Corporate Calendar

2 4

1. Hilltop Bungalows in Penang 3. Setia Tropika Wins Landscape Awards 2006 12 December 2006 26 December 2006 S P Setia entered into a joint venture Continuing to set new benchmarks in landscaping, with PPH Resorts (Penang) Sdn Bhd Setia Tropika bagged two Gold Awards for Best to develop 45 acres of freehold land, Neighbourhood Park and Best Private Office Building located adjacent to our Setia Pearl Island in the Johor State Landscape Awards 2006. project into a luxurious hilltop bungalow development to be named Setia View. 4. Setia Eco Gardens – First Eco-Themed Project in Johor Bahru 2. Annual Dinner and Dance 2006 10 January 2007 12 December 2006 S P Setia entered into a joint venture with the Hong The grand ballroom of Mandarin Oriental Bee Land Group to develop 948.7 acres of freehold hotel was awash with a sea of colours as land in Pulai, Johor Bahru situated within the 1,000 staff dressed to the hilt to celebrate Iskandar Development Region into a RM2.0 billion S P Setia’s Annual Dinner & Dance 2006 eco-themed township project, to be named Setia themed “Magical Night of Bollywood”. Eco Gardens.

36 ANNUAL REPORT 07 Corporate Calendar

5. Setiahills Offers First-of-its-kind Tropical Spa Villas 28 January 2007 A Balinese-style garden party was held at dusk in conjunction with the launch of Setiahills. Tan Sri Liew Kee Sin was on hand to unveil two show units constructed out of 13 available designs to display the spa villa concept. 5 6. Musical Celebration at Swan Lake 6 February 2007 The landscape centrepiece in Setia Eco Park, a 25-acre Swan Lake, was transformed into a floating concert hall as hundreds of guests turned up for the musical festival featuring classical and pop elements.

7. Nationwide Chinese New Year Carnival 2 – 4 March 2007 6 S P Setia hosted a nationwide Chinese New Year Carnival featuring the record-breaking troupe of “88” Chinese Lions and the Wind of Colourful Guizhou show from China at three of its project sites. The Guests of Honour who graciously consented to launch the event were the Menteri Besar of Selangor, YAB Dato’ Seri Dr Mohamad Khir bin Toyo in Setia Alam, Selangor, the Minister of Health, YB Dato’ Seri Chua Soi Lek in Setia Tropika, Johor Bahru and TYT Tun Dato’ Seri Utama Dr. Haji Abdul Rahman bin Haji Abbas in Setia Pearl Island, Penang.

8. Tenby Educare International School at Setia Eco Park 8 March 2007 Tenby Educare International School will set up its third branch in Malaysia following the signing of the lease agreement between Tenby Educare Sdn Bhd and S P Setia. The construction of the integrated school complex on 14 acres in Setia Eco Park is expected to be ready by end of 2008. 7 8

S P SETIA BHD 37 Corporate Calendar

9. Setia Tropika Exit 255B Opens to Traffic 11. S P Setia Introduces Luxury Condo Brand – Sky Residences 23 March 2007 12 April 2007 YB Dato’ Seri S. Samy Vellu, the Minister of S P Setia enters the luxury condominium market with the Works Malaysia was present as the Guest acquisition of 5.96 acres of prime land in Jalan Tun Razak, Kuala of Honour to officiate the dedicated Setia Lumpur earmarked for the development of a new product range Tropika Interchange Ext 255B connecting the under the “Sky Residences” brand. township to the North-South Highway (NSH) near Kempas. This Interchange was built by 12. 10th Birthday Bash for Bukit Indah Johor S P Setia at a cost of RM18 million for the 27 May 2007 convenience of its residents. Bukit Indah Johor celebrated its 10th anniversary with a big birthday bash that featured an outdoor cinema screening “Pirates 10. Setia Pearl Island Makes Impressive Debut of the Caribbean” under the starry night. 31 March 07 S P Setia launched its maiden project in 13. Duta Grandé – the Pinnacle of Luxury Penang with a sizeable crowd of some 5,000 30 May 2007 people attending the event. Setia Pearl Island S P Setia acquired 6.2 acres of freehold land in Kenny Hills was an instant hit with 95% of the first phase for RM73.9 million to embark on an ultra luxury project – Duta sold upon official launch. Grandé, featuring 15 mansions to be sold at breakthrough prices of RM30 million each.

10 11

38 ANNUAL REPORT 07 Corporate Calendar

14. Setia Eco Park voted World’s Best Master Plan 16. S P Setia Foundation Charity Dinner 2007 Development in FIABCI Prix d’Excellence 2007 6 July 2007 6 June 2007 A whopping sum of RM5.8 million was raised Setia Eco Park was named the World’s Best Master Plan at the S P Setia Foundation Charity Dinner 2007 Development by the Paris-headquartered Federation of which saw Setia staffers performing a musical International Real Estate (FIABCI) in its International Prix show entitled “Bollywood the Musical”. Deputy d’Excellence Award in Barcelona, Spain. Prime Minister of Malaysia, YAB Dato’ Sri Mohd Najib bin Tun Hj Abdul Razak graced the event as 15. S P Setia Ventures into Vietnam the Guest of Honour. 26 June 2007 S P Setia joined forces with Vietnam top’s state-owned 17. Signing of Centrex Services for conglomerate, Becamex IDC Corp to develop its maiden Setia Tropika overseas project in Vietnam, EcoLakes@MyPhuoc located 24 July 2007 40km north of Ho Chi Minh City. The birth of the historic Setia Tropika and Telekom Malaysia inked an partnership was witnessed by YB Dato’ Seri Ong Ka Ting, agreement for the provision of Centrex Service Minister of Housing and Local Government Malaysia, which allows Setia Tropika’s residents to enjoy Mr Nguyen Hoang Son, Chairman and Mr Mai The Trung, direct and immediate access to voice and Chief Secretary, both of the People’s Committee of Binh broadband services. Duong Province.

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S P SETIA BHD 39 Corporate Calendar

18. Eco-themed Project in Cyberjaya 25 July 2007 S P Setia purchased 156 acres of freehold land in Cyberjaya to develop another eco-themed project named Setia Eco Villas with an estimated gross development value (GDV) of RM1.2 billion.

19. Energy-Efficient EcoVillas at Setia Eco Park 3 August 2007 Setia Eco Park launched the first energy-efficient bungalows in the country, named EcoVillas which will be

18 19 powered by the Building Integrated PhotoVoltaic (BIPV) solar technology in association with the Malaysia Energy Centre.

20. Three Teams for Rat Race 2007 7 August 2007 S P Setia sponsored three teams at a cost of RM37,000 to raise funds for various charities at The Edge Bursa Malaysia Rat Race 2007.

21. Sally Yeh Live in S P Setia 10 – 12 August 2007 S P Setia presented the highly-anticipated “Sally Yeh Live in S P Setia” free concerts at three of its townships in Penang, Shah Alam and Johor Bahru. Huge crowds of 20 delighted fans thronged the concert sites to celebrate this musical extravaganza.

22. The Edge Top Property Developers Award 30 August 2007 S P Setia once again claimed the top spot in The Edge Malaysia Top Property Developers Awards 2007, making it the third straight year of victory. Dato’ Voon Tin Yow, S P Setia Chief Operating Officer received the award from YB Dato’ Seri Ong Ka Ting, Housing and Local Government Minister.

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40 ANNUAL REPORT 07 Corporate Calendar

23. Fostering Togetherness on Family Day 2007 26. Cityscape Exhibition at Dubai 1 September 2007 16 – 18 October 07 Some 1,000 S P Setia staff and their family members had a fun and S P Setia was one of the few Malaysian memorable time at the Annual Family Day themed “One Setia” at developers that exhibited at the world’s the Setia Alam Show Village, which was transformed into a night largest real estate exposition, Cityscape market-cum-fun fair ground for the day. Dubai 2007 held in the Dubai International Exhibition Centre (DIEC). Among the 24. Choose Your Home from The Sky projects showcased were Setia Sky 9 & 16 September 2007 Residences, Duta Grandé, Setia EcoCity Setia Eco Park’s prospective buyers were flown by helicopter or and Setia City. hot-air balloon to choose their dream homes in conjunction with the launch of its latest phase of bungalow lots named Le Grandeur. 27. Setia Walk to Springboard S P Setia into Commercial Sector 25. Euromoney Real Estate Award 2007 6 October 07 26 September 2007 Setia Walk was launched to spearhead S P Setia was voted the “Best Developer in Malaysia” for the S P Setia’s expansion into the commercial third consecutive year by UK-based, globally distributed financial sector. 85% of the shop-offices previewed publication Euromoney in its Liquid Real Estate Awards. Company were pre-booked by interested purchasers Director Datuk Ismail bin Adam represented the company to receive prior to the official launch. the prestigious award in London.

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S P SETIA BHD 41 Corporate Calendar

28. Property Man of the Year 2007 27 October 2007 S P Setia Group Managing Director and Chief Executive Officer, Tan Sri Dato’ Sri Liew Kee Sin was named Property Man of the Year 2007 by FIABCI Malaysia Property Awards 2007 in recognition of his contributions to the country’s real estate industry and community at large.

42 ANNUAL REPORT 07 Corporate Calendar

29. Retail Giants JUSCO and TESCO come to Bukit Indah Johor 29 October 2007 AEON Co. (M) Berhad acquired a piece of land measuring 37.78 acres from Bukit Indah Johor for RM106.9 million to construct a new AEON Shopping Centre which will have JUSCO as the anchor tenant. Bukit Indah Johor entered into an agreement to lease with Tesco Stores (M) Sdn Bhd to construct a hypermarket on 9.69 acres of land which will

be operated by TESCO. 29

30. Signing of Bonds Issuance 5 November 2007 S P Setia signed an agreement with Aseambankers Malaysia Berhad and United Overseas Bank (Malaysia) Bhd for the issuance of RM500 million nominal value Redeemable Serial Bonds with 168,151,302 Detachable Warrants (RSB) to fund its expansion plans.

31. Night with Mawi Concert 8 November 2007 30 Setia Eco Park and Setia Alam hosted a concert dubbed “A Night with Mawi” featuring Malaysia’s pop sensation Mawi and vocal powerhouse Adibah Noor to celebrate Hari Raya with their Muslim customers and business associates.

S P SETIA BHD 43 adapt to challenge

Change opens up new windows of opportunities, and is necessary for facing new challenges both at home and across foreign shores. However, a steadfast commitment to integrity and time-honoured values are equally important. At S P Setia, we balance the necessity for change with our unwavering pledge to deliver on all our promises to stakeholders.

Corporate Information

Board Of Directors Executive Committee Nomination Committee

Tan Sri Abdul Rashid bin Abdul Manaf Tan Sri Abdul Rashid bin Abdul Manaf Datuk Ismail bin Adam (Chairman) (Chairman) (Chairman) Tan Sri Dato’ Sri Liew Kee Sin Tan Sri Dato’ Sri Liew Kee Sin Dato’ Leong Kok Wah (Group Managing Director/Chief Executive Dato’ Voon Tin Yow Ng Soon Lai @ Ng Siek Chuan Officer)

Dato’ Voon Tin Yow (Executive Director/Chief Operating Officer) Audit Committee Risk Management Committee Teow Leong Seng Tan Sri Dato’ Hari Narayanan Dato’ Voon Tin Yow (Executive Director/Chief Financial Officer) a/l Govindasamy (Chairman) (Chairman) Yap Kok Weng Teow Leong Seng (Executive Director) Dato’ Leong Kok Wah Yap Kok Weng Khor Chap Jen Datuk Ismail bin Adam (Executive Director) Khor Chap Jen Ng Soon Lai @ Ng Siek Chuan Chang Khim Wah Khor Soo Weng (Executive Director) Wong Tuck Wai Tan Sri Lee Lam Thye Remuneration Committee (Non-Independent Non-Executive Director) Kow Choong Ming Dato’ Leong Kok Wah Tan Sri Dato’ Hari Narayanan (Chairman) a/l Govindasamy Secretaries (Independent Non-Executive Director) Tan Sri Dato’ Hari Narayanan a/l Govindasamy Dato’ Leong Kok Wah Lee Wai Ngan (LS 00184) (Independent Non-Executive Director) Datuk Ismail bin Adam Chan Toye Ying (LS 00185) Datuk Ismail bin Adam (Independent Non-Executive Director)

Ng Soon Lai @ Ng Siek Chuan (Independent Non-Executive Director)

46 ANNUAL REPORT 07 Corporate Information

Registered Office Auditors

Wisma Selangor Dredging Moores Rowland (AF 0539) 6th Floor, South Block Wisma Selangor Dredging 142-A, Jalan Ampang 7th Floor, South Block 50450 Kuala Lumpur 142-A, Jalan Ampang Tel: 21615466 Fax: 21636968 50450 Kuala Lumpur

Registrar Solicitors

Systems & Securities Sdn Bhd Shearn Delamore & Co Wisma Selangor Dredging 6th Floor, South Block Cheong Kee Fong & Co 142-A, Jalan Ampang Soo Thien Ming & Nashrah 50450 Kuala Lumpur Tel: 21615466 Fax: 21636968 Stock Exchange Listing Bankers Main Board of Bursa Malaysia Securities Berhad Malayan Banking Berhad Public Bank Berhad Indices OCBC Bank (Malaysia) Berhad EON Bank Berhad KL Composite Index United Overseas Bank (Malaysia) Bhd FTSE All-World Asia Pacific Index CIMB Bank Berhad Bloomberg World Index HSBC Bank Malaysia Berhad S & P / IFC Global Composite Price Index Affin Bank Berhad Ambank (M) Berhad Alliance Bank (Malaysia) Berhad

1. Timber roof-rafters lend a rustic charm to the spa-villas at Setiahills 1

S P SETIA BHD 47 Corporate Structure

100% Bandar Setia Alam Sdn Bhd 50% Bandar Eco-Setia Sdn Bhd 100% Setia Duta One Sdn Bhd 100% Bukit Indah (Johor) Sdn Bhd 100% Setia Indah Sdn Bhd 100% Shabra Development Sdn Bhd 50% 100% Wawasan Indera Sdn Bhd* 100% S P Setia Project Management Sdn Bhd Syarikat Kemajuan Jerai Sdn Bhd * (50% investment in Wawasan Indera Sdn Bhd is held by S P Setia) 100% 100% Lagavest Sdn Bhd 100% Bukit Indah (Perak) Sdn Bhd S P Setia Eco-Projects Management Sdn Bhd 100% 100% Setia Recreation Sdn Bhd Setia Promenade Sdn Bhd 100% Property Development 100% 60% Ambleside Sdn Bhd Cosmotek Sdn Bhd SJ Classic Land Sdn Bhd 70% Bukit Indah Property Management Sdn Bhd 70% 100% Indera Perasa Sdn Bhd Dian Mutiara Sdn Bhd 50% Golden Klang Valley Sdn Bhd 70% Sendiman Sdn Bhd 70% Exceljade Sdn Bhd 70% Aeropod Sdn Bhd 100% Setia Eco Villa Sdn Bhd (Formerly known as Optagreen Sdn Bhd) 70% 100% Kemboja Mahir Sdn Bhd Ganda Anggun Sdn Bhd 100% S P Setia Construction Sdn Bhd 100% 100% 100% Setia Precast Sdn Bhd Suharta Properties Sdn Bhd Construction & Infrastructure Setia Prefab Sdn Bhd 100% 60% 51% 100% Manih System Construction Sdn Bhd Suharta Sdn Bhd Suharta Development Sdn Bhd Setia Bina Raya Sdn Bhd 100% Suharta Management Sdn Bhd 100% 100% 60% Setia-Wood Industries Sdn Bhd S P Setia Marketing Sdn Bhd Yunikhas Sdn Bhd* 50% 100% Setia Putrajaya Sdn Bhd Setia Putrajaya Construction Sdn Bhd * 8% investment in Yunikhas Sdn Bhd 100% 100% is held by S P Setia Kewira Jaya Sdn Bhd Setia Putrajaya Development Sdn Bhd * 10% investment in Yunikhas Sdn Bhd 100% 25.03% is held by Manih System S P Setia Management Services Sdn Bhd Loh & Loh Corporation Berhad Construction Sdn Bhd 60% S P Setia Estate Management Sdn Bhd 51% S. P. Setia Security Services Sdn Bhd 100% 100% Aneka Baru (M) Sdn Bhd S P Setia Property Holdings Sdn Bhd 100% Manufacturing/Investment Setia Alam Property Holdings Sdn Bhd & Property Holding/ 100% 20% S P Setia Technology Sdn Bhd Icfox (Malaysia) Sdn Bhd Property Management/ 100% 100% Security Services/Other Futurecrest (M) Sdn Bhd Kesas Kenangan Sdn Bhd 100% Pelita Dunia Sdn Bhd 100% Bukit Indah (Selangor) Sdn Bhd 100% Setia Hicon Sdn Bhd 99.9% 49% Kenari Kayangan Sdn Bhd PTB Property Developer Sdn Bhd 87% Tenaga Raya Sdn Bhd 40% 100% 55% Konsortium Lebuhraya Wangsa-Keramat Sdn Bhd Setia MyPhuoc Limited SetiaBecamex Joint Stock Company 40% 100% KLWK Sdn Bhd Prime Globe Holdings Limited 100% 100% Setia International Limited Toptec Holdings Limited

48 ANNUAL REPORT 07 Corporate Structure

S P SETIA BHD 49 Profileof Board of Directors

Tan Sri Abdul Rashid bin Abdul Manaf (Chairman) Malaysian, 61 years of age Barrister-at-Law (Middle Temple London)

Tan Sri Abdul Rashid is a full-time businessman. Before venturing He is also the Chairman of Loh & into business, he was a senior partner in a legal firm in Kuala Loh Corporation Berhad and Maika Lumpur until his retirement on 24 August 2006. In 1970, he Holdings Berhad. became a Barrister-at-Law. He joined the Malaysian Judicial and Legal Service in 1971 and became a Magistrate until 1973. He He does not have any family was later made the President of the Sessions Court in Klang. In relationship with any director and/or 1975, he became the Senior Federal Counsel for the Income Tax major shareholder, nor any conflict of Department. interest with the Company. He has no convictions for any offences over He was appointed Director of S P Setia on 15 January 1996 the past 10 years. and the Chairman of the Executive Committee of S P Setia on 29 January 1996. He assumed his position as the Chairman of S P Setia Group on 12 March 1997.

50 ANNUAL REPORT 07 Profile of Board of Directors

Tan Sri Dato’ Sri Liew Kee Sin Dato’ Voon Tin Yow (Group Managing Director/Chief Executive (Executive Director/Chief Operating Officer) Officer) Malaysian, 50 years of age Malaysian, 49 years of age Bachelor of Science Degree Bachelor of Economics Degree (Business in Civil Engineering Administration) (University of Malaya) Master of Science Degree (University of Texas, Austin)

Tan Sri Dato’ Sri Liew started his Dato’ Voon has 23 years of working career in a local merchant bank experience in the construction and in 1981. After gaining 5 years of property development industry, extensive experience in the banking which includes 3 years in industry, he ventured into property construction site management and development. He was appointed as 20 years in management of property an Executive Director of S P Setia development. He began his working Group on 15 January 1996 and was career in 1984 by joining Kimali subsequently appointed to his current Construction Sdn Bhd as a Site position as the Group Managing Manager and in 1986, he held the Director on 3 May 1996. He is now post of Development Engineer in the Group Managing Director/Chief Juru Bena Tenaga Sdn Bhd. In 1990, Executive Officer. he joined Syarikat Kemajuan Jerai Sdn Bhd (“SKJ”) as Project Manager He does not have any family and was subsequently appointed relationship with any director and/or General Manager of SKJ in 1994. major shareholder, nor any conflict of He was appointed Director of interest with the Company. He has S P Setia on 15 July 1996. no convictions for any offences over the past 10 years. He also sits on the Board of Loh & Loh Corporation Berhad.

He was appointed Chairman of the Risk Management Committee on 29 October 2003.

He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.

1. Entertain in style with the spacious dining area at the spa-villa of Setiahills 2. A gazebo at Setiahills provides the perfect place to enjoy a quiet afternoon or a relaxing massage in the evening 2

S P SETIA BHD 51 Profile of Board of Directors

Mr. Teow Leong Seng Mr. Yap Kok Weng (Executive Director/Chief Financial Officer) (Executive Director) Malaysian, 49 years of age Malaysian, 46 years of age Fellow of the Chartered Institute of Management Accountants (UK) Associate Member of the Chartered Institute of Chartered Accountant of the Malaysian Institute of Accountants Management Accountants (UK) Master of Business Administration (MBA) (University of Strathclyde Chartered Accountant of the Malaysian Institute of Graduate School of Business, Glasgow) Accountants

Mr Teow is responsible for the Group Corporate and Finance Mr Yap has more than 21 years of experience in the division of the Group and the International Business Development accounting, finance, administration and corporate activities. In addition, he also oversees Setia Putrajaya Group. finance field. He was attached with Arab-Malaysian Merchant Bank Berhad as an Internal Audit Officer Mr Teow joined the S P Setia Group in 1997 and was previously from 1987 to 1989, prior to joining the Hong Leong the Division General Manager in charge of all Business Group where he held various positions during Development activities for the Group as well as the Duta his term of service from 1989 to 1991. His last Nusantara project prior to being seconded to Setia Putrajaya as appointment with the Hong Leong Group was as Chief Executive Officer. an Accountant. He later joined S P Setia as the Group Accountant in 1991. Prior to joining the S P Setia Group, Mr Teow headed the Real Estate Finance Department of Citibank, NA (Corporate Bank) in Mr Yap was the Chief Financial Officer and Malaysia and was the Group Financial Controller of a public-listed responsible for the Group Corporate and Finance company. He has also held finance and accounting positions within division and manufacturing division of S P Setia the Hong Leong Group and various other property development Group until 31 July 2007. He is now the Director companies. He has in all over 26 years of experience in the responsible for Strategic Planning for the Group property development industry, corporate finance, accounting with effect from 1 August 2007. He was appointed and financial management and real-estate finance. He was Director on 19 December 2001 and became a appointed to the Board of Directors of S P Setia with effect from member of the Risk Management Committee on 1 July 2007. He assumed the role of Chief Financial Officer 29 October 2003. and was also appointed as a member of the Risk Management Committee with effect from 1 August 2007. He does not have any family relationship with any director and/or major shareholder, nor any conflict of Mr Teow is a Fellow of the Chartered Institute of Management interest with the Company. He has no convictions Accountants (UK) and a Chartered Accountant of the Malaysian for any offences over the past 10 years. Institute of Accountants.

He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.

1. The artistic interior styling of a single-storey show unit at Setia Eco Gardens 2. A charming blend of modern and traditional elements in the show unit at Setia Eco Gardens

52 ANNUAL REPORT 07 Profile of Board of Directors

Mr. Khor Chap Jen Mr. Chang Khim Wah (Executive Director) (Executive Director) Malaysian, 48 years of age Malaysian, 43 years of age Bachelor of Engineering (Honours) (University of Malaya) Bachelor of Engineering (University of New South Wales) Professional Engineer registered with the Board of Professional Engineer registered with the Board of Engineers, Engineers, Malaysia Malaysia Fellow of the Institute of Engineers, Malaysia Member of the Institute of Engineers, Malaysia

Mr Khor started his career with Jurutera Perunding Kemajuan Mr Chang is the Executive Director and Divisional as an Engineer and held various posts before being promoted General Manager for the Property South Division of to Associate Director in 1995. He was involved in housing S P Setia. He is a member of the Institute of Engineers, development and several highway projects including the Malaysia and is a registered Professional Engineer. He North-South Expressway and the Shah Alam Expressway. began his career as a consultant engineer in Australia He left in 1995 to join S P Setia and was seconded to from 1989 to 1991. Upon his return to Malaysia Setia Putrajaya Sdn Bhd from 1997 to 1999, as the Deputy in 1991, he joined one of the biggest consultancy Chief Executive Officer, to undertake the turnkey contracts firms in Malaysia, KTA-Tenaga Sdn Bhd, specialising for the prestigious Prime Minister’s Office and Prime in dam designs and water supply systems. Minister’s Official Residence. He was involved in the mixed development of Precinct 9 in Putrajaya. Upon completion of In 1994, he joined S P Setia and assisted in setting up his secondment in 1999, he was transferred back to the Head the property division in Johor Bahru. His responsibilities Office as Divisional General Manager – Property Central and include formulation of marketing and sales strategies, Highway Divisions of S P Setia. He was appointed Director of overall planning, coordination and quality control S P Setia on 18 December 2002 and became a member of over all aspects of S P Setia’s property development the Risk Management Committee on 29 October 2003. projects in Johor Bahru. He was promoted to General Manager from June 2000 and appointed to He also sits on the Board of DN Homeowners Berhad, DT the Board of Directors of S P Setia with effect from Homeowners Berhad and SPJ Corporation Berhad. 15 February 2007.

He does not have any family relationship with any director He does not have any family relationship with any and/or major shareholder, nor any conflict of interest with the director and/or major shareholder, nor any conflict of Company. He has no convictions for any offences over the interest with the Company. He has no convictions for past 10 years. any offences over the past 10 years.

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S P SETIA BHD 53 Profile of Board of Directors

Tan Sri Lee Lam Thye Tan Sri Dato’ Hari Narayanan (Non-Independent Non-Executive Director) a/l Govindasamy Malaysian, 61 years of age (Independent Non-Executive Director) Honorary Doctorate of Laws by Universiti Malaysian, 57 years of age Sains Malaysia Bachelor’s Degree in Electrical & Electronic Honorary Doctorate of Letters by Universiti Engineering (University of Northumbria, Malaysia Sarawak England)

Tan Sri Lee began his career as a teacher Tan Sri Dato’ Hari Narayanan is a and was elected and served as the State businessman by profession and also Legislative Assemblyman for Bukit Nanas a member of the Institute of Engineers,

1. Free-flow landscaping meets from 1969 to 1974. From 1974 to 1990, Malaysia (IEM). He is also a registered geometric-inspired architecture he served as Member of Parliament for professional engineer with the Board of the Santiago show unit at Bukit Indah, Johor Kuala Lumpur for four terms. Following of Engineers, Malaysia. He has extensive 2. The majestic three-storey his retirement from politics in 1990, experience in electrical and electronic Solarium at Setia Eco Park is an inspiring sight he has continued his career of public engineering and has held various service by contributing actively in the key positions with some established social arena. companies as an engineer and entrepreneur. He was appointed Director Currently, he is the Chairman of the and a member of the Audit Committee National Institute of Occupational Safety of S P Setia on 14 November 1996. and Health (NIOSH), Ministry of Human Subsequently on 28 April 1997, he Resources, Vice Chairman and Member was appointed the Chairman of the of the Executive Council of the Malaysia Audit Committee and on 3 April 2001, Crime Prevention Foundation (MCPF), he was appointed as a member of the Member of National Unity Advisory Remuneration Committee. Panel and Chairman of the Board of Trustees of S P Setia Foundation. He Tan Sri Dato’ Hari Narayanan also sits 1 was appointed Director of S P Setia on the Board of Tenaga Nasional Berhad on 17 December 2007. and Puncak Niaga Holdings Berhad. He also holds directorships on the Board of Tan Sri Lee also sits on the Board of Lembaga Lebuhraya Malaysia (Malaysian MBM Resources Berhad, AMDB Berhad Highway Authority), Asian Institute of and Media Prima Berhad. Medicine, Science & Technology and several other private companies. He does not have any family relationship with any director and/or major He does not have any family relationship shareholder, nor any conflict of interest with any director and/or major shareholder, with the Company. He has no convictions nor any conflict of interest with the for any offences over the past 10 years. Company. He has no convictions for any 2 offences over the past 10 years.

