Contents. Annual Report

Transcription

1 ANNUAL REPORT 2008

2 Cover Rationale Each living organism has an ongoing and continual relationship with every other element that makes up its environment. An ecosystem can be defined as any situation where there is interaction between organisms and their environment. At Equine Capital Berhad, to realize environmental protection idea, we act responsibly on the environment by striking a balance between economic objectives and environmental welfare in our mission to grow value for generations to come. Our aim is always blend with ecosystem to minimize impact on the natural environment. Caring for the environment involves an endless learning process; the journey is best to get started on with simple and creative solutions. As we progress into another new year, we draw strength, passion and continue to focus on enriching the quality of life and seeking new opportunities for growth.

3 Contents Our Vision and Mission Corporate Information The Group at A Glance Profile of Directors Chairman s Statement Statement on Corporate Governance Audit Committee Report Statement on Internal Control Statement on Directors Responsibility Financial Statements Analysis of Ordinary Shareholdings Analysis of the 3% Irredeemable Convertible Unsecured Loan Stocks 2003/2008 ( ICULS ) Additional Disclosures Group Properties Notice of Annual General Meeting Statement Accompanying Notice of Annual General Meeting Form Of Proxy Annual Report

4 Our VISION Create space and value which fulfills the needs and exceeds the expectations of all stakeholders. 2 Equine Capital Berhad

5 Our MISSION To provide affordable, efficient, comfortable living and work space that enables users to achieve high living standards in an ecologically balanced environment. Just like the artisans of old, we are committed to excellence and are guided by the desire to be achievers, not merely accumulators. For to be the best in any given field and endeavour will definitely bring with it rewards. Our vision and commitment will lead us towards long term sustainable growth, returns and enhancement of value. Annual Report

6 Corporate Information BOARD OF DIRECTORS AUDIT COMMITTEE SHARE REGISTRAR Datuk Patrick Lim Soo Kit (Executive Chairman) YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah (Independent Non-Executive Director) Datuk Ahmad Zabri bin Ibrahim (Non-Independent Non-Executive Director) Dato Hamzah Bin Md Rus (Independent Non-Executive Director) Wong Kim Seng (Independent Non-Executive Director) YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah (Member of the Committee) Datuk Ahmad Zabri bin Ibrahim (Member of the Committee) NOMINATION COMMITTEE YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah (Chairman of the Committee) Datuk Patrick Lim Soo Kit (Member of the Committee) COMPANY SECRETARY Chin Pei Fung (MAICSA ) Symphony Share Registrars Sdn Bhd Level 26, Menara Multi Purpose Capital Square No. 8, Jalan Munshi Abdullah Kuala Lumpur Malaysia Tel : (603) Fax : (603) / 2531 REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS No. 1, Jalan Putra Permai 1A Taman Equine Seri Kembangan Selangor Darul Ehsan Malaysia Tel : (603) Fax : (603) equine@equine.com.my Web : AUDITORS Messrs. BDO Binder (AF: 0206) 12th Floor, Menara Uni Asia 1008, Jalan Sultan Ismail Kuala Lumpur Malaysia Tel : (603) Fax : (603) / 3191 STOCK EXCHANGE LISTING Main Board of Bursa Malaysia Securities Berhad (Properties Sector, Stock Code : 1147) (Listed since 28 October 2003) 4 Equine Capital Berhad

7 The Group At a Glance 100% 100% 100% 100% 100% Syarikat Tenaga Sahabat Sdn Bhd Kuala Lumpur Industries Bhd Kuala Lumpur Industries Holdings Bhd Exceed Concept Sdn Bhd Equine Park Stud Sdn Bhd 100% 100% 100% 100% Kelab Taman Equine Sdn Bhd Taman Equine Riding Sdn Bhd Penaga Pesona Sdn Bhd Taman Equine (M) Sdn Bhd 100% 100% 100% 100% Pertanian Taman Equine Sdn Bhd Taman Equine Industrial Sdn Bhd Taman Equine Rekreasi Sdn Bhd Akademi Ekuestrian Selangor Sdn Bhd 100% 100% 51% 25% Tujuan Ehsan Sdn Bhd Equine Park Country Resort Sdn Bhd Duta Security Sdn Bhd Abad Naluri Sdn Bhd Annual Report

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9 We are building townships with a sense of passion and inspiration. The unique concept of our properties speaks the indulgence of lifestyle amenities for a work-life balance. Annual Report

