Proposal Final Year Project

FINAL YEAR PROJECT

NUR AFIEFAH BINTI ABDUL GHANI

PTM110718322

KOLEJ POLY-TECH MARA KUALA LUMPUR

DECLARATION

I hereby that the work in this thesis is my own except for quotations and summarises which have

been duly acknowledge

Date : ____________________

Name : Nur Afiefah Binti Abdul Ghani

ID Number : PTM110718322

ACKNOWLEDGEMENT

ABSTRACT

CONTENTS

Page

DECLARATION

ACKNOWLEDGEMENT

ABSTRACT

CONTENTS

LIST OF TABLE

LIST OF FIGURE

CHAPTER 1 INTRODUCTION

1 Objective of the research

2 Companies background

3 Literature review

3.1 Mulpha Land Berhad

3.2 Magna Prima Berhad

3.3 Malton Berhad

CHAPTER 2 FROM FINANCIAL ACCOUNTING POINT OF VIEW

2.1 IFRS 101

2.2 IFRS 110

2.3 IFRS 116

CHAPTER 3 FROM FINANCIAL MANAGEMENT POINT OF VIEW

3.1 Profitability Ratio

CHAPTER 1

INTRODUCTION

1.1 OBJECTIVE OF THE RESEARCH

1.1.1 Learn on how to read an annual report.

Reading an annual report can be difficult process if we don’t know exactly what we are

looking for and where to find it. However, after all I did and study for the report, I can

understand that mostly of them are standardized with their own ‘key words’ or ‘parts’

such as they provide a table contents with numbering so it is easy for the user to find the

parts needed and the title is written in big size. This guide helps me make things more

accessible. It explains the three important basic financial statements from the annual

report. In the annual report it will included the income statement of the company and

shows how good the company is at making money. Other than that, in cash flow statement

it shows how the company paying for their operations and their future growth. Last but not

least, balance sheet. In balance sheet, it shows what the company owns and owes.

1.1.2 The effectiveness and efficiencies of the company.

It is also important to know what are the profit maximizations and wealth maximizations

of a company for the investors to invest in a company. Profit maximization refers to how

much profit the company makes and profit maximization is basically is a single-period or,

at most, a short-term goal, to be achieved within one year. Wealth maximization is the

modern approaches for the improvements of the company business.

1.1.3 Does the company follow the International Financial Reporting Standard (IFRS)?

A company should follow the IFRS and today nearly 100 countries require or allow the

use of IFRS for the preparation of financial statements by publicly held companies as the

business world became more global, regulators, investors, large companies and auditing

firms began to realize the importance of having common standards in all areas of the

financial reporting chain.

1.1.4 Discover the company inside the industry of property in Malaysia.

By doing this final year project, I am able to discover the company in the property

industry in Malaysia that listed in Kuala Lumpur Stock Exchange (KLSE). Before this, in

my thoughts the only company based on the industrial on properties that is listed in KLSE

are Country Heights Holding Bhd, MK Land Bhd and Amcorp properties Bhd. But as I

make more research I learnt that there are a lot of other companies that is listed in KLSE

in fact some of the companies are more potential and equally rank with the others. This is

good as they open up a bigger opportunity for those who want to make investments or to

become one of the company’s shareholders.

1.1.5 SWOT and SMART of a company.

A company must have their strength and weaknesses, a company also must apply SWOT

and SMART for their performance and for improvements. As for the three company that I

did a research on, I find that three of them have the positive and negative sides and it is

good as this can help the companies to evaluate and take actions for the company.

1.2 COMPANIES BACKGROUND

1.2.1 Mulpha Land Berhad

Mulpha Land Berhad is listed on the Main Market of Bursa Malaysia and offers

mixed property development services & investment across the region. The company’s

focus is on real estate and property related services, with its primary operations and

investments centered in Malaysia. Mulpha Land Berhad's real estate development and

investments in Malaysia, located in several strategic development areas include Raintree

Residence, 6 Kenny Hills, Enclave Bangsar and Tropicana in the Klang Valley. In the

Northern Corridor Economic Region (NCER), Mulpha’s prominent projects namely

Taman Bukit Punchor, Bukit Punchor Industrial Park and Taman Seri Bayu in Penang

coupled with the mixed development township, Taman DesaAman near Kulim High Tech

Park, Kedah, further enhance Mulpha’s property portfolio.Moving forward, Mulpha Land

is set to expand and embark on the hospitality & lifestyle division aside its existing core

business - property development and property investment & management. With the

presence of hospitality & lifestyle, Mulpha pursues to enrich and further heighten its

portfolio as an emerging boutique developer in Malaysia.The principal activities of

MULPHAL are investment holding, property development and property investment. The

principal activities of the subsidiaries are investment holding, property development,

property investment and licensee of a quarry plant MPASCAL is one of the largest

producers of ready-mixed concrete in Malaysia. In addition, the company is also involved

in the provision, such as fabrication and sale of batching plants and rental of mixer

trucks. MPASCAL managed to secure several major.

1.1.2 Magna Prima Berhad

Magna Prima was incorporated in Malaysia on 5 December 1995 as a private

limited company before subsequently being converted to a public limited company,

assuming its listing status on Bursa Malaysia and adopting its present name of Magna

Prima Berhad on 16 January 1997. Magna Prima Berhad is an investment holding

company and through its subsidiaries, provides a diverse range of property development,

building construction, trading and management services. Focussed in the Klang Valley,

Magna Prima Berhad is a niche developer of integrated lifestyle themed projects that

attract robust take up rates. The Group focuses on purchasing and developing pocket-

sized land banks which are located in high density areas, with easy accessibility and have

a significant gross development value. Magna Prima's two current signature projects

are The Avare and The Istana, Melbourne. The Avare, an immaculate 6-star super luxury

condominium located near KLCC, was awarded the CNBC Asia Pacific Property Award

in the light rise development category. This jewel in Magna Prima's portfolio is spread

over 1.06 acres of magnificently landscaped terrain and consists of one 41-storey tower

that houses just two units per floor. The Istana Melbourne, a 25-storey single tower

apartment located in the heart of Melbourne’s Central Business District. The building’s

design, both internal and external, exudes timelessness and elegance which residents will

find easy to enjoy.

1.1.3 Malton Berhad

The Malton Group comprises mainly the KhuanChoo Group, Bukit Rimau

Development and Domain Group. KhuanChoo Group started its construction and property

development businesses in 1980 and launched its maiden property development project,

Kuchai Business Centre, comprising 31 units of 5-storey shop offices in 1992 under

Khuan Choo Realty Sdn Bhd. Since then, it has successfully completed several projects

ranging from residential houses and condominiums to high-rise office buildings in the

Klang Valley. Bukit Rimau Development Sdn Bhd is the developer of the integrated

self-contained Bukit Rimau Township spanning over 358 acres of development land in

Shah Alam neighbouring the Kota Kemuning Township. The development is strategically

located in the vicinity of many major fast growing areas in the Klang Valley such as Shah

Alam, Subang Jaya, Bandar Sunway and Klang. With its innovative resort lifestyle

concept, the project has received consistent support and high take-up rate since its first

launch. Domain Group carries out construction and project management activities.

Domain Resources Sdn Bhd, the holding company, has been the project manager for

various housing projects under Bank Negara Malaysia’s “Tabung Pusingan Perumahan

http://www.magnaprima.com.my/the-istana.php

http://www.magnaprima.com.my/the_avare_klcc.php

Terbengkalai” and “Tabung Pusingan Perumahan Kos Rendah” schemes since

1991. Under the schemes, the group has successfully rehabilitated and completed more

than 12,700 units of properties in Klang Valley, Penang, Johor and Melaka. Apart from

that, the group has also undertaken many construction projects awarded by multinational

corporations such as Carrefour Hypermarket, Pacific Dunlop Group, Robert Bosch Pte

Ltd, Tesco Hypermarket and many more. In 2002, Khuan Choo Group, Domain Group

and Bukit Rimau Development were injected into Gadek Capital Berhad, culminating in

its re-listing on the Main Board of Bursa Malaysia. On 20 February 2002, it assumed the

present name, Malton Berhad.

1.3 LITERITURE VIEW


1. Mulpha Land Bhd’s unit Mayfair Ventures Sdn Bhd has acquired two adjacent

parcels of leasehold land for RM116.1mil cash to develop into a mixed commercial

development with a gross development value (GDV) of about RM700mil. In a filing

with Bursa Malaysia, Mulpha Land said Mayfair acquired the land measuring 6.41

acres from Tropicana Gold & Country Resort Bhd, a wholly-owned subsidiary of

Tropicana Corp Bhd. Mulpha Land said that it is upon completion of the proposed

acquisition, Mayfair Ventures intends to develop the land for mainly service

residences.