54 ANNUAL REPORT 07 Profile of Board of Directors

Dato’ Leong Kok Wah Datuk Ismail bin Adam Mr. Ng Soon Lai @ (Independent Non-Executive Director) (Independent Non-Executive Director) Ng Siek Chuan Malaysian, 54 years of age Malaysian, 62 years of age (Independent Non-Executive Director) Master of Business Administration (MBA) Master in Public Administration (MPA) Malaysian, 53 years of age (University of Hull, UK) (Pennsylvania State University, U.S.A.) Fellow of the Institute of Chartered Member of Institute of Bankers (UK) Diploma in Public Administration Accountants in England and Wales Member of Institute of Credit (University of Malaya) Management (UK) Bachelor of Arts (Honours) (University Member of Institute of Marketing (UK) of Malaya)

Dato’ Leong has an extensive Datuk Ismail started his career in 1969 Mr Ng had several years of experience career and held senior positions in as an Assistant Director of Public in the accounting profession with the banking industry. He has vast Services Department. He was made Coopers & Lybrand in London and experience in stockbroking, asset Deputy Director Service Division of Kuala Lumpur before moving on to management and options and Public Services Department from the financial sector in 1980. Prior to futures trading. He is currently a 1983 till 1988. In 1988, he was with the joining Alliance Bank Malaysia Berhad stockbroker and sits on the Board Ministry of Culture, Arts and Tourism in July 1991 as General Manager of various companies in Malaysia. as a Deputy Secretary General and of Credit, he had served in various He was appointed Director and a as Secretary General in 1995. He positions in a leading local merchant member of the Audit Committee then assumed his last position as bank and a finance company. of S P Setia on 1 June 2000. On Secretary General of Ministry of 3 April 2001, he was appointed Health Malaysia in 1999 till 2000. He He was appointed as Chief Executive as a member of the Nomination has extensive experience in general Director of Alliance Bank Malaysia Committee and Remuneration management, hospitality, tourism, Berhad on 21 January 1994 and to Committee. He was nominated cultural and arts management and the Board of Alliance Merchant Bank as the Chairman of Remuneration health and medical administration. Berhad on 22 July 2002 until his Committee on 21 September 2005. He was appointed Director and resignation on 31 August 2005. He a member of the Audit Committee was appointed a Director, a member He also sits on the Board of MUI of S P Setia on 19 December 2001. of the Audit Committee and a member Continental Insurance Berhad and On 21 September 2005, he was of the Nomination Committee of S P is also a member of the Audit appointed as a member of Setia on 21 September 2005. Committee. the Remuneration Committee. Subsequently on 2 October 2006, He also sits on the Board of Deutsche He does not have any family he was appointed as a Chairman of Bank (M) Berhad. relationship with any director and/or the Nomination Committee. major shareholder, nor any conflict of He does not have any family interest with the Company. He has He does not have any family relationship with any director and/or no convictions for any offences over relationship with any director and/or major shareholder, nor any conflict of the past 10 years. major shareholder, nor any conflict of interest with the Company. He has interest with the Company. He has no convictions for any offences over no convictions for any offences over the past 10 years. the past 10 years.

S P SETIA BHD 55 1. The fusion of striking colours add charm and personality to the Eco Villa bungalow at Setia Eco Park Corporate Governance

Corporate Governance Statement...... 58 Audit Committee Report...... 65 Internal Control Statement...... 68

S P SETIA BHD 57 Corporate Governance Statement

The Board of Directors (“Board”) is committed to ensure that good corporate governance is practiced throughout the Group in accordance with the Malaysian Code on Corporate Governance (“Code”) to enhance shareholders’ value and the financial performance of the Group.

The following paragraphs describe how the Group has applied the principles set out in the Code and save where otherwise identified, its compliance with the best practices of the Code for the year ended 31 October 2007.

A. BOARD OF DIRECTORS

1. The Board

The Company is led and controlled by the Board which assumes overall responsibility for corporate governance, strategic direction and investments made by the Company.

2. Board Meetings

During the financial year under review, the Board met five times and the attendance record for each Director is as follows:-

Name of Director Total Meetings Attended Percentage of Attendance (%)

Tan Sri Abdul Rashid bin Abdul Manaf * 5/5 100 Tan Sri Dato’ Sri Liew Kee Sin 5/5 100 Dato’ Voon Tin Yow 5/5 100 Teow Leong Seng (appointed w.e.f. 01.07.2007) 2/2 100 Yap Kok Weng 5/5 100 Khor Chap Jen 5/5 100 Chang Khim Wah (appointed w.e.f. 15.02.2007) 4/4 100 Tan Sri Dato’ Zaki bin Tun Azmi * (resigned w.e.f. 04.09.2007) 3/3 100 George Anthony Dass David (resigned w.e.f. 30.06.2007) 2/3 66.7 Tan Sri Lee Lam Thye (appointed w.e.f. 17.12.2007) N/A N/A Tan Sri Dato’ Hari Narayanan a/l Govindasamy 5/5 100 Dato’ Leong Kok Wah 5/5 100 Datuk Ismail bin Adam 5/5 100 Ng Soon Lai @ Ng Siek Chuan 5/5 100

* Tan Sri Abdul Rashid bin Abdul Manaf attended the June 2007 meeting via teleconferencing as he was overseas.

** Tan Sri Dato’ Zaki bin Tun Azmi attended the December 2006 and June 2007 meetings via teleconferencing as he was overseas.

All the Directors have complied with the minimum 50% attendance requirement in respect of Board meetings as stipulated by the Listing Requirements of Bursa Malaysia Securities Berhad.

58 ANNUAL REPORT 07 Corporate Governance Statement

A. BOARD OF DIRECTORS (CONT’D)

3. Board Balance

The Board comprises six (6) Executive Directors and six (6) Non-Executive Directors of whom four (4) are independent which is in compliance with paragraph 15.02 of Bursa Securities Listing Requirements in respect of the board composition.

All Directors are jointly responsible for determining the Group’s strategic business direction. The Executive Directors are responsible for overseeing the Group’s operations and executing the Group’s business strategies. The Independent Non-Executive Directors continue to carry out an important role in ensuring that the strategies proposed by executive members of the Board and management are fully discussed and evaluated, taking into account the long term interests of all stakeholders, namely the Company’s shareholders, employees, customers, business associates and the community as a whole.

There were several changes in the Board during the financial year. To further strengthen the Board in line with the rapid expansion of the Group, two new Executive Directors, namely Mr Chang Khim Wah and Mr Teow Leong Seng were appointed during the financial year. Following Tan Sri Dato’ Zaki’s appointment as a Judge of the Federal Court of Malaysia, Tan Sri Lee Lam Thye was appointed on 17 December 2007 as a Non-Independent Non-Executive Director. The new composition of the Board continues to provide the Group with a wealth of knowledge and experience to draw on with a comprehensive mix of skills which includes financial, technical and business expertise that is important for the continued successful direction of the Group.

4. Supply of Information

The Directors have full and unrestricted access to all information pertaining to the Group’s business and affairs to enable them to discharge their duties. All Directors are provided with the agenda together with the Board papers in advance of Board Meetings to enable them to consider and deliberate knowledgeably on issues and to facilitate informed decision making.

In addition there is a schedule of matters reserved specifically for the Board’s decision which includes the approval of corporate plans and budgets, material acquisitions and disposals of assets, major capital projects, financial results, dividend recommendations and board appointments.

All Directors have access to the advice and services of the Company Secretary and Senior Management and may seek independent professional advice, at the Company’s expense, if required, in furtherance of their duties.

5. Appointment and Re-election to The Board

Appointments to the Board are made based on the recommendation of the Nomination Committee. In accordance with the Company’s Articles of Association, all Directors shall retire from office at least once every three (3) years but shall be eligible for re-election.

6. Directors’ Training

All the Directors have attended the Mandatory Accreditation Programme and the Continuing Education Programme (CEP) prescribed by the Bursa Securities. The Directors will continue to attend other relevant training programmes to equip themselves with the knowledge to discharge their duties effectively and also to keep abreast with developments on a continuous basis in compliance with paragraph 15.09 of Bursa Securities Listing Requirements.

During the financial year ended 31 October 2007, the Directors and senior management attended two training programmes conducted by external training providers on topics relevant to the Group’s business operations and strategy.

S P SETIA BHD 59 Corporate Governance Statement

A. BOARD OF DIRECTORS (CONT’D)

7. Board Committees

The Board has delegated certain responsibilities to Board Committees which operate within defined terms of reference. The Board Committees include the Audit Committee, Executive Committee, Nomination Committee, Remuneration Committee and Risk Management Committee. The respective Committees report to the Board on matters considered and their recommendation thereon. The ultimate responsibility for the final decision on all matters, however, lies with the Board.

B. DIRECTOR’S REMUNERATION

Objective

The Company’s remuneration policy for Directors is tailored to support the Company’s overall objective of delivering long-term value to its shareholders. The remuneration packages are designed to encourage the creativity and innovation appropriate for a property, infrastructure and construction company and to enable the Company to recruit and retain individuals of the necessary calibre relevant to the achievement of the Company’s strategic objectives.

Remuneration Procedures

The Remuneration Committee recommends to the Board the remuneration package for each Executive Director. It is the ultimate responsibility of the entire Board to approve the remuneration of these Directors.

The determination of the remuneration of the Non-Executive Directors is a matter decided by the Board as a whole.

Remuneration Package

The remuneration package of Directors is as follows:-

(a) Basic salary The basic salary (inclusive of statutory employer’s contributions to the Employees Provident Fund) for each Executive Director is recommended by the Remuneration Committee, taking into account the individual responsibility, contribution and performance, additional responsibilities of the Directors, as well as the market-rate for similar positions in comparable companies.

(b) Allowance The allowance given to the Non-Executive Directors is based on the experience and level of responsibilities undertaken by the particular Non-Executive Director concerned.

(c) Bonus scheme The Group operates a bonus scheme for all employees, including the Executive Directors. The criteria for the scheme include the level of profit achieved by the Group from its business activities against targets, together with an assessment of each individual’s performance during the period. Bonuses payable to the Executive Directors are reviewed by the Remuneration Committee and approved by the Board.

60 ANNUAL REPORT 07 Corporate Governance Statement

B. DIRECTOR’S REMUNERATION (CONT’D)

Remuneration Package (Cont’d)

(d) Benefits-in-kind Other benefits (such as car, petrol, chauffeur, security services and travelling allowance) are made available as appropriate. The details of the remuneration of each Director of the Company who served during the financial year ended 31 October 2007 are as follows:-

Category Basic Allowance Bonus Benefits- Total Salary in-kind (RM’000) (RM’000) (RM’000) (RM’000) (RM’000)

Executive Directors

Tan Sri Dato’ Sri Liew Kee Sin 1,680.08 - 4,360.70 1,716.24 7,757.02 Dato’ Voon Tin Yow 1,292.74 - 2,364.82 319.60 3,977.16 Yap Kok Weng 687.68 - 658.07 68.03 1,413.78 Khor Chap Jen 681.05 - 654.70 22.70 1,358.45 Chang Khim Wah (Appointed w.e.f. 15.02.2007) 456.92 - - 26.40 483.32 Teow Leong Seng (Appointed w.e.f. 01.07.2007) 224.21 - - 11.73 235.94

Non-Executive Directors

Tan Sri Abdul Rashid bin Abdul Manaf - 806.54 - 261.19 1,067.73 Tan Sri Dato’ Zaki bin Tun Azmi (Resigned w.e.f. 04.09.2007) - 321.98 - 94.61 416.59 George Anthony Dass David (Resigned w.e.f. 30.06.2007) - 140.63 - - 140.63 Tan Sri Dato’ Hari Narayanan a/l Govindasamy - 192.63 - - 192.63 Dato’ Leong Kok Wah - 192.63 - - 192.63 Datuk Ismail bin Adam - 129.75 - - 129.75 Ng Soon Lai @ Ng Siek Chuan 111.50 - 111.50

Total 5,022.68 1,895.66 8,038.29 2,520.50 17,477.13

S P SETIA BHD 61 Corporate Governance Statement

C. SHAREHOLDERS

The Company’s Annual General Meeting remains the principal forum for dialogue with shareholders. Shareholders are encouraged to participate in the proceedings and ask questions about the resolutions being proposed and the operations of the Group.

In addition to various announcements made during the year, the timely release of annual reports, circulars to shareholders, press releases and financial results on a quarterly basis provides shareholders with a regular update on the Groups’ performance and operations.

The Company also responds to requests for discussions with institutional shareholders and analysts to give them a better understanding of the businesses of the Group. During the financial year, the Company participated in 17 road shows and investor conferences and had approximately 749 meetings with financial analysts and investors.

The Group maintains the following websites that allows all shareholders and investors access information about the Group:-

• www.spsetia.com.my • www.setiahomes.com

Any queries or concerns relating to the Group may be conveyed to the following persons:-

(i) Tan Sri Dato’ Hari Narayanan a/l Govindasamy, Chairman of the Audit Committee

Telephone Number : 03-20351788 Fax Number: 03-26927187

(ii) Lee Wai Ngan, Chan Toye Ying, Company Secretaries

Telephone Number: 03-21615466 Fax Number: 03-21636968

D. ACCOUNTABILITY AND AUDIT

FINANCIAL REPORTING

In presenting the annual audited financial statements and quarterly announcement of results to shareholders, the Directors aim to present a balanced and understandable assessment of the Group’s position and prospects. The Audit Committee assists the Board by reviewing the information to be disclosed, to ensure completeness, accuracy and adequacy.

AUDIT COMMITEE

The composition of the Audit Commitee complies with the code of Corporate Governance in that all members of the Audit Committee are non executive directors and one member is a Fellow of the Institute of Chartered Accountants in England and Wales.

INTERNAL CONTROL

The Statement on Internal Control set out on page 68 of this Annual Report provides an overview of the state of internal controls within the Group.

62 ANNUAL REPORT 07 Corporate Governance Statement

D. ACCOUNTABILITY AND AUDIT (CONT’D)

RELATIONSHIP WITH AUDITORS

The Board via the Audit Committee, maintains a formal and transparent professional relationship with the Group’s auditors, both internal and external. The role of the Audit Committee in relation to the auditors is described in the Audit Committee Report set out on page 65 to page 67 of this Annual Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year which have been made out in accordance with the applicable approved accounting standards and give a true and fair view of the state of affairs of the Group and Company at the end of the financial year and of the results and cash flows of the Group and Company for the financial year.

The directors are satisfied that in preparing the financial statements of the Group and of the Company for the financial year ended 31 October 2007, the Group has used the appropriate accounting policies and applied them consistently. The directors are also of the view that relevant approved accounting standards have been followed in the preparation of these financial statements.

ADDITIONAL COMPLIANCE INFORMATION

OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES

During the financial year, 7,920,809 options were exercised pursuant to the Employees’ Share Option Scheme (“ESOS”) which was implemented on 26 January 2002. The ESOS expired on 25 January 2007.

The Company did not issue any warrants or convertible securities during this financial year.

NON-AUDIT FEES

Other than the following, there were no non-audit fees paid to the external auditors for the financial year 31 October, 2007:

Auditors Services Amount Paid (RM) Moores Rowland Professional services in connection with the review on the 2,100.00 Statement of Internal Control

Professional fees for financial due diligence 42,000.00

MATERIAL CONTRACTS

There were no material contracts entered into by the Company and its subsidiaries involving directors’ and major shareholders’ interest which were still subsisting as at the end of the financial year under review or which were entered into since the end of the previous financial year except as disclosed in note 44(a) of the financial statements.

S P SETIA BHD 63 Corporate Governance Statement

RECURRENT RELATED PARTY TRANSACTIONS

At the Thirty Second Annual General Meeting of the Company held on 12 February 2007, the Company had obtained the approval for the renewal of the shareholders’ mandate to enter into recurrent related party transactions of a revenue or trading nature, which are necessary for its day-to-day operations and in the ordinary course of its business, with related parties.

The said mandate took effect on 12 February 2007 and will continue until the conclusion of the forthcoming Annual General Meeting of the Company.

At the forthcoming Annual General Meeting to be held on 27 February 2008, the Company intends to seek its shareholders’ approval to renew the existing mandate for recurrent related party transactions of a revenue or trading nature. The details of the shareholders’ mandate to be sought will be furnished in the Circular to Shareholders dated 4 February 2008 attached to this Annual Report.

REVALUATION OF LANDED PROPERTIES

The Company does not have a revaluation policy on landed properties.

64 ANNUAL REPORT 07 Audit Committee Report

MEMBERS OF THE AUDIT COMMITTEE Tan Sri Dato’ Hari Narayanan a/l Govindasamy (Chairman & Independent Non-Executive Director) Dato’ Leong Kok Wah (Independent Non-Executive Director) Datuk Ismail bin Adam (Independent Non-Executive Director) Ng Soon Lai @ Ng Siek Chuan (Independent Non-Executive Director)

SECRETARIES Lee Wai Ngan Chan Toye Ying

TERMS OF REFERENCE

1.0 PURPOSE The primary objective of the Audit Committee (as a sub-committee of the Board) is to assist the Board in the effective discharge of its fiduciary responsibilities for corporate governance, timely and accurate financial reporting and development of sound internal controls.

2.0 COMPOSITION i. The Audit Committee shall be appointed by the Directors amongst their numbers, who fulfills the following requirements:- • comprised no fewer than 3 members • a majority must be independent directors • at least one member must be a member of the Malaysian Institute of Accountants or having the relevant qualifications and experience as specified in the Listing Requirements of Bursa Malaysia Securities Berhad ii. The Chairman of the Audit Committee shall be an independent director.

3.0 REPORTING RESPONSIBILITIES The Audit Committee will report to the Board on the nature and extent of the functions performed by it and may make such recommendations to the Board on any audit and financial reporting matters as it may think fit.

4.0 ATTENDANCE AT MEETINGS i. The heads of finance and internal audit and a representative of the external auditor shall normally attend meetings. ii. Other directors and employees may attend any particular Audit Committee meeting only upon the invitation of the Audit Committee specific to the relevant meeting. iii. The company secretary shall be the secretary of the Committee.

5.0 FREQUENCY OF MEETINGS A minimum of four (4) meetings a year shall be planned, although additional meetings may be called at any time at the Chairman’s discretion. The Audit Committee held four (4) meetings during the financial year ended 31 October 2007. The details of attendance of the Audit Committee members are as follows:- Name of Audit Committee Total meetings Percentage of Member attended attendance (%) Tan Sri Dato’ Hari Narayanan a/l Govindasamy 4/4 100 Dato’ Leong Kok Wah 4/4 100 Datuk Ismail bin Adam 4/4 100 Ng Soon Lai @ Ng Siek Chuan 4/4 100

S P SETIA BHD 65 Audit Committee Report

6.0 QUORUM The quorum for a meeting shall be two (2) members. The majority of members present shall be Independent Directors.

7.0 AUTHORITY i. The Audit Committee is authorised by the Board to investigate any activity within its Terms of Reference. It is authorised to seek any information it requires from any employee for the purpose of discharging its functions and responsibilities. ii. The Committee may, with the approval of the Board, obtain legal or other advice from independent professionals and appoint external parties with relevant experience and expertise to assist the Committee if it considers this necessary.

8.0 DUTIES The duties of the Committee shall be:- i. To consider the appointment of the external auditors, the audit fees and any questions of resignation or dismissal. ii. To review the nature and scope of the audit by the external auditors before commencement. iii. To review the quarterly and year end financial statements before submission to the Board, focusing particularly on:- • any changes in accounting policies and practices • significant audit adjustments from the external auditors • the going concern assumption • compliance with accounting standards and regulatory requirements iv. To discuss problems and reservations arising from the interim and final audits and any matter the auditors may wish to discuss (in the absence of management, where necessary). v. To review the external auditors’ management letter and management’s response. vi. To review the adequacy of the scope, functions and resources of the internal audit function, major findings of any internal investigations and management’s response. vii. To review any related party transactions that may arise within the Company or Group. viii. To consider other related matters, as defined by the Board.

SUMMARY OF ACTIVITIES OF THE COMMITTEE DURING THE YEAR The Audit Committee met four times during the financial year ended 31 October 2007. The activities of the Audit Committee for the financial year were summarised as follows:- (a) Reviewed the quarterly financial results announcements for each quarter of the Group prior to the Board of Directors’ approval, focusing particularly on:- - the overall performance of the Group; - the prospects for the Group; - the changes in or implementation of major accounting policy changes; and - compliance with accounting standards and other legal requirement. (b) Discussed significant audit findings in respect of the financial statements of the Group with the external auditors; (c) Reviewed the reports prepared by the internal auditors on the state of internal control of the Group; and (d) Reviewed the related party transactions entered into by the Company and the Group.

66 ANNUAL REPORT 07 Audit Committee Report

STATEMENT ON EMPLOYEES’ SHARE OPTON SCHEME (“SCHEME”) BY THE COMMITTEE The Audit Committee has reviewed and verified that the allocations of options granted during the financial year under the Company’s Scheme were in accordance with the provisions as set out in the Scheme. The Scheme has expired on 25 January 2007.

INTERNAL AUDIT FUNCTION The Group has an in-house Internal Audit Department which assists the Committee in the discharge of its duties and responsibilities. The Committee is aware of the fact that an independent and adequately resourced internal audit function is essential to assist in obtaining the assurance it requires regarding the effectiveness of the system of internal controls.

The internal audit activities carried out for the financial year include, inter alia, the following: • Ascertained the extent of compliance with the established Group policies, procedures and statutory requirements. • Reviewed the system of internal controls and key operating processes of certain business units. • Reviewed compliance with established risks management policies and its process and procedure. • Reviewed related party transactions.

Arising from the above activities, Internal Audit reports, incorporating findings, recommendations and management action plan with regards to audit findings relating to the weaknesses in the systems and controls of the respective business units audited were reported to the Audit Committee. The Internal Audit Department also followed up with management on the implementation of the agreed upon audit recommendations and reported implementation status to the Audit Committee.

S P SETIA BHD 67 Internal Control Statement

The Board acknowledges that it is responsible for the Group’s system of internal control and for ensuring its adequacy and integrity. The system is designed to provide reasonable assurance of effective operations and compliance with laws and regulations. The Board ensures the effectiveness of the system through regular reviews.

The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

The key elements of the Group’s system of internal control are as follows: • There is in place an organisation structure, which formally defines lines of responsibility and delegation of authority. • Key functions such as finance, tax, treasury, corporate and legal matters are controlled centrally. • There is a strategic planning, annual budgeting and target-setting process, which includes forecasts for each area of business with detailed reviews at all levels of operations. The Board reviews and approves the annual budget. • Actual performance compared with budget is reviewed quarterly with detailed explanation of any major variances. • The Audit Committee examines the effectiveness of the Group’s system of internal control on behalf of the Board. This is accomplished through the review of the internal audit department’s work, which adopts a risk-based approach in identifying areas of priority and which is carried out in accordance with the audit plan. • A Risk Management Committee is entrusted with the overall responsibility to coordinate the risk management activities within the Group. As proper risk management is a significant component of a sound system of internal control, the Group has also put in place a risk management process that is ongoing to help the Board in identifying, evaluating and managing risks. The process has been in place throughout the year. The Risk Management Committee reports quarterly to the Board on all major issues relating to risks and risk management together with a Corporate Risk Register, which summarises all risks with high gross and residual risk rating. • Policies and procedures of operating units within the Group are documented in Standard Operating Procedures manuals. • Corporate values, which emphasise ethical behavior, quality products and services, are set out in the Group’s Employee Handbook. • The Executive Directors meet on a monthly basis with all divisional heads and business unit heads to consider the Group’s financial performance, business development, management and corporate issues.

The Group’s system of internal control does not apply to associate companies because the Group does not have full management and control over them.

68 ANNUAL REPORT 07 Financial Statements

Directors’ Report...... 71 Report of the Auditors to the Members...... 77 Consolidated Balance Sheet...... 78 Consolidated Income Statement...... 80 Consolidated Statement of Changes In Equity.....81 Consolidated Cash Flow Statement...... 82 Balance Sheet...... 84 Income Statement...... 85 Statement of Changes In Equity...... 86 Cash Flow Statement...... 87 Notes to the Financial Statements...... 89 Statement by Directors...... 155 Statutory Declaration...... 155

S P SETIA BHD 69 Corporate Information

DOMICILE : Malaysia

LEGAL FORM AND PLACE OF : Public listed company limited by way of INCORPORATION shares incorporated in Malaysia under the Companies Act, 1965

REGISTERED OFFICE : Wisma Selangor Dredging 6th Floor, South Block 142-A Jalan Ampang 50450 Kuala Lumpur

PRINCIPAL PLACE OF BUSINESS : Wisma S P Setia 1 Jalan Bandar Satu Pusat Bandar Puchong 47100 Puchong Selangor Darul Ehsan

70 ANNUAL REPORT 07 Directors’ Report for the year ended 31 October 2007

The directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 October 2007.

PRINCIPAL ACTIVITIES

The Company is engaged in business as building contractors. It is also an investment holding company. The principal activities of the subsidiary companies are indicated in note 7 to the financial statements.

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

RESULTS Group Company RM’000 RM’000 Profit attributable to shareholders of the Company 260,070 731,575 Unappropriated profit brought forward As previously stated 787,187 226,333 Prior year adjustment (1,959) (378) As restated 785,228 225,955 Profit available for appropriation 1,045,298 957,530 Transfer from reserve 22 Dividends (147,301) (147,301) Unappropriated profit carried forward 897,999 810,231

DIVIDENDS

During the financial year, the Company paid the following dividends:

(a) A final dividend of 20 sen per ordinary share of RM0.75 each less 27% income tax amounting to RM98,200,362 in respect of the financial year ended 31 October 2006, as proposed in the directors’ report for that year, and

(b) An interim dividend of 10 sen per ordinary share of RM0.75 each less 27% income tax amounting to RM49,100,181 in respect of the financial year ended 31 October 2007.

The directors now recommend a final dividend of 15 sen per ordinary share of RM0.75 each less 26% income tax amounting to RM111,988,767 in respect of the financial year ended 31 October 2007.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year except as disclosed in the statements of changes in equity set out on pages 81 and 86.

S P SETIA BHD 71 Directors’ Report for the year ended 31 October 2007

ISSUE OF SHARES AND DEBENTURES

During the financial year, the issued and paid up capital of the Company was increased from RM498,513,300 to RM504,453,907 by way of the issue of 7,920,809 new ordinary shares of RM0.75 each at prices ranging from RM1.74 to RM3.47 per share pursuant to the Company’s Employees’ Share Option Scheme (“the ESOS”) as indicated below.

The new ordinary shares rank pari passu in all respects with the existing ordinary shares.

The Company did not issue any debentures during the financial year.

During the financial year, the Company embarked on the following proposals:

(i) Proposed issue of RM500,000,000 nominal value of 2.00% redeemable serial bonds with 168,151,302 detachable provisional rights to allotment of warrants (“Warrants”) on a bought deal basis to primary subscribers (“Proposed Bonds with Warrants Issuance”);

(ii) Proposed offer for sale by the primary subscribers of the provisional rights to allotment of 168,151,302 Warrants to existing shareholders of the Company on a renounceable rights issue basis of one (1) Warrant for every four (4) existing ordinary shares of RM0.75 each held in the Company at an offer price of RM0.30 per Warrant; and

(iii) Proposed bonus issue of 336,302,604 new ordinary shares on the basis of one (1) bonus share for every two (2) existing shares held.

On 23 November 2007, the Company issued the RM500,000,000 nominal value of 2.00% redeemable serial bonds with 168,151,302 detachable provisional rights to allotment of warrants pursuant to the Proposed Bonds with Warrants Issuance as described in (i) above. (ii) and (iii) remain uncompleted to-date.

EMPLOYEES’ SHARE OPTION SCHEME

Options granted and exercised under the ESOS, and those which lapsed during the financial year were as follows:

------No. of unissued shares of RM0.75 each under option ------Date option Exercise At Exercised Lapsed At granted price 1.11.2006 31.10.2007 RM 28 January 2002 2.07 739,793 729,675 10,118 - 15 October 2002 1.78 35,300 35,300 - - 16 May 2003 1.74 16,240 16,240 - - 17 September 2003 2.81 239,880 232,880 7,000 - 18 February 2004 3.23 476,731 454,961 21,770 - 23 September 2004 3.35 924,057 915,004 9,053 - 6 April 2005 3.42 976,530 976,446 84 - 7 October 2005 3.47 1,683,678 1,680,084 3,594 - 23 March 2006 3.30 707,200 702,700 4,500 - 5 September 2006 3.41 2,177,600 2,177,519 81 - 7,977,009 7,920,809 56,200 -

The ESOS expired on 25 January 2007.

