On behalf of the Board of Directors, I am pleased to present the Annual Report of the Company for the year ended 31 December 2008.


2008 was a difficult year, with unprecedented volatility as a result of the global credit crisis. What started as a sub prime credit deterioration in the United States led to a threat of a systemic failure of the global financial systems. The disruption to the capital markets resulted in sharp decline in prices of all major asset classes including properties, equities and commodities. The consequent erosion of wealth resulted in a global economic contraction.

The overall performance of the Group in 2008 was not spared from such a once in a generation financial calamity. Operationally, the Group maintained its revenue performance at RM1.01 billion in 2008 as compared to RM988.63 million in 2007. This is testament to the strong appeal of the Group's operational assets which recorded improved revenue despite operating under such adverse economic conditions. However, the global economic contraction has necessitated the Group to review the carrying value of its major assets specifically properties, equity investments and foreign currency holdings, resulting in significant asset value impairments in 2008. This contributed to a Group net loss of RM121.72 million in 2008, despite an improvement in the operational revenue base, as compared to the profit of RM120.19 million in 2007. Excluding the asset impairment charges, the Group would have recorded a profit of RM58.27 million in 2008.

In addition to the impairment charges in 2008, the Group also recorded significant decline in its foreign exchange reserve account. This decline in the foreign exchange reserve account in 2008 was mainly due to the weakening of the Australian Dollar, where a significant proportion of the Group's assets are denominated, as compared to the Group's reporting currency of Ringgit Malaysia. Consequently, the key performance measure that management focuses on, net tangible assets ("NTA") per share, deteriorated in 2008 declining to RM1.66 in 2008 as compared to RM1.95 in 2007. However management is confident that our NTA position should strengthen going forward as asset values stabilize and the underlying value of the Australian Dollar, supported by its vast commodities reserves, begins to recover.

Pursuant to the mandate given by the shareholders for the Company to buy back up to 10% of its issued shares, the Company has up to 30 April 2009 repurchased 77,015,000 shares costing approximately RM98.0 million at an average of RM1.27 per share. The Board of Directors has resolved to cancel the 77,015,000 treasury shares and will be seeking your approval at the forthcoming Annual General Meeting to renew the shares buy back mandate for another year.

Real Estate

Malaysia

Leisure Farm, the Group's flagship project in Malaysia comprising 1,722 acres of exclusive master planned residential resort development in Southern Johor, continued to remain profitable in 2008. Leisure Farm achieved profit of RM15.5 million mainly from the lockedin progress sales of its Bayou Water Village development comprising of 213 units of bungalow, semi-detached and low rise courtyard homes. There were also significant new sales of other products, primarily bungalow homes, in 2008 albeit at a lower rate that in 2007.

The unique and innovative concepts embedded in the development of Leisure Farm have continued to receive local and global industry recognition over the years. Leisure Farm won the Best Master Plan Resort Award at the 2008 CNBC Asia Pacific Property Awards, and went on to represent the Asia Pacific region at the 2008 CNBC International Property Awards where it also won the global award. Pinggiran Bayou Village Homes, an exclusive low density enclave of 122 courtyard homes, also was recognized by winning the internationally acclaimed FIABCI Prix d'Excellence Award 2008 in the residential development category. These honours are a testament to the quality and innovation of our products at Leisure Farm even when compared to global benchmarks.

The Group held back the start of a number of our developments in Malaysia which were originally planned for 2008, namely the Grade A office tower located at Jalan Sultan Ismail, Kuala Lumpur and the high-end bungalow developments at Bangsar and Bukit Tunku, Kuala Lumpur, due to the uncertain economic conditions and falling construction and materials prices.

The Group took cognisance of the deteriorating economic conditions going into 2009 and decided to record an impairment of RM18.2 million on its development land located at Sepang, Selangor. Excluding this impairment, the Group's ongoing property projects in Malaysia remained profitable on an overall basis in 2008.

Australia

Sanctuary Cove, the Group's 474-hectare award winning development on Queensland Gold Coast, built on its legacy as the premier master planned community in the southern hemisphere. Property sales at Sanctuary Cove were resilient in 2008 despite the difficult economic conditions with sales reaching A$100 million. This brings the overall value of sales (including resales) to more than A$700 million since the Group assumed ownership of the resort in 2002. The profit achieved by Sanctuary Cove in 2008 was A$22.5 million which is more than double that of 2007. Sanctuary Cove will celebrate in 2009 its 21st anniversary since its inception as a resort. To enhance its position as a premier master planned community, the Group had in 2008 commenced a A$50 million transformation of the community involving a new A$12 million golf clubhouse, a new entry boulevard, A$9 million improvement of The Marina Village with inclusion of worldclass retail traders and an additional 250 marina berths with a mega-yacht berthing facility to enhance Sanctuary Cove's reputation as a yachting haven.

The Group's hotel portfolio comprising of the InterContinental Hotel Sydney, Hilton Melbourne Airport and Hyatt Regency Sanctuary Cove remained profitable in 2008. However, Hayman Great Barrier Reef, Australia's most celebrated island destination, suffered from low occupancy due to unseasonably bad weather conditions as well as a drop discretionary vacation and corporate spending. In view of such difficult environment, the Group decided to record an impairment of A$17.5 million on the value of its resort at Hayman. Management is confident when the potential development of the land parcels on Hayman is realized, the long term value of Hayman exceeds its short term assessed values.

