case 3 flight of funds

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27 C A S E 3 Asian Journal of Case Research 4(S): 27 – 44 (2011) Flight of Funds MOHD NOOR ABU BAKAR a , MARIATI NORHASHIM b* AND ABDUL HAMID MOHAMED GHOWS c ABSTRACT In 2006, Malaysian Travels Sdn Bhd, a subsidiary of a public listed company, purchased 40% equity in Turkistan Global Services Sdn Bhd on the basis of a project paper which outlined a potential travel business to exploit opportunities in Turkistan. Turkistan Global Services Sdn Bhd purported to have acquired the opportunity through a Memorandum of Understanding (MoU) signed by a Malaysian Minister with a Turkistan Minister for exclusive rights to handle logistic arrangements for the promotion of businesses between the two countries. However, other than the shares contract, no other documentation existed to prove that money had been invested into the company with the understanding that the money would be used specifically for carrying out the proposal. It is now 1 April 2009. A new Chief Executive Officer, Mr Idris bin Junid, was appointed for the holding company, Travel Investment Holdings Bhd. While conducting a review of the TIH group, he came upon a discrepancy in the form of an investment in Malaysian Turkistan Travels Sdn Bhd made by a subsidiary, Malaysian Travels Sdn Bhd (MTSB). He recalled his conversation with an old friend who used to work in MTSB who told him of the circumstances surrounding the company. The company was cashflow stricken; staff morale was low as they had not been paid their salaries on time or their bonuses for the past three years. Idris immediately requested the Corporate Finance Department to submit a report detailing what had happened in MTSB on the Turkistan Global Services Project. The job was outsourced to an external auditor, Agoos a A member of the Malaysian Institute of Accountants (MIA), Malaysian Institute of Certified Public Accountants (MICPA), Financial Planning Association of Malaysia (FPAM), Malaysian Institute of Management (MIM), Institute of Marketing Malaysia and the Certified Financial Planner (CFA). Fellow Member of Certified Practicing Accountant Australia (CPA Aust), Malaysian Association of Company Secretary (MACS) and Chartered Tax Institute of Malaysia (CTIM) b Faculty of Management, Multimedia University c A member of the Malaysian Institute of Accountants (MIA), a Fellow member of the Institute of Chartered Accountants in England & Wales (ICAEW) and the Chartered Institute of Management Accountants (CIMA), UK * Corresponding author: E-mail: [email protected]

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Page 1: Case 3 Flight of Funds

27

C A S E 3 Asian Journal of Case Research 4(S): 27 – 44 (2011)

Flight of Funds

MOHD NOOR ABU BAKARa, MARIATI NORHASHIMb* AND ABDUL HAMID MOHAMED GHOWSc

ABSTRACTIn 2006, Malaysian Travels Sdn Bhd, a subsidiary of a public listed company, purchased 40% equity in Turkistan Global Services Sdn Bhd on the basis of a project paper which outlined a potential travel business to exploit opportunities in Turkistan. Turkistan Global Services Sdn Bhd purported to have acquired the opportunity through a Memorandum of Understanding (MoU) signed by a Malaysian Minister with a Turkistan Minister for exclusive rights to handle logistic arrangements for the promotion of businesses between the two countries. However, other than the shares contract, no other documentation existed to prove that money had been invested into the company with the understanding that the money would be used specifically for carrying out the proposal. It is now 1 April 2009.