The main features of the ESOS are disclosed in note 23 to the financial statements.

72 ANNUAL REPORT 07 Directors’ Report for the year ended 31 October 2007

DIRECTORS

The directors in office since the date of the last report are:

Tan Sri Abdul Rashid bin Abdul Manaf Tan Sri Dato’ Sri Liew Kee Sin Dato’ Voon Tin Yow Tan Sri Dato’ Hari Narayanan a/l Govindasamy Dato’ Leong Kok Wah Datuk Ismail Bin Adam Yap Kok Weng Khor Chap Jen Ng Soon Lai @ Ng Siek Chuan Chang Khim Wah (appointed on 15 February 2007) Teow Leong Seng (appointed on 1 July 2007) Tan Sri Dato’ Zaki bin Tun Azmi (resigned on 4 September 2007) George Anthony Dass David (resigned on 30 June 2007)

In accordance with the Company’s Articles of Association, Chang Khim Wah and Teow Leong Seng who were appointed to the Board subsequent to the last annual general meeting retire at the forthcoming annual general meeting together with Tan Sri Abdul Rashid bin Abdul Manaf, Datuk Ismail bin Adam and Yap Kok Weng who retire by rotation. The retiring directors, being eligible, offer themselves for re-election.

DIRECTORS’ INTEREST IN SHARES AND SHARE OPTIONS

The following directors who held office at the end of the financial year had an interest in shares in the Company during the financial year required to be disclosed in accordance with Section 169(6)(g) of the Companies Act, 1965, as follows: ------No. of ordinary shares of RM0.75 each ------At Additions Disposals At 1.11.2006 or date 31.10.2007 of appointment Tan Sri Abdul Rashid bin Abdul Manaf - direct 3,041,241 - 3,041,241 - - indirect 6,571,800 - 1,971,800 4,600,000 Tan Sri Dato’ Sri Liew Kee Sin - direct 62,207,994 101,233 - 62,309,227 - indirect 18,800,865# - - 18,800,865 Dato’ Voon Tin Yow - direct 4,041,549 - 4,028,261 13,288 Yap Kok Weng - direct 300,023 - 300,000 23 Khor Chap Jen - direct 116,161 - - 116,161 - indirect 50,000# - - 50,000 Chang Khim Wah - direct 71,404 - 40,000 31,404 Teow Leong Seng - direct 7,289 - - 7,289

# Restated to include disclosure of interest held by spouse pursuant to amendment to Section 134(12)(c) of the Companies Act, 1965.

S P SETIA BHD 73 Directors’ Report for the year ended 31 October 2007

DIRECTORS’ INTEREST IN SHARES AND SHARE OPTIONS (CONT’D)

Tan Sri Abdul Rashid bin Abdul Manaf and Tan Sri Dato’ Sri Liew Kee Sin were also deemed to be interested in the Company’s shareholdings in all its subsidiary companies. The Company’s shareholdings in its subsidiary companies during the financial year were as follows:

------Ordinary shares of RM1.00 each ------At Additions Disposals At 1.11.2006 31.10.2007 Syarikat Kemajuan Jerai Sdn Bhd 30,000,000 - - 30,000,000 Wawasan Indera Sdn Bhd 18,749,999 - - 18,749,999 Bukit Indah (Perak) Sdn Bhd 2,000,002 - - 2,000,002 Setia-Wood Industries Sdn Bhd 3,840,000 - - 3,840,000 Bukit Indah (Johor) Sdn Bhd 25,000,000 - - 25,000,000 Pelita Dunia Sdn Bhd 100,000 - - 100,000 Shabra Development Sdn Bhd 1,000,000 - - 1,000,000 S P Setia Management Services Sdn Bhd 30,000,000 - - 30,000,000 Setia Prefab Sdn Bhd 500,000 - - 500,000 S P Setia Estate Management Sdn Bhd 6,000 - - 6,000 Futurecrest (M) Sdn Bhd 8,880,000 - - 8,880,000 Setia Indah Sdn Bhd 25,000,000 - - 25,000,000 Cosmotek Sdn Bhd 300,000 - - 300,000 S P Setia Construction Sdn Bhd 5,000,000 - - 5,000,000 Tenaga Raya Sdn Bhd 1,467,000 609,000 - 2,076,000 Indera Perasa Sdn Bhd 7 - - 7 Yunikhas Sdn Bhd 40,000 - - 40,000 Kenari Kayangan Sdn Bhd 99,998 - - 99,998 Setia Bina Raya Sdn Bhd 1,000,000 - - 1,000,000 Setia Hicon Sdn Bhd 1,000 - - 1,000 S P Setia Property Holdings Sdn Bhd 300,000 - - 300,000 Bukit Indah (Selangor) Sdn Bhd 2 - - 2 S P Setia Technology Sdn Bhd 2 - - 2 S. P. Setia Security Services Sdn Bhd 153,000 - - 153,000 Setia Alam Property Holdings Sdn Bhd 10,000 - - 10,000 Setia Duta One Sdn Bhd 5,100,000 - - 5,100,000 Setia Promenade Sdn Bhd 10,000,000 - - 10,000,000 Bukit Indah Property Management Sdn Bhd 210,000 - - 210,000 Bandar Setia Alam Sdn Bhd 50,000,000 - - 50,000,000 Kewira Jaya Sdn Bhd 1,000 - - 1,000 Kesas Kenangan Sdn Bhd 2 - - 2 Aeropod Sdn Bhd - 70 - 70 Setia Eco Villa Sdn Bhd - 2 - 2 (formerly known as Optagreen Sdn Bhd)

------Ordinary shares of USD1.00 each ------At Additions Disposals At 1.11.2006 31.10.2007

Setia International Limited - 10 - 10

74 ANNUAL REPORT 07 Directors’ Report for the year ended 31 October 2007

DIRECTORS’ INTEREST IN SHARES AND SHARE OPTIONS (CONT’D)

The following director had an interest in share options under the ESOS of the Company during the financial year as follows:

------No. of unissued share of RM0.75 each under option ------Exercise At Granted Exercised Lapsed At price 1.11.2006 31.10.2007 RM Tan Sri Dato’ Sri Liew Kee Sin 2.07 101,233 - 101,233 - -

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director of the Company 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 the directors 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 benefit which may be deemed to have arisen from the transactions disclosed in note 44(a) to the financial statements.

Neither during nor at the end of the financial year was the Company a party to any arrangements whose object is to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

OTHER STATUTORY INFORMATION

(a) Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps:

(i) to ascertain the action 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 adequate allowance had been made for doubtful debts; and

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

(b) At the date of this report, the directors are not aware of any circumstances:

(i) which would render the amount written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or

(ii) which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading; or

(iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

S P SETIA BHD 75 Directors’ Report for the year ended 31 October 2007

DIRECTORS’ INTEREST IN SHARES AND SHARE OPTIONS (CONT’D)

(i) any charge on the assets of the Company or its subsidiary companies which has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability of the Company or its subsidiary companies which has arisen since the end of the financial year.

(d) No contingent or other liability of the Company or its subsidiary companies 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 affect the ability of the Company or its subsidiary companies to meet their obligations as and when they fall due.

(e) 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 respective financial statements misleading.

(f) In the opinion of the directors:

(i) the results of the operations of the Group and of the Company for the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(ii) 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 to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.

AUDITORS

The auditors, Moores Rowland, have expressed their willingness to continue in office.

Signed on behalf of the directors in accordance with a directors' resolution dated 12 December 2007.

TAN SRI DATO’ SRI LIEW KEE SIN DATO’ VOON TIN YOW Director Director

Kuala Lumpur 12 December 2007

76 ANNUAL REPORT 07 Report of the Auditors to the Members financial statements - 31 October 2007

We have audited the financial statements of the Group and of the Company set out on pages 78 to 154.

These financial statements are the responsibility of the Company’s 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 about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable MASB Approved Accounting Standards 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 as at 31 October 2007 and of their results and cash flows for the 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 subsidiary companies of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

We have considered the financial statements and the auditors' reports of the subsidiary companies of which we have not acted as auditors, and which are indicated in note 7 to the financial statements.

We are satisfied that the financial statements of the subsidiary companies that have been consolidated with the Company’s 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 auditors’ reports on the financial statements of the subsidiary companies were not subject to any qualification, and in respect of subsidiary companies incorporated in Malaysia, did not include any comment made under Section 174 (3) of the Act.

MOORES ROWLAND TANG KIN KHEONG No. AF: 0539 No. 1501/9/09 (J/PH) Chartered Accountants Partner

Kuala Lumpur 12 December 2007

S P SETIA BHD 77 Consolidated Balance Sheet 31 October 2007

Note 2007 2006 RM'000 RM'000 ASSETS Non-current assets Property, plant and equipment 3 63,185 47,319 Investment properties 4 95,032 92,068 Land held for property development 5 852,479 735,826 Prepaid lease payments 6 890 899 Investment in associated companies 8 144,444 210,058 Other investments 10 477 17,724 Amounts owing by associated companies 12 369 400 Deferred tax assets 13 21,926 644 Total non-current assets 1,178,802 1,104,938

Current assets Property development costs 14 860,048 715,653 Gross amount due from customers 15 8,301 25,745 Inventories 16 19,320 25,423 Accrued billings 17 55,725 24,448 Trade receivables 18 209,983 246,666 Amounts owing by associated companies 12 28,567 19,423 Amounts owing by jointly controlled entities 19 504 - Other receivables, deposits and prepayments 20 92,267 147,917 Current tax assets 23,650 11,830 Deposits 21 162,284 204,151 Cash and bank balances 22 242,581 99,733 Total current assets 1,703,230 1,520,989

TOTAL ASSETS 2,882,032 2,625,927

78 ANNUAL REPORT 07 Consolidated Balance Sheet 31 October 2007

Note 2007 2006 RM'000 RM'000 EQUITY AND LIABILITIES Equity Share capital 23 504,454 498,513 Share premium account 438,430 417,274 Option reserve (non-distributable) - 1,395 Unappropriated profit 897,999 785,228 Equity attributable to shareholders of the Company 1,840,883 1,702,410 Minority interests 492 1,302 Total equity 1,841,375 1,703,712

Non-current liabilities Long term loans 24 532,748 518,336 Other loans 25 1,446 1,446 Hire purchase and finance lease liabilities 26 2,365 1,948 Deferred tax liabilities 27 2,637 2,214 Total non-current liabilities 539,196 523,944

Current liabilities Trade payables 28 228,269 223,230 Progress billings 17 62,804 29,016 Other payables and accruals 29 66,512 67,553 Hire purchase and finance lease liabilities 26 1,301 1,390 Short term borrowings 30 118,831 62,000 Bank overdrafts 31 3,016 - Current tax liabilities 20,728 15,082 Total current liabilities 501,461 398,271 Total liabilities 1,040,657 922,215

TOTAL EQUITY AND LIABIILITIES 2,882,032 2,625,927

Notes to and forming part of the financial statements are set out on pages 89 to 154 Auditors' Report - Page 77

S P SETIA BHD 79 Consolidated Income Statement for the year ended 31 October 2007

Note 2007 2006 RM'000 RM'000 Revenue 32 1,153,803 1,154,641 Cost of sales 33 (776,807) (816,559) Gross profit 376,996 338,082 Other operating income 9,619 8,366 Selling and marketing expenses (29,352) (18,713) Administrative and general expenses (74,576) (54,063) Profit from operations 34 282,687 273,672 Net profit from investing activities - gross dividend from unquoted preference shares in an associated company 5,086 7,031 - others 35 17,636 10,219 Share of net profits less losses of associated companies 24,355 30,781 Finance costs 36 (1,273) (1,754) Profit before taxation 328,491 319,949 Taxation 37 (68,423) (81,718) Profit for the year 260,068 238,231 Attributable to: Shareholders of the Company 260,070 238,234 Minority interests (2) (3) 260,068 238,231

Basic earnings per share (sen) 38 38.7 36.1

Diluted earnings per share (sen) 38 38.7 36.0

Dividend per share (net of tax) (sen) 18.4 21.8

Notes to and forming part of the financial statements are set out on pages 89 to 154 Auditors' Report - Page 77

80 ANNUAL REPORT 07 Consolidated Statement of Changes In Equity for the year ended 31 October 2007

<------Attributable to shareholders of the Company ------> Share Share Option Unappropriated Minority Total Note capital premium reserve profit Total interests equity (non- distributable) RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Balance at 1.11.2005 490,734 398,623 - 684,983 1,574,340 1,359 1,575,699 Profit for the year - - - 238,234 238,234 (3) 238,231 Dividends paid 39 - - - (138,040) (138,040) - (138,040) Options granted under ESOS - - 2,010 - 2,010 - 2,010 Issue of shares pursuant to ESOS 7,779 18,651 (564) - 25,866 - 25,866 ESOS lapsed - - (51) 51 - - - Acquisition of additional shares in an existing subsidiary company - - - - - (54) (54)

Balance at 31.10.2006 498,513 417,274 1,395 785,228 1,702,410 1,302 1,703,712

Balance at 1.11.2006 As previously stated 498,513 416,710 - 787,187 1,702,410 1,302 1,703,712 Effect of adopting FRS 2 1(b) - 564 1,395 (1,959) - - -

As restated 498,513 417,274 1,395 785,228 1,702,410 1,302 1,703,712 Profit for the year - - - 260,070 260,070 (2) 260,068 Dividends paid 39 - - - (147,301) (147,301) - (147,301) Issue of shares pursuant to ESOS 5,941 21,156 (1,393) - 25,704 - 25,704 ESOS lapsed - - (2) 2 - - - Acquisition of additional shares in an existing subsidiary company - - - - - (808) (808)

Balance at 31.10.2007 504,454 438,430 - 897,999 1,840,883 492 1,841,375

Notes to and forming part of the financial statements are set out on pages 89 to 154 Auditors' Report - Page 77

S P SETIA BHD 81 Consolidated Cash Flow Statement for the year ended 31 October 2007

Note 2007 2006 RM'000 RM'000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 328,491 319,949 Adjustments for: Bad and doubtful debts 672 176 Depreciation - property, plant and equipment 6,804 7,548 - investment properties 124 16 Gain on disposal of property, plant and equipment (743) (613) Property, plant and equipment written off 3 4 Amortisation of prepaid lease payments 9 10 Profit retained in associated companies (24,355) (30,781) Gain on disposal of an investment property (43) - Realisation of profit of associated companies (2,306) (2,465) Gain on disposal of quoted investments (10,864) - Goodwill on acquisition written off 3 2 Discount on acquisition (260) - Share option expenses - 2,010 Diminution in value of quoted investments 198 (2,604) Dividend income (5,086) (7,210) Interest income (11,736) (10,549) Interest expense 1,273 1,754 Rental income (613) (608)

Operating profit before working capital changes 281,571 276,639

Changes in property development costs 7,454 32,912 Changes in accrued billings/progress billings 2,511 31,486 Changes in gross amount due from/to customers 17,979 7,648 Changes in inventories 8,858 1,509 Changes in receivables 19,843 (59,117) Changes in payables (7,540) 23,176

Cash generated from operations 330,676 314,253 Rental received 495 563 Interest received 5,184 3,155 Interest paid (31,503) (28,700) Tax paid (94,613) (77,398)

Net cash generated from operating activities 210,239 211,873

82 ANNUAL REPORT 07 Consolidated Cash Flow Statement for the year ended 31 October 2007

Note 2007 2006 RM'000 RM'000 CASH FLOWS FROM INVESTING ACTIVITIES Additions to land held for property development (89,554) (94,816) Purchase of property, plant and equipment 40 (19,189) (14,117) Purchase of investment properties 41 (12,300) (9,865) Proceeds from disposal of property, plant and equipment 1,368 1,006 Deposit received for disposal of investment properties - 21 Proceeds from disposal of an investment property 188 - Proceeds from disposal of quoted investments 27,913 - Acquisition of additional shares in existing subsidiary companies 42 (548) (2,000) Acquisition of additional shares in an existing associated company (2,396) - Acquisition of jointly controlled entities (1,879) - Redemption of preference shares in an associated company 93,750 - Advances to associated companies (994) (74) Advances to jointly controlled entities (504) - Deposit and part consideration paid for acquisition of land (46,274) (105,504) Development expenditure paid (9,442) (6,694) Withdrawal/(Placement) of fixed deposits, sinking fund and escrow account 5,853 (4,406) Dividend received from an associated company 921 909 Preference share dividends received from an associated company - 10,124 Dividends received from other investments - 129 Interest received 6,556 7,390 Rental received 118 45

Net cash used in investing activities (46,413) (217,852)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 25,704 25,866 Drawdown of bank term loans 97,348 120,752 Repayment of bank term loans (66,899) (110,871) Drawdown of revolving credit 33,000 6,000 Payment of hire purchase and finance lease liabilities (1,665) (1,786) Interest paid (195) (260) Dividends paid (147,301) (138,040)

Net cash used in financing activities (60,008) (98,339)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 103,818 (104,318) CASH AND CASH EQUIVALENTS BROUGHT FORWARD 293,799 398,117 CASH AND CASH EQUIVALENTS CARRIED FORWARD 397,617 293,799

Represented by: Deposits 159,187 196,157 Cash and bank balances 241,446 97,642 Bank overdrafts (3,016) - 397,617 293,799

Notes to and forming part of the financial statements are set out on pages 89 to 154 Auditors' Report - Page 77

S P SETIA BHD 83 Balance Sheet 31 October 2007

Note 2007 2006 RM'000 RM'000 ASSETS Non-current assets Property, plant and equipment 3 278 267 Investment properties 4 1,552 1,554 Prepaid lease payments 6 890 899 Investment in subsidiary companies 7 290,987 286,217 Investment in associated companies 8 39,249 132,999 Investment in jointly controlled entities 9 24,631 - Amounts owing by subsidiary companies 11 1,115,565 594,537 Amounts owing by associated companies 12 296 327 Deferred tax assets 13 899 248 Total non-current assets 1,474,347 1,017,048 Current assets Gross amount due from customers 15 4,203 7,538 Trade receivables 18 - - Amounts owing by subsidiary companies 11 151,986 122,435 Amounts owing by jointly controlled entities 19 30,379 - Other receivables, deposits and prepayments 20 14,362 6,323 Current tax assets 10,063 4,314 Deposits 21 109,068 120,794 Cash and bank balances 22 60,471 6,845 Total current assets 380,532 268,249 TOTAL ASSETS 1,854,879 1,285,297

EQUITY AND LIABILITIES Equity Share capital 23 504,454 498,513 Share premium account 438,430 417,274 Option reserve (non-distributable) - 1,395 Unappropriated profit 810,231 225,955 Total equity 1,753,115 1,143,137 Non-current liability Amounts owing to subsidiary companies 11 64,271 77,261 Current liabilities Gross amount due to customers 15 427 593 Trade payables 28 12,077 24,095 Amounts owing to subsidiary companies 11 21,395 38,279 Other payables and accruals 29 3,594 1,932 Total current liabilities 37,493 64,899 Total liabilities 101,764 142,160 TOTAL EQUITY AND LIABILITIES 1,854,879 1,285,297

Notes to and forming part of the financial statements are set out on pages 89 to 154 Auditors' Report - Page 77

84 ANNUAL REPORT 07 Income Statement for the year ended 31 October 2007

Note 2007 2006 RM'000 RM'000 Revenue 32 11,788 125,352 Cost of sales 33 (12,995) (119,801) Gross (loss)/profit (1,207) 5,551 Other operating income 401 350 Administrative and general expenses (36,368) (24,797) Loss from operations 34 (37,174) (18,896) Net profit from investing activities - gross dividend from unquoted preference shares in an associated company 5,086 7,031 - others 35 1,029,283 212,126 Finance costs 36 (953) (1,420) Profit before taxation 996,242 198,841 Taxation 37 (264,667) (56,631) Profit for the year 731,575 142,210

Dividend per share (net of tax) (sen) 18.4 21.8

Notes to and forming part of the financial statements are set out on pages 89 to 154 Auditors' Report - Page 77

S P SETIA BHD 85 Statement of Changes In Equity for the year ended 31 October 2007

Option reserve Share Share (non- Unappropriated Note capital premium distributable) profit Total RM'000 RM'000 RM'000 RM'000 RM'000 Balance at 1.11.2005 490,734 398,623 - 221,734 1,111,091 Profit for the year - - - 142,210 142,210 Dividends paid 39 - - - (138,040) (138,040) Options granted under ESOS - - 2,010 - 2,010 Issue of shares pursuant to ESOS 7,779 18,651 (564) - 25,866 ESOS lapsed - - (51) 51 - Balance at 31.10.2006 498,513 417,274 1,395 225,955 1,143,137

Balance at 1.11.2006 As previously stated 498,513 416,710 - 226,333 1,141,556 Effects of adopting FRS 2 1(b) - 564 1,395 (378) 1,581 As restated 498,513 417,274 1,395 225,955 1,143,137 Profit for the year - - - 731,575 731,575 Dividends paid 39 - - - (147,301) (147,301) Issue of shares pursuant to ESOS 5,941 21,156 (1,393) - 25,704 ESOS lapsed - - (2) 2 -

Balance at 31.10.2007 504,454 438,430 - 810,231 1,753,115

Notes to and forming part of the financial statements are set out on pages 89 to 154 Auditors' Report - Page 77

86 ANNUAL REPORT 07 Cash Flow Statement for the year ended 31 October 2007

Note 2007 2006 RM'000 RM'000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 996,242 198,841

Adjustments for: Bad and doubtful debts 1,654 3,026 Depreciation - property, plant and equipment 155 174 - investment properties 22 Gain on disposal of property, plant and equipment (166) (107) Amortisation of prepaid lease payments 9 10 Impairment in value of investment in subsidiary companies 178 1 Impairment in value of investment in a subsidiary company written back (4,400) - Share option expenses - 429 Dividend income (1,016,086) (206,639) Interest income (15,793) (15,624) Interest expense 953 1,420 Rental income (11) (22)

Operating loss before working capital changes (37,263) (18,489)

Changes in gross amount due from/to customers 3,169 (334) Changes in receivables 3,873 23,264 Changes in payables (11,768) (23,221)

Cash used in operations (41,989) (18,780) Rental received 77 Interest received 82 94 Interest paid (53) (16)

Net cash used in operating activities (41,953) (18,695)

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment 40 (199) (120) Proceeds from disposal of property, plant and equipment 167 107 Subscription for additional shares in an existing subsidiary company (548) (9,700) Acquisition of new jointly controlled entities (24,631) - Redemption of preference shares in an associated company 93,750 - Advances to subsidiary companies (553,730) (3,687) Repayment from/(Advances to) associated companies 28 (74) Advances to jointly controlled entities (30,305) - Dividends received 738,030 143,718 Preference shares dividend received from an associated company - 10,124 Interest received 12,210 10,092 Rental received 415

Net cash generated from investing activities 234,776 150,475

S P SETIA BHD 87 Cash Flow Statement for the year ended 31 October 2007

Note 2007 2006 RM'000 RM'000 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 25,704 25,866 Repayment to subsidiary companies (28,426) (56,791) Interest paid (900) (1,404) Dividends paid (147,301) (138,040)

Net cash used in financing activities (150,923) (170,369)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 41,900 (38,589)

CASH AND CASH EQUIVALENTS BROUGHT FORWARD 127,639 166,228

CASH AND CASH EQUIVALENTS CARRIED FORWARD 169,539 127,639

Represented by: Deposits 109,068 120,794 Cash and bank balances 60,471 6,845

169,539 127,639

Notes to and forming part of the financial statements are set out on pages 89 to 154 Auditors' Report - Page 77

88 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation The financial statements comply with applicable approved accounting standards for entities other than private entities, namely, Financial Reporting Standards (“FRSs”), issued by the Malaysian Accounting Standards Board and with the provisions of the Companies Act, 1965. The measurement bases applied in the preparation of the financial statements include cost, recoverable value, realisable value and fair value. Estimates are used in measuring these values. The financial statements are presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency. Unless otherwise indicated, the amounts in these financial statements have been rounded to the nearest thousand.

(b) Changes in accounting policies The significant accounting policies adopted are consistent with those of the previous financial year except for the adoption of new/revised FRSs which are effective. On 1 November 2006, the Group and the Company adopted the following new/revised FRSs which are relevant to their operations and effective for financial periods beginning on or after: 1 January 2006 FRS 2 Share-based Payment FRS 5 Non-current Assets Held for Sale and Discontinued Operations FRS 101 Presentation of Financial Statements FRS 102 Inventories FRS 108 Accounting Policies, Changes in Accounting Estimates and Errors FRS 110 Events after the Balance Sheet Date FRS 116 Property, Plant and Equipment FRS 121 The Effects of Changes in Foreign Exchange Rates FRS 127 Consolidated and Separate Financial Statements FRS 128 Investments in Associates FRS 131 Interests in Joint Ventures FRS 132 Financial Instruments : Disclosure and Presentation FRS 133 Earnings Per Share FRS 136 Impairment of Assets FRS 140 Investment Property 1 October 2006 FRS 117 Leases FRS 124 Related Party Disclosures

The adoption of the above FRSs does not have significant financial impact on the Group and the Company except for FRS 2, FRS 101 and FRS 117. The principal effects of the changes in accounting policies resulting from the adoption of these FRSs are discussed below:

FRS 2 - Share-based Payment Prior to 1 January 2006, no compensation expense was recognised in the income statement for share options granted to employees. The Group and the Company recognised an increase in share captial and share premium when the share options were exercised. Upon the adoption of FRS 2, the fair value of share options granted to employees is recognised as part of employee costs in the income statement over the vesting period with a corresponding increase in the share option reserve within equity.

S P SETIA BHD 89 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(b) Changes in accounting policies (Cont’d)

The Group and the Company have applied FRS 2 in accordance with the transitional provisions which allow this change in accounting policy to be applied to share options that were only granted after 31 December 2004 and which were not yet vested as at 1 January 2006.

The new accounting policy is therefore applicable to those options granted on 23 March 2006 and 5 September 2006.

The application is retrospective and its effects incorporated in the financial statements by way of a prior year adjustment. The comparative figures have been restated accordingly.

The effects on the balance sheets as at 31 October 2006 and income statements for the year ended 31 October 2006 are set out in note 51(a) below.

FRS 101 - Presentation of Financial Statements

Prior to 1 November 2006, minority interests at the balance sheet date were presented in the consolidated balance sheet separately from liabilities and equity.

Upon the adoption of the revised FRS 101, minority interests are now presented within total equity. In the consolidated income statement, minority interests are presented as an allocation of the total profit or loss for the year. A similar requirement is also applicable to the consolidated statement of changes in equity.

The revised FRS 101 also requires disclosure on the face of the consolidated statement of changes in equity, total recognised income and expenses for the year, showing separately the amounts attributable to shareholders of the Company and to minority interests.

Prior to 1 November 2006, the Group’s share of the total tax expense of the associated companies accounted for using the equity method was included as part of the Group’s income tax expense in the consolidated income statement.

Upon the adoption of the revised FRS 101, the share of the total tax expense of the associated companies is now not included as part of the Group’s income tax expense but is deducted in arriving at the share of profits or losses included in the Group’s profit or loss before tax.

The above changes in presentation have been applied retrospectively, and accordingly, the comparative have been restated. These changes in presentation have had no impact on the Company’s separate financial statements.

FRS 117 - Leases

Prior to 1 November 2006, leasehold land was classified as finance lease and prepaid lease payments were recognised as property within the property, plant and equipment and was stated at cost less accumulated amortisation and impairment losses, if any.

Upon the adoption of FRS 117, leasehold land is classified as operating lease and prepaid lease payments for the leasehold land are now classified as prepaid lease payments.

The prepaid lease payments are amortised on a straight-line basis over the remaining period of the leases, which is similar to the depreciation policy when they were treated as property, plant and equipment.

The classifications have been applied retrospectively, and accordingly, the comparative figures have been restated as disclosed in note 51 below. These changes in classification have had no impact on the income statement of the Group and of the Company.

