Annual Report 2016 - MPHB Cap

MPHB Capital Berhad (1010253-W)Annual Report 2016

Contents 2016

02 Corporate Profile

03 Corporate Structure

04 Corporate Information

05 Financial Highlights

06 Profile of Board of Directors

09 Profile of Key Senior Management

10 Chairman’s Statement

12 Corporate Social Responsibility Statement

14 Statement on Corporate Governance

28 Additional Corporate Disclosures

29 Directors’ Responsibility Statement

30 Audit Committee Report

36 Statement on Risk Management and Internal Control

40 Management Discussion & Analysis

43 Financial Statements

155 Top 10 List of Properties

157 Analysis of Equity Securities

160 Notice of Annual General Meeting

164 Statement Accompanying the Notice of Annual General Meeting

• Form of Proxy

02 MPHB Capital Berhad (1010253-W) Annual Report 2016

InsuranCe

CredIt and InvestMents

The Group is committed towards the key fundamentals stated below:-

aCHIeveMent of exCellenCe In Its Core BusInesses

CreatIon of oPtIMuM value for Its sHareHolders

to Be a CarIng and faIr eMPloyer

a soCIally resPonsIBle CorPorate CItIzen and

to PraCtICe good CorPorate governanCe

CorPorate ProfIleMPHB Capital Berhad (“MPHB Capital” or the “Company”), the holding company of the MPHB Capital Group of Companies (“the Group”), was incorporated on 17 July 2012 as a private limited company and subsequently converted into a public limited company and assumed its present name on 23 July 2012. The Company was listed on the Main Market of Bursa Malaysia Securities Berhad on 28 June 2013. The Group is involved in the businesses of:-


CorPorate struCture - 31 MarCH 2017

Subsidiary Company Associated Company

* Listed on Bursa Malaysia Securities Berhad# In voluntary liquidation

* MPHB CAPITAL BERHAD

Multi-Purpose Capital Holdings

Berhad

MPI Generali Insurans Berhad

Multi-Purpose Credit

Sdn Bhd

Caribbean GatewaySdn Bhd

Kelana Megah Development

Sdn Bhd

Magnum Leisure Sdn Bhd

Queensway Nominees

(Asing)Sdn Bhd

Tibanis Sdn Bhd

Multi-Purpose Development

(PG) Sdn Bhd

Multi-Purpose Shipping

Corporation Berhad

Multi-Purpose Credit Holdings

Sdn Bhd

MP Factors Sdn Bhd

West-JayaSdn Bhd

Jayavest Sdn Bhd

Syarikat Perniagaan Selangor Sdn Bhd

Leisure Dotcom Sdn Bhd

Magnum.Com Sdn Bhd

Mulpha Kluang Maritime Carriers Sdn Bhd

# Tune Insurance

(Labuan) Ltd.

Multi-Purpose Credit Nominees

(Tempatan) Sdn Bhd

Queensway Nominees (Tempatan)

Sdn Bhd

Mimaland Berhad

Flamingo Management

Sdn Bhd

INSU

RAN

CE

& C

RED

ITIN

VEST

MEN

TS


CorPorate InforMatIon

Board of dIreCtors

TanSriDato’DrYahyabinAwangIndependent Non-Executive Chairman

TanSriDato’SurinUpatkoonNon-Independent Non-Executive Director

Dato’LimTiongChinNon-Independent Non-Executive Director

MsIveveiUpatkoonNon-Independent Executive Director

MrKuahHunLiangIndependent Non-Executive Director

audIt CoMMIttee

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

reMuneratIon CoMMIttee

Tan Sri Dato’ Dr Yahya bin Awang (Chairman)Tan Sri Dato’ Surin UpatkoonMr Kuah Hun Liang

noMInatIon CoMMIttee

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

rIsK ManageMent CoMMIttee

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

ManageMent

Ms Ivevei Upatkoon (Executive Director)Ms Kheoh And Yeng (Chief Executive Officer)

seCretary

Ng Sook Yee (MAICSA 7020643)

regIstered offICe

39th Floor, Menara Multi-PurposeCapital Square, No. 8, Jalan Munshi Abdullah50100 Kuala LumpurTel No. : 603-2694 8333Fax No. : 603-2694 6849

sHare regIstrar

Metra Management Sdn Bhd (62169-A)30.02, 30th Floor, Menara Multi-PurposeCapital Square, No. 8, Jalan Munshi Abdullah50100 Kuala LumpurTel No. : 603-2698 3232Fax No. : 603-2694 8571

audItors

Messrs Ernst & Young

PrInCIPal BanKers

Malayan Banking BerhadAlliance Bank Malaysia Berhad

stoCK exCHange lIstIng

Main Market of Bursa Malaysia Securities Berhad(Listed on 28 June 2013)Stock Name : MPHBCAPStock Code : 5237ISIN Code : MYL5237OO002

WeBsIte

www.mphbcap.com.my

e-MaIl

[email protected]


fInanCIal HIgHlIgHts

2016 2015 2014 2013RM’000 RM’000 RM’000 RM’000

(restated) (restated)

assetsNon-currentassetsProperty, plant and equipment 78,353 81,570 84,266 87,324Investment properties 820,512 830,077 748,661 744,051Investments 388,851 397,479 328,195 362,755Deferred tax assets 3,185 1,561 1,300 11,598Intangible assets 35,057 34,859 43,161 42,884

1,325,958 1,345,546 1,205,583 1,248,612Currentassets 1,693,988 1,666,482 1,386,577 1,060,976assets held for sale - - - 30,195total assets 3,019,946 3,012,028 2,592,160 2,339,783

eQuIty and lIaBIlItIes

EquityattributabletoOwnersoftheCompanyShare capital 715,000 715,000 715,000 715,000 Reserves 929,157 877,608 603,839 363,545Shareholders’ fund 1,644,157 1,592,608 1,318,839 1,078,545Non-controlling interests 227,459 198,766 13,620 15,389Totalequity 1,871,616 1,791,374 1,332,459 1,093,934

Non-currentliabilities 11,016 20,772 39,756 87,800Currentliabilities 1,137,314 1,199,882 1,219,945 1,135,443Liabilitiesdirectlyassociatedwithassetsheldforsale - - - 22,606Totalliabilities 1,148,330 1,220,654 1,259,701 1,245,849

total eQuIty and lIaBIlItIes 3,019,946 3,012,028 2,592,160 2,339,783

fInanCIal results

Profitbeforetax 107,212 116,316 277,486 57,590Income tax expense (19,832) (19,629) (33,833) (10,718)Profitfortheyear 87,380 96,687 243,653 46,872Non-controlling interests (32,206) (21,988) 1,767 1,377Profit attributable to Owners of the Company 55,174 74,699 245,420 48,249

fInanCIal ratIos

Basic earnings per share (Sen) 7.7 10.4 34.3 8.9

Net assets per share (RM) 2.3 2.2 1.8 1.5

Return on equity (%) 3.4 4.7 18.6 4.5


ProfIle of Board of dIreCtors

TANSRIDATO’DRYAHYABINAWANG IndependentNon-ExecutiveChairman

Tan Sri Dato’ Dr Yahya bin Awang, a Malaysian, Male, aged 66, was appointed as an Independent Non-Executive Chairman/Director of MPHB Capital Berhad (“MPHB Capital” or “the Company”) on 1 August 2012. Tan Sri Yahya is also the Chairman of the Nomination Committee, Remuneration Committee and Risk Management Committee, and a member of the Audit Committee of MPHB Capital.

Tan Sri Yahya graduated from Monash University in Australia with a Bachelor of Medicine and Bachelor of Surgery degree in 1974. Tan Sri Yahya became a Fellow of the Royal College of Surgeons and Physicians of Glasgow in 1980.

Moving to London in 1981, Tan Sri Yahya worked as a Surgical Registrar in the Department of Cardiothoracic Surgery at Royal Brompton Hospital before returning to Malaysia to take up the role of Cardiothoracic Surgeon at the General Hospital. From 1992 until 2004, Tan Sri Yahya held the position of Head and Senior Consultant Cardiothoracic Surgeon at the National Heart Institute of Malaysia, and from 1998 to 2002, he was also the Medical Director of the Institute.

Tan Sri Yahya’s many professional achievements include pioneering the establishment of The National Heart Institute of Malaysia in 1992 and performing the first Heart Transplant in Malaysia in 1997. In 2013, Tan Sri Yahya was awarded the prestigious Merdeka Award for his contribution to the medical field. Tan Sri Yahya is also the author of many scholarly and professional articles and has made numerous presentations to professional audiences.

Tan Sri Yahya has been a Consultant Cardiothoracic Surgeon at Damansara Heart Centre, Damansara Specialist Hospital since March 2003. He was a council member of the Association of Thoracic and Cardiovascular Surgeons of Asia. He is also a committee member of the Malaysian Board of Cardiothoracic Surgery. In 2011, he was appointed as the Pro-Chancellor of University of Teknologi Malaysia.

Currently, Tan Sri Yahya also sits on the Board of Tokio Marine Life Insurance Malaysia Bhd and several private limited companies in Malaysia. Tan Sri Yahya is also a Trustee of Yayasan Wah Seong and RHB Foundation.

As at 3 April 2017, Tan Sri Yahya has a direct shareholding of 101,100 ordinary shares in MPHB Capital. He does not hold any shares in the subsidiaries of MPHB Capital.

Tan Sri Yahya has no family relationship with any of the directors and/or major shareholders of MPHB Capital. He has no conflict of interest with MPHB Capital and has had no conviction of offences within the past 5 years, and there was no public sanction or penalty imposed on him by the regulatory bodies during the financial year 2016.

He attended all six(6) Board meetings held during the financial year 2016.


profile of board of directors (Cont’d)

IveveI uPatKoon Non-IndependentExecutiveDirector

Ms Ivevei Upatkoon, a Thai National, Female, aged 40, was appointed as an Executive Director of MPHB Capital on 20 February 2014. She does not sit on any Board committee of MPHB Capital.

Ms Ivevei obtained a Master in Business Administration from INSEAD in 2004, a Bachelor of Economics and Bachelor of Arts Degree (Honours) majoring in Japanese Studies in 1997, both from the University of Michigan.

Ms Ivevei has more than 8 years working experience in property development strategy, property management and property investment. She joined Magnum Berhad (“Magnum”) as a manager in 2008 and was promoted as the Assistant General Manager, Property in 2010. After the completion of the demerger exercise of Magnum in 2013, she was transferred to MPHB Capital. She was the General Manager, Property of MPHB Capital prior to her appointment as Executive Director of MPHB Capital.

Before joining Magnum in 2008, Ms Ivevei was employed in companies involved in corporate finance/advisory, systems consulting, e-commerce services and e-business strategy consulting/advisory.

Ms Ivevei also sits on the Board of Mimaland Berhad, Multi-Purpose Capital Holdings Berhad and several private limited companies in Malaysia and is a Trustee of Magnum Foundation.

As at 3 April 2017, Ms Ivevei has a direct shareholding of 156,200 ordinary shares in MPHB Capital. She does not hold any shares in the subsidiaries of MPHB Capital.

Ms Ivevei is the daughter of Tan Sri Dato’ Surin Upatkoon, a director and major shareholder of MPHB Capital. She has no conflict of interest with MPHB Capital and has had no conviction of offences within the past 5 years, and there was no public sanction or penalty imposed on her by the regulatory bodies during the financial year 2016.

She attended all six(6) Board meetings held during the financial year 2016.

TANSRIDATO’SURINUPATKOON Non-IndependentNon-ExecutiveDirector

Tan Sri Dato’ Surin Upatkoon, a Thai National, Male, aged 68, was appointed as a Non-Independent Non-Executive Director of MPHB Capital on 18 November 2016. He is a member of the Remuneration Committee of MPHB Capital.

Tan Sri Dato’ Surin completed his secondary education in Han Chiang High School, Penang in 1970. He began his career with MWE Weaving Mills Sdn Bhd in 1971 as a manager and he was appointed as the Managing Director of MWE Spinning Mills Sdn Bhd in 1974. In 1976, he became an Executive Director of MWE Holdings Berhad and subsequently, in 1979, he was appointed as the Managing Director of MWE Weaving Mills Sdn Bhd.

In 2000, Tan Sri Dato’ Surin was appointed as an Executive Director of Magnum Berhad (“Magnum”) and subsequently in 2002, he was appointed as the Managing Director of Magnum where he played a major role in formulating the business strategies and direction of the Magnum Group and was actively involved in the policy making aspects of the operations of the Magnum Group. He was re-designated as Non-Independent Non-Executive Chairman of Magnum on 26 June 2013.

Tan Sri Dato’ Surin was a Director of MPHB Capital from 17 July 2012 to 13 May 2013 and the Managing Director of MPHB Capital from 14 May 2013 to 30 September 2016. As Managing Director of MPHB Capital, he was responsible for developing and implementing the strategic vision for the growth and expansion of MPHB Capital Group, and ensuring effective control of the general management and operations of the MPHB Capital Group.

Tan Sri Dato’ Surin also sits on the Board of MWE Holdings Berhad, Magnum 4D Berhad and several private limited companies in Malaysia. He is also a Trustee of Chang Ming Thien Foundation and Magnum Foundation.

As at 3 April 2017, Tan Sri Dato’ Surin is deemed to have an indirect interest in 261,921,093 ordinary shares in MPHB Capital. By virtue of his deemed interest in the shares of MPHB Capital, he is also deemed to have an interest in the shares of all the subsidiaries of MPHB Capital to the extent of MPHB Capital’s interest in these subsidiaries.

Tan Sri Dato’ Surin’s daughter, Ms Ivevei Upatkoon, is an Executive Director of MPHB Capital. He has no conflict of interest with MPHB Capital and has had no conviction of offences within the past 5 years, and there was no public sanction or penalty imposed on him by the regulatory bodies during the financial year 2016.

He attended all six(6) Board meetings held during the financial year 2016 when he was a Managing Director and subsequently, a Director of MPHB Capital.


profile of board of directors (Cont’d)

DATO’LIMTIONGCHIN Non-IndependentNon-ExecutiveDirector

Dato’ Lim Tiong Chin, a Malaysian, Male, aged 64, was appointed as a Non-Independent Non-Executive Director of MPHB Capital on 1 August 2012. Dato’ Lim is also a member of the Audit Committee, Nomination Committee and Risk Management Committee of MPHB Capital.

Dato’ Lim is a Public Accountant by profession and is a Fellow of the Institute of Chartered Accountants in England and Wales. He is also an Associate Member of the Malaysian Institute of Certified Public Accountants and Malaysian Institute of Accountants.

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

Dato’ Lim also sits on the Board of The Kedah Transport Company Berhad and several private limited companies in Malaysia.

As at 3 April 2017, Dato’ Lim has a direct shareholding of 1,000,000 ordinary shares in MPHB Capital (“MPHB Capital Shares”) and an indirect shareholding of 8,940,000 MPHB Capital Shares held through his shareholdings of more than 20% in Keetinsons Sendirian Berhad, T.C. Holdings Sendirian Berhad and Trade Key Investments Limited. He does not hold any shares in the subsidiaries of MPHB Capital.

Dato’ Lim has no family relationship with any of the directors and/or major shareholders of MPHB Capital. He has no conflict of interest with MPHB Capital and has had no conviction of offences within the past 5 years, and there was no public sanction or penalty imposed on him by the regulatory bodies during the financial year 2016.


KuaH Hun lIang IndependentNon-ExecutiveDirector

Mr Kuah Hun Liang, a Malaysian, Male, aged 55, was appointed as an Independent Non-Executive Director of MPHB Capital on 4 March 2013. He is the Chairman of the Audit Committee and a member of Nomination Committee, Remuneration Committee and Risk Management Committee of MPHB Capital.

Mr Kuah obtained a Bachelor of Science (Hons) degree in Applied Economics from the University of East London, United Kingdom in 1982. He started his banking career in Public Bank Berhad in 1983. He joined Deutsche Bank AG in 1989 where he served as a treasurer and was then promoted as the head of global markets in 1995. In 2000, he was appointed as an Executive Director of Deutsche Bank (M) Bhd and promoted to be the Chief Executive Officer and Managing Director in 2002 and held the position until September 2006. He was formerly a treasurer and a Director of Malaysian-German Chamber of Commerce and the Chairman of Star Publications (Malaysia) Berhad.

Mr Kuah is currently an independent director of Alliance Bank Malaysia Berhad, Alliance Investment Bank Berhad and Rexit Berhad.

As at 3 April 2017, Mr Kuah has a direct shareholding of 330,200 ordinary shares in MPHB Capital. He does not hold any shares in the subsidiaries of MPHB Capital.

Mr Kuah has no family relationship with any of the directors and/or major shareholders of MPHB Capital. He has no conflict of interest with MPHB Capital and has had no conviction of offences within the past 5 years, and there was no public sanction or penalty imposed on him by the regulatory bodies during the financial year 2016.



ProfIle of Key senIor ManageMent

KHeoH and yeng ChiefExecutiveOfficer

Ms Kheoh And Yeng, a Malaysian, Female, aged 59, was appointed as the Chief Executive Officer (“CEO”) of MPHB Capital on 18 November 2016. She is responsible for ensuring the effective control of the general management and operations of MPHB Capital, and developing and implementing the overall business strategies and direction of the MPHB Capital Group.

Ms Kheoh holds a Bachelor of Commerce (Hons) from the University of Manitoba, Canada and a Master of Business Administration from the University of Windsor, Canada.

Prior to her appointment as CEO, she was the Chief Operating Officer (“COO”) of MPHB Capital from 14 May 2013 to 17 November 2016. During her tenure as COO of MPHB Capital, she was responsible for the overall management of the operations of the MPHB Capital Group.

Ms Kheoh was the COO of Magnum Berhad (“Magnum“) from 2007 until May 2013. She joined Magnum as General Manager in 2002 and was subsequently promoted to Senior General Manager in 2003 before assuming the position of COO in 2007. Ms Kheoh was a Senior Manager at Hong Leong Bank Berhad before joining Magnum and throughout her twelve (12) years of banking experience, she was principally involved in various areas. Ms Kheoh was managing a leasing and hire purchase company prior to joining Hong Leong Bank Berhad.

Ms Kheoh is currently a director of MPI Generali Insurans Berhad, Multi-Purpose Shipping Corporation Berhad, Multi-Purpose Capital Holdings Berhad and Mimaland Berhad.

As at 3 April 2017, Ms Kheoh has a direct shareholding of 464,400 ordinary shares in MPHB Capital. She does not hold any shares in the subsidiaries of MPHB Capital.

Ms Kheoh has no family relationship with any of the directors and/or major shareholders of MPHB Capital. She has no conflict of interest with MPHB Capital and has had no conviction of offences within the past 5 years, and there was no public sanction or penalty imposed on her by the regulatory bodies during the financial year 2016.


CHAIRMAN’SstateMent

Our Group has proven to be resilient and is able to withstand market volatility in terms of global and domestic uncertainties throughout 2016 with the sound counsel, guidance and signification contribution from Tan Sri Dato’ Surin Upatkoon and fellow board members. We value our dedicated teams of Management and employees across the Group for their skills, commitment and loyal service. Our commitment towards our shareholders and community is embedded in our core values and culture; and with strategic planning we aim to achieve sustainable returns for our valued shareholders and be a socially responsible Group.

CorPorate uPdates

In 2015, the wholly-owned subsidiary of the Company, Multi-Purpose Capital Holdings Berhad (“MPCHB”) completed the disposal of 49% equity in the insurance subsidiary, MPI Generali Insurance Berhad (“MPI Generali”) to Generali Asia N.V. (“Generali Asia”).

Generali Asia has the right to exercise the call option to acquire 21% of the issued and paid-up capital of MPI Generali within two years from the date of completion, 7 May 2015.

BusIness PerforManCe overvIeW

For the year ended 31 December 2016, the Group reported revenue of RM456.5 million and profit before tax of RM107.2 million compared with the revenue of RM396.7 million and profit before tax of RM116.3 million reported in 2016. Our insurance subsidiary contributed largely to the improvement in the revenue with growth in the premiums earned during the year.

However, there was a 7.8% drop in the profit before tax of RM116.3 million in 2015 to RM107.2 million in 2016 due to other income from reversals of impairment in 2015. In view of the decline in the earnings, the earnings per share for 2016 at 7.7 sen per share was 25.9% lower than 10.4 sen per share reported in 2015.

dear shareholders,

OnbehalfoftheBoardofDirectors,IamdelightedandprivilegedtopresenttheFourthAnnualReportand Audited Financial Statements of the GroupandtheCompanyforthefinancialyearended31December2016.


chairman’s statement (cont’d)

revIeW of oPeratIng dIvIsIons

a) Insurance Division MPI Generali posted revenue of RM390.8 million

which was 15.2% higher than revenue of RM339.3 million achieved in 2015 due to higher earned premiums. However, the operating profit at RM81.7 million improved marginally compared with the operating profit of RM77.1 million recorded in 2015 due to higher claims ratios coupled with increased operating and administrative expenses.

In the foreseeable future, MPI Generali shall harness on the strength and the international network of Generali Asia to widen its market share, particularly in the retail segment of the local general insurance sector. It will also focus on operational improvements and implement cost saving measures to maintain sustainable growth.

b) Credit Division Operating profit of the credit business jumped

by RM11.2 million from operating profit of RM10.4 million posted in 2015 to RM21.6 million in 2016. Our Credit Division‘s business is limited to selected clientele and it will continually assess and evaluate potential opportunities to generate interest.

c) Investment Division Hospitality, investment properties and joint-

ventures with reputable property investors are the core components of the Investment Division. In 2016, revenue at RM57.9 million was 4.9% higher that the revenue of RM55.2 million posted in 2015 due to rental income and revenue contribution from a joint venture.

Hospitality division is affected by stiff competition and changes in the Regulatory Requirements. Our management intends to initiate marketing strategies and promotions to maintain existing customers and to attract new ones.

Although the revenue has improved, the operating profit has decreased significantly by 84.9% from RM31.2 million achieved in 2015 to operating profit of RM4.7 million in 2016 due to reversals of impairments of certain properties in 2015.

In the effort in creating value to the shareholders, we are always on the look-out for opportunities to unlock the value of the land bank within the Group; either through joint-venture with established property developer or outright sale.

ProsPeCts

The Malaysian economy is forecasted at 4.3% in 2017 and we envisaged that it is going to be a challenging year with the uncertainties in the local and global economic environment. As such our Group will continue to focus on corporate enhancements in adapting to changing market conditions and to assess opportunities to grow the existing businesses efficiently to strengthen market presence whilst taking steps to minimise risks to safeguard the assets of the Group.

dIvIdends

We acknowledge that dividends form an important aspect of the shareholders’ return and dividends will be declared and paid out upon approval from relevant authorities.

aPPreCIatIon and aCKnoWledgMent

I would like to take this opportunity to thank our shareholders for their continued support. In addition, I wish to convey my appreciation to my fellow Directors, Management and staff for their talents and contributions to the Group in building and growing the core businesses. Last but not least, I wish to thank all our loyal customers and our esteemed partners for their unwavering support.

TANSRIDATO’DRYAHYABINAWANGChairman

31 March 2017


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

tHe CoMMunIty

• Recreational/Sports/MusicalProgrammes

The Group believes that the cultivation of a healthy and active lifestyle is an important element in creating work-life balance and on that premise, MPI Generali has continued to organise its annual community run event known as the “MPI Generali Run” at Padang Merbuk on 10 January 2016 with about 5,000 runners participating in the event. In preparation for the run, MPI Generali had organised “My First Run Clinic” programme to encourage new runners to take up running as a sustainable healthy recreational activity and to promote better running techniques amongst the runners.

In promoting the development of recreational sports, the Group had sponsored the Junior Tennis Development Programme of the Sarawak Sport Council to nurture junior talents in tennis. The Group also sponsored the 2016 MPI Saujana Amateur Golf Championship, which served as a platform to nurture young amateur golfers into becoming the next generation of top professional golfers.

During the year, the Group had provided financial support to the Selangor Philharmonic Orchestra, a non-profit organization set up with the vision of promoting classical music in Selangor, educating and training young musicians to appreciate large scale performance, and discovering new talent from the local communities.

• Social/CommunityWelfareAndCharityProgrammes

As part of the Group’s community service projects, the Group had also jointly organised a blood donation campaign with the Red Crescent Society in Penang to encourage the general public to voluntarily donate blood. The Group had made financial contributions to various charity and fundraising programmes/events such as the Mitrajaya Charity Run, Kiwanis Charity Golf, Charity Dinners, Charity Golf Tournament and the UTAR Fundraising Aid.

During the year 2016, the Group had continued with its recycling project known as “The Project Good Deeds” where clean, wearable and pre-loved sport shoes and tee shirts were collected and donated to the Orang Asli/Indigenous communities in Selangor and Negeri Sembilan.

tHe WorKPlaCe

The Group is committed to ensuring that its employees are provided with fair remuneration terms and they are given equal opportunities for career progression based on merit. The benefits provided for employees include medical and healthcare insurance coverage, personal accident coverage and housing loan interest subsidy. Sports and interactive activities as well as subsidised local and overseas trips were organised for employees to foster closer working relationship and teamwork. In conjunction with the World Mosquito Day, the Group had organised a “Mosquito Day campaign” cum a “Fruit Festival for staff”, to promote awareness on the mosquito-borne diseases and at the same time, to allow staff to have a fun-filled time to feast on the local fruits.


corporate socialresponsibility statement (Cont’d)In line with the Group’s commitment to provide staff with a safe, healthy and conducive working environment, the Group had conducted Occupational Safety and Awareness programmes for staff to promote good work safety practices amongst staff.

The Group values its employees and places great emphasis on human resources development. During the year, the Group had provided staff with trainings and seminars that focused on employees’ career development and enhancement of employees’ technical skills, competency and knowledge, which includes trainings on the new Companies Act 2016 and leadership programmes such as Executive Development Programme and Young Managers Development Programme. The Group had also embarked on a programme to sponsor employees to attend the Associateship of the Malaysian Insurance Institute (“AMII”) and the Diploma of the Malaysian Insurance Institute (“DMII”) Examinations. Employees in these programmes are provided with benefits such as study leave and examination leave.

tHe envIronMent

Conscious of the need to conserve resources and preserve the environment, the Group had made efforts to cultivate its staff with the habit of “reduce, reuse and recycle”. These include minimising energy consumption, recycling paper waste, printing double-sided and communicating via e-mails.

During the year 2016, the Group had conducted waste management awareness programmes to educate staff on proper handling of food, paper, plastics and non-paper waste.

tHe MarKetPlaCe

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


stateMent on CorPorategovernanCe The Board of Directors (“the Board”) of MPHB Capital Berhad (“the Company” or “MPHB Capital”) is committed in ensuring that good corporate governance is practised throughout the Group as a fundamental part of discharging its responsibilities to protect the interest of all stakeholders, enhance shareholders’ value and for long-term sustainable business growth.

The Board is mindful of the need to regularly review the Group’s corporate governance practices with the view of ensuring that they remain relevant in meeting the challenges of the business environment.

The Board is pleased to outline below the key aspects of how the Group has applied the principles and recommendations set out in the Malaysian Code on Corporate Governance 2012 (“the Code”).

1. estaBlIsH Clear roles and resPonsIBIlItIes

1.1 Board Charter The Board recognises the role it plays in charting the strategic direction and managing the business and

affairs of the Group, including ensuring compliance with the Group’s corporate objectives.

The Board adopted a Board Charter, which outlined the composition, roles and responsibilities, processes and procedures of the Board and the various Board Committees to facilitate their effective functions. The Board Charter is available on the Company’s corporate website at www.mphbcap.com.my. The Board will review the Board Charter on a yearly basis to ensure that it remains consistent with the Company’s strategic plan and direction.

The duties and responsibilities of the Board are clearly outlined in the Board Charter as follows:

(a) To review, approve and monitor the Group’s overall strategic and financial plans.

(b) To oversee the Group’s business operations and financial performance to ensure that the businesses are being effectively managed.

(c) To identify principal risks and ensuring the implementation of appropriate internal control system and mitigation measures to manage risks.

(d) To review the adequacy and the integrity of the Group’s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives, and guidelines.

(e) To develop and implement policies and/or programmes for effective communication with shareholders and/or investors.

(f) To consider emerging issues which may be material to the Group’s business and affairs and ensure that the Group has proper succession plan for senior management.

The Board plays an active role in reviewing and monitoring the Group’s overall strategic and financial plans. The Board reviews and approves on a yearly basis the proposed business plan and budget of the Group at the Board Meetings.


statement on corporategovernance (Cont’d)1. ESTABLISHCLEARROLESANDRESPONSIBILITIES(CONT’D)

1.1 BoardCharter(Cont’d)

The Board reviews and oversees the Group’s business operations and financial performance on a regular basis by monitoring the Group’s financial results against the budget and the preceding quarter’s results. The Board is updated by the Senior Management of the Group’s key strategic initiatives, business targets and significant operational issues at the Board Meetings. The Board also deliberates and evaluates the feasibility of business propositions and corporate proposals as well as any principal risks that may have a significant impact on the Group’s business.

The Board adopted an internal Corporate Disclosure Policy for the proper handling of confidential and/or material information to prevent any improper use or leakage of such information. This policy sets out the levels of authority to be granted to designated officers for disclosure of material information to the shareholders and the public to ensure compliance with the Listing Requirements. The Group employs its best efforts to ensure that no disclosure of material information is made on a selective basis to any parties unless such information has been previously been disclosed and announced to Bursa Malaysia Securities Berhad.

The Board recognises the importance of ensuring that there is an effective and orderly succession planning for the Group’s key management positions. During the year, the Group has implemented various leadership and staff development programmes for identified candidates within the Group as preparation for internal pipeline of talents to assume critical management and operational positions in the Group.

1.2 ClearSegregationofRolesandResponsibilities

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

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

The Board has adopted a formal Authority Chart, which clearly spells out the applicable approving limits for matters reserved for the Board’s approval, and those that the Board have delegated to the Senior Management (including the Executive Director and the Chief Executive Officer), who are responsible for the execution of the Board’s policies and decisions. Key matters reserved for the Board’s approval include the financial results, budget and business plan, declaration of dividend, acquisition and disposal of material assets/investments, and major restructuring proposals.

