Chairman's Statement

Against a backdrop of the international credit crisis and its uncertain impact on the world's economies and financial systems, it has been another good year for us at MRCB – financially and operationally. We have achieved our best ever turnover and profit from operations in the last eight years.

Operationally, it has been a very productive year and one in which our businesses have continued to expand. We have begun new property developments in Penang and accelerated development at Kuala Lumpur Sentral. MRCB also secured infrastructure and engineering projects which will provide us a platform for future growth and revenue in upcoming years.

We have exceeded all our headline Key Performance Indicators (KPIs) in 2007. Our 2007 revenues are up by more than 70% from 2006 and now exceed RM900 million, and our profits before taxation more than doubled from 2006 to RM69.8 million.

In our last Annual General Meeting (AGM), we committed to our shareholders to institute a dividend policy this year. I am pleased to announce that MRCB will start paying dividends again – the first dividend in the last 10 years. The Board of Directors have committed to a dividend payout ratio of at least 20% of annual profits available for distribution.

Whilst relatively nominal at this point, we believe that this is a transformational step forward for the Group and our shareholders. Given the Group's capital needs for expansion and investment in our new long-term assets, we hope to increase this ratio to 50% of available profits over time.

MRCB recorded its best ever revenue since 1999 of RM903.7 million. This is a significant increase of RM375.8 million or 71% from 2006. Group profit before taxation grew by RM39.6 million or 131% to RM69.8 million. The significant increase in revenue was mainly due to higher contributions from the Group's property development and engineering and construction sectors that are mainly driven by the ongoing development at Kuala Lumpur Sentral and the Group's infrastructure related projects.

Significantly, the increase in revenue has contributed to a marked increase in operational profits. The Group's operational profits increased to RM138.4 million in 2007 from RM61 million in 2006, reflecting stronger operational performance.

Our balance sheet is on a significantly better footing with Net Assets Per Share at 77.7 sen compared to 2006 of 57.3 sen. The improved Net Assets of the Group and aggressive reduction of the Group's borrowings has substantially reduced its gearing from 2.46 times in 2006 to 1.05 times in 2007.

We have also restructured our remaining debt at Kuala Lumpur Sentral Sdn. Bhd. comprising RM720 million Serial Sukuk Musyarakah (Sukuk) in April 2007, which reduced the average interest cost on the bond from 9% to 5%. Though the Sukuk was issued in series of yearly redemption from one to seven years, the entire Sukuk was fully settled on 4 April 2008 as a result of the continued good response for property developments within Kuala Lumpur Sentral which have accelerated the completion of sales target initially spread over the Sukuk tenure.

Operational And Corporate Highlights

While the Operations Review by our Group Managing Director will cover in detail the business of the Group, I would like to take this opportunity to discuss some key highlights.

We have made significant inroads in Penang in 2007 with the launch of an Integrated Transportation Hub (Penang Sentral) in June, which marks the fastest launch to market that MRCB has done. The Penang Sentral project replicates the urban regeneration and transformation model of Kuala Lumpur Sentral, which will pave the way forward for the property development activities of the Group.

The Penang Sentral project is a long-term commitment with Pelaburan Hartanah Bumiputera Berhad (PHBB), which will become the central transportation hub for Penang, integrating Penang's ferry, train, intercity and intra-city bus and taxi services, with provision for a monorail station to be incorporated into the hub. It will also include an integrated development comprising commercial, residential and retail components, service facilities and car park areas, all located within an approximately 30-acre site.

We have also entered into turnkey development contracts with PHBB to develop residential units ranging from high-end apartments and landed units to affordable housing in Penang Island. The residential development covers about 120 acres and is located over three key localities in Weld Quay, Bukit Dumbar in Gelugor and Teluk Kumbar area. These will be progressively developed over the next seven years with an estimated Gross Development Value (GDV) of over RM500 million.

At Kuala Lumpur Sentral, we have accelerated the development of the premium lots fronting Muzium Negara and the Lake Gardens and had announced several joint ventures over the course of the year. Kuala Lumpur Sentral will soon see the development of the new headquarters for CIMB Investment Bank, a new luxury condominium development and a luxury hotel development.

Kuala Lumpur Sentral will see the development of 6.8 million square feet of office, retail and residential coming on stream from 2008 onwards with a GDV of over RM4 billion. With this launch, the property earnings profile of the Group will be enhanced over the next four to five years.

2007 also saw the completion of 1 Sentral and Sooka Sentral, our latest Grade A office tower and retail centre respectively in Kuala Lumpur Sentral. 1 Sentral with 100% occupancy, housing reputable and well-known foreign names such as PricewaterhouseCoopers, General Electric International, Regus, Cisco, and Wilhemsen Maritime Services. Sooka Sentral, our new retail area, provides a much needed addition to the premium food and beverages and lifestyle scene at Kuala Lumpur Sentral area.

MRCB continues to successfully develop and launch other properties including Laman Suria in Kajang Utama, our Small & Medium Enterprise (SME) Industrial Park at Senawang Sentral and our new semi-detached and bungalow properties at Bandar Seri Iskandar in Perak which were fully taken up.

MRCB's first concession asset, the Duta-Ulu Kelang Expressway project (DUKE), is on track for its scheduled opening in early 2009. This highway will provide a new link that will complete Kuala Lumpur's highway road system.

