Beyond Boundaries - I3investor

a n n u a l r e p o r t 2 0 0 6

B e y o n d

B o u n d a r i e s

37465-A

Beyond Boundaries

The point of corporate origin for Sunway

Holdings Incorporated Berhad (“SunInc”) lies

in Malaysia. To represent its expansion into

the global marketplace, a line extends

upward, intersecting another line. As the line

arcs beyond the borderline, it shows SunInc's

ascendancy as a global player and its ongoing

quest for limitless business opportunities. In

short, SunInc aims for nothing less than the

stars -- ssttrriivveess ffoorr eexxcceelllleennccee.

• Malaysia• Singapore

• Hong Kong

• Trinidad and Tobago

• Indonesia

India• • Vietnam

China•

Macau•

Sunway Holdings Incorporated Berhad’s Global PresenceREPUBLIC OF TRINIDAD AND TOBAGO

Sunway Construction Caribbean Ltd.Republic of Trinidad and Tobago(Year of Inception 2004)

CHINA

Sunway Hoston (Zhuhai) Spun Pile Co. Ltd.Zhuhai(Year of Inception 2006)

Sunway Building Materials (Shanghai) Co. Ltd.Shanghai(Year of Inception 2005)

Sunway Building Materials (Dongguan) Co. Ltd.Dongguan(Year of Inception 2005)

Sunway Marketing (Shanghai) Pte. Ltd.Shanghai(Year of Inception 2003)

Sunway Xin Long (Anhui) Hydraulic Co. Ltd.Anhui(Year of Inception 2006)

HONG KONG

Sunway Global LimitedHong Kong(Year of Inception 2003)

MACAU

Sunway GD Foundation Engineering Co. Ltd.Macau(Year of Inception 2005)

INDIA

Sunway Construction India Pte. Ltd.Karnataka, Uttar Pradesh Bihar(Year of Inception 2001)

THAILAND

Sunway Marketing (Thailand) Ltd.Bangkok, Rayong(Year of Inception 1990)

VIETNAM

Sunway Hatay Construction & Building MaterialsJV Co. Ltd.Hatay (Year of Inception 1995)

Sungei Way Ocean Joint Venture Ltd.Ho Chin Minh (Year of Inception 1997)

Sunway Hotel Hanoi Joint-Venture CompanyHanoi (Year of Inception 1992)

INDONESIA

PT Trek MasindoJakarta(Year of Inception 2003)

PT Sunway Marketing IndonesiaJakarta(Year of Inception 2001)

SINGAPORE

Sunway Marketing (S) Pte. Ltd.Singapore (Year of Inception 1975)

Sunway Concrete Products (S) Pte. Ltd.Singapore (Year of Inception 1995)

1Sunway Holdings Incorporated Berhad annual report ‘06

Table of ContentsVision, Mission and Core Values 2Strategy Statement 3Corporate Information 4 - 5Corporate Profile 6 - 7Group Corporate Structure 8At a Glance 9 - 10Calendar of Significant Events 11Chairman's Statement / Penyata Pengerusi 12 - 16Managing Director's Review 17 - 18Finance Director's Review 19 - 21Economic Review 22

Motivating LeadershipProfile of Board of Directors 24 - 27

Innovative Products and ServicesConstruction 29Property Development 30Trading and Manufacturing 31Building Materials 32Quarry 33

Our People Our Strength 34 - 37

Performing Business with IntegrityInvestor Relations 39Corporate Social Responsibility 40Business Dynamics and Risk Factors 41Corporate Governance Statement 42 - 47Terms of Reference of Management Committee 48Terms of Reference of Nomination Committee 49Terms of Reference of Remuneration Committee 50Terms of Reference of Employees' Share Option

Scheme Committee 51 - 52Terms of Reference of Risk Management Committee 53Terms of Reference of Strategic Direction Committee 54Audit Committee Report 55 - 59Statement on Internal Control 60 - 61Enterprise Risk Management Framework 62 - 63Additional Compliance Information 64 - 65

Striving Towards ExcellenceAwards and Achievements 66Research and Development 67Statement on Quality 68Statement of Occupational Safety and Health 69

FinancialsFinancial Statements 71-183List of Properties 184-194Recurrent Related Party Transactions 195-196

Shareholdings' InformationDirectors' Interests in Shares, Options over Ordinary

Shares and Warrants 197Analysis of Shareholdings 198-199Analysis of Warrantholdings 200-201

28th Annual General MeetingNotice of 28th Annual General Meeting 202-206Statement Accompanying Notice of Annual General Meeting 207Form of Proxy

FINANCIAL CALENDAR

31 MAY 2005Announcement of the unaudited consolidatedresults for the 1st quarter ended 31 March 2005

6 JUNE 2005Announcement of notice of entitlement andpayment of 2 sen Final Dividend less 28%income tax for the financial year ended 31 December 2004

7 JUNE 2005Issuance of notice of 27th Annual GeneralMeeting and Annual Report for the financialyear ended 31 December 2004

29 JUNE 2005 Date of 27th Annual General Meeting

29 JULY 2005Date of entitlement to 2 sen Final Dividendless 28% income tax for the financial yearended 31 December 2004

17 AUGUST 2005Announcement of the unaudited consolidatedresults for the 2nd quarter ended 30 June 2005

19 AUGUST 2005Announcement of the change of financial yearend from 31 December to 30 June

25 AUGUST 2005Date of payment of 2 sen Final Dividend less28% income tax for the financial year ended31 December 2004

23 NOVEMBER 2005Announcement of the unaudited consolidatedresults for the 3rd quarter ended 30 September 2005

23 FEBRUARY 2006Announcement of the unaudited consolidatedresults for the 4th quarter and year ended31 December 2005

25 MAY 2006Announcement of the unaudited consolidatedresults for the financial period ended 31 March 2006

30 AUGUST 2006Announcement of the unaudited consolidatedresults for the financial period ended 30 June 2006

8 NOVEMBER 2006Issuance of notice of 28th Annual GeneralMeeting and Annual Report for the financialperiod ended 30 June 2006

30 NOVEMBER 2006Date of 28th Annual General Meeting


Vision To be a leading conglomerate providing world-class and

competitive products and services that enhance stakeholders’ value.

MissionTo provide innovative quality products and services that exceed customers’ expectation.

To continuously attract, retain and develop Human Capital.

To achieve market leadership and operating excellence in every business segment.

Core Values

Excellence

We will have only one standard - EXCELLENCE!

Customers

We will strive to exceed customers’ expectations.

Motivating Leadership

We will lead by example.

Teamwork

We share one Vision, we work as one Team.

Innovation

We will encourage and reward innovation, especially breakthrough ideas.

Integrity

We will conduct ourselves professionally and ethically.


Strategy Statement

We believe growth is on the horizon.We go beyond the boundaries of the localmarket into the horizon.

We are driving growth for tomorrow andgaining momentum.

SunInc leaders are passionate for growth,passionate to provide innovative qualityproducts and services that exceedcustomers’ expectation and help them tobe more competitive in the marketplace.

Yes, growth is coming.SunInc leaders are driving.Sunwayians will bring it home.

From left to right:

Yau Kok SengManaging Director

Mark Victor RozarioFinance Director

Dato’ Chew Chee KinPresident

‘

’

We go BeyondBoundaries because...

Corporate Information

BOARD OF DIRECTORS

Executive Chairman, Non-Independent ExecutiveDirector

Tan Sri Dato’ Seri (Dr) Cheah Fook Ling

President, Non-Independent Executive DirectorDato’ Chew Chee Kin

Managing Director, Non-Independent ExecutiveDirector

Yau Kok Seng

Finance Director, Non-Independent Executive DirectorMark Victor Rozario

Non-Independent Non-Executive DirectorsDato’ Tan Kia LokeKwan Foh Kwai

Senior Independent Non-Executive DirectorWong Chin Mun

Independent Non-Executive DirectorsDatuk Low Seng KuanDatuk Abdul Malek Bin Abdul Aziz

AUDIT COMMITTEE

Wong Chin Mun (Chairman)Datuk Low Seng KuanDatuk Abdul Malek Bin Abdul AzizYau Kok Seng

MANAGEMENT COMMITTEE

Tan Sri Dato’ Seri (Dr) Cheah Fook Ling (Chairman)Dato’ Chew Chee KinDato’ Tan Kia LokeYau Kok SengMark Victor RozarioPuan Sri Datin Seri (Dr) Susan Cheah Seok Cheng

NOMINATION COMMITTEE

Wong Chin Mun (Chairman)Datuk Low Seng KuanDatuk Abdul Malek Bin Abdul Aziz

REMUNERATION COMMITTEE

Wong Chin Mun (Chairman)Datuk Low Seng KuanTan Sri Dato’ Seri (Dr) Cheah Fook Ling

EMPLOYEES’ SHARE OPTIONSCHEME COMMITTEE

Tan Sri Dato’ Seri (Dr) Cheah Fook Ling (Chairman)Dato’ Chew Chee KinDato’ Tan Kia LokeYau Kok Seng

RISK MANAGEMENT COMMITTEE

Yau Kok Seng (Chairman)Mark Victor RozarioKwan Foh KwaiWong Fook ChaiNg Boon LiangLeong Kai HongYap Chin LeongTeh Quen ChangWong Siew HoongNg Eng Lee

STRATEGIC DIRECTIONCOMMITTEE

Dato’ Chew Chee Kin (Chairman)Dato’ Tan Kia LokeYau Kok SengMark Victor RozarioKwan Foh KwaiWong Fook ChaiNg Boon LiangLeong Kai HongYap Chin LeongTeh Quen ChangWong Siew Hoong

COMPANY SECRETARIES

Puan Sri Datin Seri (Dr) Susan Cheah Seok Cheng(MIA 5601)

Tan Kim Aun (MAICSA 7002988)Lee Suan Choo (MAICSA 7017562)

REGISTERED OFFICE

Level 16, Menara SunwayJalan Lagoon TimurBandar Sunway46150 Petaling JayaSelangor Darul EhsanMalaysia

Tel No : (03) 5639 8889Fax No: (03) 5639 9507



Corporate Information (Cont’d)

SHARE REGISTRAR

Sunway Management Sdn Bhd (50661-X)

Level 16, Menara SunwayJalan Lagoon TimurBandar Sunway46150 Petaling JayaSelangor Darul EhsanMalaysia

Tel No : (03) 5639 8889Fax No: (03) 5639 9507

AUDITORS

PricewaterhouseCoopers Chartered Accountants

SOLICITORS

David Lingam & Co.Mah-Kamariyah & Philip Koh

PRINCIPAL BANKERS

HSBC Bank Malaysia BerhadMalayan Banking BerhadRHB Bank Berhad

STOCK EXCHANGE LISTING

Main Board of Bursa Malaysia Securities Berhad

WEBSITE ADDRESS

www.sunway.com.my

Corporate Profile

Sunway Holdings Incorporated Berhad (“SunInc”) strivesfor sustainable operational excellence.

SunInc is an investment holding company listed on theMain Board of Bursa Malaysia Securities Berhad since1984.

SunInc Group's major core businesses are construction,property development, trading and manufacturing,building materials and quarry.

These activities are mainly operated by a group ofcompanies namely:

� Sunway Construction Sdn Bhd ("SunCon"), one of thetop 3 construction companies in Malaysia,

� SunwayMas Sdn Bhd ("SunwayMas"), the propertyarm of SunInc Group,

� Sunway Marketing Sdn Bhd ("Sunway Marketing"),has international presence with offices throughout theregion,

� Sun-Block Sdn Bhd ("Sun-Block"), a market leader inbuilding materials,

� Sunway Keramo Sdn Bhd ("Sunway Keramo"),manufacturer of vitrified clay pipes that also lead theway in the market and

� Sunway Quarry Industries Sdn Bhd ("Sunway QuarryIndustries"), with its quarry operations in Malaysiawhilst, Sungei Way Ocean Joint Venture Ltd. andSunway Hatay Construction & Building Materials JVCo. Ltd. with their quarry and asphalt premixoperations in Vietnam.

Each of SunInc's subsidiary companies that consists ofvarious business divisions continue to strengthen andsynergise with each other. Today SunInc is part of TheSunway Group that is a vast, thriving conglomerate - onefortified with the foundation of strong public listedcompanies.

SunInc will always be an intrinsic part of the success ofThe Sunway Group as it continues to strive for sustainableoperational excellence.

Menara Sunway

Building Materials

Property Development

Quarry

Construction

Trading and Manufacturing

Group Corporate Structure


GopengBerhad*^

FortunaGembiraEnterprisSdn Bhd

Notes:This Group Corporate Structure excludesdormant and non-operating companies^ Public listed company# Overseas company* Associated company

SunwayConstruction

Sdn Bhd

Sun-Block Sdn Bhd

Sunway KeramoSdn Bhd

Sunway Pipeplus Technology Sdn Bhd

Sungei WayOcean JointVenture Ltd.#

SunwayMasSdn Bhd

MuhibbahPermai Sdn Bhd

Sunway QuarryIndustries Sdn Bhd

Sunway Marketing

Sdn Bhd

Sunway Enterprise

(1988)Sdn Bhd Sunway

HydraulicIndustriesSdn Bhd

SunwayMarketing (S)

Pte. Ltd.#

Sunway HotelHanoi Joint-

VentureCompany#

Sunway Credit & Leasing Sdn Bhd

Sunway Holdings

(Vietnam)Sdn Bhd

Sunway Shared Services Centre Sdn Bhd

Sunway RiskManagement

Sdn Bhd

SunwayManagement

Sdn Bhd

SunwayInfrastructure

Berhad*^

Sunway GlobalLimited#

Sunway HatayConstruction &

Building Materials JV Co. Ltd.#

Sunway Construction (India)Pte. Ltd.#

Sunway GD Piling Sdn Bhd

Sunway PrecastIndustries Sdn Bhd

Sunway ConstructionCaribbean Limited.#

Sunway CreativeStones Sdn Bhd

SunwayMachinery Sdn Bhd(formerly known as SWC Machinery Sdn Bhd)

SunwayConcrete

Products (S)Pte. Ltd.#

SunwayPiling

Sdn BhdPT Sunway-Yasa PMI Pile#

Sunway Marketing(Shanghai) Pte. Ltd.#

PT SunwayMarketing

Indonesia#

PT Trek Masindo#

Sunway Marketing(Thailand) Ltd.*#

Sunway ArchitecturalProducts Sdn Bhd

Buildtrend B.S.G.(M) Sdn Bhd*

Sunway Marketing (East Malaysia) Sdn Bhd

Sunway Hose Centre Sdn Bhd

SunwayBuilders Sdn Bhd

SunwayBuilding

Materials(Shanghai)Co. Ltd.#

SunwayBuilding

Materials(Dongguan)

Co. Ltd.#

SunwayHoston

(Zhuhai)Spun PileCo. Ltd.#

Sunway GDFoundationEngineering

Co. Ltd.#

Sunway Xin Long (Anhui)

Hydraulic Co. Ltd.#

Sunway Engineering Sdn Bhd


At a Glance *2006 #2004 2003 2002 2001RM ’000 RM ’000 RM ’000 RM ’000 RM ’000

OPERATING RESULTSRevenue 2,057,266 1,497,519 1,390,321 1,039,194 998,663Profit/(loss) from ordinary activities before tax 29,247 55,849 123,497 (145,535) (64,762)Tax expense (30,040) 1,874 (27,637) (9,823) 1,461(Loss)/profit after tax (793) 57,723 95,860 (155,358) (63,301)Minority interest (10,477) (18,424) (22,321) (31,435) 7,634Net (loss)/profit for the financial period/year (11,270) 39,229 73,539 (186,793) (55,667)

KEY BALANCE SHEET DATAProperty, plant and equipment 272,189 216,617 226,410 254,332 356,027Quarry development expenditure 1,165 0 0 0 0Investments 52,865 108,567 117,774 106,477 133,300ABS Notes and other investments 2,232 9,514 11,762 79,157 46,006Long-term debtors 10,366 38,473 76,708 83,587 86,890Land held for property development 66,935 70,943 84,572 87,288 0Goodwill 114,100 77,104 0 0 42,530Deferred tax assets 12,600 11,010 6,387 11,109 16,086Investment properties 0 0 0 13,329 13,898Current assets 1,383,260 1,224,891 1,075,394 993,797 1,200,483Total assets 1,915,712 1,757,119 1,599,007 1,629,076 1,895,220Current liabilities 852,153 1,044,203 1,026,119 969,430 901,152Non-current borrowings 407,964 49,009 51,538 73,380 167,867Deferred tax liabilities 17,546 15,074 18,622 18,709 23,537ABS Senior Notes 89,873 89,805 0 0 0Non-current bonds 0 0 63,884 202,191 256,109Total liabilities 1,367,536 1,198,091 1,160,163 1,263,710 1,348,665Total net assets 548,176 559,028 438,844 365,366 546,555Minority interest 27,579 17,012 134,653 140,309 131,813Shareholders’ equity 520,597 542,016 304,191 225,057 414,742

FINANCIAL RATIOSProfit/(loss) from ordinary activities

before tax to revenue (%) 1.42 3.72 8.88 (14.00) (6.48)Basic(loss)/earnings per share (sen) (2.09) 8.08 18.11 (46.12) (13.75)Dividends (sen) 0.00 5.00 0.00 0.00 0.00Market price (RM) 0.48 1.39 1.63 0.26 0.60Price-earnings ratio (times) (22.97) 17.20 9.00 (0.56) (4.37)Return on capital employed (“ROCE”) (%) 11.96 14.94 24.02 (10.83) (3.60)Gearing ratio (times) 0.89 0.82 0.94 1.66 1.27Net tangible assets per share (sen) 75.23 86.25 74.05 55.57 91.91Total asset turnover (times) 1.07 0.85 0.87 0.64 0.53Share capital 540,367 539,029 410,812 404,985 404,985

* 18 months ended 30 June 2006# Figures for the financial year ended 2004 have been adjusted and restated to conform to the changes in the presentation and to take into account

the adoption of IC 112, Consolidation Special Purpose Entities


Segmental Performance

0 500 1000 1500

*20061,271

163

312

103

160

0 200 400 600 800

2002683

94

134

105

0 200 400 600 800

2001650

109

124

92

0 200 400 600 800 1000 1200

#20041,055

150

194

88

0 200 400 600 800 1000 1200

20031,065

72

157

76

Construction



Building Materials

Quarry

Construction



Building Materials

Quarry

Revenue (RM million)

0 20 40 60 80

*200663

36

21

2

5

0 20 40 60 80 100

#200482

19

9

14

-30 -20 -10 0 10 20

2002

Basic Earnings/(Loss) Per Share (sen)

10

6

5

-19

0 20 40 60 80 100

200389

13

8

13

0 20 40 60 80 100

Net Tangible Assets Per Share (sen)

75.23

86.25

74.05

55.57

91.91

Profit/(Loss) from Operations (RM million)

-60 -40 -20-30-50 -10 0 10 20 30

*2006

2004

2003

2002

2001

*2006

2004

2003

2002

2001

0 0.5 1 1.5 2 2.5 3

Gearing Ratio (times)

0.89

0.82

0.94

1.66

1.27

*2006

2004

2003

2002

2001

8.08

-2.09

18.11

-46.12

-13.75

Price-Earnings Ratio (times)

-20 -15 -10 -5 0 5 1510 20

*2006

2004

2003

2002

2001

17.20

-22.97

9.00

-0.56

-4.37

-25

-30 -20 -10 0 10 20

2001

10

5

-17

-26

Financial Ratios

* 18 months ended 30 June 2006# Figures for the financial year ended 2004 have been adjusted and restated to conform to the changes in the presentation and to take into account

the adoption of IC 112, Consolidation Special Purpose Entities

2005/2006 Highlights13/01/2005SunInc made a comeback in thelocal quarry business via itsacquisition of the entire equityinterest in Setia Juta QuarryIndustries Sdn Bhd (now knownas Sunway Quarry Industries SdnBhd) that has a 5% market shareof the local quarry business. Itoperates 3 quarries and 5 pre-mix plants in Malaysia.

