Annual Report | 2009 11/3/2009 · Tunku Yahaya does not have any conflictof interest with the...

MITHRIL Berhad (577765-U)

Suite 19.01, 19th Floor

Menara MAA

No. 12, Jalan Dewan Bahasa

50460 Kuala Lumpur

TEL : 603-2142 0366

FAX : 603-2142 0533

Annual Report | 2009

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NOTICE OF THE SEVENTH ANNUAL GENERAL MEETING 02

Corporate Information 04

Corporate Structure 05

ProFIle Of Directors 06

Chairman’s Statement 09

STATEMENT OF Corporate Governance 11

Audit Committee Report 19

Statement Of Internal Control 22

CORPORATE SOCIAL RESPONSIBILITY 24

Directors’ Report & Financial Statements 25

List Of Properties 95

Analysis Of Shareholdings 97

Analysis Of RcSls Holdings 99

Form Of Proxy

Contents

2

MITHRILBerhadNOTICE OF THE SEVENTH

ANNUAL GENERAL MEETING

AS ORDINARY BUSINESS

1. ToreceivetheAuditedFinancialStatementsfortheyearended30June2009togetherwiththe ReportsoftheDirectorsandtheAuditorsthereon. 2. ToapprovethepaymentofDirectors’feesamountingtoRM96,000.00fortheperiodfrom1 July2009until the forthcomingAnnualGeneralMeetingtobeheld in2010tobepayable quarterlyinarrears.

3. Tore-electthefollowingDirectorsoftheCompanywhoareretiringinaccordancewithArticle 77of theCompany’sArticlesofAssociationandwho,beingeligible,offer themselves for re-election:-

(i) TunkuYahaya@YahyabinTunkuTanSriAbdullah (ii) Dato’AbdulMajidbinMohamed

4. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directorstofixtheirremuneration.

By Order of the Board

LILY YIN KAM MAY (MAICSA NO. 0878038)Company Secretary

KualaLumpur3November2009

(Resolution 1)

(Resolution 2)(Resolution 3)

(Resolution 4)

NOTICE IS HEREBY GIVENthattheSEVENTH ANNUAL GENERAL MEETINGof

theCompanywillbeheldatTheAuditorium,Podium1,MenaraMAA,No.12Jalan

DewanBahasa,50460KualaLumpuronWednesday,25November2009at4.00p.m.

forthefollowingpurposes:-

3

MITHRILBerhadNOTICE OF THE SEVENTH

ANNUAL GENERAL MEETING (continued)

NOTES: -

1. AmemberentitledtoattendandvoteatameetingoftheCompanyisentitledtoappointaproxytoattendandvote inhisstead.AproxymaybutneednotbeamemberoftheCompany.

2. A member of the Company, who is an authorised nominee as defined under the Securities Industry (Central Depositories)Act1991,mayappointone(1)proxyinrespectofeachsecuritiesaccount.

3. Theinstrumentappointingaproxy,shallbeinwritingunderthehandoftheappointerorhisattorneydulyauthorised inwriting,andinthecaseofacorporation,eitherundersealorunderhandofanofficerorattorneydulyauthorised.

4. TheinstrumentappointingaproxymustbedepositedattheCompany’sRegisteredOffice,Suite20.03,20thFloor, MenaraMAA,No.12,JalanDewanBahasa,50460KualaLumpur,notlessthan48hoursbeforethetimeappointed forholdingthemeetingoranyadjournmentthereof.

5. Anyalterationintheformofproxymustbeinitialed.

6. FormofProxysentthroughfacsimiletransmissionshallnotbeaccepted.

STATEMENT ACCOMPANYING NOTICE OF THE SEVENTH ANNUAL GENERAL MEETING

Pursuant toParagraph8.27(2)of theMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhad (“BursaSecurities”),thedetailsoftheDirectorswhoareseekingforre-electionorre-appointmentinAgenda3oftheNoticeoftheSeventhAnnualGeneralMeetingoftheCompanyaresetoutintheDirectors’Profilesonpages6to7ofthisAnnualReport.TheirsecuritiesholdingsintheCompanyaresetoutintheDirectors’shareholdingswhichappearonpage27ofthisAnnualReport.

4

MITHRILBerhadCorporate

INFORMATION

DomicileMalaysia

Legal Form & Place of IncorporationApubliclistedcompanyincorporatedinMalaysiaundertheCompaniesAct,1965andlimitedbyshares

Board of Directors

Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah-ExecutiveChairman

En Razman Hafidz bin Abu Zarim-ManagingDirector/ChiefExecutiveOfficer

Dato’ Abdul Majid bin Mohamed-IndependentNon-ExecutiveDirector

Mr Onn Kien Hoe-IndependentNon-ExecutiveDirector

Datuk Chee Hong Leong-IndependentNon-ExecutiveDirector

Datuk Haji Mohamed Iqbal bin M.M. Mohamed Ganey -IndependentNon-ExecutiveDirector

SolicitorsMessrsCheang&[email protected],JalanMedanTuanku50300KualaLumpurTelephoneNo:03-26910803TelefaxNo:03-26928533

AuditorsMessrsErnst&YoungLevel23A,MenaraMileniumJalanDamanlelaPusatBandarDamansara50490KualaLumpurTelephoneNo:03-74958000TelefaxNo:03-74957981

Principal Bankers(Inalphabeticalorder)AllianceBankMalaysiaBerhadMalayanBankingBerhad

Stock Exchange ListingBursaMalaysiaSecuritiesBerhad(“BursaSecurities”)StockNumber8311

Websitehttp://www.mithril.com.my/

SecretaryMsLilyYinKamMay

Audit CommitteeMrOnnKienHoe-ChairmanDato’AbdulMajidbinMohamed-MemberDatukCheeHongLeong-MemberDatukHajiMohamedIqbalbinM.M.MohamedGaney-Member

Registrar & Transfer OfficeTraceManagementServicesSdnBhdSuite20.03,20thFloor,MenaraMAANo.12JalanDewanBahasa50460KualaLumpurTelephoneNo:03-21413060TelefaxNo:03-21413061

Registered OfficeSuite20.03,20thFloor,MenaraMAANo.12JalanDewanBahasa50460KualaLumpurTelephoneNo:03-21413060TelefaxNo:03-21413061

Principal Place of BusinessSuite19.01,19thFloor,MenaraMAANo.12JalanDewanBahasa50460KualaLumpurTelephoneNo:03-21420366TelefaxNo:03-21420533

5

MITHRILBerhadCorporate

Structure

Mithril Saferay Sdn Bhd

100%

MITHRIL MARKETING SDN BHD

100%

MITHRIL FRP SDN BHD100%

MITHRIL MANAGEMENT SERVICES SDN BHD100%

MITHRIL REALTY SDN BHD100%

MITHRIL CLAY INDUSTRIES SDN BHD100%

MITHRIL POLYMERS SDN BHD100%

MITHRIL CLAY MANUFACTURING SDN BHD100%

MITHRIL PVC SDN BHD

100%

MithrilBerhad

100%

Alpha Glow Sdn Bhd

70%

Resolute Omega Sdn Bhd

100%

Prominent Landscape Sdn Bhd

65%

Tajo Development Sdn Bhd

100%

Tajo Project ManagementSdn Bhd

6

MITHRILBerhadPROFILE

OF DIRECTORS

Tunku Yahaya @ Yahya bin Tunku Tan Sri AbdullahAged 48, MalaysianExecutive Chairman

Member of the Nomination CommitteeMember of the Remuneration CommitteeMember of the Risk Management Committee

Tunku Yahaya @ Yahya bin Tunku Tan Sri AbdullahwasappointedastheExecutiveChairmantotheCompany’sBoardofDirectorson12November2003.On12January2007, he was appointed as a member of the RiskManagementCommitteeoftheCompany.

Tunku Yahaya currently sits on the Boards of MelewarIndustrial Group Berhad, Melewar Group Berhad, MAAHoldings Berhad, Khyra Legacy Berhad, The MelewarCorporation Berhad and other several private limitedcompanies.

TunkuYahayagraduatedin1983withaBachelorofScience(Hons)degreeinEconomicsandAccountancyfromTheCityUniversity,London.ThatyearinLondon,hejoinedPeatMarwickMitchell&Co. In1986,heobtainedhisMasterofScienceinEconomicsfromBirkbeckCollege,UniversityofLondon.