90 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (c) New/Revised FRSs that are not yet effective

The Group and the Company have not adopted the following new/revised FRSs that have been issued and relevant to their operations but which are only effective for the financial periods beginning on or after:

1 July 2007 Amendment to FRS 121: The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation FRS 107 Cash Flow Statements FRS 111 Construction Contracts FRS 112 Income Taxes FRS 118 Revenue FRS 137 Provisions, Contingent Liabilities and Contingent Assets

The Group and the Company will apply these standards from the financial year beginning 1 November 2007.

The adoption of the above FRSs will not have any significant financial impact on the Group and the Company except for the amendment to FRS 121. The principal effects of the adoption of the amendment to FRS 121 are as discussed below:

Amendment to FRS 121: The Effects of Changes in Foreign Exchange Rates - Net investment in a Foreign Operation

This amendment results in exchange differences arising from a monetary item that forms part of the Group’s net investment in a foreign operation to be recognised in equity irrespective of the currency in which the monetary item is denominated and of whether the monetary item results from a transaction with the Company or any of its subsidiary companies. Previously, exchange differences arising from such transactions between the Company and its subsidiary companies would be accounted for in the income statement or in equity depending on the currency of the monetary item.

Effective date yet to be announced FRS 139 Financial Instruments : Recognition and Measurement

(d) Significant accounting judgements and estimates

The preparation of financial statements requires management to exercise judgement in the process of applying the accounting policies. It also requires the use of accounting estimates and assumptions that affect reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet date, and reported amounts of income and expenses during the financial year.

Although these estimates are based on management’s best knowledge of current events and actions, historical experiences and various other factors, including expectations for future events that are believed to be reasonable under the circumstances, actual results may ultimately differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

(i) Critical judgement made in applying accounting policies

The followings are judgements made by management in the process of applying the Group’s accounting policies that have the most significant effect on amounts recognised in the financial statements:

Classification between investment properties and owner-occupied properties

The Group determines whether a property qualifies as an investment property, and has developed certain criteria based on FRS 140 in making that judgement.

S P SETIA BHD 91 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(d) Significant accounting judgements and estimates (Cont’d)

(i) Critical judgement made in applying accounting policies (Cont’d)

In making its judgement, the Group considers whether a property generates cash flows largely independently of other assets held by the Group. Owner-occupied properties generate cash flows that are attributable not only to the property, but also to other assets used in the production or supply process.

Some properties comprise a portion that is held to earn rental or for capital appreciation and another portion that is held for use in the production or supply of goods and services or for administrative purposes.

If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately.

If the portions could not be sold separately, the property is accounted for as an investment property only if an insignificant portion is held for use in the production and supply of goods and services or for administrative purposes.

Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.

Revenue recognition of property development activities and construction contracts

The Group recognises property development activities and construction contracts based on the percentage of completion method. The stage of completion of the property development activities and construction contracts is measured in accordance with the accounting policies set out in (n) and (o) below.

Significant judgement is required in determining the percentage of completion, the extent of the development project and contract costs incurred, the estimated total revenue and total costs and the recoverability of the development project and contract. In making these judgements, management relies on past experience and the work of specialists.

(ii) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources associated with estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below:

Depreciation of property, plant and equipment and investment properties

Property, plant and equipment and investment properties are depreciated on a straight-line basis to write off their costs to their residual values over their estimated useful lives. Management estimates the useful lives of these assets to be within 3 to 50 years for property, plant and equipment and 50 to 96 years for investment properties.

The carrying amounts of the Group’s and Company’s property, plant and equipment as at 31 October 2007 were RM63,185,000 and RM278,000 (2006 : RM47,319,000 and RM267,000), respectively.

The carrying amounts of the Group’s and Company’s investment properties as at 31 October 2007 were RM95,032,000 and RM1,552,000 (2006 : RM92,068,000 and RM1,554,000), respectively.

Changes in the expected level of usage, physical wear and tear and technological development could impact the economic useful lives and residual values of these assets, and therefore future depreciation charges could be revised.

92 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (d) Significant accounting judgements and estimates (Cont’d)

(ii) Key sources of estimation uncertainty (Cont’d)

Provision for stock obsolescence and inventories write down

Inventories are stated at the lower of cost and net realisable value. The Group estimates the net realisable value of inventories based on an assessment of committed sales prices.

Inventories are reviewed on a regular basis and the Group will make a provision for excess or obsolete inventories based primarily on historical trends and management estimates of expected and future product demand and related pricing.

The carrying amounts of the Group’s inventories as at 31 October 2007 were RM19,320,000 (2006 : RM25,423,000).

Demand levels, technological advances and pricing competition could change from time to time. If such factors result in an adverse effect on the Group’s products, the Group might be required to reduce the value of its inventories and additional provisions for slow moving inventories may be required.

Allowance for doubtful debts

The collectibility of receivables is assessed on an ongoing basis. An allowance for doubtful debts is made for any receivables considered to be doubtful of collection.

The carrying amounts of the Group’s and Company’s trade and other receivables as at 31 October 2007 were RM331,690,000 and RM1,312,588,000 (2006 : RM414,406,000 and RM723,622,000), respectively.

The allowance for doubtful debts is made based on a review of all outstanding amounts as at the balance sheet date. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the creditworthiness and the past collection history of each customer. If the financial condition of customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Income taxes

Significant judgement is involved in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income tax. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business.

The Group and the Company recognise liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

The carrying amounts of the Group’s and the Company’s tax assets as at 31 October 2007 were RM45,576,000 and RM10,962,000 (2006 : RM12,474,000 and RM4,562,000), respectively.

The carrying amounts of the Group’s tax liabilities as at 31 October 2007 were RM23,365,000 (2006 : RM17,296,000).

Deferred tax assets

Deferred tax assets are recognised for deductible temporary differences and unutilised tax losses to the extent that it is probable that taxable profit will be available in future against which the deductible temporary differences and tax losses can be utilised.

S P SETIA BHD 93 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (d) Significant accounting judgements and estimates (Cont’d)

(ii) Key sources of estimation uncertainty (Cont’d)

Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

The carrying amounts of the Group’s recognised and unrecognised deferred tax assets as at 31 October 2007 were RM21,926,000 (2006 : RM644,000) and RM10,932,000 (2006 : RM10,217,000), respectively.

(e) Subsidiary companies

A subsidiary company is an entity controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible, are considered when assessing whether the Company has the power to govern the financial and operating policies of another entity.

In the Company’s separate financial statements, investment in subsidiary companies are stated at cost less impairment losses. Impairment losses are charged to the income statement.

On disposal, the difference between the net disposal proceeds and the carrying amounts of the subsidiary company disposed of is taken to the income statement.

(f) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and of all its subsidiary companies and jointly controlled entities (see note 1(h) below) made up to the end of the financial year. The consolidated financial statements are prepared using uniform accounting policies for like transactions in similar circumstances.

All intra-group balances, transactions, income and expenses are eliminated in full on consolidation and the consolidated financial statements reflect external transactions only.

All subsidiary companies and jointly controlled entities are consolidated on the purchase method of accounting from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases except for Syarikat Kemajuan Jerai Sdn Bhd and Wawasan Indera Sdn Bhd which are consolidated on the merger method of accounting in accordance with the provisions of Malaysian Accounting Standard No. 2.

The Group has chosen to adopt the provisions of FRS 3 - Business Combinations prospectively, as permitted under the transitional provisions of FRS 3. Accordingly, the effects of the merger method of accounting under Malaysian Accounting Standard No. 2 have been retained.

Under the purchase method of accounting, the cost of an acquisition is measured as the aggregate of the fair values of the assets given, liabilities incurred or assumed and equity instruments issued at the date of exchange, plus any costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date.

The excess of the acquisition cost over the fair values of the identifiable assets, liabilities, contingent liabilities acquired is retained in the balance sheet as goodwill, while the shortfall is immediately credited to the consolidated income statement. The goodwill is accounted for in accordance with the accounting policy set out in (v)(i) below.

94 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (f) Basis of consolidation (Cont’d)

Goodwill arising on the acquisition of subsidiary companies is presented separately in the balance sheet.

After initial recognition, goodwill is measured at cost less accumulated impairment losses, if any. Goodwill is tested for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying values may be impaired.

Minority interests represent the portion of the profit or loss and net assets of subsidiary companies not held by the Group.

(g) Associated companies

An associated company is an entity in which the Group has significant influence and that is neither a subsidiary company nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has significant influence.

In the Company’s separate financial statements, investments in associated companies are stated at cost less impairment losses. Impairment losses are charged to income statement.

On disposal, the difference between the net disposal proceeds and the carrying amount of the associated company disposed of is taken to the income statement.

Investments in associated companies are accounted for in the consolidated financial statements by the equity method of accounting. Under the equity method, the investments in associated companies are initially recognised at cost and adjusted thereafter for post-acquisition changes in the Group’s share of net assets of the associated companies.

The Group’s share of net profits or losses and changes recognised directly in the equity of the associated companies are recognised in the consolidated income statement and consolidated statement of changes in equity, respectively.

An investment in an associated company is accounted for using the equity method from the date on which the Group obtains significant influence until the date the Group ceases to have a significant influence over the associated company.

Premium relating to an associated company is included in the carrying value of the investment and it is not tested for impairment separately. Instead, the entire carrying amount of the investment is tested for impairment in accordance with the accounting policy set out in (v)(ii) below.

Discount on acquisition is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associated company’s profit or loss in the period in which the investment is acquired.

Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred.

Equity accounting is discontinued when the carrying amount of the investment in an associated company diminishes by virtue of losses to zero, unless the Group has incurred legal or constructive obligations or made payments on behalf of the associated company.

The results and reserves of associated companies are accounted for in the consolidated financial statements based on audited and/or unaudited management financial statements made up to the end of the financial year and prepared using accounting policies that conform to those used by the Group for like transactions in similar circumstances.

S P SETIA BHD 95 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(h) Jointly controlled entities

The Group has interests in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. A jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.

Investments in jointly controlled entities are accounted for in the consolidated financial statements using the proportionate consolidation method of accounting. The Group combines its share of each of the assets, liabilities, income and expenses of the jointly controlled entities with the similar items, line by line, in its consolidated financial statements. The audited financial statements of the jointly controlled entities are made up to the end of the financial year and prepared using accounting policies that conform to those used by the Group for like transactions in similar circumstances.

In the Company’s separate financial statements, investments in jointly controlled entities are stated at cost less impairment losses. Impairment losses are charged to the income statement.

On disposal, the difference between the net disposal proceeds and the carrying amount of the jointly controlled entity disposed of is taken to the income statement.

(i) Other investments

Other investments are stated at cost. An allowance for diminution in value is made if the directors are of the opinion that there is a decline in the value of such investments which is other than temporary. The diminution in value is charged to the income statement.

On disposal, the difference between the net disposal proceeds and the carrying amount of the investment disposed of is taken to the income statement.

(j) Property, plant and equipment

(i) Measurement basis

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

The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of an asset. Dismantlement, removal or restoration costs are included as part of the costs of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset.

Subsequent costs are included in the asset’s carrying amount when it is probable that future economic benefits associated with the asset will flow to the Group and the Company and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial year in which they are incurred.

Property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected from their use or disposal. On disposal, the difference between the net disposal proceeds and the carrying amount is recognised in the income statement.

(ii) Depreciation

Freehold land and capital work-in-progress are not depreciated.

Depreciation is calculated to write off the depreciable amount of other property, plant and equipment on a straight-line basis over their estimated useful lives. The depreciable amount is determined after deducting residual value from cost.

96 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(j) Property, plant and equipment (Cont’d)

(ii) Depreciation (Cont’d)

The principal annual rates used for this purpose are:

Freehold buildings 1% - 2% Plant, machinery, cranes and trucks 20% Office equipment, renovations, furniture and fittings 10% - 40% Motor vehicles 16%

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.

(k) Investment properties

Investment properties are properties held to earn rental income or for capital appreciation or both rather than for use in the production or supply of goods and services or for administrative purposes, or sale in the ordinary course of business.

(i) Measurement basis

Investment properties are stated at cost less accumulated depreciation and impairment losses, if any.

The cost of investment properties includes expenditure that is directly attributable to the acquisition of the asset.

Investment properties are derecognised upon disposal or when they are permanently withdrawn from use and no future economic benefits are expected from their disposal. On disposal, the difference between the net disposal proceeds and the carrying amount is recognised in the income statement.

(ii) Depreciation

Freehold land is not depreciated.

Depreciation is calculated to write off the depreciable amount of other investment properties on a straight- line basis over their estimated useful lives. Depreciable amount is determined after deducting the residual value from the cost of the investment property.

The principal annual rates used for this purpose are:

Freehold buildings 2% Leasehold buildings Over the remaining period of the lease

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.

(l) Leases

A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time.

S P SETIA BHD 97 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (l) Leases (Cont’d)

(i) Finance lease

A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred.

Property, plant and equipment acquired by way of finance leases are stated at amounts equal to the lower of their fair values and the present value of minimum lease payments at the inception of the leases, less accumulated depreciation and any impairment losses.

In calculating the present value of the minimum lease payments, the discount rate is the interest rate implicit in the lease, if this is determinable; if not, the Group incremental borrowing rate is used.

(ii) Operating lease

An operating lease is a lease other than a finance lease.

Operating lease income or operating lease rentals are credited or charged to the income statement on a straight-line basis over the period of the lease.

(m) Prepaid lease payments

Leasehold land that has an indefinite economic life and title that is not expected to pass to the Group by the end of the lease term is classified as operating lease. The up-front payments for right to use the leasehold land over a predetermined period are accounted for as prepaid lease payments and are stated at cost less amounts amortised.

The prepaid lease payments are amortised on a straight-line basis over the remaining period of the lease.

(n) Development properties

Development properties are classified under two categories i.e. land held for property development and property development costs.

Land held for property development is defined as land on which development is not expected to be completed within the normal operating cycle. Usually, no significant development work would have been undertaken on these lands. Accordingly, land held for property development is classified as non-current assets on the balance sheet and is stated at cost plus incidental expenditure incurred to put the land in a condition ready for development.

Land on which development has commenced and is expected to be completed within the normal operating cycle is included in property development costs. Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities.

Where the outcome of a development can be reasonably estimated, revenue is recognised on the percentage of completion method. The stage of completion is determined by the proportion that costs incurred to-date bear to estimated total costs. In applying this method of determining stage of completion, only those costs that reflect actual development work performed are included as costs incurred.

Where the outcome of a development cannot be reasonably estimated, revenue is recognised to the extent of property development costs incurred that is probable will be recoverable, and the property development costs on the development units sold shall be recognised as an expense in the period in which they are incurred.

When it is probable that total costs will exceed total revenue, the foreseeable loss is immediately recognised in the income statement irrespective of whether development work has commenced or not, or of the stage of completion of development activity, or of the amounts of profits expected to arise on other unrelated development projects.

98 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(n) Development properties (Cont’d)

The excess of revenue recognised in the income statement over the billings to purchasers of properties is recognised as accrued billings under current assets.

The excess of billings to purchasers of properties over revenue recognised in the income statement is recognised as progress billings under current liabilities.

(o) Long term construction contracts

The Group’s long term construction contracts are all fixed price contracts and where their outcome can be reasonably estimated, revenue is recognised on the percentage of completion method. The stage of completion is determined by the proportion that costs incurred to-date bear to estimated total costs, and for this purpose, only those costs that reflect actual contract work performed are included as costs incurred.

Where the outcome of a long term construction contract cannot be reasonably estimated, revenue is recognised only to the extent of contract costs incurred that are expected to be recoverable. At the same time, all contract costs incurred are recognised as an expense in the period in which they are incurred.

Costs that relate directly to a contract and which are incurred in securing the contract are also included as part of contract costs if they can be separately identified and measured reliably and it is probable that the contract will be obtained.

When it is probable that total costs will exceed total revenue, the foreseeable loss is immediately recognised in the income statement irrespective of whether contract work has commenced or not, or of the stage of completion of contract activity, or of the amounts of profits expected to arise on other unrelated contracts.

On the balance sheet, contracts in progress are reflected either as gross amounts due from or due to customers, where a gross amount due from customers is the surplus of (i) costs incurred plus profits recognised under the percentage of completion method over (ii) recognised foreseeable losses plus progress billings. A gross amount due to customers is the surplus of (ii) over (i).

(p) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis. In the case of finished goods and work-in-progress, cost comprises materials, direct labour, other direct charges and an appropriate proportion of factory overheads.

In the case of completed houses held for sale, cost is determined based on specific identification method.

Net realisable value represents the estimated selling price in the ordinary course of business, less selling and distribution costs and all other estimated cost to completion.

(q) Receivables

Receivables are initially recognised at their costs when the contractual right to receive cash or another financial asset from another entity is established. Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts.

Known bad debts are written off and allowance is made for any receivables considered to be doubtful of collection.

S P SETIA BHD 99 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(r) Share capital

Ordinary shares are recorded at nominal value and proceeds received in excess of the nominal value of shares issued, if any, are accounted for as share premium. Both ordinary shares and share premium are classified as equity. Cost incurred directly attributable to the issuance of the shares is accounted for as a deduction from share premium, if any, otherwise it is charged to the income statement.

Dividends to shareholders are recognised in equity in the period in which they are declared.

(s) Payables

Payables are measured initially and subsequently at cost. Payables are recognised when there is a contractual obligation to deliver cash or another financial asset to another entity.

(t) Income recognition

(i) Revenue from construction contracts and sale of development properties which are under development is recognised on the percentage of completion method, where the outcome of the contracts and development projects can be reliably estimated.

Revenue from construction contracts represents the proportionate contract value on construction contracts attributable to the percentage of contract work performed during the financial year.

Revenue from the sale of development properties represents the proportionate sales value of development properties sold attributable to the percentage of development work performed during the financial year.

(ii) Revenue from the sale of completed development properties is measured at the fair value of the consideration receivable and is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.

(iii) Revenue from the sale of goods is measured at the fair value of the consideration receivable and is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.

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

(v) Interest income is recognised on a time proportion basis.

(vi) Rental income is recognised on a straight-line basis over the specific tenure of the respective leases.

(u) Foreign currencies

(i) Functional currency

Functional currency is the currency of the primary economic environment in which an entity operates.

The financial statements of each entity within the Group are measured using their respective functional currency.

(ii) Transactions and balances in foreign currencies

Transactions in currencies other than the functional currency (“foreign currencies”) are translated to the functional currency at the rate of exchange ruling at the date of the transaction.

100 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(u) Foreign currencies (Cont’d)

(ii) Transactions and balances in foreign currencies (Cont’d)

Monetary items denominated in foreign currencies at the balance sheet date are translated at foreign exchange rates ruling at that date.

Non-monetary items which are measured in terms of historical costs denominated in foreign currencies are translated at foreign exchange rates ruling at the date of the transaction.

Non-monetary items which are measured at fair values denominated in foreign currencies are translated at the foreign exchange rates ruling at the date when the fair values were determined.

Exchange differences arising on the settlement of monetary items and the translation of monetary items are included in the income statement for the period.

When a gain or loss on a non-monetary item is recognised directly in equity, any corresponding exchange gain or loss is recognised directly in equity. When a gain or loss on a non-monetary item is recognised in the income statement, any corresponding exchange gain or loss is recognised in the income statement.

(iii) Translation of foreign operations

For consolidation purposes, all assets and liabilities of foreign operations that have a functional currency other than RM (including goodwill and fair value adjustments arising from the acquisition of the foreign operations) are translated at the exchange rates ruling at the balance sheet date.

Income and expense items are translated at exchange rates approximating those ruling on transactions dates.

All exchange differences arising from the translation of the financial statements of foreign operations are dealt with through the exchange translation reserve account within equity. On the disposal of a foreign operation, the exchange translation differences relating to that foreign operation are recognised in the income statement as part of the gain or loss on disposal.

(v) Impairment of assets

(i) Goodwill

Goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the goodwill may be impaired.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units that are expected to benefit from synergies of the business combination.

An impairment loss is recognised in the income statement when the carrying amount of the cash-generating unit, including the goodwill, exceeds the recoverable amount of the cash-generating unit. Recoverable amount of the cash-generating unit is the higher of the cash-generating unit’s fair value less cost to sell and its value in use.

The total impairment loss is allocated first to reduce the carrying amount of goodwill allocated to the cash- generating unit and then to the other assets of the cash-generating unit proportionately on the basis of the carrying amount of each asset in the cash-generating unit.

Impairment loss recognised on goodwill is not reversed in the event of an increase in recoverable amount in subsequent periods.

S P SETIA BHD 101 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(v) Impairment of assets (Cont’d)

(ii) Property, plant and equipment, investment properties, land held for property development, investment in subsidiary companies, associated companies and jointly controlled entities

Property, plant and equipment, investment properties, land held for property development, investment in subsidiary companies, associated companies and jointly controlled entities are assessed at each balance sheet date to determine whether there is any indication of impairment.

If such an indication exists, the asset’s recoverable amount is estimated. The recoverable amount is the higher of an asset’s fair value less cost to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to which the asset belongs.

An impairment loss is recognised whenever the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount. Impairment losses are charged to the income statement.

Any reversal of an impairment loss as a result of a subsequent increase in recoverable amount should not exceed the carrying amount that would have been determined (net of amortisation or depreciation, if applicable) had no impairment loss been previously recognised for the asset.

(w) Employee benefits

(i) Short-term employee benefits

Wages, salaries, paid annual leave, paid sick leave, bonuses and non-monetary benefits are recognised as an expense in the period in which the associated services are rendered by employees other than those that are attributable to property development activities or construction contract in which case such expenses are recognised in the property development costs or contract costs.

(ii) Post-employment benefits

The Company and its Malaysian subsidiary companies pay monthly contributions to the Employees Provident Fund ("EPF") which is a defined contribution plan.

The legal or constructive obligation of the Company and its Malaysian subsidiary companies is limited to the amount that they agree to contribute to the EPF. The contributions to the EPF are charged to the income statement in the period to which they relate.

(iii) Share-based payment transactions

The Group operates an equity-settled share-based compensation plan for its employees. The fair value of share options granted to employees is recognised as an employee cost over the vesting period with a corresponding increase in the share option reserve within equity.

The amount to be expensed over the vesting period is determined by reference to the fair value of the share options at the date of the grant. The fair value of the share option is computed using the binomial model.

The fair value of share options recognised in the share option reserve is transferred to share premium when the share option is exercised, or transferred directly to unappropriated profit when the share option expires or lapses.

102 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(x) Borrowing costs

Borrowing costs incurred on assets under development that take a substantial period of time for completion are capitalised into the carrying value of the assets. Capitalisation of borrowing costs ceases when that assets are completed or during extended periods when active development is interrupted.

All other borrowing costs are charged to the income statement in the period in which they are incurred. The interest component of hire purchase payments is charged to the income statement over the hire purchase period so as to give a constant periodic rate of interest on the remaining tenure of the hire purchase liabilities.

(y) Taxation

The tax expense in the income statement represents the aggregate amount of current tax and deferred tax included in the determination of profit or loss for the financial year.

On the balance sheet, a deferred tax liability is recognised for taxable temporary differences while a deferred tax asset is recognised for deductible temporary differences and unutilised tax losses only to the extent that it is probable that taxable profit will be available in future against which the deductible temporary differences and tax losses can be utilised.

No deferred tax is recognised for temporary differences arising from the initial recognition of:

(i) goodwill, or

(ii) an asset or liability which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

Deferred tax assets and liabilities are measured based on tax consequences that would follow from the manner in which the asset or liability is expected to be recovered or settled, and based on tax rates enacted or substantively enacted by the balance sheet date that are expected to apply to the period when the asset is realised or when the liability is settled.

Current tax and deferred tax are charged or credited directly to equity if the tax relates to items that are credited or charged, whether in the same or a different period, directly to equity.

(z) Cash equivalents

Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

For the purpose of the cash flow statement, cash and cash equivalents are presented net of bank overdrafts and exclude fixed deposits, sinking fund accounts and escrow accounts pledged to secure banking facilities.

(aa)Financial instruments

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.

(i) Financial instruments recognised in the balance sheet

The Group’s financial instruments which are recognised in the balance sheet comprise cash and cash equivalents, other investments, receivables, payables, bank borrowings, hire purchase liabilities and ordinary shares.

S P SETIA BHD 103 Notes to the Financial Statements for the year ended 31 October 2007

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(aa)Financial instruments (Cont’d)

These financial instruments are recognised when a contractual relationship has been established. The accounting policies and methods adopted, including the basis of measurement applied are disclosed above, where relevant.

The information about the extent and nature of these recognised financial instruments, including significant terms and conditions that may affect the amount, timing and certainty of future cash flows are disclosed in the respective notes below, where applicable.

(ii) Financial instruments not recognised in the balance sheet

The Group and the Company have provided corporate guarantees to banks for credit facilities granted to a jointly controlled entity and subsidiary companies, respectively, which represent present obligations existing at the balance sheet date. The corporate guarantees are not recognised in the financial statements at inception because it is not probable that an outflow of economic benefits will be required to settle the obligations.

(ab)Segment reporting

Segment revenue, expense, assets and liabilities are those amounts resulting from operating activities of a segment that are directly attributable to the segment and a relevant portion that can be allocated on a reasonable basis to the segment.

Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group entities within a single segment.

(ac) Disclosure of fair value

Cash and cash equivalents, trade and other receivables, trade and other payables, short term investments and short term borrowings

The carrying amounts of these financial instruments approximate fair values because of their short maturities.

Long term investments

The fair value of quoted investments is estimated based on quoted market price.

For unquoted investments, a reasonable estimate of fair value is not practical due to the lack of comparable quoted market prices and available market data for valuation. Therefore, such investments are valued at cost subject to review for diminution in value.

Long term borrowings and debts

The carrying amounts of the Group’s long term floating-rate borrowings approximate fair value.

The fair value of the Group’s long term fixed-rate borrowings and debts is estimated using discounted cash flow analyses, based on current market interest rates available to the Group for similar types of lending and borrowing arrangements.

Hire purchase and finance lease liabilities

The fair value of the Group’s hire purchase and finance lease liabilities approximate their carrying amounts.

104 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s activities are exposed to a variety of financial risks, including interest rate risk, credit risk, market risk, liquidity and cash flow risks. The Group’s overall financial risk management objective is to minimise potential adverse effects on the financial performance of the Group.

Financial risk management is carried out through risk review, internal control systems and adherence to Group financial risk management policies. The Board regularly reviews these risks and approves the policies covering the management of these risks. The Group does not trade in derivative instruments.

(a) Interest rate risk

The Group is exposed to interest rate risk which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates. Exposure to interest rate risk relates primarily to the Group’s fixed deposits and interest-bearing borrowings.

Surplus funds are placed with licensed financial institutions to earn interest income based on prevailing market rates. The Group manages its interest rate risks by placing such funds on short tenures of 12 months or less.

The Group’s policy is to borrow principally on a floating rate basis but to retain a proportion of fixed rate debt. The objective of a mix of fixed and floating rate borrowings is to reduce the impact of a rise in interest rates and to enable savings to be enjoyed if interest rates fall. The Group does not generally hedge interest rate risks. The Group has a policy to ensure that interest rates obtained are competitive.

(b) Credit risk

Credit risk arises from the possibility that a counter party may be unable to meet the terms of a contract in which the Group has a gain position.

The Group minimises and monitors its credit risk by dealing with credit worthy counter-parties and applying credit approval controls for material contracts. If necessary, the Group may obtain collaterals from counter-parties as a means of mitigating losses in the event of default.

In respect of trade receivables arising from the sale of development properties, the Group mitigates its credit risk by maintaining its name as the registered owner of the development properties until full settlement by the purchaser of the self-financed portion of the purchase consideration and upon undertaking of end-financing by the purchaser’s end-financier.

The Group’s principal exposure to market risk arises from changes in value caused by movements in market prices of its quoted investments. The risk of loss is minimised via thorough analyses before investing and continuous monitoring of the performance of the investments. The Group optimises returns by disposing of investments after thorough analyses.

Common to all business, the overall performance of the Group’s investments is also driven externally by global and domestic economies that are largely unpredictable and uncontrollable.

(d) Liquidity and cash flow risks

The Group seeks to ensure all business units maintain optimum levels of liquidity at all times, sufficient for their operating, investing and financing activities.

Therefore, the policy seeks to ensure that each business unit, through efficient working capital management (i.e. inventory, accounts receivable and accounts payable management), must be able to convert its current assets into cash to meet all demands for payment as and when they fall due.