05/05/2005Sunway Construction CaribbeanLimited has been awarded acontract worth RM220.8 millionfrom Urban DevelopmentCorporation of Trinidad andTobago Ltd. This is for theproposed construction of the 22-storey Ministry of Legal AffairsTower.

12/05/2005SunCon has obtained aRM165.0 million sub-contractto build part of elevatedhighway in Kuala Lumpur. Thesub-contract is for a portion of the elevated highway fromJalan Tun Razak, Kuala Lumpur at Kampung Pandanroundabout to the Putrajayalink interchange in Putrajaya.

30/06/2005SunCon won 2 contracts inIndia totalling RM695.5 millionfrom the National HighwaysAuthority of India, to complete,upgrade and maintain anexisting carriageway in UttarPradesh and Rajasthan.

27/07/2005Puan Sri Datin Seri (Dr) SusanCheah of The Sunway Groupreceived the Asia HumanResource Development Congress2005 Award in the "Contributionto Society" category, based oncontributions on human resourcedevelopment, education andphilanthropic works.

08/08/2005YBhg Tan Sri Dato’ Seri (Dr)Cheah Fook Ling received theprestigious award of the MostInnovative Asia-Pacific ChineseEntrepreneur Award 2005 atthe Asia Pacific ChineseEntrepreneurial Leaders Forum.

19/09/2005SunCon accepted the letter ofaward for a contract worthRM119.2 million from SunwayCity Berhad (“SunCity”) for theproposed construction ofseveral campus buildings forMonash University SunwayCampus Malaysia Sdn Bhd.

25/11/2005SunCon was awarded “Builderof the Year” for the 2nd time bythe Construction IndustryDevelopment Board ofMalaysia, one of the mostprestigious categories amongthe Malaysian ConstructionIndustry Excellence Awards2005. The first win was in year2003.

20/12/2005Joint venture agreement betweenSunway Global Limited andZhuhai Hoston Special MaterialsCo. Ltd. to set up SunwayHoston (Zhuhai) Spun Pile Co.Ltd. (“Sunway Hoston”) toundertake the business ofdesigning, manufacturing andsale of Pretensioned SpunConcrete Piles.

30/12/2005SunCon accepted the letter ofaward for a contract worthRM90.3 million from SunwayCarnival Sdn Bhd for theproposed construction of ashopping complex at SeberangPerai Tengah.

04/01/2006Joint venture agreementbetween Sunway Property(China) Limited and GuangzhouCuihua Trade Co. Ltd. to set upSunway Cuihua (Guangzhou)Real Estate Development Co. Ltd. to undertake a realestate development project inHuadu District, Guangzhou,Guangdong, China.

16/01/2006SunCon had signed aconstruction contract worthabout RM54.9 million withZuellig Pharma Sdn Bhd for theproposed design, construction,completion and commissioningof a distribution warehouse andassociated facilities at BukitJelutong, Shah Alam, Selangor.

11/04/2006Ground breaking ceremony ofSunway Hoston in China is thebeginning of the strong alliancewith Sunway Global Limited’sstrategic partner, ZhuhaiHoston Special Material Co.Ltd., in spun pile technology.

05/05/2006SunInc entered into a strategicpartnership with GoldmanSachs Strategic Investments(Asia) L.L.C. taking a 20%stake in Sunway GlobalLimited, a maiden venture intobuilding materials andmanufacturing in China.

23/05/2006YBhg Tan Sri Dato’ Seri (Dr)Cheah Fook Ling received the prestigious award on the Corporate Governance“Malaysian Business CorporateGovernance Award 2005 –Merit Award” on behalf ofSunInc.

28/06/2006SunCon accepted the letter ofaward for a contract worthRM154.9 million from AstonStar Sdn Bhd for the executionand completion of buildingworks for basement B1 to B7for Solaris 2 Dutamas, locatedat Sri Hartamas, Kuala Lumpur.

15/07/2006Launch of The SunwayGroup’s new corporateidentity. This event wasofficiated by Dato’ Seri RafidahAziz. This new identitypromises a vibrant, dynamicand bold image.

14/08/2006Joint venture agreement withWuhu Xin Long Machinery Co.Ltd. to set up Sunway Xin Long(Anhui) Hydraulic Co. Ltd. toundertake the business ofproduction and sale ofautomotive parts, high pressurehydraulic steel pipes andflexible pipes, coupling andadapter.

17/01/2005The Sunway Group was thePlatinum sponsor at theMalaysia India EconomicConference 2005. SunCon has4 highway projects progressingsmoothly in Belgaum Bypass(18 km), Dharwad (62 km),Jharkand (78 km) and Varanasi(72 km).

20/05/2005SunCon was awarded RM181.0million contract from HaluanPrisma Sdn Bhd in relation tothe construction of theUniversiti Teknologi Mara’snew campus.

08/02/2006Memorandum of Understandingbetween Soma Developers,Soma Enterprise Limited,SunCity and SunCon for theproposed development andconstruction of a parcel of landlocated within the city fringes ofBangalore, India.

Calendar of Significant Events

546 days ofLeadership,Innovation,Corporate

Governanceand Social

Responsibility




Chairman’s Statement

Dear Shareholders,It is with pleasure that I report the performance of SunIncfor this financial period, with income from major newcontracts across our international businesses.

Our investments made in 2005/2006 demonstrated ourcommitment to growth through regional expansions.Individual business units have developed overseasstrategies and several have already established beachheadsin selected Asian markets.

In anticipation of rapid economic growth within thesemarkets, there will be abundant demand for thetechnology and expertise provided by the Group, drawingon the wealth of experience we have accumulated overthe last Malaysian construction boom period.

On the local front, it has been a challenging period and wehave consolidated our presence to reflect a leaner andmore efficient organisation.

Group Performance

As a result of the change of the financial year end, thefinancial statements for the current financial period of theGroup were drawn up for a period of 18 months ended 30June 2006 as compared to the period of 12 months inrespect of the previous financial year ended 31 December2004.

The Group’s revenue has surpassed the billion-ringgitmark, achieving RM2.1 billion for the 18 months'financial period. The Group achieved a revenue of RM1.5billion for the period of 12 months in 2004. The Grouphad registered a profit before tax of RM29.2 million in the18 months’ period, whilst the profit before tax in theprior year’s 12 months’ period was RM55.8 million. Forthe period under review, the revenue was mainlycontributed by the construction, property development,trading and manufacturing divisions.

Dividend

The Company has paid an interim gross dividend of 3 senper share less income tax of 28% and a final gross dividendof 2 sen per share less income tax of 28% for the financialyear ended 31 December 2004 (on 13 January 2005 and25 August 2005 respectively). No dividend has beenproposed or paid for the financial period ended 30 June2006.

Nevertheless, the Company has adopted a dividend policyand endeavours to declare a minimum of 2.5% grossdividend to its shareholders subject to availability ofdistributable reserves and tax credits to frank thedividends as well as the Company’s future cash flowrequirements.

Corporate Milestones

Our associated company, Sunway Infrastructure Berhad(“SunInfra”) had appointed Rating Agency MalaysiaBerhad ("RAM") to undertake an independent rating on

Chairman’s Statement (Cont’d)

the outstanding Al-Bai Bithaman Ajil Islamic DebtSecurities ("BaIDs"). RAM had issued a rating of B3 onthe BaIDs. In view of the revised rating of the BaIDswhich rendered it to be a non-investment grade, SunInfrahas appointed CIMB Investment Bank Berhad (formerlyknown as Commerce International Merchant BankersBerhad) as its financial adviser to look at the overallfinancial position of SunInfra and the possiblerestructuring of the BaIDs.

SunCon has outstanding order book of RM2.1 billion in2005/2006, with close to RM900 million in overseascountries. This further reinforces our reputation as aworld-class construction company for infrastructure and“design and build” projects.

Our core development to improve cost efficiency andoptimise resources is the Shared Services Centreinitiative. Over the years, this division has significantlycontributed to the Group’s goal of returning maximumvalue on our invested assets.

Human capital has been further enhanced with a recordnumber of trainings and human capital developmentinitiatives implemented throughout the year.

Strategic Thrusts

The Group continues to pursue contracts and establishenterprises in foreign countries. Early this year, the Grouppartnered with Goldman Sachs Strategic Investments(Asia) L.L.C. in a company with business investments inthe building, construction and manufacturing industries inChina. With our deeper presence in the Asian growthmarkets, I am confident that the Group will yieldimproved profits and returns to shareholders in thecoming years.

I envisage our widely publicised target of 40% overseasrevenue from the existing base of 10% to be realisedwithin the next 3 to 5 years.

Our success will be driven by our commitment toexcellence in delivering world-class products and serviceswithin each market.

Property development remains a profitable venture andwe will continue to seek landbanks in identified locationsthat deliver value to our customers.

The 9th Malaysia Plan is expected to boost theconstruction sector resulting in a growth of 3% this year.The allocation under the 9th Malaysia Plan is estimated tobe between RM150 billion and RM200 billion. Projectsinitiated through privately financed initiatives are alsoexpected to be quite significant. The Group expects to seesome new infrastructure and smaller-scale projects forrural development, as well as the continuation of projectsinitiated under the 8th Malaysia Plan.

Corporate Social Responsibility

We remain committed to a policy of continuousimprovement in applying sound safety and socialstandards in our dealings with all our stakeholders.

The Group contributes generously to charityorganisations such as the Malaysian Liver Foundation,Kiwanis, Malaysian Kidney Foundation and NationalArthritis Foundation. Our contributions go beyond plainfinancial support including volunteer manpower and theprovision of venues for the activities.

We have also embarked on a job placement project inwhich students with learning disabilities are given on-the-job training over 6 months to smoothen their transitioninto the workforce. The schools selected were pre-identified by the Ministry of Education.

In response to the Government’s call to rehabilitate ourenvironment, the Group in partnership with Alam Flora,has also embarked on a recycling project that has resultedin 313 tonnes of waste materials being processed. We arealso credited by being the first developer to be recognisedby the Ministry of Housing for our efforts.The project wasa joint effort together with the local Rotary Club, schoolsand resident associations.

With the hope of raising the quality of life among the lessfortunate, SunCon has carried out communityrefurbishment works in 3 selected homes. The recipientswere House of Joy, Praise Emmanuel Children’s Homeand Asrama Penyayang Nur Iman.

The management also actively supports the in-houserecreational club’s activities to carry out philanthropicactivities.

Corporate Governance

We are proud to maintain high standards of accountabilityand corporate governance by keeping abreast with thelatest developments in corporate transparency, satisfyingthe requisites of today’s increasingly sophisticatedinvestors.

With effect from 1 July 2006, the Group will prepare itsaccounts using Financial Reporting Standards (“FRS”).

Appreciation

I would like to welcome Datuk Abdul Malek Bin AbdulAziz as a member of the Board.

I wish to extend my gratitude to the Board of Directorsfor their commitment and contributions madethroughout the period. I would also like to thank all ofour colleagues for their untiring effort in propelling theGroup forward.

Yours Sincerely,

Tan Sri Dato’ Seri (Dr) Cheah Fook LingExecutive Chairman

12 October 2006



Penyata Pengerusi

Pemegang Saham yang Dihormati,

Dengan sukacitanya, saya ingin melaporkan prestasiSunInc bagi tempoh kewangan ini, dengan pendapatandaripada kontrak besar yang baru bagi semua perniagaanantarabangsa kami.

Pelaburan yang kami buat pada tahun 2005/2006membuktikan komitmen kami terhadap pertumbuhanmelalui perluasan serantau. Unit-unit perniagaan telahmenyusun strategi luar negeri dan beberapa unit sudahpun bertapak di beberapa pasaran Asia yang tertentu.

Dengan jangkaan pertumbuhan ekonomi yang pesat dipasaran-pasaran ini, permintaan yang tinggi turut dijangkabagi teknologi dan kepakaran yang disediakan olehKumpulan ini, yang diperoleh melalui pengalaman luasyang kami kumpul sepanjang tempoh pertumbuhan pesatyang lepas bagi sektor pembinaan di Malaysia.

Di pasaran tempatan pula, tempoh kewangan yang lepasmerupakan tempoh yang mencabar, dan kami telahmengukuhkan kedudukan kami untuk menampilkanorganisasi yang lebih kemas dan lebih cekap.

Prestasi Kumpulan

Oleh sebab tarikh bagi hujung tahun kewangan telahdiubah, penyata kewangan Kumpulan bagi tempohkewangan ini telah disediakan bagi tempoh 18 bulan yangberakhir pada 30 Jun 2006, dan bukan 12 bulan sepertibagi tahun kewangan lepas yang berakhir pada 31Disember 2004.

Hasil Kumpulan berjaya melepasi aras sebilion ringgitsehingga mencapai RM2.1 bilion bagi tempoh kewangan18 bulan ini. Sebagai bandingan, Kumpulan memperolehhasil RM1.5 bilion bagi tempoh 12 bulan tahun 2004.Kumpulan mencatatkan keuntungan sebelum cukaisebanyak RM29.2 bilion bagi tempoh 18 bulan ini,manakala keuntungan sebelum cukai bagi tempoh 12bulan sebelum itu ialah RM55.8 juta. Bagi tempoh yangditinjau ini, hasil diperoleh terutamanya daripadabahagian pembinaan, perdagangan dan pembangunanharta.

Dividen

Syarikat telah membayar dividen kasar interim sebanyak 3sen sesaham ditolak cukai pendapatan sebanyak 28% dandividen kasar akhir sebanyak 2 sen sesaham ditolak cukaipendapatan sebanyak 28% bagi tahun kewangan yangberakhir pada 31 Disember 2004, masing-masing pada 13Januari 2005 dan 25 Ogos 2005. Dividen tidakdicadangkan mahupun dibayar bagi tempoh kewanganyang berakhir pada 30 Jun 2006.

Namun demikian, Syarikat mengamalkan dasarpembayaran dividen dan berikhtiar untukmengisytiharkan dividen kasar sekurang-kurangnya 2.5%kepada pemegang sahamnya, sekiranya ada rizab bolehagih dan kredit cukai yang secukupnya untuk menjelaskan

cukai bayaran dividen dan memenuhi keperluan alirantunai Syarikat pada masa akan datang.

Peristiwa Penting Korporat

Syarikat sekutu kami, Sunway Infrastructure Berhad(“SunInfra”) telah melantik Rating Agency MalaysiaBerhad ("RAM") untuk menjalankan penarafan bebasterhadap Sekuriti Hutang Islam Al-Bai Bithaman Ajil (Al-Bai Bithaman Ajil Islamic Debt Securities atau “BaIDs”)yang belum lunas. RAM telah memberikan penarafan B3bagi BaIDs ini. Memandangkan penarafan BaIDs yangdiubah ini meletakkannya pada gred bukan pelaburan,SunInfra telah melantik CIMB Investment Bank Berhad(dahulu dikenali sebagai Commerce InternationalMerchant Bankers Berhad) sebagai penasihatkewangannya untuk mengkaji kedudukan kewanganSunInfra pada keseluruhannya, dan kemungkinanmenyusun semula BaIDs.

SunCon berjaya memperoleh pesanan semasa berjumlahRM2.1 bilion pada tahun 2005/2006, dengan hampirRM900 juta di negara-negara asing. Ini memantapkan lagireputasi kami sebagai syarikat pembinaan bertaraf duniabagi projek infrastruktur dan projek reka bentuk dan bina.

Inisiatif Pusat Perkhidmatan Kongsi merupakan usahateras kami untuk memperbaiki kecekapan dari segi kosdan mempergunakan sumber dengan sebaik-baiknya.Sepanjang tahun-tahun yang berlalu, bahagian inimenyumbang dengan banyaknya ke arah mencapaimatlamat Kumpulan untuk mendapatkan pulanganmaksimum daripada aset pelaburan kami.