1.3 PromotingEthicalStandards

(a) WhistleBlowingPolicy

The Board has established a Whistle Blowing Policy to provide an avenue for employees of the Group to report any genuine concerns about possible improprieties relating to unethical/improper conduct, financial reporting, non-compliance with regulatory requirements and other malpractices through internal channels.

The Audit Committee is tasked with responsibility to implement the Whistle Blowing Policy. All whistle blowing reports are to be submitted to the Audit Committee Chairman and shall be investigated promptly by the Audit Committee with the assistance of the Internal Auditors, the Human Resources Department and the Legal Department (where applicable). The Audit Committee shall be updated on the progress of investigation not later than the next scheduled meeting of the Audit Committee of the Company.


1. ESTABLISHCLEARROLESANDRESPONSIBILITIES(CONT’D)

1.3 PromotingEthicalStandards(Cont’d)

(b) CodeofBusinessConductandEthicsforDirectors

As part of the Board’s continuous efforts to ensure good corporate governance practices, the Board has adopted a Director’s Code of Business Conduct and Ethics (“Code of Conduct”). The Code of Conduct sets out the standards of ethical behaviors and business conduct to be observed by the Directors in carrying out their responsibilities and in their business dealings with external parties. A copy of the Code of Conduct is available at the Company’s website.

The main principles of the Code of Conduct are as follows:• To avoid any conflict of interest;• To avoid any misuse of position for personal advantage/benefit/preferential treatment in any

way;• To avoid any misuse of information for personal gains or for any purpose other than intended by

the Company;• To observe confidentiality of information;• To avoid any improper use of the Company’s assets.

The Directors have the duty to declare immediately to the Board of their interests in any transaction to be entered into directly or indirectly with the Company/Group. The interested director shall abstain from all deliberations and decision making of the Board on the transaction. In the event where a corporate proposal is required to be approved by the shareholders, the interested Directors will abstain from voting in respect of their shareholdings in the Company and will further undertake to ensure that persons connected to them will similarly abstain from voting on the resolution.

1.4 StrategiesPromotingSustainability

The Group endeavours to promote sustainable growth in every aspects of the Group’s business through the continuous review and repositioning of its business strategies in order to achieve competitive advantage. At workplace, the Group is committed to promote staff welfare through the provision of attractive remuneration and fringe benefits, a safe and healthy working environment as well as equip the staff with the relevant skillsets.

1.5 AccesstoInformationandAdvice The Board has direct access to the Management, including the advice and services of the Company

Secretary and has full unrestricted access to information in relation to the Group’s business and affairs, whether as a full board or in their individual capacity. The Directors may request to be provided with additional information or clarification on complex/technical issues relating to the affairs of Group in order to make informed and timely decision. The Directors are at liberty to seek independent professional advice at the Company’s expense, if necessary, after consultation with the Board.

The Board is updated by the Chief Executive Officer on the Group’s operations and performance and the status of implementation of all strategic plans. The agenda for Board Meetings, together with the detailed reports and proposition papers to be tabled at the Board Meetings, are circulated to all the directors with sufficient time for their perusal and consideration prior to each Board Meeting.

statement on corporategovernance (Cont’d)


1. ESTABLISHCLEARROLESANDRESPONSIBILITIES(CONT’D)

1.6 CompanySecretary

The Company Secretary and her team support the Board in fulfilling its fiduciary duties and leadership role in shaping the corporate governance practices of the Group. The Company Secretary facilitates timely communication of decisions made and policies set by the Board to the Management for action to be taken. The Company Secretary attends and ensures that all Board meetings are properly convened, and that proper records of the proceedings and resolutions passed are maintained in the statutory registers at the registered office of the Company. The Board is regularly updated by the Company Secretary on the new statutory/regulatory requirements required to be observed by the Directors and/or the Company. The Company Secretary also serves notice to the Directors and principal officers to notify them of the closed periods for dealing in the Company’s shares pursuant to the provisions of the Listing Requirements.

The Company Secretary is an Associate member of the Malaysian Institute of Chartered Secretaries and Administrators (“MAICSA”) and she is qualified to act as company secretary under Section 235(2) of the Companies Act, 2016. During the year, the Company Secretary has attended the relevant continuous professional development programmes to keep herself abreast with the changes in the statutory and regulatory requirements. The Board is satisfied with the performance and support rendered by the Company Secretary to the Board in the discharge of its duties and responsibilities.

2. strengtHen CoMPosItIon

2.1 CompositionoftheBoard

As at 31 December 2016, the Board has 5 members, comprising a Non-Executive Chairman, an Executive Director and three Non-Executive Directors, of which two are Independent Non-Executive Directors. The size and composition of the Board are adequate to provide for a diversity of views and the effective stewardship of the Company. The number of independent directors, which represents one-third of the Board, fulfils the Main Market Listing Requirements of the Bursa Malaysia Securities Berhad (“Listing Requirements”).

The Board members are persons of high calibre and they are from diverse backgrounds with expertise and skills in the areas of medical science, business management, property management, project management, corporate affairs, banking, stockbroking, finance, accounting, corporate finance/advisory and system consulting. They have a sound understanding of the Group’s business. A brief profile of each Director is set out in this Annual Report.

The Board’s policy is to ensure that the mix of skills and profiles of the Company’s Board members, in terms of age, ethnicity, gender, business experience and personal skills, provide the necessary perspectives, experience and expertise required to achieve effective stewardship and management of the Company’s operations. The Board’s current composition with one female Director reflects the Board’s commitment towards achieving a more gender diversified Board. The Board will review and consider the appointment of additional woman director taking into consideration of the combination of skills, experience and diversity necessary to strengthen the composition of the Board.

2.2 BoardCommittees

The Board has established four (4) Board committees, namely, the Nomination Committee, Remuneration Committee, Audit Committee and Risk Management Committee to assist the Board in discharging its fiduciary duties and responsibilities.

The Board Committees review and deliberate in details the issues within their terms of reference and make the necessary recommendations to the Board with regards to the matters under their review. The Board remains fully responsible for the effective control of the Company.



2. STRENGTHENCOMPOSITION(CONT’D)

2.2 BoardCommittees(Cont’d)

(a) NominationCommittee

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

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

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

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

The Nomination Committee is primarily responsible for the following:

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

(ii) To assess the performance and effectiveness of the Board as a whole, the Board Committees and each individual Director on an annual basis. It includes the assessment of independence of the independent directors.

(iii) To oversee the overall composition of the Board in terms of appropriate size, required mix of skills, experience and core competencies as well as the balance between Executive Directors, Non-Executive Directors and Independent Directors.

ActivitiesoftheNominationCommittee

During the financial year 2016, the Nomination Committee met two(2) times, which were attended by all members.

The Nomination Committee has undertaken the following activities during the year 2016:-

(a) Annual assessment of the performance and effectiveness of the Board as a whole and the individual Directors.

(b) Annual review of the overall composition of the Board in terms of the appropriate size, mix of skills, experience, core competencies and board balance.

(c) Annual review of the composition, functions, performance of the Board Committees.

(d) Annual assessment of the independence of its independent directors.

(e) Assessment of the training needs of the directors of the Company.

(f) Review and assessment of the proposed re-appointments of directors prior to submissions to Bank Negara Malaysia.

(g) Annual review of the term of office and performance of the Audit Committee and each member of the Audit Committee.





(a) NominationCommittee(Cont’d)

AssessmentofthePerformanceoftheBoardandBoardCommittees

The Board has established an annual performance evaluation process to assess the performance of the Board and Board Committees, as well as the performance of each Director and each member of the Board Committees. The Board is assessed in areas such as board conduct, board processes, board accountability, board governance, succession planning and interaction with management and stakeholders. For the individual director’s self-assessment, the criteria include integrity, commitment, leadership, knowledge, capability and communication ability.

The Board Committees are assessed based on the following criteria:-

(i) Whether the Committees have the right members’ composition.

(ii) Whether the Committees are providing appropriate recommendations in assisting the Board in making more efficient and effective decisions.

(iii) Whether the communications by the Board Committees are of sufficient quality.

(iv) Whether the Board is well informed on a timely basis regarding the Committees’ deliberations.

(v) Whether the Committees had carried out their duties effectively in accordance with their terms of reference.

The Nomination Committee also assesses the independence of Directors based on the criteria as specified in the Listing Requirements, which include factors such as the relationship between the independent director and the Company and his involvement in any significant transaction with the Company.

(b) AuditCommittee

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

The Audit Committee assists the Board to review the Group’s financial reporting process, the system of internal control, the audit process and the Group’s process for monitoring compliance with laws and regulations, and such other matters which may be delegated by the Board.

(c) RemunerationCommittee

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


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

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





(c) RemunerationCommittee(Cont’d)

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

(d) RiskManagementCommittee

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


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

Mr Kuah Hun Liang - Member (Independent Non-Executive Director) The responsibilities of the Risk Management Committee shall include the following:

(a) To ensure that the Company’s corporate objectives are supported by a sound risk strategy and an effective risk management framework that is appropriate to the nature and complexity of its activities.

(b) To review and assess the adequacy of the Group’s risk management policies and framework and ensure adequate infrastructure, resources and systems are in place for effective risk management of the Group.

(c) To identify and review any significant risks that exist in the Group and ensure that steps are taken to mitigate the risks within the Group’s risk appetite.

The Risk Management Committee held one(1) meeting during the year, which was attended by all members.

2.3 NominationandAppointmentofDirectors

The Company’s procedures for appointment/re-appointment of directors are in line with the relevant provisions under the Bank Negara Malaysia’s Policy Documents on Fit and Proper Criteria, the Financial Services Act, 2013 (“FSA”) and the Listing Requirements. Under the procedures, the Nomination Committee proposes the nominees for appointment/re-appointment to the Board, and recommends to the Board on the appointment and re-appointment of directors, subject to the approval(s) of Bank Negara Malaysia (“BNM”).




2.3 NominationandAppointmentofDirectors(Cont’d)

The Nomination Committee has established the following process for selection or nomination of suitable candidates to be appointed as directors:-

Stage 1 : Identification of candidatesStage 2 : Meeting up with the candidates (where feasible)Stage 3 : Evaluation of suitability of candidatesStage 4 : Final deliberation by the Nomination CommitteeStage 5 : Recommendation to the Board

The Nomination Committee considers, among others, the following criteria in making recommendations to the Board on suitable candidates for appointment as Directors:

(a) Whether the candidate have key qualities such as honesty, personal/financial integrity, diligence and professionalism.

(b) Whether the candidate possesses the necessary qualification, training, skills, expertise, practical experience and ability to understand the technical requirements of the business, the inherent risks and the management process required to perform his role as a director of the Company effectively.

(c) Whether the candidate has the commitment to effectively fulfill the role and responsibilities as a director, having regard to his existing directorships and other commitments.

(d) Whether the candidate is likely to work constructively with the existing directors and contribute to the overall effectiveness of the Board.

(e) Whether the candidate complies with the Guidelines on Fit and Proper Criteria issued by BNM,

the relevant provisions under the FSA and the provisions of the Listing Requirements governing the directors of listed issuer.

The Board will decide or approve the appointment or re-appointment of directors based on the recommendations of the Nomination Committee.

2.4 RemunerationofDirectors

The objective of the Group’s remuneration policy is to attract, retain and motivate directors with the necessary calibre, expertise and experience to lead and manage the Group effectively. In the case of the Executive Directors, the remuneration package are linked to the corporate and individual performance. For Non-Executive Directors, the quantum of fixed fee takes into consideration of the directors’ increased fiduciary duties and responsibilities, accountability to shareholders, memberships in Board Committees and performance and scope of business of the Group.

The Board has established a formal and transparent process for approving the remuneration of Non-Executive Directors and the Managing/Executive Directors. The Remuneration Committee is responsible for reviewing and approving the remuneration packages of the Managing/Executive Directors; and also reviewing the directors’ fees of the Non-Executive Directors and making the recommendations on the same to the Board for endorsements. The Directors’ fees for Non-Executive Directors are then tabled for the approval by the shareholders.




2.4 RemunerationofDirectors(Cont’d)

The aggregate remuneration of Directors of the Company in respect of the financial year ended 31 December 2016 categorised into appropriate components is as follows:-

DirectorsoftheCompanyNumberofDirectors

2016 2015Executivedirectors

Non-Executivedirectors

Executivedirectors

Non-Executivedirectors

RM1 to RM50,000 1*RM50,001 to RM100,000 2 - 1RM100,001 to RM150,000 1 - 2RM300,001 to RM350,000 1 1 -RM450,001 to RM500,000 1 -RM1,800,001 to RM1,850,000 1 - - -RM2,300,001 to RM2,350,000 1 -

Note: * The Managing Director had resigned on 30 September 2016 and subsequently, he was appointed

as a Director on 18.11.2016.

3. reInforCe IndePendenCe

3.1 Independent directors

The Board has adopted a nine-year policy for Independent Directors of the Company. The two Independent Directors of the Company had served the Board for less than 9 years.

The presence of Independent Directors on the Board brings unbiased and independent views, advice and judgement to the decision making of the Board as well as safeguarding the interest of minority shareholders. For the financial year under review, the two(2) Independent Directors of the Company, namely, Tan Sri Dato’ Dr Yahya bin Awang and Mr Kuah Hun Liang have affirmed their independence based on the criteria of Independent Directors as prescribed under the Listing Requirements.

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



4. foster CoMMItMent

4.1 TimeCommitmentandBoardMeetings

The Board is satisfied with the level of commitment given by the Directors towards fulfilling their roles and responsibilities as Directors as reflected in the Directors’ record of attendance at the Company’s Board meetings held in the financial year 2016 as follows:

NameofDirectorsTotalNumberofBoardMeetings

attended in 2016Tan Sri Dato’ Dr Yahya bin Awang 6/6Tan Sri Dato’ Surin Upatkoon 6/6Ms Ivevei Upatkoon 6/6Dato’ Lim Tiong Chin 6/6Mr Kuah Hun Liang 6/6

The directorships held by the Board members in public listed companies do not exceed the number of directorships as prescribed under the Listing Requirements. Under the Company’s Board Charter, Directors are required to notify the Board for accepting any new appointment as director in other companies. This is to ensure that the Directors are committed and focused on the affairs of the Group and there is no conflict of interest to enable them to discharge their duties effectively.

The Company plans its Board meetings’ dates ahead of time and has obtained the commitment from the Directors on their availability to attend the Board Meetings.

4.2 Training

During the year 2016, the Nomination Committee has assessed the training requirements of the directors. The details of the training attended by the Directors in 2016 are set out below:-

directors TitleofTraining

Tan Sri Dato’ Dr Yahya bin Awang Briefing by Messrs Ernst & Young (“EY”) on “The New Auditors’ Report – Implementing the New and Revised International Standards on Auditing”.

Tan Sri Dato’ Surin Upatkoon · • Briefing by EY on “The New Auditors’ Report – Implementing the New and Revised International Standards on Auditing”.

· · • Financial Institutions Directors’ Education (“FIDE”) Core

Programme (Insurance – Module A).

Dato’ Lim Tiong Chin · • Briefing by EY on “The New Auditors’ Report – Implementing the New and Revised International Standards on Auditing”.

· · • FIDE Core Programme (Insurance Modules A and B).



4. FOSTERCOMMITMENT(CONT’D)

4.2 Training(Cont’d)

directors TitleofTraining

Mr Kuah Hun Liang · • Briefing by EY on “The New Auditors’ Report – Implementing the New and Revised International Standards on Auditing”.

· · • Board briefing by PWC on (1) Understanding Anti-Money

Laundering/Counter Financing of Terrorism (“AML/CFT”) Risks; (2) Social Media Governance; (3) South East Asian Banking: Perfect Storm, A Case for Change; (4) MFRS 9 “Financial Instruments”.

· · • FIDE forum on Financial Technology.

Ms Ivevei Upatkoon · • Briefing by EY on “The New Auditors’ Report – Implementing the New and Revised International Standards on Auditing”.

· · • Sustainability Engagement Series for Directors/Chief

Executive Officer organised by Bursa Malaysia Berhad.· · • FIDE Core Programme (Insurance Modules A and B).· · • FIDE Elective Programme on current issues in Corporate

Governance.

The Directors will continue to undergo other relevant training programmes to upgrade themselves to effectively discharge their duties as Directors.

5. uPHoldIng IntegrIty In fInanCIal rePortIng

5.1 FinancialReporting

The Board is committed to ensure that the interim financial statements and annual financial statements of the Company present a balanced, clear and meaningful assessment of the financial performance and prospects of the Group.

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

The Statement of Responsibility by Directors in respect of the preparation of the annual audited financial statements of the Company and the Group is presented in this Annual Report.



5. UPHOLDINGINTEGRITYINFINANCIALREPORTING(CONT’D)

5.2 RelationshipwithExternalAuditors

The Audit Committee has established a formal and transparent relationship with the external auditors. During the year 2016, the Audit Committee had met with external auditors once without the presence of the Management to discuss the Group’s audited financial statements for the year ended 31 December 2015 and any matters arising from the audit. The external auditors have given a written assurance to the Audit Committee in relation to the audit of the Group’s audited financial statements that they are independent in accordance with the By-laws of the Malaysian Institute of Accountants.

The current engagement partner for the audit of the financial statements of the Company has been in place since 2013. The external auditors are required to rotate the engagement partner responsible for audit of the financial statements of the Company/Group every five years.

The services provided by the external auditors include statutory audit and non-audit services. The details of the non-audit services provided by the external auditors are set out in Additional Disclosures section in this Annual Report. The terms of engagement for the services rendered by the external auditors are reviewed by the Audit Committee and approved by the Board. During the year, the Audit Committee had reviewed the proposed fees for audit and non-audit services and subsequently, recommended to the Board for approval. In their review, the Audit Committee ensured that the independence and objectivity of the external auditors are not compromised.

5.3 AssessmentofthePerformanceandIndependenceofExternalAuditors

The Audit Committee has assessed/reviewed the performance and independence of the external auditors of the Company based on the criteria approved by the Board. The assessment process by the Audit Committee is conducted through the completion of a detailed questionnaire covering the factors/criteria as set out below, after obtaining feedbacks from the Finance Department which regularly interacts with the external auditors:

(a) The engagement partner’s qualification, knowledge and experience to perform his duty as external auditor.

(b) The external auditors’ quality control processes and its process for internal review of accounting judgements.

(c) The number of man days spent by the engagement and concurring partners in the audit of financial statements of the Company/Group after taking into consideration of the size and complexity of the Company’s/Group’s operations.

(d) The level of engagement between the external auditors and the Audit Committee and whether the external auditors have provided independent views in the discussions with the Audit Committee.

(e) Whether the external auditors have updated the Audit Committee on significant issues concerning the Group, new developments (including the applicability of new and significant accounting standards) and its impact on the Group.

(f) Whether the external auditors have provided any constructive observations and recommendations in areas which required improvements particularly with regards to the internal control system relating to financial reporting of the Group.



5. UPHOLDINGINTEGRITYINFINANCIALREPORTING(CONT’D)

5.3 AssessmentofthePerformanceandIndependenceofExternalAuditors(Cont’d)

(g) Whether the external auditors have met its performance targets in terms of the following:

(i) The adequacy of the external auditors’ scope of audit; (ii) The external auditors’ effectiveness in planning and conduct of their audit of the financial

statements of the Company/Group;(iii) The external auditors’ performance against the agreed duration set by the Company;(iv) The timeliness of the external auditors’ response to the issues raised by the Company.

(h) The external auditors’ level of commitment towards ensuring their staff’s continuity on the audit of the financial statements of the Company and the Group.

(i) Whether the provision of non-audit services by the external auditors has impaired the external auditors’ objectivity, judgement or independence.

(j) Whether the external auditors have shown to be independent and objective in their audit of the financial statements of the Company/Group.

The Audit Committee is satisfied with the performance, technical competence and audit independence of the external auditors. The Audit Committee is of the view that the provision of non-audit services by the external auditors did not impair their objectivity, judgement or independence.

6. audIt and rIsK ManageMent

6.1 RiskManagementandInternalControls

The Board is responsible in ensuring the implementation of risk management system to identify, assess and monitor material risks of the Group as well as maintaining a system of internal controls that provide reasonable assurance of effective and efficient operations and compliance with internal procedures, guidelines, laws and regulations.

The Risk Management Committee reviews the adequacy of the Group’s risk management policies and framework and ensure adequate infrastructure, resources and systems are in place for effective risk management of the Group.

6.2 InternalAuditFunction

The Group’s internal audit function is carried out independently by its Group Internal Audit Department (“GIAD”), which reports to the Audit Committee (“AC”). It reviews, assesses and highlights significant risk impacting the Group’s operations and its system of internal controls. The internal auditors adhere to the standards of best professional practice in accordance to the Institute of Internal Auditors and any other relevant guidelines and recommendations from the relevant authorities.

The GIAD conducts its audit based on approved internal audit plans. The frequency of audit on each business or operational units is determined by the level of risk assessed with greater focus is set on higher risk areas. All audit reports detailing the audit findings and recommendations are provided to the Management with their response on the actions to be taken. GIAD submits to the AC the reports on key audit findings and actions to be taken by the Management and updates the status on audit activities.

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



7. ensurIng tIMely and HIgH QualIty dIsClosure

The Board endeavours to provide its investors/shareholders with timely and accurate information on the Group’s major developments through disclosures and/or announcements made to Bursa Malaysia Securities Berhad (“Bursa Securities”). The Company announces its performance to Bursa Securities on a quarterly basis and issues its Annual Report on an annual basis to provide shareholders/ investors with information on the Group’s business review, financial performance and governance framework. The Board and the Senior Management take reasonable steps to ensure the accuracy and completeness of the information contained in the disclosures and/or announcements made to Bursa Securities.

The Company has established a website, www.mphbcap.com.my, which the shareholders and members of the public can access for corporate information and new events relating to the Group.

8. strengtHen relatIonsHIP BetWeen tHe CoMPany and sHareHolders

8.1 AnnualGeneralMeeting

The Board regards the Annual General Meetings (“AGM”) as an important avenue for communication and dialogue with its shareholders. During the AGMs, shareholders are accorded the opportunity and time to raise questions and seek clarifications on the agenda items and on matters relating to the affairs, operations and prospects of the Group. The Board members, Senior Management and the external auditors are present at the AGMs to respond to shareholders’ queries.

8.2 Investors’Relations

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

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

CoMPlIanCe stateMent

The Board is satisfied that the Company has complied substantially with the principles and recommendations of the Code.

This Corporate Governance Statement was approved by the Board on 31 March 2017.



addItIonal CorPoratedIsClosures1. utilisation of Proceeds

During the financial year ended 31 December 2016, there were no corporate proposals in which proceeds had been raised.

2. AuditandNon-AuditFees

The details of the statutory audit, audit related and non-audit fees paid/payable in 2016 to the external auditors are set out below:

detailsCompany

(rM)Group

(rM)

(1) AuditFeesPaid/PayabletoMessrsErnst&Young(“EY”)

(a) Review of the audited financial statements for the year ended 31.12.2015 15,000 418,700

(2) AuditFeesPaid/PayabletotheAffiliatesofEY - -

(3) Non-AuditFeesPaid/PayabletoEY

(a) Review of Directors’ Statement on Risk Management and Internal Control 6,500 6,500

(b) Review of fair value of financial derivative 12,000 12,000

(c) Review of projected cash flow for impairment assessment of goodwill 20,000 20,000

(d) Validation for Differential Levy System and Returns on Calculation of Premium to Perbadanan Insurans Deposit Malaysia - 8,500

(4) Non-AuditFeesPaid/PayabletotheaffiliatesofEY - -

total 53,500 465,700

3. MaterialContractsInvolvingTheInterestsofDirectors,ChiefExecutiveOfficerandMajorShareholders

Save as disclosed in the Audited Financial Statements of the Group and the Company for the year ended 31 December 2016, none of the Directors, Chief Executive Officer and major shareholders of the Company have any material contracts with the Company and/or its subsidiaries.


DIRECTORS’RESPONSIBILITYstateMentThe Directors are required by the Company Act 2016 (“CA”) to prepare the financial statements for each financial year which have been drawn up in accordance with the applicable Malaysian Financial Reporting Standards, International Financial Reporting Standards, the requirements of the CA and the Main Listing Requirements of Bursa Malaysia Securities Berhad.

The Directors are responsible to ensure that the financial statements give a true and fair view of the state of affairs of the Group and the Company at the end of the financial year, and of the results and cash flows of the Group and the Company of the financial year.

In preparing the financial statements, the Directors have:-

• Adopted appropriate accounting policies and applied them consistently;

• Made judgements and estimates based on reasonableness and prudence; and

• Prepared the financial statements on a going concern basis.

The Directors are responsible to ensure that the Group and the Company keep accounting records which disclose with reasonable accuracy the financial position of the Group and the Company enabling them to ensure that the financial statements comply with the CA.

They are also responsible for taking reasonable steps to safeguard the assets of the Group and the Company, and to detect and prevent fraud and other irregularities.


audIt CoMMItteerePort ConstItutIon

The Audit Committee was established by the Board on 1 August 2012.

MeMBersHIP

The composition of the Audit Committee and the attendance of the Audit Committee members during the financial year ended 31 December 2016, where a total of five(5) meetings were held, are as follows:-

Name Designation/DirectorshipNumberofmeetings

attended

Mr Kuah Hun Liang Chairman/Independent Non-Executive Director 5/5

Tan Sri Dato’ Dr Yahya bin Awang Member/Independent Non-Executive Director 5/5

Dato’ Lim Tiong Chin Member/Non-Independent Non-Executive Director

5/5

The composition of the Audit Committee complies with Paragraph 15.09 of the Main Market Listing Requirements (“Listing Requirements”) of Bursa Malaysia Securities Berhad (“Bursa Securities”).

The Audit Committee Meetings were appropriately structured through the use of agenda, which were distributed to members prior to the meeting.

The Managing Director, the Chief Executive Officer (previously the Chief Operating Officer), the Head of Finance, the Head of Internal Audit and the Company Secretary were present by invitation at the meetings. The representatives of the external auditors, Messrs Ernst & Young, were present as and when invited by the Audit Committee.

terMs of referenCe

CoMPosItIon

(1) The Audit Committee shall be appointed by the Directors from amongst their members (pursuant to a resolution of the Board of Directors) which fulfills the requirements as prescribed under Paragraph 15.09 of the Listing Requirements and paragraph 7.0 of Practice Note 13 of the Listing Requirements.

(2) No alternate director shall be appointed as a member of the Audit Committee.

(3) Any vacancy, which affects the composition, must be filled within three (3) months.

(4) The members of the Audit Committee shall elect a Chairman, from among their members, who shall be an Independent Non-Executive Director.

(5) The Company Secretary of MPHB Capital shall serve as Secretary of the Audit Committee (“Secretary”).

(6) The Board of Directors shall review the term of office and performance of the Audit Committee and each of its members annually.


audit committeereport (Cont’d)MeetIngs and rePortIng ProCedures

(1) The Audit Committee shall meet not less than four (4) times a year, with each meeting planned to coincide with key dates in the Company’s financial reporting cycle. The majority of Audit Committee members present must be Independent Directors to form a quorum for the meeting.

(2) The Audit Committee shall meet with the external auditors without the presence of Executive Board members and employees of the Company, whenever deemed necessary.

(3) The Secretary is responsible for :-

(i) drawing up the agenda together with the Chairman, and circulating it, supported by explanatory documentation, to the committee members prior to each meeting;

(ii) recording attendance of all members and invitees;

(iii) recording all proceedings, and preparing and keeping minutes of all meetings; and

(iv) circulation of the minutes to all Board members at each Board Meeting.

autHorIty

The Audit Committee shall have the authority to:

(1) investigate any matter within its terms of reference and all employees are directed to cooperate with any request made by the Audit Committee;

(2) have the resources which are required to perform its duties;

(3) have full and unrestricted access to any information pertaining to the Company;

(4) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity;

(5) obtain, at the expense of the Company, outside legal or other independent professional advice or other advice it considers necessary;

(6) convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other Directors and employees of the Company, whenever deemed necessary;

(7) report promptly any breaches of the Listing Requirements, which have not been satisfactorily resolved by the Board, to the Bursa Securities; and

(8) convene a meeting, upon request of the external auditors, to consider any matter the external auditors believe should be brought to the attention of the Directors or shareholders.


funCtIons

The Audit Committee shall undertake the following responsibilities and duties and report to the Board of Directors:

(1) Review the quarterly results and year-end financial statements, prior to the approval of the Board of Directors, focusing particularly on:

(i) changes in or implementation of major accounting policies and practices;

(ii) significant matters highlighted including financial reporting issues, significant judgements made by the Management, significant and unusual events or transactions, and how these matters are addressed;

(iii) going concern assumptions; and

(iv) compliance with accounting standards, regulatory and other legal requirements.

(2) Review/recommend the nomination, appointment, re-appointment and performance of external auditors, the audit fee and any question of resignation or dismissal before making recommendations to the Board; and evaluate if there is reason (supported by facts) to believe that the Company’s external auditors are not suitable for re-appointment.

(3) Review/discuss with the external auditors:

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

(ii) its evaluations of the system of internal control;

(iii) the results of the interim (if any) and final audits and the Management’s response thereto;

(iv) problems and reservations arising from the interim (if any) and final audits, and any matter the auditors may wish to discuss (in the absence of the management, where necessary);

(v) the assistance given by the employees to the external auditors, and any difficulties encountered in the course of the audit work.

(4) Establish an internal audit function which is independent of the activities it audits and oversee its function as follows:

(i) the Head of Internal Audit shall report directly to the Audit Committee;

(ii) review the adequacy of the internal audit scope, functions, competency and resources of the internal audit department and that it has the necessary authority to carry out its work;

(iii) review the internal audit department’s progress of audit activities, the results of the internal audit activities or investigation undertaken, and whether or not appropriate action is taken on the recommendations of the internal audit department;

(iv) review any appraisal or assessment of the performance of staff of the internal audit department;

(v) approve any appointment, transfer or termination of senior staff members of the internal audit function and take cognizance of resignation and providing the resigning members an opportunity to submit reasons for resigning.

audit committeereport (Cont’d)


funCtIons (CONT’D)

(5) Review any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raise questions of management integrity.

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

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

suMMary of aCtIvItIes of audIt CoMMIttee

During the financial year and up to the date of this report, the Audit Committee had carried out its duties in accordance with its Terms of Reference.

