Contents. Contents. Tanco Holdings Berhad Annual Report. 2-3 Notice of Annual General Meeting. 4 Corporate Information. 5-7 Directors Profile

Transcription

1 2004 Annual Report Contents 2-3 Notice of Annual General Meeting 4 Corporate Information 5-7 Directors Profile 8-11 Corporate Governance Statement 12 Additional Compliance Information 13 Statement on Internal Control Audit Committee Chairman s Statement Managing Director s Review Directors Report 26 Balance Sheets 27 Income Statements 28 Statements of Changes in Equity Cash Flow Statements Notes to the Financial Statements 64 Statement by Directors 65 Statutory Declaration Report of the Auditors List of Properties Shareholdings Structure Warrant Holdings Structure 75 Statement of Directors Interests Contents 1

2 2004 Annual Report Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Forty-Sixth Annual General Meeting of the Company will be held in Agong & Madura Hall at Duta Palms Resort & Anglers' Club, Jalan Desa Permai, Bandar Country Homes, Rawang, Selangor Darul Ehsan on Thursday, 30 June 2005 at a.m. for the following purposes: - AGENDA 1. To receive and adopt the audited financial statements for the year ended 31 December 2004 together with the Reports of the Directors and the Auditors thereon. (Resolution 1) 2. To approve payment of Directors' Fees of RM96, in respect of the financial year ended 31 December (Resolution2) 3. To re-elect the following Directors who retire under the respective provisions of the Company's Articles of Association :- (a) Dato' Tan Lee Sing (Article 101) (Resolution 3) (b) James Wong Kwong Yew (Article 101) (Resolution 4) (c) Dato' Abdul Rahim bin Saibu (Article 106) (Resolution 5) 4. To consider, and if thought fit, to pass the following resolution: By Order of the Board Chan Keng Yew Choi Siew Fun Company Secretaries Selangor Darul Ehsan Date : 8 June 2005 Notes: (i) "THAT Dato' Dr. Mohd Noordin bin Haji Keling, who retires in compliance with Section 129(6) of the Companies Act, 1965 be and is hereby re-appointed as a Director of the Company and to hold office until the conclusion of the next Annual General Meeting of the Company." (Resolution 6) 5. To re-appoint Messrs. Monteiro & Heng as auditors of the Company and to authorise the Board of Directors to fix their remuneration. (Resolution 7) AS SPECIAL BUSINESS: - To consider and if thought fit, to pass the following resolution as Ordinary Resolution: - (ii) (iii) (iv) (v) APPROVAL FOR ISSUANCE OF NEW ORDINARY SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT,1965 "THAT, subject always to the Companies Act, 1965, the Articles of Association of the Company and approvals of the relevant governmental/regulatory authorities, the Directors be and are hereby empowered pursuant to Section 132D of the Companies Act, 1965 to issue new ordinary shares of RM1.00 each in the Company, from time to time and upon such terms and conditions and for such purposes and to such persons whomsoever as the Directors may, in their absolute discretion deem fit and expedient in the interest of the Company, provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued and paid-up share capital of the Company for the time being AND THAT the Directors be and are hereby also empowered to obtain approval from the Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares issued AND THAT such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company." (Resolution 8) To transact any other business for which due notice has been given in accordance with the Company's Articles of Association and the Companies Act, A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy may but need not be a member of the Company. A member shall be entitled to appoint more than one proxy to attend and vote at the same meeting. Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under seal or under the hand of an officer or attorney duly authorised. The instrument appointing a proxy must be deposited at the Company's Registered Office at Jalan Desa, Bandar Country Homes, Rawang, Selangor Darul Ehsan not less than 48 hours before the time for holding the meeting or any adjournment thereof. 2

3 2004 Annual Report Notice of Annual General Meeting (cont d) EXPLANATION NOTE ON SPECIAL BUSINESS RESOLUTION PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965 The proposed Ordinary Resolution No. 8, if passed, will empower the Directors of the Company to issue and allot shares in the Company up to an aggregate amount not exceeding 10% of the issued share capital of the Company for the time being for such purposes as they consider would be in the interest of the Company. This authority unless revoked or varied at a general meeting will expire at the next Annual General Meeting ANNUAL REPORT: The 2004 Annual Report is in the CD-ROM format. Printed copy of the Annual Report shall be provided to the shareholders upon request. Shareholders who wish to receive the printed copy of the Annual Report and who require assistance with viewing the CD-ROM, kindly contact Cik Rohana bt Mohd Yusoff at Tel: ext. 154 or Miss Yeap Pek Yoong at Tel: ext. 129 or to thbannualreport@tancoresorts.com. STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETING 1) NAMES OF DIRECTORS WHO ARE STANDING FOR RE-ELECTION (a) DIRECTORS RETIRING BY ROTATION PURSUANT TO ARTICLE 101 OF THE ARTICLES OF ASSOCIATION Dato' Tan Lee Sing James Wong Kwong Yew (b) DIRECTORS RETIRING PURSUANT TO ARTICLE 106 OF THE ARTICLES OF ASSOCIATION Dato' Abdul Rahim bin Saibu Loh Chen Peng, although eligible, does not wish to offer himself for re-election and pursuant to Article 106 of the Articles of Association, he will retire at the conclusion of the Forty-Sixth Annual General Meeting of the Company. (c) DIRECTOR RETIRING PURSUANT TO SECTION 129(6) OF THE COMPANIES ACT, 1965 Dato' Dr. Mohd Noordin bin Haji Keling 2) DETAILS OF ATTENDANCE OF DIRECTORS AT BOARD MEETINGS There were five (5) Board meetings held during the financial year ended 31 December The details of attendance of the Directors are set out in the Directors' Profile appearing on pages 5 to 7 of the Annual Report. 3) PLACE, DATE & TIME OF FORTY-SIXTH ANNUAL GENERAL MEETING The Forty-Sixth Annual General Meeting of the Company will be held in Agong & Madura Hall at Duta Palms Resort & Anglers' Club, Jalan Desa Permai, Bandar Country Homes, Rawang, Selangor Darul Ehsan on Thursday, 30 June 2005 at a.m. 4) DETAILS OF DIRECTORS SEEKING FOR RE-ELECTION OR RE-APPOINTMENT AT THE ANNUAL GENERAL MEETING Details of Directors who are seeking for re-election or re-appointment are set out in the Directors' Profile appearing on pages 5 to 7 of the Annual Report. Information relating to the Directors' securities holdings in the Company and its subsidiaries is presented on page 75 of the Annual Report. 3