10 Profile of Directors Datuk Patrick Lim Soo Kit Executive Chairman Datuk Patrick Lim Soo Kit, a Malaysian and aged 43, was appointed as the Executive Chairman of ECB on 26 August He obtained a Bachelor of Business majoring in Economics and Finance Management from Curtin University, Australia in Datuk Patrick Lim Soo Kit has been involved in the property development industry since In the early 1990 s, he rehabilitated an abandoned project in Taman Bukit Cahaya, Serdang, Selangor Darul Ehsan which involved the takeover and completion of 145 units of shophouses. He is currently involved in the development of an integrated township on 789 acres of land comprising residential, commercial and recreational components in Taman Equine, Putra Permai and Pusat Bandar Putra Permai, which are located in Seri Kembangan, Selangor Darul Ehsan. Datuk Patrick Lim Soo Kit has been conferred various titles including the Ahli Mahkota Selangor in 1991, Justice of Peace, Selangor in 1996, Darjah Kebesaran Dato Sultan Salahuddin Abdul Aziz Shah in 1997 and Darjah Kebesaran Panglima Setia DiRaja in He is also actively involved in social activities and was a Committee Member of Petaling District Development Board (Ahli Majlis Pembangunan Daerah Petaling) from 1996 to 1998 and a member from 1998 to 2001, a member of the Board of Directors of University Putra Malaysia from March 2002 to March 2004 and a Vice President of the Council of Justice of Peace from March 2002 to June Presently, he is a member of the Council of Advisors, Akademi Ekuestrian DiRaja Selangor and he also sits on the Board of Directors of several private limited companies. Datuk Patrick Lim Soo Kit is a substantial shareholder of the Company with indirect interest of 16.02%. He is the husband of Datin Wong Mun Yee and nephew to Lim Ah Yee and Lim Ah Chai. Datin Wong Mun Yee is a substantial shareholder with a direct interest of 0.10% and indirect interest of 15.92%. Lim Ah Yee and Lim Ah Chai are also substantial shareholders of the Company with indirect interest of 15.92% each. Save as disclosed above, Datuk Patrick Lim Soo Kit has no conflict of interest with the Company. He has no family relationship with any other directors of the Company and has not been convicted of any offences within the past ten years. He is a Member of the Nomination Committee and attended all the meetings of the Board of Directors held during the financial year. 8 Equine Capital Berhad

11 Profile of Directors Yam Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Independent and Non-Executive Director YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah, a Malaysian and aged 53, was appointed as an Independent and Non-Executive Director of ECB on 26 August He completed his Diploma in Business Administration from Universiti Teknologi MARA in He started his career in Charles Bradburne (1930) Sdn Bhd as a broker from 1974 to He was a Director of TTDI Development Sdn Bhd from 1978 to 2000 and a Director of Sime UEP Berhad from 1983 to In 1987, he was appointed as Chairman of Subang Jaya Medical Centre, a position which he still holds. Presently, he is a Director of Sumatec Resources Berhad, Melewar Industrial Group Berhad and Wawasan TKH Holdings Bhd. In 2008, he was appointed to the Supervisory Committee of Sime Darby Properties Division. He also sits on the Board of Directors of several private limited companies involved in property development. He has no family relationship with any other directors or major shareholders of the Company nor any conflict of interest with the Company. He has not been convicted of any offences within the past ten years. He is a Member of the Audit Committee and the Chairman of the Nomination Committee. He attended all the meetings of the Board of Directors and Audit Committee held during the financial year. Dato Hamzah Bin Md Rus Independent and Non-Executive Director Dato Hamzah Bin Md Rus, a Malaysian and aged 58, was appointed as an Independent and Non-Executive Director of ECB on 10 April He obtained his BA (Hons) Degree from University of Malaya and a Professional Diploma in Purchasing and Supply Management from University of North London. He has served the Government of Malaysia throughout his career ( ) in various Ministries. He has held various positions, headed many working groups and represented the Government of Malaysia on many international, regional and bilateral meetings and forums. His last position in the Government was the Deputy Secretary General, Ministry of Internal Security. For his dedication and commitment throughout his career, he was awarded several service excellence awards and was also conferred several Federal and State Awards. He has no family relationship with any other directors or major shareholders of the Company nor any conflict of interest with the Company. He has not been convicted of any offences within the past ten years. He did not attend any of the meetings of the Board of Directors held during the financial year as he was appointed after the financial year-end. Annual Report

12 Profile of Directors Datuk Ahmad Zabri Bin Ibrahim Non-Independent and Non-Executive Director Datuk Ahmad Zabri Bin Ibrahim, a Malaysian and aged 65, was appointed as a Non- Independent and Non-Executive Director of ECB on 26 August He obtained a Bachelor of Arts (Hons.) in History from the University of Malaya, Kuala Lumpur in 1966, a Diploma in Development Administration from University of Birmingham, United Kingdom in 1972 and a Masters in Public Administration from University of Southern California, U.S.A. in He also obtained a Certificate in Advanced Management Programme from Harvard Business School, Harvard University, U.S.A. in He started his career in the Malaysian Administrative and Diplomatic Service in 1966 and as an Assistant Secretary in the Ministry of Education until He served in the Public Service Department from 1972 to 1973 as the Principal Assistant Director (Establishment Division). In 1973, he joined the National Institute of Public Administration (INTAN), as the Head of Research Unit and became the Deputy Director (Academic) and later as the Deputy Director (Management) until In 1983, he was seconded to the Institute of Strategic and International Studies (ISIS) as Company Secretary/Deputy Director General (Management) until May He served in the Chief Minister s Department, Sabah as a Director of Development from 1987 to He was the Secretary General in the Ministry of Youth and Sports Malaysia from 1990 to 1991, the State Secretary of Selangor from 1991 to 1993 and the Secretary General, Ministry of Agriculture, Malaysia from 1993 until his retirement in He was the Chairman of Bank Pembangunan Malaysia from 1997 to 1999 and the Chairman of Oriental Bank Berhad from 1999 to 2000 and Independent Non-Executive Director of BERNAS from 1997 till September, Presently he sits on the Board of Directors of Sime Engineering Services Berhad, a public listed company on the Bursa Malaysia and several other private limited companies. He has no family relationship with any other directors or major shareholders of the Company nor any conflict of interest with the Company. He has not been convicted of any offences within the past ten years. He is a Member of the Audit Committee and attended all the meetings of the Board of Directors and Audit Committee held during the financial year. 10 Equine Capital Berhad

