A N N U A L R E P O R T B E R H A D

Transcription

1 A N N U A L R E P O R T M Y C O M (7296-V) B E R H A D

2 Contents Corporate Information 1 Operational & Financial Highlights 2 Chairman s Statement 4 Profile Of Directors 6 Corporate Governance Statement 9 Statement On Internal Control 12 Audit Committee Report 13 Other Compliance Information 17 Directors Responsibility Statement 21 Directors Report And Audited Financial Statements 22 Properties Held By The Group 78 Analysis Of Shareholdings 80 Notice Of Annual General Meeting 83 Statement Accompanying Notice Of Annual General Meeting 86 Form Of Proxy

3 MYCOM BERHAD (7296-V) Annual Report 2006 Corporate Information BOARD OF DIRECTORS Tan Sri Dato Jaffar bin Abdul Dato Yap Yong Seong Yap Wee Chun Tan Sri Dato Sri Abang Ahmad Urai bin Datu Hakim Abg. Hj. Mohideen Tan Sri Dato Haji Lamin bin Haji Mohd Yunus Dato Murad Mohamed Hashim Yap Wee Keat Cheong Wong Sang Chairman Group Managing Director Executive Director Independent Director Independent Director Non-Independent & Non-Executive Director Non-Independent & Non-Executive Director Independent Director COMPANY SECRETARY Yap Siew Khim (MAICSA ) REGISTERED OFFICE AUDITORS Level 23, Menara Olympia No. 8, Jalan Raja Chulan Kuala Lumpur Tel : Fax : mycom@mycom.com.my Website : SHARE REGISTRARS Symphony Share Registrars Sdn Bhd Level 26, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah Kuala Lumpur Tel : Fax : /31 Website : Ernst & Young Chartered Accountants Level 23A, Menara Milenium, Jalan Damanlela Pusat Bandar Damansara, Kuala Lumpur PRINCIPAL BANKERS Alliance Investment Bank Berhad AmBank (M) Berhad AmMerchant Bank Berhad Maybank Berhad RHB Bank Berhad STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad (Main Board) 1

4 Operational & Financial Highlights Year Ended Year Ended Year Ended Year Ended Year Ended 30 June June June June 2002 RM Million RM Million RM Million RM Million RM Million INCOME STATEMENT Revenue Loss before taxation (54.2) (77.0) (106.4) (93.4) (77.3) Loss attributable to members (54.4) (73.3) (88.9) (76.6) (92.0) BALANCE SHEET Issued and paid up capital Shareholders deficits (519.9) (460.7) (388.0) (313.4) (248.3) Total Assets , ,054.6 PER SHARE DATA Gross loss per share (sen) (14) (20) (27) (24) (20) Net loss per share (sen) (14) (19) (23) (20) (23) Net tangible liabilities per share (sen) (132) (117) (99) (80) (63) 2

5 MYCOM BERHAD (7296-V) Annual Report 2006 Operational & Financial Highlights (Cont d) RM Million RM Million 1,200 1, , , REVENUE TOTAL ASSETS RM Million RM Million (20) (100) (40) (200) (60) (80) (54.2) (300) (400) (313.4) (248.3) (100) (77.0) (77.3) (500) (388.0) (120) (106.4) (93.4) (600) (519.9) (460.7) LOSS BEFORE TAXATION SHAREHOLDERS DEFICITS 3

6 Chairman s Statement On behalf of the Board of Directors of Mycom, I wish to present the Annual Report and Audited Financial Statements for the financial year ended. FINANCIAL RESULTS For the financial year ended, Group revenue declined by 30% to RM86 million compared to the previous financial year as a result of further consolidation of the non-core business of the Group. Operating profit has, however, reversed from a loss of RM6.5 million to a profit of RM13 million due mainly to reduction in operating expenses, unrealised foreign exchange gain relating to the US dollar denominated Floating Rate Notes and gain on disposal of a subsidiary, which more than offset the lower contribution from the Plantation Division and marginal loss suffered by the Property Division for the financial year under review. The above gain on disposal relates to the disposal of Mycom South Africa (Proprietary) Ltd ( MCSA ) Group during the financial year under review. The MCSA Group was relatively dormant and has been incurring losses for many years. The disposal represented an opportunity for the Group to exit from the loss making entities in the Republic, and was also in line with the restructuring scheme of Mycom to dispose of noncontributing or non-core businesses to focus on its core activities after the completion of the Restructuring Scheme. The bottom line was a 26% improvement in net loss from RM73 million reported in the previous financial year to RM54 million in financial year The Group continued to report a loss after taking into account financing cost of RM67 million, as interest continued to accrue on debts that are yet to be restructured. In view of the losses incurred, the Board of Directors recommends that no dividend be declared for the financial year ended 30 June REVIEW OF OPERATIONS Plantation Division With a substantial portion of the oil palm trees reaching maturity in the past couple of years, the rate of increase in production volume in the plantation has stabilised. Production volume increased by 6% from 235,000 tonnes in financial year 2005 to 250,000 tonnes for the financial year under review. 4

