AmcorpGroup Berhad

AMMB Holdings Berhad Group, or more commonly referred to as the AmBank Group, contributed a total of RM180.3 million to the Group's share of results of associates for FY2006. The completion of the corporate reorganization programme embarked on in FY2005 proved to be a rewarding step for AmBank Group. The streamlined operations have enabled AmBank Group to gain meaningful market share in all areas of its business activities by offering a comprehensive range of innovative products and quality service, as well as increasing the scale of its already strong franchise in the country.

AmBank Group's pre-tax profit rose 44.2% to RM710.1 million while net profit after tax and minority interests increased 79.2% to RM365.5 million. The balance sheet of AmBank Group has also strengthened as a result of the transformation of its finance company into a full-fledged commercial bank in June 2005 with a nationwide network of 170 branches and 233 ATMs. Total assets increased 16.3% to RM72.3 billion, firmly consolidating AmBank Group's position as the 5th largest banking group in the country. Total customer deposits mobilised rose 13% to RM38.9 billion whilst net loans and advances expanded 11.9% to RM44.9 billion, the first time AmBank Group has achieved double-digit loans growth since the Asian financial crisis.

In addition to the balance sheet growth, AmBank Group's net non-performing loans (NPL) ratio, based on a three-month classification, also registered a sharp decline to 9.6% as at end-March 2006, compared with 13.8% a year ago, mainly due to the various intensified recovery efforts undertaken by AmBank Group.

RCE Capital Berhad (RCE) , another associate of the Group, had another successful year marked by double-digit growth in both top-line and bottom-line figures. RCE's revenue rose 29% to RM57.5 million, while profit after tax increased 31% to RM22.3 million.

RCE continued to focus on growing its business relationships with the various co-operatives to expand its consumer credit business. As a result, its co-operative business partners now have more than 50 distribution channels throughout the country, compared with approximately 40 channels in the previous year.

Besides organic growth, RCE had also undertaken several corporate proposals to further strengthen its position. A total of 156,309,410 bonus shares were issued under its 1 for 3 bonus issue exercise and, after the paid-up capital enlargement, RCE had, on 23 August 2006, successfully transferred its listing status from the Second Board to the Main Board of Bursa Malaysia Securities Berhad. Going forward, RCE will continue to expand its distribution and marketing network while remaining focussed on improving its productivity and efficiency, strengthening its credit risk management and leveraging on its balance sheet strength to reduce the overall cost of funding.

Our IT unit, MCM Technologies Berhad (MCMTech) turned around and recorded a net profit of RM0.9 million compared with a net loss of RM1.4 million in FY2005. Apart from priming two major contracts for managed services under the AmBank Group, MCMTech Group was also appointed as one of Telekom Malaysia Berhad's data sales agent for its various telecommunication products including fixed line and wireless services. During the year, MCMTech Group was also appointed as an "Advanced Certified Partner" of Huawei-3Com Co. Ltd., an international organisation specialising in providing a full range of networking products and tailored solutions including routers, switches and network security systems. These new business developments are expected to contribute positively to MCMTech Group's future earnings.

Following the merger of ECM Libra Berhad (ECMLibra) with Avenue Capital Resources Berhad to form a new investment bank known as ECM Libra Avenue Berhad (ECM), Amcorp's stake in the new ECM entity had been diluted to 4.2% from 8.1%. To offset the effects of this dilution, Amcorp subsequently acquired an additional 3.2% stake in ECM at RM0.65 per share. As a result, Amcorp now has a substantial shareholding of 7.4% in ECM.

With regard to Amcorp's investment in AMDB Berhad (AMDB), several initiatives had been undertaken to improve its financial position. These include the disposal of investments and assets and the implementation of programmes for the rationalisation and re-engineering of its non-profitable operating units. Going forward, AMDB will stay focussed on its long-term strategy for growth and the active pursuit of new business ventures that are synergistic to its existing business units and activities. With effect from April 2006, the Group has also adopted Financial Reporting Standard (FRS) 127 on Consolidated and Separate Financial Statements by consolidating the results and balance sheet of AMDB as a subsidiary of Amcorp in view of the Group's 75.9 million holdings in AMDB's Irredeemable Convertible Unsecured Loan Stock (ICULS). The ICULS, when converted, will increase the Group's stake in AMDB from 44.2% to 53%.

As a result of the lower turnover from our property division for FY2006, the Group's revenue decreased 35.6% to RM85.3 million. The Group also reported a loss before tax of RM9.9 million for FY2006 compared with a profit before tax of RM59.2 million in the previous year. The significant decline was mainly due to the allowance for diminution in value of long-term and short-term investments of RM54.1 million, higher finance costs and the Group's share of losses in AMDB. For the current financial year, our share of losses in AMDB was RM77.8 million (2005: share of profit of RM0.4 million) arising from allowance in value impairment and write-down in respect of assets and inventories from their Property and Travel & Leisure Divisions. This impairment in assets by AMDB was a one-off exercise made after assessing available information for indication of impairment and is in compliance with Financial Reporting Standards.

As you may be aware, I am offering to acquire Amcorp shares at a price of RM1.40 per share, to take Amcorp private. The offer price represents a premium of 35% on the 5-day weighted average market price of Amcorp shares prior to the announcement of the proposed privatisation exercise on 17 January 2006. The proposed exercise will provide shareholders with the opportunity to realise their investment in Amcorp, as the price has not come close to the RM1.40 mark in the last 18 months.

Barring unforeseen circumstances, I expect to complete this privatisation exercise by the end of 2006. Post privatisation, Amcorp's listing status on the Main Board of Bursa Malaysia Securities Berhad would be removed as it would not have the required public shareholding spread for listing.

I wish to welcome Y. Bhg. Dato' Che Md. Nawawi bin Ismail who joined the Board in February 2006. With his wealth of experience, I am confident that he will provide invaluable support to the Group. I would like to thank all our business partners, shareholders and the relevant authorities for your continuing support, without which our progress over the years would not have been possible.

I would also like to thank my fellow Directors and all employees of Amcorp for their invaluable contribution and commitment to the Group.