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corporate structure

Property Development

100% 50% 100% 100% 100% 100% 100% 100% 100% 100% 70% 70% 50% Bandar Setia Alam Sdn Bhd Bandar Eco­Setia Sdn Bhd Setia Duta One Sdn Bhd Bukit Indah (Johor) Sdn Bhd Setia Indah Sdn Bhd Shabra Development Sdn Bhd Syarikat Kemajuan Jerai Sdn Bhd Bukit Indah (Perak) Sdn Bhd Setia Promenade Sdn Bhd Cosmotek Sdn Bhd Bukit Indah Property Management Sdn Bhd Indera Perasa Sdn Bhd Golden Klang Valley Sdn Bhd

100% 100%

S P Setia Project Management Sdn Bhd Lagavest Sdn Bhd

60% 100%

SJ Classic Land Sdn Bhd Dian Mutiara Sdn Bhd

Construction and Infrastructure

100% 100% 100% S P Setia Construction Sdn Bhd Setia Prefab Sdn Bhd Setia Bina Raya Sdn Bhd 100% 100% Setia Precast Sdn Bhd Manih System Construction Sdn Bhd

Manufacturing / Investment and Property Holding / Property Management / Security Services / Others

100% 50% 100% 100% 60% 51% 100% 100% 100% 100% 100% 100% 100% 99.9% 61.5% 40% 40%

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Setia­Wood Industries Sdn Bhd Setia Putrajaya Sdn Bhd Kewira Jaya Sdn Bhd S P Setia Management Services Sdn Bhd S P Setia Estate Management Sdn Bhd S P Setia Security Services Sdn Bhd S P Setia Property Holdings Sdn Bhd Setia Alam Property Holdings Sdn Bhd S P Setia Technology Sdn Bhd Futurecrest (M) Sdn Bhd Pelita Dunia Sdn Bhd Bukit Indah (Selangor) Sdn Bhd Setia Hicon Sdn Bhd Kenari Kayangan Sdn Bhd Tenaga Raya Sdn Bhd Konsortium Lebuhraya Wangsa­Keramat Sdn Bhd KLWK Sdn Bhd

100% 100% 100% 23.2%

S P Setia Marketing Sdn Bhd Setia Putrajaya Construction Sdn Bhd Setia Putrajaya Development Sdn Bhd Loh & Loh Corporation Berhad

20%

Icfox (Malaysia) Sdn Bhd

49%

PTB Property Developer Sdn Bhd

50% 100% 100% 66.7%

Wawasan Indera Sdn Bhd*

* 50% investment in Wawasan Indera Sdn Bhd is held by S P Setia

S P Setia Eco­Projects Management Sdn Bhd Setia Recreation Sdn Bhd Ambleside Sdn Bhd

60%

Suharta Sdn Bhd

100% 51% 100% 60%

Suharta Properties Sdn Bhd Suharta Development Sdn Bhd Suharta Management Sdn Bhd Yunikhas Sdn Bhd*

100%

Aneka Baru (M) Sdn Bhd

* 8% investment in Yunikhas Sdn Bhd is held by S P Setia * 10% investment in Yunikhas Sdn Bhd is held by Manih System Construction Sdn Bhd

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board of directors' profile

Tan Sri Abdul Rashid bin Abdul Manaf

Chairman Malaysian, 59 years of age Barrister-at-Law (Middle Temple London)

Tan Sri Abdul Rashid is a Senior Partner in a legal firm in Kuala Lumpur. He was called to the English Bar in 1971. He was also called to the Malaysian Bar in 1977. He was a magistrate from 1971 to 1973 and was later made the President of the Sessions Court. From 1975 to 1977, he was the Federal Counsel for the Income Tax Department before starting his own practice, which todate he is still a senior partner. He was appointed Director of S P Setia on 15 January 1996 and the Chairman of the Executive Committee of S P Setia on 29 January 1996. He assumed his position as the Chairman of S P Setia Group on 12 March 1997. He is also the Chairman of Loh & Loh Corporation Berhad, SMIS Corporation Berhad and Maika Holdings Berhad. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.

Dato' Sri Liew Kee Sin

Group Managing Director/Chief Executive Officer Malaysian, 47 years of age Bachelor of Economics Degree (Business Administration) (University of Malaya)

Dato' Sri Liew started his career in a local merchant bank in 1981. After gaining 5 years of extensive experience in the banking industry, he ventured into property development. He was appointed an Executive Director of S P Setia Group on 15 January 1996 and was subsequently appointed to his current position as the Group Managing Director on 3 May 1996. He is now the Group Managing Director/Chief Executive Officer. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.

Dato' Voon Tin Yow

Executive Director/Chief Operating Officer Malaysian, 48 years of age Bachelor of Science in Civil Engineering Degree Master of Science Degree (University of Texas, Austin)

Dato' Voon has 22 years of working experience in the construction and property development industry, which includes 3 years in construction site management and 19 years in management of property development. He began his working career in 1984 by joining Kimali Construction Sdn Bhd as a Site Manager and in 1986, he held the post of Development Engineer in Juru Bena Tenaga Sdn Bhd. In 1990, he joined Syarikat Kemajuan Jerai Sdn Bhd ("SKJ") as Project Manager and was subsequently appointed General Manager of SKJ in 1994. He was appointed Director of S P Setia on 15 July 1996. He also sits on the Board of Loh & Loh Corporation Berhad. He was appointed Chairman of the Risk Management Committee on 29 October 2003. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.

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Yap Kok Weng

Executive Director/Chief Financial Officer Malaysian, 44 years of age Associate Member of the Chartered Institute of Management Accountants (UK) Chartered Accountant of the Malaysian Institute of Accountants

Mr Yap has more than 20 years of experience in the accounting, finance, administration and corporate finance field. He was attached with Arab-Malaysian Merchant Bank Berhad as an Internal Audit Officer from 1987 to 1989 prior to joining the Hong Leong Group where he held various positions during his term of service from 1989 to 1991. His last appointment with the Hong Leong Group was as an Accountant. He later joined S P Setia as the Group Accountant in 1991. He is currently responsible for the corporate and finance division and manufacturing division of S P Setia Group. He was appointed Director on 19 December 2001 and became a member of the Risk Management Committee on 29 October 2003. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years. Khor Chap Jen

Executive Director Malaysian, 46 years of age Bachelor of Engineering (Honours) (University of Malaya) Professional Engineer registered with the Board of Engineers, Malaysia Fellow of the Institute of Engineers, Malaysia

Mr Khor started his career with Jurutera Perunding Kemajuan as an Engineer and held various posts before being promoted to Associate Director in 1995. He was involved in housing development and several highway projects including the North-South Expressway and the Shah Alam Expressway. He left in 1995 to join S P Setia and was seconded to Setia Putrajaya Sdn Bhd from 1997 to 1999, as the Deputy Chief Executive Officer, to undertake the turnkey contracts for the prestigious Prime Minister's Office and Prime Minister's Official Residence. He was involved in the mixed development of Precinct 9 in Putrajaya. Upon completion of his secondment in 1999, he was transferred back to the Head Office as Divisional General Manager - Property Central and Highway Divisions of S P Setia. He was appointed Director of S P Setia on 18 December 2002 and became a member of the Risk Management Committee on 29 October 2003. He also sits on the Board of DN Homeowners Berhad and DT Homeowners Berhad. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years. Tan Sri Dato' Zaki bin Tun Azmi

Non-Independent Non-Executive Director Malaysian, 60 years of age Barrister-at-Law at Lincoln's Inn (London)

Tan Sri Dato' Zaki joined a leading legal firm in Kuala Lumpur as a Senior Partner in 1985 till the present day. He served in the Malaysian Government Judicial and Legal Service from 1969 to 1985. Tan Sri Dato' Zaki was previously Magistrate in 1970 and President of the Sessions Court in 1971. In 1973, he became the Federal Counsel of the Drafting Division of the Attorney General's Chambers. From 1976 to 1984, he held the position as a Senior Federal Counsel of the Ministry of Home Affairs. He was appointed Director of S P Setia on 28 October 1996. He also sits on the Board of Petroliam Nasional Berhad (PETRONAS), HLG Capital Berhad, Bina Darulaman Berhad, Narra Industries Berhad, Panasonic Manufacturing Malaysia Berhad (formerly known as Matsushita Electric Company (Malaysia) Bhd), Berjaya Vacation Club Berhad and Kumpulan Fima Berhad. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.

