EQUINE CAPITAL BERHAD. Setting Trends

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1 EQUINE CAPITAL BERHAD Setting Trends annual report 2011

2 USJ Development

3 Setting Trends The cover features the theme Setting Trends to emphasize Equine Capital Berhad s leadership in the areas of architecture and construction technology. In line with the theme, the cover depicts glorious images of our latest project ( da:men ) which façade sets a new direction for architectural flair, while its indoor and outdoor shopping sections are exciting innovations. The dazzling white background of the cover reflects our integrity. And on the whole, the cover has a finesse that inspires our sense of style. CONTENTS 003 Our Vision and Mission 004 Corporate Information 005 The Group At a Glance 006 Board of Directors 008 Profile of Directors 012 Chairman s Statement 018 Review of Operations 027 Senior Management Team 028 Profile of the Senior Management 029 Corporate & Staff Events 032 Statement on Corporate Governance 038 Audit Committee Report 041 Statement on Internal Control 043 Statement on Directors Responsibility on Financial Statements 044 Additional Disclosures 045 Financial Statements 116 Analysis of Ordinary Shareholdings 119 Group Properties 122 Notice of Annual General Meeting 123 Statement Accompanying Notice of Annual General Meeting Form Of Proxy

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6 ANNUAL REPORT CORPORATE INFORMATION BOARD OF DIRECTORS YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah (Independent Non-Executive Chairman) Othman bin Mohammad (Executive Director) Wee Beng Aun (Executive Director) Datuk Ahmad Zabri bin Ibrahim (Independent Non-Executive Director) Dato Hamzah bin Md Rus (Independent Non-Executive Director) Wong Yuk Mou (Independent Non-Executive Director) AUDIT COMMITTEE Wong Yuk Mou (Chairman) NOMINATION COMMITTEE YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah (Chairman) Datuk Ahmad Zabri bin Ibrahim (Member) Dato Hamzah bin Md Rus (Member) RISK MANAGEMENT COMMITTEE Wong Yuk Mou (Chairman) Dato Hamzah bin Md Rus (Member) Lau Yik Wai (Member) Ranjeet Singh A/L Sarjit Singh (Member) SHARE REGISTRAR Symphony Share Registrars Sdn Bhd Level 6, Symphony House Block D13, Pusat Dagangan Dana 1 Jalan PJU 1A/ Petaling Jaya Selangor Darul Ehsan Tel : (603) Fax : (603) REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS No. 1, Jalan Putra Permai 1A Taman Equine Seri Kembangan Selangor Darul Ehsan Tel : (603) Fax : (603) Web Web : equine@equine.com.my : : Datuk Ahmad Zabri bin Ibrahim (Member) Dato Hamzah bin Md Rus (Member) COMPANY SECRETARY Chin Pei Fung (MAICSA ) AUDITORS Deloitte KassimChan (AF: 0080) Level 19, Uptown 1 Damansara Uptown No. 1, Jalan SS21/ Petaling Jaya Selangor Darul Ehsan STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad (Properties Sector, Stock Code : 1147) (Listed since 28 October 2003) Tel : (603) Fax : (603)

7 5 EQUINE CAPITAL BERHAD ( T) THE GROUP AT A GLANCE Exceed Concept Sdn Bhd 100% Equine Park Stud Sdn Bhd 100% Kuala Lumpur Industries Bhd 100% EQUINE CAPITAL BHD Kuala Lumpur Industries Holdings Bhd 100% Kelab Taman Equine Sdn Bhd 100% Penaga Pesona Sdn Bhd 100% Syarikat Tenaga Sahabat Sdn Bhd 100% Taman Equine Riding Sdn Bhd 100% Taman Equine (M) Sdn Bhd 100% Akademi Ekuestrian Selangor Sdn Bhd 100% Equine Park Country Resort Sdn Bhd 100% Pertanian Taman Equine Sdn Bhd 100% Permai Construction Sdn Bhd 100% Taman Equine Industrial Sdn Bhd 100% Tujuan Ehsan Sdn Bhd 100% Duta Security Sdn Bhd 51%

8 ANNUAL REPORT BOARD OF DIRECTORS

9 from left to right 1. Dato Hamzah bin Md Rus Independent Non-Executive Director 2. Datuk Ahmad Zabri bin Ibrahim Independent Non-Executive Director 3. YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Independent Non-Executive Chairman 4. Othman bin Mohammad Executive Director 5. Wong Yuk Mou Independent Non-Executive Director 6. Wee Beng Aun Executive Director

10 ANNUAL REPORT PROFILE OF DIRECTORS YAM Datuk Seri Tengku Ahmad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Independent Non-Executive Chairman YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah, a Malaysian aged 56, was appointed the Independent Non-Executive Director of Equine Capital Berhad ( ECB ) on 26 August 2003 and was subsequently re-designated as the Independent Non-Executive Chairman on 10 October He is also the Chairman of the Nomination Committee of ECB. 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 until now. Presently, he is a Director of Melewar Industrial Group Berhad, Wawasan TKH Holdings Berhad, DutaLand Berhad and Sime Darby Property Berhad. 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 director or major shareholder of the Company. He has no conflict of interest with the Company and has not been convicted of any offence within the past ten years. He attended five out of six meetings of the Board of Directors held during the financial year. Othman bin Mohammad Executive Director Othman bin Mohammad, a Malaysian aged 55, was appointed the Executive Director of ECB on 10 October He obtained a Bachelor of Science (Hons.) in Civil Engineering from the University of Southampton, United Kingdom in He is a registered Professional Engineer of the Institute of Engineers, Malaysia as well as an Associate Member of the Institution of Civil Engineers, United Kingdom. He was involved in civil engineering, construction and property development for over 25 years in various companies. He is a substantial shareholder of ECB with indirect interest of 12.05%. He is the brother-in-law of Dato Hamzah bin Md Rus, the Independent Non-Executive Director of ECB. Save as disclosed, he has no family relationship with any other director or major shareholder of the Company. He has no conflict of interest with the Company and has not been convicted of any offence within the past ten years. He attended all the meetings of the Board of Directors held during the financial year.