A new Chief Executive Officer, Mr Idris bin Junid, was appointed for the holding company, Travel Investment Holdings Bhd. While conducting a review of the TIH group, he came upon a discrepancy in the form of an investment in Malaysian Turkistan Travels Sdn Bhd made by a subsidiary, Malaysian Travels Sdn Bhd (MTSB). He recalled his conversation with an old friend who used to work in MTSB who told him of the circumstances surrounding the company. The company was cashflow stricken; staff morale was low as they had not been paid their salaries on time or their bonuses for the past three years. Idris immediately requested the Corporate Finance Department to submit a report detailing what had happened in MTSB on the Turkistan Global Services Project. The job was outsourced to an external auditor, Agoos

a A member of the Malaysian Institute of Accountants (MIA), Malaysian Institute of Certified Public Accountants (MICPA), Financial Planning Association of Malaysia (FPAM), Malaysian Institute of Management (MIM), Institute of Marketing Malaysia and the Certified Financial Planner (CFA). Fellow Member of Certified Practicing Accountant Australia (CPA Aust), Malaysian Association of Company Secretary (MACS) and Chartered Tax Institute of Malaysia (CTIM)b Faculty of Management, Multimedia Universityc A member of the Malaysian Institute of Accountants (MIA), a Fellow member of the Institute of Chartered Accountants in England & Wales (ICAEW) and the Chartered Institute of Management Accountants (CIMA), UK* Corresponding author: E-mail: [email protected]

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Bagoos. When he went to MTT, he discovered several irregularities. His only conclusion was that MTSB had been cheated. He reported this conclusion to Idris.

Keywords: Corporation Sector, Corporate Governance, Ethics, Auditing

THE MANIdris Ben Junid, a UK trained chartered accountant, returned to Malaysia and started his career in 1998 as a merchant banker in a consulting firm of international repute. He soon gained a reputation as a turnaround specialist. Under the Government Linked Companies (GLC) Transformation Programme launched by the Malaysian government in 2005, he had helped a number of government linked manufacturing companies and financial institutions produce better results and undergo major industry consolidations.

THE JOB It was no surprise when he was headhunted to be the new Chief Executive Officer (CEO) of Travel Investment Holdings Berhad (TIH). TIH was the holding company of a group in logistics and travel related businesses. It was one of the biggest government linked public listed companies on Bursa Malaysia. However, TIH had suffered major losses due to the global economic downturn in 2009. Idris felt it was his patriotic duty to bring TIH onto the road to recovery. He began his new job on 1 April 2010.

THE SCENE Idris developed a turnaround methodology over his years of experience. He likened himself to a surgeon looking to remove malignant tumours. The first thing he had to do was identify the cancerous cells. Not unlike a trained auditor, his first tool of diagnosis was to have an overview of how a particular business worked. However, he realised that, as a CEO, he could not spend his time scrutinising every single detail. Instead, he should focus on the bottom line and cash flow of the organisation. He knew that, in doing so, he could quickly get to the truth of the company. His first strategy would be to call for a meeting among the senior management staff and ask them to brief him on the organisation to discover the current state of affairs. He had been well aware that the team was going to want to make things look good. So, he had to be vigilant for any sign of weakness.

He always had a particular concern about ‘relationship based’ transactions, which he knew was quite prevalent in Malaysia. Transactions between “friends’, “connected” or “favoured” persons sometimes lacked commercial justification

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that led to undesirable consequences. He noted that the organisational chart of TIH showed several investments by a subsidiary which indicated to him that, to ensure accountability, he had to watch out for any evidence of issues that had been swept under the carpet and any possible lack of proper procedural practice.

During the first briefing by the senior staff, he noticed that there had been an investment made by a subsidiary, Malaysian Travels Sdn Bhd (MTSB), in 2006, which had shown no movement since. He asked for an explanation from the senior management team, but was met by hushed murmurs. As they discussed among themselves, he recognised a name on one of the MTSB papers. It was his old friend, Norehan. She had been attached to a sub-subsidiary of TIH as the Human Resource Manager.

Travel Investment Holding Bhd. (TIH)

Malaysian Travel Sdn. Bhd. (MTSB)

Turkistan Global Services Sdn. Bhd.