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board of directors' profile

George Anthony Dass David

Non-Independent Non-Executive Director Malaysian, 58 years of age LLB (Hons) degree (1971) (University of Singapore) Masters in Law (University of London) High Court of Malaya as an Advocate & Solicitor in 1971

Mr David Dass began his career as a Lawyer in 1972 and was a Senior Partner of a leading legal firm in Kuala Lumpur until 31 December 2004. He was appointed Director of S P Setia on 15 January 1996. He also sits on the Board of United Bintang Berhad. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.

Tan Sri Dato' Hari Narayanan a/l Govindasamy

Independent Non-Executive Director Malaysian, 55 years of age Bachelor Degree in Electrical & Electronic Engineering (University of Northumbria, England)

Tan Sri Dato' Hari Narayanan is a businessman by profession and also a member of the Institute of Engineers, Malaysia (IEM). He is also a registered professional engineer with the Board of Engineers, Malaysia. He has extensive experience in electrical and electronic engineering and has held various key positions with some established companies as an engineer and entrepreneur. He was appointed Director and a member of the Audit Committee of S P Setia on 14 November 1996. Subsequently on 28 April 1997, he was appointed the Chairman of the Audit Committee and on 3 April 2001, he was appointed as a member of the Remuneration Committee. Tan Sri Dato' Hari Narayanan also sits on the board of Tenaga Nasional Berhad and Puncak Niaga Holdings Berhad. He also holds directorships on the Board of Lembaga Lebuhraya Malaysia (Malaysian Highway Authority), Asian Institute of Medicine, Science & Technology and several other private companies. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.

Dato' Leong Kok Wah

Independent Non-Executive Director Malaysian, 52 years of age Master of Business Administration (MBA) [University of Hull (UK)] Member of Institute of Bankers (UK) Member of Institute of Credit Management (UK) Member of Institute of Marketing (UK)

Dato' Leong has an extensive career and held senior positions in the banking industry. He has vast experience in stockbroking, asset management and options and futures trading. He is currently a Stockbroker and sits on the board of various companies in Malaysia. He was appointed Director and a member of the Audit Committee of S P Setia on 1 June 2000. On 3 April 2001, he was appointed as a member of the Nomination Committee and Remuneration Committee. He was nominated Chairman of Remuneration Committee on 21 September 2005. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.

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board of directors' profile

Datuk Ismail bin Adam

Independent Non-Executive Director Malaysian, 60 years of age Master in Public Administration (MPA) (Pennsylvania State University, U.S.A.) Diploma in Public Administration (University of Malaya) Bachelor of Arts (Honours) (University of Malaya)

Datuk Ismail started his career in 1969 as an Assistant Director of Public Services Department. He was made Deputy Director Service Division of Public Services Department from 1983 till 1988. In 1988, he was with the Ministry of Culture, Arts and Tourism as a Deputy Secretary General and as Secretary General in 1995. He then assumed his last position as Secretary General of Ministry of Health Malaysia in 1999 till 2000. He has extensive experiences in general management, hospitality, tourism, cultural and arts management and health and medical administration. He was appointed Director and a member of the Audit Committee of S P Setia on 19 December 2001. On 21 September 2005, he was appointed as a member of the Remuneration Committee. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years. Dato' Ali bin Hassan

Independent Non-Executive Director Malaysian, 63 years of age Bachelor of Arts (Honours) (University of Malaya) Diploma in Public Administration (University of Malaya) Master in Public Administration (University of Southern California)

Prior to venturing into the private sector, Dato' Ali held various positions in the Public Services Department, Prime Minister's Department, Ministry of Finance and Ministry of Energy, Telecommunications and Posts. He also served as Executive Chairman of the Inland Revenue Board. He was the Chairman of Telekom Malaysia Berhad before he retired in 1999. He was the Chairman of RHB Bank Berhad until 2005. He was appointed Director and a member of the Audit Committee of S P Setia on 18 December 2002. On 21 September 2005, he was appointed as the Chairman of Nomination Committee. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years. Ng Soon Lai @ Ng Siek Chuan

Independent Non-Executive Director Malaysian, 51 years of age Fellow of the Institute of Chartered Accountants in England and Wales

Mr Ng had several years of experience in the accounting profession with Coopers & Lybrand in London and Kuala Lumpur before moving on to the financial sector in 1980. Prior to joining Alliance Bank in July 1991 as General Manager of Credit, he had served in various positions in a leading local merchant bank and a finance company. He was appointed as Chief Executive Director of Alliance Bank Malaysia Berhad on 21 January 1994 and to the Board of Alliance Merchant Bank Berhad on 22 July 2002 until his resignation on 31 August 2005. He was appointed a Director, a member of the Audit Committee and a member of the Nomination Committee of S P Setia on 21 September 2005. He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.

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q u a l 1t y

What drives us at S P Setia is our passion for quality because we believe that anything less is a compromise. Shortchange on quality once and you are likely to lose a customer forever. That's why we always do our very best because we want our customers to keep coming back.

chairman's statement

Dear valued shareholders, MARKET REVIEW 2005 has been a good year for the S P Setia Bhd Group (The Group) with new records set for both revenues and profits. And to cap off a great year, S P Setia was also recognised as the Best Property Developer in Malaysia in 2005 by two leading domestic and international publications.

Financial Perfomance For the financial year ended 31 October 2005, the Group registered a strong showing with total Group revenue surging by 23% to RM1.3 billion and profit after tax rising by 26% to RM203.4 million. We have managed to exceed our RM1 billion sales target which we set at the start of the year in the face of challenges from tough market conditions and stiff competition. Dividends I am pleased to inform our shareholders that the Board has proposed a final dividend of 19 sen per share for the financial year ended 31 October 2005. Together with the interim dividend of six sen per share, the total dividend for the year adds up to 25 sen per share representing 58% of the Group's net profit. Corporate Developments During the fiscal year under review, the Group implemented a few key corporate strategies to improve our capital structure, strengthen our profitability and sustain earnings visibility. The Group announced and completed a capital repayment exercise as part of an active capital management strategy to enhance returns to shareholders. Under the exercise, the par value of each S P Setia share was reduced to 75 sen per share from RM1.00 per share thereby returning RM163.5 million in total to shareholders. The capital repayment, which was funded by internally generated funds, excess proceeds from warrants and the exercise of options under the employees' share option scheme, also contributed towards the improvement in our return on equity (ROE). For the financial year ended 2005, our ROE was 13%, a steady improvement from 12% in 2004 and 10% in 2003.

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The Group also announced plans to venture up North and penetrate the lucrative Penang property market to broaden its geographical reach. In September, the Group's wholly-owned subsidiary, Setia Promenade Sdn Bhd signed a sale and purchase agreement for the proposed acquisition of 112.6 acres of freehold land in Penang for RM144.3 million from PPH Resorts (Penang) Sdn Bhd. The land is strategically located 20 km south of Georgetown and 9 km from the Penang Bridge. It is only 2 km away from Bayan Lepas Free Trade Zone, Bayan Lepas Town and the Penang International Airport which will provide a ready market catchment for the project. After establishing a leading position in both the Klang Valley and Johor Bahru property markets, it is timely for the Group to introduce the S P Setia range of products to the Penang market to build up a strong presence there. Awards and Achievements We are proud to report that our steadfast commitment to excellence in every sphere of our business has once again earned us numerous awards this year. S P Setia clinched the No. 1 spot in The Edge Malaysia's Top Property Developers Award 2005 after being ranked second in 2004 and 2003. The survey covered over 100 property developers listed on Bursa Malaysia Securities Bhd. We were also named the Best Property Developer in Malaysia by international financial magazine Euromoney in their inaugural Awards for Excellence in Real Estate 2005. Real estate practitioners in over 50 countries were polled under six award categories including developers, property managers, real estate advisory firms, commercial bankers providing capital to real estate industry, investment banks with real estate services and investment managers with specialist real estate funds. S P Setia also made it to Forbes Asia magazine's List of 200 best under US$1 billion companies in the Asia-Pacific for the second consecutive year and received a Special Mention by the Judges in ACCA Malaysia's Environmental and Social Reporting Awards 2004.

