CONTENTS 2

3

4

5

Corporate Profile

Corporate Structure

Corporate Information

Financial Highlights

6

9

11

13

Chairman’s Statement

Chairman’s Statement

Directors’ Profile

Chairman’s Statement

15

17

26

27

Corporate Social Responsibility Statement

Corporate Governance Statement

Additional Corporate Disclosures

Directors’ Responsibilities Statement

38

33

36

136

Audit Committee Report

Statement On Risk Management and Internal Control

Directors’ Report And Audited Financial Statements

List Of Top 10 Properties

138

141

145

Notice Of Annual General Meeting

Statement Accompanying The Notice Of Annual General Meeting

Analysis Of Equity Securities

(In Bahasa Malaysia)

(In Chinese)

Form Of Proxy

CORPORATE PROFILE MPHB Capital Berhad (“MPHB Capital”), the holding company for the MPHB Capital Group of Companies (“MPHB Capital Group”), was incorporated on 17 July 2012 as a private limited company and subsequently converted into a public limited company and assumed its present name on 23 July 2012. The Company was listed on the Main Market of Bursa Malaysia Securities Berhad on 28 June 2013. The MPHB Capital Group is involved in the businesses of:- . Insurance . Credit and investments The MPHB Capital Group is committed towards the key fundamentals stated below:- . achievement of excellence in its businessess . strive to obtain optimum value for its shareholders . to be a caring and fair employer and . a socially responsible corporate citizen

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CORPORATE STRUCTURE AS AT 31 MARCH 2014

INSURANCE & CREDIT

Multi-Purpose Capital Holdings Berhad

INVESTMENTS

*MPHB CAPITAL BERHAD

Multi-Purpose Insurans Bhd

Multi-Purpose Credit Sdn Bhd

Multi-Purpose Credit Holdings Sdn Bhd

MP Factors Sdn Bhd

* #

Multi-Purpose Venture Partners Sdn Bhd #

Multi-Purpose Credit Nominees (Tempatan) Sdn Bhd

West-Jaya Sdn Bhd

Queensway Nominees (Tempatan) Sdn Bhd

Queensway Nominees (Asing) Sdn Bhd

Leisure Dotcom Sdn Bhd

Kelana Megah Development Sdn Bhd

Jayavest Sdn Bhd

Mimaland Berhad

Tibanis Sdn Bhd

Magnum.Com Sdn Bhd

Magnum Leisure Sdn Bhd

Syarikat Perniagaan Selangor Sdn Bhd

Caribbean Gateway Sdn Bhd

Flamingo Management Sdn Bhd



Tune Insurance (Labuan) Ltd.

Multi-Purpose Shipping Corporation Berhad

Multi-Purpose Development (PG) Sdn Bhd

Mulpha Kluang Maritime Carriers Sdn Bhd

Subsidiary Company Associated Company Listed on Bursa Malaysia Securities Berhad In liquidation

ANNUAL REPORT 2013

3

CORPORATE INFORMATION DIRECTORS Tan Sri Dato’ Dr Yahya bin Awang Tan Sri Dato’ Surin Upatkoon Mr Ng Kok Cheang Ms Ivevei Upatkoon Dato’ Lim Tiong Chin Mr Kuah Hun Liang

AUDIT COMMITTEE

REGISTERED OFFICE

Mr Kuah Hun Liang (Chairman) Tan Sri Dato’ Dr Yahya bin Awang Dato’ Lim Tiong Chin

39th Floor, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Telephone No. : 603-26948333 Fax No. : 603-26946849

REMUNERATION COMMITTEE

SHARE REGISTRAR

Tan Sri Dato’ Dr Yahya bin Awang (Chairman) Tan Sri Dato’ Surin Upatkoon

Metra Management Sdn Bhd (62169-A) 30.02, 30th Floor, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Telephone No. : 603-26983232 Fax No. : 603-26948571

Mr Kuah Hun Liang

NOMINATION COMMITTEE Tan Sri Dato’ Dr Yahya bin Awang (Chairman) Dato’ Lim Tiong Chin Mr Kuah Hun Liang

MANAGEMENT Tan Sri Dato’ Surin Upatkoon (Managing Director) Mr Ng Kok Cheang (Executive Director) Ms Ivevei Upatkoon (Executive Director)

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Independent Non-Executive Chairman Non-Independent Managing Director Non-Independent Executive Director Non-Independent Executive Director Non-Independent Non-Executive Director Independent Non-Executive Director

AUDITORS Messrs Ernst & Young

PRINCIPAL BANKERS Malayan Banking Berhad Alliance Bank Malaysia Berhad

STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad (Listed on 28 June 2013) Stock Name: MPHBCAP Stock Code: 5237 ISIN Code: MYL5237OO 002

WEBSITE

Ms Kheoh And Yeng (Chief Operating Officer)

www.mphbcap.com.my

SECRETARY

E-MAIL

Ng Sook Yee (MAICSA 7020643)

[email protected]

FINANCIAL HIGHLIGHTS

2013 RM’000

ASSETS Non-current assets Property, plant and equipment Investment properties Investments Intangible assets

87,324 744,051 362,755 54,482

Current assets Asset held for sale

1,248,612 1,060,976 30,195

TOTAL ASSETS

2,339,783

EQUITY AND LIABILITIES Equity attributable to Owners of the Company Share capital Reserves

715,000 363,545

Shareholders’ fund Non-controlling interests

1,078,545 15,389

Total equity

1,093,934



Non-current liabilities Current liabilities Liability directly associated with asset held for sale

87,800 1,135,443 22,606

Total liabilities

1,245,849

TOTAL EQUITY AND LIABILITIES

2,339,783

FINANCIAL RESULTS Profit before tax Income tax expense

57,590 (10,718)

Profit for the year Non-controlling interests

46,872 1,377

Profit attributable to Owners of the Company

48,249

FINANCIAL RATIOS Basic earnings per share (Sen) Net assets per share (RM) Return on equity (%)

8.90 1.51 4.47

No comparative figures are available as the Group has elected no restatement of financial information in the consolidated financial statements for the periods prior to the combination of the entities under common control. ANNUAL REPORT 2013

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DIRECTORS’ PROFILE

TAN SRI DATO’ DR YAHYA BIN AWANG Independent Non-Executive Chairman

Tan Sri Dato’ Dr Yahya bin Awang, a Malaysian, aged 63, was appointed as an Independent Non-Executive Chairman/Director of MPHB Capital Berhad (“MPHB Capital” or “the Company”) on 1 August 2012. Tan Sri Yahya is also the Chairman of the Nomination Committee and Remuneration Committee, and a member of the Audit Committee of MPHB Capital. Tan Sri Yahya graduated from Monash University in Australia with a Bachelor of Medicine and Bachelor of Surgery degree in 1974. Tan Sri Yahya became a Fellow of the Royal College of Surgeons and Physicians of Glasgow in 1980. Moving to London in 1981, Tan Sri Yahya worked as a Surgical Registrar in the Department of Cardiothoracic Surgery at Royal Brompton Hospital before returning to Malaysia to take up the role of Cardiothoracic Surgeon at the General Hospital. From 1992 until 2004, Tan Sri Yahya held the position of Head and Senior Consultant Cardiothoracic Surgeon at the National Heart Institute of Malaysia, and from 1998 to 2002, he was also the Medical Director of the Institute.



Tan Sri Yahya has been a Consultant Cardiothoracic Surgeon at Damansara Heart Centre, Damansara Specialist Hospital since March 2003. He was a council member of the Association of Thoracic and Cardiovascular Surgeons of Asia. He is also a committee member of the Malaysian Board of Cardiothoracic Surgery. In 2011, he was appointed as the Pro-Chancellor of University of Teknologi Malaysia. Currently, Tan Sri Yahya also sits on the Board of MultiPurpose Insurans Bhd, Tokio Marine Life Insurance Malaysia Bhd, KPJ Healthcare Berhad and several private limited companies in Malaysia. Tan Sri Yahya is also a Trustee of Yayasan Wah Seong. He attended all of the two (2) Board Meetings held during the financial year ended 31 December 2013.

TAN SRI DATO’ SURIN UPATKOON Non-Independent Managing Director

Tan Sri Dato’ Surin Upatkoon, a Thai National, aged 65, was appointed as a Director of the Company on 17 July 2012 and as Managing Director of the Company on 14 May 2013. Tan Sri Dato’ Surin is also a member of Remuneration Committee of the Company. Tan Sri Dato’ Surin completed his secondary education in Han Chiang High School, Penang in 1970. He began his career with MWE Weaving Mills Sdn Bhd in 1971 as a manager and he was appointed as the Managing Director of MWE Spinning Mills Sdn Bhd in 1974 where he was in charge of its daily operations. In 1976, he became an Executive Director of MWE Holdings Berhad. Subsequently, in 1979, he was appointed as the Managing Director of MWE Weaving Mills Sdn Bhd. In 2000, he was appointed as an Executive Director of Magnum Berhad (formerly known as Multi-Purpose Holdings Berhad) (“Magnum”) and subsequently, in 2002, he was appointed as the Managing Director of Magnum where he played a major role in formulating the business strategies and direction of the Magnum

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Tan Sri Yahya’s many professional achievements include pioneering the establishment of The National Heart Institute of Malaysia in 1992 and performing the first Heart Transplant in Malaysia in 1997. Tan Sri Yahya is the author of many scholarly and professional articles and has made numerous presentations to professional audiences.

Group and was actively involved in the policy making aspects of the operations of the Magnum Group. He was re-designated as Non-Independent Non-Executive Chairman of Magnum on 26 June 2013. Tan Sri Dato’ Surin Upatkoon is responsible for developing and implementing the strategic vision for the growth and expansion of MPHB Capital Group, and ensuring effective control of the general management and operations of the MPHB Capital Group. He has vast working experience in formulating the business strategies/direction as well as in policy making aspects of the business operations of the MWE Group and Magnum Group. Tan Sri Dato’ Surin also sits on the Board of MWE Holdings Berhad, Multi-Purpose Capital Holdings Berhad, Magnum 4D Berhad, Mimaland Berhad and several private limited companies in Malaysia. He is also a Trustee of Chang Ming Thien Foundation and Magnum Foundation. Tan Sri Dato’ Surin attended all of the two (2) Board Meetings held during the financial year ended 31 December 2013.

DIRECTORS’ PROFILE (cont’d)

NG KOK CHEANG Non-Independent Executive Director

Mr Ng Kok Cheang, a Malaysian, aged 57, was appointed as a Director of the Company on 17 July 2012 and as an Executive Director of the Company on 14 May 2013. He does not sit on any Board committee of the Company. Mr Ng obtained his higher school certificate from Technical Institute, Penang in 1977. He has vast working experience in property valuation, property management and property development. He commenced his career in the Property Valuation/General Practice Surveying profession in 1979 with an established Chartered Valuation Firm as a valuation assistant. In 1981, he was promoted to a manager and was a consultant in various property development companies. In 1996, he joined Penas Realty Sdn Bhd as a planning manager, where he was responsible for the sourcing of land bank, planning and project feasibility/marketing of development projects. He was also involved in the development of



residential and mixed developments which include shopping malls, condominiums and shophouses. In 2002, he was appointed as an Executive Director of Magnum Berhad (formerly known as Multi-Purpose Holdings Berhad) (“Magnum”) and subsequently ceased to be an Executive Director of Magnum in May 2013. Mr Ng currently also sits on the Board of several private limited companies. He attended all of the two (2) Board Meetings held during the financial year ended 31 December 2013.

DATO’ LIM TIONG CHIN Non-Independent Non-Executive Director

Dato’ Lim Tiong Chin, a Malaysian, aged 61, was appointed as a Non-Independent Non-Executive Director of the Company on 1 August 2012. Dato’ Lim is also a member of the Audit Committee and Nomination Committee of the Company. Dato’ Lim is a Public Accountant by profession and is a Fellow of the Institute of Chartered Accountants in England and Wales. He is also an Associate Member of the Malaysian Institute of Certified Public Accountants and Malaysian Institute of Accountants.

Dato’ Lim also sits on the Board of Multi-Purpose Insurans Bhd, The Kedah Transport Company Berhad and several private limited companies in Malaysia. Dato’ Lim attended all of the two (2) Board Meetings held during the financial year ended 31 December 2013.

Dato’ Lim was the Managing Director of A.A. Anthony Securities Sdn. Bhd. from 2001 to February 2013. Prior to joining A.A. Anthony Securities Sdn Bhd, he was a Partner of Kiat & Associates from 1977 to 1983, General Manager of A.A. Anthony & Co. Sdn Bhd from 1983 to 1985, Chairman and Managing Director of A.A. Anthony & Co. Sdn Bhd from 1985 to 3 September 2001.

ANNUAL REPORT 2013

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DIRECTORS’ PROFILE (cont’d)

KUAH HUN LIANG Independent Non-Executive Director

Mr Kuah Hun Liang, a Malaysian, aged 52, was appointed as an Independent Non-Executive Director of the Company on 4 March 2013. He is also a Chairman of the Audit Committee and a member of Nomination Committee and Remuneration Committee of the Company. Mr Kuah obtained a Bachelor of Science (Hons) degree in Applied Economics from the University of East London, United Kingdom in 1982. He started his banking career in Public Bank Berhad in 1983. He joined Deutsche Bank AG in 1989 where he served as a treasurer and was then promoted as the head of global markets in 1995. In 2000, he was appointed as an Executive Director of Deutsche Bank (M) Bhd and promoted to be the Chief



Executive Officer and Managing Director in 2002 and held the position until September 2006. He also held the position as a treasurer and a Director of MalaysianGerman Chamber of Commerce and the Chairman of Star Publications (Malaysia) Berhad. He was formerly a member of the Quality Assurance Committee for Financial Sector Talent Enrichment Programme (FSTEP), part of Institut Bank-Bank Malaysia. Mr Kuah is currently an independent director of Alliance Bank Malaysia Berhad, Alliance Investment Bank Berhad and Rexit Berhad. Mr Kuah attended all of the two (2) Board Meetings held during the financial year ended 31 December 2013.

IVEVEI UPATKOON Non-Independent Executive Director

Ms Ivevei Upatkoon, a Thai National, aged 37, was appointed as an Executive Director of the Company on 20 February 2014. She does not sit on any Board committee of the Company. Ms Ivevei obtained a Master in Business Administration from INSEAD in 2004, a Bachelor of Economics and Bachelor of Arts Degree (Honours) majoring in Japanese Studies in 1997, both from the University of Michigan.

as Executive Director, she was the General Manager, Property of the Company. She joined Magnum Berhad (formerly known as Multi-Purpose Holdings Berhad) (“Magnum”) as a manager in 2008 and was then promoted as the Assistant General Manager, Property in 2010. Before joining Magnum in 2008, she was employed in companies involved in corporate finance/ advisory, systems consulting, e-commerce services and e-business strategy consulting/advisory.

Ms Ivevei has more than 5 years working experience in property development strategy, property management and property investment. Prior to being appointed

She also sits on the Board of Mimaland Berhad and several private limited companies in Malaysia and is a Trustee of Magnum Foundation.

Notes:

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1.

Family Relationship with Director and/or Major Shareholder



Ms Ivevei Upatkoon is the daughter of Tan Sri Dato’ Surin Upatkoon, the Managing Director and major shareholder of the Company. Saved as disclosed herein, none of the Directors has any family relationship with any director and/or major shareholder of the Company.

2.

Conflict of Interest



None of the Directors has any conflict of interest with the Company.

3.

Conviction of Offences



None of the Directors has been convicted of any offences in the past ten(10) years.

CHAIRMAN’S STATEMENT Ladies and gentlemen, It is my privilege and delight to present the first Annual Report and Audited Financial Statements of the Group and Company for the financial year ended 31 December 2013. It has been a memorable year for the Group as we witnessed the successful listing and quotation of the Company’s entire issued and paid-up share capital of 715 million shares of RM1.00 each on the Main Market of Bursa Securities Malaysia Berhad (“Bursa”) on 28 June 2013. With the outstanding leadership of our experienced Managing Director, Tan Sri Dato’ Surin Upatkoon, invaluable contributions from our dedicated Board of Directors and competency of our management team, the profit for the year for the Company and the Group is recorded at RM37.87 million and RM46.87 million respectively.

BUSINESS PERFORMANCE Despite the challenging economic environment, the Group achieved revenue of RM245.97 million in 2013. This is largely contributed by the Insurance business with revenue of RM215.77 million which is 87.72% of the total revenue. Credit and Investment businesses made up the remaining RM30.20 million or 12.28% of the revenue. In tandem with the revenue composition, the operating profit of the Group at RM61.32 million is mainly attributable to Insurance business which generated an operating profit of RM44.92 million whilst Credit and Investment businesses achieved an operating profit of RM16.40 million. The basic earnings per share for the Group in 2013 is 8.90 sen.

REVIEW OF OPERATIONS a) Insurance Division

Our insurance arm achieved revenue and operating profit of RM215.77 million and RM44.92 million in 2013 with is 87.72% and 73.26% of the Group’s revenue and operating profit respectively.



The insurance division intends to improve operational effectiveness, expand its market share through organic growth from business channels via multi-pronged business strategies, utilisation of existing multiple distribution options and development of alternative channels as well as strengthening their agency force. The introduction of new or enhanced innovative products to tap the wide and diverse market segments will serve to establish a solid foothold in the industry.



Together with the expertise of the insurance team, it is envisaged that the performance of the insurance business will take the Group to a new level in terms of profitability, stability and growth in the future.

b) Credit and Investment businesses

The Credit business contributed RM6.34 million to the operating profit of Group.



Investment relates to the hotel operations, investment properties and joint ventures which contributed RM29.06 million and RM10.06 million to the revenue and operating profit of the Group. The hotels aim to maintain its competitive edge with greater emphasis on better customer service and promotional activities to retain existing clientele and to attract new guests. As for the investment properties, the Group will continue to assess and evaluate all viable options to optimise returns to the shareholders either through joint ventures with reputable partners or outright disposal at the right price and time.

ANNUAL REPORT 2013

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CHAIRMAN’S STATEMENT (cont’d)

One of our subsidiaries, Multi-Purpose Shipping Corporation Berhad had concluded the disposal of 7 parcels of land as disclosed in Note 34 (b).

MARKET OUTLOOK AND PROSPECTS The Malaysian economy is expected to remain fairly stable as it is domestic driven primarily with local and private activities and the Gross Domestic Product growth is expected to be in the region of 5%-5.5% in 2014. The Group will continue to focus on its core activities and to formulate policies to strengthen and build up its businesses for long term stability and returns.

GOVERNANCE Our Group is committed to a certain standards of corporate governance as it is a fundamental part of being a responsible corporate entity. Since the listing on the Bursa, we have instituted our governance framework and processes.

CORPORATE DEVELOPMENT On 22 January 2014, the Company announced that Bank Negara Malaysia (“BNM”) had no objection in principle for the Company to commence preliminary negotiations with an interested party in relation to the strategic alliance with the Insurance business of the Group, which may result in the disposal of a minority interest in the business.

APPRECIATION AND ACKNOWLEDGEMENT I am impressed by the strength of our Board members and the commitment, quality and teamwork of our people. Thank you for all your dedication, expertise and hard work for the results the Group has attained. Our Group acknowledges with gratitude the support from our esteemed customers, bankers, business associates and shareholders for your confidence and trust in us.

TAN SRI DATO’ DR YAHYA BIN AWANG CHAIRMAN 23 APRIL 2014

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PENYATA PENGERUSI Tuan-tuan dan puan-puan, Saya dengan sukacitanya membentangkan Laporan Tahunan Pertama dan Penyata Kewangan yang telah diaudit bagi Kumpulan dan Syarikat bagi tahun kewangan berakhir 31 Disember 2013. Tahun ini merupakan tahun yang tidak dapat dilupakan bagi Kumpulan di mana kita menyaksikan kejayaan penyenaraian dan penawaran modal yang diterbitkan dan berbayar sebanyak 715 juta saham bernilai RM1.00 sesaham di Pasaran Utama Bursa Securities Malaysia Berhad (“Bursa”) pada 28 Jun 2013. Dengan kepimpinan yang cemerlang daripada Pengarah Urusan kami, Tan Sri Dato’ Surin Upatkoon, sumbangan yang tidak ternilai daripada Lembaga Pengarah kami yang berdedikasi serta kecekapan kumpulan pengurusan kami, keuntungan bagi tahun kewangan yang direkodkan untuk Syarikat dan Kumpulan adalah masing-masing sebanyak RM37.87 juta dan RM46.87 juta.

PRESTASI Meskipun dengan persekitaran ekonomi yang mencabar, Kumpulan telah mencatatkan perolehan sebanyak RM245.97 juta pada tahun 2013. Sebahagian besar daripada perolehan ini adalah disumbangkan oleh perniagaan Insurans dengan perolehan sebanyak RM215.77 juta, di mana ianya adalah 87.72% daripada jumlah perolehan. Perniagaan-perniagaan Kredit dan Pelaburan pula telah menyumbang sebanyak RM30.20 juta, iaitu 12.28% daripada jumlah perolehan. Selaras dengan komposisi perolehan, sebahagian besar daripada hasil sumbangan bagi keuntungan operasi Kumpulan iaitu pada RM61.32 juta adalah melalui perniagaan Insurans, di mana ia telah menyumbangkan perolehan operasi sebanyak RM44.92 juta, sementara perniagaan Kredit dan Pelaburan pula telah memperolehi perolehan operasi sebanyak RM16.40 juta. Pendapatan asas sesaham bagi Kumpulan pada tahun 2013 adalah 8.90 sen.

TINJAUAN OPERASI a)

Bahagian Insurans



Cabang Insurans kami telah mencapai perolehan dan keuntungan operasi sebanyak RM215.77 juta dan RM44.92 juta pada tahun 2013 di mana ia adalah 87.72% dan 73.26% daripada perolehan dan keuntungan operasi Kumpulan.



Bahagian Insurans berhasrat untuk meningkatkan keberkesanan operasi, mengembangkan bahagian pasarannya menerusi pertumbuhan organik dari saluran perniagaan melalui strategi perniagaan pelbagai hala, penggunaan pelbagai cara pengedaran yang sedia ada dan pembangunan saluran-saluran alternatif serta pengukuhan tenaga agensi mereka. Pengenalan produk-produk baru yang inovatif atau yang telah dipertingkatkan demi menembusi segmen pasaran yang luas dan pelbagai akan membantu dalam menubuhkan kedudukan Bahagian yang kukuh di dalam industri.



Dengan adanya kepakaran dalam kumpulan Insurans, adalah diharapkan bahawa prestasi perniagaan Insurans akan membawa Kumpulan ke tahap yang baru dari segi keuntungan, kestabilan dan pertumbuhan pada masa hadapan.

b)

Perniagaan Kredit dan Pelaburan



Perniagaan Kredit telah menyumbang sebanyak RM6.34 juta kepada keuntungan operasi Kumpulan.



Pelaburan yang berkaitan dengan operasi hotel, pelaburan hartanah dan usaha sama telah menyumbang sebanyak RM29.06 juta dan RM10.06 juta kepada perolehan dan keuntungan operasi Kumpulan. Hotelhotel berhasrat untuk mengekalkan semangat daya saing dengan memberi penekanan yang lebih kepada ANNUAL REPORT 2013

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PENYATA PENGERUSI (sambungan) perkhidmatan pelanggan yang lebih baik dan mengadakan aktiviti promosi untuk mengekalkan pelanggan yang sedia ada serta menarik perhatian tetamu yang baru. Bagi pelaburan hartanah pula, Kumpulan akan terus menaksir dan menilai semula semua pilihan yang berdaya maju untuk mengoptimumkan pulangan kepada pemegang saham sama ada melalui usaha sama dengan rakan kongsi yang bereputasi atau penjualan apabila menemui harga dan masa yang tepat.

Salah sebuah anak syarikat kami, Multi-Purpose Shipping Corporation Berhad telah menyempurnakan pelupusan 7 bidang tanah seperti yang dinyatakan dalam Nota 34(b).

TINJAUAN DAN PROSPEK MASA HADAPAN Ekonomi Malaysia dijangka akan kekal stabil kerana ia adalah terdorong kepada rangsangan domestik terutamanya aktiviti-aktiviti tempatan dan swasta dan pertumbuhan Keluaran Dalam Negara Kasar dijangka akan berada pada paras 5%-5.5% pada tahun 2014. Kumpulan akan terus memberi tumpuan kepada aktiviti-aktiviti terasnya dan menggubal dasar untuk mengukuh dan membina perniagaannya demi kestabilan dan pulangan jangka panjang.

TADBIR URUS Kumpulan adalah komited kepada piawaian tertentu dalam tadbir urus korporat kerana ia merupakan sebahagian yang penting dalam menjadi entiti korporat yang bertanggungjawab. Sejak penyenaraian di Bursa, kami telah mula merangka tadbir urus kerja dan proses-prosesnya.

PEMBANGUNAN KORPORAT Pada 22 Januari 2014, Syarikat telah mengumumkan bahawa Bank Negara Malaysia (“BNM”) tidak membantah untuk Syarikat memulakan rundingan awal dengan pihak yang berkepentingan mengenai perikatan strategik dengan perniagaan Kumpulan Insurans, di mana ia boleh mengakibatkan pelupusan kepentingan minoriti dalam perniagaan.