7 MYCOM BERHAD (7296-V) Annual Report 2006 Chairman s Statement (Cont d) REVIEW OF OPERATIONS (CONT D) Plantation Division (Cont d) Revenue showed a marginal decline to RM62 million compared to the previous financial year s RM63 million as the average selling price of the fresh fruit bunches is lower in financial year 2006 at a level of RM249 per tonne compared to RM268 per tonne previously. More upkeep works have also been carried out during the financial year under review and hence the resulting operating profit for the Division has declined from RM21 million in financial year 2005 to RM18 million in financial year Property Division Pending completion of the Group Restructuring Scheme which also entails acquisitions of prime landbank, the Property Division was finishing off the tail end of the Oakland Industrial Park ( Oakland ) development. Phase 4B of Oakland comprising 110 units of shops/office/service suites was completed and handed over to purchasers during the financial year under review. In May 2006, Phase 4C of Oakland comprising 27 units of shops/ offices was launched and was well received by the public. For the financial year under review, the revenue from the property division has thus declined to RM6.7 million from RM12.4 million reported in the previous financial year with a marginal operating loss of RM0.3 million. FUTURE PROSPECTS After a long and difficult process finalising the restructuring documents, Mycom has recently concluded the documentation phase of the Group Restructuring Scheme. The implementation phase has moved a big step forward and the completion of the Restructuring Scheme is targeted within the current financial year. The property market sentiment is expected to remain positive as interest rates are still relatively low and financing is still easy to secure backed by the healthy economic development in the country. The Property Division has made preparation for the development of the prime landbank to be acquired under the Restructuring Scheme. The development shall provide steady earnings and cash flow to the Group for the next 10 to 15 years. The outlook for the oil palm industry is promising in view of the rising crude oil prices as well as the usage of bio-diesel as a new source of energy. Hence for the plantation division, the young average age of oil palms which has not reached their peak yield potential and the upward trend in CPO prices augur well for higher profitability in the years ahead. APPRECIATION On behalf of the Board, I wish to thank all our management and staff for their relentless efforts in sustaining the Group s operations and in pushing the Restructuring Scheme forward. Our appreciation also goes to the lenders for their understanding and patience during the tedious negotiation process as we need to balance the interests of all stakeholders in the Group. Furthermore, we wish to express our gratitude to our shareholders and other stakeholders who have given us their continuous support. TAN SRI DATO JAFFAR BIN ABDUL Chairman 18 October

8 Profile of Directors TAN SRI DATO JAFFAR BIN ABDUL Age 74, Malaysian, Chairman, Non-Independent and Non-Executive Director of Mycom Berhad. Appointed to the Board on 30 July Tan Sri Dato Jaffar first joined the Police Force in 1951 and having graduated from Bramshill College, United Kingdom in 1978 specialising in Senior Command and Administration, he rose to become Director of the Anti-Narcotics Branch, Federal Police Headquarters in He later became Chief Police Officer, Johor from 1982 to 1984, and between 1984 to 1985, he was the Director of Management, Police Headquarters, Bukit Aman. He was also the Deputy Inspector-General of the Royal Malaysian Police before retiring from the civil service in May He also sits on the Board of Olympia Industries Berhad, Amalgamated Containers Bhd, Berjaya Sports Toto Bhd, Cosway Corporation Bhd, Yinson Holdings Bhd and Silverstone Corporation Berhad. He has no family relationship with any director and/or major shareholders of Mycom Berhad. DATO YAP YONG SEONG Age 65, Malaysian, Group Managing Director of Mycom Berhad. Appointed to the Board on 16 February 1993 and member of the Audit Committee and Remuneration Committee of the Board. Dato Yap first ventured into the property business in the early 70 s under the Duta Group which was a pioneer in embarking on a reclamation project at the fore shore lands in Malacca which now stood the new business centre known as Melaka Raya. He also sits on the Board of Olympia Industries Berhad as the Group Managing Director and on the Board of several companies of the Mycom and Olympia Group. He is the father to both Mr. Yap Wee Keat and Mr. Yap Wee Chun and a major shareholder of Mycom Berhad. He is also the spouse of Datin Leong Li Nar, a major shareholder of the Company. TAN SRI DATO SRI ABANG AHMAD URAI BIN DATU HAKIM ABG. HJ. MOHIDEEN Age 73, Malaysian, Independent Director. Appointed to the Board of Mycom Berhad on 8 November 1999 and currently the Chairman of Audit Committee of the Board. Tan Sri Dato Sri Abang Ahmad Urai started his civil service in the British Colonial Service in the Chief Secretary s Office, Secretariat Kuching, Sarawak in October 1954 which later became the office of the Sarawak Chief Minister after Sarawak s independence in Malaysia He was elected as Sarawak State Assemblyman in 1974 and was appointed as Assistant Minister in the State Ministry of Culture, Youth & Sports in 1976 and later switched to the Ministry of Agriculture and Community Development in In 1984, he was elected by the Sarawak State Assembly to fill the post of Senator in the Malaysian Senate in Parliament, Kuala Lumpur. Soon after the appointment in 1985, he was elected to the post of Deputy Senate President. In 1988, he was elevated to the post of Malaysian Senate President where he retired in July 1990 after having served a full six (6) years term as Senator. He also sits on the Board of Grand Central Enterprise Berhad, PanGlobal Berhad, United Chemical Industries Berhad and several private companies. He has no family relationship with any director and/or major shareholders of Mycom Berhad. YAP WEE CHUN Age 36, Malaysian, Executive Director. Appointed to the Board of Mycom Berhad on 5 September Mr. Yap Wee Chun graduated in 1990 with a Bachelor of Arts, majoring in Business Administration and Economics from Richmond University of London. He began his career as an Officer with the then D & C Sakura Merchant Bank Bhd in He sits on the Board of other companies in the Mycom and Olympia Group. He is the son of Dato Yap Yong Seong, the Group Managing Director and Datin Leong Li Nar, both major shareholders of the Company. He is a brother to Mr. Yap Wee Keat. 6

