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On behalf of the Board of Directors of SCIB (Board), AmMerchant Bank Berhad (AmMerchant Bank) is pleased to announce that SCIB has on 6 November 2003 entered into a Conditional Share Sale Agreement ("Conditional SSA") with Alcovest Connection Sdn Bhd (Alcovest), Orionsun Gains Sdn Bhd (Orionsun) and Tiara Senja Sdn Bhd (Tiara Senja) (collectively to be referred to as Vendors) to acquire the entire issued and paid-up share capital of Eurologic comprising 100,000 Shares for an indicative purchase consideration of RM175,000,000 to be satisfied by way of RM10,000,000 in cash and the balance of RM165,000,000 via the issuance of 73,991,031 new Shares in the Company (Consideration Shares) at an issue price of RM2.23 per Share. However, the final purchase consideration for the Proposed Acquisition is subject to the final valuation of the Privatisation Project (as defined hereunder) which will be based on the terms and conditions of the Concession Agreement to be executed (as defined in Section 2.2 of this announcement) and also the approval of the Securities Commission (SC).

Eurologic is an investment holding company and is presently dormant. Eurologic proposes to acquire 65% interest in N S Water Konsortium Sdn Bhd ("Konsortium"). Konsortium has been granted an exclusive right to undertake the privatisation of Jabatan Bekalan Air Negeri Sembilan (JBANS) ("Privatisation Project") by the State Government of Negeri Sembilan ("State Government"). Further information on Eurologic and Konsortium is set out in Section 2 of this announcement.

Upon completion of the Proposed Acquisition, the Company is proposing to change its name to
N S Water Corporation Berhad.

Presently, the Company is in the midst of implementing the following corporate exercises which are expected to be completed by end 2003, the details of which are further set out in the Circular to shareholders dated 14 July 2003 :-
(i) bonus issue of 22,500,000 new Shares on the basis of five (5) new Shares for every four (4) existing Shares held ("Proposed Bonus Issue");
(ii) renounceable rights issue of 18,000,000 new Shares ("Rights Shares") together with 18,000,000 free detachable warrants ("Rights Warrants") at an issue price of RM1.00 per Share ("Proposed Rights Issue with Warrants");
(iii) acquisition of a mixed zoned land in Kuching, Sarawak for a purchase consideration of RM18,500,000 ("Proposed Land Acquisition");
(iv) an employees' share option scheme of up to ten percent (10%) of the issued and paid-up share capital of SCIB ("Proposed ESOS"); and
(v) the increase in the authorised share capital of SCIB from RM25,000,000 comprising 25,000,000 Shares to RM100,000,000 comprising 100,000,000 Shares.

(The Proposed Bonus Issue, the Proposed Rights Issue with Warrants and Proposed Land Acquisition to be collectively referred to as Existing Proposals)

2.1 Information On Eurologic

Eurologic was incorporated in Malaysia under the Companies Act, 1965 (Act) as a private limited company on 11 March 2003. Both the authorised and issued and paid-up capital of Eurologic are RM100,000 comprising 100,000 Shares. Eurologic is an investment holding company and is presently dormant.

There is no profit & dividend record for Eurologic as it has not commenced operations as at the date of this announcement.

2.2 Information On Konsortium

Konsortium was incorporated in Malaysia under the Act as a private limited company on 24 February 1994. The authorised and issued and paid-up capital of Konsortium are RM10,000,000 and RM1,000,000 respectively comprising 10,000,000 Shares and 1,000,000 Shares. Konsortium which was incorporated for the sole purpose of undertaking the Privatisation Project has not commenced operations.

Presently, Lembaga Pemegang-Pemegang Amanah Yayasan Negeri Sembilan
(Yayasan) holds the entire equity interest in Konsortium. Eurologic and Eastern Utilities Sdn Bhd ("Eastern Utilities"), an independent third party, are proposing to acquire the Shares held by Yayasan in Konsortium such that Eurologic and Eastern Utilities will hold 65% and 25% of the equity interest in Konsortium respectively. The eventual shareholding structure in Konsortium was approved by the State Government via its letter dated 3 June 2003.

Konsortium was granted an exclusive right to undertake the Privatisation Project by the State Government on 25 March 1998 upon the terms and conditions to be agreed upon and set out in a thirty (30) year Concession Agreement (Concession Agreement) to be executed between the State Government and Konsortium. During the concession period, Konsortium will be principally engaged in the sourcing, development, abstraction, treatment of raw water, distribution and supply of treated water within the State of Negeri Sembilan and also direct billing and collection of tariff from consumers.