MRCB made significant progress with its recurring income base strategy with the signing of the concession agreement on the Eastern Dispersal Link highway project (EDL) in June 2007. The project is expected to commence work by mid 2008 and targets completion by end 2011. The EDL provides a long overdue connection between the PLUS expressway to the new Customs, Immigration and Quarantine complex in Johor Bahru.

MRCB continues to be a leader in the field of environmental engineering, particularly in relation to the restoration of coastlines, beaches and rivers. In 2007, we were successful in finalizing the project for the restoration of Pulau Tioman. This key development in restoring one of the nation's island jewels will be completed by end 2008.

In addition to that, works have started in relation to our new projects at Sungai Pahang and Sungai Perai. These will only serve to reinforce our position at the forefront of environmental restoration in Malaysia.

The Engineering & Construction Division has been busy at Kuala Lumpur Sentral with the delivery of the first grade A office, the 33-storey high end 1 Sentral to Lembaga Tabung Haji in April 2007. It also completed the construction of Sooka Sentral in December 2007. Construction of two office towers at Lot J which were sold to Malaysian Industrial Development Authority (MIDA) and Suruhanjaya Syarikat Malaysia (SSM) are progressing well and are expected to be completed as scheduled in 2009.

Elsewhere, the division's road projects will be expanded significantly with the commencement of the EDL project in 2008.

In Penang, work is progressing well on the initial phase of Penang Sentral, which encompasses the temporary facilities required to relocate existing services. Once completed in early 2008, work on the main integrated terminal will commence.

On the Energy contracting side, we have successfully delivered the 275 kV Sabah East-West Grid Interconnection Transmission project in Sabah in November 2007. During 2007, the energy sub-division has secured new contracts worth over RM400 million, with the most recent in October 2007, the Bakun 275kV switchyard and control building works. With proven track record and being one of the leading energy contractors, the Group will continue to explore for new business opportunities especially with the upcoming Bakun Dam power transmission project.

Responsible Corporate Citizen

Our corporate risk assessment processes cover corporate governance, bribery and corruption, environmental risk, supply chain issues, human rights, employee relations and health and safety.

Our anti-corruption and bribery policy and other ethical guidelines are available in the Code of Business Ethics introduced in 2004. This is provided to all employees during induction training and covers responsibilities within the company, to our customers, our suppliers and all other external parties. It also provides guidance on breaches of our procedures and outlines our whistle-blower policy, which protects employees who identify and report unethical behaviour. Our Prevention of Fraud Manual introduced in 2006 supports the Code.

Our Corporate Governance procedures more than fulfill the requirements of the Securities Commission Revised Code on Corporate Governance 2007. We are happy to report that there were no instances of breaches of any of these Codes during the year and no significant penalties for non-compliance with any laws or regulations.

Corporate Social Responsibility

At MRCB, we have an active CSR programme that aims to make a real difference to the environment and the communities we serve. As one of the nation's leading development and construction companies, we believe we have an important role to play in sustainable development.

In 2007, we dedicated ourselves to four key themes: Education, Environment, Corporate Philanthropy, and Employee Welfare.

Under our education initiatives, we established the PINTAR programme in Penang, which saw us adopting two primary schools for the next three years. The schools, both located in Penang, are Sekolah Kebangsaan Kampong Jawa and Sekolah Kebangsaan Dato Kramat. These primary schools have achieved good results since the adoption with a marked improvement in academic results. We will continue to work with the parents, students and teaching staff to help improve further the achievements of these schools.

As part of our environmental conservation work, we organised several rehabilitation projects on the badly eroded beach and rivers of Pulau Tioman. The project also involved rehabilitating the seriously polluted river by adding breakwaters and rubbish traps to prevent waste materials from entering the sea.

We are promoters of rehabilitation and conservation works necessary to preserve the vital connection between environmental stability and business opportunities. We are proud to be leaders in an important social issue affecting future generations and are part of a growing movement for corporations to take responsibility for environmental preservation.

The Board firmly believe that our employees are our assets. We held several human capital development and teambuilding courses throughout the year to increase communications and cooperation amongst staff. These are critical measures that play a part in our continuing quest to increase productivity.

2007 also saw the launch of our new internal philosophy. "We Care, We deliver" commits all MRCB employees to the MRCB organisation and its stakeholders. Critically, MRCB has also embraced four key values to continue driving performance and promoting our results based culture:
Integrity – fair, honest & accountable
Passion – deliver from the heart
Teamwork – work as one
Innovation – continuous improvement

MRCB also provides education grants for staff members who are interested in pursuing undergraduate degree courses. This is in addition to our efforts to ensure continuous training and learning for staff at all levels.

We aim to continue with our efforts in environmental conservation and education in 2008. One of our main environmental activities for 2008 will be the launch of the MRCB Art Awards in June, where the proceeds from the sales of the artworks will be distributed to various needy and charitable organizations. We also look forward to conducting alternative business workshops for poor fishermen in Kuala Pahang and Tioman Island to generate secondary income for out-of-work fishermen during the monsoon season.

The focus of our educational initiatives for 2008 is to help underprivileged children in primary schools improve their academic performance. Under our three-year education programme, we aim to adopt four more primary schools within areas of our operation. The schools are Sekolah Kebangsaan Bagan Jermal, in Butterworth, Penang; Sekolah Kebangsaan Tebrau Bakar Batu, in Johor Bahru, Johor; and Sekolah Kebangsaan La Salle I and Sekolah Kebangsaan La Salle II in Brickfields, Kuala Lumpur. Our educational initiatives will include programmes aimed at providing reward incentives, motivation and teambuilding activities, especially for students from lowincome families.