delivering performance

Transcription

1 delivering performance Financial Statements 2014 Portfolio reporting & EKUITI NASIONAL BERHAD

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3 portfolio reporting Ekuinas Direct (Tranche I) Fund 02 Ekuinas Direct (Tranche Ii) Fund 05 Ekuinas Outsourced (Tranche I) Fund 08 Ekuinas Outsourced (Tranche Ii) Fund 11 Notes To The Portfolio Reporting 14

4 EKUINAS DIRECT (TRANCHE I) FUND as at 31 December Fund Overview Fund Name Ekuinas Direct (Tranche I) Fund Vintage Year 2010 Status Capital Commitment Term Investment Period Legal Form & Structure Fully deployed & 20% distributed 1.0 billion 5 Years + 2 Years 3 to 5 Years One fund manager and one investor Fund: Ekuinas Direct (Tranche I) Fund Fund Manager: Ekuiti Nasional Berhad Fund s Domicile : Malaysia Geographical Focus Investment Focus Industry Focus Malaysia Buy-Out and Growth Capital Fund - Education - Oil & Gas - Fast Moving Consumer Goods (FMCG) - Retail & Leisure - Healthcare - Services 2 Ekuiti nasional berhad annual report 2014

5 EKUINAS DIRECT (TRANCHE I) FUND as at 31 December Fund Net Assets Value (NAV) as at 31 December million Movement million 2014 million A. Capital Commitment 1, ,000.0 B. Capital Called 1, ,095.7 C. Capital Reinvested D. Total Capital Contributed (B+C) 1, ,263.7 E. Debt Drawdown (Amortised Cost) F. Total Capital Invested (D+E) 1, ,303.7 Plus increases/(decreases) to Net Assets Value: Dividend Income Net Unrealised Gain/(Loss) on Fair Value of Investments (253.6) Realised Gain from Divestment Interest Expenses (14.6) (1.5) (16.1) Total Gross Portfolio Return Organisational Expenses (214.6) 22.3 (192.3) Capital Distributions to Limited Partners (C+H)* (463.3) (411.2) (874.5) Net Decrease in Net Assets Value (22.0) (367.7) (389.7) G. Net Assets Value 1,264.0 (350.0) Net Assets Value made up of: Investments - at cost (130.3) Net Unrealised Gain/(Loss) on Fair Value of Investments (253.6) Investments carried at Fair Value 1,461.2 (383.9) 1,077.3 Plus: Cash Balance 36.4 (30.4) 6.0 Plus: Working Capital (233.6) 64.3 (169.3) Plus: Uncalled Capital Equals Net Assets Value 1,264.0 (350.0) Net Assets Value 1,264.0 (350.0) H. Capital Distributed Total Net Assets Value plus Distributed Capital (G+H) 1, ,624.5 Refund of Capital Gross IRR p.a. 25.5% 19.6% Net IRR (before carried interest) p.a. 20.4% 15.3% Carried Interest ( million) H/B Cash Distributions to Capital Called G/B Net Assets Value to Capital Called (G+H)/B Total Value to Capital Called B/A Capital Called to Committed Capital * Includes deemed distribution for reinvested capital Ekuiti nasional berhad annual report

6 EKUINAS DIRECT (TRANCHE I) FUND as at 31 December INVESTMENT PERFOANCE (a) Current Portfolio Summary as at 31 December 2014 Company Date of Initial Investment Stake % Cost of Investment million Alliance Cosmetics Group 4 January APIIT Education Group 18 February Cosmopoint Group 2 April UNITAR International University 21 May Burger King Malaysia 15 September San Francisco Coffee 12 September Revenue Valley Group 15 March Icon Offshore Berhad 19 November Fair Value million Gross Portfolio Return million 1, Gross IRR Net IRR 19.6% p.a. 15.3% p.a. Gross IRR is derived after interest expense. Net IRR is derived after management fees and other operating expenses. (b) Realisation Summary as at 31 December 2014 Company Date of Disposal Stake % Full realisation Cost of Investment million Total Realisation million Tanjung Offshore Berhad* 14 November Konsortium Logistik Berhad 19 December Partial realisation Icon Offshore Berhad 25 June * The divestment of Tanjung Offshore Berhad forms part of Ekuinas restructuring of its O&G portfolio as it reinvested the proceeds into additional investment in Icon Offshore Berhad. 4 Ekuiti nasional berhad annual report 2014

7 EKUINAS DIRECT (TRANCHE II) FUND as at 31 December Fund Overview Fund Name Ekuinas Direct (Tranche II) Fund Vintage Year 2012 Status Capital Commitment Term Investment Period Legal Form & Structure Fully Committed 1.0 billion 5 Years + 2 Years 3 to 5 Years One fund manager and one investor Fund: Ekuinas Direct (Tranche II) Fund Fund Manager: Ekuiti Nasional Berhad Fund s Domicile : Malaysia Geographical Focus Investment Focus Industry Focus Malaysia Buy-Out and Growth Capital Fund - Education - Oil & Gas - Fast Moving Consumer Goods (FMCG) - Retail & Leisure - Healthcare - Services Ekuiti nasional berhad annual report

8 EKUINAS DIRECT (TRANCHE II) FUND as at 31 December Fund Net Assets Value (NAV) as at 31 December million Movement million 2014 million A. Capital Commitment 1, ,000.0 B. Capital Called C. Capital Reinvested D. Total Capital Contributed (B+C) E. Debt Drawdown (Amortised Cost) F. Total Capital Invested (D+E) Plus increases/(decreases) to Net Assets Value: Dividend Income Net Unrealised Gain/(Loss) on Fair Value of Investments (59.2) 70.9 Realised Gain from Divestment Interest Income 2.9 (2.9) - Total Gross Portfolio Return Organisational Expenses (45.3) (18.1) (63.4) Capital Distributions to Limited Partners (C+H)* - (97.8) (97.8) Net Decrease in Net Assets Value 87.7 (100.5) (12.8) G. Net Assets Value (1.8) Net Assets Value made up of: Investments - at cost Net Unrealised Gain/(Loss) on Fair Value of Investments (59.2) 70.9 Investments carried at Fair Value Plus: Cash Balance Plus: Working Capital (69.6) (274.6) (344.2) Plus: Uncalled Capital Equals Net Assets Value (1.8) Net Assets Value (1.8) H. Capital Distributed Total Net Assets Value plus Distributed Capital (G+H) Gross IRR p.a. 68.9% 31.9% Net IRR (before carried interest) p.a. 50.4% 19.3% Carried Interest ( million) H/B Cash Distributions to Capital Called G/B Net Assets Value to Capital Called (G+H)/B Total Value to Capital Called B/A Capital Called to Committed Capital * Include deemed distribution for reinvested capital 6 Ekuiti nasional berhad annual report 2014

9 EKUINAS DIRECT (TRANCHE II) FUND as at 31 December INVESTMENT PERFOANCE (a) Current Portfolio Summary as at 31 December 2014 Company Date of Initial Investment Stake % Cost of Investment million Icon Offshore Berhad 19 November Burger King Singapore 12 September Burger King Malaysia 27 November Primabaguz Sdn Bhd 27 November APIIT Sri Lanka 20 December San Francisco Coffee 23 May Revenue Valley Group 27 June Coolblog Sdn Bhd 24 July Orkim Sdn Bhd 18 December Fair Value million Gross Portfolio Return million Total Gross IRR Net IRR 31.9% p.a. 19.3% p.a. Gross IRR is derived after interest expense. Net IRR is derived after management fees and other operating expenses. (b) Realisation Summary as at 31 December 2014 Company Date of Disposal Stake % Cost of Investment million Total Realisation million Partial realisation Icon Offshore Berhad 25 June Ekuiti nasional berhad annual report

10 EKUINAS OUTSOURCED (TRANCHE I) FUND as at 31 December Fund Overview Fund Name Ekuinas Outsourced (Tranche I) Fund Vintage Year 2011 Status Capital Commitment Term Investment Period Legal Form & Structure Investing million 6 Years (+ 1 Year) 3 to 6 Years One fund manager and multiple investors. Outsourced to the following fund and fund managers: 1) Fund: Navis Malaysia Growth Opportunities Fund I, L.P. Fund Manager: Navis MGO I GP Ltd Fund s Domicile : Cayman Islands 2) Fund: CIMB National Equity Fund Ltd. P. Fund Manager: CIMB General Partner Ltd Fund s Domicile : Labuan 3) Fund: TAP Fund L.P Fund Manager: TAP Private Equity (Malaysia) Ltd Fund s Domicile : Labuan Geographical Focus Investment Focus Industry Focus Malaysia Minority Growth Capital Fund General except for Ekuinas negative investment list 8 Ekuiti nasional berhad annual report 2014

11 EKUINAS OUTSOURCED (TRANCHE I) FUND as at 31 December Fund Net Assets Value (NAV) as at 31 December million Movement million 2014 million A. Capital Commitment B. Capital Called C. Capital Reinvested D. Total Capital Contributed (B+C) E. Debt Drawdown (Amortised Cost) F. Total Capital Invested (D+E) Plus increases to Net Assets Value: Dividend Income Net Unrealised Gain on Fair Value of Investments Realised Loss on Fair Value of Investments (2.1) 0.3 (1.8) Interest Expenses Total Gross Portfolio Return Organisational Expenses (6.2) (2.0) (8.2) Capital Distributions to Limited Partners (C+H) Net Increase in Net Assets Value G. Net Assets Value Net Assets Value made up of: Investments - at cost Net Unrealised Gain on Fair Value of Investments Investments carried at Fair Value Plus: Cash Balance Plus: Working Capital Plus: Uncalled Capital Equals Net Assets Value Net Assets Value H. Capital Distributed Total Net Assets Value plus Distributed Capital (G+H) Gross IRR p.a. 5.0% 10.6% Net IRR (before carried interest) p.a. 2.4% 8.8% Carried Interest ( million) - - H/B Cash Distributions to Capital Called - - G/B Net Assets Value to Capital Called (G+H)/B Total Value to Capital Called B/A Capital Called to Committed Capital Ekuiti nasional berhad annual report

12 EKUINAS OUTSOURCED (TRANCHE I) FUND as at 31 December INVESTMENT PERFOANCE Current Portfolio Summary as at 31 December 2014 Fund Navis Malaysia Growth Oppurtunities Fund I, L.P. CIMB National Equity Fund Ltd. P. TAP Harimau Fund L.P Ekuinas Commitment million Private Capital Commitment million Total Fund Size million Ekuinas Invested Capital million Investment by Others million Net Asset Value million Gross IRR Net IRR 10.6% p.a. 8.8% p.a. 10 Ekuiti nasional berhad annual report 2014

13 EKUINAS OUTSOURCED (TRANCHE II) FUND as at 31 December Fund Overview Fund Name Ekuinas Outsourced (Tranche II) Fund Vintage Year 2013 Status Capital Commitment Term Investment Period Legal Form & Structure Investing million 7 Years (+ 1 Year) 3 to 7 Years One fund manager and multiple investors. Outsourced to the following fund and fund managers: 1) Fund: CP One Sdn Bhd Fund Manager: CP Cayman Ltd Fund s Domicile : Malaysia 2) Fund: COPE Opportunities 3 Sdn Bhd Fund Manager: CMS Opus Private Equity Sdn Bhd Fund s Domicile : Malaysia 3) Fund: Tael Tijari (OFM) L.P. Fund Manager: TAEL Tijari Partners Ltd. Fund s Domicile : Cayman Islands 4) Fund: Tuas Capital Partners Malaysia Growth Fund I LP. Fund Manager: Tuas Capital Partners MGF I General Partner Ltd. Fund s Domicile : Labuan Geographical Focus Investment Focus Industry Focus Malaysia Minority Growth Capital Fund General except for Ekuinas negative investment list Ekuiti nasional berhad annual report

14 EKUINAS OUTSOURCED (TRANCHE II) FUND as at 31 December Fund Net Assets Value (NAV) as at 31 December million Movement million 2014 million A. Capital Commitment B. Capital Called C. Capital Reinvested D. Total Capital Contributed (B+C) E. Debt Drawdown (Amortised Cost) F. Total Capital Invested (D+E) Plus decreases to Net Assets Value: Dividend Income Net Unrealised Loss on Fair Value of Investments - (15.5) (15.5) Realised Gain/(Loss) from Divestment Interest Expenses Total Gross Portfolio Return - (15.5) (15.5) Organisational Expenses (1.2) (1.2) (2.4) Capital Distributions to Limited Partners (C+H) Net Decrease in Net Assets Value (1.2) (16.7) (17.9) G. Net Assets Value 17.1 (2.3) 14.8 Net Assets Value made up of: Investments - at cost Net Unrealised Loss on Fair Value of Investments - (15.5) (15.5) Investments carried at Fair Value 17.1 (2.3) 14.8 Plus: Cash Balance Plus: Working Capital Plus: Uncalled Capital Equals Net Assets Value 17.1 (2.3) 14.8 Net Assets Value 17.1 (2.3) 14.8 H. Capital Distributed Total Net Assets Value plus Distributed Capital (G+H) 17.1 (2.3) 14.8 Gross IRR p.a. N/M N/M Net IRR (before carried interest) p.a. N/M N/M Carried Interest ( million) - - H/B Cash Distributions to Capital Called - - G/B Net Assets Value to Capital Called (G+H)/B Total Value to Capital Called B/A Capital Called to Committed Capital Ekuiti nasional berhad annual report 2014

15 EKUINAS OUTSOURCED (TRANCHE II) FUND as at 31 December INVESTMENT PERFOANCE Portfolio Summary as at 31 December 2014 Fund CP One Sdn Bhd COPE Opportunities 3 Sdn Bhd Tael Tijari (OFM) L.P. Tuas Capital Partners Malaysia Growth Fund I LP. Ekuinas Commitment million Private Capital Commitment million Total Fund Size million Ekuinas Invested Capital million Investment by Others million Net Asset Value million Gross IRR Net IRR N/M N/M The financial performance for Ekuinas Outsourced (Tranche II) Fund is not presented as the fund is still in early stages of investments. Ekuiti nasional berhad annual report

16 NOTES TO THE PORTFOLIO REPORTING 1 Notes to the Portfolio Reporting The external auditor, PwC, was engaged by Ekuinas to perform certain procedures on the Portfolio Reporting on pages 1 to 12 for the financial year ended 31 December 2014, and has checked the information on Funds Net Assets Value and Investment Performance as at 31 December 2014 included therein to supporting source data, and re-performed computations, where applicable. 14 Ekuiti nasional berhad annual report 2014

17 EKUITI NASIONAL BERHAD (Incorporated in Malaysia) Reports And Statutory Financial Statements For The Financial Year Ended 31 December 2014 Directors Report 16 Statement By Directors 19 Statutory Declaration 19 Independent Auditors Report 20 Statement Of Comprehensive Income 22 Statement Of Financial Position 23 Statement Of Changes In Equity 24 Statement Of Cash Flows 25 Notes To The Financial Statements 26 Ekuiti nasional berhad annual report

18 directors' report for the financial year ended 31 december 2014 The Directors have pleasure in submitting their report and the audited financial statements of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The Company is principally engaged in providing investment management, financial, corporate and management advisory services to a Government-linked private equity fund to promote equitable and sustainable Bumiputera economic participation via the creation of Malaysia s next generation of leading companies. There have been no significant changes in the nature of these activities during the financial year ended 31 December FINANCIAL RESULTS Net profit for the financial year 14,451,442 DIVIDEND No dividend has been paid, declared or proposed since the end of the previous financial year. The Directors do not recommend the payment of any final dividend for the financial year ended 31 December ISSUE OF SHARES There were no changes in the authorised, issued and fully paid capital of the Company during the financial year. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements and notes to the financial statements. DIRECTORS The Directors who have held office since the date of last report are as follows: Raja Tan Sri Dato Seri Arshad bin Raja Tun Uda Datuk Noriyah binti Ahmad Tan Sri Mohamed Jawhar bin Hassan Tan Sri Mohamed Azman bin Yahya Datuk Seri Dr Rahamat Bivi binti Yusoff Dato Abdul Rahman bin Ahmad In accordance with Article 65 of the Company s Articles of Association, Tan Sri Mohamed Jawhar bin Hassan and Tan Sri Mohamed Azman bin Yahya shall retire from the Board at the forthcoming Annual General Meeting and being eligible, offer themselves for re-election. 16 Ekuiti nasional berhad annual report 2014

19 directors' report for the financial year ended 31 december 2014 DIRECTORS INTERESTS IN SHARES AND DEBENTURES According to the Register of Directors Shareholdings maintained by the Company in accordance with Section 134 of the Companies Act, 1965, none of the Directors in office at the end of the financial year held any interest in shares, warrants, share options and debentures in the Company or its related corporations during the financial year. DIRECTORS BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the date of last report, no Director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by a Director as the fixed salary of a full-time employee of the Company as shown in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. STATUTORY INFOATION ON THE FINANCIAL STATEMENTS Before the financial statements of the Company were made out, the Directors took reasonable steps: (a) (b) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that there are no known bad debts that had been written off and that allowance need not be made for doubtful debts; and to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business, their values as shown in the accounting records of the Company have been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances: (a) (b) (c) (d) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Company inadequate to any substantial extent; or which would render the values attributed to current assets in the financial statements of the Company misleading; or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate; or not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Company misleading. Ekuiti nasional berhad annual report