13 Profile of Directors Wong Kim Seng Independent and Non-Executive Director Wong Kim Seng, a Malaysian and aged 47, was appointed as an Independent and Non-Executive Director of ECB on 11 April He obtained his MBA and B.A. from Duke University, North Carolina, USA. He has more than 20 years of working experience in corporate management, corporate finance, strategy consulting and banking in Malaysia and Australia. Presently, he is the Director of Finance with a Malaysian group that owns and manages several hotels and is responsible for the overall financial management of the group. He has no family relationship with any other directors or major shareholders of the Company nor any conflict of interest with the Company. He has not been convicted of any offences within the past ten years. He did not attend any of the meetings of the Board of Directors held during the financial year as he was appointed after the financial year-end. Annual Report

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15 Equine Capital creates a lifestyle where our homes are complemented with entertainment and commercial hubs; places where you can indulge in living a lifestyle you desire in which you will become accustomed to. Annual Report

16 Chairman s Statement Dear Shareholders, On behalf of the Board of Directors, I am pleased to present the fifth Annual Report of Equine Capital Berhad Group for the financial year ended 31 March Equine Capital Berhad

17 Chairman s Statement FINANCIAL REVIEW 2007 was indeed a challenging year for the Group. The Group s revenue for the financial year ended 31 March 2008 grew to RM million from RM74.75 million reported in the corresponding financial year ended 31 March 2007, representing an increase of 46%. The increase in revenue was mainly contributed by continued recognition of progress billing stemming from sales recorded from previous years coupled with new sales recorded in this financial year. Turnover was sustained mainly by contributions from the Group s ongoing projects which included: - Pusat Bandar Putra Permai, our ongoing township development located in Seri Kembangan, Selangor; and Crescentia Park, another ongoing township development located in Batu Kawan, Penang. For the current financial year, the Group registered a loss after taxation of RM28.80 million compared to a profit after taxation of RM3.6 million recorded in the previous year. Main contributors to the loss was due to delay in new project launches, higher contribution from lower margin-yield products during the financial year from our developments in Seri Kembangan, Batu Kawan and Cheras, and slower project progress exacerbated by escalating cost of construction raw materials. In addition, the Group also adopted a more conservative stance by writing off goodwill on consolidation and making provisions for liquidated and ascertained damages, tax penalty and doubtful debts in the current financial year. On a positive note, this conservative stance adopted was in line with the Group s strategy to better position itself to face the future economic challenges. In the financial year under review, the Group decided to adopt Financial Reporting Standard 140 Investment Property and accordingly revalued its property (Wisma KLIH) located at Jalan Bukit Bintang, Kuala Lumpur, to reflect its fair value of RM35 million. This is in line with the Group s intention to reflect a strong underlying asset base which is supported by its 1.8 times total assets to total equity ratio and a corresponding net tangible asset on a diluted basis of RM1.16 as at 31 March REVIEW OF OPERATIONS During the financial year under review, the Group launched two new projects, namely: - 1) Permai Central a commercial centre with a transportation hub in the Group s Pusat Bandar Putra Permai township development. Permai Central features a mixed development of retail outlets, shop offices and office space fronting a transport hub; and 2) Callisia, the Group s latest offering to its Cresentia Park township development in Batu Kawan. The development which comprises of 246 units of double storey linked houses has a gross development value ( GDV ) of RM52.1 million. Annual Report

18 Chairman s Statement Apart from the above, the Group s ongoing projects are as follows: - Township Product Project Pusat Bandar Putra Permai The Eminence 216 units two and half storey terrace houses ( PBPP ) Permai Place 150 units single and two storey shop offices Permai Square 113 units single to three storey shop offices Sovereign 102 units semi-detached two storey houses Cahaya Permai 300 units medium cost apartment and 13 units of shops The Rise 6 unit bungalows Taman Mestika Mestika Square 48 units two and three storey shop offices Crescentia Park Studio-S 330 units low cost double storey terrace houses Studio-M 259 units low medium cost double storey terrace houses Clover Plus 137 units two and half storey cluster link houses Studio L 72 units two storey cluster link In June 2007 and November 2007, the Group completed and handed over 54 units Permai Square Zone 1 two and three storey shop office and 48 units Sovereign Zone 1 semi-detached two storey houses located at Permai Park, Seri Kembangan and in January 2008, the Mega Indah low cost apartments and shops located in Cheras to our valued purchasers. Given the highly competitive market and escalating raw material prices, the Group had also embarked on reviewing its product mix on its existing land banks to ensure that future products launched are well accepted and coupled with the on going product value engineering to manage cost without compromising on the quality of our end product, the Group is confident of launching more competitive products into the market in the future. CORPORATE DEVELOPMENT On 29 October 2007, the Company announced that it was undertaking a proposed private placement exercise to issue up to 22,733,832 new ordinary shares of RM1.00 each representing up to ten percent (10%) of the enlarged issued and paid-up share capital of the Company ( Proposed Private Placement ). The Proposed Private Placement was approved by the Securities Commission ( SC ) and Bursa Malaysia Securities Berhad on 1 November 2007 and 14 November 2007 respectively. On 31 March 2008, the Company submitted an application to the SC for an extension of time of six months until 29 October 2008 to implement the Proposed Private Placement. As at the date of this report, the Company has not issued any shares in relation to the Proposed Private Placement. On 19 March 2008, the Company executed a Facility Agreement with a licenced bank for a term loan facility of RM95 million ( the Facility ). The Facility has been utilised towards refinancing the nominal amounts of the 2005/2010 RM50 million Commercial Papers ( CP ) and RM25 million Medium Term Notes ( MTN ) issued by the Company, and the balance of RM20 million is to be utilised for development of its new projects in Taman Equine and Pusat Bandar Putra Permai. 16 Equine Capital Berhad