Upon returning to Malaysia in 1986, he joined theadvertisingcompany,MZC-Saatchi&Saatchi.In1988,hejoinedthemanagementoftherefurbishedCentralMarket(KL)asExecutiveDirector.In1994,hewasappointedtoput into operation and manage the television station,MetroVision,asManagingDirector.In1997,hestartedthemusicrecordinglabel,MelewarParallaxSdnBhd.

TunkuYahayaisthebrotherofTunkuDato’Ya’acobbinTunku Tan Sri Abdullah. He is an indirect substantialshareholderbyvirtueofhisrelationshipwithTunkuDato’Ya’acobbinTunkuTanSriAbdullah,whohassubstantialinterest in MAA Holdings Berhad via Khyra LegacyBerhad.HisshareholdingintheCompanyisdisclosedonpage27oftheDirectors’Report.

TunkuYahayadoesnothaveanypersonalinterestinanybusinessarrangementsinvolvingtheCompany.

TunkuYahayadoesnothaveanyconflictofinterestwiththe Company and he has had no convictions for anyoffenceswithinthepast10years.

Razman Hafidz bin Abu ZarimAged 54, MalaysianManaging Director/Chief Executive Officer

En Razman Hafidz bin Abu Zarim was appointedas a Non-Independent Non-Executive Director to theCompany’sBoardofDirectorson12November2003,butsubsequently,wasre-designatedasanIndependentNon-ExecutiveDirectoron19August2004.

On12January2007,EnRazmanwasappointedas theManaging Director of Mithril Berhad and accordingly,became a Non-Independent Executive Director of theCompany.

En Razman currently sits on the Boards of PanasonicManufacturingMalaysiaBerhad,YeoHiapSeng(Malaysia)Berhad,eBworxBerhadandseveralotherprivatelimitedcompanies.

EnRazmanisajoint-HonoursdegreeholderinEconomicsand Accounting BSc (Econ), from University College,Cardiff,UniversityofWales.HeisaFellowmemberoftheInstitute of Chartered Accountants in England & WalesandamemberoftheMalaysianInstituteofAccountants.

EnRazmanbeganhiscareerin1977withToucheRoss&Co,charteredaccountants,inLondon.In1984,hemovedon to Hacker Young, another chartered accountancyfirm based in London, where he was admitted as anAudit Partner in 1987. In 1989, En Razman returned toMalaysiaasanAuditPartnerofPriceWaterhouse(PW),aninternationalpublicaccountancyfirm.In1993,hewasappointed the Partner-In-Charge of PW’s ManagementConsultingPracticeandbecameanExecutiveCommitteemember. In 1994, he established Norush Sdn Bhd, aninvestmentholdingcompanyandbusinessadvisoryfirm,whereheremainsasChairman.

En Razman does not have any personal interest in anybusinessarrangementsinvolvingtheCompany.

En Razman does not have any family relationship withanyDirectorand/ormajor shareholderof theCompany.HealsodoesnothaveanyshareholdingintheCompanyandhehashadnoconvictionsforanyoffenceswithinthepast10years.

7


OF DIRECTORS (continued)

Dato’ Abdul Majid Bin MohamedAged 69, MalaysianNon-Executive Independent Director

Chairman of the Remuneration CommitteeChairman of the Nomination CommitteeMember of the Audit CommitteeMember of the Risk Management Committee

Dato’ Abdul Majid Bin MohamedwasappointedasanIndependent Non-Executive Director to the Company’sBoard of Directors on 13 December 2006. He wasthen appointed the Chairman of the RemunerationCommittee,amemberoftheAuditCommittee,amemberoftheNominationCommitteeandamemberoftheRiskManagementCommitteeon12January2007.

On16February2009,Dato’AbdulMajidwasre-designatedastheChairmanoftheNominationCommittee.

PriortojoiningtheCompany,hehasheldvariousseniorministerial positionsanddirectorships in severalprivatelimitedcompaniesinMalaysia.

AmongstthepositionsheldwereAmbassadorofMalaysiato Libya, Ambassador of Malaysia to the Republic ofKorea,AmbassadorofMalaysiatotheFederalRepublicofGermany,AmbassadorofMalaysiatotheUnitedStatesofAmericaandDeputySecretaryGeneralwiththeMinistryofForeignAffairs.

Dato’AbdulMajiddoesnothaveanypersonalinterestinanybusinessarrangementsinvolvingtheCompany.

Dato’AbdulMajiddoesnothaveanyfamilyrelationshipwith any Director and/or major shareholder of theCompany.HealsodoesnothaveanyshareholdingintheCompanyandhehashadnoconvictionsforanyoffenceswithinthepast10years.

Onn Kien HoeAged 44, MalaysianNon-Executive Independent Director

Chairman of the Audit CommitteeChairman of the Risk Management CommitteeMember of the Nomination CommitteeMember of the Remuneration Committee

Mr Onn Kien Hoe,wasappointedasanIndependentNon-ExecutiveDirectortotheCompany’sBoardofDirectorson12January2007.HewasthenappointedtheChairmanoftheRiskManagementCommittee,amemberoftheAuditCommittee,amemberoftheNominationCommitteeandamemberoftheRemunerationCommitteeon12January2007.

On16February2009,MrOnnwasre-designatedastheChairmanoftheAuditCommittee.

MrOnncurrentlysitsontheBoardsofMelewarIndustrialGroupBerhad,M3nergyBerhad,NovaMSCBerhad,KianJooCanFactoryBerhadandseveralotherprivatelimitedcompanies.

MrOnncompletedhisprofessionalqualificationwiththeAssociationofCharteredCertifiedAccountants in1988,andhasbeenintheaccountingprofessionsincethen.HeisalsoamemberoftheMalaysianInstituteofAccountantsandMalaysianInstituteofCertifiedPublicAccountants.

Mr Onn joined Horwath (Kuala Lumpur Office), aninternational accounting firm, in 1994. He is currentlythe partner in charge of Horwath’s corporate advisorydepartments. Mr Onn has served as an examiner forthe Malaysian Institute of Certified Public AccountantsandasamemberoftheInterpretationCommitteeoftheMalaysianAccountingStandardsBoard.

Mr Onn does not have any personal interest in anybusinessarrangementsinvolvingtheCompany.

Mr Onn does not have any family relationship with anyDirector and/or major shareholder of the Company. HealsodoesnothaveanyshareholdingintheCompanyandhehashadnoconvictionsforanyoffenceswithinthepast10years.

8


OF DIRECTORS (continued)

Datuk Chee Hong LeongAged 45, MalaysianIndependent Non-Executive Director

Member of the Audit Committee

Datuk Chee Hong Leong was appointed as anIndependent Non-Executive Director to the Company’sBoard of Directors on 7 November 2008. He was thenappointed as a member of the Audit Committee on 22May2009.

Datuk Chee currently sits on the Boards of PriceworthWood Products Berhad, SYF Resources Berhad andotherseveralprivatelimitedcompanies.

Datuk Chee graduated with a Bachelor of Engineering(Computer) and Master of Business Administration,McMasterUniversity,Hamilton,Ontario,Canada.

Datuk Chee startedhis career in 1990coordinating thedevelopment in Corporate and Annual Strategic Plansfor Leisure Holidays Group of Companies. He joinedTancoResortBerhadfrom1998to2002,whereheheldvarious positions from General Manager to ExecutiveDirector/Chief Operating Officer. Currently, he managesasoftwarehousethatfocusesonCustomerRelationshipManagementandStudentPlacementPortal.

DatukCheedoesnothaveanypersonal interest inanybusinessarrangementsinvolvingtheCompany.

Datuk Chee does not have any family relationship withanyDirectorand/ormajor shareholderof theCompany.HealsodoesnothaveanyshareholdingintheCompanyandhehashadnoconvictionsforanyoffenceswithinthepast10years.

Datuk Haji Mohamed Iqbal bin M.M. Mohamed GaneyAged 60, MalaysianIndependent Non-Executive Director

Member of the Audit Committee

Datuk Haji Mohamed Iqbal bin M.M. Mohamed GaneywasappointedasanIndependentNon-ExecutiveDirectorto the Company’s Board of Directors on 7 November2008.HewasthenappointedasamemberoftheAuditCommitteeon22May2009.

