STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

Transcription

1 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL INTRODUCTION The Malaysian Code on Corporate Governance requires the Board of Directors of public listed companies to establish a sound risk management framework and internal control system to safeguard shareholders investments and the s assets. Provided below is the risk management framework and internal control of OSK Property Holdings Berhad and its subsidiaries ( the ) made by the Board of Directors ( the Board ) of OSK Property Holdings Berhad in compliance with Chapter 15, Paragraph and Practice Note 9 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) and the Statement of Risk Management and Internal Control: Guidelines for Directors of Listed Issuers issued by Taskforce on Internal Control with the support and endorsement of the Bursa Securities. RESPONSIBILITY OF THE BOARD The Board recognises the importance of a sound risk management framework and internal control system for good corporate governance and acknowledges its primary responsibility to ensure that principal risks in the are identified, measured and managed with an appropriate internal control system, and to ensure that the effectiveness, adequacy and integrity of the internal control system is reviewed on an ongoing basis. The Board also acknowledges that whilst the s system of risk management and internal control is designed to highlight, manage and attempt to lower the risk threatening the achievement of business objectives, some risks may not be eliminated. As such, the system of risk management and internal control can only provide reasonable but not absolute assurance against material misstatement of financial and management information and records, and/or against any financial losses or fraud. The has in place an on-going mechanism to identify, evaluate, monitor and manage the key risks which will hinder the achievement of its business objectives and strategies throughout the period under review. The Board is assisted by the Risk Management Committee as well as the management to implement the Board s policies and procedures on risk and control. These include identifying the risks and assessing the potential impacts of the risks, and to have the necessary internal control to reduce the risk. The mechanism is reviewed by the Board on a quarterly basis. THE GROUP S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM Enterprise Risk Management ( E ) The Board acknowledges that effective risk management is part of a good business management practice. The s activities involve some degree of risk and the Board is committed to ensure that the has an effective risk management framework which will allow the to be able to identify, evaluate, monitor and manage risks that affect the achievement of the s business objectives and strategies within a defined risk tolerance level in a timely and effective manner. Risk Governance The s risk management framework is designed to establish the context for an embedded E into key departments and business processes of the. The fundamental approach of our framework is to ensure that risks are proactively identified, communicated and managed across the. Risk Management Framework The Board confirms that an ongoing process for identifying, measuring and managing the s principal risks is in place throughout the year under review. This process is carried out via the following risk management governance structure:- The Board The Board is fully responsible for the risk management of the and carries out its duties by having regular Board meetings to review and approve business strategies, risk management policies and the business performances of the. OSK PROPERTY HOLDINGS BERHAD ( D) annual report

2 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL THE GROUP S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM (CONT D) Risk Management Framework (Cont d) The Risk Management Committee The Risk Management Committee has been established to review the adequacy and effectiveness of risk management of the. The Risk Management Committee s main role is to review, on behalf of the Board, the system of risk management necessary to manage the key risks inherent in the business and to present its findings to the Board. In addition, the Risk Management Committee plays a significant role in contributing to the establishment of a more conducive risk management environment. The Risk Management Committee meets quarterly to oversee the development of general risk policies and procedures to monitor and evaluate the numerous risks that may arise from the various business activities in the. The Risk Management Committee is assisted by the internal risk management function. The role of the internal risk management function is to monitor and evaluate the effectiveness of the risk management process within the on an on-going basis. The Audit Committee The Audit Committee is responsible to review the adequacy and effectiveness of internal control and governance systems of the. The Audit Committee s main role is to review, on behalf of the Board, the system of internal controls necessary to manage the key risks inherent in the business and to present its findings to the Board. The Audit Committee is assisted by the internal audit function, whose role is to review the effectiveness of risk identification procedures and control processes implemented by the management. The Audit Committee also reviews and deliberates on any matters relating to internal control highlighted by the External Auditors in the course of their statutory audit of the financial statements of the. The other management committee set up in the to manage specific areas of risks is the Executive Committee. The s risk management framework is consistent with the ISO Risk Management Principles and Guidelines, which is designed to establish the context for an embedded E into key departments and business processes of the. The framework: provides clear functional responsibilities and accountabilities within the for the management of risk; helps to identify the risk appetite and risk tolerance level through a set of measurable parameters related to the critical risks that may impact the strategy, performance and reputation of the ; ensures that the risk policies and limits are consistent with the risk appetite and risk tolerance level of the ; and helps to report, monitor and ensure that appropriate skills and resources are applied in managing the risks. Key Elements of the s Internal Control System The s internal control system consists of the policies, processes, activities and control environment that facilitates an effective and efficient operation by enabling it to respond appropriately to significant business, operational, financial, compliance and other risks in order to achieve the s strategy and objectives. The key elements of the s internal control system, that are regularly reviewed by the Board, are described below:- Establishment of a conducive control environment in respect of the overall attitude, awareness and actions of Directors and management regarding the internal control system and its importance to the ; Recruitment of experienced, skilled and professional staff with the necessary calibre to fulfill the respective roles and responsibilities and ensuring that adequate controls are in place; 56 annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