19 Chairman s Statement PROSPECTS Going forward, the Group is confident of registering growth from its existing land banks and will continue to focus on launching products with high acceptance which emphasise on quality and competitive pricing for its Seri Kembangan, Batu Kawan and Cheras projects. The Group is also confident that its existing land banks in more developed locations in Seri Kembangan and Cheras will continue to enjoy favourable take-up rates. For the Seri Kembangan township project, the Group is currently re-assessing the product mix to be developed on its existing land bank to enhance demand and maximise shareholder value. Whereas for our development in Cheras, the Group had on May 2008, launched a new phase within Taman Mega Jaya, known as Palomino that comprises 54 units of two-storey link houses with an estimated gross development value of RM25.2 million which was fairly accepted. Meanwhile for its Batu Kawan township development in Penang, the Group intends to accelerate its development to capitalise on the implementation of the Northern Corridor Economic Region and the Penang Second Bridge. DIVIDEND No dividend payment is proposed for the financial year under review. ACKNOWLEDGEMENT On behalf of the Board, I wish to extend my warm welcome to Dato Hamzah Bin Md. Rus and Mr. Wong Kim Seng who were appointed to the Board in April I would also like to express my appreciation to Mr. Yap Kim Swee, Mr. Lim Eu Keong and Mr. James Mackenzie Hall, who resigned from the Board in the first half of the year, for their support, guidance and wisdom throughout their tenure of service to the Company. On behalf of the Board, I wish to convey my deepest gratitude to the management and staff for their hard work, dedication and commitment and ask that they continue to uphold their commitment to excellence. Our sincere appreciation must also go to our regulators, customers, business partners and investors for their unwavering support. I would also like to thank my colleagues on the Board for their guidance and insight. DATUK PATRICK LIM SOO KIT Executive Chairman Seri Kembangan, Selangor Darul Ehsan 17 July 2008 Annual Report

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21 Statement on Corporate Governance The Board of Directors ( the Board ) of Equine Capital Berhad ( ECB or Company ) is fully committed to promote and achieve the highest standards of corporate governance and to ensure that the principles and best practices in corporate governance as detailed in the Malaysian Code of Corporate Governance ( the Code ) are practiced and adopted in ECB and its subsidiaries ( the Group ). The Board continuously evaluates the Group s corporate governance practices and procedures with a view to adopt and implement the principles and best practices of the Code, wherever applicable, as a fundamental part of discharging its responsibilities to protect and enhance shareholders value. The Board believes that good corporate governance results in creation of long term value and benefits for all stakeholders. 1. THE BOARD OF DIRECTORS The Board takes full responsibility for the performance of the Group and guides the Group towards achieving its short and long term objectives, setting corporate strategies for growth and new business development while providing advice and direction to the Management to enable the Group to achieve its corporate goals. 1.1 Board Responsibilities Having recognised the importance of an effective and dynamic Board, the Board s members are guided by six (6) areas of responsibility as outlined below: Reviewing and adopting a strategic plan for the Group; Overseeing the conduct of the Group s business to evaluate whether the business is properly managed; Identifying principal risks of the Group and ensuring that appropriate systems are implemented and/or steps are taken to manage these risks; Succession planning, including appointing, training, fixing the compensation of and where appropriate, replacing senior management; Developing and implementing an investor relations programme or shareholder communications policy for the Group; and Reviewing the adequacy and the integrity of the Group s internal control systems and management information systems, including system for compliance with applicable laws, regulations, rules, directives and guidelines. Specifically and within the limits set by the Company s Articles of Association ( Articles ), the Board is charged with the development of corporate objectives and the review and approval of corporate plans, annual budgets, acquisitions and disposals of major assets, major investments and changes to the management and control structure within the Group including risk management, delegation of authority and financial and operational policies and procedures. 1.2 Composition of the Board and Board Balance The Board members are professionals from diverse disciplines, tapping on their respective qualifications and experiences in business, commercial and financial aspects. Together, they bring a wide range of experience and expertise which are vital towards the effective discharge of the Board s responsibilities for the successful direction and growth of the Group. A brief description of the background of each Director is presented on pages 8 to 11 of the Annual Report. Annual Report