11 9 EQUINE CAPITAL BERHAD ( T) PROFILE OF DIRECTORS Wee Beng Aun Executive Director Wee Beng Aun, a Malaysian aged 52, was appointed the Executive Director of ECB on 1 July He obtained a Bachelor of Civil Engineering from the University of Melbourne, Australia. He has more than 25 years of working experience in civil engineering, building construction and property development. He held various senior management positions in companies in Malaysia and prior to joining the Group, he was the Managing Director of a subsidiary of a public listed company in Malaysia. During his tenure with these companies, he had been involved in the development and construction of several prestigious projects such as The Pavilion Kuala Lumpur s Mega Integrated Urban Commercial, Shopping, Entertainment Centre with Luxury Residential Towers, The KL City Centre high-end condominium, and Mixed Development of Bukit Rimau Township in Shah Alam, Selangor Darul Ehsan. He has no family relationship with any other director or major shareholder of the Company. He has no conflict of interest with the Company and has not been convicted of any offence within the past ten years. He attended four out of six meetings of the Board of Directors held during the financial year as he was appointed to the Board on 1 July Datuk Ahmad Zabri bin Ibrahim Independent Non-Executive Director Datuk Ahmad Zabri bin Ibrahim, a Malaysian aged 68, was appointed the Non-Independent Non-Executive Director of ECB on 26 August 2003 and was subsequently re-designated as Independent Non-Executive Director on 10 October He is also a Member of the Audit Committee and Nomination Committee of ECB. He obtained a Bachelor of Arts (Hons.) in History from the University of Malaya, Kuala Lumpur in 1966, a Diploma in Development Administration from the University of Birmingham, United Kingdom in 1972 and a Masters in Public Administration from the University of Southern California, U.S.A. in He also obtained a Certificate in Advanced Management Programme from the 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 several other private limited companies. He has no family relationship with any other director or major shareholder of the Company. He has no conflict of interest with the Company and has not been convicted of any offence within the past ten years. He attended all the meetings of the Board of Directors and Audit Committee held during the financial year.

12 ANNUAL REPORT PROFILE OF DIRECTORS Dato Hamzah bin Md Rus Independent Non-Executive Director Dato Hamzah bin Md Rus, a Malaysian aged 61, was appointed the Independent Non-Executive Director of ECB on 10 April He is also a Member of the Audit Committee, Nomination Committee and Risk Management Committee of ECB. He obtained his Bachelor of Arts (Hons) Degree from the University of Malaya and a Professional Diploma in Purchasing and Supply Management from the 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 is the brother-in-law of the Executive Director, Othman bin Mohammad. Save as disclosed, he has no family relationship with any other director or major shareholder of the Company. He has no conflict of interest with the Company and has not been convicted of any offence within the past ten years. He attended five out of six meetings of the Board of Directors and four out of five meetings of the Audit Committee held during the financial year. Wong Yuk Mou Independent Non-Executive Director Wong Yuk Mou, a Malaysian aged 56, was appointed the Independent Non-Executive Director of ECB on 23 November He is also the Chairman of the Audit Committee and Risk Management Committee of ECB. He is a Chartered Accountant and a Member of the Malaysian Institute of Accountants, a Member of the Chartered Tax Institute of Malaysia, a Fellow of the Association of Chartered Certified Accountants (FCCA, UK) and holder of a Post Graduate Diploma in Islamic Banking and Finance (IIUM). He has extensive working experiences in audit and banking industry. He started his career in public accounting firms and subsequently held various managerial positions in the banking sector in Malaysia. Prior to his retirement in 2008, he was the Head of Group Retail Banking of a local bank in Malaysia. He has no family relationship with any other director or major shareholder of the Company. He has no conflict of interest with the Company and has not been convicted of any offence within the past ten years. He attended all the meetings of the Board of Directors and Audit Committee held during the financial year.

13 we are building townships with a sense of passion & inspiration. The unique concept of our properties speaks the indulgence of lifestyle amenities for a work-life balance.