20 directors' report for the financial year ended 31 december 2014 STATUTORY INFOATION ON THE FINANCIAL STATEMENTS (continued) No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve (12) months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Company to meet their obligations when they fall due. At the date of this report, there does not exist: (a) (b) any charge on the assets of the Company which has arisen since the end of the financial year which secures the liability of any other person; or any contingent liability of the Company which has arisen since the end of the financial year. At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. In the opinion of the Directors: (a) (b) the results of the Company s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Company for the financial year in which this report is made. HOLDING FOUNDATION The Directors regard Yayasan Ekuiti Nasional, a foundation incorporated in Malaysia, as the Company s holding foundation. AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with their resolution. RAJA TAN SRI DATO SERI ARSHAD BIN RAJA TUN uda DIRECTOR dato ABDUL RAHMAN BIN AHMAD DIRECTOR Kuala Lumpur 20 March Ekuiti nasional berhad annual report 2014

21 STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, Raja Tan Sri Dato Seri Arshad bin Raja Tun Uda and Dato Abdul Rahman bin Ahmad, being two of the Directors of Ekuiti Nasional Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 22 to 38 have been properly drawn up so as to give a true and fair view of the state of affairs of the Company as at 31 December 2014 and of the results and cash flows of the Company for the financial year ended on that date in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. Signed on behalf of the Board of Directors in accordance with their resolution. RAJA TAN SRI DATO SERI ARSHAD BIN RAJA TUN uda DIRECTOR dato ABDUL RAHMAN BIN AHMAD DIRECTOR Kuala Lumpur 20 March 2015 STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965 I, Mazhairul bin Jamaludin, being the Officer primarily responsible for the financial management of Ekuiti Nasional Berhad, do solemnly and sincerely declare that the financial statements set out on pages 22 to 38 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, MAZHAIRUL BIN JAMALUDIN GROUP CHIEF FINANCIAL OFFICER Subscribed and solemnly declared by the above named Mazhairul bin Jamaludin at Kuala Lumpur before me, on 20 March COMMISSIONER FOR OATHS Ekuiti nasional berhad annual report

22 INDEPENDENT AUDITORS REPORT TO THE MEMBER OF EKUITI NASIONAL BERHAD (Incorporated in Malaysia) (Company No: U) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of Ekuiti Nasional Berhad on pages 22 to 38, which comprise the statement of financial position as at 31 December 2014 of the Company, and the statement of comprehensive income, statement of changes in equity and statement of cash flows of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 14. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Company as of 31 December 2014 and of its financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. 20 Ekuiti nasional berhad annual report 2014

23 INDEPENDENT AUDITORS REPORT TO THE MEMBER OF EKUITI NASIONAL BERHAD (Incorporated in Malaysia) (Company No: U) REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that, in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act. OTHER MATTERS This report is made solely to the member of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants dato MOHAMMAD FAIZ BIN MOHAMMAD AZMI (No. 2025/03/16 (J)) chartered Accountant Kuala Lumpur 20 March 2015 Ekuiti nasional berhad annual report

24 STATEMENT OF COMPREHENSIVE INCOME INCOME Note 2014 Management fees ,279,088 42,900,000 Treasury fees ,907,247 4,478, OTHER INCOME Interest income 1,842,341 1,068,319 Gain on disposal of plant and equipment 68,963 2,460 Other income 683,012 - TOTAL INCOME 54,780,651 48,449,195 EXPENSES Employee benefit costs 5 (23,666,959) (19,032,468) Occupancy costs (968,583) (959,229) Consultancy fees (5,419,637) (5,015,154) Other expenses (10,274,030) (8,813,989) Profit before taxation 6 14,451,442 14,628,355 Taxation Total comprehensive income and net profit for the financial year 14,451,442 14,628,355 The significant accounting policies and other explanatory notes are set out on pages 26 to 38 of these financial statements. 22 Ekuiti nasional berhad annual report 2014

25 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014 Note 2014 NON-CURRENT ASSET Plant and equipment 8 1,318,110 1,073, CURRENT ASSETS Other receivables, deposits and prepayments 9 1,895, ,285 Amount due from holding foundation Amount due from related companies ,778,689 1,435,269 Tax recoverable 5,772 5,772 Cash and cash equivalents 10 57,202,950 42,819,679 61,882,872 44,948,155 CURRENT LIABILITIES Other payables and accruals 11 13,376,897 10,686,777 Amount due to a related company ,537-13,414,434 10,686,777 NET CURRENT ASSETS 48,468,438 34,261,378 49,786,548 35,335,106 FINANCED BY: Share capital 12 9,900,002 9,900,002 Retained earnings 39,886,546 25,435,104 49,786,548 35,335,106 The significant accounting policies and other explanatory notes are set out on pages 26 to 38 of these financial statements. Ekuiti nasional berhad annual report

26 STATEMENT OF CHANGES IN EQUITY Issued and fully paid ordinary shares of 1 each Number of shares Share capital Distributable Retained earnings At 1 January ,900,002 9,900,002 25,435,104 35,335,106 Total comprehensive income for the financial year ,451,442 14,451,442 At 31 December ,900,002 9,900,002 39,886,546 49,786,548 Total At 1 January ,900,002 9,900,002 10,806,749 20,706,751 Total comprehensive income for the financial year ,628,355 14,628,355 At 31 December ,900,002 9,900,002 25,435,104 35,335,106 The significant accounting policies and other explanatory notes are set out on pages 26 to 38 of these financial statements. 24 Ekuiti nasional berhad annual report 2014

27 STATEMENT OF CASH FLOWS Note 2014 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 14,451,442 14,628, Adjustments for: Depreciation of plant and equipment 8 900, ,780 Gain on disposal of plant and equipment (68,963) (2,460) Interest income (1,842,341) (1,068,319) Operating profit before working capital changes 13,440,532 14,390,356 Changes in working capital: Other receivables, deposits and prepayments (1,125,968) (70,377) Amount due to holding foundation 30 12,501 Amount due (from)/to related companies (1,305,883) 4,865,661 Other payables and accruals 2,690,121 3,698,496 Cash generated from operations 13,698,832 22,896,637 Tax refund - 475,911 Interest received 1,760,251 1,037,552 Net cash flows generated from operating activities 15,459,083 24,410,100 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment 8 (1,180,247) (453,123) Proceeds from disposal of plant and equipment 104,435 4,699 Net cash flows used in investing activities (1,075,812) (448,424) NET CHANGE IN CASH AND CASH EQUIVALENTS DURING THE FINANCIAL YEAR 14,383,271 23,961,676 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 42,819,679 18,858,003 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 10 57,202,950 42,819,679 The significant accounting policies and other explanatory notes are set out on pages 26 to 38 of these financial statements. Ekuiti nasional berhad annual report

28 NOTES TO THE FINANCIAL STATEMENTS The principal activities of the Company are to provide investment management, financial, corporate and management advisory services to a Government-linked private equity fund to promote equitable and sustainable Bumiputera economic participation via the creation of Malaysia s next generation of leading companies. There have been no significant changes in the nature of these activities during the financial year. The Company is a private limited company, incorporated and domiciled in Malaysia. The address of the registered office of the Company is: 12th Floor, Bangunan Setia 1, 15 Lorong Dungun, Bukit Damansara, Kuala Lumpur. The principal place of business of the Company is: Level 13, Surian Tower, No 1, Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Darul Ehsan. The principal accounting policies applied in preparing the financial statements are set out below. These policies have been applied to all years presented, unless otherwise stated. 1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements of the Company have been prepared in accordance with the Malaysian Financial Reporting Standards ( MFRS ), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The financial statements have been prepared under the historical cost convention, unless otherwise stated in the notes to the financial statements. The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the Company s accounting policies. Although these estimates and judgement are based on the Directors best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note Standards, amendments to published standards and interpretations that are applicable and effective The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Company s financial year beginning on or after 1 January 2014 are as follows: Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities Amendments to MFRS 136 Recoverable Amount Disclosures for Non-Financial Assets Amendments to MFRS 139 Novation of Derivatives and Continuation of Hedge Accounting Amendments to MFRS 10, MFRS 12 and MFRS 127 Investment entities IC Interpretation 21 Levies Apart from the new presentation and disclosure requirements as disclosed in the financial statements, the adoption of the above standards and amendments to published standards does not have any other material impact on the Company s financial statements. 26 Ekuiti nasional berhad annual report 2014

29 NOTES TO THE FINANCIAL STATEMENTS 1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (continued) 1.2 Standards, amendments to published standards and interpretations to existing standards that are applicable to the Company but not yet effective MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 "Financial Instruments: Recognition and Measurement". The complete version of MFRS 9 was issued in November MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. There is now a new expected credit losses model on impairment for all financial assets that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. Unless otherwise disclosed, the above standards, amendments to published standards and interpretations to existing standards are not anticipated to have any significant impact on the Company s financial statements in the year of initial application. 2 SIGNIFICANT ACCOUNTING POLICIES 2.1 PLANT AND EQUIPMENT Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. When significant parts of an item of plant and equipment have different useful lives, they are accounted for as separate items (major components) of plant and equipment. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised to the income statement. All other repairs and maintenance costs are charged to the income statement during the financial year in which they are incurred. Plant and equipment are depreciated on the straight line basis to write off the cost of the assets, or their revalued amounts, to their residual values over their estimated useful lives, summarised as follows: Motor vehicles Furniture and fittings Office equipment Renovation Computer equipment 5 years 5 years 5 years 5 years 3 years Ekuiti nasional berhad annual report

30 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 PLANT AND EQUIPMENT (continued) Depreciation methods, useful lives and residual values are reviewed and adjusted as appropriate at the end of the reporting year. At the end of each reporting year, the Company assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. See accounting policy Note 2.2 on impairment of non-financial assets. Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in the income statement from operations in the financial year the asset is de-recognised. 2.2 IMPAIENT OF NON-FINANCIAL ASSETS Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If any such indications exist, the asset s recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or group of assets ( the cash generating units ). An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The impairment loss is charged to the income statement and any subsequent increase in recoverable amount is recognised in the income statement. Any reversal is credited to the income statement to the extent of a previously recognised impairment loss. 2.3 FINANCIAL ASSETS Loans and receivables Classification Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than twelve (12) months after the end of the reporting year. These are classified as non-current assets. The Company s loans and receivables comprise of other receivables, deposits and prepayments, amount due from holding foundation, amount due from related companies and cash and cash equivalents in the statement of financial position Recognition and initial measurement Financial assets are initially recognised at fair value plus transaction costs, for all financial assets not carried at fair value through profit or loss Subsequent measurement Loans and receivables are subsequently carried at amortised cost using the effective interest method. 28 Ekuiti nasional berhad annual report 2014

31 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.3 FINANCIAL ASSETS (CONTINUED) Loans and receivables (continued) Subsequent measurement - impairment of financial assets The Company assesses at the end of the reporting year whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If in a subsequent year, the amount of the impairment loss decrease and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in the income statement. As at the end of the reporting year, there is no recognition of impairment in the income statement De-recognition 2.4 CASH AND CASH EQUIVALENTS A financial asset is de-recognised when the rights to receive cash flows from loans and receivables have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Cash and cash equivalents comprise of cash at bank and deposits which are subject to an insignificant risk of changes in value. 2.5 PROVISIONS Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligations, and when a reliable estimate of the amount can be made. 2.6 FINANCIAL LIABILITIES Classification Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139 Financial Instruments: Recognition and Measurement, are recognised in the statement of financial position when, and only when, the Company becomes party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. The Company s financial liabilities include other payables and accruals and amount due to a related company in the statement of financial position Recognition and measurement Financial liabilities are recognised initially at fair value plus directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest method. Ekuiti nasional berhad annual report

32 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.6 FINANCIAL LIABILITIES (Continued) De-recognition 2.7 SHARE CAPITAL A financial liability is derecognised when the obligation under the liability is extinguished when an existing financial liability is replaced by another from the same party on substantially different terms, or the term of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement. Ordinary shares are classified as equity. Distributions to holders of a financial instrument classified as an equity instrument are charged directly to equity. 2.8 REVENUE RECOGNITION Management fees and treasury fees Management fees and treasury fees are recognised on an accrual basis when services are rendered Interest income 2.9 INCOME TAXES Interest income is recognised on a time proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income shall accrue to the Company. Current tax expense is determined according to Malaysian tax laws and includes all taxes based upon the taxable profits. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Tax rates enacted or substantively enacted by the reporting year end are used to determine deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised EMPLOYEE BENEFITS Short term employee benefits Wages, salaries, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by the employees of the Company Defined contribution plan The Company contributes to the Employees Provident Fund, the mutual defined contribution plan. Once the contributions have been paid, the Company has no further payment obligations. The Company s contributions to the Employees Provident Fund are charged to the income statement in the financial period to which they relate. 30 Ekuiti nasional berhad annual report 2014

33 NOTES TO THE FINANCIAL STATEMENTS 3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of the Company s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the end of the reporting year. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the assets or liabilities affected in the future. In the process of applying the Company s accounting policies, the Directors and management have made the following judgements, which have the most significant effect on the amounts recognised in the financial statements: Deferred tax liability As at the end of the reporting year, the Company has not recognised a deferred tax liability of 129,280 (2013: 120,619) arising from taxable temporary differences in relation to plant and equipment, as based on management s estimates, the temporary differences will reverse during the year of the tax exemption as disclosed in Note 7. 4 FINANCIAL RISK MANAGEMENT 4.1 Financial risk management objectives and policies The Company s overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. Financial risk management is carried out through risk reviews, internal control systems and adherence to the Company s financial risk management policies. The Board reviews these risks based on the approved treasury policies and investment guidelines, which cover the management of these risks. The Company is exposed to interest rate risk, credit risk and liquidity risk. 4.2 Interest rate risk The Company s exposure to interest rate risk is mainly attributable to its interest bearing assets which are deposits with licensed financial institutions (Note 10). The Company closely monitors the movement of interest rate to reduce the Company s interest rate exposure. At 31 December 2014, if interest rates on deposits with licensed financial institutions had been 100 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been 566,000 (2013: 422,500) higher/lower. 4.3 Credit risk The Company s exposure to credit risk is limited as the Company is an investment management company. The Company s exposure to credit risk is on the carrying amount of cash and cash equivalents, other receivables, deposits and prepayments, amount due from holding foundation and amount due from related companies which are repayable upon demand. 4.4 Liquidity risk The Company s exposure to liquidity risk is on the undiscounted contractual payments of other payables and accruals and amount due to a related company which are short-term and repayable within one year. 4.5 Capital management The Company s objectives when managing capital are to safeguard the Company s ability to continue as a going concern in order to provide returns to the shareholder and to maintain an optimal capital structure to reduce the cost of capital. The Company is not subject to any externally imposed capital requirements. Ekuiti nasional berhad annual report

34 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (continued) 4.6 Fair value estimation of the financial instruments Financial instruments comprise of financial assets and financial liabilities. Fair value is the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in an arm s length transaction. The information presented herein represents the estimated fair values as at the end of the reporting year. Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates. The carrying amounts of current assets and current liabilities approximate their fair value due to the relatively short term nature of these financial instruments. 4.7 Fair value hierarchy Fair value hierarchy disclosure is not applicable to the Company as the Company s assets and liabilities are short term financial instruments for which the carrying amount approximates the fair values. 5 EMPLOYEE BENEFIT COSTS Wages and salaries 12,433,119 9,939,151 Defined contribution plan 2,115,232 1,770,171 Other employee benefits 9,118,608 7,323, ,666,959 19,032,468 Included in wages and salaries is Directors remuneration amounting to 1,775,480 (2013: 1,645,664). 32 Ekuiti nasional berhad annual report 2014

35 NOTES TO THE FINANCIAL STATEMENTS 6 PROFIT BEFORE TAXATION Profit before taxation is arrived at after charging: Auditors remuneration: - Statutory audit 41,450 34,650 - Audit related fees 5,850 5,450 Depreciation of plant and equipment 900, ,780 Rental of premises 708, , and after crediting: Gain on disposal of plant and equipment 68,963 2,460 7 TAXATION Current tax: Malaysian taxation Reconciliation between tax expense and the product of accounting profit multiplied by the Malaysian tax rate is as follows: Profit before taxation 14,451,442 14,628, Tax calculated at rate of 25% 3,612,861 3,657,089 Income not subject to tax (3,483,581) (3,536,470) Effect of temporary differences not recognised * (129,280) (120,619) Taxation - - On 26 November 2010, the Ministry of Finance granted income tax exemption for all statutory business income for a period of five (5) years commencing from year of assessment 2009 until 2013 for the Company. On 5 August 2013, the exemption was extended for an additional period of 5 years commencing from year of assessment 2014 until * No deferred tax liability has been recognised in respect of the temporary differences arising from plant and equipment based on management s estimates that the temporary differences will reverse during the period of the tax exemption described above. Ekuiti nasional berhad annual report