9 MYCOM BERHAD (7296-V) Annual Report 2006 Profile of Directors (Cont d) DATO MURAD MOHAMED HASHIM Age 73, Malaysian, Non-Independent and Non-Executive Director. Appointed to the Board of Mycom Berhad on 10 March 1994 and a member of Nomination and Remuneration Committees of the Board. Dato Murad obtained his Bachelor of Arts degree in International Relations and Economics from Boston University, Massachusetts, United States of America in 1958 and later completed his postgraduate studies in Business Management from Columbia University Graduate School of Business, New York in He started his career with Esso Singapore as management trainee in 1959 and rose to become a Director in He later left and joined Petronas Berhad as Executive Director and Senior Vice-President, Downstream in 1984 and in 1989 became Chief Executive Officer of Malaysian Palm Oil Promotion Council where he served until He had previously served as Chairman of Olivetti Malaysia from 1975 to In 1976, he was appointed to the Board of Pacific Bank Bhd until June He was also Chairman of PA Consulting Group from 1994 to He currently sits on the Board of Lion Diversified Holdings Berhad and Amalgamated Containers Berhad and several other private companies in Malaysia and overseas. He has no family relationship with any director of Mycom Berhad and/or its major shareholders. TAN SRI DATO HAJI LAMIN BIN HAJI MOHD YUNUS Age 71, Malaysian, Independent Director. Appointed to the Board of Mycom Berhad on 28 December 2001 and member of Nomination and Remuneration Committees of the Board. Tan Sri Dato Haji Lamin obtained his LLB (Honours), Singapore in 1963 and in the same year, he was admitted into the diplomatic service and served both locally and overseas namely the Ministry of Foreign Affairs, Kuala Lumpur and the Malaysian Embassy in Bangkok. In 1967, he began his illustrous working career in the Legal and Judicial service when he joined the Malaysian Judicial and Legal Service. He first served as a deputy Public Prosecutor in the Attorney General s Chambers, Kuala Lumpur and later was appointed a Magistrate also in Kuala Lumpur. He served briefly as Acting President of the Sessions Court, Seremban before his appointment as Federal Counsel with the Ministry of Defence, Kuala Lumpur. In 1972, he was appointed Senior Assistant Registrar, High Court, Kuala Lumpur and later Deputy Public Prosecutor, Perak. In 1973, he assumed the post of Senior Federal Counsel in the Prosecution Division in the Attorney General s Chambers, Kuala Lumpur. In 1976, he proceeded for further studies at University College, Cardiff, Wales, United Kingdom. Upon his return in 1977, he was appointed State Legal Adviser, Pahang. In 1980, he was appointed Deputy Head of Prosecution Division, AG Chambers, Kuala Lumpur. In 1982, he returned to Pahang as Pahang State Legal Adviser and simultaneously for a short while he held the post of Judge Advocate General in the Ministry of Defence, Kuala Lumpur. In 1983, he was appointed Solicitor General and later (1988) a Judge of the High Court Malaya, Pahang. In 1994, he was promoted to the position of a Judge of the Federal Court and about two months later when the Court of Appeal was instituted, he was appointed the first President. His last day in office was on 12 March 2001 after having served the six months extension as provided for under article 125 (1) of the Federal Constitution. In 2005, he was appointed to the post of ad litem judge to the international Criminal Tribunal for the former Republic of Yugoslavia (ICTY). He also sits as a Director of Golden Hope Plantations Berhad and Chairman of Europlus Berhad. He is also a Director of Taman TAR Development Sdn Bhd. He has no family relationship with any director and/or major shareholders of the Company. YAP WEE KEAT Age 38, Malaysian, Non-Independent and Non-Executive Director. Appointed to the Board of Mycom Berhad on 25 March Mr. Yap Wee Keat graduated with LLB (Honours) degree from the University of London in 1989 and started his career with the Royal Trust Bank, Singapore as a Bank Officer from 1991 to He is also an Executive Director on the Board of Olympia Industries Berhad and sits on several companies within the Olympia Group. He is the son of Dato Yap Yong Seong, the Group Managing Director and Datin Leong Li Nar, both major shareholders of the Company. He is a brother to Mr. Yap Wee Chun, an Executive Director of Mycom Berhad. 7

10 Profile of Directors (Cont d) CHEONG WONG SANG Age 49, Malaysian, Independent Director. Appointed to the Board of Mycom Berhad on 28 December 2001 and is a member of Audit Committee and Nomination and Remuneration Committees. A CPA and CMA qualified accountant by profession, Mr. Cheong has varied and extensive direct hands-on specialised business experiences both in Malaysia and overseas. He started his early articleship training with an international accounting firm and simultaneously graduated as a Chartered Management Accountant. He specialises in turn-around situations, portfolio management, divestment exercise, Mergers & Acquisitions activities and high level negotiations involving privatisation of national projects. Prior to that, he has worked and participated as a professional manager in various senior executive positions including as director and adviser to the Board of various business entrepreneurial organisations including public listed entities in the Asia-Pacific region. He has no family relationship with any director and/or major shareholders of the Company. OTHER INFORMATION i. Shareholdings Details of Directors Shareholdings in the Company are as disclosed on page 82 of the Annual Report. ii. Conviction of offences None of the Directors have been convicted of offences within the past 10 years other than traffic offences. iii. Conflict of interest Dato Yap Yong Seong, Mr. Yap Wee Keat and Mr. Yap Wee Chun are the interested Directors in certain related party transactions with the Company, the details are set out in the Circular to Shareholders dated 13 November 2006 and on pages 17 to 18 of the Annual Report. iv. Attendance at Board Meetings The attendance of the Directors are disclosed in the Corporate Governance Statement on page 9 of the Annual Report. 8