4 2004 Annual Report Corporate Information BOARD OF DIRECTORS Dato' Abdul Rahim bin Saibu Independent Non-Executive Chairman Aznan bin Abdul Aziz Deputy Chairman/Executive Director Dato' Tan Jing Nam Managing Director James Wong Kwong Yew Executive Director Dato' Tan Lee Sing Executive Director Dato' Dr. Mohd. Aminuddin bin Mohd. Rouse Independent Non-Executive Director Dato' Dr. Mohd. Noordin bin Haji Keling Independent Non-Executive Director Loh Chen Peng Independent Non-Executive Director AUDIT COMMITTEE Dato' Dr. Mohd. Noordin bin Haji Keling (Chairman) James Wong Kwong Yew Dato' Dr. Mohd. Aminuddin bin Mohd. Rouse NOMINATION COMMITTEE Dato' Dr. Mohd. Aminuddin bin Mohd. Rouse Dato' Dr. Mohd. Noordin bin Haji Keling REMUNERATION COMMITTEE Dato' Dr. Mohd. Aminuddin bin Mohd. Rouse (Chairman) Dato' Dr. Mohd. Noordin bin Haji Keling Dato' Tan Jing Nam COMPANY SECRETARIES Chan Keng Yew Choi Siew Fun REGISTERED OFFICE Jalan Desa, Bandar Country Homes, Rawang, Selangor Darul Ehsan Tel: (603) Fax: (603) Website: SHARE REGISTRAR Sectrars Services Sdn. Bhd. (92781-X) No. 28-1, Jalan Tun Sambanthan 3 Brickfields, Kuala Lumpur. Tel: (603) Fax: (603) AUDITORS Monteiro & Heng Chartered Accountants PRINCIPAL BANKERS AmMerchant Bank Berhad (23742-V) Hong Leong Bank Berhad (97141-X) Malayan Banking Berhad (3813-K) STOCK EXCHANGE LISTING Main Board of Bursa Malaysia Securities Berhad, Malaysia Corporate Information 4

5 2004 Annual Report Directors Profile DATO' ABDUL RAHIM BIN SAIBU Chairman/ Independent Non-Executive Director Dato' Abdul Rahim bin Saibu, a Malaysian aged 50, was appointed as Chairman of THB on 1 September His prominence in the infrastructure and property development sectors stems from construction of toll roads under the government privatization program. His years of experience in real estate development included large-scale housing projects both in Malaysia and abroad. He currently holds the position of Managing Director of Peninsular Metro-Works Sdn Bhd. He is also actively involved in community and social welfare projects. He does not have any family relationship with any other directors and/or major shareholders of THB. He does not have any conflict of interest with THB. He has not been convicted for offences within the past ten years. He attended one Board Meeting held during the financial year ended 31 December ENCIK AZNAN BIN ABDUL AZIZ Deputy Chairman / Executive Director Encik Aznan bin Abdul Aziz, a Malaysian aged 47, was appointed as Deputy Chairman of THB on 8 January He holds a Diploma in Mechanical Engineering. He has extensive hand-on experience in property development and construction sectors. Over the last 25 years, he had been involved in various major development projects such as Bandar Country Homes, a 730 acres of self-contained township in Rawang, 682 units of mixed housing development for Koperasi Polis Diraja, Kelab Darul Ehsan, Taman Keramat, Taman Bukit Chedang and Taman Abdul Razak. He does not have any family relationship with any other directors and/or major shareholders of THB. He is deemed in conflict of interest with THB by virtue of his interest in certain privately-owned companies which are also involved in property development business. However, these privately-owned companies are not in direct competition with the business of THB. He has not been convicted for offences within the past ten years. He attended three out of the five Board Meetings held during the financial year ended 31 December DATO' TAN JING NAM Managing Director Dato' Tan Jing Nam, a Malaysian aged 49, was appointed to the Board on 28 July 1995 and is the Managing Director since on 23 October He is also a member of the Remuneration Committee of THB. He has over 28 years of experience in the property and construction sectors. Under his leadership, the Tanco diversified from plantation business to property development, construction and leisure businesses. He is the driving force behind the successful development of Bandar Country Homes, a self-contained township in Rawang. He is the brother of Dato' Tan Lee Sing, a Director of THB. Save as aforesaid, he does not have any family relationship with any other directors and/or major shareholders of THB. He is deemed in conflict of interest with THB by virtue of his interest in certain privately-owned companies which are also involved in property development business. However, these privately-owned companies are not in direct competition with the business of THB. He has not been convicted for offences within the past ten years. He attended all the five Board Meetings held during the financial year ended 31 December