Modal manusia diperkasa lagi dengan bilangan tinggilatihan dan inisiatif pembangunan modal manusia yangdilaksanakan sepanjang tahun yang lepas.

Teras Strategi

Kumpulan ini terus berusaha untuk mendapatkan kontrakdan menubuhkan perusahaan di negara-negara asing. Padaawal tahun ini, Kumpulan menjalinkan perkongsiandengan Goldman Sachs Strategic Investments (Asia)L.L.C. dalam syarikat yang membuat pelaburanperniagaan dalam industri pembangunan, pembinaan danperkilangan di negara China. Dengan penglibatan kamiyang lebih ketara di pasaran-pasaran Asia yang sedangberkembang maju, saya yakin bahawa Kumpulan ini akanmemperoleh keuntungan yang lebih besar danmemberikan pulangan yang lebih lumayan kepadapemegang saham pada tahun-tahun yang akan datang.

Saya menjangka bahawa sasaran kami yang telahdihebahkan dengan luasnya untuk meningkatkan hasilluar negeri kepada 40% daripada nilai dasar 10% padamasa ini akan dicapai dalam masa 3 hingga 5 tahun lagi.

Kejayaan kami akan didorong oleh komitmen kamiterhadap kecemerlangan dalam menyediakan produk danperkhidmatan bertaraf dunia di setiap pasaran.

Penyata Pengerusi (Sambungan)

Pembangunan harta tetap menjadi usaha niaga yangmenguntungkan, dan kami akan terus mencari simpanantanah di lokasi-lokasi yang telah dikenal pasti, yangmampu memberikan nilai kepada para pelanggan kami.

Rancangan Malaysia Ke-9 dijangka akan memajukansektor pembinaan sehingga mencapai pertumbuhan 3%pada tahun ini. Peruntukan di bawah Rancangan MalaysiaKe-9 ini dianggarkan antara RM150 bilion hingga RM200bilion. Agak banyak projek juga dijangka akan dijalankanmelalui inisiatif yang dibiayai oleh pihak swasta.Kumpulan ini berharap untuk menyaksikan beberapaprojek infrastruktur yang baru dan projek kecil-kecilanbagi pembangunan luar bandar, di samping penerusanprojek-projek yang telah dimulakan di bawah RancanganMalaysia Ke-8.

Tanggungjawab Sosial Korporat

Kami tetap komited terhadap dasar peningkatanberterusan apabila mengamalkan piawaian keselamatandan sosial yang baik dalam urusan kami dengan pihak-pihak berkepentingan.

Kumpulan ini menyumbang dengan banyaknya kepadaorganisasi amal seperti Yayasan Hepar Malaysia, Kiwanis,Yayasan Buah Pinggang Malaysia dan Yayasan ArtritisKebangsaan. Sumbangan kami tidak sekadar berupabantuan kewangan semata-mata, tetapi juga merangkumitenaga sukarelawan dan tempat untuk mengadakanaktiviti.

Kami juga telah memulakan projek penempatanpekerjaan yang memberikan latihan sambil bekerja selama6 bulan kepada para pelajar yang mempunyai dayapembelajaran yang lemah, untuk memudahkan prosesperalihan mereka apabila menyertai tenaga kerja. Sekolah-sekolah yang terpilih telah dikenal pasti oleh KementerianPendidikan.

Sebagai menyahut seruan Kerajaan untuk memulihkanalam sekitar kita, Kumpulan ini memulakan projek kitarsemula dengan kerjasama Alam Flora, dan melalui projekini, 313 tan bahan buangan telah pun diproses. Kami jugamerupakan pemaju pertama yang diiktiraf olehKementerian Perumahan atas usaha kami ini. Projek inidijayakan melalui usaha sama dengan Kelab Rotary,beberapa sekolah dan beberapa persatuan penduduk.

Dengan harapan untuk meningkatkan mutu hidup dikalangan golongan yang kurang bernasib baik, SunConmenjalankan kerja pembaharuan komuniti di 3 asrama.Penerimanya ialah House of Joy, Praise EmmanuelChildren's Home dan Asrama Penyayang Nur Iman.

Pihak pengurusan juga menyokong kelab rekreasi Syarikatdalam melaksanakan aktiviti derma.

Tadbir Urus Korporat

Kami berasa bangga kerana mampu mengekalkan tarafkebertanggungjawaban dan tadbir urus korporat yangtinggi, dengan mengikuti perkembangan terkini dari segiketelusan korporat, di samping memenuhi keperluan parapelabur yang semakin bijaksana hari ini.

Mulai 1 Julai 2006, Kumpulan akan menyediakanakaunnya dengan menggunakan Piawaian PelaporanKewangan (Financial Reporting Standards atau ‘FRS’).

Penghargaan

Saya ingin mengalu-alukan penyertaan Datuk AbdulMalek Bin Abdul Aziz dalam Lembaga Pengarah kami.

Saya juga ingin melahirkan penghargaan saya kepadaLembaga Pengarah atas komitmen dan sumbanganmereka sepanjang tempoh yang ditinjau ini. Akhir kata,terima kasih kepada semua rakan kerja atas usaha andayang tidak mengenal penat dalam memarakan Kumpulanini.

Yang Ikhlas,

Tan Sri Dato’ Seri (Dr) Cheah Fook LingPengerusi Eksekutif

12 Oktober 2006


Managing Director’s Review

The current year is an eventful one for SunInc. TheGroup has acted on several initiatives in efforts toreinvent its business operations while keeping true to itscore competencies. We have experienced some measureof success in these endeavours. However, while there aremany reasons to be optimistic, there remain severalchallenges to meet and hurdles to overcome.

SunInc continues to focus on its core businesses ofconstruction, property development, trading andmanufacturing, building materials and quarry which aresynergistically linked to one another. This allows focus ofmanagement attention on specific areas and the furtherdevelopment of expertise in our business operations withminimum disruption. Although the business environmentwe operate in is rapidly changing, our extensive customer,supplier and partnership networks make it possible toreact flexibly and quickly.

As SunInc’s main competence areas have long beendefined, it has achieved a strong position in the markets itoperates in. It now aims to expand this further into theinternational arena. The Group has decided to implementa two-pronged growth strategy by organically growing itslocal operations and by investing and expanding overseas.New investments overseas will be spearheaded bybusinesses within our core competencies. This enables usto tap into burgeoning opportunities provided by highgrowth economies in selected countries. At the sametime, our local operations will provide a measure of

stability and a foundation for the development oftechnology, skilled expertise and operational efficiency.

In the current financial period, SunInc Group continuedto develop its business operations with generallysatisfactory results. Profits in the trading andmanufacturing and property development divisionsimproved while the construction and building materialsdivisions saw a reduction in profits as a consequence ofthe slowdown in the local construction industry. Thisfinancial period also saw the SunInc Group back into thequarry industry after an absence of 6 years, withacquisitions of 5 quarries in West Malaysia.

SunInc’s aim is controlled growth. It aims to offerinvestors a steadily growing return over a medium term. Itbelieves the key to this objective is controlled risk-takingand focused operations that will offer a basis for a stablecash flow and a consistent ability to earn profits.

SunCon, SunInc’s wholly-owned subsidiary, is alreadyknown as one of the leading construction companies inMalaysia. As it is armed with an impressive track record,it took the bold move of securing sizable contracts inseveral countries, notably in India, Abu Dhabi and as far asTrinidad and Tobago in the Caribbean. The strategy issimilarly adopted through our other business operationssuch as the building materials division with investments intrading and manufacturing operations in China.

Kuala Lumpur Convention Centre


Managing Director’s Review (Cont’d)

Particular attention is given to our businesses in India andChina as the bulk of our foreign investments have beendirected to these 2 countries. We believe that its rapideconomic growth and huge markets offer SunInctremendous opportunities for profit. To better focus our

operations and planning for investments in that country,we have placed our China business operations into adedicated subsidiary incorporated in Hong Kong, calledSunway Global Limited. We intend to use our knowledgeof the relevant technologies, combined with the low costresource environment in China and our extensiveinternational market network to give us an edge in

achieving a frontrunner position quickly. SunInc needs tobe open-minded to increase the chances of its success inthese endeavours. Towards this objective, a strategicpartnership with Goldman Sachs Strategic Investments(Asia) L.L.C. was established through its subscription of a20% equity stake in Sunway Global Limited. Thispositions the company for growth and expansion in Chinain the near future.

While we plan for the continued growth for the SunIncGroup, a major challenge continues to demand ourattention. This being the proposed restructuring orsettlement of the outstanding Al-Bai Bithamam AjilIslamic Bonds (“BaIDs”) issued by Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd, the wholly-owned subsidiaryof our associated company, SunInfra. SunInfra is presentlyexploring various options to seek a settlement proposal forthe outstanding BaIDs that would be acceptable to allparties.

SunInc intends to further develop its business operationsboth locally as well as overseas with the overall objectiveof achieving profit growth and enhancing shareholders’value. Towards this, it continues to explore new businessventures and markets. It will continue to seek strategicpartnerships to invest in high growth industries andeconomies on an international scale.

Yau Kok SengManaging Director

Signing ceremony for joint venture with Wuhu Xin Long Machinery Co.Ltd. to set up Sunway Xin Long (Anhui) Hydraulic Co. Ltd., Anhui China.

Venetian Resorts Project Site, Macau.


Amidst a contracting domestic construction industry,rising interest rates, escalating raw materials costs andadoption of new financial reporting guidelines, SunIncGroup posted a net loss of RM11.3 million on revenue ofRM2.1 billion for the 18 months’ financial period ended30 June 2006. Profit from operations for the period stoodat RM123.3 million (2004: RM98.8 million) but wasadversely affected by major non-recurring expenses.

These include the impairment of assets held for resaleproperties, plant and equipment of RM8.4 million andprovision for diminution in value of investment inSunInfra of RM14.8 million. Notwithstanding the effectof these items, the Group would have reported profitfrom operations of RM146.5 million.

Finance Director’s Review

CONSOLIDATED INCOME STATEMENTS

18 months 12 months 2006 2004

RM million RM millionRevenue 2,057 1,497Cost of sales (1,667) (1,207)

Gross profit 390 290Other operating income 48 19Operating expenses (291) (201)Impairment losses (24) (9)

Profit from operations 123 99Finance cost (54) (27)Share of results of associated companies (40) (16)

Profit from ordinary activities before tax 29 56Tax expense (30) 2

(Loss)/profit after tax (1) 58Minority interest (10) (19)

Net (loss)/profit for the financial period/year (11) 39

Basic (loss)/earnings per share (sen) (2.09) 8.08Operating profit margin 6% 7%Profit from ordinary activities before tax over revenue 1% 4%Net (loss)/profit over revenue (1%) 3%

SEGMENTAL FINANCIAL REVIEW

The construction division’s profits were comparativelylower than that reported in the previous financial year asmost of the current projects are in the early stages ofcompletion. Therefore, profits had not been recognised asthe percentage of completion was below the recognitionthreshold.

Year 2005 was a challenging period for the Malaysianconstruction industry with the sector shrinking 1.6%. Theperformance of the Group’s construction and buildingmaterials divisions deteriorated in tandem with the overallmarket sentiment. Nonetheless, the Group’s constructionarm remained profitable and reported profit fromoperations of RM62.8 million on the back of revenue ofRM1.3 billion (2004: RM82.3 million and RM1.1 billion).

* 18 months ended 30 June 2006


competitive domestic environment and a growing numberof opportunities abroad afforded by the strengtheningSunCon brand.

Disregarding the temporary setbacks of the 2 divisions,stellar performances were exhibited by the trading andmanufacturing as well as the property developmentdivisions. The trading and manufacturing divisionregistered profits from operations of RM20.7 million onrevenue of RM312.1 million (2004: RM9.1 million andRM194.0 million). On an annualised basis, profit fromoperations surged 51.6% and revenue was up by 7.3%.The improved performance is largely the product of thedivision’s successful overseas market penetration strategyespecially to Singapore, China and Indonesia with 39.5%of the division’s profits derived from these foreignsubsidiaries.

Meanwhile, the property development division notchedrevenue of RM163.0 million and profit from operations ofRM36.4 million for financial period 2006 (2004:RM149.9 million and RM18.5 million). On an annualisedbasis, the increase in profit from operations was acommendable 31.2% mainly riding on the success of newlaunches in Sunway Batu Caves and Bangi Town Center.

In the period under review, the Group had re-entered thequarrying industry in Malaysia via the acquisition ofSunway Quarry Industries Sdn Bhd. The newly acquiredcompany contributed favourably to the Group’s results bygenerating revenue of RM159.7 million and profit fromoperations of RM4.7 million. With the Group planningnew quarry operations both locally and abroad, thisdivision is expected to be a major future growth engine.

The Group’s associated company, SunInfra incurredfurther losses for the financial period ended 2006 with theGroup sharing losses of RM43.9 million. As part of theefforts to improve the performance of SunInfra, theGroup has hired a prominent consulting firm to advise onthe restructuring of SunInfra and is in the final stages ofnegotiations with bondholders.

Despite the competitive environment, the constructiondivision had remained resilient and managed to securenew projects amounting to RM2.1 billion during thefinancial period. With an outstanding order book as at 30June 2006 of RM2.1 billion, the division is expected tocontinue to perform well in the coming years.

Due to the strong correlation with the constructionindustry, the Group’s building materials division similarlyreported lower profits of RM2.3 million on revenue ofRM102.7 million (2004: RM13.7 million and RM88.3million). The division suffered from a combination oflower demand due to sluggish construction activities andhigher raw materials costs resulting from higher crude oilprices. The Group had, in the financial period, alsoincurred substantial relocation costs to transfer twoInterlocking Concrete Pavers (“ICP”) manufacturingplants to Dongguan and Shanghai as part of the Group’splan to diversify operations geographically. Furthermore,significant costs were incurred to set up a spun pilemanufacturing facility in Zhuhai, China. The Groupopines that there is a huge untapped market for both ICPand spun piles in China and the Group foresees theseoperations to demonstrate robust growth in years tocome.

In the nearer future, the Group anticipates performanceof both construction and building materials divisions toimprove with new construction projects being rolled outunder the 9th Malaysia Plan and Private FinanceInitiatives (“PFI”). Budget 2007 had already allocatedRM27.5 billion for projects under the 9th Malaysia Planwith PFI projects valuing RM4.0 billion expected to takeoff simultaneously. The Group eagerly awaits theimplementation of the 9th Malaysia Plan and PFI projectsas they are widely expected to be the catalysts to revivethe flagging construction and other related industries.Moving forward, it is also envisioned that a significantproportion of the construction division’s revenue will bederived from overseas ventures in view of the increasingly

Finance Director’s Review (Cont’d)


Finance Director’s Review (Cont’d)

CONSOLIDATED CASH FLOW STATEMENTS

18 months 12 months 2006 2004

RM million RM millionCash from operations 188 (4)Tax paid (36) (24)Tax refund 9 22Interest received 4 5Dividends received from other investments 0 1

Net cash flow from operating activities 165 0Net cash flow from investing activities (105) (131)Net cash flow from financing activities 22 133

Net increase in cash and cash equivalents 82 2

Early Adoption of IC 112, Consolidation-Special Purpose Entities

In accordance with the Group’s policy of promotingbetter corporate governance and accountability toshareholders, the Group has chosen to early adoptfinancial reporting guidelines that are expected to have amaterial impact on the Group’s financial performance. Aconsequence of this policy was the adoption of ICInterpretation 112, Consolidation – Special PurposeEntities (“IC 112”) for the financial period 2006, inadvance of regulatory requirements.

In 2004, the Group completed an asset-backedsecuritisation exercise involving the disposals of the entireequity interest of Coral White Sdn Bhd (“CWSB”), awholly-owned indirect subsidiary of the Group, and aportfolio of commercial and residential properties to ABSLand & Properties Berhad (“ALP”) for a total saleconsideration of RM205.6 million which was satisfied byRM84.3 million cash and the issuance of RM121.3million nominal value of subordinated class asset-backedsecuritisation notes.

Under the definitions set forth in IC 112, ALP is deemedto have met the definition of a “Special Purpose Entity”and is to be considered as part of the Group. Accordingly,ALP’s results were consolidated and this resulted in aprior year adjustment of RM39.4 million arising mainlyfrom the reversal of gains recognised on disposal of theassets to ALP and consolidation of prior year ALP losses.

Investment in Sunway Global Limited byGoldman Sachs Strategic Investments(Asia) L.L.C. (“Goldman Sachs”)

A notable development in the year was the acquisition ofa 20% stake by Goldman Sachs, a subsidiary of GoldmanSachs Group Inc. in Sunway Global Limited, the holdingcompany for the Group’s China investments. The alliancewith Goldman Sachs, who already has a strong businesspresence in various industries in China, would benefit theGroup by providing access to financial resources, businessnetworks and human capital.

The increase in cash generated from operations wasprimarily due to the improved collection from customersand settlement of long outstanding debts.

The net cash outflow from investing activities wasprimarily due to the acquisition of Sunway QuarryIndustries with a cash consideration of RM54.9 million aswell as capital expenditure incurred for the Group’sexpansion to China.

As for financing activities, the Group obtained asyndicated term loan facility of RM360 million from aconsortium of banks in early 2005. Proceeds from thefacility were used to restructure the Group’s short-term

CASH FLOW STATEMENTS REVIEWborrowings to a 6-year repayment term. In addition,Goldman Sachs granted RM25 million borrowingsspecifically for our investments in China. As at the end offinancial period 2006, the Group’s gearing ratio edged upto 0.89 times compared to 0.82 times in 2004, mainly asa consequence of reconsolidation of borrowings of ALP.

Mark Victor RozarioFinance Director


Economic Review

Construction Sector

The development expenditure in 2006 that coincideswith the first year of the 9th Malaysia Plan has beenbudgeted at RM33.5 billion, up 9.8% from RM30.5billion in 2005.