S P SETIA BHD 105 Notes to the Financial Statements for the year ended 31 October 2007

2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)

(d) Liquidity and cash flow risks (Cont’d)

Owing to the nature of its businesses, the Group seeks to maintain sufficient credit lines available to meet its liquidity requirements while ensuring an effective working capital management within the Group.

3. PROPERTY, PLANT AND EQUIPMENT Group 2007 Office Plant, equipment Capital ------Freehold------machinery, renovations, work- crane furniture and Motor in- Land Buildings and trucks fittings vehicles progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cost

At 1.11.2006 2,886 26,880 13,445 22,755 29,343 4,795 100,104 Additions - 248 373 5,165 6,917 16,205 28,908 Disposals - - (635) (452) (4,505) - (5,592) Write-offs - - - (129) (4) - (133) Transfer to investment properties upon completion (see note 4) - - - - - (5,075) (5,075)

At 31.10.2007 2,886 27,128 13,183 27,339 31,751 15,925 118,212

Accumulated depreciation

At 1.11.2006 - 7,348 11,158 14,684 19,595 - 52,785 Charge for the year - 1,041 720 3,031 2,547 - 7,339 Disposals - - (571) (398) (3,998) - (4,967) Write-offs - - - (129) (1) - (130)

At 31.10.2007 - 8,389 11,307 17,188 18,143 - 55,027

Net book value At 31.10.2007 2,886 18,739 1,876 10,151 13,608 15,925 63,185

106 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

3. PROPERTY, PLANT AND EQUIPMENT (CONT’D) Group 2006 Office Plant, equipment Capital ------Freehold------machinery, renovations, work- crane furniture and Motor in- Land Buildings and trucks fittings vehicles progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cost At 1.11.2005 2,886 25,327 14,666 19,497 27,548 422 90,346 Additions - 716 897 4,033 4,940 5,210 15,796 Disposals - - (294) (289) (2,987) - (3,570) Write-offs - - (1,824) (486) (158) - (2,468) Reclassification - 837 - - - (837) - At 31.10.2006 2,886 26,880 13,445 22,755 29,343 4,795 100,104 Accumulated depreciation At 1.11.2005 - 6,314 12,511 13,185 18,018 - 50,028 Charge for the year - 1,034 742 2,232 4,390 - 8,398 Disposals - - (271) (250) (2,656) - (3,177) Write-offs - - (1,824) (483) (157) - (2,464) At 31.10.2006 - 7,348 11,158 14,684 19,595 - 52,785 Net book value At 31.10.2006 2,886 19,532 2,287 8,071 9,748 4,795 47,319

Company 2007 Office equipment, Plant, renovations, machinery, furniture cranes and and Motor trucks fittings vehicles Total RM’000 RM’000 RM’000 RM’000 Cost At 1.11.2006 1,706 4,116 1,185 7,007 Additions - 167 - 167 Disposals - (9) (936) (945) Write-offs - (102) - (102) At 31.10.2007 1,706 4,172 249 6,127 Accumulated depreciation At 1.11.2006 1,705 3,851 1,184 6,740 Charge for the year - 155 - 155 Disposals - (8) (936) (944) Write-offs - (102) - (102) At 31.10.2007 1,705 3,896 248 5,849 Net book value At 31.10.2007 1 276 1 278

S P SETIA BHD 107 Notes to the Financial Statements for the year ended 31 October 2007

3. PROPERTY, PLANT AND EQUIPMENT (CONT’D) Company 2006 Office equipment, Plant, renovations, machinery, furniture cranes and and Motor trucks fittings vehicles Total RM’000 RM’000 RM’000 RM’000 Cost At 1.11.2005 3,785 4,080 1,393 9,258 Additions - 152 - 152 Disposals (255) (116) (112) (483) Write-offs (1,824) - (96) (1,920)

At 31.10.2006 1,706 4,116 1,185 7,007

Accumulated depreciation

At 1.11.2005 3,784 3,808 1,377 8,969 Charge for the year - 159 15 174 Disposals (255) (116) (112) (483) Write-offs (1,824) - (96) (1,920)

At 31.10.2006 1,705 3,851 1,184 6,740

Net book value At 31.10.2006 1 265 1 267

Freehold land and buildings, including capital work-in-progress of the Group included above at a net book value of RM28,575,000 (2006 : RM14,548,000), have been charged to partially secure the long term loans, revolving credit and bank overdrafts referred to in notes 24, 30 and 31 below.

Included in property, plant and equipment are assets acquired under unexpired finance lease and hire purchase arrangements with net book values as follows:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Plant and machinery 678 478 - - Motor vehicles 5,447 3,792 - -

During the financial year, the Group revised the residual values, useful lives and depreciation methods of all its property, plant and equipment. The revision was accounted for prospectively as a change in accounting estimate and as a result, the depreciation charges for the current financial year have been decreased by RM2,232,000. The effect on future periods is not disclosed as it is impracticable to estimate the revised residual values, useful lives and depreciation methods for future periods.

108 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

4. INVESTMENT PROPERTIES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Cost At 1 November 92,200 82,335 1,571 1,571 Additions 33,762 9,865 - - Transfer from property, plant and equipment upon completion (see note 3) 5,075 - - - Transfer to land held for property development (see note 5) (16,761) - - - Transfer to property development costs (see note 14) (18,822) - - - Disposals (189) - - -

At 31 October 95,265 92,200 1,571 1,571

Accumulated depreciation

At 1 November 132 116 17 15 Charge for the year 124 16 2 2 Disposals (23) - - -

At 31 October 233 132 19 17

Net book value at 31 October 95,032 92,068 1,552 1,554

Comprising: Freehold land 89,184 91,005 1,371 1,371 Freehold buildings 5,322 364 - - Leasehold buildings 526 699 181 183

95,032 92,068 1,552 1,554

Fair value at 31 October 610,806 1,555

Title deeds to certain of the Group’s and Company’s investment properties costing RM1,005,000 and RM200,000 (2006 : RM1,195,000 and RM200,000), respectively, have yet to be issued in or transferred to the name of the Company and subsidiary companies concerned.

Title deeds to certain of the Group’s investment properties at a net book value of RM43,518,000 (2006 : RM9,757,000) have been charged to banks to secure the long term loans referred to in note 24 below.

In previous years, these investment properties were included in property, plant and equipment. Following the adoption of FRS 140 Investment Property, these investment properties are now classified separately.

The fair values of the investment properties at 31 October 2007 are arrived at by reference to market evidence of transaction prices for similar properties and are performed by registered valuers having appropriate recognised professional qualification and recent experiences in the locations and category of properties being valued.

S P SETIA BHD 109 Notes to the Financial Statements for the year ended 31 October 2007

5. LAND HELD FOR PROPERTY DEVELOPMENT Freehold Leasehold Development land land expenditure at cost at cost at cost Total Group RM’000 RM’000 RM’000 RM’000

At 1 November 2006 512,241 18,017 205,568 735,826 Additions 80,072 - 83,822 163,894 Transfer from investment properties (see note 4) 16,761 - - 16,761 Transfer to current assets as property development costs (see note 14) (41,252) (14,817) (7,933) (64,002)

At 31 October 2007 567,822 3,200 281,457 852,479

At 1 November 2005 504,569 15,388 172,132 692,089 Adjustment* - 2,629 - 2,629 Additions 37,730 - 65,859 103,589 Disposals (11,246) - - (11,246) Transfer to current assets as property development costs (see note 14) (18,812) - (32,423) (51,235)

At 31 October 2006 512,241 18,017 205,568 735,826

* The adjustment arose from the acquisition of the remaining shares in Ambleside Sdn Bhd.

Included in additions is interest expense of RM15,564,000 (2006 : RM8,773,000) incurred during the financial year.

Land held for property development included above at a carrying amount of RM692,105,000 (2006 : RM562,762,000) have been charged to banks to partially secure the long term loans, revolving credit, and bank overdrafts referred to in notes 24, 30 and 31 below.

110 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

6. PREPAID LEASE PAYMENTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Long leasehold land

Cost

At 1 November 978 978 978 978 Addition/Disposal - - - -

At 31 October 978 978 978 978

Accumulated amortisation

At 1 November 79 69 79 69 Amortisation for the year 9 10 9 10

At 31 October 88 79 88 79

Carrying amount At 31 October 890 899 890 899

7. INVESTMENT IN SUBSIDIARY COMPANIES

2007 2006 RM’000 RM’000

Unquoted shares in Syarikat Kemajuan Jerai Sdn Bhd and Wawasan Indera Sdn Bhd at cost 115,186 115,186 Unquoted shares in other subsidiary companies at cost 179,129 178,581 Impairment loss (3,328) (7,550)

290,987 286,217

The subsidiary companies are as follows:

Equity interest Direct Indirect Country of Principal 2007 2006 2007 2006 incorporation activities %%% %

Bandar Setia Alam Sdn Bhd 100 100 - - Malaysia Property development and property investment holding Setia Indah Sdn Bhd 100 100 - - Malaysia Property development and property investment holding

S P SETIA BHD 111 Notes to the Financial Statements for the year ended 31 October 2007

7. INVESTMENT IN SUBSIDIARY COMPANIES (CONT’D)

Equity interest Direct Indirect Country of Principal 2007 2006 2007 2006 incorporation activities %%% %

Setia Duta One Sdn Bhd 100 100 - - Malaysia Property development * Syarikat Kemajuan Jerai 100 100 - - Malaysia Property Sdn Bhd development and investment holding * S P Setia Project Management - - 100 100 Malaysia Property Sdn Bhd development project management * Lagavest Sdn Bhd - - 100 100 Malaysia Investment holding * Wawasan Indera Sdn Bhd 50 50 50 50 Malaysia Property development * S P Setia Eco-Projects - - 100 100 Malaysia Property Management Sdn Bhd development project management * Setia Recreation Sdn Bhd - - 100 100 Malaysia Club operator * Ambleside Sdn Bhd - - 100 100 Malaysia Property development * Bukit Indah (Johor) Sdn Bhd 100 100 - - Malaysia Property development and property investment holding Setia Bina Raya Sdn Bhd 100 100 - - Malaysia Road contractor Setia Precast Sdn Bhd - - 100 100 Malaysia Building and road contractors Setia-Wood Industries 100 100 - - Malaysia Prefabrication, Sdn Bhd installation, sale of wood products and provision of kiln dry services S P Setia Marketing Sdn Bhd - - 100 100 Malaysia Sale of wood products and buildings materials S P Setia Estate Management 60 60 - - Malaysia Property Sdn Bhd management services

112 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

7. INVESTMENT IN SUBSIDIARY COMPANIES (CONT’D)

Equity interest Direct Indirect Country of Principal 2007 2006 2007 2006 incorporation activities %%% %

S P Setia Construction 100 100 - - Malaysia Building Sdn Bhd contractors Bukit Indah (Perak) Sdn Bhd 100 100 - - Malaysia Property development S P Setia Management 100 100 - - Malaysia Investment Services Sdn Bhd holding Futurecrest (M) Sdn Bhd 100 100 - - Malaysia Investment holding Kesas Kenangan Sdn Bhd - 100 100 - Malaysia Property development Shabra Development Sdn Bhd 100 100 - - Malaysia Property development Pelita Dunia Sdn Bhd 100 100 - - Malaysia Property investment S. P. Setia Security Services 51 51 - - Malaysia Provision of Sdn Bhd security services Setia Prefab Sdn Bhd 100 100 - - Malaysia Investment holding Manih System Construction - - 100 100 Malaysia Investment Sdn Bhd holding Suharta Sdn Bhd - - 60 60 Malaysia Investment holding Suharta Development Sdn Bhd - - 51 51 Malaysia Property development Suharta Management Sdn Bhd - - 100 100 Malaysia Dormant Suharta Properties Sdn Bhd - - 100 100 Malaysia Dormant Yunikhas Sdn Bhd 8 8 70 70 Malaysia Investment holding Aneka Baru (M) Sdn Bhd - - 100 100 Malaysia Property development Tenaga Raya Sdn Bhd 87 62 - - Malaysia Dormant Cosmotek Sdn Bhd 100 100 - - Malaysia Investment holding SJ Classic Land Sdn Bhd - - 60 60 Malaysia Dormant * Indera Perasa Sdn Bhd 70 70 - - Malaysia Investment holding * Dian Mutiara Sdn Bhd - - 100 100 Malaysia Dormant * Kenari Kayangan Sdn Bhd 100 100 - - Malaysia Investment holding

S P SETIA BHD 113 Notes to the Financial Statements for the year ended 31 October 2007

7. INVESTMENT IN SUBSIDIARY COMPANIES (CONT’D)

Equity interest Direct Indirect Country of Principal 2007 2006 2007 2006 incorporation activities %%% %

Bukit Indah (Selangor) 100 100 - - Malaysia Dormant Sdn Bhd S P Setia Property Holdings 100 100 - - Malaysia Property Sdn Bhd investment Setia Hicon Sdn Bhd 100 100 - - Malaysia Dormant S P Setia Technology Sdn Bhd 100 100 - - Malaysia Contractor for home automation and alarm systems Setia Alam Property Holdings 100 100 - - Malaysia Dormant Sdn Bhd Setia Promenade Sdn Bhd 100 100 - - Malaysia Property development and property investment holding * Bukit Indah Property 70 70 - - Malaysia Property Management Sdn Bhd development * Kewira Jaya Sdn Bhd 100 100 - - Malaysia Dormant Aeropod Sdn Bhd 70 - - - Malaysia Dormant Setia International Limited 100 - - - British Investment Virgin holding Islands Setia MyPhuoc Limited - - 100 - British Investment Virgin holding Islands Setia Eco Villa Sdn Bhd 100 - - - Malaysia Property (formerly known as development Optagreen Sdn Bhd)

* Not audited by Moores Rowland

114 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

8. INVESTMENT IN ASSOCIATED COMPANIES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Ordinary shares quoted in Malaysia at cost 56,438 54,042 - - Unquoted ordinary shares at cost 41,648 41,648 39,276 39,276 Impairment loss - - (27) (27) Group’s share of post-acquisition profits less losses and less unrealised profit 46,358 20,618 - -

144,444 116,308 39,249 39,249 Unquoted redeemable cumulative preference shares, at cost - 93,750 - 93,750

144,444 210,058 39,249 132,999

Market value of shares quoted in Malaysia 52,678 30,769 - -

The summarised financial information of the associated companies are as follows:

2007 2006 RM’000 RM’000

Assets and liabilities Total assets 1,050,820 1,000,162

Total liabilities 637,897 640,835

Results Revenue 639,625 641,063

Profit for the year 55,958 69,414

The Group’s share of the current year’s losses and the accumulated losses of 3 associated companies amounting to RM1,000 and RM643,000 (2006 : RM1,000 and RM642,000), respectively, have not been recognised in the Group’s income statement as equity accounting has ceased when the Group’s share of losses of these associated companies exceeded the carrying amount of its investment in these associated companies.

S P SETIA BHD 115 Notes to the Financial Statements for the year ended 31 October 2007

8. INVESTMENT IN ASSOCIATED COMPANIES (CONT’D)

The associated companies, all incorporated in Malaysia, are as follows:

Equity interest Direct Indirect Principal 2007 2006 2007 2006 activities %% %%

Loh & Loh Corporation Berhad - - 24 23 Investment (“LLCB”)* holding and civil construction Setia Putrajaya Sdn Bhd (“SPJ”) 50 50 - - Property development and building construction Bandar Eco-Setia Sdn Bhd 50 50 - - Property (“BE-SSB”) development and property investment Golden Klang Valley 50 50 - - Property Sdn Bhd (“GKV”) development PTB Property Developer - - 49 49 Property Sdn Bhd (“PTB”) development Konsortium Lebuhraya Wangsa- 40 40 - - Dormant Keramat Sdn Bhd (“KLWK”) KLWK Sdn Bhd (“KLWKSB”) 40 40 - - Dormant Icfox (Malaysia) Sdn Bhd (“Icfox”)* - - 20 20 Development of internet websites

* The financial year of these 2 associated companies end on 31 December. The financial year of the others end on 31 October.

For the purpose of applying the equity method of accounting, audited financial statements made up to the end of the financial year have been used, except for LLCB and Icfox where management financial statements made up to 30 September and 31 October, respectively, have been used.

116 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

9. INVESTMENT IN JOINTLY CONTROLLED ENTITIES Company 2007 2006 RM’000 RM’000

Unquoted ordinary shares, at cost 4,681 - Unquoted cumulative redeemable preference shares, at cost 19,950 -

24,631 -

The jointly controlled entities, all incorporated in Malaysia, are as follows:

Proportion of ownership interest Direct Indirect Principal 2007 2006 2007 2006 activities %%%%

Exceljade Sdn Bhd 70 - - - Property development Sendiman Sdn Bhd 70 - - - Property development Kemboja Mahir Sdn Bhd 70 - - - Property development Ganda Anggun Sdn Bhd - - 70 - Property development

The Group’s aggregate share of the jointly controlled entities’ non-current assets, current assets, non-current liabilities and current liabilities as at 31 October 2007 and revenue and expenses for the year ended 31 October 2007, which are included in the consolidated financial statements are as follows:

2007 2006 RM’000 RM’000

Assets and liabilities Non-current assets 124 - Current assets 141,267 -

Total assets 141,391 -

Non-current liabilities 103,670 - Current liabilities 35,762 -

Total liabilities 139,432 -

Results Revenue --

Loss for the period (1,139) -

The jointly controlled entities have no material contingencies and capital commitments at year end.

The Group’s share of operating lease commitments of the jointly controlled entities are disclosed in note 46 to the financial statements.

S P SETIA BHD 117 Notes to the Financial Statements for the year ended 31 October 2007

10. OTHER INVESTMENTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Shares quoted in Malaysia, at cost 878 23,297 - - Diminution in value (738) (6,470) - - 140 16,827 - - Irredeemable convertible unsecured loan stocks quoted in Malaysia, at cost - 557 - - Warrants quoted in Malaysia, at cost - 3 - - Unquoted shares, at cost 462 462 - - Diminution in value (125) (125) - - 337 337 - -

477 17,724 - -

Market value of securities quoted in Malaysia - shares 140 19,350 - - - irredeemable convertible unsecured loan stocks - 1,389 - - - warrants - 846 - -

140 21,585 - -

11. AMOUNTS OWING BY/TO SUBSIDIARY COMPANIES

Amounts owing by subsidiary companies included under non-current assets

The amounts owing by subsidiary companies included under non-current assets represent unsecured advances not expected to be recalled within the next 12 months and are analysed as follows:

2007 2006 RM’000 RM’000

Bearing interest at 2.0% per annum 426,852 470,567 Interest free 707,528 141,134

1,134,380 611,701 Allowance for doubtful debts (18,815) (17,164)

1,115,565 594,537

118 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

11. AMOUNTS OWING BY/TO SUBSIDIARY COMPANIES (CONT’D)

Amounts owing by subsidiary companies included under current assets

2007 2006 RM’000 RM’000

Trade accounts Progress billings receivable 2,526 3,151 Retention sums receivable 10,418 17,989

Total trade receivables 12,944 21,140 Allowance for doubtful debts (795) (795)

12,149 20,345 Unsecured advances - bearing interest at 2.0% per annum 84,636 95,426 - interest free 55,201 6,664

151,986 122,435

The trade accounts are expected to be settled within the normal credit periods.

The interest bearing advances are repayable within the next 12 months.

Amounts owing to subsidiary companies included under non-current liabilities

The amounts owing to subsidiary companies included under non-current liabilities represent unsecured interest free advances not expected to be recalled within the next 12 months.

Amounts owing to subsidiary companies included under current liabilities

2007 2006 RM’000 RM’000

Trade accounts Sub-contract claims 1,790 3,238 Retention sums 1,985 1,985

3,775 5,223 Unsecured interest free advances 17,620 33,056

21,395 38,279

The trade accounts which are expected to be settled within the normal credit periods.

The unsecured interest free advances are payable on demand.

S P SETIA BHD 119 Notes to the Financial Statements for the year ended 31 October 2007

12. AMOUNTS OWING BY ASSOCIATED COMPANIES

Amounts owing by associated companies included under non-current assets

The amounts owing by associated companies included under non-current assets represent unsecured interest free advances not expected to be recalled within the next 12 months: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Gross amount of advances 2,046 2,074 1,973 2,001 Allowance for doubtful debts (1,677) (1,674) (1,677) (1,674)

369 400 296 327

Amounts owing by associated companies included under current assets

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Trade accounts - progress billings receivable 17,655 11,256 - - - retention sums 9,841 8,167 - - Others 1,071 - - -

28,567 19,423 - -

The trade accounts are expected to be settled within the normal credit period.

13. DEFERRED TAX ASSETS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

At beginning of the year 644 1,141 248 216 Originating/(Reversed) during the year 21,282 (497) 651 32

At end of the year 21,926 644 899 248

The Group has recognised the deferred tax assets as it is probable that its existing construction contracts and housing development projects would generate sufficient taxable profit in the future against which the deferred tax assets can be utilised.

120 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

13. DEFERRED TAX ASSETS (CONT’D)

The temporary differences on which deferred tax assets have been recognised are as follows:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Tax effects of: - unabsorbed capital allowances 422 349 260 254 - unabsorbed tax losses 320 162 - - - property development and construction profits 21,334 - 657 - - excess of capital allowances over accumulated depreciation on property, plant and equipment (269) (28) (18) (6) - excess of accumulated depreciation on property, plant and equipment over capital allowances claimed 65 77 - - - unpaid qualifying expenditure of hire purchase and finance lease liabilities 54 84 - -

21,926 644 899 248

Further, the following temporary differences and unused tax losses exist as at 31 October the deferred tax benefits of which have not been recognised in the financial statements:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Unabsorbed capital allowances 781 532 - - Unabsorbed tax losses 41,207 36,917 - - Excess of capital allowances claimed on property, plant and equipment over accumulated depreciation (138) (28) - - Property development profits 1,781 1,808 - - Other temporary differences 98 66 - -

43,729 39,295 - -

S P SETIA BHD 121 Notes to the Financial Statements for the year ended 31 October 2007

14. PROPERTY DEVELOPMENT COSTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Freehold land at cost 394,892 509,800 - - Leasehold land at cost 47 51 - - Development and construction costs 1,655,981 1,515,481 - - Costs recognised as an expense in previous years (1,335,267) (1,350,278) - -

At 1 November 715,653 675,054 - -

Costs transferred from land held for property development (see note 5) - freehold land at cost 41,252 18,812 - - - leasehold land at cost 14,817 - - - - development costs 7,933 32,423 - - Costs transferred from investment properties (see note 4) - freehold land 18,822 - - - Costs incurred during the financial year - freehold land at cost 180,841 4,833 - - - leasehold land at cost 6,977 - - - - development and construction costs 434,483 607,794 - - 705,125 663,862 - - Costs recognised as an expense in the current year (557,975) (615,994) - - Transferred to inventories (2,755) (7,269) - -

At 31 October 860,048 715,653 - -

Property development costs included above at a carrying amount of RM583,577,000 (2006 : RM306,997,000), have been charged to banks to partially secure the long term loans, revolving credit and bank overdrafts referred to in notes 24, 30 and 31 below.

Included under development and construction costs is interest expense of RM15,965,000 (2006: RM18,299,000) incurred during the financial year.

122 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

15. GROSS AMOUNT DUE FROM/TO CUSTOMERS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Aggregate contract expenditure incurred to-date 725,139 599,499 408,403 542,757 Attributable profit recognised to-date 68,697 60,199 19,900 27,339

793,836 659,698 428,303 570,096 Progress billings (785,535) (633,953) (424,527) (563,151)

8,301 25,745 3,776 6,945

Gross amount due from customers 8,301 25,745 4,203 7,538 Gross amount due to customers - - (427) (593)

8,301 25,745 3,776 6,945

Progress billings comprise: Progress billings - received 728,328 571,261 410,190 540,618 - receivable 36,563 39,021 3,028 3,653 Retention sums 20,644 23,671 11,309 18,880

785,535 633,953 424,527 563,151 Advances received for contract work not yet performed by the Group included under other payables and accruals (see note 29) 1,149 10,000 - -

Contract expenditure include the following expenses incurred during the financial year: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Depreciation 535 850 - - Hire purchase interest - 2 - - Hire of machinery 3,345 3,866 - - Rental expense 21 24 - -

S P SETIA BHD 123 Notes to the Financial Statements for the year ended 31 October 2007

16. INVENTORIES

2007 2006 At net At net realisable realisable At cost value Total At cost value Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Stock of completed properties 15,885 525 16,410 22,341 550 22,891 Raw materials 2,773 - 2,773 2,286 - 2,286 Work-in-progress 14 - 14 79 - 79 Finished goods 33 - 33 46 - 46 Consumable goods 90 - 90 121 - 121

18,795 525 19,320 24,873 550 25,423

17. ACCRUED BILLINGS/PROGRESS BILLINGS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Revenue recognised in income statement to-date 2,556,949 2,548,003 - - Progress billings to-date (2,564,028) (2,552,571) - -

(7,079) (4,568) - -

Accrued billings 55,725 24,448 - - Progress billings (62,804) (29,016) - -

(7,079) (4,568) - -

18. TRADE RECEIVABLES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Gross progress billings receivable 151,721 179,733 502 502 Gross retention sums receivable 50,706 56,602 891 891 Other gross receivables 10,909 13,630 - -

Total gross receivables 213,336 249,965 1,393 1,393 Allowance for doubtful debts (3,353) (3,299) (1,393) (1,393)

209,983 246,666 - -

The progress billings are due within 14 to 90 days as stipulated in construction contracts and sale and purchase agreements. The retention sums are due upon the expiry of the defect liability period stated in the respective construction contracts or sale and purchase agreements. The defect liability periods range from 6 to 24 months.

Other receivables are collectible within 14 to 90 days.

124 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

19. AMOUNTS OWING BY JOINTLY CONTROLLED ENTITIES

The amounts owing by jointly controlled entities included under non-current assets represent unsecured advances not expected to be recalled within the next 12 months and are analysed as follows: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Bearing interest at 8.75% per annum 504 - 1,679 - Interest free - - 28,700 -

504 - 30,379 -

20. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Refundable deposit and part purchase consideration paid for the acquisition of development land in - Mukim of Pulai, District of Johor Bahru 22,729 - - - - Mukim of Dengkil, District of Sepang 19,060 - - - - Mukim 12, District of Barat Daya - 119,932 - - - Others 603 - - - Development expenditure 13,315 7,068 - - Refundable deposit received for Agreement to Lease placed with a stakeholder (see note 29) 3,510 3,510 - - Compensation paid to squatters [see note 52(f)] 3,600 - - - Refundable deposit placed with a stakeholder for impending acquisition of development land 3,882 - - - Dividend from unquoted preference shares in an associated company 3,980 264 3,980 264 Interest receivables - 4 - - Other sundry receivables, deposits and prepayments 22,852 18,096 10,382 6,059

93,531 148,874 14,362 6,323 Allowance for doubtful debts (1,264) (957) - -

92,267 147,917 14,362 6,323

The refundable deposit of RM22,729,000 is paid for the acquisition of 5 pieces of freehold land in Mukim of Pulai, District of Johor Bahru, for a total cash consideration of RM227,290,000 pursuant to a conditional Sale and Purchase Agreement entered into by Kesas Kenangan Sdn Bhd, a wholly-owned subsidiary company, on 10 January 2007. The acquisition has not been completed as at 31 October 2007. The balance of the purchase consideration is disclosed as a capital commitment in note 47 below.

S P SETIA BHD 125 Notes to the Financial Statements for the year ended 31 October 2007

20. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS (CONT’D)

The refundable deposit of RM19,060,000 is paid for the acquisition of 3 pieces of freehold land including basic infrastructure in Mukim of Dengkil, District of Sepang, for a total cash consideration of RM169,300,000 pursuant to a conditional Sale and Purchase Agreement entered into by Setia Eco Villa Sdn Bhd (formerly known as Optagreen Sdn Bhd), a wholly-owned subsidiary company, on 25 July 2007. The acquisition has not been completed as at 31 October 2007 as certain conditions precedent remain unfulfilled. The balance of the purchase consideration is disclosed as a capital commitment in note 47 below.