3 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL THE GROUP S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM (CONT D) Key Elements of the s Internal Control System (Cont d) Clear structure, reporting lines of responsibilities and appropriate levels of delegation; Documented policies, procedures and limits of approving authorities for key aspects of the businesses. This provides a sound framework of authority and accountability within the organisation and facilitates proper corporate decision-making at the appropriate level within the organisation s hierarchy; Establishment of an effective segregation of duties via independent checks, review and reconciliation activities to prevent human errors, fraud and abuses; Regular and comprehensive management reports to the Board from various lines of operations and business units, on key business performance, operating statistics and regular matters. This allows for an effective monitoring of significant variances and deviation from standard operating procedures and budget; Recommendations of necessary actions to manage risk to an acceptable level of risk tolerance in a timely manner; and Engagement of independent internal auditors to review the effectiveness of internal controls. Assurance Mechanisms The Audit Committee is tasked by the Board to carry out the duty to review and monitor the effectiveness of the s internal control system. To discharge its responsibilities, the Audit Committee relies significantly on the support of independent Internal Auditors to review the effectiveness of risk identification procedures and control processes implemented by management, and to report directly to the Audit Committee during the quarterly Audit Committee meetings. The independent Internal Auditors provide assurance over the operation and validity of the internal control system in relation to the level of risk involved using Risk-Based-Auditing methodology. Based on the audit, the Internal Auditors provide the Audit Committee with quarterly reports highlighting observations, recommendations and management action plans to improve the internal control system of the. The Audit Committee Report is set out on pages 50 to 54 of this Annual Report. THE BOARD S COMMITMENT As the operates in a dynamic business environment, a sound risk management and internal control system must be in place in order to be able to support its business objectives. Therefore, the Board remains committed towards maintaining a sound system of risk management and internal control and believes that a balanced achievement of its business objectives and operational efficiency can be attained. THE BOARD S CONCLUSION The Board has reviewed the risk management and internal control system and believes that the risk management and internal control system of the is in place for the year under review and up to the date of issuance of the financial statements, is effective and adequate to safeguard the shareholders investment, the interests of regulators and employees. The Board has also received assurance from the Chief Executive Officer and Chief Financial Officer that the s risk management and internal control system is, in all material aspects, effective and adequate throughout the year under review. Moving forward, the will continue to improve and enhance the existing systems of risk management and internal controls, taking into consideration the changing business environment. REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS The External Auditors have reviewed this Statement on Risk Management and Internal Control for inclusion in the annual report of the Company for the year ended and reported to the Board that nothing has come to their attention that caused them to believe that this statement is inconsistent with their understanding of the processes adopted by the Board in reviewing the adequacy and effectiveness of the risk management and internal control system of the. OSK PROPERTY HOLDINGS BERHAD ( D) annual report