11 MYCOM BERHAD (7296-V) Annual Report 2006 Corporate Governance Statement The Board of Directors of Mycom Berhad ( Mycom ) recognizes the importance of good corporate governance and is committed in adopting the principles and standards of corporate governance throughout the Mycom Group. The following statement describes how the Company has applied the principles and extent of its compliance with the best practices set out in the Malaysian Code on Corporate Governance. BOARD OF DIRECTORS Board Composition and Balance The Board of Mycom consists of eight (8) members with a Non-Executive Chairman, a Group Managing Director, an Executive Director, two (2) Non-Independent Non-Executive Directors and three (3) Independent Non-Executive Directors. The Board views that the independent directors do fairly represent the investment of the minority shareholders in the Company. The Board has a balance mix of executive, non-executive and independent members. The roles of both Chairman and Group Managing Director are distinct and separate so as to ensure balance of power and authority. The Chairman is primarily responsible for the orderly conduct of meetings of the Board. The Group Managing Director is responsible for the day-to-day management of the Group s business operations and finance and implementation of decisions of the Board. The Board had also identified Tan Sri Dato Sri Abang Ahmad Urai bin Datu Hakim Abg. Hj. Mohideen as a senior independent Non-Executive Director to whom all concerns may be conveyed. The current Board brings with it a broad range of business, financial, technical and public service background. This balance enables the Board to provide clear and effective leadership to the Group and bring informed and independent judgement to many aspects of the Group s strategy and performance. Board Responsibilities The Board leads and controls the Group and is principally responsible for, amongst others, the review and adoption of strategic plan for the Group, regular oversight of the Company s business, identifying risks and ensuring the existence of adequate internal controls and management systems to measure and manage risks. The Board has also delegated certain responsibilities to the Board Committees, namely Audit Committee, Nomination Committee and Remuneration Committee, all of which operate within defined terms of reference. All these Board Committees do not have executive power but report to the Board on all matters they have considered and recommended thereon. Board Meetings are held at least four (4) times a year with additional meetings held if necessary. During the financial year the Board had met four (4) times whereby all the Directors have complied with the requirements in respect of board meeting attendance which are as follows:- Number of Board Meetings Directors Held Attended Tan Sri Dato Jaffar bin Abdul 4 3 Dato Yap Yong Seong 4 4 Tan Sri Dato Sri Abang Ahmad Urai bin Datu Hakim Abg. Hj. Mohideen 4 4 Tan Sri Dato Haji Lamin bin Haji Mohd Yunus 4 3 Dato Murad Mohamed Hashim 4 3 Yap Wee Keat 4 3 Yap Wee Chun 4 4 Cheong Wong Sang 4 4 Notices of meetings setting out the agenda and relevant Board papers are provided to all Directors for their review prior to each Board Meeting. Senior management staff are also invited to attend Board Meetings when necessary to provide the Board with further explanation and clarification on matters being tabled for consideration by the Board. The Board has access to the services of the Company Secretary and any independent professional advice at the Company s expense if required in furtherance of their board duties. 9

12 Corporate Governance Statement (Cont d) BOARD OF DIRECTORS (CONT D) Appointments to the Board The Nomination Committee of the Board is responsible for proposing new nominees for the Board and for assessing directors on an on-going basis in accordance with their terms of reference. The decision as to who shall be nominated remains the responsibility of the full Board after considering the recommendations of the Committee. The Board, through the Nomination Committee, will review its required mix of skills and experience and other qualities, including core competencies which non-executive Directors should bring to the Board. The following are the members of the Nomination Committee who are exclusively non-executive directors:- 1. Tan Sri Dato Haji Lamin bin Haji Mohd Yunus (Chairman) 2. Dato Murad Mohamed Hashim 3. Cheong Wong Sang Directors Training All Board members have attended the Mandatory Accreditation Programme and the Continuing Education Programmes prescribed under Bursa Malaysia Listing Requirements. The Directors are empowered by the Board to evaluate and assess its own individual training needs and are encouraged to attend seminars and/or conferences relevant to their responsibilities in order to enhance and meet the needs of the Group and the business environment in which it operates. For the financial year ended, the Directors have attended seminars relating to financial reporting standards, takeovers and conducting meetings. Re-election The Company s Articles of Association provide that one third (1/3) of the Board, including the Group Managing Director, shall retire by rotation at each Annual General Meeting and all Directors shall retire from office at least once in every three (3) years. These retiring Directors shall be eligible for re-election. The Articles of Association also provide that a Director appointed by the Board during the year shall also be subject to re-election at the forthcoming Annual General Meeting after his appointment. Details of Directors seeking re-election are disclosed in the statement accompanying the notice of annual general meeting. In addition, 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, There are currently four directors in Mycom who are retiring under Section 129(6) of the Companies Act, DIRECTORS REMUNERATION Remuneration, Procedure and Disclosure The Remuneration Committee of the Board comprising mainly of Non-Executive Directors is responsible for developing the remuneration policy and recommending the remuneration packages for executive Directors. However, the Board as a whole approves the remuneration of executive and non-executive Directors and Directors do not participate in decisions regarding their own remuneration. The following are the members of the Remuneration Committee :- 1. Tan Sri Dato Haji Lamin bin Haji Mohd Yunus (Chairman) 2. Dato Murad Mohamed Hashim 3. Dato Yap Yong Seong 4. Cheong Wong Sang Directors fees are recommended by the Board for approval of the shareholders at its annual general meetings. 10

