News

(1) Shareholders Agreement Between SunCity and SunwayMas Sdn Bhd On The Joint Venture Of Sunway Real Estate (China) Limited (2) Master Agreement, Equity Joint Venture Agreement, Share Capital Subscription Agreement And Articles Of Association On The Joint Venture Of Jiangyin Guang Hao Real Estate Development Group Co. Ltd.

1. INTRODUCTION

We wish to announce that SunCity had on 27 June 2008, entered into a Shareholders Agreement with SunwayMas Sdn Bhd ("SunwayMas") for the purpose of recording the understanding of the co-operation and joint venture of the parties via Sunway Real Estate (China) Limited ("Sunway Real Estate"), a joint venture company registered in Hong Kong Special Administrative Region, to undertake a property development project ("the Project") on a piece of land located in Jiangyin, China ("Proposed Joint Venture") and other projects in future.

On even date, Sunway Real Estate had also entered into the following agreements to undertake the Project with Shanghai Guang Hao Real Estate Development Group Co. Ltd. ("Shanghai Guanghao") through a joint venture company, Jiangyin Guang Hao Real Estate Development Co. Ltd. ("Jiangyin Guanghao"):-

(a) Master Agreement with Shanghai Guanghao;
(b) Equity Joint Venture Agreement with Shanghai Guanghao;
(c) Share Capital Subscription Agreement with Shanghai Guanghao and Jiangyin Guanghao; and
(d) Articles of Association of Jiangyin Guanghao with Shanghai Guanghao

(hereinafter referred to as "the Definitive Agreements").

Sunway Real Estate will subscribe for new shares in Jiangyin Guanghao representing 65% of the enlarged share capital of Jiangyin Guanghao ("Proposed Share Subscription"). Shanghai Guanghao will hold the remaining 35% equity interest in Jiangyin Guanghao.

2. INFORMATION ON SUNWAYMAS, SUNWAY REAL ESTATE, SHANGHAI GUANGHAO AND JIANGYIN GUANGHAO

2.1 SUNWAYMAS

SunwayMas is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 46150 Petaling Jaya, Selangor. The authorised and paid-up share capital of SunwayMas are RM10,000,000/- and RM7,500,000/- respectively. The principal activity of SunwayMas is property and housing development.

SunwayMas is a wholly-owned subsidiary of Sunway Holdings Berhad (formerly known as Sunway Holdings Incorporated Berhad) ("Sunway Holdings").

2.2 SUNWAY REAL ESTATE

Sunway Real Estate is a company incorporated in Hong Kong Special Administrative Region and having its registered office at Unit 1601, 16/F, Malaysia Building, 50 Gloucester Road, Wanchai, Hong Kong. The authorised and paid-up share capital of Sunway Real Estate are HK$10,000/- and HK$5/- respectively. The principal activity of Sunway Real Estate is real estate and property development.

2.3 SHANGHAI GUANGHAO

Shanghai Guanghao is a company incorporated in the People's Republic of China and having its registered office at Room 306, No. 72, Xiu Shan Road, Chong Ming Industry Park. The registered capital of Shanghai Guanghao is RMB67,000,000/-. The principal activities of Shanghai Guanghao are property development, construction, mechanical and electrical installation and mechanical and electrical equipment trading.

2.4 JIANGYIN GUANGHAO

Jiangyin Guanghao is a company incorporated in the People's Republic of China and having its registered office at Unit 2-1062, 555# of North Tongjiang Road, LinGang New City, Jiangyin, China. The registered capital of Jiangyin Guanghao is RMB70,000,000/-. The principal activity of Jiangyin Guanghao is real estate development and operation.

3. SALIENT TERMS OF THE SHAREHOLDERS AGREEMENT

The Shareholders Agreement outlines the joint venture arrangement of the respective parties in respect of the Proposed Joint Venture and regulates the relationship of the parties as shareholders of Sunway Real Estate as well as their rights and obligations.

The shareholding structure of Sunway Real Estate is as follows:-

(a) SunCity - 60%
(b) SunwayMas - 40%

4. SALIENT TERMS OF THE DEFINITIVE AGREEMENTS

The parties had entered into the Definitive Agreements to record their intent to co-operate and form a joint venture relationship in Jiangyin Guanghao to undertake the Project, and for the Proposed Share Subscription.