4 ADDITIONAL DISCLOSURES RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE In accordance with prescribed thresholds under paragraph 10.09(1) of the Listing Requirement, details of the OSK Property Holdings Berhad ( OSKP ) s recurrent related party transactions made during the financial year ended 31 December 2013 pursuant to the shareholders mandate obtained by the Company at the Annual General Meeting are as follows: Name of *Relationship with OSKP Company/ Interested Directors, Name of Major Shareholders and Actual Value Involved Nature of Transaction Related Party Persons Connected () OSKP Construction works / DCSB OLH, WCK, WAC, KCM, 27,456,067 buildings materials for OYC, LMSB project development & (See Note 1) office renovation and maintenance by DCSB OSKP Construction works / PJD OLH, WCK, WAC, WCS, 9,290,260 buildings materials for KCM, OYC, OJX, LMSB project development & (See Note 2) office renovation and maintenance by PJD OSKP Purchase of land and/or Directors and/or Major Directors and/or Major 4,871,400 developed properties Shareholders of the OSKP Shareholders of the OSKP from the OSKP and Persons and Persons Connected with them Connected with them Notes:- * Disclosure pursuant to the Circular to Shareholders dated 19 March (1) Tan Sri Ong Leong Wong Joo Hwa (OLH) is a Major Shareholder and Managing Director / Chief Executive Officer of OSKP and also the brother of Mr. Wong Chong Kim (WCK), who is a Director of OSKP. OLH and WCK are the brothers of Mr. Wong Ah Chiew (WAC). WAC is a Director and Substantial Shareholder of DCSB. LMSB is a Major Shareholder of OSKP and a Substantial Shareholder of DCSB. Puan Sri Khor Chai Moi (KCM) is a Director and Substantial Shareholder of DCSB and the spouse of OLH. She is a Substantial Shareholder of LMSB and is deemed interested in OSKP Shares held by LMSB by virtue of Section 6A(4) of the Companies Act, 1965 ( the Act ). Hence, she is also a Major Shareholder of OSKP. Ms. Ong Yee Ching (OYC) is a Director and shareholder of OSKP and the daughter of OLH and KCM. The principal activities of DCSB comprise investment holdings, property development, insurance and construction. (2) OLH is a Major Shareholder and Managing Director / Chief Executive Officer of OSKP and also the brother of WCK, who is a Director of OSKP. OLH and WCK are the brothers of WAC and Mr. Wong Chong Shee (WCS). WAC is a Director and Major Shareholder of PJD. WCS is a Director of PJD. KCM is a Director and Major Shareholder of PJD and the spouse of OLH. She is a Substantial Shareholder of LMSB, which in turn is a Major Shareholder of OSKP. She is deemed interested in OSKP Shares held by LMSB by virtue of Section 6A(4) of the Act. Hence, she is also a Major Shareholder of OSKP. OYC is a Director and shareholder of OSKP and the daughter of OLH and KCM. OJX is a Director of PJD. He is also a shareholder of OSKP and the son of OLH and KCM. The principal activities of PJD comprise investment holding, property development and construction, manufacture of power cables and concrete wall panels, trading of building materials, operation and management of hotels and resorts and operation of timeshare business. 58 annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

5 ADDITIONAL DISCLOSURES MATERIAL CONTRACTS INVOLVING DIRECTORS AND MAJOR SHAREHOLDERS INTEREST There were no material contracts entered into by the Company and its subsidiaries involving directors and major shareholders interest, either still subsisting at the end of the financial year ended or entered into since the end of the previous financial year. DEPOSITORY RECEIPT (DR) PROGRAMME The Company did not sponsor any DR programme for the financial year ended. IMPOSITION OF SANCTIONS/PENALTIES There were no sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by relevant regulatory bodies for the financial year ended. VARIATION IN RESULTS There was no variation between the financial results in the Audited Financial Statements 2013 and the audited financial results for the year ended announced on 18 February PROFIT GUARANTEE There was no profit guarantee for the financial year. STATUS OF UTILISATION OF PROCEEDS RAISED FROM CORPORATE PROPOSALS There were no proceeds raised from any corporate proposals during the financial year. Nonetheless, the has undertaken Rights Issue in the financial year ended 31 December Rights Issue The has raised 18,744,703 from the Rights Issue of 18,744,703 new ordinary shares of 1.00 each at an issue price of 1.00 each in the financial year ended 31 December The status of utilisation of proceeds from the Rights Issue as at are summarised below: Actual Proposed utilisation utilisation to-date Balance Purpose Working capital 17,945 (17,945) - Rights Issue expenses 800 (800) - 18,745 (18,745) - OSK PROPERTY HOLDINGS BERHAD ( D) annual report

6 ADDITIONAL DISCLOSURES SHARE BUY-BACK During the financial year, there were shares buy-back by the Company, the details of which are set out in the Notes to Financial Statements on pages 115 and 116 of this Annual Report. OPTIONS OR CONVERTIBLE SECURITIES Information pertaining to the exercise of Warrant C 2012/2017 during the financial year is set out in the Notes to Financial Statements on page 115 of this Annual Report. The Company did not issue any options or convertible securities during the financial year. CORPORATE SOCIAL RESPONSIBILITIES (CSR) Information pertaining to the Company s corporate social responsibility activities for the year 2013 is presented in the Chairman s Statement on pages 24 to 26 of this Annual Report. 60 annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

7 STATEMENT OF RESPONSIBILITY BY DIRECTORS In Respect of the Preparation of the Annual Audited Financial Statements The Directors are responsible for ensuring that the annual audited financial statements of the and the Company are drawn up in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 and the Listing Requirements of Bursa Malaysia Securities Berhad. The Directors are also responsible for ensuring that the annual audited financial statements of the and the Company are prepared with reasonable accuracy from the accounting records of the and the Company so as to give a true and fair view of the state of affairs of the and the Company as at, and of the results of their operations and cash flows for the year ended on that date. In preparing the annual audited financial statements, the Directors have applied the appropriate and relevant accounting policies on a consistent basis; made judgements and estimates that are reasonable and prudent; and prepared the annual audited financial statements on a going concern basis. The Directors are also responsible for taking reasonable steps to safeguard the assets of the and the Company to prevent and detect fraud and other irregularities. OSK PROPERTY HOLDINGS BERHAD ( D) annual report