14 ANNUAL REPORT CHAIRMAN S STATEMENT YAM Datuk Seri Tengku Ahmad Shah ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Chairman

15 13 EQUINE CAPITAL BERHAD ( T) CHAIRMAN S STATEMENT On behalf of the Board of Directors, I have great pleasure in presenting the Annual Report of the Group for the financial year ended 31 March OVERVIEW The global economic recovery has been gradual until it was affected by the development of events of geopolitical tensions in the Middle East and North Africa in 2010, and aftermath of earthquakes in Japan in March In addition, the sovereign debt issues of European countries continue to cause concerns in parts of the European economy with cascading effects on the world economy. In the meantime, economic issues in the US in 2010 caused major currencies to consolidate against the USD while emerging currencies appeared to progress their appreciation trend. As the consequences of these events affect the global economic recovery process, economic growth was highly uneven across regions of the world. Although growth has remained strong with support from overall robust domestic economic activity, global inflation has crept in due to escalating prices of crude oil and commodities. Despite these developments, the Malaysian economy made a remarkable recovery in 2010 registering an overall GDP growth of 7.2% against prior year s -1.7%. Growth was supported by continued firm expansion in domestic demand with private consumption spending continue to benefit from the favourable labour market conditions. The Government s roll-out and implementation of a series of construction and infrastructural activities under the Economic Transformation Programme (ETP) served to provide the impetus to the growth momentum in private investment, besides stimulating and encouraging economic activities on the domestic front. Domestic inflation has been on the rise due to higher fuel and food prices caused by supply factors. With the improving Malaysian economy, the labour market has enhanced, resulting in increased consumer spending as market confidence improved. However, with the issues governing external supply factors of fuel and food, domestic demand continues to exert inflationary pressure on the economy.

16 ANNUAL REPORT CHAIRMAN S STATEMENT FINANCIAL REVIEW Moving in tandem with the recovery of market sentiments since 2009, the Group launched a new residential property project, Villa Avenue, in Seri Kembangan in March 2010 which complemented the advancing progress of an existing commercial development project, Equine Boulevard, launched earlier in The progress achieved on both projects construction activities during the current financial year contributed significantly to the operating profits of the Group. Coupled with the completion of three transactions of strategic land sales during the financial year, for which sale profits were recognised in the financial year, the level of operating profits was further enhanced. Construction works at Batu Kawan s low cost housing projects progressed significantly in 2010 and with their prolonged delay in delivery, additional provisions for liquidated ascertained damages (LAD) have impacted the overall performance of the Group for the financial year to a certain extent. However, the physical completion of the low cost housing in July 2011 has finally stemmed further provision for LAD. Consistent with the Group s business continuity plans, the Group proceeded with efforts to source for land which culminated in strategic partnerships of two joint development agreements with land owners for a mixed development project, da:men in USJ Subang and commercial shop office project, EQuator in Seri Kembangan. Despite not being direct acquisitions of land, the essence of procuring land via strategic alliances with land owners is in alignment with the Group s strategy of procuring land banks for property development purposes. While works have not commenced on these projects as at 31 March 2011, the commencement of development activities and subsequent construction progress are expected to have a positive impact on the results of the following and subsequent financial years. The Group registered a net profit for the current financial year on the back of higher level of progress of project development activities and the recognition of profits for completion of past years strategic disposals of land. The positive results, being the culmination of efforts of all strategic measures undertaken by the Group in the recent years, marked a significant change in financial position of the Group after three consecutive financial years of losses. The positive results are expected to lay a solid foundation for the Group s businesses besides charting a new direction for growth to improve future earnings of the Group.

17 15 EQUINE CAPITAL BERHAD ( T) CORPORATE HIGHLIGHTS The Group s efforts to secure land bank to undertake future property development activities culminated in the successful execution of a joint development agreement with the land owners in January 2011 for a mixed development project of a parcel of freehold land measuring 8.98 acres in USJ Subang, Selangor Darul Ehsan known as da:men with an estimated Gross Development Value ( GDV ) of RM1.0 billion. The project s development activities commenced in early March 2011 and are expected to be completed within the next three years. As part of its on-going efforts to increase its land banks, the Group entered into a sale and purchase agreement (SPA) in August 2009 to acquire a parcel of leasehold land measuring 16 acres in Seri Kembangan for RM47.4 million for the development of commercial properties. However, in view of prolonged delay in fulfilment of conditions precedent, the SPA was terminated and replaced by a joint development agreement with the land owner which was executed on 27 January 2011; this arrangement being in continuance with the Group s intentions to procure land, albeit in a different legal manner, for development, particularly in the strategic land area within the Group s principal development area in Taman Equine, Seri Kembangan. On 31 March 2011, the Group s whollyowned subsidiary company, Penaga Pesona Sdn. Bhd. (PPSB), through the nomination by a third party, Abad Naluri Sdn. Bhd. (ANSB), acquired a parcel of leasehold land measuring acres in Batu Kawan (identified as Parcel 2B) for RM16.7 million for mixed development of commercial and residential properties. Under the terms of the Share Sale Agreement with ANSB entered on 12 February 2007 for the acquisition of the entire equity of PPSB, ANSB agreed to nominate PPSB to accept the transfer of five parcels of leasehold land in Batu Kawan (identified as Parcels 1, 2A, 2B, 3A and 3B) totalling 450 acres, of which two parcels of land, Parcels 1 and 2A with total land area of acres had then been nominated and secured by PPSB. On 31 March 2011, ANSB entered into a Supplemental Agreement with Penang Development Corporation which entitled ANSB to acquire the remaining 145 acres (in Parcels 3A and 3B) upon fulfilment of certain conditions (as detailed in the Group s announcement on Bursa Malaysia Securities Bhd on 1 April 2011). The development on this matter has addressed the Group s concerns on the protracted negotiation process of securing these land banks in Batu Kawan.