DatukHajiMohamedIqbalisanassociateofInternationalBankers, London. He has vast experience in bankinghaving worked with a foreign bank in various seniorpositions for 29 years. He had the opportunity to beexposedtovariousindustriesandacquiredknowledgeonthebusinessandeconomicenvironmentinthedomesticas well as international markets whilst serving as theHeadofProductDevelopment,TradeFinance,StandardCharteredBankMalaysiaBerhad.

DatukHajiMohamedIqbalwasalsoanactivememberoftheExportCreditRefinancing (ECR)Committeechairedby Bank Negara Malaysia and currently by EXIM Bank,a committee member of APEC, for standardisation ofimport and export documents chaired by EXIM Bank,a committee member for Cross Border Barter TradechairedbyMalayanBankingBerhad,anexaminerfortheInternationalTradeFinance(DP06),paperoftheInstituteof Bankers Malaysia Diploma in Banking and FinancialServices examination and a resident trainer for theInstitute’s International Trade.His immensecontributionto the banking fraternity and to Bank Negara Malaysia(BNM)hasbeenwellreceivedandrecognised.

DatukHajiMohamedIqbalistheGroupExecutiveDirectorofSPMHoldingsSdnBhd,amajorrecyclerinthecountrysince2000.He isalso theChairmanofPatcheeBakerySdn Bhd, a company involved in food production formorethanover100years.HeisalsotheChairmanofMIGResourcesSdnBhd,aninvestmentholdingcompanywithinvestmentinproperties,foodproductionandrestaurants.

DatukHajiMohamedIqbalisalsoinvolvedinanumberofsocialand religiousbodiessuchasPersatuanMusliminIndia Malaysia (PERMIM), Angkatan Kemajuan IslamP.J. dan Selangor (Committee Member and Chairmanof Building Committee), Persatuan Kemajuan MusliminBangsar,KualaLumpurdanSelangor(Treasurer).

DatukHajiMohamed Iqbaldoesnothaveanypersonalinterest in any business arrangements involving theCompany.

Datuk Haji Mohamed Iqbal does not have any familyrelationshipwithanyDirectorand/ormajorshareholderofthe Company. He also does not have any shareholdingin theCompanyandhehashadnoconvictions foranyoffenceswithinthepast10years.

9

MITHRILBerhadChairman’s

Statement

REVIEW OF FINANCIAL PERFORMANCE

ThisyearcontinuedtobeachallengingyearfortheGroup.

Forthefinancialyearended30June2007,MithrilgeneratedrevenueofapproximatelyRM48millionascomparedtoapproximatelyRM65millionforthepreviousfinancialyear.Thisrepresentsadecreaseof26%ascomparedtothepreviousfinancialyear.Thedecreaseinrevenueismainlyduetothefollowing:

i) LowersalesvalueasaresultofthestrengtheningofRinggitMalaysiacurrencyagainsttheUSDollar,asthesalesof polyurethanproducts(“PU”)aredenominatedinUSD;ii) IncreaseincompetitionparticularlyfromChina;andiii) Temporarycessationofproductionandsalesofbricksascomparedtothepreviousyear.

TheGroupincurredahigherlossbeforetaxationofapproximatelyRM15millionascomparedtoapproximatelyRM10millionasreportedinpreviousfinancialyear.Theincreaseinlossbeforetaxationismainlyduetothefollowing:

i) Decreaseinrevenueascomparedtopreviousfinancialyear;ii) Risingrawmaterialcosts,inparticular,thechemicalsfortheproductionofthePU;iii) ImpairmentinvalueandlossondisposalofidlefactoryamountingtoapproximatelyRM2million;andiv) WriteoffofdamagedandobsoletestocksamountingtoapproximatelyRM3.8million.

REVIEW OF OPERATIONS

Mithrilcontinuestofocusonitscorebusinessactivitiesi.e.manufacturingandinvestmentproperties.Forthefinancialyearended30June2007,themanufacturingdivisioncontributedapproximatelyRM41millionor85%ofrevenueandtheinvestmentpropertiesdivisioncontributedapproximatelyRM7millionor15%ofrevenue.

ThemaincontributorofthemanufacturingdivisionisthemanufacturingandtradingofPUwhichoperatesunderitswholly-ownedsubsidiary,MithrilSaferaySdnBhd.ThePUbusinesscontinuestofacethechallengesofincreasingchemicalpricesasaresultofhighercrudeoilpricesandtheshortageofsupplyduringthefinancialyearunderreview.Tomitigatetheincreaseinpricesofrawmaterial,theGrouphasinitiatedthepriceadjustmenttotransferaportionofthecosttothecustomers.Apart fromthepriceadjustment,Mithril iscurrently intheprocessofrelocatingandcentralisingitsproductionfacilitiesunderonerooftofurtherimproveitsproductioncapacityandefficiency.

Asaresultofafirewhichdamagedasectionofthebricksplantinthepreviousfinancialyear,thebricksbusinesshastemporarilyceasedandtherefore,didnotcontributemateriallytotheGroupduringthefinancialyearunderreview.Theinvestmentpropertiesi.e.thetwo(2)officebuildings(MenaraMAA)inKotaKinabaluandinKuchingcontinuestogenerateastablesourceofrentalincomeandcashflowstotheGroup.

On behalf of the Board of Directors,

I am pleased to present to you the Annual Report

of Mithril Berhad (“Mithril”) for the financial

year ended 30 June 2007.

On behalf of the Board of Directors, l am pleased to present the Annual Report of Mithril Berhad (“Mithril”) and itssubsidiaries(“theGroup”)forthefinancialyearended30June2009.

REVIEW OF FINANCIAL PERFORMANCE

TheglobalfinancialcrisishasaffectedtheGroupseverely.Duringthesecondquarterofthisfinancialyear,weexperiencedasuddenanddrasticdrop indemandforourpolyurethane(“PU”)productsfromtheUnitedStatesandEurope.Asaresult,forthefinancialyearended30June2009,theGroup’srevenuedecreasedby34%fromRM38millionachievedinthepreviousfinancialyeartoRM25millionforthecurrentfinancialyear.

Nevertheless,despitethedropinrevenue,theGrouphasrecordedalowerlossforthefinancialyearofRM3.5millionascomparedtoRM17.2millionreportedinthepreviousfinancialyear.TheimprovementwasattributedtothecontinuouscostcontrolmeasurestakenbytheManagement,thedisposalofanoncontributingbusinessandthesecuringofawaiverofinterestandchargesonloansgrantedbyarelatedparty.

REVIEW OF OPERATIONS

OurGroup’srevenuecontinuestocomefromtheinvestmentpropertiesandthePUmanufacturingoperations.Forthefinancialyearended30June2009,therentalincomeandthesaleofPUproductscontributedRM6millionandRM19millionrespectively.Asannouncedon22May2009,weareexitingfromthebrickmanufacturingoperationsbysellingtheunproductiveassetsforRM13.6millionincash.Apartfromraisingthecashtoreduceourdebts,thedisposalalsoendsthecontinuousoperatinglossessufferedfromthebrickmanufacturingoperations.

CORPORATE EXERCISES

AspartoftheinitiativestoimprovetheperformanceandfinancialpositionoftheGroup,wehaveannouncedaseriesofcorporateexercisesduringthefinancialyear,asfollows:

1. Early Partial Redemption of Redeemable Convertible Secured Loan Stocks (“2004/2012 RCSLS”)

Following the Securities Commission’s approval obtained on 17 April 2009, our company has, on 5 June 2009, obtainedtheapprovalfromthe2004/2012RCSLSHolderstovarythetrustdeedanddeedsofassignmentgoverning the2004/2012RCSLS.Thevariationhasallowedustomakeanearlypartialredemptionofthe2004/2012RCSLSby utilisingthesinkingfund.Accordingly,on3July2009,wehaveredeemedRM12.98millionofthe2004/2012RCSLS and hence, reduced the nominal amount of the 2004/2012 RCSLS from RM59 million to RM46.02 million. This exercisehasimprovedourgearingratioaswellasreducedtheburdenoffutureinterestpayments.