2. In a related party transaction involving its parent Mulpha International Bhd (MIB),

Mulpha Land Bhd (MLB) will undertake the development MIB’s land and

headquarters in Petaling Jaya into high-rise serviced residences. Located in Section

13 in Petaling Jaya, the property is currently vacant as MIB has moved to its new

headquarters in MenaraMudajaya in MutiaraDamansara. MIB holds a 67% stake in

MLB. With a gross development value of about RM200 million to RM250 million,

work on the development is expected to commence in the first half of 2015 and be

completed three years later, MLB said in an announcement to Bursa Malaysia two

days ago. MLB will buy the two-acre (0.81ha) tract of land from Mulpha Properties

(M) SdnBhd (MPM), a wholly owned subsidiary of Mulpha Group Services SdnBhd

(MGS) which, in turn, is a wholly owned subsidiary of MIB. The proposed

acquisition price is RM47.07 million cash. As part of the deal, MLB has proposed to

sell two parcels of land in Johor Baru to MIB’s wholly owned subsidiary, Leisure

Farm Equestrian Sdn Bhd. The two parcels will be sold for a total of RM19.67

million. Measuring 26,970 sq m (2.7ha), the first parcel has a price tag of RM14.92

million and has been designated for the development of apartments. Prior to the

proposed land sale, MLB was in the process of conceptualising the development of 67

villas there with golf course frontage. The second parcel, which covers an area of

5.172 sq m, is priced at RM4.75 million. The deal also involves a proposed 3-for-2

bonus issue by MLB. MLB said the proposed inter-company transactions are part of

MIB’s strategy to streamline its property development projects in Malaysia. MIB,

through Leisure Farm, will in future concentrate in the southern region, while MLB

will concentrate in the central and northern regions of Peninsular Malaysia.

1.3.2 Magna Prima Berhad

1. Magna Prima Bhd, whose shares rose 34% to hit limit up, said it was in the midst

of considering a potential fund raising exercise for the company according to a

reply issued to Bursa Malaysia Securities after Bursa had issued an unusual

market activity query to the company. It said its board was not aware of any other

factor which may have contributed to the unusual market activity. The company

will make the necessary announcement to the exchange at the appropriate time

upon finalisation of the terms and timing of the proposed fund raising exercise.

The property developer’s shares rose 34% and had risen as much as 30 cent to

RM1.18 before closing at RM1.16 with some 8.5 million shares done. At 2.38pm

on Wednesday, its shares rose four cent to RM1.20 with some six million shares

traded between RM1.10 and RM1.33. The FBM KLCI inched higher, up 0.24

points to 1,786.63. Turnover was 871.61 million valued at RM1.158bil. There

were 362 gainers, 284 losers and 308 counters unchanged. The group is involved

in the high-end development of The Avare, KLCC and The Istana in Melbourne.

2. Magna Prima Bhd expects to launch several projects with a gross development

value (GDV) of over RM2 billion. It is planning to build the retail mall, which is

phase 3, in the second quarter this year. This will run concurrently with the

serviced apartment project. The apartments and the retail mall are slated for

completion in 2015, while the construction of the office blocks is estimated to be

completed in 2014. About 80% of phase one of the development consisting of

office blocks has been snapped up. The niche property developer is planning to

embark on two more projects this year. One of them is on a parcel of land in

Petaling Jaya, Selangor, which the company purchased for RM23.03 million. The

76,757 sq ft tract will house 36 shop lots with a GDV of RM68 million. The shops

are expected to be completed in 18 months after commencement of works. Magna

Prima also plans to commence its RM1.4 billion mixed development in Section

15.The company acquired the 20-acre land last September 2012 from PCM

BinaSdnBhd for RM100 million. It was settled with RM70 million in cash and

RM30 million in shares amounting to a 30% stake in Magna Prima unit, Magna

Ecocity Sdn Bhd

1.3.3 Malton Berhad

1. Malton Bhd's share price rose to a high of 91 cent in heavy trade on reports about

its purchase of Pusat Bandar Damansara from Johor Corp. Malton was up rose 4.5

cent to 88 cent. There were 47.55 million shares traded between 85 cent and 91

cent. The FBM KLCI was up 3.01 points to 1,790.81. Turnover was 539.56

million shares done at RM331.9mil. To recap, JCorp and Malton were embroiled

in a legal case in the courts as Malton-related entities were seeking to enforce a

2009 agreement, whereby Johor Corp had supposedly agreed to sell Pusat Bandar

Damansara for RM700mil. In the latest development, StarBiz reported Johor

Corp chief executive officer Datuk Kamaruzzaman Abu Kassim as saying on May

29 that the deal involving the sale of its prized real estate asset Pusat Bandar

Damansara to Malton would go ahead as planned within six months, subject to

conditions being met.

2. The legal tussle between MaltonBhd and Johor Corp (JCorp) over the prized

Pusat Bandar Damansara (PBD) development has been resolved, according to

Malton deputy chairman Guido Paul Philip Joseph Ravelli. JCorp and Malton had

been embroiled in a legal tussle as Malton-related entities were seeking to enforce

a 2009 agreement whereby JCorp had supposedly agreed to sell PBD for

RM700mil. Malton shareholders unanimously approved the property exchange

exercise with JCorp. JCorp will be exchanging PBD with Malton for a 20-storey

commercial building in Petaling Jaya known as V Square. The deal also involved

Malton-linked companies paying JCorp-linked companies RM500mil cash.

According to Malton’s previous announcements, chairman Tan Sri Desmond Lim

Siew Choon-controlled unit Impian Ekspresi Sdn Bhd’s preliminary plan to

redevelop PBD included the construction of five new towers – two office and

three residential – as well as a suburban mall in the commercial space. Analysts

reckoned that PBD could be the next growth area in view of Lim’s success with

the Pavilion project in Kuala Lumpur. The redevelopment could exceed RM10bil

in gross development value, with construction lasting for no less than six years.

The market is expecting Lim to turn PBD into another property play with his

golden touch.

CHAPTER 2

FROM FINANCIAL ACCOUNTING POINT OF VIEW

2.1 IFRS101 PRESENTATION OF FINANCIAL STATEMENT

Financial statements shall present fairly the financial position, financial performance and cash

flows of an entity. Fair presentation requires the faithful representation of the effects of

transactions, other events and conditions in accordance with the definitions and recognition

criteria for assets, liabilities, income and expenses set out in the Framework. The application of

FRSs, with additional disclosure when necessary, is presumed to result in financial statements

that achieve a fair presentation. 16 An entity whose financial statements comply with FRSs shall

make an explicit and unreserved statement of such compliance in the notes. An entity shall not

describe financial statements as complying with FRSs unless they comply with all the

requirements of FRSs.

An entity cannot rectify inappropriate accounting policies either by disclosure of the

accounting policies used or by notes or explanatory material. In the extremely rare circumstances

in which management concludes that compliance with a requirement in an FRS would be so

misleading that it would conflict with the objective of financial statements set out in the

Framework, the entity shall depart from that requirement in the manner set out in paragraph 20 if

the relevant regulatory framework requires, or otherwise does not prohibit, such a departure.

When an entity has departed from a requirement of an FRS in a prior period, and that

departure affects the amounts recognised in the financial statements for the current period, it

shall make the disclosures set out in paragraph 20(c) and (d). When preparing financial

statements, management shall make an assessment of an entity’s ability to continue as a going

concern. An entity shall prepare financial statements on a going concern basis unless

management either intends to liquidate the entity or to cease trading, or has no realistic

alternative but to do so. When management is aware, in making its assessment, of material

uncertainties related to events or conditions that may cast significant doubt upon the entity’s

ability to continue as a going concern, the entity shall disclose those uncertainties. When an

entity does not prepare financial statements on a going concern basis, it shall disclose that fact,

together with the basis on which it prepared the financial statements and the reason why the

entity is not regarded as a going concern.

An entity shall prepare its financial statements, except for cash flow information, using the

accrual basis of accounting and shall present separately each material class of similar items. An

entity shall present separately items of a dissimilar nature or function unless they are immaterial.