22 Statement on Corporate Governance The current Board consists of five (5) members, comprising the Executive Chairman and four (4) Non Executive Directors, three (3) of whom are independent. This is in compliance with the listing requirements of Bursa Malaysia Securities Berhad ( Bursa Malaysia ), which requires one third (1/3) of or two members of the Board, whichever is higher, to be independent directors. No individual or group of individuals dominates the Board s decision making and the number of directors fairly reflects the investment of the shareholders. Datuk Patrick Lim Soo Kit ( Datuk Patrick Lim ), the Executive Chairman and the founder of the Group, has the requisite knowledge and experience in managing the business of the Group. The Executive Chairman together with the Management Team are responsible for making and implementing operational decisions. The Board is comfortable that there are sufficient experienced Non-Executive Directors on the Board who provide unbiased and independent views, advice and judgement to take into account the interests of all stakeholders. In addition, all major decisions and key issues involving the Group are referred to the Board for consideration and approval. The Independent Non-Executive Directors of the Company are YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah ( YAM Datuk Seri Tengku Ahmad Shah ), Dato Hamzah Bin Md Rus and Mr Wong Kim Seng. They are independent of management and free from any business or other relationships, which could interfere with the exercise of independent judgement on the Board s deliberations and decision-making process. The role of these Independent Non-Executive Directors is therefore important as they provide unbiased and independent views, advice and directions and ensure that the strategies proposed by the management are fully discussed and examined and take into account the long-term interests, not only of the Group and the shareholders, but also of employees, customers, suppliers and other stakeholders. The Board has also designated YAM Datuk Seri Tengku Ahmad Shah as the Independent Non-Executive Director, to whom concerns may be conveyed. All Directors have given their undertakings to comply with the listing requirements of Bursa Malaysia and the Independent Directors have confirmed their independence in writing. 1.3 Appointment of Directors The Nomination Committee is responsible for making recommendations to the Board on suitable candidates for appointment. In making these recommendations, due consideration is given to the required mix of skills, expertise, knowledge and experience that the proposed directors shall bring to complement the Board. 1.4 Re-Election of Directors In accordance with the Articles, all directors who are appointed by the Board are subject to election by shareholders of the Company at the first Annual General Meeting after their appointment, and one-third, or the number nearest one-third, of the remaining directors shall retire from office and be eligible for re-election. Notwithstanding the above, the Articles also provide that all the directors of the Company shall retire from office once at least in every three years but shall be eligible for re-election. 20 Equine Capital Berhad

23 Statement on Corporate Governance To aid shareholders in their decision, sufficient information such as personal profile, meetings attendance and the shareholdings in the Group, if any, of each Director standing for election are furnished in a separate statement accompanying the Notice of Annual General Meeting. 1.5 Directors Training The Group acknowledges that continuous education is vital for the Board members to gain insight into the state of economy, technological advances, regulatory updates and management strategies. All the Directors have attended the Mandatory Accreditation Programme (MAP) except for Dato Hamzah Bin Md Rus and Mr Wong Kim Seng who were appointed to the Board on 10 April 2008 and 11 April 2008 respectively. Trainings on Improving Board of Directors Performance, Leadership and Governance and Corporate Tax Planning were arranged by the Company to all Directors during the financial year ended 31 March The Board will continue to evaluate and determine the training needed by the Directors from time to time to enhance their skills and knowledge, where relevant and keep abreast with the new regulatory development and listing requirements of Bursa Malaysia. 1.6 Supply of Information The Board has a formal schedule of matters for decision-making to ensure that the direction and control of the Group is firmly in its hands. Board papers, together with the agenda of the Board meeting and relevant reports, are circulated in advance of each Board meeting to enable the Directors to review and obtain further information, where necessary, on matters presented in the Board papers. During Board meetings, management provides further details on each matter or supplementary information, where necessary. In addition and in accordance with the Articles, the Board also ratifies matters previously approved through directors circular resolution. Board proceedings, deliberations and conclusions of the Board at every Board meeting are duly recorded in the Board minutes and all minutes are signed by the Chairman of the meeting in compliance with Section 156 of the Companies Act, All Directors have the right and duty to make further enquiries where they consider this necessary. Each director has unrestricted access to all information within the Group, the senior management and the company secretary. The directors, whether as full Board or in their individual capacity, may in furtherance of their duties, take independent professional advice at the Company s expense, if required. 1.7 Board Meetings The Board schedules to meet at least four times a year, with additional meetings convened as and when necessary. Due notice is given for all scheduled meetings. During the financial year ended 31 March 2008, five (5) Board meetings were convened on 17 May 2007, 12 July 2007, 16 August 2007, 15 November 2007 and 21 February All meetings had 100% participation from all Directors. Annual Report