2. Disposal of brick manufacturing operations

Ashighlightedabove,wehaveenteredintothesalesandpurchaseagreementstodisposeofthebrickmanufacturing operationsconsistingof13parcelsoffreeholdlands,factorybuildingsandtherelatedmachineriesandequipment. On3August2009,subsequenttothefinancialyearend,wehaveobtainedyourapprovaltoselltheoperations.The proceeds from thedisposalwill be substantially utilised to reduce theGroup’sdebts. This stepwill improve the Group’sgearingandreducetheburdenofinterestpaymentsfurther.

3. Par value reduction and share premium reduction

Togetherwiththedisposalofbrickmanufacturingoperations,wehavealsoobtainedyourapprovaltoreducethepar valueoftheauthorisedandissuedordinarysharesofMithrilfromRM1eachtoRM0.25andtoreducetheentireshare premium on the same date. This exercise allows us to eliminate RM217 million against the accumulated losses carriedforwardandhencerationaliseourbalancesheetthatisunrepresentedbytheavailableassets.

10

MITHRILBerhadChairman’s

Statement (continued)

FUTURE OUTLOOK

The Group expects the coming financial year to continue to be challenging. The Group is currently undertaking thefollowingkeyinitiativestoarrestthedecliningperformanceoftheGroup:

i) todisposeofnon-coreassetstofundtheworkingcapitaloftheGroup;ii) torelocateandcentralisetheproductionfacilitiesofthepolyurethanemanufacturingdivisiontofurtherimprovethe productioncapacityandefficiency;andiii) torestructuretheexistingloanstoreducethegearingandinterestexpense.

ACKNOWLEDGEMENT AND APPRECIATION

OnbehalfoftheBoardofDirectors,IwouldliketowelcomeDato’AbdulMajidbinMohamedandMrOnnKienHoe,theindependentnon-executivedirectorswhowereappointedon13December2006and12January2007respectively.

lwouldalsoliketotakethisopportunitytoexpressmygratitudetomyfellowdirectors,managementandallmembersoftheMithrilteamfortheirdedicatedeffortsandvaluablecontributionstoensurethecontinuedgrowthoftheGroup.

Finally, Iwould like to thankour valued shareholders, customersandbusinessassociates for the support, trust andconfidenceplaceduponus.

TUNKU YAHAYA @ YAHYA BIN TUNKU TAN SRI ABDULLAHEXECUTIVE CHAIRMAN

3. Par value reduction and share premium reduction (continued)

On29September2009,wehavelodgedwiththeRegistrarofCompaniesthesealedorderfromtheHighCourtof Malaya,therebyeffectingtheparvaluereductionandsharepremiumreductiononthatdate.

Inadditiontotheaboveexercises,wehavealsodisposedofalossmakingsubsidiary,MithrilFRPIndustriesSdn Bhd,whichwasinvolvedinthemanufacturingandtradingoffibrereinforcedplasticproductsandfabricationofluxury yachts.

Ialsowishtohighlightthatthefollowingloanstockshavematuredandbeenconvertedintoordinaryshares:

1. Irredeemable Cumulative Convertible Preference Shares (“ICCPS”)

On12March2009,pursuanttothematurityoftheICCPS,12.5millionofICCPShavebeenconvertedinto12.5million ofnewordinarysharesofRM1each.

2. Irredeemable Convertible Unsecured Loan Stocks (“ICULS”)

On7April2009,pursuanttothematurityoftheICULS,59.8millionofICULShavebeenconvertedinto59.8million ofnewordinarysharesofRM1each.

FollowingthematurityoftheaboveICCPSandICULS,thecompanyhasfullydischargedall its interestpayment obligationsoverthelastfiveyears.Theconversionalsomeansthattherewillbelessinterestbearingloanstocks tobeservicedinthecomingyear.

FUTURE OUTLOOK

Giventheweakeconomicoutlook,theManagementexpectsthatthecomingfinancialyearwillcontinuetobechallenging.However, theManagementwillcontinue to identifynewmarkets tocombat thedecrease indemand fromtheUnitedStatesandEuropeforPUproducts.

Inaddition,tostrengthentheGroup’sbalancesheetfurther,theManagementwillcontinuewithitsinitiativestoimproveitsmanufacturingoperationsandtodisposeofnon-performingassetstoreducetheGroup’sgearing;fundtheworkingcapitalrequirementsoftheGroupandmeetitsdebtsettlementobligations.

ACKNOWLEDGEMENT AND APPRECIATION

OnbehalfoftheBoardofDirectors,lwouldliketotakethisopportunitytoexpressmygratitudetomyfellowDirectors,Managementandallmembersof theMithril teamfor theirdedicatedeffortsandvaluablecontributions toensure thecontinuedgrowthoftheGroup.

Finally, Iwould like to thankourvaluedshareholders,customersandbusinessassociates for theirsupport, trustandconfidenceplaceduponus.

TUNKU YAHAYA @ YAHYA BIN TUNKU TAN SRI ABDULLAHEXECUTIVE CHAIRMAN

11

MITHRILBerhadSTATEMENT OF

CORPORATE GOVERNANCE

The Board of Directors (“Board”) of Mithril Berhad recognises that the practice of good corporate governance is afundamentalelementintheGroup’scontinuedgrowthandsuccess.TheBoardremainsfullycommittedtoensuringthatthehigheststandardsofcorporategovernancebasedonthePrinciplesandBestPracticessetoutintheMalaysianCodeonCorporateGovernance(“theCode”)areappliedandmaintainedthroughouttheGroupwiththeultimateobjectiveofsafeguardingandenhancingshareholdervalueaswellasthefinancialperformanceoftheGroup.

TheBoardispleasedtopresentthefollowingontheapplicationofprinciplesandcompliancewiththebestpracticesassetoutintheCodeforthefinancialyearended30June2009.

A. BOARD OF DIRECTORS

I The Board

The Group is led and controlled by an experienced Board, comprising members from diverse professional background, having expertise and experience, skills and knowledge in fields such as technical, financial, corporateandmanagementskills.TheBoard is responsible for theoverallmanagementof theGroupand in ensuringthattheGroupismanagedwithintegrity,transparencyandaccountability. TheBoardentails to reviewandadoptstrategicplans for theGroup,setdirection,overseeandmanage the conductofthebusiness.Keymatterssuchasapprovalofannualandquarterlyresults,acquisitionsanddisposals, capital expenditures, budgets, business engagements, material contracts, succession planning for top managementarereservedfortheBoard.

TheBoardisassistedbyvariousCommittees,whichoverseestheday-to-dayoperationsoftheGroupincluding reviewofmonthlyperformance,budgets,capitalinvestmentproposalsandmanyotheroperatingissuesarising outoftheordinarycourseofbusiness.

TheBoardhasdelegatedspecificresponsibilitiestootherBoardcommitteeswhichoperatewithinclearlydefined terms of reference. The committee of the Board includes the Audit Committee, Nomination Committee, RemunerationCommitteeandRiskManagementCommittee.Reportsofproceedingsandoutcomeofvarious CommitteemeetingsaresubmittedtotheBoard.

II Board Balance and Composition

TheBoardcurrentlyhassix(6)memberscomprisingthefollowing:

• 1ExecutiveChairman • 1ManagingDirector/ChiefExecutiveOfficer • 4IndependentNon-ExecutiveDirectors

PremisedontheaboveBoardbalance,theBoardhascompliedwithParagraph15.02oftheMainMarketListing RequirementsofBursaMalaysiaSecuritiesBerhad(“BursaSecurities”)tohaveatleastone-thirdoftheBoard comprisingIndependentDirectors.

TheprofilesoftheDirectorsaresetoutonpages6to8ofthisAnnualReport.

III Board Meetings

TheBoardmeetsatleastquarterlywithtimelynoticesofissuestobediscussed.Additionalmeetingsmaybe convenedonanad-hocbasisasandwhennecessary.Whereappropriate,decisionsarealsotakenbywayof Directors’CircularResolutions.

12


CORPORATE GOVERNANCE (continued)

A. BOARD OF DIRECTORS (continued)

III Board Meetings (coninued)

TheBoardmetatotalofseven(7)timesduringthefinancialyearended30June2009.