13 MYCOM BERHAD (7296-V) Annual Report 2006 Corporate Governance Statement (Cont d) DIRECTORS REMUNERATION (CONT D) Details of Directors remuneration for the Group for the financial year ended, distinguishing between Executive and Non-Executive Directors in aggregate, with categorisation into appropriate components and the number of Directors whose remuneration falls into each band of RM50, are set out below. Allowances Basic & Statutory Directors Fees Salary Contributions Benefits-in-Kind Total (RM 000) (RM 000) (RM 000) (RM 000) (RM 000) Executive 10 1, ,538 Non-Executive Number of Directors Range of remuneration Executive Non-Executive Below RM50,000-3 RM50,001 to RM100,000-3 RM600,001 to RM650, RM900,001 to RM950, SHAREHOLDERS Dialogue and Annual General Meeting ( AGM ) The AGM is the principal forum for dialogue and for shareholders to be informed of all material business and corporate developments concerning the Group. In addition to various corporate restructuring announcements made during the financial year, the Board had ensured timely release of financial results on a quarterly basis to provide shareholders with an overview of the Group s performance and operations. In addition, a press conference is usually held immediately after the AGM to provide an opportunity for the private investors / shareholders to interact with members of the Board and for the Board to respond to questions raised by private investors / shareholders. ACCOUNTABILITY AND AUDIT Financial Reporting The Board aims to ensure that the quarterly reports, annual financial statements as well as the annual review of operations in the annual report are presented in a well balanced and understandable assessment of the Group s position and its prospects. A statement of directors responsibility for preparing the financial statements is published on page 21 of the Annual Report. Internal Control The Board is responsible for maintaining a sound system of internal control which covers not only financial controls but also the operational, compliance and risk management. The Audit Committee of the Board has been established, which is assisted by an independent internal audit function in the discharge of its duties and responsibilities. The statement on internal control on page 12 of the Annual Report further elaborated on the subject. Relationship with Auditors The Company through its Audit Committee has a formal and transparent relationship with the external auditors. The Audit Committee meets with the external auditors at least once a year for the purpose of presenting its external audit plan and significant matters for discussion relating to its audit. The external auditors also advise the Audit Committee on compliance matters pertaining to approved accounting standards. A summary of the activities of the Audit Committee during the year, including the evaluation of the independent audit process, are set out in the Audit Committee Report in pages 13 to 16 of the Annual Report. 11

14 Statement on Internal Control THE BOARD S RESPONSIBILITIES The Board of Directors acknowledges their responsibility to maintain a system of internal control and for reviewing its adequacy and integrity. The system is designed to manage rather than eliminate the risk of failure in achieving the Group s corporate objectives and can only provide reasonable but not absolute assurance against any material misstatement or loss. THE RISK MANAGEMENT PROCESS The Board has formally endorsed an ongoing risk management and internal control framework which includes the following key elements: The guiding principles of the risk management framework; The underlying approach to risk management; The roles and responsibilities of the Board and the Management team; The underlying approach in reviewing and monitoring any significant risk; Regular review on the effectiveness of internal control. The framework is applied continuously throughout the financial year to determine, evaluate and manage the significant risks of the Group. This is further assured by the implementation of an internal control system that has been integrated in the Group s operations and working culture. Therefore, any significant risk arising from factors within the Group and from changes in business environment can be addressed on a timely basis. The process is regularly reviewed by the Board through the Audit Committee and is in accordance with the Guidance as contained in the Statement on Internal Control - Guidance for Directors of Public Listed Companies. THE INTERNAL CONTROL PROCESS The other key features of the Group s internal control system include the following: An organisation structure with defined lines of responsibility and appropriate reporting structure including proper approval and authorisation limits for approving capital expenditure and expenses within the Group; Internal policies and procedures are documented through a series of manuals for all major operations of the Group; Strategic planning and annual budgeting are undertaken for the key business units and consolidated at Group level. Senior management closely monitors the key performance indicators and financial and operating results against budget to identify and where appropriate, to address significant variances; An Internal Audit Department which performs regular and systematic review of the internal controls to assess on the effectiveness of the systems of internal control and to highlight significant risks impacting the Group with recommendation for improvement; The Audit Committee regularly reviews and scrutinises the audit report by the Internal Audit Department and conducts annual assessment on the adequacy of the Department s scope of work and resources. During the financial year, some weaknesses in internal control were identified and measures have been or are being taken to address these weaknesses. None of these weaknesses will result in any material losses, contingencies or uncertainties that would require disclosure in the Group s annual report. The Group continues to take measures to enhance and strengthen the internal control environment. 12