The Group's industrialised building system specialist, Setia Precast Sdn Bhd (Setia Precast) also bagged the prestigious Malaysian Construction Industry Excellence Award 2005 under the Major Scale Project Category. These awards and recognitions will reinforce our resolve to perform even better to reward all our stakeholders for their continued confidence in us. Commitment to the Community We understand that our long term business success is closely linked to the welfare and vitality of our local communities. We also want to grow our business as a trusted and respected corporate citizen. As such, active community engagement continues to be advocated by the Group in fulfilling our social responsibility. Our charitable trust, S P Setia Foundation remained at the forefront of our charitable endeavours, lending a helping hand to numerous worthy causes. The Foundation's Annual Charity Dinner held on 11 August 2005 succeeded in raising a record sum of RM5.5 million for its charitable purposes. In this, we were privileged to have the support of the Deputy Prime Minister of Malaysia, YAB Dato' Sri Mohd Najib Tun Razak, who graced the fundraiser as our Guest of Honour. As the entertainment for the evening close to 90 staff put on an electrifying musical extravaganza entitled "Sparks", wooing and wowing the crowd with their nifty dance moves and flashy costumes. It took six months of dedication and demanding training for the performers to successfully stage the show. We are indeed proud that our staff has passionately embraced our philosophy of giving back to society by contributing their time and energy to the performance. Our heartfelt thanks also go to all our business associates for their generous donations which have enabled the Foundation to reach out to the less fortunate. With a partnership built on shared values with our business associates, we believe that together we can continue to be significant active contributors to society.

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chairman's statement

S P Setia clinched the No. 1 spot in The Edge Malaysia's Top Property Developers Award 2005 after being ranked second in 2004 and 2003. The survey covered over 100 property developers listed on Bursa Malaysia Securities Bhd.

Staff Development At S P Setia, we stress on exploring the full potential of our human capital. We believe one of the Group's greatest competitive advantages is our people. We have a pool of highly united, motivated and skilled employees who anchor our business success. Being a progressive employer, we have developed a comprehensive human capital management programme to attract and retain the right people, nurture talents and groom future leaders. To create an excellence-driven culture, we have also implemented a performance-based management system where superior performance is richly rewarded. The Group provides extensive training for our staff to help them keep abreast of current trends and developments in their professional fields. To promote the sharing of knowledge in line with efforts to inculcate a learning culture, the Setia Learning Centre was established this year. We hope the Centre can encourage S P Setia staff to engage in learning opportunities, exchange ideas, enhance their skills and promote knowledge retention and dissemination within the Group. Setia Sports and Recreational Club (SSRC) continued to play a pivotal role in fostering the spirit of teamwork organisation-wide. A host of activities such as the annual Badminton, Bowling and Dart-Throwing Tournaments were held in addition to Yoga, Akido and Ballroom Dancing classes which were introduced during the year.

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chairman's statement

Future Prospects Our multiple projects in the Klang Valley and Johor Bahru have performed well, registering good take-up rates. We will continue to build on this year's progress in 2006 and beyond. Going forward, we expect challenging times ahead amidst softening consumer sentiments and a lackluster stock market. Nevertheless, we believe prospects for residential properties remain encouraging given our country's young demographic which continues to ensure a rising need for housing. Further, the underlying economic fundamentals are still very much intact with GDP projected to grow at 5.5% next year. We are therefore optimistic of sustained interest in S P Setia's extensive choice of housing products ranging from the affordable to the mid and high end markets. Over the years, we have built our business on our brand promise of providing high quality homes to our customers. To further strengthen our brandname and establish S P Setia as the Preferred Developer, we have initiated the Service, Product and People Quality (SPPQ) Programme in 2005. This organisation-wide programme is targeted at improving our brand delivery at every level of our organisation to win customers' loyalty and support in the current competitive business environment. We also target to streamline our operations by containing cost and improving profit margins. Barring any unanticipated changes to the global and local operating environment, the Group is confident of performing better next year.

Acknowledgements We are pleased to welcome Mr Ng Siek Chuan as an Independent Non-Executive Director to the Board of S P Setia on 21 September 2005. Mr Ng brings with him a wealth of experience in the financial and banking sector, having been an industry veteran for over 20 years. On behalf of the Board of Directors, I would also like to put on record my deepest appreciation to all our customers, shareholders, government authorities and business associates for their trust and confidence in us. And of course, my gratitude also goes to our dedicated employees, whose unwavering commitment to delivering value and quality products and services to our customers lies at the heart of our every success.

TAN SRI ABDUL RASHID ABDUL MANAF Chairman

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group managing director's review of operations

Dear valued shareholders, 2005 has been an exciting year for the Group. Fresh from the success of our Setia Alam township, the Group launched two new projects ­ Setia Eco Park in Shah Alam and Setia Tropika in Johor Bahru to capture greater market share in both our key target markets.

Property Development We registered another record-high with some 4,500 units of properties sold with a combined value of RM1.2 billion for the financial year under review. The strong performance was attributable to the good sales recorded by our Klang Valley as well as Johor Bahru projects. Klang Valley

watch over the neighbourhood. The presence of a dedicated police beat will help to deter the occurrence of crimes, safeguard the interest of residents and enhance overall public safety. Setia Alam will also be home to a brand new SJK (C) Pin Hwa (1) following the school's relocation from Klang Town. The ground-breaking ceremony was officiated by YB Dato' Seri Ong Ka Ting, the Minister of Housing and Local Government on 20 September 2005. The school, which will be built on a 5-acre piece of land, is targeted to be completed on time for the 2007 academic session. The school will have 30 classrooms, which can take in 2,500 pupils in addition to science labs, workshops, multi-purpose hall, computer room, football and basketball fields. SJK (C) Pin Hwa (1) will be the first of 24 primary schools that will be built in Setia Alam in addition to 11 secondary schools, a concrete statement of our commitment to provide quality educational establishments for our residents. The scheduled opening of the 7.5 km NKVE-Jalan Meru Link which was fully funded by the Group by early 2006 will also enhance the overall attractiveness and provide further impetus to sales in both Setia Alam as well as Setia Eco Park.

Setia Eco Park, Shah Alam

The much-awaited official launch of Setia Eco Park was successfully held on 11 June 2005 by YAB Dato' Seri Dr Mohamad Khir Toyo, the Menteri Besar of Selangor. Over 1,000 special guests were invited to the exclusive launch celebration at the expansive Show Village. The launch was a classy affair with an international buffet spread and street musicians entertaining the guests as dusk set in. Setia Eco Park's captivating vision of being a "Valley of Dreams" created a strong emotional appeal for discerning buyers in search of eco-sensitive yet affordable luxury housing. Homebuyers were attracted to the promise of a private sanctuary to which they can return to seek respite from the frenetic pace of modern life. Conceived as a low-density and exclusive enclave of semiDs and bungalows sited on 791 acres of rolling terrain, residents of Setia Eco Park can also enjoy the scenic skyline of the neighbouring Bukit Cahaya Forest Reserve from their homes.