ThedetailsofeachDirector’sattendanceatmeetingsaresetoutbelow:

Directors Designation Number of % meetings attended TunkuYahaya@Yahyabin ExecutiveChairman 5/7 71 TunkuTanSriAbdullah

RazmanHafidzbinAbuZarim ManagingDirector/ChiefExecutiveOfficer 7/7 100

MrOnnKienHoe IndependentNon-ExecutiveDirector 6/7 86

Dato’AbdulMajidbinMohamed IndependentNon-ExecutiveDirector 7/7 100

*DatukCheeHongLeong IndependentNon-ExecutiveDirector 4/4 100

* DatukHajiMohamedIqbalbin IndependentNon-ExecutiveDirector 4/4 100 M.M.MohamedGaney

*AppointedasIndependentNon-ExecutiveDirectorson7November2008

AllDirectorshavecompliedwiththeminimum50%attendancerequirementatBoardMeetingsduringthefinancialyear stipulatedbytheMainMarketListingRequirementsofBursaSecurities.

IV Supply of Information

TheagendaforeveryBoardmeetingtogetherwithrelevantmanagementreports,proposalpapersandsupporting documentsare furnished toallDirectors for theirperusal inadvanceof theBoardmeetingdate,so that the DirectorshaveampletimetoreviewmatterstobedeliberatedattheBoardmeetingtoenablethemtodischarge theirduties.MinutesofeveryBoardmeetingarecirculatedtoalldirectorsfortheirperusalpriortoconfirmation oftheminutesatthefollowingBoardmeeting.

TheBoardreportcontainsrelevantinformationonthebusinessofthemeeting,whichmayincludeamongst others:-

• PerformanceoftheGroup • Operationalmatters • Businessdevelopmentissuesandmarketresponses • Capitalexpenditureproposals • Appointmentofseniorexecutives • AcquisitionandDisposalproposals

TheDirectorshavefullandtimelyaccesstoall informationwithintheCompany,whetherasafullBoardorin theirindividualcapacity,inthefurtheranceoftheirduties.TheCompanySecretaryisresponsibleforensuringthat Boardmeetingproceduresarefollowedandthatapplicablerulesandregulationsarecompliedwith.TheDirectors mayalsoseekindependentprofessionaladvice,attheCompany’sexpenses,ifrequired.

13




V Appointments to the Board

The Nomination Committee

TheBoardhasestablishedaNominationCommitteeon10December2003,whichhastheprimaryresponsibility to assess the suitability of proposed Board members and to recommend such appointments to the Board. Theobjectiveoftheestablishmentofthiscommitteeistoensureindependentassessmentofappointmentstothe Board.TheCommittee isalso responsible forannualassessmentof theskillsandexperiencepossessedby Boardmembers toensureeffectivenessof theBoard, thecommitteeof theBoardand thecontributionand performanceofeachindividualDirectorincludingtheExecutiveChairmanandtheMD/CEO.

TheNominationCommitteehasthreememberscomprisingtwoIndependentNon-ExecutiveDirectorsandone ExecutiveDirector.Duringthefinancialyearended30June2009,three(3)meetingswereheld.

ThemembersoftheNominationCommitteeare:-

i. Dato’AbdulMajidbinMohamed(Chairman) ii. MrOnnKienHoe iii. TunkuYahaya@YahyabinTunkuTanSriAbdullah

VI Appointment and Re-election

AppointmentstotheBoardaremadebasedontherecommendationoftheNominationCommittee.Inaccordance withtheCompany’sArticlesofAssociation,atleastone-thirdoftheDirectorsarerequiredtoretirebyrotationat each Annual General meeting and can offer themselves for re-election at the Annual General Meeting. The Directorsshallalsoretirefromofficeatleastonceinthreeyearsbutshallbeeligibleforre-election.

InaccordancewithSection129(6)of theCompaniesAct,1965,Directorswhoseageareseventyyearsand abovearerequiredtosubmitthemselvesforre-appointmentbyshareholdersannually.

VII Director’s Training

AllDirectorsareencouragedtoattendtalks,trainingprogrammesandseminarstoupdatethemselvesonnew developments in thebusinessenvironmentduring the financial year ended30June2009.TheDirectorswill continuetoundertakeotherrelevantprogrammestofurtherenhancetheirskillsandknowledge.

DetailsoftrainingattendedbyDirectorsduringtheyearareasfollows:

Name of Directors Programmes/Forums

TunkuYahaya@YahyabinTunkuTanSriAbdullah • GlobalMacroeconomics

EnRazmanHafidzbinAbuZarim • HighLevelForumProgrammebyBursaSecurities • GlobalMacroeconomics • CorporateGovernanceGuide –TowardsBoardroomExcellence

Dato’AbdulMajidbinMohamed • GlobalMacroeconomics

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MITHRILBerhad


VII Director’s Training (continued)

Name of Directors Programmes/Forums

MrOnnKienHoe • FieldAudit&TaxInvestigation • MIT Workshop on Introduction to Tax Principles andProcedures • MIT Workshop on Dividends & Single Tier Tax System • PersidanganCukaiMalaysia2008 • 2009BudgetTalk

DatukCheeHongLeong • InvestorRelationship–ANecessity,NotAChoice • HighLevelForumProgrammebyBursaSecurities • CorporateGovernance

DatukHajiMohamedIqbalbinM.M.MohamedGaney • HighLevelForumProgrammebyBursaSecurities • GlobalMacroeconomics

B. DIRECTORS’ REMUNERATION

I The Remuneration Committee

TheRemunerationCommitteewasestablishedbytheBoardon10 December 2003.TheRemuneration Committee reviewsandrecommends to theBoard the remunerationpackageof theExecutiveDirectorsand SeniorManagementoftheGroupwiththemainaimofprovidingthelevelofremunerationsufficienttoattractand retainkeypersonnelneededtoruntheGroupsuccessfully.

TheRemunerationCommitteehas threememberscomprising two IndependentNon-ExecutiveDirectorsand oneExecutiveDirector.Duringthefinancialyearended30June2009,one(1)meetingwasheld.

ThemembersoftheRemunerationCommitteeare:-

i. Dato’AbdulMajidbinMohamed(Chairman) ii. MrOnnKienHoe iii. TunkuYahaya@YahyabinTunkuTanSriAbdullah

II Procedure

The remunerationpackagesofExecutiveDirectorsare reviewedby theentireBoard,with thepresenceofa majorityofNon-ExecutiveDirectors.TheExecutiveDirectorconcernedshallnotparticipateinthedeliberations andshallvacatethemeetingroomduringdeliberationsofhisremunerationpackage.

The fees of directors, including Non-Executive Directors, are recommended and endorsed by the Board for approvalbytheshareholdersoftheCompanyatitsAGM.

STATEMENT OF CORPORATE GOVERNANCE (continued)

15



B. DIRECTORS’ REMUNERATION (continued)

III Disclosure

AsummaryoftheremunerationoftheDirectorsforthefinancialyeardistinguishedbetweenExecutiveandNon- ExecutiveDirectorsinaggregate,withcategorisationintoappropriatecomponentsandnumberofDirectorsare setoutbelow:

Executive Non-Executive Directors Directors Total

BasicSalaries 552,120 - 552,120

Bonus 43,000 - 43,000

Fees - 123,097 123,097

MeetingAllowance - 42,500 42,500

Benefits-in-kind 24,300 - 24,300

EPF 71,890 - 71,890

TOTAL (RM) 691,310 165,597 856,907

Range of Directors’ Number of Number of Remuneration Executive Directors Non-Executive Directors Total 0–RM50,000 - 7 7

RM200,001–RM250,000 1 - 1

RM450,001–RM500,000 1 - 1

C. SHAREHOLDERS AND INVESTORS

I Dialogue between Companies and Investors

The Board recognises the importance of communication and proper dissemination of information to its shareholdersandinvestors.MajorcorporatedevelopmentsandhappeningsintheCompanyhavealwaysbeen promptly announced to all shareholders in line with Bursa Malaysia Securities Berhad’s (“Bursa Securities”) objectivesofensuringtransparencyandgoodcorporategovernancepractice.

ThefinancialperformanceoftheGroupandotherrelevantinformationarepromptlydisseminatedtoshareholders andinvestorsviaannouncementofitsquarterlyperformance,annualreportandcorporateannouncementsto BursaSecurities.DuringtheAnnualGeneralMeeting,shareholdersaregivenabriefingontheperformanceand majoractivitiesoftheGroupduringthefinancialyearunderreviewwherebytheshareholdershaveopportunityto enquireandcommentontheCompany’sperformanceandoperations.