PENGHARGAAN DAN PENGIKTIRAFAN Saya berasa kagum dengan kekuatan ahli Lembaga Pengarah serta komitmen, kualiti dan kerjasama daripada ahli kumpulan kami. Terima kasih di atas dedikasi, kepakaran dan kerja keras anda yang mendorong kepada hasil yang telah dicapai oleh Kumpulan. Kumpulan kami amat berterima kasih atas sokongan daripada pelanggan yang dihormati, bank-bank, rakan perniagaan dan para pemegang saham atas keyakinan dan kepercayaan anda terhadap kami. TAN SRI DATO’ DR YAHYA BIN AWANG PENGERUSI 23 APRIL 2014

12

主席献词 各位先生女士， 在此本人非常荣兴地代表公司呈报本集团和公司上市后截至2013年12月31日为止的首个年度报告和 经审计财务账目。 今年是值得纪念的一年，因为我们见证了公司于2013年6月28日，将7亿1千5百万零吉的缴足资本以 每股现金1零吉的7亿1千5百万股份成功在马来西亚证券交易所主板进行上市。 在董事经理丹斯里拿督刘锦坤的英明领导引航之下，配合董事局成员及管理层要员的支持及奉献， 集团及公司各取得各为4千6百87万零吉以及3千7百87万零吉的年度盈利。 业务表现 在充满挑战的经济环境下，公司依然取得2亿4千5百97万零吉的总营业额。主要的营业额是源自于保 险业务。在2013年，保险业务取得2亿1千5百77万零吉的营业额，为总营业额的87.72巴仙。余下总营 业额的12.28巴仙则来自信贷与投资业务。 在2013年，本集团共取得6千1百32万零吉的业务盈利。高营业额的保险业务为公司取得4千4百92万 零吉的业务盈利，而信贷与投资业务则取得1千6百40万零吉的业务盈利。 本集团今年的业务每股盈利为8.90仙。 营运回顾 a) 保险业务 保险业务在2013年的营业额及业务盈利为2亿1千5百77万零吉及4千4百92万零吉，各占总营业额 及总业务盈利的87.72巴仙以及73.26巴仙。 保险部门将采取各种积极方案来提高营运效率以及扩大市场份额。其中包括利用多种策略来发展 并增强代理及经纪们的组织能力。此外，有关部门将大力推广全新的保险产品和改良现有保险产 品，扩大客户来源和市场分类，以便在保险业中建立稳固的一席之地。 有鉴于此，本着保险团队精英的专业知识和水平，保险业务的业绩盈利和稳定发展预料将为本 集团掀开崭新的一页。 b) 信贷与投资业务 在2013年，信贷业务为本集团取得6百34万零吉的业务盈利。 投资业务包括酒店管理、产业投资和联营投资。投资业务取得2千9百零6万零吉的营业额以及1 千零6万零吉的业务盈利。酒店管理将以更良好的客户服务及促销活动为主要目标，以获得现有 顾客的长期支持并同时招揽新的顾客群。在业务投资方面，产业部将在适当时机与联营伙伴发 展产业或进行脱售产业来兑现股东们的投资价值。 此外本集团的子公司，Multi-Purpose Shipping Corporation Berhad已出售7幅土地。详细资料请 翻阅Note 34 (b)。

ANNUAL REPORT 2013

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主席献词

(延续)

市场前景及展望 国内需求是主要的经济成长驱动力，而2014年的国内生产总值成长率将预定为5至5.5巴仙。因此，马 来西亚的经济有望保持相对稳定。 本集团将把重心放在主要业务方面，以更好的策略让整体的业绩能稳定增长。 企业治理 本集团尊旨有关的企业治理条规，并且遵照和执行马来西亚证券交易所的法规。 企业发展 在2014年1月22日，本公司对外宣布马来西亚国家银行（国行）原则上不反对本公司与有关当事人就 本集团保险业务的战略联盟进行初步蹉商，而这项行动基本上会导致少数股东权益出售的可能性。 致诚感谢 对于董事局，管理团队及员工所付出的贡献与合作、所体现的专业及团队精神，我感到非常感动。 我由衷地感谢大家，因为你们的奉献、专业与辛劳，让公司业绩获得稳定的成长。 最后，本人特别对于尊贵的客户、银行及商业伙伴和股东们所给予的信任和支持，致以崇高的谢 意。 主席：TAN SRI DATO’DR YAHYA BIN AWANG 2014年 4月 23日

14

CORPORATE SOCIAL RESPONSIBILITY STATEMENT The Group, as a socially responsible corporate citizen, is committed to continuously develop and implement corporate social responsibility (“CSR”) initiatives as part of its efforts to create business sustainability and enhance the value of shareholders and other stakeholders.

THE COMMUNITY •

Social/Community Welfare And Charity Programme



During the year 2013, the Group had participated in various CSR initiatives to provide financial assistance to the needy, the underprivileged and the less fortune which include donations to Persatuan Kanak-Kanak Istimewa Hulu Langat, Pertubuhan Kebajikan Anak Yatim Malaysia (PEYATIM) and Yayasan Sunbeams Home.



As part of its social welfare initiatives, the Group had on 6 December 2013 launched “The Project Good Deed Shoes” where a total of 254 clean, wearable and pre-loved sports shoes were collected and donated to the Orang Asli/Indigenous communities in Selangor.

•

Recreational/Sports Programme



In conjunction with the MPIB Run for 2014, the Group had in 2013 organised the “My First Run Clinic” for new and seasoned runners in preparation for the run. The concept of “My First Run Clinic” is to help individuals to take up running as a sustainable healthy recreational activity and to inculcate a healthy work life balance lifestyle.

THE WORKPLACE Besides providing its employees with a safe, healthy and conducive working environment, the Group is committed to ensuring that its employees are offered fair remuneration terms and they are given equal opportunities for career progression based on merit. The benefits provided for employees include medical and healthcare insurance coverage, personal accident coverage, housing loan interest subsidy and staff retirement scheme. Sports and interactive activities as well as subsidised overseas trips were organised for employees to foster closer working relationship and teamwork. The Group values its employees and places great emphasis on human resource development. During the year under review, the Group had provided staff with trainings, seminars and workshops that focused on employees’ career development and enhancement of employees’ technical skill and competency which includes leadership development programmes such as Executive Development Programme and Young Managers Development Programme. As part its efforts towards employees’ sustainability, the Group had embarked on a programme to sponsor employees to enrol in the Associateship of the Malaysian Insurance Institute (“AMII”) and Diploma of the Malaysian Insurance Institute (“DMII”) Examinations to create and retain caliber and qualified employees. Employees in these programmes are provided with benefits such as study leave and examination leave. The Group had also given out cash award as incentives for employees who had passed their examinations.

ANNUAL REPORT 2013

15

CORPORATE SOCIAL RESPONSIBILITY STATEMENT (cont’d) THE ENVIRONMENT Conscious of the need to conserve resources and preserve the environment, the Group had made efforts to cultivate its staff with the habit of “reduce, reuse and recycle”. These include minimising energy consumption, recycling paper waste, printing double-sided, communicating via e-mails and using environmentally friendly products.

THE MARKETPLACE The Group continued to have regular get-together and social events with its business partners to build up a rapport with its business partners. Steps were also taken to provide assistance, technical support, training and to promote ethical business practices to the business partners to ensure that they continue to provide excellent customer service.

16

CORPORATE GOVERNANCE STATEMENT The Board of Directors (“the Board”) of MPHB Capital Berhad (“the Company” or “MPHB Capital”) is committed to ensuring that good corporate governance are practised throughout the Group as fundamental part of discharging its responsibilities to protect the interest of all stakeholders, enhance shareholders’ value and for long-term sustainable business growth. This statement outlines the key aspects of how the Group has applied the principles and recommendations set out in the Malaysian Code on Corporate Governance 2012 (“the Code”).

1. ROLES AND RESPONSIBILITIES

1.1 Board Charter

The Board recognises the important role its plays in charting the strategic direction, managing the business and affairs of the Group including ensuring compliance with the Group’s corporate governance objectives.



The duties and responsibilities of the Board are clearly set out in the Board Charter as follows: (a) Reviewing, approving and monitoring the Group’s overall strategic and financial plans; (b) Overseeing the Group’s business operations and financial performance to ensure that the businesses are being properly managed. This includes ensuring the solvency of the Group and the ability of the Group to meet its contractual obligations and to safeguard its assets; (c) Establishing the Group’s corporate values, vision and mission, including governance systems and processes in line with the principles of good corporate governance; (d) Identifying principal risks and ensuring the implementation of appropriate internal controls and mitigation measures to manage risks; (e) Reviewing the adequacy and the integrity of the Group’s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives, and guidelines; (f) Overseeing the development and implementation of policies and/or programmes for effective communication with shareholders and/or investors; (g) Considering emerging issues which may be material to the Group’s business and affairs and ensure that the Group has proper succession plan for senior management.



The Chairman of the Board, Tan Sri Dato’ Dr Yahya bin Awang, is an Independent Non-Executive Director. The directors holding executive office are Tan Sri Dato’ Surin Upatkoon, the Managing Director, and Mr Ng Kok Cheang and Ms Ivevei Upatkoon, the Executive Directors.



There is a clear segregation of responsibilities between the Chairman, the Managing Director and the Executive Directors to ensure an appropriate balance of power, authority and accountability at the Board level. The Chairman of the Board provides overall leadership to the Board in decision making and is responsible for the orderly conduct of the Board such that no one individual has unfettered powers of decision.



The Managing Director and the Executive Directors are responsible for the day-to-day management of the Group’s business operations and implementation of decisions of the Board. Non-Executive Directors play a key supporting role, contributing their knowledge and experience in the decision-making process and towards the formulation of the Company’s goals and policies.



The Board Charter is available on the Company’s corporate website at www.mphbcap.com.my. The Board Charter will be periodically reviewed, as and when necessary. ANNUAL REPORT 2013

17

CORPORATE GOVERNANCE STATEMENT (cont’d) 1.2 Board Committees

The Board has established three (3) Board Committees, namely, the Nomination Committee, the Remuneration Committee and the Audit Committee to assist the Board in the discharge of its duties and responsibilities.



The Board Committees deliberate in greater details and examine the issues within its terms of reference as set out by the Board and make the necessary recommendations to the Board which retains full responsibility.

1.3 Promoting Ethical Standards

The Board has formally adopted a Directors’ Code of Business Conduct and Ethics which requires directors to uphold good business ethics and conduct in their performance of their duties, business dealings and all aspects of the Group’s business.



During the year, the Group had also put in place a Whistle Blowing Policy which serves as a guide for employees to report or raise any genuine concerns about possible improprieties in matters of financial reporting, unethical behaviour, non-compliance with regulatory requirements and other malpractices.

1.4 Strategies Promoting Sustainability

The Group aims to promote sustainable growth in every aspects of the Group’s business through constant review of its business strategies to create greater customer awareness, to provide better and more innovative products and to pursue excellent services to sustain its competitive edge. At workplace, the Group is committed to promote staff welfare through the provision of attractive remuneration and fringe benefits, a safe and healthy working environment as well as skill and competency development for staff.

1.5 Access to Information and Advice

18



The Board receives update by the Management on the Group’s operations and performance and the status of implementation of the strategic plans during the Board Meetings. Notice of meetings, setting out the agenda and accompanied by the relevant Board papers are given to the Directors prior to each Board Meeting in sufficient time to enable the Directors to peruse, obtain additional information and/or seek further clarification on the matters to be deliberated.



The Board’s rights to information and access to independent advice are entrenched in the Board Charter. The Board has direct access to the Management, including the advice and services of the Company Secretary, and has full and unrestricted access to information in relation to the Group’s business and affairs. The Directors may, in their discharge of their duties, request to be furnished with additional information or clarification on complex/technical issues. The Directors are at liberty to seek independent professional advice at the Company’s expense, if necessary, after consultation with the Chairman and the rest of the Board members.



The Board is regularly updated by the Company Secretary on the new statutory/regulatory requirements required to be observed by the Directors and/or the Company. The Company Secretary attends all Board Meetings and ensures that records of the proceedings of the Board meetings are properly kept. The Company also serves notice to the Directors and principal officers to notify them of the closed periods for dealing in the Company’s shares pursuant to provisions of the Main Market Listing Requirements of the Bursa Malaysia Securities Berhad ( “Listing Requirements”).

CORPORATE GOVERNANCE STATEMENT (cont’d) 2. STRENGTHEN COMPOSITION



2.1 Board Composition

The Board, as at the date of this statement, has six(6) members, comprising a Non-Executive Chairman, a Managing Director, two(2) Executive Directors and two(2) Non-Executive Directors, total of whom two (2) are Independent Non-Executive Directors. The Board is satisfied that the number of independent directors, which represents one-third of the Board, fulfils the Listing Requirements and is sufficient to fairly reflect the investment of the minority shareholders.



The size and composition of the Board are adequate to provide for a diversity of views and to facilitate effective decision making. The directors are from diverse backgrounds with expertise and skills in the areas of medicine, business management, property development, property management, project management, corporate affairs, banking, stockbroking, finance, accounting, corporate finance/advisory and system consulting. A brief profile of each Director is set out in this Annual Report.



The appointment of Ms Ivevei Upatkoon as Executive Director on 20 February 2014 reflects that the Board recognises the value of a lady member on the Board and was an initial step taken by the Board towards achieving a more gender diversified Board.

2.2 Nomination Committee

The Nomination Committee comprises the following non-executive directors, the majority of whom are independent directors:-



Tan Sri Dato’ Dr Yahya bin Awang (Independent Non-Executive Director)

-

Chairman



Dato’ Lim Tiong Chin (Non-Independent Non-Executive Director)

-

Member

Mr Kuah Hun Liang - Member (Independent Non-Executive Director)

The Nomination Committee is primarily responsible for the following:(i)

To consider, evaluate and recommend suitable candidates for appointment to the Board.

(ii) To assess the performance and effectiveness of the Board as a whole, Board Committees, as well as each individual Director, on an annual basis. The assessment includes assessment of independence of independent directors. (iii) To oversee the overall composition of the Board in terms of appropriate size, required mix of skills, experience and core competencies. The Nomination Committee met once during the year 2013, which was attended by all members. The Nomination Committee has undertaken the following activities during the second half of 2013:(a) Established the forms and criteria for assessment of the performance of the Board and individual directors as well as the criteria for the assessment of the independent directors. (b) Established the board nomination and election process of directors and criteria used by the nomination committee in the selection process.

ANNUAL REPORT 2013

19

CORPORATE GOVERNANCE STATEMENT (cont’d) (c) Assessed the training needs of each directors for 2013.

The following annual assessment/review in respect of 2013 was undertaken by the Nomination Committee in 2014:(i) Assessment of the Board’s effectiveness as a whole. (ii) Assessment of the performance assessment of each individual Director. (iii) Review the overall composition of the Board in terms of the appropriate size, mix of skills, experience, core competencies and board balance. (iv) Review of the independence of its independent directors.





The criteria for the assessment of the Board’s performance cover specific areas such as board conduct, board processes, board accountability, board governance, succession planning and interaction with management and stakeholders. For individual self-assessment, the assessment criteria include integrity, commitment, leadership, knowledge and communication ability. As for independent directors, the criteria for assessing the independent directors include the relationship between the independent director and the Company and his involvement in any significant transaction with the Company.

2.3 Appointment of Directors

The Nomination Committee has put in place the following process for selection or nomination of suitable candidates to be appointed as directors:Stage 1 Stage 2 Stage 3 Stage 4 Stage 5



: : : : :

Identification of candidates Meeting up with the candidates (where feasible) Evaluation of suitability of candidates Final deliberation by the Nomination Committee Recommendation to the Board

The Nomination Committee considers, among others, the following criteria in making recommendations to the Board on suitable candidates for appointment as Directors:(a) Whether the candidate have key qualities such as honesty, personal/financial integrity, diligence and professionalism. (b) Whether the candidate possesses the necessary qualification, training, skills, expertise, practical experience and ability to understand the technical requirements of the business, the inherent risks and the management process required to perform his role as a director of the Company effectively. (c) Whether the candidate has the commitment to effectively fulfill the role and responsibilities as a director, having regard to his existing directorships and other commitments. (d) Whether the candidate is likely to work constructively with the existing directors and contribute to the overall effectiveness of the Board. (e) Whether the candidate complies with provisions of the Listing Requirements governing the directors of listed issuer.



20

The proposed appointment of a new director to the Board will be approved by full Board based on the recommendation of the Nomination Committee.

CORPORATE GOVERNANCE STATEMENT (cont’d)



2.4 Remuneration Committee

The Remuneration Committee consists of the following directors, the majority of whom are Independent Non-Executive Directors:-



Tan Sri Dato’ Dr Yahya bin Awang (Independent Non-Executive Director)

-

Chairman



Tan Sri Dato’ Surin Upatkoon (Non-Independent Managing Director)

-

Member



Mr Kuah Hun Liang (Independent Non-Executive Director)

-

Member



The Remuneration Committee is primarily responsible for the formulation of remuneration policy such as rewards and benefits and other terms of employment of the Managing Director and Executive Directors as well as for the Senior Management and staff. The Remuneration Committee held one (1) meeting during the year, which was attended by all members.

2.5 Remuneration of Directors

The Company believes that the levels of directors’ remuneration must be sufficient to attract, retain and motivate directors of the necessary calibre, expertise and experience to lead and manage the Group effectively. The remuneration of the Managing Director and Executive Directors are linked to the corporate and individual performance. The directors’ fees payable to directors are endorsed by the Board based on the recommendation of the Remuneration Committee and shall be tabled for the approval of shareholders at the forthcoming annual general meeting of the Company. The quantum of fixed fee takes into consideration of the directors’ increased fiduciary duties and responsibilities, accountability to shareholders, memberships in Board Committees and performance and scope of business of the Group.



The aggregate remuneration of Directors of the Company in respect of the financial year ended 31 December 2013 categorised into appropriate components is as follows:-



Directors of the Company

Number of Directors 2013

Executive Directors

2012

Non- Executive NonExecutive Directors Executive Directors Directors



RM0 to RM50,000

-

1

-

-



RM50,001 to RM100,000

-

2

-

-



RM350,001 to RM400,000

1

-

-

-



RM800,001 to RM850,000

1

-

-

-

ANNUAL REPORT 2013

21

CORPORATE GOVERNANCE STATEMENT (cont’d) 3. REINFORCE INDEPENDENCE

The Independent Directors play a pivotal role in corporate accountability and provide unbiased and independent views and judgement to the Board’s deliberation and decision making as well as in safeguarding the interest of minority shareholders. The concept of independence adopted by the Board is in accordance with the definition in paragraph 1.01 of the Listing Requirements. For the financial year under review, the two(2) Independent Non-Executive Directors have affirmed their independence based on the criteria of Independent Directors adopted by the Company.



The Nomination Committee has, upon the annual assessment in 2014, concluded that the two(2) Independent Non-Executive Directors of the Company have continued to be independent, and they have demonstrated that they have exercised unbiased and independent judgement in the discharge of their duties as Independent Directors. None of the independent directors had any business or other relationship which could materially interfere with their exercise of independent judgement, objectivity or the ability to act in the best interest of the Company.



During the year 2013, the Board has adopted the Code’s recommendation that the tenure of service of an independent director of the Company shall not exceed a cumulative term of nine (9) years.

4. FOSTER COMMITMENT

4.1 Time Commitment and Board Meetings

The Board is satisfied with the level of commitment given by the Directors towards fulfilling their roles and responsibilities as Directors. All the board members comply with the restriction on the number of directorships in public listed companies as prescribed under the Listing Requirements. Directors are required to notify the Board for accepting any new appointment as director in other companies. These would ensure that the Directors’ commitment and time are focused on the affairs of the Group to enable them to discharge their duties effectively.



During the year 2013, two(2) Board Meetings were held where the Board had deliberated and considered various issues including the Group’s performance, business strategies and quarterly financial results. The Board also reviewed the adequacy of the Group’s internal control system, identified and addressed principal risks in the Group through the Audit Committee. The Board takes note of the decisions and salient issues deliberated by the Audit Committee through minutes of the Audit Committee meetings tabled at the Board Meetings. The Chairman of the Audit Committee would inform the Directors at Board Meetings, of any salient matters noted by the Audit Committee and which require the Board’s attention or direction.



The details of attendance of the Directors at the Board Meetings held in 2013 are set out below: Name of Directors

Total Number of Board Meetings Held in 2013*

Total Number of Board Meetings Attended in 2013

Tan Sri Dato’ Dr Yahya bin Awang

2

2

Tan Sri Dato’ Surin Upatkoon

2

2

Mr Ng Kok Cheang

2

2



Dato’ Lim Tiong Chin

2

2



Mr Kuah Hun Liang

2

2

Ms Ivevei Upatkoon (Appointed on 20 February 2014)

-

-



Note: * 22

Board Meetings held after the Company’s listing on the Main Market of Bursa Malaysia Securities Berhad on 28 June 2013.

CORPORATE GOVERNANCE STATEMENT (cont’d)

The Board Meetings’ dates are planned ahead of schedule and a commitment is obtained from the Directors on their availability to attend the Board Meetings.

4.2 Training

The Board recognises the importance of continuing training and education for its members to ensure they are equipped with the necessary skills and knowledge on changes in both the regulatory and business environments as well as with new developments within the industry in which the Group operates.



During the financial year 2013, the Directors have attended the following training programmes or seminars:Directors

Title of Training

Tan Sri Dato’ Dr Yahya bin Awang

•

Financial Institutions Directors’ Education Programme by The Iclif Leadership and Governance Centre

•

Training on Malaysian Financial Reporting Standards (“MFRS”) 10, 11 and 12, Interpretation 15 Agreements for the Constructions of Real Estate (“IC 15”) and updates on Goods and Services Tax by Messrs Ernst & Young (“EY”).

Tan Sri Dato’ Surin Upatkoon

•

Training on MFRS 10, 11 and 12, IC 15 and updates on Goods and Services Tax by EY

Mr Ng Kok Cheang

•

Training on MFRS 10, 11 and 12, IC 15 and updates on Goods and Services Tax by EY

Dato’ Lim Tiong Chin

•

Training on MFRS 10, 11 and 12, IC 15 and updates on Goods and Services Tax by EY

Mr Kuah Hun Liang

•

Managing Asia Competitive Landscape

•

PWC Board Agenda Series

•

Dialogue on Financial Services Act and Islamic Financial Services Act by Bank Negara Malaysia

•

Success on corporate banking by EY

•

The future banking by Dr Fleming

•

Managing talents at Board and Management by Professor Dave Ulrich

•

Training on MFRS 10, 11 and 12, IC 15 and updates on Goods and Services Tax by EY

ANNUAL REPORT 2013

23

CORPORATE GOVERNANCE STATEMENT (cont’d) 5. UPHOLD INTEGRITY IN FINANCIAL REPORTING



5.1 Financial Reporting

The Board upholds the integrity in financial reporting by ensuring that shareholders are provided with a balanced, clear and reliable assessment of the financial performance and prospects of the Group in the interim financial statements and annual financial statements.



The Audit Committee is entrusted with the responsibility of reviewing the integrity and reliability of the Group’s interim and annual financial statements as well as ensuring that these financial statements comply with the relevant accounting and regulatory requirements prior to recommending for the Board’s approval. The Audit Committee also reviews the appropriateness of the Group’s accounting policies and the changes to these policies.



The details of the composition, terms of reference and activities of the Audit Committee during the year are set out in the Audit Committee Report in this Annual Report.

5.2 Relationship with External Auditors

The Audit Committee maintains a formal and transparent relationship with external auditors. To ensure independence and objectivity, the Audit Committee had met with external auditors once without the presence of the Management in 2014 to discuss the Group’s audited financial statements for the year ended 31 December 2013 and any matters arising from the audit. The external auditors have also given a written assurance to the Audit Committee in relation to the audit of the Group’s audited financial statements that they were independent in accordance with the By-laws of the Malaysian Institute of Accountants.



The Audit Committee had in 2014 assessed the performance and independence of the external auditors of the Company based on criteria approved by the Board. The Audit Committee, has upon its assessment, was satisfied with EY’s performance, technical competence and audit independence.

6. RECOGNISE AND MANAGE RISK



6.1 Risk Management and Internal Controls

The Board has the overall responsibility of establishing a sound system of internal control and in determining the Group’s level of risk tolerance as well as to continuously identify, assess and monitor principal risks faced by the Group to safeguard shareholders’ investments and the Group’s assets.



The Board is assisted by the Audit Committee to periodically review the effectiveness of the risk management processes and the system of internal controls of the Group. The review covers the financial, operational, compliance controls and risk assessment including ensuring that adequate infrastructure, resources and systems are in place for effective risk management of the Group.



The Statement of Risk Management and Internal Control, which provides an overview of the state of risk management and internal control within the Group, is set out in the Annual Report.

6.2 Internal Audit Function

24

The Company has established a Group Internal Audit Department (“GIAD”) to assist the Board in maintaining a sound system of risk management and internal control. Formal procedures are in place for the GIAD to report independently to the Audit Committee on their audit findings and the rectification steps taken by the Management. The frequency of audit on each business or operational units was determined by the level of risk assessed and greater focus is set for higher risk areas.

CORPORATE GOVERNANCE STATEMENT (cont’d)

The Audit Committee is satisfied that the GIAD has an appropriate standing within the Group to perform its function effectively. The Head of GIAD is an associate member of the Chartered Institute of Management Accountants and Institute of Internal Auditors. The GIAD carries out its audit activities in accordance with the Standards for Professional Practice of Internal Auditing set by the Institute of Internal Auditors Malaysia.

7. ENSURE TIMELY AND HIGH QUALITY DISCLOSURE

The Board recognises the importance of providing investors and shareholders with timely and accurate information on the Group’s major developments through disclosures and/or announcements made to Bursa Malaysia Securities Berhad (“Bursa Securities”). The Group announces its performance to Bursa Securities on a quarterly basis and the Annual Report is issued on an annual basis to provide shareholders and investors with information on the Group’s business review, financial performance and governance framework. The Company has established a website, www.mphbcap.com.my, which the shareholders and members of the public can access for corporate information and new events relating to the Group.



The Group employs best efforts to ensure that no disclosure of material information is made on a selective basis to any parties unless such information has been previously been disclosed and announced to Bursa Securities. The Board has adopted an internal Corporate Disclosure Policy to facilitate the proper handling of confidential and/or material information to avoid leakage and improper use of such information. The policy clearly sets out the levels of authority to be accorded to designated persons for approving, verifying and disclosing material information to shareholders and stakeholders to ensure compliance with the Listing Requirements.

8. STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS

8.1 Annual General Meeting

The Board regards the Annual General Meeting (“AGM”) as the principal forum for dialogues and interactions with the shareholders of the Company. At the forthcoming AGM, shareholders will be accorded the opportunity and time to enquire on the resolutions being proposed at the AGM and on matters relating to the operations and affairs of the Group. The Board members, Senior Management of the Company as well as the Auditors of the Company will be in attendance to provide clarifications to shareholders’ queries.

8.2 Investors’ Relations

The Company had, from time to time, held meetings and dialogues with investors and research/investment analysts to convey information regarding the Group’s performance, corporate developments and business strategies. Press interviews were also conducted on significant corporate developments to keep the investing community and shareholders updated on the progress and developments of the business of the Group.



The Board has identified and appointed Tan Sri Dato’ Dr Yahya bin Awang, the Chairman of the Board, to whom shareholders may direct any concerns in respect of the Group.

COMPLIANCE STATEMENT The Board is satisfied that the Company has complied substantially with the principles and recommendations of the Code. This Corporate Governance Statement was approved by the Board on 23 April 2014.