36 NOTES TO THE FINANCIAL STATEMENTS 8 PLANT AND EQUIPMENT Motor vehicles Furniture and fittings Office equipment Renovation Computer equipment Cost At 1 January , , , ,703 1,989,374 4,143,383 Additions 375,882 40,305 4,210 18, ,150 1,180,247 Disposal (270,534) (125,232) (395,766) At 31 December , , , ,403 2,605,292 4,927,864 Total Accumulated depreciation At 1 January , ,719 90, ,067 1,448,228 3,069,654 Charge for the financial year 76, ,916 32, , , ,394 Disposal (235,102) (125,192) (360,294) At 31 December , , , ,869 1,778,190 3,609,754 Net book value At 31 December , ,015 5,344 46, ,102 1,318,110 Cost At 1 January , , , ,703 1,725,920 3,793,439 Additions 6,780 76,955 8, , ,123 Disposal (5,645) (97,534) (103,179) At 31 December , , , ,703 1,989,374 4,143,383 Accumulated depreciation At 1 January , ,535 65, ,296 1,131,280 2,337,815 Charge for the financial year 55, ,184 24, , , ,780 Disposal (3,405) (97,535) (100,940) At 31 December , ,719 90, ,067 1,448,230 3,069,655 Net book value At 31 December , ,626 33, , ,144 1,073, Ekuiti nasional berhad annual report 2014

37 NOTES TO THE FINANCIAL STATEMENTS 9 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS Other receivables 1,267, ,942 Deposits 268, ,599 Prepayments 359, , ,895, , CASH AND CASH EQUIVALENTS Cash and bank balances 602, ,679 Deposits with licensed financial institutions 56,600,000 42,250, ,202,950 42,819,679 Bank balances are deposits held at call with licensed financial institutions. The weighted average effective interest rate per annum of the deposits with licensed financial institutions as at 31 December 2014 is 3.57% (2013: 3.35%) with an average maturity period of 87 days (2013: 103 days). 11 OTHER PAYABLES AND ACCRUALS Other payables 512, ,039 Accruals 12,864,657 10,182, ,376,897 10,686, SHARE CAPITAL Authorised: Ordinary shares of 1 each At 1 January/ 31 December 100,000, ,000, Issued and fully paid: Ordinary shares of 1 each At 1 January/ 31 December 9,900,002 9,900,002 Ekuiti nasional berhad annual report

38 NOTES TO THE FINANCIAL STATEMENTS 13 SIGNIFICANT RELATED PARTY DISCLOSURES Parties are considered related if the party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions The related parties of, and their relationships with the Company as at 31 December 2014, are as follows: Related party Yayasan Ekuiti Nasional Ekuinas Capital Sdn Bhd E-Cap (Internal) One Sdn Bhd E-Cap (Internal) Two Sdn Bhd E-Cap (Internal) Three Sdn Bhd E-Cap (External) One Sdn Bhd E-Cap (External) Two Sdn Bhd Bendahara 1 Sdn Bhd Awana Setia Sdn Bhd Ilmu Education Group Sdn Bhd Prinsip Lagenda Sdn Bhd Integrated Food Group Sdn Bhd Hallmark Odyssey Sdn Bhd Tekun Prima Sdn Bhd Revenue Valley Sdn Bhd Lyndarahim Ventures Sdn Bhd Alliance Cosmetics Group Icon Offshore Berhad Cosmopoint Sdn Bhd Unitar Capital Sdn Bhd Skim Jejak Jaya Sdn Bhd Tetap Kuasa Sdn Bhd Relationship Holding foundation which is formed by the Government of Malaysia Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company Related company 13.2 Key management personnel Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Company either directly or indirectly. The key management personnel of the Company include all the Directors of the Company who make certain critical decisions in relation to the strategic direction of the Company. Directors remuneration 1,775,480 1,645, Ekuiti nasional berhad annual report 2014

39 NOTES TO THE FINANCIAL STATEMENTS 13 SIGNIFICANT RELATED PARTY DISCLOSURES (continued) 13.3 Significant related party transactions In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions. Management fees income E-Cap (Internal) One Sdn Bhd 15,704,088 20,000,000 E-Cap (External) One Sdn Bhd 2,000,000 2,000,000 E-Cap (Internal) Two Sdn Bhd 20,000,000 20,000,000 E-Cap (External) Two Sdn Bhd 1,200, ,000 E-Cap (Internal) Three Sdn Bhd 4,375, ,279,088 42,900,000 Treasury fees income Ekuinas Capital Sdn Bhd 7,634,805 4,157,879 E-Cap (Internal) One Sdn Bhd 3,204 9,683 Bendahara Sdn Bhd 11, ,854 Hallmark Odyssey Sdn Bhd 1,257,643-8,907,247 4,478,416 Ekuiti nasional berhad annual report

40 NOTES TO THE FINANCIAL STATEMENTS 13 SIGNIFICANT RELATED PARTY DISCLOSURES (continued) 13.4 Significant related party balances In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are significant related party balances: Amount due from holding foundation Yayasan Ekuiti Nasional Amount due from related companies Ekuinas Capital Sdn Bhd 1,020, ,271 Bendahara 1 Sdn Bhd - 47,114 Ilmu Education Group Sdn Bhd 153,749 - Rancak Selera Sdn Bhd - 223,974 Integrated Food Group Sdn Bhd - 218,985 E-Cap (Internal) One Sdn Bhd 23 9,672 Cosmo Restaurants Sdn Bhd - 220,475 Revenue Valley Sdn Bhd 37,778 58,118 Lyndarahim Ventures Sdn Bhd 28,448 19,950 Alliance Cosmetics Group - 3,390 Icon Offshore Berhad 1,319 35,595 Cosmopoint Sdn Bhd 44,752 70,800 Unitar Capital Sdn Bhd - 38,525 Tekun Prima Sdn Bhd 42,400 42,400 Skim Jejak Jaya Sdn Bhd 2,650 - Tetap Kuasa Sdn Bhd 1,447,060-2,778,689 1,435,269 Amount due to a related company Hallmark Odyssey Sdn Bhd 37,537-37,537 - The above outstanding balances are unsecured, interest-free and repayable upon demand. 14 AUTHORISATION FOR ISSUE OF FINANCIAL STATEMENTS The financial statements have been authorised for issue in accordance with a resolution of the Board of Directors. 38 Ekuiti nasional berhad annual report 2014

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44 Ekuiti Nasional Berhad U Level 13 Surian Tower, No 1 Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Tel: Fax:

45 delivering performance Financial Statements 2014 E-CAP (INTERNAL) ONE SDN BHD

46

47 E-CAP (INTERNAL) ONE SDN BHD (Incorporated in Malaysia) Reports And Statutory Financial Statements For The Financial Year Ended 31 December 2014 Directors' Report 02 Statement by Directors 05 Statutory Declaration 05 Independent Auditors' Report 06 Statement of Comprehensive Income 08 Statement of Financial Position 09 Statement of Changes in Equity 10 Statement of Cash Flows 11 Notes to the Financial Statements 12

48 Directors' report The Directors hereby submit their report and the audited financial statements of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The principal activities of the Company are to carry on the business of an investment holding company, to invest in private equity investments and to acquire the shares of or invest in any company. There have been no significant changes in the nature of these activities during the financial year ended 31 December FINANCIAL RESULTS Net loss for the financial year 29,992,544 DIVIDEND No dividend has been paid, declared or proposed since the end of the previous financial year. The Directors do not recommend the payment of any final dividend for the financial year ended 31 December ISSUE OF SHARES During the financial year, the Company issued 88 ordinary shares at par value of 1 each and 157,040 redeemable preference shares of 0.01 each at an issue price of 100. The shares have been fully paid in cash. A summary of the shares issued by the Company during the financial year from 1 January 2014 to 31 December 2014 is as follows: Date of issue Type of share Purpose of issue Number of shares Par value Premium Terms of issue 30 November 2014 Preference Working capital 100, Cash, at December 2014 Ordinary Working capital Cash, at par 31 December 2014 Preference Working capital 57, Cash, at 100 The new shares issued during the financial year ranked pari passu in all respects with the existing shares of the Company. There were no other changes in the authorised, issued and fully paid capital of the Company during the financial year. REDEMPTION OF SHARES Details of the decrease in issued and paid up share capital is as disclosed in Note 10 of the financial statements. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements and notes to the financial statements. 2 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

49 directors' report DIRECTORS The Directors who have held office since the date of last report are as follows: Raja Tan Sri Dato Seri Arshad bin Raja Tun Uda Datuk Noriyah binti Ahmad Dato Abdul Rahman bin Ahmad In accordance with Article 66 of the Company s Articles of Association, Dato Abdul Rahman bin Ahmad shall retire from the Board in the forthcoming Annual General Meeting and being eligible, offers himself for re-election. DIRECTORS INTERESTS IN SHARES AND DEBENTURES According to the Register of Directors Shareholdings maintained by the Company in accordance with Section 134 of the Companies Act, 1965, none of the Directors in office at the end of the financial year held any interest in shares, warrants, share options and debentures in the Company or its related corporations during the financial year. DIRECTORS BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the date of last report, no Director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. STATUTORY INFOATION ON THE FINANCIAL STATEMENTS Before the financial statements of the Company were made out, the Directors took reasonable steps: (a) (b) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that there are no known bad debts that had been written off and that allowance need not be made for doubtful debts; and to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business, their values as shown in the accounting records of the Company have been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances: (a) (b) (c) (d) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Company inadequate to any substantial extent; or which would render the values attributed to current assets in the financial statements of the Company misleading; or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate; or not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Company misleading. EKUITI NASIONAL BERHAD ANNUAL REPORT

50 directors' report STATUTORY INFOATION ON THE FINANCIAL STATEMENTS (CONTINUED) No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve (12) months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Company to meet their obligations when they fall due. At the date of this report, there does not exist: (a) (b) any charge on the assets of the Company which has arisen since the end of the financial year which secures the liability of any other person; or any contingent liability of the Company which has arisen since the end of the financial year. At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. In the opinion of the Directors: (a) (b) the results of the Company s operations for the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Company for the financial year in which this report is made. IMMEDIATE HOLDING COMPANY AND ULTIMATE HOLDING FOUNDATION The Directors regard Ekuinas Capital Sdn Bhd, a company incorporated in Malaysia as the immediate holding company. The Directors regard Yayasan Ekuiti Nasional, a foundation incorporated in Malaysia, as the Company s ultimate holding foundation. AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with their resolution. RAJA TAN SRI DATO SERI ARSHAD BIN RAJA TUN UDA DIRECTOR DATO ABDUL RAHMAN BIN AHMAD DIRECTOR Kuala Lumpur 10 April EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

51 STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, Raja Tan Sri Dato Seri Arshad bin Raja Tun Uda and Dato Abdul Rahman bin Ahmad, being two of the Directors of E-Cap (Internal) One Sdn Bhd, state that, in the opinion of the Directors, the financial statements set out on pages 8 to 30 have been properly drawn up so as to give a true and fair view of the state of affairs of the Company as at 31 December 2014 and of the results and cash flows of the Company for the financial year ended on that date in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. Signed on behalf of the Board of Directors in accordance with their resolution. RAJA TAN SRI DATO SERI ARSHAD BIN RAJA TUN UDA DIRECTOR DATO ABDUL RAHMAN BIN AHMAD DIRECTOR Kuala Lumpur 10 April 2015 STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965 I, Mazhairul bin Jamaludin, being the Officer primarily responsible for the financial management of E-Cap (Internal) One Sdn Bhd, do solemnly and sincerely declare that the financial statements set out on pages 8 to 30 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, MAZHAIRUL BIN JAMALUDIN GROUP CHIEF FINANCIAL OFFICER Subscribed and solemnly declared by the above named Mazhairul bin Jamaludin at Kuala Lumpur before me, on 10 April COMMISSIONER FOR OATHS EKUITI NASIONAL BERHAD ANNUAL REPORT

52 INDEPENDENT AUDITORS REPORT TO THE MEMBER OF E-CAP (INTERNAL) ONE SDN BHD (Incorporated in Malaysia) (Company No: M) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of E-Cap (Internal) One Sdn Bhd on pages 8 to 30, which comprise the statement of financial position as at 31 December 2014 of the Company, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 13. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Company as of 31 December 2014 and of its financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. 6 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

53 INDEPENDENT AUDITORS REPORT TO THE MEMBER OF E-CAP (INTERNAL) ONE SDN BHD (Incorporated in Malaysia) (Company No: M) REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that, in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act. OTHER MATTERS This report is made solely to the member of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants DATO MOHAMMAD FAIZ BIN MOHAMMAD AZMI (No. 2025/03/16 (J)) Chartered Accountant Kuala Lumpur 10 April 2015 EKUITI NASIONAL BERHAD ANNUAL REPORT

54 STATEMENT OF COMPREHENSIVE INCOME Note 2014 INCOME Net unrealised (loss)/gain on investments at fair value through profit or loss (483,937,504) 281,796,747 Dividend income ,404,373 73,292,183 Interest income 21,408 64,552 Other income 55,312,254 - (14,199,469) 355,153, EXPENSES Management fees 12.3 (15,704,088) (20,000,000) Other expenses (88,987) (66,929,414) (Loss)/Profit before taxation 5 (29,992,544) 268,224,068 Taxation Total comprehensive (loss)/income and net (loss)/profit for the financial year (29,992,544) 268,224,068 The significant accounting policies and other explanatory notes are set out on pages 12 to 30 of these financial statements. 8 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

55 STATEMENT OF Financial position as at 31 DECEMBER 2014 Note 2014 NON-CURRENT ASSET Investments at fair value through profit or loss 7 949,905,671 1,423,582, CURRENT ASSETS Amount due from subsidiaries ,266,676 Cash and cash equivalents 8 105,905 12,118, ,905 15,384,870 CURRENT LIABILITIES Accruals 9 71,897, ,230,571 Amount due to immediate holding company ,904,093 20,336,406 Amount due to a related company ,672 Amount due to subsidiaries ,308,060-86,109, ,576,649 NET CURRENT LIABILITIES (86,003,616) (132,191,779) 863,905,055 1,291,390,711 FINANCED BY: Share capital 10 39,069 78,731 Share premium ,179, ,635,628 Capital redemption reserve 78,664 37,344 Retained earnings 478,605, ,639, ,905,055 1,291,390,711 The significant accounting policies and other explanatory notes are set out on pages 12 to 30 of these financial statements. EKUITI NASIONAL BERHAD ANNUAL REPORT

56 STATEMENT OF changes in equity for the financial year ended 31 DECEMBER 2014 Note Issued and fully paid ordinary shares of 1 each Number of shares Share capital Issued and fully paid redeemable preference shares of 0.01 each Non-distributable Distributable Number of shares Share capital Share premium Capital redemption reserve Retained earnings At 1 January ,827,139 78, ,635,628 37, ,639,008 1,291,390,711 Issuance of shares during the financial year 10, ,040 1,570 15,702, ,704,088 Redemption of shares during the financial year 10, (4,132,002) (41,320) (413,158,880) 41,320 (41,320) (413,200,200) Total comprehensive loss for the financial year (29,992,544) (29,992,544) At 31 December ,852,177 38, ,179,178 78, ,605, ,902,055 Total At 1 January ,193, ,938 1,119,272, ,452,284 1,359,837,183 Issuance of shares during the financial year 10, ,727 3,677 36,769, ,772,760 Redemption of shares during the financial year 10, (3,734,433) (37,343) (373,405,957) 37,344 (37,344) (373,443,300) Total comprehensive income for the financial year ,224, ,224,068 At 31 December ,827,139 78, ,635,628 37, ,639,008 1,291,390,711 The significant accounting policies and other explanatory notes are set out on pages 12 to 30 of these financial statements. 10 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

57 STATEMENT OF cash flows CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit before taxation Note (29,992,544) 268,224,068 Adjustments for: Dividend income (414,404,373) (73,292,183) Interest income (21,408) (64,552) Net unrealised loss/(gain) on investments at fair value through profit or loss 483,937,504 (281,796,747) Operating profit/(loss) before working capital changes 39,519,179 (86,929,414) Changes in working capital: Accruals (55,333,226) 66,865,155 Amount due (from)/to immediate holding company (17,432,313) 25,236,740 Amount due to/(from) subsidiaries 14,574,736 (5,173,958) Amount due to a related company (9,649) (41,048) Cash flows used in operating activities (18,681,273) (42,525) Dividend received 414,404,373 73,292,183 Interest received 21,408 64,552 Net cash flows generated from operating activities 395,744,508 73,314,210 CASH FLOWS FROM INVESTING ACTIVITIES Redemption by subsidiaries - 289,756,051 Additional capital call for investment 7.1 (10,260,685) (14,365,103) Net cash flows (used in)/generated from investing activities (10,260,685) 275,390,948 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issuance of ordinary shares Proceeds from the issuance of redeemable preference shares 15,704,000 36,772,700 Redemption of share capital (413,200,200) (373,443,300) Net cash flows used in financing activities (397,496,112) (336,670,540) NET CHANGE IN CASH AND CASH EQUIVALENTS DURING THE FINANCIAL YEAR (12,012,289) 12,034,618 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 12,118,194 83,576 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 8 105,905 12,118,194 The significant accounting policies and other explanatory notes are set out on pages 12 to 30 of these financial statements. EKUITI NASIONAL BERHAD ANNUAL REPORT