There is a sense of gradual shift in the Government’s focusfrom predominantly small-scale projects, to a combinationof small-scale and mid-sized projects. In the 2006 Budgetannounced in end-September 2005, for instance, a heftysum of RM1.9 billion has been allocated for“environmental preservation projects consisting of worksin relation to the prevention of coastal erosion, drainageand flood mitigation, improvement of river and riverestuaries, repair and construction of sewerage plants, andsolid waste management.” The mid-sized segment iswhere the big boys will dominate and could walk awaywith more decent margins.

After 2 consecutive years of decline, the constructionsector is expected to turn around and register a positivegrowth of 1%, led mainly by the improvement in the civilengineering sub-sector. The civil engineering sub-sectorwould be supported by higher construction activity in theoil and gas industry as well as in public projects with thecommencement of new projects under the 9th MalaysiaPlan. Meanwhile, the residential and non-residential sub-sectors are expected to expand further supported by theattractive financing conditions and brisk business

activities. The residential sub-sector is expected to expandat a moderate rate following the strong expansion in thelast few years, while the non-residential segment wouldcontinue to improve, benefiting from the favourablebusiness environment which has resulted in highoccupancy rates of retail and office space.

(Source: RHB 2006 Market Outlook and Strategy)

However, the outlook for the 9th Malaysia Plan 2006 to2010 is much better. The construction industry isexpected to grow by an average of 3.5% per annum ascompared to only 0.5% in the 8th Malaysia Plan.

With the RM220 billion allocated under the 9th MalaysiaPlan for overall development, there are encouraging signsthat the construction industry will be stimulated toexpand at an even faster pace.

The Government’s policy to step up the progress in theapplication of Industrial Building System will also add tothe momentum of expansion in the construction industry.SunInc will have to be proactive and to fully utilise theopportunities that are provided under the 9th MalaysiaPlan.At the same time, SunInc will have to take advantageof the challenges and opportunities abroad to benefit onall fronts.

Indeed, SunInc will have to increasingly think and actglobal in order to progress more purposefully.

Ministry of Finance, Putrajaya


Motivating Leadership

One of SunInc’s core values is motivatingleadership, whereby we believe in leading byexample, driving positive efforts and maintainingclear focus on excelling in all our core businesses.The key role of the Board of Directors is tomotivate and lead the management tocontinuously enhance stakeholders’ value.

From left to right: Kwan Foh Kwai, Dato' Tan Kia Loke, Yau Kok Seng, Datuk Low Seng Kuan, Wong Chin Mun, Tan Sri Dato' Seri (Dr) Cheah Fook Ling,Datuk Abdul Malek Bin Abdul Aziz, Dato' Chew Chee Kin, Mark Victor Rozario.


Profile of Board of Directors

Tan Sri Dato' Seri (Dr) Cheah Fook Ling Executive Chairman, Non-Independent Executive DirectorMalaysian

Founder of The Sunway Group and Chairman of SunInc, SunCity and SunInfra which are a conglomerate of companies thatare listed individually on the Main Board of Bursa Malaysia Securities Berhad.

Aged 61 and a Certified Practising Accountant by profession, he was appointed a Board Member of Financial ReportingFoundation by the Minister of Finance in July 1997. Sits on the Board of The National Kidney Foundation and the Boardof Trustees of Malaysian Liver Foundation. In 1995, appointed a Member of Malaysian Business Council and in 1996, washonoured with the Chairmanship of Malaysian Industry-Government Group for High Technology (“MIGHT”) forConstruction and Housing, besides the accolade of Property Man of the Year (Malaysia) in 1993 and CEO of the Year(Malaysia) in 1996. The Minister of Tourism Malaysia appointed him an EXCO Member to Malaysian Tourism ActionCouncil. In recognition of his outstanding contribution to education, the Minister of Education appointed him to the HigherEducation Council in 1998. Was conferred Honorary Doctorates by 8 leading universities worldwide and in September2006, was appointed as the Foundation Chancellor of Sunway University College by His Royal Highness Sultan of Selangor.

Appointed to the Board of SunInc on 29 December 1979 and also serves as Chairman of the Management and Employees'Share Option Scheme (“ESOS”) Committees and a Member of the Remuneration Committee.

Current directorships in other public companies include SunCity, SunInfra and Federation of Public Listed CompaniesBerhad.

Attended 7 out of the 8 Board Meetings held in the financial period.

Dato' Chew Chee Kin President, Non-Independent Executive Director Malaysian

Aged 60 and graduated with a Bachelor of Economics (Honours) Degree from University of Malaya. Attended the Programin Management Development (“PMD”) at the Harvard Business School in 1980.

Joined SunInc in 1981 as Group General Manager (Operations) and was promoted to Deputy Group Managing Director(Operations) in 1989. In 1995, was promoted to Group Managing Director and to Group President in 1999. Prior to joiningSunInc, was the General Manager of UMW (Malaya) Sdn Bhd where he had first joined as a Trainee Executive. Has morethan 20 years' experience in general management, quarrying, construction, building materials, trading and manufacturingbusinesses.

Appointed to the Board of SunInc on 14 July 1983 and also serves as Chairman of the Strategic Direction Committee anda Member of the Management and ESOS Committees.

Current directorship in other public company includes Gopeng Berhad.

Attended all of the 8 Board Meetings held in the financial period.


Profile of Board of Directors (Cont’d)

Yau Kok Seng Managing Director, Non-Independent Executive DirectorMalaysian

Aged 46 and a Chartered Accountant by profession with more than 20 years of experience in auditing, accounting, corporatefinance and general management. Prior to joining SunInc, was with Ernst & Young, an international accounting firm, wherehe qualified as a Certified Public Accountant. In 1988, was posted to its London office for 3 years.

Joined SunInc as Head of Corporate Finance in 1992 and was subsequently promoted as Group Finance Director in 1995.In April 2001, was promoted as Managing Director of SunInc.

Appointed to the Board of SunInc on 1 September 1995 and also serves as Chairman of the Risk Management Committeeand a Member of the Management, ESOS, Audit and Strategic Direction Committees.

Current directorships in other public companies include SunInfra, Gopeng Berhad and Federation of Public ListedCompanies Berhad.


Mark Victor Rozario Finance Director, Non-Independent Executive DirectorMalaysian

Aged 42 and a Chartered Accountant by profession with 20 years of experience in auditing, accounting and corporatefinance.

After obtaining a BSc (Econs) from the London School of Economics, joined KPMG Peat Marwick, London where hequalified as a Chartered Accountant and worked for 5 years in a Banking and Finance audit department. In 1991, joinedthe internal audit division of the Paris headquarters of Schlumberger Limited, a global oilfield services group. His lastposition in Schlumberger was the Financial Controller of the East Asia Division before joining SunInc in 1997.

Represents Federation of Public Listed Companies in several working groups of the Malaysian Accounting Standards Board.A Member of the Malaysian Institute of Accountants and a Fellow of the Institute of Chartered Accountants in England andWales.

Prior to appointment as Finance Director of SunInc, was the Senior General Manager - Group Finance and Treasury.

Appointed to the Board of SunInc on 1 March 2002 and also serves as a Member of the Management, Risk Managementand Strategic Direction Committees.

Has no directorships in other public companies.


Dato' Tan Kia Loke Non-Independent Non-Executive DirectorMalaysian

Aged 56 and attained a Bachelor of Science (Honours) Degree in Civil Engineering from University of Strathclyde, UnitedKingdom in 1977. A Registered Professional Engineer with the Board of Engineers, Malaysia, a Fellow of the Institute ofEngineers, Malaysia and Honorary Advisor of the Master Builders Association of Malaysia.

Joined SunCon in 1981 as Project Manager to spearhead the formation of the construction arm within the SunInc Groupand has now more than 28 years' experience in the construction industry.

Appointed to the Board of SunInc on 15 February 1993 and also serves as a Member of the Management, ESOS andStrategic Direction Committees.

Current directorships in other public companies include SunInfra and Malaysian South-South Corporation Berhad.




Kwan Foh Kwai Non-Independent Non-Executive DirectorMalaysian

Aged 54 and holds a Bachelor of Engineering (Civil) (Honours) Degree from University of Malaya in 1977, and is the VicePresident of the Master Builders Association of Malaysia.

Began his career as a contract engineer with the Department of Public Works, Ministry of Works for 3 years and was attachedto the East-West Highway project. He then moved to Promet Construction Sdn Bhd as a Site Manager. Following this, hejoined Alam Baru Sdn Bhd, a Class "A" Contractor as General Manager. Joined Taisei Corporation of Japan in 1986 and hislast position was General Manager of Taisei (Malaysia) Sdn Bhd.

On 1 October 1996, joined SunCon as an Executive Director. In June 2001, was promoted to Managing Director ofSunCon, which has now been delisted from Bursa Malaysia Securities Berhad and converted to a private limited company.

Appointed to the Board of SunInc on 8 January 2004 and also serves as a Member of the Risk Management and StrategicDirection Committees.

Has no directorships in other public companies.

Attended 7 out of the 8 Board Meetings held in the financial period.

Wong Chin Mun Senior Independent Non-Executive DirectorMalaysian

Aged 62 and graduated with Bachelor of Business (Accounting) Degree and Bachelor of Business (SecretarialAdministration) Degree from Curtin University, Australia in 1972. A Fellow of the Australian Society of Certified PractisingAccountants and Chartered Secretaries and Administrators (UK). Also a Member of the Malaysian Institute of Accountants.Attended the Senior Executives Program at International Management Imede Development (“IMD”) at Lausanne,Switzerland in 1982. Also attended JUSE International Program for TQC for Top Management in Tokyo by Japanese Unionof Scientists and Engineers in 1993.

Joined Nylex (Malaysia) Berhad ("Nylex") as the Financial Controller/Company Secretary in January 1976 and became thefirst local General Manager/Director of Nylex in 1980. Was promoted to the position of Managing Director in 1985 and leftNylex at the end of June 1994 to found TEC Asia Centre, an international organisation which aims to help Chief ExecutiveOfficers manage change and grow their businesses. Had served on the Board of Trustees of the Malaysian Rubber ExportPromotion Council from 2000 to 2002.

Appointed to the Board of SunInc on 8 September 1994 and also serves as Chairman of the Audit, Nomination andRemuneration Committees. Appointed as the Senior Independent Non-Executive Director on 6 August 2001.

Current directorship in other public company includes Esthetics International Group Berhad.




Datuk Low Seng Kuan Independent Non-Executive DirectorMalaysian

Aged 59 and a Chartered Accountant by profession. A Member of the professional accountants' organisation, the MalaysianInstitute of Accountants and has more than 30 years' experience in the manufacturing industry. Graduated from FootscrayInstitute of Technology (Victoria University) in Business Studies (Accountancy) and the Royal Melbourne Institute ofTechnology (“RMIT”) in Industrial Accountancy.

Currently, the Executive Director of Malaysian Sheet Glass Sdn Bhd. Serves on the board of a number of private andgovernment-linked corporations. Former President of the Federation of Malaysian Manufacturers (“FMM”) and is currentlythe Vice-President. Under the FMM, he is Chairman of TradeNex.com (involving in information communicationtechnology) and the FMM Institute of Manufacturing (involving in the training and education). Also a Member of theNational Economic Action Council (“NEAC”), the National Economic Consultative Council II (“NECC II”) and MalaysianIndustrial Development Authority (“MIDA”).

Appointed to the Board of SunInc on 12 April 2001 and also serves as a Member of the Audit, Nomination andRemuneration Committees.

Current directorships in other public companies include Pos Malaysia Berhad, Rosettanet Malaysia Berhad and LogosInstitute Berhad.


Datuk Abdul Malek Bin Abdul AzizIndependent Non-Executive DirectorMalaysian

Aged 69 and graduated with a LLB (Honours) Degree from University of Singapore. Retired as a Superscale "A" SeniorDeputy Secretary-General in the Prime Minister's Department in the year 1991 and had recently retired as the Chairmanof Konsortium ABASS Sdn Bhd.

Appointed to the Board of SunInc on 13 March 2006 as Independent Non-Executive Director and also serves as a Memberof the Audit and Nomination Committees.

Current directorships in other public companies include Negara Properties Berhad, Linear Corporation Berhad and NCBHoldings Berhad.

Attended 1 Board Meeting held in the financial period since his appointment.

NOTES:1. Family Relationship with Director and/or Major Shareholder

None of the Directors has any family relationship with any director and/or major shareholder of SunInc.

2. Conflict of Interest(a) Tan Sri Dato' Seri (Dr) Cheah Fook Ling is a Director and Major Shareholder of SunCity Group, whose principal activity is property development.

He has deemed interest in SunwayMas and its subsidiaries via SunInc, which are involved in the similar business as SunCity Group.

(b) Dato' Chew Chee Kin is a Director and shareholder of SunInc. He is also a Director and shareholder of Sunway Global Limited, a 60% ownedsubsidiary of SunInc, whose principal activity is investment holding and provision of management services.

(c) Yau Kok Seng is a Director and shareholder of SunInc. He is also a Director and shareholder of Sunway Global Limited, a 60% owned subsidiaryof SunInc, whose principal activity is investment holding and provision of management services.

(d) Mark Victor Rozario is a Director and shareholder of SunInc. He is also a Director and shareholder of Sunway Global Limited, a 60% ownedsubsidiary of SunInc, whose principal activity is investment holding and provision of management services.

Save as disclosed, none of the other Directors has any conflict of interest with SunInc Group.

3. Conviction for OffencesNone of the Directors has been convicted for offences within the past 10 years other than traffic offences, if any.

4. Attendance of Board MeetingsThe attendance of the Directors at Board of Directors' Meetings is disclosed in the Corporate Governance Statement.


Innovative Productsand Services

Kuala Lumpur Convention Centre


Construction

Kuala Lumpur Convention and Exhibition Centre,

Malaysia.

22-storey Ministry of Legal Affairs Tower,

Trinidad and Tobago.

4 laning of Km 495 to Km 515 including Belgaum

Bypass of NH-4 in the Stateof Karnataka, India.

"Our passion to deliver total solutions sets us apartfrom the competition. As we embrace an ever-changingenvironment and expanding our business globally, wereckon the importance of a lean learning culture tocontinuously improve our business processes whichultimately translates into improved returns to ourshareholders. That remains our forte in today'schallenging business world.1"

Growth Drivers:

� The commitment to the pursuit of all-rounded managementexcellence in construction from professionalism, innovationand dedication to responsible corporate citizenship.

� Despite a decline in the availability of local constructionprojects, the division had RM2.1 billion outstanding orderbook in the 18 months’ period ended 30 June 2006, of whichRM1.2 billion was from domestic projects and RM900million from overseas projects. This is in line with thedivision's regional expansion plan, which targets a turnover of40% from overseas projects in the near future. The division isalso set towards achieving another milestone in the 2nd halfof year 2006, with plans to secure its first project in theMiddle East.

2006 Milestones:

� Completion of the design and construction of the RM550million Kuala Lumpur Convention and Exhibition Centre.

� Completion of the RM193 million, 571 room Traders Hotel,Kuala Lumpur.

� Construction of 83 units of high-end residential bungalows inMont Kiara, Kuala Lumpur.

� Awarded contract for Package 3 of the Kuala Lumpur-Putrajaya Highway, valued at RM165 million.

� Awarded contract for RM155 million from Aston Star SdnBhd for the construction of the 7-storey basement of acommercial building, Solaris 2 Dutamas, located in SriHartamas, Kuala Lumpur.

� Secured 2 highway projects from the National HighwaysAuthority of India which form part of the East West CorridorIndia, in the States of Uttar Pradesh and Rajasthan,amounting to RM695 million.

� Awarded contract for RM220 million for the construction ofthe 22-storey Ministry of Legal Affairs Tower in Trinidad andTobago.

SunInc's construction division, SunCon offers complete turnkey, design and construction services,with prominent recognition in the fields of building construction, civil engineering, infrastructure,mechanical and electrical engineering, as well as machinery and site equipment rental. Recentadditions to the division including precast, piling and stone materials have further strengthened itscapability as an integrated builder in Malaysia and the region.

In recognition of its excellence in construction, SunCon was awarded Builder of the Year in 2005 and2003 by the Construction Industry Development Board of Malaysia.

Dato’ Tan Kia LokeSenior Managing Director

Kwan Foh KwaiManaging Director

*18 months ended 30 June 2006

Revenue (RM ’000)

2006* 2004 2003

1,271,184

1,055,317 1,064,887

PBT (RM ’000)

2006* 2004 2003

58,987

77,910 83,846



“Providing lifestyle living tomeet the needs of ourcustomers.”

Wong Siew HoongGeneral Manager

Growth Drivers:

� Exploring regional opportunities, looking at the feasibility oflandbanks in East Malaysia as well as in overseas countriessuch as Vietnam and China.

� Focus on small parcel of lands in order to achieve speediernew product launches and reduction of holding costs of land.

2006 Milestones:

� New launches in Pusat Bandar Baru Bangi and Sunway BatuCaves for both commercial and residential properties havereceived good response from the market, with a total sales ofRM57 million achieved out of total launched propertiesworth RM97 million.

� Handover to purchasers of 34 units Double Storey Shops and31 units Retail Lots, Phase 4 at SunwayMas CommercialCentre, Kelana Jaya on October 2005, 12 months ahead ofschedule. Expected also to achieve early handover by morethan 6 months to purchasers of the 200 units low costapartment and 15 units low cost shops at Sunway Batu Caves.

SunwayMas, the property arm of the SunInc Group aspires to expand its property developmentbusiness through acquiring more development lands in the Klang Valley. We will continue to focuson mixed commercial and residential properties as there is strong demand for such properties instrategic locations.

Our competitive edge would be towards developing land in strategic locations, providing good beforeand after sales customer services and quality finished products. Our strong brand name under TheSunway Group will be an added advantage when we market our products at the right timing andpricing.

Revenue (RM ’000)

2006* 2004 2003

162,963

149,949

72,007

Taman Teluk Gedung Indah,Klang – Double Storey Semi

Detached House.

Taman Rawang Perdana 2,Rawang – Double Storey

Link House.