Malaysian Turkistan Travels Sdn. Bhd. (MTT)

60%

40%

He recalled that he had mentioned to her about his CEO appointment in TIH. It was then when Idris realised that the sub-subsidiary Norehan had mentioned about was the same MTSB investment that he had just inquired into. He remembered her telling him that she had left the company in the previous year, in 2009, because she felt that the company had been established under fraudulent circumstances. When prodded, she acknowledged that her boss had been the son-in-law of the MTSB director, who had signed the contract that founded the sub-subsidiary. Norehan lamented that staff morale had been low at the time she left, with the company being short on funds and the staff not being paid their salaries on time and their bonuses since 2007.

Idris snapped out of his reverie and called his senior management to move on to the next agenda. As the briefing came to an end, he announced that he wanted more information about MTSB and its investment in the joint venture with Turkistan Global Services Sdn Bhd, Malaysian Turkistan Travels Sdn Bhd (MTT). He told the Chief Financial Officer (CFO), Ms Goh to send an officer to investigate the matter and prepare a report on what had transpired.

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INVESTIGATION INITIATED Ms Goh had been with TIH since the company listed in 2005 but had just been promoted to the CFO position on 1 January 2010. She reviewed the documentation they had on MTT and realised that, other than the annual audited financial reports, there had been no other information provided by MTSB. She was further informed that there was actually no position or portfolio that catered to the monitoring of MTT or any of MTSB’s other subsidiaries. She concluded that she had to send someone to visit MTSB in person to investigate the matter. Unfortunately, she lacked the resources to do so. Her ten-member team in the Accounts and Finance Department were responsible for the accounting services for the whole TIH group. In accordance with Securities Commission ruling, there was also an Internal Audit department who reports to the Audit Committee rather than to the CFO. The Internal Audit department had three members. They were in charge of the internal control for the entire group. She realised that not only did she have to investigate the matters at MTSB, but the problem had shed more light on issues that needed to be resolved on a corporate level. Not least of which is the internal control of investments made by subsidiaries. She was torn between taking charge of the investigation herself by sending one of her team members or utilizing her entire team to focus on the changes that needed to be done right away in TIH. However, she was reluctant to pass the job to the Internal Audit, a department over which she had no authority. She raised these concerns with Idris, talking about the constraints she was facing. Idris decided to outsource the task to Agoos Bagoos, a consultant from a Big Four accounting firm.

THE VISIT Agoos Bagoos arrived in mid-April 2010 at MTSB on behalf of TIH. He found that there were only four people in the office; an office manager, a secretary, an accounts clerk and a tour leader. He was further informed that additional staff would only be contracted when necessary. MTSB mostly organised pilgrimage (umrah) services and, since their operations had been severely curtailed due to lack of funds, they resorted to focusing on marketing and outsourcing the services to independent subcontractors.

When Agoos requested for relevant documents pertaining to the MTT investment, the office manager informed him that there had not been any from MTT since the beginning. Since the directors had never enquired, no effort to contact MTT was ever made. The office manager had also been instructed to inform the auditors that MTT was an associate company accounted for using the equity method and the amount invested from a group point of view was immaterial for consolidation. The office manager then went on to provide three documents to Agoos: (i) a project paper that briefly described the Memorandum

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of Understanding (MoU) between MTSB and Turkistan Global Services Sdn Bhd, the MTT business model and the financial implications (Appendix A) (ii) MTT’s projected financials (Appendix B) and (iii) the minutes of meetings where the Board approved the investment (Appendix C).

THE DEAL MTSB had been set up in mid-1995 to provide inbound and outbound travel services. After ten years of operations, MTSB began to look for opportunities to expand. They were approached by Turkistan Global Services Sdn Bhd (TGS). Turkistan Global Services was owned by a Malaysian businessman, Dato’ Shazali Hamid, who had participated in a Malaysian delegation to Turkistan with a Minister from the Prime Minister’s office in 2005.