ANNUAL REPORT 2013

25

ADDITIONAL CORPORATE DISCLOSURES 1. Utilisation of Proceeds

During the financial year ended 31 December 2013, there were no corporate proposals in which proceeds had been raised.

2. Share Buy-Back

The Company did not propose/undertake any share buy-back during the financial year ended 31 December 2013.

3. Options or Convertible Securities

The Company did not issue any options and convertible securities during the financial year ended 31 December 2013.

4. Depository Receipt Programme

The Company did not sponsor any Depository Receipt programme during the financial year ended 31 December 2013.

5. Sanctions and/or Penalties Imposed

There were no sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by the relevant regulatory authorities during the financial year ended 31 December 2013.

6. Non-Audit Fees

During the financial year ended 31 December 2013, the following non-audit fees were paid to the Group’s external auditors, Messrs Ernst & Young (“EY”):-



Non-audit services rendered by EY Subsidiaries (RM)

(a) Professional fees rendered in relation to the training on Malaysian Financial Reporting Standards, and Goods and Services Tax

1,676

Company (RM)

9,499

7. Variation in Results

There were no variances of 10% or more between the audited results for the financial year ended 31 December 2013 and the unaudited results previously announced.

8. Profit Guarantee

There was no profit guarantee received by the Company during the financial year ended 31 December 2013.

9. Material Contracts Involving Directors’ and Major Shareholders’ Interest

26

Save as disclosed in the Audited Financial Statements of the Group and the Company for the year ended 31 December 2013, none of the Directors and Major Shareholders of the Company have any material contracts with the Company and/or its subsidiaries.

DIRECTORS’ RESPONSIBILITY STATEMENT The Directors are required by the Malaysian Companies Act 1965 (“CA”) to prepare the financial statements for each financial year which have been drawn up in accordance with the applicable Malaysian Financial Reporting Standards, International Financial Reporting Standards, the provisions of the CA and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The Directors are responsible to ensure that the financial statements give a true and fair view of the state of affairs of the Group and the Company at the end of the financial year, and of the results and cash flows of the Group and the Company for the financial year. In preparing the financial statements, the Directors have:• adopted and applied appropriate accounting policies and practices consistently; • made judgements and estimates that are based on reasonableness and prudence; and • prepared the financial statements on a going concern basis. The Directors have ensured that the Group and the Company keep proper accounting records to enable the preparation of the financial statements with reasonable accuracy. The Directors have an overall responsibility for taking reasonable steps to safeguard the assets of the Group and the Company to detect and prevent fraud and other irregularities.

ANNUAL REPORT 2013

27

AUDIT COMMITTEE REPORT CONSTITUTION The Audit Committee was constituted by the Board on 1 August 2012.

MEMBERSHIP The composition of the Audit Committee and the attendance of the Audit Committee members during the financial year ended 31 December 2013, where a total of two(2) meetings were held, are as follows:Name

Designation/Directorship

Number of Meetings Attended

Mr Kuah Hun Liang

Chairman/Independent Non-Executive Director

2/2

Tan Sri Dato’ Dr Yahya bin Awang

Member/Independent Non-Executive Director

2/2

Dato’ Lim Tiong Chin

Member/Non-Independent Non-Executive Director

2/2

The composition of the Audit Committee complies with Paragraph 15.09 of the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”). The Audit Committee Meetings were appropriately structured through the use of agenda, which were distributed to members prior to the meeting. The Managing Director, the Chief Operating Officer, the Head of Finance, the Head of Group Internal Audit and the Company Secretary were present by invitation at all the meetings. Representatives of the external auditors, Messrs Ernst & Young were present as and when invited.

TERMS OF REFERENCE COMPOSITION (a) The Audit Committee shall be appointed by the Directors from amongst their members (pursuant to a resolution of the Board of Directors) which fulfills the requirements as prescribed under Paragraph 15.09 of the MMLR and paragraph 7.0 of Practice Note 13 of the MMLR. (b) No alternate director shall be appointed as a member of the Audit Committee. (c) Any vacancy, which affects the composition, must be filled within three (3) months. (d) The members of the Audit Committee shall elect a Chairman, from among their members, who shall be an Independent Non-Executive Director. (e) The Company Secretary of MPHB Capital shall serve as Secretary of the Audit Committee (“Secretary”). (f) The Board of Directors shall review the term of office and performance of the Audit Committee and each member no less than once in every three (3) years.

28

AUDIT COMMITTEE REPORT (cont’d) MEETINGS AND REPORTING PROCEDURES (a) The Audit Committee shall meet not less than four (4) times a year, with each meeting planned to coincide with key dates in the Company’s financial reporting cycle. The majority of Audit Committee members present must be Independent Directors to form a quorum to the meeting. (b) The Audit Committee shall meet with the external auditors without the presence of Executive Board members and employees of the Company, whenever deemed necessary. (c) The Secretary is responsible for :(i) drawing up the agenda together with the Chairman, and circulating it, supported by explanatory documentation, to the committee members prior to each meeting; (ii) recording attendance of all members and invitees; (iii) recording all proceedings, and preparing and keeping minutes of all meetings; and (iv) circulation of the minutes to all Board members at each Board Meeting. (d) The Head of Finance and the Head of Group Internal Audit should normally attend meetings upon invitation of the Audit Committee. Other Directors, employees and representatives of the external auditors shall attend any particular Audit Committee meeting only at the Audit Committee’s invitation, specific to the relevant meeting.

AUTHORITY The Audit Committee shall have the authority to: (a) investigate any matter within its terms of reference; (b) have the resources which are required to perform its duties; (c) have full and unrestricted access to any information pertaining to the Company; (d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; (e) obtain independent professional advice it considers necessary; (f) convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other Directors and employees of the Company, whenever deemed necessary; (g) report promptly any breaches of the MMLR, which have not been satisfactorily resolved by the Board, to the Bursa Securities; and (h) convene a meeting, upon request of the external auditors, to consider any matter the external auditors believe should be brought to the attention of the Directors or shareholders.

ANNUAL REPORT 2013

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AUDIT COMMITTEE REPORT (cont’d) FUNCTIONS The Audit Committee shall undertake the following responsibilities and duties and report to the Board of Directors: (a) Review the quarterly results and year-end financial statements, prior to the approval of the Board of Directors, focusing particularly on: (i)

changes in or implementation of major accounting policies and practices;

(ii) significant and unusual events; (iii) going concern assumptions; and (iv) compliance with accounting standards, regulatory and other legal requirements. (b) Review/recommend the nomination, appointment, re-appointment and performance of external auditors, the audit fee and any question of resignation or dismissal before making recommendations to the Board; and evaluate if there is reason (supported by facts) to believe that the Company’s external auditors are not suitable for re-appointment. (c) Review/discuss with the external auditors: (i)

the audit scope and plan, and ensure co-ordination where more than one audit firm is involved;

(ii) its evaluations of the system of internal control; (iii) the results of the interim (if any) and final audits and the Management’s response thereto; (iv) problems and reservations arising from the interim (if any) and final audits, and any matter the auditors may wish to discuss (in the absence of the management, where necessary); (v) the assistance given by the employees to the external auditors, and any difficulties encountered in the course of the audit work. (d) Establish an internal audit function which is independent of the activities it audits and oversee its function as follows: (i)

the Head of Internal Audit shall report directly to the Audit Committee;

(ii) review the adequacy of the internal audit scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work; (iii) review the internal audit department’s progress of audit activities, the results of the internal audit activities or investigation undertaken, and whether or not appropriate action is taken on the recommendations of the internal audit function; (iv) determine the remit of the internal audit function; (v) review any appraisal or assessment of the performance of members of the internal audit function; (vi) approve any appointment, transfer or termination of senior staff members of the internal audit function and take cognizance of resignation and providing the resigning members an opportunity to submit reasons for resigning.

30

AUDIT COMMITTEE REPORT (cont’d) (e) Review any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raise questions of management integrity. (f)

Direct, and where appropriate, supervise any special projects or investigation considered necessary, and review investigation reports on any major defalcations, frauds and thefts.

(g) Carry out any such other functions as authorised by the Board of Directors.

SUMMARY OF ACTIVITIES OF AUDIT COMMITTEE During the financial year and up to the date of this report, the Audit Committee had carried out its duties in accordance with its Terms of Reference. The activities undertaken by the Audit Committee were as follows: (a) Reviewed the unaudited quarterly financial results before recommending to the Board for their approval and subsequent release of the results to Bursa Securities. (b) Reviewed with the external auditors on the annual audited financial statements of the Group to ensure that compliance with applicable approved accounting standards and legal requirements were met before recommending to the Board for their approval. Any significant audit findings and accounting issues were deliberated at the Audit Committee Meeting. (c) Reviewed the Audit Planning Memorandum of the external auditors, in terms of the nature of the audit procedures, significant accounting and auditing issues, impact of new or proposed changes in the accounting standards and regulatory requirements for the financial year 2013. (d) Reviewed and approved the Group Internal Audit Department’s (“GIAD”) Annual Audit Plan in ensuring that adequate scope and comprehensive coverage on the audit activities and principal risk areas are adequately identified and covered. (e) Reviewed the adequacy of staff and resources within the GIAD to ensure satisfactory performance of GIAD. (f) Met with the external auditors without the presence of any Executive Board members and Management, to discuss issues arising from the final audits, or any other matters the auditors may wish to discuss, including the level of assistance provided by the Group’s employees to the auditors, and any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information. (g) Reviewed the independence, objectivity, effectiveness and terms of engagement of the external auditors. (h) Reviewed the GIAD’s progress of audit activities and the internal audit reports of the Group, which highlighted issues, recommendations and Management’s responses to ensure appropriate actions were taken to improve the system of internal controls based on improvement opportunities identified in the internal audit reports. (i)

Reviewed with the external auditors on the Statement on Risk Management and Internal Control for inclusion in the annual report prior to Board’s approval.

(j)

Reviewed the Audit Committee Report for inclusion in the annual report prior to Board’s approval.

ANNUAL REPORT 2013

31

AUDIT COMMITTEE REPORT (cont’d) SUMMARY OF ACTIVITIES OF INTERNAL AUDIT FUNCTION FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 During the financial year ended 31 December 2013, the Internal Audit Department carried out the following activities:(a) Prepared the annual audit plan for the review and approval of the Audit Committee. The annual audit plan was prepared using a risk-based methodology, including input from the Chairman of Audit Committee and Senior Management. (b) Regularly performed risk based audits, which covered reviews of the internal control system, risk management, accounting and management information system. (c) Issued audit reports to the Audit Committee and Management identifying weaknesses and issues as well as highlighting recommendations for improvements. The costs incurred for the internal audit function of the Group for financial year ended 31 December 2013 was RM50,000. This Audit Committee Report was approved by the Board on 23 April 2014.

32

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Responsibility The Board of Directors (“Board”) recognises the importance of maintaining a sound internal control system and a robust risk management framework for good corporate governance; with the objective of safeguarding the shareholders’ investment, the interest of customers, regulators and the Group’s assets. The Board affirms its overall responsibility for reviewing the adequacy and the effectiveness of the Group’s risk management and internal control system. This includes reviewing the adequacy and integrity of financial, operational and compliance controls and risk management procedures. The Management assists the Board in the implementation of the Board’s policies and procedures on risk and control by identifying, assessing, monitoring and reporting risks and internal control; as well as taking proper actions to address the risks. The Board has received assurance from the Managing Director and Head of Finance & Administration that the Group’s risk management and internal control systems have operated adequately during the year under review, in all material aspects. The assurance has been given based on the internal audit function, management letters provided by external auditors, reviews performed by management and various Board Committees as well as reliance on confirmations by management. However, it should be noted that such system, by its nature, manages the Group’s key areas of risk within acceptable risk profile rather than eliminates the risk of failure of achieving the Group’s objectives and therefore can provide only reasonable and not absolute assurance against material misstatement, loss or fraud. The Board is committed and will continue to take measures to strengthen the risk management and internal control environment of the Group based on the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers. The Board in 2014 will review the current systems in the Company, including the assurance process to strengthen the internal controls and risk management in the Company.

Key Risk Management and Internal Control Processes 1.

2.

Risk Management •

Risk Management is firmly embedded in the Group’s culture, processes and structure of the Company.

•

The Group has in place an ongoing review process for identifying, evaluating, monitoring and managing the significant risks affecting the achievement of its business objectives. This review process is conducted by the Company’s management team and Group Internal Audit Department.

•

The Group will continue to foster a risk-aware culture in all decision-making and to commit in managing all risks in a proactive and effective manner. This is to enable the Group to respond effectively to the changing business and competitive environment which is critical for the Group’s sustainability and the enhancement of shareholders’ value.

Independent Assurance Mechanism •

The Group has a Group Internal Audit Department (“GIAD”) which carries out its functions independently and provides the Audit Committee and the Board with the assurance on the adequacy and integrity of the system of internal controls.

•

Risk-based internal audits are carried out by the GIAD focusing on key risk areas. It provides a systematic and disciplined approach to evaluate and improve the effectiveness of the Group’s risk management, internal control, and governance processes.

ANNUAL REPORT 2013

33

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont’d)

3.

•

The findings of the internal audits are discussed with Management and affirmative action agreed in response to the audit recommendations are duly documented in the audit report and tabled at the Audit Committee meetings. Follow ups will be carried out by GIAD should there be unresolved findings and the status of actions taken by Management will be reported to the Audit Committee.

•

The Audit Committee reviews and approves the Annual Internal Audit Plan. It also reviews the internal audit function and quality of internal audits.

•

In addition to this internal mechanism, the Audit Committee also reviews the detailed audit reports and management letter from its external auditors.

Other Key Elements of Internal Control Systems •

The Group has clear and formally defined approving authority limits and authorization procedures, which is the primary instrument that governs and manages the business decision making process within the Group. It also ensures that a system of internal control and checks and balances are incorporated therein.

•

An annual budget is reviewed and approved by the Board. The actual performance is assessed against the approved budget where explanations, clarifications and corrective actions taken are regularly reported by the Management for significant variances to the Board. The Board also approves any changes or amendments to the Group’s policies.

•

Management has introduced well-established standard operating procedures that cover the key aspects of the Group’s various business processes. The procedures are subject to regular reviews to cater for process changes, changing risks or further improvements.

•

Aside from the standard operating procedures, changes in internal control procedures are also communicated via circulars and internal memos. Such circulars and memos are properly authorised by the relevant members of senior management.

•

The Group places much emphasis on human capital management and talent management with the objectives of ensuring staff of all levels are adequately trained and competent to carry out their duties and responsibilities towards achieving the Group’s objectives.

•

The Management team undertakes site visits to the operating units and communicates with various levels of staff to gauge the effectiveness of the strategies discussed and implemented as well as understand their problems and concerns with regard to daily operations. This is to ensure that a transparent and open channel of communication is maintained and to enable prompt corrective actions taken for any deficiencies noted.

•

The Group has in place a Whistle Blowing Policy that is approved by the Board. The policy outlines the Group’s commitment towards enabling the employees to raise concerns in a responsible manner regarding any wrong doings or malpractices without being subject to victimization or discriminatory treatment, and to have such concerns properly investigated. All the disclosures made under the Policy will be handled with strict confidence. The Policy promotes a culture of honesty, openness and transparency within the Group.

Board Assessment Taking into consideration the assurance from the Managing Director and Finance & Administration Head and input from the relevant assurance providers, the Board is of the view that the Group’s risk management and internal control systems are operating adequately and effectively in all material aspects, during the year under review.

34

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont’d)

Review of this Statement As required by Para 15.23 of the Main Market Listing Requirements, the external auditors have reviewed the Statement on Risk Management and Internal Control. This review was performed in accordance with Recommended Practice Guide (“RPG”) 5 issued by the Malaysian Institute of Accountants (“MIA”). Based on the review, the external auditors have reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the processes adopted by the Board in reviewing the adequacy and integrity of the risk management and internal control system within the Group. RPG 5 does not require the external auditors to consider whether the Statement on Risk Management and Internal Control covers all the risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the assessment and opinion by the Board and management thereon. This Statement is made in accordance to the resolution of the Board dated 23 April 2014.

ANNUAL REPORT 2013

35

Directors’ report anD auDiteD Financial statements 37 - 41 42

Statement by Directors

42

Statutory Declaration

43 - 44

Independent Auditors’ Report

45 - 46

Statements of Comprehensive Income

47 - 48

Statements of Financial Position

49 - 50

Statements of Changes in Equity

51 - 53

Statements of Cash Flows

54 - 135

36

Directors’ Report

Notes to the Financial Statements

Directors’ report

The Directors have pleasure in submitting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2013. Principal activities The principal activities of the Company are that of investment holding and provision of management services. The principal activities of the subsidiaries is as disclosed in Note 38. There have been no significant changes in the nature of these principal activities during the financial year. Results Group Company RM’000 RM’000 Profit for the year 46,872 37,870 Attributable to: Owners of the Company 48,249 Non-controlling interests (1,377) 46,872 There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. In the opinion of the Directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. Dividend A final dividend of 5 sen single-tier dividend per share for the financial year ended 31 December 2013 has been proposed subject to Bank Negara Malaysia’s approval and shareholders’ approval at the forthcoming Annual General Meeting. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by Bank Negara Malaysia and shareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 December 2014. .

ANNUAL REPORT 2013

37

Directors’ report (cont’d)

Directors The Directors of the Company in office since the date of the last report and at the date of this report are: Tan Sri Dato’ Dr Yahya bin Awang Tan Sri Dato’ Surin Upatkoon Mr Ng Kok Cheang Dato’ Lim Tiong Chin Mr. Kuah Hun Liang Ms. Ivevei Upatkoon (Appointed on 20 February 2014) Directors’ benefits Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the Directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors as shown in Note 6(b) to the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with any Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest, except as disclosed in Note 31 to the financial statements. Directors’ interests According to the register of Directors’ shareholdings, the interests of Directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows: Number of ordinary shares of RM1.00 each (d) As at As at Allotted 01.01.2013/ /Acquired Disposed 31.12.2013 Date of appointment Shares in the Company Direct Interest: Tan Sri Dato’ Dr Yahya bin Awang - 51,100 - 51,100 Mr Ng Kok Cheang - 263,900 - 263,900 Dato’ Lim Tiong Chin - 508,000 - 508,000 Mr Kuah Hun Liang - 241,100 - 241,100 Indirect/Deemed Interest: Tan Sri Dato’ Surin Upatkoon 2 (b) 714,999,998 (b)(f) (715,000,000) (b) - - 252,303,493 - 252,303,493 (c) Indirect Interest: Dato’ Lim Tiong Chin - 4,160,000 - 4,160,000 (e)

38

Directors’ report (cont’d)

Directors’ interests (cont’d) Number of ordinary shares of RM1.00 each As at As at (a) 01.01.2013/ Acquired Disposed 27.06.2013 Date of appointment Shares in former ultimate Holding Company Magnum Berhad (a) (formerly known as Multi-Purpose Holdings Berhad) Direct Interest: Tan Sri Dato’ Dr Yahya bin Awang 30,000 10,000 - 40,000 Mr Ng Kok Cheang 500,000 - - 500,000 Dato’ Lim Tiong Chin 1,000,000 - - 1,000,000 Mr Kuah Hun Liang 5,139,010 45,400 (45,400) 5,139,010 Indirect/Deemed Interest: Tan Sri Dato’ Surin Upatkoon 470,984,361 - - 470,984,361 (b) Indirect Interest: Dato’ Lim Tiong Chin 8,200,000 - - 8,200,000 (e) (a) As at 1 January 2013, MPHB Capital Berhad (“MPHB Capital” or “the Company”) was a wholly-owned subsidiary of Magnum Berhad (“Magnum”). On 27 June 2013, Magnum ceased to have any interest in MPHB Capital following the completion of the renounceable offer for sale by Magnum of 715,000,000 ordinary shares of RM1.00 each in MPHB Capital (“Offer Shares”) representing 100% equity interest in MPHB Capital to the existing shareholders of Magnum (“Offer for Sale”). Consequently, Magnum also ceased to be the ultimate holding company of the Company. (b) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through his shareholdings in Casi Management Sdn. Bhd. and Pinjaya Sdn. Bhd. and indirect interest held through his daughter, Ivevei Upatkoon. Tan Sri Dato’ Surin Upatkoon by virtue of his interest of not less than 15% in the voting shares in Magnum, is deemed to have an indirect interest in the shares of all subsidiaries of Magnum to the extent of Magnum’s interest in these subsidiaries. (c) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through his shareholdings in Casi Management Sdn. Bhd. and Pinjaya Sdn. Bhd. and indirect interest held through his daughters, Ivevei Upatkoon and Maythini Upatkoon. Tan Sri Dato’ Surin Upatkoon by virtue of his interest of not less than 15% in the voting shares in MPHB Capital, is deemed to have an indirect interest in the shares of all subsidiaries of MPHB Capital to the extent of MPHB Capital’s interest in these subsidiaries. (d) Allotment of MPHB Capital’s shares pursuant to the Offer for Sale on the basis of 1 Offer Share for every 2 existing ordinary shares of RM1.00 each held in Magnum. (e) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through his shareholdings of more than 15% in Keetinsons Sendirian Berhad and T.C. Holdings Sendirian Berhad. (f) Allotment and issuance of shares to Magnum as described below.

ANNUAL REPORT 2013

39

Directors’ report (cont’d)

Issuance of shares During the financial year, the Company increased its issued and paid-up capital from RM2.00 to RM715,000,000.00 through the allotment and issuance of 714,999,998 new ordinary shares of RM1.00 each in the Company pursuant to the Company’s acquisition shares in Caribbean Gateway Sdn. Bhd.,Tibanis Sdn. Bhd., Magnum.Com Sdn. Bhd., Mimaland Berhad, Magnum Leisure Sdn. Bhd., Leisure Dotcom Sdn. Bhd., Queensway Nominees (Asing) Sdn. Bhd., Queensway Nominees (Tempatan) Sdn. Bhd., West-Jaya Sdn. Bhd., Kelana Megah Development Sdn. Bhd. and Multi-Purpose Capital Holdings Berhad from Magnum for a total consideration of RM1,088,664,998.00, satisfied by a cash payment of RM77,574,000.00 and the issuance of 714,999,998 new ordinary shares of RM1.00 each in the Company at an issue price of RM1.00 per share. The fair value of the shares were RM1.4141 per share. Other statutory information (a) Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps: (i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and (ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the Directors are not aware of any circumstances which would render: (i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and (ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading. (c) At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. (d) At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amounts stated in the financial statements misleading. (e) As at the date of this report, there does not exist: (i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or (ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year. (f) In the opinion of the Directors: (i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and 40

Directors’ report (cont’d)

Other statutory information (cont’d) (ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made. Significant events during the financial year Significant events during the financial year are disclosed in Note 32 to the financial statements. Subsequent events Details of subsequent events are disclosed in Note 33 to the financial statements. Auditors The auditors, Ernst & Young, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the Directors dated 23 April 2014. Tan Sri Dato’ Surin Upatkoon Ng Kok Cheang

ANNUAL REPORT 2013

41

Statement by directors

Pursuant to Section 169(15) of the Companies Act, 1965

We, Tan Sri Dato’ Surin Upatkoon and Ng Kok Cheang, being two of the Directors of MPHB Capital Berhad, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 45 to 134 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2013 and of their financial performance and cash flows for the year then ended. The information set out in Note 40 to the financial statements have been prepared in accordance with the Guidance on Special Matter 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and directive of Bursa Malaysia Securities Berhad. Signed on behalf of the Board in accordance with a resolution of the Directors dated 23 April 2014. Tan Sri Dato’ Surin Upatkoon Ng Kok Cheang

Statutory declaration

Pursuant to Section 169(16) of the Companies Act, 1965

I, Tan Sri Dato’ Surin Upatkoon, being the Director primarily responsible for the financial management of MPHB Capital Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 45 to 135 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the abovenamed Tan Sri Dato’ Surin Upatkoon at Kuala Lumpur in the Federal Territory on 23 April 2014. Tan Sri Dato’ Surin Upatkoon Before me, M. SIVANASON (Licence No. W590) Commissioner for Oaths

42

Independent auditors’ report

to the members of MPHB Capital Berhad (Incorporated in Malaysia)

Report on the financial statements We have audited the financial statements of MPHB Capital Berhad, which comprise the statements of financial position as at 31 December 2013 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flow of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 45 to 134. Directors’ responsibility for the financial statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2013 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.  