58 NOTES TO THE FINANCIAL STATEMENTS The principal activities of the Company are to carry on the business of an investment holding company, to invest in private equity investments and to acquire the shares of or invest in any company. There have been no significant changes in the nature of these activities during the financial year. The Company is a private limited company, incorporated and domiciled in Malaysia. The address of the registered office of the Company is: 12th Floor, Bangunan Setia 1, 15 Lorong Dungun, Bukit Damansara, Kuala Lumpur. The principal place of business of the Company is: Level 13, Surian Tower, No 1, Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Darul Ehsan. The principal accounting policies applied in preparing the financial statements are set out below. These policies have been applied to all years presented, unless otherwise stated. 1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements of the Company have been prepared in accordance with the Malaysian Financial Reporting Standards ( MFRS ), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The financial statements have been prepared under the historical cost convention, as modified by the investments designated at fair value through profit or loss. The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported year. It also requires Directors to exercise their judgement in the process of applying the Company s accounting policies. Although these estimates and judgement are based on the Directors best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3. The Company recorded a net loss of 29,992,544 for the financial year ended 31 December 2014 and as of that date, the Company recorded net current liabilitites of 86,003,616. The immediate holding company, Ekuinas Capital Sdn Bhd, has indicated its intention to provide continuous financial support to the Company so as to enable the Company to meet its liability as and when they fall due and to carry on its business without any significant curtailment of its operations. In view of the foregoing, the Directors consider that it is appropriate to prepare the financial statements of the Company on a going concern basis. 12 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

59 NOTES TO THE FINANCIAL STATEMENTS 1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) 1.1 Standards, amendments to published standards and interpretations that are applicable and effective The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Company s financial year beginning on or after 1 January 2014 are as follows: Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities Amendments to MFRS 136 Recoverable Amount Disclosures for Non-Financial Assets Amendments to MFRS 139 Novation of Derivatives and Continuation of Hedge Accounting Amendments to MFRS 10, MFRS 12 and MFRS 127 Investment entities IC Interpretation 21 Levies Apart from the new presentation and disclosure requirements as disclosed in the financial statements, the adoption of the above standards and amendments to published standards does not have any other material impact on the Company s financial statements. 1.2 Standards, amendments to published standards and interpretations to existing standards that are applicable to the Company but not yet effective MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 "Financial Instruments: Recognition and Measurement". The complete version of MFRS 9 was issued in November MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. There is now a new expected credit losses model on impairment for all financial assets that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. Unless otherwise disclosed, the above standards, amendments to published standards and interpretations to existing standards are not anticipated to have any significant impact on the Company s financial statements in the year of initial application. EKUITI NASIONAL BERHAD ANNUAL REPORT

60 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES 2.1 INVESTMENT ENTITY AND CONSOLIDATION Investment Entity The Company has been deemed to meet the definition of an Investment Entity per MFRS 10 Consolidated Financial Statements as the following conditions exist: (a) (b) (c) The Company obtained funds from its investor for the purpose of providing investment management services; The Company commits to its investor that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and The performance of investments made through its subsidiaries are measured and evaluated on a fair value basis. The Company being an Investment Entity is exempted from preparing consolidated financial statements Subsidiaries The Company does not have any other subsidiaries other than those determined to be controlled subsidiary investments. Controlled subsidiary investments are measured at fair value through profit or loss and not consolidated, in accordance with MFRS 10. The fair value of controlled subsidiary investments is determined on a consistent basis to all other investments measured at fair value through profit or loss, and as described in Note 4.7. Controlled subsidiary investments include the special purpose entities (SPEs) over which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies. Subsidiaries (SPEs) are incorporated for the purpose of holding underlying investments (the portfolio companies ) on behalf of the Company; as new SPEs are incorporated for each investment, there are no business combinations. The SPEs have no operations other than their respective investment in portfolio companies and providing a vehicle for the onward sale of a portfolio investment. The SPEs are also reflected at fair value, with the key fair value driver being the investment in the underlying portfolio company investments that the SPEs hold on behalf of the Company. None of the SPEs required consolidation as the SPEs are not deemed to be providing investment related services, as defined by MFRS 10. Where the Company is deemed to control an underlying portfolio company, whereby the control be via voting rights or through the ability to direct the relevant activities in return for access to a significant portion of the variable gains and losses derived from those relevant activities, the underlying portfolio company and its results are also not consolidated and are instead reflected at fair value through the profit or loss (through the reflection of the respective SPE that holds the underlying portfolio company value in the Company s financial statements). Movements in the fair value of the Company s portfolio companies may expose the Company to potential gains or losses in the income statement Associates An associate is an entity, including an unincorporated entity such as partnership, over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. Investments that are held as part of the Company's investment portfolio are carried in the statement of financial position at fair value through profit or loss even though the Company may have significant influence over those companies. This treatment is permitted by MFRS 128, which allows investments that are held by Investment Entities to be recognised and measured as at fair value through profit or loss in accordance with MFRS 13, with changes in fair value recognised in the statement of comprehensive income in the period of the change. 14 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

61 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 FINANCIAL ASSETS Financial assets designated at fair value through profit or loss Classification Financial assets designated at fair value through profit or loss at inception are financial instruments that are not classified as held for trading. The Company s financial assets designated at fair value through profit or loss comprise of investments at fair value through profit or loss in the statement of financial position Recognition and initial measurement Financial assets designated at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed as incurred in the income statement Subsequent measurement Subsequent to initial recognition, all financial assets designated at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value are presented in the income statement in the year in which they arise De-recognition Loans and receivables A financial asset is de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership Classification Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than twelve (12) months after the end of the reporting year. These are classified as non-current assets. The Company s loans and receivables comprise of cash and cash equivalents in the statement of financial position Recognition and initial measurement Financial assets are initially recognised at fair value plus transaction costs, for all financial assets not carried at fair value through profit or loss Subsequent measurement Loans and receivables are subsequently carried at amortised cost using the effective interest method. EKUITI NASIONAL BERHAD ANNUAL REPORT

62 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 FINANCIAL ASSETS (CONTINUED) Loans and receivables (continued) Subsequent measurement impairment of financial assets The Company assesses at the end of the reporting year whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If in a subsequent year, the amount of the impairment loss decrease and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in the income statement. As at the end of the reporting year, there is no recognition of impairment in the income statement De-recognition 2.3 CASH AND CASH EQUIVALENTS A financial asset is de-recognised when the rights to receive cash flows from loans and receivables have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Cash and cash equivalents comprise cash at bank and deposits which are subject to an insignificant risk of changes in value. 2.4 PROVISIONS Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligations, and when a reliable estimate of the amount can be made. 2.5 FINANCIAL LIABILITIES Classification Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Company becomes party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. The Company s financial liabilities include accruals, amount due to immediate holding company, amount due to a related company and amount due to subsidiaries in the statement of financial position Recognition and measurement Financial liabilities are recognised initially at fair value plus directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest method. 16 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

63 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 FINANCIAL LIABILITIES (continued) De-recognition 2.6 SHARE CAPITAL A financial liability is derecognised when the obligation under the liability is extinguished when an existing financial liability is replaced by another from the same party on substantially different terms, or the term of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement. Ordinary shares are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular instrument. Distributions to holders of a financial instrument classified as an equity instrument are charged directly to equity. 2.7 REVENUE RECOGNITION Dividend income Dividend income is recognised when the right to receive payment is established Interest income Interest income is recognised on a time proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income shall accrue to the Company. 2.8 CARRIED INTEREST Carried interest represents the fees payable to the Fund Management Company and is computed and accrued at each financial year end based on the valuation of the investments in the Fund s portfolio of companies, after accounting for appropriate outflow payments/ inflow receipts in accordance with the terms stated in the Global Fund Management Agreement. Any increase or decrease in carried interest is recognised in the income statement. 2.9 INCOME TAXES Current tax expense is determined according to Malaysian tax laws and includes all taxes based upon the taxable profits. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Tax rates enacted or substantively enacted by the reporting year are used to determine deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. EKUITI NASIONAL BERHAD ANNUAL REPORT

64 NOTES TO THE FINANCIAL STATEMENTS 3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of the Company s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the end of the reporting year. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. In the process of applying the Company s accounting policies, the Directors and management have made the following judgements which have the most significant effect on the amounts recognised in the financial statements: (a) Valuation of unquoted investments The Company carries its investments at fair value, with changes in fair values being recognised in the income statement. The Company estimates the fair values of its unquoted investments based on the net assets valuation method and enterprise valuation method as recommended by the International Private Equity and Venture Capital Valuation Guidelines. Based on management s estimates and judgements, the Company applied a marketability and liquidity discount rate on the selected comparable companies earning multiples in deriving the fair value of the unquoted investments. Where expectations differ from original estimates, the difference will impact the fair value of the unquoted investments. (b) Carried interest Carried interest represents the amount payable to Ekuiti Nasional Berhad, the Fund Management Company, based on the valuation of investments in the Fund s portfolio of companies. Significant judgements are required in determining the extent of the carried interest expense to be recognised which is dependent on the valuation of the Fund s portfolio. Where expectations differ from original estimates, the difference will impact the recognition of carried interest. 4 FINANCIAL RISK MANAGEMENT 4.1 Financial risk management objectives and policies The Company s overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. Financial risk management is carried out through risk reviews, internal control systems and adherence to the Company s financial risk management policies. The Board reviews these risks based on the approved treasury policies and investment guidelines, which cover the management of these risks. The Company is exposed to market price risks, credit risk and liquidity risk. 4.2 Market price risks The Company s exposure to market price risk is limited to those unquoted investments in which its fair value is determined using the enterprise valuation methods as recommended by the International Private Equity and Venture Capital Valuation Guidelines to derive a fair value based on multiples of comparable listed companies. An unquoted investment is exposed to market price risk of the comparable companies. The impact of a higher/lower selected comparable companies discounted earnings multiples is disclosed in Note EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

65 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.3 Interest rate risk The Company's interest rate risk arises from cash and cash equivalents. At 31 December 2014, if interest rates had been 100 basis points higher/lower with all other variables held constant, post-tax profit for the financial year would have been nil (2013: 120,000) lower/higher. 4.4 Credit risk The Company s exposure to credit risk is limited as the Company is an investment holding company. The Company s exposure to credit risk is on the carrying amount of cash and cash equivalents. 4.5 Liquidity risk The Company s exposure to liquidity risk is limited as the Company is an investment holding company with the cash management and treasury managed by Ekuiti Nasional Berhad ( Ekuinas ), a related company. Furthermore, the Company has the ability to obtain funding through the immediate holding company to ensure settlement of all transaction costs and expenses. The Company s exposure to liquidity risk is on the undiscounted contractual payment of accruals, amount due to immediate holding company, amount due to a related company and amount due to subsidiaries all of which are short term and repayable within one year. The Company maintains a level of cash and cash equivalents deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. 4.6 Capital management The Company s objectives when managing capital are to safeguard the Company s ability to continue as a going concern in order to provide returns to the shareholder and to maintain an optimal capital structure to reduce the cost of capital. The Company is not subject to any externally imposed capital requirements. 4.7 Fair value estimation of the financial instruments Financial instruments comprise financial assets and financial liabilities. Fair value is the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in an orderly transaction between market participants at the measurement date. The information presented herein represents the estimates of fair values as at the end of the reporting year. Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates. Methodologies and assumptions had been used in deriving the fair values of the investments at fair value through profit or loss at the end of the reporting year as disclosed in Note 3 to the financial statements. The carrying amounts of current assets and current liabilities approximate their fair value due to the relatively short term nature of these financial instruments. EKUITI NASIONAL BERHAD ANNUAL REPORT

66 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.8 Fair value hierarchy The different levels have been defined as follows: (i) (ii) (iii) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs that have been applied in the models to value the respective asset or liability. The following table presents the Company s financial instruments that are measured at fair value, other than the short term financial instruments: Level 1 Level 2 Level 3 At 31 December 2014 Financial assets Investments at fair value through profit or loss ,905, ,905,671 Total At 31 December 2013 Financial assets Investments at fair value through profit or loss - - 1,423,582,490 1,423,582,490 Investments classified within Level 3 have significant unobservable inputs, as they are traded infrequently. As observable prices are not available for this investment, the fair value of the unquoted investment is based on valuation methods as recommended by the International Private Equity and the Venture Capital Valuation Guidelines, namely net assets valuation method and enterprise valuation method. The main input into the net assets valuation method for these unquoted investments is the net assets value of the investment. The main input into the enterprise valuation method for this unquoted investment include earnings before interest, taxes, depreciation and amortisation ( EBITDA ), comparable companies earning multiples and marketability discount. In assessing fair value, management of Ekuiti Nasional Berhad (fund management company) performs quarterly valuation assessments of all portfolio companies and these will be tabled to the Board of Directors on a quarterly basis. 20 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

67 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.8 Fair value hierarchy (continued) The following table presents the movement in Level 3 financial instruments for the financial year ended 31 December 2014: Investments at fair value through profit or loss At 1 January 1,423,582,490 1,417,176,691 Additional capital call for investments 10,260,685 14,365,103 Redemption of shares (289,756,051) Net unrealised (loss)/gain on investments at fair value through profit or loss (483,937,504) 281,796,747 At 31 December 949,905,671 1,423,582,490 Significant unobservable inputs The following table discloses the valuation techniques and significant unobservable inputs by the Company for assets recognised at fair value and classified as Level 3 along with the range of values used for those significant unobservable inputs. Asset Investments at fair value through profit or loss Fair value at Valuation technique Significant unobservable inputs Range of unobservable inputs Reasonable possible shift Change in valuation 897,605,671 NAV NAV - +/-5% +/- 44,880,000 52,300,000 Enterprise valuation Discounted multiple 10x -20x +/-5% +/- 2,615,000 Valuation process applied by the Company for Level 3 fair value The Company has an established framework in respect to the measurement of fair values of financial instruments. This includes a team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to senior management. The team regularly reviews significant unobservable inputs and valuation adjustments. EKUITI NASIONAL BERHAD ANNUAL REPORT

68 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.9 Financial instruments by category At 31 December 2014 Loans and receivables Designated at fair value through profit or loss Financial assets Investments at fair value through profit or loss - 949,905, ,905,671 Cash and cash equivalents 105, ,905 Total 105, ,905, ,011,576 Total Financial liabilities Accruals 71,897,345-71,897,345 Amount due to immediate holding company 2,904,093-2,904,093 Amount due to a related company Amount due to subsidiaries 11,308,060-11,308,060 Total 86,109,521-86,109,521 At 31 December 2013 Financial assets Investments at fair value through profit or loss - 1,423,582,490 1,423,582,490 Amount due from subsidiaries 3,266,676-3,266,676 Cash and cash equivalents 12,118,194-12,118,194 Total 15,384,870 1,423,582,490 1,438,967,360 Financial liabilities Accruals 127,230, ,230,571 Amount due to immediate holding company 20,336,406-20,336,406 Amount due to a related company 9,672-9,672 Total 147,576, ,576, EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

69 NOTES TO THE FINANCIAL STATEMENTS 5 (Loss)/PROFIT BEFORE TAXATION (Loss)/Profit before taxation is arrived at after charging: Auditors remuneration 24,850 21, TAXATION Current tax: Malaysian taxation Reconciliation between tax expense and the product of accounting (loss)/profit multiplied by the Malaysian tax rate is as follows: (Loss)/profit before taxation (29,992,544) 268,224, Tax calculated at rate 25% (7,498,136) 67,056,017 Income not subject to tax (117,434,509) (88,788,371) Expenses not deductible 124,932,645 21,732,354 Taxation - - On 26 November 2010, the Ministry of Finance granted income tax exemption on the statutory business income for a period of five (5) years commencing from year of assessment 2009 until 2014 for the Company. On 5 August 2013, the exemption was extended for an additional period of 5 years commencing from year of assessment 2014 until 2018 for the company. 7 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Investment in subsidiaries (Note 7.1) 897,605,671 1,377,458,949 Investment in an associate (Note 7.2) 52,300,000 46,123, ,905,671 1,423,582,490 EKUITI NASIONAL BERHAD ANNUAL REPORT

70 NOTES TO THE FINANCIAL STATEMENTS 7 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) 7.1 Investment in subsidiaries Unquoted shares, at fair value: At 1 January 1,377,458,949 1,357,145,243 Additional capital call for investments 10,260,685 14,365,103 Redemption of shares - (289,756,051) Net unrealised (loss)/gain on investments at fair value (490,113,963) 295,704,654 At 31 December 897,605,671 1,377,458, The details of the investment in subsidiaries are as follows: Company s effective interest Name Place of incorporation Principal activity Relationship 2014 % 2013 % Bendahara 1 Sdn Bhd* Malaysia Investment holding Subsidiary Integrated Food Group Malaysia Investment holding Subsidiary Sdn Bhd** Simbol Minda Sdn Bhd*** Malaysia Investment holding Subsidiary Hallmark Odyssey Sdn Bhd* Malaysia Investment holding Subsidiary Subsidiary of Simbol Minda Sdn Bhd Ilmu Education Group Sdn Bhd*** Malaysia Investment holding Subsidiary Subsidiaries of Integrated Food Group Sdn Bhd Prinsip Lagenda Sdn Bhd** Malaysia Investment holding Subsidiary Awana Setia Sdn Bhd** Malaysia Investment holding Subsidiary Rancak Selera Sdn Bhd** Malaysia Investment holding Subsidiary CoolBlog Apps Sdn Bhd** Malaysia Investment holding Subsidiary Subsidiary of Hallmark Odyssey Sdn Bhd Icon Offshore Berhad*@ Malaysia Investment holding Subsidiary * Audited by PricewaterhouseCoopers, Malaysia ** Audited by KPMG, Malaysia *** Audited by Ernst & Young, Listed on the Bursa Malaysia Stock Exchange 24 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