6 2004 Annual Report Directors Profile (cont d) MR. JAMES WONG KWONG YEW Executive Director Mr. James Wong Kwong Yew, a Malaysian aged 58, was appointed to the board on 28 July 1995 and subsequently appointed as Executive Director on 23 October He is also a member of the Audit Committee of THB. He is a Chartered Accountant (England and Wales since 1971). With over 33 years of experience in professional firms and commercial sector, he is well versed in the field of accounting, corporate finance, banking and property development. Prior to joining THB, he was the Executive Vice President/Director of a listed financial services group. He does not have any family relationship with any other directors and/or major shareholders of THB. He does not have any conflict of interest with THB. He has not been convicted for offences within the past ten years. He attended all the five Board Meetings held during the financial year ended 31 December DATO' DR. MOHD. AMINUDDIN BIN MOHD. ROUSE Independent Non-Executive Director Dato' Dr. Mohd. Aminuddin bin Mohd. Rouse, a Malaysian aged 59, was appointed to the Board as an Independent Non-Executive Director on 20 October He is the Chairman of the Remuneration Committee, a member of the Nomination Committee and a member of the Audit Committee of THB. He graduated with a B. Sc (Hons) in Biochemistry from University Malaya and holds a Ph.D in Agriculture Chemistry from University of Adelaide. Prior to venturing into commercial sector, he was an academician for 14 years having started as a lecturer in University Putra Malaysia and serve as Professor in University Sains Malaysia. While in academia, he held numerous positions including Head of Biochemistry and Microbiology, Deputy Dean, Dean and Professor of Biochemistry. He ventured into corporate world in He also sits on the board of several public listed company including Konsortium Logistik Bhd, Star Publications (Malaysia) Bhd and Ajiya Bhd. He is also a director of Deutsche Bank Malaysia Bhd. He does not have any family relationship with any other directors and/or major shareholders of THB. He does not have any conflict of interest with THB. He has not been convicted for offences within the past ten years. He attended all the five Board Meetings held during the financial year ended 31 December DATO' DR. MOHD. NOORDIN BIN HAJI KELING Independent Non-Executive Director Dato' Dr. Mohd. Noordin bin Haji Keling, a Malaysian aged 78, was appointed to the Board as an Independent Non-Executive Director on 1 July He is the Chairman of the Audit Committee, a member of the Nomination Committee and a member of the Remuneration Committee of THB. A veterinary surgeon by profession, he graduated from the Bengal Veterinary College, Calcutta in 1950 and in 1956 from the Royal Veterinary College, University of London as a Member of the Royal College of Veterinary Surgeons, England. While in government service, he obtained post-graduate qualifications in tropical veterinary medicine at the University of Edinburgh in 1960 and in veterinary public health at the University of Toronto in He later obtained the Bachelor of Laws degree, LLB (Hons) from the University of London and the Certificate in Legal Practice (C.L.P) awarded by the Legal Profession Qualifying Board, Malaysia. He was admitted as an Advocate and Solicitor of the High Court, Malaya in December He had a distinguished career in the Veterinary Department, Malaysia, retiring in 1982 as the Director-General of the National Livestock Development Authority. On retirement he served for two years as Executive Vice-Chairman of MAX Agriculture Sdn Bhd, a company with principal activities in the manufacture and trading of fertilizers. Currently he also sits on the board of several private limited companies. He does not have any family relationship with any other directors and/or major shareholders of THB. He does not have any conflict of interest with THB. He has not been convicted for offences within the past ten years. He attended all the five Board Meetings held during the financial year ended 31 December