During the visit, Dato’ Shazali had signed a MoU with the Turkistan Government for exclusive rights to arrange for the travel needs of business individuals along the Turkistan-Malaysia route. Since Dato’ Shazali was not in the travel business, he needed to identify a partner who could provide the expertise. The executive director of MTSB at that time had been Yatim Nor, the father of Omar Yatim, a board member in TGS. Omar approached his father to set up a joint venture between MTSB and TGS. The joint venture was structured to represent a 60%-40% ownership between TGS and MTSB, which resulted in a RM2 company, Malaysia-Turkistan Travels Sdn Bhd (MTT). MTSB paid RM8 per share for 100,000 units to represent its 40% shareholding in MTT at the signing of the agreement on 1 May 2006. A further check by Agoos led to the discovery of MTT’s paid up capital increasing from RM2 to RM250,000 on 1 July 2006. No audited accounts had been issued to the shareholders since, nor any filing made with the Companies Commission of Malaysia (Appendix D). The following week, Agoos conveyed the report on MTSB to Idris.

WHAT NEXT? It was crucial to Idris that TIH would not be embroiled in a front-page financial scandal. “Thank goodness, it’s less than a million! Let’s hope it’s too small for those media sharks at the Sun to sniff out. But, Agoos, I can’t just fold my arms on this matter. I still want to show that I’m doing damage control. I want to know where the money went, who was responsible for it and if there’s anything left that we can salvage. That’s your job, Agoos. I need you to get me the relevant information for me to report to the Audit Committee and the Board who will then decide what to report to Bursa Malaysia. I need this for this quarter’s announcement. More importantly, I want to be able to tell them what we’re doing to fix this mess. So, I need your best advice for this Agoos, consider this the number one priority!”

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REFERENCESBursa Malaysia Main Market Listing Rules, Practice Note 12. Recurrent Related Party

TransactionChapter 9 of the Listing Requirement, Part C – Immediate Disclosure of Material

InformationCompanies Act 1965, Part V – Management and Administration

Companies Act 1965, Part VI – Accounts and Audit

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APPENDIX A

Project paper on the proposed MOU presented at the Board of Directors’ Meeting on 21 June 2006

21ST BOARD OF DIRECTORS MEETING MALAYSIAN TRAVELS SDN BHD (MTSB)

On 21 June 2006AGENDA 3:

Investment in Malaysian Turkistan Travels Sdn Bhd (MTT) (Malaysian – Turkistan Business Cooperation)

OBJECTIVEThe objective of this paper is to seek the Board’s approval to invest in Malaysian Turkistan Travels Sdn. Bhd. (MTT), a Malaysia – Turkistan Business Cooperation (MATUBUCO).

BACKGROUND On 18 January 2006, a Memorandum of Understanding (MoU) was signed by Malaysian Turkistan Travels Sdn Bhd (MTT) with the Turkistan Business Development Board (TBDB) representing cooperation between the two nations on all matters pertaining to the business and promotion of tourism. The signing ceremony was witnessed by a Minister from the Prime Minister’s Office of Malaysia and the Vice President of Turkistan.

TURKISTAN AS A POTENTIAL BUSINESS DESTINATION Turkistan is an emerging business destination and its government has been initiating aggressive efforts on joint business cooperation with countries such as Singapore, Brunei, Indonesia and Malaysia. A 2003 report ranks Turkistan as 145th in business revenue worldwide with tourism revenue of US$2 billion. Joint business cooperation will not only to boost Turkistan’s business revenue but will enable the ‘export’ of its business travelers to popular destinations around the world. Turkistan has a population of 68 million with a 2005 total GDP of US$554.8 billion. It stands as a strategic market yet to be tapped.

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GROWTH OF TURKISTAN TOURISTS INTO MALAYSIATurkistanian arrivals to Malaysia have been on the upward trend. Especially for the first four months of 2006, the arrivals have increased by 61%. Currently, there are only two direct flights per week operated by Turkistan Air. According to an industry report, Turkistan Air will be making additional flights before end-2006. Turkistanians will be able to fly to Malaysia via commercial carriers departing from the Middle East, Pakistan and India.