Pusat Bandar Bangi,Type C3 - 3 Storey

Shop Office.


PBT (RM ’000)

2006* 2004 2003

35,774

16,466

8,161



“Providing the bestvalue product fromthe bestmanufacturerthrough our globalsourcing. We willpartner otherbranded products to complement therange.”

Wong Fook ChaiExecutive Director

Growth Drivers:

� Going regional with our present range of products. We shallstrive to build an extensive network of branches andcustomers throughout the region.

� Established 19 distribution points in West Malaysia, EastMalaysia, Indonesia, Thailand, Singapore and China.

� Actively searching for opportunities to integrate intomanufacturing of our own products.

� Sourcing for ‘STAR’ products.

2006 Milestones:

� Opened 2 new branches in Pekan Baru, Indonesia and Tawau,East Malaysia.

� New profits recorded from Thailand, Singapore and Indonesiaoperations.

� Acquisition of Sunway Hydraulic Industries Sdn Bhd andSunway Enterprise (1998) Sdn Bhd.

SunInc’s trading and manufacturing division strives to be a successful market leader in providingworld-class products and services which comprise hoses and fittings, heavy equipment parts, heavyequipments and building materials. We compete for market leadership through our vast distributionnetwork spread throughout the ASEAN countries and China. Hedging from our regional presence, wehave expanded our customer base to 36 countries. We established strong brand recognition throughour own hoses and fittings brand “Sunflex” as well as recognised and accepted brand names such asTREK and FP Diesel for heavy equipment parts. Our heavy equipment division carries the Furukawaand Airman brands.

Revenue (RM ’000)

2006* 2004 2003

312,135

193,953

156,925

Our “Sunflex” brand of hydraulicand industrial hoses and fittings

are established and widelyaccepted in the ASEAN region.

We provide a full range of undercarriage, engine,

replacement and wear parts fromestablished brands such as

TREK and FP Diesel.

Our product range of buildingmaterials includes steel bars,cement, roof and floor tiles,

concrete products, sanitary waresand architectural products.

PBT (RM ’000)

2006* 2004 2003

18,408

7,565

6,467



Building Materials

Growth Drivers:

� Acquisition of LAS Industries Sdn Bhd (now known as Sun-Block (Beranang) Sdn Bhd) in 2004 and currently a marketleader for interlocking concrete pavers.

� Started concrete imprint business complementing our rangeof products to tailor and meet customer requirements, thusproviding a complete range of external pavement flooringsolutions.

� Extended its pavement business to Shanghai and Dongguan,China, one of the fastest growing regions in the world.

� To keep in line with comtemporary technology, SunwayKeramo is ready to produce high quality vitrified clay jackingpipes by 1st quarter of 2007.

2006 Milestones:

� Successfully leased a factory area of 3,988 sq m. in Nanhui,Shanghai for 15 years from Shanghai Yuanyau BiotechnologyCo. Ltd. for relocation of our MASA paver plant. Alterationof factory building is in progress. Plant was relocated andinstalled in August 2005. Sunway Building Materials(Shanghai) Co. Ltd., has been established to operate thisbusiness in Nanhui, Shanghai.

� Successfully leased a factory land area of approximately28,000 sq m. in Zhongtang, Dongguan, Guangzhou for 20years from Dongguan Zhongtang Assets Management Co.Ltd., for relocation of our Omag paver plant. SunwayBuilding Materials (Dongguan) Co. Ltd. has been establishedto operate this business in Dongguan, Guangzhou.

� As for vitrified clay piping business, we successfully upgradedproduction processes and commissioned a new kiln to achievehigher output and yield.

� Installed and commissioned a new fast firing shuttle kiln.

� Extention to our range of pipes, the DN 450x2.0m in class160.

� Installed 3rd fast dryer that reduces drying time by 60%,resulting in higher output.

Sun-Block strives to be a regional player in the Asia Pacific rim as a pavement and flooring solutionsprovider and be the industry-preferred choice in the enhancement and beautification of theenvironment. We are committed to provide innovative quality products and services that exceed ourcustomers’ expectations through economics of continual improvement and operational effectiveness.

Sunway Keramo is committed to provide high quality, cost effective glazed vitrified clay pipingsystems and solutions to ensure an environmentally enlightened approach to water and wastemanagement.

Revenue (RM ’000)

2006* 2004 2003

102,682

88,328

75,945

Interlocking Pavers are ideal forexternal pavement for ports, road

junctions, warehouses, housinginternal roads with variety of

colours to enhance the aestheticappearances.

Eurotiles are ideal pavementproduct for both outdoor

pavement and indoor floorings,hard landscaping usage as well as

exterior and interior wallcladdings.

Attractive Concrete Imprint with natural Stone Textures,

Sun-Crete is functional eleganceat its best. A visual delight,

Sun-Crete is ideally suited forresurfacing concrete floors and

walkways. It transforms anyspace into a veritable stone

masterpiece.


“Our customers’ needs will determine our path,our value will guide us, our competencies andperseverance will lead us there.”

Danny Ng Executive Director

David LeongSenior General Manager

PBT (RM ’000)

2006* 2004 2003

87

9,6429,288


Quarry

“Our business is structuredand focused to meet ourcustomers’ requirements andwe continuously look fortotal customer satisfaction.”

Teh Quen ChangExecutive Director

Growth Drivers:

� Expanding our operations to good locations, along potentialdevelopment corridors, within the country so as to provide acomprehensive network to serve our customers better.

� Continuous and aggressive process re-engineering to cutdown the cost of production albeit rising fuel cost.

2006 Milestones:

� Set-up of a new quarry operation in Bandar Sungei Long,Mukim Ulu Langat, Selangor.

� Relocation of a 250 tonnes per hour (“tph”) asphalt plantfrom Klang Valley to Bukit Mertajam, as a step towardsbuilding up market share in the northern states of PeninsularMalaysia.

� Undertaking quarrying and premix operations in Jhansi, UttarPradesh and Kota, Rajasthan in India – an overseas highwayproject undertaken by SunCon.

Sunway Quarry Industries is one of the leading producers and suppliers of crushed rock aggregatesand asphalts in the country. The company provides comprehensive range of single sized and blendedaggregates to meet most of the demand of building and construction industries. The company alsomanufactures large range of asphalts products to cater to and to comply with various agencies andhighway authorities’ specification. The year 2005 marked the return of the Group into the quarryingbusiness, once the country’s leading producer of aggregates and asphalts prior to the divestment in1999.

Revenue (RM ‘000)

March 2005 - June 2006 March 2005 - June 2006

159,693

PBT (RM ‘000)

3,871

We provide a full range of crushed stone aggregates to meet the

demands of building andinfrastructure requirements.

We have comprehensive network of asphalt

manufacturing plants providing excellent customer support.

Our asphalt manufacturingproducts in road surfacing

meet and comply with Highway Authorities and

JKR specifications.


Our People Our Strength

“Growing Together”I will be graduating from the Sunway Managerial Advancement forRecruited Trainees (“SMART”) programme after 2 years. Throughthis program, I was given many different opportunities andextensive exposure – from risk management to corporate finance tomanufacturing projects as well as events organisation. Sunway’sculture is performance-driven, but rewards passion and hard work.We work hard, but play just as hard. I have been a committeemember of our very active Sunway Sports Club, organising variousactivities, which never fail to receive great response. All thisdefinitely makes Sunway an exciting company to work with! In thelight of this all, I believe that not only have I grown to become abetter executive, but definitely also a better person.

EL REGINA TAJUDIN SUNWAY MANAGERIAL ADVANCEMENT FOR RECRUITEDTRAINEES 2nd INTAKE (2004)SUNWAY HOLDINGS INCORPORATED BERHADMALAYSIA


Our People Our Strength

At SunInc, we believe that our strategies are solelydependent on the talent, skills and passion of our people.In turn, we are passionate about finding the best talentsand making sure they develop and grow with us.

We believe that “Our People are Our Strength”. Theircommitment, alignment, skills, competencies anddetermination drive the Group towards excellence.

What inspires our employees most is working in anenvironment which resembles a big and happy family,despite being in different geographical regions globally.

There are many different nationalities within ourorganisation, different cultures, yet we work as one team,with one vision. We face challenges together, share ourexperiences as well as continuously motivate and learnfrom each other.

As we continue to expand “glocally” (globally and locally),we will continuously need energetic and dynamic peoplewith strategic and innovative ideas. Our people are thereal source in pushing our competitive advantage. Wevalue skills and competencies and more importantly weencourage candour (speaking without fear or favour) toforge ahead of competition.

At SunInc, we listen attentively and encourageparticipation in the decision making process. The Groupalso believes in empowering its people and providingthem with the right tools and support to enable them todo their jobs efficiently and effectively.

Our Culture

We encourage continuous learning and development andpropagate the culture of candour. We encourage thepractice of knowledge management principles and wereward innovation, especially breakthrough ideas for ourproducts and services.

Communicating with Our People

We have constant communication with our employeesthrough various channels, such as Coffee Sessions, Hang

Loose Nites, Tea Sessions (with non-executive staff),Annual Managers’ Conference, e-bulletins, Sunway Portaland Plasma Television insertions etc., just to name a few.

The results of our 2005 Organisational Climate Survey(“OCS2005”) (which can be benchmarked withparticipating companies in Asia Pacific as well asMalaysia) were encouraging and we will continue to workharder to further value add to all our stakeholders.

Employee Development - Recognise, Nurtureand Support

It is our mission to recognise, nurture and support ouremployees at every level and to continuously provideopportunities for them to develop their competencies andto realise their full potential.

� Training and Development

The year 2005 saw a total of 37 value-based trainingand development programmes organised by GroupHuman Resources as well as 11 sessions of SaturdaySeminar Series, a 3-hour short presentation on softskills enhancement involving between 80 and 120employees per session. These programmes organised

150

140

130

120

110

100

90

80

70

MalaysiaNorm

Commitment Alignment Enablement

98 112 134 141

83 89

Sunway

MalaysiaNorm Sunway

MalaysiaNorm

Sunway

The extent to whichemployees express pride intheir company, describe it asa good place to work,demonstrate a desire to stayand have confidence in itsfuture success

The extent to whichemployees perceive that theyunderstand their company’sbusiness strategies, goals, andwhat they personally have todo to help the companyreach those goals

The extent to whichemployees perceive thatthey have the right tools,resource, information, andsupport to do their jobs well

AsiaPacificNorm

➛

OCS2005 INDEX RESULTS

By far the most outstanding aspect of the Sunway companyculture is the sense of “Group”. It never fails to surprise orplease me the reaction I receive when walking into MenaraSunway in Malaysia no matter how long I have been away.From the security guard onwards, a sea of familiar andunfamiliar faces greet me by name (embarrassingly I canremember far fewer than those I cannot) and ask how I amand how are the tidings in Vietnam. Likewise, by the end ofthe first day back, I have been able to find out exactly thelatest on who, how and why of the Group. This care foreach other and care for the Group in my mind is the bestaspect of Sunway’s rich culture.

SCOTT STACEYGENERAL DIRECTORSUNWAY HATAY CONSTRUCTION & BUILDING MATERIALS JV CO. LTD.VIETNAM

Our People Our Strength (Cont’d)

by Group Human Resources were attended by a totalof 2,132 employees. In addition, employees were alsosent to external courses.

� Talent Pool Development

The Sunway Group has initiated the TalentIdentification and Development (“TID”) programme,whereby 8 sessions were conducted in the year 2005.Essentially, this programme is a systematic way ofidentifying and assessing talents among employees.These identified talents are then put through a regimeof training and development programmes to close anycompetency gaps. One-on-one coaching is provided toanchor these individualised plans.

� Succession Planning

As a follow up to the TID initiative, we have rolled-out Succession Planning for SunCon in October 2005.Succession Planning is of crucial importance for TheSunway Group. It aims to fill in key positions now andin the future; develop competent people needed forour highly diversified and competitive environment;and to grow and develop our key employees for futureleadership requirements.

� Sunway Managerial Advancement for RecruitedTrainees (“SMART”) Programme

The SMART programme was initiated in 2002 withthe aim of bringing potential talents into The SunwayGroup. Under this programme, candidates withexcellent academic results and a track record ofleadership capabilities, are offered an initial “Trainingand Education” programme followed by job rotationwithin identified business units, thereby equippingtalents with a basic operational knowledge. This will inturn help fast-track their careers within The SunwayGroup. We are now in our 4th successful year in therunning of the SMART programme. These initiativesare aimed at ensuring a succession pool for TheSunway Group.

� The Institute of Chartered Accountants in Englandand Wales (“ICAEW”) Programme

In 2004, The Sunway Group was appointed as anApproved Training Organisation by ICAEW to run theAssociation of Chartered Accountants (“ACA”)programme. The Sunway Group is the 1st non-accounting related firms outside of the UnitedKingdom to be accorded such an appointment. Todate, 2 individuals have been recruited and offeredtraining contracts under this programme. We willcontinue to recruit graduates to participate in thisprogramme on an annual basis.

The “TAP” signifies a steady stream ofwater flowing through. We use this symbolto represent what we envisage in thefuture - a strong leadership pipeline to

lead the future of The Sunway Group.

Sports and Social Activities

The Sunway Group believes that sports and socialactivities foster closer relationships amongst ouremployees. Such activities help in building a greater senseof identification and pride within The Sunway Groupthus enhancing better rapport among our employees andimprove quality of work.

The Kelab Sukan Sunway (“KSS”) Clubhouse, located atBasement 1, Menara Sunway is equipped withrecreational facilities such as a gymnasium, sauna, squashcourt, snooker table, Astro, table tennis table and carromset, for the exclusive use of our employees.

KSS also provides avenues for our employees to pursuehealthy lifestyles by organising sporting and socialprogrammes such as bowling tournaments, futsalcompetitions, local and overseas trips, communityservices, car treasure hunts, white water rafting, familydays, health and informative talks, as well as annual KSSDinner and Dance Nites.

“One Vision One Team!”I have just completed my 7th year in SunCon as a ProjectManager. My journey with the Group has taken me to greaterhorizons. I have been given responsibilities which I could onlydream of getting elsewhere. Everything we do here atSunway, is cutting edge. But in my opinion, the best thingabout working for this organisation, is its people and theculture. The company has a unique culture, one in whichworking together is the cornerstone of everything we do.Sunway places a high emphasis on innovation and beingpassionate about your job. I work with an incredible teamthat shares my passion, my dreams and my aspirations. Hence,I am inspired and encouraged to fulfill my dreams and leadmy team to greater heights!

GERARD SOOSAYSENIOR MANAGER – PROJECTSUNWAY CONSTRUCTION SDN BHDMALAYSIA

Our People Our Strength (Cont’d)

These informal get-togethers have fostered a sense offamily-like atmosphere throughout The Sunway Group.

Employee Benefits

The Sunway Group continuously encourages employeestowards performance enhancement and careeradvancement by providing tuition fee discounts whenemployees embark on courses offered by SunwayUniversity College and Monash University Malaysia. Thisdiscount scheme is also extended to our employees’immediate family members, which is in tandem with TheSunway Group’s emphasis on caring for its employees’welfare.

There is also an Employee Tuition Assistance Schemewhere employees may seek financial assistance to takeexternal courses which are relevant to their work, leadingto certificate, diploma, graduate degrees as well as postgraduate. This is in line with The Sunway Group’s focuson the continuous development in our employees.

The Sunway Group Scholarship

As a responsible corporate citizen and in alignment withThe Sunway Group’s commitment to education, fullscholarships have been awarded to deserving studentswith excellent academic achievements. Currently, thereare 2 students under this scholarship scheme.

The best part of SunInc’s construction division is that themanagement looks at all its employees and families as itsgreatest assets. The management’s relationship with itsemployees is founded on a climate of mutual trust andrespect within an environment for listening and personalexpression. They involve working with and through peopleand seeing them as partners, not just as costs to beminimised or avoided. To ensure all employees be part ofthe company, the management always share andcommunicate, letting employees know the goals, the plans,why we’re doing what we’re doing and how we’re doing.This recognition for each other in my opinion is the mostproductive working environment.

ERIC TAN CHEE HINSENIOR MANAGER - PROJECTSUNWAY ENGINEERING SDN BHDMALAYSIA


Performing Business with Integrity


Investor Relations

SunInc is committed to the principles of good corporategovernance, accountability and transparency. It continuesto maintain its investor friendly position and consistentlycommunicates with representatives of shareholders andmembers of the investment community. Its corporatewebsite is updated regularly to present the latest publiclyavailable corporate and financial information such asannouncements to Bursa Malaysia Securities Berhad andquarterly results.

Directors and members of Senior Management make apoint to meet with shareholders, fund managers andanalysts regularly at conferences and at one-on-one

meetings. One of the initiatives in communicatingdevelopments and changes in SunInc was a generalpresentation on 14 January 2005 to explain SunInc's re-entry into the quarry business to interested investors.

As a response to interest by investors in the futureperformance of SunInc, greater effort was taken to explainthe strategies SunInc have adopted to improve itsoperational profitability, to address ongoing problems andits endeavours to expand its operations overseas. Asignificant number of SunInc’s shares continues to be heldby foreign investors (6.4%), and local institutional bodiesincluding the Employees Provident Fund (73.8%).

Investors and analyst meet SunInc’s management.


Corporate Social Responsibility

In 2005, The Sunway Group’s financial mission toproduce strong returns for shareholders by leveraging onintellectual capital to create open and new markets was asuccess. However, sustained success for The SunwayGroup requires a long-term commitment to corporateresponsibility that reflects positively on customers,employees and communities where we operate. In linewith this commitment, The Sunway Group instituted aformal Corporate Social Responsibility (“CSR”)programme that establishes a framework of reference forEducation, Environmental Conservation and Socio-economic activities to be implemented in a consistentmanner. The Sunway Group is committed to makingsignificant progress in defining and implementing thecorporate responsibility programme and in executing thepolicy and standards in a manner that strives tocontinuously improve The Sunway Group’s performance.