7 2004 Annual Report Directors Profile (cont d) DATO' TAN LEE SING Executive Director Dato' Tan Lee Sing, a Malaysian aged 45 was appointed to the Board as Executive Director on 28 July She graduated from the University of Melbourne, Australia with a degree in Commerce in She has over 13 years of experience in the property and construction sectors. She is the sister of Dato' Tan Jing Nam, the Managing Director of THB. Save as aforesaid, she does not have any family relationship with any other directors and/or major shareholders of THB. She is deemed in conflict of interest with THB by virtue of her interest in certain privately-owned companies which is also involved in property development business. However, these privately-owned companies are not in direct competition with the business of THB. She has not been convicted for offences within the past ten years. She attended all the five Board Meetings held during the financial year ended 31 December MR. LOH CHEN PENG Independent Non-Executive Director Mr. Loh Chen Peng, a Malaysian aged 51, was appointed to the Board as an Independent Non-Executive Director on 26 August He is a member of Malaysian Institute of Certified Public Accountant. He had worked for an international accounting firm for five years and spent the next thirteen years with a merchant bank. In 1994, he helped established and thereafter served on the executive committee of directors of a commercial banking group until He is now involved in some private ventures and is an independent non-executive director of Major Team Holdings Berhad, Nexnews Berhad, Dijaya Corporation Berhad and Sunrise Berhad. He does not have any family relationship with any other directors and/or major shareholders of THB. He does not have any conflict of interest with THB. He has not been convicted for offences within the past ten years. He attended one Board Meeting held during the financial year ended 31 December

8 2004 Annual Report Corporate Governance Statement The Board of Directors ("the Board") of recognises the importance of good corporate governance and fully supports the recommendations of the Malaysian Code of Corporate Governance (the Code). Accordingly, the Board is committed to ensuring that the highest standards of corporate governance are practised throughout the as a fundamental part of discharging its responsibilities to protect and enhance shareholder value. Set out below is a statement of how the has applied the principles and complied with the best practice provisions set out in the Code during the year. DIRECTORS The Board The is led and controlled by an effective Board. The Board meets on a scheduled basis, at least four (4) times a year, with additional meetings convened as necessary. All Board members bring an independent judgement to bear on issues of strategy, performance, resources and standards of conduct. The Board has delegated specific responsibilities to three (3) sub-committees (Audit, Nomination and Remuneration Committees), the details of which are set out below. These Committees have the authority to examine particular issues and report back to the Board with their recommendation. The ultimate responsibility for the final decision on all matters, however, lies with the entire Board. Board Balance The Board has a balanced composition of executive and non-executive directors so that no individual or small group of individuals can dominate the Board's decision making. The Board currently has eight (8) members, comprising four (4) Executive Directors and four (4) Non-Executive Directors (including the Chairman). The four (4) Non-Executive Directors are Independent Non-Executive Directors within the meaning of Chapter 1.01 of the Listing Requirements. The Board therefore fulfilled the Listing Requirements under Paragraph 15.02, which states that one third of the board members must be Independent Directors. During the year ended 31 December 2004, five (5) Board meetings were held. The composition of the Board together with the attendance of the respective Directors at Board meetings are as follows: - Name of Director Date of Appointment Attendance Dato' Abdul Rahim bin Saibu /1 Aznan bin Abdul Aziz /5 Dato' Tan Jing Nam /5 James Wong Kwong Yew /5 Dato' Dr. Mohd. Aminuddin bin Mohd. Rouse /5 Dato' Dr. Mohd. Noordin bin Haji Keling /5 Dato' Tan Lee Sing /5 Loh Chen Peng /1 Together, the Directors bring a wide range of business and financial experience relevant to the. A brief description of the background of each Director is presented on pages 5 to 7 of the Annual Report. The role of the Chairman and the Managing Director are distinct and separate; the Chairman being Non-Executive, is not involved in the management and day-to-day operations of the. Dato' Dr. Mohd. Noordin bin Haji Keling is the Senior Independent Non-Executive Director, to whom all concerns may be conveyed. The presence of independent non-executive Directors in the Board provides objectivity and they are of the calibre necessary to carry sufficient weight in Board decisions. Although all the Directors have an equal responsibility for the 's operations, the role of the independent non-executive Directors is particularly important in ensuring that the strategies proposed by the executive management are fully discussed and examined, and take account of the long term interests, not only of the shareholders, but also of employees, customers, suppliers, and the many communities in which the conducts business. Supply of Information All directors are provided with an agenda and a set of Board papers, prior to every board meeting. The Board papers circulated include quarterly and annual financial statements, minutes of meetings, major operational and financial matters, and performance report of the. All matters requiring Board approvals are also circulated prior to the Board Meetings and during Board Meetings these matters are duly discussed and deliberated with senior management before decisions are made. All Directors have access to the advice and services of the Company Secretaries and where necessary, in the furtherance of their duties, take independent professional advice at the 's expense. 8