18 ANNUAL REPORT CHAIRMAN S STATEMENT In 2009, to address the difficult economic environment and to elevate the Group s financial position to a healthy platform, the Group rationalised its businesses by executing several business strategic measures amongst which involved the disposal of non-core assets as well as the disposal of parcels of land which either contributes a strategic catalytic impact to spur future development of existing land bank or those land with low development value or low returns. During the financial year, the Group completed the following disposals of land: a. Parcel of leasehold land in Seri Kembangan measuring 8.47 acres to Meridian Score Sdn Bhd for a total consideration of RM11.1 million - SPA in February 2010; and b. Parcel of leasehold land in Seri Kembangan measuring 6.04 acres to Safetags Solution Sdn. Bhd., a whollyowned subsidiary of Titijaya Group Sdn. Bhd., for a total consideration of RM19.6 million - SPA in April However, the SPA for disposal of a parcel of leasehold land measuring approximately acres to Tesco Stores (Malaysia) Sdn. Bhd. for a total consideration of RM29.8 million was terminated in October 2010 due to non-fulfilment of conditions precedent. Subsequent to the financial year end, with the handover of vacant possession to the property in June 2011, the Group completed the disposal of investment property, Wisma KLIH. The SPA to sell Wisma KLIH to Wonderful Vantage Sdn. Bhd. for a cash consideration up to RM58.0 million was signed in October Although the Group has secured rights to purchase land in Batu Kawan, the Group will continue to pursue and explore other opportunities to acquire suitable land, whether through direct acquisition or joint arrangements with land owners, in other strategic locations of economic growth for property development activities. PROSPECTS The Malaysian economy is forecast to continue to grow with an average GDP growth rate of 5.0% to 6.0% in the years ahead. The growth is expected to be driven by key initiatives undertaken by the Government which will likely be through the ETPs to improve the infrastructural requirements to spearhead growth of the Malaysian economy. The public sector spending is expected to be supported by the strong labour market and sustained consumers confidence. The manufacturing sectors and commodities exports are expected to complement the Government s initiatives to bring about a cohesive economy for growth.

19 17 EQUINE CAPITAL BERHAD ( T) CHAIRMAN S STATEMENT In cognition of the revitalised economic conditions with a positive effect on the property industry, the Group seeks to establish and re-position itself as an active developer in the property market. As a measure to increase its revenue base as well as for business growth, the Group has planned several new launches in Seri Kembangan and Batu Kawan in the new financial year, FY2012. Amongst the projects launched recently or to be launched are: a. Project da:men in USJ, Subang, Selangor, a mixed commercial and residential development involving 480 units service apartments in two 16-storey blocks, 385 units of 5-6 storey commercial shop offices, a 6- storey retail mall and 2 basement car parks with an estimated total GDV of RM1.0 billion; b. 182 units of semi-detached and bungalow houses in Seri Kembangan with estimated GDV of RM203 million; c. 272 units of condominiums in Seri Kembangan with estimated GDV of RM65 million; d. 420 units of service apartments/retail shops in Seri Kembangan with estimated GDV of RM128 million; e. 259 units of two-storey terrace houses in Batu Kawan with estimated GDV of RM74 million; and f. 164 units of semi-detached houses in Batu Kawan with estimated GDV of RM95 million. With the progress of on-going projects as well as the increasing number of projects to be launched and undertaken in the new financial year FY2012, the increased level of activities will propel the growth of the Group s businesses to a higher level. Going forward, barring any unforeseen circumstances, with the higher level of activity, the performance of the Group is expected to be enhanced favourably in the near future. ACKNOWLEDGEMENT On behalf of the Board, I would like to thank all our customers, shareholders and business associates for their confidence in, and loyal support to, our Group s businesses. I wish to express my appreciation to the members of the Board, management and staff of the Group for their commitment and dedication in continuing to improve and enhance value to all stakeholders, not just in the quality of our Group s products and services, but also the prospects of future growth of the Group s businesses. YAM DATUK SERI TENGKU AHMAD SHAH IBNI ALMARHUM SULTAN SALAHUDDIN ABDUL AZIZ SHAH Chairman

20 ANNUAL REPORT REVIEW OF OPERATIONS Overview The Group s landmark property development projects, the township development of Taman Equine and Pusat Bandar Putra Permai, Seri Kembangan, begun in the 1990s. Taman Equine s development commenced in 1996 covering mixed commercial and residential properties over a total land area of approximately 550 acres. Prominent landmarks developed in Taman Equine to date are a shopping mall and an international school. Our Group s development in Pusat Bandar Putra Permai comprises mixed commercial and residential properties which are spread over a total land area of approximately 239 acres. The development commenced in 2000 and the Group has successfully completed a bazaar, shop offices, apartments, link houses, semi-detached houses and bungalows in the township.

21 19 EQUINE CAPITAL BERHAD ( T) serikembangan

22 ANNUAL REPORT REVIEW OF OPERATIONS The projects undertaken by the Group during the financial year are as follows: a. Taman Equine i. Equine Boulevard The development comprising 118 units of 3 and 4-storey shop offices with a total GDV of RM170 million, is strategically located at a prime commercial area facing the main access road to Taman Equine i.e. Jalan Putra Permai, the main road linking Serdang/Seri Kembangan/The Mines. Tucked beside the lush greenery of a forest reserve next to the Kuala Lumpur Putrajaya Expressway, the development spreads over a land area of approximately 13 acres. Launched in August 2009 with 100% sales achievement, the project s earthworks commenced in January 2010 and completed in June Building foundation works commenced in July 2010 and are advancing rapidly to the project s completion which is targeted in April ii. Villa Avenue A residential development, which is nestled on elevated grounds in the pristine and prime area of Taman Equine, comprises 152 units of semi-detached houses and 13 units of bungalows in a land area of approximately 30 acres. The semi-detached houses are aesthetically pleasant and offered in conventional side-link and new end-link designs, were launched in March The bungalow units within the development were launched in June Both semi-detached houses and bungalows have been sold out. This gated and guarded development has a total GDV of RM132 million. The project s earthworks commenced in January Building works are in advanced stages and expected to be completed by end Overall completion of the project is targeted for March 2012.