Setia Alam, Shah Alam

Our flagship project, the 2,525-acre Setia Alam continued to make commendable headway, selling over 2,600 units of residential and commercial properties within two years of its launch. This nature-themed township is shaping up to be a modern suburb with extensive amenities to cater to the lifestyle aspirations of today's homebuyers. Setia Alam is set to welcome its first batch of residents with the maiden hand-over of its 1st phase of terrace houses scheduled during the first quarter of 2006. Even now, some 60 acres of garden-themed landscaping including ponds, waterways, pedestrian walkways and the central townpark is ready for use, creating a lush soothing ambience for residents and visitors alike. To provide Setia Alam's residents with peace of mind on their security, a police beat will be ready by early 2006 to

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To date, a total of 440 units of bungalow lots, semi-Ds and bungalows have been sold in Setia Eco Park, which will house some 3,000 units of homes upon completion. Setia Eco Park is set to become a landmark community of the biggest enclave of semi-Ds and bungalows nestled within a richly landscaped and ecologically balanced environment that will test the limits of our ingenuity in township development.

minimalist homes. Over at Bukit Indah, the Show Village was given a facelift and renamed the "Street of Dreams" to better identify with the evolving taste and preferences of today's customers. After making our mark in the Johor property market with two award-winning townships, namely Bukit Indah and Setia Indah, S P Setia launched its third project known as Setia Tropika in the year under review.

Duta Tropika, Sri Hartamas

This niche project in the heart of Sri Hartamas, Kuala Lumpur was an instant sell-out. All 138 units of the courtyard and garden villas were snapped up by enthusiastic buyers within one year of its official launch. Duta Tropika, with its luxurious trappings in a quiet corner of Sri Hartamas proved to be immensely popular with a privileged group of buyers who were looking for just such a project located mere minutes away from the city centre. The popularity of Duta Tropika can be credited to its unique architectural concept, which stays true to its quintessential resort features whilst retaining liveable practicality. Some of the notable features that set Duta Tropika apart are large lanais and windows, hanging gardens, floating feature ponds and semi-outdoor bathrooms, all converging to bring the outdoors in and maximise the resort ambience. Johor Bahru

Setia Tropika, Johor Bahru

Setia Tropika, located in Kempas, a key development corridor, introduced a refreshing new lifestyle concept previously unseen in Johor Bahru. Its streamlined and minimalist chic designs have captured the imagination of buyers in search of contemporary homes that reflect their modern lifestyle trends. Accessibility-wise, Setia Tropika enjoys an edge that few other developers have. It is strategically situated just off the Kempas Interchange (Exit 255) on the North South Highway and is served by an excellent network of highways, with direct connection to the North South Highway, Tebrau Highway, Pasir Gudang Highway and Skudai Highway. The 740-acre township will also enjoy direct access to the North South Highway via a RM15 million link currently being constructed by Setia Indah Sdn Bhd, the developer of Setia Tropika. Infrastructure and Construction

The Johor Bahru property market demonstrated resilience with our key projects performing well despite the tough competition. The southern property market is poised to enjoy spin-off benefits from the Federal Government's commitment to spur the state's growth and the renewed economic vigour in neighboring Singapore due to its proximity to the island state. Our established projects, Setia Indah in Tebrau and Bukit Indah in Bandar Nusajaya continued to record strong sales based on their value for money propositions of wellplanned amenities and extensive greenery. Setia Indah also introduced contemporary, clean line designs in its township to cater to the rising demand for

The Infrastructure and Construction Division generated total revenues of RM131.6 million for the period under review. The Group's subsidiary, Setia Precast Sdn Bhd (Setia Precast) achieved a proud milestone by winning the Malaysian Construction Industry Excellence Awards 2005 (MCIEA 2005) under the Major Scale Project Category. The annual award, organised by the Construction Industry Development Board (CIDB), aims to acknowledge industry players for demonstrating all-round excellence and creativity in developing the construction sector.

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group managing director's review of operations

The Group's profitability for the year under review was mainly contributed by the Property Development Division which accounted for 92% of profit before tax. The Manufacturing Infrastructure and Construction Divisions accounted for the remaining 8% of pre-tax profits.

Setia Precast was picked as the winner based on its success in employing the Industrialised Building System (IBS) in the construction of the Putrajaya Parcel 8 project involving two blocks of 684 apartment units and a public amenity building in Precinct 9 of the New Federal Administrative Centre. The prestigious award recognises Setia Precast as the frontrunner for the construction industry in the IBS field which has been strongly advocated by the Government in line with its efforts to modernise the sector. As the pioneer of IBS in the country since 1982, Setia Precast has amassed a wealth of technical know-how and extensive experiences and is in a strong position to leverage on the mileage provided by the award to further grow its business. Wood-Based Manufacturing The Group's Wood-Based Manufacturing Division recorded a pre-tax profit of RM9.6 million on the back of revenues of RM42.2 million during the year under review. In line with efforts to expand its business, the manufacturing division has successfully ventured into the overseas market. During the year under review, the division secured a contract to supply customised fire-rated doors for the Philips Innovation Campus in Bangalore, India. The division will continue to aggressively seek new business opportunities both locally and overseas to develop its business. Looking Ahead We expect market conditions to turn increasingly challenging next year with concerns over softening demand. Despite that, we remain confident that good opportunities still exist for us, given the breath and depth of our product range and established brand presence. Our sizeable locked-in sales of RM1 billion will underpin earnings in 2006. Meanwhile, we continue to expect strong performance to be recorded by our existing Klang Valley and Johor Bahru projects. We have also lined up two new exciting projects, namely Setia Hills Ampang, a high-end exclusive bungalow project and Setia Pearl Island, which will be our first foray

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into the Penang property market. With the on-going projects performing well and new projects coming on stream, we are confident of charting stronger earnings growth. One of our main areas of focus in 2006 will be on strategic brand positioning to differentiate ourselves from other industry players. Our target is to have a product in every RM100,000 price bracket starting from as low as RM150,000 for simple single storey houses in Johor Bahru to in excess of RM 2 million for luxurious bungalows in the Klang Valley. The S P Setia house of brands currently has three distinct product ranges covering the mass to mid and high-end markets. The "Setia" range features projects such as Setia Alam in Shah Alam, Setia Indah and Bukit Indah in Johor Bahru. This range is synonymous with well-planned townships, award-winning landscaping and quality homes at accessible pricing. The "Eco Park" range showcased by Setia Eco Park in Shah Alam offers a nature-inspired and ecologically balanced environment with good security features at affordable mid high-end prices. Our "Duta" range consisting of projects such as Duta Tropika and Duta Nusantara in Sri Hartamas promises five-star luxury and top-notch security consistent with its premium pricing. While each range has its unique features to cater to the needs of their individual market segment, they share the same S P Setia's brand promise of uncompromising product and service quality. With our targeted brand-building efforts and multiple projects at multiple locations with multi-level pricing, we are confident of penetrating every market segment and delivering long-term value to our customers.

DATO' SRI LIEW KEE SIN Group Managing Director

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relationsh1 ps

Our brand is a customer-centric one, underscored by a promise "to provide a delightful customer experience." By turning the ordinary into the extraordinary, we build longlasting relationships with all our customers.

awards, standards and certification

As a reputable property developer, S P Setia has delivered quality homes that fulfil a broad spectrum of customer expectations. Our efforts are guided by our vision statement: `To be the best in all we do'. This commitment to exceed customers' expectations is reflected in our willingness to listen and understand their needs. Our award-winning neighbourhood parks and the encouraging accolades we have received over the years are testimonies of our unwavering pursuit of excellence.