The activities undertaken by the Audit Committee were as follows:

(1) Reviewed the unaudited interim financial statements of the Company/Group, in particular on the change in accounting policies, significant matters in relation to financial issues, going concern assumptions, compliance with accounting standards and other regulatory requirements before recommending them for approvals by the Board. These reviews also take into consideration of the policies and practices adopted in the Company’s/Group’s financial statements, the estimates and judgements of the Management and the adequacy of their disclosure in the financial statements.

(2) Reviewed the annual audited financial statements of the Company/Group with the external auditors before recommending them to the Board for approval. This review takes into consideration the accounting principles, policies and practices adopted in the Company’s/Group’s financial statements to ensure compliance with applicable approved accounting standards, the estimates and judgements of the Management, the significant matters highlighted by the auditors on accounting and auditing matters, and whether the relevant accounting items/matters are adequately disclosed in the financial statements.

The accounting issues considered by the Audit Committee in relation to the audited financial statements of the Group include the following:

(i) The accounting treatments for the joint venture agreement (“JVA”) between Tibanis Sdn Bhd and Pinggir Mentari Sdn Bhd, which include the recognition of revenue and cost for disposal of land under the JVA.

(ii) The Management’s assessments of any indication of impairment of investment properties, goodwill and intangible assets.

(iii) The Management’s assessment of the fair value of the derivative financial instruments (being the call and put option payment received from Generali Asia N.V. (“Generali Asia”) pursuant to the Call and Put Option Agreement entered into between Multi-Purpose Capital Holdings Berhad and Generali Asia in respect of the shares in MPI Generali Insurans Berhad).

(iv) The Management’s assessment of impairment on financial assets/investments (i.e. Available for Sale and Fair Value Through Profit or Loss) and whether these investments have been recognised appropriately in the financial statements in accordance with Malaysian Financial Reporting Standards (“MFRS”) 139 and that appropriate disclosures have been made in accordance with MFRS 7.

(v) The claims and premium liabilities estimation of MPI Generali Insurans Berhad.(vi) The adequacy of the provision made by Management in respect of taxation and deferred tax.(vii) The Management’s going concern assessment of the Company and its subsidiaries.



suMMary of aCtIvItIes of audIt CoMMIttee (CONT’D)

(3) Reviewed the Audit Planning Memorandum of the external auditors, in terms of the nature of the audit procedures, scope of work and timeline for completion of the audit of the financial statements, significant accounting and auditing issues, impact of new or proposed changes in the accounting standards and regulatory requirements for the financial year 2017.

(4) Reviewed and approved the Group Internal Audit Department’s (“GIAD”) Annual Audit Plan in ensuring that adequate scope and comprehensive coverage on the audit activities and principal risk areas are adequately identified and covered.

(5) Reviewed the adequacy of staff and resources within the GIAD to ensure that the internal audit function of the Group is carried out effectively.

(6) Reviewed the performance of the GIAD. The Audit Committee is satisfied with the performance of the GIAD. The GIAD has carried out and completed the audit assignments in a timely manner and it has responded promptly to the issues raised by the Audit Committee. It has also provided constructive observations and recommendations in areas which required improvements in the internal control system of the Group. The GIAD has shown to be objective and independent in carrying out the internal audit function of the Group.

(7) Met with the external auditors without the presence of any Executive Board members and Management, to discuss issues arising from the final audits, or any other matters the auditors may wish to discuss, including the level of assistance provided by the Group’s employees to the auditors, and any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information. There were no areas of concern raised by the external auditors that needed to be escalated to the Board.

(8) Reviewed the independence, objectivity and effectiveness of the external auditors, having regard to several factors, including the qualification, experience and knowledge of the engagement partner and audit staff, the resources of the audit firm, the external auditors’ quality control processes and the level of non-audit services rendered by external auditors.

The Audit Committee is of the view that the provision of non-audit services by the external auditors did not impair the external auditors’ objectivity, judgement or independence. The external auditors have assured the Audit Committee that they are independent throughout the audit engagement for 2016 in accordance with the By-laws of the Malaysian Institute of Accountants. The Audit Committee is satisfied with the performance, technical competency and audit independence of the external auditors and it has made recommendations to the Board for their re-appointment as external auditors for the financial year ending 31 December 2017.

(9) Reviewed and deliberated on the GIAD’s progress of audit activities and the internal audit reports of the Group, which highlighted issues, recommendations and Management’s responses to ensure appropriate actions were taken by the Management to improve the system of internal controls based on the audit recommendations in the internal audit reports.

(10) Reviewed the adequacy and effectiveness of the corrective actions taken by the Management on all matters highlighted in the internal audit reports.

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

(12) Reviewed the revised Terms of Reference of the Audit Committee to be in line with the amendments in the Listing Requirements.



suMMary of aCtIvItIes of Internal audIt funCtIon for tHe fInanCIal year ended 31 deCeMBer 2016

The activities undertaken by the GIAD for the financial year ended 31 December 2016 were as follows:

(1) The annual audit plan was prepared based on risk-based methodology with emphasis on key risk areas. The audit plan considered the risk registers of the operating companies within the Group, inputs from the Senior Management as well as the Chairman and members of the Audit Committee on their concerns and expected scope of audit. It was submitted to the Audit Committee for review and approval.

(2) Updated the Audit Committee on the status of internal audits carried out and highlighted any changes made to the plan for Audit Committee’s approval in the event of any changes in the business and operating environment.

(3) Regularly performed risk-based audits, covering the review of internal control system, risk management, accounting and management information system. The reviews comprised the evaluation of the following:

(a) Efficiency and effectiveness of the management controls and monitoring functions;

(b) Adequacy and effectiveness of internal controls as well as compliance with regulatory requirements and internal policies and procedures;

(c) Reliability, integrity, accuracy, completeness and timeliness of financial and operational information;

(d) Adequacy and comprehensiveness of existing policies and procedures and Group Enterprise Risk Management (“ERM”) Framework;

(e) Efficiency and effectiveness in the existing work processes;

(f) Assessed adequacy of human capital; and

(g) Identified other areas for further improvements.

(4) Carried out special assignments requested by the Management and/or the Audit Committee.

(5) Issued audit reports to the Audit Committee and Management highlighting any deficiencies or findings which required management’s attention as well as proposed corrective actions to be adopted by the Management.

(6) Followed-up on the implementation of the agreed remedial measures and rectification of any shortcomings. The action status was subsequently reported to the Audit Committee.

The costs incurred for the internal audit function of the Group for financial year ended 31 December 2016 was RM0.859 million. (For the financial year ended 31 December 2015, the cost was RM0.995 million).



IntroduCtIon

This statement is in line with Paragraph 15.26(b) of the Listing Requirements of Bursa Malaysia Securities Berhad on the Group’s compliance with the Principles and Best Practices relating to internal control as stipulated in the Malaysia Code on Corporate Governance 2012.

BOARD’SRESPONSIBILITY

The Board of Directors (“Board”) is responsible for maintaining a sound internal control system and a robust risk management for the Group with the objective of safeguarding the shareholders’ investment, the interest of customers, regulators, employees and the Group’s assets. The Board has established a process for identifying, assessing, monitoring and managing the significant risks which includes review of adequacy and integrity of financial, operational and compliance controls and risk management procedures.

However, there are limitations inherent in any system of internal control and risk management and as such, can provide only reasonable and not absolute assurance against material misstatement, loss or fraud.

The Board believes that the internal control system of the Group is operating adequately and effectively in all material aspects. The assurance has been given based on the internal audit function, management letters provided by external auditors, reviews performed by management and various Board/ Committees.

The Board is committed and will continue to take reasonable measures at all time to strengthen the risk management and internal control environment of the Group based on the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers.

Key rIsK ManageMent and Internal Control ProCesses

1. RiskManagement

1.1 RiskGovernanceStructure

The Group adopts an Enterprise Risk Management (“ERM”) Framework which outlines the policy, risk governance structure, responsibilities and risk management process of the Group. It is designed to formalise the risk management practices across the companies under the Group.

The risk governance includes mechanisms that ensure accountability and authority for managing risk, implementing the risk management framework and ensuring proper reporting procedures are in place. This ensures that the risk management activities remain appropriate and prudent, and that significant risks are managed and monitored continuously within the Group’s risk appetite. The Risk Governance Structure is appended next page:

stateMent on rIsK ManageMent and Internal Control


1. RiskManagement(Cont’d)

1.1 RiskGovernanceStructure(Cont’d)

• The Board is assisted by the Group Risk Management Committee (“the GRMC”) to oversee the overall risk management of the Group.

• The Chief Executive Officer (“CEO”) and Senior Management of the companies within the Group assist the GRMC in managing risks under their portfolio.

• The Heads of department/ company within the Group provide the leadership to drive the risk management culture across their own department/ company. They are also responsible to monitor, assess and manage the risks associated with the business and operations of the department/ company.

• The Group Internal Audit Department (“GIAD”) carries out its functions independently assuring the Group Audit Committee (“GAC”) and the Board that the adequacy and integrity of the system of internal controls are intact.

1.2 RiskManagementProcess

ERM is a disciplined approach that the Board, Management and employees use to identify, evaluate and manage risks from all sources to protect and increase the Group long term value to its shareholders. The risk management process involves the fowllowings:

• ObjectiveSetting: Management will establish the risk statement of the company.• event Identification: Identify the internal and external events that may affect the achievement of

company’s objectives and the risks associated to the events.• RiskAssessment: Analyse the risk identified and assess the likelihood of occurrence and its impact to

the company.• RiskResponse: The risk response is dependent on the risk assessment results and the company’s risk

appetite.

statement on risk management and internal control (Cont’d)

GroupBoardofDirectors(“theBoard”)

GroupRiskManagementCommittee GroupAuditCommittee

CEOofcompanies GroupInternalAudit

CEOofthedifferentcompaniesaresupportedby the following parties, depending on thecompany’sriskgovernancestructure:• Head of Risk Management Department;

and/or• Headsofeverydepartment/Company.


statement on risk management and internal control (Cont’d)1. RiskManagement(Cont’d)

1.2 RiskManagementProcess(Cont’d)

• Control activities: Establish the internal control policies and procedures and implement them to ensure the appropriate risk responses are effectively carried out.

• Information and Communication: Communicate the risk appetite, internal control policies and procedures to all levels within the company to ensure appropriate mitigation actions are executed and the company’s goals and objectives are achieved.

• Monitoring and Reporting: Regular monitoring and reporting mechanism will be defined and implemented by each company to ensure the internal control policies and procedures are adhered to.

The Group has identified the major risks that have significant impact on its operations, namely; operational risk, financial risk, information technology risk, strategic risk, insurance risk, liquidity risk and compliance risk. Each company has a number of functional departments which are responsible for managing and monitoring these risks through limits, procedures and oversight.

2. InternalControlSystem

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

• An annual budget is reviewed and approved by the Board. The actual performance is assessed against the approved budget where explanations, clarifications and corrective actions taken are regularly reported by the Management on significant variances to the Board.

• Management has formulated well-established standard operating procedures that cover the key aspects of the Group’s various business processes and risks. The procedures are subject to regular reviews to be aligned with business environment process changes.

• During the monthly management meetings attended by the Group Director, Senior Management, CEO and COO of the companies within the Group where risks related to operations and financial issues, market risk and regulatory requirement are discussed and dealt with strategic action plans.

In addition, various aspects of the financial and operational performance of the Group are also discussed during the meetings. Key matters affecting the Group are escalated to the Board.

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

• The Management team undertakes site visits to the operating units and communicates with various levels of staff to gauge the effectiveness of the strategies discussed and implemented as well as to address their concerns (if any) with regard to daily operations. It ensures that a transparent and open channel of communication is maintained to enable prompt corrective actions.

• The Business Continuity and Disaster Recovery Plan (“BCP/DRP”) is established to ensure the Group’s critical business functions can be maintained, or restored in a timely manner, in the event of material disruptions arising from internal or external events.


statement on risk management and internal control (Cont’d)2. InternalControlSystem(Cont’d)

• The Group has in place a Whistle Blowing Policy that is approved by the Board. The policy outlines the Group’s commitment towards employees who raise concerns in a responsible manner regarding any wrong doings or malpractices. Such concerns shall be properly investigated without any victimization or discriminatory treatment, thereby promoting a culture of honesty, openness and transparency within the Group.

• Regular assessment on the adequacy and integrity of the internal controls and monitoring of compliance with policies and procedures are carried out through internal audits. The internal audit function provides a systematic and disciplined approach to evaluate and improve the effectiveness of the Group’s risk management, internal control and governance processes.

• The Board maintains regular meetings with the GAC and Management to consider their reports on matters relating to internal controls and deliberate on their recommendations for implementation.

• In addition to the above internal controls, the GAC also reviews the detailed audit reports and management letter from its external auditors.

Board assessMent

In respect of the year ended 31 December 2016, the Board had received assurance from the relevant CEO and Head of Finance & Administration that the respective Company’s internal control and risk management system was operating adequately and effectively, in all material aspects, based on the framework adopted by the Group.

The Board considered the Group’s risk management and internal control system effective and adequate. No significant areas of concern that might affect the financial, operational, compliance controls and risk management functions of the Group were identified.

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

revIeW of tHIs stateMent

As required by Para 15.23 of the Main Market Listing Requirements, the external auditors have reviewed the Statement on Risk Management and Internal Control. This review was performed in accordance with Recommended Practice Guide (“RPG”) 5 issued by the Malaysian Institute of Accountants (“MIA”). Based on the review, the external auditors have reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the processes adopted by the Board in reviewing the adequacy and integrity of the risk management and internal control system within the Group.

RPG 5 does not require the external auditors to consider whether the Statement on Risk Management and Internal Control covers all the risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the assessment and opinion by the Board and Management thereon.

This Statement was approved by the Board on 31 March 2017.


ManageMent DISCUSSION&analysIsInsuranCe

MPIGeneraliInsuransBerhad(“MPIGenerali”)

The Insurance Division recorded higher net earned premiums at RM390.8 million in 2016, representing an improvement of 15.2% from RM339.3 million in 2015. The increase in earned premiums was primarily contributed by the Fire and Motor classes.

In 2016, net claims incurred ratio was higher at 58.0% (2015: 54.8%), mainly attributed to adverse claims experience from several accounts and additional provision of incurred by not reported (“IBNR”) reserve of RM6.4 million.

Higher interest income as well as higher gains from sale of financial assets led to higher non-underwriting income of RM49.3 million in 2016, an improvement of 29.1% from RM38.2 million recorded in 2015.

However, management expenses also increased to RM95.1 million in 2016 (2015: RM86.5 million) mainly due to higher staff costs.

Overall, this division reported operating profit of RM81.7 million in 2016 (2015: RM77.1 million) whereas capital adequacy ratio (“CAR”) in 2016 was 225.8% (2015: 249.2%).

The Malaysia Competition Commission “MYCC” had investigated PIAM (General Insurance Association of Malaysia) together with its 22 members, including MPI Generali, for an alleged infringement of the prohibition under section 4(2)(a) of the Competition Act 2010 (“the Act”) for fixing part trade discount and labour rates for PARS (PIAM Authorised Repairers Scheme) workshops.

On 23 February 2017, the MYCC issued its proposed decision to impose a financial penalty on all 22 members amounting to RM213.5 million of which MPI Generali’s share of the penalty is RM4.1 million.

As at the date of this report, MPI Generali and its fellow general insurers are appealing against this penalty.

To ensure long-term value creation for this division, MPI Generali has entered into more efficient treaty programmes.

Further, MPI Generali intends to leverage off Generali Asia’s technical knowledge, strength and international network to grow its earned premiums, particularly with a focus on the Fire and Motor classes.

MPI Generali will also focus on streamlining operating costs as well as improve operational efficiency to maintain sustainable growth.

Generali Asia is expected to exercise the call option to acquire 21% of MPI Generali by 7 May 2017 as per the Sale and Purchase Agreement between Multi-Purpose Capital Holdings Berhad, a wholly subsidiary of MPHB Capital Berhad and Generali Asia dated 18 December 2014, which is expected to be completed in 2018.

CredIt

The Credit Division improved its revenue to RM7.7 million in 2016 from RM2.2 million in 2015 due to a new business written in 2016.

In tandem with improved revenue, the Credit Division’s operating profit was RM21.6 million in 2016 (2015: RM10.4 million) from higher interest income and dividend income from its fund placements and investments respectively. However, the higher interest and dividend income was offset by unfavourable change in fair value of its investments due to volatility in the capital market.

Considering the uncertainty in global and local economic conditions and the impact on the equity and bond markets, the Group will continue to invest in low to medium risk funds and investment securities with committed yields to safeguard the Group’s assets.


management discussion & analysis (Cont’d)HosPItalIty

The Group owns and operates two hotels located in Tanjung Bungah, Penang (Flamingo by the Beach) and in Ampang, Kuala Lumpur (Flamingo by the Lake). Annexed to Flamingo by the Lake is Plaza Flamingo, which is also owned by the Group.

The Hospitality Division achieved revenue of RM31.1 million in 2016, a marginal decrease from RM31.8 million in 2015 and reported operating profit of RM3.1 million 2016 (2015: RM5.6 million).

Stiff competition from neighbouring hotels as well as reduced tourists from China and Middle-East affected the performance of the Hospitality Division. Further, the introduction of clean wages with effect from 1 July 2016 led to higher operating expenses in 2016.

Following the slow recovery of oil prices which affects the Malaysian Ringgit and the moderation of the Malaysian economy, the Hospitality Division will strive to cut or keep operational costs at an optimal level as well as continue to seek potential long-term corporate contracts. Further, the hotels will continue to retain and improve its relationship with existing guests.

ProPertIes

ImbiLands

The Imbi Lands are a combination of around 5.0 acres of lands which all are located in and around Jalan Imbi/Golden Triangle in the heart of the city of Kuala Lumpur.

Currently, a few plots of the Imbi Lands and buildings erected on the Imbi Lands are leased out to generate rental income to offset its operating costs such as quit rent and assessment as well as professional fees whilst the remaining are left vacant due to the condition of the lands and its surrounding environment.

The Group expects the current tenants to continue leasing the lands and buildings in the foreseeable future.

In FY 2016, the Group has fully repaid two term loans and have sought to discharge the properties pledged against the term loans. The discharge is expected to be completed by April 2017. As at 31 December 2016, outstanding loan was RM5.0 million which will be fully repaid by May 2017.

In view of the weak sentiment in the property market and current economic affair, the Group will evaluate and assess the best possible options for the Imbi Lands.

PengerangLand

The Pengerang land spawns across 1,702.52 acres, located adjacent to the Refinery and Petrochemical Integrated Project in Pengerang (“RAPID”) project in Johor. The Pengerang land is currently leased to an unrelated company, which plants, harvests and markets oil palm fruits. In return, the Group is entitled to a monthly rental which is dependent on the sale of oil palm fruits.

Due to compulsory acquisitions by the Johor State Government and Petroliam National Berhad in 2012 and 2015, the Pengerang land has been reduced from 4,644.09 acres to its current acreage of 1,702.52.

The Group will seek to work closely with the unrelated company to increase production and minimise harvesting costs, which in turn will increase the Group’s monthly rental.


management discussion & analysis (Cont’d)Jointventures

As at 31 December 2016, the Group has two joint-venture agreements (“JVA”) being;

1. JVA entered into on 29 April 2011 between Tibanis Sdn Bhd (“TSB”) with Pinggir Mentari Sdn Bhd (“PMSB”), a subsidiary of Bandar Raya Developments Berhad (“BRDB”) (hereinafter referred to as “JVA 1”)

Under JVA 1, PMSB has undertaken to develop two parcels of land in Taman Sari, Rawang measuring 265.13 acres (the “proposed development”). The estimated net proposed development value is RM1.9 billion where the proposed development is expected to be completed over 10 years from 2011.

In accordance with the JVA 1, TSB is to be paid 22% of the cash collected pursuant to billings issued of the proposed development (“the Land Owner’s Entitlement”) by way of completed units or components, or by a combination of cash payment and completed units or components. TSB had received RM22.0 million from PMSB as upfront and advance amount towards account of the Land Owner’s Entitlement.

TSB regards that the transfer of significant risk and rewards to the joint venture partner has occurred when the development of the phases in the JVA 1 is approved by the relevant authorities. Once the authorities’ approval is obtained, TSB will no longer have the legal and beneficial rights as a landowner. Instead, TSB’s risk and rewards would then be changed to recovery of its share of the Land Owner’s Entitlement.

Authorities approved the development for Phase 1A in 2015 and Phase 1B in 2016 where in the same year approvals were obtained, PMSB launched Phase 1A and have sold 59.0% out of 117 units up to 31 December 2016. Phase 1B was launched in 1Q 2016 where 11.4% out of 149 units have been sold up to 31 December 2016. Phase 1A and Phase 1B are super-link terrace houses.

TSB used the planned saleable area to estimate its Land Owner’s Entitlement for Phases 1A and 1B. Accordingly, the total entitlement amounting to RM20.3 million and RM15.9 million were recognised as revenue by the Group in 2016 and 2015, respectively. The entitlement was used to off-set the advance payment of RM22.0 million. As of 31 December 2016, amount due from PMSB is RM14.2 million.

In 2017, PMSB intends to launch Phase 1C, affordable housing and Phase 2A, terrace houses.

2. JVA entered into on 29 April 2011 and supplementary JVA entered into on 13 January 2012 between Magnum.com Sdn Bhd and Orion Vibrant Sdn Bhd (“OVSB”), another subsidiary of BRDB (hereinafter referred to as “JVA 2”)

In accordance to JVA 2, OVSB will undertake to develop 26 parcels of land in Pulau Pinang measuring 82.97 acres.

The Group and BRDB are still assessing the viability of developing JVA 2.

MimalandBerhad(“MB”)

MB holds seven contiguous parcels of development land designated for tourist centre and holiday resort with a combined area of 324.06 acres located in the district of Gombak, Selangor.

The Group will continue to evaluate and assess all possible options to create value, either to enter into other joint venture arrangements with reliable and reputable partners with shorter payback period or outright disposal with extended payback period.

44 Directors’ Report

49 Statement by Directors

49 Statutory Declaration

50 Independent Auditors’ Report

55 Statements of Comprehensive Income

56 Statements of Financial Position

58 Statements of Changes in Equity

60 Statements of Cash Flows

63 Notes to the Financial Statements

154 Supplementary Information

financial statements

mPHB capital Berhad (1010253-W)Annual Report 2016

44 mPHB capital Berhad (1010253-W) Annual Report 2016

The Directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2016.

PrinciPal activities

The principal activities of the Group consist of:

- investment holding and trading;- operation of general insurance business;- provision of leasing, hire purchase and general loan financing services;- operation of hotels; and- property development and property investment

The principal activities of the Company are investment holding and provision of management services.

Other information relating to the subsidiaries are disclosed in Notes 12 and 36 to the financial statements.

results

Group company RM’000 RM’000

Profit/(loss) for the year 87,380 (7,437)

Attributable to:Owners of the Company 55,174 Non-controlling interests 32,206

87,380

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements.

In the opinion of the Directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature.

DiviDenD

No dividend has been paid or declared by the Company since the end of the previous financial year. The Directors do not recommend the payment of any dividend in respect of the current financial year.

DiRectoRs’ RepoRt


Directors’ report (cont’d)

BoarD of Directors

The Directors of the Company in office since beginning of the financial year to the date of this report are:

Non-executive chairman: Tan Sri Dato’ Dr Yahya bin Awang*Executive director: Ms Ivevei Upatkoon Non-executive directors: Tan Sri Dato’ Surin Upatkoon (resigned as Managing Director on 30 September 2016) (appointed as Non-Executive Director on 18 November 2016) Dato’ Lim Tiong Chin Mr Kuah Hun Liang*

* Independent non-executive directors

The persons who were directors of the subsidiaries of the Company during the year are:

Datuk Vijeyaratnam a/l V. Thamotharam Pillay Kheoh And Yeng Mohd Azlan bin Mohammed Tam Chiew Lin Datuk Tan Leh Kiah Terence Yeuk Hang Wong (resigned on 26 September 2016) Jennifer Susan Sparks (appointed on 26 September 2016) Dato’ Cheah Siong Lack @ Ray Cheah

DiRectoRs’ benefits

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the Directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors as shown in Note 6(b) to the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with any Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest, except as disclosed in Note 30 to the financial statements.


DiRectoRs’ inteRests

According to the register of Directors’ shareholdings, the interests of Directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows:

number of ordinary shares of rm1.00 each as at as at

1.1.2016 acquired Disposed 31.12.2016 shares in the company

Direct interests:Tan Sri Dato’ Dr Yahya bin Awang 101,100 - - 101,100

Ms Ivevei Upatkoon 156,200 - - 156,200

Dato’ Lim Tiong Chin 508,000 492,000 - 1,000,000

Mr Kuah Hun Liang 241,100 89,100 - 330,200

indirect/Deemed interests: Tan Sri Dato’ Surin Upatkoon 261,921,093 - - 261,921,093 (a)

Dato’ Lim Tiong Chin 8,940,000 - - 8,940,000 (b)

Notes:

(a) Deemed interest by virtue of Section 6A(4) of the Companies Act, 2016 held through his shareholdings of more than 15% in Cypress Holdings Limited and Pinjaya Sdn. Bhd. and indirect interest held through his daughters, Ivevei Upatkoon and Maythini Upatkoon.

Tan Sri Dato’ Surin Upatkoon by virtue of his interest of not less than 15% in the voting shares the Company, is deemed to have an indirect interest in the shares of all subsidiaries of the Company to the extent of the Company’s interest in these subsidiaries.

(b) Deemed interest by virtue of Section 6A(4) of the Companies Act, 2016 held through his shareholdings of more than 15% in Keetinsons Sendirian Berhad, T.C. Holdings Sendirian Berhad and Trade Key Investments Limited.

otHer statutory information

(a) Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.



otheR statutoRy infoRMation (cont’D)

(b) At the date of this report, the Directors are not aware of any circumstances which would render:

(i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

(c) At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(d) At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amounts stated in the financial statements misleading.

(e) As at the date of this report, there does not exist:

(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

(f) In the opinion of the Directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due. For the purpose of paragraphs (e) (ii) and (f) (i), contingent and other liabilities do not include liabilities arising from contracts of insurance underwritten in the ordinary course of business of the Company insurance subsidiary; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.

(g) Before the statements of comprehensive income and statements of financial position the Group and the Company were made out, the Directors took reasonable steps to ascertain that there was adequate provision for its insurance liabilities in accordance with the valuation methods specified in the Risk-Based Capital Framework for insurers issued by Bank Negara Malaysia.



suBsequent events

Subsequent events are disclosed in Note 37 to the financial statements.

auDitors

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Auditors’ remunerations are disclosed in Note 6 to the financial statements.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 31 March 2017.

tan sri Dato’ Dr yahya bin awang ivevei upatkoon



We, Tan Sri Dato’ Dr Yahya bin Awang and Ivevei Upatkoon, being two of the Directors of MPHB Capital Berhad, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 55 to 153 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2016 and of their financial performance and cash flows for the year then ended. The information set out in Note 40 on page 154 to the financial statements have been prepared in accordance with the Guidance on Special Matter 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and directive of Bursa Malaysia Securities Berhad. Signed on behalf of the Board in accordance with a resolution of the Directors dated 31 March 2017. tan sri Dato’ Dr yahya bin awang ivevei upatkoon

statement By Directors Pursuant to Section 251(2) of the Companies Act, 2016

I, Kheoh And Yeng, being the Officer primarily responsible for the financial management of MPHB Capital Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 55 to 154 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the abovenamed Kheoh And Yeng at Kuala Lumpur in the Federal Territory on 31 March 2017 Kheoh and yeng Before me,

mohan a.s. maniam (Licence No. W710)Commissioner for Oaths

statutory DeclarationPursuant to Section 251(1)(b) of the Companies Act, 2016


inDePenDent auDitoRs’ RepoRt to the members of MPHB Capital Berhad (Incorporated in Malaysia)

rePort on tHe auDit of tHe financial statements

opinion

We have audited the financial statements of MPHB Capital Berhad, which comprise the statements of financial position as at 31 December 2016 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flow of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 55 to 153. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2016, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”), and the requirements of the Companies Act, 1965 in Malaysia. Basis of opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence and other ethical responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditors’ responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements of the Group and of the Company. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.


Independent auditors’ report (Cont’d) to the members of MPHB Capital Berhad (Incorporated in Malaysia)

Key audit matters (cont’d.)

1. Valuation of insurance contract liabilities

Insurance contract liabilities, which comprise claim liabilities and premium liabilities, represent approximately 80% of the Group’s total liabilities. Insurance contract liabilities are estimated by the insurance subsidiary and its appointed actuary using judgment and applying assumptions on actuarial valuation techniques and projections. Due to the significance of insurance contract liabilities and the subjective nature inherent in making this estimate, we consider this to be a key audit matter.

Note 2.4 (u) to the financial statements describes the Group’s accounting policies in the determination of insurance contract liabilities while Note 2.5 (b) to the financial statements describe the underlying assumptions used by the Group in applying its accounting policies. Note 33 (f) to the financial statements describes the underlying uncertainties and risks resulting from these assumptions used.

Our response:

Our audit procedures included the assessment and testing of controls over the approval, recording and monitoring of insurance premiums and claims, including the review of claim files to determine if the associated reserves correspond to the Group’s policies and reinsurance agreements. We have also tested the completeness and accuracy of data used by the appointed actuary to the Group’s underlying records.

In relation to the valuation methods used, we have assessed the propriety of the methods to Bank Negara Malaysia’s Risk-based Capital Framework and the relevant financial reporting standards. We independently assessed and challenged the estimates made by the Group, on five major lines of insurance business, including the historical claims experience and loss ratios, expectation of future claims including estimation of claims incurred but not reported as well as comparison with industry data.

We also assessed the adequacy and accuracy of disclosures in the financial statements to the methods and underlying data used by the Group.

2. Impairment assessment of goodwill

As at 31 December 2016, the carrying amount of goodwill recognised by the Group amounted to RM31.9 million, as disclosed in Note 15 to the financial statements.

The Group is required to perform annual impairment test of goodwill by comparing the carrying amount with the recoverable amount of the cash generating units (“CGUs”) to which this goodwill has been allocated. The Group estimated the recoverable amount of its CGUs to which the goodwill is allocated based on the higher of value-in-use (“VIU”) or fair value less cost of disposal in accordance with the requirement of the accounting standards.