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9 FINANCIAL STATEMENTS 64 Directors Report 69 Statement by Directors 69 Statutory Declaration 70 Independent Auditors' Report 72 Statements of Comprehensive Income 73 Statements of Financial Position 75 Consolidated Statement of Changes in Equity 76 Company Statement of Changes in Equity 77 Statements of Cash Flows 79 Notes to the Financial Statements 138 Supplementary Information

10 DIRECTORS REPORT DIRECTORS REPORT The directors have pleasure in presenting their report together with the audited financial statements of the and of the Company for the year ended. PRINCIPAL ACTIVITIES The principal activity of the Company is investment holding. The principal activities of the subsidiary companies are property investment, property development, property management and sale of oil palm fresh fruit bunches. There have been no significant changes in the nature of these activities during the year. RESULTS Company Profit net of tax: - Attributable to owners of the Company 55,463,134 28,005,921 - Attributable to non-controlling interests 831,318-56,294,452 28,005,921 In the opinion of the directors, the results of the operations of the and of the Company during the year were not substantially affected by any item, transaction or event of a material and unusual nature. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the year other than as disclosed in the financial statements. DIVIDENDS The amount of dividends paid by the Company since 31 December 2012 were as follows: In respect of the financial year ended 31 December 2012 as reported in the directors report of that year: Final dividend of 2.5 sen less 25% taxation, paid on 15 May ,509,959 In respect of the financial year ended : Interim dividend of 5.0 sen less 25% taxation, paid on 27 September ,020,033 13,529,992 The Board has recommended a final tax exempt (single-tier) dividend of 5.0 sen per share for the year ended 31 December The proposed dividend is subject to shareholders approval at the forthcoming Annual General Meeting. The financial statements for the current year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits for the year ending 31 December annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

11 DIRECTORS REPORT DIRECTORS The names of the directors of the Company in office since the date of the last report and at the date of this report are: Dato Nik Mohamed Din bin Datuk Nik Yusoff Tan Sri Ong Leong Wong Joo Hwa Ong Yee Ching Foo San Kan Dato Thanarajasingam Subramaniam (appointed on 7 March 2013) Dr. Ngo Get Ping (appointed on 7 March 2013) Ong Ju Xing (appointed on 9 October 2013) Wong Chong Kim (retired on 10 April 2013) Haron bin Datuk Tamby Chik (retired on 10 April 2013) Dato Ikmal Hisham bin Abdul Aziz (retired on 10 April 2013) DIRECTORS BENEFITS Neither at the end of the 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 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 10 to the financial statements or the fixed salary of a full time employee of the Company and its related corporation) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he 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 year in shares and warrants in the Company during the year were as follows: The Company Number of ordinary shares of 1.00 Each 1 January 2013/^as at 31 December appointment date Acquired Disposed 2013 Direct Interest Tan Sri Ong Leong Wong Joo Hwa 65,137,610 2,200,000-67,337,610 Ong Yee Ching 248, , ,744 Ong Ju Xing ^ 5,314, ,200-5,453,981 Indirect Interest Tan Sri Ong Leong Wong Joo Hwa* 107,455,491 2,625, ,080,791 Ong Ju Xing** ^ 150, ,000 OSK PROPERTY HOLDINGS BERHAD ( D) annual report

12 DIRECTORS REPORT DIRECTORS INTERESTS (CONT D) Number of Warrant C 2012/ January 2013/^as at 31 December appointment date Acquired Disposed 2013 The Company Direct Interest Tan Sri Ong Leong Wong Joo Hwa 13,876, ,000-14,726,268 Ong Yee Ching 57, ,309 Ong Ju Xing ^ 995, ,300-1,310,018 Indirect Interest Tan Sri Ong Leong Wong Joo Hwa* 58,902,241 2,742,000-61,644,241 Each Warrant C 2012/2017 entitles the registered holder to subscribe for 1 new ordinary share in the Company at an exercise price of 1.00 per share, at any time between the date of issue on 29 August 2012 and the expiry date of 28 August Other than as disclosed above, the other directors in office at the end of the year did not hold any shares or warrants in the Company or its related corporations. * Deemed interested pursuant to Section 6A of the Companies Act, 1965 ( the Act ) by virtue of his substantial shareholdings in Land Management Sdn. Bhd. and disclosure made pursuant to Section 134(12)(c) of the Act on interest held by his children. ** Disclosure made pursuant to Section 134(12)(c) of the Act on interest held by his spouse. ISSUE OF SHARES During the financial year, the Company increased its issued and paid up ordinary share capital from 243,686,148 to 243,704,520 by way of the issuance of 18,372 ordinary shares of 1.00 each at an issue price of 1.00 per ordinary share pursuant to the exercise of Warrants C as disclosed in Note 24 to the financial statements. The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company. TREASURY SHARES During the year, the Company repurchased 1,272,800 ordinary shares of 1.00 each for a total cash consideration of 1,325,479 from open market at an average cost of 1.04 per share. The shares repurchased are held as treasury shares and treated in accordance with the requirement of Section 67A of the Companies Act, As at, the Company held as treasury shares a total of 3,171,800 of its 243,704,520 issued ordinary shares. Such treasury shares are held at a carrying amount of 3,241,753 and further details are disclosed in Note 24(a) to the financial statements. WARRANTS C 2012/2017 Details of Warrants C 2012/2017 are disclosed in Note 24(b) to the financial statements. 66 annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