Other than that, an entity shall not offset assets and liabilities or income and expenses, unless

required or permitted by an FRS. An entity shall present a complete set of financial statements

including comparative information at least annually. When an entity changes the end of its

reporting period and presents financial statements for a period longer or shorter than one year, an

entity shall disclose, in addition to the period covered by the financial statements are the reason

for using a longer or shorter period, and the fact that amounts presented in the financial

statements are not entirely comparable.

Comparative information except when FRSs permit or require otherwise, an entity shall

disclose comparative information in respect of the previous period for all amounts reported in the

current period’s financial statements. An entity shall include comparative information for

narrative and descriptive information when it is relevant to an understanding of the current

period’s financial statements. When the entity changes the presentation or classification of items

in its financial statements, the entity shall reclassify comparative amounts unless reclassification

is impracticable. When the entity reclassifies comparative amounts, the entity shall disclose the

nature of the reclassification, the amount of each item or class of items that is reclassified and the

reason for the reclassification. When it is impracticable to reclassify comparative amounts, an

entity shall disclose the reason for not reclassifying the amounts and the nature of the

adjustments that would have been made if the amounts had been reclassified.

In the financial statement, an entity shall clearly identify the financial statements and

distinguish them from other information in the same published document. An entity also shall

present current and non-current assets, and current and non-current liabilities, as separate

classifications in its statement of financial position in accordance with paragraphs 66–76 except

when a presentation based on liquidity provides information that is reliable and more relevant.

When that exception applies, an entity shall present all assets and liabilities in order of liquidity.

Whichever method of presentation is adopted, an entity shall disclose the amount expected to be

recovered or settled after more than twelve months for each asset and liability line item that

combines amounts expected to be recovered or settled no more than twelve months after the

reporting period, and more than twelve months after the reporting period.

An entity shall classify an asset as current when it expects to realise the asset, or intends to

sell or consume it, in its normal operating cycle, it holds the asset primarily for the purpose of

trading and it expects to realise the asset within twelve months after the reporting period or the

asset is cash or a cash equivalent (as defined in FRS 107) unless the asset is restricted from being

exchanged or used to settle a liability for at least twelve months after the reporting period. An

entity shall classify all other assets as non-current. An entity shall classify a liability as current

when it expects to settle the liability in its normal operating cycle, it holds the liability primarily

for the purpose of trading, the liability is due to be settled within twelve months after the

reporting period and it does not have an unconditional right to defer settlement of the liability

for at least twelve months after the reporting period (see paragraph 73). Terms of a liability that

could, at the option of the counterparty, result in its settlement by the issue of equity instruments

do not affect its classification. An entity shall classify all other liabilities as non-current. An

entity shall disclose information that enables users of its financial statements to evaluate the

entity’s objectives, policies and processes for managing capital.

2.2 IFRS 116 PROPERTY PLANT AND EQUIPMENT

This Standard clarifies that an entity is required to apply the principles of this Standard to items

of property, plant and equipment used to develop or maintain biological assets and mineral rights

and mineral reserves such as oil, natural gas and similar non-regenerative resources. Recognition

subsequent cost shows an entity evaluates under the general recognition principle all property,

plant and equipment costs at the time they are incurred. Those costs include costs incurred

initially to acquire or construct an item of property, plant and equipment and costs incurred

subsequently to add to, replace part of, or service an item. FRS 1162004 contained two

recognition principles. An entity applied the second recognition principle to subsequent costs.

Measurement at recognition asset dismantlement, removal and restoration costs shows the cost of

an item of property, plant and equipment includes the costs of its dismantlement, removal or

restoration, the obligation for which an entity incurs as a consequence of installing the item. Its

cost also includes the costs of its dismantlement, removal or restoration, the obligation for which

an entity incurs as a consequence of using the item during a particular period for purposes other

than to produce inventories during that period. FRS 1162004 included within its scope only the

costs incurred as a consequence of installing the item. Measurement at recognition asset

exchange transactions shows an entity is required to measure an item of property, plant and

equipment acquired in exchange for a non-monetary asset or assets, or a combination of

monetary and non-monetary assets, at fair value unless the exchange transaction lacks

commercial substance. Under FRS 1162004, an entity measured such an acquired asset at fair

value unless the exchanged assets were similar. Measurement after recognition is revaluation

model if fair value can be measured reliably, an entity may carry all items of property, plant and

equipment of a class at a revalued amount, which is the fair value of the items at the date of the

revaluation less any subsequent accumulated depreciation and accumulated impairment losses.

Under FRS 1162004, use of revalued amounts did not depend on whether fair values were

reliably measurable. Depreciation unit of measure happened when entity is required to determine

the depreciation charge separately for each significant part of an item of property, plant and

equipment. FRS 1162004 did not as clearly set out this requirement. Depreciation depreciable

amount explain that entity is required to measure the residual value of an item of property, plant

and equipment as the amount it estimates it would receive currently for the asset if the asset were

already of the age and in the condition expected at the end of its useful life. FRS 1162004 did not

specify whether the residual value was to be this amount or the amount, inclusive of the effects

of inflation, that an entity expected to receive in the future on the asset’s actual retirement date.

Depreciation period shows that an entity is required to begin depreciating an item of property,

plant and equipment when it is available for use and to continue depreciating it until it is

derecognised, even if during that period the item is idle. FRS 1162004 did not specify when

depreciation of an item began and specified that an entity should cease depreciating an item that

it had retired from active use and was holding for disposal. Derecognition date explain that an

entity is required to derecognise the carrying amount of an item of property, plant and equipment

that it disposes of on the FRS 116 date the criteria for the sale of goods in FRS 118 Revenue

would be met. FRS 1162004 did not require an entity to use those criteria to determine the date

on which it derecognised the carrying amount of a disposed-of item of property, plant and

equipment. An entity is required to derecognise the carrying amount of a part of an item of

property, plant and equipment if that part has been replaced and the entity has included the cost

of the replacement in the carrying amount of the item. FRS 1162004 did not extend it

derecognition principle to such parts; rather, its recognition principle for subsequent expenditures

effectively precluded the cost of a replacement from being included in the carrying amount of the

item. Derecognition gain classification explain that an entity cannot classify as revenue a gain it

realises on the disposal of an item of property, plant and equipment. FRS 1162004 did not

contain this provision.

2.3 IFRS 110 EVENT AFTER REPORTING PERIOD

The objective is to prescribe when an entity should adjust its financial statements for events after

the reporting period and the disclosures that an entity should give about the date when the

financial statement were authorised for issue and about events after the end of the reporting

period. Adjusting events an entity shall adjust the amounts recognised in its financial statements

to reflect adjusting events after the end of the reporting period. For examples of adjusting events

are the settlement after the end the reporting period of a court case that confirms that the entity

had a present at the end of the reporting period the receipt of information after the end of the

reporting period indicating that an asset was impaired at the end of the reporting period the

discovery of fraud or errors that show that the financial statements are incorrect.

Non-adjusting events an entity shall not adjust the amounts recognised in its financial

statements to reflect non-adjusting events after the end of the reporting period. Examples of non-

adjusting events are,a major business combination or disposal a major subsidiary after reporting

date, announcement of plans to discontinue an operation. The destruction of a major production

plant by a fire after the reporting date entering into significant commitments or contingent

liabilities. Commencement major litigati arising solely out of events occuring after reporting

date.

CHAPTER 3

FROM FINANCIAL MANAGEMENT POINT OF VIEW

3.1 Profitability Ratio

3.1.1 Net profit ratio

Net profit ratio = Net profit x 100%

Net sales

Mulpha Land (‘000) Magna Prima (‘000) Malton Berhad (‘000)