24 Statement on Corporate Governance 1.8 Committees The Board has established the Audit Committee to assist the Board in discharging its duties and responsibilities. The Audit Committee comprises: YAM Datuk Seri Tengku Ahmad Shah (Member of the Committee) Datuk Ahmad Zabri bin Ibrahim (Member of the Committee) The Company is not in compliance with paragraph 15.10(1) of the Listing Requirements of Bursa Malaysia following the resignation of Mr Yap Kim Swee as Director and Chairman of Audit Committee of the Company on 29 February Bursa Malaysia had on 6 May 2008 granted an extension of time of three months until 31 August 2008 to the Company to comply with this requirement. The terms of reference of the Audit Committee have been approved by the Board and where applicable, comply with the recommendations of the Code. The details of the Audit Committee are set out on pages 26 to 29 of this Annual Report. In line with best practices in Corporate Governance, the Code recommends for the establishment of the following committees: 1) Nomination Committee The Board established the Nomination Committee on 16 April Presently, the Nomination Committee comprises: YAM Datuk Seri Tengku Ahmad Shah (Chairman of the Committee) Datuk Patrick Lim (Member of the Committee) The primary function of the Nomination Committee is to propose new nominees for the Board, assess directors on an ongoing basis and review the required mix of skills, experience and other qualities of the directors to ensure that the Board is functioning effectively and efficiently. 2) Remuneration Committee The primary function of the Remuneration Committee is to set the policy framework for the remuneration of the directors to ensure that the policy on directors remuneration are sufficient to attract and retain directors of the calibre needed to manage the Group successfully. As the Company has only one Executive Director, the review of directors remuneration will be a matter for the Board s consideration. 1.9 Company Secretary The removal and replacement of the Company Secretary is a matter for the Board s consideration. 22 Equine Capital Berhad

25 Statement on Corporate Governance 2. DIRECTORS REMUNERATION The remuneration of directors is formulated to be competitive and realistic, emphasis being placed on performance and calibre, with aims to attract, motivate and retain Directors with the relevant experience, expertise and quality needed to assist in managing the Group effectively. For the Executive Director, the remuneration packages link rewards to corporate and individual performance whilst for the Non-Executive Directors, the level of remuneration is linked to their experience and level of responsibilities undertaken. The remuneration package for the directors of ECB comprises the following elements: a. Salary b. Fee The salary (inclusive of statutory employer contributions to the Employee Provident Fund) of the Executive Director is determined and approved by the Board annually. The fee payable to the directors is determined by the Board and approved by the shareholders of the Company at each Annual General Meeting. c. Allowances and benefits-in-kind The allowances and other customary benefits (such as private medical insurance, company car, driver, fuel, etc) to the directors are determined and approved by the Board as appropriate. The service contract between Datuk Patrick Lim and the Company was renewed on 17 May 2007 for a period of three (3) years from 1 April 2007, wherein the remuneration package for Datuk Patrick Lim is subject to annual review by the Board. The notice period for the termination of the service contract is six (6) months on either side. The details of directors remuneration during the financial year ended 31 March 2008 are as follow: 2.1 Aggregate Remuneration Aggregate Remuneration Executive Director (RM) Non-Executive Directors (RM) Salaries 437,500 - Fees - 116,000 Allowances 60,000 39,000 Benefits-in-kind* 27,691 - Total 525, ,000 * Based on estimated monetary value Annual Report

26 Statement on Corporate Governance 2.2 Range of Remuneration No. of Directors Range of Remuneration Executive Non-Executive Less than RM50,000-4 RM500,001 RM550, The Code recommends disclosure of details of remuneration of each director. However, as the Company has only one executive director, the board is of the view that the disclosure of the remuneration of the directors by bands of RM50,000 is sufficient to meet the objective of the Code. 3. SHAREHOLDERS 3.1 Shareholders and Investor Relations The Board recognises the importance of transparency and accountability to its shareholders and maintains an effective communication policy that enables both the Board and the management to communicate effectively with its shareholders and the public. An important aspect of an active and constructive communication policy is the timeliness in disseminating information to shareholders and investors. Accordingly, the Board communicates information on the operations, activities and performance of the Group on a timely manner through the following: The Annual Report which contains the financial and operational review of the Group s business, corporate information, financial statements and information on the Board and Audit Committee; Various announcements made to Bursa Malaysia which includes the announcement of quarterly results of the Group; and The Company s website at Annual General Meeting ( AGM ) The AGM serves as an important means for shareholders communication. Notice of the AGM and the Annual Report are sent to shareholders twenty-one (21) days prior to the AGM. ECB will be convening its seventh AGM on 28 August The Board encourages its shareholders to raise questions regarding the resolutions being proposed at the AGM and also other matters pertaining to the business activities of the Group. The Directors and senior management of the Company will be available at the AGM to respond to questions posed by the shareholders. Additionally, a press conference is held immediately following the AGM where the Directors and senior management of ECB advise the press of the resolutions passed, and answer questions on the Group. 24 Equine Capital Berhad