ANNUAL REPORT 2013

43

Independent auditors’ report (cont’d)

to the members of MPHB Capital Berhad (Incorporated in Malaysia)

Report on other legal and regulatory requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: (a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act. (b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. (c) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act. Other reporting responsibilities The supplementary information set out in Note 40 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Yeo Beng Yean AF: 0039 No. 3013/10/14(J) Chartered Accountants Chartered Accountant Kuala Lumpur, Malaysia 23 April 2014

44

Statements of comprehensive income For the year ended 31 December 2013

Group Company Note 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 Revenue 3 245,973 46,905 Cost of sales 4 (164,592) - Gross profit Other income 5 Administrative expenses Other expenses

81,381 50,802 (36,636) (34,223)

46,905 412 (3,798) (2,777)

(168)

Operating profit/(loss) 6 Finance costs 7 Share of results of an associate

61,324 (3,835) 101

40,742 - -

(168) -

Profit/(loss) before tax Income tax expense 8

57,590 (10,718)

40,742 (2,872)

(168) -

Profit/(loss) for the year 46,872 37,870 (168) Other comprehensive income Items that are or may be reclassified subsequently to profit or loss Fair value reserves Net loss arising during the year (4,349) - Net realised gains transferred to profit or loss (6,170) - Tax effects

(10,519) 314

- -

-

(10,205) - Total comprehensive income/(loss) for the year 36,667 37,870 (168)

ANNUAL REPORT 2013

45

Statements of comprehensive income (cont’d)

For the year ended 31 December 2013

Group Company Note 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 Profit/(loss) attributable to: Owners of the Company 48,249 37,870 (168) Non-controlling interests (1,377) - 46,872 37,870 (168) Total comprehensive income/(loss) attributable to: Owners of the Company 38,044 37,870 (168) Non-controlling interests (1,377) - 36,667 37,870 (168) Earnings per share attributable to Owners of the Company (sen per share) . Basic, for profit for the year 9 8.9

The accompanying notes form an integral part of the financial statements. 46

Statements of financial position as at 31 December 2013

Group Company Note 2013 2013 2012 RM’000 RM’000 RM’000 Assets Non-current assets Property, plant and equipment 10 87,324 1,114 Investment properties 11 744,051 - Investment in subsidiaries 12 - 1,202,131 Investment in an associate 13 550 - Investment securities 14 362,205 - Intangible assets 15 42,884 - Deferred tax assets 26 11,598 - 1,248,612 1,203,245 Current assets Inventories 16 199 - Receivables 17 228,356 14,876 Reinsurance assets 18 411,528 - Tax recoverable 6,156 - Investment securities 14 103,315 - Cash and bank balances 19 311,422 7,506 3 1,060,976 22,382 3 Asset held for sale

20

30,195

-

-

Total assets 2,339,783 1,225,627 3

ANNUAL REPORT 2013

47

Statements of financial position (cont’d)

as at 31 December 2013

Group Company Note 2013 2013 2012 RM’000 RM’000 RM’000 Equity and liabilities Equity attributable to Owners of the Company Share capital 21 715,000 715,000 Share premium 21 296,091 296,091 Other reserves 22 47,837 - Merger deficit 23 (28,464) - Retained profits/(Accumulated losses) 24 48,081 37,702 (168) Non-controlling interests

1,078,545 15,389

1,048,793 -

(168) -

Total equity 1,093,934 1,048,793 (168) Non-current liabilities Borrowings 25 63,721 - Deferred tax liabilities 26 24,079 - 87,800 - Current liabilities Payables 27 288,714 176,749 171 Insurance contract liabilities 18 816,204 - Borrowings 25 29,650 - Tax payable 875 85 1,135,443 176,834 171 Liability directly associated with asset held for sale 20 22,606 - Total liabilities 1,245,849 176,834 171 Total equity and liabilities 2,339,783 1,225,627 3

The accompanying notes form an integral part of the financial statements. 48

statements of changes in equity For the year ended 31 December 2013

Attributable to Owners of the Company Non-distributable Distributable Share Share Other Merger Retained Non- capital premium reserves deficit profits controlling Total (Note 21) (Note 21) (Note 22) (Note 23) (Note 24) Total interests equity Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2013 # - - - (168) (168) - (168) Issuance of ordinary shares in connection with the merger and acquisition of subsidiaries 715,000 296,091 58,042 (28,464) - 1,040,669 16,766 1,057,435 Other comprehensive income for the year - - (10,205) - - (10,205) - (10,205) Profit for the year - - - - 48,249 48,249 (1,377) 46,872 Total comprehensive income for the year - - (10,205) - 48,249 38,044 (1,377) 36,667 At 31 December 2013 715,000

296,091

47,837

(28,464)

48,081 1,078,545

15,389 1,093,934



The accompanying notes form an integral part of the financial statements. ANNUAL REPORT 2013

49

Statements of changes in equity (cont’d) For the year ended 31 December 2013

Attributable to Owners of the Company Non-distributable Distributable (Accumulated losses)/ Share Share Other Merger Retained capital premium reserves deficit profits (Note 21) (Note 21) (Note 22) (Note 23) (Note 24) Total Company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 17 July 2012 Issuance of ordinary shares at date of incorporation # - - - - Total comprehensive income for the year - - - - (168) (168) At 31 December 2012

#

-

-

-

(168)

(168)

At 1 January 2013 Issuance of ordinary shares Total comprehensive income for the year

#

-

-

-

(168)

(168)

715,000

296,091

-

-

-

-

-

-

37,870

At 31 December 2013 715,000

296,091

-

-

37,702 1,048,793

# represents RM2.00

The accompanying notes form an integral part of the financial statements. 50

- 1,011,091 37,870

Statements of cash flows For the year ended 31 December 2013

Group 2013 RM’000 Operating activities Profit before tax 57,590 Adjustments for: Depreciation of property, plant and equipment 5,218 Depreciation of investment properties 1,326 Interest expense 3,835 Amortisation of premiums 5 Amortisation of intangible assets 387 Impairment loss on AFS financial assets 280 Bad debts written off 4 Property, plant and equipment written off 2,211 Allowance for impairment of receivables 3,152 Write back of allowance for impairment for loans and advances (139) Share of results of an associate (101) Gain on disposal of property, plant and equipment (5) Realised gain on: - AFS financial assets (6,170) - Financial assets at FVTPL (79) Interest income (22,479) Dividend income on quoted shares and unit trusts (2,551) Gain arising from fair value change in financial assets at FVTPL (821) Operating cash flows before working capital changes

41,663

Changes in working capital: Inventories 27 Receivables (35,203) Reinsurance assets (39,078) Insurance contract liabilities 86,874 Payables 183,444 Cash flows generated from operations Income tax paid

237,727 (19,750)

Net cash flows generated from operating activities 217,977

ANNUAL REPORT 2013

51

Statements of cash flows (cont’d) For the year ended 31 December 2013

Group 2013 RM’000 Investing activities Proceeds from disposals of: - property, plant and equipment 5 - investment securities 237,768 Redemption of fixed income securities 75,627 Purchase of: - intangible assets (583) - property, plant and equipment (2,707) - investment securities (402,845) Net dividend received from quoted shares and unit trusts 2,551 Interest received 11,956 Interest paid (3,078) Cash and cash equivalents of the subsidiaries acquired 192,465 Net cash flows generated from investing activities 111,159 Financing activities Net repayment of borrowings (17,714) Net movement in fixed deposits with licensed bank (287) Net cash flows used in financing activities (18,001) Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year

311,135 -

Cash and cash equivalents at end of year (Note 19) 311,135

52

Statements of cash flows (cont’d) For the year ended 31 December 2013

Company 17.07.2012 to 2013 31.12.2012 RM’000 RM’000 Operating activities Profit/(Loss) before tax 40,742 (168) Adjustments for: Depreciation of property, plant and equipment 236 Dividend income (45,641) Interest income (412) Operating cash flows before working capital changes Changes in working capital: Receivables Payables Inter-company indebtedness

(5,075)

(168)

(1,427) (66,988) 39,764

3 168

Cash flows (used in)/generated from operations Tax paid

(33,726) (2,787)

3 -

Net cash flows (used in)/generated from operating activities (36,513) 3 Investing activities Purchase of property, plant and equipment (1,350) Dividends received 45,641 Interest received 401 Shares issuance expenses (676) Net cash flows generated from investing activities 44,016 Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year

7,503 3

3 -

Cash and cash equivalents at end of year (Note 19) 7,506 3

The accompanying notes form an integral part of the financial statements. ANNUAL REPORT 2013

53

Notes to the financial statements 31 December 2013

1. Corporate information The Company was incorporated on 17 July 2012 as a private limited company under the name of MPHB Capital Sdn. Bhd.. The Company was converted into a public limited company and assume its present name on 23 July 2012. On 28 June 2013, the Company’s entire issued and paid-up share capital was listed on the Main Market of Bursa Malaysia Securities Berhad. The principal activities of the Company are that of investment holding and provision of management services. The principal activities of the subsidiaries is as disclosed in Note 38. There have been no significant changes in the nature of these principal activities during the financial year. The registered office and the principal place of business of the Company is located at 39th Floor, Menara MultiPurpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur. As at 1 January 2013, MPHB Capital was a wholly-owned subsidiary of Magnum. On 27 June 2013, Magnum ceased to have any interest in MPHB Capital following the completion of the renounceable offer for sale by Magnum of 715,000,000 ordinary shares of RM1.00 each in MPHB Capital representing 100% equity interest in MPHB Capital to the existing shareholders of Magnum. Consequently, Magnum also ceased to be the ultimate holding company of the Company. These financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 23 April 2014. 2. Significant accounting policies 2.1 Basis of preparation These financial statements of the Group and the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”) and the requirements of the Companies Act, 1965 in Malaysia. These financial statements have also been prepared on a historical cost basis, except for those financial instruments which have been measured at their fair values and insurance liabilities which have been measured in accordance with the valuation methods specified in the Risk-Based Capital Framework (“RBC Framework”) for insurers issued by Bank Negara Malaysia (“the Framework”). The accounting policies set out in Note 2.4 have been applied in preparing the financial statements of the Group and the Company for the financial year ended 31 December 2013. The financial statements are presented in Ringgit Malaysia (“RM”) and all values are rounded to the nearest thousand (RM’000) except when otherwise indicated.

54

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.2 Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year except as follow: On 1 January 2013, the Group and the Company adopted the following new and amendments to MFRSs and IC Interpretations mandatory for annual financial periods beginning on or after 1 January 2013. Effective for periods beginning on or after Amendments to MFRS 101: Presentation of Items of Other Comprehensive Income 1 July 2012 MFRS 3 Business Combinations (IFRS 3 Business Combinations issued by IASB in March 2004) 1 January 2013 MFRS 127 Consolidated and Separate Financial Statements (IAS 27 revised by IASB in December 2003) 1 January 2013 MFRS 10 Consolidated Financial Statements 1 January 2013 MFRS 11 Joint Arrangements 1 January 2013 MFRS 12 Disclosure of Interests in Other Entities 1 January 2013 MFRS 13 Fair Value Measurement 1 January 2013 MFRS 119 Employee Benefits (IAS 19 as amended by IASB in June 2011) 1 January 2013 MFRS 127 Separate Financial Statements (IAS 27 as amended by IASB in May 2011) 1 January 2013 MFRS 128 Investment in Associate and Joint Ventures (IAS 28 as amended by IASB in May 2011) 1 January 2013 IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013 Amendments to MFRS 7: Disclosure - Offsetting Financial Assets and Financial Liabilities 1 January 2013 Annual Improvements 2009-2011 Cycle 1 January 2013 Amendments to MFRS 1: Government Loans 1 January 2013 Amendments to MFRS 10, MFRS 11 and MFRS 12: Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance 1 January 2013 Adoption of the above standards and interpretations did not have any effect on the financial performance or position of the Group and the Company except as discussed below: MFRS 10 Consolidated Financial Statements MFRS 10 replaces part of MFRS 127 Consolidated and Separate Financial Statements that deals with consolidated financial statements and IC Interpretation 112 Consolidation – Special Purpose Entities. Under MFRS 10, an investor controls an investee when (a) the investor has power over an investee, (b) the investor has exposure, or rights, to variable returns from its investment with the investee, and (c) the investor has ability to use its power over the investee to affect the amount of the investor’s returns. Under MFRS 127 Consolidated and Separate Financial Statements, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

ANNUAL REPORT 2013

55

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.2 Changes in accounting policies (cont’d) MFRS 10 Consolidated Financial Statements (cont’d) MFRS 10 includes detailed guidance to explain when an investor that owns less than 50 per cent of the voting shares in an investee has control over the investee. MFRS 10 requires the investor to take into account all relevant facts and circumstances, particularly the size of the investor’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders. The application of MFRS 10 affected the accounting for the Group’s investment in Opus Institutional Income Fund 2 (“the Fund”). As at 31 December 2013, the Group owns 100% of the Fund. Accordingly, in compliance with MFRS 10, the Group’s financial statements now comprise the Fund which has been consolidated with the Group. The accounting treatment for the investment in the Fund have been applied in accordance with the relevant transitional provisions as set out in MFRS 10. MFRS 13 Fair Value Measurement MFRS 13 establishes a single source of guidance under MFRS for all fair value measurements. MFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under MFRS. MFRS 13 defines fair value as an exit price. As a result of the guidance in MFRS 13, the Group re-assessed its policies for measuring fair values, in particular, its valuation inputs such as non-performance risk for fair value measurement of liabilities. MFRS 13 also requires additional disclosures. Application of MFRS 13 has not materiality impacted the fair value measurement of the Group and the Company. Additional disclosures, where required, are provided in the individual notes relating to the assets and liabilities whose fair values were determined. Amendments to MFRS 101: Presentation of Items of Other Comprehensive Income The amendments to MFRS 101 introduce a grouping of items presented in other comprehensive income. Items that will be reclassified (“recycled”) to profit or loss at a future point in time (eg. net loss or gain on available-for-sale financial assets) have to be presented separately from items that will not be reclassified (eg. revaluation of land and buildings). The amendments affect presentation only and have no impact on the Group’s and Company’s financial position or performance. 2.3 Standards issued but not yet effective The standards and interpretations that are issued but not yet effective up to the date of issuance of the Group’s and the Company’s financial statements as disclosed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective. Effective for periods beginning on or after Amendments to MFRS 132: Offsetting Financial Assets and Financial Liabilities 1 January 2014 Amendments to MFRS 10, MFRS 12 and MFRS 127: Investment Entities 1 January 2014 Amendments to MFRS 136: Recoverable Amount Disclosures for Non-Financial Assets 1 January 2014 Amendments to MFRS 139: Novation of Derivatives and Continuation of Hedge Accounting 1 January 2014 56

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d)

2.3 Standards issued but not yet effective (cont’d)

Effective for periods beginning on or after

IC Interpretation 21 Levies 1 January 2014 Amendments to MFRS 119: Defined Benefit Plans: Employee Contributions 1 July 2014 Annual Improvements to MFRSs 2010–2012 Cycle 1 July 2014 Annual Improvements to MFRSs 2011–2013 Cycle 1 July 2014 MFRS 9 Financial Instruments (IFRS 9 issued by IASB in November 2009) To be announced MFRS 9 Financial Instruments (IFRS 9 issued by IASB in October 2010) To be announced MFRS 9 Financial Instruments: Hedge Accounting and amendments to MFRS 9, MFRS 7 and MFRS 139 To be announced

The directors expect that the adoption of the above standards and interpretations will have no material impact on the financial statements in the period of initial application except as discussed below: MFRS 9 Financial Instruments MFRS 9 reflects the first phase of work on the replacement of MFRS 139 and applies to classification and measurement of financial assets and financial liabilities as defined in MFRS 139. The standard was initially effective for annual periods beginning on or after 1 January 2013, but Amendments to MFRS 9: Mandatory Effective Date of MFRS 9 and Transition Disclosures, issued in March 2012, moved the mandatory effective date to 1 January 2015. Subsequently, on 14 February 2014, it was announced that the new effective date will be decided when the project is closer to completion. The adoption of the first phase of MFRS 9 will have an effect on the classification and measurement of the Group’s and the Company’s financial assets, but will not have an impact on classification and measurements of the Group’s and the Company’s financial liabilities. The Group and the Company will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued. 2.4 Summary of significant accounting policies (a) Subsidiaries and basis of consolidation (i) Subsidiaries In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses. (ii) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

ANNUAL REPORT 2013

57

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (a) Subsidiaries and basis of consolidation (cont’d) (ii) Basis of consolidation (cont’d) The Group controls an investee if and only if the Group has all the following: • Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); • Exposure, or rights, to variable returns from its investment with the investee; and • The ability to use its power over the investee to affect its returns. When the Group has less than a majority of the voting rights of an investee, the Group considers the following in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power over the investee: • The size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; • Potential voting rights held by the Group, other vote holders or other parties; • Rights arising from other contractual arrangements; and • Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Business combinations (other than involving entities under common control) are accounted for using the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisitionrelated costs are recognised as expenses in the periods in which the costs are incurred and the services are received. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. Acquisition costs incurred are recognised in profit and loss and included in administrative expenses. For each business combination, the Group elects whether it measures the noncontrolling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Any excess of the cost of business combination over the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill. Any excess of the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised as income in profit or loss on the date of acquisition. 58

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (a) Subsidiaries and basis of consolidation (cont’d) (ii) Basis of consolidation (cont’d) Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Business combinations under common control Business combination involving entities under common control are accounted for by applying the pooling of interest method which involves the following: • The assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company. • No adjustments are made to reflect the fair values on the date of combination or recognise any new assets or liabilities. • No additional goodwill is recognised as a result of the combination. Only existing goodwill relating to either of the combining entities is recognised. • Any differences between the consideration paid/transferred and the equity ‘acquired’ is reflected within the equity as merger reserve. The Group has elected no restatement of financial information in the consolidated financial statements for the periods prior to the combination of the entities under common control. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. (iii) Transactions with non-controlling interest Non-controlling interest represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in profit or loss of the Group and within equity in the statements of financial position, separately from parent shareholders’ equity. Transactions with non-controlling interests are accounted for using the entity concept method, whereby, transactions with non-controlling interests are accounted for as transactions with owners. On acquisition of non-controlling interests, the difference between the consideration and carrying value of the share of the net assets acquired is recognised directly in equity. Gain or loss on disposal to non-controlling interests is recognised directly in equity.

ANNUAL REPORT 2013

59

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (b) Associate An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. The Group’s investments in an associate is accounted for using the equity method. Under the equity method, the investment in an associate is measured in the statements of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profit or loss for the period in which the investment is acquired. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss. The financial statements of the associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group. In the Company’s separate financial statements, investments in the associate is stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss. (c) Intangible assets (i) Goodwill Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination. The cash-generating unit to which goodwill has been allocated is tested for impairment annually or whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cashgenerating unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods. 60

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (c) Intangible assets (cont’d) (i) Goodwill (cont’d) Where goodwill forms part of a cash-generating unit and part of the operation within that cashgenerating unit is disposed off, the goodwill associated with the operation disposed off is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed off in this circumstance is measured based on the relative fair values of the operations disposed off and the portion of the cash-generating unit retained. (ii) Other intangible assets Other intangible assets comprise computer application software which were developed or acquired to meet the unique requirements of a subsidiary. Other intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are not capitalised and expenditure is reflected in the profit or loss in the period in which the expenditure is incurred. Other intangible assets with finite lives are amortised over the useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful lives are reviewed at least once at each financial year-end. Changes in the expected useful lives or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss. The acquisition cost of computer application software are amortised over their estimated useful lives of five years. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised. (d) Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the Company and the cost of the item can be measured reliably. Subsequent to recognition, property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group and the Company recognise such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the property, plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

ANNUAL REPORT 2013

61

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (d) Property, plant and equipment (cont’d) Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation of other property, plant and equipment is computed on a straight-line basis over the estimated useful lives of the assets at the annual rates as follows: % Freehold and leasehold buildings 2.0 - 2.8 Leasehold land 0.1 - 1.7 Plant and equipment 10.0 - 33.3 Computer equipment 12.5 - 33.3 Work-in-progress are not depreciated as these assets are not yet available for use. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised. (e) Investment properties Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and any accumulated impairment losses. The depreciation policy for investment properties are in accordance with the depreciation policy for property, plant and equipment. Investment properties are derecognised when either they have been disposed off or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its use or disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year in which they arise. Transfers are made to or from investment properties only when there is a change in use.

62

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (f) Leases i) As lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term. Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. ii) As lessor Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. (g) Impairment of non-financial assets The Group and the Company assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group and the Company make an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”)). In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset.

ANNUAL REPORT 2013

63

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d)



(g) Impairment of non-financial assets (cont’d)

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period. (h) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in-first-out basis. The cost of raw materials comprises costs of purchase. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (i) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand and demand deposits which have a maturity period of three months or less. (j) Borrowing costs Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that incurred in connection with the borrowings of funds. (k) Income taxes (i) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

64

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (k) Income taxes (cont’d) (ii) Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all temporary differences, except: • where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: • where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised.





Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. ANNUAL REPORT 2013

65

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (l) Employee benefits (i) Short term benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group and the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. (ii) Defined contribution plans The companies in the Group make contributions to the Employee Provident Fund in Malaysia, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed. (iii) Defined benefit plan (“the plan”) In addition to the contributions made to the statutory employees provident fund, the participating companies of the Group contribute at an approved rate to funded scheme for eligible employees based on defined benefits plans. This fund is known as the Multi-Purpose Group Retirement Scheme (“MPGRS”) and was established pursuant to a trust deed between Magnum Berhad and the Trustees in 1984. The provision for retirement benefits has been retained to meet unfunded past service liabilities and in addition, annual provision are made at rates as advised by the actuaries to cover the shortfall in the approved rate of contributions to the funded scheme in respect of future service liabilities. The Group’s obligations under MPGRS is solely refer to contributions including deficit (if any) made to the plan. Contributions made are charged to profit or loss. The financial position of MPGRS is subject to review by an actuary not less than once in every 3 years and in an event of deficit, the Trustees of MPGRS may request the participating companies, subject to the consent of the Director-General of Inland Revenue being obtained, to make such further contributions as recommend by the actuary for the purpose of reducing or eliminating the said deficit. The latest actuarial valuation of liabilities of MPGRS was carried out in 2011 and covered the financial year ended 31 December 2011, 2012 and 2013. (m) Revenue recognition (i) Dividend income Dividend from equity securities and distribution income are recognised when the Group’s or the Company’s right to receive payment is established. 66

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (m) Revenue recognition (cont’d) (ii) Interest income and investment income Interest income and investment income are recognised using the effective interest method. For the subsidiaries operating credit business, income on hire purchase and finance lease transactions are computed on the ‘sum of digits’ method and interest income from housing, mortgage and other loans is recognised on the reducing balance basis. (iii) Rental income Rental income is recognised on a straight-line basis over the lease terms. (iv) Sale of goods Revenue relating to sale of goods is recognised net of sales taxes and discounts upon the transfer of risks and rewards of ownership to the buyer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. (v) Revenue from services Revenue from services rendered is recognised net of service taxes and discounts as and when the services are performed. The revenue from services include hotel services and management fees. (vi) Realised gains and losses on investments Realised gains and losses recorded in profit or loss on investment include gains and losses on financial assets and investment properties. Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the carrying amount and are recorded on occurrence of the sale transaction. (n) Foreign currencies (i) Functional and presentation currency The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The financial statements are presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency.

ANNUAL REPORT 2013

67

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d)



(n) Foreign currencies (cont’d)

(ii) Foreign currency transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss. (o) Financial assets Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. (i) Financial assets at fair value through profit or loss (“FVTPL”) Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at FVTPL do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at FVTPL are recognised separately in profit or loss as part of other losses or other income. FVTPL could be presented as current or non-current. Financial assets that is held primarily for trading purposes are presented as current whereas financial assets that is not held primarily for trading purposes are presented as current or non-current based on the settlement date.

68

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (o) Financial assets (cont’d) (ii) Loans and receivables (“LAR”) Financial assets with fixed or determinable payments that are not quoted in an active market are classified as LAR. Subsequent to initial recognition, LAR are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the LAR are derecognised or impaired. Effective interest rate is calculated by taking into account any premium or discount on acquisition and includes transaction costs and fees that are integral part of the effective interest rate. LAR are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current. (iii) Available-for-sale financial assets (“AFS”) AFS are financial assets that are designated as AFS or are not classified in any of the two preceding categories. AFS include equity investments and debt securities. After initial recognition, AFS are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss. AFS are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date. (iv) Insurance receivables Insurance receivables are recognised when due and measured at the fair value of the consideration received and receivable. If there is objective evidence that the insurance receivable is impaired, the Group reduces the carrying amount of the insurance receivable accordingly and recognises that impairment loss in profit or loss. The Group gathers the objective evidence that an insurance receivable is impaired using the same process adopted for financial assets carried at amortised cost. The impairment loss is calculated under the same method used for financial assets. These processes are described in Note 2.4(q). Insurance receivables are derecognised when the derecognition criteria for financial assets have been met.

ANNUAL REPORT 2013

69

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (o) Financial assets (cont’d) A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset. (p) Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 9, are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. (i) Financial liabilities at FVTPL Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL. Financial liabilities held for trading include derivatives entered into by the Group that do not meet the hedge accounting criteria. (ii) Other financial liabilities Other financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. The Group’s and the Company’s other financial liabilities include payables, loans and borrowings. Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

70

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d)



(p) Financial liabilities (cont’d)



(ii) Other financial liabilities (cont’d) A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

(q) Impairment of financial assets The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. (i) Unquoted equity securities carried at cost If there is objective evidence that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. (ii) AFS investments If an AFS investments is impaired, the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Increase in fair value, if any, subsequent to impairment loss is recognised as other comprehensive income in AFS reserve. (iii) Assets carried at amortised cost To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account. ANNUAL REPORT 2013

71

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (q) Impairment of financial assets (cont’d) (iii) Assets carried at amortised cost (cont’d) If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. (r) Segment reporting For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 37, including the factors used to identify the reportable segments and the measurement basis of segment information. (s) Share capital and share issuance expenses An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Dividends on ordinary shares are recognised in equity in the period in which they are declared. (t) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably. Provision for claims for the insurance segment is made for the estimated cost of all claims together with related expenses less reinsurance recoveries, in respect of claims notified but not settled at the reporting date. Provision is also made for the cost of claims together with related expenses incurred but reported at reporting date, using a mathematical method of estimation. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.

72

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (u) General insurance underwriting results The general insurance underwriting results are determined for each class of business after taking into account, inter alia, reinsurances, unearned premium, commissions and claims incurred. (i) Gross premiums Gross premiums are recognised in a financial period in respect of risks assumed during that particular financial period. (ii) Reinsurance premiums Inwards facultative reinsurance premiums are recognised in the financial period in respect of the facultative risks assumed during that particular financial period, as in the case of direct policies, following the individual risks’ inception dates. In respect of reinsurance premiums relating to proportional treaties, it is recognised on the basis of periodic advices received from the cedants given that the periodic advices reflect the individual underlying risks being incepted and reinsured at various inception dates of these risks and contractually accounted for, as such to reinsurers under the terms of the proportional treaties. (iii) Premium liabilities Premium liability is reported at the higher of the aggregate of the unearned premium reserve (“UPR”) for all lines of business and the best estimate value of the insurer’s unexpired risk reserves (“URR”) at the end of the financial year and the provision of risk margin for adverse deviation (“PRAD”) calculated at 75% confidence level at the overall Multi-Purpose Insurans Bhd. (“insurance subsidiary”) level. The best estimate value is a prospective estimate of the expected future payments arising from future events insured under policies in force at the end of the financial year including allowance for insurer’s expenses. (a) Unexpired risk reserves The URR is the prospective estimate of the expected future payments arising from future events insured under policies in force as at the end of the financial year and also includes allowance for expenses, including overheads and cost of reinsurance, expected to be incurred during the unexpired period in administering these policies and settling the relevant claims, and expected future premium refunds. (b) Unearned premium reserves The UPR represents the portion of net premiums less the related net acquisition costs of insurance policies written that relate to the unexpired periods of the policies at the end of the financial year.