Performance of Mulpha FKP Pty Limited ("Mulpha FKP"), the developer of the 377-hectare world class Norwest Business Park located in the northwest of Sydney, was resilient despite the economic difficulties. The Group's share of profit of Mulpha FKP in 2008 was A$9.2 million which was only marginally below that of 2007. Besides development of commercial land, Mulpha FKP is also at the forefront of residential development following the successful master planned community of Bella Vista in Sydney which comprises of 1,400 residential blocks and 500 medium density dwellings. Future residential developments for Mulpha FKP include 550 lots at Mulgoa in the west of Sydney and 150 lots at Kellyville in the northwest of Sydney.

The Group increased its holding in FKP Property Group ("FKP"), a listed property group in Australia, to a 22.80% equity interest and increased our Board representation in FKP during the year. This allowed the Group to treat its investment in FKP as an associate and equity account for its share of FKP results effective from June 2008. As with many other property companies in worldwide, FKP recorded significant asset impairments in 2008 resulting in the Group taking a share of these losses. However, management remains confident of the long term prospects of FKP considering the massive asset base it owns.

Vietnam

The Indochine Park Tower ("IPT"), the Group's 18-storey luxury serviced apartment located in the prime district of Ho Chi Minh City, continued to record a strong year with nearly full occupancy in 2008. The clientele comprising of mainly diplomatic missions and multinational companies is testament to the high level of asset and service quality offered by IPT.


The Group has a 23.5% equity interest in Mudajaya Group Berhad ("Mudajaya") which is a listed construction and property group in Malaysia. The performance of Mudajaya was robust in 2008 with the Group's share of profit in Mudajaya amounting to RM13.26 million. The construction and development businesses of Mudajaya continued to perform well. Mudajaya continued to secure construction contracts both locally and internationally. Among the sizable contracts secured are (i) the design and build construction project for the privatisation of the Kuala Lumpur – Kuala Selangor Expressway Package 1 – Assam Jawa to Kundang and for Package 2 – Kundang to Taman Rimba Templer amounting to RM958.0 million and (ii) the EP contract for the setting up of Unit 2, 3 and 4 of the 4 x 360 MW IPP Plant Project in Chhattisgarh, India for a total consideration of US$721.41 million through an international competitive bidding exercise. Mudajaya's order book as at 31 March 2009 stands at RM5.5 billion.

Mudajaya has a 26% equity interest in RKM Powergen Private Limited ("RKM") which is the special purpose vehicle to undertake the IPP Project in the state of Chhattisgarh, India. The IPP Project is a coal-based thermal power station consisting of 4 generating units with a nominal capacity of 360 MW each, to be set up in two phases, comprising of Phase 1 (unit 1 of the generating units) and Phase 2 (Unit-2, 3 and 4 of the generating units). RKM has made significant progress on the IPP Project. The development for Phase 1 is on track and targeted for completion by the second half of 2011 while the development for Phase 2 has commenced since February 2009 and is expected to be completed in 3 years. A steady long-term stream of recurring income is expected to commence upon the commercial operation of the power plant.

The Group has an interest of 88% in Manta group which is involved in the sale, rental and servicing of construction equipment mainly in Hong Kong and Singapore. Manta group achieved profit of RM10.1 million in 2008 which is more than double the profit of 2007. The construction sectors in Hong Kong and Singapore continued to remain robust in 2008 despite the difficult conditions.


Greenfield Chemical Holdings Limited ("Greenfield"), the Group's 62.5% listed subsidiary in Hong Kong, is engaged in the manufacture and sale of industrial paints in Hong Kong and China. Greenfield group recorded improvement in revenue in 2008 mainly due to launch of new products and expansion of business scope. However, cost pressures resulting from high prices of oil and other raw materials together with high labour costs mainly during the 1st half of 2008 eroded the margins and resulted in profit decline for Greenfield group in 2008. The Greenfield group has taken various measures to reinforce its competitiveness in view of the difficult economic conditions including developing high-yield products and enhancing product quality.


The Group acquired a 38% equity interest in Rotol Singapore Ltd ("Rotol"), a listed entity in Singapore, which is presently involved in the building materials industry. The acquisition comprise of 145,920,000 shares in Rotol at S$0.06 per share or a total cash consideration of S$8.755 million. The rationale for the acquisition is to allow the Group to further expand its existing business operations and growth opportunities into Singapore through a listed entity at a reasonable entry cost.

The Group increased its holding in FKP Property Group ("FKP") from 27,280,428 FKP securities or 10.37% equity interest as at end-2007 to 80,119,102 FKP securities or 22.80% equity interest as at end-2008 after taking into account the securities sub-underwritten and subscribed by the Group pursuant to a rights issue at A$1.50 per security by FKP. The Group's sub-underwriting and subscription of FKP securities was an opportunity to increase its participation in a leading diversified property investment company which is also the largest private sector owner and operator of retirement villages in Australia and New Zealand.

As mentioned in my 2007 Chairman's Statement, the Group had intended to acquire two coal mines in Inner Mongolia through its subsidiary in Hong Kong, Greenfield. However, the global economic contraction has dampened demand for natural resources including coal resulting in the viability of this acquisition becoming uncertain. The Group has therefore mutually agreed with the vendors to terminate the conditional sale and purchase agreement in November 2008.


The prospects for 2009 are challenging given the continued uncertainty in the global economy. The Group will continue to remain vigilant with regards to its costs base, however, concurrently preparing the groundwork for the launch of our development pipeline to be timed with an expected economic recovery.

Management is confident that the Group will be able to withstand the challenges arising from the unprecedented global economic turmoil, supported by our world class asset base. The Group is also well positioned to seize any potential opportunities that may arise during such period of uncertainty given the Group's conservative balance sheet.


I wish to express the Board's appreciation to the management and staff for their efforts and dedication. I also wish to thank our shareholders, financiers and customers for their continued support over the years, particularly in a year such as 2008.

LEE SENG HUANG
Chairman
22 May 2009