In 2006, The Sunway Group embarked on the 3-pronged3R CSR programme (Reach Out, Respect, Realise) tomaximise the impact as a constructive force for thecommunity. In realising The Sunway Group’s vision, it isessential to strive to make a difference in the lives ofpeople, social and environmental considerations into ourvalue system. Firmly entrenched in The Sunway Group’scorporate value system is The Sunway Education TrustFund that has, to date awarded more than RM23 millionof scholarships to students. In helping the students torealise their dreams, The Sunway Group has made asignificant contribution and remains committed to

provide young people with opportunities to excel byreinvesting profits from Sunway University College forthe benefit of the students in terms of quality educationand facilities upgrade.

The 3R programme also focuses on recycling and jobplacement programme for the special students of SekolahMenengah Bandar Sunway that have been endorsed bythe Ministry of Education. The Sunway Group is happy toreport that tremendous progress in the recyclingcampaign in collaboration with Alam Flora and Ministryof Housing and Local Government has resulted in asignificant increase of about 459% in the collection ofrecyclable items from all components within The SunwayGroup from the year 2003 to 2005.

The Sunway Group will continue to monitor the progressmade in all the 3 main thrust – Education, Environmentalconservation and Socio-economic activities. The SunwayGroup is especially proud of the CSR project withSekolah Menengah Bandar Sunway because these specialchildren are often left outside the mainstream as they areconsidered less productive. It is a pleasant surprise to learnthat not only are they able to perform simple tasksdiligently, their sunny disposition clearly shows they enjoythe opportunity we have helped to provide. We hope thatthis project will be held up as a model for similarprogrammes that provide opportunities for these specialchildren to realise their dreams.


Business Dynamics and Risk Factors

SunInc has long recognised the importance of riskmanagement as a critical part of corporate governance. Inview of this, SunInc has implemented and maintained acomprehensive Enterprise Risk Management (“ERM”)Framework, which is applied across the organisation aswell as at every business unit. Proactive steps are taken tomanage all possible risks before they occur in order tominimise the financial impact to SunInc. To ensure aconsistent, disciplined and systematic manner in themanagement and monitoring of risks, SunInc has investedin a risk management software known as the CorporateRisk Scorecard, which also functions as the permanentdatabase for risks, management actions and controls.

The risks that have been identified to have the mostsignificant potential impact on SunInc are set out below.

Market, regulatory and otherexternal factors� SunInc’s overseas operations in the construction and

building materials divisions expose SunInc to risks oftrade or foreign exchange restrictions, increased tariffs,foreign currency fluctuations and other risksassociated with international operations such aspolitical, economical and social instability of thosecountries.

� The high level of competition in the local market aswell as the rising raw material costs in the buildingmaterials division can significantly reduce theprofitability of this division.

� The increasing competition for strategic landbanks inthe local market can affect the future profitability ofthe property division.

� The effectiveness in managing the cost, level andavailability of funding is important to the financialperformance of SunInc and its ability to deliverreturns to shareholders.

Business and operational factors� The loss of the services of key management staff can

negatively impact SunInc’s ability to implementbusiness strategies.

� The low traffic volumes of SunInfra’s toll roadoperation will continue to erode the operating resultsof SunInc.

� The timely completion of overseas projects isimportant to ensure that all contractual obligations aremet thus enhancing SunInc’s reputation withstakeholders.

Business Risk Management is an essential discipline in our business operations.


Corporate Governance Statement

The Board is committed to ensure that good corporategovernance is practised throughout the Group with theultimate objective of protecting and enhancingshareholders' value and the financial performance of theCompany and of the Group.

The Board is committed to implementing the MalaysianCode on Corporate Governance ("the Code") whereverapplicable in the best interest of the shareholders of theCompany.

A. DIRECTORS

THE BOARD AND ITS RESPONSIBILITIES

The Board leads and controls the Group. It regularlymeets to perform its main functions, amongst others, asfollows:-

• Setting the objectives, goals and strategic plans forthe Group with a view to maximising shareholders'value.

• Adopting and monitoring progress of theCompany's strategies, budgets, plans and policies.

• Overseeing the conduct of the Group's businessesto evaluate whether the businesses are properlymanaged.

• Identifying principal risks of the Group andensuring the implementation of appropriate systemsto mitigate and manage these risks. The Boardthrough the Risk Management Committee, sets,where appropriate, objectives, performance targetsand policies to manage the key risks faced by theGroup.

• Considering Management's recommendations onkey issues including acquisitions, divestments,restructuring, funding and significant capitalexpenditure.

• Human resources planning and development.• Reviewing the adequacy and integrity of the

Company's internal control systems andmanagement information systems, includingsystems for compliance with applicable laws,regulations, rules, directives and guidelines.

• The Board through the Strategic DirectionCommittee, decides on the appropriate strategicdirection for the Group, particularly to manage theGroup from a Strategy Driven Perspective, withclear objectives and targets for proactive decision-making.

The Board delegates certain responsibilities to the BoardCommittees, all of which operate within defined terms ofreference.

BOARD COMPOSITION

Following the demise of Tan Sri Dato' Seri Dr MdNoordin Bin Md Sopiee on 29 December 2005, thenumber of independent directors has fallen below theminimum size of one-third (1/3). The Board had soughtthe Exchange's approval for extension of time to comply

with Paragraph 15.02 of the Listing Requirements ofBursa Malaysia Securities Berhad ("Bursa Securities") andwas granted three (3) months until 31 March 2006 tocomply with the said Paragraph. Subsequently on 13March 2006, Datuk Abdul Malek Bin Abdul Aziz wasappointed to the Board as Independent Non-ExecutiveDirector. On 26 April 2006, Tan Ler Chin had resignedfrom the Board as Non-Independent Non-ExecutiveDirector.

As at the financial period ended 30 June 2006, the Boardconsisted of nine (9) members, three (3) or one-third(1/3) are Independent Non-Executive Directors.

The composition reflects a balance of Executive and Non-Executive Directors with a mix of suitably qualified andexperienced professionals in the fields of accountancy,economics, finance, civil engineering and real estatedevelopment. This combination of different professionsand skills working together enables the Board toeffectively lead and control the Company. The Boardcomposition also fairly reflects the investment in theCompany by shareholders other than the significantshareholder.

There is clear segregation of responsibilities between theExecutive Chairman and the Managing Director to ensurea balance of power and authority. The Managing Directoris subject to the control of the Board of Directors. He isresponsible for the day-to-day management of thebusiness in accordance with the objectives and strategiesestablished by the Board.

Wong Chin Mun is the Senior Independent Non-Executive Director, to whom concerns relating to theaffairs of the Group may be conveyed.

A brief profile of each Director is presented on pages 24to 27 of the Annual Report.

MEETINGS AND SUPPLY OFINFORMATION

Unless there are urgent matters, the Board normally meetsquarterly to review financial, operational and businessperformances. Notices and agenda of meetings dulyendorsed by the Executive Chairman together with therelevant board papers are normally given at least one (1)week prior to the meetings for the Directors to study andevaluate the matters to be discussed.

The board papers provided include inter alia, financialresults, business plan and budget, progress report on theCompany's developments, minutes of meetings of BoardCommittees, regulatory/statutory updates and otheroperational and financial issues for the Board'sinformation and/or approval.

All Directors are entitled to information pertaining theCompany. In addition, all Directors have direct access tothe advice and services of the Company Secretaries. Theyare also permitted to seek independent advice wheneverdeemed necessary, at the Company's expense.


Corporate Governance Statement (Cont’d)

There is a formal procedure approved by the Board for allDirectors, whether as a full Board or in their individualcapacity, to obtain independent professional advice, whennecessary, at the Company's expense.

The Board met eight (8) times during the financial periodfrom 1 January 2005 to 30 June 2006 and the attendanceof the respective Directors was as follows:-

Number of Percentage ofMeetings Attendance

Name of Directors Attended (%)

Tan Sri Dato' Seri (Dr) Cheah Fook Ling 7/8 88

Dato' Chew Chee Kin 8/8 100Yau Kok Seng 8/8 100Mark Victor Rozario 8/8 100Dato' Tan Kia Loke 8/8 100Kwan Foh Kwai 7/8 88Tan Ler Chin 7/7* 100

(Resigned on 26 April 2006)Wong Chin Mun 8/8 100Tan Sri Dato' Seri Dr Md 2/6* 33

Noordin Bin Md Sopiee (Passed away on 29 December 2005)

Datuk Low Seng Kuan 8/8 100Datuk Abdul Malek Bin 1/1* 100

Abdul Aziz (Appointed on 13 March 2006)

* Reflects the number of Board Meetings attended duringthe time the Director held office.

DIRECTORS' TRAINING

All the Directors had attended the MandatoryAccreditation Programme and Continuous EducationProgramme ("CEP") as prescribed by Bursa Securities.

As the CEP has been repealed by Bursa Securities witheffect from 1 January 2005, the Board will assess thetraining needs of the Directors and ensure fulfillment ofsuch training deemed appropriate by the Board. Duringthe financial period, the Directors had attended varioustraining programmes and seminars organised by therelevant regulatory authorities and professional bodies tobroaden their knowledge and to keep abreast with therelevant changes in law, regulations and the businessenvironment.

The training programmes, seminars and workshopsattended by the Directors during the financial period are,inter alia, on areas relating to corporate governance, riskmanagement and financial reporting.

Training Programmes, Seminars and Workshops Attended by Directors

Course Title / Organiser Date

Making Corporate Boards more effective 10-11 March 2005(Harvard Club of Malaysia)

S&P REIT Seminar 2005 - Asian REITS : Directions, Insights and Global Context * 15 March 2005(Standard & Poor's)

2005 CFO Conference - Driving Profitability in Today's Economy 10-11 May 2005(Federation of Public Listed Companies Berhad & NTP World Forum Sdn Bhd)

Board's Role in Risk Management and Strategy 14 June 2005(The Institute of Internal Auditors Malaysia)

The 2nd Annual Asia Pacific Bond Congress 16-17 June 2005(Euromoney)

Workshop on "Managing Country Risk" 22 June 2005(CPA Australia)

Explore Latest Developments and Profitable Opportunities 30 June-1 July 2005for Real Estate Investment Trusts in Malaysia *(The Asia Business Forum)



RETIREMENT BY ROTATION AND RE-ELECTION

The Company's Articles of Association provides that one-third (1/3) of the Board is subject to retirement byrotation at each Annual General Meeting. Each Directorshall retire at least once every three (3) years but shall beeligible for re-election. The Directors to retire in each yearare those who have been longest in office since their lastelection or appointment.

To assist the shareholders in their decision, sufficientinformation such as personal profile, attendance ofmeetings and the shareholdings of each Director standingfor re-election are disclosed in the StatementAccompanying Notice of Annual General Meeting.

BOARD COMMITTEES

The Board has set up the following Committees and willperiodically review their terms of reference and operatingprocedures. The Committees are required to report to theBoard on all their deliberations and recommendations andsuch reports are incorporated in the minutes of the BoardMeetings.

1. Audit Committee

The Audit Committee is set up to play an active rolein assisting the Board in discharging its governanceresponsibilities. The composition of the AuditCommittee, its terms of reference, attendance ofmeetings and a summary of its activities are set outon pages 55 to 59 of the Annual Report.

Course Title / Organiser Date

Strategic Brand Management 1 July 2005(Harvard Club of Malaysia)

Michael E. Porter - Winning Competitive Strategies 12 July 2005(Leading Minds)

The 3rd Asia Economic Summit - Asia on the Move : Enhancing Competitiveness 28-29 July 2005Expanding Opportunities(Asian Strategy & Leadership Incorporated Sdn Bhd)

MICPA Business Forum 2005 # 5-6 September 2005(The Malaysian Institute of Certified Public Accountants)

PricewaterhouseCoopers Seminar 2005 - Tax & Finance Developments 3 October 2005(PricewaterhouseCoopers)

Strategic Positioning for Brand Power 9 March 2006(Dr Paul Temporal)

Robert S. Kaplan - Live in Malaysia : Turning Execution into Competitive Advantage 29 March 2006(Global Leaders)

9th Malaysia Plan : Impact and Implications for Businesses 25 April 2006(RAM Consultancy Services Sdn Bhd & TEC Asia Centre Sdn Bhd)

Managers' Conference 27 April 2006(Sunway Construction Sdn Bhd)

Topgrading your Organisation 2 May 2006(Pritchett Rummler Brache Asia)

Conference on "Excellent in Manufacturing" 27 June 2006(FMM Institute)

5th Real Estate Investment World Conference 27-28 June 2006(Terrapinn)

* Attendance by the Finance Director as a Speaker at the Seminars held.# Attendance by the Finance Director as a Panelist at the Forum held.

All Directors were also constantly updated by the Company Secretary on changes to the relevant guidelines on theregulatory and statutory requirements.

Training Programmes, Seminars and Workshops Attended by Directors (Cont’d)



2. Management Committee

The Management Committee comprises Tan SriDato' Seri (Dr) Cheah Fook Ling, Dato' ChewChee Kin, Dato' Tan Kia Loke, Yau Kok Seng, MarkVictor Rozario and Puan Sri Datin Seri (Dr) SusanCheah Seok Cheng. Its primary role is to assist theBoard in overseeing and dealing with operationalmatters of the Group. The terms of reference of theManagement Committee are set out on page 48 ofthe Annual Report.

3. Nomination Committee

The Nomination Committee comprises three (3)wholly Independent Non-Executive Directors. TheChairman of this Committee is Wong Chin Mun.The other members of the Committee are DatukLow Seng Kuan and Datuk Abdul Malek Bin AbdulAziz.

The Nomination Committee is responsible foridentifying and making recommendations for anyappointments and re-election of Board members.The Committee also assesses the effectiveness of theBoard as a whole as well as the performance of eachDirector. The terms of reference of the NominationCommittee are set out on page 49 of the AnnualReport.

During the financial period, four (4) meetings wereheld for the following purposes:-

(a) to endorse the proposed re-election ofDirectors retiring by rotation at theCompany's Annual General Meeting, subjectto the approval of shareholders;

(b) to discuss the evaluation on the effectiveness ofAudit Committee and ManagementCommittee; and

(c) to recommend to the Board, the appointmentof Datuk Abdul Malek Bin Abdul Aziz asIndependent Non-Executive Director of theCompany.

4. Remuneration Committee

The Remuneration Committee comprises mainlyNon-Executive Directors namely Wong Chin Munas Chairman, Datuk Low Seng Kuan and Tan SriDato' Seri (Dr) Cheah Fook Ling.

The Remuneration Committee recommends to theBoard the remuneration for Directors and therenewal of the terms of Employment Contracts forExecutive Directors, with the aim of ensuring thatthe Company attracts and retains the Directorsneeded to run the Group successfully. The terms ofreference of the Remuneration Committee are setout on page 50 of the Annual Report.

The Remuneration Committee will meet as andwhen required. For the financial period, two (2)

meetings were held to evaluate the performance ofthe Executive Directors and to determine theirannual increments and bonuses. The ExecutiveDirector of Human Resources attended the saidmeetings on the invitation of the Committee.

5. Employees' Share Option Scheme("ESOS") Committee

The ESOS Committee comprising Tan Sri Dato'Seri (Dr) Cheah Fook Ling, Dato' Chew Chee Kin,Dato' Tan Kia Loke and Yau Kok Seng, is responsiblefor implementing, allocating and administering theESOS in accordance with such powers and dutiesconferred upon it under the Bylaws of the ESOS.The terms of reference of the ESOS Committee areset out on pages 51 and 52 of the Annual Report.


(a) to consider and approve the allocation ofoptions over ordinary shares to the employeesof the Group;

(b) to discuss on the basis for the allocation ofoptions; and

(c) to consider and approve the applications madeby employees to continue holding their optionsupon attaining retirement and due to transferto a company which is outside the Group.

6. Risk Management Committee

The Risk Management Committee comprises YauKok Seng as Chairman, Mark Victor Rozario, KwanFoh Kwai, Wong Fook Chai, Ng Boon Liang, LeongKai Hong, Yap Chin Leong, Teh Quen Chang, WongSiew Hoong and Ng Eng Lee.

The Risk Management Committee is tasked withthe responsibility to oversee the risk managementactivities of the Group, approving appropriate riskmanagement procedures and measurementmethodologies across the organisation as well asidentification and management of strategic businessrisks of the Group. The terms of reference of theRisk Management Committee are set out on page53 of the Annual Report.

During the financial period, seven (7) meetingswere held for the following purposes:-

(a) to identify and evaluate new and existingstrategic risks;

(b) to review the status of implementation ofmanagement action plan; and

(c) to review the effectiveness of overall riskmanagement at enterprise level.

The Risk Management Committee reports directlyto the Board on a quarterly basis on its deliberationsand recommendations.



7. Strategic Direction Committee

The Strategic Direction Committee which wasformed on 20 April 2005, comprises Dato' ChewChee Kin as Chairman, Dato' Tan Kia Loke, YauKok Seng, Mark Victor Rozario, Kwan Foh Kwai,Wong Fook Chai, Ng Boon Liang, Leong Kai Hong,Yap Chin Leong, Teh Quen Chang and Wong SiewHoong.

The Strategic Direction Committee has the overallresponsibility for deciding on appropriate strategicdirection for the Group, particularly to manage theGroup from a Strategy Driven Perspective, withclear objectives and targets for proactive decision-making. This is to promote transparency,accountability and set a formal platform forcommunicating the Group's strategic direction inline with enhancing Corporate Governance withinthe Group. The terms of reference of the StrategicDirection Committee are set out on page 54 of theAnnual Report.


(a) to review and adopt the terms of reference;

(b) to establish the preferred industries forexpansion, preferred countries for capitalinvestment and investment criteria;

(c) to assess the current investment portfolio ofthe Group; and

(d) to discuss on divisional divestment and growthstrategies.