ANNUAL REPORT 2013

73

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (u) General insurance underwriting results (cont’d) (iii) Premium liabilities (cont’d) (b) Unearned premium reserves (cont’d) In determining the UPR at reporting date, the methods used in calculation of actual unearned premium are as follows: • 25% method for marine and aviation cargo, and transit business. • 1/24th method for all other classes of general business in respect of Malaysian policies, with the following deduction rates, or actual commission incurred, whichever is lower: • Motor and bonds 10% • Fire, engineering, aviation and marine hull 15% • Medical 10 - 15% • Other classes 20% • 1/8th method for all other classes of overseas inward treaty business, with a deduction of 20% for commission. • Non-annual policies are time-apportioned over the period of the risks. (iv) Claim liabilities Claim liabilities are recognised as the obligation to make future payments in relation to all claims that have been incurred as at the end of the financial year. They are recognised in respect of both direct insurance and inward reinsurance. The value is the best estimate value of claim liability which includes provision for claims reported, claims incurred but not enough reserved (“IBNER”), claims incurred but not reported (“IBNR”) and direct and indirect claim-related expenses as well as PRAD at 75% confidence level calculated at the overall insurance subsidiary level. These are based on an actuarial valuation by a qualified actuary, using a mathematical method of estimation based on, among others, actual claims development pattern. (v) Acquisition costs The costs of acquiring and renewing insurance policies, net of income derived from ceding reinsurance premiums, are recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. (v) Insurance contract liabilities General insurance contract liabilities are recognised when contracts are entered into and premiums are charged. These liabilities comprise outstanding claims provision and provision for unearned premiums.

74

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (v) Insurance contract liabilities (cont’d) Outstanding claims provision are based on the estimated ultimate cost of all claims incurred but not settled at the reporting date, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification and settlement of certain types of claims, therefore, the ultimate cost of these claims cannot be known with certainty at the reporting date. The liability is calculated at the reporting date using a range of standard actuarial claim projection techniques based on empirical data and current assumptions that may include a margin for adverse deviation. The liability is not discounted for the time value of money. No provision for equalisation or catastrophe reserves is recognised. The liabilities are derecognised when the contract expires, is discharged or is cancelled. The provision for unearned premiums represents premiums received for risks that have not yet expired. Generally, the reserve is released over the term of the contract and is recognised as premium income. At each reporting date, the insurance subsidiary reviews its unexpired risks and a liability adequacy test is performed to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses current estimates of future contractual cash flows (taking into consideration current loss ratios) after taking into account of the investment return expected to arise on assets relating to the relevant general insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums less related deferred acquisition costs is inadequate, the deficiency is recognised in the income statement by setting up a provision for liability adequacy. (w) Product classification The insurance subsidiary issues contracts that transfer insurance risk only. Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of price or rate, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. Insurance risk is the risk other than financial risk. Insurance contracts are those contracts that transfer significant insurance risk. An insurance contract is a contract under which the insurance subsidiary (the insurer) has accepted significant insurance risk from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event (the insured event) adversely affects the policyholders. As a general guideline, the insurance subsidiary determines whether it has significant insurance risk, by comparing benefits paid with benefits payable if the insured event did not occur. Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its life-time, even if the insurance risk reduces significantly during this period, unless all rights and obligations are extinguished or expire. Investment contracts can, however, be reclassified as insurance contracts after inception if insurance risk becomes significant. Insurance and investment contracts are further classified as being either with or without discretionary participation features (“DPF”). DPF is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits.

ANNUAL REPORT 2013

75

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (w) Product classification (cont’d) The insurance subsidiary does not have any investment contracts and the insurance contracts issued do not contain any DPF. (x) Reinsurance The insurance subsidiary cedes insurance risk in the normal course of business for all of its insurance businesses. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contracts. Ceded reinsurance arrangements do not relieve the insurance subsidiary from its obligations to policyholders. Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance. Reinsurance assets are reviewed for impairment at each reporting date or more frequently when an indication of impairment arises during the reporting period. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the insurance subsidiary may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the insurance subsidiary will receive from the reinsurer. Impairment loss is recorded in profit or loss. Gains or losses on buying reinsurance are recognised in profit or loss immediately at the date of purchase and are not amortised. The insurance subsidiary also assumes reinsurance risk in the normal course of business for general insurance contracts when applicable. Premiums and claims on assumed reinsurance are recognised as revenue or expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business. Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract. Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party. (y) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.

76

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d) 2.4 Summary of significant accounting policies (cont’d) (y) Financial guarantee contracts (cont’d) Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation. 2.5 Significant accounting estimates and judgements (a) Critical judgements made in applying accounting policies The following are the judgements made by management in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements. (i) Valuation of investment properties The Group classifies a property as an investment property in accordance with requirements of MFRS 140 Investment Property. The Group’s investment properties are held to earn rental and for capital appreciation or both. In estimating fair value of investment properties, the Group uses market observable data to the extent it is available. Where level 1 inputs are not available, the Group engaged third party qualified valuers to perform the valuation in establishing the appropriate valuation techniques and inputs to the model. Information about the valuation techniques and inputs used in determining the fair value of investment properties are disclosed in Note 11. (ii) Classification of investment properties The Group has entered into several Joint Venture Agreements (“JVAs”) with certain third parties to develop land owned by the Group. As the Group does not have joint control and significant influence nor substantive rights over the relevant activities of these JVAs, which is determined to be development of properties on the land, the JVAs do not fall within the scope of MFRS 11 Joint Arrangement. Consequently, the land belonging to the Group are classified as investment properties as disclosed in Note 11. As at reporting date, the land are not deemed disposed as the risk and rewards of the land have yet to be transferred to third parties.

ANNUAL REPORT 2013

77

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d)

2.5 Significant accounting estimates and judgements (cont’d)

(a) Critical judgements made in applying accounting policies (cont’d) (iii) Impairment of non-financial assets An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. Goodwill is tested for impairment on an annual basis and when circumstances indicate that carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, impairment is recognised. Impairment relating to goodwill cannot be reversed in future years. Futher details on the goodwill are as disclosed in Note 15. (iv) Impairment of AFS financial assets Significant judgement is required to assess impairment for AFS financial assets. The Group evaluates the duration and extent to which the fair value of an investment is less than it’s cost; the financial health and near term business outlook for the investee, including but not limited to factors such as industry and sector performance, changes in technology and operational and financial cash flows. The carrying amount of the Group’s AFS financial assets are as disclosed in Note 14. (v) Impairment of receivables The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. Factors considered by the Group and the Company are probability of insolvency or significant financial difficulties of the debtors and default or significant delay in payments. In addition, the Group and the Company take into consideration default risk of the industry and credit rating, payment trend and aging of receivables. The carrying amount of the Group’s and the Company’s receivables are as disclosed in Note 17.

78

Notes to the financial statements (cont’d) 31 December 2013

2. Significant accounting policies (cont’d)

2.5 Significant accounting estimates and judgements (cont’d)

(b) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Deferred tax assets Deferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The carrying amount and unrecognised deferred tax assets are as disclosed in Note 26. (ii) Valuation of insurance contract liabilities For insurance contracts, estimates have to be made for both the expected ultimate cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred but not yet reported (“IBNR”) at the reporting date. It can take a significant period of time before the ultimate claims costs can be established with certainty and for some type of policies, IBNR claims form the majority of the reporting liability. The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques, such as Chain Ladder and Bornheutter-Ferguson methods. The main assumption underlying these techniques is that a company’s past claims development experience can be used to project future claims development and hence, ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses, average costs per claim and claim numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident years, but can also be further analysed by geographical areas, as well as by significant business lines and claims type. Large claims are usually separately addressed, either by being reserved at the face value of loss adjuster estimates or separately projected in order to reflect their future development. In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratio. Instead, the assumptions used are those implicit in the historic claims development data on which the projections are based. Additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (for example, to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, level of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely outcome from the range of possible outcomes, taking account of all the uncertainties involved. The movement and carrying amount of insurance contract liabilities are as disclosed in Note 18.

ANNUAL REPORT 2013

79

Notes to the financial statements (cont’d) 31 December 2013

3. Revenue Group Company 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 Net earned premiums (Note (i)) 215,774 - Interest income on loans and advances 661 - Investment income in respect of gross dividends from: - subsidiaries - 45,641 - unquoted investment securities in Malaysia 380 - Revenue from rental of properties 341 - Hotel services 28,331 - Sale of goods 486 - Management fees from subsidiaries - 1,264 -

80

245,973 46,905 (i) Net earned premiums comprised: (a) Gross premium 436,179 - Change in premium liabilities (65,407) -

-

Gross earned premium 370,772

-

-

(b) Gross premium ceded Change in premium liabilities

- -

-

Premium ceded (154,998)

-

-

Net earned premiums 215,774

-

-

(196,455) 41,457

-

Notes to the financial statements (cont’d) 31 December 2013

4. Cost of sales Group 2013 RM’000 Cost of insurance business (Note (i)) 153,690 Cost of hotel services 10,902 (i) Cost of insurance business comprised: Gross claims paid Claims ceded to reinsurers Gross change in contract liabilities Change in contract liabilities ceded to reinsurers

154,946 (50,319) 21,468 2,379



Net claims incurred (Note (ii)) Fee and commission income Fee and commission expenses

128,474 (36,994) 62,210

(ii) Net claims incurred comprised: Gross claims paid less salvage Reinsurance recoveries

153,690

Net claims paid Gross change in contract liabilities At 31 December At 1 April

104,627 564,448 (542,980)



21,468

Change in contract liabilities ceded to reinsurers At 31 December At 1 April

(304,125) 306,504

Net claims incurred

ANNUAL REPORT 2013

164,592

154,946 (50,319)

2,379 128,474

81

Notes to the financial statements (cont’d) 31 December 2013

5. Other income Group Company 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 Realised gain from financial assets at FVTPL 79 - Write back of allowance for impairment for loan and advances 139 - Interest income (Note (i)) 4,770 412 Other income of an insurance subsidiary (Note (ii)) 34,187 - Share of profits from a completed housing project 7,897 - Income from rental of properties 401 - Gain arising from fair value change in financial assets at FVTPL 821 - Others 2,508 - 50,802 412 (i) Interest income Interest income on: - loan to subsidiaries - 111 - short term deposits 2,847 301 - investment securities 1,923 -

-

4,770

-

412

-

(ii) Other income of an insurance subsidiary Group 2013 RM’000 Other income of an insurance subsidiary comprised: Investment income (Note (a)) 19,710 Realised gains from AFS financial assets (Note (b)) 6,170 Other operating income (Note (c)) 8,307

82

34,187

Notes to the financial statements (cont’d) 31 December 2013

5. Other income (cont’d) (ii) Other income of an insurance subsidiary (cont’d) Group 2013 RM’000 (a) Investment income comprised: AFS financial assets: Dividend income - Equity securities quoted in Malaysia 2,548 - Equity securities quoted outside Malaysia 3 Interest income 12,386 LAR interest 4,662 Rental income from investment properties 116 Amortisation of premium (5)

19,710

(b) Realised gains from AFS financial assets comprised: Equity securities quoted in Malaysia Equity securities quoted outside Malaysia Unit trust fund unquoted in Malaysia

4,520 1,050 600



6,170

(c) Other operating income comprised: Gain on disposal of property, plant and equipment Property, plant and equipment written off Impairment loss on AFS financial assets Service income earned from Malaysian Motor Insurance Pool (“MMIP”) Sundry income

5 (2,204) (280) 9,531 1,255



8,307



ANNUAL REPORT 2013

83

Notes to the financial statements (cont’d) 31 December 2013

6. Operating profit/(loss) The following amounts have also been included in arriving at operating profit/(loss): Group Company 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 Depreciation of property, plant and equipment 5,218 236 Depreciation of investment properties 1,326 - Auditors’ remuneration (Note (a)) 312 15 3 Key management personnel (Note (b)) 1,384 1,270 Amortisation of intangible assets 387 - Rent of land and buildings 2,477 690 Employee benefits expense (Note (c)) 41,702 3,798 Bad debts written off included in management expenses 4 - Property, plant and equipment written off: - from a non-insurance subsidiary 7 - Fund management charges 655 - Allowance for impairment of receivables 3,152 - Contributions for defined benefit plan (Note (d)) 550 24 (a) Auditors’ remuneration Auditors of the Company: - statutory audit 281 8 3 - assurance related services 31 7 312 15 3 (b) Key management personnel Key management personnel is defined as the Board of Directors of the Company whereby the authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly lies. Group Company 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 Executive directors’ remuneration: - bonus 462 462 - emoluments 715 715 - benefits-in-kind 15 15 1,192

84

1,192

-

Notes to the financial statements (cont’d) 31 December 2013

6. Operating profit/(loss) (cont’d) (b) Key management personnel (cont’d) Group Company 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 Non-executive directors’ remuneration: - fees 190 90 - emoluments 17 3 - benefits-in-kind 7 -

-



93

-

1,285 (15)

-

214

Total directors’ remuneration 1,406 Less: estimated money value of benefits-in-kind (22)

Total directors’ remuneration excluding benefits-in-kind 1,384 1,270 The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below: Number of Directors 2013 Executive Directors: RM350,001 - RM400,000 1 RM800,001 - RM850,000 1 Non-executive Directors: RM0 - RM50,000 1 RM50,001 - RM100,000 2 Group Company 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 (c) Employee benefits expense Wages and salaries 33,697 3,246 Contributions to defined contribution plan 4,318 418 Other staff related expenses 3,687 134 41,702

ANNUAL REPORT 2013

3,798

-

85

Notes to the financial statements (cont’d) 31 December 2013

6. Operating profit/(loss) (cont’d) (d) Contributions for defined benefit plan Group Company 17.07.2012 to 2013 2013 31.12.2012 Principal actuarial assumptions used: (i) Discount rate 5.75%-6.25% 5.75%-6.25% (ii) Expected rate of salary increases 7.00% 7.00% (iii) The expected average remaining working lives of the employees participating in the plan as at 1 January 2011 is 10.8 years and retirement age is 55 years. 7. Finance costs Group 2013 RM’000 Interest expense on term loans and short term revolving credit 3,835 8. Income tax expense The components of income tax expense comprise the following: Group Company 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 Malaysian current income tax 10,452 2,872 Deferred income tax (Note 26) 266 - 10,718 2,872 Domestic income tax is calculated at the Malaysian statutory tax rate of 25% (2012: 25%) of the estimated assessable profit for the year.

86

Notes to the financial statements (cont’d) 31 December 2013

8. Income tax expense (cont’d) The reconciliation between tax expense and the product of accounting profit/(loss) multiplied by the applicable corporate tax rate are as follows: Group Company 17.07.2012 to 2013 2013 31.12.2012 Group RM’000 RM’000 RM’000 Profit/(loss) before tax 57,590 40,742 (168)

Taxation at Malaysian statutory tax rate Effect of income not subject to tax Effect of expenses not deductible for tax purposes Effect of utilisation of previously unrecognised tax losses Additional deduction allowed in respect of cash contributions made to MMIP during the period*

14,398 (9,354) 10,437 (266)

10,186 (8,958) 1,644 -

(42) 42 -

(4,497)

-

-

2,872

-

10,718

* In accordance with the P.U (A) 419 Income Tax (Deduction for contributions by Licensed Insurers to the Malaysian Motor Insurance Pool) Rules 2012, cash contributions made to MMIP via cash calls is allowed for additional deduction in the year when such cash is paid to the MMIP. 9. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit for the year attributable to Owners of the Company by the weighted average number of ordinary shares in issue during the financial year. Group 2013 RM’000 Profit for the year attributable to Owners of the Company 48,249 Number of ordinary shares in issue - weighted average 542,616 Basic earnings per share (Sen) 8.9

ANNUAL REPORT 2013

87

Notes to the financial statements (cont’d) 31 December 2013

10. Property, plant and equipment Buildings on leasehold and Freehold Leasehold freehold Plant and Computer Work-in- land land land equipment equipment progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Cost Merger and acquisition of subsidiaries (Note 12) 17,409 3,706 89,170 27,770 7,980 1,444 147,479 Additions - - - 2,454 253 - 2,707 Disposals - - - - (43) - (43) Transfer to intangible assets - - - - (39) - (39) Reclassification - - - - (760) 760 Written off - - (10) (8) (14) (2,204) (2,236) At 31 December 2013 17,409 3,706 89,160 30,216 7,377 - 147,868 Accumulated depreciation and impairment losses Merger and acquisition of subsidiaries (Note 12) - 234 27,367 22,183 5,610 - 55,394 Depreciation charge for the year - 34 2,481 2,029 674 - 5,218 Disposals - - - - (43) - (43) Written off - - (4) (7) (14) - (25) -

60,544

Net carrying amount At 31 December 2013 17,409 3,438 59,316 6,011 1,150 -

87,324

At 31 December 2013

-

268

29,844

24,205

6,227

The fair value of land and buildings are RM170,453,000 and is estimated based on valuations performed by accredited independent valuers. Information about the valuation techniques and inputs used in determine the fair value of lands and buildings are as disclosed in Note 11.

88

Notes to the financial statements (cont’d) 31 December 2013

10. Property, plant and equipment (cont’d) Plant and Computer equipment equipment Total RM’000 RM’000 RM’000 Company Cost At 1 January 2013 - - Additions 1,262 88 1,350 At 31 December 2013 1,262 88 1,350 Accumulated depreciation At 1 January 2013 - - Depreciation charge for the year 186 50 236 At 31 December 2013 186 50 236 Net carrying amount At 31 December 2013 1,076 38 1,114 At 31 December 2012 - - 11. Investment properties Group 2013 RM’000

Cost Merger and acquisition of subsidiaries (Note 12) Reclassified to asset held for sale (Note 20)

779,456 (30,195)

At 31 December 749,261 Accumulated depreciation Merger and acquisition of subsidiaries (Note 12) 3,884 Depreciation charge for the year 1,326 At 31 December Net carrying amount Estimated fair value

ANNUAL REPORT 2013

5,210 744,051 825,541

89

Notes to the financial statements (cont’d) 31 December 2013

11. Investment properties (cont’d) Investment properties comprise freehold lands, leasehold lands and buildings. Investment properties and lands and buildings in property, plant and equipment are stated at cost. Estimated fair value is based on valuations performed by an accredited independent valuers with recent experience in the location and category of properties being valued. Fair value is determined using the comparison method of valuation. Under the comparison method, fair value is estimated by considering the sale of similar or substitute properties and related market data and established a value estimate by adjustments made in factors including physical inspection of investment properties that affect value. The valuations were performed by the valuers in February 2014 for market value of investment properties as at 31 December 2013. Group 2013 RM’000 Rental income derived from investment properties 858 Direct operating expenses (including repairs and maintenance) generating rental income (451) Profit arising from investment properties

407

Carrying amounts of certain investment properties of the Group amounting to RM174,831,000 are pledged as security for the Group’s bank borrowings as disclosed in Note 25. The Group has no restrictions on the realisability of its investment properties and no contractual obligations to either purchase, construct or development investment properties or for repairs, maintenance and enhancements except for certain joint ventures have been undertaken with Bandar Raya Developments Berhad in respect of investment properties with carrying amounts of RM396,003,000. Details of the joint ventures are as follows: (i) On 29 April 2011, Magnum.Com Sdn. Bhd. (“MCSB”), a wholly owned subsidiary of the Group, entered into a Joint Venture Agreement (“JVA”) with a subsidiary of Bandar Raya Developments Berhad, Orion Vibrant Sdn. Bhd. (“OVSB”), to undertake development of 20 parcels of land in Pulau Pinang (measuring approximately 80.897 acres) (“PP Land”) legally and/or beneficially owned by MCSB. In accordance with the JVA, MCSB is to be paid 22% of the cash collected pursuant to billings issued of the proposed development for the PP Land (“the Land Owner’s Entitlement”) by way of completed units or components, or by a combination of cash payment and completed units or components. MCSB has received RM9,000,000 from OVSB as upfront and advance amount towards account of the Land Owner’s entitlement. (ii) On 13 January 2012, MCSB entered into a separate JVA with OVSB, to undertake development of 3 parcels of freehold land in Pulau Pinang measuring 2.1 acres. In accordance with the JVA, the payment for the purchase of the 3 parcels of land is to be made jointly through OVSB’s contribution of 74.53% (or not exceeding RM7,900,000) and through MCSB’s contribution of 25.47% (or not exceeding RM2,700,000). The 3 parcels of land were acquired in 2012 with the land titles registered under MCSB’s name and MCSB accordingly recognised the full cost of acquisition as its investment properties, despite only having a beneficial interest of 25.47% while recognising the balance of 74.53% as payable to OVSB. 90

Notes to the financial statements (cont’d) 31 December 2013

11. Investment properties (cont’d) (iii) On 29 April 2011, Mimaland Berhad (“MB”), a wholly owned subsidiary of the Group, signed a separate JVA with a subsidiary of Bandar Raya Developments Berhad, Magna Senandung Sdn. Bhd. (“MSSB”), to undertake development of seven parcels of land in Gombak (measuring approximately 324 acres) (“G Land”). In accordance with the JVA, MB is to be paid 22% of the cash collected pursuant to billings issued of the proposed development for the G Land (“the Land Owner’s Entitlement”) by way of completed units or components, or by a combination of cash payment and completed units or components. MB has received RM34,000,000 from the MSSB as upfront and advance amount towards account of the Land Owner’s entitlement. (iv) On 29 April 2011, Tibanis Sdn. Bhd. (“TSB”), a wholly owned subsidiary of the Group, entered into a separate JVA with a subsidiary of Bandar Raya Developments Berhad, Pinggir Mentari Sdn Bhd (“PMSB”), to undertake development of 2 parcels of land in Gombak (measuring approximately 265.13 acres) (“G2 Land”). In accordance with the JVA, TSB is to be paid 22% of the cash collected pursuant to billings issued of the proposed development for the G2 Land (“the Land Owner’s Entitlement”) by way of completed units or components, or by a combination of cash payment and completed units or components. TSB has received RM22,000,000 from PMSB as upfront and advance amount towards account of the Land Owner’s entitlement. 12. Investment in subsidiaries Company 2013 2012 RM’000 RM’000 At 1 January / the date of incorporation - Acquisition of shares in subsidiaries 1,202,131 At 31 December 1,202,131

-

Details of the subsidiaries, all of which are incorporated in Malaysia are disclosed in Note 38. Acquisition of shares in subsidiaries The Company completed the following acquisitions of shares in subsidiaries on 29 March 2013: (i) Share sale agreement with Magnum Berhad (“Magnum”) (formerly known as Multi-Purpose Holdings Berhad) for the acquisition of entire equity interest in West Jaya Sdn. Bhd., Caribbean Gateway Sdn. Bhd., Queensway Nominees (Tempatan) Sdn. Bhd., Queensway Nominees (Asing) Sdn. Bhd., Kelana Megah Development Sdn. Bhd., Magnum.Com Sdn. Bhd., Tibanis Sdn. Bhd., Mimaland Berhad, Leisure Dotcom Sdn. Bhd. and Magnum Leisure Sdn. Bhd. from Magnum for a total consideration of RM399,742,998; to be satisfied by a combination of cash payment of RM40,036,000 and the issuance of 359,706,998 new ordinary shares of RM1.00 each of the Company (“Acquisition I”); (ii) Share sale agreement with Magnum for the acquisition of entire equity interest in Multi-Purpose Capital Holdings Berhad from Magnum for a total consideration of RM392,831,000; to be satisfied by a combination of cash payment of RM37,538,000 and the issuance of 355,293,000 new ordinary shares of RM1.00 each of the Company (“Acquisition II”); and

ANNUAL REPORT 2013

91

Notes to the financial statements (cont’d) 31 December 2013

12. Investment in subsidiaries (cont’d) Acquisition of shares in subsidiaries (cont’d) (iii) Share sale agreement with Magnum for the acquisition of entire equity interest in Multi-Purpose Shipping Corporation Berhad, Jayavest Sdn. Bhd. and Syarikat Perniagaan Selangor Sdn. Bhd. from Magnum for a total cash consideration of RM112,790,000 (“Acquisition III”). The following table summarise the considerations paid for acquisition of shares in subsidiaries: Company 2013 RM’000 Total purchase consideration 1,201,455 Add: Acquisition expenses 676

Total purchase consideration satisfied by: - Cash - Issue of 715,000,000 shares of RM1.00 each at fair value of RM1.4141 each

1,202,131 190,364 1,011,091

1,201,455 Analysis of the effect of subsidiaries acquired: Group 2013 RM’000 Assets Property, plant and equipment (Note 10) 92,085 Investment properties (Note 11) 775,572 Investment in an associate 449 Investment securities 1,001 Intangible assets (Note 15) 42,649 Deferred tax assets (Note 26) 2,340 Inventories 226 Receivables 185,582 Reinsurance assets (Note 18) 372,451 Tax recoverable 1,622 Investment securities 378,489 Cash and bank balances 382,829 Total assets

92

2,235,295

Notes to the financial statements (cont’d) 31 December 2013

12. Investment in subsidiaries (cont’d)

Analysis of the effect of subsidiaries acquired: (cont’d)

Group 2013 RM’000 Liabilities Borrowings 111,085 Deferred tax liabilities (Note 26) 14,868 Payables 200,897 Insurance contract liabilities (Note 18) 729,330 Tax payable 5,326 Total liabilities

1,061,506



Net assets of subsidiaries acquired Less: non-controlling interests

1,173,789 (122)

The Group’s share of net assets of subsidiaries acquired The Group’s share of net assets of subsidiaries acquired comprised of: - net assets acquired under pooling of interests (Note 23) - net assets acquired under acquisition of assets

1,173,667

846,224 327,443

1,173,667 Impact of acquisition in income statement From the date of acquisition, the subsidiaries acquired had recorded profit after tax of RM51,441,000. If the acquisition had taken place at the beginning of the financial year, the Group’s profit after tax would have been RM57,416,000 and revenue would have been RM318,781,000. 13. Investment in an associate Group 2013 RM’000 Unquoted shares in Malaysia, at cost 100 Share of post-acquisition reserves 450

ANNUAL REPORT 2013

550

93

Notes to the financial statements (cont’d) 31 December 2013

13. Investment in an associate (cont’d) The summarised financial information of the associate is as follows: 2013 RM’000 Assets 3,085 Liabilities (333) Equity

2,752

Proportion of the Group’s ownership Carrying amount of the investment

20% 550



Revenue Other income Cost of sales Management expenses

105 1,245 (515) (214)



Profit before tax Income tax expense

621 (50)

Profit for the year

571



505

Profit for the period (1 April 2013 to 31 December 2013)

Group’s share of profit for the period 101 Details of the associate are disclosed in Note 38. 14. Investment securities Group 2013 RM’000 Current Financial asset at FVTPL Quoted shares in Malaysia 16,276 Unit trusts - quoted 87,039 Total current investment securities

94

103,315

Notes to the financial statements (cont’d) 31 December 2013

14. Investment securities (cont’d) Group 2013 RM’000 Non-Current AFS financial assets Quoted shares in Malaysia 69,619 Quoted shares outside Malaysia 2,879 Unquoted shares in Malaysia 1,001 Unquoted debts securities in Malaysia 239,663 Commercial papers 2,478 Unit trusts - quoted 40,997 Malaysian Government Papers 5,568 Total non-current investment securities

362,205

Total investment securities 465,520 The Group’s investment securities are summarised by categories as follows: Group 2013 RM’000 At fair value 464,519 At cost 1,001

465,520

15. Intangible assets Computer Goodwill software Total Group RM’000 RM’000 RM’000 Cost Merger and acquisition of subsidiaries (Note 12) 41,102 4,511 45,613 Transfer from property, plant and equipment - 39 39 Additions - 583 583 At 31 December 2013 41,102

ANNUAL REPORT 2013

5,133

46,235

95

Notes to the financial statements (cont’d) 31 December 2013

15. Intangible assets (cont’d) Computer Goodwill software Total Group RM’000 RM’000 RM’000 Accumulated amortisation Merger and acquisition of subsidiaries (Note 12) - 2,964 2,964 Charge for the year - 387 387 At 31 December 2013 - 3,351 3,351 Net carrying amount At 31 December 2013 41,102 1,782 42,884

Goodwill of the Group which arose from merger and acquisition of subsidiaries during the financial year has been allocated to the following CGUs for impairment testing: Group 2013 RM’000 Carrying amount Insurance division 18,782 Credit division 2,503 Investment division 19,817

41,102

The recoverable amount of the CGUs have been determined based on the value in use calculations using cash flows projections approved by management covering a period of 5 years and based on the following key assumptions: (i) Growth rates ranging from 4.9% to 5.7%; and (ii) Pre-tax discount of 5% estimated based on the effective average borrowing rate of the Group. The above key assumptions made by the management are based on past operating results and management’s expectations of market development and assessment of future trends derived from both external sources and internal sources. Barring unforeseen circumstances, the management believed that these assumptions are reasonable and achievable. The management do not expect any reasonable possible changes in the key assumptions would cause the carrying amount of the goodwill on consolidation to exceed its recoverable amount.