The registered capital of Jiangyin Guanghao shall be increased to RMB200,000,000/- from the existing RMB70,000,000/- pursuant to the Proposed Share Subscription. Following the completion of the Proposed Share Subscription, Sunway Real Estate and Shanghai Guanghao will hold 130,000,000 shares and 70,000,000 shares in Jiangyin Guanghao respectively.

The Proposed Share Subscription shall be deemed to be completed on the date when all the conditions precedent are fulfilled including the foreign investment approvals and filings are completed, and the issuance of a new business licence to Jiangyin Guanghao.

5. BASIS OF ARRIVING AT THE SUBSCRIPTION PRICE

The subscription price for the Proposed Share Subscription was based on the net assets value and the initial working capital requirements of Jiangyin Guanghao.

6. LIABILITIES TO BE ASSUMED

There are no liabilities to be assumed by SunCity arising from the Proposed Joint Venture, the Project and the Proposed Share Subscription.

7. RATIONALE

The Project represents the first entry of SunCity in the booming real estate market in China and is expected to be the pioneering project for SunCity to secure future possible property projects in China.

The Project affords SunCity the opportunity to venture into the property development business in China and gain immediate access to property development experience in China via strategic partnership with Shanghai Guanghao.

The Project is located inside the Central Business District of the Jiangyin New Harbour City ("CBD"), a new Jiangyin Government administration centre which will enjoy all the urban amenities in the coming years once the CBD is fully completed. This will provide demand for residential as well as commercial properties. The Project will also benefit from the continued growth of China's economy, especially in the property development sector.

The Project seeks to be differentiated by introducing ultra modern resort style living design concepts and international quality standard with a well-planned premium product. This is aligned to SunCity's strategic regional expansion into property markets where SunCity has a competitive edge as a top Malaysian developer with an excellent track record and expertise on quality, high-end property development.

SunCity is confident that the superior quality high-rise residential development of the Project will receive good response in line with the bullish growth outlook of the property market and driven by the development of the new harbour city.

The yield for the Project, being located in a second tier city, is higher than similar project in the first tier cities due to lower cost. In addition, the second tier cities also have less stringent laws than the first tier cities.

(Source : Deloitte - China real estate investment handbook)

8. FEASIBILITY STUDY

A feasibility study was conducted jointly by SunCity, Sunway and Shanghai Guanghao prior to the entering of the Definitive Agreements.

The preliminary feasibility study of Jiangyin Guanghao features a high-rise mixed development complemented by integrated and high quality amenities. The Project will provide Jiangyin Guanghao with an estimated gross development value of RMB1 billion (equivalent to approximately RM473 million). Market studies conducted by representatives from the valuers and marketing experts were carried out in China to assess the relevant property market conditions.

Based on the results of the feasibility study, SunCity is of the view that the project financials are sufficiently attractive for SunCity to proceed with the Project.

9. PROSPECTS

With strong economic growth, urbanisation, the upcoming 2008 Olympic Games and 2010 Shanghai World Exposition, the property market in China remains strong with high growth potential. It is forecasted that the gross domestic products growth for 2008 is expected to be 10% (Source : Asia Development Outlook 2008 by Asian Development Bank). According to the National Bureau of Statistics of China, total investment in the real estate market for the first 5 months of 2008 was RMB1,075 billion with a growth rate of 34% compared to the same period of 2007.

With the population of 1.3 billion and at 0.58% growth rate per annum, China is creating some 9.5 million new households every year. Therefore, China will need 3.8 million new homes per year. The housing demands are supported by strong income growth on national per capital income at 13.4% between 2002 and 2007. The second tier cities also see a faster growth rate compared to the first tier cities.

The improved standard of living allowed for increased spending on housing. New household creation is further boosted by the projected decline in average household size, increasing urbanisation and changing demographics trends. China is probably the only country in the world with low urbanisation and strong economic growth. With an average 20 million urban migration per annum, the growing demand for residential properties is expected to continue.