II Annual General Meeting (“AGM”)

The AGM provides an opportunity for the shareholders to seek and clarify any issues and to have a better understandingoftheGroup’sperformance.Shareholdersareencouragedtomeetandcommunicatewiththe BoardattheAGMandtovoteonallresolutions.Seniormanagementandtheexternalauditorsarealsoavailable torespondtoshareholders’queriesduringtheAGM.

TheGroupalsomaintainsacorporatewebsite(www.mithril.com.my)forpublicaccessoftheGroup’sinformation.

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MITHRILBerhad

D. ACCOUNTABILITY AND AUDIT

Audit Committee

The Company has in place an Audit Committee which comprises of four (4) Independent Directors. The Audit CommitteeholdsquarterlymeetingstoreviewmattersincludingtheGroup’sfinancialreporting,theauditplansfor theyearaswellastodeliberatethefindingsoftheinternalandexternalauditors.

Withallthemembersbeingindependent,thecompositionoftheAuditCommitteeisfullycompliantwiththeCode andtheMainMarketListingRequirementsofBursaSecurities,whichrequirethemajorityofdirectorsontheAudit Committeetobeindependentandthatone(1)memberwhohasthefinancialbackgroundthatmeetstherequirement setoutunderparagraph7.0ofPracticeNote13.

Fulldetailsof thecomposition,complete termsof referenceandtheactivitiesof theAuditCommitteeduring the financialyeararesetoutintheAuditCommitteeReportincludedinthisAnnualReport.

I Financial Reporting

TheDirectorsareresponsibletopresentafairassessmentoftheGroup’sfinancialperformanceandbusiness prospects,primarilythroughitsannualauditedfinancialstatements,quarterlyreportstoBursaSecuritiesand AnnualReporttotheshareholders.TheBoardisassistedbytheAuditCommitteetoscrutinisefinancialreporting for disclosure to ensure accuracy, adequacy and completeness and to oversee the Group’s interest audit functions relating to theassuranceof theadequacyand integrityof internalcontrolsandmonitoringof risks affectingtheGroup’soperations.

II Internal Control

TheBoardhas theoverall responsibilityofmaintainingasystemof internal control thatprovides reasonable assuranceofeffectiveandefficientoperationsandcompliancewithlawsandregulationsaswellaswithinternal procedures and guidelines. The effectiveness of the system of internal control of the Group was reviewed periodicallybytheAuditCommittee.Thereviewcoversthefinancialoperationalaswellascompliancecontrols.

TheGroup’sStatementofInternalControlissetoutonpage22ofthisAnnualReport. III Risk Management TheBoardhasestablishedaRiskManagementCommittee(“RMC”)on10December2003.TheRiskManagement CommitteeistaskedwiththeresponsibilitytooverseetheriskmanagementactivitiesoftheGroup,approving appropriateriskmanagementproceduresandmeasurementmethodologiesacrosstheorganisationaswellas identificationandmanagementofstrategicbusinessrisksoftheGroup.

TheRiskManagementCommitteehasthree(3)memberscomprisingtwo(2)IndependentNon-ExecutiveDirectors andone(1)ExecutiveDirector.Duringthefinancialyearended30June2009,three(3)meetingswereheld.

ThemembersoftheRiskManagementCommitteeare:-

i. MrOnnKienHoe(Chariman) ii. DatoAbdulMajidbinMohamed iii. TunkuYahaya@YahyabinTunkuTanSriAbdullah

TheRMCistomeetregularly,atleastonceeveryquarterinafinancialyeartoreviewriskmanagementreportof theCompanyanditssubsidiarycompanies.TheCompanySecretaryistheSecretarytotheRiskManagement Committee.


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MITHRILBerhad

D. ACCOUNTABILITY AND AUDIT (continued)

IV Relationship with External Auditors

TheappointmentofExternalAuditorsisrecommendedbytheCommitteewhichdeterminestheremunerationofthe ExternalAuditors.TheExternalAuditorsmeetwiththeCommitteeto:

• presentthescopeoftheauditbeforethecommencementofaudit;and • reviewtheresultsoftheauditaswellasthemanagementletteraftertheconclusionoftheaudit.

ThroughtheAuditCommitteeoftheBoard,theGrouphasalsoestablishedtransparentandappropriaterelationship withtheGroup’sauditors,bothinternalandexternal.TheAuditCommitteealsomeetstheExternalAuditorsatleast twiceayearwithoutthepresenceofthemanagement.

E. DIRECTORS’ RESPONSIBILITY STATEMENT IN RESPECT OF FINANCIAL STATEMENT

TheDirectorsarerequiredtopreparethefinancialstatementswhichgiveatrueandfairviewofthestateofaffairsof the Company and of the Group at the end of each financial year end of the results and cashflow for that year. ThefinancialstatementsmustbepreparedincompliancewiththeCompaniesAct,1965andwithapplicableapproved accountingstandards.

TheDirectorsconsideredthefollowinginpreparingthefinancialstatements:-

• selectsuitableaccountingpoliciesandapplythemconsistently; • makejudgementsandestimatesthatarereasonableandprudent;and • statewhetherapplicableapprovedaccountingstandardshavebeenfollowed.

TheDirectorsareoftheopinionthatthefinancialstatementscomplywiththeaboverequirements.TheDirectorsare alsoresponsibleforensuringthemaintenanceofadequateaccountingrecordstoenablethemtoensurethatthe financialstatementscomplywiththerequirementsoftheCompaniesAct,1965.

COMPLIANCE STATEMENT

TheBoardissatisfiedthattheCompanyhas,inallmaterialaspects,compliedwiththebestpracticesoftheCodeforthefinancialyearended30June2009.ThisstatementwasapprovedbytheBoardofDirectorson21October2009.

ADDITIONAL COMPLIANCE INFORMATION

1. Share Buyback

Duringthefinancialyearended30June2009,therewerenosharebuybacksbytheCompany.

2. American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) Programmes

Duringthefinancialyearended30June2009,thecompanydidnotsponsoranyADRorGDRprogrammes.

3. Imposition of Sanctions/Penalties

Therewerenosanctionsand/orpenaltiesimposedontheCompanyanditssubsidiaries,DirectorsorManagement bytherelevantregulatorybodies.

4. Non-Audit Fees

Theamountofnon-auditfeespaidtotheGroup’sExternalAuditorsforthefinancialyearended30June2009was RM5,000.


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MITHRILBerhad

ADDITIONAL COMPLIANCE INFORMATION (continued)

5. Profit Estimate, Forecast and Projection

TheCompanydidnotreleaseanyprofitestimates,forecastorprojectionsforthefinancialyearended30June2009.

6. Profit Guarantees

Duringthefinancialyearended30June2009,therewerenoprofitguaranteesgivenbytheCompany.

7. Material Contract Involving Directors and Major Shareholders

Thereisnomaterialcontract(notbeingcontractenteredintointheordinarycourseofbusiness)oftheCompanyand itssubsidiaries,involvingdirectors’andmajorshareholders’interests,stillsubsistingattheendofthefinancialyear.

8. Contracts Relating to Loans

TherewerenomaterialcontractsrelatingtoloansbytheCompanyinvolvingdirectorsandmajorshareholders.

9. Utilisation of proceeds

TheCompanydidnotimplementanyfundraisingexerciseduringthefinancialyearunderreview.

10. Options, warrants or convertible securities

On2March2009,theCompanyannouncedthematuritydateoftheICULS2004/2009andtheexpiryofWarrantsB. TheICULS2004/2009andWarrantsBweresubsequentlyremovedandceasetobelistedontheOfficialListofBursa Securitieson6April2009.

11. Employees Share Option Scheme (“ESOS”)

Duringthefinancialyearended30June2009,therewasnoexerciseofESOS.TheperiodfortheCompany’sESOS offivecalendaryearscommencingon4March2004wasnotextendedandallowedtoexpireon3March2009in accordancetotheESOSBy-LawsoftheCompany.

12. Revaluation of Landed Properties

Therewasrevaluationoflandedpropertiesduringthefinancialyear.Thedetailsoftherevaluationhavebeendisclosed inthefinancialstatements.