23 21 EQUINE CAPITAL BERHAD ( T) REVIEW OF OPERATIONS b. Pusat Bandar Putra Permai (PBPP) iii. EQuator - joint development arrangement with landowner Launched in April 2011, the commercial development on a 16- acre land, consists of 74 units of 2-storey shop offices, 59 units of 3-storey shop offices and 5 units of 5-storey shop offices together with a multi-storey car park housing several small shops with the project s estimated total GDV at RM198 million. Site clearing works and earthworks commenced in April The construction works of buildings are expected to commence in August 2011 while the entire project is targeted for completion in early i. Permai Square 2 Strategically located in the commercial hub of the township with ease of access within close proximity of the main road and nearby Pasar Borong Selangor, the project comprises 59 units of double storey shop offices with a total GDV of RM30 million. Construction work on the project commenced in February 2007 and was completed in July All units have been sold and handed over. ii. Suria Permai Located within the matured township of PBPP, Suria Permai comprises 300 units of lowmedium cost apartments and 7 units of shops in two tower blocks. The total GDV of the project was RM39 million and the apartment units have been fully sold. Earthworks commenced in February 2011 with the foundation completed on one of the blocks while construction of the building is targeted to start end The project is targeted for completion in early 2014.

24 ANNUAL REPORT REVIEW OF OPERATIONS 02 Studio S 03 Playground 04 Studio L

25 23 EQUINE CAPITAL BERHAD ( T) REVIEW OF OPERATIONS batu kawan Overview Through its acquisition of Penaga Pesona Sdn Bhd (PPSB) in February 2007, the Group secured an opportunity to participate in the development of the new township of Bandar Cassia in Batu Kawan. To date, PPSB has secured 305 acres of land intended for mixed development of commercial and residential properties in Crescentia Park, which forms part of Bandar Cassia, which is strategically located in vicinity of Second Penang Bridge s landing on the mainland. Crescentia Park, planned as an integrated self-contained township, offers affordable yet contemporary homes for every strata of society. At present, the Group is constructing low and low-medium cost housing and double storey terrace houses on its land. On-going Projects i. Studio S ii. Comprising 330 units of low cost double storey terrace houses, construction works was completed in July Studio M 259 units of low medium cost double storey terrace houses. Construction works was completed in July iv. Clover Plus 137 units of two and half storey cluster link houses construction works was completed in July v. Callisia 246 units of double storey terrace houses construction progress is 15%; target completion for the first phase in year iii. Studio L 72 units of two storey cluster link houses construction works was completed in July 2011.

26 ANNUAL REPORT REVIEW OF OPERATIONS Overview Taman Mestika and Taman Mega Jaya are both mixed commercial and residential development projects located in Cheras, Selangor Darul Ehsan on approximately 13 acres of leasehold land. The development is accessible via Jalan Kuari and is well supported by the catchment from surrounding established and matured residential neighbourhoods in the district of Ampang. i. Mega Jaya shop offices The development of the 22 units of one and half-storey shop offices is strategically located in Taman Mega Jaya. The total GDV of the project is RM11 million and all units sold with target completion in April cheras ii. Palomino terrace houses in Taman Mega Jaya Launched in May 2008, the 54 units of double storey terrace houses with estimated GDV RM26 million have all been fully sold and was completed in July 2010.

27 25 EQUINE CAPITAL BERHAD ( T) REVIEW OF OPERATIONS USJ subang Overview da:men Launched in June 2011, the development is a mixed commercial & residential freehold development jointly undertaken by Revenue Concept Sdn Bhd (as the Land Owner) and Equine Park Country Resort Sdn Bhd, a subsidiary of Equine Group (as the Developer). The proposed development, with a total GDV estimated at RM1.0 billion, consists of 480 units of service apartments in 2 building blocks, 68 units of 5 to 6-storey shop-offices and a 6-storey retail mall which will have outlets catering for a wide range of interests covering F&B, beauty & fashion, travel, IT & technology, leisure, Asian gourmet village and entertainment. The development land of 8.98 acres is strategically located beside the intersection of Persiaran Kewajipan with Persiaran Subang Permai, and is surrounded by established landmarks and education centres/universities. The project s site is easily accessible via a network of highways which will be complemented by a proposed LRT Station in the surrounding of the site. Site clearing works commenced in March 2011 and completed in June The target completion of the whole project is in 2014.