Corporate Management Excellence 2005 · No. 1 in The Edge Top Property Developers Award 2005 · Best Property Developer in Malaysia in Euromoney's Awards for Excellence in Real Estate 2005 · No. 3 in Hewitt Associates' Top Ten Best Employers in Malaysia 2005 Survey · Setia Precast Sdn Bhd ­ Winner of Major Scale Project Category in Malaysian Construction Industry Excellence Award 2005 · Forbes Asia Best Under a Billion Award 2005 2004 · Top Ten Best-Managed Companies & Best Corporate Governance in Malaysia in Finance Asia's Asia Best Companies 2004 · No. 2 in The Edge Top Property Developers Award 2004 · Forbes Asia Best Under a Billion Award 2004 · Special Mention by the Judges in ACCA Malaysia's Environmental and Social Reporting Awards 2004 2003 · Top Ten Overall Best-Managed Companies in Malaysia in Asiamoney's 12th Annual Best-Managed Companies Poll 2003 · No. 1 for Best Corporate Governance Standards in the Real Estate Sector, Asia Pacific and Malaysia in Asiamoney's Corporate Governance Poll 2003 · No. 2 in The Edge Top Property Developers Award 2003 · No. 9 in Hewitt Associates' Top Ten Best Employers in Malaysia 2005 Survey Landscaping Awards · · · · · · 2003 Johor State Special Award (Outstanding Contribution and Excellent Commitment in maintaining Neighbourhood Park) for Bukit Indah Johor 2002 National Landscape Award (Neighbourhood Park Category) for Setia Indah Johor 2002 Johor State Landscape Award (Neighbourhood Park Category) for Setia Indah Johor 2001 National Landscape Award (Neighbourhood Park Category) for Bukit Indah Johor 2001 Johor State Landscape Award (Neighbourhood Park Category) for Bukit Indah Johor First runner-up in the 2001 Ampang Jaya Municipal Council Landscape Award (Residential Category) for Bukit Indah Ampang

Quality Certification · · · · ISO9001:2000 Certification of Quality Management for Setia Precast Sdn Bhd ISO9001:2000 Certification of Quality Management for S P Setia Estate Management Sdn Bhd ISO9001:2000 Certification of Quality Management for Setia-Wood Industries Sdn Bhd ISO9001:2000 Certification of Quality Management for S P Setia Project Management Sdn Bhd System System System System

corporate social responsibility

Our commitment towards good corporate social responsibility (CSR) practices is deeply embedded in our corporate philosophy. We not only want to be profitable but also to maintain and improve conditions both for society and the physical environment.

S P Setia Foundation In the sphere of society, S P Setia Foundation anchors our CSR activities and involvement. Since its inception in 2000, S P Setia Foundation has grown to become a meaningful force for good that lends a compassionate hand to the needy within the community. Setia Adoption Programme

2500 Number of Pupils 2000 1500 1000 500 0 230 2000 2001 2002 2003 2004 2005 Year 1477 1162 1975 2256 2345

Now into its sixth year, the Setia Adoption Programme has grown by leaps and bounds. The programme started off with just 79 pupils, the majority of whom were underprivileged students from Kuala Lumpur and Puchong, Selangor. Today, the number has swelled to 2,345 students from 109 schools in both urban and less developed areas within Kuala Lumpur, Selangor, Johor, Pulau Pinang, Kedah, Perlis and Pahang.

Number of Adopted Pupils from year 2000 to 2005

The main objective of the Setia Adoption Programme is to give needy children equal access to good basic education to chart a better future. By providing them with educational assistance, the Foundation hopes to ease the financial burden faced by the parents and allow the pupils to concentrate on their studies. The Programme funds the students' education by providing them with school bags, stationery, school uniforms, workbooks and exercise books, school fees, canteen meals, computer fees and tuition fees worth between RM700 and RM800 per pupil annually until they complete their primary schooling. To further encourage the students to excel in their studies, the Foundation organised activities such as the Excellence Awards Night 2004, Dialogue Sessions with Parents, UPSR Camps in Perlis, Penang, Kuala Lumpur, Pahang and Johor. Home visit trips were also made to students' homes in Perlis, Kedah, Kuala Lumpur, Selangor and Johor to monitor the students' progress. Beginning in the year 2003, the Board of Trustees of the Foundation extended the scope of the Setia Adoption Programme to cover secondary school students, in order to develop the potential of outstanding students under the core primary school programme. Setia Adopted Children scoring straight As in their UPSR examination in the final year of primary school are eligible to continue to receive aid of RM1,000 a year to cover their educational needs. At present, the Foundation has adopted a total of 88 secondary students.

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corporate social responsibility

We are heartened by the good progress shown by our first batch of Setia Adopted Children who are now in the third year of their secondary schooling. In the future, the programme may be further extended to assist outstanding performers who progress to tertiary education. Education, General Welfare and Medical During the year, the Foundation also rendered assistance to numerous deserving individuals and charitable organisations for the betterment of society. Education · Scholarship to 6 underprivileged students to study medicine at AIMST, Sg Petani · Sponsorship of a newspaper reading campaign for 2,000 students from 100 schools · Sponsorship of 1,350 tables and chairs for new classrooms in 3 primary schools in Selangor and Johor Bahru · Contribution to Pusat Tuisyen Darul Falah, Jeli, Kelantan · Contribution to SMK Taman Medan General Welfare · Annual Grant to Montfort Boys Town · Annual Sponsorship for Pusat Maju Diri `Y' Toy Library · Donation of Computers for Damai Disabled Persons Association of Selangor & Wilayah Persekutuan · Donation to Kelab Kecacatan Fizikal Klang · Donation to Persatuan Kanak-Kanak Istimewa Hulu Langat Medical · Upgrading of the Reverse Osmosis System for Kurnia Dialysis Centre Environmental Management Sensitivity towards the environment guides every aspect of our development activity. Our goal is to create green havens that are in perfect harmony with nature to enhance the quality of life. The conferment of numerous landscaping awards over the years is testament of our firm commitment towards responsible environmental management. Greening the environment continues to rank high on our list of priorities. Our townships are well-known for the meticulous planning and vast expanse of greens which provide a healthy living environment for our residents. To ensure that new benchmarks of excellence continue to be set in this important segment of our development activities, we have invested in a dedicated Landscape Department with 24 full time staff. In 2005, S P Setia's Landscape Department was invited by Star Publications to conduct a Landscaping and Gardening workshop under their "Learning Skills Workshop Series". Hosted by Setia Eco Park, the sold-out event drew over 50 gardening enthusiasts from several states. This community event is part of S P Setia's efforts as an environmentallysensitive developer to share our knowledge and expertise on environmental management with interested members of the public.

28 S P SETIA BERHAD

corporate social responsibility

During the year under review, we introduced Setia Tropika, our latest project, to the Johor market with exciting new and revolutionary planning standards. Setia Tropika adheres to the "Archiplanning" concept whereby creative architectural designs and innovative layouts for practical living are perfectly blended with suitable landscaping to create a cohesive living environment. This modern township will have an 11-acre townpark with features to promote community interaction, engagement and welfare such as an old folks' plaza, sculpture plaza, picnic zones, amphitheatre, multipurpose court and football field. A total of 28 acres of linear parks with ponds, jogging paths and recreational utilities act as active zones to encourage healthy lifestyles amongst its residents. The linear parks also buffer the homes from the highway and protect the air quality in the township. Setia Tropika also adopts the safe city planning concept to ensure a secure living environment. A multi-tiered security system has been planned for the township. Firstly, there will only be 3 guarded entry points into the township. Next, each precinct will have gated perimeter fencing with a single entry point for controlled access. Commercial areas are separated from residential areas to maintain privacy and 24-hour security patrol will be available for further security. The Way Forward We foresee that the importance placed on good CSR practices will continue to gain prominence as the public becomes more aware of the wider roles and responsibilities that corporations should assume in developing our country. We are well-placed to benefit from this, given our early incorporation of CSR as an integral part of our business philosophy and strategy. This dedication to good CSR practices will continue to be diligently practised as we seek to further grow our business in the years ahead.

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corporate calendar

15 & 16 December 2004

S P Setia partnered The Star Publication to present the spectacular "Shaolin Kung Fu Masters Return!", raising RM1 million in support of Tung Shin, a community based hospital. The show was a huge success with over 16,000 people packing Stadium Putra Bukit Jalil to witness the awe-inspiring feats of the 32-member troupe from the legendary Songshan Shaolin Wushu Centre in Henan, China.

18 December 2004

YB Dato' Seri Ong Ka Ting, Minister of Housing and Local Government launched S P Setia's luxury boutique development, Duta Tropika at an exclusive dusk celebration. Combining the creative use of architecture and Balinese resort landscaping, Duta Tropika is a sensory feast of colour, sights and sounds.

