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1. Investment in Prime Utilities Berhad ("PUB")

Our current investment in PUB comprises 19.387 million ordinary shares and 1.5 million PUB warrants. The 19.387 million ordinary shares constitute a 32.31% equity interest in PUB. Although the market share price of PUB as at 31 December 1999 was around RM4.46, which is way below our average cost of RM25.73, the directors are of the view that the diminution is temporary and that this investment is being held for long term investment purposes. As such, no provision for diminution in value of investment in quoted shares in Malaysia amounting to RM383,177,000 has been set aside. In view of the significant price differential and the substantial size of the investment, the auditors are of the opinion that it is material to highlight it in their report.

In the previous financial year, the Company entered into an agreement with KFC Holdings (Malaysia) Bhd. (“KFC”) to rescind and revoke the various Sale and Purchase and Supplementary Agreements for the acquisition of Wisma Idris via the issuance of 32,812,500 ordinary shares of RM0.50 each at a price of RM3.20 per share. The directors obtained a legal opinion which stated that the issue of the shares was void from the time of issue as the sale and purchase agreements entered into never became unconditional and as such the obligation on the vendors to transfer the property to the Company never arose. The rescission and revocation involved the discharge of an existing charge over the said property and the transfer of title to KFC and the completion of the cancellation of the placement shares for the acquisition. The issued and paid-up capital and share premium of the Company amounting to RM16,406,000 and RM88,594,000 respectively were reversed as a result of the cancellation of the placement shares. Shareholders’ approval for cancellation of the placement shares will be sought and the Company is currently taking the necessary steps to resolve the discharge of the existing charge and the transfer of the property back to KFC. In the auditors' opinion, it is necessary to highlight this as the cancellation of shares is not formally completed as of the date of their report.

The development projects of two subsidiaries, Idris Hydraulic Properties Sdn. Bhd. and Idris Hydraulic Investment (Myanmar) Limited were temporarily suspended due to the following reasons:

(i) delay in obtaining approvals from the relevant authorities on the revised plans submitted;
(ii) inability to obtain financing for the projects; and
(iii) the weak property market conditions.

No adjustment has been made in the accounts of the Group to write down the development expenditure incurred as at 31 December, 1999 amounting to RM86,940,000 to its net realisable value as the directors expect to re-activate the projects in the near future upon obtaining the relevant approvals, securing financing for the projects and improvement in the overall property market conditions.

In view of the significance of the amount of development expenditure and the uncertainties in the property market conditions, the auditors are of the opinion that reference has to be made to highlight the above in their report.

As at 31 December, 1999, the Company and the Group incurred a net loss of RM159,086,000 and RM112,540,000 respectively
and, as of that date, the Company and the Group have net current liabilities of RM616,623,000 and RM408,598,000 respectively.
The Corporate Debt Restructuring Committee supervised restructuring exercise of the Company and the Group so as to
satisfy all the financial obligations of the Company and the Group including the resolution and unwinding of the Wisma Idris
transaction is currently ongoing. In view of the above matters, the auditors are of the opinion that the ability of the Company
and the Group to continue as a going concern is dependent upon the outcome of the restructuring exercise, its subsequent
approval by the relevant parties and its successful implementation. As the outcome is still pending as of the date of their report,
the auditors have had to highlight this fact in their report.

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