Based on the indicative terms and conditions of the Concession Agreement, the expected total capital expenditure for the Privatisation Project over the concession period is approximately RM4.0 billion.

The audited financial results of Konsortium for the nine (9) month period ended 31 December 1998 and the past four (4) financial years ended 31 December 2002 are set out in Table 1 of this announcement.

2.3 Information On the Vendors

2.3.1 Information On Alcovest

Alcovest was incorporated in Malaysia under the Act as a private limited company on 4 September 2003. Both the authorised and issued and paid-up capital of Alcovest are RM100,000 comprising 100,000 Shares. The directors who are also shareholders of Alcovest are Dato' Azhar Bin Hashim and Dato' Dr. Abdul Rahiman Bin Dato' A S Dawood, holding 50% of the equity interest in Alcovest each. The principal activity of Alcovest is investment holding. Alcovest is presently dormant.

2.3.2 Information On Orionsun

Orionsun was incorporated in Malaysia under the Act as a private limited company on 1 August 2003. Both the authorised and issued and paid-up capital of Orionsun are RM100,000 comprising 100,000 Shares. The directors of Orionsun are Dato' Azhar Bin Hashim and Dato' Dr. Abdul Rahiman Bin Dato' A S Dawood whilst its shareholders are Murad Bin Bujang and Dayang Rostylawati Binti Awang Ehsan, holding 50% of the equity interest in Orionsun each. The principal activity of Orionsun is investment holding. Orionsun is presently dormant.

2.3.3 Information On Tiara Senja

Tiara Senja was incorporated in Malaysia under the Act as a private limited company on 12 August 1997. Both the authorised and issued and paid-up capital of Tiara Senja are RM100,000 comprising 100,000 Shares. The directors who are also the shareholders of Tiara Senja are Hasnandi Bin Mohamad and Hossen Bin Jamail, holding 50% of the equity interest in Tiara Senja each. The principal activity of Tiara Senja is investment holding.

The Vendors shareholdings in Eurologic are set out in Table 2 of this announcement.

2.4 Salient Terms Of The Conditional SSA

The salient terms of the Conditional SSA, inter-alia, are as follows:-
(i) The indicative purchase consideration of RM175,000,000 (Indicative Purchase Consideration) will be paid to the Vendors in the following manner :-

§ Cash payment of RM200,000 upon signing of the Conditional SSA as deposit and part payment of the Indicative Purchase Consideration;

§ Cash payment of RM4,800,000 as part payment of the Indicative Purchase Consideration within one (1) month from the date of acquisition of 65% equity interest in Konsortium by Eurologic;

§ Cash payment of RM5,000,000 as part payment of the Indicative Purchase Consideration within one (1) month from the date of the signing of the Conditional SSA; and

§ the balance of RM165,000,000 will be paid via the issuance of 73,991,031 new Shares at an issue price of RM2.23 per Share or the issue price as determined by the SC but subject always to the agreement of SCIB and the Vendors, whichever is the higher;

(ii) the Indicative Purchase Consideration is subject to the completion and acceptance of the valuation of the Privatisation Project by the Purchaser. The valuation of the Privatisation Project is expected to provide a range of values and the Company and the Vendors have mutually agreed that in the event that the Indicative Purchase Consideration falls outside the lower or upper ends of the range of values based upon Eurologic's shareholding in Konsortium, then the parties will negotiate in good faith to revise and agree on the final purchase consideration taking into account the valuation. Any revision in the Indicative Purchase Consideration shall only affect the number of Shares to be issued and not the cash consideration.

(iii) The Conditional SSA is subject to the following conditions precedent being obtained within twelve (12) months from the date of the Conditional SSA (Conditions Period) :-
(a) the Vendors shall ensure that Eurologic acquire and maintain its equity holding in Konsortium of not less than 65% interest throughout the Conditions Period. Any change in the shareholding of Konsortium shall require the written consent of SCIB, subject always to the approval of the State Government;

(b) the Vendors will warrant and undertake that Eurologic and/or Konsortium will execute and deliver the Concession Agreement within six (6) months from the date of signing of the Conditional SSA or such additional time as shall be consented in writing by SCIB;

(c) the appointment of a party to undertake all or any part of the capital expenditure programmes required under the Concession Agreement by the Company and /or Konsortium, if required;

(d) the approvals as set out in Section 8 of this announcement;

(e) the satisfactory outcome of the legal and financial review / audit of Eurologics accounts, books, assets and liabilities and the inspection of all books and documents of Eurologic; and

(f) the completion of the Proposed Bonus Issue and Proposed Rights Issue with Warrants;