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MITHRILBerhad

TheAuditCommitteewasestablishedon10December2003toactascommitteeoftheBoardofDirectors.TheprincipalfunctionsofthisCommitteearetoassisttheBoardintheeffectivedischargeofitsfiduciaryresponsibilitiesinrelationtocorporategovernance,ensuretimelyandaccuratefinancialreportingaswellasthedevelopmentofinternalcontrols.

Members

MembersoftheAuditCommitteeduringthefinancialyearended30June2009areasfollows:

Members Directorship

MrOnnKienHoe(Chairman) IndependentNon-ExecutiveDirector

Dato’AbdulMajidbinMohamed IndependentNon-ExecutiveDirector

* DatukCheeHongLeong IndependentNon-ExecutiveDirector

* DatukHajiMohamedIqbalbinM.M. MohamedGaney IndependentNon-ExecutiveDirector

*AppointedasAuditCommitteememberseffectivefrom22May2009.

Meetings

Duringthefinancialperiodended30June2009,theAuditCommitteeheldatotalof5meetingsanddetailsareasfollows:

Members Directorship No. of Meetings attended

MrOnnKienHoe(Chairman) IndependentNon-ExecutiveDirector 5/5

Dato’AbdulMajidbinMohamed IndependentNon-ExecutiveDirector 5/5

* DatukCheeHongLeong IndependentNon-ExecutiveDirector 1/1

* DatukHajiMohamedIqbalbin IndependentNon-ExecutiveDirector 1/1 M.M.MohamedGaney

RepresentativesoftheExternalAuditorsaswellasInternalAuditorsalsoattendedthemeetingsuponinvitation.

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009

TheAuditCommitteehascarriedoutthefollowingdutiesduringthefinancialyearunderreviewinaccordancewithitstermsofreference:-

• Reviewedandsoughtmanagementexplanationsandrecommendedactionsonthequarterlyandannualfinancial resultsandperformanceoftheCompanyandtheGrouppriortosubmissiontotheBoardforapproval;

• ReviewedandreceivedtheInternalAuditReportfromtheGroupInternalAuditorofMAACorporateAdvisorySdnBhd (“MAACA”)forMithrilBerhadandMithrilSaferaySdnBhd;

• ReviewedanddiscussedtheyearlystatutoryaccountsoftheGroupwiththeExternalAuditorsandManagementprior torecommendingtotheBoardforapproval;

• ConductedprivatediscussionswiththeExternalAuditorswithoutthepresenceoftheManagement;

• ReviewedanddiscussedwiththeExternalAuditorsandtheInternalAuditorsrespectively,thenatureandscopeof theirauditbeforereportingthesametotheBoardofDirectors;

• Reviewed the disclosure statements on compliance of Malaysian Code on Corporate Governance, Board’s responsibility on the annual audited financial statements and the state of internal controls and other relevant documentsforpublicationintheCompany’sAnnualReport;and

AUDIT COMMITTEE REPORT

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MITHRILBerhad

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009 (continued)

• ReportedtotheBoardonitsactivitiesandsignificantfindingsandresults.

SUMMARY OF ACTIVITIES OF THE INTERNAL AUDIT DEPARTMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009

ThemajoractivitiesconductedbyInternalAuditDepartmentofMAACAfortheyearended30June2009fortheGrouparesummarisedasfollows:-

• FormulatedtheInternalAuditplan,strategyandscopeofwork;

• Evaluatedandassessedtheinternalcontrolsandefficiencyofprocesses,andprovidedappropriaterecommendations tomanagementtoaddresstheissueshighlightedintheinternalauditreports;

• Soughtmanagementexplanationsandactionplansonissueshighlightedintheinternalauditreportsandconducted subsequentfollow-upreviews;and

• Conductvisitstotheprojectsitesandprovidedappropriaterecommendations.

TERMS OF REFERENCE OF THE AUDIT COMMITTEE

1. COMPOSITION

TheauditcommitteeshallbeappointedbytheBoardofDirectorsandshallconsistofatleastthree(3)Directors.All membersoftheAuditCommitteeareIndependentNon-ExecutiveDirectors.

AllmembersoftheAuditCommitteeincludingtheChairmanshallholdofficeonlyaslongastheyserveasDirectors oftheCompany.ThemembersoftheAuditCommitteeshallelectaChairmanfromamongsttheirmemberswhoisnot anExecutiveDirectororemployeeoftheCompany.

COMMITTEE MEMBERS

a) MrOnnKienHoe(Chairman) b) Dato’AbdulMajidbinMohamed c) DatukCheeHongLeong d) DatukHajiMohamedIqbalbinM.M.MohamedGaney

2. AUTHORITY

TheCommitteeisauthorisedbytheBoardto:

• Investigateanyactivitywithinitstermsofreference;

• Obtainresources,whicharereasonablyrequiredtoenableperformanceofitsduties;

• Havefreeaccesstoallinformationanddocumentsitrequiresforthepurposeofdischargingitsfunctionsand responsibilities;

• MaintaindirectcommunicationchannelswiththeExternalAuditorsandtheinternalauditdepartmentofMAACA;

• Procuretheserviceofexternalindependentprofessionaladvisorswhendeemednecessary;

• ConvenemeetingswiththeExternalAuditors,theInternalAuditorsorbothwithouttheattendanceofManagement, otherDirectorsandemployees,wheneverdeemednecessary;

• Beabletoinviteoutsiderswithrelevantexperiencetoattendmeetingifnecessary;and

• Beable tomakeprompt reports toBursaSecuritieswhen theAuditCommittee isof theview thatamatter reportedbyittotheBoardofDirectorshasnotbeensatisfactorilyresolvedresultinginabreachofMainMarket ListingRequirements.

AUDIT COMMITTEE REPORT (continued)

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MITHRILBerhad

3. MEETINGS

TheAuditCommitteeshallmeetatleastfour(4)timesayear.AdditionalmeetingsmaybecalledattheChairman’s discretion. The Committee has the discretion to invite relevant personnel including External Auditors and other advisors,ifdeemednecessary.Thequorumforeachmeetingshallconsistofamajorityofauditcommitteemembers presentwhoareIndependentDirectors.

MinutesofeachmeetingshallbekeptanddistributedtoeachmemberoftheCommitteeandalsomembersofthe Board.TheCommitteeChairmanshallreporttotheBoardonactivitiesoftheCommittee.

4 SECRETARY

The Company Secretary shall be the secretary of the Committee and be responsible for drawing up agendas inconsultationwiththeChairman.Theagenda,togetherwiththerelevantdocumentationshallbecirculatedtothe Committeemembersincompliancewiththeregulatoryrequirements.TheSecretaryshallberesponsibleforrecording attendance, keeping minutes of meeting and circulating minutes of meetings to the Committee members and membersoftheBoardofDirectors.

5. DUTIES AND RESPONSIBILITIES

ThedutiesandresponsibilitiesoftheCommitteeareto:

• Review all financial information for publication, including quarterly and annual financial statements prior to submissiontotheBoardofDirectors.Thereviewshallfocuson:

> Changesinaccountingpoliciesandpractices; > Thegoingconcernassumption; > SignificantauditadjustmentsfromtheExternalAuditors; > Compliancewithaccountingstandards;and > CompliancewithBursaSecuritiesandotherregulatoryandlegalrequirements

• DiscusswiththeExternalAuditors,thenature,scopeandapproachoftheauditofthefinancialstatements;

• DiscusswithExternalAuditorsonareasofconcernarisingfromtheauditofthefinancialstatements;

• Assesstheadequacyandeffectivenessoftheaccountingproceduresandtheinternalcontrolsystemsofthe CompanybyreviewingmanagementlettersfromExternalAuditors;

• Discussproblemsandreservationsarisingfromtheinterimandfinalauditsandanymatterstheauditorsmay wishtodiscussintheabsenceoftheManagement,wherenecessary;

• Reviewtheinternalauditplanandprocesses,considermajorfindingsofinternalauditandrecommendactions andstepstobetakenbymanagementinresponsetothefindings;

• Reviewtherelevanceandadequacyofthescope,functions,competencyandresourcesofinternalauditandthe necessaryauthoritytocarryoutthefunction;

• Reviewanyappraisaloftheperformanceandcompensationofstaffmembers;

• Approveanyappointmentorterminationofseniorstaffmembers;

• ReviewrelatedpartytransactionsandconflictofinterestsituationsthatmayarisewithintheCompany;and

• UndertakesuchotherresponsibilitiesasmaybeagreedtobytheCommitteeandtheBoard.

