Certain emerging global trends, such as the promotion on use of biofuels by governments, have boosted the long term prospects of the palm oil industry in a fundamental way. It has however also created a greater challenge to find viable acquisition targets to sustain long term growth on terms and conditions acceptable to us. I am therefore pleased to report that we are in the process of finalising a joint venture for oil palm cultivation in Indonesia (“the JV“) that will provide us the opportunity to continue to grow our palm oil business on a more robust pace over the next five years. Essentially, the JV involves IOI acquiring:

1. A 33% stake in a grouping of plantation land of approximately 100,000 hectares, of which 35,000 hectares is planted and together with three palm oil mills; and
2. A 67% stake in a grouping of land of about 52,700 hectares in total for planting in due course.

A fundamental term for the JV is that the oil palm cultivation be undertaken on sustainable basis in accordance with the principles prescribed by RSPO (Round Table of Sustainable Palm Oil) of which IOI is a founding member.

During the financial year, the Group also completed the acquisition of a 70% stake in Rinwood Pelita Plantation Sdn. Bhd., a company with about 9,000 hectares of plantation land in the state of Sarawak.

Meanwhile, we also made an important acquisition in our downstream manufacturing segment. The acquisition of the Pan-Century companies (“PC”) located in Pasir Gudang, Johor and which owns one of the largest single-site refinery and oleochemical complex was completed at the end of January 2007. PC is a significant producer of palm-based fatty acids and soap noodles and had just expanded their production capacity by about 35% to a total of 350,000 MT of splitting capacity prior to the takeover by IOI. With the inclusion of PC, the Oleo Business of the group is now the leading global producer of vegetable oil based fatty acids, with about 710,000 MT annual capacity, equivalent to about 10% global market share. Additionally, PC also has about 1 million MT of refining capacity. The acquisition of PC not only helps us to consolidate our leadership position in the fatty acid and soap noodle markets, but more importantly also fits in nicely with our specialty fats business undertaken by subsidiary, Loders Croklaan, Asia, located right next door. The resultant manufacturing complex comprising refining, oleochemicals and specialty fats production facilities over a combined land size of 25 hectares, provides us unique opportunities and competitive edge in supply chain efficiencies, optimal use of oil fractions and new product development.

On the property front, the Group has also made significant acquisitions during the year. Apart from the objective of taking on additional land bank for development, the following acquisitions also reflect a fine tuning in our business strategy, that is, to compliment our core business model of developing townships by also taking on niche, luxury-range projects. This is in response to the global trend of liquidity driven demand for prime properties as mentioned earlier in my report.

• A 50:50 joint venture with a Singapore developer, Ho Bee Investment Limited to develop about 160 units of luxury range condominiums in Sentosa Cove, Singapore. The land for the development was acquired through a tender bid from the Sentosa Development Corporation for a sum of SGD 460 million. The project is expected to have a gross development value of more than SGD 800 million and is to be launched in 2008. together with three palm oil mills; and
• A 163,786 sq ft parcel of land in Jalan Ampang, Kuala Lumpur for construction of about 150 units of condominiums with gross development value expected to be in excess of RM300 million.

In addition, the following land acquisitions by the Group were completed during the year:

• 925 hectares of freehold land adjacent to Ayer Keroh toll plaza in the state of Melaka, for RM91.3 million.
• 102 hectares of freehold land in Tebrau, in the state of Johor for RM87 million.

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