Table 1 Arrival of Turkistan Business Traveller to Malaysia

Year Arrival %

2003 10,412 n.a.2004 11,236 +7.92005 12,309 +9.52006 (Jan – Apr) 8,256 +61.6

THE MALAYSIA-TURKISTAN BUSINESS COOPERATIONThe business cooperation between the two nations will be made possible by the formation of two companies, Malaysian Turkistan Travels Sdn Bhd (MTT) and CNTP Turkistan Pte Ltd.

1. The Malaysian Turkistan Travels Sdn Bhd (MTT) will be formed in Kuala Lumpur with the partnership of Turkistan Global Services Sdn Bhd (TGS) (60%) and the Turkistan Business Development Corporation (40%).

2. The CNTP Turkistan Pte Ltd. will be formed in Turkistan with the partnership of Turkistan Business Development Corporation (60%) and Turkistan Global Services Sdn Bhd (TGS).

Turkistan Travels Sdn Bhd (MTT) The first step is the establishment of Malaysian Turkistan Travels Sdn Bhd (MTT) as a subsidiary to Malaysian Travels Sdn Bhd.

1. Therefore, Malaysian Turkistan Travels Sdn. Bhd. (MTT) is a joint venture between Malaysian Travels Sdn. Bhd. (MTSB) (40%) and Turkistan Global Services Sdn. Bhd. (TGS) (60%). Malaysian Turkistan Travels Sdn. Bhd. (MTT) will initially undertake all business pertaining to travel for the Turkistan market and subsequently for other markets identified by the Prime Minister’s Office.

2. The office of Malaysian Turkistan Travels Sdn Bhd (MTT) will be based at KLCC. Via this acquisition, it will have license access to all inbound, out-bound, ticketing and Malaysian My Second Home (MM2H) activities. The

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rapport between the Turkistan and Malaysian governments is expected to be leveraged for all relevant purposes.

THE ORGANISATION The Malaysia-Turkistan Business Cooperation structure is proposed to be two-tiered, whereby the first tier shall represent Malaysian Travels Sdn Bhd (MTSB) venturing with Turkistan Global Services Sdn Bhd (TGS) to form Malaysian Turkistan Travels Sdn Bhd (MTT), while the second tier shall represent the partnership between the MTT and the Turkistan Business Development Corporation (TBDC), which will be called MATUBUCO.

Malaysian Turkistan Travels Sdn Bhd (MTT) will have an initial number of 20 staff.

PRODUCTS SERVICES AND PRINCIPAL ACTIVITIES The following are the main products and services of Malaysian Turkistan Travels Sdn Bhd (MTT) Inbound/Outbound Travel Agent Services for business travelers:

Promoting Malaysia

• Malaysian Turkistan Travels Sdn Bhd (MTT) shall act as the Marketing Office for Business with Malaysia in Turkistan

• Undertake local promotions, business traveler sales missions and advertising activities as follows:

� Business Traveller MICE Promotions � Tourism & Management Training � MM2H & Event Promotions

COMPETITIVE ANALYSIS Currently, six local travel agencies are involved in the Malaysian–Turkistan business market, with an estimated inbound market size of about 15,000 arrivals annually. Via Government-to-Government (G2G) involvement, it is anticipated to heighten tourism promotion where the market is poised to grow substantially. The collaboration between Malaysian Turkistan Travels Sdn Bhd (MTT) and TBDC through MATUBUCO is expected to help MTT to be a dominant player in the Malaysia-Turkistan Business Travel market.

BUSINESS MODELA two-tier business model is proposed to enable the joint venture collaboration to be effective and ultimately achieve the results envisioned by both governments.