96

Notes to the financial statements (cont’d) 31 December 2013

16. Inventories Group 2013 RM’000 At cost: Food and beverages 106 Hotel supplies and merchandise 37 143 At net realisable value: Food and beverages 56 Total 199 During the year, the amount of inventories recognised as an expense in cost of sales of the Group was RM27,000. 17. Receivables Group Company Note 2013 2013 2012 RM’000 RM’000 RM’000 Loans and advances (a) 34,283 - Less: Allowance for impairment (22,269) - Security deposit (1,664) - 10,350 - Outstanding premium including agents/brokers balance (b) 107,976 - Less: Allowance for impairment (2,328) -

-



-



105,648

-

-

Amounts due from reinsurers/ceding companies and co-insurers (b) 36,585 - Less: Allowance for impairment (4,590) - -



31,995

-

-



Trade receivables

(c)

4,971

-

-



Other receivables (d) Amounts due from subsidiaries (e) Less: Allowance for impairment

85,667 - (10,275)

1,438 13,438 -

-

14,876

-

14,876

-

75,392 Total receivables 228,356

ANNUAL REPORT 2013

97

Notes to the financial statements (cont’d) 31 December 2013

17. Receivables (cont’d) (a) Loan and advances Ageing analysis of loan and advances The ageing analysis of the Group’s loan and advances is as follows: Group 2013 RM’000 Neither past due nor impaired 10,350 Past due not impaired 10,350 Loan and advances that are neither past due nor impaired Loan and advances that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. Movement in allowance accounts Group 2013 RM’000 Merger and acquisition of subsidiaries 22,408 Write-back of allowance for impairment (139) At 31 December 22,269 (b) Outstanding premium including agents/brokers balance and amount due from reinsurers/ceding companies and co-insurers Age analysis of outstanding premium including agents/brokers balance and amount due from reinsurers/ ceding companies and co-insurers The ageing analysis of the Group’s outstanding premium including agents/brokers balance and amount due from reinsurers/ceding companies and co-insurers are as follows: Group 2013 RM’000 Neither past due nor impaired 1 to 30 days past due but not impaired 86,295 31 to 60 days past due but not impaired 23,815 61 to 90 days past due but not impaired 16,047 91 to 120 days past due but not impaired 8,983 More than 121 days past due but not impaired 2,503 137,643 98

137,643

Notes to the financial statements (cont’d) 31 December 2013

17. Receivables (cont’d) (b) Outstanding premium including agents/brokers balance and amount due from reinsurers/ceding companies and co-insurers (cont’d) Movement in allowance accounts Group 2013 RM’000 Merger and acquisition of subsidiaries 3,766 Charge for the year 3,152

At 31 December

6,918

(c) Trade receivables Ageing analysis of trade receivables The ageing analysis of the Group’s and the Company’s trade receivables are as follows: Group 2013 RM’000 Neither past due nor impaired 1,290 1 to 30 days past due but not impaired 217 31 to 60 days past due but not impaired 109 61 to 90 days past due but not impaired 105 91 to 120 days past due but not impaired 55 More than 121 days past due but not impaired 3,195 3,681

4,971

Trade receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.

ANNUAL REPORT 2013

99

Notes to the financial statements (cont’d) 31 December 2013

17. Receivables (cont’d) (d) Other receivables Breakdown of other receivables of the Group and the Company are as follows: Group Company 2013 2013 2012 RM’000 RM’000 RM’000 Share of net assets in MMIP 42,380 - Deposits 1,422 - Prepayments 6,233 - Amount due from third parties for completion of developments 8,553 - Deposit for purchase of a land 10,133 - Income due and accrued 10,523 - Others 6,423 1,438 85,667 1,438 Movement in allowance accounts Group 2013 RM’000 At 1 January/31 December 10,275 (e) Amounts due from subsidiaries The amounts due from subsidiaries consist of amounts which are unsecured, repayable on demand and non-interest bearing except for an amount of RM10,996,000, which bore interest at 5% per annum. The Group and the Company has no significant concentration of credit risk that may arise from exposures to a single receivable or to group of receivables and the Group and the Company normal trade credit term is 30 to 90 days (2012: 30 to 90 days). 18. Reinsurance assets and insurance contract liabilities 2013 Gross Reinsurance Net RM’000 RM’000 RM’000 Group General insurance 816,204 (411,528) 404,676

100

Notes to the financial statements (cont’d) 31 December 2013

18. Reinsurance assets and insurance contract liabilities (cont’d) 2013 Gross Reinsurance Net RM’000 RM’000 RM’000 Group The balances are further analysed as follow: Provision for claims reported by policy holders 453,189 (254,536) Provision for IBNR 111,259 (49,589)

198,653 61,670



260,323 144,353

Provision for outstanding claims (Note (a)) Provision for unearned premium (Note (b))

564,448 251,756

(304,125) (107,403)

816,204 (411,528) 404,676 (a) Provision for outstanding claims 2013 Gross Reinsurance Net RM’000 RM’000 RM’000

At 1 January Merger and acquisition of subsidiaries (Note 12) Claims incurred in current accident year Claims incurred in prior accident year Movement in provision of risk margin for adverse deviation of claim liabilities at 75% confidence level Movement in claims handling expenses Adjustment in IBNR Other movement in claims incurred during the year Claims paid during the period Others

- 542,980 134,347 16,496

- (306,504) (65,937) (9,080)

236,476 68,410 7,416

2,578 770 (3,312) 90,580 (154,946) (65,045)

(385) - 12,085 (10,326) 50,319 25,703

2,193 770 8,773 80,254 (104,627) (39,342)

(304,125)

260,323

(b) Provision for unearned premiums At 1 January - - Merger and acquisition of subsidiaries (Note 12) 186,349 (65,946) Premiums written in the period 436,179 (196,455) Premiums earned during the period (370,772) 154,998

120,403 239,724 (215,774)

At 31 December 564,448

At 31 December 251,756 (107,403)

ANNUAL REPORT 2013

144,353

101

Notes to the financial statements (cont’d) 31 December 2013

19. Cash and bank balances Group Company 2013 2013 2012 RM’000 RM’000 RM’000 Cash at banks and on hand 12,339 306 3 Short term deposits with licensed banks 299,083 7,200

311,422

7,506

3

Less: Short term deposits with licensed banks with maturity period of more than 3 months (287)

-

-

7,506

3



Cash and cash equivalents

311,135

Short term deposits of the Group and the Company are placed for periods ranging between 1 day and 365 days. The effective interest rates of deposits at the reporting date were: Group Company 2013 2013 Short term deposits with licensed banks 2.90%-3.20% 2.90%-3.20%

2012 -

20. Asset held for sale and liability directly associated with asset held for sale On 21 August 2013, Multi-Purpose Shipping Corporation Berhad (“MPSC”), a subsidiary of the Company, had entered into a Sale and Purchase Agreement (“SPA”) with Twin Universal Sdn. Bhd. to dispose off 7 parcels of land located at Mukim B, Daerah Barat Daya, Pulau Pinang measuring approximately 9,042,280 square feet for a total cash consideration of RM226,057,004. MPSC has received a forfeitable deposit of RM22,605,700 towards part payment of the sales consideration upon execution of the SPA. As at 31 December 2013, the above mentioned investment property and the forfeitable deposit are presented separately in the Statements of Financial Position as “Asset held for sale” and “Liability directly associated with asset held for sale” respectively. Statements of Financial Position The asset classified as held for sale and liability directly associated with asset held for sale are as follow: Group 2013 RM’000 Investment properties 30,195 Deposit received (22,606) MPSC has received the remaining portion of the sales consideration subsequent to the financial year end as disclosed in Note 33(b).

102

Notes to the financial statements (cont’d) 31 December 2013

21. Share capital Number of ordinary shares of RM1.00 each Amount Note 2013 2012 2013 2012 RM RM Authorised share capital At 1 January/the date of incorporation 1,000,000,000 100,000 1,000,000,000 100,000 Created during the period (a) - 999,900,000 - 999,900,000 At 31 December 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 Issued and fully paid At 1 January/the date of incorporation 2 2 2 2 Ordinary shares issued during the year (b) 714,999,998 - 714,999,998 At 31 December

715,000,000

2

715,000,000

2

(a) The Company increased its authorised share capital from RM100,000 to RM1,000,000,000 by creation of an additional 999,900,000 new ordinary shares of RM1.00 each in 2012. (b) During the financial year, the Company increased its issued and paid-up ordinary share capital from RM2.00 to RM715,000,000.00 by way of the issuance of 714,999,998 ordinary shares of RM1.00 each at fair value of RM1.4141 per ordinary share of the followings: Number of ordinary shares of Share Share RM1.00 each capital premium ‘000 RM’000 RM’000 (i) Acquisition I (Note 12) 359,707 359,707 185,811 (ii) Acquisition II (Note 12) 355,293 355,293 110,280 715,000

715,000

296,091

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company residual assets.

ANNUAL REPORT 2013

103

Notes to the financial statements (cont’d) 31 December 2013

22. Other reserves Group 2013 RM’000 Capital reserve (Note (a)) 41,903 Fair value reserve (Note (b)) 5,934

47,837

(a) Capital reserve represents a non-distributable reserve arising from capitalisation of reserve via bonus issue and a gain on disposal of a freehold land of a subsidiary.

(b) Fair value reserve represents the cumulative fair value changes, net of tax, of AFS financial assets until they are disposed off or impaired. 23. Merger deficit The merger deficit relating to business combination involving entities under common control, is accounted for by applying the pooling of interest method. The difference between the consideration paid and the share capital and reserves of the subsidiaries acquired is reflected as a merger deficit. Group 2013 RM’000 Cost of investment in subsidiaries under pooling of interests 874,688 Less: Net assets of subsidiaries representing the share capital and reserves of subsidiaries acquired (Note 12) (846,224) Merger deficit 28,464 24. Retained profits The Company may distribute dividends out of its entire retained earnings as at 31 December 2013 under the single tier system. 25. Borrowings Group 2013 RM’000 Current Secured: Revolving credits 3,000 Term loans 26,650 104

29,650

Notes to the financial statements (cont’d) 31 December 2013

25. Borrowings (cont’d) Group 2013 RM’000 Non-current Secured: Revolving credits 6,000 Term loans 57,721

63,721

Total loans and borrowings Revolving credits 9,000 Term loans 84,371



93,371

The remaining maturities of the loans and borrowings are as follows: Group 2013 RM’000 On demand or within one year 29,650 Later than 1 year and not later than 2 years 36,038 Later than 2 years and not later than 3 years 21,295 Later than 3 years 6,388

93,371

The revolving credits and term loan bear interest at rates ranging between 5.09%-5.13% and 4.99%-5.02% respectively per annum during the financial year. The borrowings are secured by corporate guarantees of the subsidiaries and certain investment properties as disclosed in Note 11. 26. Deferred tax assets/liabilities Group 2013 RM’000 Merger and acquisition of subsidiaries (Note 12) (12,529) Recognised in: - other comprehensive income 314 - income statement (Note 8) (266) At 31 December

ANNUAL REPORT 2013

(12,481)

105

Notes to the financial statements (cont’d) 31 December 2013

26. Deferred tax assets/liabilities (cont’d) Group 2013 RM’000 Presented after appropriate offsetting as follows: Deferred tax assets (Note (a)) 11,598 Deferred tax liabilities (Note (b)) (24,079) (12,481) (a) Deferred tax assets Unused tax losses and Allowance unabsorbed Property, for capital plant and impairment allowances equipment Total RM’000 RM’000 RM’000 RM’000 Merger and acquisition of subsidiaries 678 10,298 1,173 12,149 Recognised in income statement 135 (621) (65) (551) At 31 December 2013 813 9,677

1,108

11,598

(b) Deferred tax liabilities Investment property, Unearned property, plant premium and equipment and and fair value accelerated changes on capital investment allowance Total RM’000 RM’000 RM’000 Merger and acquisition of subsidiaries 23,620 1,058 24,678 Recognised in: - other comprehensive income (314) - (314) - income statement (138) (147) (285) At 31 December 2013 23,168 106

911

24,079

Notes to the financial statements (cont’d) 31 December 2013

26. Deferred tax assets/liabilities (cont’d) Unrecognised deferred tax assets The Group has the following tax losses and capital allowances that are available indefinitely for off-setting against future taxable profits of the entities where they arose, subject to the requirements of the Income Tax Act, 1967. Group 2013 RM’000 Tax losses 160,243 Capital allowances 5,300

165,543

27. Payables Group Company Note 2013 2013 2012 RM’000 RM’000 RM’000 Trade payables and bills payable 107,353 - Amount due to agents/broker and insurers 5,374 - Other payables and accruals (a) 26,023 3,201 3 Advance received from third parties (b) 65,000 - Sundry creditors 29,746 - An affiliated company - former ultimate holding company (c) 42,604 42,604 Amounts due to shareholders of subsidiaries (d) 12,614 - Amount due to subsidiaries (c) - 130,944 168

288,714

176,749

171

(a) The other payables are non-interest bearing and are repayable on demand. (b) Amounts received from third parties relating to the development of investment properties as disclosed in Note 11. (c) Amounts due to an affiliate and subsidiaries are unsecured, non-interest bearing and repayable on demand. (d) The amounts due to shareholders of subsidiaries represent amounts funded by shareholders for the acquisitions of investment properties which are unsecured, non-interest bearing and repayable on demand.

ANNUAL REPORT 2013

107

Notes to the financial statements (cont’d) 31 December 2013

28. Operating lease arrangements (a) The Group as lessor The Group has entered into operating lease agreements for the use of certain office premises. These noncancellable leases have an average life of between 1 to 5 years with certain contracts carrying renewal options in the contracts. These contracts include fixed rentals over the tenure of the lease period. The future aggregate minimum lease payments receivable under operating lease contracted for as at the reporting date but not recognised as receivables, are as follows: Group 2013 RM’000 Future minimum rental payments receivables: Not later than 1 year 467 Later than 1 year and not later than 5 years 444 911 (b) The Group as lessee The Group has entered into operating lease agreements for the use of certain office premises. These noncancellable leases have an average life of between 1 to 5 years with certain contracts carrying renewal options in the contracts. Operating lease payments represent rental payables by the Group for use of building. Leases have an average life of 3 years with no renewal or purchase option included in the contracts. The future aggregate minimum lease payments under operating leases contracted for as at the reporting date but not recognised as liabilities, are as follows: Group 2013 RM’000 Future minimum rental payments: Not later than 1 year 2,800 Later than 1 year and not later than 5 years 1,955

108

4,755

Notes to the financial statements (cont’d) 31 December 2013

29. Capital commitments Group 2013 RM’000 Approved and contracted for: Computer software and hardware Property, plant and equipment Investment properties

1,275 743 4,009 6,027

30. Material litigation (a) Kuala Lumpur High Court Suit No. S1-22-946-2008 On 6 October 2008, Leisure Dotcom Sdn. Bhd. (“Leisure Dotcom”), a subsidiary, commenced a legal proceeding at the High Court of Malaya (“High Court”) at Kuala Lumpur against Globesource Sdn. Bhd. (“GBS”) claiming for among others, specific performance for delivery of a piece of freehold land and 2 leases (“the properties”) in Kuala Lumpur pursuant to a conditional sale and purchase agreement dated 21 June 2007 entered into between Leisure Dotcom and GBS. Pursuant to the agreement, GBS is to sell and Leisure Dotcom is to purchase the properties for a total consideration of RM72,162,000.00. Upon the execution of the agreement, Leisure Dotcom paid a deposit of RM7,216,000.00 representing 10.00% of the purchase price. Subsequent to that, Leisure Dotcom paid the balance purchase price but such sum was returned by GBS. As the result, the sale and purchase under the agreement dated 21 June 2007 was not completed. Hence, Leisure Dotcom filed a claim against GBS. In turn, GBS had counterclaimed, among others, that the agreement had been validly terminated. On 6 July 2012, Leisure Dotcom’s claim was dismissed with costs and GBS’s counterclaim was allowed with costs by the High Court. On 9 July 2012, Leisure Dotcom filed a notice of appeal and subsequently on 24 August 2012, a record of appeal at the Court of Appeal. On 19 September 2012, the High Court granted Leisure Dotcom an Erinford injunction against GBS and a stay of execution of the High Court decision pending the appeal. On 26 November 2012, Leisure Dotcom further filed a supplemental record of appeal at the Court of Appeal to include the grounds of judgment for the High Court case which was received on 8 November 2012. In light of the grounds of judgment of the High Court case, Leisure Dotcom had on 20 December 2012, further filed a second supplemental record of appeal to include an amended memorandum of appeal. Subsequently, Leisure Dotcom had on 22 February 2013 filed an application for leave to amend the memorandum of appeal, which was allowed by the Court of Appeal on 1 April 2013. The hearing of the Court of Appeal case has been fixed on 25 June 2014.

ANNUAL REPORT 2013

109

Notes to the financial statements (cont’d) 31 December 2013

30. Material litigation (cont’d) (b) Kuala Lumpur High Court Suit No. S22-100-2010 Mulpha Kluang Maritime Carriers Sdn. Bhd. (“Mulpha”), a subsidiary,  had on 27 June 2013 filed a Notice of Appeal and subsequently on 21 August 2013, a Record of Appeal at the Court of Appeal in respect of the decision of the High Court on 6 June 2013 which dismissed Mulpha’s claim with costs under a legal suit commenced against the personal representatives and executors of the estate of Liew Yee Tiam (“Madam Liew”) who passed away on 30 October 2010 (after the High Court suit had commenced), namely Chai Hon Keong @ Chye How Keong and Chai Hon Min (as the First and Second Defendants), Thong Honn (Housing Development) Sdn. Bhd. (“Thong Honn”) as the Third Defendant and Messrs. Chin & Co (“ Messrs. Chin  & Co”) as the Fourth Defendant in its capacity as the conveyancing solicitors and stakeholders for Madam Liew and Thong Honn. The High Court suit was filed on 8 February 2010 to claim for the overpayment of RM3,316,942 pursuant to two (2) conditional sale and purchase agreements (“SPAs”), both dated 12 October 2009, which were entered into between Mulpha with Madam Liew and Thong Honn respectively for the acquisition of two pieces of lands in Kuala Lumpur (“Lands”) on discovery that  the total area described in the SPAs and warranties therein were incorrect as part of each of the  Lands had in fact been surrendered to the State Authority previously. The hearing of the Court of Appeal case has been fixed on 11 August 2014. (c) Shah Alam High Court Civil Suit No. 22NCVC-682-11/2013 On 18 November 2013, Mulpha (as defined in (b) above) commenced a legal proceedings at the Shah Alam High Court ( “Court”) against the partners of Messrs. Mah-Kamariyah & Philip Koh (“MKPK”) claiming for special damages of RM3,316,942 and other damages to be assessed by the court being the losses suffered by Mulpha. Mulpha claims against MKPK is in their capacity as the conveyancing solicitors for Mulpha in which event MKPK had failed to exercise professional skill, care and diligence in advising Mulpha and handling the SPAs (as defined in (b) above) on which after the conclusion of the said sale and purchase transactions, Mulpha discovered that the total area described in the SPAs therein were incorrect as part of each of the Lands (as defined in (b) above) had in fact been surrendered to the State Authority in year 1988 and MKPK had failed, neglected and/or omitted to notify and/or advise Mulpha of the same. The Court had fixed the matter for Full Trial on 23 and 24 September 2014.

110

Notes to the financial statements (cont’d) 31 December 2013

31. Significant related party transactions For the purpose of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Group Company 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 Subsidiaries: Interest receivable on loans - 111 Investment income in respect of gross dividends - 45,641 Management fees receivables - 1,264 An associate: Premium ceded to reinsurers (2) - Claims ceded to insurers (218) - Affiliated companies: Gross insurance premium receivables 2,455 - Insurance commission payable (480) - Claim paid (551) - Professional fees paid (197) - Office rental paid (6) - IT management fees payable (254) - (i)

The above transactions are entered into in the normal course of business based on negotiated and mutual terms. (ii) Affiliated companies during the financial year refer to the following: • Ganda Pesona Sdn. Bhd., incorporated in Malaysia, which is a company in which a Director has a substantial financial interest. • MWE Properties Sdn. Bhd., incorporated in Malaysia, which is a company in which a Director has a substantial financial interest. • Metra Management Sdn. Bhd., incorporated in Malaysia, which is a company in which a Director has a substantial financial interest. •

Magnum Berhad, incorporated in Malaysia, which is a company in which a Director has a substantial financial interest. • Ace Management Sdn. Bhd., incorporated in Malaysia, which is a company in which a Director has a substantial financial interest.

ANNUAL REPORT 2013

111

Notes to the financial statements (cont’d) 31 December 2013

32. Significant events (a) Listing and quotation of issued and paid-up share capital of the Company On 28 June 2013, the Company completed the listing and quotation of the Company’s entire issued and paid-up share capital of RM715 million comprising 715 million ordinary shares of RM1.00 each on the Main Market of Bursa Malaysia Securities Berhad. (b) Non-compliance Pursuant to the listing of the Company, the Group has undertaken to rectify the following non-compliances by 31 December 2014 (extended from 31 December 2013). As at current date, the non-compliances are as follows: (i) The condition imposed on the land title Syarikat Perniagaan Selangor Sdn. Bhd. (“SPSSB”) is the registered proprietor of a land held under PM 345, Lot 13501, Mukim Hulu Kelang, District of Gombak, State of Selangor Darul Ehsan. This land can only be used for guards’ and keepers’ quarters. However, a Tenaga Nasional Berhad (“TNB”) sub-station and network pumping station has been erected on the said land. SPSSB is currently liaising with TNB to register a lease in favour of TNB over that portion of land on which the TNB substation is situated; and (ii) The undetermined status of the certificate of fitness for occupation In respect of the following lands, the Group has yet to determine the status of the certificate of fitness for occupation to the buildings erected thereon, all of which are currently tenanted. The Group is exploring options available to resolve this non-compliance. (a)  GRN 28274, Lot 643 and GRN 9036, Lot 1199, Seksyen 67, Town of Kuala Lumpur, District and State of Wilayah Persekutuan Kuala Lumpur, properties registered under Mulpha Kluang Maritime Carriers Sdn. Bhd.; (b) GRN 28267, Lot 634, Seksyen 67, Town of Kuala Lumpur, District and State of Wilayah Persekutuan Kuala Lumpur, property registered under Caribbean Gateway Sdn. Bhd.; and (c) GRN 28273, Lot 642, Seksyen 67, Town of Kuala Lumpur, District and State of Wilayah Persekutuan Kuala Lumpur, property registered under Queensway Nominees (Tempatan) Sdn. Bhd.. 33. Subsequent events (a) Preliminary negotiations with an interested party in relation to the strategic alliance with MultiPurpose Insurans Bhd (“MPIB”) On 22 January 2014, the Company announced that Bank Negara Malaysia (“BNM”) had no objection in principle for the Company to commence preliminary negotiations with an interested party in relation to the strategic alliance with MPIB, which may result in the disposal of a minority interest in MPIB.

112

Notes to the financial statements (cont’d) 31 December 2013

33. Subsequent events (cont’d) (b) Disposal of investment properties in Multi-Purpose Shipping Corporation Berhad (“MPSC”) MPSC entered into a SPA with Twin Universal Sdn. Bhd. (“the Original Purchaser”) on 21 August 2013 to dispose of 7 parcels of land as disclosed in Note 20. On 20 February 2014, MPSC had entered into a Deed of Novation Cum Assignment with the Original Purchaser and Pr1ma Corporation Malaysia (“New Purchaser”), a statutory body enacted pursuant to Perumahan Rakyat 1 Malaysia Act, 2012, whereby the Original Purchaser has assigned and novated to New Purchaser all the Original Purchaser’s rights, benefits, interests, liabilities and obligations under SPA dated 21 August 2013 entered into between the Company and the Original Purchaser, save for the rights, benefits, interests, liabilities and obligations under the Power of Attorney. Pursuant to the terms of the SPA and the Deed of Novation cum Assignment, MPSC has received from the New Purchaser another 10% of the Sale Consideration amounting to RM22,605,700. MPSC has granted an extension of the completion date of the SPA for a period of 6 months from 21 February 2014 to 20 August 2014 to the New Purchaser. On 9 April 2014, the SPA was completed when MPSC received the balance of the sale consideration of RM180.8 million. 34. Financial risk management objectives and policies The Group’s and the Company’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s and the Company’s businesses whilst managing its liquidity risk, credit risk, market price risk, interest rate risk and insurance risk. The Group and the Company operate within clearly defined guidelines that are approved by the Board of Directors. As the Group’s result is significantly contributed by Multi-Purpose Insurans Bhd. (“MPIB” or “insurance subsidiary”), there are significant financial risks which relates to MPIB. Hence, the Group adopt the risk management objectives and policies from MPIB as follow: Risk Management Framework of MPIB The Board of MPIB, with the assistance of the Management of MPIB, had implemented the risk management processes that sets out the overall business strategies and the general risk management philosophy. The major areas of risk that the activities of MPIB are exposed to are operational risk, financial risk and general risk. The Strategic Operations Management Committee (“SOMC”), headed by Chief Executive Officer of MPIB was established with the responsibility to identify on critical risks in terms of likelihood exposures and impact on MPIB’s business and the management action plans to manage these risks regularly. The independent risk management and control functions under the Internal Audit Department provides the necessary support to the committee, and SOMC is responsible to ascertain that the risk policies are implemented and complied with. The Business Units are responsible for identifying, mitigating and managing risks within their lines of business and ensure that their day-to-day business activities are carried out in accordance with the established risk policies, procedures and limits. The role of the Audit Committee, supported by the Internal Audit Department, is to provide an independent assessment of the adequacy and reliability of the risk management processes and system of internal controls and compliance with risk policies, laws, internal and regulatory guidelines.