15 MYCOM BERHAD (7296-V) Annual Report 2006 Audit Committee Report Tan Sri Dato Sri Abang Ahmad Urai bin Datu Hakim Abg. Hj. Mohideen Chairman - Independent & Non-Executive Cheong Wong Sang Member - Independent & Non-Executive Dato Yap Yong Seong Member - Executive TERMS OF REFERENCE OF AUDIT COMMITTEE 1. Composition a) The Committee shall be appointed by the Directors amongst its members of no fewer than 3 members, a majority of whom shall be independent directors defined below: is not an executive director of the Company or its related corporation; has not been within the last 2 years and is not an officer (except as an independent director) of the Company or its related corporation; is not a major shareholder of the Company or its related corporation; is not a relative of any executive director, officer or major shareholder of the Company or its related corporation [ relative means the spouse, parent, brother, sister, child (including adopted or step child) and the spouse of such brother, sister or child]; is not acting as a nominee or representative of any executive director or major shareholder of the Company or its related corporation; is not engaged as a professional adviser by the Company or its related corporation either personally or through a firm or company of which he is a partner, director or major shareholder; or has not within the last 2 years and does not engage in any transaction with the Company or its related corporation, whether by himself or with other persons or through a firm or company of which he is a partner, director or major shareholder, as the case may be, the value of which exceeds RM250,000. b) The Committee shall include at least one person who is a member of the Malaysia Institute of Accountants or a person who must have at least 3 years working experience and have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967 or is a member of one of the associations specified in Part II of the said Schedule. c) No alternate director shall be appointed as a member of the Committee. d) The members of the Committee shall elect from among their number a Chairman who is independent and non-executive. e) If a member of the 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 shall, within three (3) months of the event, appoint such number of new members as may be required to make up the minimum number of three (3) members. f) The Board shall review the term of office of Committee members at least once every three (3) years. 13

16 Audit Committee Report (Cont d) TERMS OF REFERENCE OF AUDIT COMMITTEE (CONT D) 2. Authority The Committee is authorised by the Board, in accordance with the procedures to be determined by the Board (if any) and at the cost of the Company, to: investigate any activity within the Committee s Terms of Reference; have resources which are reasonably required to enable it to perform its duties; have full and unrestricted access to any information pertaining to the Company or the Group; have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any); obtain outside legal or other independent professional advice and secure the attendance of outsiders with relevant experience and expertise if it considers this necessary; convene meetings with the external auditors, excluding the attendance of the executive members of the committee, whenever deemed necessary. 3. Duties The duties of the Committee shall be to review the following and report the same to the Board: Any matters concerning the appointment and dismissal of the external auditor and the audit fee; The nature and scope of the audit by the external auditors before commencement; The external auditors audit report, areas of concern arising from the audit and any other matters the external auditors may wish to discuss (in the absence of management if necessary); Any financial information for publication, including quarterly and annual financial statements, before submission to the Board; The external auditors management letter and management s response; The adequacy and relevance of the scope, functions and resources of internal audit and the necessary authority to carry out its work; The audit plan and work programme of internal audit; Findings of internal audit work and management s response; Any evaluations on internal controls by auditors; Extent of co-operation and assistance given by employees; The propriety of any related party transactions and conflict of interest situations that may arise within the Company or the Group; Any other matter as authorised by the Board. 14

17 MYCOM BERHAD (7296-V) Annual Report 2006 Audit Committee Report (Cont d) TERMS OF REFERENCE OF AUDIT COMMITTEE (CONT D) 4. Overseeing the Internal Audit Function a) The Committee shall oversee all internal audit functions and is authorised to commission investigations to be conducted by internal audit, as it deems fit. b) The Head of Internal Audit shall report directly to the Committee and shall have direct access to the Chairman of the Committee. 5. Procedures a) The Audit Committee may regulate its own procedures and in particular, the calling of the meetings, the notice given of such meetings, the voting and the proceedings thereat, the keeping of minutes and the custody, production and inspection of such minutes. b) The Secretary shall circulate the minutes of the meeting of the Committee to all members of the Board. 6. Attendance at Meetings a) A quorum of the Audit Committee shall be two (2) members. The majority of the members present must be independent. b) The Head of Finance and The Head of Internal Audit shall normally attend the meetings of the Committee. The External Auditors shall have the right to appear and be heard at any meeting of the Audit Committee and shall appear before the Committee when required to do so by the Committee. c) The Company Secretary shall be the Secretary of the Committee. 7. Frequency of Meetings Meetings shall be held not less than four (4) times a year. The External Auditors may request a meeting if they consider that one is necessary to consider any matter the External Auditors wish to bring to the attention of the Directors or shareholders of the Company. AUDIT COMMITTEE MEETINGS There were four (4) Audit Committee Meetings held during the financial year ended. Details of attendance of Audit Committee Members No. of Audit Committee Meetings Members Held Attended Tan Sri Dato Sri Abang Ahmad Urai bin Datu Hakim Abg. Hj. Mohideen 4 4 Dato Yap Yong Seong 4 4 Cheong Wong Sang

18 Audit Committee Report (Cont d) SUMMARY OF ACTIVITIES The activities of the Audit Committee for the financial year were as summarised below: 1. Reviewed draft financial statements together with external auditors; 2. Reviewed unaudited quarterly results prior to recommendation to the Board for approval; 3. Reviewed internal audit plans/reports and discuss findings/recommendations and management response with Internal Audit; 4. Discussed and reviewed with the external auditors the external audit plan and approach, results of their examinations, auditors report and management issue highlights relating to audit and updates on MASB accounting standards; 5. Reviewed risk management and monitored its implementation; and 6. Reviewed procedures and guidelines for recurrent related party transactions. AUDIT FUNCTION The Internal Audit Department provides an independent and objective assurance on risk management and internal controls. The Department reports directly to the Board s Audit Committee. The Internal Audit Department performs its audit activities with the prime objective of ensuring that a sound internal control system is in place and the system is functioning adequately. This is achieved through regular and systematic reviews of internal control systems and management information systems to ensure the reliability and integrity of information, including the extent of compliance with applicable policies, plans, procedures and regulations. In addition, audit activities ensure that principal risks are identified by management and appropriate controls are in place to manage these risks. The Audit Committee reviews and approves the annual audit plan of the Internal Audit Department at the first Audit Committee meeting of the financial year. The internal audit scope of coverage for the financial year encompassed the audit of key processes and operations of all active subsidiaries as identified in the annual audit plan. Internal audit reports on findings noted during the audit, including implementation of the risk management policy, and recommended corrective actions were discussed with senior management of the subsidiaries. Implementation timelines of the agreed action plans were agreed upon and follow-up audits were conducted to ensure full compliance. The corresponding audit reports with follow-up action plans and implementation status were also presented to the Audit Committee. 16