The refundable deposit and part purchase consideration of RM119,932,000 was in connection with the acquisition of a piece of development land in Mukim 12, District of Barat Daya, costing RM140,280,000. These amounts together with the development expenditure of RM7,068,000 have been reclassified to property, plant and equipment, investment properties, land held for property development and property development cost, respectively, upon the completion of acquisition during 2007.

The development expenditure is incurred in respect of the proposed development on the land under acquisition referred to the above. Included in development expenditure is interest expense incurred during the year of RM Nil (2006 : RM338,000).

21. DEPOSITS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Deposits - with licensed banks 151,339 126,516 109,068 58,967 - with other licensed financial institutions 10,945 77,635 - 61,827

162,284 204,151 109,068 120,794

Included in fixed deposits with licensed banks of the Group are amounts of RM97,000 (2006 : RM94,000) which have been pledged to banks as security for bank guarantee facilities granted to subsidiary companies.

Included in fixed deposits with licensed banks are funds maintained under sinking fund accounts and escrow accounts amounting to RM3,000,000 (2006 : RM7,900,000) which were opened in accordance with terms and conditions set out in the term loan agreements referred to in note 24 below.

The effective interest rates range from 2.50% to 3.58% (2006 : 2.20% to 3.60%). All deposits have maturities of less than a year.

126 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

22. CASH AND BANK BALANCES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Cash and bank balances include monies in:

Housing Development Accounts 102,929 60,882 - - Sinking Funds 1,006 2,004 - - Escrow accounts 129 87 - -

Withdrawals from the Housing Development Accounts are restricted in accordance with the Housing Development (Housing Development Account) Regulations 1991.

Funds maintained in the Housing Development Accounts earn interest ranging from 1.50% to 2.40% (2006 : 1.45% to 2.40%).

The sinking fund accounts and escrow accounts were opened in accordance with the terms and conditions set out in the term loan agreements referred to in note 24 below.

23. SHARE CAPITAL 2007 2006 Number Number of shares of shares ’000 RM’000 ’000 RM’000

Authorised: Ordinary shares of RM0.75 each 1,600,000 1,200,000 1,600,000 1,200,000

Issued and fully paid: Ordinary shares of RM0.75 each At beginning of the year 664,685 498,513 654,312 490,734 Shares issued pursuant to ESOS 7,920 5,941 10,373 7,779

At end of the year 672,605 504,454 664,685 498,513

The main features of the ESOS as set out in the Bye-Laws are as follows:

(a) The maximum number of new shares which may be made available under the ESOS shall not be more than ten per cent (10%) of the issued and paid-up share capital of the Company at the point in time when an Offer is made.

(b) To qualify for participation in the ESOS, any employee or full time Executive Director of the Company and its subsidiary companies (save for subsidiary companies which are dormant) as at the Date of Allocation must:-

(i) be of at least eighteen (18) years of age on the Date of Offer;

(ii) be employed by any company comprised in the Group (save for subsidiary companies which are dormant); and

(iii) be under such categories and of such criteria that the Option Committee may from time to time decide.

S P SETIA BHD 127 Notes to the Financial Statements for the year ended 31 October 2007

23. SHARE CAPITAL (CONT’D)

(c) Subject to any adjustments which may be made under (h) below, the aggregate number of shares comprised in the Options to be offered to a selected employee in accordance with the ESOS shall be determined at the discretion of the Option Committee after taking into consideration the selected employee’s performance, position, seniority and the number of years in service, subject to the following:

(i) that the number of Options made available under the ESOS shall not exceed the number stipulated in (a) above;

(ii) that not more than fifty percent (50%) of the shares available under the ESOS at the point in time when an Offer is made shall be allocated, in aggregate, to directors and senior management; and

(iii) that not more than ten percent (10%) of the shares available under the ESOS at the point in time when an Offer is made shall be granted to any individual selected employee who, either singly or collectively through persons connected with him, holds twenty percent (20%) or more in the issued and paid-up share capital of the Company.

(d) The price at which the Grantee is entitled to subscribe for each new share shall be based on the weighted average market price of the shares as shown in the daily official list issued by the Bursa Malaysia Securities Berhad (“Bursa Malaysia”) for the five (5) Market Days immediately preceding the Date of Offer subject to a discount of not more than ten per cent (10%), or at the par value of the shares, whichever is higher.

(e) The Options shall not carry any rights to vote at any general meeting of the Company.

(f) A Grantee shall not be entitled to any dividends, rights or other entitlement on his unexercised Options.

(g) The new shares to be allotted and issued upon any exercise of the Options will upon such allotment and issuance, rank pari passu in all respects with the then issued and fully paid-up shares except that the shares so issued will not be entitled to any dividends, rights, allotments or other distributions, the entitlement date (namely the date as at the close of business on which shareholders must be registered in order to be entitled to any dividends, rights, allotments or other distributions) of which is prior to the date of allotment of the new shares and will be subject to all the provisions of the Articles relating to transfer, transmission and otherwise of the shares.

(h) The number of shares under option or the exercise price or both, so far as the option remains unexercised, may be adjusted following any variation in the issued share capital of the Company by way of capitalisation of profits or reserves, rights issue, consolidation of capital, sub-division or reduction of the Company’s share capital.

(i) The ESOS shall be in force for a period of five (5) years from 26 January 2002 subject however to any extension or renewal for a further period of five (5) years commencing from the date after the date of expiration of the original five (5) years as may be approved by:

(i) shareholders of the Company in a general meeting; and

(ii) any relevant regulatory authority whose approval is necessary.

The ESOS expired on 25 January 2007.

128 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

23. SHARE CAPITAL (CONT’D)

The number and weighted average exercise price of, and movements in share options during the financial year are as follows: 2007 No. of unissued shares of RM0.75 each under option Exercise At At Exercisable Date option granted Date of expiry price 1.11.2006 Exercised Lapsed 31.10.2007 at RM 31.10.2007

28 January 2002* 25 January 2007 2.07 739,793 729,675 10,118 - - 15 October 2002* 25 January 2007 1.78 35,300 35,300 - - - 16 May 2003* 25 January 2007 1.74 16,240 16,240 - - - 17 September 2003* 25 January 2007 2.81 239,880 232,880 7,000 - - 18 February 2004* 25 January 2007 3.23 476,731 454,961 21,770 - - 23 September 2004* 25 January 2007 3.35 924,057 915,004 9,053 - - 6 April 2005* 25 January 2007 3.42 976,530 976,446 84 - - 7 October 2005* 25 January 2007 3.47 1,683,678 1,680,084 3,594 - - 23 March 2006 25 January 2007 3.30 707,200 702,700 4,500 - - 5 September 2006 25 January 2007 3.41 2,177,600 2,177,519 81 - - 7,977,009 7,920,809 56,200 - - Weighted average exercise price (RM) 3.24 3.25 3.01 - -

2006 No. of unissued shares of RM0.75 each under option Exercise At Exercisable Date option Date of expiry price 1.11.2005 Granted Exercised Lapsed 31.10.2006 at granted RM 31.10.2006 28 January 2002* 25 January 2007 2.07 6,321,533 - 5,581,297 443 739,793 739,793 28 February 2002* 25 January 2007 2.14 101,261 - 101,261 - - - 15 October 2002* 25 January 2007 1.78 450,700 - 415,400 - 35,300 35,300 16 May 2003* 25 January 2007 1.74 365,451 - 348,651 560 16,240 16,240 17 September 2003* 25 January 2007 2.81 1,081,640 - 839,080 2,680 239,880 239,880 18 February 2004* 25 January 2007 3.23 978,500 - 439,709 62,060 476,731 476,731 23 September 2004* 25 January 2007 3.35 1,558,950 - 592,633 42,260 924,057 924,057 6 April 2005* 25 January 2007 3.42 1,607,090 - 420,860 209,700 976,530 976,530 7 October 2005* 25 January 2007 3.47 2,334,900 - 468,393 182,829 1,683,678 1,683,678 23 March 2006 25 January 2007 3.30 - 1,273,500 473,900 92,400 707,200 707,200 5 September 2006 25 January 2007 3.41 - 2,897,200 691,600 28,000 2,177,600 2,177,600 14,800,025 4,170,700 10,372,784 620,932 7,977,009 7,977,009 Weighted average exercise price (RM) 2.69 3.38 2.49 3.39 3.24 3.24

* The recognition and measurement principle in FRS 2 have not been applied to these grants as they were granted and vested prior to the effective date of FRS 2.

During the financial year, share options exercised resulted in the issuance of 7,920,809 (2006 : 10,372,784) ordinary shares at an average price of RM3.25 (2006 : RM2.49) each. The related weighted average share price at the date of exercise was RM4.54 (2006: RM3.54) each.

S P SETIA BHD 129 Notes to the Financial Statements for the year ended 31 October 2007

23. SHARE CAPITAL (CONT’D)

The fair value of share options granted during 2006 was estimated as at the grant date using the binomial model, taking into account the terms and conditions upon which the options were granted. The fair value of the share option measured at grant date and the inputs to the model used are as follows:

23 March 2006 5 September 2006

Fair value of share options granted under ESOS (RM) 0.4869 0.4822

Weighted average share price (RM) 3.70 3.81 Weighted average exercise price (RM) 3.30 3.41 Expected volatility (%) 19.43 19.77 Expected option life (month) 10 5 Expected dividend yield (%) 3.20 0.00 Risk-free interest rate (based on Malaysian government bonds) (%) 3.32 3.49

The expected volatility reflects the assumption that the historical volatility is indicative of future trends, and which may differ from the actual volatility.

24. LONG TERM LOANS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Secured Total outstanding balances on long term loans 612,579 574,336 - - Repayments due within the next 12 months included under short term borrowings (see note 30) (79,831) (56,000) - -

Repayments due later than 12 months included under non-current liabilities 532,748 518,336 - -

The term loans are payable as follows: - not later than one year (included under current liabilities) 79,831 56,000 - - - later than one year but not later than five years (included under non-current liabilities) 527,442 385,825 - - - later than five years (included under non-current liabilities) 5,306 132,511 - -

532,748 518,336 - -

612,579 574,336 - -

The long term loans are secured by various fixed charges and deeds of assignment over various lands belonging to the Group as indicated in notes 3, 4, 5 and 14 above, sinking funds and escrow accounts as indicated in notes 21 and 22 above.

130 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

24. LONG TERM LOANS (CONT’D)

The long term loans are analysed as follows: 2007 2006 RM’000 RM’000

Variable rate syndicated term loan at 1.25% (2006 : 1.25%) above the cost of funds of the lending banks, effectively, 5.25% to 5.31% (2006 : 5.17% to 5.50%) 25,000 45,000

Variable rate loans at 1.50% above the cost of funds of the lending banks, effectively, 5.30% (2006 : 5.38%) 109,895 91,652

Variable rate loans at 1.25% above the cost of funds of the lending banks, effectively, 5.10% to 5.15% (2006 : 5.13% to 5.25%) 363,884 408,584

Variable rate loans at 1.00% above the cost of funds of the lending banks, effectively, 4.71% to 4.95% (2006 : 5.00%) 106,100 29,100

Variable rate loan at 1.75% above the base lending rate of the lending bank, effectively, 8.50% 3,080 -

Variable rate loan at 2.00% above the base lending rate of the lending bank, effectively, 8.75% 4,620 -

612,579 574,336

25. OTHER LOANS

The other loans are from minority shareholders of certain subsidiary companies. These loans are unsecured and not repayable within the next 12 months. There are no pre-agreed arrangements pertaining to the payment of interest and no interest was charged for the year ended 31 October 2007 (2006 : RM Nil).

26. HIRE PURCHASE AND FINANCE LEASE LIABILITIES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Total future instalments payable 3,971 3,617 - - Unexpired term charges (305) (279) - -

Total outstanding principal 3,666 3,338 - -

Future instalments payable - not later than one year 1,455 1,545 - - - later than one year but not later than five years 2,516 2,072 - -

Total future instalments payable 3,971 3,617 - -

Outstanding principal - not later than one year (included under current liabilities) 1,301 1,390 - - - later than one year but not later than five years 2,365 1,948 - -

Total outstanding principal 3,666 3,338 - -

The effective interest rates of the hire purchase liabilities are between 3.40% and 8.47% (2006 : 4.61% and 8.47%).

S P SETIA BHD 131 Notes to the Financial Statements for the year ended 31 October 2007

27. DEFERRED TAX LIABILITIES

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

At 1 November 2,214 1,381 - - (Reversal)/Originating during the year (104) 150 - - Arising from the acquisition of the remaining shares in Ambleside Sdn Bhd - 683 - - Arising from the acquisition of jointly controlled entities 527 - - -

At 31 October 2,637 2,214 - -

The deferred tax liabilities on temporary differences recognised in the financial statements were as follows:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Tax effects of - excess of capital allowances over accumulated depreciation on property, plant and equipment 2,846 2,586 - - - unpaid qualifying expenditure of hire purchase and finance lease liabilities (66) (78) - - - allowance for doubtful debts (143) (160) - - - other temporary differences - (134) - -

2,637 2,214 - -

28. TRADE PAYABLES

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Sub-contractors’ claims 123,193 115,292 153 1,417 Retention sums 95,471 99,491 11,776 22,480 Others 9,605 8,447 148 198

228,269 223,230 12,077 24,095

The normal credit terms extended by sub-contractors and suppliers range from 30 to 90 days. The retention sums are repayable upon the expiry of the defect liability period of 12 to 24 months.

Other trade payables are required to be settled within 30 to 60 days.

132 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

29. OTHER PAYABLES AND ACCRUALS

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Unsecured advances 12,493 8,774 - - Interest accrued 961 362 - - Rebates payable to house purchasers - 11,265 - - Contract advances received (see note 15) 1,149 10,000 - - Deposits received - from disposal of development lands 5,619 131 - - - from disposal of investment property - 21 - - - from Agreement to Lease (see note 20) 3,510 3,510 - - - from others 2,289 1,325 6 6 Unpaid consideration for property, plant and equipment acquired (see note 40) 325 929 - 32 Other sundry payables and accruals 40,166 31,236 3,588 1,894

66,512 67,553 3,594 1,932

The unsecured advances are from a minority shareholder of certain subsidiary companies and a joint venture partner. These advances are interest free and payable on demand.

The refundable deposit for the Agreement to Lease was received pursuant to an Agreement to Lease entered into by Bandar Setia Alam Sdn Bhd, a wholly-owned subsidiary company, on 30 May 2006.

30. SHORT TERM BORROWINGS

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Secured: Current portion of long term loans (see note 24) 79,831 56,000 - - Revolving credit 30,000 - - -

Unsecured: Revolving credit 9,000 6,000 - -

118,831 62,000 - -

The secured revolving credit of the Group is secured by fixed charges over various land belonging to the Group as indicated in notes 3, 4, 5 and 14 above.

The revolving credit bears interest at 0.75% to 1.25% above the lender banks’ cost of funds. The effective interest rates are 4.49% to 5.10% (2006 : 4.63%).

S P SETIA BHD 133 Notes to the Financial Statements for the year ended 31 October 2007

31. BANK OVERDRAFTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Secured 2,846 - - -

Unsecured 170 - - -

3,016 - - -

The secured bank overdraft of the Group is secured by fixed charges over various land belonging to the Group as indicated in notes 3, 4, 5 and 14 above.

The bank overdrafts bear interests at 1.25% above the lender banks’ cost of funds. The effective interest rates are 5.10% to 5.48%.

32. REVENUE Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Sale of development properties 927,149 929,221 - - Contract revenue 171,706 150,807 11,788 125,352 Sale of other goods and services 54,948 74,613 - -

1,153,803 1,154,641 11,788 125,352

33. COST OF SALES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Cost of properties sold 573,666 632,672 - - Contract cost recognised as expense 159,353 127,896 12,995 119,801 Cost of other goods and services sold 43,788 55,991 - -

776,807 816,559 12,995 119,801

34. PROFIT/(LOSS) FROM OPERATIONS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Profit/(Loss) from operations is stated after charging:

Auditors’ remuneration - current year 504 477 65 65 - underprovision in prior years 20 - - 5

134 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

34. PROFIT/(LOSS) FROM OPERATIONS (CONT’D) Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Bad and doubtful debts 734 213 - - Depreciation - property, plant and equipment 6,804 7,548 155 174 - investment properties 124 16 2 2 Amortisation of prepaid lease payments 9 10 9 10 Direct operating expenses on - revenue generating investment properties 125 18 6 6 - non-revenue generating investment properties 1,707 1,630 6 7 Directors’ remuneration - Company’s directors - emoluments other than fees 14,957 11,897 14,957 11,897 - subsidiaries’ directors - fees 27 28 - - - other emoluments 4,896 4,695 1,450 1,196 Goodwill on acquisition written off 3 2 - - Property, plant and equipment written off 3 4 - - Hiring charges 60 115 - - Rental of - office equipment 75 2 69 - - premises 634 627 236 275 - motor vehicles 10 1 - 1 Realised foreign exchange loss 4 - - - Preliminary expenses 15 - - - Waiver of liquidated ascertained damages on late completion receivable from contractor 350 - - -

and crediting:

Allowance for doubtful debts no longer required 65 40 - - Interest income 5,184 3,155 82 94 Gain on disposal of property, plant and equipment 743 613 166 107 Realised foreign exchange gain - 2 - - Rental received from operating leases other than those relating to investing properties 495 563 7 7 Liquidated damages on late completion receivable from contractor 614 - - -

Directors’ remuneration does not include the estimated monetary value of benefits-in-kind as follows:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Company’s directors 2,520 2,248 2,520 2,013 Subsidiaries’ directors 137 198 - -

S P SETIA BHD 135 Notes to the Financial Statements for the year ended 31 October 2007

35. NET PROFIT FROM INVESTING ACTIVITIES - OTHERS

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Gross dividends from - subsidiary companies - - 1,011,000 199,608 - investments quoted in Malaysia - 179 - - Interest income from - subsidiary companies - - 11,663 10,794 - jointly controlled entities 22 - 74 - - deposits 6,530 7,394 3,974 4,736 Rental income from investment properties 118 45 4 15 Gain on disposal of quoted investments 10,864 - - - Discount on acquisition of additional shares in an existing subsidiary company 260 - - - Diminution in value of quoted investments written back - 2,604 - - Allowance for doubtful debts no longer required - - 201 - Impairment in value of an investment in a subsidiary company written back - - 4,400 - Gain on disposal of an investment property 43 - - -

17,837 10,222 1,031,316 215,153 Impairment in value of investment in subsidiary companies - - (178) (1) Diminution in value of quoted investments (198) - - - Bad and doubtful debts (3) (3) (1,855) (3,026)

17,636 10,219 1,029,283 212,126

36. FINANCE COSTS

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Interest paid and payable on: Bank overdrafts 174 87 53 16 Revolving credits 900 1,404 900 1,404 Bankers’ acceptance - 2 - - Hire purchase and finance lease 195 258 - - Others 4 3 - -

1,273 1,754 953 1,420

136 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

37. TAXATION

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Malaysian taxation based on results for the year - current 73,577 82,969 266,500 57,033 - deferred (11,009) 188 (72) (30)

62,568 83,157 266,428 57,003

Under/(Over)provision in prior years - current 16,232 (1,898) (1,182) (370) - deferred (10,377) 459 (579) (2)

68,423 81,718 264,667 56,631

The statutory tax rate applicable to the Company was reduced from 28% in 2006 to 27% in 2007.

The provision for taxation differs from the amount of taxation determined by applying the applicable statutory tax rate of the profit before tax as a result of the following differences:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Accounting profit 304,136 289,168 996,242 198,841

Taxation at applicable tax rates 82,153 80,798 268,985 55,675 Tax effects arising from non-deductible expenses 4,790 4,482 1,856 2,611 Tax effects arising from non-taxable income (6,449) (2,177) (4,485) (1,302) Unavailable group relief 11 8 - - Originating of deferred tax assets not recognised 550 116 - - Effect of income subject to lower tax rate (19,393) - - - Effect on reduction in future tax rate 906 (70) 72 19 Under/(Over)provision in prior years 5,855 (1,439) (1,761) (372)

68,423 81,718 264,667 56,631

Tax savings during the financial year arising from: Utilisation of current year tax losses 7,318 2,712 7,303 2,678

Utilisation of previously unrecognised tax losses 102 639 - -

Subject to agreement with the Inland Revenue Board, based on estimated tax credits available and the prevailing tax rate applicable to dividends and the balance on the tax exempt account, the entire unappropriated profit of the Company is available for distribution by way of dividends.

S P SETIA BHD 137 Notes to the Financial Statements for the year ended 31 October 2007

38. EARNINGS PER SHARE

Basic earnings per share

The basic earnings per share has been calculated by dividing the Group’s profit for the year attributable to shareholders of the Company of RM260,070,000 (2006: RM238,234,000) by the weighted average number of shares in issue of 671,653,000 (2006 : 660,720,000). The weighted average number of shares in issue is calculated as follows: 2007 2006 ’000 ’000 Number of ordinary shares at beginning of the year 664,685 654,312 Effect of shares issued pursuant to the ESOS 6,968 6,408

Weighted average number of ordinary shares 671,653 660,720

Diluted earnings per share

The diluted earnings per share has been calculated by dividing the Group’s profit for the year attributable to shareholders of the Company of RM260,070,000 (2006 : RM238,234,000) by the weighted average number of ordinary shares that would have been in issue upon full exercise of the remaining options under the ESOS, adjusted for the number of such shares that would have been issued at fair value, calculated as follows: 2007 2006 ’000 ’000 Weighted average number of ordinary shares calculated above 671,653 660,720 Weighted average number of unissued shares under ESOS - based on exercise price 714 9,407 - based on average fair value (479) (7,942)

Weighted average number of ordinary shares that would have been in issue 671,888 662,185

39. DIVIDENDS 2007 2006 RM’000 RM’000 In respect of the year ended 31 October 2005 Final dividend of 19 sen per ordinary share of RM0.75 each less 28% income tax - 90,359

In respect of the year ended 31 October 2006 Interim dividend of 10 sen per ordinary share of RM0.75 each less 28% income tax - 47,681 Final dividend of 20 sen per ordinary share of RM0.75 each less 27% income tax 98,201 -

In respect of the year ended 31 October 2007 Interim dividend of 10 sen per ordinary share of RM0.75 each less 27% income tax 49,100 -

147,301 138,040

Subsequent to 31 October 2007, the directors recommended a final dividend of 15 sen per ordinary share of RM0.75 each less 26% income tax amounting to RM111,988,767 in respect of the financial year ended 31 October 2007.

138 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

40. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Aggregate cost of property, plant and equipment acquired 28,908 15,796 167 152 Financed via hire purchase and finance lease (1,993) (650) - - Unpaid balance included under other payables and accruals (see note 29) (325) (929) - (32) Deposit paid in previous year (8,330) (100) - - Cash paid in respect of previous year acquisition 929 - 32 -

Cash paid during the financial year 19,189 14,117 199 120

41. PURCHASE OF INVESTMENT PROPERTIES

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Aggregate cost of investment properties acquired 33,762 9,865 - - Deposit paid in prior year (21,462) - - -

Cash paid during the financial year 12,300 9,865 - -

42. ACQUISITION OF SHARES IN SUBSIDIARY COMPANIES

Details of the new subsidiary companies acquired during the financial year are as follows:

Name of subsidiary Purchase Group’s effective Effective companies acquired consideration interest acquisition date RM’000 %

2007 Setia Eco Villa Sdn Bhd # 100 17 July 2007 (formerly known as Optagreen Sdn Bhd) Tenaga Raya Sdn Bhd 548 25.5+ 4 July 2007 Setia International Limited ^ 100 11 June 2007 Aeropod Sdn Bhd * 70 30 March 2007

2006 Kesas Kenangan Sdn Bhd # 100 25 September 2006 Ambleside Sdn Bhd 2,000 33.3+ 14 August 2006

# Represent RM2 ^ Represent RM34 * Represent RM70 + Represents additional equity interest acquired in existing subsidiary companies

S P SETIA BHD 139 Notes to the Financial Statements for the year ended 31 October 2007

42. ACQUISITION OF SHARES IN SUBSIDIARY COMPANIES (CONT’D)

Details of the assets, liabilities and net cash outflow arising from the acquisition of new subsidiary companies were as follows:

Carrying/Fair value 2007 2006 RM’000 RM’000

Cash and cash equivalents -** -* Other payables and accruals - (2)

Net asset/(liability) acquired -** (2) Goodwill on acquisition written off - 2

Total purchase consideration -** -* Less: Cash and cash equivalents acquired -** -*

Net cash outflow on acquisition of new subsidiary companies - -

* Represent RM2 ** Represent RM106

The revenue and net loss for the year in which the acquisition took place and their post acquisition contribution included in the consolidated income statement were as follows:

2007 2006 RM’000 RM’000

Revenue During the financial year - - Pre-acquisition --

Post-acquisition --

Net loss for the year During the financial year (20) (2) Pre-acquisition -1

Post-acquisition (20) (1)

The net assets of the acquired new subsidiary companies included in the consolidated balance sheet at the end of the financial year were as follows:

2007 2006 RM’000 RM’000

Non-current assets 9- Current assets 19,445 - Current liabilities (5) - Non-current liabilities (19,469) (3)

Group’s share of net liabilities (20) (3)

140 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

42. ACQUISITION OF SHARES IN SUBSIDIARY COMPANIES (CONT’D) The minority interest acquired and the net cash outflow arising from the acquisition of additional interest in the existing subsidiary companies were as follows:

2007 2006 RM’000 RM’000

Minority interest acquired 808 54 Fair value adjustment on land held for property development - 2,629 Deferred tax liability - (683) Discount on acquisition (260) -

Net cash outflow on acquisition 548 2,000

43. EMPLOYEE INFORMATION Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Employee costs 77,945 66,243 20,547 16,506

Included in the employee costs are:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

EPF contributions 7,311 6,021 2,016 1,545 Fair value of options granted under ESOS - 2,010 - 429

44. RELATED PARTY DISCLOSURES (a) Significant related party transactions during the financial year are as follows:

------Transaction value ------Balance outstanding ------Group Company Group Company 2007 2006 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Transactions with subsidiary companies

Construction services rendered to subsidiary companies - - 11,533 119,836 - - 12,944 21,140

Interest received and receivable - - 11,663 10,794 - - 14,916 11,489

Management fee received and receivable - - 145 140 - - - -

Disposal of a subsidiary company - - * - - - - -

S P SETIA BHD 141 Notes to the Financial Statements for the year ended 31 October 2007

44. RELATED PARTY DISCLOSURES (CONT’D)

(a) Significant related party transactions during the financial year are as follows: (Cont’d)

------Transaction value ------Balance outstanding ------Group Company Group Company 2007 2006 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Administrative, accounting and management fees paid and payable - - 36 36 - - - -

Maintenance fee paid and payable - - - 4 - - - -

Construction services rendered by subsidiary companies - - - 798 - - 3,775 5,223

Security management fee paid and payable - - 1,620 1,577 - - - -

* Represent RM2

Transaction with jointly controlled entity

Interest receivable 22 - 74 - 22 - 74 -

Transactions with associated companies

Construction services rendered 40,745 62,117 - - 22,267 18,804 - - Security services rendered 415 247 - - 49 78 - - Project management and administrative fee received and receivable 5,880 6,376 - - 452 504 - - Rental received and receivable 357 416 ------Marketing expenses charged 259 23 - - 152 5 - - Disposal of a motor vehicle - 98 ------Sale of development property from an associated company to Khor Chap Jen, a director of the Company - 1,406 ------Sale of development property from an associated company to Gateway Attempt Sdn Bhd, a company in which Dato’ Leong Kok Wah, a director of the Company, has financial interest - 1,638 - - 19 1 - -

142 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

44. RELATED PARTY DISCLOSURES (CONT’D)

(a) Significant related party transactions during the financial year are as follows: (Cont’d)

------Transaction value ------Balance outstanding ------Group Company Group Company 2007 2006 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Transactions with associated companies

Sale of development properties from an associated company to directors of subsidiary companies: - Kow Choong Ming 1,140 - - - 1 - - - - Koe Peng Kang - 904 - - - 15 - -

Transactions with directors of the Company, close family members of the directors and companies, firms in which they have interests

------Transaction value ------Balance outstanding ------Group Company Group Company 2007 2006 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Sale of development properties to - Dato’ Voon Tin Yow 629 ------Khor Chap Jen - 629 ------Ng Soon Lai @ Ng Siek Chuan 2,056 ------Chang Khim Wah 599 ------

Sale of development properties to companies in which Tan Sri Dato’ Sri Liew Kee Sin has financial interest - Jernih Padu Sdn Bhd 1,464 - - - 146 - - - - Bima Murni Sdn Bhd 1,454 - - - 145 - - - - Gito Jaya Sdn Bhd 4,670 ------Citra Budaya Sdn Bhd 4,487 ------

Rental paid to Dato’ Voon Tin Yow 30 30 30 30 - - - -

Rental paid to Alsirat Sdn Bhd, a company in which Tan Sri Abdul Rashid bin Abdul Manaf has financial interest 72 72 ------

Legal fees paid to Shahrizat Rashid & Lee, a firm in which Tan Sri Dato’ Zaki bin Tun Azmi was a consultant* 86 1,473 - 111 - - - -

S P SETIA BHD 143 Notes to the Financial Statements for the year ended 31 October 2007

44. RELATED PARTY DISCLOSURES (CONT’D) (a) Significant related party transactions during the financial year are as follows: (Cont’d) ------Transaction value ------Balance outstanding ------Group Company Group Company 2007 2006 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Security services rendered to Tan Sri Abdul Rashid bin Abdul Manaf 11 - - - 11 - - -

Disposal of a motor vehicle to Dato’ Voon Tin Yow 150 - 150 - - - - -

* Tan Sri Dato’ Zaki bin Tun Azmi ceased as consultant of Sharizat Rashid & Lee and resigned as a director of the Company on 4 September 2007.