71 NOTES TO THE FINANCIAL STATEMENTS 7 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) 7.2 Investment in an associate Unquoted shares, at fair value: At 1 January 46,123,541 60,031,448 Net unrealised gain/(loss) on investment at fair value through profit or loss 6,176,459 (13,907,907) At 31 December 52,300,000 46,123, The details of the investment in an associate are as follows: Name Forma South East Asia Holdings **** Place of incorporation Principal activity Relationship Republic of Mauritius Company s effective interest 2014 % 2013 % Investment holding Associate **** Audited by another audit firm 8 CASH AND CASH EQUIVALENTS Cash at bank 105, ,194 Deposit with licensed financial institutions - 12,000, ,905 12,118,194 Bank balances are deposits held at call with licensed financial institutions. The weighted average effective interest rate per annum of the deposits with licensed financial institution as at 31 December 2014 is 3.00% (2013: 3.15%) with an average maturity period of 30 days (2013: Nil). 9 ACCRUALS Carried interest 71,847, ,159,752 Other accruals 49,850 70, ,897, ,230,571 Accruals are non-interest bearing. EKUITI NASIONAL BERHAD ANNUAL REPORT

72 NOTES TO THE FINANCIAL STATEMENTS 10 SHARE CAPITAL Authorised Issued and fully paid Ordinary shares of 1 each At 1 January ,000, Issuance of shares during the financial year - 88 At 31 December ,000, Redeemable preference shares of 0.01 each At 1 January ,000 78,272 Issuance of shares during the financial year - 1,570 Redemption of shares during the financial year - (41,320) At 31 December ,000 38,522 Total issued and fully paid capital 100,090,000 39,069 Ordinary shares of 1 each At 1 January ,000, Issuance of shares during the financial year - 60 At 31 December ,000, Redeemable preference shares of 0.01 each At 1 January , ,938 Issuance of shares during the financial year - 3,677 Redemption of shares during the financial year - (37,343) At 31 December ,000 78,272 Total issued and fully paid capital 100,090,000 78,731 The main features of the redeemable preference shares ( RPS ) are as follows: The holders of the shares shall be entitled to any dividend declared. The RPS shall rank pari passu among themselves and in priority of ordinary shares. The holders of the RPS shall be entitled to receive all notices, accounts and report which holder of the ordinary shares are entitled to. The holders of the RPS shall only be entitled to vote at the meetings convened for the purpose of transacting to the following items of the business: (a) (b) (c) Variation, whether directly or indirectly of the rights attached to the RPS Winding up of the Company Such other circumstances as may be expressly provided under law from time to time in respect of preference shares 26 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

73 NOTES TO THE FINANCIAL STATEMENTS 10 SHARE CAPITAL (CONTINUED) The main features of the redeemable preference shares ( RPS ) are as follows (continued): Subject to the Companies Act, 1965, the Company shall have the right at any time, to redeem all or part of the RPS at a price of 100 per RPS ( Redemption Amount ). The RPS are not convertible into ordinary shares or any other classes of shares in the Company. The RPS are classified as equity as they are redeemable but only at the Company s option, and any dividends are discretionary. During the financial year, the Company issued 88 ordinary shares at par value of 1 each and 157,040 redeemable preference shares of 0.01 each at an issue price of 100. The shares have been fully paid in cash. A summary of the shares issued by the Company during the financial year from 1 January 2014 to 31 December 2014 is as follows: Date of issue Type of share Purpose of issue Number of shares Par value Premium Terms of issue 30 November 2014 Preference Working capital 100, Cash, at December 2014 Ordinary Working capital Cash, at par 31 December 2014 Preference Working capital 57, Cash, at 100 During the financial year, the Company redeemed 4,132,002 redeemable preference shares of 0.01 each at an issue price of 100. The shares have been fully paid in cash. A summary of the shares redeemed by the Company during the financial year ended 31 December 2014 is as follows: Date of redemption Type of share 31 December 2014 Redeemable preference shares Purpose of redemption Number of shares Par value Premium Terms of issue Capital repayment 4,132, Cash, at 100 EKUITI NASIONAL BERHAD ANNUAL REPORT

74 NOTES TO THE FINANCIAL STATEMENTS 11 SHARE PREMIUM At 1 January 782,635,628 1,119,272,562 Issuance of shares during the financial year 15,702,430 36,769,023 Redemption of shares during the financial year (413,158,880) (373,405,957) At 31 December 385,179, ,635, SIGNIFICANT RELATED PARTY DISCLOSURES Parties are considered related if the party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions The related parties of, and their relationship with the Company, are as follows: Related party Yayasan Ekuiti Nasional Ekuinas Capital Sdn Bhd Ekuiti Nasional Berhad Bendahara 1 Sdn Bhd Simbol Minda Sdn Bhd Integrated Food Group Sdn Bhd Hallmark Odyssey Sdn Bhd Forma South East Asia Holdings Relationship Ultimate holding foundation which is formed by the Government of Malaysia Immediate holding company Related company Subsidiary company Subsidiary company Subsidiary company Subsidiary company Associate company 28 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

75 NOTES TO THE FINANCIAL STATEMENTS 12 SIGNIFICANT RELATED PARTY DISCLOSURES (CONTINUED) 12.2 Key management personnel Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Company either directly or indirectly. The key management personnel of the Company includes all the Directors of the Company who make certain critical decisions in relation to the strategic direction of the Company. The Company has no key management personnel compensation during the financial year Significant related party transactions In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions. Management fees Ekuiti Nasional Berhad (15,704,088) (20,000,000) Treasury fees Ekuiti Nasional Berhad (3,204) (9,682) Dividend income Forma South East Asia Holdings 4,787,734 6,012,996 Hallmark Odyssey Sdn Bhd 387,839,210 - Bendahara 1 Sdn Bhd 21,777,429 67,279, ,404,373 73,292,183 EKUITI NASIONAL BERHAD ANNUAL REPORT

76 NOTES TO THE FINANCIAL STATEMENTS 12 SIGNIFICANT RELATED PARTY DISCLOSURES (CONTINUED) 12.4 Significant related party balances Included in the Company s statement of financial position are the following significant related party balances: Amount due to immediate holding company Ekuinas Capital Sdn Bhd (2,904,093) (20,336,406) Amount due (to)/from subsidiaries Simbol Minda Sdn Bhd (67) 1,512,433 Integrated Food Group Sdn Bhd (373,952) 1,752,817 Hallmark Odyssey Sdn Bhd (10,934,041) 1,426 (11,308,060) 3,266,676 Amount due to a related company Ekuiti Nasional Berhad (23) (9,672) The above outstanding balances are unsecured, interest-free, and repayable upon demand. 13 AUTHORISATION FOR ISSUE OF FINANCIAL STATEMENTS The financial statements have been authorised for issue in accordance with a resolution of the Board of Directors. 30 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

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80 Ekuiti Nasional Berhad U Level 13 Surian Tower, No 1 Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Tel: Fax:

81 delivering performance Financial Statements 2014 E-CAP (INTERNAL) two SDN BHD

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83 E-CAP (INTERNAL) TWO SDN BHD (Incorporated in Malaysia) Reports And Statutory Financial Statements For The Financial Year Ended 31 December 2014 Directors' Report 02 Statement by Directors 05 Statutory Declaration 05 Independent Auditors' Report 06 Statement of Comprehensive Income 08 Statement of Financial Position 09 Statement of Changes in Equity 10 Statement of Cash Flows 11 Notes to the Financial Statements 12

84 directors' report for the financial year ended 31 december 2014 The Directors hereby submit their report and the audited financial statements of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The principal activities of the Company are to carry on the business of an investment holding company, to invest in private equity investments and to acquire the shares of or invest in any company. There have been no significant changes in the nature of these activities during the financial year ended 31 December FINANCIAL RESULTS Net loss for the financial year 2,030,231 DIVIDEND No dividend has been paid, declared or proposed since the previous financial year. The Directors do not recommend the payment of any final dividend for the financial year ended 31 December ISSUE OF SHARES During the financial year, the Company issued 88 ordinary shares at par value of 1 each and 986,911 preference shares of 0.01 each at an issue price of 100. The shares have been fully paid in cash. A summary of the shares issued by the Company during the financial year from 1 January 2014 to 31 December 2014 is as follows: Date of issue Type of share Purpose of issue Number of shares Par value Premium Terms of issue 30 June 2014 Ordinary Working capital Cash, at par 30 June 2014 Preference Working capital 345, Cash, at December 2014 Ordinary Working capital Cash, at par 31 December 2014 Preference Working capital 641, Cash, at 100 The new shares issued during the financial year ranked pari passu in all respects with the existing shares of the Company. REDEMPTION OF SHARES Details of the decrease in issued and paid up share capital is as disclosed in Note 8 in the financial statement. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements and notes to the financial statements. 2 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

85 directors' report for the financial year ended 31 december 2014 DIRECTORS The Directors who have held office since the date of last report are as follows: Dato Abdul Rahman bin Ahmad Syed Yasir Arafat bin Syed Abd Kadir In accordance with Article 66 of the Company s Article of Association, there will be no retirement by rotation in the subsequent Annual General Meeting since the number of directors being in office at the end of the financial year is only two. DIRECTORS INTERESTS IN SHARES AND DEBENTURES According to the Register of Directors Shareholdings maintained by the Company in accordance with Section 134 of the Companies Act, 1965, none of the Directors in office at the end of the financial year held any interest in shares, warrants, share options and debentures in the Company or its related corporations during the financial year. DIRECTORS BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the date of last report, no Director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. STATUTORY INFOATION ON THE FINANCIAL STATEMENTS Before the financial statements of the Company were made out, the Directors took reasonable steps: (a) (b) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that there are no known bad debts that had been written off and that allowance need not be made for doubtful debts; and to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business, their values as shown in the accounting records of the Company have been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances: (a) (b) (c) (d) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Company inadequate to any substantial extent; or which would render the values attributed to current assets in the financial statements of the Company misleading; or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate; or not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Company misleading. EKUITI NASIONAL BERHAD ANNUAL REPORT

86 directors' report for the financial year ended 31 december 2014 STATUTORY INFOATION ON THE FINANCIAL STATEMENTS (CONTINUED) No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve (12) months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Company to meet their obligations when they fall due. At the date of this report, there does not exist: (a) (b) any charge on the assets of the Company which has arisen since the end of the financial year which secures the liability of any other person; or any contingent liability of the Company which has arisen since the end of the financial year. At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. In the opinion of the Directors: (a) (b) the results of the Company s operations for the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Company for the financial year in which this report is made. IMMEDIATE HOLDING COMPANY AND ULTIMATE HOLDING FOUNDATION The Directors regard Ekuinas Capital Sdn Bhd, a company incorporated in Malaysia as the immediate holding company. The Directors regard Yayasan Ekuiti Nasional, a foundation incorporated in Malaysia, as the Company s ultimate holding foundation. AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with their resolution. DATO ABDUL RAHMAN BIN AHMAD DIRECTOR SYED YASIR ARAFAT BIN SYED ABD KADIR DIRECTOR Kuala Lumpur 10 April EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

87 STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, Dato Abdul Rahman bin Ahmad and Syed Yasir Arafat bin Syed Abd Kadir, being two of the Directors of E-Cap (Internal) Two Sdn Bhd, state that, in the opinion of the Directors, the financial statements set out on pages 8 to 30 have been properly drawn up so as to give a true and fair view of the state of affairs of the Company as at 31 December 2014 and of the results and cash flows of the Company for the financial year ended on that date in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. Signed on behalf of the Board of Directors in accordance with their resolution. DATO ABDUL RAHMAN BIN AHMAD DIRECTOR SYED YASIR ARAFAT BIN SYED ABD KADIR DIRECTOR Kuala Lumpur 10 April 2015 STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965 I, Mazhairul bin Jamaludin, being the Officer primarily responsible for the financial management of E-Cap (Internal) Two Sdn Bhd, do solemnly and sincerely declare that the financial statements set out on pages 8 to 30 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, MAZHAIRUL BIN JAMALUDIN GROUP CHIEF FINANCIAL OFFICER Subscribed and solemnly declared by the above named Mazhairul bin Jamaludin at Kuala Lumpur before me, on 10 April COMMISSIONER FOR OATHS EKUITI NASIONAL BERHAD ANNUAL REPORT

88 INDEPENDENT AUDITORS REPORT TO THE MEMBER OF E-CAP (INTERNAL) TWO SDN BHD (Incorporated in Malaysia) (Company No: X) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of E-Cap (Internal) Two Sdn Bhd on pages 8 to 30, which comprise the statement of financial position as at 31 December 2014 of the Company, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 11. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Company as of 31 December 2014 and of its financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. 6 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

89 INDEPENDENT AUDITORS REPORT TO THE MEMBER OF E-CAP (INTERNAL) TWO SDN BHD (Incorporated in Malaysia) (Company No: X) REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that, in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act. OTHER MATTERS This report is made solely to the member of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants DATO MOHAMMAD FAIZ BIN MOHAMMAD AZMI (No. 2025/03/16 (J)) Chartered Accountant Kuala Lumpur 10 April 2015 EKUITI NASIONAL BERHAD ANNUAL REPORT

90 STATEMENT OF COMPREHENSIVE INCOME INCOME Note 2014 Net unrealised (loss)/gain on investments at fair value through profit or loss 7 (78,327,995) 112,253,644 Dividend income ,509,755 - Interest income ,409,954 4,853,460 Other income 802,329 - EXPENSES ,394, ,107,104 Management fees 10.3 (20,000,000) (20,000,000) Interest expense Other expenses (2,409,954) (4,853,460) (14,320) (18,448,413) (Loss)/profit before taxation 5 (2,030,231) 73,805,231 Taxation Total comprehensive (loss)/income and net (loss)/profit for the financial year (2,030,231) 73,805,231 The significant accounting policies and other explanatory notes are set out on pages 12 to 30 of these financial statements. 8 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

91 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014 Note 2014 NON-CURRENT ASSETS Investments at fair value through profit or loss 7 327,150, ,902,438 Advance to an associate ,154, ,150, ,056,928 CURRENT ASSETS Amount due from immediate holding company ,250,064 Amount due from a related company ,783, ,000 Amount due from subsidiaries ,024, ,807,346 1,650,064 CURRENT LIABILITIES Accruals 21,149,649 21,949,571 Amount due to immediate holding company ,871,399 - Amount due to a related company ,749,933 - Amount due to an associate ,352,494 1,573, ,123,535 23,523,103 NET CURRENT LIABILITIES (26,316,189) (21,873,039) 300,834, ,183,889 FINANCED BY: Share capital 8 21,817 21,646 Share premium 9 215,084, ,249,474 Capital redemption reserve 9,786 - Retained earnings 85,718,262 87,758, ,834, ,029,399 NON-CURRENT LIABILITY Advance from immediate holding company ,154, ,834, ,183,889 The significant accounting policies and other explanatory notes are set out on pages 12 to 30 of these financial statements. EKUITI NASIONAL BERHAD ANNUAL REPORT

92 STATEMENT OF CHANGES IN EQUITY Note Issued and fully paid ordinary shares of 1 each Number of shares Share capital Issued and fully paid redeemable preference shares of 0.01 each Non-distributable Distributable Number of shares Share capital Share premium Capital redemption reserve Retained earnings At 1 January ,142,709 21, ,249,474-87,758, ,029,399 Issuance of shares during the financial year 8, ,911 9,869 98,681, ,691,188 Redemption of shares during the financial year 8,9 - - (978,557) (9,786) (97,845,914) 9,786 (9,786) (97,855,700) Total comprehensive loss for the financial year (2,030,231) (2,030,231) At 31 December ,151,063 21, ,084,791 9,786 85,718, ,834,656 Total At 1 January ,064 9,001 89,997,400-13,953, ,959,517 Issuance of shares during the financial year 8, ,242,645 12, ,252, ,264,651 Total comprehensive income for the financial year ,805,231 73,805,231 At 31 December ,142,709 21, ,249,474-87,758, ,029,399 The significant accounting policies and other explanatory notes are set out on pages 12 to 30 of these financial statements. 10 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

93 STATEMENT OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit before taxation Adjustments for: Note (2,030,231) 73,805,231 Net unrealised loss/(gain) on investments at fair value through profit or loss 78,327,995 (112,253,644) Operating profit/(loss) before working capital changes 76,297,764 (38,448,413) Changes in working capital: Accruals (799,922) 18,368,437 Amount due from/(to) immediate holding company 327,121,463 (1,250,064) Amount due from/(to) a related company 2,366,943 (5,400,000) Amount due from subsidiaries (331,024,296) - Amount due to an associate 6,778,962 1,573,872 Net cash flows generated from/(used in) operating activities 80,740,914 (25,156,168) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of investments 7 (6) (86,116,473) Additional investments 7 (81,576,396) (12,992,010) Net cash flows used in investing activities (81,576,402) (99,108,483) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of ordinary shares Proceeds from issuance of redeemable preference shares 9 98,691, ,254,500 Redemption of redeemable preference shares (97,855,700) - Advance from immediate holding company (47,154,490) 12,200,000 Advance to an associate company 47,154,490 (12,200,000) Net cash flows generated from financing activities 835, ,264,651 NET CHANGE IN CASH AND CASH EQUIVALENTS DURING THE FINANCIAL YEAR - - CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR - - CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR - - The significant accounting policies and other explanatory notes are set out on pages 12 to 30 of these financial statements. EKUITI NASIONAL BERHAD ANNUAL REPORT