Due to the complexity and subjectivity involved in the annual impairment test, we consider this impairment test to be an area of audit focus. Specifically, for VIU, we focus on the growth rates used in estimating the future cash flows of the CGUs and the discount rates applied.

Note 2.4(c)(i) and Note 2.4(g) to the financial statements, respectively, disclose the accounting policies for goodwill and impairment assessment of goodwill. The description of the estimates and judgment used in the impairment assessment is disclosed in Note 2.5(a)(iii) to the financial statements. Key assumptions used in the estimated future cash flows are disclosed in Note 15 to the financial statements.

Our response:

Where VIU is used, we assessed the appropriateness of the growth rates used to extrapolate the cash flows and the discount rates applied by comparing them against external economic and market data, wherever available. We also tested the basis of preparing the cash flow forecasts by taking into account the back testing results on the accuracy of previous forecasts and the historic evidence supporting underlying assumptions.

Where fair value less cost of disposal is used, we assessed the basis on which the fair values were determined and underlying valuation reports. We also compared the key assumptions in these valuation reports, such as the price per square metres, to other internal information, and external economic and market data, wherever available. For cost of disposal, we compared the basis used against historical records.

We performed sensitivity analysis where we tested independently those assumptions to which the outcome of the impairment test is most sensitive.

We also evaluated the adequacy of disclosures in the financial statements including the key assumptions to which the recoverable amount is most sensitive.


Key audit matters (cont’d.)

3. Impairment assessment of investment in subsidiaries

For the subsidiaries having indication of impairment as at reporting date, the impairment assessment on investment in subsidiaries involves the assessment of recoverability of the respective subsidiaries, which is based on the higher of value-in-use (“VIU”) or fair value less cost of disposal.

We have considered this as a key audit matter due to the significance of the amount of investment in subsidiaries in the financial statements of the Company and the high level of the subjectivity associated with the assumptions used in estimating the fair value, specifically the market value of the underlying investment properties.

Notes 2.4(a)(i) and 2.4(g) to the financial statements, respectively, disclose the accounting policies for investment in subsidiaries and impairment of such investments. The description of the estimates and judgment used in the impairment assessment is disclosed in Note 2.5(a)(iii) to the financial statements. The carrying amount of the investment in subsidiaries and the amount of impairment loss recognised are disclosed in Note 12 to the financial statements.

Our response:

We assessed the basis on which the fair values were determined and underlying valuation reports. We also compared the key assumptions in these valuation reports, such as the price per square metres, to other internal information, and external economic and market data, wherever available. For cost of disposal, we compared the basis used against historical records.

We performed sensitivity analysis where we tested independently those assumptions to which the outcome of the impairment test is most sensitive.

We also evaluated the adequacy of required and related disclosures in the financial statements.

Information other than the financial statements and auditors’ report thereon

The directors of the Company are responsible for the other information. The other information comprises the Directors’ Report and the information included in annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon. The annual report is expected to be made available to us after the date of this auditors’ report.

Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard on the Directors’ Report.

When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors of the Company and take appropriate action.



responsibilities of the directors for the financial statements

The directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”), 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 of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Company, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Group’s and the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.



Auditors’ responsibilities for the audit of the financial statements (Cont’d)

• Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current financial year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

other reporting responsibilities

The supplementary information set out in Note 40 on page 154 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and directive of Bursa Malaysia Securities Berhad.

other matters

This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Yeo Beng YeanAF: 0039 No. 03013/10/2018 JChartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia31 March 2017



statements of comPreHensive incomeFor the year ended 31 December 2016

Group companynote 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000 restated

Revenue 3 456,488 396,697 7,273 43,149 Cost of sales 4 (247,565) (203,922) - - Gross profit 208,923 192,775 7,273 43,149 Other income 5 120,647 125,608 1,821 1,714 Administrative expenses (68,628) (62,430) (9,528) (10,518)Other expenses (152,923) (137,172) (6,854) (33,032)operating profit/(loss) 6 108,019 118,781 (7,288) 1,313 Finance costs 7 (805) (2,441) - (1,118)Share of results of an associate (2) (24) - - Profit/(loss) before tax 107,212 116,316 (7,288) 195 Income tax expense 8 (19,832) (19,629) (149) (45)Profit/(loss) for the year 87,380 96,687 (7,437) 150

other comprehensive lossItems that are or may be reclassified subsequently to profit or loss

Fair value reservesNet gain arising during the year 866 685 - - Net realised gains transferred to profit or loss (9,677) (2,697) - - (8,811) (2,012) - - Tax effects 1,688 466 - - total other comprehensive loss for the year (7,123) (1,546) - -

total comprehensive income/(loss) for the year 80,257 95,141

(7,437) 150

Profit attributable to:Owners of the Company 55,174 74,699 Non-controlling interests 32,206 21,988

87,380 96,687

total comprehensive income attributable to:Owners of the Company 51,540 74,092 Non-controlling interests 28,717 21,049

80,257 95,141

earnings per share attributable to ownersof the company (sen per share) Basic and diluted 9 7.7 10.4

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


statements of financial PositionAs at 31 December 2016

Group company 31.12.2016 31.12.2015 1.1.2015 31.12.2016 31.12.2015 1.1.2015

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 note restated restated restated restated

assetsnon-current assetsProperty, plant and

equipment 10 78,353 81,570 84,266 734 1,104 1,459 Investment properties 11 820,512 830,077 748,661 - - - Investment in subsidiaries 12 - - - 1,229,221 1,231,034 1,197,486 Investment in an associate 13 - 515 539 - - - Investment securities 14 388,851 396,964 327,656 - - - Intangible assets 15 35,057 34,859 43,161 - - - Receivables 17 - - - 1,646 1,822 634 Deferred tax assets 25 3,185 1,561 1,300 - - -

1,325,958 1,345,546 1,205,583 1,231,601 1,233,960 1,199,579

current assetsInventories 16 243 269 231 - - - Receivables 17 291,345 289,783 341,097 135,449 109,786 156,635 Reinsurance assets 18 381,056 434,278 443,946 - - - Tax recoverable 1,566 720 5,689 49 58 - Investment securities 14 403,201 409,252 113,900 2,011 5,045 67,208 Cash and bank balances 19 616,577 532,180 481,714 319 20,542 3,227

1,693,988 1,666,482 1,386,577 137,828 135,431 227,070

total assets 3,019,946 3,012,028 2,592,160 1,369,429 1,369,391 1,426,649


StatementS of financial poSition (Cont’d)As at 31 December 2016

Group Company 31.12.2016 31.12.2015 1.1.2015 31.12.2016 31.12.2015 1.1.2015

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Note Restated Restated Restated Restated

Equity and liabilitiesEquity attributable to

owners of the CompanyShare capital 20 715,000 715,000 715,000 715,000 715,000 715,000 Share premium 296,091 296,091 296,091 296,091 296,091 296,091 Other reserves 21 38,470 42,104 42,711 - - - Merger deficit 22 (28,464) (28,464) (28,464) - - - Retained profits 23 623,060 567,877 293,501 209,520 216,957 216,807

1,644,157 1,592,608 1,318,839 1,220,611 1,228,048 1,227,898 Non-controlling interests 33 227,459 198,766 13,620 - - -Total equity 1,871,616 1,791,374 1,332,459 1,220,611 1,228,048 1,227,898

Non-current liabilitiesBorrowings 24 - 4,997 26,848 - - - Deferred tax liabilities 25 11,016 11,625 12,908 - - - Derivative financial

instruments - 4,150 - - - - Payables 26 - - - - 57,914 97,517

11,016 20,772 39,756 - 57,914 97,517

Current liabilitiesPayables 26 208,017 241,043 276,883 148,818 83,429 101,213 Insurance contract liabilities 18 916,361 929,881 897,733 - - - Borrowings 24 4,997 21,851 36,595 - - - Tax payable 7,939 7,107 8,734 - - 21

1,137,314 1,199,882 1,219,945 148,818 83,429 101,234

Total liabilities 1,148,330 1,220,654 1,259,701 148,818 141,343 198,751

Total equity and liabilities 3,019,946 3,012,028 2,592,160 1,369,429 1,369,391 1,426,649



statements of cHanGes in equityFor the year ended 31 December 2016

attributable to owners of the company non-distributable Distributable

share share other Merger retained non- capital premium reserves deficit profits controlling total

(note 20) (note 21) (note 22) (note 23) total interests equity Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

at 1 January 2015 715,000 296,091 42,711 (28,464) 293,501 1,318,839 13,620 1,332,459

Profit for the year- Previously stated - - - - 64,566 64,566 21,988 86,554 - Prior year adjustment

(Note 39) - - - - 10,133 10,133 - 10,133 Profit for the year as

restated - - - - 74,699 74,699 21,988 96,687 Other comprehensive

loss for the year - - (607) - - (607) (939) (1,546)Total comprehensive

(loss)/income for the year, restated - - (607) - 74,699 74,092 21,049 95,141

Arising from increase in equity interests in

subsidiaries - - - - 15,467 15,467 (15,467) -

Arising from partial disposal of equity interest in a subsidiary - - - - 184,210 184,210 179,564 363,774

at 31 December 2015 (restated) 715,000 296,091 42,104 (28,464) 567,877 1,592,608 198,766 1,791,374

At 1 January 2016, previously stated 715,000 296,091 42,104 (28,464) 557,744 1,582,475 198,766 1,781,241

Prior year adjustment (Note 39) - - - - 10,133 10,133 - 10,133

at 1 January 2016, restated 715,000 296,091 42,104 (28,464) 567,877 1,592,608 198,766 1,791,374

Profit for the year - - - - 55,174 55,174 32,206 87,380 Other comprehensive

loss for the year - - (3,634) - - (3,634) (3,489) (7,123)Total comprehensive

(loss)/income for the year - - (3,634) - 55,174 51,540 28,717 80,257

Arising from increase in equity interests in

a subsidiary - - - - 9 9 (24) (15)

at 31 December 2016 715,000 296,091 38,470 (28,464) 623,060 1,644,157 227,459 1,871,616


non-distributable Distributable share share retained

capital premium profits (note 20) (note 23) total

company RM’000 RM’000 RM’000 RM’000

At 1 January 2015 715,000 296,091 216,807 1,227,898

Total comprehensive income for the year - - 150 150 At 31 December 2015 715,000 296,091 216,957 1,228,048

at 1 January 2016 715,000 296,091 216,957 1,228,048

Total comprehensive loss for the year - - (7,437) (7,437)

at 31 December 2016 715,000 296,091 209,520 1,220,611

StatementS of changeS in equity (Cont’d)For the year ended 31 December 2016



Group 2016 2015

RM’000 RM’000

operating activitiesProfit before tax 107,212 116,316 Adjustments for: Depreciation of property, plant and equipment 6,005 5,964 Depreciation of investment properties 1,757 1,770 Interest expense 805 2,441 Amortisation of premiums 148 95 Amortisation of intangible assets 1,092 816 Impairment loss on AFS financial assets 2,708 869 Bad debts written off 784 730 Property, plant and equipment written off 1 2 Allowance for impairment of insurance receivables 1,802 4,731 Reversal of allowance for impairment for loans and advances (701) (20) Allowance/(reversal) for impairment of other receivables 100 (10,134) Share of results of an associate 2 24 Gain on disposal of: - property, plant and equipment (79) (4) - investment properties (369) (2,497) Realised gain on: - AFS financial assets (9,677) (2,697) - financial assets at FVTPL (4,876) (2,347) Reversal of impairment on investment properties - (13,187) Interest income (48,417) (38,537) Dividend income on quoted shares and unit trusts (4,195) (6,033) Loss/(gain) arising from fair value change in financial assets at FVTPL 1,624 (443)Operating cash flows before working capital changes 55,726 57,859 Changes in working capital: Inventories 27 (38) Receivables (2,025) (19,228) Reinsurance assets 53,222 9,668 Insurance contract liablities (13,520) 32,148 Payables (26,027) (31,993)Cash flows generated from operations 67,403 48,416 Income tax paid (20,391) (17,365)Net cash flows generated from operating activities 47,012 31,051

statements of casH floWsFor the year ended 31 December 2016


StatementS of caSh flowS (Cont’d)For the year ended 31 December 2016

Group 2016 2015

RM’000 RM’000

investing activitiesProceeds from disposals of: - property, plant and equipment 81 5 - investment properties 1,141 7,050 - investment securities 487,623 345,246 Capital repayment arising from an associate 100 - Redemption of fixed income securities - 15,399 Purchase of: - additional shares in a subsidiary (15) - - intangible assets (1,290) (1,717) - property, plant and equipment (2,791) (3,271) - investment properties - (5,250) - investment securities (476,448) (722,794)Net cash flows arising from partial disposal of equity interests in a subsidiary - 374,845 Proceeds from a derivative financial instrument - 4,150 Net dividend received from quoted shares and unit trusts 4,608 6,033 Interest received 46,995 38,537 Interest paid (768) (2,223)Net cash flows generated from investing activities 59,236 56,010

financing activitiesNet repayment of borrowings (21,851) (36,595)Net movement in fixed deposits with licensed bank (54,510) 6,638 Net cash flows used in financing activities (76,361) (29,957)

net increase in cash and cash equivalents 29,887 57,104 cash and cash equivalents at beginning of year 96,031 38,927 cash and cash equivalents at end of year (note 19) 125,918 96,031


company 2016 2015

RM’000 RM’000

operating activities(Loss)/profit before tax (7,288) 195 Adjustments for: Depreciation of property, plant and equipment 397 414 Interest expense - 1,118 Dividend income (4,803) (40,385) Interest income (1,387) (1,381) Realised loss/(gain) on financial assets at FVTPL 2 (24) Loss/(gain) arising from fair value change in financial assets at FVTPL 309 (309) Impairment on investment in a subsidiary 1,828 27,252 Operating cash flows before working capital changes (10,942) (13,120)Changes in working capital: Receivables (1,382) 409 Payables (1,456) 1,389 Inter-company indebtedness (15,175) (74,324)Cash flows used in operations (28,955) (85,646)Tax paid (140) (124)Net cash flows used in operating activities (29,095) (85,770)

investing activitiesProceeds from disposals of: - investment securities 3,471 65,000 Purchase of: - investment in subsidiaries (15) - - property, plant and equipment (27) (59) - investment securities (747) (2,504)Dividends received 4,803 40,385 Interest received 1,387 1,381 Interest expense - (1,118)Net cash flows generated from investing activities 8,872 103,085

net (decrease)/increase in cash and cash equivalents (20,223) 17,315 cash and cash equivalents at beginning of year 20,542 3,227 cash and cash equivalents at end of year (note 19) 319 20,542


StatementS of caSh flowS (Cont’d)For the year ended 31 December 2016


1. corPorate information

The Company was incorporated on 17 July 2012 as a private limited company under the name of MPHB Capital Sdn. Bhd.. The Company was converted into a public limited company and assume its present name on 23 July 2012. On 28 June 2013, the Company’s entire issued and paid-up share capital was listed on the Main Market of Bursa Malaysia Securities Berhad.

The principal activities of the Company are that of investment holding and provision of management services. Other information relating to the subsidiaries are disclosed in Notes 12 and 36. The registered office and the principal place of business of the Company is located at 39th Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur. These financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 31 March 2017.

2. siGnificant accountinG Policies 2.1 Basis of preparation

These financial statements of the Group and the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”) and the requirements of the Companies Act, 1965 in Malaysia.

These financial statements have also been prepared on a historical cost basis, except for those financial instruments which have been measured at their fair values and insurance liabilities which have been measured in accordance with the valuation methods specified in the Risk-Based Capital Framework (“RBC Framework”) for insurers issued by Bank Negara Malaysia (“the Framework”).

The accounting policies set out in Note 2.4 have been applied in preparing the financial statements of the Group and the Company for the financial year ended 31 December 2016.

The financial statements are presented in Ringgit Malaysia (“RM”) and all values are rounded to the nearest thousand (RM’000) except when otherwise indicated.

2.2 changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except as follows:

On 1 January 2016, the Group and the Company adopted the following new and amended MFRSs mandatory for annual financial periods beginning on or after 1 January 2016.

Description

effective for periods

beginning on or after

Annual Improvements to MFRSs 2012 - 2014 Cycle 1 January 2016 Amendments to MFRS 116 and MFRS 138: Clarification of Acceptable Methods of Depreciation and Amortisation 1 January 2016 Amendments to MFRS 116 and MFRS 141 : Agriculture : Bearer Plants 1 January 2016

notes to tHe financial statements- 31 December 2016


Notes to the fiNaNcial statemeNts (Cont’d)- 31 December 2016

2. significant accounting policies (cont’D) 2.2 changes in accounting policies (cont’d)

Description



Amendments to MFRS 11: Accounting for Acquisitions of interests in Joint Operations 1 January 2016 Amendments to MFRS 127: Equity Method in Separate Financial Statements 1 January 2016 Amendments to MFRS 101: Disclosure Initiatives 1 January 2016 Amendments to MFRS 10, MFRS 12 and MFRS 128: Investment Entities: Applying the Consolidation Exception 1 January 2016 MFRS 14 Regulatory Deferral Accounts 1 January 2016

The adoption of the new and amendments to MFRSs above did not have any material impact on the

financial statements of the Group and the Company in the current financial year.

2.3 standards issued but not yet effective

The standards and interpretations that are issued but not yet effective up to the date of issuance of the Group’s and the Company’s financial statements are disclosed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective.

Description



MFRS 107 Disclosures Initiatives (Amendments to MFRS 107) 1 January 2017 MFRS 112 Recognition of Deferred Tax for Unrealised Losses (Amendments to MFRS 112) 1 January 2017 MFRS 2 Classification and Measurement of Share-based Payment Transactions (Amendments to MFRS 2) 1 January 2018 MFRS 15 Revenue from Contracts with Customers 1 January 2018 MFRS 9 Financial Instruments 1 January 2018 MFRS 16 Leases 1 January 2019 Amendments to MFRS 10 and MFRS 128: Sale of Contribution of Assets between an Investor and its Associate or Joint Venture Deferred

The Group and the Company plan to adopt the above amendments when they become effective in the respective financial periods. These pronouncements are expected to have no material impact to the financial statements of the Group and Company upon their initial application except as described below:

MfRs 15 Revenue from contracts with customers

MFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. MFRS 15 will supersede the current revenue recognition guidance including MFRS 118 Revenue, MFRS 111 Construction Contracts and the related interpretations when it becomes effective.



2. significant accounting policies (cont’D) 2.3 standards issued but not yet effective (cont’d)

MfRs 15 Revenue from contracts with customers (cont’d)

The core principle of MFRS 15 is that an entity should recognise revenue which depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under MFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services undelying the particular performance obligation is transferred to the customer. MFRS 15 is effective for annual periods beginning on or after 1 January 2018 with either a full modified retrospective application or early adoption is permitted. mfrs 9 financial instruments

In November 2014, MASB issued the final version of MFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces MFRS 139 Financial Instruments: Recognition and Measurement and all previous versions of MFRS 9. MFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory.

The standard introduces new requirements for classification and measurement, impairment and hedge accounting.

mfrs 9 financial instruments: classification and measurement

MFRS 9 has three measurement categories – amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investment in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income. All equity instruments are measured at fair value. 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 financial 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 fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the statement of profit or loss, unless this creates an accounting mismatch.

mfrs 9 financial instruments: impairment

The impairment requirements apply to financial assets measured at amortised cost and fair value through other comprehensive income and certain loan commitments as well as financial guarantee contracts. At initial recognition, allowance for impairment is required for expected credit losses (‘ECL’). In the event of a significant increase in credit risk, allowance for impairment is required for ECL resulting from all possible default events over the expected life of the financial instrument. The assessment of credit risk, as well as the estimation of ECL, are required to be unbiased, probability-weighted and should incorporate all available information which is relevant to the assessment, including information about past events, current conditions and reasonable and supportable forecasts of future events and economic conditions at the reporting date.



2. significant accounting policies (cont’D) 2.3 standards issued but not yet effective (cont’d)

mfrs 16 leases

MFRS 16 will replace MFRS 117 Lease, IC Interpretation 4: Determining whether an Arrangement contains a Lease, IC Interpretation 115: Operating Lease-Incentives and IC Interpretation 127: Evaluating the Substance of Transactions Involving the Legal Form of a Lease. MFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under MFRS 117.

At the commencement date of a lease, a lessee will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Lessees will be required to recognise interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessor accounting under MFRS 16 is substantially the same as the accounting under MFRS 117. Lessors will continue to classify all leases using the same classification principle as in MFRS 117 and distinguish between two types of leases: operating and finance leases.

MFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted but not before an entity applies MFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The Group and the Company are in the process of assessing financial implications for adopting MFRS 15, MFRS 9 and MFRS 16.

2.4 summary of significant accounting policies

(a) subsidiaries and basis of consolidation

(i) subsidiaries

In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses.

(ii) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

The Group controls an investee if and only if the Group has met all the following:

- Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

- Exposure, or rights, to variable returns from its investment with the investee; and

- The ability to use its power over the investee to affect its returns.



2. significant accounting policies (cont’D) 2.4 summary of significant accounting policies (cont’d)

(a) subsidiaries and basis of consolidation (cont’d)

(ii) basis of consolidation (cont’d)

When the Group has less than a majority of the voting rights of an investee, the Group considers the following in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power over the investee:

- The size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

- Potential voting rights held by the Group, other vote holders or other parties;

- Rights arising from other contractual arrangements; and

- Any additional facts and circumstances that indicate the Company has, or does not have, the current liability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholdings’ meetings.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Business combinations (other than involving entities under common control) are accounted for using the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the period in which the costs are incurred and the services are received.

The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree.

Acquisition costs incurred are recognised in profit and loss and included in administrative

expenses. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.

Any excess of the cost of business combination over the Group’s share in the net fair value

of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill. Any excess of the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised as income in profit or loss on the date of acquisition.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group

obtains control, and continue to be consolidated until the date that such control ceases. Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly,

to owners of the Company, and are presented separately in the statements of comprehensive income and within equity in the statements of financial position, separately from equity attributable to owners of the Company.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for

as an equity transaction. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries.




(a) subsidiaries and basis of consolidation (cont’d)

(iii) Business combinations under common control

Business combination involving entities under common control are accounted for by applying the pooling of interest method which involves the following:

- The assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company.

- No adjustments are made to reflect the fair values on the date of combination or recognise any new assets or liabilities.

- No additional goodwill is recognised as a result of the combination. Only existing goodwill relating to either of the combining entities is recognised.

- Any differences between the consideration paid/transferred and the equity ‘acquired’ is reflected within the equity as merger reserve.

The Group has elected to not restate financial information in the consolidated financial statements for the periods prior to the combination of the entities under common control.

(iv) transactions with non-controlling interests

Transactions with non-controlling interests are accounted for using the entity concept method, whereby, transactions with non-controlling interests are accounted for as transactions with owners. On acquisition of non-controlling interests, the difference between the consideration and carrying value of the share of the net assets acquired is recognised directly in equity. Gain or loss on disposal to non-controlling interests is recognised directly in equity.

(b) associate

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

The Group’s investment in an associate is accounted for using the equity method. Under the equity method, the investment in an associate is measured in the statements of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associate.

Goodwill relating to the associate is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profit or loss for the period in which the investment is acquired.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.




(b) associate (cont’d.)

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss.

The financial statements of the associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group. In the Company’s separate financial statements, investments in the associate is stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

(c) intangible assets

(i) goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually or whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed off, the goodwill associated with the operation disposed off is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed off in this circumstance is measured based on the relative fair values of the operations disposed off and the portion of the cash-generating unit retained.

(ii) other intangible assets

Other intangible assets comprise computer application software which were developed or acquired to meet the unique requirements of the Group.

Other intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are not capitalised and an expenditure is reflected in the profit or loss in the period in which the expenditure is incurred.




(c) intangible assets (cont’d)

(ii) other intangible assets

Other intangible assets with finite lives are amortised over the useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful lives are reviewed at least once at each financial year-end. Changes in the expected useful lives or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss.

Computer application software are amortised over an estimated useful life of five years.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

(d) Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the Company and the cost of the item can be measured reliably.

Subsequent to recognition, property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group and the Company recognise such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the property, plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation of other property, plant and equipment is computed on a straight-line basis over the estimated useful lives of the assets at the annual rates as follows:

% Freehold and leasehold buildings 2.0 - 2.8

Leasehold land 0.1 - 1.7 Plant and equipment 10.0 - 33.3 Computer equipment 12.5 - 33.3 Work-in-progress are not depreciated as these assets are not yet available for use.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.




(d) Property, plant and equipment (cont’d)

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if any.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

(e) investment properties

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and any accumulated impairment losses.

The depreciation policy for investment properties are in accordance with the depreciation policy for property, plant and equipment.

Investment properties are derecognised when either they have been disposed off or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its use or disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year in which they arise.

Transfers are made to or from investment properties only when there is a change in use.

(f) leases

(i) as lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

(ii) as lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income.




(g) impairment of non-financial assets

The Group and the Company assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group and the Company make an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”)).

In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period.

(h) inventories

Inventories are stated at the lower of cost and net realisable value.

Cost is determined using the first-in-first-out basis. The cost of inventories comprises costs of purchase. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(i) cash and cash equivalents

Cash and cash equivalents comprise cash at banks, cash on hand and demand deposits which have a maturity period of three months or less.




(j) borrowing costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that incurred in connection with the borrowings of funds.

(k) income taxes

(i) current tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

(ii) Deferred tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

- where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, unused tax credits

and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

- where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.




(k) income taxes (cont’d)

(ii) Deferred tax (cont’d)

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(l) employee benefits

(i) short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group and the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defined contribution plans

The companies in the Group make contributions to the Employee Provident Fund (“EPF”) in Malaysia, a defined contribution pension scheme. Contributions to EPF are recognised as an expense in the period in which the related service is performed.

(m) Revenue recognition

(i) Dividend income

Dividend from equity securities and distribution income are recognised when the Group’s or the Company’s right to receive payment is established.




(m) Revenue recognition (cont’d)

(ii) interest income and investment income

Interest income and investment income are recognised using the effective interest method.

For the subsidiaries operating credit business, income on hire purchase and finance lease transactions are computed on the effective interest rate method and interest income from housing, mortgage and other loans is recognised on the reducing balance basis.

(iii) rental income

Rental income is recognised on a straight-line basis over the lease terms.

(iv) Revenue from services Revenue from services rendered is recognised net of service taxes and discounts as and when the services are performed. The revenue from services include hotel services and management fees.

(v) Revenue from joint venture

Revenue from joint venture is recognised when the transfer of significant risk and rewards to the joint venture partner has occurred as and when the development of the phases mentioned in the joint venture agreement is approved by the relevant authorities, where thereafter the legal and beneficial rights to the land would have been transferred to the joint venture partner.

(vi) Realised gains and losses on investments

Realised gains and losses recorded in profit or loss on investment include gains and losses on financial assets and investment properties. Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the carrying amount and are recorded on occurrence of the sale transaction.

(n) foreign currencies

(i) functional and presentation currency

The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The financial statements are presented in Ringgit Malaysia (“RM”), which is also the Group’s and the Company’s functional currency.

(ii) foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary

items at the reporting date are recognised in profit or loss.




(o) financial assets

Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets.

(i) financial assets at fair value through profit or loss (“fVtpl”)

Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at FVTPL do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at FVTPL are recognised separately in profit or loss as part of other losses or other income.

FVTPL could be presented as current or non-current. Financial assets that is held primarily for trading purposes are presented as current whereas financial assets that is not held primarily for trading purposes are presented as current or non-current based on the settlement date.

(ii) loans and receivables (“laR”)

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as LAR.

Subsequent to initial recognition, LAR are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the LAR are derecognised or impaired.

Effective interest rate is calculated by taking into account any premium or discount on acquisition and includes transaction costs and fees that are integral part of the effective interest rate.

LAR are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current.




(o) financial assets (cont’d)

(iii) available-for-sale financial assets (“afs”)

AFS are financial assets that are designated as AFS or are not classified in any of the two preceding categories. AFS include equity investments and debt securities.

After initial recognition, AFS are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an AFS equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

AFS are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date.

(iv) insurance receivables

Insurance receivables are recognised when due and measured at the fair value of the consideration received and receivable.

If there is objective evidence that the insurance receivable is impaired, the Group reduces the carrying amount of the insurance receivable accordingly and recognises that impairment loss in profit or loss. The Group gathers the objective evidence that an insurance receivable is impaired using the same process and method adopted for financial assets carried at amortised cost.

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset.

(p) financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

Financial liabilities, within the scope of MFRS 139, are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.




(p) financial liabilities (cont’d)

(i) financial liabilities at fvtPl

Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL.

Financial liabilities held for trading include derivatives entered into by the Group that do not meet the hedge accounting criteria.

(ii) other financial liabilities

Other financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

The Group’s and the Company’s other financial liabilities include payables and borrowings.

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

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

(q) impairment of financial assets

The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.

(i) unquoted equity securities carried at cost

If there is objective evidence that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

(ii) afs financial assets

If an AFS financial assets are impaired, the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss.

Reversals in respect of equity instruments classified as AFS are not recognised in the income statement. Reversals of impairment losses on debt instruments classified as AFS are reversed through profit or loss if the increase in the fair value of the instruments can be objectively related to an event occurring after the impairment losses were recognised in profit or loss.




(q) impairment of financial assets (cont’d)

(iii) assets carried at amortised cost

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

(r) segment reporting

For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 35, including the factors used to identify the reportable segments and the measurement basis of segment information.

(s) share capital and share issuance expenses

An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs.

Dividends on ordinary shares are recognised in equity in the period in which they are declared.




(t) provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.

Provision for claims for the insurance subsidiary is as described in Note 2.4(u)(iv).

(u) general insurance underwriting results

The general insurance underwriting results are determined for each class of business after taking into account, inter alia, reinsurances, unearned premium, commissions and claims incurred.

(i) Gross premiums

Gross premiums are recognised in a financial period in respect of risks assumed during that particular financial period.

ii) reinsurance premiums

Inwards facultative reinsurance premiums are recognised in the financial period in respect of the facultative risks assumed during that particular financial period, as in the case of direct policies, following the individual risks’ inception dates.