Transactions with directors of subsidiary companies ------Transaction value ------Balance outstanding ------Group Company Group Company 2007 2006 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Sale of development properties to: - Wong Sheue Yann 557 - - - 60 - - - - Kow Choong Ming 566 ------Sundarajoo a/l Somu 1,225 ------Thum Kok Mun 729 ------Koe Peng Kang 1,156 - - - 60 - - - - Norhayati binti Subali 2,154 ------Puan Sri Nik Sazlina binti Mohd Zain 2,101 ------Disposal of a motor vehicle to Thum Kok Mun 36 ------

The balances outstanding are expected to be settled within the normal credit period. None of the balances is secured.

(b) Key management personnel compensation Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Directors Remuneration 13,558 10,825 13,558 10,825 Estimated monetary value of benefits-in-kind 2,520 2,248 2,520 2,013

Total short-term employee benefits 16,078 13,073 16,078 12,838

144 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

44. RELATED PARTY DISCLOSURES (CONT’D)

(b) Key management personnel compensation (Cont’d)

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Post-employment benefits - EPF 1,399 1,072 1,399 1,072 Fair value of share options - - - -

17,477 14,145 17,477 13,910

Other key management personnel Fees 27 28 - - Salary, allowances and bonuses 4,374 4,227 1,295 1,069 Estimated monetary value of benefits-in-kind 137 198 - -

Total short-term employee benefits 4,538 4,453 1,295 1,069 Post-employment benefits - EPF 522 468 155 127 Fair value of share options - - - -

5,060 4,921 1,450 1,196

Total compensation 22,537 19,066 18,927 15,106

Movements in share options granted under the ESOS to key management personnel during the financial year are as follows: 2007 2006

Directors At beginning of the year 101,233 419,888 Granted -- Exercised (101,233) (318,655) Lapsed --

At end of the year - 101,233

Other key management personnel At beginning of the year 412,750 1,316,340 Granted -- Exercised (412,544) (903,590) Lapsed (206) -

At end of the year - 412,750

S P SETIA BHD 145 Notes to the Financial Statements for the year ended 31 October 2007

45. COMMITMENTS - JOINT VENTURE WITH PUTRAJAYA HOLDINGS SDN BHD (“Putrajaya Holdings”)

On 15 May 1997, the Company entered into a joint venture agreement with Putrajaya Holdings to jointly develop certain residential and commercial properties and construct certain public infrastructure within the Federal Administrative Centre at Putrajaya.

In accordance with the joint venture agreement, the joint development has been carried out by SPJ, in which the Company has a 50% equity interest.

Under the joint venture agreement, as varied by the supplemental agreement dated 18 December 2002, the Company shall procure the approval of the Securities Commission for a reverse take over by SPJ of a public company listed on the Bursa Malaysia by 31 March 2004, save and except where such reverse take over effort is affected by changes in listing rules imposed by the Securities Commission or other relevant regulatory authorities, or changes in legislation or policies imposed by the Government or by Putrajaya Holdings affecting the status of SPJ.

On 16 January 2004, Putrajaya Holdings agreed to extend the deadline for the procurement of the Securities Commission’s approval for the reverse take over from 31 March 2004 to 31 March 2005. On 15 March 2005, Putrajaya Holdings agreed to further extend the deadline from 31 March 2005 to 31 March 2006.

For the purpose of discharging its obligations under the joint venture agreement with Putrajaya Holdings, the Company entered into a Restructuring Agreement on 24 April 2004 with Kramat Tin Dredging Berhad (“Kramat”), a company listed on the Main Board of Bursa Malaysia, Prudent Location Sdn Bhd (“Prudent”), Putrajaya Holdings, Abad Kilat Sdn Bhd and Kelana Ventures Sdn Bhd for, inter-alia, the proposed acquisition by Prudent of the entire issued and paid up share capital of SPJ and the proposed transfer of Kramat’s listing status to Prudent.

The proposals under the Restructuring Agreement were approved by the Securities Commission on 9 June 2005 subject to certain terms and conditions. The proposals under the Restructuring Agreement, as approved by the Securities Commission, are currently being implemented by the parties. On 5 November 2007, the Securities Commission has approved an extension of the date of implementation to 30 April 2008.

46. OPERATING LEASE COMMITMENTS

The Group as lessee

The Group leases premises from various parties under operating leases. These leases are cancellable and typically run for a period ranging from 1 to 3 years, with the option to renew the leases after the expiry dates. None of the leases includes contingent rentals. There are no restrictions placed upon the Group by entering into these leases.

A jointly controlled entity of the Group leases an office under non-cancellable operating lease agreement. The Group’s share of the non-cancellable operating lease rentals payable are as follows:

2007 2006 RM’000 RM’000

Not later than one year 118 - Later than one year but not later than 5 years 108 -

226 -

146 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

46. OPERATING LEASE COMMITMENTS (CONT’D)

The Group as lessor

The Group leases out its investment properties under cancellable operating leases. These leases typically run for a period of 1 to 3 years with the option to renew the leases after the expiry date. None of the leases include contingent rentals.

The Group has also entered into long term property leases (1 cancellable and 1 non-cancellable) on investment properties which are currently under construction.

47. OTHER COMMITMENTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Commitments to purchase development land in (see note 20) - Contracted - Mukim of Pulai, District of Johor Bahru 204,561 - - - - Mukim of Dengkil, District of Sepang 150,240 - - - - Mukim 12, District of Barat Daya - 20,348 - - - Others 21,451 - - - - Approved but not contracted 7,940 - - -

Contractual commitment to subscribe for preference shares in an existing jointly controlled entity - - 16,100 -

Contractual commitment for acquisition of property, plant and equipment 47,468 569 - -

431,660 20,917 16,100 -

Additionally, under the conditional Sale and Purchase Agreement for the acquisition of development land in Mukim Bukit Raja which was completed in 2003, the Group is also obliged to acquire a further 60 acres of adjoining land from the vendor for a total consideration of RM9,120,000 in the event that the relevant authority withdraws from the compulsory acquisition of the said adjoining land.

Subsequent to 31 October 2007, the said adjoining land was surrendered to the relevant authority and accordingly, the Group is no longer obliged to acquire the said adjoining land.

48. CONTINGENT LIABILITIES (unsecured) Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

Guarantees given to banks to secure banking facilities granted to subsidiary companies - - 948,641 802,984

Guarantees given to banks for performance bonds granted to subsidiary companies - - 16,640 12,678

S P SETIA BHD 147 Notes to the Financial Statements for the year ended 31 October 2007

48. CONTINGENT LIABILITIES (unsecured) (CONT’D) Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Guarantees given to the suppliers of goods for credit terms granted to subsidiary companies - - 2,628 3,646

Guarantees given to banks to secure banking facilities granted to jointly controlled entities 15,000 - 92,000 -

15,000 - 1,059,909 819,308

Additionally, the Company has given a guarantee to the holders of 131,250,000 preference shares issued on 13 October 2004 by BE-SSB, for the prompt payment of dividends on the preference shares. The guarantee is enforceable after the third anniversary of the date of issue of the preference shares in respect of dividends payable for the first 3 years; after the sixth anniversary in respect of dividends payable for the fourth, fifth and sixth year; and after the seventh anniversary in respect of the dividend payable for the seventh year.

The accrued dividend, net of tax, subject to the guarantee up to 31 October 2007 amounted to RM7,723,728 (2006 : RM368,938).

49. FINANCIAL INSTRUMENTS

(i) Credit risk

At balance sheet date, the Group and the Company did not have any significant concentration of credit risk that may arise from exposure to a single debtor or group of debtors.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

(ii) Fair value

The carrying amounts of the financial assets and liabilities of the Group and of the Company at the balance sheet date approximated their fair values except for the following: 2007 Group Company Carrying Fair Carrying Fair amount value amount value RM’000 RM’000 RM’000 RM’000 Non-current assets

Amounts owing by subsidiary companies - - 1,115,565 * Amounts owing by associated companies 369 * 296 *

Other investments

Unquoted shares 337 ** - -

Non-current liabilities

Other loans 1,446 * - -

Amounts owing to subsidiary companies - - 64,271 *

148 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

49. FINANCIAL INSTRUMENTS (CONT’D) (ii) Fair value (Cont’d) 2006 Group Company Carrying Fair Carrying Fair amount value amount value RM’000 RM’000 RM’000 RM’000 Non-current assets

Amounts owing by subsidiary companies - - 594,537 * Amounts owing by associated companies 400 * 327 *

Other investments

Shares quoted in Malaysia 16,827 19,350 - - Irredeemable convertible unsecured loan stocks quoted in Malaysia 557 1,389 - - Warrants quoted in Malaysia 3 846 - - Unquoted shares 337 ** - -

Non-current liabilities

Other loans 1,446 * - -

Amounts owing to subsidiary companies - - 77,261 *

Guarantees given

It is not practical to estimate the fair values of the guarantees referred to in note 48 due to the uncertainties of timing, costs and eventual outcome.

* It is not practical to estimate the fair values of these financial instruments due principally to the absence of fixed repayment terms. However, the Group and the Company do not anticipate the carrying amounts to be significantly different from the values that would eventually be received or settled.

** It is not practical to estimate the fair values of these financial instruments due to the lack of quoted market values and available observable market data. Such investments are valued at cost subject to review for impairment.

50. SEGMENTAL ANALYSIS Property development Construction Others Elimination Consolidated 2007 RM’000 RM’000 RM’000 RM’000 RM’000 REVENUE

External sales 927,149 171,706 54,948 - 1,153,803 Inter-segment sales 30,695 16,291 13,978 (60,964) -

Total revenue 957,844 187,997 68,926 (60,964) 1,153,803

RESULTS

Segment results 270,485 7,311 4,891 - 282,687

S P SETIA BHD 149 Notes to the Financial Statements for the year ended 31 October 2007

50. SEGMENTAL ANALYSIS (CONT’D)

Property development Construction Others Elimination Consolidated 2007 RM’000 RM’000 RM’000 RM’000 RM’000

Net profit from investing activities - others 17,636 Share of associated companies’ profit and dividend on preference shares 21,398 8,044 (1) - 29,441 Finance costs (1,273)

Profit before taxation 328,491 Taxation (68,423)

Profit for the year 260,068

OTHER INFORMATION

Segment assets 2,303,682 123,160 265,170 - 2,692,012 Investment in associated companies 27,869 116,533 42 - 144,444 Current and deferred tax assets 45,576

Consolidated total assets 2,882,032

Segment liabilities 925,840 80,830 10,622 - 1,017,292 Current and deferred tax liabilities 23,365

Consolidated total liabilities 1,040,657

Capital expenditure 61,165 712 793 Amortisation and depreciation 5,788 966 718 Other non-cash items 18,714 8,479 10,502

Property development Construction Others Elimination Consolidated 2006 RM’000 RM’000 RM’000 RM’000 RM’000

REVENUE

External sales 929,221 150,807 74,613 - 1,154,641 Inter-segment sales 38,979 224,686 28,039 (291,704) -

Total revenue 968,200 375,493 102,652 (291,704) 1,154,641

RESULTS

Segment results 252,924 8,033 12,715 - 273,672

Net profit from investing activities - others 10,219 Share of associated companies’ profit and dividend on preference shares 30,174 7,641 (3) - 37,812 Finance costs (1,754)

Profit before taxation 319,949 Taxation (81,718)

Profit for the year 238,231

150 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

50. SEGMENTAL ANALYSIS (CONT’D) Property development Construction Others Elimination Consolidated 2006 RM’000 RM’000 RM’000 RM’000 RM’000 OTHER INFORMATION

Segment assets 1,883,170 194,465 325,760 - 2,403,395 Investment in associated companies 103,000 107,015 43 - 210,058 Current and deferred tax assets 12,474

Consolidated total assets 2,625,927

Segment liabilities 793,736 90,706 20,477 - 904,919 Current and deferred tax liabilities 17,296

Consolidated total liabilities 922,215

Capital expenditure 22,737 1,823 1,101 Amortisation and depreciation 6,223 1,454 747 Other non-cash items 25,881 5,913 2,477

(a) Primary reporting format - business segment

All the operations of the Group are organised in Malaysia into three main segments:

(i) Property development - Property development (ii) Construction - Building and highway construction (iii) Others - Manufacturing, trading and investing

Transactions between segments were entered into in the normal course of business and were established on terms and conditions that are not materially different from that obtainable in transactions with unrelated parties. The effects of such inter-segmental transactions are eliminated on consolidation.

(b) Secondary reporting format - geographical segment

The operations of the Group are entirely carried out in Malaysia.

51. CHANGES IN ACCOUNTING POLICIES AND EFFECTS ARISING FROM ADOPTION OF NEW/REVISED FRSs

(a) Effect of adopting FRS 2

The effect of adopting FRS 2 on the balance sheets as at 31 October 2006 and income statement for the year ended 31 October 2006 are as follows: ------Group ------Company ------As As previously As previously As stated Effects restated stated Effects restated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Balance sheet

Amounts owing by subsidiary companies - - - 120,854 1,581 122,435

S P SETIA BHD 151 Notes to the Financial Statements for the year ended 31 October 2007

51. CHANGES IN ACCOUNTING POLICIES AND EFFECTS ARISING FROM ADOPTION OF NEW/REVISED FRSs (CONT’D)

(a) Effect of adopting FRS 2 (Cont’d) ------Group ------Company ------As As previously As previously As stated Effects restated stated Effects restated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Share premium account 416,710 564 417,274 416,710 564 417,274 Unappropriated profit 787,187 (1,959) 785,228 226,333 (378) 225,955 Option reserve - 1,395 1,395 - 1,395 1,395

Income statement

Cost of sales 815,224 1,335 816,559 119,801 - 119,801 Gross profit 339,417 (1,335) 338,082 5,551 - 5,551 Administrative and general expenses 53,388 675 54,063 24,368 429 24,797

(b) Reclassification/Restatement of comparative figures

The financial statements are presented in accordance with the FRSs for the first time together with the relevant comparatives.

The following comparative figures have been reclassified/restated to conform with the adoption of the new/revised FRSs during the financial year. Group Company As As As previously As previously restated stated restated stated Balance sheet RM’000 RM’000 RM’000 RM’000 Non-current assets Property, plant and equipment 47,319 140,286 267 2,720 Investment properties 92,068 - 1,554 - Prepaid lease payments 899 - 899 -

Income statement

Other operating income 8,366 7,803 350 343 Net profit from investing activities - other 10,219 10,782 212,126 212,133 Share of net profits less losses of associated companies 30,781 42,885 - - Share of taxation of associated companies - 12,104 - - Profit before taxation 319,949 334,063 198,841 199,270 Profit for the year 238,231 240,244 142,210 142,639

52. EVENTS PENDING COMPLETION AS AT YEAR END

(a) On 12 December 2006, Setia Promenade Sdn Bhd, a wholly-owned subsidiary company, entered into a conditional Joint Venture Agreement (“JVA”) with PPH Resorts (Penang) Sdn Bhd for the proposed development of approximately 45 acres of freehold land in the state of Pulau Pinang.

To-date, certain conditions precedent of the JVA remain unfulfilled.

152 ANNUAL REPORT 07 Notes to the Financial Statements for the year ended 31 October 2007

52. EVENTS PENDING COMPLETION AS AT YEAR END (CONT’D)

(b) On 13 March 2007, Ambleside Sdn Bhd, a wholly-owned subsidiary company, entered into a conditional Sale and Purchase Agreement with AEON Co. (M) Bhd for the proposed disposal of a piece of leasehold land included under property development costs for a total cash consideration of RM53,687,700. As at 31 October 2007, certain conditions precedent remained unfulfilled.

On 6 November 2007, the disposal became unconditional.

(c) On 26 June 2007, Setia MyPhuoc Limited (“Setia MyPhuoc”), a wholly-owned subsidiary company, entered into a proposed Joint Venture Agreement (“PJVA”) with Becamex IDC Corporation (“Becamex”) and Treasure Link Far East Limited for the establishment of a joint venture company, Setia Becamex Joint Stock Company (“SetiaBecamex”) to jointly undertake the development of various parcels of land located at My Phuoc, Province of Binh Duong, Vietnam. Under the PJVA, within 3 months of the issuance of the Investment Certificate (“IC”), on terms and conditions satisfactory to Setia MyPhuoc, Becamex shall hand over the relevant parcels of land for the initial development and Setia MyPhuoc shall contribute 55% of the charter capital of Setia Becamex.

On 19 November 2007, the Company has received notification that the People’s Committee of Binh Duong Province, Vietnam had approved the application for the IC and the incorporation of Setia Becamex, with a charter capital of USD20.0 million.

(d) On 10 January 2007, Futurecrest (M) Sdn Bhd (“FMSB”), a wholly-owned subsidiary company, entered into a conditional Subscription Agreement with Topasia Projects Sdn Bhd (“TPSB”) to subscribe for 29,999,998 ordinary shares of RM1.00 each at an issue price of RM1.00 each per share and 70,000,000 cumulative redeemable preference shares (“CRPS”) of RM0.01 each at an issue price of RM1.00 per CRPS in Kesas Kenangan Sdn Bhd (currently wholly-owned by FMSB). The subscription ratio between FMSB and TPSB shall be in the ratio of 70 : 30.

To-date, the issuance of the ordinary shares and CRPS has not been completed.

(e) On 12 June 2007, the Company entered into a conditional Subscription Agreement with Prolific Pristine Sdn Bhd (“PPSB”) to subscribe for 1,990,000 ordinary shares of RM1.00 each at an issue price of RM1.00 each per share and 23,000,000 cumulative redeemable preference shares (“CRPS”) of RM0.01 each at an issue price of RM1.00 per CRPS in Sendiman Sdn Bhd, a jointly controlled entity. The subscription ratio between the Company and PPSB shall be in the ratio of 70 : 30.

To-date, only the issuance of the ordinary shares has been completed.

(f) On 21 August 2007, the Group announced the signing of a Memorandum of Understanding (“MOU”) by Pelita Dunia Sdn Bhd (“PDSB”), a wholly-owned subsidiary company, with Datuk Bandar Kuala Lumpur (“DBKL”) to establish and record the parties’ agreement on a proposed privatisation joint venture project comprising a mixed residential and commercial development on certain state lands and private lands (“the said lands”).

To-date, pursuant to the MOU, PDSB has paid a compensation of RM3,600,000, through DBKL, to squatter families occupying the said lands.

(g) During the financial year, the Company embarked on the following proposals:

S P SETIA BHD 153 Notes to the Financial Statements for the year ended 31 October 2007

52. EVENTS PENDING COMPLETION AS AT YEAR END (CONT’D)

(g) During the financial year, the Company embarked on the following proposals: (Cont’d)

(iii) Proposed bonus issue of 336,302,604 new ordinary shares on the basis of one (1) bonus share for every two (2) existing shares held.

53. SUBSEQUENT EVENTS

On 6 December 2007, Setia International Limited, a wholly-owned subsidiary company, acquired 10 ordinary shares of USD 1 each in Prime Globe Holdings Limited (“PGHL”) and Toptec Holdings Limited (“THL”), companies incorporated in the British Virgin Islands, representing 100% of the equity interest of PGHL and THL, for a total cash consideration of USD 10 each. The principal activities of PGHL and THL are investment holding.

54 AUTHORISATION FOR ISSUE OF FINANCIAL STATEMENTS

These financial statements were authorised for issue on 12 December 2007 by the board of directors.

154 ANNUAL REPORT 07 Statement by Directors

In the opinion of the directors, the financial statements set out on pages 78 to 154 have been drawn up:

(a) so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 October 2007 and of their results and cash flows for the year then ended;

(b) in accordance with applicable MASB Approved Accounting Standards for Entities Other Than Private Entities and the provisions of the Companies Act, 1965.

Signed on behalf of the directors in accordance with a directors' resolution dated 12 December 2007.

TAN SRI DATO' SRI LIEW KEE SIN DATO’ VOON TIN YOW Director Director

Kuala Lumpur

Statutory Declaration

I, Teow Leong Seng, being the director primarily responsible for the financial management of S P Setia Berhad do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 78 to 154 are 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 at ) Kuala Lumpur in the Federal Territory ) this 12 December 2007 ) TEOW LEONG SENG

Before me:

ROBERT LIM HOCK KEE W092 Commissioner for Oaths

S P SETIA BHD 155 Analysis of Shareholdings as at 31 December 2007

Authorised Share Capital : RM1,200,000,000 Issued Share Capital : 672,605,209 Paid Up Share Capital : RM504,453,906.75 Class of Shares : Ordinary Shares of RM0.75 each Voting Rights : One Vote per Ordinary Share

DISTRIBUTION OF SHAREHOLDINGS

Size of Shareholdings No. of Shareholders % No. of Shares %

less than 100 523 10.91 15,430 0.002 100 - 1,000 1,405 29.31 1,063,281 0.158 1,001 - 10,000 1,857 38.73 7,071,983 1.051 10,001 - 100,000 612 12.77 21,036,464 3.128 100,001 to less than 5% of issued shares 395 8.24 493,637,862 73.392 5% and above of issued shares 2 0.04 149,780,189 22.269

Total 4,794 100.00 672,605,209 100.000

LIST OF THIRTY LARGEST SHAREHOLDERS

Name of Shareholders No. of Shares %

1. Employees Provident Fund Board 77,951,090 11.589 2. HSBC Nominees (Asing) Sdn Bhd - Exempt An For JPMorgan Chase Bank, National Association (U.S.A.) 71,829,099 10.679 3. EB Nominees (Tempatan) Sendirian Berhad - Pledged Securities Account For Tan Sri Dato’ Sri Liew Kee Sin 25,395,325 3.776 4. HSBC Nominees (Asing) Sdn Bhd - Exempt An For J.P. Morgan Bank Luxembourg S.A. 24,265,600 3.608 5. Tan Sri Dato’ Sri Liew Kee Sin 13,980,570 2.079 6. Puan Sri Datin Sri How Teng Teng 12,967,532 1.928 7. Cartaban Nominees (Asing) Sdn Bhd - SSBT Fund ZM47 For Aim Developing Markets Fund 11,684,200 1.737 8. Amanah Raya Nominees (Tempatan) Sdn Bhd - Amanah Saham Wawasan 2020 11,229,500 1.670 9. Amanah Raya Nominees (Tempatan) Sdn Bhd - Skim Amanah Saham Bumiputera 10,556,199 1.569 10. Valuecap Sdn Bhd 9,900,000 1.472 11. CIMB Group Nominees (Tempatan) Sdn Bhd - Pledged Securities Account For Tan Sri Dato’ Sri Liew Kee Sin 8,583,333 1.276 12. Citigroup Nominees (Asing) Sdn Bhd - Exempt An For American International Assurance Company Limited 7,821,100 1.163 13. HSBC Nominees (Asing) Sdn Bhd - TNTC For Saudi Arabian Monetary Agency 7,719,400 1.148 14. Cartaban Nominees (Asing) Sdn Bhd - SSBT Fund HG22 For Smallcap World Fund, Inc. 7,500,000 1.115 15. HSBC Nominees (Asing) Sdn Bhd - HSBC BK Plc For First State Asian Equity Plus Fund 7,393,000 1.099 16. Cartaban Nominees (Asing) Sdn Bhd - SSBT Fund KG33 For Aim Asia Pacific Growth Fund 6,671,600 0.992

156 ANNUAL REPORT 07 Analysis of Shareholdings as at 31 December 2007

LIST OF THIRTY LARGEST SHAREHOLDERS (CONT’D)

Name of Shareholders No. of Shares %

17. Citigroup Nominees (Asing) Sdn Bhd - Chase Manhattan Trustees Limited For Pacific Trust (CBLDN) 6,497,800 0.966 18. HSBC Nominees (Asing) Sdn Bhd - Exempt An For JPMorgan Chase Bank, National Association (Jersey) 6,241,966 0.928 19. Cartaban Nominees (Asing) Sdn Bhd - Investors Bank And Trust Company For Ishares, Inc. 5,912,200 0.879 20. Sakura Gold Sdn Bhd 5,833,333 0.867 21. Cartaban Nominees (Asing) Sdn Bhd - Nomura Trust And Banking Company Limited Tokyo For Asia Attractive Dividend Stock Fund Mother Fund 5,769,000 0.858 22. Amsec Nominees (Tempatan) Sdn Bhd - Ambank (M) Berhad For Tan Sri Dato’ Sri Liew Kee Sin 5,600,000 0.833 23. Lee Siew Choong 5,507,400 0.819 24. Dynamic Growth Management Limited 5,500,000 0.818 25. Citigroup Nominees (Asing) Sdn Bhd - Exempt An For Mellon Bank (Mellon) 5,474,800 0.814 26. HSBC Nominees (Asing) Sdn Bhd - TNTC For Baring Global Emerging Markets Fund 5,464,600 0.813 27. Alliancegroup Nominees (Tempatan) Sdn Bhd - Pledged Securities Account For Tan Sri Dato’ Sri Liew Kee Sin 5,250,000 0.781 28. Citigroup Nominees (Asing) Sdn Bhd - CBNY For E.I.I International Property Fund 4,900,000 0.729 29. Amanah Raya Nominees (Tempatan) Sdn Bhd - Amanah Saham Malaysia 4,570,900 0.680 30. Cartaban Nominees (Asing) Sdn Bhd - State Street Luxembourg Fund 9T02 For Emerging Markets High Value Teilfonds 4,367,900 0.649

392,337,447 58.334

SUBSTANTIAL SHAREHOLDERS

No. of Ordinary Shares Held Name Direct % Indirect %

Employees Provident Fund Board 85,606,790 12.73 - - Tan Sri Dato’ Sri Liew Kee Sin 62,309,227 9.26 a 18,800,865 2.80 Capital Group International, Inc - - b 37,369,100 5.56 Capital Research and Management Company - - c 50,242,000 7.47 a Deemed interested by virtue of the shareholdings of Sakura Gold Sdn Bhd and the shareholdings of his spouse. b Deemed interested by virtue of shares owned by accounts under discretionary investment management of Capital Group International, Inc. c Deemed interested by virtue of shares owned by accounts under discretionary investment management of Capital Research and Management Company.