94 Notes to the financial statement The principal activities of the Company are to carry on the business of an investment holding company, to invest in private equity investments and to acquire the shares of or invest in any company. There have been no significant changes in the nature of these activities during the financial year. The Company is a private limited company, incorporated and domiciled in Malaysia. The address of the registered office of the Company is: 12th Floor, Bangunan Setia 1, 15 Lorong Dungun, Bukit Damansara, Kuala Lumpur. The principal place of business of the Company is: Level 13, Surian Tower, No 1, Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Darul Ehsan. The principal accounting policies applied in preparing the financial statements are set out below. These policies have been applied to all years presented, unless otherwise stated. 1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements of the Company have been prepared in accordance with the Malaysian Financial Reporting Standards ( MFRS ), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The financial statements have been prepared under the historical cost convention, as modified by the investments designated at fair value through profit or loss. The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the the Company s accounting policies. Although these estimates and judgement are based on the Directors best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3. The Company recorded a net loss of 2,030,231 for the financial year ended 31 December 2014 and as of that date, the Company recorded net current liabilities of 26,316,189. The immediate holding company, Ekuinas Capital Sdn Bhd, has indicated its intention to provide continuous financial support to the Company so as to enable the Company to meet its liability as and when they fall due and to carry on its business without any significant curtailment of its operations. In view of the foregoing, the Directors consider that it is appropriate to prepare the financial statements of the Company on a going concern basis. 12 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

95 NOTES TO THE FINANCIAL STATEMENTS 1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) 1.1 Standards, amendments to published standards and interpretations that are applicable and effective The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Company s financial year beginning on or after 1 January 2014 are as follows: Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities Amendments to MFRS 136 Recoverable Amount Disclosures for Non-Financial Assets Amendments to MFRS 139 Novation of Derivatives and Continuation of Hedge Accounting Amendments to MFRS 10, MFRS 12 and MFRS 127 Investment entities IC Interpretation 21 Levies Apart from the new presentation and disclosure requirements as disclosed in the financial statements, the adoption of the above standards and amendments to published standards does not have any other material impact on the Company s financial statements. 1.2 Standards, amendments to published standards and interpretations to existing standards that are applicable to the Company but not yet effective MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 "Financial Instruments: Recognition and Measurement". The complete version of MFRS 9 was issued in November MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. There is now a new expected credit losses model on impairment for all financial assets that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. Unless otherwise disclosed, the above standards, amendments to published standards and interpretations to existing standards are not anticipated to have any significant impact on the Company s financial statements in the year of initial application. EKUITI NASIONAL BERHAD ANNUAL REPORT

96 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES 2.1 INVESTMENT ENTITY AND CONSOLIDATION Investment Entity The Company has been deemed to meet the definition of an Investment Entity per MFRS 10 Consolidated Financial Statements as the following conditions exist: (a) (b) (c) The Company obtained funds from its investor for the purpose of providing investment management services; The Company commits to its investor that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and The performance of investments made through its subsidiaries are measured and evaluated on a fair value basis. The Company being an Investment Entity is exempted from preparing consolidated financial statements Subsidiaries The Company does not have any other subsidiaries other than those determined to be controlled subsidiary investments. Controlled subsidiary investments are measured at fair value through profit or loss and not consolidated, in accordance with MFRS 10. The fair value of controlled subsidiary investments is determined on a consistent basis to all other investments measured at fair value through profit or loss, and as described in Note 4.6. Controlled subsidiary investments include the special purpose entities (SPEs) over which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies. Subsidiaries (SPEs) are incorporated for the purpose of holding underlying investments (the portfolio companies ) on behalf of the Company; as new SPEs are incorporated for each investment, there are no business combinations. The SPEs have no operations other than their respective investment in portfolio companies and providing a vehicle for the onward sale of a portfolio investment. The SPEs are also reflected at fair value, with the key fair value driver being the investment in the underlying portfolio company investments that the SPEs hold on behalf of the Company. None of the SPEs required consolidation as the SPEs are not deemed to be providing investment related services, as defined by MFRS 10. Where the Company is deemed to control an underlying portfolio company, whereby the control be via voting rights or through the ability to direct the relevant activities in return for access to a significant portion of the variable gains and losses derived from those relevant activities, the underlying portfolio company and its results are also not consolidated and are instead reflected at fair value through the profit or loss (through the reflection of the respective SPE that holds the underlying portfolio company value in the Company s financial statements). Movements in the fair value of the Company s portfolio companies may expose the Company to potential gains or losses in the income statement Associates An associate is an entity, including an unincorporated entity such as partnership, over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. Investments that are held as part of the Company's investment portfolio are carried in the balance sheet at fair value even though the Company may have significant influence over those companies. This treatment is permitted by MFRS 128, which allows investments that are held by Investment Entities to be recognised and measured as at fair value through profit or loss and accounted for in accordance with MFRS 13, with changes in fair value recognised in the statement of comprehensive income in the period of the change. 14 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

97 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 OTHER INVESTMENTS Other investments are designated at fair value through profit or loss. Changes in the fair value of other investments are recognised in the income statement in the year which the changes arise. On disposal of such investments, the difference between the net disposal proceeds and its carrying amount is included in the income statement. 2.3 FINANCIAL ASSETS Financial assets designated at fair value through profit or loss Classification Financial assets designated at fair value through profit or loss at inception are financial instruments that are not classified as held for trading. The Company s financial assets designated at fair value through profit or loss comprise of investments at fair value through profit or loss in the statement of financial position Recognition and initial measurement Financial assets designated at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed as incurred in the income statement Subsequent measurement Subsequent to initial recognition, all financial assets designated at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value are presented in the income statement in the year in which they arise De-recognition Loans and receivables A financial asset is de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership Classification Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than twelve (12) months after the end of the reporting year. These are classified as non-current assets. The Company s loans and receivables comprise of amount due from immediate holding company, amount due from a related company and amount due from subsidiaries in the statement of financial position. EKUITI NASIONAL BERHAD ANNUAL REPORT

98 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 FINANCIAL ASSETS (CONTINUED) Loans and receivables (continued) 2.4 PROVISIONS Recognition and initial measurement Financial assets are initially recognised at fair value plus transaction costs, for all financial assets not carried at fair value through profit or loss Subsequent measurement Loans and receivables are subsequently carried at amortised cost using the effective interest method Subsequent measurement impairment of financial assets The Company assesses at the end of the reporting year whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If in a subsequent year, the amount of the impairment loss decrease and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in the income statement. As at the end of the reporting year, there is no recognition of impairment in the income statement De-recognition A financial asset is de-recognised when the rights to receive cash flows from loans and receivables have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligations, and when a reliable estimate of the amount can be made. 2.5 FINANCIAL LIABILITIES Classification Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Company becomes party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. The Company s financial liabilities comprise of amount due to immediate holding company, amount due to an associate, amount due to a related company and accruals in the statement of financial position. 16 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

99 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 FINANCIAL LIABILITIES (CONTINUED) Recognition and measurement Accruals are recognised initially at fair value plus directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest method De-recognition 2.6 SHARE CAPITAL A financial liability is derecognised when the obligation under the liability is extinguished when an existing financial liability is replaced by another from the same party on substantially different terms, or the term of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement. Ordinary shares are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular instrument. Distributions to holders of a financial instrument classified as an equity instrument are charged directly to equity. 2.7 INCOME TAXES Current tax expense is determined according to Malaysian tax laws and includes all taxes based upon the taxable profits. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Tax rates enacted or substantively enacted by the reporting year are used to determine deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. 2.8 CARRIED INTEREST Carried interest represents the fees payable to the Fund Management Company and is computed and accrued at each financial year end based on the valuation of the investments in the Fund s portfolio of companies, after accounting for appropriate outflow payments/ inflow receipts in accordance with the terms stated in the Global Fund Management Agreement. Any increase or decrease in carried interest is recognised in the income statement. EKUITI NASIONAL BERHAD ANNUAL REPORT

100 NOTES TO THE FINANCIAL STATEMENTS 3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of the Company s financial statements requires the management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the end of the reporting year. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. In the process of applying the Company s accounting policies, the Directors and management have made the following judgements which have the most significant effect on the amounts recognised in the financial statements: (a) Valuation of unquoted investments The Company carries its investments at fair value, with changes in fair values being recognised in the income statement. The Company estimates the fair values of its unquoted investments based on net asset valuation, net realisable value and enterprise valuation methods as at 31 December 2014 as recommended by the International Private Equity and Venture Capital Valuation Guidelines. Based on management s estimates and judgements, the Company applied a marketability and liquidity discount rate on the selected comparable companies earnings multiple in deriving the fair value of the unquoted investment. Where expectations differ from original estimates, the difference will impact the fair value of the unquoted investment. (b) Carried interest Carried interest represents the amount payable to Ekuiti Nasional Berhad, the Fund Management Company, based on the valuation of investments in the Fund s portfolio of companies. Significant judgements are required in determining the extent of the carried interest expense to be recognised which is dependent on the valuation of the Fund s portfolio. Where expectations differ from original estimates, the difference will impact the recognition of carried interest. 4 FINANCIAL RISK MANAGEMENT 4.1 Financial risk management objectives and policies The Company s overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. Financial risk management is carried out through risk reviews, internal control systems and adherence to the Company s financial risk management policies. The Board reviews these risks based on the approved treasury policies and investment guidelines, which cover the management of these risks. The Company is exposed to market price risk, credit risk and liquidity risk. 4.2 Market price risk The Company s exposure to market price risk is limited to those unquoted investments in which its fair value is determined using the enterprise valuation and net assets valuation methods as recommended by the International Private Equity and Venture Capital Valuation Guidelines to derive a fair value based on multiples of comparable listed companies. An unquoted investment is exposed to market price risk of the comparable companies. 4.3 Credit risk The Company s exposure to credit risk is limited as the Company is an investment holding company. The Company s exposure to credit risk is on the carrying amount of amount due from immediate holding company, amount due from a subsidiary company, amount due from an associate company and amount due from a related company. All these balances are repayable upon demand, except for advance to an associate in EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

101 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.4 Liquidity risk The Company s exposure to liquidity risk is limited as the Company is an investment holding company with the cash management and treasury managed by Ekuiti Nasional Berhad ( Ekuinas ), a related company. Furthermore, the Company has the ability to obtain funding through the immediate holding company to ensure settlement of all transaction costs and expenses. The Company s exposure to liquidity risk is on the undiscounted contractual payment of amount due to immediate holding company, amount due to a related company, amount due to an associate company and accruals. The Company maintains a level of cash and cash equivalents deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. The table below summarises the maturity profile of the Company s financial liabilities as at the end of the reporting year based on undiscounted contractual payments. Less than 1 year 1 3 years At 31 December 2014 Accruals 21,149,649 - Amount due to immediate holding company 325,871,399 - Amount due to a related company 4,749,993 - Amount due to an associate 8,352, ,123,535 - At 31 December 2013 Accruals 21,949,571 - Advance from immediate holding company - 47,154,490 Amount due to an associate 1,573,532-23,523,103 47,154, Capital management The Company s objectives when managing capital are to safeguard the Company s ability to continue as a going concern in order to provide returns to the shareholder and to maintain an optimal capital structure to reduce the cost of capital. The Company is not subject to any externally imposed capital requirements. EKUITI NASIONAL BERHAD ANNUAL REPORT

102 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.6 Fair value estimation of the financial instruments Financial instruments comprise of financial assets and financial liabilities. Fair value is the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in an orderly transaction between market participants at the measurement date. The information presented herein represents the estimates of fair values as at the end of the reporting year. Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates. Methodologies and assumptions had been used in deriving the fair values of the investments at the end of the reporting year as disclosed in Note 3 to the financial statements. The carrying amounts of current assets and current liabilities approximate their fair value due to the relatively short term nature of these financial instruments. The fair value of the non-current balance ie. advance to an associate is nil (2013: 47,154,490). The fair value is estimated using the prevailing market rates on the reporting date. 4.7 Fair value hierarchy The different levels have been defined as follows: (i) (ii) (iii) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs that have been applied in the models to value the respective asset or liability. The following table presents the Company s financial instruments that are measured at fair value, other than the short term financial instruments. Level 1 Level 2 Level 3 At 31 December 2014 Financial assets Investments at fair value through profit or loss ,150, ,150,845 Total At 31 December 2013 Financial assets Investments at fair value through profit or loss ,902, ,902, EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

103 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.7 Fair value hierarchy (continued) Investments classified within Level 3 have significant unobservable inputs, as they are traded infrequently. As observable prices are not available for this investment, the fair value of the unquoted investment is based on valuation methods as recommended by the International Private Equity and the Venture Capital Valuation Guidelines, namely net assets valuation method, enterprise valuation method and net realisable value. The main input into the net assets valuation method for these unquoted investments is the net assets value of the investment. The main input into the enterprise valuation method for these unquoted investments include earnings before interest, taxes, depreciation and amortisation ( EBITDA ), comparable companies earnings multiple and marketability discount. The main input for net realisable value for the unquoted investment is the amount realisable for the investment. In assessing fair value, management of Ekuiti Nasional Berhad (fund management company) performs quarterly valuation assessments of all portfolio companies and these will be tabled to the Board of Directors on a quarterly basis. The following table presents the movement in Level 3 financial instruments for the financial year ended 31 December 2014: At 1 January 323,902, ,540,311 Acquisition of investment 6 86,116,473 Additional capital call for investment 81,576,396 12,992,010 Net unrealised (loss)/gain on investments at fair value through profit or loss (78,327,995) 112,253,644 At 31 December 327,150, ,902, EKUITI NASIONAL BERHAD ANNUAL REPORT

104 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.7 Fair value hierarchy (continued) Significant unobservable inputs The following table discloses the valuation techniques and significant unobservable inputs by the Company for assets recognised at fair value and classified as Level 3 along with the range of values used for those significant unobservable inputs. Significant unobservable inputs Asset Fair Value at Valuation technique Reasonable possible shift Change in valuation Investment in subsidiaries 52,858,647 NAV NAV +/-5% 2,642,932 Investment in an associate 96,734,115 NAV NAV +/-5% 4,836,705 +/-5% 3,542,437 Other investments 70,848,733 Net realisable value Net realisable value 41,850,881 NAV NAV +/-5% 2,092,544 64,858,469 Enterprise Discounted +/-5% 3,242,923 valuation multiple Valuation process applied by the Company for Level 3 fair value The Company has an established framework in respect to the measurement of fair values of financial instruments. This includes a team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to senior management. The team regularly reviews significant unobservable inputs and valuation adjustments. 22 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

105 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.8 Financial instruments by category At 31 December 2014 Loans and receivables Designated at fair value through profit or loss Financial assets Investments at fair value through profit or loss - 327,150, ,150,845 Amount due from a related company 2,783,057-2,783,057 Amount due from subsidiaries 331,024, ,024,289 Total 333,807, ,150, ,958,191 Total Financial liabilities Accruals 21,149,649-21,149,649 Amount due to immediate holding company 325,871, ,871,399 Amount due to a related company 4,749,993-4,749,993 Amount due to an associate 8,352,494-8,352,494 Total 360,123, ,123,535 At 31 December 2013 Financial assets Investments at fair value through profit or loss - 323,902, ,902,438 Amount due from immediate holding company 1,250,064-1,250,064 Amount due from a related company 400, ,000 Advance to an associate 47,154,490-47,154,490 Total 48,804, ,902, ,706,992 Financial liabilities Accruals 21,949,571-21,949,571 Amount due to an associate 1,573,532-1,573,532 Advance from immediate holding company 47,154,490-47,154,490 Total 70,677,593-70,677,593 EKUITI NASIONAL BERHAD ANNUAL REPORT

106 NOTES TO THE FINANCIAL STATEMENTS 5 (LOSS)/PROFIT BEFORE TAXATION (Loss)/Profit before taxation is arrived at after charging: Auditors remuneration 7,400 3, TAXATION Current tax: Malaysian taxation Reconciliation between tax expense and the product of accounting (loss)/profit multiplied by the Malaysian tax rate is as follows: (Loss)/Profit before taxation (2,030,231) 73,805, Tax calculated at rate 25% (507,558) 18,451,308 Income not subject to tax (24,680,510) (29,276,776) Expenses not deductible 25,188,068 10,825,468 Taxation - - On 5 August 2013, the Ministry of Finance granted income tax exemption on the statutory business income for a period of five (5) years commencing from year of assessment 2012 until 2016 for the Company. 7 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Investment in subsidiaries (Note 7.1) 52,858,647 36,634,596 Investment in an associate (Note 7.2) 96,734, ,534,466 Other investments (Note 7.3) 177,558,083 87,733, ,150, ,902, EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