In respect of reinsurance premiums relating to proportional treaties, it is recognised on the basis of periodic advices received from the cedants given that the periodic advices reflect the individual underlying risks being incepted and reinsured at various inception dates of these risks and contractually accounted for, as such to reinsurers under the terms of the proportional treaties.

(iii) Premium liabilities

The provision for unearned premiums represents premiums received for risks that have not yet expired. Generally, the reserve is released over the term of the contract and is recognised as premium income.

At each reporting date, the insurance subsidiary reviews its unexpired risks and a liability adequacy test is performed to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses current estimates of future contractual cash flows (taking into consideration current loss ratios) after taking into account of the investment return expected to arise on assets relating to the relevant general insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums less related deferred acquisition costs is inadequate, the deficiency is recognised in the income statement by setting up a provision for liability adequacy.




(u) general insurance underwriting results (cont’d)

(iii) premium liabilities (cont’d)

Premium liability is reported at the higher of the aggregate of the unearned premium reserve (“UPR”) for all lines of business and the best estimate value of the insurer’s unexpired risk reserves (“URR”) at the end of the financial year and the provision of risk margin for adverse deviation (“PRAD”) calculated at 75% confidence level at the insurance subsidiary level. The best estimate value is a prospective estimate of the expected future payments arising from future events insured under policies in force at the end of the financial year including allowance for insurer’s expenses.

(a) urr

The URR is the prospective estimate of the expected future payments arising from future events insured under policies in force as at the end of the financial year and also includes allowance for expenses, including overheads and cost of reinsurance, expected to be incurred during the unexpired period in administering these policies and settling the relevant claims, and expected future premium refunds.

(b) uPr

The UPR represents the portion of net premiums less the related net acquisition costs of insurance policies written that relate to the unexpired periods of the policies at the end of the financial year.

In determining the UPR at reporting date, the methods used in calculation of actual unearned premium are as follows:

- 25% method for marine and aviation cargo, and transit business.

- 1/24th method for all other classes of general business in respect of Malaysian policies, with the following deduction rates, or actual commission incurred, whichever is lower:

- Motor and bonds 10%- Fire, engineering, aviation and marine hull 15%- Medical 10 - 15%- Other classes 20%

- 1/8th method for all other classes of overseas inward treaty business, with a deduction

of 20% for commission.

- Non-annual policies are time-apportioned over the period of the risks.




(u) general insurance underwriting results (cont’d)

(iv) claim liabilities

General insurance contract liabilities are recognised when contracts are entered into and premiums are charged. These liabilities comprise outstanding claims provision and provision for unearned premiums.

Outstanding claims provision are based on the estimated ultimate cost of all claims incurred but not settled at the reporting date, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification and settlement of certain types of claims, therefore, the ultimate cost of these claims cannot be known with certainty at the reporting date. The liability is calculated at the reporting date using a range of standard actuarial claim projection techniques based on empirical data and current assumptions that may include a margin for adverse deviation. The liability is not discounted for the time value of money. No provision for equalisation or catastrophe reserves is recognised. The liabilities are derecognised when the contract expires, is discharged or is cancelled.

Claim liabilities are recognised as the obligation to make future payments in relation to all claims that have been incurred as at the end of the financial year. They are recognised in respect of both direct insurance and inward reinsurance. The value is the best estimate value of claim liability which includes provision for claims reported, claims incurred but not enough reserved (“IBNER”), claims incurred but not reported (“IBNR”) and direct and indirect claim-related expenses as well as PRAD at 75% confidence level calculated at the insurance subsidiary level. These are based on an actuarial valuation by a qualified actuary, using a mathematical method of estimation based on, among others, actual claims development pattern.

(v) acquisition costs

The costs of acquiring and renewing insurance policies, net of income derived from ceding reinsurance premiums, are recognised as incurred and properly allocated to the periods in which it is probable they give rise to income.

(v) product classification

The insurance subsidiary issues contracts that transfer insurance risk only.

Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of price or rate, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. Insurance risk is the risk other than financial risk.

Insurance contracts are those contracts that transfer significant insurance risk. An insurance contract is a contract under which the insurance subsidiary (the insurer) has accepted significant insurance risk from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event (the insured event) adversely affects the policyholders. As a general guideline, the insurance subsidiary determines whether it has significant insurance risk, by comparing benefits paid with benefits payable if the insured event did not occur.




(v) product classification (cont’d)

Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its life-time, even if the insurance risk reduces significantly during this period, unless all rights and obligations are extinguished or expire.

Investment contracts can, however, be reclassified as insurance contracts after inception if insurance risk becomes significant.

Insurance and investment contracts are further classified as being either with or without discretionary participation features (“DPF”). DPF is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits.

The insurance subsidiary does not have any investment contracts and the insurance contracts issued do not contain any DPF.

(w) Reinsurance

The insurance subsidiary cedes insurance risk in the normal course of business for all of its insurance businesses. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contracts.

Ceded reinsurance arrangements do not relieve the insurance subsidiary from its obligations to policyholders. Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance.

Reinsurance assets are reviewed for impairment at each reporting date or more frequently when an indication of impairment arises during the reporting period. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the insurance subsidiary may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the insurance subsidiary will receive from the reinsurer. Impairment loss is recorded in profit or loss.

Gains or losses on buying reinsurance are recognised in profit or loss immediately at the date of purchase and are not amortised.

The insurance subsidiary also assumes reinsurance risk in the normal course of business for general insurance contracts when applicable.

Premiums and claims on assumed reinsurance are recognised as revenue or expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business. Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract.

Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expired or when the contract is transferred to another party.



2. significant accounting policies (cont’D) 2.5 significant accounting estimates and judgements

(a) critical judgements made in applying accounting policies

The following are the judgements made by management in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements.

(i) Valuation of investment properties

The Group classifies a property as an investment property in accordance with requirements of MFRS 140 Investment Property. The Group’s investment properties are held to earn rental and for capital appreciation or both.

In estimating fair value of investment properties, the Group uses market observable data to the extent it is available. Where level 1 inputs are not available, the Group engaged third party qualified valuers to perform the valuation and in establishing the appropriate valuation techniques and inputs to the model.

Information about the valuation techniques and inputs used in determining the fair value of investment properties are disclosed in Note 11.

(ii) classification of investment properties

The Group has entered into several Joint Venture Agreements (“JVAs”) with certain third parties to develop land owned by the Group. As the Group does not have joint control and significant influence nor substantive rights over the relevant activities of these JVAs, which is determined to be development of properties on the land, the JVAs do not fall within the scope of MFRS 11 Joint Arrangement. Consequently, the land belonging to the Group are classified as investment properties as disclosed in Note 11, up until significant risks and rewards of the land is transferred to the joint venture partner.

The Group regards that the transfer of significant risk and rewards to the joint venture partners have occurred when the development of properties on the land in the JVA is approved by the relevant authorities. Once the authorities approval is obtained, the Group will no longer have the legal and beneficial rights as a landowner whereby the Group’s risk and rewards would then be changed to recovery of share or entitlement as a landowner.

The Group uses the planned saleable area to estimate the revenue entitled from the joint venture partner and to estimate the cost of the investment properties transferred to the joint venture partner.

(iii) impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next three years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

Goodwill is tested for impairment on an annual basis and when circumstances indicate that carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU to which the goodwill relates. Further details on the goodwill are as disclosed in Note 15.



2. significant accounting policies (cont’D) 2.5 significant accounting estimates and judgements (cont’d)

(b) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

valuation of insurance contract liabilities

For insurance contracts, estimates have to be made for both the expected ultimate cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred but not yet reported (“IBNR”) at the reporting date.

It can take a significant period of time before the ultimate claims costs can be established with certainty and for some type of policies, IBNR claims form the majority of the reporting liability. The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques, such as Chain Ladder and Bornheutter-Ferguson methods.

The main assumption underlying these techniques is that a company’s past claims development experience can be used to project future claims development and hence, ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses, average costs per claim and claim numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident years, but can also be further analysed by geographical areas, as well as by significant business lines and claims type. Large claims are usually separately addressed, either by being reserved at the face value of loss adjuster estimates or separately projected in order to reflect their future development. In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratio. Instead, the assumptions used are those implicit in the historic claims development data on which the projections are based. Additional qualitative judgement is used to assess the extent to which past trends may not apply in future (for example, to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, level of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely outcome from the range of possible outcomes, taking account of all the uncertainties involved.

The movement and carrying amount of insurance contract liabilities are as disclosed in Note 18.



3. revenue

Group company 2016 2015 2016 2015


Net earned premiums (Note (i)) 390,846 339,341 - -

Interest income on loans and advances 5,657 1,028 - - Investment income in respect of gross dividends from: - subsidiaries - - 4,686 40,377 - quoted investment securities in Malaysia 1,287 8 117 8 - unquoted investment securities in Malaysia 580 800 - - Revenue from rental of properties 7,205 8,609 - - Revenue from joint venture 20,279 15,910 - - Hotel services 29,795 30,137 - - Management fees from: - subsidiaries - - 1,631 1,900 - an affiliated company 839 864 839 864

456,488 396,697 7,273 43,149

(i) Net earned premiums comprised:

(a) Gross premium 637,656 593,891 - - Change in premium liabilities (4,445) (14,873) - - Gross earned premium 633,211 579,018 - -

(b) Gross premium ceded (234,160) (237,208) - - Change in premium liabilities (8,205) (2,469) - - Premium ceded (242,365) (239,677) - -

Net earned premiums 390,846 339,341 - -



4. cost of sales

Group 2016 2015

RM’000 RM’000 restated

Cost of insurance business (Note (i)) 226,654 185,926 Cost of hotel services 13,812 12,219 Cost of investment property transferred to a joint venturer 7,099 5,777

247,565 203,922

(i) Cost of insurance business comprised:

Gross claims paid 355,032 261,543 Claims ceded to reinsurers (155,430) (100,091)Gross change in contract liabilities (17,965) 17,275 Change in contract liabilities ceded to reinsurers 45,017 7,199 Net claims incurred (Note (ii)) 226,654 185,926

(ii) Net claims incurred comprised:

Gross claims paid less salvage 355,032 261,543 Reinsurance recoveries (155,430) (100,091)Net claims paid 199,602 161,452

Gross change in contract liabilitiesAt 31 December 628,893 646,858 At 1 Jan (646,858) (629,583)

(17,965) 17,275

Change in contract liabilities ceded to reinsurersAt 31 December (284,768) (329,785)At 1 Jan 329,785 336,984

45,017 7,199

Net claims incurred 226,654 185,926



5. otHer income

Group company 2016 2015 2016 2015


Interest income (Note (i)) 11,135 7,316 1,387 1,381 Fee and commission income 45,732 42,983 - -Other income of an insurance subsidiary (Note (ii)) 52,773 45,630 - - Income from rental of properties 326 505 - - Gain on disposal of investment properties - 2,028 - - Gain arising from fair value change in financial assets at FVTPL 4,150 443 - 309 Realised gain from financial assets at FVTPL 4,876 2,347 - 24 Reversal of allowance for impairment for loans and advances (Note 17(a)) 701 20 - - Reversal of allowance for impairment of other receivables (Note 17(d)) - 10,134 - - Reversal of allowance for impairment for loans on a subsidiary (Note 17(e)) - - 434 - Reversal of impairment on investment properties - 13,187 - - Others 954 1,015 - -

120,647 125,608 1,821 1,714

(i) Interest income

Interest income on: - loan to subsidiaries - - 1,144 22 - short term deposits 530 771 190 490 - investment securities 10,590 6,533 53 869 - late payment 15 12 - -

11,135 7,316 1,387 1,381



5. otheR incoMe (cont’D)

(ii) Other income of an insurance subsidiary Group

2016 2015 RM’000 RM’000

Other income of an insurance subsidiary comprised:

Investment income (Note (a)) 39,601 35,458 Realised gains from AFS financial assets (Note (b)) 9,677 2,697 Other operating income (Note (c)) 3,495 7,475

52,773 45,630

Group 2016 2015

RM’000 RM’000 (a) Investment income comprised:

AFS financial assets:Dividend income - Equity securities quoted in Malaysia 2,326 2,928 - Equity securities quoted outside Malaysia 2 4 - Quoted unit trust - 2,293 Interest income 1,850 12,770 LAR interest 35,432 17,423 Rental income from investment properties 139 135 Amortisation of premium (148) (95)

39,601 35,458

(b) Realised gains from AFS financial assets comprised:

Equity securities quoted in Malaysia 5,857 2,610 Debt securities unquoted outside Malaysia 3,820 87

9,677 2,697

(c) Other operating income comprised:

Gain on disposal of property, plant and equipment 79 4 Gain on disposal of investment properties 369 469 Impairment loss on AFS financial assets (2,708) (869)Allowance for impairment on receivables (100) - Recovery of impairment of investment 676 - Service income earned from Malaysian Motor Insurance Pool (“MMIP”) 6,365 6,724 Sundry (expenses)/income (1,186) 1,147

3,495 7,475



6. oPeratinG Profit/(loss)

The following amounts have also been included in arriving at operating profit/(loss):

Group company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Depreciation of property, plant and equipment 6,005 5,964 397 414 Depreciation of investment properties 1,757 1,770 - - Auditors’ remuneration (Note (a)) 476 455 54 22 Key management personnel (Note (b)) 2,495 3,392 2,495 3,351 Amortisation of intangible assets 1,092 816 - - Impairment on investment in a subsidiary - - 1,828 27,252 Rental expense of land and buildings 3,950 3,732 1,116 1,116 Employee benefits expense (Note (c)) 76,865 68,506 9,529 10,518 Bad debts written off 784 730 - - Property, plant and equipment written off 1 2 - - Fund management charges 924 898 - - Fee and commission expenses 85,943 78,397 - -Realised loss from financial assets at FVTPL - - 2 - Loss arising from fair value change in financial assets at FVTPL 5,774 - 309 - Allowance for impairment of insurance receivables (Note 17(b)) 1,802 4,731 - -

(a) auditors’ remuneration

Auditors of the Company: - statutory audit 419 421 15 15 - assurance related services 47 24 39 7

466 445 54 22 Other auditors - statutory audit 10 10 - -

476 455 54 22



6. opeRating pRofit/(loss) (cont’D)

(b) Key management personnel

Key management personnel is defined as the Board of Directors of the Company whereby the authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly lies.

Group company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Executive directors’ remuneration: - bonus 792 1,026 792 1,026 - emoluments 1,394 2,068 1,394 2,068 - benefits-in-kind - 14 - 14

2,186 3,108 2,186 3,108

Non-executive directors’ remuneration: - fees 281 275 281 240 - emoluments 21 23 21 17 - benefits-in-kind 7 2 7 -

309 300 309 257

Total directors’ remuneration 2,495 3,408 2,495 3,365 Less: estimated money value of benefits-in-kind - (16) - (14)Total directors’ remuneration excluding benefits-in-kind 2,495 3,392 2,495 3,351

The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below:

number of Directors Directors

2016 2015

Executive Directors:RM300,001 - RM350,000 1 1 RM450,001 - RM500,000 - 1 RM1,851,000 - RM1,900,000 1* - RM2,300,001 - RM2,350,000 - 1

Non-executive Directors:RM1 - RM50,000 1 - RM50,001 - RM100,000 2 1 RM100,001 - RM150,000 1 2

* The Managing Director had resigned on 30 September 2016 and was reappointed as a Director on 18 November 2016.



6. opeRating pRofit/(loss) (cont’D)

(c) employee benefits expense

Group company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Wages and salaries 63,165 56,184 8,367 9,325 Contributions to Employee Provident Fund (“EPF”) 7,828 7,001 840 902 Other staff related expenses 5,872 5,321 322 291

76,865 68,506 9,529 10,518

7. finance costs

Group company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Interest expense on: Term loans and revolving credit 805 2,441 - - Amounts due to subsidiaries - - - 1,118

805 2,441 - 1,118

8. income tax exPense

The components of income tax expense comprise the following:

Group company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Income tax:Malaysian income tax* 20,684 20,977 149 117 Over provision of tax expense in prior year (307) (270) - (72)

20,377 20,707 149 45

Deferred tax:Relating to origination and reversal of temporary differences (734) (351) - - Reduction of income tax rate - (647) - - Under/(over) provision of deferred tax in prior year 189 (80) - - Deferred income tax (Note 25) (545) (1,078) - -

Income tax expense for the year 19,832 19,629 149 45

Domestic income tax is calculated at the Malaysian statutory tax rate of 24% (2015: 25%) of the estimated assessable profit for the year.

* Included in the prior year income tax is an amount of RM713,000 relates to Real Property Gains Tax (“RPGT”) arising from the disposal of investment properties in the financial year ended 31 December 2015.



8. incoMe tax expense (c0nt’D)

The reconciliation between tax expense and the product of accounting profit/(loss) multiplied by the applicable corporate tax rate are as follows:

Group company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Profit/(loss) before tax 107,212 116,316 (7,288) 195

Taxation at Malaysian statutory tax rate 25,731 29,079 (1,749) 49 Effect of income not subject to tax (10,209) (20,199) - (9,794)Effect of decrease of income tax rate - (647) - - Effect of expenses not deductible for tax purposes 5,484 13,914 1,898 9,862 Effect of utilisation of previously unrecognised tax losses (1,056) (416) - - Additional deduction allowed in respect of cash contributions made to MMIP during the year* - (1,752) - - Over provision of income tax expense in prior year (307) (270) - (72)Under/(over) provision of deferred tax in prior year 189 (80) - -

19,832 19,629 149 45

* In accordance with the P.U (A) 419 Income Tax (Deduction for contributions by Licensed Insurers to the Malaysian Motor Insurance Pool) Rules 2012, cash contributions made to MMIP via cash calls is allowed for additional deduction in the year when such cash is paid to the MMIP.

9. earninGs Per sHare

basic and diluted earnings per share

Basic and diluted earnings per share is calculated by dividing the profit for the year attributable to owners of the Company by the weighted average number of ordinary shares in issue during the financial year.

Group 2016 2015

RM’000 RM’000

Profit for the year attributable to owners of the Company 55,174 74,699

Number of ordinary shares in issue - weighted average 715,000 715,000

Basic and diluted earnings per share (Sen) 7.7 10.4



10. ProPerty, Plant anD equiPment

freehold land #

leasehold land #

buildings on

leasehold and

freehold land #

Plant and equipment

computer equipment total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group

costAt 1 January 2016 17,409 3,706 90,317 32,508 9,720 153,660 Additions - - - 2,228 563 2,791 Disposals - - - (338) (251) (589)Written off - - - (9) - (9)At 31 December 2016 17,409 3,706 90,317 34,389 10,032 155,853

accumulated depreciationAt 1 January 2016 - 356 36,692 27,689 7,353 72,090 Depreciation charge for

the year - 45 3,360 2,187 413 6,005 Disposals - - - (339) (248) (587)Written off - - - (8) - (8)At 31 December 2016 - 401 40,052 29,529 7,518 77,500

net carrying amountAt 31 December 2016 17,409 3,305 50,265 4,860 2,514 78,353

# estimated fair value 176,700

# The valuations of freehold land, leasehold land and buildings are based on valuation reports by an independent property valuer as disclosed in Note 11.



10. pRopeRty, plant anD equipMent (cont’D)

freehold land #

leasehold land #

buildings on

leasehold and

freehold land #

Plant and equipment

computer equipment total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group

costAt 1 January 2015 17,409 3,706 90,317 31,632 7,492 150,556 Additions - - - 911 2,360 3,271 Disposals - - - (18) (132) (150)Written off - - - (17) - (17)At 31 December 2015 17,409 3,706 90,317 32,508 9,720 153,660

accumulated depreciationAt 1 January 2015 - 312 33,268 25,994 6,716 66,290 Depreciation charge for

the year - 44 3,424 1,728 768 5,964 Disposals - - - (18) (131) (149)Written off - - - (15) - (15)At 31 December 2015 - 356 36,692 27,689 7,353 72,090

net carrying amountAt 31 December 2015 17,409 3,350 53,625 4,819 2,367 81,570

# estimated fair value 176,850

# The valuations of freehold land, leasehold land and buildings are based on valuation reports by an independent property valuer as disclosed in Note 11.



10. pRopeRty, plant anD equipMent (cont’D)

Plant and computer equipment equipment total

RM’000 RM’000 RM’000 company

at 31 December 2016

costAt 1 January 2016 2,056 151 2,207 Additions - 27 27 At 31 December 2016 2,056 178 2,234

accumulated depreciationAt 1 January 2016 990 113 1,103 Depreciation charge for the year 370 27 397 At 31 December 2016 1,360 140 1,500

net carrying amountAt 31 December 2016 696 38 734

at 31 December 2015

costAt 1 January 2015 2,028 120 2,148 Additions 28 31 59 At 31 December 2015 2,056 151 2,207

accumulated depreciationAt 1 January 2015 597 92 689 Depreciation charge for the year 393 21 414 At 31 December 2015 990 113 1,103

net carrying amountAt 31 December 2015 1,066 38 1,104



11. investment ProPerties

Group 2016 2015

RM’000 RM’000 restated

costAt 1 January 855,561 785,573 Reclassified from other receivables - 75,079 Additions - 5,250 Disposals (7,871) (10,341)At 31 December 847,690 855,561

accumulated depreciation At 1 January 8,739 6,980 Depreciation charge for the year 1,757 1,770 Disposals (63) (11)At 31 December 10,433 8,739

accumulated impairment lossAt 1 January 16,745 29,932 Reversal of impairment loss - (13,187)At 31 December 16,745 16,745

net carrying amount 820,512 830,077

estimated fair value 1,412,270 1,311,832

Investment properties comprise freehold land, leasehold land and buildings.

Investment properties and lands and buildings in property, plant and equipment are stated at cost. Estimated fair value is based on valuations performed by an accredited independent valuers with recent experience in the location and category of properties being valued. Fair value is determined using the comparison method of valuation.

Under the comparison method, fair value is estimated by considering the sale of similar or substitute properties and related market data and established a value estimated by adjustments made in factors including location, accessibility, market conditions, size, shape and terrain of land that affect value.

The valuations were performed by the valuers in January and February 2017 for market value of investment properties and land and buildings of property, plant and equipment as at 31 December 2016.

The updated valuation for the insurance subsidiary was performed by the valuers in February 2017 for market value of investment properties and land and buildings of property, plant and equipment as at 31 December 2016. The updated valuation revealed that there have been no significant changes in method of valuation used as compared with previous valuation report in 2013.



11. inVestMent pRopeRties (cont’D)

Group 2016 2015

RM’000 RM’000

Rental income derived from investment properties 7,344 8,744 Direct operating expenses (2,233) (2,196)Net rental arising from investment properties 5,111 6,548

Carrying amounts of certain investment properties of the Group amounting to RM187,808,000 (2015: RM187,808,000) are pledged as security for the Group’s bank borrowings as disclosed in Note 24.

The Group has no restrictions on the realisability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements except for certain joint ventures which have been undertaken with subsidiaries of Bandar Raya Developments Berhad in respect of investment properties with carrying amount of RM172,448,000 (2015: RM246,866,000). Details of the joint ventures are as follows:

(i) On 29 April 2011, Magnum.Com Sdn. Bhd. (“MCSB”), a wholly owned subsidiary of the Group, entered into a Joint Venture Agreement (“JVA”) with a subsidiary of Bandar Raya Developments Berhad, Orion Vibrant Sdn. Bhd. (“OVSB”), to undertake development of 20 parcels of land in Pulau Pinang (measuring approximately 80.897 acres) (“PP Land”) legally and/or beneficially owned by MCSB.

In accordance with the JVA, MCSB is to be paid 22% of the cash collected pursuant to billings issued of the proposed development for the PP Land (“the Land Owner’s Entitlement”) by way of completed units or components, or by a combination of cash payment and completed units or components. MCSB has received RM9,000,000 from OVSB as upfront and advance amount towards account of the Land Owner’s entitlement.

(ii) On 13 January 2012, MCSB entered into a supplemental JVA with OVSB, to undertake development of 3 parcels of freehold land in Pulau Pinang measuring 2.07 acres.

In accordance with the supplemental JVA, the payment for the purchase of the 3 parcels of land is to be made jointly through OVSB’s contribution of 74.53% (or not exceeding RM7,900,000) and through MCSB’s contribution of 25.47% (or not exceeding RM2,700,000).

The 3 parcels of land were acquired in 2012 with the land titles registered under MCSB’s name and MCSB accordingly recognised the full cost of acquisition as its investment properties, despite only having a beneficial interest of 25.47% while recognising the balance of 74.53% as payable to OVSB.

(iii) On 29 April 2011, Tibanis Sdn. Bhd. (“TSB”), a wholly owned subsidiary of the Group, entered into a separate JVA with a subsidiary of Bandar Raya Developments Berhad, Pinggir Mentari Sdn Bhd (“PMSB”), to undertake development of 2 parcels of land in Gombak (measuring approximately 265.13 acres) (“G2 Land”).

In accordance with the JVA, TSB is to be paid 22% of the cash collected pursuant to billings issued of the proposed development for the G2 Land (“the Land Owner’s Entitlement”) by way of completed units or components, or by a combination of cash payment and completed units or components. TSB has received RM22,000,000 from PMSB as upfront and advance amount towards account of the Land Owner’s Entitlement.

The development for Phases 1A and 1B of the G2 Land was approved by the relevant authorities in 2015 and 2016. TSB has used the planned saleable area to estimate its Land Owner’s Enttitlement for Phases 1A and 1B. Accordingly, the Land Owner’s Entitlement amounting to RM20,279,000 and RM15,910,000 was recognised as revenue by the Group in 2016 and 2015, respectively which was used to off-set the advance payment of RM22,000,000. As of 31 December 2016, amount due from PMSB is RM14,189,000.



12. investment in suBsiDiaries

company 2016 2015

RM’000 RM’000

at carrying amount: At 1 January 1,231,034 1,202,133 Acquisition of shares in subsidiaries during the year 15 60,800 Less: allowance for impairment for the year (1,828) (31,899)At 31 December 1,229,221 1,231,034

Further details of the subsidiaries, all of which are incorporated in Malaysia are disclosed in Note 36.

The movement for allowance for impairment:

company 2016 2015

RM’000 RM’000

At 1 January 31,899 4,647 Impairment for the year 1,828 27,252 At 31 December 33,727 31,899

The recoverable amount of the investment in subsidiaries have been determined based on the higher of fair value less cost to sell or value in use calculations using cash flows projections.

The fair values of investment properties are based on valuations performed by accredited valuers with recent experience in the location and category of properties being valued. The fair values are determined using the comparison method. Based on historical track records, management used 4% in assuming the cost to sell.

For sensitivity analysis purpose, 5% change in market value of investment properties would not result in significant change in the recoverable amount.

acquisition and subscription of shares in subsidiaries

company 2016 2015

RM’000 RM’000

By way of purchase:Mimaland Berhad (“Mimaland”) 15 -

By way of allotment of shares:Queensway Nominees (Tempatan) Sdn. Bhd. - 5,145 Queensway Nominees (Asing) Sdn. Bhd. - 55,655

15 60,800

The Company purchased 7,000 ordinary shares of RM1.00 each at RM2.09 each for cash from a shareholder, representing 0.01% of equity shareholding in Mimaland.

The acquisition of shares in the subsidiaries did not have any significant effects on the earnings or net assets of the Group for the financial year ended 31 December 2016.



13. investment in an associate

Group 2016 2015

RM’000 RM’000

Unquoted shares in Malaysia, at cost 100 100 Share of post-acquisition reserves 413 415 Repayment of capital by an associate (100) - Dividend received (413) -

- 515

The summarised financial information of the associate is as follows:

2016 2015 RM’000 RM’000

Assets 500 2,593 Liabilities - (17)Equity 500 2,576

Proportion of the Group’s ownership 20% 20%Carrying amount of the investment 100 515

Revenue - - Other income - 39 Cost of sales - - Management expenses (30) (160)Loss before tax (30) (121)Income tax expense - - Loss for the year (30) (121)

Group’s share of loss for the year (6) (24)Group’s share of dividend for the year 4 -

(2) (24)

Further details of the associate are disclosed in Note 36.



14. InvestMent seCurItIes

Group Company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Current Financial asset at FvtPLQuoted shares in Malaysia 52,302 17,501 1,994 1,606 Unit trusts - quoted 350,899 391,751 17 3,439 Total current investment securities 403,201 409,252 2,011 5,045

non-Current AFs financial assetsQuoted shares in Malaysia 56,600 66,559 - - Quoted shares outside Malaysia 138 4,135 - - Unquoted shares in Malaysia 1,001 1,001 - - Unquoted debts securities in Malaysia 267,291 262,167 - - Unit trusts - quoted 50,769 49,986 - - Malaysian Government Papers 13,052 13,116 - - Total non-current investment securities 388,851 396,964 - -

Total investment securities 792,052 806,216 2,011 5,045

The Group’s investment securities are summarised by categories as follows:

Group Company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

At fair value 791,051 805,215 2,011 5,045 At cost 1,001 1,001 - -

792,052 806,216 2,011 5,045



15. intanGiBle assets

computer goodwill software total

RM’000 RM’000 RM’000 Group

costAs at 1 January 2016 31,899 7,743 39,642 Additions - 1,290 1,290 At 31 December 2016 31,899 9,033 40,932

As at 1 January 2015 41,102 6,026 47,128 Additions - 1,717 1,717 Derecognised on partial disposal of a subsidiary (9,203) - (9,203)At 31 December 2015 31,899 7,743 39,642

accumulated amortisationAs at 1 January 2016 - 4,783 4,783 Charge for the year - 1,092 1,092 At 31 December 2016 - 5,875 5,875

As at 1 January 2015 - 3,967 3,967 Charge for the year - 816 816 At 31 December 2015 - 4,783 4,783

net carrying amountAt 31 December 2016 31,899 3,158 35,057

At 31 December 2015 31,899 2,960 34,859

Goodwill of the Group has been allocated to the following CGUs for impairment testing:

Group 2016 2015

RM’000 RM’000 carrying amount

Insurance division 9,579 9,579 Credit division 2,503 2,503 Investment division 19,817 19,817

31,899 31,899



15. intangible assets (cont’D)

The recoverable amount of the CGUs have been determined based on the higher of fair value less cost to sell or value in use (“VIU”) calculations using cash flow projections.