10. RISK FACTORS

The Project is subject to certain risks in the real estate industry in China. These include changes in general economic conditions such as, but not limited to inflation, taxation, foreign exchange, interest rates, labour and material supply, changes in business and operating conditions such as, but not limited to government and statutory regulations, deterioration in prevailing market conditions and industrial disputes.

With Shanghai Guanghao as the local experienced partner in the Project, these risks would be mitigated. Further, Shanghai Guanghao also has experience in dealing with the local authorities and the financing requirements. In addition, Sunway Holdings Group's existing businesses in China (including piling services, pavers and clay pipes supplies, etc) provide a network on competitive building material pricing. SunCity's branding and lifestyle development concept would help in sustaining margin especially in this rising cost environment. With constant monitoring of the market conditions, forward planning and proactive steps to early detect the risks would enable SunCity to mitigate them accordingly.

11. SOURCE OF FUNDS

SunCity will fund its investment in Sunway Real Estate for its share of equity participation in Jiangyin Guanghao through internally generated funds. The payment for the Proposed Share Subscription will be made by Sunway Real Estate upon fulfillment of all conditions precedent.

12. EFFECTS OF THE PROPOSED JOINT VENTURE, THE PROJECT AND THE PROPOSED SHARE SUBSCRIPTION

12.1 On Share Capital and Substantial Shareholders' Shareholding

The Proposed Joint Venture, the Project and the Proposed Share Subscription will not have any effect on the share capital and substantial shareholders' shareholding of SunCity as they do not involve any allotment or issuance of new shares by SunCity.

12.2 On Earnings Per Share, Net Assets Per Share and Gearing

The Proposed Joint Venture, the Project and the Proposed Share Subscription are not expected to have any immediate material effect on the earnings per share, net assets per share and gearing of SunCity for the current financial year ended 30 June 2008. However, the Proposed Joint Venture and the Project are expected to contribute positively to the future earnings of SunCity Group.

13. APPROVALS REQUIRED

The Proposed Joint Venture, the Project and the Proposed Share Subscription do not require approval from the shareholders of SunCity or any government authorities in Malaysia but the Project and the Proposed Share Subscription are subject to approval of the relevant authorities in China.

14. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS

Tan Sri Dato' Seri Dr Cheah Fook Ling is a director and major shareholder of SunCity and Sunway Holdings. He has deemed interest in SunwayMas via Sunway Holdings. As such, he is deemed interested in the Proposed Joint Venture.

Accordingly, Tan Sri Dato' Seri Dr Cheah Fook Ling has abstained from Board deliberation of SunCity and voting in respect of the Proposed Joint Venture.

Save as disclosed above, none of the other directors or major shareholders of SunCity or persons connected with them has any interest, direct or indirect, in the Proposed Joint Venture, the Project and the Proposed Share Subscription.

15. STATEMENT BY THE BOARD OF DIRECTORS

The Board of Directors of SunCity (save for Tan Sri Dato' Seri Dr Cheah Fook Ling) is of the opinion that the Proposed Joint Venture is in the best interests of SunCity Group.

As for the Project and the Proposed Share Subscription, the Board of Directors of SunCity is of the opinion that they are in the best interests of SunCity Group.

16. ESTIMATED TIMEFRAME FOR COMPLETION OF THE PROPOSED SHARE SUBSCRIPTION

Barring any unforeseen circumstances and subject to the approval of the relevant authorities and fulfillment of all conditions precedent, the Proposed Share Subscription is expected to be completed within 6 months from the date of the Definitive Agreements.

17. COMPLIANCE WITH SECURITIES COMMISSION'S POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES ("SC GUIDELINES")

The Proposed Joint Venture, the Project and the Proposed Share Subscription are not subject to Securities Commission's approval and hence, does not fall under the SC Guidelines.

18. DOCUMENTS AVAILABLE FOR INSPECTION

The Shareholders Agreement and the Definitive Agreements are available for inspection at the registered office of SunCity at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 46150 Petaling Jaya, Selangor Darul Ehsan during normal business hours (9.00 a.m. to 6.00 p.m.) from Monday to Friday (except public holidays) for a period of 3 months from the date of this announcement.


This announcement is dated 30 June 2008.