27 Statement on Corporate Governance Shareholders are welcomed to raise queries by contacting the Group at any time throughout the financial year and not just at the AGM. While the Group endeavours to provide as much information as possible to its shareholders and stakeholders, it is mindful of the legal and regulatory framework governing the release of material and price-sensitive information. Any information that may be deemed as undisclosed material information about the Group will not be imparted to any single shareholder or group of shareholders. 4. ACCOUNTABILITY AND AUDIT 4.1 Financial Reporting The Board aims to provide and present a clear, balanced and comprehensive assessment of the Group s financial performance and prospects through the quarterly announcement of results to shareholders via the Bursa Malaysia as well as the Chairman s statement, review of operations and annual financial statements in the Annual Report. The Board is assisted by the Audit Committee to oversee the Group s financial reporting process and the quality of its financial reporting. The Directors are responsible to ensure that the annual financial statements are prepared in accordance with the provisions of the Companies Act 1965 and applicable approved accounting standards in Malaysia. A statement of the directors responsibilities in preparing the financial statements is set out separately on page 42 of this Annual Report. 4.2 Internal Control and Risk Management The Board acknowledges their responsibilities for the internal control system of the Group, covering not only financial controls but also controls relating to operations, compliance and risk management. Information of the Group s internal control and risk management is presented in the Statement on internal Control set out on pages 30 to 31 of this Annual Report. 4.3 Relationship with the External Auditors The Board, via the Audit Committee, established formal and transparent arrangements for maintaining an appropriate relationship with the Group s external auditors, Messrs BDO Binders. A summary of the activities of the Audit Committee during the year as well as the role of the Audit Committee in relation to the external auditors is set out in the Audit Committee s Report on pages 26 to 29 of this Annual Report. This Statement of Corporate Governance is made in accordance with the resolution of the Board dated 17 July Annual Report

28 Audit Commitee Report The Audit Committee ( the Committee ) was established on 26 August 2003 to act as a committee of the Board of Directors. Presently, its members are as follows: YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Independent Non-Executive Director (Member of the Committee) Datuk Ahmad Zabri bin Ibrahim Non-Independent Non-Executive Director (Member of the Committee) Details of the members of the Committee are contained in the Profile of Directors as set out on pages 9 to 10 of this Annual Report. TERMS OF REFERENCE The Committee is governed by the following terms of reference: 1. Composition The Committee shall be appointed from amongst the Board and shall comprise at least three (3) members. All the members must be non-executive directors, with a majority of them being independent directors. In the event of any vacancy with the result that the number of members is reduced to below three, the vacancy must be filled within three (3) months. The Company is not in compliance with paragraph 15.10(1) of the Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Malaysia ) following the resignation of Mr Yap Kim Swee as Director and Chairman of Audit Committee of the Company on 29 February Bursa Malaysia had on 6 May 2008 granted an extension of time of three months until 31 August 2008 to the Company to comply with this requirement. 2. Chairman The Chairman, who shall be elected by the Committee, must be an independent director. 3. Secretary The Company Secretary shall be the Secretary of the Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and circulating it prior to each meeting. The Secretary shall also be responsible for keeping the minutes of meetings of the Committee and circulating them to the Committee Members. 26 Equine Capital Berhad

29 Audit Commitee Report 4. Meetings The quorum for a meeting shall be two (2) members, provided that the majority of members present at the meeting shall be independent. The external auditors have the right to appear at any meeting of the Committee and shall appear before the Committee when required to do so by the Committee. The external auditors may also request a meeting if they consider it necessary. 5. Rights The Committee shall: (a) (b) (c) (d) (e) (f) have explicit authority to investigate any matter within its terms of reference; have the necessary resources which it needs to perform its duties; have full and unrestricted access to any information which it requires in the course of performing its duties; have unrestricted access to the chief executive officer and the chief financial officer; have direct communication channels with the external auditors and internal auditors; and be able to obtain independent professional or other advice in the performance of its duties at the cost of the Company. 6. Duties The duties of the Committee shall include a review of: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) the nomination of external auditors; the adequacy of existing external audit arrangements, with particular emphasis on the scope and quality of the audit; the adequacy and effectiveness of the internal control and management information systems; the financial statements of the Company with both the external auditors and management; the external auditors audit report; any management letter sent by the external auditors to the Company and the management s response to such letter; any letter of resignation from the Company s external auditors; the assistance given by the Company s officers to the external auditors; all areas of significant financial and operational risks and the arrangements in place to contain those risks to acceptable levels; and all related-party transactions and potential conflict of interests situations. Annual Report

30 Audit Commitee Report INTERNAL AUDIT FUNCTION In discharging its function, the Committee is supported by an internal audit function whose primary responsibility is to evaluate and report on the adequacy, integrity and effectiveness of the overall system of internal control of Equine Capital Berhad and its subsidiaries ( the Group ). The internal audit function of the Group has been outsourced to an external party, who reports directly to the Committee. The internal audit function also adopts a risk-based audit methodology, which is aligned with the risks of the Group to ensure that relevant controls addressing those risks are reviewed on a regular basis. MEETINGS During the financial year ended 31 March 2008, the Committee convened a total of five (5) meetings on 17 May 2007, 12 July 2007, 16 August 2007, 15 November 2007 and 21 February All meetings had 100% participation from all members. The Group s internal and external auditors and certain members of senior management team attended the meetings upon the invitation of the Committee. Minutes of the meetings of the Committee are circulated to all members of the Board and significant issues are discussed at the Board Meetings. SUMMARY OF ACTIVITIES OF THE COMMITTEE During the financial year and up to the date of this Report, the Committee carried out the following activities in discharging their duties and responsibilities: Controls - Evaluated the overall effectiveness of the system of internal control through the review of the results of work performed by the internal and external auditors and discussions with key senior management. Financial Results - Reviewed the quarterly results of the Group and audited annual financial statements of the Group and Company before recommending to the Board for release to Bursa Malaysia. The review should focus primarily on: a) major judgmental areas, significant and unusual events; b) significant adjustments resulting from audit; c) the going concern assumptions; d) compliance with applicable approved accounting standards in Malaysia; and e) compliance with Listing Requirements of Bursa Malaysia and other relevant regulatory requirements. 28 Equine Capital Berhad