B. DIRECTORS' REMUNERATION

Information prepared by independent consultants andsurvey data on the remuneration practices of comparablecompanies are taken into consideration in determining theremuneration packages for Executive and Non-ExecutiveDirectors. The remuneration of the Executive Directors isstructured on the basis of linking rewards to corporate andindividual performance. For Non-Executive Directors,the level of remuneration reflects the experience and levelof responsibilities.

The Board as a whole resolves on the fees for the Non-Executive Directors with individual Directors abstainingfrom decisions in respect of their individual remuneration.The fees payable to the Non-Executive Directors aresubject to the approval of shareholders.

The breakdown of the Directors' remuneration during thefinancial period is as follows:-

Executive Non-Executive TotalDirectors Directors

RM RM RMFees - 84,000 84,000Other Emoluments - 36,500 36,500Salaries and other Remuneration 3,268,292 1,694,745 4,963,037Bonus 368,391 299,280 667,671Benefits-in-kind 275,882 80,269 356,151

Total: 3,912,565 2,194,794 6,107,359

The number of Directors whose remuneration falls under the following bands:-

Executive Non-Executive TotalRange of Remuneration Directors DirectorsBelow RM50,000 - 4 4RM700,001 to RM750,000 2 - 2RM900,001 to RM950,000 1 1 2RM1,100,001 to RM1,150,000 - 1 1RM1,550,001 to RM1,600,000 1 - 1

Total: 4 6* 10#

* Include Directors' Remuneration in respect of two (2) Non-Executive Directors who are Executive Directors of a subsidiaryof the Company.

# Include Director's Fee payable to a Non-Independent Non-Executive Director who resigned on 26 April 2006.

The movement of Directors' options over ordinary shares during the financial period ended 30 June 2006 is set out onpage 75 of the Annual Report.



C. SHAREHOLDERS

DIALOGUE BETWEEN THE COMPANYAND INVESTORS

The Board values constant dialogue and is committed toclear communication with its shareholders and investors.In this respect, as part of the Group's active investorrelations programme, discussions and dialogues are heldwith fund managers, financial analysts, shareholders andthe media to convey information about the Group'sperformance, corporate strategy and other mattersaffecting shareholders' interests.

In addition to published Annual Report and QuarterlyReports announced to Bursa Securities, the Group hasestablished a website at http://www.sunway.com.my fromwhich investors and shareholders can access forinformation.

While the Company endeavours to provide as muchinformation as possible to its shareholders andstakeholders, it is mindful of the legal and regulatoryframework governing the release of material and price-sensitive information. To achieve this, the Board hadapproved and adopted a Corporate Disclosure Policywhich outlines the Company's approach toward thedetermination and dissemination of material information,the circumstances under which the confidentiality ofinformation will be maintained, response to marketrumours and restrictions on insider trading. This Policyalso provides guidance and structure in disseminatingcorporate information to, and in dealing with, investors,analysts, media and the investing public.

ANNUAL GENERAL MEETING

The annual general meeting of the Company provides theprincipal forum for dialogue and interaction between theBoard and the shareholders. The participation ofshareholders, both individuals and institutional at generalmeetings on clarifications of pertinent and relevantinformation is encouraged.

D. ACCOUNTABILITY AND AUDIT

FINANCIAL REPORTING

In presenting the annual financial statements, annualreport and quarterly announcement of results toshareholders, the Board aims to provide a balanced andunderstandable assessment of the Group's financialposition, performance and prospects. The Board is assistedby the Audit Committee to oversee the Group's financialreporting processes and the quality of its financialreporting.

INTERNAL CONTROL

The Statement on Internal Control set out on pages 60and 61 of the Annual Report provides an overview of thestate of internal controls within the Group.

RELATIONSHIP WITH THE AUDITORS

The Board maintains, via the Audit Committee, an active,transparent and professional relationship with itsAuditors. The role of the Audit Committee in relation tothe External Auditors is disclosed in the Audit CommitteeReport set out on pages 55 to 59 of the Annual Report.

E. DIRECTORS' RESPONSIBILITYSTATEMENT ON ANNUALAUDITED FINANCIALSTATEMENTS

The Directors are responsible in the preparation of theAnnual Audited Financial Statements to give a true andfair view of the state of affairs, results and cash flows ofthe Company and of the Group at the end of the financialperiod.

In preparing the financial statements, the Directors willensure that suitable accounting policies have been appliedconsistently, and that reasonable and prudent judgmentsand estimates have been made. All applicable approvedaccounting standards and provisions of the CompaniesAct, 1965 have been complied with.

The Directors are also responsible for ensuring thatproper accounting and other records are kept whichdisclose with reasonable accuracy, the financial position ofthe Company and of the Group and which enables themto ensure that the financial statements comply with therelevant statutory requirements.

F. COMPLIANCE WITH THE CODE

The Group has complied substantially with the principlesand best practices outlined in the Code.

This Corporate Governance Statement was approved bythe Board of Directors on 24 August 2006.

Tan Sri Dato’ Seri (Dr) Cheah Fook LingExecutive Chairman


Terms of Reference of Management Committee

1. COMPOSITION

1.1 The Management Committee shall be establishedby the Board of Directors pursuant to Article 110 ofthe Company’s Articles of Association and shallconsist of not less than three (3) members.

1.2 The members of the Management Committee shallelect a Chairman from amongst their number.

1.3 If a member of the Management Committee resigns,dies or for any reason ceases to be a member withthe result that the number of members is reducedbelow three (3), the Board shall appoint suchnumber of new members as may be required tomake up the minimum of three (3) members.

2. OBJECTIVE

To assist the Board in the day-to-day operations ofthe Group.

3. MEETINGS

3.1 The quorum for the Management Committee shallbe at least two (2) members.

3.2 The Management Committee shall meet as andwhen it thinks necessary and expedient for thedespatch of its terms of reference.

3.3 The Secretary to the Management Committee shallbe the Company Secretary and shall be responsible,with the concurrence of the Chairman, for drawingup and circulating the agenda and the notice ofmeeting together with the supporting explanatorydocumentation to members prior to each meeting.

3.4 The Secretary of the Management Committee shallbe entrusted to record all proceedings and minutesof all meetings of the Committee.

3.5 In addition to the availability of detailed minutes ofthe Management Committee meetings to all Boardmembers, the Committee at each Board Meetingwill report a summary of significant matters andresolutions.

4. FUNCTIONS AND DUTIES

The Management Committee shall be responsiblefor overseeing and dealing with operational mattersfrom time to time. Such matters to include:-

4.1 Investments

To deliberate and make recommendations to theBoard on all transactions and matters relating to theGroup’s core business or existing investments.

4.2 Financial Arrangement

(a) Approve financial arrangements with banksand other financial institutions including thesigning of such documents for facilitiesnegotiated up to RM5 million. Any suchapprovals are to be reported to the Board at

the subsequent quarterly Board of Directors’Meeting.

(b) Approve the creation of any mortgage, chargeor other encumbrance over the Company orGroup’s property or assets for amounts notexceeding RM5 million. Any such approvalsare to be reported to the Board at thesubsequent quarterly Board of Directors’Meeting.

(c) Approve the issuing or providing or permittingthe Company or any of its subsidiaries to issueor provide any form of guarantees orindemnities or other financial or non-financialsupport provided it is made in the ordinarycourse of business.

(d) Authorises changes in signatories in respect ofaccounts maintained by the Company withbanks and other financial institutions.

4.3 Approval of Capital Expenditure, Commitments,Investment Contracts pursuant to the GroupCredit Policies approved by the Board

To approve capital expenditure, commitments andany investment contract (or series of contracts) orany amendment to an existing contract involvingcumulative payments up to RM5 million (or itsequivalent in another currency), except as providedin the budget or business plan of the Company.

4.4 Adoption of any Significant Changes in AccountingTreatment or Policies

Approve the adoption of or any significant changein the accounting treatment or policies of eachCompany within the Group, other than as requiredby law or accounting policies generally accepted inMalaysia from time to time.

4.5 Human Resource

Approval of manpower plan including successionplanning, appointing, training and fixing thecompensation of senior management (excludingExecutive Directors).

4.6 Investors’ Relation Programme

Developing and implementing an investor relationsprogramme including shareholder communicationspolicy.

4.7 Other Matters

To undertake such functions and all matters as maybe approved or delegated by the Board.

5. CIRCULAR RESOLUTION INWRITING

A circular resolution in writing signed by majorityof the members of the Management Committeeshall be considered valid and effectual as aresolution duly passed at a meeting of theManagement Committee.


Terms of Reference of Nomination Committee

1. MEMBERSHIP

(a) The Nomination Committee shall beappointed by the Board from among theirnumber and shall comprise not fewer thanthree (3) in number.

(b) The majority of the members of theCommittee shall be independent non-executive Directors.

(c) The members of the Committee shall elect aChairman from among their number who isnot an Executive Director of the Company.

(d) In the event of any vacancy in the Committeeresulting in the number of members beingreduced to below three (3), the Board shall,within three (3) months fill the vacancy.

2. AUTHORITY

(a) The Nomination Committee is entrusted withthe task of proposing new nominees for theBoard and for assessing existing Directors onan on-going basis.

(b) The ultimate decision as to who shall benominated should be the responsibility of thefull Board after considering therecommendations of such a Committee.

3. FUNCTIONS

(a) To determine the core competencies and skillsrequired of Board members to best serve thebusiness and operations of the Group as awhole and the optimum size of the Board toreflect the desired skills and competencies.

(b) To review the size of Non-Executiveparticipation, Board balance and determine ifadditional Board members are required andalso to ensure that at least one-third (1/3) ofthe Board is independent.

(c) To recommend to the Board on theappropriate number of Directors to comprisethe Board which should fairly reflect theinvestments of the minority shareholders inthe Company, and whether the current Boardrepresentation satisfies this requirement.

(d) To recommend to the Board, candidates for alldirectorships to be filled by the shareholders orthe Board.

(e) To consider in making its recommendations,candidates for directorships proposed by theChief Executive Officer and, within thebounds of practicability, by any other seniorexecutive or any Director or shareholder.

(f) To recommend to the Board, Directors orofficers of the Company to fill the seats onBoard Committees.

(g) To undertake an annual review of the requiredmix of skills and experience and other qualitiesof Directors, including core competencieswhich Non-Executive Directors should bringto the Board and to disclose this in the AnnualReport.

(h) To assist the Board to implement a procedureto be carried out by the NominationCommittee annually for assessing theeffectiveness of the Board as a whole, theCommittees of the Board and for assessing thecontributions and performance of Directorsand Board of Committee members.

(i) To introduce such regulations or guidelines,procedures to function effectively and fulfillthe Committee’s objective.

4. MEETINGS

(a) The Committee shall meet at least once a year.However, additional meetings may be called atany time at the Nomination CommitteeChairman’s discretion.

(b) The quorum for the meeting shall be two (2)members.

5. REPORTING

The Chairman of the Committee shall report oneach meeting to the Board.

6. SECRETARY

The Secretary to the Committee shall be theCompany Secretary.


1. OBJECTIVES

The Remuneration Committee shall:-

(a) Ensure that the Company’s ExecutiveDirectors are fairly rewarded for theirindividual contributions to the Company’soverall performance and the levels ofremuneration should be sufficient to attractand retain Directors to run the Companysuccessfully.

(b) Demonstrate to all stakeholders in the businessthat the remuneration of the ExecutiveDirectors of the Company is set by aCommittee of Board members who have nopersonal interest in the outcome of theirdecisions and who will give due regard to theinterests of the stakeholders and to thefinancial and commercial health of theCompany.

2. MEMBERSHIP

(a) The Committee shall be appointed by theBoard from among their number and shall becomposed of not fewer than three (3) innumber.

(b) The majority of the members comprising theCommittee shall be:-

(i) Non-Executive Directors of theCompany; or

(ii) any person not having a relationshipwhich, in the opinion of the Board, wouldinterfere with the exercise of independentjudgment in carrying out the functions ofthe Remuneration Committee.

(c) The members of the Committee shall elect aChairman from among their number who isnot an Executive Director of the Company.

(d) In the event of any vacancy in the Committeeresulting in the number of members beingreduced to below three (3), the Board shall,within three (3) months fill the vacancy.

3. FUNCTIONS

(a) To recommend to the Board the remunerationof the Executive Chairman, Chief ExecutiveOfficer and Executive Directors.

(b) Assume responsibility for all elements ofExecutive Directors’ remuneration eg:

(i) Basic salary(ii) Profit sharing schemes (if any)

(iii) Share Options(iv) Any other benefits(v) Compensation for early termination

(c) Ensure that a fair differential between theremuneration of Board members and otherlevels of management is maintained.

(d) Conduct continued assessment of individualExecutive Directors to ensure thatremuneration is directly related to corporateand individual performance.

(e) Obtain the advice and information fromexternal source, if necessary, to compare theremuneration currently earned by theExecutive Directors and those paid toExecutive Directors of other companies of asimilar size in a comparable industry sector.

(f) To ensure that the base salary element iscompetitive but fair.

(g) To advise on and monitor, a suitableperformance related formula ie. whether theformula is based on individual performance,company profit performance, earnings pershare, etc.

(h) To provide an objective and independentassessment of the benefits granted to ExecutiveDirectors.

(i) To introduce any policy or guidelines whichwould enable the smooth administration andeffective discharge of the Committee’s dutiesand responsibilities.

(j) To furnish a report to the Board of any findingsof the Committee.

4. MEETINGS

(a) The Committee shall meet at least once peryear. However, additional meetings may becalled at any time at the RemunerationCommittee Chairman’s discretion.

(b) The quorum of each meeting shall be two (2)members.

5. SECRETARY

The Secretary to the Committee shall be theCompany Secretary or Senior General Manager ofHuman Resource.

Terms of Reference of Remuneration Committee


Terms of Reference of Employees’ Share OptionScheme Committee1. MEMBERSHIP

(a) The Committee shall be appointed by theBoard from among their number and shall becomposed of not fewer than four (4) innumber.

(b) The members of the Committee shall elect aChairman from among their number.

(c) In the event of any vacancy in the Committeeresulting in the number of members beingreduced to below four (4), the Board shall,within three (3) months fill the vacancy.

(d) The Board shall have the discretion as it deemsfit to rescind and/or revoke the appointment ofany person(s) in the Committee.

2. FUNCTIONS

Pursuant to Bylaw 21, the Committee shalladminister the Employees’ Share Option Scheme(“ESOS”) in such manner as it shall in its discretiondeem fit and with such powers and duties as areconferred upon it by the Board including thepowers:-

(a) Subject to the provisions of the ESOS, toconstrue and interpret the ESOS and option(s)granted under it, to define the terms thereinand to recommend to the Board to establish,amend and revoke rules and regulationsrelating to the ESOS and its administration.The Committee in the exercise of this powermay correct any defect, supply any omission orreconcile any inconsistency in the ESOS or inany agreement providing for an option(s) in amanner and to the extent it shall deemnecessary to expedite and make the ESOS fullyeffective.

(b) To determine all questions of policy andexpediency that may arise in theadministration of the ESOS and generallyexercise such powers and perform such acts asare deemed necessary or expedient to promotethe best interests of the Company.

3. POWERS AND AUTHORITY

3.1 Pursuant to Bylaw 4.1, the Committee has thediscretion to offer such number of options toeligible employees in accordance with the Schemeafter taking into consideration the contribution,performance, number of years of service and thepotential worth of the employees to the continuedsuccess of the Group.

3.2 Pursuant to Bylaw 8.6, the Committee shall havethe right at its discretion by notice in writing to thateffect:-

(a) to suspend the right of any Option Holder whois found to have contravened the writtenpolicies and guidelines of the Group and/or theterms and conditions of the Option Holder’semployment (whether or not suchcontravention may give rise to a disciplinaryproceeding being instituted) to exercise hisoption(s). In addition to this right ofsuspension, the Committee may impose suchterms and conditions as the Committee shalldeem appropriate in its discretion, on the rightof exercise of his option(s) having regard to thenature of the contravention PROVIDEDALWAYS that in the event such contraventionwould result in the dismissal or termination ofservice of such Option Holder, the option(s)shall immediately cease without notice, uponpronouncement of the dismissal or terminationof service of such Option Holder; OR

(b) to suspend the right of any Option Holder whois being subjected to disciplinary proceedings(whether or not such disciplinary proceedingsmay give rise to a dismissal or termination ofservice of such Option Holder) to exercise hisoption(s) pending the outcome of suchdisciplinary proceedings. In addition to thisright of suspension, the Committee mayimpose such terms and conditions as theCommittee shall deem appropriate in itsdiscretion, on the right of exercise of hisoption(s) having regard to the nature of thecharges made or brought against such OptionHolder, PROVIDED ALWAYS that:-

(i) in the event such Option Holder is foundnot guilty of the charges which gave riseto such disciplinary proceedings, theCommittee shall reinstate the right ofsuch Option Holder to exercise hisoption(s); or

(ii) in the event such Option Holder is foundguilty resulting in the dismissal ortermination of service of such OptionHolder, the option(s) shall immediatelycease without notice, uponpronouncement of the dismissal ortermination of service of such OptionHolder; or

(iii) in the event such Option Holder is foundguilty but not dismissed or termination ofservice is recommended, the Committeeshall have the right to determine at itsdiscretion whether or not the OptionHolder may continue to exercise hisoption(s) and if so, to impose such termsand conditions as it deems appropriate, onsuch exercise.


Terms of Reference of Employees’ Share OptionScheme Committee (Cont’d)3.3 Bylaw 20.1 stipulates that the Committee may at

any time and from time to time recommend to theBoard, any additions or amendments to and/ordeletions of the Bylaws as it shall in its absolutediscretion think fit and the Board shall have thepower by resolution to add to, amend and/or deleteall or any of the Bylaws upon suchrecommendation, subject to the approval of allrelevant authorities and all applicable laws,regulations, directives and guidelines (if required)PROVIDED THAT no such amendment and/ormodification shall be made which would either:-

(a) prejudice the rights then accrued to anyOption Holder who has accepted an optionwithout his prior consent; or

(b) without the prior approval of the shareholdersof the Company in general meeting alter theBylaws to the advantage of any Option Holderor group of Option Holders or all OptionHolders.