ANNUAL REPORT 2013

113

Notes to the financial statements (cont’d) 31 December 2013

34. Financial risk management objectives and policies (cont’d)

Risk Management Framework of MPIB (cont’d) The risk management policies are regularly review to ensure that they remain applicable and effective in managing the associated risks due to changes in the market and regulatory environments. Capital Management Plan of MPIB Pursuant to the RBC Framework for Insurers issued by Bank Negara Malaysia, the Board had approved and adopted a Capital Management Plan (“CMP”) for MPIB in line with the requirements set out in the RBC Framework with effect from 1 January 2009. The objective of the CMP is to optimise the efficient and effective use of resources in order to maximise the return on equity and provide an appropriate level of capital to protect the policyholders taking into account events that can impact directly or indirectly on the operations and financial resilience of MPIB whilst complying with rules and regulations issued by the relevant authorities. MPIB has met the minimum capital requirements as prescribed by the RBC Framework as at the end of the reporting date. The management of capital is guided by the CMP which is driven by MPIB’s business strategies and organisational requisites which take into account the business and regulatory environment in which MPIB operates. In this respect, MPIB sets capital targets for both Tier 1 and Tier 2 as defined under the RBC Framework that is above the minimum regulatory requirements. The management committee responsible for the oversight of MPIB’s capital management is the SOMC. All proposals on any deviation from capital targets or capital raising exercise must be addressed to and approved by the SOMC prior to recommendation to the Board of MPIB for approval and implementation. Stress test of MPIB The CMP also include a Stress Policy which requires a stress test be conducted twice a year to systematically evaluate the extent by which the MPIB’s capital could withstand market shocks and by which capital will be eroded by the principal risks identified due to exceptional but adverse plausible events and to determine the impact on the performance and financial conditions. The stress tests results together with the counter measures are tabled to the Risk Management Committee for deliberation and recommendation to MPIB’s Board for approval prior to the submission to Bank Negara Malaysia. Asset/Liability Management (“ALM”) of MPIB The primary objective of MPIB’s asset/liability management policy is to ensure that adequate liquid assets are held at all times and provide a satisfactory and consistent earnings on these assets. MPIB’s ALM is integrated with the management of the financial risks associated with MPIB’s other financial assets and liabilities not directly associated with insurance. MPIB’s SOMC and Investment Committee are primarily responsible for the asset/liability management based on guidelines approved by the Board of MPIB.

114

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (a) Financial instruments by category Assets at fair value through Loans and profit or Available for receivables loss sale Total RM’000 RM’000 RM’000 RM’000 Group 2013 Financial assets Receivables 228,356 - - 228,356 Reinsurance assets - - 411,528 411,528 Investment securities - 103,315 362,205 465,520 Tax recoverable 6,156 - - 6,156 Cash and bank balances 311,422 - - 311,422 545,934 103,315 773,733 1,422,982 Financial liabilities Payables 288,714 - - 288,714 Insurance contract liabilities * - - 816,204 816,204 Borrowings 93,371 - - 93,371 382,085 - 816,204 1,198,289 Company 2013 Financial assets Receivables 14,876 - - 14,876 Cash and bank balances 7,506 - - 7,506 22,382 - - Financial liabilities Payables 176,749 - - 2012 Financial assets Cash and bank balances 3 - - Financial liabilities Payables 171 - -

ANNUAL REPORT 2013

22,382 176,749

3 171

115

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d) (b) Liquidity risk The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. The Group also apportions its investments in marketable securities and other financial investments by maintaining different maturity profiles. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group prudently balances its portfolio with some short term funding so as to achieve overall cost effectiveness. In respect of the Group’s insurance business, the following policies and procedures are in place to mitigate MPIB’s exposure to liquidity risk: i)

A company-wide liquidity risk policy setting out the evaluation and determination of the components of liquidity risk for MPIB. Compliance with the policy is monitored and reported monthly and exposures and breaches are reported to MPIB’s SOMC as soon as practicable. The policy is regularly reviewed for pertinence and for changes in the risk environment. ii) MPIB has set the guidelines on asset allocations, portfolio limit structures and maturity profiles of assets, in order to ensure sufficient funding is available to meet insurance and investment contracts obligations. iii) MPIB has set up contingency funding plans which specify minimum proportions of funds to meet emergency calls as well as specifying events that would trigger such plans. iv) MPIB’s treaty reinsurance contracts contains clauses permitting MPIB to call for funding to meet claim payment should claim events exceed a specify amount. Analysis of financial instruments by remaining contractual maturities The table below summarises the maturity profile of the Group’s and the Company’s financial assets and liabilities at the reporting date based on the carrying amount of the financial assets and liabilities. Up to a More than No maturity year 1-5 years 5 years date Total RM’000 RM’000 RM’000 RM’000 RM’000 Group 2013 Financial assets Receivables 228,356 - - - 228,356 Reinsurance assets * 152,126 133,104 18,895 - 304,125 Investment securities 103,315 188,854 58,855 114,496 465,520 Tax recoverable 6,156 - - - 6,156 Cash and bank balances - - - 311,422 311,422 489,953 321,958

116

77,750

425,918

1,315,579

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d) Analysis of financial instruments by remaining contractual maturities (cont’d) (b) Liquidity risk (cont’d) Up to a More than No maturity year 1-5 years 5 years date Total RM’000 RM’000 RM’000 RM’000 RM’000 Group 2013 Financial liabilities Payables 288,714 - - - Insurance contract liabilities * 282,342 247,038 35,068 - Borrowings 29,650 63,721 - - 600,706 310,759

35,068

-

288,714 564,448 93,371 946,533

Company 2013 Financial assets Receivables 14,876 - - - 14,876 Cash and bank balances 7,506 - - - 7,506 22,382 -

-

-

22,382

Financial liabilities Payables 176,749 - - - 176,749

2012 Financial assets Cash and bank balances 3 - - - 3 Financial liabilities Payables 171 - - - 171

ANNUAL REPORT 2013

117

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d) (b) Liquidity risk (cont’d) Analysis of financial instruments by remaining contractual maturities (cont’d) * For insurance contracts liabilities and reinsurance assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance liabilities. Unearned premiums and the reinsurers’ share of unearned premiums have been excluded from the analysis as they are not contractual obligations. (c) Credit risk Credit risk is the risk of financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The major classes of financial assets of the Group are deposits with financial institutions, available-for-sale securities (unit trusts and bonds), loan receivables and trade receivables. Credit risk arises when the Group’s and the Company’s cash assets are placed in interest-bearing instruments, mainly fixed and call deposits and repurchase agreements with licensed financial institutions. The Group and the Company manage this credit risk by spreading its deposits with a large group of financial institutions. Credit exposure The table below shows the maximum exposure to credit risk for the components on the statements of financial position. Group Company 2013 2013 2012 RM’000 RM’000 RM’000 LAR Short term deposits with licensed banks 299,083 AFS financial assets Malaysian Government Papers 5,568 Debt securities 239,663 Commercial Papers 2,478 Reinsurance assets 411,528 Receivables 228,356 Cash and bank balances 12,339 1,199,015

118

7,200

-

- - - - 14,876 306

3

22,382

3

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d) (c) Credit risk (cont’d) Credit exposure by credit rating The table below provides information regarding the credit risk exposure of the Group and the Company by classifying assets according to the Group’s and the Company’s credit ratings of counterparties. Neither past-due nor impaired Group Investment Past-due but grade Not Rated not impaired Total RM’000 RM’000 RM’000 RM’000 2013 LAR Short term deposits with licensed banks 248,560 50,523 - 299,083 AFS financial assets Malaysian Government Papers - 5,568 - 5,568 Debt securities 234,406 5,257 - 239,663 Commercial Papers - 2,478 - 2,478 Reinsurance assets 188,644 222,884 - 411,528 Receivables - 87,032 141,324 228,356 Cash and bank balances 12,200 139 - 12,339 683,810 373,881 141,324 1,199,015 Company 2013 LAR Fixed and call deposits - 7,200 - 7,200 Other receivables - 14,876 - 14,876 Cash and bank balances 286 20 - 306 286 22,096 - 22,382 2012 Cash and bank balances - 3 -

ANNUAL REPORT 2013

3

119

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d) (c) Credit risk (cont’d) Credit exposure by credit rating (cont’d) The table below provides information regarding the credit risk exposure of the Group and the Company by classifying assets according to the Rating Agency of Malaysia’s (“RAM”), Malaysian Rating Corporation Berhad (“MARC”), A.M. Best Company (“A.M. Best”) and Standards & Poor’s (“S&P”) credit ratings of counterparties. AAA is the highest possible rating. Group AAA AA A BBB Not rated Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2013 LAR Short-term deposits with licensed banks 84,610 12,577 151,373 - 50,523 299,083 AFS financial assets Malaysian Government Papers - - - - 5,568 5,568 Debt securities 22,179 199,514 12,713 - 5,257 239,663 Commercial Papers - - - - 2,478 2,478 Reinsurance assets - 8,933 171,918 7,793 222,884 411,528 Receivables - 516 3,791 888 223,161 228,356 Cash and bank balances 4,609 957 6,634 - 139 12,339 111,398 222,497 346,429 8,681

510,010 1,199,015

Company 2013 LAR Short-term deposits with licensed banks - - - - 7,200 7,200 Other receivables - - - - 14,876 14,876 Cash and bank balances 29 - 257 - 20 306 29 - 257 - 22,096 22,382 2012 Cash and bank balances - - - - 3 3 It is the Group’s and the Company’s policy to maintain accurate and consistent risk ratings across its credit portfolio. This enables Management to focus on the applicable risks and the comparison of credit exposures across all lines of business and products. The rating system is supported by a variety of financial analytics combined with processed market information to provide the main inputs for the measurement of counterparty risk. All internal risk ratings are tailored to the various categories and are derived in accordance with the Group’s and the Company’s rating policy. The attributable risk ratings are assessed and updated regularly.

120

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d) (c) Credit risk (cont’d) Credit exposure by credit rating (cont’d) During the year, no credit exposure limits were exceeded. The Group actively manages its product mix to ensure that there is no significant concentration of credit risk. (d) Market price risk Equity price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate/profit yield risk or currency risk), irregardless whether those changes are caused by factors specific to the individual financial instruments or its issuer or factors affecting similar financial instruments traded in the market. The Group’s equity price risk exposure relates to financial assets whose values will fluctuate as a result of changes in market prices. The Group is exposed to equity price risk arising from investments held by the Group and classified in the statements of financial position as financial assets at FVTPL and AFS financial assets that comprises quoted shares in Malaysia and outside Malaysia. The analysis below is performed for reasonably possible movements in equity price with all other variables held constant, showing the impact of statements of comprehensive income and equity. Impact on Changes equity* in variable 2013 Group % RM’000 Market indices: Bursa Malaysia +10% 16,261 Bursa Malaysia -10% (16,261) * Impact on equity reflects adjustments for tax, when applicable. (e) Interest rate risk Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates/profit yield. The Group and the Company are exposed to interest rate risk primarily through its investments in fixed income securities and deposits placements. Interest rate risk is managed by the Group and the Company on an ongoing basis. The Group and the Company have no significant concentration of interest rate/profit yield risk.

ANNUAL REPORT 2013

121

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d) (e) Interest rate risk (cont’d) The sensitivity analysis of the Group’s and the Company’s fixed income securities and borrowings are as follow: Sensitivity of Change in changes in interest Impact to basis points bearing debts profit before tax Increase/(decrease) Increase/(decrease) Group Company Group Company 2013 RM’000 RM’000 RM’000 RM’000 Borrowings +25 / -25 231/(231) - (231)/231 Sensitivity of Change in changes in fair value Impact to basis points investment securities profit before tax Increase/(decrease) Increase/(decrease) Group Company Group Company 2013 RM’000 RM’000 RM’000 RM’000 Malaysian Government Papers +25 / -25 14/(14) - 14/(14) Debt securities +25 / -25 599/(599) - 599/(599) Commercial Papers +25 / -25 6/(6) - 6/(6) Short term deposits with licensed banks +25 / -25 801/(801) 25/(25) 801/(801) 25/(25) (f) Insurance risk MPIB, a subsidiary which underwrites various general insurance contracts, which are mostly on an annual coverage and annual premium basis, with the exception of short term policies such as Marine Cargo which covers the duration in which the cargo is being transported. MPIB also underwrites some non-annual policies with coverage period more than one year such as Mortgage Reducing Personal Accident, Contractor’s All Risk and Engineering, Bonds and Workmen Compensation. The majority of the insurance businesses written by the Group are Fire and Motor. Other major lines of business include Contractor’s All Risk and Engineering, Workmen Compensation, Liabilities, Personal Accidents and other miscellaneous classes. MPIB’s objectives of managing insurance risks are to enhance the long-term financial performance of the business to achieve sustainable growth in profitability, strong asset quality and to continually optimise shareholders’ value. MPIB seeks to write those risks that it understands and that provide a reasonable opportunity to earn an acceptable profit. Insurance risk is the inherent uncertainty regarding the occurrence, amount or timing of insurance liabilities. Insurance contracts transfer risk to MPIB by indemnifying the policy holders against adverse effects arising from the occurrence of specified uncertain future events. The principal risk MPIB faces under insurance contracts is that the actual claims and benefits payments differ from expectations, the risks arise from the fluctuations in timing, frequency and severity of claims, as well as the adequacy of premiums and reserves.

122

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d) (f) Insurance risk (cont’d) MPIB adopts the following measures to manage the insurance risks: (i) MPIB has in place a claims management and control system to pay claims and control claim wastage or fraud. MPIB has claim review policies to assess all new and ongoing claims, review of claims handling procedures and investigation of possible fraudulent claims are put in place to reduce the risk exposure of MPIB. MPIB further enforces a policy of actively managing and promptly pursuing claims, in order to reduce its exposure to unpredictable future developments that can negatively impact the business. Inflation risk is mitigated by taking expected inflation into account when estimating insurance contract liabilities. (ii) MPIB purchases reinsurance as part of its risks mitigation programme. The objectives for purchasing reinsurance are to provide market-leading capacity for MPIB’s customers while protecting the statement of financial position and optimising MPIB’s capital efficiency. Reinsurance is ceded on quota share, proportional and non-proportional basis. MPIB’s placement of reinsurance is diversified such that it is neither dependent on a single reinsurer nor are the operations of MPIB substantially dependent upon any single reinsurance contract. The table below sets out the concentration of the MPIB’s insurance contract liabilities by type of insurance product: 31 December 2013 Gross Reinsurance Net Group RM’000 RM’000 RM’000 Claim liabilities Motor 176,880 (5,806) 171,074 Fire 83,023 (62,834) 20,189 Marine, Aviation & Transit 144,427 (135,332) 9,095 Miscellaneous 160,118 (100,153) 59,965 564,448 (304,125) 260,323 Premium Liabilities Motor 86,780 (10,068) 76,712 Fire 17,105 (6,709) 10,396 Marine, Aviation & Transit 52,380 (49,988) 2,392 Miscellaneous 95,491 (40,638) 54,853 251,756

(107,403)

144,353



ANNUAL REPORT 2013

123

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d)

(f) Insurance risk (cont’d) Key Assumptions

The principal assumption underlying the liability estimates is that MPIB’s future claims development will follow a similar pattern to past claims development experience. This includes assumptions in respect of average claims costs, claims handling cost and claims numbers for each accident year. Additional qualitative judgements are used to assess the extent to which past trends may not apply in the future, for example, isolated occurrence, change in market factors such as public attitude to claiming, economic conditions, as well as internal factors, such as, portfolio mix, policy conditions and claims handling procedures. Judgement is further used to assess the extent to which external factors, such as, judicial decisions and government legislation affect the estimation. Other key circumstances affecting the reliability of assumptions include variation in interest rates, delays in settlement and changes in foreign rates. MPIB has based its risk margin for adverse deviation for the provisions for unexpired risks and insurance claims at a minimum 75% of sufficiency, according to the requirement set by Bank Negara Malaysia under the RBC Framework. Sensitivities MPIB has appointed independent actuarial firm to evaluate its valuation models on various bases. An analysis of sensitivity around various scenarios provides an indication of the adequacy of MPIB’s estimation process in respect of its insurance contracts. The table presented below demonstrates the sensitivity of the insurance contract liabilities estimates to particular movements in assumptions used in the estimation process. The analysis below is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities, profit before tax and equity. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that movements in these assumptions are non-linear.

124

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d)

(f) Insurance risk (cont’d)

Sensitivities (cont’d) Impact on Impact Impact Change in gross on net on profit Impact on assumption liabilities liabilities before tax equity* RM’000 RM’000 RM’000 RM’000 2013 Average claim cost +10% 51,439 21,981 (21,981) (16,486) Average number of claims +10% 41,302 19,555 (19,555) (14,666) Average claims settlement period Increase by 7,913 4,922 (4,922) (3,692) 6 months * impact on equity reflects adjustments for tax, when applicable Claim Development Table The following tables show the estimate of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at reporting date, together with cumulative payments to-date. In setting provisions for claims, MPIB gives consideration to the probability and magnitude of future experience being more adverse than assumed and exercises a degree of caution in setting reserves when there is considerable uncertainty. In general, the uncertainty associated with the ultimate claims experience in an accident year is greater when the accident year is at an early stage of development and the margin necessary to provide the necessary confidence in adequacy of provision is relatively at its highest. As claims develop and the ultimate cost of claims becomes more certain, the relative level of margin maintained should decrease. The management of MPIB believes that the estimate of total claims outstanding as of 31 December 2013 are adequate. However, due to the inherent uncertainties in the reserving process, it cannot be assured that such balances will ultimately prove to be adequate. Information in the claims development table below is provided to the extent available as the current actuary was only appointed in 2007.

ANNUAL REPORT 2013

125

126

Best estimate of claim liabilities Claim handling expenses Fund PRAD at 75% confidence interval

Gross general insurance contract liabilities per statement of financial position (Note 18)





564,448

508,802 3,589 52,057

Cumulative payments to date (149,168) (182,460) (200,310) (237,111) (182,266) (152,569) (140,189) (78,103) Gross general insurance outstanding liabilities (direct and facultative) 12,379 9,320 26,945 31,689 98,912 33,032 78,302 172,469 463,048 Case reserves reconciliation difference between SMCD and G Forms 623 Gross general insurance outstanding liabilities (treaty inward) 45,131

Current estimate of cumulative claims incurred 161,547 191,780 227,255 268,800 281,178 185,601 218,491 250,572 At end of accident year (42,845) (52,271) (63,026) (110,654) (66,089) (66,857) (68,404) (78,103) One year later (85,871) (98,334) (145,216) (196,934) (145,219) (132,063) (140,189) Two years later (97,434) (165,102) (175,215) (225,951) (164,223) (152,569) Three years later (137,545) (178,272) (194,030) (233,745) (182,266) Four years later (146,123) (180,874) (198,157) (237,111) Five years later (148,695) (182,046) (200,310) Six years later (149,743) (182,460) Seven years later (149,168)

35. Financial instruments (cont’d) (f) Insurance risk (cont’d) Claim Development Table (cont’d) Gross General Insurance Contract Liabilities 2013 Group Prior 2006 2007 2008 2009 2010 2011 2012 2013 Total Accident year RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At end of accident year 158,168 201,119 282,098 364,710 273,955 221,090 225,900 250,572 One year later 158,168 201,119 282,098 283,469 297,469 196,534 218,491 Two years later 158,168 201,119 232,193 276,209 283,844 185,601 Three years later 158,168 197,027 227,013 273,541 281,178 Four years later 160,274 195,365 226,850 268,800 Five years later 155,270 194,270 227,255 Six years later 154,456 191,780 Seven years later 161,547

Notes to the financial statements (cont’d) 31 December 2013

At end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later

75,960 88,126 115,506 120,410 125,104 129,888 142,610 157,393 78,383 90,454 113,749 118,098 122,605 123,352 137,867 79,602 91,988 114,565 119,218 120,211 121,022 79,334 91,075 113,794 118,971 117,792 79,511 90,489 113,196 119,025 78,925 90,095 113,010 78,471 88,503 79,526

ANNUAL REPORT 2013

Cumulative payments to date



22,908

39,782

94,284

Net general insurance contract liabilities per statement of financial position (Note 18)

15,351

(63,109)



9,155

(98,085)

Best estimate of claim liabilities Claim handling expenses Fund PRAD at 75% confidence interval

6,899

(98,114)



2,534

(85,969) (106,111) (109,870) (102,441)

Case reserves reconciliation difference between SMCD and G Forms Net general insurance outstanding liabilities (treaty inward)

3,205

(76,321)

(35,745) (41,078) (51,593) (49,962) (46,848) (47,308) (55,488) (63,109) (63,467) (71,976) (86,076) (87,688) (85,718) (85,415) (98,085) (68,782) (77,332) (96,674) (100,243) (96,694) (98,114) (71,356) (83,181) (103,078) (107,283) (102,441) (73,940) (84,819) (104,786) (109,870) (75,169) (85,729) (106,111) (75,750) (85,969) (76,321)



Net general insurance outstanding liabilities (direct and facultative)

At end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later



260,323

239,872 3,589 16,862

623 45,131

194,118

Current estimate of cumulative claims incurred 79,526 88,503 113,010 119,025 117,792 121,022 137,867 157,393



35. Financial instruments (cont’d) (f) Insurance risk (cont’d) Claim Development Table (cont’d) Net General Insurance Contract Liabilities 2013 Group Prior 2006 2007 2008 2009 2010 2011 2012 2013 Total Accident year RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Notes to the financial statements (cont’d) 31 December 2013

127

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d) (g) Fair values The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments: (i) Cash and cash equivalents, receivables, payables and borrowings The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are repriced to market interest rates on or near the reporting date. The carrying amounts of the current portion of loans and borrowings are reasonable approximations of fair values due to the insignificant impact of discounting. The carrying amounts of term loans is approximated to the fair values based on current lending rates for similar types of lending and borrowing arrangements. (ii) Quoted investments The fair value of quoted investments is determined by reference to stock exchange quoted market bid prices at the close of the business on the reporting date. (iii) Unquoted investments The fair value of the unquoted investments of the Group, except for the unquoted shares in Malaysia are determined based on quoted market price at the reporting date or valued using valuations models which uses observable data. (iv) Amount due from/to subsidiaries The Group and the Company do not anticipate the carrying amounts recorded at the reporting date that would eventually be received or settled to be significantly different from the fair values as the amounts are repayable on demand. Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instrument by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value observable, either directly or indirectly Level 3 : inputs for the asset or liability that are not based on observable market data (unobservable inputs)

128

Notes to the financial statements (cont’d) 31 December 2013

35. Financial instruments (cont’d) (g) Fair values (cont’d) As at 31 December 2013, the Group held the following financial instruments carried at fair value in the statements of financial position: Group Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 Current Financial assets at FVTPL 103,315 - - 103,315 Non-current AFS financial assets 113,495 247,709 1,001 362,205 Total investment 216,810 247,709

1,001

465,520

As at 31 December 2013, the Group held the following financial assets carried at cost in the statements of financial position and their fair values are disclosed as follows: Group Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 Non-current Land and buildings - 170,453 - 170,453 Investment properties - 825,541 - 825,541 - 995,994

-

995,994

Reconciliation of fair value measurement of the investment in unquoted equity shares Group 2013 RM’000 1 January/31 December 1,001 There were no gains or losses recognised in profit or loss or in other comprehensive income with respect to these assets.

ANNUAL REPORT 2013

129

Notes to the financial statements (cont’d) 31 December 2013

36. Capital management The primary objective of the Group’s capital management is to maintain on optimal capital structure in order to support its business and maximise shareholder value. The Group manages its capital structure and make adjustments to it, in light of changes in economic condition. To maintain or adjust its capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group monitors capital using a gearing ratio, which is the net debt divided by total equity plus net debt. The Group includes within its net debt, term loan, payables, less cash and bank balances and short term deposits. Capital of the Group represents total equity. The debt to equity ratio as at 31 December 2013 and 31 December 2012 are as follows: Group Company 2013 2013 2012 RM’000 RM’000 RM’000 Payables 288,714 176,749 171 Borrowings 93,371 - Less: Cash and bank balances (12,339) (306) (3) Less: Short term deposits (299,083) (7,200)

Net debt

70,663

169,243

168



Total equity

1,078,545

1,048,793

(168)

Capital and net debt 1,149,208 1,218,036 Gearing ratio 6% 14%

0%

37. Segment information The following segment information has been prepared in accordance with MFRS 8 Operating Segments, which defines the requirements for the disclosure of financial information of an entity’s operating segments. It is prepared on the basis of the “management approach”, which requires presentation of the segments on the basis of internal reports about the components of the entity which are regularly reviewed by the chief operating decision-maker in order to allocate resources to a segment and to assess its performance. The Group’s businesses are organised into the following three segments based on the types of products and services that it provides: (i) Insurance- underwriting of all classes of general insurance business; (ii) Credit- provision of credit and related services; and (iii) Investments- ownership of buildings for rental income and hotel operation. The Directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business based on negotiated and mutual terms.