917 x 100%

17,850

= 5.13 %

8,372 x 100%

201,743

= 4.15%

72,694 x 100%

462,392

= 15.72%

3.1.3 Gross profit ratio

Gross profit ratio = Gross profit x 100%

Net sales


4,922 x 100%

17,850

= 27.57%

35,992 x 100%

201,743

= 17.84 %

162,078 x 100%

462,392

= 35.05%

3.1.3 Return on capital employed

Return on capital employed = Net profit x 100%

Capital employed

Capital employed = Total asset – current liabilities

@

Owner’s equity + non-current liabilities


917

263,030

= 0.35%

8,372

722,125

= 1.16%

72,694

1,360,139

= 5.34%

3.2 Activity ratio

3.2.1 Inventory turnover ratio

Inventory turnover ratio = Cost of goods sold

Average inventory

Average inventory = Opening + closing inventory

2


12,928

68,238

= 0.19 times

165,751

6,201

=27 times

300,314

50,451

= 6 times

3.2.2 Receivable turnover ratio

Receivable turnover ratio = Net sales

Average debtors balance


17,850

4,699

= 3.8 times

201,743

57,634

= 3.5 times

462,392

68,280

6.8 times

3.3 Liquidity ratio:

3.3.1 Current ratio

Current ratio = Current assets

Current liabilities


110,452

57,739

= 1.91

328,240

227,892

= 1.44

663,010

400,773

= 1.65

3.3.2 Quick ratio

Quick ratio = Current asset – inventory- prepaid assets

Current liabilities


110,452 – 136,475

57,739

= -0.45

328,240 – 12,402

227,892

= 1.39

663,010 – 100,901- 328

400,773

=1.4

CHAPTER 4

FROM MANAGERIAL POINT OF VIEW

4.1 CORPORATE GOVERNANCE


The Board

The Board has the overall responsibility for corporate governance, strategic direction,

development and control of the Company. The Board has adopted all the six specific

responsibilities as listed in the Code. The Board has adopted a five year strategic plan and

key performance indicators were developed towards achieving the objectives. The Board

meets at least four times a year, with additional meetings convened when necessary. Due

notice is given for the meetings and matters to be dealt with. In the intervals between Board

meetings, Board decisions for urgent matters are obtained via circular resolutions to which

are attached sufficient information required for an informed decision. Four Board meetings

were held during the year ended 31 December 2011.

Board Balance

The Board currently has six members comprising two Executive Directors and four Non-

Executive Directors. Of the four Non-Executive Directors, three are independent, thereby

fulfilling the one-third requirement. A brief profile of each Director is presented on pages

10 to 11. The Chairman is responsible for ensuring Board effectiveness and conduct. The

Chief Executive Officer oversees the dayto-day operations and implementation of the

Board’s policies and decisions. There is active and unrestricted participation in the

deliberations and decision making of the Board. The Directors have extensive working

experience and are from diverse professional backgrounds with a wide range of business

and financial experience and knowledge. There is proper balance in the Board with the

presence of the Independent Directors. The role of the Independent Directors is particularly

important as they provide unbiased and independent opinions and advice. Mr Lim Kok

Beng has been appointed by the Board as the Independent Non-Executive Director to whom

any concern regarding the Company may be conveyed.

Supply of Information

All Directors are provided with an agenda and a set of Board papers in sufficient time prior

to a Board meeting to enable the Directors to review and consider the items to be discussed

at the Board meeting. The Board papers include, inter alia, the following:-

1. quarterly progress report by the Chief Executive Officer;

2. quarterly financial report; and

3. Minutes/decisions of meetings of the Committees of the Board.

Directors may obtain independent professional advice in the furtherance of their duties at

the Company’s expense. All Directors have access to the advice and services of the

Company Secretary in carrying out their duties.

Appointments to the Board

The Nomination Committee recommends the appointment of new Directors to the Board.

Visits to the Group’s businesses and meetings with senior management will be arranged for

the new Directors to facilitate their understanding of the Group. As part of the Continuing

Education Programme, the Directors attended seminars and courses to keep abreast of

current and regulatory matters.

Re-election

The Company’s Articles of Association provide for all Directors who are appointed by the

Board to be subject to election by the shareholders at the first opportunity after their

appointment. The Articles also provide that at least one third of the remaining Directors be

subject to re-election by rotation at each Annual General Meeting provided always that all

Directors shall retire from office at least once every three years but shall be eligible for re-

election.

Board Committees

The Board has delegated specific responsibilities to the following Committees:-

1. Audit Committee

2. Nomination Committee

The Nomination Committee comprises exclusively of Non-Executive Directors, the

majority of whom are independent, with Mr Chung Tze Hien as Chairman and Mr

Lim Kok Beng and Lt. Col (R) Abdul Jalil Bin Abdullah as members. The main

responsibilities of the Nomination Committee are as follows:

i. recommend new nominees to the Board as well as Board Committees;

ii. assist the Board in annually reviewing its required mix of skills, experience

and other qualities of the Non- Executive Directors; and

iii. assessing the effectiveness of the Board and Board Committees and the

contribution of each Director. During the year, the Nomination Committee

met once and the meeting was attended by all its members.

3. Remuneration Committee

The Remuneration Committee comprises of Non-Executive Directors. Its members

are Lt. Col (R) Abdul Jalil Bin Abdullah as Chairman and Mr Chung Tze Hien and

Mr Lim Kok Beng as members. The main responsibilities of the Remuneration

Committee are to recommend to the Board the following:-

i. remuneration package of each Director of the Company; and

ii. incentive schemes, profit sharing arrangements or the like for management or

other employees.

During the year, the Remuneration Committee met once and the meeting was

attended by all its members.

DIRECTORS’ REMUNERATION

The Company has adopted the objectives as recommended by the Code to determine the

remuneration of the Directors so as to ensure that the Company attracts and retains the

Directors of the calibre needed to run the Group successfully. In the case of Executive

Directors, the remuneration is structured so as to link rewards to corporate and individual

performance. For Non-Executive Directors, the level of remuneration reflects the

experience and level of responsibilities undertaken by each Director.

The Remuneration Committee recommends to the Board the remuneration

(including fees) for each Director of the Company. Fees are subject to the approval of the

shareholders. Reasonable expenses incurred by the Directors in the course of carrying out

their duties are reimbursed by the Company.

For the year ended 31 December 2011, the Directors’ remuneration of the Company

amounted to RM90,000 representing fees payable to the three Independent Non-Executive

Directors.

SHAREHOLDERS

Communication between the Company and Investors

The Board acknowledges the need for shareholders to be informed of all material business

matters of the Company. Announcements to Bursa Malaysia are made on significant

developments and matters within the Group. Financial results are released on a quarterly

basis to provide shareholders with an overview of the Group’s performance.

Shareholders’ Meeting

The Company’s practice is to give as much notice as possible to shareholders of its general

meetings. In addition, notices of general meetings with sufficient information of business to

be dealt with thereat are published in one national newspaper to provide for wider

dissemination of such notice to encourage shareholders participation. General meetings are

a mean of direct communication and interaction between the Company and shareholders. It

is the policy of the Board to have all its members present at shareholders’ meetings. At

such meetings, shareholders are encouraged to participate in the question and answer

session.

ACCOUNTABILITY AND AUDIT

Financial Reporting

In preparing the annual financial statements and quarterly announcements of results to

shareholders, the Board aims to present a balanced and understandable assessment of the

Group’s position and prospects. The Board considers that in preparing the financial

statements and announcements, the Group has used appropriate accounting policies and

standards, consistently applied and supported by reasonable and prudent judgements and

estimates.

Internal Control

The Board has an overall responsibility for the Group’s system of internal controls

covering not only financial controls but also operational and compliance controls as well as

risk management. This system can only provide reasonable and not absolute assurance

against material misstatement, loss or fraud. Please refer to the Statement on Internal

Control.

Audit Committee

The information on the Audit Committee is presented in the Audit Committee Report on

pages 20 to 21. Through the Audit Committee, the Company has established an appropriate

relationship with the Company’s auditors, both internal and external. The external auditors

attend the Audit Committee’s meetings when necessary and may meet the Audit

Committee without the presence of the management.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors are required by the Companies Act, 1965 to prepare financial statements

which are in accordance with applicable approved financial reporting standards and give a

true and fair view of the financial position of the Group and Company at the end of the

financial year and of the financial performance and cash flows of the Group and Company

for the financial year.

In preparing the financial statements, the Directors have:

i. ensured that the financial statements are in accordance with the provisions of the

Companies Act, 1965, the applicable financial reporting standards and the Listing

Requirements of Bursa Malaysia;

ii. adopted the appropriate accounting policies and applied them consistently and

iii. made judgements and estimates that are prudent and reasonable.

The Directors are responsible for ensuring that the Group and Company keep proper

accounting records which disclose with reasonable accuracy the financial position of the

Group and Company and which enables them to ensure that the financial statements

comply with the Companies Act, 1965.

The Directors have the general responsibility for taking such steps as are reasonably

open to them to safeguard the assets of the Group and to detect and prevent fraud and other

irregularities.

OTHER INFORMATION

Material Contracts

Other than those disclosed in the financial statements, there were no material contracts

entered into by the Company and its subsidiaries involving the interests of Directors and

major shareholders.