19 December 2004

Some 1,000 staff dressed to the theme "That 50's Nite" overran the Sunway Lagoon Resort Hotel at S P Setia's Annual Dinner & Dance 2004. Colorful frocks, graceful kebayas and lacy dresses were popular among the ladies while men donned tailored tuxedos and dashing leather jackets.

18 February 2005

S P Setia hosted a Chinese New Year Carnival to usher in the Year of the Rooster. YB Dato' Sri Chan Kong Choy, Minister of Transport and wife, YBhg Datin Sri Ann Lai joined the crowd to toss the"888ft Triple Prosperity Yee Sang" which made its way into the Malaysia Book of Records.

30 S P SETIA BERHAD

corporate calendar

15 March 2005

SAC Dato' Hj Kamarulzaman Hj Itam, Deputy Chief Police Officer of Selangor performed the ground breaking ceremony for the construction of a police beat in Setia Alam township. The single storey police beat is equipped with a reception area, waiting lobby, office, kitchenette and restroom, surau and a lock-up room.

12 April 2005

S P Setia held a press conference and analysts' briefing to announce its capital repayment plan which saw it returning a total of RM163.5 million to shareholders. The capital repayment has boosted the Group's return on equity (ROE) from 10% in 2003 to 13% for the year ended 2005.

20 April 2005

Dato' Sri Liew Kee Sin received the Best Employers in Malaysia 2005 Award on behalf of S P Setia from YAB Dato' Sri Mohd Najib Tun Razak, Deputy Prime Minister of Malaysia for being ranked the overall top three Best Employer in the country by Hewitt Associates.

29 May 2005

S P Setia staff celebrated a memorable Family Day at the Mines Wonderland with lots of good fun and laughter. Plenty of fun-filled events such as magical clowns, telematches and games stalls were lined up for the youngsters and young at heart.

11 June 2005

YAB Dato' Seri Dr Mohamad Khir Toyo, Menteri Besar Selangor launched Setia Eco Park, the country's biggest enclave of exclusive semi-Ds and bungalows in Shah Alam. The guests were treated to a sumptuous buffet spread while entertainment was provided by a live band and street musicians.

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corporate calendar

28 July 2005

S P Setia was named the No.1 Property Developer in Malaysia by The Edge Top Property Developers Award 2005. Dato' Sri Liew Kee Sin accepted the award from YB Dato' Seri Ong Ka Ting, Minister of Housing and Local Government.

5 August 2005

Taiwanese singer, Emil Chou performed at a mega concert held at Setia Tropika, Johor Bahru to a capacity crowd of over 25,000 fans. The open air concert, which also saw the appearance of local boy band Island, was held in conjuction with the soft launch of Setia Tropika.

11 August 2005

S P Setia Foundation Annual Charity Dinner raised RM5.5 million to benefit the needy. S P Setia staff stole the show with a musical titled "Sparks". YAB Dato' Sri Mohd Najib Tun Razak, Deputy Prime Minister of Malaysia was the Guest of Honour at the event.

3 September 2005

YAB Dato' Haji Abdul Ghani, Menteri Besar of Johor declared open S P Setia's third Johor Bahru project, Setia Tropika at the official launching ceremony. The show village featuring 16 units of homes was also launched simultaneously.

10 & 11 September 2005

Setia Alam and Setia Eco Park held a unique event called "My Family Portrait", attracting hundreds of families to snap photos to be cherished for all time. Following the resounding success of the function, similar events were also held in Setia Tropika and Setia Indah in October 2005 and Bukit Indah Johor in November 2005.

32 S P SETIA BERHAD

corporate calendar

20 September 2005

Setia Alam will house the new SJK (C) Pin Hwa (1), which is relocating from Klang Town. YB Dato' Seri Ong Ka Ting, Minister of Housing and Local Government officiated at the ground breaking ceremony. The school covering a 5-acre land, will be fully equipped with two science labs, two workshops, a library, TV-media room, computer room and an art room. There will also be a football field and two basketball courts for sports activities.

1 November 2005

S P Setia was named the Best Property Developer in Malaysia 2005 by Euromoney in their inaugural Awards for Excellence in Real Estate 2005. This inaugural survey aims to recognize high quality and consistent performance in global real estate activities with evaluation on both quantitative and qualitative criterias, organised according to geography and area of services.

24 & 25 September 2005

S P Setia held two consecutive corporate nights featuring Dama Orchestra's "September Tale: Terese Teng: Her Life, Her Songs" to overwhelming response. On the second night, YB Datuk Ong Tee Keat, Deputy Minister of Youth and Sports launched a coffeetable book on Setia Eco Park called "The Collection of Dreams" .

25 November 2005

Tan Sri Abdul Rashid Abdul Manaf, Chairman of S P Setia received the Malaysian Construction Industry Excellence Awards 2005 on behalf of Setia Precast Sdn Bhd from Datuk Seri S. Samy Vellu, Minister of Works at the awards ceremony.

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corporate governance statement

Corporate Governance Statement The Board of Directors ("Board") is committed to ensure that good corporate governance is practiced throughout the Group in accordance with the Malaysian Code on Corporate Governance ("Code") to enhance shareholders' value and the financial performance of the Group. The following paragraph describe of how the Group has applied the principles set out in the Code and save where otherwise identified, its compliance with the best practices of the Code for the year ended 31 October 2005.

3. Board Balance The Board comprises four (4) Executive Directors and eight (8) Non-Executive Directors of whom five (5) are independent which is in compliance with paragraph 15.02 of Bursa Securities Listing Requirements in respect of the board composition. The Board members have a wealth of experience as well as skills and knowledge, which are relevant to the Group. Although all the Directors are jointly responsible for the Group's strategic business direction, the role of the Independent Non-Executive Directors is particularly important in ensuring that the strategies proposed by management are fully discussed and evaluated, taking into account the long term interests of our stakeholders, namely the Company's shareholders, employees, customers, business associates and the community as a whole. The roles of the Chairman and Group Managing Director/Chief Executive Officer are distinct and separate with their responsibilities clearly defined to ensure a balance of power and authority. 4. Supply of Information The Directors have full and unrestricted access to all information pertaining to the Group's business and affairs to enable them to discharge their duties. All Directors are provided with the agenda together with the Board papers in advance of Board Meetings to enable them to consider and deliberate knowledgeably on issues and to facilitate informed decision making. In addition there is a schedule of matters reserved specifically for the Board's decision which includes the approval of corporate plans and budgets, material acquisitions and disposals of assets, major capital projects, financial results, dividend recommendations and board appointments. All Directors have access to the advice and services of the Company Secretary and Senior Management and may seek independent professional advice, at the Company's expense, if required, in furtherance of their duties.

A. BOARD OF DIRECTORS 1. The Board The Company is led and controlled by the Board which assumes overall responsibility for corporate governance, strategic direction and investments made by the Company. 2. Board Meetings During the financial year under review, the Board met seven times and the attendance record for each Director is as follows:Name of Director Total Meetings Percentage of Attended Attendance (%)

Tan Sri Abdul Rashid bin Abdul Manaf Dato' Sri Liew Kee Sin Dato' Voon Tin Yow Yap Kok Weng Khor Chap Jen Tan Sri Dato' Zaki bin Tun Azmi George Anthony Dass David Tan Sri Dato' Hari Narayanan a/l Govindasamy Dato' Leong Kok Wah Datuk Ismail bin Adam Dato' Ali bin Hassan Ng Soon Lai @ Ng Siek Chuan * * Appointed w.e.f 21.09.2005