107 NOTES TO THE FINANCIAL STATEMENTS 7 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) 7.1 Investment in subsidiaries Unquoted shares, at fair value: At 1 January 36,634,596 - Acquisition of investment 6 37,090,718 Additional capital call for investment 3,410,642 - Unrealised gain/(loss) on investments at fair value through profit or loss 12,813,403 (456,122) At 31 December 52,858,647 36,634, The details of the investment in subsidiaries are as follows: Company s effective interest Name Country of incorporation Principal activity Relationship 2014 % 2013 % Tekun Prima Sdn Bhd Malaysia Investment holding Subsidiary Tetap Kuasa Sdn Bhd Malaysia Investment holding Subsidiary Nexus Leap Sdn Bhd Malaysia Investment holding Subsidiary Premier Agenda Sdn Bhd Malaysia Investment holding Subsidiary Subsidiary of Tekun Prima Sdn Bhd PrimaBaguz Sdn Bhd Malaysia Manufacturer of premium halal meat Subsidiary Subsidiary of Tetap Kuasa Sdn Bhd Orkim Sdn Bhd Malaysia Shipping operations, ship brokering and shipping management of Clean Petroleum Product (CPP) Subsidiary 91 - The significant investment activities during the financial year ended 31 December 2014 were as follows: (a) (b) (c) (d) On 8 May 2014, the Company had acquired 100% of the issued and paid up ordinary share capital totalling 2 ordinary shares of 1 each of Tetap Kuasa Sdn Bhd ( Tetap Kuasa ), a company incorporated in Malaysia which is an investment holding company, for a total cash consideration of 2. On 28 October 2014, the Company had acquired 100% of the issued and paid up ordinary share capital totalling 2 ordinary shares of 1 each of Premier Agenda Sdn Bhd ( Premier Agenda ), a company incorporated in Malaysia which is an investment holding company, for a total cash consideration of 2. On 12 December 2014, the Company had acquired 100% of the issued and paid up ordinary share capital totalling 2 ordinary shares of 1 each of Nexus Leap Sdn Bhd ( Nexus Leap ), a company incorporated in Malaysia which is an investment holding company, for a total cash consideration of 2. On 18 December 2014, Tetap Kuasa had acquired 91% equity interest in Orkim Sdn Bhd, a company incorporated in Malaysia, for a total cash consideration of 331,021,261. EKUITI NASIONAL BERHAD ANNUAL REPORT

108 NOTES TO THE FINANCIAL STATEMENTS 7 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) 7.2 Investment in an associate Unquoted shares, at fair value: At 1 January 199,534,466 99,260,034 Additional capital call for investment - 402,000 Unrealised (loss)/gain on investments at fair value through profit or loss (102,800,351) 99,872,432 At 31 December 96,734, ,534, The details of the investment in an associate are as follows: Company s effective interest Name Country of incorporation Principal activity Relationship 2014 % 2013 % Hallmark Odyssey Sdn Bhd Malaysia Investment holding Associate Other investments Unquoted shares, at fair value: At 1 January 87,733,376 13,280,277 Additional capital call for investment 78,165,754 12,590,010 Acquisition of investment - 49,025,755 Net unrealised gain on fair value of investments at fair value through profit or loss 11,658,953 12,837, ,558,083 87,733,376 Other investments relate to the Company s interest in the Redeemable Preference Shares ( RPS ) of Rancak Selera Sdn Bhd ( Rancak Selera ), Integrated Food Group Sdn Bhd ( IFG ), Prinsip Lagenda ( Prinsip ) and Ilmu Education Group Sdn Bhd ( Ilmu ) During the financial year ended 31 December 2014, the Company made additional capital investments of 25,611,620, 49,286,800, 3,000,000 and 267,334 in the RPS B of Rancak Selera, IFG, Prinsip and Ilmu respectively. 26 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

109 NOTES TO THE FINANCIAL STATEMENTS 8 SHARE CAPITAL Authorised Issued and fully paid Ordinary shares of 1 each At 1 January ,000, Issuance of shares during the financial year - 88 At 31 December ,000, Redeemable preference shares of 0.01 each At 1 January ,000 21,427 Issuance of shares during the financial year - 9,869 Redemption of shares during the financial year - (9,786) At 31 December ,000 21,510 Total issued and fully paid capital 100,090,000 21,817 Ordinary shares of 1 each At 1 January ,000, Issuance of shares during the financial year At 31 December ,000, Redeemable preference shares of 0.01 each At 1 January ,000 9,001 Issuance of shares during the financial year - 12,426 At 31 December ,000 21,427 Total issued and fully paid capital 100,090,000 21,646 During the financial year, the Company issued 88 ordinary shares at par value of 1 each and 986,911 redeemable preference shares of 0.01 each at an issue price of 100. The shares have been fully paid in cash. A summary of the shares issued by the Company for the financial year ended 31 December 2014 are as follows: Date of issue Type of share Purpose of issue Number of shares Par value Premium Terms of issue 30 June 2014 Ordinary Working capital Cash, at par 30 June 2014 Preference Working capital 345, Cash, at December 2014 Ordinary Working capital Cash, at par 31 December 2014 Preference Working capital 641, Cash, at 100 During the financial year, the Company redeemed 978,557 redeemable preference shares of 0.01 each at an issue price of 100. The shares have been fully paid in cash. EKUITI NASIONAL BERHAD ANNUAL REPORT

110 NOTES TO THE FINANCIAL STATEMENTS 8 SHARE CAPITAL (CONTINUED) A summary of the shares redeemed by the Company during the financial year ended 31 December 2014 is as follows: Date of redemption Type of share 31 December 2014 Redeemable preference shares Purpose of redemption Capital repayment Number of shares Par value Premium Term of issue 978, Cash at 100 The main features of the redeemable preference shares ( RPS ) are as follows: The holders of the shares shall be entitled to any dividend declared. The RPS shall rank pari passu among themselves and in priority of ordinary shares. The holders of the RPS shall be entitled to receive all notices, accounts and report which holder of the ordinary shares are entitled to. The holders of the RPS shall only be entitled to vote at the meetings convened for the purpose of transacting to the following items of the business: (a) (b) (c) Variation, whether directly or indirectly, of the rights attached to the RPS. Winding-up of the Company. Such other circumstances as may be expressly provided under the law from time to time in respect of preference shares. Subject to the Companies Act, 1965, the Company shall have the right at any time, to redeem all or part of the RPS at a price of 100 per RPS ( Redemption Amount ). The RPS are not convertible into ordinary shares or any other classes of shares in the Company. The RPS are classified as equity as they are redeemable but only at the Company s option, and any dividends are discretionary. 9 SHARE PREMIUM At 1 January 214,249,474 89,997,400 Issuance of shares during the financial year 98,681, ,252,074 Redemption of shares during the financial year (97,845,914) - At 31 December 215,084, ,249, EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

111 NOTES TO THE FINANCIAL STATEMENTS 10 SIGNIFICANT RELATED PARTY DISCLOSURES Parties are considered related if the party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions The related parties of, and their relationships with the Company, are as follows: Related party Yayasan Ekuiti Nasional Ekuinas Capital Sdn Bhd Tekun Prima Sdn Bhd Tetap Kuasa Sdn Bhd Hallmark Odyssey Sdn Bhd Ekuiti Nasional Berhad Ilmu Education Group Sdn Bhd Integrated Food Group Sdn Bhd Prinsip Lagenda Sdn Bhd Rancak Selera Sdn Bhd Relationship Ultimate holding foundation which is formed by the Government of Malaysia Immediate holding company Subsidiary company Subsidiary company Associate company Related company Related company Related company Related company Related company 10.2 Key management personnel Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Company either directly or indirectly. The key management personnel of the Company includes all the Directors of the Company who make certain critical decisions in relation to the strategic direction of the Company. The Company has no key management personnel compensation during the financial year Significant related party transaction In addition to related party disclosures mentioned elsewhere in the financial statements, set out below is other significant related party transaction. Dividend income Hallmark Odyssey Sdn Bhd 95,509, Interest income Hallmark Odyssey Sdn Bhd 2,409,954 - Management fees expenses Ekuiti Nasional Berhad (20,000,000) (20,000,000) EKUITI NASIONAL BERHAD ANNUAL REPORT

112 NOTES TO THE FINANCIAL STATEMENTS 10 SIGNIFICANT RELATED PARTY DISCLOSURES (CONTINUED) 10.4 Significant related party balances Included in the Company s statement of financial position are the following significant related party balances: Advance to an associate Hallmark Odyssey Sdn Bhd ,154,490 Amount due (to)/from immediate holding company Ekuinas Capital Sdn Bhd (325,871,399) 1,250,064 Amount due from a related company Rancak Selera Sdn Bhd 2,783, ,000 Amount due from subsidiary companies Tetap Kuasa Sdn Bhd 331,024,293 - Premier Agenda Sdn Bhd (2) - Nexus Leap Sdn Bhd (2) - 331,024,289 - Amount due to a related company Integrated Food Group Sdn Bhd (4,749,993) - Amount due to an associate company Hallmark Odyssey Sdn Bhd (8,352,494) (1,573,532) Advance from immediate holding company Ekuinas Capital Sdn Bhd - (47,154,490) The above outstanding balances are unsecured, interest-free and repayable upon demand, except for advance to Hallmark Odyssey Sdn Bhd and advance from Ekuinas Capital Sdn Bhd, which are interest-free for a period of 3 years. The amount has been fully paid in AUTHORISATION FOR ISSUE OF FINANCIAL STATEMENTS The financial statements have been authorised for issue in accordance with a resolution of the Board of Directors. 30 EKUITI NASIONAL BERHAD ANNUAL REPORT 2014

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116 Ekuiti Nasional Berhad U Level 13 Surian Tower, No 1 Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Tel: Fax:

117 delivering performance Financial Statements 2014 E-CAP (EXTERNAL) ONE SDN BHD

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119 E-CAP (ExTERNAL) ONE SDN BHD (Incorporated in Malaysia) Reports And Statutory Financial Statements For The Financial Year Ended 31 December 2014 Directors' Report 02 Statement by Directors 05 Statutory Declaration 05 Independent Auditors' Report 06 Statement of Comprehensive Income 08 Statement of Financial Position 09 Statement of Changes in Equity 10 Statement of Cash Flows 11 Notes to the Financial Statements 12

120 Directors' report The Directors have pleasure in submitting their report and the audited financial statements of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The principal activities of the Company are to carry on the business of an investment holding company, to invest in private equity investments and to acquire the shares of or invest in any company. There have been no significant changes in the nature of these activities during the financial year ending 31 December FINANCIAL RESULTS Net profit for the financial year 40,452,369 DIVIDEND No dividend has been paid, declared or proposed since the end of the previous financial year. The Directors do not recommend the payment of any final dividend for the financial year ended 31 December ISSUE OF SHARES During the financial year, the Company issued 56 ordinary shares at par value of 1 each and 743,378 redeemable preference shares of 0.01 each at an issue price of 100. The shares have been fully paid in cash. A summary of the shares issued by the Company during the financial year from 1 January 2014 to 31 December 2014 is as follows: Date of issue Type of share Purpose of issue Number of shares Par value Premium Terms of issue 30 June 2014 Ordinary Working capital Cash, at par 30 June 2014 Preference Working capital 407, Cash, at December 2014 Ordinary Working capital Cash, at par 31 December 2014 Preference Working capital 335, Cash, at 100 RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements and notes to the financial statements. 2 ekuiti nasional berhad annual report 2014

121 directors' report DIRECTORS The Directors who have held office since the date of the last report are as follows: Raja Tan Sri Dato Seri Arshad bin Raja Tun Uda Datuk Noriyah binti Ahmad Mazhairul bin Jamaludin In accordance with Article 66 of the Company s Articles of Association, Mazhairul bin Jamaludin shall retire from the Board in the forthcoming Annual General Meeting and being eligible, offers himself for re-election. DIRECTORS INTERESTS IN SHARES AND DEBENTURES According to the Register of Directors Shareholdings maintained by the Company in accordance with Section 134 of the Companies Act, 1965, none of the Directors in office at the end of the financial year held any interest in shares, warrants, share options and debentures in the Company or its related corporations during the financial year. DIRECTORS BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the date of last report, no Director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. STATUTORY INFOATION ON THE FINANCIAL STATEMENTS Before the financial statements of the Company were made out, the Directors took reasonable steps: (a) (b) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that there are no known bad debts that had been written off and that allowance need not be made for doubtful debts; and to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business, their values as shown in the accounting records of the Company have been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances: (a) (b) (c) (d) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Company inadequate to any substantial extent; or which would render the values attributed to current assets in the financial statements of the Company misleading; or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate; or not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Company misleading. ekuiti nasional berhad annual report

122 directors' report for the financial year ended 31 december 2014 STATUTORY INFOATION ON THE FINANCIAL STATEMENTS (CONTINUED) No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve (12) months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Company to meet their obligations when they fall due. At the date of this report, there does not exist: (a) (b) any charge on the assets of the Company which has arisen since the end of the financial year which secures the liability of any other person; or any contingent liability of the Company which has arisen since the end of the financial year. At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. In the opinion of the Directors: (a) (b) the results of the Company s operations for the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Company for the financial year in which this report is made. IMMEDIATE HOLDING COMPANY AND ULTIMATE HOLDING FOUNDATION The Directors regard Ekuinas Capital Sdn Bhd, a company incorporated in Malaysia, as the immediate holding company. The Directors regard Yayasan Ekuiti Nasional, a foundation incorporated in Malaysia, as the Company s ultimate holding foundation. AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with their resolution. RAJA TAN SRI DATO SERI ARSHAD BIN RAJA TUN UDA DIRECTOR MAZHAIRUL BIN JAMALUDIN DIRECTOR Kuala Lumpur 20 March ekuiti nasional berhad annual report 2014

123 STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, Raja Tan Sri Dato Seri Arshad bin Raja Tun Uda and Mazhairul bin Jamaludin, being two of the Directors of E-Cap (External) One Sdn Bhd, state that, in the opinion of the Directors, the financial statements set out on pages 8 to 24 have been properly drawn up so as to give a true and fair view of the state of affairs of the Company as at 31 December 2014 and of the results and cash flows of the Company for the financial year ended on that date in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. Signed on behalf of the Board of Directors in accordance with their resolution. RAJA TAN SRI DATO SERI ARSHAD BIN RAJA TUN UDA DIRECTOR MAZHAIRUL BIN JAMALUDIN DIRECTOR Kuala Lumpur 20 March 2015 STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965 I, Mazhairul bin Jamaludin, the Officer primarily responsible for the financial management of E-Cap (External) One Sdn Bhd, do solemnly and sincerely declare that the financial statements set out on pages 8 to 24 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, MAZHAIRUL BIN JAMALUDIN GROUP CHIEF FINANCIAL OFFICER Subscribed and solemnly declared by the above named Mazhairul bin Jamaludin at Kuala Lumpur before me, on 20 March COMMISSIONER FOR OATHS ekuiti nasional berhad annual report

124 INDEPENDENT AUDITORS REPORT TO THE MEMBER OF E-CAP (external) one SDN BHD (Incorporated in Malaysia) (Company No: t) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of E-Cap (External) One Sdn Bhd on pages 8 to 24, which comprise the statement of financial position as at 31 December 2014 of the Company and the statement of comprehensive income, changes in equity and cash flows of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 12. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Company as of 31 December 2014 and of its financial performance and cash flows for the year then ended in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that, in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act. 6 ekuiti nasional berhad annual report 2014

125 INDEPENDENT AUDITORS REPORT TO THE MEMBER OF E-CAP (external) One SDN BHD (Incorporated in Malaysia) (Company No: T) OTHER MATTERS This report is made solely to the member of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants DATO MOHAMMAD FAIZ BIN MOHAMMAD AZMI (No. 2025/03/16 (J)) Chartered Accountant Kuala Lumpur 20 March 2015 ekuiti nasional berhad annual report

126 STATEMENT OF COMPREHENSIVE INCOME Note 2014 INCOME Unrealised gain on investment at fair value through profit or loss 7 42,474,400 30,826,668 42,474,400 30,826, EXPENSES Management fees 10.3 (2,000,000) (2,000,000) Other expenses (22,031) (57,394) Profit before taxation 5 40,452,369 28,769,274 Taxation Total comprehensive income and net profit for the financial year 40,452,369 28,769,274 The significant accounting policies and other explanatory notes are set out on pages 12 to 24 of these financial statements. 8 ekuiti nasional berhad annual report 2014

127 STATEMENT OF Financial Position As at 31 DECEMBER 2014 Note 2014 NON-CURRENT ASSET Investments at fair value through profit or loss 7 331,025, ,229, CURRENT LIABILITY Accruals 18,850 13,200 NET CURRENT LIABILITY 18,850 13, ,006, ,216,321 FINANCED BY: Share capital 8 3,028,764 3,021,275 Share premium 9 281,212, ,882,009 Retained earnings 46,765,406 6,313, ,006, ,216,321 The significant accounting policies and other explanatory notes are set out on pages 12 to 24 of these financial statements. ekuiti nasional berhad annual report

128 STATEMENT OF changes in equity for the financial year ended 31 DECEMBER 2014 Note Issued and fully paid ordinary shares of 1 each Number of shares Share capital Issued and fully paid redeemable preference shares of 0.01 each Number of shares Share capital Nondistributable Share premium Distributable Retained earnings At 1 January ,000,584 3,000,584 2,069,027 20, ,882,009 6,313, ,216,321 Issuance of shares during the financial year 8, ,378 7,433 74,330,367-74,337,856 Total comprehensive income for the financial year ,452,369 40,452,369 At 31 December ,000,640 3,000,640 2,812,405 28, ,212,376 46,765, ,006,546 Total At 1 January ,000,281 3,000, ,761 9,088 90,867,012 (22,456,237) 71,420,144 Issuance of shares during the financial year 8, ,160,266 11, ,014, ,026,903 Total comprehensive income for the financial year ,769,274 28,769,274 At 31 December ,000,584 3,000,584 2,069,027 20, ,882,009 6,313, ,216,321 The significant accounting policies and other explanatory notes are set out on pages 12 to 24 of these financial statements. 10 ekuiti nasional berhad annual report 2014