130

Notes to the financial statements (cont’d) 31 December 2013

37. Segment information (cont’d) Group Asset/Liability 2013 directly associated with Insurance Credit Investments held for sale Total RM’000 RM’000 RM’000 RM’000 RM’000 (a) Revenue 215,774 1,137 29,062 - 245,973 (b) Results Segment results 44,922 6,342 10,060 - 61,324 Finance costs (3,835) Share of profit of an associate 101

Segment profit before tax Income tax expense

57,590 (10,718)

Profit for the year 46,872 (c ) Assets and liabilities Segment assets 1,270,974 173,684 864,380 30,195 2,339,233 Investment in an associate 550

Total assets

2,339,783

Segment/total liabilities 968,909 718 253,616 22,606 1,245,849 (d) Other information Capital expenditure 1,380 - 1,910 - 3,290 Depreciation of property, plant and equipment 814 - 4,404 - 5,218 Depreciation of investment properties 37 - 1,289 - 1,326 Amortisation of premium and intangible assets 392 - - - 392 Impairment loss on AFS financial assets 280 - - - 280 Allowance for impairment of receivables 3,152 - - - 3,152 Write back of allowance for impairment for loans and advances - (139) - - (139) Gain arising from fair value change in financial assets at FVTPL - (259) (562) - (821) Non-cash expenses other than depreciation, amortisation and impairment losses 2,208 - 7 - 2,215

ANNUAL REPORT 2013

131

Notes to the financial statements (cont’d) 31 December 2013

38. Subsidiaries and an associate Subsidiaries Effective interest held by non- Group’s effective controlling Name of subsidiaries interest held (%)* interests (%)* Principal 2013 2013 activities Direct subsidiaries of the Company Multi-Purpose Capital Holdings Berhad 100 - Investment holding Multi-Purpose Shipping Corporation Berhad 100 - Investment holding and property investment West-Jaya Sdn. Bhd. 70 30 Investment holding and property investment Queensway Nominees (Tempatan) Sdn. Bhd. 70 30 Property investment Queensway Nominees (Asing) Sdn. Bhd. 70 30 Property investment Caribbean Gateway Sdn. Bhd. 100 - Investment holding Jayavest Sdn. Bhd. 100 - Investment holding Leisure Dotcom Sdn. Bhd. 70 30 Property investment Magnum.Com Sdn. Bhd. 100 - Property investment Magnum Leisure Sdn. Bhd. 100 - Operation of a hotel Mimaland Berhad 98 2 Property investment Syarikat Perniagaan Selangor Sdn. Bhd. 100 - Property investment & management and operation of hotel 132

Notes to the financial statements (cont’d) 31 December 2013

38. Subsidiaries and an associate (cont’d) Subsidiaries (cont’d) Effective interest held by non- Group’s effective controlling Name of subsidiaries interest held (%)* interests (%)* Principal 2013 2013 activities

Direct subsidiaries of the Company (cont’d) Tibanis Sdn. Bhd. 100 - Property investment Kelana Megah Development Sdn. Bhd. 100 - Plantation and property holding Subsidiaries of Multi-Purpose Capital Holdings Berhad (“MPCHB”) Multi-Purpose Insurans Bhd. 100 - General insurance Multi-Purpose Credit Holdings Sdn. Bhd. 100 - Investment holding A subsidiary of Multi-Purpose Insurans Bhd. Opus Institutional Income Fund 2 100 - Fund management Subsidiaries of Multi-Purpose Credit Holdings Sdn. Bhd. Multi-Purpose Credit Sdn. Bhd. 100 - Credit and leasing business, hire purchase and general loans financing MP Factors Sdn. Bhd. 100 - Business of factoring and property investment Multi-Purpose Venture Partners Sdn. Bhd. 100 - Dormant (in members’ voluntary liquidation) Multi-Purpose Credit Nominees (Tempatan) Sdn. Bhd. 100 - Nominee services

ANNUAL REPORT 2013

133

Notes to the financial statements (cont’d) 31 December 2013

38. Subsidiaries and an associate (cont’d) Subsidiaries (cont’d) Effective interest held by non- Group’s effective controlling Name of subsidiaries interest held (%)* interests (%)* Principal 2013 2013 activities Subsidiaries of Multi-Purpose Shipping Corporation Berhad Mulpha Kluang Maritime Carriers Sdn. Bhd. 70 30 Property investment Multi-Purpose Development (PG) Sdn. Bhd. 100 - Property development A subsidiary of Syarikat Perniagaan Selangor Sdn. Bhd. Flamingo Management Sdn. Bhd. 100 - Hotel management * Equals to the proportion of voting rights held An associate of MPCHB Group’s effective Accounting interest held (%) Principal model Name of an associate 2013 activities applied Tune Insurance (Labuan) Ltd. 20 Reinsurance Equity method

39. Comparative figures This is the first set of consolidated financial statements of the Group effective from 1 January 2013 which is the effective date of combination. Accordingly, no comparative figures are presented as the Group adopts the approach of not restating the consolidated financial statements for periods prior to the effective date of combination.

134

Notes to the financial statements (cont’d) 31 December 2013

40. Supplementary information The breakdown of the retained profits of the Group and of the Company as at 31 December 2013 into realised and unrealised profits is presented below in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. Group Company 17.07.2012 to 2013 2013 31.12.2012 RM’000 RM’000 RM’000 Total retained profits/(accumulated losses) - realised 226,159 37,702 (168) - unrealised (12,481) - Total share of retained profits from an associate - realised 450 - Less: Consolidation adjustments (166,047) - Retained profits/(accumulated losses) as per financial statements 48,081 37,702 (168)

ANNUAL REPORT 2013

135

LIST OF TOP 10 PROPERTIES OWNED BY MPHB CAPITAL GROUP As at 31 December 2013 RESIDUAL AGE OF GROUP NET LEASE EXPIRY APPROX BUILDING BOOK VALUE DATE OF LOCATION TENURE (YEARS) DATE AREA DESCRIPTION (YEARS) (RM’000) REVALUATION



1

Lot PT 37379, H.S(D) 73892 and Freehold - - 262.91 acres - Lot PT 37380, H.S(D) 73893, Mukim Rawang, District of Gombak, Selangor. Vacant land 169,991 17.02.2014

2

Lot 2947, Geran 307402 Freehold - - 124.41 acres and Lot 3003, Geran 49265, Mukim Setapak, District of Gombak, Selangor.



Lot PT B, H.S(D) 40430, Leasehold 56 2069 197.05 acres - Lot PT 7546, H.S(D) 40431, and Lot PT A, H.S(D) 1767, Vacant land 149,112 17.02.2014 Mukim Setapak, District of Gombak, Selangor.



Lot PT 5300, H.S(M) 1726 Leasehold 78 2091 2.60 acres - and Lot PT 5301, H.S(M) 1727, Mukim Setapak, District of Gombak, Selangor.

Lot 1048, PM 854, Leasehold 78 2091 2.22 acres - Bandar Kundang , Sg Bakau, District of Gombak, Selangor.











3 Lot 200, Geran 12089, Freehold - - 1.50 acres Vacant land - 130,500 17.02.2014 Section 67, Bandar & Daerah Kuala Lumpur.



4

Lot 296, Geran Mukim 528, Freehold - - 82.97 acres Vacant land - 76,900 17.02.2014 Lot 306,Geran Mukim 531, Lot 1675, Geran Mukim 654, Lot 1713, Geran Mukim 672, Lot 1714, Geran Mukim 673, Lot 1465, Geran Mukim 889, Lot 1460, Geran Mukim 909, Lot 1461, Geran Mukim 910, Lot 2343, Geran Mukim 1047, Lot 2346, GRN 47939, Lot 302, Geran Mukim 529, Lot 1677, Geran Mukim 656, Lot 1688, Geran Mukim 659, Lot 1462, Geran Mukim 886, Lot 1463, Geran Mukim 887, Lot 1464, Geran Mukim 888, Lot 1278, Geran Mukim 1008, Lot 1282, Geran Mukim 1010, Lot 1283, Geran Mukim 1011, Lot 1285, Geran Mukim 1013, Lot 1287, Geran Mukim 1014, Lot 1288, Geran Mukim 1015, and Lot 14895, Geran Mukim 1443. Mukim 12, Telok Tempoyak, Daerah Barat Daya, Pulau Pinang.



136

LIST OF TOP 10 PROPERTIES OWNED BY MPHB CAPITAL GROUP As at 31 December 2013 (cont’d) RESIDUAL AGE OF GROUP NET LEASE EXPIRY APPROX BUILDING BOOK VALUE DATE OF LOCATION TENURE (YEARS) DATE AREA DESCRIPTION (YEARS) (RM’000) REVALUATION



5

Lot 109, GRN 83563, Freehold - - 1,033.79 acres - Lot 201, GRN 121896, Lot 364, GRN 83581, Lot 437, GRN 456954, Lot 519, GRN 82700, Lot 919, GRN 106049, Lot 980, GRN 121929 and Lot 1104, GRN 84211. Agriculture 64,199 21.02.2014 Mukim Pengerang, District of Kota Tinggi, Johor.



Lot 992, PN 13368, Leasehold 897 2910 769.41 acres - Lot 993, PN 58271, and Lot 994, PN 58272. Mukim Pengerang, District of Kota Tinggi, Johor.

6

Lot 1282, Geran 47410 and Freehold - - 1.36 acres Vacant land - 61,790 17.02.2014 Lot 1283, Geran 42982, Section 67, Bandar & Daerah Kuala Lumpur.

7

Lot 4071, Geran 60996, Freehold - - 2.33 acres Hotel - 43,186 19.02.2014 Town of Tanjong Bungah, District of North East, Pulau Pinang.

8

Lot 18207, PM 435, Leasehold 78 2091 2.71 acres 4 storey 17 38,519 15.02.2014 Seksyen 2, Bandar Ulu Kelang, commercial Ampang Tasik, complex District of Gombak, Selangor.

9

Lot 13499, PM343, Leasehold 78 2091 12.28 acres Hotel, Lake 17-18 34,099 15.02.2014 Lot 13500, PM344 and & Boat house Lot 13501, PM345, Mukim Ulu Kelang, Ampang Tasik District of Gombak, Selangor.













10 Lot 643, Geran 28274, Lot 644, Geran 28275, Lot 1199, Geran 9036, Seksyen 67, Bandar & Daerah Kuala Lumpur.

Freehold

-

-

0.39 acres Vacant land

ANNUAL REPORT 2013

-

13,760 17.02.2014

137

ANALYSIS OF EQUITY SECURITIES AS AT 30 APRIL 2014

Class of Security Authorised Share Capital Total Issued And Paid-Up Capital Voting Rights

: : : :

Ordinary shares of RM1.00 each RM1,000,000,000 RM 715,000,000 1 vote per share

No. of Holders Largest Shareholders

30

% of No. of % of Holders Shares Shares 0.18

Size of Holdings less than 100 shares 103 0.63 100 - 1,000 shares 4,259 26.23 1,001 -10,000 shares 9,276 57.12 10,001-100,000 shares 2,284 14.06 100,001- less than 5% of issued shares 316 1.95 5% and above of issued shares 2 0.01 Total



16,240

100.0

506,218,699

70.80

3,073 2,655,091 35,433,939 64,943,717 360,105,696 251,858,484

0.00 0.37 4.96 9.08 50.36 35.23

715,000,000

100.00

THIRTY (30) MAJOR SHAREHOLDERS AS AT 30 APRIL 2014 Name Shareholdings 1. CIMB GROUP NOMINEES (TEMPATAN) SDN BHD Pledged Securities Account For Casi Management Sdn Bhd

138

%

213,706,793

29.89

2. HSBC NOMINEES (ASING) SDN BHD Exempt An For Credit Suisse (SG BR-TST-Asing)

38,151,691

5.34

3. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD Pledged Securities Account for MWE Holdings Berhad

30,871,000

4.31

4. IMPIAN RIMBUN SDN BHD

27,540,645

3.85

5. UOB KAY HIAN NOMINEES (ASING) SDN BHD Pledged Securities Account For Citibase Limited

27,260,200

3.81

6. CASI MANAGEMENT SDN BHD

16,149,500

2.26

7. HENG GUAN SENDIRIAN BERHAD

15,200,000

2.13

8. UOB KAY HIAN NOMINEES (ASING) SDN BHD Pledged Securities Account For Mr Sakarin Uppatthangkul

14,145,500

1.98

9. NAUM CONSULTING INC

14,135,633

1.98

10. HSBC NOMINEES (ASING) SDN BHD Exempt An For Coutts & Co. Ltd (Sg Branch)

11,187,780

1.56

11. CITIGROUP NOMINEES (ASING) SDN BHD Exempt An For UBS AG Singapore (Foreign)

10,811,352

1.51

ANALYSIS OF EQUITY SECURITIES (cont’d)

AS AT 30 APRIL 2014

THIRTY (30) MAJOR SHAREHOLDERS AS AT 30 APRIL 2014 Name Shareholdings 12. CHONG YIEW ON

%

10,412,700

1.46

13. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD Great Eastern Life Assurance (Malaysia) Berhad

9,500,750

1.33

14. CRUICKSAND FINANCE LIMITED

8,800,000

1.23

15. CIMSEC NOMINEES (TEMPATAN) SDN BHD CIMB Bank For Heng Guan Sendirian Berhad

6,900,000

0.97

16. INTER-PACIFIC EQUITY NOMINEES (ASING) SDN BHD Kingston Ventures Corp.

6,394,000

0.89

17. CIMB GROUP NOMINEES (TEMPATAN) SDN BHD CIMB Bank Berhad

5,102,000

0.71

18. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD Great Eastern Life Assurance (Malaysia) Berhad

5,012,150

0.70

19. UOB KAY HIAN NOMINEES (ASING) SDN BHD Pledged Securities Account For Claire Foong Ling Chin

4,250,000

0.59

20. EB NOMINEES (TEMPATAN) SENDIRIAN BERHAD Pledged Securities Account For MWE Holdings Berhad

4,000,000

0.56

21. CIMSEC NOMINEES (TEMPATAN) SDN BHD CIMB For Lawrence Lim Swee Lin

3,700,000

0.52

22. KHOO SU CHIN

3,500,000

0.49

23. T.C. HOLDINGS SENDIRIAN BERHAD

3,145,000

0.44

24. UOB KAY HIAN NOMINEES (ASING) SDN BHD Pledged Securities Account For Mrs Suthera Uppaputthangkul

3,136,700

0.44

25. TANAH SUBOR SDN BHD

3,030,055

0.42

26. TAN SHU AYAN

2,619,600

0.37

27. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD Great Eastern Life Assurance (Malaysia) Berhad

2,150,950

0.30

28. CHOO SHIOW CHARN

1,850,000

0.26

29. JF APEX NOMINEES (TEMPATAN) SDN BHD Pledged Securities Account For Teo Siew Lai

1,826,800

0.26

30. GAN HUEY FEN

1,727,900

0.24

506,218,699

70.80



TOTAL

ANNUAL REPORT 2013

139

ANALYSIS OF EQUITY SECURITIES AS AT 30 APRIL 2014 SUBSTANTIAL SHAREHOLDERS AS AT 30 APRIL 2014 Name

Direct Interest No. of shares %

1. Casi Management Sdn Bhd 2. Tan Sri Dato’ Surin Upatkoon

229,856,293 -

Indirect / Deemed Interest No. of shares %

32.15 -

- 264,893,393 (a)

37.05

Notes:(a) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through his shareholdings in Casi Management Sdn Bhd and Pinjaya Sdn Bhd; and indirect interest held through his daughters.

DIRECTORS’ INTEREST AS SHOWN IN THE REGISTER OF DIRECTORS’ SHAREHOLDINGS AS AT 30 APRIL 2014 (A) Interest In Shares In MPHB Capital Berhad (“MPHB Capital”) Name

1. 2. 3. 4. 5. 6.

Direct Interest No. of shares %

Tan Sri Dato’ Dr Yahya bin Awang Tan Sri Dato’ Surin Upatkoon Mr Ng Kok Cheng Dato’ Lim Tiong Chin Mr Kuah Hun Liang Ms Ivevei Upatkoon

71,100 - 263,900 508,000 241,100 156,200

0.01 - 0.04 0.07 0.03 0.02

Indirect / Deemed Interest No. of shares % - 264,893,393 (a) - 4,160,000 (b) - -

37.05 0.58 -

Notes:(a) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through his shareholdings in Casi Management Sdn Bhd and Pinjaya Sdn Bhd; and indirect interest held through his daughters, Ms Ivevei Upatkoon and Ms Maythini Upatkoon pursuant to Section 134(12)(c) of the Companies Act, 1965. (b) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through his shareholdings of more than 15% in Keetinsons Sendirian Berhad and T.C. Holdings Sendirian Berhad. (B) Interest In Shares In Related Corporations

140



Tan Sri Dato’ Surin Upatkoon by virtue of his interest in the shares of MPHB Capital, is also deemed to have interest in the shares of the subsidiaries of MPHB Capital to the extent that MPHB Capital has an interest.



Save as disclosed above, none of the other Directors of MPHB Capital have any interest in the shares of the subsidiaries of MPHB Capital as at 30 April 2014.

NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Second Annual General Meeting of MPHB Capital Berhad (“the Company” or “MPHB Capital”) will be held at the Multi-Purpose Hall, 25th Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur on Wednesday, 18 June 2014 at 9.30 a.m.

AGENDA 1.

2. 3.

To receive and consider the Report of the Directors and the Audited Financial Statements for the year ended 31 December 2013 together with the Report of the Auditors thereon. (Please refer to Note A) To approve the payment of Directors’ fees of RM90,000 in respect of the year ended 31 (Resolution 1) December 2013. To re-elect the following Directors who retire by rotation in accordance with Article 113 of the Company’s Articles of Association:(Resolution 2) (Resolution 3)

(i) Tan Sri Dato’ Surin Upatkoon (ii) Mr Ng Kok Cheang

4.

To re-elect Ms Ivevei Upatkoon who retires in accordance with Article 120 of the Company’s (Resolution 4) Articles of Association.

5.

To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors (Resolution 5) to fix the remuneration.

AS SPECIAL BUSINESS To consider and, if thought fit, pass the following Ordinary Resolutions: 6. ORDINARY RESOLUTION - Authority To Allot And Issue Shares Pursuant To Section 132D Of The Companies Act, (Resolution 6) 1965

7.

“THAT, subject always to the Companies Act, 1965, the Articles of Association of the Company and the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered, pursuant to Section 132D of the Companies Act, 1965, to allot and issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed ten per centum (10%) of the total issued and paid-up share capital of the Company and THAT such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.” ORDINARY RESOLUTION - Proposed Authority For The Company To Purchase Its Own Shares

(Resolution 7)

“THAT, subject always to the Companies Act, 1965, the Company’s Memorandum and Articles of Association, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and any other relevant governmental and/or regulatory authority, the Company be and is hereby authorised to purchase its own shares from time to time and at any time such amount of ordinary shares of RM1.00 each in the Company as may be determined by the Directors of the Company from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the best interest of the Company (“Proposed Share Buy-Back”) provided that:-

ANNUAL REPORT 2013

141

NOTICE OF ANNUAL GENERAL MEETING (cont’d) (a) The maximum number of shares which may be purchased and/or held as treasury shares by the Company at any point of time pursuant to the Proposed Share Buy-Back shall not exceed ten per centum (10%) of the total issued and paid-up share capital of the Company provided always that in the event that the Company ceases to hold all or any part of such shares as a result of, amongst others, cancellation of shares, sale of shares on the open market of the Bursa Securities or distribution of treasury shares to shareholders as dividend, the Company shall be entitled to further purchase and/or hold such additional number of shares as shall, in aggregate with the shares then still held by the Company, not exceed ten per centum (10%) of the total issued and paid-up share capital of the Company for the time being quoted on the Bursa Securities; (b) The maximum amount of funds to be allocated by the Company pursuant to the Proposed Share Buy-Back shall not exceed the sum of the retained profits and share premium account of the Company;

AND THAT authority be and is hereby given to the Directors to decide in their absolute discretion to deal in any of the following manners the shares purchased by the Company pursuant to the Proposed Share Buy-Back:(i) to cancel the shares purchased; and/or (ii) to retain the shares purchased as treasury shares, to be either distributed as share dividends to the shareholders and/or re-sold on the open market of the Bursa Securities and/or subsequently cancelled; and/or (iii) a combination of (i) and (ii) above;



AND THAT such authority shall commence immediately upon the passing of this resolution, until the conclusion of the next Annual General Meeting of the Company or the expiry of the period within which the next Annual General Meeting is required by law to be held, unless earlier revoked or varied by ordinary resolution of the shareholders of the Company in a general meeting, whichever is earlier;



AND THAT the Directors of the Company be and are hereby authorised to take all such steps as are necessary or expedient or to give effect to the Proposed Share Buy-Back.”

8.

To transact any other business for which due notice shall have been given in accordance with the Articles of Association of the Company and the Companies Act, 1965.

BY ORDER OF THE BOARD NG SOOK YEE (MAICSA 7020643) Secretary Kuala Lumpur 27 May 2014

NOTES TO THE AGENDA A.

142

Agenda 1 - Directors’ Report, Audited Financial Statements and Auditors’ Report Agenda item No. 1 is meant for discussion only. The provisions of Section 169 of the Companies Act, 1965 and the Articles of Association of the Company only require that the Audited Financial Statements and the Reports of the Directors and Auditors thereon be laid before the Company at its Annual General Meeting. Hence, this Agenda item is not a business which requires a resolution to be put to vote by shareholders.

NOTICE OF ANNUAL GENERAL MEETING (cont’d) NOTES TO THE AGENDA (cont’d) B.

Agenda 2 – Directors’ Fees The proposed directors’ fees of RM90,000 are fees for 6 months period ended 31 December 2013 subsequent to the Company’s listing on the Main Market of Bursa Securities on 28 June 2013.

NOTES RELATING TO REGISTRATION AND PROXY 1.

A depositor whose name appears in the Record of Depositors on 11 June 2014 shall be regarded as a member entitled to attend, speak and vote at the meeting or to appoint proxy to attend, speak and vote on its behalf at the meeting.

2.

A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3.

A member, other than an authorised nominee or an exempt authorised nominee, shall be entitled to appoint not more than two proxies to attend and vote at the same meeting.

4.

A member who is an authorised nominee may appoint one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

5.

Where a member is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which an exempt authorised nominee may appoint in respect of each omnibus account it holds.

6.

Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

7.

If the appointor is a corporation, the form of proxy must be executed under its Common Seal or under the hand of its attorney.

8.

To be valid the form of proxy duly completed must be deposited at the registered office of the Company at 39th Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur not less than 48 hours before the time for holding the meeting.

EXPLANATORY NOTES ON SPECIAL BUSINESS Proposed Resolution 6 (Ordinary) – Authority To Allot and Issue Shares Pursuant To Section 132D Of The Companies Act, 1965 The Proposed Resolution 6 is to seek a new general mandate for issue of shares, and if passed, will empower Directors to issue and allot shares in the Company up to an amount not exceeding in total ten per centum (10%) of the issued and paid-up share capital of the Company for such purposes as they consider would be in the interest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the next Annual General Meeting (“AGM”). The general mandate is sought to provide flexibility to the Company of any possible fund raising exercise, including but not limited to further placement of shares, without the need to convene a separate general meeting to avoid any delays and incurring additional cost. The proceeds raised from the general mandate will be utilised for the purpose of funding future investments, acquisitions and/or working capital requirements.

ANNUAL REPORT 2013

143

NOTICE OF ANNUAL GENERAL MEETING (cont’d) EXPLANATORY NOTES ON SPECIAL BUSINESS (cont’d) Proposed Resolution 7 (Ordinary) – Proposed Share Buy-Back The Proposed Resolution 7, if passed, will empower the Company to purchase its own shares of up to ten per centum (10%) of the issued and paid-up share capital of the Company. This authority, unless revoked or varied by the Company at a general meeting, will expire at the next AGM. The details of the Proposed Share Buy-Back are set out in the Circular to Shareholders dated 27 May 2014 despatched together with the Annual Report.

144

STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETING (Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad) No individual is seeking for new election as a Director at the Second Annual General Meeting of the Company.

ANNUAL REPORT 2013

145

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FORM OF PROXY MPHB CAPITAL BERHAD (1010253-W) (Incorporated in Malaysia)

I/We

CDS ACCOUNT NUMBER

NO. OF SHARES HELD

Tel.No.

(FULL NAME IN BLOCK CAPITALS)

I.C. No._________________________ (old)_________________________ (new)/ Co. No. of

(ADDRESS)

being a member/members of MPHB CAPITAL BERHAD, hereby appoint:Name

NRIC/Passport No.

Proportion of Shareholdings No. of Shares

%

Address

and/or failing him/her, Name

NRIC/Passport No.

Proportion of Shareholdings No. of Shares

%

Address

or failing him/her, THE CHAIRMAN OF THE MEETING as my/our proxy/proxies to vote on my/our behalf at the Second Annual General Meeting of the Company to be held at the Multi-Purpose Hall, 25th Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur on Wednesday, 18 June 2014 at 9.30 a.m. and any adjournment thereof. RESOLUTIONS 1. To approve the payment of Directors’ fees of RM90,000 2.

To re-elect Tan Sri Dato’ Surin Upatkoon as Director of the Company

3.

To re-elect Mr Ng Kok Cheang as Director of the Company

4.

To re-elect Ms Ivevei Upatkoon as Director of the Company

5. 6.

To re-appoint Messrs Ernst & Young as Auditors of the Company To authorise Directors to allot and issue shares pursuant to Section 132D of the Companies Act, 1965

7.

To authorise the Company to purchase its own shares

*FOR

*AGAINST

* Please indicate with an “X” how you wish your votes to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his/her discretion. Dated this _________ day of ________________________ 2014

_______________________________ Signature(s) of member/Common Seal NOTES:1. 2. 3. 4. 5. 6. 7. 8.

A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. A member, other than an authorised nominee or an exempt authorised nominee, shall be entitled to appoint not more than two proxies to attend and vote at the same meeting. A member who is an authorised nominee may appoint one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Where a member is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which an exempt authorised nominee may appoint in respect of each omnibus account it holds. Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. If the appointor is a corporation, the form of proxy must be executed under its Common Seal or under the hand of its attorney. To be valid the form of proxy duly completed, must be deposited at the registered office of the Company at 39th Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur not less than 48 hours before the time for holding the meeting. A depositor whose name appears in the Record of Depositors on 11 June 2014 shall be regarded as a member entitled to attend, vote and speak at the meeting or to appoint proxy to attend, vote and speak on its behalf at the meeting.

STAMP

THE COMPANY SECRETARY MPHB CAPITAL BERHAD (1010253-W) 39th Floor, Menara Multi-Purpose Capital Square, No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur