity periods ranging from 30 days to 183days (2006 - 30 days). Certain deposits of the Company have been pledged as security for the ABBA Bonds asdisclosed in Note 26 to the financial statements.The foreign currency exposure profile of the short-term deposits is as follows:- THE GROUP 2007 2006RM RM Thai Baht 2,000,000 - 23.CASH AND BANK BALANCESTHE GROUP THE COMPANY2007 20062007 2006RM RMRMRM Cash and bankbalances1,917,8381,082,118 76,234 27,320 Sinking fund account(Note 42)12,001,0758,123,11212,001,0758,123,11213,918,9139,205,23012,077,3098,150,432 The foreign currency exposure profile of the cash and bank balances is as follows:-THE GROUP THE COMPANY2007 20062007 2006RM RMRMRM Thai Baht 805,933268,831 71,210 25,879Page 49 50. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200723.CASH AND BANK BALANCES (CONTD)Included in the cash and bank balances of the Group is RM208,949 (2006 - RM701,950)maintained under the Housing Development Accounts pursuant to Section 7A of theHousing Development (Control and Licensing ) Act, 1966. The sinking fund account is maintained with a financial institution, and forms part of thesecurity for the repayment of the ABBA Bonds. 24.SHARE CAPITAL THE COMPANY 2007 2006 20072006NUMBER OF SHARESRMRMAUTHORISEDOrdinary shares ofRM1 each193,167,000193,167,000193,167,000193,167,000 5.5% ICCPS ofRM1 each6,833,0006,833,000 6,833,000 6,833,000 Total authorised sharecapital 200,000,000200,000,000200,000,000200,000,000ISSUED AND FULLY PAID-UPOrdinary shares of RM1 each 82,435,00082,435,000 82,435,000 82,435,00025.RESERVES THE GROUPTHE COMPANY 200720062007 2006RM RM RM RM (Restated)Share premium(Note a)111,412,895 111,412,895111,412,895 111,412,895Capital reserve (Note b)1,199,999 1,199,999- -Retained profits (Note c)18,077,89221,680,691 22,322,99822,239,634 130,690,786 134,293,585133,735,893 133,652,529Page 50 51. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200725.RESERVES (CONTD)(a)The share premium is not available for distribution by way of cash dividends. (b)The capital reserve arose from a bonus issue of ordinary shares on 21 August 1992 by a former subsidiary, and is not available for distribution by way of dividends. (c)Subject to agreement with the tax authorities, at the balance sheet date, the Company has:-(i)tax-exempt income of approximately RM233,000 (2006 - RM233,000)available for the purpose of paying tax-exempt dividends; and(ii) tax credits under Section 108 of the Income Tax Act, 1967 to frank thepayment of dividends of approximately RM15,456,000 (2006 -RM14,457,000) out of its entire retained profits without incurring anyadditional tax liabilities. 26.ABBA BONDSTHE GROUP/THE COMPANY2007 2006 RM RM Al-Bai Bithaman Ajil Bonds (nominal value) 61,961,250 61,961,250Less: ABBA Bonds issuance expenses (1,343,155)(1,281,283)Finance charges on bonds issue(21,961,250) (21,961,250) Net proceeds 38,656,84538,718,717Additional ABBA Bonds issuance expenses (59,932)(61,872)38,596,91338,656,845Cumulation of amortisation of ABBA Bondsissuance expenses 1,270,823993,053Cumulation of amortisation of finance chargeson ABBA Bonds issue19,968,43515,481,62659,836,17155,131,524Cumulative repayments:-At 1 April (8,674,575)(6,196,125)Repayment made during the year (2,478,450)(2,478,450) At 31 March (11,153,025)(8,674,575)48,683,14646,456,949 Page 51 52. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200726.ABBA BONDS (CONTD)THE GROUP/THE COMPANY 2007 2006RM RMAnalysis of the ABBA Bonds:- Not later than one year 48,683,1462,478,450- Later than one year and not later than fiveyears-43,978,499 48,683,14646,456,949 On 13 September 2002, the Company issued RM61,961,250 nominal value Al-Bai BithamanAjil Bonds (ABBA Bonds) comprising RM49,569,000 nominal value Primary Bonds and 10equal tranches of Secondary Bonds with RM12,392,250 nominal value. The Primary Bondsare redeemable at maturity. Each Primary Bond is supported by 10 Secondary Bonds whichare redeemable in semi-annual instalments commencing 6 months from the