AUDIT COMMITTEE REPORT (continued)

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MITHRILBerhad

Introduction

TheBoardofDirectors(“Board”)recognisestheimportanceofmaintainingasoundsystemofinternalcontroltosafeguardshareholdersinvestmentsandtheGroup’sassets.Hence,theBoardispleasedtopresenttheStatementofInternalControlof theGrouppursuant toparagraph15.26 (b)of theMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhadandinaccordancewiththeStatementonInternalControl:GuidanceforDirectorsofPublicListedCompanies.

Board Responsibilities

TheBoardacknowledgesitsresponsibilitiesformaintainingsoundinternalcontrolsystemstosafeguardshareholdersinvestmentsandtheGroup’sassetsandforthecontinuingreviewofitsadequacyandintegrityofthesesystems.

Forthefinancialyearunderreview,theGrouphadinplaceasystemofinternalcontrolandhadestablishedanon-goingprocessofreviewing,identifying,evaluatingandmanagingsignificantrisksfacedbytheGroup.

TheroleofManagementistoimplementtheBoard’spolicies,proceduresandguidelinesonriskandcontrolbyidentifyingandevaluatingtherisksfacedanddesign,operateandmonitorasuitablesystemofinternalcontrolstomanagetheserisks.TheBoardhasextendedtheresponsibilitiesoftheRiskManagementCommittee(“RMC”)to includetheroleofmonitoringall internalcontrolsonbehalfof theBoard, including identifyingriskareasandcommunicatetotheBoardcriticalriskareasfacedbytheGroup.BesidestheRMC,theAuditCommitteeisalsoassignedthetaskofreviewingandassessingtheinternalauditreportspresentedattheAuditCommitteeMeetingsonaquarterlybasisandtoensurethattheinternalauditorshaveperformedtheirdutieswithimpartiality,proficiencyanddueprofessionalcare.

TheBoardconfirmsthattheriskmanagementprocessisanongoingprocesstoidentify,evaluate,andmanagesignificantriskstoeffectivelymitigatetherisksthatmayimpedetheachievementoftheGroup’sbusinessandcorporateobjectives.TheBoardreviewstheprocessonaregularbasistoensurepropermanagementofrisksandthatmeasuresaretakentomitigateanyweaknessesinthecontrolenvironment.

System of Internal Controls

TheBoard recognises that inorder toachieveasoundsystemof internalcontrol,aconduciveenvironmentmustbeestablished.TheBoardisfullycommittedtothemaintenanceofsuchacontrolenvironmentwithintheGroupandindischargingtheirresponsibilities,enhancedthefollowingkeysystemofinternalcontrolwithintheGrouptogovernthemannerinwhichtheGroupanditsemployeesconductthemselves.

Thekeyelementofinternalcontrolscomprisesthefollowing:-

• TheBoardmeetsregularlytomonitorandreviewtheoverallperformanceoftheGroup,toconsiderthefindingsand recommendationsofthecommitteesandtoconsidertheapprovedmeasurestobetakenandchangesinpoliciesand proceduresnecessarytoaddressrisksandtoenhancethesystemofinternalcontrol;

• TheAuditCommitteecomprisesallnon-executiveandindependentdirectors,whoholdregularmeetingsthroughout the financial year. Audit Committee members are briefed and updated on the matters of corporate governance practiceandlegalregulatorymatters.Thecurrentcompositionofmemberswithatleastonewhoisamemberof anaccountingassociationorbody,bringswiththemawidevarietyofexperiencefromdifferentfieldsandbackgrounds. Theyhavefullandunimpededaccesstoboththeinternalaswellasexternalauditorsduringthefinancialyear.They alsomeetwiththeexternalauditorswithoutthepresenceoftheManagementtwiceayear;

• InternalAuditorscontinuetoindependentlyassuretheBoard,throughtheAuditCommittee,thattheinternalcontrol systemfunctionsasintended.Theirworkpracticeasgovernedbytheirauditplanisderivedonariskbasedapproach andtheirfindingshighlightedtotheAuditCommittee.Theirannualauditplansarepresentedandapprovedbythe AuditCommitteeannuallybeforethecommencementofthefollowingfinancialyearandupdatesaregivenasand whenthereareanychanges;

STATEMENT OF INTERNAL CONTROL

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MITHRILBerhad

System of Internal Control (continued)

• TheLimitofAuthoritydeterminestherespectivelevelsofauthoritywhicharedelegatedtotherespectivelevelsof stafftoenablecontroloftheGroup’scommitmentofbothcapitalandoperationalexpenditure.Theauthoritylimits aresubjecttoperiodicreviewthroughoutthefinancialyearastotheirimplementationandforthecontinuingsuitability; and

• Policiesandproceduresforkeybusinessprocessesareformalisedanddocumentedforeachsignificantoperating unit.

TheBoardengagedtheservicesofMAACorporateAdvisorySdnBhd(“MAACA”)tocarryouttheinternalauditfunction.TheprincipledutyandresponsibilityofMAACAistoexamineandevaluateallmajorphasesofoperationsoftheGroupandtoassisttheBoardintheeffectivedischargeoftheBoard’sresponsibilities.Thecostincurredfortheinternalauditfunctioninrespectofthefinancialyearended30June2009wasRM53,475.00.

TheBoardofDirectorsreviewedtheadequacyandintegrityofthesystemofinternalcontrolsthatprovidereasonableassurancetotheCompanythattheshareholdersinterestsandtheGroup’sassetsaresafeguarded.

TheManagementcontinuestotakemeasurestostrengthenthecontrolsenvironmentandduringthecurrentfinancialyear,therewerenomajorweaknessesininternalcontrolswhichresultedinmateriallosses,contingenciesoruncertaintiesthatwouldrequiredisclosureintheCompany’sAnnualReport.

Financial Reporting

Inpresentingtheannualfinancialstatementsandquarterlyannouncementsof itsresults,theBoardofDirectorshaveensured that the financial statements present a balanced and understandable assessment of the Company and theGroup’spositionandprospects.

STATEMENT OF INTERNAL CONTROL (continued)

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MITHRILBerhadCORPORATE

SOCIAL RESPONSIBILITY

The Group recognises its social obligation to the society and is striving for a balanced approach in fulfilling its keybusinessobjectivesandtheexpectationsofstakeholders.Inviewofthis,theGroupcommenceditsinitiativesintheareasofstaffwelfareandenvironmentcare.

The Group ensures that all employees are reasonably covered for in any unforeseen mishaps through providing theemployeeswithvarious levelsof insurancecoverageonmedicalandhospitalisationbenefitsaswellas term lifeandpersonalaccident insurance.All foreignworkersareprovidedwithaccommodationwithallbasicamenitiestoensurecomfortandhygiene.TheGrouphasalsoestablishedtheOccupationalSafetyandHealthCommitteetodeveloppoliciesandguidelinestoprovideandmaintainasafeandhealthyworkplaceforitsemployees,contractorsandvisitors.Regularmeetingsandinspectionsarecarriedouttocontinuouslymonitorthesafetyandhygieneconditionsoftheworkplace.

The Group also acknowledges the responsibility to care for the environment. All industrial wastes from the Group’soperationsareproperlyhandledaccordingtopresetproceduresandregulationsandaredisposedofsafelytolicensedpartiesauthorisedbytherelevantenvironmentaldepartment.TheGroupensuresstrictcompliancewithallenvironmentalregulationsandlawsatalltimes.

Duringthefinancialyear,theGroupalsomakescontributiontoorphanagehomesandparticipatedinthecharityeventsorganisedbyTheBudimasCharitableFoundation(“Budimas”).

TheGroupreckonsthattheexistingeffortstakenaremerelyitsminimumsocialobligation.Accordingly,theGroupwillcontinuetoimprovetheareaofsocialcoverageinthefuture. DIRECTORS’ REPORT 26

STATEMENT BY DIRECTORS 30

STATUTORY DECLARATION 30

INDEPENDENT AUDITORS’ REPORT 31

INCOME STATEMENTS 33

BALANCE SHEETS 34

STATEMENTS OF CHANGES IN EQUITY 36

CASH FLOW STATEMENTS 39

NOTES TO THE FINANCIAL STATEMENTS 42

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