CORPORATE SOCIAL RESPONSIBILITY

Mulpha Land Berhad has maintained unwavering support to the protection of the

environment and mitigating the impacts of our operations on the surroundings where we

operate. This is the core to our corporate social responsibility conduct and practices. As a

property development company, energy saving and waste avoidance are the central

components of our commitment to maintain a sustainable development and utilising natural

resources in a responsible manner. Enclave Bangsar project is built with GBI (Green

Building Index) green and CONSQUAS (Construction Quality Assessment System) BCI

Certification. We strive to enhance and incorporate energy saving features to all our new

developments with new technology and latest practices in the market. The blueprint of

Enclave Bangsar will include design specifications that adopt green features for efficiency

in water and energy usage with a Green Architectural Concept in mind. Rainwater will be

required to be collected and reuse for landscaping. Ground levels of each unit feature added

openings for natural lighting and cross ventilation. This will aid in reducing the

requirement for artificial lighting.


The Board of Directors (“Board”) recognizes that the practice of good corporate

governance is a fundamental element in the Group’s continued growth and success. The

Board remains fully committed to ensuring that the highest standards of corporate

governance, based on the Principles and Best Practices set out in the Malaysian Code on

Corporate Governance (“Code”) are applied and maintained throughout the Group with the

ultimate objective of safeguarding and enhancing shareholder value as well as the financial

performance of the Group. The Board confirms that the Group has complied with the best

practices in the Code throughout the financial year ended 31 December 2011.

BOARD OF DIRECTORS

The Board

The Group is led and controlled by an experienced Board, comprising members from

diverse professional background, having expertise and experience, skills and knowledge in

fields such as technical, legal, financial, corporate and management skills. The Board is

responsible for the overall management of the Group and in ensuring that the Group is

managed with integrity, transparency and accountability. The Board will review and adopt

strategic plans for the Group, set direction, oversee and manage the conduct of the

business. Key matters such as approval of annual and quarterly results, acquisitions and

disposals, capital expenditures, budgets, material contracts and business engagements, and

succession planning for top management are decided upon by the Board.

The Board is assisted by various Committees including the Management Committee,

which oversees the day-to-day operations of the Group including review of monthly

performance, budgets, capital investment proposals and many other operating issues arising

out of the ordinary course of business. The Board has delegated specific responsibilities to

other Board committees, which operate within clearly defined terms of reference. Standing

committees of the Board include the Audit Committee, Nomination Committee and

Remuneration Committee. Other committees such as ESOS Committee and Tender

Committee were set up for specific purposes. Reports of proceedings and outcome of

various Committee meetings were submitted to the Board.

BOARD MEETINGS

Supply of Information

The agenda for every Board meeting, together with relevant management reports, proposal

papers and supporting documents are furnished to all Directors for their perusal in advance

of the Board meeting date, so that the Directors have ample time to review matters to be

deliberated at the Board meeting to enable them to discharge their duties. Minutes of every

Board meeting are circulated to all Directors for their perusal prior to confirmation of the

minutes at the following Board meeting.

The Board report contains relevant information on the business of the meeting,

which may include among others: -

• Performance of the Group

• Operational matters

• Business development issues and market responses

• Capital expenditure proposals

• Acquisitions and disposals proposals

• Appointment of senior executives

The Directors have full and timely access to all information within the Company, whether

as a full Board or in their individual capacity, in the furtherance of their duties. In addition,

the Board has ready and unrestricted access to all information within the Company and

Group as well as the advice and services of senior management and Company Secretary in

carrying out their duties. The Company Secretary is responsible for ensuring that Board

meeting procedures are followed and that applicable rules and regulations are complied

with. The Directors may also seek independent professional advice, at the Company

expense, if required.

Directors Training

All Directors are encouraged to attend talks, training programmes and seminars to update

themselves on new developments in the business environment during the year ended 31

December 2011. A directors’ training conducted by Epsilon Advisory Services Sdn Bhd

was held on 12 July 2011 and the topic was Regulatory Updates for Directors and

Executives. The Directors will continue to undertake other relevant programmes to further

enhance their skills and knowledge.

Appointment and Re-election to the Board

Appointments to the Board are made based on the recommendation of the Nomination and

Remuneration committee. In accordance with the Company’s Articles of Association, at

least one-third of the Directors are required to retire by rotation at each Annual General

Meeting but are eligible to offer themselves for re-election at the Annual General Meeting.

The Directors shall also retire from office at least once in three years but shall be eligible

for re-election.

THE AUDIT COMMITTEE

The Board is also assisted by the Audit Committee whose members, key function and

activities for the year under review are stated in pages 23 to 24 of the Annual Report.

THE NOMINATION COMMITTEE

The Board has established a Nomination Committee, which has the primary responsibility

to assess the suitability of candidates for nomination to the Board and to recommend such

appointments. The objective is to ensure independent assessment of appointments to the

Board. The Committee is also responsible for annual assessment of the skills mix and

experience possessed by Board members to ensure effectiveness of the Board, the other

committees of the Board and the contribution of individual Directors.

The Nomination Committee has three (3) members comprising three (3) Independent

Non Executive Directors. During the financial year ended 31 December 2011, three (3)

meetings were held.

THE REMUNERATION COMMITTEE

The Remuneration Committee reviews and recommends to the Board the remuneration

package of the executive directors and senior management of the Group with the main aim

of providing the level of remuneration sufficient to attract and retain key personnel needed

to run the Group successfully. The Remuneration Committee has three (3) members

comprising exclusively Independent Non Executive Directors. During the financial year

ended 31 December 2011, two (2) meetings were held.

EMPLOYEE SHARE OPTION SCHEME (ESOS) COMMITTEE

The ESOS Committee was established with delegated authority by the Board to administer

the ESOS of the Group in accordance with the Scheme’s by-laws and the exercise of any

discretion under the by-laws with regards to the eligibility of employees to participate in

the ESOS, share offers and share allocations and to attend to such other matters as may be

required. The ESOS Committee has five (5) members comprising two (2) Independent Non

Executive Directors and three (3) Executive Directors.

RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS

The Board recognizes the importance of communication and proper dissemination of

information to its shareholders and investors. Major corporate developments and

happenings in the Company have always been promptly announced to all shareholders, in

line with Bursa Securities’ objective of ensuring transparency and good corporate

governance practice.

The financial performance of the Group, major corporate developments and other

relevant information are promptly disseminated to shareholders and investors via

announcements of its quarterly performance, annual report and corporate announcements to

Bursa Securities. During the Annual General Meeting, the shareholders have opportunity to

enquire and comment on the Company’s performance and operations.


Financial Reporting

In its financial reporting via quarterly announcements of results, annual financial

statements and annual report presentations including the Chairman’s Statement and Review

of Operations, the Board of Directors provides a comprehensive assessment of the Group’s

performance and prospects for the benefit of shareholders, investors and interested parties.

The Audit Committee also assists the Board by scrutinizing the information to be disclosed,

to ensure accuracy and adequacy.

Internal Control

The Board has the overall responsibility of maintaining a system of internal control that

provides reasonable assurance of effective and efficient operations and compliance with

laws and regulations as well as with internal procedures and guidelines. The effectiveness

of the system of internal control of the Group was reviewed periodically by the Audit

Committee. The review covers the financial, operational as well as compliance controls.

Directors’ responsibility in financial reporting

The Board is responsible for the preparation of the annual financial statements of the Group

and to ensure that the financial statements give a true and fair view of the state of affairs of

the Group and its result and cash flow for the financial year. The Board has ensured that the

financial statements have been prepared in accordance with applicable approved

accounting standards in Malaysia, the requirements of the Companies Act 1965 and other

regulatory provisions. In preparing the financial statements, the Board has ascertained that

reasonable prudent judgment and estimates have been consistently applied and the

accounting policies adopted have been complied with. The Directors have a general

responsibility of taking reasonable steps to safeguard the assets of the Group and to prevent

and detect any irregularities.

Relationship with Auditors

Through the Audit Committee and the Board, the Group has established transparent and

appropriate relationship with the Group’s auditors, both internal and external. The Audit

Committee also met the external auditors twice in financial year 2011 without the presence

of the management.

ADDITIONAL COMPLIANCE INFORMATION

Pursuant to Paragraph 9.25 of the Main Market Listing Requirements of Bursa Malaysia

Securities Berhad Share Buy-Back During the financial year, the Company has not

undertaken any share buy-back exercise.