5/7 7/7 5/7 7/7 6/7 6/7 7/7 4/7 7/7 7/7 6/7 1/7

71.43 100 71.43 100 85.71 85.71 100 57.14 100 100 85.71 14.28

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

34 S P SETIA BERHAD

corporate governance statement

5. Appointment and Re-Election to the Board Appointments to the Board are made based on the recommendation of the Nomination Committee. In accordance with the Company's Articles of Association, all Directors shall retire from office at least once every three (3) years but shall be eligible for re-election. The Group Managing Director/Chief Executive Officer, however, subject to the provision of the service contract executed between the Company and himself on 2 January 2001 prior to the coming into effect of paragraph 7.28, Part K of Bursa Securities Listing Requirements on 1 June 2001, shall continue his service for a fixed period of five years from 2 May 2001 to 1 May 2006. The requirement set out in para 7.28 Part K of the Listing Requirement could not be adhered to as such adherence would result in the Company being in breach of the contract with the Group Managing Director/Chief Executive Officer. 6. Directors' Training All the Directors have attended the Mandatory Accreditation Programme. The Directors will continue to attend other relevant training programmes to keep abreast with developments on a continuous basis in compliance with paragraph 15.09 of Bursa Securities Listing Requirements. 7. Board Committees The Board has delegated certain responsibilities to Board Committees which operate within defined terms of reference. The Board Committees include the Audit Committee, Executive Committee, Nomination Committee, Remuneration Committee, Option Committee and Risk Management Committee. The respective Committees report to the Board on matters considered and their recommendation thereon. The ultimate responsibility for the final decision on all matters, however, lies with the Board. B. DIRECTOR'S REMUNERATION Objective The Company's remuneration policy for Directors is tailored to support the Company's overall objective of delivering long-term value to its shareholders. The remuneration packages are designed to encourage the creativity and innovation appropriate for a property, infrastructure and construction company and to enable the Company to recruit and retain individuals

of the necessary calibre relevant to the achievement of the Company's strategic objectives. Remuneration Procedures The Remuneration Committee recommends to the Board the remuneration package for each Executive Director. It is the ultimate responsibility of the entire Board to approve the remuneration of these Directors. The determination of the remuneration of the NonExecutive Directors is a matter decided by the Board as a whole. Remuneration Package The remuneration package of Directors is as follows:(a) Basic salary The basic salary (inclusive of statutory employer's contributions to the Employees Provident Fund) for each Executive Director is recommended by the Remuneration Committee, taking into account the individual responsibility, contribution and performance, additional responsibilities of the Directors, as well as the market-rate for similar positions in comparable companies. (b) Allowance The allowance given to the Non-Executive Directors is based on the experience and level of responsibilities undertaken by the particular NonExecutive Director concerned. (c) Bonus scheme The Group operates a bonus scheme for all employees, including the Executive Directors. The criteria for the scheme include the level of profit achieved by the Group from its business activities against targets, together with an assessment of each individual's performance during the period. Bonuses payable to the Executive Directors are reviewed by the Remuneration Committee and approved by the Board. (d) Benefits-in-kind Other benefits (such as car, petrol, chauffeur, security services and travelling allowance) are made available as appropriate.

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corporate governance statement

The details of the remuneration of each Director of the Company who served during the financial year ended 31 October 2005 are as follows:Category In RM'000 Executive Directors Dato' Sri Liew Kee Sin Dato' Voon Tin Yow Yap Kok Weng Khor Chap Jen Non-Executive Directors Tan Sri Abdul Rashid bin Abdul Manaf Tan Sri Dato' Zaki bin Tun Azmi George Anthony Dass David Tan Sri Dato' Hari Narayanan A/L Govindasamy Dato' Leong Kok Wah Datuk Ismail bin Adam Dato' Ali bin Hassan Ng Soon Lai @ Ng Siek Chuan

(Appointed w.e.f 21.09.2005)

Basic Salary

Allowance

Bonus

Benefits-in-kind

Total

1,034.86 819.19 493.54 485.05

­ ­ ­ ­

2,575.82 1,609.80 440.07 437.47

1,198.47 358.17 59.70 35.20

4,809.15 2,787.16 993.31 957.72

­ ­ ­ ­ ­ ­ ­ ­

656.95 293.44 157.20 157.20 157.20 104.80 91.72 8.00

­ ­ ­ ­ ­ ­ ­ ­

228.65 106.73 13.33 ­ ­ ­ ­ ­

885.60 400.17 170.53 157.20 157.20 104.80 91.72 8.00

Total

2,832.64

1,626.51

5,063.16

2,000.25

11,522.56

C. SHAREHOLDERS The Company's Annual General Meeting remains the principal forum for dialogue with shareholders. Shareholders are encouraged to participate in the proceedings and ask questions about the resolutions being proposed and the operations of the Group. In addition to various announcements made during the year, the timely release of annual reports, circulars to shareholders, press releases and financial results on a quarterly basis provides shareholders with an overview of the Groups' performance and operations. The Company also responds to requests for discussions with institutional shareholders and analysts to give them a better understanding of the businesses of the Group. During the financial year, the Company participated in 11 road shows and investor conferences and had approximately 200 meetings with financial analysts and investors.

The Group maintains the following websites that allows all shareholders and investors access information about the Group:www.spsetia.com.my www.setiahomes.com Any queries or concerns relating to the Group may be conveyed to the following persons:(i) Tan Sri Dato' Hari Narayanan a/l Govindasamy, Chairman of the Audit Committee Telephone Number : 03-625 70812 Fax Number: 03-6257 0048 (ii) Lee Wai Ngan Chan Toye Ying Company Secretaries Telephone Number: 03-2161 5466 Fax Number: 03-2163 6968

36 S P SETIA BERHAD

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

NON-AUDIT FEES Other than the following, there were no non-audit fees paid to the external auditors for the financial year 31 October, 2005: Auditors Moores Rowland Services Professional services in connection with the advice on the interest charges in relation to a deferred payment loan facility. Professional services in connection with the review on the Statement of Internal Control. Professional services in connection with the review of adjustments to option prices. Amount Paid (RM)

1,575.00

Moores Rowland The Statement on Internal Control set out on page 40 of this Annual Report provides an overview of the state of internal controls within the Group. RELATIONSHIP WITH AUDITORS The Board via the Audit Committee, maintains a formal and transparent professional relationship with the Group's auditors, both internal and external. The role of the Audit Committee in relation to the auditors is described in the Audit Committee Report set out on page 38 to page 39 of this Annual Report. DIRECTORS' RESPONSIBILITY STATEMENT The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year which have been made out in accordance with the applicable approved accounting standards and give a true and fair view of the state of affairs of the Group and Company at the end of the financial year and of the results and cash flows of the Group and Company for the financial year. The directors are satisfied that in preparing the financial statements of the Group and of the Company for the financial year ended 31 October 2005, the Group has used the appropriate accounting policies and applied them consistently. The directors are also of the view that relevant approved accounting standards have been followed in the preparation of these financial statements. ADDITIONAL COMPLIANCE INFORMATION OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES During the financial year 10,744,380 options were exercised pursuant to the Employees' Share Option Scheme which was implemented on 26 January 2002. 75,519,262 warrants were converted during the financial year ended 31 October, 2005. The warrants have lapsed on 16 June 2005. The Company did not issue any convertible securities.

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2,100.00

Moores Rowland

4,200.00

MATERIAL CONTRACTS There were no material contracts entered into by the Company and its subsidiaries involving directors' and major shareholders' interest which were still subsisting as at the end of the financial year under review or which were entered into since the end of the previous financial year except as disclosed in page 47 and note 41 of the financial statements. RECURRENT RELATED PARTY TRANSACTIONS At the Thirteeth Annual General Meeting of the Company held on 24 February 2005, the Company had obtained the approval for the renewal of the shareholders' mandate to enter into recurrent related party transactions of a revenue or trading nature, which are necessary for its day-to-day operations and in the ordinary course of its business, with related parties. The said mandate took effect on 24 February 2005 and will continue until the conclusion of the forthcoming Annual General Meeting of the Company. At the forthcoming Annual General Meeting to be held on 9 February 2006, the Company intends to seek its shareholders' approval to renew the existing mandate for recurrent related party transactions of a revenue or trading nature. The details of the shareholders' mandate to be sought will be furnished in the Circular to Shareholders dated 18 January 2006 attached to this Annual Report. REVALUATION OF LANDED PROPERTIES The Company does not have a revaluation policy on landed properties.