19 MYCOM BERHAD (7296-V) Annual Report 2006 Other Compliance Information a) Status of Utilisation of Proceeds from corporate proposals The status of utilisation of proceeds arising from the following corporate transactions as at the date of this report are as follows: i) Execution of the transfer of a portion of vacant land by Cape Rendezvous Hotel (Proprietary) Limited, a 64% owned subsubsidiary in South Africa, measuring approximately acres in Cape Town based on a deed of sale entered into in the prior year. The proceeds of Rand4,250,000 (approximately RM2,515,000 equivalent) have been utilised as follows: RM 000 equivalent Rand 000 Repayment of bank borrowings 2,071 3,500 Working Capital ,515 4,250 ii) Disposal of 100% equity interest in Mycom South Africa (Proprietary) Limited by Mycom Berhad for a cash consideration of Rand1,000,000 (RM500,000 equivalent). The proceeds have been fully utilised for working capital. b) Non-Audit fees Paid/Payable There was an amount of RM20,300 being professional fees paid/payable to external auditors for the financial year ended 30 June c) Material Contracts There were no material contracts entered into by the Company and its subsidiaries involving directors and major shareholders interests still subsisting at the end of the financial year ended except the following: i) A conditional sale and purchase agreement dated 14 August 2000 between Mycom and Kenny Height Developments Sdn Bhd ( KHD ) and its extensions dated 12 December 2000, 12 June 2001, 12 December 2001, 11 July 2002, 30 January 2003, 18 September 2003, 12 December 2003, 23 September 2004, 27 April 2005, 12 October 2005 and 5 May 2006 and a Supplemental Agreement dated 14 February 2003 for the proposed acquisition of six parcels of vacant land measuring acres situated in Mukim Batu, Wilayah Persekutuan ( KHD Land ) for a total purchase consideration of RM261 million to be satisfied by an issuance of 248,571,429 new Mycom shares at an issue price of RM1.05 per new Mycom share credited as fully paid up under the Mycom Group Restructuring Scheme. ii) iii) A conditional assets acquisition agreement dated 14 August 2000 and its extensions dated 12 December 2000, 12 June 2001, 12 December 2001, 11 July 2002, 30 January 2003, 18 September 2003, 12 December 2003, 23 September 2004, 27 April 2005, 12 October 2005 and 5 May 2006 and a Supplemental Agreement dated 14 February 2003 between Mycom and Olympia Industries Berhad ( OIB ) and certain of its subsidiaries, namely United Malaysian Properties Sdn Bhd, Mascon Sdn Bhd ( Mascon ) and Regal Unity Sdn Bhd for the proposed acquisitions by Mycom of a 100% equity interest in Olympia Land Berhad (and its selected subsidiaries), Rambai Realty Sdn Bhd, City Properties Development Sdn Bhd, Olympia Plaza Sdn Bhd, Maswarna Colour Coatings Sdn Bhd, Salhafa Sdn Berhad, Mascon Construction Sdn Bhd together with four (4) storey shop office situated at Taman Shamelin Perkasa, Kuala Lumpur and a factory unit situated at Beranang Industrial Estate, Selangor and five (5) acre land situated at District of Kota Kinabalu, Sabah for a total purchase consideration of RM million to be satisfied via novation of debts to Mycom totalling RM47.39 million and a cash payment of RM8.98 million under the Mycom Group Restructuring Scheme. A consortium agreement dated 14 February 2003 entered into between KH Estates Sdn Bhd ( KHE ) and Olympia Properties Sdn Bhd ( OP ) for the proposed development of the KHD Land to be acquired by KHE as well as the approximately 32.3 acres of land situated at Mukim Batu, Kuala Lumpur proposed to be acquired by OIB pursuant to the OIB Group Restructuring Scheme. 17