Where VIU is used, the cash flow projections were approved by management covering a period of three years and based on the following key assumptions: (i) Average growth rate of 16.00% (2015: 19.00%); and

(ii) Pre-tax discount rate of 11.83% (2015: 6.00%) estimated based on the weighted average cost of equity

(2015: effective average borrowing rate) of the Group.

The above key assumptions made by management are based on past operating results and management’s expectations of market development and assessment of future trends derived from both external sources and internal sources. Barring unforeseen circumstances, the management believed that these assumptions are reasonable and achievable.

Where fair value less cost to sell is used, the fair values of investment properties are based on valuations performed by accredited valuers with recent experience in the location and category of properties being valued. The fair values are determined using the comparison method. Based on historical track records, management used 4% in assuming the cost to sell.

For sensitivity analysis purpose, 1% change in growth rate or discount rate and 5% change in market value of investment properties would not result in significant change in the recoverable amount.

16. inventories

Group 2016 2015

RM’000 RM’000

at cost:Food and beverages 194 226 Hotel supplies and merchandise 49 43 total 243 269

The amount of inventories recognised as an expense in cost of sales of the Group was RM3,555,000 (2015: RM3,535,000).



17. receivaBles



currentLoans and advances (a) 79,090 37,588 - - Less: Allowance for impairment (21,525) (22,226) - -

57,565 15,362 - -

Insurance receivables (b) 165,118 203,809 - -Less: Allowance for impairment (19,762) (17,960) - -

145,356 185,849 - -

Trade receivables (c) 1,129 1,230 - -

Other receivables (d) 87,436 87,483 2,225 844 Less: Allowance for impairment (141) (141) - -

87,295 87,342 2,225 844

Amounts due from subsidiaries (e) - - 133,224 109,376 Less: Allowance for impairment - - - (434)

- - 133,224 108,942

Total current receivables 291,345 289,783 135,449 109,786

non-currentAmounts due from subsidiaries (e) - - 1,646 1,822 Total non-current receivables - - 1,646 1,822

total receivables 291,345 289,783 137,095 111,608



17. ReceiVables (cont’D)

(a) Loans and advances

Ageing analysis of loans and advances

The ageing analysis of the Group’s loans and advances is as follows:

Group 2016 2015

RM’000 RM’000

Neither past due nor impaired 57,565 15,362 Impaired 21,525 22,226

79,090 37,588

Loans and advances that are neither past due nor impaired

Loans and advances that are neither past due nor impaired are creditworthy debtors with good payment records with the Group.

Movement in allowance accounts

Group 2016 2015

RM’000 RM’000

At 1 January 22,226 22,246 Reversal of allowance for impairment (Note 5) (701) (20)At 31 December 21,525 22,226

(b) Insurance receivables

The ageing analysis of the Group’s insurance receivables comprising outstanding premium including agents/brokers balance and amount due from reinsurers/ceding companies and co-insurers are as follows:

Group 2016 2015

RM’000 RM’000

Neither past due nor impaired 129,671 157,491 Past due but not impaired 18,461 28,689 Impaired 16,986 17,629

165,118 203,809




(b) Insurance receivables (Cont’d)

For outstanding balances to be classified as “past due”, contractual payments must be in arrears for more than six months. No collateral is held as security for any past due or impaired assets. A reconciliation of the allowance for impairment is as follows:


Group 2016 2015

RM’000 RM’000 (i) individual allowance for impairment

At 1 January 17,629 12,898 Charge for the year (643) 4,731 At 31 December 16,986 17,629

(ii) collective allowance for impairmentAt 1 January 331 331 Charge for the year 2,445 - At 31 December 2,776 331

(c) Trade receivables

The ageing analysis of the Group’s trade receivables are as follows:

Group 2016 2015

RM’000 RM’000

Neither past due nor impaired 937 989 1 to 30 days past due but not impaired 46 163 31 to 60 days past due but not impaired 7 41 61 to 90 days past due but not impaired 94 1 91 to 120 days past due but not impaired 45 12 More than 121 days past due but not impaired - 24

192 241 1,129 1,230

Trade receivables that are neither past due nor impaired

Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group.

None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.




(d) Other receivables

Breakdown of other receivables of the Group and the Company are as follows:

Group company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Share of net assets in MMIP 49,771 60,923 - - Deposits 1,038 1,244 435 435 Prepayments 1,745 1,633 114 114 Amount due from third parties

for completion of developments 1,488 3,299 - - Amount due from a joint-venturer 14,189 - - - Income due and accrued 10,017 11,528 - - Others 9,188 8,856 1,676 295 Less: allowance for impairment (141) (141) - -

9,047 8,715 1,676 295 87,295 87,342 2,225 844


Group 2016 2015

RM’000 RM’000

At 1 January 141 10,275 Reversal of allowance for impairment loss (Note 5) - (10,134)At 31 December 141 141

(e) Amounts due from subsidiaries

The amounts due from subsidiaries consist of amounts which are unsecured, repayable on demand and non-interest bearing except for an amount of RM1,646,000 (2015: RM1,822,000), which bore interest rate at 3.00% (2015 : 3.00%) per annum.

Movement in allowance accountscompany

2016 2015 RM’000 RM’000

At 1 January 434 434 Reversal of allowance for impairment (Note 5) (434) - At 31 December - 434

As at 31 December 2016, the Group and the Company have no significant concentration of credit risk that may arise from exposures to a single receivable or to a group of receivables other than the Group had one amounting to RM47,497,000 receivable that accounted for approximately 16.2% of the receivable outstanding. The Group and the Company normal trade credit term is 30 to 90 days (2015: 30 to 90 days).



18. reinsurance assets anD insurance contract liaBilities

2016 2015 Group Gross reinsurance net Gross reinsurance net

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Provision for claims reported by policyholders 490,452 (236,251) 254,201 516,779 (283,168) 233,611 Provision for IBNR 138,441 (48,517) 89,924 130,079 (46,617) 83,462 Claim liabilities (Note (i)) 628,893 (284,768) 344,125 646,858 (329,785) 317,073 Premium liabilities (Note (ii)) 287,468 (96,288) 191,180 283,023 (104,493) 178,530 Insurance contract liabilities 916,361 (381,056) 535,305 929,881 (434,278) 495,603

(i) claim liabilities

at 1 January 646,858 (329,785) 317,073 629,583 (336,984) 292,599 Claims incurred in current

accident year 317,615 (96,194) 221,421 285,873 (123,675) 162,198 Claims incurred in prior

accident year 11,091 (12,319) (1,228) (3,064) 19,191 16,127 Movement in PRAD of claim

liabilities at 75% confidence level 8,212 (4,379) 3,833 (486) 3,686 3,200 Movement in claims handling

expenses (1,250) - (1,250) 2,382 - 2,382 Adjustment in IBNR 1,399 2,479 3,878 (5,887) 7,906 2,019 Claims paid during the year (355,032) 155,430 (199,602) (261,543) 100,091 (161,452)at 31 December 628,893 (284,768) 344,125 646,858 (329,785) 317,073

(ii) Premium liabilities

at 1 January 283,023 (104,493) 178,530 268,150 (106,962) 161,188 Premiums written in the year 637,656 (234,160) 403,496 593,891 (237,208) 356,683 Premiums earned during the

year (633,211) 242,365 (390,846) (579,018) 239,677 (339,341)at 31 December 287,468 (96,288) 191,180 283,023 (104,493) 178,530



19. casH anD BanK Balances

Group company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Cash at banks 27,535 75,516 302 20,524Cash on hand 60 51 17 18 Short term deposits with licensed financial institutions 588,982 456,613 - - Total cash and bank balances 616,577 532,180 319 20,542 Less: Short term deposits with licensed financial institutions with

maturity period of more than 3 months (490,659) (436,149) - - Cash and cash equivalents 125,918 96,031 319 20,542

Short term deposits of the Group and the Company are placed for periods ranging between 1 day to 365 days (2015: 1 day to 365 days).

The effective interest rates of deposits at the reporting date were:

Group company 2016 2015 2016 2015

Short term deposits with licensed financial institutions (per annum) 2.90%-3.20% 2.95%-4.00% 2.50%-4.00% 2.95%-3.35%

20. sHare caPital

number of ordinaryshares of rm1.00 each amount

2016 2015 2016 2015rm rm

authorised share capital

At January/31 December 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000

issued and fully paid

At January/31 December 715,000,000 715,000,000 715,000,000 715,000,000 The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All

ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company residual assets.



21. otHer reserves

Group 2016 2015

RM’000 RM’000

Capital reserve (Note (a)) 41,903 41,903 Fair value reserve (Note (b)) (3,433) 201

38,470 42,104

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

(b) Fair value reserve represents the cumulative fair value changes, net of tax, of AFS financial assets until they are disposed off or impaired.

22. merGer Deficit

The merger deficit, relating to business combination involving entities under common control, is accounted for by applying the pooling of interest method. The difference between the consideration paid and the share capital and reserves of the subsidiaries acquired is reflected as a merger deficit.

Group 2016 2015

RM’000 RM’000

Cost of investment in subsidiaries under pooling of interests 874,688 874,688 Less: Net assets of subsidiaries representing the share capital and reserves of subsidiaries acquired (846,224) (846,224)Merger deficit 28,464 28,464

23. retaineD Profits

The Company may distribute dividends out of its entire retained earnings as at 31 December 2016 under the single tier system.



24. BorroWinGs

Group 2016 2015

RM’000 RM’000

currentSecured:Revolving credits - 3,000 Term loans 4,997 18,851

4,997 21,851

non-currentSecured:Term loans - 4,997

total loans and borrowingsRevolving credits - 3,000 Term loans 4,997 23,848

4,997 26,848

The remaining maturities of the loans and borrowings are as follows:

Group 2016 2015

RM’000 RM’000

On demand or within one year 4,997 21,851 Later than 1 year and not later than 2 years - 4,997

4,997 26,848

The revolving credits and term loan bear interest at rates ranging between 5.21%-5.51% (2015: 5.30%-5.51%) and 5.23%-5.61% (2015: 5.39%-5.59%), respectively, per annum during the financial years.

The borrowings are secured by corporate guarantees of the Company and certain investment properties as disclosed in Note 11.



25. DeferreD tax assets/(liaBilities)

Group 2016 2015

RM’000 RM’000

At 1 January (10,064) (11,608)Recognised in:

- other comprehensive income 1,688 466 - income statements (Note 8) 545 1,078

At 31 December (7,831) (10,064)

Presented in the statements of financial position:Deferred tax assets 3,185 1,561 Deferred tax liabilities (11,016) (11,625)

(7,831) (10,064)

Presented prior to appropriate offsetting as follows:Deferred tax assets (Note (a)) 12,282 9,907 Deferred tax liabilities (Note (b)) (20,113) (19,971)

(7,831) (10,064)

(a) Deferred tax assets

Property, unused plant and

tax losses equipment

allowance and

unabsorbed and fair

value for capital changes on

impairment allowances investment total RM’000 RM’000 RM’000 RM’000

At 1 January 2016 849 7,230 1,828 9,907 Recognised in other

comprehensive income - - 1,688 1,688 Recognised in income statements 409 171 107 687 At 31 December 2016 1,258 7,401 3,623 12,282

At 1 January 2015 774 7,764 1,300 9,838 Transfer from deferred tax liabilities - - (104) (104)Recognised in income statements 75 (534) 632 173 At 31 December 2015 849 7,230 1,828 9,907



25. DefeRReD tax assets/(liabilities) (cont’D)

(b) Deferred tax liabilities

investment property,

property, plant and

equipment and fair value

changes on unearned investment premium total

RM’000 RM’000 RM’000

At 1 January 2016 19,820 151 19,971 Recognised in income statements 65 77 142 At 31 December 2016 19,885 228 20,113

At 1 January 2015 21,334 112 21,446Transfer to deferred tax assets (104) - (104)Recognised in:

- other comprehensive income (466) - (466)- income statements (944) 39 (905)

At 31 December 2015 19,820 151 19,971

unrecognised deferred tax assets

The Group has the following tax losses and capital allowances that are available indefinitely for off-setting against future taxable profits of the entities where they arose, subject to the requirements of the Income Tax Act, 1967.

Group 2016 2015

RM’000 RM’000

Tax losses 154,460 158,860 Capital allowances 5,300 5,300

159,760 164,160



26. PayaBles


RM’000 RM’000 RM’000 RM’000 restated restated restated

currentTrade payables and bills payable 1,433 1,425 - - Insurance payable 121,808 152,958 - -Other payables and accruals (a) 28,788 27,347 3,849 5,306 Advance received from third parties (b) 9,000 18,819 - - Sundry creditors 34,212 27,720 - - Amounts due to subsidiaries (c) - - 144,969 78,123 Amounts due to shareholders of subsidiaries (d) 12,776 12,774 - - Total current payables 208,017 241,043 148,818 83,429

non-currentAmounts due to subsidiaries (c) - - - 57,914 Total non-current payables - - - 57,914

total payables 208,017 241,043 148,818 141,343

(a) Other payables are non-interest bearing and are repayable on demand.

(b) Represent amounts received from third parties relating to the development of investment properties as disclosed in Note 11.

(c) Amounts due to subsidiaries are unsecured, repayable on demand (2015: except for RM57,914,000, which bore interest rate at 3.00% per annum) and non-interest bearing.

(d) The amounts due to shareholders of subsidiaries represent amounts funded by shareholders of subsidiaries for the acquisitions of investment properties which are unsecured, non-interest bearing and repayable on demand.



27. oPeratinG lease arranGements

(a) the Group as lessor

The Group has entered into operating lease agreements for the rent of certain office premises. These non-cancellable leases have an average life of between 1 to 5 years (2015: 1 to 5 years) with certain contracts carrying renewal options in the contracts. These contracts include fixed rentals over the tenure of the lease period.

The future aggregate minimum lease payments receivable under operating lease contracted for as at the reporting date but not recognised as receivables, are as follows:

Group 2016 2015

RM’000 RM’000 Future minimum rental income receivables:

Not later than 1 year 5,268 304 Later than 1 year and not later than 5 years 1,398 349

6,666 653

(b) the Group as lessee

The Group has entered into operating lease agreements for the use of certain office premises. These non-cancellable leases have an average life of between 1 to 5 years (2015: 1 to 5 years) with certain contracts carrying renewal options in the contracts. The future aggregate minimum lease payments under operating leases contracted for as at the reporting date but not recognised as liabilities, are as follows:

Group company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Future minimum rental payments:

Not later than 1 year 3,238 1,321 558 1,116 Later than 1 year and not later

than 5 years 2,644 672 - 558 5,882 1,993 558 1,674



28. caPital commitments

Group

2016 2015 RM’000 RM’000

Approved and contracted for:

Property, plant and equipment and computer software 493 2,317

29. material litiGation

(a) shah alam high court civil suit no. 22ncVc-682-11/2013

On 18 November 2013, Mulpha Kluang Maritime Carriers Sdn Bhd (“Mulpha”) commenced legal proceedings at the Shah Alam High Court (“Court”) against the partners of Messrs. Mah-Kamariyah & Philip Koh (“MKPK”) claiming for special damages of RM3,316,942 and other damages to be assessed by the court being the losses suffered by Mulpha.

Mulpha claims against MKPK is in the latter’s capacity as the conveyancing solicitors for Mulpha whereby MKPK had failed to exercise professional skill, care and diligence in advising Mulpha and in handling the two (2) conditional sale and purchase agreements (“SPAs”), both dated 12 October 2009, for the acquisition of two pieces of land in Kuala Lumpur (“the Land”). Subsequent to the conclusion of the said SPAs, Mulpha had discovered that the total area described in the SPAs therein were incorrect as part of each of the Lands had in fact been surrendered to the State Authority in year 1988 and MKPK had failed, neglected and/or omitted to notify and/or advise Mulpha of the same.

The chain of key events are as follows:

Dates Key events

21 April 2015 The Court had delivered the decision which held that Mulpha’s claim for the sum of RM3,316,942 against MKPK was allowed with costs.

27 April 2015 MKPK had lodged an appeal to the Court of Appeal against the Court’s decision (“MKPK’s Appeal”).

28 February 2017 The Court of Appeal had allowed MKPK’s Appeal with costs.



29. MateRial litigation (cont’D)

(b) Johor bahru high court suit no. 21ncvc-20-05/2015

Kelana Megah Development Sdn Bhd (“KMD”), a wholly-owned subsidiary, had on 9 May 2014 filed a civil suit at the High Court of Malaya in Johor Bahru (“High Court”) against the Government of the State of Johor and Petroliam Nasional Berhad (collectively referred to as the “Defendants”) in connection with the compulsory land acquisition of seven (7) plots of land owned by KMD in relation to the RAPID Project in Johor.

This civil suit is filed against the Defendants following breaches of the Federal Constitution, the Land Acquisition Act 1960 and the National Land Code 1965.

KMD’s claim which is set out and particularised in the Statement of Claim dated 9 May 2014 seeks “inter alia” the return of the seven (7) plots of land illegally acquired and damages arising therefrom.

The chain of key events are as follows:

Dates Key events

June 2014 Defendants filed striking out applications to strike out KMD’s claim in the civil suit.

26 November 2014 The Defendants’ striking out applications were allowed with costs.

8 December 2014 KMD filed its appeals to the Court of Appeal against the High Court’s decision on the Defendants’ striking out applications.

8 December 2015 KMD’s appeals were dismissed by the Court of Appeal with costs of RM25,000 to be paid by KMD to each of the Defendants.

5 January 2016 KMD filed its Applications for Leave to appeal the decision made by Court of Appeal to the Federal Court (“KMD’s Leave Applications”).

21 September 2016 KMD’s Leave Applications were dismissed by Federal Court with costs.

(c) legal suit filed by isM sendirian berhad civil suit no. Wa-22ncc–68–02/ 2016 [consolidated with civil suit no. Wa-22ncc–70–02/ 2016, Wa-22ncc–69–02/ 2016, Wa-22ncc–71–02/ 2016 and Wa-22ncc–72–02/ 2016]

ISM Sendirian Berhad (“ISM/ Plaintiff”) had filed five suits against MPHB Capital Berhad (“MPHB Capital”) and its subsidiaries, namely, Queensway Nominees (Asing) Sdn Bhd, Queensway Nominees (Tempatan) Sdn Bhd, West-Jaya Sdn Bhd, Mulpha Kluang Maritime Carriers Sdn. Bhd. and Leisure Dotcom Sdn Bhd (“the Companies”), as well as its respective directors (collectively referred to hereinafter as “the Defendants”), alleging minority shareholders oppression under Section 181 of the Companies Act 1965. ISM is a minority shareholder of the Companies.

In the five suits, the Plaintiff seeks damages, both general and punitive against the Defendants, several declarations regarding the manner in which the affairs of MPHB Capital and the Companies are conducted, several injunctions to restrain the conduct of MPHB Capital with regards to the Companies as well as an order that ISM’s shares in the Companies are to be purchased by the Defendants at a value fixed by an independent auditor and valuer.

In response, the Defendants contended that the Plaintiff is in breach of the joint venture arrangement

between the parties in failing to fulfil its financial obligations under the same. Hence, the Defendants have filed a Defence and Counterclaim (in each suit) against the Plaintiff for losses and damages suffered by the Defendants due to the Plaintiff’s breach in the joint venture arrangement.

These five suits are currently at the trial stage.



30. siGnificant relateD Party transactions

Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

Group company

2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Subsidiaries:Interest receivable on loans - - 48 22 Investment income in respect of gross dividends - - 4,686 40,377 Management fees receivables - - 1,631 1,900 Interest payable on loans - - - (1,118)

Affiliated companies:Gross insurance premium receivables 1,825 2,222 - - Management fees receivables 839 864 840 864 Insurance commission payable (261) (51) - - Claim paid (945) (842) - - Professional fees paid (483) (663) (483) (663)IT management fees payable (78) (76) (78) (76)

(i) The above transactions are entered into in the normal course of business based on negotiated and mutually agreed terms.

(ii) Affiliated companies during the financial year refer to the following:

- Ganda Pesona Sdn. Bhd., incorporated in Malaysia, which is a company in which a Director has a substantial financial interest.

- MWE Properties Sdn. Bhd., incorporated in Malaysia, which is a company in which a Director has a substantial financial interest.

- Metra Management Sdn. Bhd., incorporated in Malaysia, which is a company in which a Director has a substantial financial interest.

- Magnum Berhad, incorporated in Malaysia, which is a company in which a Director has a substantial financial interest.

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



31. financial risK manaGement oBJectives anD Policies

The Group’s and the Company’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s and the Company’s businesses whilst managing its liquidity risk, credit risk, market price risk, interest rate risk and insurance risk. The Group and the Company operate within clearly defined guidelines that are approved by the Board of Directors. As the Group’s result is significantly contributed by MPI Generali Insurans Berhad (“MPI Generali”), the insurance subsidiary, there are significant financial risks which relate to MPI Generali. Hence, the Group adopts the risk management objectives and policies from MPI Generali.

The Group’s interest in MPI Generali is represented via one of the Board of Directors (“the Board”) of MPI

Generali, who is also the Chief Executive Director of the Company.

Risk Management framework of Mpi generali

The Board of MPI Generali is committed to the development of an effective Risk Management Framework (“RMF”), with the aims of providing a consistent approach to risk and facilitating an accurate perception of acceptable risk by all employees. It forms an intergral part of MPI Generali’s business strategic planning, performance agreement and general risk management culture. The RMF is established to provide guiding principles on risk management approach, risk governance structure, roles and responsibilities, methodology used for risk assessment, and risk monitoring and reporting.

Under the RMF, MPI Generali adopts the three lines of defence approach to provide an independent oversight to assist the Management in archieving its strategic plans and missions by implementing risk management and compliance activities across the organisation. In this regard, the Business Units act as the “first line of defence” while the risk control units and the Risk Management and Compliance (“RMC”) act as the second and third line of defence, respectively.

The Board of MPI Generali entrusts the RMC with the overall responsibility for overseeing the risk management activities of MPI Generali and to ensure that appropriate risk management is in place and functioning effectively as well as to endorse appropriate risk management policies/frameworks and measurement methodologies across the organisation.

The RMC has a broad mandate to ensure the effective implementation of the objectives outlined in the RMF and to monitor their compliance throughout MPI Generali. The RMC is periodically reporting higher risk exposures to the Board of MPI Generali. The roles and responsibilities as well as the authorities of the RMC are set out in the Board of MPI Generali approved Term of Reference (“TOR”) for the RMC.

A Strategic Operations Management Committee (“SOMC”) has been established to serve as a medium between the RMC and the Management of MPI Generali. This Committee will oversee the daily risks management activities of MPI Generali to ensure that risks inherent in daily business activities are managed efficiently and effectively and will report regularly to the RMC on its recommendations and/or decisions.

In addition, the Board of MPI Generali delegates to the Chief Executive Officer (“CEO”) of MPI Generali the responsiblity for ensuring effective implementation and maintenance of this RMF and that all personnel adhere to its mandates.

The detailed line accountability for risk management is fully aligned with MPI Generali’s Risk Governance structure. Accordingly, the approvals, responsibilities and accountabilities applicable to the identification, evaluation, management and reporting of MPI Generali’s risks are attributed to the CEO of MPI Generali, head of various departments and branches.



31. financial RisK ManageMent obJectiVes anD policies (cont’D) objectives and policies of Mpi generali’s Risk Management framework

The objective of MPI Generali’s risk management policy is to define an ongoing and consistent process for identifying, assessing, monitoring and reporting upon the significant risks faced by the various departments and branch offices, and ultimately, of MPI Generali.

The implementation of the RMF allows management of MPI Generali to manage risks within defined risk/return parameters, risk tolerances and risk management standards. As such it provides a framework for the effective identification, evaluation, management and reporting of MPI Generali’s risks.

Effective management of risks identified is implemented via establishment of internal controls, systems, policies and procedures. Systems are designed to provide reasonable assurance that assets are safeguarded, insurance risk exposure is within the desired limit, reinsurance protection is adequate and counterparties are subject to security assessment. The RMF is reviewed on a periodic basis.

capital Management plan (“cMp”) of Mpi generali

The objective of the CMP is to optimise the efficient and effective use of resources in order to maximise the return on equity and provide an appropriate level of capital to protect the policyholders, taking into account events that can impact directly or indirectly on the operations and financial resilience of MPI Generali whilst complying with rules and regulations issued by the relevant authorities.

MPI Generali’s capital management is driven by the business strategies and taking into consideration the impact of business and regulatory environment in which MPI Generali operates in. To comply with the RBC Framework, MPI Generali has also set an Individual Target Capital Level (“ITCL”) which is above the minimum regulatory requirements.

stress test of mPi Generali

The CMP also includes a Stress Test Policy which requires a stress test to be conducted twice a year.

Stress testing is a fundamental risk management tool in assessing the financial resilience of MPI Generali under exceptional but adverse possible events.

The stress tests results together with mitigating plans are tabled every half-year for deliberation and recommendation to the Board of MPI Generali for approval prior to submission to Bank Negara Malaysia.

asset/liability Management (“alM”) of Mpi generali

The primary objective of MPI Generali’s policy is to ensure that adequate liquid assets are held at all times and provide a satisfactory and consistent earnings on these assets.

MPI Generali’s ALM is integrated with the management of the financial risks associated with MPI Generali’s other financial assets and liabilities not directly associated with insurance. MPI Generali’s SOMC and Investment Committee are primarily responsible for the ALM based on guidelines approved by the Board of MPI Generali.



32. financial instrument

(a) assets/liabilities by categories

loans and financial assets/ receivables/ assets/ afs liabilities

other liabilities financial not in scope liabilities at fvtPl assets of mfrs 139 total

RM’000 RM’000 RM’000 RM’000 RM’000

Group

2016

assetsProperty, plant and equipment - - - 78,353 78,353 Investment properties - - - 820,512 820,512 Intangible assets - - - 35,057 35,057 Deferred tax assets - - - 3,185 3,185 Inventories - - - 243 243 Receivables 291,345 - - - 291,345 Reinsurance assets - - - 381,056 381,056 Investment securities - 403,201 388,851 - 792,052 Tax recoverable - - - 1,566 1,566 Cash and bank balances 616,577 - - - 616,577

907,922 403,201 388,851 1,319,972 3,019,946

liabilitiesPayables 208,017 - - - 208,017 Insurance contract liabilities - - - 916,361 916,361 Borrowings 4,997 - - - 4,997 Tax payable - - - 7,939 7,939 Deferred tax liabilities - - - 11,016 11,016

213,014 - - 935,316 1,148,330



32. financial instRuMent (cont’D)

(a) assets/liabilities by categories (cont’d.)

loans and financial assets/ receivables/ assets/ afs liabilities

other liabilities financial not in scope liabilities at fvtPl assets of mfrs 139 total

RM’000 RM’000 RM’000 RM’000 RM’000

Group

2015

assetsProperty, plant and equipment - - - 81,570 81,570 Investment properties - - - 830,077 830,077 Investment in an associate - - - 515 515 Intangible assets - - - 34,859 34,859 Deferred tax assets - - - 1,561 1,561 Inventories - - - 269 269 Receivables 289,783 - - - 289,783 Reinsurance assets - - - 434,278 434,278 Investment securities - 409,252 396,964 - 806,216 Tax recoverable - - - 720 720 Cash and bank balances 532,180 - - - 532,180

821,963 409,252 396,964 1,383,849 3,012,028

liabilitiesPayables 241,043 - - - 241,043 Insurance contract liabilities - - - 929,881 929,881 Borrowings 26,848 - - - 26,848 Tax payable - - - 7,107 7,107 Deferred tax liabilities - - - 11,625 11,625 Derivative financial instruments - 4,150 - - 4,150

267,891 4,150 - 948,613 1,220,654




(a) assets/liabilities by categories (cont’d.)

loans and assets/ receivables financial afs liabilities

/other assets at financial not in scope liabilities fvtPl assets of mfrs 139 total

RM’000 RM’000 RM’000 RM’000 RM’000 company

2016

assetsProperty, plant and equipment - - - 734 734 Investment in subsidiaries - - - 1,229,221 1,229,221 Investment securities - 2,011 - - 2,011 Receivables 137,095 - - - 137,095 Cash and bank balances 319 - - - 319 Tax recoverable - - - 49 49

137,414 2,011 - 1,230,004 1,369,429

liabilitiesPayables 148,818 - - - 148,818

148,818 - - - 148,818

2015

assetsProperty, plant and equipment - - - 1,104 1,104 Investment in subsidiaries - - - 1,231,034 1,231,034 Investment securities - 5,045 - - 5,045 Receivables 111,608 - - - 111,608 Cash and bank balances 20,542 - - - 20,542 Tax recoverable - - - 58 58

132,150 5,045 - 1,232,196 1,369,391

liabilitiesPayables 141,343 - - - 141,343

141,343 - - - 141,343




(b) liquidity risk The Group actively manages its debt maturity profile, operating cash flows and the availability of funding

so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. The Group also apportions its investments in marketable securities and other financial investments by maintaining different maturity profiles. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group prudently balances its portfolio with some short term funding so as to achieve overall cost effectiveness.