date of the firstissue of the Secondary Bonds. The ABBA Bonds were placed out to a licensed financialinstitution via a private placement. The tenure of the ABBA Bonds is 5 years from the date ofissue. The profit margin on the ABBA Bonds is fixed at 5% per annum, payable in arrears ona semi-annual basis represented by the Secondary Bonds. The ABBA Bonds are issuedbased on a 10% per annum yield to maturity. The ABBA Bonds are secured in the following manner:- (i)by a third party first legal charge over certain properties of a subsidiary; (ii) by a third party first legal charge over all the shares held by a wholly-owned subsidiary in an associate; (iii)by a first party charge over a reserve account which is an Islamic banking account opened for the placement of all monies received from dividends, unappropriated profits and bonus shares accruing to a subsidiary; and (iv) by a first party charge over a sinking fund account and a Mudharabah Account of the Company.Page 52 53. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200727.LONG-TERM BORROWINGS THE GROUP 20072006RMRM Term loans (Note 28) 4,610,276 1,200,000Hire purchase payables (Note a)259,793 360,180Amount owing to the Sabah State Government(Note b)29,069,000 29,069,000 33,939,069 30,629,180 THE GROUP 20072006RMRM(a)Hire purchase payablesFuture minimum hire purchase payments: - repayable not later than one year 107,664113,549 - repayable later than one year and notlater than five years289,917397,581397,581511,130 Future finance charges(41,318) (53,760)Present value of hire purchase payables 356,263457,370Present value of hire purchase payables are payable as follows:-Not later than one year (Note 30)96,470 97,190 Later than one year and not later thanfive years 259,793360,180356,263457,370The hire purchase payables at the balance sheet date were subject to interest at rates ranging from 4.33% to 4.55% (2006 - 2.28% to 5.35%) per annum. Page 53 54. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200727.LONG-TERM BORROWINGS (CONTD)(b)Amount owing to the Sabah State GovernmentThe amount represents the purchase consideration for the development land located on Signal Hill, Tanjung Lipat, Kota Kinabalu, Sabah, which is currently being developed by one of the Companys subsidiary, i.e. South East Best Sdn. Bhd. (SEB). Under the terms of the agreement between SEB and the Sabah State Government dated 5 September 1994, the amount owing to the Sabah State Government shall be paid in the form of 130 completed units of the property under development to be completed within a period of five years from the commencement of their construction as consideration in kind.On 16 July 2002, the Sabah State Government agreed to execute a change of their entitlement to the outstanding amount of RM29,069,000. The change of entitlement is in the form of the construction by SEB of an office building for the Land and Survey Department (Jabatan Tanah dan Ukur) and part of a building for the Ministry of Finance at a value equivalent to the amount outstanding of RM29,069,000.On 21 October 2002, SEB was requested to prepare the Contract Document and Estimation for the above project.On 17 December 2004, SEB entered into a supplemental agreement with the Sabah State Government and agreed to execute a change of their entitlement. The change of entitlement is in the form of the construction by SEB of an office building for the Land and Survey Department (Jabatan Tanah dan Ukur) at a value equivalent to the amount outstanding of RM29,069,000.The Company completed the construction work in May 2007 and handed over the property to the authority in June 2007. The contract value was extended to RM30.3 million with variation orders.Page 54 55. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200728.TERM LOANSTHE GROUP20072006 RMRMCurrent portion:- repayable within one year (Note 32)2,580,042 2,597,379 Non-current portion:- repayable between one to two years 1,983,119-- repayable between two to five years2,627,157 1,200,000 Total non-current portion (Note 27)4,610,276 1,200,0007,190,318 3,797,379 Details of the term loans outstanding at the balance sheet date are as follows:-THE GROUP20072006Term loanRMRMI-197,379II 800,000 3,600,000 III 4,900,068- IV1,490,250-7,190,318 3,797,379Number ofMonthlyInterest Rate Date ofTerm loan Monthly InstalmentPer Annum CommencementInstalments Amount % of RepaymentRM I 17141,667 8.50% July 2005 II 9400,000 8.50%October 2006III48120,312 8.00%* *Repayable immediately upon full drawdown. Term loan IV is the Islamic financing facility of Al-Bai Bithaman Ajil (ABBA) Scheme whichis repayable in 3 monthly instalments of RM9,750 commencing March 2007 and 21 monthlyinstalments of RM76,646 commencing June 2007. It carries a financing charge of 7.80% perannum. Page 55 56. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200728.TERM LOANS (CONTD)(a)Term loans I and II are secured:-(i)by way of a first and second legal charge over 3 pieces of convertedresidential land of a subsidiary;(ii) by the personal guarantee of one of the directors of the Company; and(iii)by corporate guarantees from the Company and South-East Best Sdn. Bhd. (b)Term loan III is secured:-(i)by way of a Facility Agreement of RM28,000,000 to cover all facilities asprincipal instrument;(ii) by way of a first party legal charge over four pieces of development land ofsubsidiaries; and(iv) a corporate guarantee from the Company. (c)Term loan IV is secured:-(i)by way of a Lien Holders Caveat on a property of the subsidiary;(ii) by way of a legal charge over a sinking fund; and(iii)by way of a corporate guarantee from the Company. 29.DEFERRED TAXATIONThe deferred tax relates to the revaluation of land held for property development.Page 56 57. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200730.PAYABLESTHE GROUPTHE COMPANY200720062007 2006RMRMRMRM Trade payables 19,160,40822,580,762 --Retention payable 6,957,999 6,641,013 -- Total trade payables 26,118,40729,221,775 -- Other payables andaccruals5,474,865 2,922,532371,667 244,765Progress billings(Note 15)10,823,152 - --Hire purchasepayables (Note 27a)96,47097,190 --42,512,89432,241,497371,667 244,765The foreign currency exposure profile of the payables is as follows:-THE GROUP 20072006RMRM Thai Baht3,813,987 93,595 Credit terms of trade payables range from 30 to 60 days. Included in other payables is an amount owing to a related party of RM169,367 (2006 -RM169,367). The details of the transaction and the balance are disclosed in Note 45 to thefinancial statements. 31.AMOUNT OWING TO A DIRECTORThe above amount owing is unsecured, not subject to fixed terms of repayment and boreinterest at 5.5% (2006 - 5.5%) per annum.Page 57 58. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200732.SHORT-TERM BORROWINGSTHE GROUP2007 2006 SECUREDUNSECURED TOTALSECURED UNSECURED TOTALRMRM RM RM RM RM Term loans (Note 28) 2,580,042 - 2,580,042 2,597,379 -2,597,379Revolving credits5,294,4007,000,000 12,294,400 - 13,344,40013,344,4007,874,4427,000,000 14,874,442 2,597,379 13,344,40015,941,779THE COMPANY2007 2006 SECUREDUNSECURED TOTALSECURED UNSECURED TOTALRMRM RM RM RM RM Revolving credits - 5,000,0005,000,000- 5,000,000 5,000,000The weighted average effective interest rates at the balance sheet date for borrowings whichbear interest at floating rates, were as follows:- THE GROUPTHE COMPANY 2007 2006 20072006%%% % Term loans 8.01 8.25--Revolving credits6.57 6.257.65 7.5033.BANK OVERDRAFTSTHE GROUPTHE COMPANY 2007 2006 20072006RM RM RMRM Bank overdrafts(Note 42) 27,028,13414,656,1897,456,572 5,053,440The weighted average effective interest rates at the balance sheet date for bank overdraftswere as follows:- THE GROUPTHE COMPANY 2007 2006 20072006%%% % Bank overdrafts8.73 8.648.97 8.70Page 58 59. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 200734.NET ASSETS PER ORDINARY SHAREThe net assets per ordinary share is calculated based on the net assets value ofRM213,125,786 (2006 - RM216,728,585) attributable to ordinary shares div