(Items (a) to (f) to be collectively referred to as Conditions Precedent)

(iv) in the event that the conditions precedent or any of them are not obtained within the Conditions Period or such extended period or periods mutually agreed by the parties, the Vendors shall refund all monies paid by SCIB in accordance with item (i) above and any other sums paid or advanced to Eurologic or the Vendors and the Conditional SSA shall by mutual consent be terminated and be null and void, subject to the timeframe stipulated for any appeal or variation to the terms of the Conditional SSA pursuant to conditions imposed by any of the relevant authorities;
(v) upon fulfilment of all the Conditions Precedent, if the Vendors or either one of them commit any breach of the Conditional SSA and/or that any of the representations, warranties or covenants of the Vendors is false, incorrect or misrepresented or in the event the Vendors fail to complete the Conditional SSA, SCIB shall in its absolute discretion be entitled to :-

(a) terminate the Conditional SSA and seek damages against the Vendors for any antecedent breaches; or

(b) terminate the Conditional SSA and the Vendors shall refund all monies paid by SCIB in accordance with item (i) above and any other sums paid or advanced to Eurologic or the Vendors and further agree to pay estimated liquidated damages amounting to Ringgit Malaysia Ten Million (RM10 Million) and the Conditional SSA shall be null and void; or

(c) enforce specific performance by the Vendors for the sale of the 100,000 Shares in Eurologic;

(vi) upon fulfilment of all the Conditions Precedent, if SCIB fails to pay the final purchase consideration or any part thereof or fail to perform any of its covenants and undertakings, the Vendors shall in its absolute discretion be entitled to :-

(a) terminate the Conditional SSA and forfeit the deposit and part payment received in accordance with item (i) above as agreed liquidated damages; or

(b) enforce specific performance by SCIB for the purchase of the 100,000 Shares in Eurologic.

2.5 Basis of Arriving at the Indicative Purchase Consideration

The Indicative Purchase Consideration was arrived at on a willing buyer willing seller basis after taking into consideration the preliminary cashflow projected to be receivable from the Privatisation Project.

However, the final purchase consideration is still subject to the valuation of the Privatisation Project by an independent party to be appointed by the Company and also the approval of the SC. In view of the nature of the Privatisation Project, the valuation will be undertaken using the discounted cashflow methodology which is not an asset-backed valuation. To this end, the Board has appointed AmMerchant Bank to undertake the valuation of the Privatisation Project based on the final cashflow projections which will incorporate, amongst others, the terms and conditions of the Concession Agreement to be executed and the water demand projections.

An announcement will be made upon finalisation of the valuation and accordingly, the final purchase consideration for the Proposed Acquisition.

2.6 Basis of Determining the Issue Price

The issue price of RM2.23 per Share was arrived at after taking into consideration the following :-
(i) The five (5)-day weighted average market price of SCIB Shares up to and including 5 November 2003, being the last market day preceding the date of the Conditional SSA, of RM2.2261 per Share; and

(ii) The proforma consolidated Net Tangible Assets (NTA) of SCIB after the Existing Proposals of RM1.16 per Share based on the audited consolidated balance sheet of SCIB as at 31 December 2002.

2.7 Source of financing

The cash portion of the Indicative Purchase Consideration of RM10,000,000 will be financed by the Company through internally generated funds and / or borrowings.

2.8 Shares Acquired Free From Encumbrances

The Shares to be acquired pursuant to the Proposed Acquisition shall be free from all liens, charges, pledges or encumbrances.

2.9 Ranking of the Consideration Shares

The Consideration Shares shall rank pari passu in all respects with the existing SCIB Shares, save and except that they are not entitled to any dividends, rights, bonus, allotments and/or any other distributions, the entitlement date of which is prior to the allotment date of the Consideration Shares.

2.10 Original Cost of Investment

The Vendors original cost of investment in Eurologic are set out in Table 2 of this announcement.

2.11 Liabilities to be assumed

There are no external liabilities to be assumed by SCIB pursuant to the Proposed Acquisition.

Upon completion of the Proposed Acquisition, SCIB will be venturing into a new business activity, namely the sourcing, development, abstracting and treating of raw water and distribution and supply of treated water to the domestic, industrial and commercial consumers within the State of Negeri Sembilan. An evaluation of the risk factors (which may not be exhaustive) that may affect SCIB, Eurologic and Konsortium are as follows :-

3.1 Termination of the Concession Agreement

The State Government will have the right to terminate the Concession Agreement should Konsortium fail to perform its duties and obligations and/or comply with the terms and conditions to be contained in the Concession Agreement. In addition, in the event of force majeure which may occur at any time during the concession period, the water treatment business may be disrupted.