Option, Warrant and Convertible Securities

During the current financial year ended 31 December 2011, the Company issued

85,686,356 ordinary shares of RM0.25 each for cash, pursuant to the exercise of

85,686,356 MPB Warrants 2006/2011 (“Warrants”) at the exercise price of RM0.37 per

ordinary share, details of which are disclosed in the Directors’ Report on page 29. Warrants

were exercised prior to the expiry of the subscription Rights of Warrants 2006/2011 at

5.00p.m on Monday, 26 September 2011. There was no option granted and the Company

did not issue any convertible securities during the financial year ended 31December 2011.

American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) Programme

During the financial year, the Company did not sponsor any ADR or GDR Programme.

Imposition of Sanctions/Penalties

There were no sanctions and/or penalties imposed on the Company or its subsidiaries,

Directors or management by the relevant regulatory bodies.

Non-Audit Fees

No amounts of non-audit fees were paid to external auditors by the Group during the

financial year ended 31 December 2011.

Variation in results

There were no material variances between the audited results for the financial year ended

31 December 2011 and the unaudited results previously announced.

Profit Guarantee

No profit guarantee was received by the Company during the financial year.

Material Contracts

There were no material contracts of the Company and its subsidiary companies which

involve Directors and major shareholders interest, either still subsisting at the end of

financial year ended 2011 or entered into since the end of the previous financial year


Magna Prima continues to make strides towards integrating CSR into our working practices

and long term strategic goals. Highlights during FY11 include our continued support of

Habitat for Humanity’s house builds in the Greater Klang Valley area by lending our site

supervisory and building expertise. The Group also extended financial assistance to

organizations serving the sickly and handicapped, fund raising activities organized by

children’s homes, to associations promoting the arts and societies encouraging healthy

lifestyles via sporting activities. Internally, we continue place an emphasis on nurturing and

developing our greatest asset – our employees. To this end, employees continue to be

encouraged to pursue professional development courses in various areas ranging from risk

management to accounting, construction and property management, information

technology, seminars on updates in the housing and developers acts and soft skills training

in topics such as leadership and self-development.

4.1.3 Malton Berhad

THE BOARD

1. Board Membership

The Group is led and controlled by an effective Board. Presently, the Board comprises

four executive directors and three independent non-executive directors as set out below.

During the financial year, Mr Chong Wan Ping who was Managing Director resigned on

1 April 2011. The present composition of the Board complies with the requirement of the

Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Main Market

Listing Requirements”). There is balance in the Board as each independent director

brings invaluable judgement to bear on issues of strategy, performance, resource

allocation, risk management and standards of conduct. In the opinion of the Board, the

minority shareholders are fairly well represented by the presence of these highly capable

and credible independent non-executive directors. Mr Guido Paul Philip Joseph Ravelli is

the senior independent non-executive director. Any concerns relating to the Group may

be conveyed to him.

2. Directors’ Duties and Responsibilities

Malton is led by a team of experienced directors. Each director comes from different

professional background bringing depth and diversity of expertise, a wide range of

experience and perspective to the business operations. There is a clear division of role

and responsibilities of the Executive Chairman and the Managing Director to ensure

balance of power and authority. The Executive Chairman is primarily responsible for the

vision and strategic direction of the Group. The Executive Directors including Managing

Director are responsible for the implementation of the objectives and goals of the Group

and operational matters of the Group. The Deputy Chairman, an independent non-

executive director, ensures that the Board practices good governance in discharging its

duties and responsibilities. The Board, as a whole, retains overall control of the Group.

As a matter of course, from time to time, the Board examines its size with a view to

determine the impact of its number upon its effectiveness.

3. Board Meetings

The Board meets at least five times a year, with additional matters addressed by way of

circular resolutions and additional meetings held as and when necessary. The Board met

five times during the financial year ended 30 June 2011.

4. Board Committees

As recommended by the Code, the Board may establish Board Committees to assist the

Board in discharging its duties. The Board has formed the following Committees, each

with its own functions and responsibilities. All Board Committees report to the Board.

• Audit Committee

• Nominating Committee

• Remuneration Committee

5. Appointment to the Board

It is recommended in Part 2 of the Code that the assessment of new candidates for

appointment as directors is to be made by the Nominating Committee. The decision for

appointment of new directors is a matter for deliberation by the Board as a whole. The

Nominating Committee of Malton comprises exclusively independent non-executive

directors. The members of the Nominating Committee are as follows:-

• Guido Paul Philip Joseph Ravelli

• Hj Ahmad Bin Hj Ismail, PJK

• Tan Peng Sheung

The authorities, functions and responsibilities of the Nominating Committee are set out in

its terms of reference. The main objectives of the Nominating Committee are to review,

recommend and consider candidates for appointment to the Board, to assess the

effectiveness and continually seek ways to upgrade the effectiveness of the Board as a

whole and the Committees of the Board. It also assesses the contribution of each

Director, executive or independent non-executive. During the financial year ended 30

June 2011, the Nominating Committee met once to review the performance of all the

Board members, individually and collectively as a Board.

6. Appointment and Re-election of the Directors

In accordance with the Articles of Association of the Company, the Board can appoint

any person to be a Director as and when it is deemed necessary. Any person so appointed

shall hold office until the next Annual General Meeting at which time he will be subject

to election by the shareholders. In compliance with the Main Market Listing

Requirements, the Articles of Association of the Company provide that all Directors of

the Company, including the Managing Director shall retire from office at least once every

three years but be eligible for re-election.

7. Directors’ Training and Development

The Board of Directors as a whole will assess, then establish and propose training and

development programmes which in its view are essential and beneficial to the Directors

in carrying out his or her duties and responsibilities as a Director. The Directors will

continuously review conferences, seminars and forums based on the suitability and

timing. In addition to attending conferences, seminars and other training programmes, the

Directors constantly keep up to date with all types of reading materials concerning

market development, industry news, changes in the regulations, related issues and all

happenings. All of the Directors have attended the Directors’ Mandatory Accreditation

Programme (“MAP”) as required by Bursa Malaysia Securities Berhad. During the

financial year ended 30 June 2011, the Directors attended various seminar and forums,

amongst others, industry-related programmes including the 4th Malaysian Property

Summit 2011, Green Tour, Tall Buildings – Cost & Construction Challenges and

Development Strategies for Greater KL & Klang Valley, programmes organised by Bursa

Malaysia including The Board’s Responsibility for Corporate Culture and Assessing the

Risk and Control Environment, Brand Creation with Blue Ocean Strategy and World

Expo 2010 held in Shanghai.

8. Supply and Dissemination of Information

Board meetings are structured with pre-determined agendas. Appropriate and complete

Board papers are prepared prior to each Board meeting. These are distributed to the

Board in sufficient time to enable the Directors to obtain further information and

explanation, where necessary. Directors also have unfettered access to all information

within the Group in furtherance of their duties. There are matters reserved specifically for

the Board’s decision including the approval of acquisitions and disposals of assets and

investments that are material to the Group. The Directors in their individual capacity or

the Board as a whole, in furtherance of their duties, have access to independent

professional advice, if and when they deem necessary, and at the Group’s expense. All

Directors have access to the advice and services of the Company Secretary and the

Internal Audit Department.

9. Directors’ Remuneration

The Company has adopted the principle recommended in the Code whereby the level of

remuneration of the Directors is sufficient to attract and retain Directors needed to

manage the Group successfully. The remuneration system is structured to link rewards to

corporate and individual performance in the case of executive directors. In the case of

non-executive directors, the level of remuneration shall reflect the level of responsibilities

undertaken by the particular non-executive director concerned.

THE BOARD (cont’d)

Directors’ Remuneration (cont’d)

To assist the Board in the discharge of its responsibilities in this matter, the Board

endorsed the formation of a Remuneration Committee on 24 October 2002. The

composition of the Remuneration Committee is as follows:-

• Guido Paul Philip Joseph Ravelli

• Chua Thian Teck

• Hj Ahmad Bin Hj Ismail, PJK

The authorities, functions and responsibilities of the Remuneration Committee are set out

in its terms of reference. The Committee will review the remuneration packages of each

individual Executive Director from time to time to ensure that the remuneration packages

remain competitive in order to attract and retain competent executives who can manage

the Group successfully. Executive Directors play no part in decisions on their own

remuneration. The determination of remuneration packages of non-executive directors is

a matter of the Board as a whole. The independent non-executive directors do not partake

in decisions affecting their remuneration. During the financial year ended 30 June 2011,

the Remuneration Committee had met to discuss the remuneration structure and packages

for review by the Board.