31 Audit Commitee Report External Audit - Reviewed with the external auditor, their audit plan for the financial year ended 31 March 2008 to ensure that their scope of work adequately covers the activities of the Group; - Reviewed the results and issues arising from their audit of the annual financial statements and their resolution of such issues as highlighted in their report to the Committee; and - Reviewed their performance and independence before recommending to the Board their reappointment and remuneration. Internal Audit - Reviewed with the internal auditor, their audit plan for the financial year ended 31 March 2008 ensuring that principal risk areas were adequately identified and covered in the plan; - Reviewed the recommendations by internal audit, representations made and corrective actions taken by management in addressing and resolving issues as well as ensuring that all issues were adequately addressed on a timely basis; - Reviewed the competencies of the internal auditors to execute the plan, the audit programs used in the execution of the internal audit work and the results of their work; and - Reviewed the adequacy of the terms of reference of internal audit. Related Party Transactions - Reviewed the procedures for identification of related party transactions for compliance with the Listing Requirements of Bursa Malaysia; and - Reviewed the procedures for identification of recurrent related party transactions and securing the shareholders mandate for such transactions. This Audit Committee Report is made in accordance with the resolution of the Board dated 17 July Annual Report

32 Statement On Internal Control This statement on internal control by the Board of Directors ( the Board ) is made pursuant to paragraph 15.27(b) of the Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Malaysia ) with respect to the compliance of Equine Capital Berhad and its subsidiaries ( the Group ) with the principles and best practices for internal controls as provided in the Malaysian Code of Corporate Governance. BOARD RESPONSIBILITIES The Board has the overall responsibility for the Group s system of internal control and for reviewing its effectiveness, adequacy and integrity. The internal control system covers financial, operational and compliance controls, and risk management. However, the system of internal control is designed to manage rather than to eliminate the risk of failure to achieve business objectives and can provide reasonable, and not absolute assurance, against material misstatement of management and financial information or against financial losses and fraud. It is the Board s view that in order to achieve a sound system of internal control, it is first necessary to provide a control environment and framework that is conducive to this objective. This requires that the Board, management and all levels of employees must be aware of the Group s business objectives, the risks that could potentially impede the Group in achieving these objectives and the policies and control strategies that are required to manage these risks. RISK MANAGEMENT FRAMEWORK The Board is responsible for the ongoing identification, evaluation and management of significant risks. These ongoing processes have been in place during the year under review and are reviewed regularly by the Audit Committee and the internal auditor. The internal audit function has been outsourced to an independent external consultant, who reports directly to the Audit Committee. Based on the risk assessment exercise conducted in April 2006 to identify and evaluate significant risks faced by the Group, the Board approved a two-year cycle audit plan covering financial year ended 31 March 2007 and 2008 to continuously review the adequacy, integrity and effectiveness of the Group s system of internal controls to mitigate the risks of the Group including financial, operational and compliance risks. The audit plan is reviewed annually to take into account changes in risks the Group may be exposed to as the Group s objectives, the organisation and the environment in which it operates are continuously evolving. This is evidenced by the change of audit areas for the one-year cycle audit plan covering financial year ended 31 March Equine Capital Berhad

33 Statement On Internal Control INTERNAL CONTROL SYSTEM The key elements of the Group s internal control system are as follows: Organisation structure with defined lines of responsibilities and delegation of authority; Appropriate authorisation of transactions, supported by policies and procedures; Monthly financial reporting framework for all companies within the Group whereby actual results monitored against forecasts/budgets and variances are investigated accordingly; Quarterly reporting of the financial results of the Group to the Audit Committee and the Board; Management meetings and project department meetings are held fortnightly to identify, discuss, evaluate and resolve operational and financial issues During the financial year ended 31 March 2008, the internal audit review covered the control systems and processes within the following key functions of the Group: 1. Project Planning and Scheduling, including project scope management, project human resource management, and project tender process management; 2. Management Information System and Electronic Data Processing, including system controls and program maintenance, physical security and environmental controls, and disaster recovery plans; 3. Sales and Marketing covering strategies and procedures, sales administrations, and price management; and 4. Finance and Accounting covering planning and management accounting, general accounting and reporting, and accounts payable and expense reimbursements. The recommendations on improvements to the internal control system of the Group were made to the respective Head of Departments for corrective actions. Such corrective actions were reviewed by the internal auditors in subsequent follow-up audits on the above functions. The results of the above internal audit reviews, including comments from the management, were reported to the Audit Committee on a regular and timely basis. CONCLUSION Based on the above, the Board is of the view that system of internal control being implemented within the Group is sound and effective. Notwithstanding this, reviews of all the control procedures will be continuously carried out to ensure the ongoing adequacy, integrity and effectiveness of the system of internal control, so as to safeguard the Group s assets and shareholders investments. This Statement of Internal Control is made in accordance with the resolution of the Board dated 17 July Annual Report