37

audit committee report

MEMBERS OF THE AUDIT COMMITTEE Tan Sri Dato' Hari Narayanan a/l Govindasamy

(Chairman & Independent Non-Executive Director)

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

Dato' Leong Kok Wah

(Independent Non-Executive Director)

Datuk Ismail bin Adam

(Independent Non-Executive Director) Dato' Ali bin Hassan (Independent Non-Executive Director)

ii

Ng Soon Lai @ Ng Siek Chuan

(Independent Non-Executive Director) (Appointed w.e.f. 21.09.2005) Yap Kok Weng (Resigned w.e.f. 21.09.2005) Tan Sri Dato' Zaki Bin Tun Azmi (Resigned w.e.f. 21.09.2005)

iii.

5.0 FREQUENCY OF MEETINGS A minimum of four (4) meetings a year shall be planned, although additional meetings may be called at any time at the Chairman's discretion. The Audit Committee held four (4) meetings during the financial year ended 31 October 2005. The details of attendance of the Audit Committee members are as follows:Name of Audit Committee Member Tan Sri Dato' Hari Narayanan a/l Govindasamy Tan Sri Dato' Zaki Bin Tun Azmi

(Resigned w.e.f 21.09.2005)

SECRETARIES Lee Wai Ngan Chan Toye Ying TERMS OF REFERENCE 1.0 PURPOSE The primary objective of the Audit Committee (as a sub-committee of the Board) is to assist the Board in the effective discharge of its fiduciary responsibilities for corporate governance, timely and accurate financial reporting and development of sound internal controls. 2.0 COMPOSITION i. The Audit Committee shall be appointed by the Directors amongst their numbers, who fulfils the following requirements:· comprised no fewer than 3 members · a majority must be independent directors · at least one member must be a member of the Malaysian Institute of Accountants or having the relevant qualifications and experience as specified in the Listing Requirements of Bursa Malaysia Securities Berhad The Chairman of the Audit Committee shall be an independent director.

Total meetings attended

Percentage of attendance (%)

3/4 3/4 4/4 4/4 3/4 4/4 NA

75 75 100 100 75 100 NA

Dato' Leong Kok Wah Datuk Ismail Bin Adam Dato' Ali Bin Hassan Yap Kok Weng

(Resigned w.e.f 21.09.2005)

Ng Soon Lai @ Ng Siek Chuan

(Appointed w.e.f 21.09.2005)

6.0 QUORUM The quorum for a meeting shall be two (2) members. The majority of members present shall be Independent Directors. 7.0 AUTHORITY i. The Audit Committee is authorised by the Board to investigate any activity within its Terms of Reference. It is authorised to seek any information it requires from any employee for the purpose of discharging its functions and responsibilities. The Committee may, with the approval of the Board, obtain legal or other advice from independent professionals and appoint external parties with relevant experience and expertise to assist the Committee if it considers this necessary.

ii.

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

ii.

38 S P SETIA BERHAD

audit committee report

8.0 DUTIES The duties of the Committee shall be:i. To consider the appointment of the external auditors, the audit fees and any questions of resignation or dismissal. To review the nature and scope of the audit by the external auditors before commencement. To review the quarterly and year end financial statements before submission to the (Board), focusing particularly on:· · · · iv. any changes in accounting policies and practices significant audit adjustments from the external auditors the going concern assumption compliance with accounting standards and regulatory requirements

(b)

Discussed significant audit findings in respect of the financial statements of the Group with the external auditors; Reviewed the reports prepared by the internal auditors on the state of internal control of the Group; and Reviewed the related party transactions entered into by the Company and the Group.

(c)

ii. iii.

(d)

STATEMENT ON EMPLOYEES' SHARE OPTION SCHEME ("SCHEME") BY THE COMMITTEE The Audit Committee has reviewed and verified that the allocations of options granted during the financial year under the Company's Scheme were in accordance with the provisions as set out in the Scheme. INTERNAL AUDIT FUNCTION The Group has an established Internal Audit Department which assists the Committee in the discharge of its duties and responsibilities. The Committee is aware of the fact that an independent and adequately resourced internal audit function is essential to assist in obtaining the assurance it requires regarding the effectiveness of the system of internal controls. The internal audit activities carried out for the financial year include, inter alia, the following:­ ­ Ascertained the extent of compliance with the established Group policies, procedures and statutory requirements Reviewed the system of internal controls and key operating processes of certain business units by adopting a risk based approach towards planning and conducts of internal audit Reviewed related party transactions

To discuss problems and reservations arising from the interim and final audits and any matter the auditors may wish to discuss (in the absence of management, where necessary). To review the external auditors' management letter and management's response. To review the adequacy of the scope, functions and resources of the internal audit function, major findings of any internal investigations and management's response.

v. vi.

vii. To review any related party transactions that may arise within the Company or Group. viii. To consider other related matters, as defined by the Board.

­ SUMMARY OF ACTIVITIES OF THE COMMITTEE DURING THE YEAR The Audit Committee met four times during the financial year ended 31 October 2005. The activities of the Audit Committee for the financial year were summarised as follows:(a) Reviewed the quarterly financial results announcements for each quarter of the Group prior to the Board of Directors' approval, focusing particularly on:­ ­ ­ ­ the overall performance of the Group; the prospects for the Group; the changes in or implementation of major accounting policy changes; and compliance with accounting standards and other legal requirement

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

a n n u a l

r e p o r t

2 0 0 5

39

internal control statement

Board Responsibility The Board acknowledges that it is responsible for the Group's system of internal control and for reviewing its adequacy and integrity. The system is designed to provide reasonable assurance of effective operations and compliance with laws and regulations. The Board ensures the effectiveness of the system through regular reviews. The system of internal control is designed to rather than eliminate the risk of failure to business objectives, and as such, can only reasonable but not absolute assurance against misstatement or loss. manage achieve provide material

c) The framework of the Group's system of internal control and key procedure include:

There is in place an organisation structure, which

formally defines lines of responsibility and delegation of authority.

Key functions such as finance, tax, treasury,

corporate and legal matters are controlled centrally.

There is a strategic planning, annual budgeting

and target-setting process, which includes forecasts for each area of business with detailed reviews at all levels of operations. The Board reviews and approves the annual budget.

Actual performance compared with budget is

Risk Management The Board is pleased to disclose that there is an ongoing process for identifying, evaluating and managing significant risks faced by the Group throughout the financial year. The said process is regularly reviewed by the Board and accords with the Statement of Internal Control ­ Guidance for Directors of Public Listed Companies. reviewed quarterly with detailed explanation of any major variances.

The Executive Directors meet on a monthly basis

with all Divisional Heads and Business Unit Heads to consider the Group's financial performance, business development, management and corporate issues.

Policies and procedures of most operating units

Internal Control The Board summarises below the process applied in reviewing the adequacy and integrity of the system of internal control: a) The Board has appointed the Audit Committee to examine the effectiveness of the Group's system of internal control on behalf of the Board. This is accomplished through the review of the Group Internal Audit Department's work, which focused on areas of priority as identified by risk analysis and in accordance with the audit plan approved by the Audit Committee. b) The Group's Risk Management Framework is outlined in the Risk Management Policy. The Group has a Risk Management Committee who reports to the Board on quarterly basis on all major risk areas. The Risk Management Committee coordinates the overall risk management activities within the Group.

within the Group are documented in Standard Operating Procedures.

The Divisional Heads and Business Unit Heads

determines the applicability of the risk monitoring and reporting procedures and is responsible for the identification and evaluation of significant risks applicable to their areas of business together with the design and operation of suitable internal controls.

Corporate values, which emphasise on ethical

behaviour, is set out in the Group's Employee Handbook. The Group's system of internal control does not apply to Associate Companies where the Group does not have full management and control over them.

40 S P SETIA BERHAD

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SP Setia Corp-FA

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