3.2 Water Supply Operations

The operations of water supply is a complex supply system that involves many risks which are beyond the control of Konsortium, including but not limited to construction, operating and revenue risks.

The Privatisation Project is expected to involve the construction of new infrastructure as well as improving the existing infrastructure which may not be up to standard. In undertaking this, there may be delays in completion, performance shortfall and cost overruns during the construction or upgrading of the said infrastructure. However, such risks may be mitigated by engaging an experienced and reputable contractor to undertake these contracts, a close review and monitoring of the capital expenditure programme and also adequate insurance coverage for its operations.

In terms of operating risks, there may be a shortage or cessation of raw water or deterioration in the quality of raw water, a shortage of treated water or lower quality of treated water which affects the overall supply of water or even breakdowns of the water treatment plants. Such risks may be mitigated through close review of the capital expenditure programme which would involve the refurbishment and maintenance of new and existing infrastructure to ensure optimal performance.

The Privatisation Project also faces a risk in its revenue due to lower demand, slow collection from consumers and lower tariffs.

These risks, which are not exhaustive, may have a material adverse effect on revenue and/or costs, thereby affecting the profitability and ultimately, viability of the Privatisation Project.

3.3 Capital Intensive and Long gestation period

The water supply operations will be capital intensive in nature and is expected to have a gestation period in terms of strong cashflow and earnings contribution. Extensive and substantial capital works programme and operational expenditure must be undertaken to meet the requirements of the Concession Agreement, particularly in increasing the water treatment and distribution capacity over the concession period and also reduce the non-revenue water level.

In view of the foregoing and having considered that Konsortium is not expected to generate significant operational cashflow nor profitability during the initial years of its operations, the SCIB Group will be required to assist Konsortium in procuring financing for it to carry out its operations in accordance with the terms and conditions of the Concession Agreement. Nevertheless, the future financial performance of the SCIB Group is expected to improve pursuant to the Proposed Acquisition and significantly enhanced in the later years of Konsortiums operations.

3.4 Dependence on Key Personnel

While the water supply operations is relatively new to the Executive Directors and management of SCIB, some of the Independent Directors of SCIB have extensive knowledge and experience in water related operations.

Notwithstanding this, the continued success of Konsortium will depend on the abilities and efforts of the SCIB Group in retaining Konsortiums key management and technical personnel. The loss of any key management or technical personnel may adversely affect the water supply operations and ultimately the performance of the Group. Moreover, based on the indicative terms and conditions of the Concession Agreement, Konsortium is required to assume the existing employees of JBANS who have the relevant experience and skills in managing water supply operations. This will help minimise any potential disruptions when Konsortium takes over the operations from JBANS.

Upon completion of the Proposed Acquisition, SCIB will formulate a succession plan to groom as well as attract skilled personnel to ensure continuity in the management of the Group.

3.5 Control by Vendors

Upon completion of the Proposed Acquisition, the Vendors will control approximately 52% of the equity interest in SCIB. As such these Vendors will be able to control the outcome of certain matters requiring the votes of the Companys shareholders unless they are required to abstain from voting and deliberating by law, covenants and/or by the relevant authorities.

The thrust of the water supply sector will focus on the need to efficiently manage the national water resources so that the nation will have an adequate supply of safe water. Besides ensuring an efficient and reliable water supply system, priority will also be given to minimise wastage and losses such that the non-revenue water level will be reduced to 31% in 2005. It is expected that the demand for water for domestic and industrial use will increase by 5.4% per annum during the Eighth Malaysia Plan Period with the national water supply coverage expected to increase to 95%, with almost 100% coverage of urban areas and 91% of rural areas in 2005. During the Eighth Malaysia Plan Period, the implementation of water supply projects will be further accelerated including the construction of Sungai Selangor Phase III project and the Pahang-Selangor Raw Water Transfer scheme to cater for the increase in water demand in the Klang Valley. In addition, the states of Melaka, Negeri Sembilan, Pahang, Perak and Sabah are expected to complete the privatisation or corporatisation of water supply authorities. Privatisations of water supply authorities will be conducted in an integrated manner to include treatment works, distribution of water, billing and customer services (Source : Eighth Malaysia Plan Period 2001  2005).