129 STATEMENT OF CASH FLOWS for the financial year ended 31 DECEMBER 2014 Note 2014 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 40,452,369 28,769, Adjustment for: Unrealised gain on investments at fair value through profit or loss 7 (42,474,400) (30,826,668) Operating loss before working capital changes (2,022,031) (2,057,394) Changes in working capital: Accruals 5,650 (1,200) Net cash flows used in operating activities (2,016,381) (2,058,594) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of investment 7 - (922,192) Additional capital call for investments 7 (72,321,475) (113,046,117) Net cash flows used in investing activities (72,321,475) (113,968,309) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issuance of ordinary shares Proceeds from the issuance of redeemable preference shares 8, 9 74,337, ,026,600 Net cash flows generated from financing activities 74,337, ,026,903 NET CHANGE IN CASH AND CASH EQUIVALENTS DURING THE FINANCIAL YEAR - - CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR - - CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR - - The significant accounting policies and other explanatory notes are set out on pages 12 to 24 of these financial statements. ekuiti nasional berhad annual report

130 Notes to the financial statement for the financial year ended 31 DECEMBER 2014 The principal activities of the Company are to carry on the business of an investment holding company, to invest in private equity investments and to acquire the shares of or invest in any company. There have been no significant changes in the nature of these activities during the financial year. The Company is a private limited company, incorporated and domiciled in Malaysia. The address of the registered office of the Company is: 12th Floor, Bangunan Setia 1, 15 Lorong Dungun, Bukit Damansara, Kuala Lumpur. The principal place of business of the Company is: Level 13, Surian Tower, No 1, Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Darul Ehsan. The principal accounting policies applied in preparing the financial statements are set out below. These policies have been applied to all years presented, unless otherwise stated. 1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements of the Company have been prepared in accordance with the Malaysian Financial Reporting Standards ( MFRS ), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The financial statements have been prepared under the historical cost convention, as modified by the investments designated at fair value through profit or loss. The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the Company s accounting policies. Although these estimates and judgement are based on the Directors best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3. The Company recorded net current liabilities of 18,850 (2013: 13,200) for the financial year ended 31 December The immediate holding company, Ekuinas Capital Sdn Bhd, has indicated its intention to provide continuous financial support to the Company so as to enable the Company to meet its liability as and when they fall due and to carry on its business without any significant curtailment of its operations. In view of the foregoing, the Directors consider that it is appropriate to prepare the financial statements of the Company on a going concern basis. 12 ekuiti nasional berhad annual report 2014

131 NOTES TO THE FINANCIAL STATEMENTS 1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) 1.1 Standards, amendments to published standards and interpretations that are applicable and effective: The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Company s financial year beginning on or after 1 January 2014 are as follows: Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities Amendments to MFRS 136 Recoverable Amount Disclosures for Non-Financial Assets Amendments to MFRS 139 Novation of Derivatives and Continuation of Hedge Accounting Amendments to MFRS 10, MFRS 12 and MFRS 127 Investment entities IC Interpretation 21 Levies Apart from the new presentation and disclosure requirements as disclosed in the financial statements, the adoption of the above standards and amendments to published standards does not have any other material impact on the Company s financial statements. 1.2 Standards, amendments to published standards and interpretations to existing standards that are applicable to the Company but not yet effective: MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 "Financial Instruments: Recognition and Measurement". The complete version of MFRS 9 was issued in November MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. There is now a new expected credit losses model on impairment for all financial assets that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. Unless otherwise disclosed, the above standards, amendments to published standards and interpretations to existing standards are not anticipated to have any significant impact on the Company s financial statements in the year of initial application. ekuiti nasional berhad annual report

132 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES 2.1 INVESTMENT ENTITY AND CONSOLIDATION Investment entity The Company has been deemed to meet the definition of an Investment Entity per MFRS 10 Consolidated Financial Statements as the following conditions exist: (a) (b) (c) The Company obtained funds from its investor for the purpose of providing investment management services; The Company commits to its investor that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and The performance of investments made through its subsidiaries are measured and evaluated on a fair value basis. The Company being an Investment Entity is exempted from preparing consolidated financial statements Subsidiaries The Company does not have any other subsidiaries other than those determined to be controlled subsidiary investments. Controlled subsidiary investments are measured at fair value through profit or loss and not consolidated, in accordance with MFRS 10. The fair value of controlled subsidiary investments is determined on a consistent basis to all other investments measured at fair value through profit or loss, and as described in note 4.5. Movements in the fair value of the Company s portfolio company may expose the Company to potential gains or losses in the income statement. 2.2 FINANCIAL ASSETS Financial assets designated at fair value through profit or loss Classification Financial assets designated at fair value through profit or loss at inception are financial instruments that are not classified as held for trading. The Company s financial assets designated at fair value through profit or loss comprise of investments at fair value through profit or loss in the statement of financial position Recognition and initial measurement Financial assets designated at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed as incurred in the income statement Subsequent measurement Subsequent to initial recognition, all financial assets designated at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value are presented in the income statement in the period in which they arise De-recognition A financial asset is de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. 14 ekuiti nasional berhad annual report 2014

133 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 PROVISIONS Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligations, and when a reliable estimate of the amount can be made. 2.4 FINANCIAL LIABILITIES Classification Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139 Financial Instruments: Recognition and Measurement, are recognised in the statement of financial position when, and only when, the Company becomes party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. The Company s financial liability comprises of accruals in the statement of financial position Recognition and measurement Accruals are recognised initially at fair value plus directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest method De-recognition 2.5 SHARE CAPITAL A financial liability is derecognised when the obligation under the liability is extinguished when an existing financial liability is replaced by another from the same party on substantially different terms, or the term of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement. Ordinary shares are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular instrument. Distributions to holders of a financial instrument classified as an equity instrument are charged directly to equity. 2.6 CARRIED INTEREST Carried interest represents the fees payable to the Fund Management Company and is computed and accrued at each financial year end based on the valuation of the investments in the Fund s portfolio of companies, after accounting for appropriate outflow payments/ inflow receipts in accordance with the terms stated in the Global Fund Management Agreement. Any increase or decrease in carried interest is recognised in the income statement. ekuiti nasional berhad annual report

134 NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.7 INCOME TAXES Current tax expense is determined according to Malaysian tax laws and includes all taxes based upon the taxable profits. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Tax rates enacted or substantively enacted by the reporting year are used to determine deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. 3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of the Company s financial statements requires the management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the end of the reporting year. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. In the process of applying the Company s accounting policies, the Directors and management have made the following judgements which have the most significant effect on the amounts recognised in the financial statements: Valuation of unquoted investments The Company carries its investments at fair value, with changes in fair values being recognised in the income statement. The Company estimates the fair values of its unquoted investments based on the net assets valuation method as at 31 December 2014, as recommended by the International Private Equity and Venture Capital Valuation Guidelines. Where expectations differ from original estimates, the difference will impact the fair value of the unquoted investments. 4 FINANCIAL RISK MANAGEMENT 4.1 Financial risk management objectives and policies The Company s overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. Financial risk management is carried out through risk reviews, internal control systems and adherence to the Company s financial risk management policies. The Board reviews these risks based on the approved treasury policies and investment guidelines, which cover the management of these risks. The Company is exposed to market price risk and liquidity risk. 4.2 Market price risk Unquoted investment is exposed to market price risk of the comparable companies. The fair value of unquoted investment is based on net assets valuation method. If the fair value adjustment of the investments is 5% higher/lower, with all other variables held constant, the Company s profit after tax would have been 16,500,000 higher/lower (2013: 10,810,000). As at the end of the reporting year, the unquoted investments have been recognised at fair value. 16 ekuiti nasional berhad annual report 2014

135 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.3 Liquidity risk The Company s exposure to liquidity risk is limited as the Company is an investment holding company with the cash management and treasury is managed by Ekuiti Nasional Berhad ( Ekuinas ), a related company. Furthermore, the Company has the ability to obtain funding through the immediate holding company to ensure settlement of all transaction costs and expenses. The Company s exposure to liquidity risk is on the undiscounted contractual payments of accruals which are short-term and repayable within one year. 4.4 Capital management The Company s objectives when managing capital are to safeguard the Company s ability to continue as a going concern in order to provide returns to the shareholder and to maintain an optimal capital structure to reduce the cost of capital. The Company is not subject to any externally imposed capital requirements. 4.5 Fair value estimation of the financial instruments Financial instruments comprise financial assets and financial liabilities. Fair value is the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in orderly transaction between market participants at the measurement date. The information presented herein represents the estimates of fair values as at the end of the reporting year. Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates. Methodologies and assumptions had been used in deriving the fair values of the investments at the end of the reporting year as disclosed in Note 3 to the financial statements. As at 31 December 2014 the carrying amounts of current liabilities approximate their fair value due to the relatively short term nature of these financial instruments. 4.6 Fair value hierarchy The different levels have been defined as follows: (i) (ii) (iii) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 input are unobservable inputs that have been applied in the models to value the respective asset or liability. ekuiti nasional berhad annual report

136 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.6 Fair value hierarchy (continued) The following table presents the Company s financial instruments that are measured at fair value, other than the short term financial instruments: Level 1 Level 2 Level 3 At 31 December 2014 Financial asset Investments at fair value through profit or loss ,025, ,025,396 Total At 31 December 2013 Financial asset Investments at fair value through profit or loss ,229, ,229,521 Investments classified within Level 3 have significant unobservable inputs, as they are not quoted in active markets. In determining the fair value, the Company relies on the net asset value ( NAV ) as reported in the latest available financial statements and capital account statements provided by the general partner, unless the Company is aware of reasons that such a valuation may not be the approximation of fair value. In such cases, the Company will make adjustments to the NAV obtained in order to determine carrying value that more appropriately reflects the fair value at the reporting date. The following table presents the movement in Level 3 financial instruments: Investments at fair value through profit or loss At 1 January 216,229,521 71,434,544 Acquisition of investment - 922,192 Additional capital call for investment 72,321, ,046,117 Unrealised gain on investment at fair value through profit or loss 42,474,400 30,826,668 At 31 December 331,025, ,229, ekuiti nasional berhad annual report 2014

137 NOTES TO THE FINANCIAL STATEMENTS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) 4.6 Fair value hierarchy (continued) Significant unobservable inputs The following table discloses the valuation techniques and significant unobservable inputs by the Company for asset recognised at fair value and classified as Level 3 along with the range of values used for those significant unobservable inputs. Asset Fair Value at Valuation technique Significant unobservable inputs Reasonable possible shift Change in valuation Investments at fair value through profit or loss 331,025,396 NAV NAV +/- 5% 16,500,000 If the NAV had been 5% higher/lower, with all other variable held constant, the Company s profit after tax would have been 16,500,000 higher/lower. Valuation process applied by the Company for Level 3 fair value The Company has an established control framework in respect to the measurement of fair values of financial instruments. This includes a team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to senior management. The team regularly reviews significant unobservable inputs and valuation adjustments. 4.7 Financial instruments by category Loans and receivables Designated at fair value through profit or loss At 31 December 2014 Financial asset Investments at fair value through profit or loss - 331,025, ,025,396 Total Financial liability Accruals 18,850-18,850 At 31 December 2013 Financial asset Investments at fair value through profit or loss - 216,229, ,229,521 Financial liability Accruals 13,200-13,200 ekuiti nasional berhad annual report

138 NOTES TO THE FINANCIAL STATEMENTS 5 PROFIT BEFORE TAXATION Profit before taxation is arrived at after charging: Auditors remuneration 11,950 10, TAXATION Current tax: Malaysian taxation Reconciliation between tax expense and the product of accounting profit multiplied by the Malaysian tax rate is as follows: Profit before taxation 40,452,369 28,769, Tax calculated at rate 25% 10,113,092 7,192,319 Income not subject to tax (10,618,600) (7,706,668) Unrecognised tax losses 505, ,349 Taxation - - On 26 November 2010, the Ministry of Finance granted income tax exemption on the statutory business income for a period of 5 years commencing from year of assessment 2009 until 2014 for the Company. On 5 August 2013, the exemption was extended for an additional period of 5 years commencing from year of assessment 2014 until ekuiti nasional berhad annual report 2014

139 NOTES TO THE FINANCIAL STATEMENTS 7 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Unquoted shares, at fair value: At 1 January 216,229,521 71,434,544 Acquisition of investment - 922,192 Additional capital call for investment 72,321, ,046,117 Unrealised gain on investment at fair value through profit or loss 42,474,400 30,826,668 At 31 December 331,025, ,229, The details of the investments are as follows: Name Navis Malaysia Growth Opportunities Fund I, L.P. * Place of incorporation Principal activity Relationship Company s effective interest 2014 % 2013 % Cayman Islands Investment holding Subsidiary CIMB National Equity Fund Ltd. P. * Labuan Investment holding Subsidiary Asiasons Harimau Fund L.P. * Labuan Investment holding Subsidiary * Audited by PricewaterhouseCoopers, Malaysia During the year, the Company made additional drawdowns into Navis Malaysia Growth Opportunities Fund I, L.P. that amounted to 21,420,000. During the year, the Company made additional drawdowns into CIMB National Equity Fund Ltd. P. that amounted to 30,119,547. During the year, the Company made additional drawdowns into Asiasons Harimau Fund L.P. that amounted to 21,113,956. ekuiti nasional berhad annual report

140 NOTES TO THE FINANCIAL STATEMENTS 8 SHARE CAPITAL Authorised Issued and fully paid Ordinary shares of 1 each At 1 January ,000,000 3,000,584 Issuance of share during the financial year - 56 At 31 December ,000,000 3,000,640 Redeemable preference shares of 0.01 each At 1 January ,000 20,691 Issuance of share during the financial year - 7,433 At 31 December ,000 28,124 Total 100,090,000 3,028,764 Ordinary shares of 1 each At 1 January ,000,000 3,000,281 Issuance of share during the financial year At 31 December ,000,000 3,000,584 Redeemable preference shares of 0.01 each At 1 January ,000 9,088 Issuance of share during the financial period - 11,603 At 31 December ,000 20,691 Total 100,090,000 3,021,275 During the financial year, the Company issued 56 ordinary shares at par value of 1 each and 743,378 redeemable preference shares of 0.01 each at an issue price of 100. The shares have been fully paid in cash. 22 ekuiti nasional berhad annual report 2014

141 NOTES TO THE FINANCIAL STATEMENTS 8 SHARE CAPITAL (CONTINUED) A summary of the shares issued by the Company for the financial year ended 31 December 2014 is as follows: Date of issue Type of share Purpose of issue Number of shares Par value Premium Terms of issue 30 June 2014 Ordinary Working capital Cash, at par 30 June 2014 Preference Working capital 407, Cash, at December 2014 Ordinary Working capital Cash, at par 31 December 2014 Preference Working capital 335, Cash, at 100 The main features of the redeemable preference shares ( RPS ) are as follows: The holders of the shares shall be entitled to any dividend declared. The RPS shall rank pari passu among themselves and in priority of ordinary shares. The holders of the RPS shall be entitled to receive all notices, accounts, and report which holder of the ordinary shares are entitled to. The holders of the RPS shall only be entitled to vote at the meetings convened for the purpose of transacting to the following items of the business: (a) (b) (c) Variation, whether directly or indirectly, of the rights attached to the RPS. Winding-up of the Company. Such other circumstances as may be expressly provided under the law from time to time in respect of preference shares. Subject to the Companies Act, 1965, the Company shall have the right at any time, to redeem all or part of the RPS at a price of 100 per RPS ( Redemption Amount ). The RPS are not convertible into ordinary shares or any other classes of shares in the Company. The RPS are classified as equity as they are redeemable but only at the Company s option, and any dividends are discretionary. 9 SHARE PREMIUM At 1 January 206,882,009 90,867,012 Issuance of shares during the financial year 74,330, ,014,997 At 31 December 281,212, ,882, ekuiti nasional berhad annual report

142 NOTES TO THE FINANCIAL STATEMENTS 10 SIGNIFICANT RELATED PARTY DISCLOSURES Parties are considered related if the party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions The related parties of, and their relationship with the Company, are as follows: Related party Yayasan Ekuiti Nasional Ekuinas Capital Sdn Bhd Ekuiti Nasional Berhad Relationship Ultimate holding foundation which is formed by the Government of Malaysia Immediate holding company Related company 10.2 Key management personnel Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Company either directly or indirectly. The key management personnel of the Company includes all the Directors of the Company who make certain critical decisions in relation to the strategic direction of the Company. The Company has no key management personnel compensation during the financial year Significant related party transaction In addition to related party disclosures mentioned elsewhere in the financial statements, set out below is other significant related party transaction. Management Fees Ekuiti Nasional Berhad (2,000,000) (2,000,000) CAPITAL COMMITTED Capital committed and contracted for 125,735, ,389,308 Capital called 274,264, ,610, ,000, ,000,000 These are capital committed under the Ekuinas Outsourced Programme. 12 AUTHORISATION FOR ISSUE OF FINANCIAL STATEMENTS The financial statements have been authorised for issue in accordance with a resolution of the Board of Directors. 24 ekuiti nasional berhad annual report 2014

143

144 Ekuiti Nasional Berhad U Level 13 Surian Tower, No 1 Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Tel: Fax:

145 delivering performance Financial Statements 2014 E-CAP (EXTERNAL) TWO SDN BHD