9 2004 Annual Report Corporate Governance Statement (cont d) Appointments to the Board New appointments to the Board are recommended by the Nomination Committee to the Board for their approval. The other responsibilities of the Nomination Committee include making recommendations to the Board on the appointment of members of Board Committees, the review on an annual basis of the Board structure, size and composition, and assessment of the effectiveness of the Board, its Committees and the contribution of each Board. The Nomination Committee consists of wholly Independent Non-Executive Directors and its composition is as follows:- For the year, the Nomination Committee had three (3) meetings held on 30 April 2004, 26 August 2004 and 1 September Directors' Training All the Directors of the Company have attended and completed the Mandatory Accreditation Programme, as required under the Listings Requirements of Bursa Malaysia Securities Berhad ("Bursa Malaysia"). The Directors have also attended various accredited programme under the Continuous Education Programme ("CEP") approved by Bursa Malaysia. The Directors who have yet to meet the CEP requirements have until 31 December 2005 to do so. Re-election In accordance with the Company's Articles of Association, at least one third of the Directors are required to retire by rotation at each Annual General Meeting and can offer themselves for re-election at the Annual General Meeting. Directors who are appointed by the Board to fill a casual vacancy or as an addition to the existing Board are subject to election by shareholders at the next Annual General Meeting following their appointment. The Directors also shall retire from office at least once in three years, but shall be eligible for re-election. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129 (6) of the Companies Act, DIRECTORS' REMUNERATION Remuneration Policy The Remuneration Committee reviews annually and recommends to the Board, the 's remuneration policy for Executive Directors to ensure that the Executive Directors are rewarded appropriately for their contributions to the 's growth and profitability, and that the remuneration policy supports the 's objectives and shareholders' interest. In framing the 's remuneration policy, the Remuneration Committee obtains the advice and information from external source, if necessary. It is, nevertheless, the ultimate responsibility of the entire Board to approve the remuneration of these Directors. The determination of the remuneration of the non-executive Directors including Non-Executive Chairman is a matter for the Board as a whole. Procedure Designation Dato' Dr. Mohd. Aminuddin bin Mohd. Rouse - Independent Non-Executive Director Dato' Dr. Mohd. Noordin bin Haji Keling - Independent Non-Executive Director The Remuneration Committee consists of three (3) members of which one (1) is executive director and two (2) independent non-executive directors and its composition is as follows:- Designation Dato' Dr. Mohd. Aminuddin bin Mohd. Rouse - Chairman of the Remuneration Committee, Independent Non-Executive Director Dato' Dr. Mohd. Noordin bin Haji Keling - Independent Non-Executive Director Dato' Tan Jing Nam - Managing Director For the year, the Remuneration Committee had one (1) meeting held on 30 June

10 2004 Annual Report Corporate Governance Statement (cont d) Disclosure A summary of the remuneration of the Directors for the financial year ended 31 December 2004, distinguishing between executive and non-executive Directors in aggregate, with categorization into appropriate components and the number of Directors whose remuneration falls into each successive band of RM50,000 are as follows: Executive Directors Non-Executive Directors Total Directors' Fees (RM) - 96,000 96,000 Salaries (RM) 2,587,200-2,587,200 Meeting Allowances - 5,000 5,000 Benefits-in-kind (RM) 79,750 13,325 93,075 Directors' Remuneration 0 -RM50, RM50,001-RM200, RM200,001-RM250, RM250,001-RM500, RM500,001-RM550, RM550,001-RM850, RM850,001-RM900, RM900,001-RM1,000, RM1,000,001-RM1,050, Note : Inclusive of two Directors who had resigned during the year. Detail remuneration of each Director is presented under Note 33 of the Financial Statements. SHAREHOLDERS Dialogue between the Company and Investors The Board recognizes the importance of communication and proper dissemination of information to its shareholders, stakeholders and the public generally. However, any information that may be regarded as undisclosed material information about the will not be given. The following are the channels of communication of the Company to its shareholders, stakeholders, analysts and the public: - 1) the distribution of annual reports and circulars to shareholders; 2) timely quarterly results announcements and various disclosures and announcements made to the Bursa Malaysia Securities Berhad; 3) company's website at Annual General Meeting At each Annual General Meeting, the Board presents the progress and performance report of the and encourages shareholders to participate and pose questions to the Board in the Question and Answer session. Each item of special business included in the notice of the meeting will be accompanied by a full explanation of the effects of a proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting. 10

11 2004 Annual Report Corporate Governance Statement (cont d) ACCOUNTABILITY AND AUDIT Financial Reporting In presenting the annual financial statements and quarterly announcement to shareholders, the Directors aim to present a balanced and understandable assessment of the 's position and prospects. This also applies to other price-sensitive public reports and reports to regulators. Audit Committee The Audit Committee of the Board comprises two Independent Non-Executive Directors and one Executive Director. The composition of the Audit Committee together with the terms of reference and activities of the Audit Committee during the financial year ended 31 December 2004 are provided separately in this Annual Report. Internal Control The Board acknowledges its responsibility for establishing an efficient and effective system of internal controls covering not only financial controls but also controls relating to operational, compliance and risk management to safeguard shareholders' investment and the 's assets. Such system can, however, only provide reasonable and not absolute assurance against material misstatement, loss or fraud. The 's Statement on Internal Control is set out on page 13 of the Annual Report. Relationship with the Auditors The Company has established transparent and appropriate relationships with the Company's auditors through the Audit Committee. The auditors has continued to report to shareholders of the Company on their findings which are included as part of the Company's financial reports with respect to each year's audit on the statutory financial statements. From time to time, the auditors would highlight to the Audit Committee matters that require their attention. Directors' Responsibility Statement for Preparing the Financial Statements 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, the results and cashflows of the and Company for the financial year. In preparing the financial statements, the Directors have: * selected suitable accounting policies and applied them consistently. On the application of the going concern basis as had been adopted by the Company in preparation of the financial statements of the and the Company, the assumption as taken is that the and the Company will be able to realise their assets and liquidate their liabilities in the normal course of business. The ability of the and of the Company to continue as going concerns, however is dependent on:- i) the successful completion of the debt restructuring schemes as mentioned in Note 22 (c) and (d) to the financial statements in a timely basis; ii) the and the Company achieving sustainable and viable operations; and iii) the and the Company generating adequate cashflows for its operating activities. Should the debt restructuring schemes not be successfully concluded, the entire borrowings may become repayable immediately and the application of the going concern concept may be inappropriate and adjustments may be required to, inter alia, write down assets to their realisable values, reclassify all long term assets and liabilities as current and to provide for any further costs which may arise; * made judgements and estimates that are reasonable and prudent; * ensured that all applicable accounting standards have been followed. The Directors have responsibility for ensuring that the Company keeps accounting records which disclose the financial position of the and Company and which enable them to ensure that the financial statements comply with the Companies Act The Directors have overall responsibilities for taking such steps as are reasonably open to them to safeguard the assets of the to prevent and detect fraud and other irregularities. This Statement is made in accordance with the Board of Directors' resolution dated 26 April