28 ANNUAL REPORT REVIEW OF OPERATIONS Others Overview The Group s other business segment in property letting involves three main properties which were either acquired in the past or were developed incidental to the core business activities. i. Wisma KLIH The building, acquired as a result of a restructuring scheme in 2003, is located in the heart of the prime shopping district of Jalan Bukit Bintang in Kuala Lumpur. The building occupies a land area of sq. metres and has a net lettable area of 5,129 sq. metres. The tenancies in the building have been progressively terminated during the financial year to vacate it to facilitate a refurbishment for upgrading purposes. However, the refurbishment exercise was suspended when the building was disposed of via Sale and Purchase Agreement with Wonderful Vantage Sdn. Bhd. signed on 26 October 2010 for a cash consideration of up to RM58.0 million. The disposal transaction was completed on 24 June iii. Leasehold land with shopping complex in Seri Kembangan The land has been leased to a major retail store operator who had constructed its own building, a shopping complex, on the land. The shopping complex built on a land area of 11.8 acres is a landmark property in Taman Equine. The land has been sold to a third party in December 2009 and the transaction was completed in January Upon the completion of the sale and effective transfer of title to the land, the lease was assigned to the purchaser. ii. Leasehold land with single storey building in Seri Kembangan leased to a bank The property s location faces the main road of Jalan Putra Permai and the main access road to Taman Equine. The property is leased to a major bank which fulfils all the banking needs of the residents of the surrounding commercial and residential properties in Taman Equine as well as those from nearby development properties. The lease is for a period of ten years commencing March 2008.

29 SENIOR MANAGEMENT TEAM from left to right 1. Wee Beng Aun Executive Director 2. Lee Tart Choong Chief Financial Officer 3. Othman bin Mohammad Executive Director 4. Ranjeet Singh A/L Sarjit Singh Chief Operating Officer 5. Lau Yik Wai Business Development Director

30 ANNUAL REPORT PROFILE OF THE SENIOR MANAGEMENT The Board of Directors of ECB is assisted by an experienced management team. The profile of the management team is as follows: Othman bin Mohammad Executive Director Please refer to Profile of Directors in this Annual Report. Wee Beng Aun Executive Director Please refer to Profile of Directors in this Annual Report. Lau Yik Wai Business Development Director He obtained a Bachelor of Science Degree in Accounting and Finance from the University of Hull, United Kingdom. He has more than 17 years of working experience in various industries. He started his career with an audit firm in United Kingdom and continued in the profession when he returned to Malaysia with one of the Big Four audit firms. He was appointed to the post of Group Financial Controller of a Hong Kong public listed company, which owned an electronics manufacturing group of companies with a production plant in China and marketing and sales offices in Europe and the United States. He held the position for five years before returning to Malaysia upon which he joined a property development company listed on the then KLSE Main Board, as its Group Financial Controller. Thereafter, he was appointed to the board of directors, and acted as corporate advisor, for several private companies in Malaysia, Japan and France, with activities ranging from aircraft overhaul and maintenance, property investments and development, retail operations to advertising media. Lee Tart Choong Chief Financial Officer He is a qualified accountant and is a member of both The Malaysian Institute of Certified Public Accountants and the Malaysian Institute of Accountants. He has extensive working experience over 27 years which covers the principal areas of auditing, accounting, corporate affairs, finances and human resources. He started his career in a Big Four audit firm in Kuala Lumpur where he gained valuable audit experience during his eight years tenure with the firm. He later ventured into commerce, where he held various senior positions in accounting and corporate, in businesses involved in investment holding, property development, manufacturing, trading, records and information management, waste management and consulting. His last position prior to joining the Group was the role of a Regional Chief Financial Officer of a public listed MNC in Australia with business operations worldwide as well as in Asia and with the Asian regional offices based at Kuala Lumpur and Singapore. During his engagement with the organisation which lasted eight years, he also assumed concurrent roles as its Regional Human Resources Director and General Manager - Commercial. Ranjeet Singh Chief Operating Officer He obtained a Master of Science degree in Project Management from University Science Malaysia. He has more than 17 years of working experience in property development, planning, marketing as well as property investment. He started his professional career with a major Quantity Surveyor firm and was subsequently appointed as a Project Manager by a private company which was principally engaged in construction and property development in Peninsular and East Malaysia. He was later appointed as a Senior General Manager (Property Development) in several subsidiary companies of a public listed company in Malaysia which is involved in large scale integrated township development. Prior to joining the Group, he was involved in the management of medium-size to large corporations with roles focusing on strategic marketing, property development as well as setting up business entities for property development and construction in Middle East, Vietnam and Cambodia.

31 29 EQUINE CAPITAL BERHAD ( T) CORPORATE & STAFF EVENTS AGM (25 August 2010) EGM (23 March 2011) EQuator Launching (30 April 2011) da:men Launching (25 June 2011)

32 ANNUAL REPORT CORPORATE & STAFF EVENTS Annual Dinner (October 2010) CIR Certification Ceremony (August 2010) Donation (January 2011) Japan Fund Raising (March 2011) Staff Training (April 2011) Team Building (December 2010)

33 da:men

34 ANNUAL REPORT 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 practised 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, construction, 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 set out on the Profile of Board of Directors in this Annual Report. The Board consists of six (6) members, comprising the Independent Non-Executive Chairman, two (2) Executive Directors and three (3) Independent Non Executive Directors. This is in compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ), 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. The Executive Directors together with senior executives form the senior management team ( Senior Management ) that is responsible for developing the Group s business strategies as well as making and implementing operational decisions.

35 33 EQUINE CAPITAL BERHAD ( T) STATEMENT ON CORPORATE GOVERNANCE 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 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 Senior 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 Director, to whom concerns may be conveyed. All Directors have given their undertakings to comply with the Main Market Listing Requirements of Bursa Securities 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 retire, and be eligible for re-election by shareholders of the Company, at the first Annual General Meeting following 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. 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 re-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 keep abreast with, or gain insight into, the state of economy, technological advances, regulatory updates and management strategies. All the Directors have attended the Mandatory Accreditation Programme (MAP). During the financial year ended 31 March 2011, the Group had arranged an in-house training programme on Sharpening the Corporate Planning Framework for Effective Performance Monitoring for Directors and Management. 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 to keep abreast with the new regulatory development and Main Market Listing Requirements of Bursa Securities.