3.4 Such other authorities as governed by the Bylawsand/or are conferred upon the Committee by theBoard from time to time.

4. MEETINGS

(a) Meetings of the Committee may be called atany time by the Committee Chairman.

(b) The quorum for the meeting shall be three (3)members.

(c) Where necessary and appropriate, any decisionof the Committee can be made by a majorityof the members via a Circular Resolution.

5. REPORTING

The Chairman of the Committee shall report theproceedings of each Committee Meeting to theBoard.

6. SECRETARY

The Secretary to the Committee shall be theCompany Secretary.

.


1. MEMBERSHIP

(a) The Risk Management Committee (“RMC”)shall be appointed by the Board and shallcomprise not fewer than four (4) in number.

(b) The members of the RMC shall elect aChairman from among their number.

(c) In the event of any vacancy in the RMCresulting in the number of members beingreduced to below four (4), the Board shall,within three (3) months fill the vacancy.

(d) The Board shall have the discretion as it deemsfit to rescind and/or revoke the appointment ofany person(s) in the RMC.

2. ROLES AND FUNCTIONS

The RMC has the overall responsibility foroverseeing the risk management activities of theGroup, approving appropriate risk managementprocedures and measurement methodologies acrossthe organisation as well as identification andmanagement of strategic business risks of theGroup. Its primary roles include the following:-

(a) To champion and promote the Enterprise RiskManagement and to ensure that the riskmanagement process and culture areembedded throughout the Group.

(b) To ensure the implementation of theobjectives outlined in the Risk ManagementPolicy and compliance with them.

(c) To provide routine quarterly reporting andupdate the Board on key risk managementissues as well as ad-hoc reporting andevaluation on investment proposals.

(d) To work with the Group Financial Controllerand Group Internal Audit Department in thepreparation of the Statement on InternalControl for inclusion in the Company’s AnnualReport and to recommend the same for theapprovals of the Audit Committee and Board.

The Risk Working Committee (“RWC”) will assistthe RMC by identifying and managing operationalrisks within the organisation.

The RWC provides updates on key divisional riskmanagement issues to the RMC by providingquarterly reporting and risk management softwarereports.

2.1 Routine Roles and Responsibilities

(a) Review the effectiveness of overall riskmanagement at the enterprise level.

(b) Evaluate new risks identified by the RWC onthe divisional level.

(c) Follow-up on management action plans basedon the status of implementation compiled bythe RWC.

(d) Identify new strategic risks including corporatematters eg. regulatory, business development,etc.

(e) Review the enterprise risk scorecard anddetermine the risks to be escalated to theBoard on a quarterly basis.

2.2 Ad-Hoc Roles and Responsibilities

(a) Propose to the Board, the monetary thresholdand nature of proposed investments thatrequire the RMC’s evaluation andendorsement before submission to the Board.

(b) Review proposals/feasibility studies preparedby project sponsor which meet the requisitethreshold before recommending to the Boardfor final decision.

3. MEETINGS

(a) The RMC shall meet at least quarterly in ayear. However, additional meetings may becalled at any time at the RMC Chairman’sdiscretion.


4. REPORTING

The Chairman of the RMC shall report theproceedings of each Committee Meeting to theBoard.

5. SECRETARY

The Secretary to the RMC shall be the CompanySecretary.

Terms of Reference of Risk Management Committee


1. MEMBERSHIP

(a) The SunInc Strategic Direction Committee(“SSDC”) shall be appointed by the Board andshall comprise not fewer than four (4) innumber.

(b) The members of the SSDC shall elect aChairman from among their number.

(c) In the event of any vacancy in the SSDCresulting in the number of members beingreduced to below four (4), the Board shall,within three (3) months fill the vacancy.

(d) The Board shall have the discretion as it deemsfit to rescind and/or revoke the appointment ofany person(s) in the SSDC.

2. ROLES AND FUNCTIONS

The SSDC has the overall responsibility for decidingon appropriate strategic direction for SunInc Group,particularly to manage the Group from a StrategyDriven Perspective, with clear objectives and targetsfor proactive decision-making.

This is to promote transparency, accountability andset a formal platform for communicating theGroup’s strategic direction, in line with enhancingCorporate Governance within the Group.

Its primary roles include the following:-

(a) To assess and deliberate on all possible localand foreign business ventures proposed by itsBusiness Units, and to decide on viability ofbusiness ventures so as to ensure that it is inline with Group strategic objectives.

(b) To ensure all acquisitions are in line withstrategic direction of the Group and wouldpositively enhance shareholders’ value.

(c) To ensure all divestments decisions arethoroughly deliberated and would positivelyenhance shareholders’ value.

(d) To ensure utilisation of all resources within theGroup are appropriate to meet strategicobjectives of the Group.

3. MEETINGS

(a) The SSDC shall meet at least quarterly or halfyearly in a year. However, additional meetingsmay be called at any time at the SSDCChairman’s discretion.


4. REPORTING

The Chairman of the SSDC shall report theproceedings of each Committee Meeting to theBoard.

5. SECRETARY

The Secretary to the SSDC shall be the CompanySecretary.

Terms of Reference of Strategic Direction Committee


FORMATION

The Audit Committee was formed by the Board ofDirectors at its meeting on 7 March 1994.

The objective of the Audit Committee is to assist theBoard of Directors in fulfilling its fiduciary responsibilitiesrelating to internal controls, financial and accountingrecords and policies as well as financial reporting practicesof the Company and its subsidiaries ("the Group").

COMPOSITION

The members of the Audit Committee during thefinancial period from 1 January 2005 to 30 June 2006were as follows:-

1. Wong Chin Mun - Chairman(Senior Independent Non-Executive Director)

2. Datuk Low Seng Kuan(Independent Non-Executive Director)

3. Datuk Abdul Malek Bin Abdul Aziz(Independent Non-Executive Director)

4. Yau Kok Seng(Managing Director, Non-Independent ExecutiveDirector)

MEETINGS AND ATTENDANCE

The Audit Committee held seven (7) meetings during thefinancial period and the attendance of the CommitteeMembers was as follows:-

Name of Committee Member Number of Meetings Attended

Wong Chin Mun 7/7Tan Sri Dato’ Seri Dr

Md Noordin Bin Md Sopiee(Passed away on 29 December 2005) 1/5*

Datuk Low Seng Kuan 6/7Datuk Abdul Malek Bin Abdul Aziz

(Appointed on 13 March 2006) 1/1*Yau Kok Seng 7/7

* Reflects the number of Audit Committee Meetings attendedduring the time the Director held office.

The Company Secretaries, the Internal Auditors and theFinance Director were present at all meetings.At three (3)of the meetings, the External Auditors were present.

TERMS OF REFERENCE

1. Membership

1.1 The Committee shall be appointed by theBoard of Directors from amongst the Directorsof the Company and shall consist of not lessthan three (3) members.

1.2 The majority of the members including theChairman of the Committee shall beIndependent Directors as defined in Chapter 1of the Listing Requirements of Bursa MalaysiaSecurities Berhad ("Bursa Securities").

1.3 The Committee shall include at least one (1)person:-

(a) who is a member of the MalaysianInstitute of Accountants; or

(b) who must have at least three (3) years'working experience and:-

(i) have passed the examinationsspecified in Part I of the 1stSchedule of the Accountants Act,1967; or

(ii) is a member of one (1) of theAssociations specified in Part II ofthe 1st Schedule of the AccountantsAct, 1967; or

(c) who must have at least three (3) years'post qualification experience inaccounting or finance and:-

(i) has a degree/masters/doctorate inaccounting or finance; or

(ii) is a member of one (1) of theprofessional accountancyorganisations which has beenadmitted as a full member of theInternational Federation ofAccountants; or

(d) who must have at least seven (7) years'experience being a chief financial officerof a corporation or having the function ofbeing primarily responsible for themanagement of the financial affairs of acorporation.

1.4 No Alternate Director shall be appointed as amember of the Committee.

1.5 The members of the Committee shall elect aChairman from amongst their number.

1.6 If a member of the Committee resigns, dies orfor any reason ceases to be a member with theresult that the number of members is reducedbelow three (3), the Board shall, within three(3) months appoint such number of newmembers as may be required to make up theminimum of three (3) members.

1.7 The terms of office and performance of theCommittee and each of its members shall bereviewed by the Board no less than once every

Audit Committee Report


three (3) years. However, the appointmentterminates when a member ceases to be aDirector.

2. Meetings

2.1 The quorum for a Committee Meeting shall beat least two (2) members, the majority presentmust be Independent Directors.

2.2 The Committee shall meet at least four (4)times a year and such additional meetings asthe Chairman shall decide.

2.3 Notwithstanding paragraph 2.2 above, uponthe request of any member of the Committee,non-member Directors, the Internal orExternal Auditors, the Chairman shall convenea meeting of the Committee to consider thematters brought to its attention.

2.4 The External Auditors have the right to appearand be heard at any meeting of the Committeeand shall appear before the Committee whenrequired to do so.

2.5 The non-member Directors and employees ofthe Company and of the Group shall normallyattend the meetings to assist in its deliberationsand resolutions of matters raised. However, atleast once a year, the Committee shall meetwith the External Auditors without thepresence of the executive members of theCommittee.

2.6 The Internal Auditors shall be in attendance atall meetings to present and discuss the auditreports and other related matters as well as therecommendations relating thereto and tofollow-up on all relevant decisions made.

2.7 The Company Secretary shall act as Secretaryof the Committee and shall be responsible,with the concurrence of the Chairman, fordrawing up and circulating the agenda and thenotice of meetings together with thesupporting explanatory documentation tomembers prior to each meeting.

2.8 The Secretary of the Committee shall beentrusted to record all proceedings andminutes of all meetings of the Committee.

2.9 In addition to the availability of detailedminutes of the Committee Meetings to allBoard members, the Committee at each BoardMeeting, will report a summary of significantmatters and resolutions.

3. Rights and Authority

The Committee is authorised to:-

3.1 Investigate any matter within its terms ofreference.

3.2 Have adequate resources required to performits duties.

3.3 Have full and unrestricted access toinformation, records and documents relevantto its activities.

3.4 Have direct communication channels with theExternal and Internal Auditors.

3.5 Engage, consult and obtain outside legal orother independent professional advice and tosecure the attendance of outsiders withrelevant experience and expertise it considersnecessary.

4. Functions and Duties

4.1 To review and recommend for the Board'sapproval, the Internal Audit Charter whichdefines the independent purpose, authority,scope and responsibility of the internal auditfunction in the Company and the Group.

4.2 To review the following and report to theBoard:-

(a) With the External Auditors:-

(i) the audit plan and audit report andthe extent of assistance rendered byemployees of the Auditee;

(ii) their evaluation of the system ofinternal controls;

(iii) the audit fee and on matterconcerning their suitability fornomination, appointment and re-appointment and the underlyingreasons for resignation or dismissalas Auditors;

(iv) the management letter andmanagement's response; and

(v) issues and reservations arising fromaudits.

(b) With the Internal Audit Department:-

(i) the adequacy and relevance of thescope, functions and resources ofInternal Audit and the necessaryauthority to carry out its work;

(ii) the audit plan of work programmeand results of internal audit processesincluding recommendations andactions taken;

Audit Committee Report (Cont’d)


(iii) the extent of cooperation andassistance rendered by employees ofAuditee; and

(iv) the appraisal of the performance ofthe internal audit including that ofthe senior staff and any matterconcerning their appointment andtermination.

(c) The quarterly results and year endfinancial statements prior to the approvalby the Board, focusing particularly on:-

(i) changes and implementation ofmajor accounting policies andpractices;

(ii) significant and unusual issues;

(iii) going concern assumption; and

(iv) compliance with accountingstandards, regulatory and other legalrequirements.

(d) The major findings of investigations andmanagement response.

(e) The propriety of any related partytransaction and conflict of interestsituation that may arise within theCompany or the Group including anytransaction, procedure or course ofconduct that raises questions ofmanagement integrity.

4.3 To report any breaches of the ListingRequirements which have not beensatisfactorily resolved, to Bursa Securities.

4.4 To prepare the Audit Committee Report forinclusion in the Company's Annual Reportcovering:-

(a) the composition of the Committeeincluding the name, designation anddirectorship of the members;

(b) the terms of reference of the Committee;

(c) the number of meetings held and detailsof attendance of each member;

(d) a summary of the activities of theCommittee in the discharge of itsfunctions and duties; and

(e) a summary of the activities of the internalaudit function.

4.5 To review the following for publication in theCompany's Annual Report:-

(a) the disclosure statement of the Board on:-

(i) the Company's applications of theprinciples set out in Part I of theMalaysian Code on CorporateGovernance; and

(ii) the extent of compliance with thebest practices set out in Part II of theMalaysian Code on CorporateGovernance, specifying reasons forany area of non-compliance and thealternative measures adopted in suchareas.

(b) the statement on the Board'sresponsibility for the preparation of theannual audited financial statements.

(c) the disclosure statement on the state ofthe internal controls system of theCompany and of the Group.

(d) the statement by the Audit Committeeon the verification of allocation of shareoptions to the Group's eligible employeesin compliance with the criteria set out inthe Bylaws of the Company's Employees'Share Option Scheme, at the end of eachfinancial year.

(e) other disclosures forming the contents ofannual report spelt out in Part A ofAppendix 9C of the ListingRequirements of Bursa Securities.

The above functions and duties are in addition tosuch other functions as may be agreed to from timeto time by the Committee and the Board.

5. Internal Audit Department

5.1 The Head of the Internal Audit Departmentshall have unrestricted access to theCommittee Members and report to theCommittee whose scope of responsibilityincludes overseeing the development and theestablishment of the internal audit function.

5.2 In respect of routine administrative matters,the Head of Internal Audit Department shallreport to the Group Executive Chairman orhis designate.

ACTIVITIES OF THE COMMITTEEFOR THE FINANCIAL PERIODENDED 30 JUNE 2006

The summary of activities of the Committee in thedischarge of its duties and responsibilities is as follows:-



(a) Reviewed the adequacy and relevance of the scope,functions, resources, risk based internal audit planand results of the internal audit processes with theInternal Audit Department.

(b) Reviewed the audit activities carried out by theInternal Audit Department and the audit reports toensure corrective actions were taken in addressingthe risk issues reported.

(c) Reviewed with the assistance of the Internal AuditDepartment and management, the adequacy,appropriateness and compliance of the proceduresestablished to monitor recurrent related partytransactions.

(d) Reviewed with the External Auditors, the audit planof the Company and of the Group for the year(inclusive of risk and audit approach, systemevaluation, audit fees, issues raised and managementresponses) prior to the commencement of theannual audit.

(e) Reviewed the extent of assistance rendered bymanagement and issues and reservations arisingfrom audits with the External Auditors without thepresence of management staff and the executivemember of the Committee.

(f) Reviewed the financial statements, the audit report,issues and reservations arising from statutory auditwith the External Auditors.

(g) Reviewed and discussed the Management Accountswith management.

(h) Reviewed the quarterly results and financialstatements for the financial period ended 30 June2006 with management for recommendation to theBoard of Directors for approval and release to BursaSecurities.

(i) Reviewed all related party transactions entered intoby the Company and the Group at the Committee'squarterly meetings to ensure that the transactionsentered into were at arm's length basis and onnormal commercial terms.

(j) Reviewed and approved the Circular toShareholders and the statement by the AuditCommittee in respect of the proposedShareholders' Mandate for Recurrent Related PartyTransactions.

(k) Reviewed any conflict of interest situation that mayarise within the Company or Group including anytransaction, procedure or course of conduct thatraises questions of management integrity andapproved the management's policy on conflict ofinterest declaration.

(l) Discussed the implications of any latest changes andpronouncements on the Company and the Group,which were issued by the accountancy, statutoryand regulatory bodies.

(m) Reported to the Board on significant issues andconcerns discussed during the Committee'smeetings together with applicablerecommendations. Minutes of meetings weretabled, discussed and noted by all Board members.

(n) Reviewed and approved the Audit CommitteeReport and the statement by the Audit Committeeon the verification of allocation of share options tothe Group's eligible employees in compliance withthe criteria set out in the Bylaws of the Company'sEmployees' Share Option Scheme for inclusion inthe Company's 2004 Annual Report.

(o) Reviewed the disclosure statements on complianceof the Malaysian Code on Corporate Governanceand the state on internal controls as well as theDirectors' Responsibility Statement on the annualaudited financial statements for inclusion in theCompany's 2004 Annual Report.

INTERNAL AUDIT ACTIVITIESREPORT FOR THE FINANCIALPERIOD ENDED 30 JUNE 2006

The summary of activities of the Internal AuditDepartment is as follows:-

(a) Prepared the annual audit plan for the approval ofthe Audit Committee.

(b) Regularly performed risk based audits on strategicbusiness units of the Company and of the Group,which covered reviews of the internal controlsystem, accounting and management informationsystem and risk management.

(c) Issued audit reports to the Committee andmanagement identifying weaknesses and issues aswell as highlighting recommendations forimprovements.

(d) Acted on suggestions made by the Committeeand/or senior management on concerns overoperations or controls and significant issuespertinent to the Company and of the Group.

(e) Followed up on management corrective actions onaudit issues raised by the External Auditors.



(f) Reported to the Committee on review of theadequacy, appropriateness and compliance with theprocedures established to monitor recurrent relatedparty transactions.

(g) Reviewed on the appropriateness of the disclosurestatements in regard to compliance with theMalaysian Code on Corporate Governance and thestate on internal controls as well as the AuditCommittee Report.

(h) Attended Committee's meetings to table anddiscuss the audit reports and followed up on mattersraised.

(i) Performed independent evaluation on the operationof risk management framework focusing primarilyon the adequacy and effectiveness of the saidframework.


Beyond Boundaries - I3investor

Documents