13 DIRECTORS REPORT OTHER STATUTORY INFOATION (a) Before the statements of comprehensive income and statements of financial position of the and of the Company were made out, the directors took reasonable steps: (i) (ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance for doubtful debts had been made; and 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) (ii) the amount written off for bad debts or the amount of the allowance for doubtful debts in respect of the financial statements of the and of the Company inadequate to any substantial extent; and the values attributed to current assets in the financial statements of the and of the Company misleading. (c) (d) (e) 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 and of the Company misleading or inappropriate. 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 and of the Company which would render any amount stated in the financial statements misleading. At the date of this report, there does not exist: (i) (ii) any charge on the assets of the and of the Company which has arisen since the end of the year which secures the liabilities of any other person; or any contingent liability of the or of the Company which has arisen since the end of the year. (f) In the opinion of the directors: (i) (ii) 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 year which will or may affect the ability of the or of the Company to meet their obligations when they fall due; and no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the year and the date of this report which is likely to affect substantially the results of the operations of the or of the Company for the financial year in which this report is made. SIGNIFICANT EVENT There is no significant event during the financial year. OSK PROPERTY HOLDINGS BERHAD ( D) annual report

14 DIRECTORS REPORT 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 18 February Dato Nik Mohamed Din bin Datuk Nik Yusoff Tan Sri Ong Leong Wong Joo Hwa Kuala Lumpur, Malaysia 68 annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

15 STATEMENT BY DIRECTORS We, Dato Nik Mohamed Din bin Datuk Nik Yusoff and Tan Sri Ong Leong Wong Joo Hwa, being two of the directors of OSK Property Holdings Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 72 to 137 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the and of the Company as at and of their financial performance and cash flows for the year then ended. The information set out in Note 36 to the financial statements on page 138 have been prepared in accordance with the 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 s Main Market Listing Requirements, as issued by the Malaysian Institute of Accountants. Signed on behalf of the Board in accordance with a resolution of the directors dated 18 February Dato Nik Mohamed Din bin Datuk Nik Yusoff Tan Sri Ong Leong Wong Joo Hwa STATUTORY DECLARATION Pursuant To Section 169(16) Of The Companies Act, 1965 I, Wong Kit Yin, being the officer primarily responsible for the financial management of OSK Property Holdings Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 72 to 138 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, Subscribed and solemnly declared by the abovenamed Wong Kit Yin at Kuala Lumpur in the Federal Territory on 18 February 2014 Wong Kit Yin Before me, Commissioner for Oaths Kuala Lumpur OSK PROPERTY HOLDINGS BERHAD ( D) annual report

16 INDEPENDENT AUDITORS REPORT To the members of OSK Property Holdings Berhad (Incorporated in Malaysia) Report on the financial statements We have audited the financial statements of OSK Property Holdings Berhad, which comprise the statements of financial positions as at of the and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the 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 72 to 137. 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 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 entity 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 entity 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 and of the Company as at and of their financial performance and cash flows for the year then ended in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. Report on other legal and regulatory requirements In accordance with the requirements of the Companies Act, 1965 ( Act ) in Malaysia, we also report the following: (a) (b) (c) 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. 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. 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. 70 annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

17 INDEPENDENT AUDITORS REPORT To the members of OSK Property Holdings Berhad (Incorporated in Malaysia) (Cont d) Other reporting responsibilities The supplementary information set out in Note 36 to the financial statements on page 138 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 matter This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Kua Choh Leang No. 2716/01/15(J) Chartered Accountant Kuala Lumpur, Malaysia 18 February 2014 OSK PROPERTY HOLDINGS BERHAD ( D) annual report