36 ANNUAL REPORT STATEMENT ON CORPORATE GOVERNANCE 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, the Senior 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 resolutions. 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 necessary. Each Director has unrestricted access to all information within the Group, the Senior Management and the Company Secretary. The Directors, whether in capacity as the 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 2011, six (6) Board Meetings were convened on 20 May 2010, 5 July 2010, 19 July 2010, 25 August 2010, 24 November 2010 and 23 February The meeting attendance of each individual Director is set out on the Profile of Board of Directors in this Annual Report. 1.8 Committees The Board has established the Audit Committee to assist the Board in discharging its duties and responsibilities. The Audit Committee comprises: Wong Yuk Mou (Chairman) Datuk Ahmad Zabri bin Ibrahim (Member) Dato Hamzah bin Md Rus (Member) 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 the Profile of Board of Directors in 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 The Nomination Committee comprises: YAM Datuk Seri Tengku Ahmad Shah (Chairman) Datuk Ahmad Zabri bin Ibrahim (Member) Dato Hamzah bin Md Rus (Member)

37 35 EQUINE CAPITAL BERHAD ( T) STATEMENT ON CORPORATE GOVERNANCE The primary function of the Nomination Committee is to propose new nominees for the Board, assess Directors performance on an on-going 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. The remuneration packages of the Group s Executive Directors are matters for the Board s review and consideration. 3) Risk Management Committee The Board established the Risk Management Committee on 18 February The Risk Management Committee comprises: Wong Yuk Mou (Chairman) Dato Hamzah bin Md Rus (Member) Lau Yik Wai (Member) Ranjeet Singh (Member) The primary function of the Risk Management Committee is to assist the Board in fulfilling its duties and discharging its responsibility relating to the risk management and compliance practices of the Group. 1.9 Company Secretary The removal and replacement of the Company Secretary is a matter for the Board s consideration. 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 Directors, the remuneration package links 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. Salaries The salaries (inclusive of statutory employer s contributions to the Employees Provident Fund) of the Executive Directors are determined and approved by the Board annually. b. Fees The fees payable to the Non-Executive Directors is determined by the Board and approved by the shareholders of the Company at each Annual General Meeting.

38 ANNUAL REPORT STATEMENT ON CORPORATE GOVERNANCE 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 details of Directors remuneration during the financial year ended 31 March 2011 are as follow: 2.1 Aggregate Remuneration Executive Non-Executive Directors Directors Aggregate Remuneration (RM) (RM) Salaries 660,000 - Fees - 204,000 Allowances - 39,000 Benefits-in-kind* 6,300 - Total 666, ,000 * Based on estimated monetary value 2.2 Range of Remuneration No. of Directors Range of Remuneration Executive Non-Executive Less than RM50,000-3 RM50,001 RM100,000-1 RM150,000 RM200, RM450,000 RM500, 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 Senior 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 Securities which includes the announcement of quarterly results of the Group; and The Company s website at

39 37 EQUINE CAPITAL BERHAD ( T) STATEMENT ON CORPORATE GOVERNANCE 3.2 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 tenth AGM on 25 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, upon request, a press conference may be 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. 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 Securities 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 in 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 in 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, Deloitte KassimChan. 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.

40 ANNUAL REPORT AUDIT COMMITTEE REPORT The Audit Committee ( the Committee ) was established on 26 August 2003 to act as a sub-committee of the Board of Directors. Presently, the members of the Committee are as follows: Wong Yuk Mou (Chairman) Datuk Ahmad Zabri bin Ibrahim (Member) Dato Hamzah bin Md Rus (Member) Details of the members of the Committee are contained in the Profile of Directors as set out in this Annual Report. TERMS OF REFERENCE The Committee is governed by the following terms of reference: 1. Purpose The primary objective of the Audit Committee, in its role as a sub-committee of the Board, is to assist the Board in the effective discharge of its fiduciary responsibilities for corporate governance, effective internal controls system, and timely and accurate financial reporting. 2. Composition The Committee shall be appointed from amongst the members of 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. 3. Chairman The Chairman, who shall be elected by the Committee, must be an independent director. 4. 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.

41 39 EQUINE CAPITAL BERHAD ( T) AUDIT COMMITTEE REPORT 5. 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. 6. Rights The Committee shall: (a) have explicit authority to investigate any matter within its terms of reference; (b) have the necessary resources which it needs to perform its duties; (c) have full and unrestricted access to any information which it requires in the course of performing its duties; (d) have unrestricted access to the management; (e) have direct communication channels with the external auditors and internal auditors; and (f) be able to obtain independent professional or other advice in the performance of its duties at the Company s expense. 7. Duties The duties of the Committee shall include a review of: (a) the nomination of external auditors; (b) the adequacy of existing external audit arrangements, with particular emphasis on the scope and quality of the audit; (c) the adequacy and effectiveness of the internal controls and management information systems; (d) the financial statements of the Company with both the external auditors and management; (e) the external auditors audit report; (f) any management letter sent by the external auditors to the Company and the management s response to such letter; (g) any letter of resignation from the Company s external auditors; (h) the assistance given by the Company s officers to the external auditors; (i) all areas of significant financial and operational risks and the arrangements in place to contain those risks to acceptable levels; and (j) all related-party transactions and potential conflict of interests situations. 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 controls of ECB and its subsidiaries. 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 2011, the Committee convened a total of five (5) meetings on 20 May 2010, 19 July 2010, 25 August 2010, 24 November 2010 and 22 February The meeting attendance of each individual Committee is set out on the Profile of Board of Directors in this Annual Report. The Group s internal and external auditors and the Senior Management 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.