In respect of the Group’s insurance business, the following policies and procedures are in place to mitigate MPI Generali’s exposure to liquidity risk:

i) A company-wide liquidity risk policy setting out the evaluation and determination of the components of liquidity risk for MPI Generali. Compliance with the policy is monitored and reported monthly and exposures and breaches are reported to MPI Generali’s SOMC as soon as practicable. The policy is regularly reviewed for pertinence and for changes in the risk environment.

ii) MPI Generali has set the guidelines on asset allocations, portfolio limit structures and maturity profiles of assets, in order to ensure sufficient funding is available to meet insurance and investment contracts obligations.

iii) MPI Generali has set up contingency funding plans which specify minimum proportions of funds to

meet emergency calls as well as specifying events that would trigger such plans.

iv) MPI Generali’s treaty reinsurance contracts contain clauses permitting MPI Generali to call for funding to meet claim payment should claim events exceed a specific amount.

analysis of financial instruments by remaining contractual maturities

The table below summarises the maturity profile of the Group’s and the Company’s financial assets and liabilities, reinsurance assets and insurance contract liabilities at the reporting date based on the carrying amount of these financial assets and liabilities.

up to a more than no maturity year 1-5 years 5 years date total

RM’000 RM’000 RM’000 RM’000 RM’000 Group2016

financial assetsReceivables 291,345 - - - 291,345 Reinsurance assets - claim liabilities* 137,143 117,454 30,171 - 284,768 Investment securities 13,997 130,896 139,940 507,219 792,052 Short-term deposits with licensed of financial institutions 571,482 17,500 - - 588,982 Cash at banks - - - 27,595 27,595

1,013,967 265,850 170,111 534,814 1,984,742




(b) liquidity risk (cont’d)

analysis of financial instruments by remaining contractual maturities (cont’d)

The table below summarises the maturity profile of the Group’s and the Company’s financial assets and liabilities, reinsurance assets and insurance contract liabilities at the reporting date based on the carrying amount of these financial assets and liabilities. (Cont’d)


RM’000 RM’000 RM’000 RM’000 RM’000 Group2016

financial liabilitiesPayables 208,017 - - - 208,017 Insurance contract liabilities- claim liabilities* 916,361 - - - 916,361 Borrowings 4,997 - - - 4,997

1,129,375 - - - 1,129,375

2015 (restated)

financial assetsReceivables 289,783 - - - 289,783 Reinsurance assets - claim liabilities* 192,032 124,011 13,742 - 329,785 Investment securities 714 986 - 804,516 806,216 Short-term deposits with licensed financial institutions 456,613 - - - 456,613 Cash at banks - - - 75,567 75,567

939,142 124,997 13,742 880,083 1,957,964

financial liabilitiesPayables 241,043 - - - 241,043 Insurance contract liabilities- claim liabilities* 376,662 243,243 26,953 - 646,858 Borrowings 21,851 4,997 - - 26,848 Derivative financial instrument - 4,150 - - 4,150

639,556 252,390 26,953 - 918,899




(b) liquidity risk (cont’d)

analysis of financial instruments by remaining contractual maturities (cont’d)

The table below summarises the maturity profile of the Group’s and the Company’s financial assets and liabilities, reinsurance assets and insurance contract liabilities at the reporting date based on the carrying amount of these financial assets and liabilities. (Cont’d)


RM’000 RM’000 RM’000 RM’000 RM’000 company2016

financial assetsReceivables 135,449 1,646 - - 137,095 Investment securities - - - 2,011 2,011 Cash and bank balances - - - 319 319

135,449 1,646 - 2,330 139,425

financial liabilitiesPayables 148,818 - - - 148,818

2015

financial assetsReceivables 109,786 1,822 - - 111,608 Investment securities - - - 5,045 5,045 Cash and bank balances - - - 20,542 20,542

109,786 1,822 - 25,587 137,195

financial liabilitiesPayables 83,429 57,914 - - 141,343

* For insurance contracts liabilities and reinsurance assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance liabilities.

Unearned premiums and the reinsurers’ share of unearned premiums have been excluded from the analysis as they are not contractual obligations.




(c) credit risk

Credit risk is the risk of financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The major classes of financial assets of the Group are deposits with financial institutions, AFS financial assets (unquoted debt securities and bonds), reinsurance assets, loan receivables, trade receivables and cash and bank balances.

Credit risk arises when the Group’s and the Company’s cash assets are placed in interest-bearing instruments, mainly fixed and call deposits with licensed financial institutions. The Group and the Company manage this credit risk by spreading its deposits with a group of financial institutions.

credit exposure

The table below shows the maximum exposure to credit risk for the components on the statements of financial position.

Group company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

LAR:Short term deposits with licensed financial institutions 588,982 456,613 - - Cash at banks 27,535 75,516 302 20,524 Receivables 291,345 289,783 137,095 111,608 AFS financial assets:

Malaysian GovernmentPapers 13,052 13,116 - - Unquoted debt securities 267,291 262,167 - -

Reinsurance assets 381,056 434,278 - - 1,569,261 1,531,473 137,397 132,132

credit exposure by credit rating

The table below provides information regarding the credit risk exposure of the Group and the Company by classifying assets according to the Group’s and the Company’s credit ratings of counterparties.

neither past-due nor impaired Past-due investment but not

grade not rated impaired total Group RM’000 RM’000 RM’000 RM’000

2016LAR:Short term deposits with licensed financial institutions 579,982 9,000 - 588,982 Cash and bank balances 27,175 360 27,535 Receivables - 291,345 - 291,345 AFS financial assets:

Malaysian GovernmentPapers - 13,052 - 13,052 Unquoted debt securities 250,594 16,697 - 267,291

Reinsurance assets 48,684 332,372 - 381,056 906,435 662,826 - 1,569,261




(c) credit risk (cont’d)

credit exposure by credit rating (cont’d)

The table below provides information regarding the credit risk exposure of the Group and the Company by classifying assets according to the Group’s and the Company’s credit ratings of counterparties. (Cont’d)

neither past-due nor impaired Past-due investment but not

grade not rated impaired total Group RM’000 RM’000 RM’000 RM’000

2015LAR:Short term deposits with licensed financial institutions 432,807 23,806 - 456,613 Cash and bank balances 8,370 67,146 - 75,516 Receivables 5,777 97,916 186,090 289,783 AFS financial assets:

Malaysian GovernmentPapers - 13,116 - 13,116 Unquoted debt securities 237,771 24,396 - 262,167

Reinsurance assets 93,308 340,970 - 434,278 778,033 567,350 186,090 1,531,473

company

2016LAR:Cash and bank balances 302 - - 302 Receivables - 137,095 - 137,095

302 137,095 - 137,397

2015LAR:Cash and bank balances 20,524 - - 20,524 Receivables - 111,608 - 111,608

20,524 111,608 - 132,132






The table below provides information regarding the credit risk exposure of the Group and the Company by classifying assets according to the Rating Agency of Malaysia’s (“RAM”), Malaysian Rating Corporation Berhad (“MARC”), A.M. Best Company (“A.M. Best”) and Standards & Poor’s (“’S&P”) credit ratings of counterparties. AAA is the highest possible rating.

aaa aa a BBB not rated total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2016

LAR:Short-term deposits with licensed financial

institutions 223,168 106,067 250,747 - 9,000 588,982 Cash and bank

balances 2,901 2,600 21,674 - 360 27,535 Receivables - - - - 291,345 291,345 AFS financial assets: Malaysian Government Papers - - - - 13,052 13,052 Unquoted debt securities 63,039 159,753 27,802 - 16,697 267,291 Reinsurance assets - 7,093 41,591 - 332,372 381,056

289,108 275,513 341,814 - 662,826 1,569,261

2015

LAR:Short-term deposits with licensed financial

institutions 183,603 4,517 244,687 - 23,806 456,613 Cash and bank

balances 5,442 639 2,289 - 67,146 75,516 Receivables - 16 5,761 3 284,003 289,783 AFS financial assets: Malaysian Government Papers - - - - 13,116 13,116 Unquoted debt securities 33,913 170,287 33,571 - 24,396 262,167 Reinsurance assets - 26,231 67,077 - 340,970 434,278

222,958 201,690 353,385 3 753,437 1,531,473






The table below provides information regarding the credit risk exposure of the Group and the Company by classifying assets according to the Rating Agency of Malaysia’s (“RAM”), Malaysian Rating Corporation Berhad (“MARC”), A.M. Best Company (“A.M. Best”) and Standards & Poor’s (“’S&P”) credit ratings of counterparties. AAA is the highest possible rating. (Cont’d)

aaa aa a BBB not rated total company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2016

LAR:Cash and bank

balances 18 - 284 - 17 319 Other receivables - - - - 137,095 137,095

18 - 284 - 137,112 137,414

2015

LAR:Cash and bank

balances 22 - 20,502 - - 20,524 Other receivables - - - - 111,608 111,608

22 - 20,502 - 111,608 132,132

It is the Group’s and the Company’s policy to maintain accurate and consistent risk ratings across its credit portfolio. This enables Management to focus on the applicable risks and the comparison of credit exposures across all lines of business and products. The rating system is supported by a variety of financial analytics combined with processed market information to provide the main inputs for the measurement of counterparty risk. All internal risk ratings are tailored to the various categories and are derived in accordance with the Group’s and the Company’s rating policy. The attributable risk ratings are assessed and updated regularly.

During the year, no credit limits were exceeded.

(d) Market price risk

Equity price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate/profit yield risk or currency risk), irregardless whether those changes are caused by factors specific to the individual financial instruments or its issuer or factors affecting similar financial instruments traded in the market.

The Group’s equity price risk exposure relates to financial assets whose values will fluctuate as a result of changes in market prices.

The Group is exposed to equity price risk arising from investments held by the Group and the Company in quoted shares and unit trusts in Malaysia and outside Malaysia.

The analysis below is performed for reasonably possible movements in equity price with all other variables held constant, showing the impact of statements of comprehensive income and statements of changes in equity.




(d) Market price risk (cont’d)

impact profit or loss* impact on equity* changes increase/(decrease) increase/(decrease)

in variable 2016 2015 2016 2015 Group % RM’000 RM’000 RM’000 RM’000

Market indices:Stock Exchange +10 30,643 30,694 38,814 39,745 Stock Exchange -10 (30,643) (30,694) (38,814) (39,745)

* Impact on profit or loss and impact on equity reflect adjustments for tax, when applicable.

(e) interest rate risk

Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates/profit yield.

The Group and the Company are exposed to interest rate risk primarily through its investments in fixed income securities and borrowings. Interest rate risk is managed by the Group and the Company on an ongoing basis.

The Group and the Company have no significant concentration of interest rate/profit yield risk.

The sensitivity analysis of the Group’s and the Company’s fixed income securities and borrowings are as follow:

sensitivity of changes impact to change in in interest bearing debts profit before taxbasis points increase/(decrease) increase/(decrease)

Group company Group company RM’000 RM’000 RM’000 RM’000

2016Borrowings +25 / -25 12/(12) - 12/(12) -

2015Borrowings +25 / -25 67/(67) - 67/(67) -




(e) interest rate risk (cont’d)

sensitivity of changes in fair value of impact to

change in interest bearing assets profit before taxbasis points increase/(decrease) increase/(decrease)

Group company Group company RM’000 RM’000 RM’000 RM’000

2016Malaysian Government Papers +25 / -25 (33)/33 - (33)/33 - Unquoted debt securities +25 / -25 (668)/668 - (668)/668 - Short term deposits with

licensed financial institutions +25 / -25 1,472/(1,472) - 1,472/(1,472) -

2015Malaysian Government Papers +25 / -25 (33)/33 - (33)/33 - Unquoted debt securities +25 / -25 (655)/655 - (655)/655 - Short term deposits with

licensed financial institutions +25 / -25 1,233/(1,233) - 1,233/(1,233) -

(f) insurance risk MPI Generali underwrites various general insurance contracts, which are mostly on an annual coverage

and annual premium basis, with the exception of short term policies such as Marine Cargo which covers the duration in which the cargo is being transported.

MPI Generali also underwrites some non-annual policies with coverage period more than one year such as Mortgage Reducing Personal Accident, Contractor’s All Risk and Engineering, Bonds and Workmen Compensation. The majority of the insurance businesses written by the Group are Fire and Motor. Other major lines of business include Contractor’s All Risk and Engineering, Workmen Compensation, Liabilities, Personal Accidents and other miscellaneous classes.

MPI Generali’s objectives of managing insurance risks are to enhance the long-term financial performance of the business to achieve sustainable growth in profitability, strong asset quality and to continually optimise shareholders’ value. MPI Generali seeks to write those risks that it understands and that provide a reasonable opportunity to earn an acceptable profit.

Insurance risk is the inherent uncertainty regarding the occurrence, amount or timing of insurance liabilities. Insurance contracts transfer risk to MPI Generali by indemnifying the policy holders against adverse effects arising from the occurrence of specified uncertain future events. The principal risk MPI Generali faces under insurance contracts is that the actual claims and benefits payments differ from expectations, the risks arise from the fluctuations in timing, frequency and severity of claims, as well as the adequacy of premiums and reserves.




(f) insurance risk (cont’d)

MPI Generali adopts the following measures to manage the insurance risks: (i) MPI Generali has in place a claims management and control system to pay claims and control

claim wastage or fraud. MPI Generali has claim review policies to assess all new and ongoing claims, review of claims handling procedures and investigation of possible fraudulent claims are put in place to reduce the risk exposure of MPI Generali. MPI Generali further enforces a policy of actively managing and promptly pursuing claims, in order to reduce its exposure to unpredictable future developments that can negatively impact the business. Inflation risk is mitigated by taking expected inflation into account when estimating insurance contract liabilities.

(ii) MPI Generali purchases reinsurance as part of its risks mitigation programme. The objectives for purchasing reinsurance are to provide market-leading capacity for MPI Generali’s customers while protecting the statement of financial position and optimising MPI Generali’s capital efficiency. Reinsurance is ceded on quota share, proportional and non-proportional basis. MPI Generali’s placement of reinsurance is diversified such that it is neither dependent on a single reinsurer nor are the operations of MPI Generali substantially dependent upon any single reinsurance contract.

The table below sets out the concentration of MPI Generali’s insurance contract liabilities by type of insurance product:

re- Gross insurance net

RM’000 RM’000 RM’000 Group2016claim liabilitiesMotor 230,159 (7,571) 222,588 Fire 93,492 (71,100) 22,392 Marine, Aviation & Transit 91,993 (83,163) 8,830 Miscellaneous 213,249 (122,934) 90,315

628,893 (284,768) 344,125

Premium liabilitiesMotor 109,460 (16,760) 92,700 Fire 42,910 (24,586) 18,324 Marine, Aviation & Transit 23,256 (20,852) 2,404 Miscellaneous 111,842 (34,090) 77,752

287,468 (96,288) 191,180





The table below sets out the concentration of MPI Generali’s insurance contract liabilities by type of insurance product: (Cont’d)

re- Gross insurance net

RM’000 RM’000 RM’000 Group2015claim liabilitiesMotor 220,247 (7,703) 212,544 Fire 125,444 (101,999) 23,445 Marine, Aviation & Transit 89,116 (82,837) 6,279 Miscellaneous 212,051 (137,246) 74,805

646,858 (329,785) 317,073

Premium liabilitiesMotor 97,493 (13,845) 83,648 Fire 40,506 (23,298) 17,208 Marine, Aviation & Transit 35,026 (32,812) 2,214 Miscellaneous 109,998 (34,538) 75,460

283,023 (104,493) 178,530

Key assumptions

The principal assumption underlying the liability estimates is that MPI Generali’s future claims development will follow a similar pattern to past claims development experience. This includes assumptions in respect of average claims costs, claims handling cost and claims numbers for each accident year.

Additional qualitative judgements are used to assess the extent to which past trends may not apply in the future, for example, isolated occurrence, change in market factors such as public attitude to claiming, economic conditions, as well as internal factors, such as, portfolio mix, policy conditions and claims handling procedures. Judgement is further used to assess the extent to which external factors, such as, judicial decisions and government legislation affect the estimation.

Other key circumstances affecting the reliability of assumptions include variation in interest rates, delays in settlement and changes in foreign rates.

MPI Generali has based its risk margin for adverse deviation for the provisions for unexpired risks and insurance claims at a minimum 75% of sufficiency, according to the requirement set by Bank Negara Malaysia under the RBC Framework.





sensitivities MPI Generali has appointed an independent actuarial firm to evaluate its valuation models on various

bases. An analysis of sensitivity around various scenarios provides an indication of the adequacy of MPI Generali’s estimation process in respect of its insurance contracts. The table presented below demonstrates the sensitivity of the insurance contract liabilities estimates to particular movements in assumptions used in the estimation process.

The analysis hereinafter is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities, profit before tax and equity. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that movements in these assumptions are non-linear.

impact on impact impact change in gross on net on profit impact on

assumption liabilities liabilities before tax equity* increase/ increase/ increase/ increase/

(decrease) (decrease) (decrease) (decrease) RM’000 RM’000 RM’000 RM’000

2016Average claim cost +10% 58,109 32,952 (32,952) (25,044)Average number of claims +10% 32,907 25,717 (25,717) (19,545)Average claims increase by settlement period 6 months 10,131 7,326 (7,326) (5,568)

2015Average claim cost +10% 57,773 26,072 (26,072) (19,554)Average number of claims +10% 34,549 23,171 (23,171) (17,378)Average claims Increase by settlement period 6 months 9,317 6,105 (6,105) (4,579)

* impact on equity reflects adjustments for tax, when applicable

claim Development table

The following tables show the estimate of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at reporting date, together with cumulative payments to-date.

In setting provisions for claims, MPI Generali gives consideration to the probability and magnitude of future experience being more adverse than assumed and exercises a degree of caution in setting reserves when there is considerable uncertainty. In general, the uncertainty associated with the ultimate claims experience in an accident year is greater when the accident year is at an early stage of development and the margin necessary to provide the necessary confidence in adequacy of provision is relatively at its highest. As claims develop and the ultimate cost of claims becomes more certain, the relative level of margin maintained should decrease.

The management of MPI Generali believes that the estimate of total claims outstanding as of 31 December 2016 are adequate. However, due to the inherent uncertainties in the reserving process, it cannot be assured that such balances will ultimately prove to be adequate.



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(g) fair values

The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments:

(i) cash and bank balances, receivables, payables and borrowings

The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the reporting date.

The carrying amounts of the loans and borrowings are reasonable approximations of fair values due to the insignificant impact of discounting.

(ii) quoted investments

The fair value of quoted investments is determined by reference to stock exchange quoted market bid prices at the close of the business on the reporting date.

(iii) unquoted investments

The fair value of the unquoted investments of the Group, except for the unquoted shares in Malaysia are determined based on valuations models which uses observable data.

Included in AFS financial assets as of 31 December 2016 are unquoted shares of RM1,001,000 (2015: RM1,001,000) that are carried at cost as their fair value could not be realibly measured. These securities were acquired for long term investment purposes.

(iv) amount due from/to subsidiaries

The Group and the Company do not anticipate the carrying amounts recorded at the reporting date that would eventually be received or settled to be significantly different from the fair values as the amounts are repayable on demand.

fair value hierarchy

The table below analyses those financial instruments carried at fair value by their valuation methods and non-financial assets which are carried at cost in the statements of financial position, of which their fair value are disclosed. The different levels have been defined as follows:

Level 1: Quoted prices (unadjusted) of identical assets in active markets

Level 2: Inputs other than at quoted prices included within Level 1 that are observable for the assets, either directly (prices) or indirectly (derived from prices)

Level 3: Inputs for the assets that are not based on observable market data




(g) fair values (cont’d)

As at 31 December 2016, the Group and the Company held the following financial instruments carried at fair value in the statements of financial position:

level 1 level 2 level 3 total RM’000 RM’000 RM’000 RM’000

Group

at 31 December 2016currentFinancial assets at FVTPL 403,201 - - 403,201

non-currentAFS financial assets* 107,507 280,343 - 387,850

Total investment 510,708 280,343 - 791,051

at 31 December 2015currentFinancial assets at FVTPL 409,252 - - 409,252

non-currentAFS financial assets* 120,680 275,283 - 395,963

Total investment 529,932 275,283 - 805,215

* excluding unquoted shares that are carried at cost


company

at 31 December 2016

currentFinancial assets at FVTPL 2,011 - - 2,011

at 31 December 2015

currentFinancial assets at FVTPL 5,045 - - 5,045





The Group held the following non-financial assets carried at cost in the statements of financial position and their fair values are disclosed as follows:


Group

at 31 December 2016non-currentLand and buildings - - 176,700 176,700 Investment properties - - 1,412,270 1,412,270

- - 1,588,970 1,588,970

at 31 December 2015non-currentLand and buildings - - 176,850 176,850 Investment properties - - 1,311,832 1,311,832

- - 1,488,682 1,488,682

(i) Movement in fair value of non-financial assets

land and investment buildings properties

RM’000 RM’000

As at 1 January 2015 176,680 924,194 Fair value increase 170 387,638 As at 31 December 2015 176,850 1,311,832 Fair value (decrease)/increase (150) 100,438 As at 31 December 2016 176,700 1,412,270

There were no gains or losses recognised in profit or loss with respect to these assets.

(ii) Key assumption

The significant unobservable valuation input used in the valuation of land and buildings and investment properties is as follows:

land and buildings investment properties 2016 2015 2016 2015

rm rm rm rm

Price per square foot ranging from 153-887 153-887 339-3,499 407-3,499





(iii) sensitivity analysis

Significant increase/(decrease) in estimated price per square foot in isolation would result in significantly higher/(lower) fair value.

land and buildings investment properties 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Increase in price per square foot by 10% 17,670 17,685 141,227 131,183

Decrease in price per square foot by 10% (17,670) (17,685) (141,227) (131,183)

33. non-controllinG interests

Group 2016 2015

RM’000 RM’000

At 1 January 198,766 13,620 Share of total comprehensive income for the year 28,717 21,049 Acquisition of additional interests from NCI - (15,467)Arising from partial disposal of equity interest in a subsidiary - 179,564 Arising from increase in equity interest in a subsidiary (24) - At 31 December 227,459 198,766

Financial information of the subsidiaries that have non-controlling interests are provided below:

Proportion of equity interest held by non-controlling interests:

2016 2015 % %

Direct subsidiaries of the Company:

West-Jaya Sdn. Bhd. 30 30 Queensway Nominees (Tempatan) Sdn. Bhd. * * Queensway Nominees (Asing) Sdn. Bhd. * * Leisure Dotcom Sdn. Bhd. 30 30 Mimaland Berhad 2 2

Subsidiary of Multi-Purpose Capital Holdings Berhad:

MPI Generali Insurans Berhad 49 49

Subsidiary of Multi-Purpose Shipping Corporation Berhad: Mulpha Kluang Maritime Carriers Sdn. Bhd. * *

* Represents less than 1% shareholding



33. non-contRolling inteRests (cont’D)

Accumulated balances of non-controlling interests:

2016 2015 RM’000 RM’000

West-Jaya Sdn. Bhd. 8 8 Queensway Nominees (Tempatan) Sdn. Bhd. 2 2 Queensway Nominees (Asing) Sdn. Bhd. 11 11 Leisure Dotcom Sdn. Bhd. 968 39 Mimaland Berhad 1,924 1,994 Mulpha Kluang Maritime Carriers Sdn. Bhd. 4 4 MPI Generali Insurans Berhad 224,542 196,708

227,459 198,766

Financial information of the subsidiaries that have non-controlling interests are provided below: (Cont’d)

Summarised statements of comprehensive income:

2016 2015 RM’000 RM’000

Revenue 168,627 156,513 Other Income 99,095 101,497 Other expenses (184,236) (169,168)Operating profit 83,486 88,842 Finance costs (1) (465)Profit before taxation 83,485 88,377 Income tax expenses (17,323) (16,104)Profit for the year 66,162 72,273 Other comprehensive loss (7,123) (1,546)Total comprehensive income 59,039 70,727

Attributable to non-controlling interests 28,717 21,049

The total comprehensive income/(loss) attributable to NCI arise from the following companies:

2016 2015 RM’000 RM’000

West-Jaya Sdn. Bhd. (2) (16)Queensway Nominees (Tempatan) Sdn. Bhd. - (13)Queensway Nominees (Asing) Sdn. Bhd. - (152)Leisure Dotcom Sdn. Bhd. 927 4,168 Mimaland Berhad (45) (14)Mulpha Kluang Maritime Carriers Sdn. Bhd. - (68)MPI Generali Insurans Berhad 27,837 17,144

28,717 21,049



33. non-contRolling inteRests (cont’D)

Financial information of the subsidiaries that have non-controlling interests are provided below: (Cont’d)

Summarised statements of financial position as at 31 December:

2016 2015 RM’000 RM’000

Property, plant and equipment 7,938 7,618 Investment properties 294,581 296,586 Investment securities 387,852 395,963 Deferred tax assets 1,549 995 Intangible assets 3,158 2,960 Trade receivables 145,356 185,850 Other receivables 68,463 82,184 Reinsurrance assets 381,056 434,278 Short term deposits 588,665 456,307 Tax recoverable 3 8 Cash and bank balances 23,493 17,989 Deferred tax liabilities (13,998) (15,362)Payables (180,073) (205,379)Insurance contract liabilities (916,361) (929,881)Tax payable (7,566) (6,034)Total equity 784,116 724,082

Equity attributable to: Owners of the Company 556,657 525,316 Non-controlling interests 227,459 198,766

784,116 724,082

Summarised cash flow information for year ended 31 December:

2016 2015 RM’000 RM’000

Operating activities 4,774 (468,019)Investing activities 13,967 Financing activities (13,237) 485,666 Net increase in cash and cash equivalents 5,504 17,647



34. caPital manaGement

The primary objective of the Group’s capital management is to maintain on optimal capital structure in order to support its business and maximise shareholder value. The Group manages its capital structure and make adjustments to it, in light of changes in economic condition. To maintain or adjust its capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

The Group monitors capital using a gearing ratio, which is the net debt divided by total equity plus net debt. The Group includes within its net debt, term loan, payables, less cash and bank balances and short term deposits. Capital of the Group represents total equity.

The debt to equity ratio as at 31 December 2016 and 31 December 2015 are as follows:

Group company 2016 2015 2016 2015


Payables 208,017 241,043 148,818 141,343 Borrowings 4,997 26,848 - - Less: Cash and bank balances (27,595) (75,567) (319) (20,542)Less: Short term deposits (588,982) (456,613) - - (Net surplus of the fund)/net debt (403,563) (264,289) 148,499 120,801 Equity attributable to owners of the Company 1,644,157 1,592,608 1,220,611 1,228,048 Capital and net debt 1,240,594 1,328,319 1,369,110 1,348,849

Gearing ratio n/a N/A 11% 9%

35. seGment information

The following segment information has been prepared in accordance with MFRS 8 Operating Segments, which defines the requirements for the disclosure of financial information of an entity’s operating segments. It is prepared on the basis of the “management approach”, which requires presentation of the segments on the basis of internal reports about the components of the entity which are regularly reviewed by the chief operating decision-maker in order to allocate resources to a segment and to assess its performance. The Group’s businesses are organised into the following three segments based on the types of products and services that it provides:

(i) Insurance - underwriting of all classes of general insurance business;

(ii) Credit - provision of credit and related services; and

(iii) Investments - ownership of buildings for rental income and hotel operation.

The Directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business based on negotiated and mutual terms.



35. segMent infoRMation (cont’D)

insurance credit investments total Group RM’000 RM’000 RM’000 RM’000

2016

(a) Revenue 390,846 7,743 57,899 456,488

(b) results

Segment results 81,680 21,646 4,693 108,019 Finance costs (805)Share of results of an associate (2)Segment profit before tax 107,212 Income tax expense (19,832)Profit for the year 87,380

(c) assets and liabilities

Segment assets 1,611,313 524,084 884,549 3,019,946 Investment in an associate - Total assets 3,019,946

Segment/total liabilities 1,088,757 2,124 57,449 1,148,330

(d) other information

Depreciation of property, plant and equipment 1,440 44 4,521 6,005 Depreciation of investment properties 50 - 1,707 1,757 Amortisation of premium 148 - - 148 Amortisation of intangible assets 1,092 - - 1,092 Allowance for impairment of insurance receivables (643) - - (643)Reversal of allowance for impairment for loans and advances - (701) - (701)Reversal of allowance for impairment of other receivables (100) - - (100)Loss arising from fair value change in financial assets at FVTPL - 5,432 342 5,774 Realised gain on AFS financial assets (9,677) - - (9,677)Interest income (37,282) (10,421) (715) (48,418)



35. segMent infoRMation (cont’D)

insurance credit investments total RM’000 RM’000 RM’000 RM’000

Group

2015

(a) Revenue 339,341 2,156 55,200 396,697

(b) results

Segment results 77,146 10,387 31,248 118,781 Finance costs (2,441)Share of results of an associate (24)Segment profit before tax 116,316 Income tax expense (19,629)Profit for the year 96,687

(c) assets and liabilities

Segment assets 1,586,411 508,135 916,967 3,011,513 Investment in an associate 515 Total assets 3,012,028

Segment/total liabilities 1,122,108 6,716 91,830 1,220,654

(d) other information

Depreciation of property,

plant and equipment 2,173 - 3,791 5,964 Depreciation of investment properties 50 - 1,720 1,770 Amortisation of premium 95 - - 95 Amortisation of intangible assets 816 - - 816 Allowance for impairment of receivables 4,731 - - 4,731 Reversal of allowance for impairment for loans and advances - - (10,134) (10,134)Reversal of allowance for impairment of other receivables - (20) - (20)Loss arising from fair value change in financial assets at FVTPL - 64 379 443 Realised gain on AFS financial assets 2,697 - - 2,697 Interest income (27,629) (5,850) (5,058) (38,537)



36. suBsiDiaries anD an associate

subsidiaries

group’s effective interest held*

effective interest held by non-

controlling interests* principal activitiesname of subsidiaries (%) (%) (%) (%)

2016 2015 2016 2015

Direct subsidiaries of the company

Multi-Purpose Capital Holdings Berhad 100 100 - - Investment holding

Multi-Purpose Shipping Corporation Berhad 100 100 - - Investment holding and property investment

West-Jaya Sdn. Bhd. 70 70 30 30 Investment holding and property investment

Queensway Nominees (Tempatan) Sdn. Bhd. 100 100 ** ** Property investment

Queensway Nominees (Asing) Sdn. Bhd. 100 100 ** ** Property investment

Caribbean Gateway Sdn. Bhd. 100 100 - - Investment holding

Jayavest Sdn. Bhd. 100 100 - - Investment holding

Leisure Dotcom Sdn. Bhd. 70 70 30 30 Property investment

Magnum.Com Sdn. Bhd. 100 100 - - Property investment

Magnum Leisure Sdn. Bhd. 100 100 - - Operation of a hotel

Mimaland Berhad 98 98 2 2 Property investment

Syarikat Perniagaan Selangor Sdn. Bhd. 100 100 - - Property investment & management and operation of hotel

Tibanis Sdn. Bhd. 100 100 - - Property investment

Kelana Megah Development Sdn. Bhd. 100 100 - - Plantation and property holding

subsidiaries of multi-Purpose capital holdings berhad (“Mpchb”)

MPI Generali Insurans Berhad 51 51 49 49 General insurance

Multi-Purpose Credit Holdings Sdn. Bhd. 100 100 - - Investment holding



36. subsiDiaRies anD an associate (cont’D)

subsidiaries (cont’d)

group’s effective interest held*

effective interest held by non-

controlling interests* principal activitiesname of subsidiaries (%) (%) (%) (%)

2016 2015 2016 2015

a subsidiary of mPi Generali insurans Berhad

Opus Institutional Income Fund 2 100 100 - - Wholesale fund

United Institutional Income Fund 2 100 100 - - Wholesale fund

subsidiaries of multi-Purpose credit holdings sdn. bhd.