18 STATEMENTS OF COMPREHENSIVE INCOME For the Year Ended Company Note Revenue 4 455,699, ,605,152 33,709,460 21,465,751 Cost of sales 5 (310,575,921) (140,378,536) - - Gross profit 145,123,134 75,226,616 33,709,460 21,465,751 Other income 6 4,955,194 6,307,930 3,769,126 2,908,376 Selling and marketing expenses (43,185,069) (17,697,080) - - Administrative expenses (21,096,998) (12,178,307) (1,506,591) (908,093) Finance costs 7 (2,581,539) (1,291,353) - - Profit before tax 8 83,214,722 50,367,806 35,971,995 23,466,034 Income tax expense 11 (26,920,270) (13,641,349) (7,966,074) (85,729) Profit net of tax, representing total comprehensive income for the year 56,294,452 36,726,457 28,005,921 23,380,305 Profit attributable to: Owners of the Company 55,463,134 31,521,023 Non-controlling interests 831,318 5,205,434 56,294,452 36,726,457 Total comprehensive income attributable to: Owners of the Company 55,463,134 31,521,023 Non-controlling interests 831,318 5,205,434 56,294,452 36,726,457 Earnings per share attributable to owners of the Company (sen) Basic 12(a) Diluted 12(b) The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 72 annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

19 STATEMENTS OF FINANCIAL POSITION As at Company Note ASSETS Non-current assets Property, plant and equipment 14 3,295,832 2,854,068 7,230 8,048 Investment properties ,558, ,008, Land held for property development 16(a) 266,277, ,846, Intangible assets , , , ,000 Investments in subsidiary companies 18(a) ,362, ,899,228 Amount due from subsidiary companies 18(c) ,347,949 71,417,556 Deferred tax assets 19 17,590,896 11,423, Trade receivables 21 1,255,694 1,397, Other receivables, deposits and prepayments 22 3,327,284 2,444, ,995, ,577, ,067, ,674,832 Current assets Property development costs 16(b) 203,088, ,129, Inventories , , Trade receivables 21 85,121,291 73,010, Accrued billings 56,056,128 23,489, Amount due from subsidiary companies 18(c) ,652,032 38,082,932 Other receivables, deposits and prepayments 22 5,876,186 3,091,191 5,002 4,971 Tax recoverable 1,352,199 3,032, , ,480 Cash, bank balances and deposits ,228, ,233,020 6,798,234 6,176, ,884, ,148,752 54,649,832 44,603,731 TOTAL ASSETS 963,880, ,726, ,717, ,278,563 OSK PROPERTY HOLDINGS BERHAD ( D) annual report

20 STATEMENTS OF FINANCIAL POSITION As at (Cont d) Company Note EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital ,704, ,686, ,704, ,686,148 Less: Treasury shares 24(a) (3,241,753) (1,916,274) (3,241,753) (1,916,274) 240,462, ,769, ,462, ,769,874 Capital redemption reserve Warrants reserve 24(c) 10,481,761 10,484,759 10,481,761 10,484,759 Share premium - 30,188-30,188 Retained profits ,924, ,988,598 68,408,280 53,929, ,869, ,273, ,352, ,214,196 Non-controlling interests 16,329,624 16,527, TOTAL EQUITY 428,198, ,800, ,352, ,214,196 Non-current liabilities Deferred tax liabilities 19 30,866,226 32,452, Long term borrowings ,191, ,938, Trade payables 27 17,500,157 6,423, Other payables, accruals and provision 28 7,591,888 11,667, ,149, ,482, Current liabilities Amount due to subsidiary companies 18(c) ,976,728 33,847,895 Trade payables 27 61,270,766 44,904, Progress billings 167,039, ,116, Other payables, accruals and provision 28 58,127,570 34,756, ,293 1,216,472 Short term borrowings 29 53,953,018 30,219, Tax payable 9,140,386 2,446, ,531, ,443,283 28,365,021 35,064,367 TOTAL LIABILITIES 535,681, ,925,431 28,365,021 35,064,367 TOTAL EQUITY AND LIABILITIES 963,880, ,726, ,717, ,278,563 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 74 annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