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Tier 1: Government Malaysia / Turkistan: The Facilitator Tier 2: Malaysian Turkistan Travels Sdn Bhd (MTT): The Implementator

KEY TARGET MARKET The following are the key target markets of Malaysian Turkistan Travels Sdn Bhd (MTT): 1. Leisure & Business Market (Families & Expatriates) 2. Special Interest Group (Honeymooners & Education) 3. M.I.C.E. and MM2H

KEY STRATEGIESThe key strategies of Malaysian Turkistan Travels Sdn Bhd (MTT) are as follows:

Specific StrategyTo increase Malaysians traveling to Turkistan 1. To assist Turkistan authorities pertaining to all advertising activities in

relation to Malaysia 2. To assist in consumer and trade promotions

Overall Strategies1. To work closely with our Turkistan counterparts and set a framework of

common standards to link compatible products and services2. To provide an effective platform for all meetings between buyers and sellers

and to facilitate strategic alliances among tour and travel agents and hoteliers3. To disseminate information and obtain consumer feedback on quality

standards and/or products and services4. To provide input to both governments on product enhancements

The key strategies for Malaysian Turkistan Travels Sdn Bhd (MTT) are as follows:1. To become the dominant player in all fields of the Malaysian-Turkistan

business market2. To provide high quality and competitive products and services as per

standards set by Malaysian Turkistan Travels Sdn Bhd (MTT)3. To set close and cordial business relationships with our agents and strategic

business partners

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4. To conduct product R&D (research and development) based on feedback from customers and Malaysian Turkistan Travels Sdn Bhd (MTT)

5. To help realise government objectives to increase the number of Turkistan business travelers to Malaysia

6. To bring reasonable returns to shareholders

MARKETING PLAN

Inbound 1. To obtain attractive contract rates from hoteliers and ground handlers 2. To have a pool of experienced Iranian tourist guides 3. To conduct product updates to overseas agents and the media

Outbound To develop special outbound packages for both the business and leisure markets

Training ProgrammesTraining programnmes will be geared to work with tourism associations and local universities in providing education and training to the Iranians. Some of the recommendations are as follows:1. English Language courses 2. Tour Guide courses by MATTA 3. International Travel and Tourism courses by lATA & UFTAA 4. Executive Diploma in Strategic Tourism Management & Technology

(MATTAIUTM/UiTM)

Promotional Activities1. To create visibility in the marketplace through trade shows, sales promotions

and missions, exhibitions and fairs2. To assist Malaysian Turkistan Travels Sdn Bhd (MTT) in organising

Familiarisation Trips for Malaysia-Turkistan tour agents/media and vice versa

3. To provide and distribute a wide range of below-the-line promotional materials such as brochures, audio visual materials, and special promotional materials

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CURRENT PROJECT STATUSMALAYSIAN TRAVELS SDN BHD (MTSB) and Turkistan Global Services Sdn Bhd (TGS) will develop a marketing plan for the MATUBUCO project. Approval has been obtained from the Prime Minister’s Office for the setting up of the Malaysian Turkistan Travels Sdn Bhd (MTT) office in KLCC. The proposed activity will take place upon completion of the.

The premises of MATUBUCO are located at Ampang Complex, Kuala Lumpur. Funding is by the Turkistan Business Board. They also seek space to establish a Souvenir Shop to showcase and sell Turkistan handicrafts and products. They are anticipated to participate in the Malaysian Business Fair and launch their advertising campaign before year-end.

FINANCIAL IMPLICATIONS

Business Arrangement The objective of this paper is to evaluate the investment proposition of acquiring a 40% shareholding in Malaysian Turkistan Travels Sdn Bhd (MTT), the management company of MATUBUCO. Attached are Cash Flow Assumptions, Cash Flow Projections for 2007–2009 and Projected Profitability Statements for 2007-2009 as Appendix C

Share ValuationThe share valuation for Malaysian Turkistan Travels Sdn Bhd (MTT) (M) Sdn Bhd is made based on the following assumptions:

Items Amount (RM)

Projected 3 yrs revenue 4,123,900.00 Operating expenditure 3,286,065 Net profit before tax 837,835.00