20 Other Compliance Information (Cont d) c) Material Contracts (Cont d) iv) Exchange of Letters dated 14 February 2003 between Mycom and its subsidiaries namely, Duta Grand Hotels Sdn Bhd ( DGH ), Pacific Forest Industries Sdn Bhd and UNP Plywood Sdn Bhd, between Mycom, OIB and OIB various subsidiaries, namely Miles and Miles Leisure Sdn Bhd, Jupiter Capital Sdn Bhd, Mascon and LC (BVI) Ltd relating to a proposed debt novation and proposed settlement of trade creditors under the Mycom Group Restructuring Scheme. v) Exchange of Letter dated 18 March 2003 between Mycom and DGH in relation to a proposed DGH project financing under the Mycom Group Restructuring Scheme. vi) A profit guarantee agreement dated 7 June 2006 entered into between Mycom s wholly-owned subsidiary, KHE and KH Land Sdn Bhd, in turn a wholly-owned subsidiary of KHE, with KHD ( Guarantor ), OP, a wholly-owned subsidiary of OIB, (OP and KHE, collectively referred to as Consortium Parties ) and OSK Trustees Berhad ( Stakeholder ) pursuant to the acquisitions under the Restructuring Scheme by Mycom and OIB of six (6) parcels and four (4) parcels of land measuring approximately and 32.3 acres situated at Lots 21763, 21764, 21765, 21766, and and at Lots 21759, 21760, and in Mukim Batu, District of Kuala Lumpur, State of Wilayah Persekutuan ( Total KHD Land ) respectively from the Guarantor whereby inter, alia, the Guarantor had agreed to provide for a profit guarantee of not less than RM million to be met over a period of four (4) twelve (12) months period from the completion of the acquisitions of the Total KHD Land. KHD is a private limited company involved in property investment and development. The major shareholders of KHD are Datin Leong Li Nar, wife of Dato Yap Yong Seong and Mr.Yap Wee Chun through his deemed interest held in Nadefinco Pte Ltd. DGH is 51.05% held by Mycom whilst the remaining 48.95% is held by Duta Credit Sdn Bhd ( DCSB ). DCSB is a private company which is ultimately owned by Dato Yap Yong Seong, Mr. Yap Wee Chun and Datin Leong Li Nar. Dato Yap Yong Seong, Mr. Yap Wee Keat and Mr. Yap Wee Chun are all directors of Mycom and deemed major shareholders of Mycom. Mycom is a major shareholder of OIB. The common Directors, except for Mr. Yap Wee Chun who is not a director in OIB, are Dato Yap Yong Seong, Mr. Yap Wee Keat and Tan Sri Dato Jaffar bin Abdul. Dato Yap Yong Seong, Mr. Yap Wee Keat, Mr. Yap Wee Chun and Koperasi Polis DiRaja Malaysia Berhad are deemed interested in the subsidiaries of Mycom and OIB by virtue of their direct and indirect interests in Mycom and OIB respectively. d) Recurrent Related Party Transactions of A Revenue or Trading Nature conducted pursuant to the Shareholders Mandate approved at the Annual General Meeting held on 8 December 2005 Related Parties involved with Mycom Berhad and/or its subsidiaries Nature of Transactions Relationship Aggregate value for financial year ended (RM 000) Miles and Miles Leisure Sdn Bhd ( MNM ) and Olympia Travels & Tours (Singapore) Pte Ltd ( OTTS ) Purchase of air tickets from MNM and OTTS, which are involved in the travel business MNM and OTTS are both wholly-owned subsidiaries of Olympia Industries Berhad ( OlB ) which in turn is an associate company of Mycom. 414 Olympia Land Berhad ( OLB ) Sub-renting of office space at Level 21, Menara Olympia, No. 8, Jalan Raja Chulan, Kuala Lumpur OLB is a wholly-owned subsidiary of OlB. 168 Dairy Maid Resort & Recreation Sdn Bhd ( DMRR ) Renting of office space at Levels 6 & 23, Menara Olympia, No. 8, Jalan Raja Chulan, Kuala Lumpur which is owned by DMRR together with car park space DMRR is a wholly-owned subsidiary of OlB

21 MYCOM BERHAD (7296-V) Annual Report 2006 Other Compliance Information (Cont d) d) Recurrent Related Party Transactions of A Revenue or Trading Nature conducted pursuant to the Shareholders Mandate approved at the Annual General Meeting held on 8 December 2005 (Cont d) Related Parties involved with Mycom Berhad and/or its subsidiaries Nature of Transactions Relationship Aggregate value for financial year ended (RM 000) OIB Sub-renting of office space at Level 22, Menara Olympia, No. 8, Jalan Raja Chulan, Kuala Lumpur OIB is an associate company of Mycom. 24 Mardec Berhad Group Purchase of latex Mardec Berhad, a major shareholder of Filati Lastex Sdn Bhd in turn 51% held subsidiary of Mycom. NIL Mascon Group Mascon Group is contractor for Oakland Holdings Sdn Bhd s property projects Mascon Sdn Bhd ( Mascon ) is a 71% owned subsidiary of OIB whilst Mascon Construction Sdn Bhd is 100% owned by Mascon. NIL JetFM Sdn Bhd ( JetFM ) Purchase of computer equipment and ancillary products JetFM is a 51% owned subsidiary of OIB. 11 e) Provision of Financial Assistance conducted pursuant to the Shareholders Mandate approved at the Annual General Meeting held on 8 December 2005 Related Parties involved with Mycom Berhad and/or its subsidiaries Nature of Transactions Relationship Aggregate value for financial year ended (RM 000) Duta Grand Hotels Sdn Bhd ( DGH ) 1) Provision of financial assistance to meet preoperational costs such as insurances, quit rent, security services and upkeep maintenance of DGH project 2) Provision of corporate guarantee to contractors or sub-contractors relating to DGH project DGH is 51.05% owned by Mycom with the remaining 48.95% held by DCSB, a company controlled by the major shareholders and/or Directors of Mycom. 538 NIL 19

22 Other Compliance Information (Cont d) f) Share buybacks There were no share buybacks by the Company in the financial year ended. g) Options, warrants or convertible securities There were no options, warrants or convertible securities issued during the financial year. h) American Depository Receipt ( ADR ) or Global Depository Receipt ( GDR ) The Company did not sponsor any ADR or GDR during the financial year under review. i) Sanctions and/or Penalties There were no sanctions and/or penalties imposed on the Company or its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year. j) Variation in results There was no variation in results during the financial year ended. k) Profit Guarantee The Company did not give any profit guarantee during the financial year. l) Revaluation Policy on landed properties Please refer to accounting policy on property, plant and equipment on Note 2(d) on page 36 of the Annual Report. 20