21 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the Year Ended Attributable to Owners of the Company Non-distributable Distributable Capital Non- Share redemption Warrants Share Treasury Retained controlling Total capital reserve reserve premium shares profits Total interests equity (Note 24) (Note 24(c)) (Note 24(a)) (Note 25) At 1 January ,686,148-10,484,759 30,188 (1,916,274) 118,988, ,273,419 16,527, ,800,725 Total comprehensive income ,463,134 55,463, ,318 56,294,452 Transactions with owners Dividends (Note 13) (13,529,992) (13,529,992) - (13,529,992) Shares issued pursuant to the exercise of Warrants C 18, ,372-18,372 Dividends paid to non-controlling interests (1,029,000) (1,029,000) Reversal of warrants reserve upon exercise of Warrants C - - (2,998) 22-2, Rights issue expenses (30,210) - - (30,210) - (30,210) Shares buyback (1,325,479) - (1,325,479) - (1,325,479) At 243,704,520-10,481,761 - (3,241,753) 160,924, ,869,244 16,329, ,198,868 At 1 January ,379,496 12,622,200-6,984,642 (3,015) 132,220, ,204,069 30,071, ,275,941 Total comprehensive income ,521,023 31,521,023 5,205,434 36,726,457 Transactions with owners Dividends (Note 13) (16,164,569) (16,164,569) - (16,164,569) Shares issued pursuant to the Rights Issue 18,744,703-9,985, (9,985,496) 18,744,703-18,744,703 Shares issued pursuant to the Bonus Issue 37,489,406 (12,622,200) - (6,264,100) - (18,603,106) Shares issued pursuant to the exercise of Warrants B 72, , ,679-90,679 Dividends paid to non-controlling interests (18,750,000) (18,750,000) Warrants issued pursuant to the Restricted Issued of Warrants , , ,263 Rights issue expenses (708,490) - - (708,490) - (708,490) Shares buyback (1,913,259) - (1,913,259) - (1,913,259) At 31 December ,686,148-10,484,759 30,188 (1,916,274) 118,988, ,273,419 16,527, ,800,725 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. OSK PROPERTY HOLDINGS BERHAD ( D) annual report

22 COMPANY STATEMENT OF CHANGES IN EQUITY For the Year Ended Non-distributable Distributable Capital Share redemption Warrants Share Treasury Retained capital reserves reserves premium shares profits Total (Note 24) (Note 24(c)) (Note 24(a)) (Note 25) At 1 January ,686,148-10,484,759 30,188 (1,916,274) 53,929, ,214,196 Total comprehensive income ,005,921 28,005,921 Transactions with owners Dividends (Note 13) (13,529,992) (13,529,992) Shares issued pursuant to the exercise of Warrants C 18, ,372 Reversal of warrants reserve upon exercise of Warrants C - - (2,998) 22-2,976 - Rights issue expenses (30,210) - - (30,210) Shares buyback (1,325,479) - (1,325,479) At 243,704,520-10,481,761 - (3,241,753) 68,408, ,352,808 At 1 January ,379,496 12,622,200-6,984,642 (3,015) 75,302, ,285,564 Total comprehensive income ,380,305 23,380,305 Transactions with owners Dividends (Note 13) (16,164,569) (16,164,569) Shares issued pursuant to the Rights Issue 18,744,703-9,985, (9,985,496) 18,744,703 Shares issued pursuant to the Bonus Issue 37,489,406 (12,622,200) - (6,264,100) - (18,603,106) - Shares issued pursuant to the exercise of Warrants B 72, , ,679 Warrants issued pursuant to the Restricted Issued of Warrants , ,263 Rights issue expenses (708,490) - - (708,490) Shares buyback (1,913,259) - (1,913,259) At 31 December ,686,148-10,484,759 30,188 (1,916,274) 53,929, ,214,196 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 76 annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

23 STATEMENTS OF CASH FLOWS For the Year Ended OPERATING ACTIVITIES Company Profit before tax 83,214,722 50,367,806 35,971,995 23,466,034 Adjustments for: Gain on disposal of development land in jointly controlled asset - (917,205) - - Allowance for impairment on other receivables written back - (126,142) - - Depreciation 744, , Amortisation of intangible assets 67,972 42, Unwinding of discount - refundable deposits 85,809 (31,877) retention sum (932,405) (95,822) low cost housing losses 1,780,844 (1,780,844) provision for land cost payable 65, , stakeholder amounts held by solicitors (103,595) 101, loan to subsidiary companies - - (3,769,126) (2,908,070) Loss/(gain) on disposal of property, plant and equipment 115 (14,249) - - Property, plant and equipment written off , Dividend income - - (33,071,000) (20,250,000) Interest income (2,346,811) (2,975,409) (638,460) (1,215,751) Operating profit/(loss) before working capital changes 82,577,456 45,956,264 (1,505,773) (907,651) Decrease/(increase) in property development costs 61,433,556 (63,038,311) - - Increase in receivables (15,619,550) (25,531,832) - (991) Increase/(decrease) in payables 46,126,270 10,806,241 (828,183) 849,967 (Increase)/decrease in accrued/progress billings (13,642,371) 134,031, Changes in intercompany balances - - (7,815,122) (28,721,640) Cash generated from/(used in) operations 160,875, ,224,343 (10,149,078) (28,780,315) Interest paid (9,119,328) (11,741,501) - - Interest received 2,348,266 2,975, ,429 1,215,688 Taxes paid (28,183,821) (21,150,084) (161,864) (285,600) Taxes refunded 1,884, , ,706 - Net cash generated from/(used in) operating activities 127,805,472 72,833,035 (9,331,807) (27,850,227) INVESTING ACTIVITIES Additional subscription of shares in subsidiary companies - - (249,998) (249,998) Dividend received ,071,000 30,840,000 Proceeds from disposal of property, plant and equipment 1,330 26, Subsequent expenditure on investment properties (55,679,779) (34,371,538) - - Purchase of property, plant and equipment (1,064,206) (966,134) - (8,184) Purchase of intangible assets (157,444) (112,407) - - Net cash (used in)/generated from investing activities (56,900,099) (35,423,579) 24,821,002 30,581,818 OSK PROPERTY HOLDINGS BERHAD ( D) annual report