12 2004 Annual Report Additional Compliance Information To comply with the Listing Requirements of Bursa Malaysia Securities Berhad ("BMSB"), the following additional information is provided:- i) Material Contracts Save as disclosed in Note 33 of the Financial Statements for the financial year ended 31 December 2005, there were no other material contracts entered into by the Company and its subsidiary companies, involving Directors and major shareholders. ii) Utilisation of Proceeds No proceeds were raised by the Company from any corporate proposal during the financial year. iii) Share buybacks During the financial year, there were no share buybacks by the Company. iv) Options, warrants or convertible securities During the financial year, there were no warrants exercised. v) American Depository Receipt (ADR) or Global Depository Receipt (GDR) programme During the financial year, the Company did not sponsor any ADR or GDR programme. vi) Imposition of sanctions/penalties There were certain late payment penalties imposed on the Company and its subsidiaries by certain statutory bodies amounting to RM68, during the financial year. vii) Non-audit fees The amount of non-audit fees paid or payable to the external auditors by the Company and its subsidiaries for the financial year ended 31 December 2004 amounted to RM84, viii) Profit estimate, forecast or projection There is no material variance between the results for the financial year and the unaudited results previously announced by the Company. The Company did not issue any profit estimate, forecast or projections for the financial year. ix) Profit guarantee During the financial year, the Company had not provided any profit guarantees nor is there any profit guarantee given to the Company. x) Recurrent related party transactions statement There was no recurrent related party transaction of a revenue nature, which requires shareholders' mandate during the financial year. xi) Revaluation policy on landed properties Please refer to Note 3 of the Financial Statements. 12

13 2004 Annual Report Statement on Internal Control The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal control to safeguard shareholders' investments and the 's assets. Paragraph 15.27(b) of the Bursa Malaysia Securities Berhad ("BMSB") Listing Requirements requires directors of listed companies to include a Statement on Internal Control in their annual reports. Set out below is the statement: - The Board of Directors of affirms its overall responsibility for the 's system of internal controls, risk management, and for reviewing the adequacy and integrity of the system. Due to the limitations that are inherent in any system of internal control, such systems are designed to manage, rather than eliminate the risk of failure to achieve business objectives. Accordingly such systems can only provide reasonable but not absolute assurances against material misstatement or loss. The existence of the internal audit function aims to assist the Audit Committee to review the effectiveness of the 's internal control system. The Board confirms that there is an on-going process for identifying, evaluating and managing significant risks faced by the. This includes examining principal business risks in critical areas and identifying measures to mitigate, avoid and eliminate these risks. The Audit Committee and the Board regularly review this process with the Statement on Internal Control: Guidance For the Directors of Public Listed Companies. The process has been in place during the year under review and up to the date of approval of this annual report. The key elements of the 's system of internal control include the following: - An organization structure which formally defines lines of responsibility and delegation of authority. - Key functions such as corporate affairs, finance, tax, treasury and human resources are controlled centrally. - Incompatible responsibilities are properly segregated to ensure that no staff is in total control of whole transactions. - The has a policy on financial limits and approving authority for its operating and capital expenditure. - There is effective reporting system in place to ensure timely generation of financial information for management review. - The internal audit function adopts a risk-based approach in identifying areas of priority and carries out its works in accordance with an annual audit plan approved by the Audit Committee and the Board. The Audit Committee holds regular meetings and reviews internal audit reports covering such matters. Significant issues are brought to the attention of the Board. In order to achieve the above objectives, the has the following procedures/processes in place:- - Financial results are reviewed quarterly by the Audit Committee and the Board. - Operating units' meetings are conducted regularly to review financial performance, business development and deliberate on management issues. - There are regular meetings between the senior management (Managing Director and Executive Directors) and Heads of Department to discuss business, operational and key management issues; and to review the financial performance of all the companies in the. - The Audit Committee has access to external auditors and their reports and meets them to discuss their findings and reports. The statement is made in accordance with a resolution of the Board of Directors dated 26 April