S P SETIA BHD 157 Analysis of Shareholdings as at 31 December 2007

DIRECTORS AND THEIR SHAREHOLDINGS

No. of Ordinary Shares Held Name Direct % Indirect %

Tan Sri Abdul Rashid bin Abdul Manaf - - a 4,600,000 0.68 Tan Sri Dato’ Sri Liew Kee Sin 62,309,227 9.26 b 18,800,865 2.80 Dato’ Voon Tin Yow 13,288 * - - Teow Leong Seng 7,289 * - - Yap Kok Weng 23 * - - Khor Chap Jen 116,161 0.02 c 50,000 * Chang Khim Wah 41,404 * - - Tan Sri Lee Lam Thye - - d 12,000 * Tan Sri Dato’ Hari Narayanan a/l Govindasamy - - - - Dato’ Leong Kok Wah - - - - Datuk Ismail bin Adam - - - - Ng Soon Lai @ Ng Siek Chuan - - - -

a Deemed interested through Alsirat Sdn Bhd. b Deemed interested by virtue of the shareholdings of Sakura Gold Sdn Bhd and the shareholdings of his spouse. c Deemed interested by virtue of the shareholdings of his spouse. d Deemed interested by virtue of the shareholdings of his son. * Insignificant.

158 ANNUAL REPORT 07 List of Properties Held by The Group as at 31 October 2007

No. Lot No. / Location Description Date of Land Area Tenure Net Book Acquisition (sq. ft.) Value (RM)

1. Lot No. 9653-9658 & 10411, 7 units – Vacant 15/9/86 11,625 Freehold 777,970 H.S.(D) 19032-19037 & H.S. (D) 19788, Shoplots Land Ampangan Seremban, Negeri Sembilan Darul Khusus

2. P.T. No. 2953, H.S.(D) 8034, Vacant 12/12/91 83,248 Freehold 593,477 P.T. No. 2961, H.S.(D) 8042, Bungalow Land C.T. 11501 Lot No. 1994, Serendah, Selangor Darul Ehsan

3. Lot No. 003, H.S.(D) 3135, Vacant 15/7/99 16,102 Leasehold 249,098 P.T. No. 2654, Mukim Ijok, Bungalow Land (Expiring Daerah Kuala Selangor, 24/3/2095) Selangor Darul Ehsan

4. Lot No. 005, H.S.(D) 3134, Vacant 15/7/99 15,996 Leasehold 247,458 P.T. No. 2653, Mukim Ijok, Bungalow Land (Expiring Daerah Kuala Selangor, 24/3/2095) Selangor Darul Ehsan

5. Lot No. 138, H.S.(D) 2864, Bungalow Lot 15/7/99 19,267 Leasehold 224,640 P.T. No. 2381, Mukim Ijok, (Expiring Daerah Kuala Selangor, 24/3/2095) Selangor Darul Ehsan

6. Lot No. 139, H.S.(D) 2865, Bungalow Lot 15/7/99 14,251 Leasehold 168,589 P.T. No. 2382, Mukim Ijok, (Expiring Daerah Kuala Selangor, 24/3/2095) Selangor Darul Ehsan

7. Indah Villa 1 unit - 1/11/99 1,336 Leasehold 181,609 H.S.(D) 23774 & H.S.(D) 23775, Condominium (Expiring P.T. 9338 & P.T. 9339, (age : 14 years) 17/8/2086) Mukim of Damansara, District of Petaling, Selangor Darul Ehsan

8. Lot No. 5 held under Industrial Building 31/1/96 181,647 Freehold 6,193,320 H.S.(D) 28236, P.T. 12118 & (age : 10 years) H.S.(D) 28227, P.T. 12109, Mukim of Rawang, District of Gombak, Selangor Darul Ehsan

S P SETIA BHD 159 List of Properties Held by The Group as at 31 October 2007

No. Lot No. / Location Description Date of Land Area Tenure Net Book Acquisition (sq. ft.) Value (RM)

9. Lot No. 6 held under Industrial Building 17/4/98 135,471 Freehold 3,351,863 H.S.(D) 28237, P.T. 12119, (age : 8 years) Mukim of Rawang, District of Gombak, Selangor Darul Ehsan

10. Lot No. 3/4U/A1, Town House 31/1/02 1,299 Freehold 355,670 Polo Town House, Jalan Bentara Luar, (age : 5 years) Pasir Pelangi, Johor Bahru

11. Indah Villa 1 unit - 24/11/93 1,104 Leasehold 134,856 H.S.(D) 23774 & H.S.(D) 23775, Condominium (Expiring P.T. 9338 & P.T. 9339, (age : 14 years) 17/8/2086) Mukim of Damansara, District of Petaling, Selangor Darul Ehsan

12. Indah Villa 1 unit - 15/7/91 1,336 Leasehold 209,658 H.S.(D) 23774 & H.S.(D) 23775, Condominium (Expiring P.T. 9338 & P.T. 9339, (age : 14 years) 17/8/2086) Mukim of Damansara, District of Petaling, Selangor Darul Ehsan

13. H.S.(D) 98547, P.T. 27875, Office Building 31/12/95 4,687 Freehold 1,405,462 Mukim and Daerah Petaling, (age : 13 years) Selangor Darul Ehsan

14. No. Hakmilik 2422, Lot No.982, Vacant Land 28/3/01 139,392 Freehold 350,000 Tempat Sg. Ular, Mukim Sungai Karang, Daerah Kuantan, Negeri Pahang

15. PTD No.103754, Office Building 15/2/96 10,890 Freehold 818,457 H.S.(D) 315469, Mukim Pulai, (age : 10 years) Daerah Johor Bahru, Johor Darul Takzim

16. Part of PTD No.90603, Commercial 15/2/96 1,465,097 Freehold 3,746,860 H.S.(D) 433015, Mukim Pulai, Land Daerah Johor Bahru, Johor Darul Takzim

160 ANNUAL REPORT 07 List of Properties Held by The Group as at 31 October 2007

No. Lot No. / Location Description Date of Land Area Tenure Net Book Acquisition (sq. ft.) Value (RM)

17. Part of PTD No.90603, Commercial 15/2/96 422,532 Freehold 6,609,204 H.S.(D) 433015, Mukim Pulai, Land (Kelab Daerah Johor Bahru, Indah) Johor Darul Takzim

18. PTD No.89286, H.S.(D) 313219, Land for 15/2/96 6,296,983 Freehold 69,834,421 PTD No.89667, H.S.(D) 313596, Development PTD No.106545, H.S.(D) 315471, Part of PTD No.108516, H.S.(D) 317193, PTD No.108523, H.S.(D) 317200, PTD No.108524, H.S.(D) 317201, Part of PTD No.108527, H.S.(D) 317204 and PTD No.108529, H.S.(D) 317207, Mukim Pulai, Daerah Johor Bahru, Johor Darul Takzim

19. Part of PTD No.71060 Land for 25/10/01 7,788,088 Freehold 44,148,914 Mukim Pulai, Daerah Johor Bahru, Development Johor Darul Takzim

20. Part of PTD No.105613, Land for 23/8/99 3,049,293 Freehold 16,295,346 H.S.(D) 351583, Development PTD No.105755, H.S.(D) 351581, PTD No.99428, H.S.(D) 354583, PTD No.95243, H.S.(D) 353215, PTD No.105608, H.S.(D) 353045, PTD No.105609, H.S.(D) 353046, Mukim Tebrau, Daerah Johor Bahru, Johor Darul Takzim

21. PTD No.95237, H.S.(D) 353212, Commercial 23/8/99 505,296 Freehold 10,232,003 PTD No.95238, H.S.(D) 353213, Land Mukim Tebrau, Daerah Johor Bahru, Johor Darul Takzim

22. PTD No.103557, H.S.(D) 350612, Office Building 23/8/99 14,002 Freehold 6,188,276 Mukim Tebrau, Daerah Johor Bahru, (age : 5 years) Johor Darul Takzim

23. Part of PTD No. 63733, Land for 04/08/04 25,754,511 Freehold 181,517,796 H.S.(D) 237888, Development Mukim Tebrau, Daerah Johor Bahru, Johor Darul Takzim

S P SETIA BHD 161 List of Properties Held by The Group as at 31 October 2007

No. Lot No. / Location Description Date of Land Area Tenure Net Book Acquisition (sq. ft.) Value (RM)

24. No. LM 38, No. Lot 1177, Land for 10/11/00 359,915 Leasehold 3,200,000 No. LM 44, No. Lot 1175, Development (Expiring No. LM 45, No. Lot 1176, 18/02/2072) Tempat Kampong Klang Gates Baru, Mukim Hulu Kelang, Daerah Gombak, Selangor Darul Ehsan

25. GRN 44830, Lot No. 2720, Land for 30/3/02 37,691,242 Freehold 119,547,133 H.S.(D) 204088, P.T. 7715, Development H.S.(D) 204089, P.T. 7716, H.S.(D) 204090, P.T. 7717, Mukim Bukit Raja, Daerah Petaling, Selangor Darul Ehsan

26. H.S.(D) 232743, P.T. 18758, Commercial 30/3/02 6,653,093 Freehold 38,603,362 H.S.(D) 232744, P.T. 18759, Land H.S.(D) 232745, P.T. 18760, H.S.(D) 232746, P.T. 18761, H.S.(D) 232747, P.T. 18762, H.S.(D) 232748, P.T. 18763, H.S.(D) 232749, P.T. 18764, H.S.(D) 232750, P.T. 18765, H.S.(D) 232751, P.T. 18766, H.S.(D) 232752, P.T. 18767, H.S.(D) 232753, P.T. 18768, H.S.(D) 232754, P.T. 18769, H.S.(D) 232755, P.T. 18770, H.S.(D) 232756, P.T. 18771, H.S.(D) 232757, P.T. 18772, H.S.(D) 232758, P.T. 18773, H.S.(D) 232759, P.T. 18774, H.S.(D) 232760, P.T. 18775, H.S.(D) 232762, P.T. 18777, H.S.(D) 204098, P.T. 7725, Mukim Bukit Raja, Daerah Petaling, Selangor Darul Ehsan

27. H.S.(M) 35859, P.T. 54751, Commercial 30/3/02 115,834 Freehold 5,479,245 H.S.(M) 35861, P.T. 54752, Land & Building Mukim Bukit Raja, Daerah Petaling, Selangor Darul Ehsan

162 ANNUAL REPORT 07 List of Properties Held by The Group as at 31 October 2007

No. Lot No. / Location Description Date of Land Area Tenure Net Book Acquisition (sq. ft.) Value (RM)

28. PN 12233 Land for 31/12/04 217,341 Leasehold 9,500,000 Lot No. 173 Seksyen 18, Development (Expiring Bandar Port Swettenham, 23/1/2099) District of Klang, Selangor Darul Ehsan

29. GRN 77162 Land for 04/12/06 239,281 Freehold 10,980,000 Lot No. 82623, Mukim Pekan Development Pandamaran, District of Klang, Selangor Darul Ehsan

30. Lot No. 4806, 4807, 4808, 4809, 4810, Land for 30/05/07 270,251 Freehold 73,866,605 4799 & 4800 Development Mukim Batu, Daerah Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur

31. Lot No. 28 & Lot No. 29 Land for 12/04/07 259,456 Freehold 77,836,800 Bandar and Daerah Kuala Lumpur, Development Wilayah Persekutuan Kuala Lumpur

32. Lot No. 102, 104, 400 & 402 Land for 29/06/06 934,362 Freehold 37,730,096 Mukim 5, Daerah Barat Daya, Development Pulau Pinang

33. Lot No. 11931, Lot No. 11930 Hotel & Club 27/09/05 406,415 Freehold 24,473,101 Mukim 12, Daerah Barat Daya, House Land Pulau Pinang

34. Lot No. 11930 Club House 27/09/05 355,000 Freehold 7,966,854 Mukim 12, Daerah Barat Daya, Pulau Pinang

35. Part of Lot No. 11897 H.S.(D) 10366, Land for 27/09/05 2,225,001 Freehold 62,535,183 Lot No. 11898 H.S.(D). 10367 and Development Lot No. 12025 H.S.(D). 16130 Mukim 12, Daerah Barat Daya, Pulau Pinang

36. Lot P.T. 6327 H.S.(D)22572 Commercial 27/09/05 370,913 Freehold 9,288,532 Mukim 12, Daerah Barat Daya, Land Pulau Pinang

S P SETIA BHD 163 Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Thirty Third Annual General Meeting of the Company will be held at The Banquet Hall, Kuala Lumpur Golf & Country Club, No. 10, Jalan 1/70D, Off Jalan Bukit Kiara, 60000 Kuala Lumpur on Wednesday, 27 February 2008 at 11.00 a.m. for the following purposes:-

AGENDA

1. To receive and adopt the Audited Financial Statements of the Company for the financial year ended 31 October 2007 together with the Reports of the Directors and Auditors thereon. Resolution 1

2. To declare a final dividend of 15 sen less 26% tax in respect of the financial year ended 31 October 2007. Resolution 2

3. To re-elect the following Directors who retire in accordance with Article 93 of the Company’s Articles of Association and, being eligible, offer themselves for re-election:

(a) Tan Sri Abdul Rashid bin Abdul Manaf; Resolution 3 (b) Datuk Ismail bin Adam; and Resolution 4 (c) Mr Yap Kok Weng. Resolution 5

4. To re-elect the following Directors who retire in accordance with Article 98 of the Company’s Articles of Association and, being eligible, offer themselves for re-election:

(a) Mr Chang Khim Wah; and Resolution 6 (b) Mr Teow Leong Seng. Resolution 7

5. To re-appoint Moores Rowland as Auditors for the ensuing year and to authorise the Board of Directors to fix their remuneration. Resolution 8

AS SPECIAL BUSINESS

To consider and if thought fit, to pass the following Resolutions:-

6. ORDINARY RESOLUTION (I) :

PROPOSED RENEWAL OF EXISTING SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE AS SPECIFIED IN SECTION 2.13(A) TO (C) OF THE CIRCULAR TO SHAREHOLDERS DATED 4 FEBRUARY 2008

“THAT, subject always to the Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and its subsidiaries (“S P Setia Group”) to enter into and give effect to specified recurrent related party transactions of a revenue or trading nature of the Group with specified classes of Related Parties (as defined in the Listing Requirements of Bursa Malaysia Securities Berhad and as specified in Section 2.13 (A) to (C) of the Circular to shareholders dated 4 February 2008 which are necessary for the day to day operations in the ordinary course of business and are carried out at arms’ length basis on normal commercial terms of the S P Setia Group on terms not more favourable to the Related Parties than those generally available to the public and are not detrimental to minority shareholders of the Company and such approval shall continue to be in force until:

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

(ii) the expiration of the period within which the next AGM after the date it is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

164 ANNUAL REPORT 07 Notice of Annual General Meeting

6. ORDINARY RESOLUTION (I) : (CONT’D)

(iii) revoked or varied by resolution passed by the shareholders in a general meeting,

whichever is the earlier,

THAT authority be and is hereby given to the Directors of the Company to complete and do all such acts and things as they may consider necessary or expedient in the best interest of the Company (including executing all such documents as may be required) to give effect to the transactions contemplated and/or authorised by this Ordinary Resolution.” Resolution 9

7. ORDINARY RESOLUTION (II) :

PROPOSED RENEWAL OF EXISTING SHARESHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE AS SPECIFIED IN SECTION 2.13(D) OF THE CIRCULAR TO SHAREHOLDERS DATED 4 FEBRUARY 2008

“THAT, subject always to the Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and its subsidiaries (“S P Setia Group”) to enter into and give effect to specified recurrent related party transactions of a revenue or trading nature of the Group with specified classes of Related Parties (as defined in the Listing Requirements of Bursa Malaysia Securities Berhad and as specified in Section 2.13(D) of the Circular to shareholders dated 4 February 2008 which are necessary for the day to day operations in the ordinary course of business and are carried out at arms’ length basis on normal commercial terms of the S P Setia Group on terms not more favourable to the Related Parties than those generally available to the public and are not detrimental to minority shareholders of the Company and such approval shall continue to be in force until:

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

(iii) revoked or varied by resolution passed by the shareholders in a general meeting,

whichever is the earlier,

8. SPECIAL RESOLUTION :

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

“THAT the existing provisions of the Articles of Association of the Company referred to and more particularly set out in the first and second columns of Appendix A attached hereto be and are hereby (i) deleted or (ii) amended, modified or varied, as the case may be, as more particularly specified or set out in the third column of Appendix A against such existing provisions so that after the passing of this special resolution, the existing provisions specified to be deleted, shall be deleted from the Articles of Association of the Company or if not specified to be deleted, shall be amended, modified or varied to read as the amended provisions more particularly set out in the third column of Appendix A against such existing provisions.” Resolution 11

S P SETIA BHD 165 Notice of Annual General Meeting

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

By Order of the Board

LEE WAI NGAN (LS 00184) CHAN TOYE YING (LS 00185) Company Secretaries

Kuala Lumpur Date: 4 February 2008

Notes: Explanatory Notes on Special Business

1. A member entitled to attend and vote at the meeting is entitled to 1. The proposed Resolutions 9 and 10, if passed, will allow the Company appoint one or more proxies to attend and vote in his stead. A proxy and its subsidiaries to enter into recurrent related party transactions of need not be a member of the Company and the provisions of Section a revenue and trading nature with related parties which are necessary 149(1)(b) of the Act shall not apply to the Company. for the Group’s day-to-day operations and are in the ordinary course of 2. The Form of Proxy, in the case of an individual, shall be signed by the business made on an arm’s length basis and on normal commercial appointor or his attorney, and in the case of a corporation, either under terms and on terms not more favourable to the related parties than seal or under the hand of an officer or attorney duly authorised. those generally extended to the public and are not to the detriment of 3. Where a member appoints more than one proxy, the appointment shall the minority shareholders of the Company. The details of the Proposal be invalid unless he specifies the proportion of his holdings to be are set out in the Circular to the Shareholders dated 4 February 2008 represented by each proxy. which is circulated together with the 2007 Annual Report.

4. The Form of Proxy duly completed and signed must be deposited at the 2. The proposed Resolution 11, if passed, will incorporate the recent Registered Office of the Company at Wisma Selangor Dredging, 6th amendments to the Listing Requirements of Bursa Malaysia Securities Floor, South Block, 142-A Jalan Ampang, 50450 Kuala Lumpur not less Berhad. than 48 hours before the time for holding the meeting or any adjournment thereof.

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN that a final dividend of 15 sen less 26% tax and for the financial year ended 31 October 2007, if approved by shareholders, will be payable on 10 April 2008 to shareholders whose names appear in the Record of Depositors of the Company at the close of business on 14 March 2008.

A depositor shall qualify for entitlement only in respect of:

a. shares transferred into the depositor’s securities account before 4.00 p.m. on 14 March 2008, in respect of transfers; and

b. shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad.

166 ANNUAL REPORT 07 Statement Accompanying Notice of Annual General Meeting

A. Names of the Directors who are standing for re-election: (a) Tan Sri Abdul Rashid bin Abdul Manaf; (b) Datuk Ismail bin Adam; (c) Mr Yap Kok Weng; (d) Mr Chang Khim Wah; and (e) Mr Teow Leong Seng.

B. Details of attendance of directors at Board Meetings The details are set out on page 58 of the annual report.

C. Date, Time and Venue of the Annual General Meeting Wednesday, 27 February 2008 at 11.00 a.m. The Banquet Hall, Kuala Lumpur Golf & Country Club, No. 10, Jalan 1/70D, Off Jalan Bukit Kiara 60000 Kuala Lumpur

D. Further details of Directors who are standing for re-election as directors The further details of the Directors who are standing for re-election are disclosed under Board of Directors’ Profile on pages 50 to 55 of this Annual Report. The shareholdings of these Directors in the Company are disclosed under Analysis of Shareholdings on page 158 of this Annual Report.

S P SETIA BHD 167 This page has been left blank intentionally. S P Setia Berhad (19698-X) No. of Ordinary (Incorporated in Malaysia) Shares Held PROXY FORM

I/We NRIC No.: of being a member / members of S P SETIA BERHAD, hereby appoint

NRIC No: of

or failing whom, NRIC No.: of

or failing whom, the Chairman of the Meeting as my / our proxy to attend and vote for me / us and on my / our behalf at the Thirty Third Annual General Meeting of the Company to be held at The Banquet Hall, Kuala Lumpur Golf & Country Club, No. 10, Jalan 1/70D, Off Jalan Bukit Kiara, 60000 Kuala Lumpur on Wednesday, 27 February 2008 at 11.00 a.m. and at any adjournment thereof in the manner as indicated below:

No. RESOLUTION FOR AGAINST 1. Adoption of Reports and Audited Financial Statements 2. Payment of final dividend 3. Re-election of Director: Tan Sri Abdul Rashid bin Abdul Manaf 4. Re-election of Director: Datuk Ismail bin Adam 5. Re-election of Director: Mr Yap Kok Weng 6. Re-election of Director: Mr Chang Khim Wah 7. Re-election of Director: Mr Teow Leong Seng 8. Re-appointment of Auditors 9. Proposed Renewal of Existing Shareholders’ Mandate as specified in Section 2.13 (A) to (C) of the Circular to Shareholders dated 4 February 2008 10. Proposed Renewal of Existing Shareholders’ Mandate as specified in Section 2.13 (D) of the Circular to Shareholders dated 4 February 2008 11. Proposed Amendments to the Articles of Association of the Company

(Please indicate with an “X” in the spaces above how you wish your votes to be cast. If you do not do so, the proxy will vote or abstain from voting at his discretion).

Dated this ______day of ______2008.

Signature of Member(s)

Notes: 1. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy need not be a member of the Company and the provisions of Section 149(1)(b) of the Act shall not apply to the Company. 2. The Form of Proxy, in the case of an individual, shall be signed by the appointor or his attorney, and in the case of a corporation, either under seal or under the hand of an officer or attorney duly authorised. 3. Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies the proportion of his holdings to be represented by each proxy. 4. The Form of Proxy duly completed and signed must be deposited at the Registered Office of the Company at Wisma Selangor Dredging, 6th Floor, South Block, 142-A, Jalan Ampang, 50450 Kuala Lumpur not less than 48 hours before the time for holding the meeting or any adjournment thereof. Fold this flap to seal

2nd fold here

STAMP

The Company Secretary S P SETIA BERHAD Wisma Selangor Dredging, 6th Floor, South Block, 142-A, Jalan Ampang, 50450 Kuala Lumpur

1st fold here Group Directory

HEAD OFFICE S P SETIA PROJECT MANAGEMENT RESIDENCES DEVELOPMENT S P SETIA BERHAD 19698-X SDN BHD 246695-X S P SETIA BERHAD Wisma S P Setia, 1 Jalan Bandar Satu Wisma S P Setia 1 Jalan Bandar Satu Wisma Lumiel, Lot 1 Ground Floor (Corner Unit) Pusat Bandar Puchong, 47100 Puchong Pusat Bandar Puchong 33, Jalan Yap Kwan Seng Selangor Darul Ehsan, Malaysia 47100 Puchong 50450 Kuala Lumpur, Malaysia TEL: 603 5882 2000 Selangor Darul Ehsan Malaysia TEL: 603 2171 2255 FAX: 603 5882 1230 TEL: 603 5882 2000 FAX: 603 2171 1255 EML: [email protected] FAX: 603 5882 2991 EML: [email protected] / www.spsetia.com.my EML: [email protected] [email protected]

BANDAR SETIA ALAM SDN BHD 566140-D SETIAWALK SETIA PROMENADE SDN BHD 388384-W Setia Alam Sales Office BANDAR SETIA ALAM SDN BHD Pearl Island Country Club Persiaran Setia Impian 566140-D No. 8, Persiaran Kelicap Wisma S P Setia, 1 Jalan Bandar Satu Setia Alam, Sek U13 11900 Bayan Lepas, Penang, Malaysia Pusat Bandar Puchong, 47100 Puchong 40170 Shah Alam TEL: 604 641 2255 Selangor Darul Ehsan, Malaysia Selangor Darul Ehsan, Malaysia FAX: 604 642 2255 TEL: 603 5882 2255 TEL: 603 3343 2255 EML: [email protected] FAX: 603 5882 2722 FAX: 603 3345 2255/2525 EML: [email protected] EML: [email protected] SETIA ECO GARDENS KESAS KENANGAN SDN BHD 745817-H S P SETIA CONSTRUCTION SDN BHD No. 2A, Jalan Indah 15/2 BANDAR ECO-SETIA SDN BHD 568138-A 405936-P 5B/1/3, 1st Floor 1 Jalan Wawasan 5/1 Bukit Indah, 81200 Johor Bahru Jalan Setia Nusantara U13/17 Pusat Bandar Puchong Johor Darul Takzim, Malaysia Sek U13, Setia Alam 47100 Puchong TEL: 607 232 2525 40170 Shah Alam Selangor Darul Ehsan, Malaysia FAX: 607 232 5522 Selangor Darul Ehsan, Malaysia TEL: 603 5882 8229 EML: [email protected] TEL: 603 3343 2228 FAX: 603 5882 0004 FAX: 603 3343 7228 EML: [email protected] BUKIT INDAH (JOHOR) SDN BHD 307260-V EML: [email protected] Wisma S P Setia, 1 Jalan Indah 15/1 SETIA PRECAST SDN BHD 347177-A Bukit Indah, 81200 Johor Bahru 3 Jalan Wawasan 5/1 Johor Darul Takzim, Malaysia SETIA DUTA ONE SDN BHD 511035-W TEL: 607 241 2255 Wisma S P Setia, 1 Jalan Bandar Satu Pusat Bandar Puchong FAX: 607 241 5955/2855 Pusat Bandar Puchong 47100 Puchong EML: [email protected] 47100 Puchong Selangor Darul Ehsan, Malaysia TEL: 603 5882 8229 Selangor Darul Ehsan, Malaysia SETIA INDAH SDN BHD 185555-H TEL: 603 6201 2255 FAX: 603 5882 0163 EML: [email protected] Wisma S P Setia, 1 Jalan Setia 3/6 FAX: 603 6201 0068 Taman Setia Indah http://spc.spsetia.com.my EML: [email protected] 81100 Johor Bahru SETIA BINA RAYA SDN BHD 482259-T Johor Darul Takzim, Malaysia WAWASAN INDERA SDN BHD 230831-A 8-1 Jalan Bandar 3 TEL: 607 351 2255 Wisma S P Setia, 1 Jalan Bandar Satu Pusat Bandar Puchong FAX: 607 351 2525 Pusat Bandar Puchong 47100 Puchong EML: [email protected] 47100 Puchong Selangor Darul Ehsan, Malaysia Selangor Darul Ehsan, Malaysia TEL: 603 5882 2255 SETIA INDAH SDN BHD 185555-H TEL: 603 5882 2000 FAX: 603 5882 2037 Wisma S P Setia FAX: 603 5882 2991 EML: [email protected] 1, Jalan Setia Tropika EML: [email protected] Taman Setia Tropika SETIA PUTRAJAYA DEVELOPMENT 81200 Kempas, Johor Bahru SYARIKAT KEMAJUAN JERAI SDN BHD SDN BHD 424995-P Johor Darul Takzim, Malaysia 23898-U 3A Jalan P9G/7 TEL: 607 237 2255 1G & 3G Medan Bukit Indah Satu 62250 Putrajaya, Malaysia FAX: 607 237 2225 Bukit Indah, 68000 Ampang TEL: 603 8887 8000 EML: [email protected] Selangor Darul Ehsan, Malaysia FAX: 603 8887 8010 TEL: 603 4292 8633 / 603 4293 2255 EML: [email protected] SETIABECAMEX JOINT STOCK COMPANY FAX: 603 4293 5535 Ecolakes My Phuoc EML: [email protected] SETIA-WOOD INDUSTRIES SDN BHD 23725-V NE2 Highway S P SETIA MARKETING SDN BHD 175198-P 3A Hamlet, Thoi Hoa Commune S P SETIA ESTATE MANAGEMENT Lot 5 & 6 Jalan Indah 1/3 Ben Cat District SDN BHD 251637-X Taman Industri Rawang Indah Bin Duong Province, Vietnam 1G & 3G Medan Bukit Indah Satu 48000 Rawang TEL: 84 650 577 255 Bukit Indah, 68000 Ampang Selangor Darul Ehsan, Malaysia FAX: 84 650 577 225 Selangor Darul Ehsan, Malaysia TEL: 603 6092 8022 EML: [email protected] TEL: 603 4292 8633 FAX: 603 6092 0322 FAX: 603 4293 5535 EML: [email protected] EML: [email protected] www.setia-wood.com.my