24 STATEMENTS OF CASH FLOWS For the Year Ended (Cont d) Company FINANCING ACTIVITIES Proceeds from conversion of Warrants B - 90,679-90,679 Proceeds from Restricted Issue of Warrants 18, ,263 18, ,263 Proceeds from issuance of Rights Issue - 18,744,703-18,744,703 Payment of rights issue expenses (30,210) (708,490) (30,210) (708,490) Dividends paid to non-controlling interests (1,029,000) (23,160,000) - - Shares buyback (1,325,479) (1,913,259) (1,325,479) (1,913,259) Net (repayment)/drawdown of term loans (53,513,276) 29,669, Net drawdown/(repayment) of revolving credits 16,500,000 (13,000,000) - - Dividends paid (13,529,992) (16,164,569) (13,529,992) (16,164,569) Net cash (used in)/generated from financing activities (52,909,585) (5,942,568) (14,867,309) 548,327 NET CHANGES IN CASH AND CASH EQUIVALENTS 17,995,788 31,466, ,886 3,279,918 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 132,233, ,766,132 6,176,348 2,896,430 CASH AND CASH EQUIVALENTS AT END OF YEAR 150,228, ,233,020 6,798,234 6,176,348 Cash and cash equivalents at end of year comprised: Cash in hand and at banks 25,469,457 9,096, , ,552 Short term placements with licensed bank 34,062,559 34,011, Short term placements with licensed investment bank 23,938,011 32,950,525 6,322,067 5,941,796 Housing Development Accounts 66,758,781 56,173, ,228, ,233,020 6,798,234 6,176,348 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 78 annual report 2013 OSK PROPERTY HOLDINGS BERHAD ( D)

25 1. GENERAL INFOATION The principal activity of the Company is investment holding. The principal activities of the subsidiary companies are property investment, property development and management and sale of oil palm fresh fruit bunches. There have been no significant changes in the nature of these activities during the year. The Company is a public company limited by shares, incorporated under the Companies Act, 1965, domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad ( Bursa Securities ). The principal place of business of the Company is located at 8th and 9th Floor, Plaza OSK, Jalan Ampang, Kuala Lumpur. The registered office of the Company is located at 7th Floor, Plaza OSK, Jalan Ampang, Kuala Lumpur. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 18 February BASIS OF PREPARATION OF FINANCIAL STATEMENTS The financial statements of the and of the Company have been prepared in accordance with Financial Reporting Standards ( FRSs ) and the Companies Act, 1965 in Malaysia. The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. The financial statements are presented in Ringgit Malaysia () except when otherwise indicated. (a) Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year except as follows: On 1 January 2013, the adopted the following new and amended FRSs and IC Interpretations mandatory for annual financial periods beginning on or after 1 January 2013: Amendments to FRS 1 Amendments to FRS 7 FRS 10 Amendments to FRS 10, FRS 11 and FRS 12 FRS 11 FRS 12 FRS 13 Amendments to FRS 101 Amendments to FRS 116 FRS 119 FRS 127 FRS 128 Amendments to FRS 132 Amendments to FRS 134 Government Loans Disclosure Offsetting Financial Assets and Financial Liabilities Consolidated Financial Statements Consolidated Financial Statement, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance Joint Arrangements Disclosure of Interest in Other Entities Fair Value Measurement Presentation of items of Other Comprehensive Income Property, plant and equipment Employee Benefits (Revised) Separate Financial Statements (Revised) Investment in Associates and Joint Ventures (Revised) Financial Instruments: Presentation Interim Financial Reporting Adoption of the above standards and interpretations did not have any effect on the financial performance or position of the and of the Company. OSK PROPERTY HOLDINGS BERHAD ( D) annual report