DIALOGUE BETWEEN THE COMPANY AND INVESTORS

The Board values and encourages dialogues with the shareholders to establish better

understanding of the Company’s objectives and performance. The Annual General

Meeting provides an appropriate forum for the shareholders to participate in questions

and answers sessions. The Company is committed to disseminate information in strict

adherence to the disclosure requirements of the Main Market Listing Requirements. The

Company ensures that material information relating to the Group is disclosed by way of

announcement to the Bursa Malaysia Securities Berhad as required. The Company has

established its website, www.malton.com.my which allows shareholders and the public,

access to corporate information, financial statements, news and events relating to the

Group.


The Board recognises the importance of the Group in its role as a responsible corporate

citizen. The Group’s business and operation practices reflect its values and the interests

of all stakeholders including its customers, investors, employees, the community and

environment. The Group is committed to conduct its business in socially and

environmentally conscious and responsible approach. The Board is aware that as the

Group continues to grow, so will its social responsibility efforts. It will have to make

frequent adjustments in response to economic and regulatory changes. It reviews its

product development and operational practices and procedures from time to time,

considering and adopting sustainable methods and processes where applicable and

feasible. As an employer, the Group is committed in the development and training needs

of its employees, both technical and soft skills. As a conscientious developer, the Group

undertakes community campaigns to create awareness among the community on security

and selfpreservation matters. The Group has and will continually support humanitarian

causes, educational and social development of the society through donation, sponsorships

and participation in fund raising and community events which include the involvement

and efforts of the employees of the Group.

MATERIAL CONTRACTS

There were no material contracts involving the interests of the Directors and/or major

shareholders of the Company other than those disclosed in the Related Party Disclosure

presented in the Financial Statements of this Annual Report.

NON-AUDIT FEES PAID TO EXTERNAL AUDITOR

Non-audit fees paid, during the financial year ended 30 June 2011, to Messrs Deloitte &

Touche amounted to RM129,250.00.

RECURRENT RELATED PARTY TRANSACTIONS

The Company was given shareholders’ mandate to enter into Recurrent Related Party

Transactions for the sale of trading stock properties with related parties (“Recurrent

Transactions”) at the Fifteenth Annual General Meeting held on 25 November 2010.


1. Financial Reporting

In presenting the annual financial statements and quarterly results, the Board aims to

present a balanced and understandable assessment of the Group’s position and prospects.

The Audit Committee assists the Board in examining information to be disclosed to

ensure the accuracy and authenticity of such information.

2. Relationship with the External Auditors

The Board has established a formal and transparent relationship with the auditors of the

Company. The role of the Audit Committee in relation to the external auditors is

described in the Audit Committee Report of this Annual Report.

STATEMENT ON INTERNAL CONTROL

The Board is committed to maintain a sound internal control system to safeguard the

shareholders’ interest and the Group’s assets. The Board has established an appropriate

control environment and risk management framework as well as reviewing its adequacy

and integrity.

1. Control Environment and Risk Management Framework

This is established to identify significant risks faced by the Group in its operating

environment. The Group continuously identifies and assesses impact of such risks and

develops necessary measures to control the risks.

2. Group Structure

This is achieved through clearly defined operating and reporting structures with clear

lines of accountability and responsibilities. Changes in the Group structure are duly

communicated to management team of the Group. In addition, details of directorships

within the Group are constantly highlighted to ensure that related parties are duly

identified, as necessary.

3. Internal Audit Function

In addition, the Group has an internal audit department which carries out the internal

audit function in the Group. The findings of the internal audit department are regularly

reported to the Audit Committee. The Audit Committee meets at least four times a year

with the Board to discuss significant issues found during the internal audit process and

make necessary recommendations to the Board.

4. Control Framework

Financial Information and Information System

Monthly management reports are prepared at subsidiary levels and subject to

review by senior management and the executive directors.

Performance Reporting and Monitoring

Quarterly financial statements are presented to the Audit Committee and the

Board for review and discussion.

Standardisation of Policies and Procedures

Standardised policies and procedures are implemented to address the financial and

operational controls of the Group.

DIRECTORS’ RESPONSIBILITY IN PREPARING THE FINANCIAL STATEMENTS

The Directors are required to prepare financial statements for each financial year which

give a true and fair view of the state of affairs of the Group at the end of the financial

year and of the results and the cash flow of the Group for the financial year. The

Directors are satisfied that, in preparing the financial statements of the Group for the

financial year ended 30 June 2011, the Group has adopted approved applicable

accounting standards in Malaysia and complied with the provisions of the Companies

Act, 1965.

CHAPTER 5

FROM AUDIT POINT OF VIEW

5.1 MULPHA LAND BERHAD

Responsibility

The Board of Directors (“the Board”) acknowledges responsibility for maintaining a sound

system of internal controls and for reviewing its adequacy and integrity. The system of

internal controls, designed to safeguard shareholders’ investments and the Group’s assets,

covers not only financial controls but also operational and compliance controls and risk

management. Such systems, however, are designed to manage rather than eliminate risks that

may hinder the achievement of the Group’s business objectives. Accordingly, the systems

can only provide reasonable and not absolute assurance against material misstatement, loss

and fraud.

Risk Management

Risk management is considered by the Board as an integral part of the business operations.

The risk management function is undertaken by the Risk Management Department of

Mulpha International Bhd, the Company’s holding company. The Risk Management

Committee of the holding company oversees the risk management process. All reports on

risk management are reviewed by the Audit Committee of the Company. The Group has in

place a risk management framework to identify, evaluate, monitor and manage risks that may

affect the Group’s businesses. The framework focuses on the property sector which is the

core business of the Group. Included in the framework is the Enterprise Risk. Management

Policy and Procedure which is based on the Australia/New Zealand standard 4630 : 2004,

one of the global authoritative standards for Enterprise Risk Management.

Key Elements of Internal Control

The other key elements of the Group’s internal control system include the following:-

clearly defined delegation of responsibilities, organisation structure and

appropriate authority limits have been established by the Board;

internal policies and procedures are in place which are updated as and when

necessary;

reporting systems are in place which generate financial and other reports for the

Board and management. Monthly management meetings are held during which

the reports are discussed and the necessary action taken;

annual business plans and budgets are prepared and actual performance is

reviewed against the budgets on a monthly basis and

the adequacy and effectiveness of the system of internal controls is continually

assessed by the Internal Audit Department of the holding company and reviewed

by the Audit Committee of the Company.

Internal Audit

The internal audit functions of the Group are performed by the Internal Audit Department of

the holding company. The Internal Audit Department undertakes the review of the system of

internal controls, procedures and operations so as to provide reasonable assurance that the

internal control system is sound, adequate and operating satisfactorily.

Monitoring and Review of the System of Internal Controls

During the year, a number of improvements to internal controls were identified and

implemented. No weaknesses were noted which have a material impact on the Group’s

financial performance or operations. The monitoring, reviews and reporting procedures and

systems in place give reasonable assurance that the controls are adequate and appropriate to

the Group’s operations and that risks are at an acceptable level. Such procedures and

systems, however, do not eliminate the possibility of human error, the deliberate

circumvention of control procedures by employees and others and the occurrence of

unforseeable circumstances.

The terms of reference of the Committee are as follows:-

Composition

The Committee shall be appointed by the Board from amongst the Directors of the Company.

The Committee shall comprise of not less than three members. All the members must be

Non-Executive Directors, with a majority of them being Independent Directors. At least one

member of the Committee must be a member of the Malaysian Institute of Accountants or

fulfil such other requirements as prescribed or approved by the Exchange. One of the

members of the Committee who is an Independent Director shall be appointed Chairman of

the Committee by the members of the Committee.

Meetings And Minutes

The Committee shall meet at least four times a year. A quorum shall be at least two members

present, the majority of whom shall be Independent Directors. The Committee may request

any member of the management and representatives of the external auditors to be present at

meetings of the Committee. Minutes of each Committee meeting are to be prepared and

distributed to each member of the Committee and the Board. The Company Secretary or his

Assistant shall be the Secretary of the Committee.

Authority

The Committee is authorised by the Board of Directors:-

to investigate any matter of the Company and its subsidiaries within its terms of

reference;

to seek any information it requires from any employee for the purpose of discharging

its functions and responsibilities and all employees are directed to cooperate with any

request made by the Committee;

to obtain legal or other independent professional advice and to secure the attendance

of outsiders with the experience and expertise if it considers it necessary to do so; and

to convene meetings with the external auditors, the internal auditors or both,

excluding the attendance of other Directors and employees of the Company and

subsidiaries, whenever deemed necessary.