Following the Proposed Acquisition, the SCIB Group will diversify its activities into the sourcing, development, abstracting and treating of raw water and distribution and supply of treated water, hence reducing its dependence on the construction industry. In view of the prospects of the water supply industry and since treated water is an essential commodity, the Board anticipates that the water treatment business will be able to generate a steady income stream for the Group and enhance the Groups future earnings over the longer term.
Taking into consideration the foregoing, the Board is confident that the Proposed Acquisition will contribute positively to the long-term earnings of the SCIB Group.

5.1 Share Capital

The effects of the Proposed Acquisition on the issued and paid-up share capital of SCIB are set out in Table 3 of this announcement.

5.2 NTA

Based on the audited consolidated balance sheet of SCIB as at 31 December 2002 and after taking into consideration the Existing Proposals, the proforma effects of the Proposed Acquisition on the Group's NTA per Share had the Proposed Acquisition been effected on that date are set out in Table 4 of this announcement.

5.3 Earnings

Barring unforeseen circumstances, the Proposed Acquisition is only expected to be completed by end 2004. As such, the Proposed Acquisition will not have any effect on the earnings of the SCIB Group for the financial year ending 31 December 2003. However, the Proposed Acquisition is expected to enhance the profitability and contribute positively to the future earnings of the SCIB Group over the longer-term once there is no longer a gestation in Konsortiums earnings.

5.4 Substantial Shareholders Shareholding

The effects of the Proposed Acquisition on the substantial shareholders shareholdings in the Company are set out in Table 5 of this announcement.

5.5 Dividends

The Proposed Acquisition is not expected to have any material effect on the dividends, if any, to be declared by the Company for the financial year ending 31 December 2003. Any potential effect on the dividends to be declared by the SCIB Group in the future would be dependent on the financial position and performance of the SCIB Group.

Upon completion of the Proposed Acquisition, the Vendors will collectively own 73,991,031 Shares representing approximately 52% of the enlarged issued and paid-up share capital of SCIB. By virtue of Part II Section 6 of the Malaysian Code on Take-Overs and Mergers, 1998 (Code), the Vendors are required to undertake a MGO for all the remaining Shares in SCIB not already owned by them and parties acting in concert.

The Vendors will seek a waiver from the SC from the obligation to undertake the MGO pursuant to Practice Note 2.9.1 of the Code (exemption if transactions involve issue of new securities) (Proposed MGO Waiver).

According to the Listing Requirements of the Kuala Lumpur Stock Exchange ("KLSE"), SCIB must have at least 25% of its issued and paid-up share capital in the hands of not less than 1,000 public shareholders holding not less than 100 Shares each upon completion of the Proposed Acquisition. Based on the Companys shareholding structure as at 2 October 2003, the Companys proforma public spread upon completion of the Proposed Acquisition is 27% comprising approximately 38,630,000 Shares.

In any event, the Company / Vendors undertake(s) to either place out / offer for sale / dispose of the number of Shares required to meet any shortfall, pursuant to the final purchase consideration for the Proposed Acquisition to be announced later, for the purposes of complying with the public spread requirement. The final number of Shares and method to be adopted will only be finalised at a later juncture.

The Proposed Acquisition is subject to the following :-

(i) the approval of the SC (including the Proposed MGO Waiver);

(ii) the approval-in-principle from the KLSE for the listing of and quotation for the new Shares in SCIB to be issued pursuant to the Proposed Acquisition;

(iii) the approval of the Economic Planning Unit and/or Foreign Investment Committee and/or State Government;

(iv) the approval of the Ministry of International Trade and Industry;

(v) the approval of the shareholders of SCIB at an extraordinary general meeting to be convened; and

(vi) the approval of any other relevant authorities.

The Proposed MGO Waiver is also subject to the approval of the independent shareholders of the Company. The Proposed Acquisition is conditional upon the Proposed MGO Waiver.

The Proposed Acquisition is conditional upon the completion of the Proposed Bonus Issue and the Proposed Rights Issue with Warrants.

To the best knowledge of the Board, the Proposed Acquisition does not depart from the SC Guidelines.

None of the directors and/or major shareholders of SCIB or persons connected with them have any interest, direct and/or indirect, in the Proposed Acquisition.

The Board, having taken into consideration all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the long term interest of the Company.

AmMerchant Bank has been appointed as Adviser to SCIB for the Proposed Acquisition. An independent adviser will be appointed at a later juncture to advise the independent shareholders of SCIB on the Proposed MGO Waiver.

The Proposed Acquisition is expected to be completed by end 2004.

The Conditional SSA will be available for inspection at the registered office of SCIB at Lot 1258, Jalan Utama, Pending Industrial Estate 93450, Kuching, Sarawak during normal office hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this announcement.

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