14 2004 Annual Report Audit Committee Members Designation Dato' Dr. Mohd. Noordin bin Haji Keling - Chairman of the Audit Committee Independent Non-Executive Director Dato' Dr. Mohd. Aminuddin bin Mohd. Rouse - Independent Non-Executive Director James Wong Kwong Yew - Executive Director Composition of Audit Committee 1. The Audit Committee shall be appointed by the Board of Directors from among its members and shall be consist of not less than three (3) members of whom a majority must be independent directors. 2. The Audit Committee shall include at least one director who is a member of the Malaysian Institute of Accountants or alternatively, a person who must have at least three (3) years working experience and have passed the examination specified in Part 1 of the First Schedule of the Accountants Act, 1967 or is a member of one of associations specified in Part II of the said Schedule. 3. No alternate director shall be appointed as a member of the Audit Committee. 4. The members of the Audit Committee shall elect a chairman from among their number who shall be an independent non-executive director. 5. If a member of the Audit Committee resigns, dies or for any other reason ceases to be a member with the result that the number of members is reduced below three (3), the board of directors shall, within three (3) months of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members. Terms of Memberships The term of office of Audit Committee members should be reviewed by the Board once every three (3) years. Authority The Audit Committee is authorised by the Board to investigate any activity of the Company and its subsidiaries within its terms of reference, the resources which it needs to do and full access to information. The Audit Committee is also authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary. The Audit Committee shall have direct communication channels with the external auditors and person(s) carrying out the internal audit function and activity and be able to convene meetings with the external auditors, excluding the attendance of the executive members of the Audit Committee, whenever deemed necessary. 14

15 2004 Annual Report Audit Committee (cont d) Duties The duties of the Audit Committee should include the following:- (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) To consider the appointment of the external auditor, the audit fee and any questions of resignation or dismissal; To review with the external auditor before the audit commences, the nature and scope of the audit and their audit plan; To review the assistance given by the company's officers to the internal and external auditors; To review the quarterly and year-end financial statements of the Company, prior to the approval of the board of directors, focusing particularly on:- - any changes in accounting policies and practices; - significant and unusual events; - significant adjustments arising from the audit; - the going concern assumption; - compliance with accounting standards and other legal requirements; To discuss problems and reservations arising from the interim and final audits, and any matter the auditor may wish to discuss (in the absence of management where necessary); To review the external auditor's management letter and management's response; The internal audit function:- - review the adequacy of the scope, functions and resources of the internal audit function, and that it has the necessary authority to carry out its work; - review the internal audit programme and results of the internal audit process and where necessary ensure that appropriate action is taken on the recommendations of the internal audit function; - review any appraisal or assessment of the performance of members of the internal audit function; - approve any appointment or termination of Internal Auditor; - inform itself of resignations of Internal Auditor and Internal Auditor an opportunity to submit his reasons for resigning. To consider any related party transactions or conflict of interests situation that may arise within the Company or ; To consider the major finding of internal investigations and management's response; To report promptly to the Bursa Malaysia Securities Berhad ( BMSB ) matters reported by the Audit Committee to the Board which have not been satisfactorily resolved resulting in a breach of Listing Requirements of BMSB, and To consider other topics as defined by the board. Attendance at Meetings The Financial Controller, Internal Auditor, and a representative of the external auditors shall normally attend meetings. Other Board members and employees may attend meetings upon the invitation of the Audit Committee. However, at least once a year the Audit Committee shall meet with the external auditors without executive board members present. The Company Secretary shall be the secretary of the Audit Committee. The secretary shall be responsible for keeping the minutes of the meeting of the Audit Committee, circulating them to Audit Committee members and to the other members of the Board of Directors. Quorum The quorum of the Audit Committee Meetings shall consist of a majority of members of whom are Independent. Frequency of Meetings The Audit Committee shall meet not less than four (4) times a year. In addition, the Chairman may call a meeting of the Audit Committee if requested to do so by any Audit Committee member or by the external auditors if they consider it necessary. Number of Meetings & Details of Attendance During the financial year ended 31 December 2004, the Audit Committee held a total of five (5) meetings. The details of attendance of the Audit Committee members are as follows: Name of Director Attendance Dato' Dr. Mohd. Noordin bin Haji Keling 5/5 James Wong Kwong Yew 5/5 Dato' Dr. Mohd. Aminuddin bin Mohd. Rouse 5/5 15

16 2004 Annual Report Audit Committee (cont d) Summary of Activities of the Audit Committee The following activities were performed by the Audit Committee during the financial year ended 31 December 2004: - (a) Reviewed the audit plans for the year for the Company and the prepared by the external auditors; (b) Reviewed the audit reports for the Company and the prepared by the external auditors and consideration of major findings by the auditors and management's responses thereto; (c) Reviewed the quarterly and annual results of the Company and the prior to submission to the Board of Directors for consideration and approval; (d) Reviewed related party transactions entered into by the Company and the ; (e) Reviewed the adequacy and relevance of the scope of internal audit works as stipulated in the internal audit plan; (f) Reviewed and considered the findings in the internal audit reports and management's response thereto; and (g) Followed up on remedial actions taken by the management on the internal audit raised. Internal Audit Function The has outsourced its internal audit function to a professional consulting firm, Nexia Consulting. The internal audit function is therefore independent of the activities of the and performs its duties with impartiality, objectivity and due professional care. The internal audit review of the 's operations encompasses an independent assessment of the Company's compliance with its internal controls and makes recommendation for improvements. During the financial year ended 31 December 2004, the internal auditors reviewed the adequacy and effectiveness of the accounting and operational internal control system of a core subsidiary of the. The audit activities carried out during the year included the following: - (a) Prepared the audit plan for the approval of the Audit Committee. (b) Performed internal audit works to review the adequacy and efficacy of the internal control systems relating to the operation of the core subsidiary. (c) Rendered internal audit reports on a quarterly basis to the Audit Committee, Board of Directors and management, identifying weaknesses and providing recommendations for improvements. (d) Acted on suggestions made by the Audit Committee and senior management on concerns over operations or control. (e) Attended Audit Committee meetings to table and discuss the audit reports, and to follow up on matters raised. 16

17 2004 Annual Report Chairman s Statement Dear Stakeholders, My decision to accept the position of Chairman of Tanco Holdings Bhd (Tanco) at such a challenging time in the development of the is a clear indication of the confidence I feel about its future. Since joining Tanco in September 2004, I have devoted much time and effort to seeking an equitable resolution of the financial difficulties that have plagued the for several years. I am happy to say that I believe that there is now light at the end of the tunnel. In the early part of the year, the significant decline in Tanco's businesses seriously affected its cashflow. As a result, on 28 May 2004, the announced that it was not in a position to meet its interest obligations to its lenders due on 31 May. This resulted in a default in the restructured loans that had been worked out with our lenders with assistance from the Corporate Debt Restructuring Committee (CDRC). The 's inability to meet its repayment obligations was due mainly to - Adverse economic conditions following the completion of the CDRC Scheme that affected the 's business, in particular the vacation ownership business. - Faults in the CDRC Restructuring Agreement that hampered the efforts of the to realize its assets so as to create sufficient liquidity to meet its obligations. The Company therefore immediately took vigorous steps to address the issue of the default. Negotiations were begun with lenders; an independent financial adviser, Z J Advisory Sdn Bhd, was appointed to assist in working out a Debt Restructuring Scheme under Section 176 of the Companies Act (the Scheme,) and to advise lenders on the 's proposed restructuring of its entire loans and debts; and Messrs Cheang & Ariff were engaged as the 's legal advisor to make application to the Court pursuant to the Scheme. As a result of these measures, on 16 August 2004, the proposed a Scheme which principally comprises - A proposed capital reduction - A proposed settlement involving - For secured lenders, the terming-out of part of the loans, repayments being met from development proceeds, conversion of part of the loan to Redeemable Secured Loan Stock (RSLS) and Redeemable Convertible Secured Loan Stock (RCSLS), and the balance not covered by any of these instruments being waived - For cross-secured lenders, the conversion of part of the loan to RSLS and RCSLS, and the balance not covered by these instruments being waived - For unsecured lenders, a waiver of a significant portion of their debt and with the balance being settled by way of shares issued by the Company - For other creditors, any surplus arising from the proposed settlement to the lenders being used to repay the remaining debts - A managed and orderly programme for the disposal of certain assets to finance debt repayments The Scheme is subject to the creditors' consent and to any modifications necessary to meet regulatory and legal requirements. To facilitate an arrangement to be reached between the and its creditors on the resolution of its indebtedness, Tanco applied to the High Court of Malaya for a restraining order (RO), which was granted on 13 August In conjunction with the grant of the RO, the Court also approved the appointment of Mr Loh Chen Peng to act as a director of the Company to represent the interest of the creditors, pursuant to Section 176(10A)(d) of the Companies Act

18 2004 Annual Report Chairman s Statement (cont d) Since the commencement of the RO, the has been proactively investigating the possibility of acquiring new income-generating assets or concluding new refinancing arrangements to support its restructuring proposals. As a result of this initiative, on 13 December 2004, Tanco was able to present Scheme creditors with an alternative proposal of an outright cash payment of RM177.5 million in lieu of the various financial instruments contemplated under the Scheme, as full and final settlement of its debt obligation. The alternative proposal would involve (i) the secured lenders with its entire debt of RM279.0 million as at 31 December 2003 being settled for RM165.7 million; (ii) the cross-secured lenders with its entire debt of RM51.8 million as at 31 December 2003 being settled for RM10.6 million; (iii) the unsecured lenders with its entire debt of RM12.5 million as at 31 December 2003 being settled for RM1.2 million. Both proposals are currently being considered by the Scheme creditors and two of its creditors have agreed in principle to its proposed cash settlement. With the goodwill and cooperation of all parties, these proposals offer a viable way to resolve the debt issue. I am therefore hopeful of a positive response from our creditors. Looking forward, I believe that 2005 offers us a golden opportunity to move forward. As soon as we have achieved a final resolution of our financial position, we will once again be able to focus our energies on the prosperous development of our core businesses of property development and vacation ownership. Dato' Abdul Rahim bin Saibu Chairman 18