Multi-Purpose Credit Sdn. Bhd. 100 100 - - Credit and leasing business, hire purchase and general loans and financing

MP Factors Sdn. Bhd. 100 100 - - Business of factoring and property investment

Multi-Purpose Credit Nominees (Tempatan) Sdn. Bhd. 100 100 - - Nominee services

subsidiaries of Multi-purpose shipping corporation Berhad

Mulpha Kluang Maritime Carriers Sdn. Bhd. 100 100 - ** Property investment

Multi-Purpose Development (PG) Sdn. Bhd. 100 100 - - Property development

a subsidiary of syarikat perniagaan selangor sdn. bhd.

Flamingo Management Sdn. Bhd. 100 100 - - Hotel management



36. subsiDiaRies anD an associate (cont’D)

subsidiaries (cont’d)

an associate of mPcHB

name of an associategroup’s effective interest held (%) principal activities

accounting model applied

2016 2015

Tune Insurance (Labuan) Ltd. 20 20 reinsurance Equity method

* Equals to the proportion of voting rights held

** Interest held by non-controlling interests for Queensway Nominess (Tempatan) Sdn. Bhd., Queensway (Asing) Sdn. Bhd. and Mulpha Kluang Maritime Carriers Sdn. Bhd. are 0.02%, 0.00001% and 0.05%, respectively.

37. suBsequent events

(i) The Malaysia Competition Commission (“MYCC”) had investigated PIAM (the General Insurance Association of Malaysia) together with its 22 members, including the insurance subsidiary, MPI Generali Sdn. Bhd. (“MPI Generali”), for an alleged infringement of the prohibition under section 4(2)(a) of the Competition Act 2010 (“the Act”) for fixing part trade discount and labour rates for PARS (PIAM Authorised Repairers Scheme) workshops.

On 23 February 2017, the MYCC issued its proposed decision to impose a financial penalty on all 22

members amounting to RM213,454,814.

MPI Generali’s share of the penalty is RM4,089,138. The MYCC’s proposed decision is premised on Section 4(2)(a) of the Act which provides that an agreement with the object to fix, directly or indirectly, a purchase or selling price or any other trading conditions is deemed to have the object of significantly preventing, restricting or distorting the competition in the market.

(ii) On 15 September 2016, the Companies Act 2016 (“New Act”) was enacted and will replace the Companies Act, 1965 in Malaysia with the New Act to be effective on 31 January 2017.

The New Act was enacted to replace the Companies Act, 1965 in Malaysia with the objective of creating a legal and regulatory structure that will facilitate business and promote accountability as well as protection of corporate directors and shareholders, taking into consideration the interest of other stakeholders. The New Act was passed on 4 April 2016 by the Dewan Rakyat (House of Representative) and gazetted on 15 September 2016. On 26 January 2017, the Minister of Domestic Trade Co-operatives and Consumerism announced that the date on which the New Act comes into operation, except for Section 241 and Division 8 of Part III of the New Act, would be 31 January 2017.

Amongst the key changes introduced in the New Act which will affect the financial statements of the Bank upon the commencement of the New Act on 31 January 2017 are: (a) the removal of the authorised share capital;

(b) the ordinary shares of the Group and the Company will cease to have par or nominal value; and

(c) share premium account shall become part of the Group and the Company’s share capital.

The adoption of the New Act is not expected to have any financial impact on the Group and the

Company for the current financial year ended 31 December 2016 as any accounting implications will only be applied prospectively, if applicable, and the effect of adoption mainly will be on the disclosures to the annual report and financial statements of the Group and the Company in the next financial year ending 31 December 2017.



38. comParative

Certain amounts in the comparative financial statements and notes diclosures have been reclassified to conform with the current year’s presentation. The reclassification is as follows:

previously re-

stated classification restated RM’000 RM’000 RM’000

company

statements of financial position 1 January 2015

Non-current assetsReceivables - 634 634

Current assetsReceivables 157,269 (634) 156,635

Non-current liabilitiesPayables - 97,517 97,517

Current liabilitiesPayables 198,730 (97,517) 101,213

31 December 2015

Non-current assetsReceivables - 1,822 1,822

Current assetsReceivables 111,608 (1,822) 109,786

Non-current liabilitiesPayables - 57,914 57,914

Current liabilitiesPayables 141,343 (57,914) 83,429

Group

statements of comprehensive income 31.12.2015

Cost of sales (235,042) 36,897 (198,145)Other income 82,625 42,983 125,608Other expenses (57,292) (79,880) (137,172)



39. Prior year aDJustment

The principal activity of Tibanis Sdn Bhd (“TSB”) as diclosed in Note 36 is property investment and its major transaction relates to its disposal of land to its joint venture partner.

TSB regards that the transfer of significant risk and rewards to the joint venture partner has occurred when the development of the phases mentioned in the JVA is approved by the relevant authorities. Once the authorities approval is obtained, TSB will no longer have the legal and beneficial rights as a landowner. Instead, TSB’s risk and rewards would then be changed to recovery of its share of the Land Owner’s Entitlement.

As the authority approval for development of Phase 1A of G2 Land was obtained in 2015, the Group has made the following adjustments to the revenue entitled from PMSB as well as cost of investment properties transferred to PMSB which had a material effect on the financial statements for the financial year ended 31 December 2015.

previously stated

after comparative

(note 38) adjustment restated Group RM’000 RM’000 RM’000

31 December 2015statements of comprehensive incomeRevenue 380,787 15,910 396,697 Cost of sales (198,145) (5,777) (203,922)Profit before tax 106,183 10,133 116,316 Profit after tax 86,554 10,133 96,687

statements of financial positionInvestment properties 832,125 (2,048) 830,077 Payables 253,224 (12,181) 241,043 Shareholders’ funds 1,582,475 10,133 1,592,608

statements of changes in equityRetained profits 557,744 10,133 567,877 Shareholders’ funds 1,582,475 10,133 1,592,608



40. suPPlementary information

The breakdown of the retained profits of the Group into realised and unrealised profits is presented below in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Group

2016 2015 RM’000 RM’000

restated

Total retained profits

- realised 718,500 657,187

- unrealised (7,754) (11,251)

- prior year adjustment to retained profits - 10,133

710,746 656,069

Total share of retained profits from an associate

- realised 413 415

Less: consolidation adjustments (88,099) (88,607)

Retained profits as per financial statements 623,060 567,877


toP 10 list of ProPerties oWneD By mPHB caPital GrouPAs at 31 December 2016

location

resiDual aGe of GrouP netlease exPiry aPProx BuilDinG BooK value Date of

tenure (years) Date area DescriPtion (years) (RM’000) revaluation

1 Lot PT 37379, H.S(D) 73892, Freehold - - 230.834 Vacant land - 157,151 28.01.2017Lot PT 43361, H.S(D) 80854, Lot PT 43362, H.S(D) 80855,

acres

Lot PT 43363, H.S(D) 80856, Lot PT 43365, H.S(D) 80858, Lot PT 43366, H.S(D) 80859, Lot PT 43367, H.S(D) 80860, Lot PT 43368, H.S(D) 80861, Lot PT 43369, H.S(D) 80862,

-

Lot PT 43370, H.S(D) 80863, Lot PT 43371, H.S(D) 80864, Mukim Rawang, District of Gombak, Selangor.

2 Lot 2947, Geran 307402 and Lot 3003, Geran 49265,

Freehold - - 124.41 acres

Mukim Setapak, District of Gombak, Selangor

Lot PT B, H.S(D) 40430, Lot PT 7546, H.S(D) 40431,

Leasehold 53 2069 197.05 acres

Vacant land - 145,561 28.01.2017

and Lot PT A, H.S(D) 1767,Mukim Setapak, District of Gombak, Selangor

Lot PT 5300, H.S(M) 1726 and Lot PT 5301, H.S(M) 1727,


Mukim Setapak, District of Gombak, Selangor

3 Lot 200, Geran 12089, Freehold - - 1.50 Vacant land - 130,500 28.01.2017Section 67, Bandar & Daerah Kuala Lumpur

acres

4 Lot 1216, Geran 8176, Freehold - - 1.66 4 storey 14 80,329 28.01.2017Section 67, Bandar & Daerah Kuala Lumpur

acres Building

5 Lot 296, Geran Mukim 528, Lot 306, Geran Mukim 531,


Vacant land - 76,900 28.01.2017

Lot 1675, Geran Mukim 654, Lot 1713, Geran Mukim 672,Lot 1714, Geran Mukim 673, Lot 1465, Geran Mukim 889,Lot 1460, Geran Mukim 909, Lot 1461, Geran Mukim 910,Lot 2343, Geran Mukim 1047, Lot 2346, GRN 47939,Lot 302, Geran Mukim 529, Lot 1677, Geran Mukim 656,


location

resiDual aGe of GrouP netlease exPiry aPProx BuilDinG BooK value Date of

tenure (years) Date area DescriPtion (years) (RM’000) revaluation

5 Lot 1688, Geran Mukim 659, Lot 1462, Geran Mukim 886,Lot 1463, Geran Mukim 887, Lot 1464, Geran Mukim 888,Lot 1278, Geran Mukim 1008, Lot 1282, Geran Mukim 1010,Lot 1283, Geran Mukim 1011, Lot 1285, Geran Mukim 1013, Lot 1287, Geran Mukim 1014, Lot 1288, Geran Mukim 1015, Lot 14895, Geran Mukim 1443, Lot PT 6581, H.S.(M) 3475, and Lot PT 6582, H.S(M) 3476.Mukim 12, Telok Tempoyak, Daerah Barat Daya, Pulau Pinang

6 Lot 1282, Geran 47410 and Freehold - - 1.36 Vacant land - 61,790 28.01.2017Lot 1283, Geran 42982, acresSection 67, Bandar & Daerah Kuala Lumpur

7 Lot 109, GRN 83563, Lot 201, GRN 121896,


Lot 364, GRN 83581, Lot 437, GRN 456954, Lot 519, GRN 82700, Lot 919, GRN 106049, Lot 980, GRN 121929 and Lot 1104, GRN 84211. Mukim Pengerang,District of Kota Tinggi, Johor Agriculture - 60,521 25.01.2017

Lot 992, PN 13368, Lot 993, PN 58271, and


Lot 994, PN 58272. Mukim Pengerang, District of Kota Tinggi, Johor.

8 Lot 4071, Geran 60996, Freehold - - 2.33 Hotel - 38,909 07.02.2017Town of Tanjong Bungah, District of North East,

acres

Pulau Pinang

9 Lot 18207, PM 435, Leasehold 75 2091 2.71 4 storey 19 37,037 06.02.2017Seksyen 2, Bandar Ulu Kelang, Ampang Tasik,

acres commercial complex

District of Gombak, Selangor

10 Lot 13499, PM343, Lot 13500, PM344 and Lot 13501, PM345,


Hotel, Lake & Boat house

19-20 30,983 06.02.2017

Mukim Ulu Kelang,Ampang Tasik, District ofGombak, Selangor

TOP 10 LIST OF PROPERTIES OWNED BY MPHB CAPITAL GROUP (Cont’d)As at 31 December 2016


analysis of equity securitiesAs at 3 April 2017

Class of Security : Ordinary shares Total Issued Share Capital : RM 715,000,000Voting Rights : 1 vote per share

no. of Holders

% of Holders

no. of shares

% of shares

largest shareholders 30 0.22 530,550,782 74.20

size of holdings less than 100 shares 152 1.09 3,886 0.00100 - 1,000 shares 3,597 25.86 2,204,820 0.311,001 -10,000 shares 7,856 56.47 30,125,830 4.2110,001-100,000 shares 2,014 14.48 59,905,298 8.38100,001- less than 5% of issued shares 290 2.08 333,119,352 46.595% and above of issued shares 3 0.02 289,640,814 40.51

total 13,912 100.0 715,000,000 100.00

tHirty (30) maJor sHareHolDers as at 3 aPril 2017

name shareholdings %

1. CIMB GROUP NOMINEES (TEMPATAN) SDN BHD Pledged Securities Account For Casi Management Sdn Bhd

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

3. CITIGROUP NOMINEES (ASING) SDN BHD Exempt An For OCBC Securities Private Limited (Client A/C-NR)

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

5. SHAN HIJAUAN SDN BHD

6. CASI MANAGEMENT SDN BHD

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

8. HENG GUAN SENDIRIAN BERHAD

9. SHAMARA FINANCE LIMITED

10. UOB KAY HIAN NOMINEES (TEMPATAN) SDN BHD Pledged Securities Account For MCC Credit Sdn Bhd

11. CITIGROUP NOMINEES (ASING) SDN BHD Exempt An For Citibank N.A Singapore (UBP SG1)

213,706,793

39,531,686

36,402,335

30,871,000

27,540,645

17,177,200

16,373,800

15,200,000

14,135,633

11,331,200

11,187,780

29.89

5.53

5.09

4.32

3.85

2.40

2.29

2.13

1.98

1.58

1.56


ANALYSIS OF EQUITY SECURITIES (Cont’d)As at 3 April 2017

thiRty (30) MaJoR shaReholDeRs as at 3 apRil 2017 (cont’D)

name shareholdings %

12. CHONG YIEW ON

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

14. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD Great Eastern Life Assurance (Malaysia) Berhad (Par 1)

15. ALLAMANDA GROWTH LIMITED

16. INTER-PACIFIC EQUITY NOMINEES (ASING) SDN BHD Driscoll Shipping Ltd.

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

18. ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD Pledged Securities Account For Chong Yiew On

19. UOB KAY HIAN NOMINEES (ASING) SDN BHD New Kota Credit Sdn Bhd for Trade Key Investments Limited

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

21. KHOO SU CHIN

22. TAN SHU AYAN

23. T C HOLDINGS SENDIRIAN BERHAD

24. CIMSEC NOMINEES (TEMPATAN) SDN BHD CIMB for Lawrence Lim Swee Lin (PB)

25. TANAH SUBOR SDN BHD

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

27. CHOO SHIOW CHARN

28. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD Great Eastern Life Assurance (Malaysia) Berhad (PAR 3)

29. CITIGROUP NOMINEES (ASING) SDN BHD Goldman Sachs International

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

10,457,800

10,120,855

9,500,750

8,800,000

8,121,100

7,700,000

4,801,100

4,780,000

4,763,800

4,110,000

3,841,300

3,145,000

3,050,000

2,980,055

2,500,000

2,226,000

2,150,950

2,050,400

1,993,600

1.46

1.41

1.33

1.23

1.13

1.08

0.67

0.67

0.67

0.57

0.54

0.44

0.43

0.42

0.35

0.31

0.30

0.29

0.28

total 530,550,782 74.20


ANALYSIS OF EQUITY SECURITIES (Cont’d)As at 3 April 2017

suBstantial sHareHolDers as at 3 aPril 2017

name

as at 3 april 2017Direct interest indirect/Deemed interest

no. of shares % no. of shares %

Casi Management Sdn Bhd (“CMSB”) 230,883,993 32.29 - -Hanton Capital Limited (“HCL”) - - (a) 230,883,993 32.29Cedar Holdings Limited (“CHL”) - - (b) 230,883,993 32.29Kularb Kaew Company Limited (“KKCL”) - - (b)230,883,993 32.29Cypress Holdings Limited (“Cypress”) - - (c) 230,883,993 32.29Tan Sri Dato’ Surin Upatkoon - - (d)261,921,093 36.63

Notes:(a) Deemed interest by virtue of Section 8(4) of the Companies Act, 2016 (“Act”) held through its shareholding

of more than 20% in CMSB.(b) Deemed interest by virtue of Section 8(4) of the Act held through its shareholding of more than 20% in HCL.(c) Deemed interest by virtue of Section 8(4) of the Act held through its shareholding of more than 20% in CHL

and KKCL.(d) Deemed interest by virtue of Section 8(4) of the Act held through his shareholdings of more than 20% in

Cypress and Pinjaya Sdn Bhd; and indirect interest held through his daughters, Ms Ivevei Upatkoon and Ms Maythini Upatkoon.

DiRectoRs’ inteRest as shoWn in the RegisteR of DiRectoRs’ shaReholDings as at 3 apRil 2017

(a) interest in shares in Mphb capital berhad (“Mphb capital”)

name

as at 3 april 2017Direct interest indirect/Deemed interest

no. of shares % no. of shares %

Tan Sri Dato’ Dr Yahya bin Awang 101,100 0.01 - -Tan Sri Dato’ Surin Upatkoon - - #261,921,093 36.63Ms Ivevei Upatkoon 156,200 0.02 - -Dato’ Lim Tiong Chin 1,000,000 0.14 ^8,940,000 1.25Mr Kuah Hun Liang 330,200 0.05 - -

Notes:# Deemed interest by virtue of Section 8(4) of the Act held through his shareholdings of more than 20% in

Cypress and Pinjaya Sdn Bhd; and indirect interest held through his daughters, Ms Ivevei Upatkoon and Ms Maythini Upatkoon.

^ Deemed interest by virtue of Section 8(4) of the Act held through his shareholdings of more than 20% in Keetinsons Sendirian Berhad, T.C. Holdings Sendirian Berhad and Trade Key Investments Limited.

(B) interest in shares in related corporations

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

Save as disclosed above, none of the other Directors of MPHB Capital have any interest in the shares of the subsidiaries of MPHB Capital as at 3 April 2017.


notice of annual General meetinGnotice is HereBy Given that the Fifth Annual General Meeting of MPHB Capital Berhad (“the Company” or “MPHB Capital”) will be held at Grand Ballroom, First Floor, Flamingo hotel by the lake, No. 5, Taman Tasik Ampang, Jalan Hulu Kelang, 68000 Ampang, Selangor Darul Ehsan on Monday, 29 May 2017 at 9.30 a.m.

aGenDa

1. To receive and consider the Report of the Directors and the Audited Financial Statements for the year ended 31 December 2016 together with the Report of the Auditors thereon.

(Please refer to note a)

2. To approve the payment of Directors’ fees amounting to RM280,820 in respect of the year ended 31 December 2016 (2015: RM240,000) and the benefits payable to Directors of an amount up to RM79,800 from 1 January 2017 until the next Annual General Meeting.

(Please refer to note B)

(Resolution 1)

3. To re-elect Tan Sri Dato’ Dr Yahya bin Awang who retires by rotation in accordance with Article 113 of the Company’s Articles of Association.

(Resolution 2)

4. To re-elect Tan Sri Dato’ Surin Upatkoon who retires in accordance with Article 120 of the Company’s Articles of Association.

(Resolution 3)

5. To re-appoint Messrs Ernst & Young as Auditors of the Company to hold office until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration.

(Resolution 4)

as sPecial Business

To consider and, if thought fit, pass the following Ordinary Resolution:-

6. orDinary resolution - proposed Renewal of authority for the share buy-back

“THAT, subject always to the Companies Act, 2016, the Company’s Memorandum and Articles of Association, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and any other relevant governmental and/or regulatory authority, approval be and is hereby given for the renewal of the authority granted by the shareholders of the Company at the Fourth Annual General Meeting of the Company held on 3 June 2016 for the Company to purchase its own shares from time to time and at any time such amount of ordinary shares in the Company as may be determined by the Directors of the Company from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the best interest of the Company (“Proposed Share Buy-Back”) provided that:-

(a) The maximum number of shares which may be purchased and/or held as treasury shares by the Company at any point of time pursuant to the Proposed Share Buy-Back shall not exceed ten per centum (10%) of the total number of issued shares of the Company provided always that in the event that the Company ceases to hold all or any part of such shares as a result of, amongst others, cancellation of shares, sale of shares on the open market of the Bursa Securities or distribution of treasury shares to shareholders as dividend, the Company shall be entitled to further purchase and/or hold such additional number of shares as shall, in aggregate with the shares then still held by the Company, not exceed ten per centum (10%) of the total number of issued shares of the Company for the time being quoted on the Bursa Securities;

(b) The maximum amount of funds to be allocated by the Company pursuant to the Proposed Share Buy-Back shall not exceed the retained profits of the Company;

(Resolution 5)


notice of annual general meeting (Cont’d) AND THAT authority be and is hereby given to the Directors to decide in their absolute

discretion to deal in any of the following manners the shares purchased by the Company pursuant to the Proposed Share Buy-Back:-

(i) to cancel the shares purchased; and/or(ii) to retain the shares purchased as treasury shares, to be either distributed as share

dividends to the shareholders and/or re-sold on the open market of the Bursa Securities and/or subsequently cancelled; and/or

(iii) a combination of (i) and (ii) above;

AND THAT such authority shall commence immediately upon the passing of this resolution until:

(aa) the conclusion of the next Annual General Meeting of the Company at which time it will lapse unless by ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions;

(bb) the expiration of the period within which the next Annual General Meeting is required by law to be held; or

(cc) revoked or varied by ordinary resolution of the shareholders of the Company in a general meeting,

whichever is earlier;

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

7. To transact any other business for which due notice shall have been given in accordance with the Articles of Association of the Company and the Companies Act, 2016.

By orDer of tHe BoarD

nG sooK yee (maicsa 7020643)Secretary

Kuala Lumpur28 April 2017


notes to tHe aGenDa

a. agenda 1 - Directors’ Report, audited financial statements and auditors’ Report

Agenda item No. 1 is meant for discussion only. The provisions of Section 340(1)(a) of the Companies Act, 2016 and the Articles of Association of the Company only require that the Audited Financial Statements and the Reports of the Directors and Auditors thereon be laid before the Company at its Annual General Meeting (“AGM”). Hence, this Agenda item is not a business which requires a resolution to be put to vote by shareholders.

b. agenda 2 - Directors’ fees and benefits payable to Directors (ordinary Resolution 1)

Section 230(1) of the Companies Act, 2016 provides, amongst others, that “the fees” of the directors and “any benefits” payable to the directors of a listed company shall be approved at a general meeting. In this respect, the Board agreed that the shareholders’ approval shall be sought at the 5th AGM on Directors’ Fees and Benefits Payable to Directors, details as follows:

(i) payment of Directors’ fees for the non-executive Directors

In 2017, the Remuneration Committee had conducted a review of the Directors’ fees and in view of the increasing responsibilities of directors, the Remuneration Committee has recommended the increase in the Directors’ fees for the financial year 2016 from RM80,000 per annum to RM90,000 per annum for each Non-Executive Director of the Company. The Board had endorsed the said Remuneration Committee’s recommendation to increase the Directors’ fees for the financial year 2016:-

non-executive Directors

existing Directors’ fees

for 2015

Proposed Directors’ fees

for 2016Tan Sri Dato’ Dr Yahya bin Awang RM80,000 RM90,000Tan Sri Dato’ Surin Upatkoon (Appointed on 18 November 2016) - RM10,820Dato’ Lim Tiong Chin RM80,000 RM90,000Mr Kuah Hun Liang RM80,000 RM90,000total rm240,000 rm280,820

(ii) Benefits Payable to the Directors

The benefits consist of sitting allowances and benefits in kind payable to the Directors of the Company are as follows:-

sitting allowances benefit in kind

Board Meeting – RM1,000 per sitting for each Director

Board Committee Meeting – RM1,000 per sitting for each Director

Note: In the circumstances where the Board Meeting and/or Board Committees’ Meetings are held on the same day, only one sitting allowance of RM1,000 is payable to each Director irrespective of the number of meetings attended.

Board Chairman - Driver

The sitting allowances payable to the Directors from 1 January 2017 until the next AGM are calculated based on the estimated number of scheduled meetings for Board of Directors (“Board”) and Board Committees of the Company.

The Board will seek approval of the shareholders at the next AGM of the Company in the event the amount of benefits proposed is insufficient due to the increase in the number of the Board and Board Committees’ meetings and/or the increase in the Board size.

notice of annual general meeting (Cont’d)


exPlanatory notes on sPecial Business

proposed ordinary Resolution 5 – proposed Renewal of authority for the share buy-back

The Proposed Ordinary Resolution 5, if passed, will empower the Company to purchase its own shares of up to ten per centum (10%) of the total number of issued shares of the Company. This authority, unless renewed, revoked or varied by the Company at a general meeting, will expire at the next AGM.

The details of the proposed renewal of authority for the share buy-back are set out in the Share Buy-Back Statement dated 28 April 2017 despatched together with the 2016 Annual Report.

notes relatinG to reGistration anD Proxy

1. A depositor whose name appears in the Record of Depositors on 22 May 2017 shall be regarded as a member entitled to attend, speak and vote at the meeting or to appoint proxy to attend, speak and vote on its behalf at the meeting.

2. A proxy may but need not be a member of the Company.

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

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

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

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

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

8. To be valid the form of proxy duly completed and signed must be deposited at the registered office of the Company at 39th Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur not less than 48 hours before the time for holding the meeting. Copies of the duly executed forms of proxy which are faxed or emailed to us are not acceptable.

9. The lodging of a proxy form does not preclude a member from attending and voting in person at the AGM should the member subsequently decides to do so.

Personal Data Privacy

By submitting an instrument appointing proxy(ies) and/or representatives to attend, speak and vote at the AGM and/or any adjournment thereof, a member of the Company:- (i) consents to the processing of the member’s personal data by the Company (or its agents): (a) for processing and administration of proxies and representatives appointed for the AGM; (b) preparation and compilation of the attendance lists, minutes and other documents relating to the AGM (which includes any adjournments thereto); and (c) for the Company’s (or its agents’) compliance with any applicable laws, listing rules, regulations and/or guidelines (collectively, the Purposes”); (ii) warrants that he or she has obtained such proxy(ies)’ and/or representative(s)’ prior consent for the Company’s (or its agents’) processing of such proxy(ies)’ and/or representative(s)’ personal data for the Purposes; and (iii) agrees that the member will indemnify the Company for any penalties, liabilities, claims, demands, losses and damages as a result of the member’s breach of warranty.

Note: The term “processing” and “personal data” shall have the meaning as defined in the Personal Data Protection Act, 2010.

notice of annual general meeting (Cont’d)


No individual is seeking for new election as a director at the 5th Annual General Meeting of the Company.

statement accomPanyinG tHe notice of annual General meetinG(Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Securities)

I/We Tel. No. (FULL NAME IN BLOCK CAPITALS)

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

of (ADDRESS)

being a member/members of mPHB caPital BerHaD, hereby appoint:-

name nric/Passport no.proportion of shareholdings

no. of shares %

address

and/or failing him/her,

name nric/Passport no.proportion of shareholdings

no. of shares %

address

or failing him/her, THE CHAIRMAN OF THE MEETING as my/our proxy/proxies to vote on my/our behalf at the Fifth Annual General Meeting of the Company to be held at grand ballroom, first floor, flamingo hotel by the lake, no. 5, taman tasik ampang, Jalan hulu Kelang, 68000 ampang, selangor Darul ehsan on Monday, 29 may 2017 at 9.30 a.m. and any adjournment thereof.

resolutions *for *aGainst1. To approve the payment of Directors’ fees of RM280,820 and benefits payable to

Directors of an amount up to RM79,8002. To re-elect Tan Sri Dato’ Dr Yahya bin Awang as Director of the Company3. To re-elect Tan Sri Dato’ Surin Upatkoon as Director of the Company4. To re-appoint Messrs Ernst & Young as Auditors of the Company5. To authorise the proposed renewal of authority for share buy-back

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

As witness my/our hand(s) this day of 2017 Signature(s) of member/Common Seal

form of ProxymPHB caPital BerHaD (1010253-W)(Incorporated in Malaysia)

cDs account numBer no. of sHares HelD

notes:-1. A proxy may but need not be a member of the Company.2. A member, other than an authorised nominee or an exempt authorised nominee,

shall be entitled to appoint not more than two proxies to attend and vote at the same meeting.

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

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

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

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

7. To be valid the form of proxy duly completed, must be deposited at the registered office of the Company at 39th Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur not less than 48 hours before the time for holding the meeting. Copies of the duly executed proxy forms which are faxed or emailed to us are not acceptable.

8. The lodging of a proxy form does not preclude a member from attending and voting in person at the Annual General Meeting (“AGM”) should the member subsequently decides to do so.

9. A depositor whose name appears in the Record of Depositors on 22 May 2017 shall be regarded as a member entitled to attend, vote and speak at the meeting or to appoint proxy to attend, vote and speak on its behalf at the meeting.

Personal Data Privacy

By submitting an instrument appointing proxy(ies) and/or representatives to attend, speak and vote at the AGM and/or any adjournment thereof, a member of the Company:- (i) consents to the processing of the member’s personal data by the Company (or its agents): (a) for processing and administration of proxies and representatives appointed for the AGM; (b) preparation and compilation of the attendance lists, minutes and other documents relating to the AGM (which includes any adjournments thereto); and (c) for the Company’s (or its agents’) compliance with any applicable laws, listing rules, regulations and/or guidelines (collectively, the Purposes”); (ii) warrants that he or she has obtained such proxy(ies)’ and/or representative(s)’ prior consent for the Company’s (or its agents’) processing of such proxy(ies)’ and/or representative(s)’ personal data for the Purposes; and (iii) agrees that the member will indemnify the Company for any penalties, liabilities, claims, demands, losses and damages as a result of the member’s breach of warranty.

Note: The term “processing” and “personal data” shall have the meaning as defined in the Personal Data Protection Act, 2010.

tHe comPany secretary

mPHB caPital BerHaD (1010253-W)39th Floor, Menara Multi-Purpose

Capital Square, No. 8, Jalan Munshi Abdullah50100 Kuala Lumpur

STAMP

MPH

B CA

PITAL BERH

AD

(1010253-W)

Annua

l Rep

ort 2016

MPHB CAPITAL BERHAD (1010253-W)

39th Floor, Menara Multi-PurPose, CaPital square, no. 8, Jalan Munshi abdullah, 50100 Kuala luMPurTel : +603 2694 8333 • Fax : +603 2694 1380 • email : [email protected]

Annual Report 2016 - MPHB Cap

Documents

Transcript of Annual Report 2016 - MPHB Cap