42 ANNUAL REPORT AUDIT COMMITTEE REPORT 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 its duties and responsibilities: Internal Controls - Evaluated the overall effectiveness of the system of internal controls through the review of the results of work performed by the internal and external auditors and discussions with Senior Management. Financial Results - Reviewed the quarterly results and audited annual financial statements of the Group before recommending to the Board for release to Bursa Securities. The review had focused primarily on: a) major accounting areas involving exercise of judgement, significant and unusual events; b) significant adjustments resulting from audit; c) going concern assumptions; d) compliance with applicable approved accounting standards in Malaysia; and e) compliance with Main Market Listing Requirements of Bursa Securities and other relevant regulatory requirements. External Audit - Reviewed with the external auditors, their audit plan for the financial year ended 31 March 2011 to ensure that their scope of work adequately covered 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 re-appointment and remuneration. Internal Audit - Reviewed with the internal auditors, their audit plan for the financial year ending 31 March 2012 ensuring that principal risk areas were adequately identified and covered in the plan; - Reviewed the recommendations by internal auditors, 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 audit 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 Main Market Listing Requirements of Bursa Securities; and - Reviewed the procedures for identification of recurrent related party transactions and securing the shareholders mandate for such transactions.

43 41 EQUINE CAPITAL BERHAD ( T) STATEMENT ON INTERNAL CONTROL STATEMENT ON INTERNAL CONTROL This statement on internal control by the Board is made pursuant to paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Securities with respect to the compliance of 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 on-going identification, evaluation and management of significant risks. These on-going processes are reviewed regularly by the Senior Management, Audit Committee, Risk Management Committee and the internal auditors. The Risk Management Committee reports directly to the Board and is responsible for coordination of the overall risk management activities within the Group. 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; and Management meetings held fortnightly to identify, discuss, evaluate and resolve operational and financial issues.

44 ANNUAL REPORT STATEMENT ON INTERNAL CONTROL The internal audit function which has been outsourced to an independent external consultant, reports directly to the Audit Committee. The role of the internal auditors is to 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 internal audit fees paid to the independent external consultant during the financial year ended 31 March 2011 was RM60,000. The internal audit plan is reviewed and approved annually by the Audit Committee. The internal auditors conduct various audit assignments regularly to evaluate the adequacy and effectiveness of the internal control systems and make recommendations for improvements to the system of internal controls. The Audit Committee reviews the internal audit reports on a regular basis and keeps the Board informed of key audit findings. 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 on-going adequacy, integrity and effectiveness of the system of internal control, so as to safeguard the Group s assets and shareholders interests.

45 43 EQUINE CAPITAL BERHAD ( T) STATEMENT ON DIRECTORS RESPONSIBILITY ON FINANCIAL STATEMENTS The Directors are responsible for ensuring the financial statements of the Group are drawn up in accordance with the applicable approved accounting standards in Malaysia and the Companies Act, 1965 which give a true and fair view of the state of affairs of the Group and of their financial performance and cash flows for the financial year. In preparing the financial statements, the Directors have: adopted suitable accounting policies and applied them consistently; made judgements and estimates that are reasonable and prudent; ensured that all applicable approved accounting standards in Malaysia have been complied with; and prepared financial statements on a going concern basis as the Directors have a reasonable expectation, having made appropriate enquiries, that the Group have adequate resources to continue in operational existence for the foreseeable future. The Directors have the responsibility for ensuring that the Group maintains such accounting and other records that will disclose with reasonable accuracy, the financial position of the Group, and which enable them to ensure that the financial statements comply with the Companies Act, 1965.

46 ANNUAL REPORT ADDITIONAL DISCLOSURES The following disclosures are made in compliance with Part A of Appendix 9C of the Main Market Listing Requirements of Bursa Securities: (a) (b) (c) Non-Audit Fees Paid The non-audit fees paid to the external auditors, Deloitte KassimChan, during the financial year ended 31 March 2011 was RM5,000. Material Contracts There was no material contract outside the ordinary course of business entered into by ECB and its subsidiaries involving Directors and major shareholders interest which was still subsisting as at 31 March Corporate Social Responsibility The Group is conscious of the importance of fulfilment of corporate social responsibilities in the community. During the financial year, the Group had organized a campaign to donate recyclable items to charitable organizations. The Group also donated RM50,000 to Malaysian Red Crescent Society during a charity drive entitled Japan Earthquake and Tsunami Charity Fundraiser. The Group, as a responsible property developer, emphasizes the implementation of public amenities and other social obligations in its product development. The Group also recognises the importance of contribution towards staff welfare and continual training to ensure development in human capital.

47 FINANCIAL STATEMENTS 046 Directors Report 050 Independent Auditors Report 052 Statements of Comprehensive Income 053 Statements of Financial Position 055 Statements of Changes in Equity 056 Statements of Cash Flows 058 Notes to the Financial Statements 114 Supplementary Information 115 Statement by Directors 115 Declaration by the Officer Primarily Responsible for the Financial Management of the Company