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Based on a 12% discounted cash flow over 3 years of net earnings, the net present value of the project is RM596,371.00. Taking into account all relevant factors, the final share value is determined as follows:

No Particulars Amount (RM)

1 Projected Net Earnings 1,108,935.00 2 Business Goodwill 750,000.00 3 Value of licenses (inbound, outbound & ticketing) 250,000.00 4 Value of MM2H license 250,000.00 Total 2,358,935.00 40% Share 943,574.00 Offer after 15% discount 800,000.00

Based on the proposed paid-up capital of MTT which is RM250,000.00, the theoretical share value of the Company stands at RM8.00 per share. The proposed stake of 40% shareholdings shall be valued at: RM8.00 x 100,000 shares = RM800,000.

Return on Investment The financial cash flow projection indicates that the Malaysian Turkistan Travels Sdn Bhd (MTT) project is viable. The net present value of the project is positive and the ROI is 17%.

RECOMMENDATIONS Given the assumptions, the Malaysian Turkistan Travels Sdn Bhd (MTT) project indicates great importance for the Malaysian business industry as G2G and B2B businesses can be developed accordingly. This MATUBUCO project is a viable project to be ventured by MALAYSIAN TRAVELS SDN BHD (MTSB) Sdn Bhd. Therefore, it is recommended that the Board approve the following: 1. To approve the acquisition of 40% equity valued at RM 800,000 in Malaysian

Turkistan Travels Sdn Bhd (MTT) by MALAYSIAN TRAVELS SDN BHD (MTSB) Sdn Bhd

2. To approve that Malaysian Turkistan Travels Sdn Bhd (MTT) is to operate its business from KLCC, Jalan Ampang, Kuala Lumpur.

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APPENDIX B.1

Projected Income Statement for MTT (2007 to 2009)

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APPENDIX B. 2

Projected Balance Sheet for MTT (2007 to 2009)

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APPENDIX B.3

Projected Cash Flow Statement for MTT (2007 to 2009)

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APPENDIX C

Minutes of Meeting Approving the MOU

MALAYSIAN TRAVELS SDN BHD (MTSB)Minutes of Board of Directors Meeting

held on 21st June 2006Malaysian – Turkistan Business Cooperation

PREAMBLE.

1. Further to the business visit from Turkistan to Malaysia, a cooperation has been sealed between the Turkistan Development Board and Malaysian Turkistan Travels Sdn Bhd (MTT)

2. The business cooperation between the two nations will be made possible by the formation of two companies to be called Malaysian Turkistan Travels Sdn Bhd (MTT) and CNTP Turkistan Pte Ltd. • The Malaysian Turkistan Travels Sdn Bhd (MTT) will be formed in

Kuala Lumpur with the partnership of Turkistan Global Services Sdn Bhd (TGS)(60%) and the Turkistan Business Development Corporation (40%).

• The CNTP Turkistan Pte Ltd. will be formed in Turkistan with the partnership of Turkistan Business Development Corporation (60%) and Turkistan Global Services Sdn Bhd (TGS)

3. The product and services marketed by the Turkistan includes Carpet and Clothing

4. Malaysian Turkistan Travels Sdn Bhd (MTT) will be operating in Kuala Lumpur from KLCC.

5. Financial Implications

• The Joint venture will allow MALAYSIAN TRAVELS SDN BHD (MTSB) to subscribed 40% shares representing 100,000 shares in Malaysian Turkistan Travels Sdn Bhd (MTT) at the consideration of RM800,000.

• Projected profit in for three years is RM1,108,935

• Projected Return on the 3rd Year is 17%.

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CONCLUSIONThe Board be and hereby resolved:

1. That the company invest in Malaysian Turkistan Travels Sdn Bhd (MTT) amounting RM800,000 be approved.

2. The Malaysian Turkistan Travels Sdn Bhd (MTT) operates in KLCC, Kuala Lumpur.