Duties and Responsibilities

The duties and responsibilities of the Committee shall be as follows and will cover the

Company and its subsidiaries:-

to consider the appointment of external auditors, their terms of appointment and

reference and any questions of resignation or dismissal;

to review with the external auditors their audit plan, scope and nature of audit;

to review the quarterly and annual financial statements before submission to the

Board;

to review and assess the adequacy and effectiveness of the systems of internal control

and accounting control procedures;

to hear from and discuss with the external auditors any problem and reservation

arising from their interim and final audits or any other matter that the external

auditors may wish to highlight;

to review the internal audit programme, consider the findings of internal audit and the

actions and steps taken by management in response to such findings and ensure co-

ordination between the internal and external auditors;

to review the adequacy of the scope, functions, competency and resources of the

internal audit function and that it has the necessary authority to carry out its work;

to review related party transactions entered into by the Company and the Group to

ensure that such transactions are undertaken on the Group’s normal commercial terms

and that the internal control procedures relating to such transactions are adequate;

to review the process for identifying, evaluating, monitoring and managing significant

risks;

to undertake such other responsibilities as may be delegated by the Board from time

to time; and

to report to the Board its activities and findings.

Internal Audit Functions

The internal audit functions of the Company are performed by the Internal Audit Department

of Mulpha International Bhd, the Company’s holding company. The principal objective of

the internal audit functions is to undertake regular reviews of the systems of controls,

procedures and operations so as to provide reasonable assurance that the internal control

system is sound, adequate and operating satisfactorily. The attainment of such objective

involves the following major activities being carried out by the Internal Audit Department:-

review and appraise the adequacy, effectiveness and reliability of internal control

systems, policies and procedures;

monitor the adequacy, reliability, integrity, security and timeliness of financial and

other management information systems;

determine the extent of compliance with relevant laws, codes, standards, regulations,

policies, plans and procedures;

review the efficiency and effectiveness of operations and identify risk exposure; and

review and verify the means used to safeguard assets.

The Company was not charged any fee for 2011 for the internal audit service provided by the

Internal Audit Department of the Company’s holding company.


The Board acknowledges the importance of maintaining a sound system of internal control to

safeguard shareholders’ investments and the Group’s assets. Guided by the Bursa Securities’

Statement on Internal Control: Guidance for Directors of Public Listed Companies, the Board

is pleased to present the Statement on Internal Control of the Group pursuant to the Main

Market Listing Requirements of Bursa Securities.

BOARD’S RESPONSIBILITY

The Board recognises the importance of sound internal control and risk management

practices for good corporate governance. The Board acknowledges that it is responsible for

the Group’s system of internal control to safeguard shareholders’ investments and the

Group’s assets and for the continuing review of its adequacy and integrity. For the financial

year under review, the Group had in place a system of internal control in accordance with

Section 167A of the Companies Act, 1965 and had established an on-going process of

reviewing, identifying, evaluating and managing significant risks faced by the Group. The

system of internal control and the process of risk management are reviewed regularly by the

Board with the assistance of the Audit Committee, Internal Audit Department and all relevant

personnel of the Group through a combination of key processes. It must be noted however,

the system of internal control is designed to manage rather than to eliminate the risk of

failure to achieve business objectives and can only provide reasonable and not absolute

assurance against material misstatement or loss.

Control Environment And Structure

The Board recognises that in order to achieve a sound system of internal control, a conducive

control environment must be established. The Board is fully committed to the maintenance of

such a control environment within the Group and in discharging their responsibilities,

enhanced the following key system of internal control within the Group to govern the manner

in which the Group and its employees conduct themselves. The key elements of internal

controls comprise the following:-

The Board meets regularly to monitor and review the overall performance of the

Group, to consider the findings and recommendations of committees and to consider

the approved measures to be taken and changes in policies and procedures necessary

to address risks and to enhance the system of internal control.

Audit Committee comprises entirely of non-executive directors, and who hold regular

meetings throughout the financial year. Audit Committee members are briefed and

updated on the matters of corporate governance practice and legal and regulatory

matters. The current composition of members, with at least one who is a member of

an accounting association or body, brings with them a wide variety of experience

from different fields and background. They have full and unimpeded access to both

the internal as well as external auditors during the financial year. They also meet with

the external auditors without the presence of the Management at least twice a year.

Internal Auditors continue to independently assure the Board, through the Audit

Committee, that the internal control system functions as intended. Their work practice

as governed by their audit plan is derived on a risk based approach and internal audit

findings are highlighted to the Audit Committee. Their annual audit plans are

presented and approved by the Audit Committee annually before the commencement

of the following financial year and updates are given as and when there are any

changes.

Financial and Operational Information continues to be prepared and presented to the

Board. A detailed budget is prepared and presented to the Board before the

commencement of a new financial year. Upon approval of the budget, the Group’s

performance is then tracked and measured against the approved budget on quarterly

basis. All major variances and critical operational issues are followed up with action

thereon. On a quarterly basis, the results are reviewed by the Audit Committee and

the Board to enable them to gauge the Group’s overall performance compared to the

approved budgets.

The Limit of Authority determines the respective levels of authority which are

delegated to staff of the respective levels to enable control of the Group’s

commitment of both capital and operational expenditure. The authority limits are

subject to periodic review throughout the financial year as to their implementation

and for the continuing suitability.

Policies and procedures for key business processes are formalised and documented

for each significant operating unit.

Tender Committee functions to ensure transparency in the award of contracts.

Executive Committee functions to advise the Board in formulating policies and

supervise the management to carry out and implement the policies laid down by the

Board.

An ISO 9001 Quality Management System which has been in practice to manage and

control the quality requirement for the Group’s work done and services rendered.

Risk Management Framework

The Audit Committee and the Management have established the following steps in order to

set-up a formalised Risk Management Framework: -

Risk Monitoring and Compliance. The Audit Committee with the assistance of the

Internal Audit Department has set in place an on-going process of formalising the risk

management systems.

Heads of each business unit are in charge of identifying principal risks and

establishing relevant processes and systems to monitor and manage those risks.

Employees are encouraged to give feedback on risk management issues and make

suggestions for improvement at the operating unit level.

The system of internal control described in this Statement is considered by the Board to be

adequate and risks are considered by the Board to be at an acceptable level within the context

of the business environment throughout the Group’s business. However, such systems are

designed to manage rather than eliminate the risk of failure to achieve business objectives

and thus they can only provide reasonable assurance and not absolute assurance against

material misstatement. Nevertheless, the systems of internal control that exist throughout the

financial year under review provide a level of confidence on which the Board relies for

assurance. This complies with the provisions recommended in the Bursa Securities’

Statement of Internal Control: Guidance for Directors of Public Listed Companies. For the

financial year under review, the Board is satisfied with the adequacy and integrity of the

Group’s system of internal control and that no material losses, contingencies or uncertainties

have arisen from any inadequate or failure of the Group’s system of internal control that

would require separate disclosure in the Group’s Annual Report. This Statement is made in

accordance with the resolution of the Board dated 12 April 2012.

Duties and Responsibilities

The duties and responsibilities of the Committee are to:

Review all financial information for publication, including quarterly and annual

financial statements prior to submission to the Board of Directors. The review shall

focus on:

Changes in accounting policies and practices

Major judgmental areas

Significant audit adjustments from the external auditors

Compliance with accounting standards

Compliance with Bursa Securities and other regulatory and legal requirements

Discuss with the external auditors, the nature, scope and approach of the audit of the

financial statements.

Discuss with the external auditor on areas of concern arising from the audit of the

financial statements.

Assess the adequacy and effectiveness of the accounting procedures and the internal

control systems of the Company by reviewing management letters from external

auditors.

Discuss problems and reservations arising from the interim and final audits and any

matters the auditors may wish to discuss in the absence of Management, where

necessary.

Review the internal audit plan and processes, consider major findings of internal audit

and recommend actions and steps to be taken by management in response to the

findings.

Review the relevance and adequacy of the scope, functions, competency and

resources of internal audit and the necessary authority to carry out the function.

Determine extent of cooperation and assistance given by the employees.

Review related party transactions and conflict of interest situations that may arise

within the Company.

Consider the appointment of the external auditors, the terms of reference of their

appointment and any questions on resignation and dismissal before recommendation

to the Board.

Undertake such other responsibilities as may be agreed to by the Committee and the

Board.

Report its activities, significant results and findings.

Review the Company’s arrangements for its employees to raise concerns, in

confidence, about possible wrongdoing in financial reporting or other matters. The

Committee shall ensure that these arrangements allow proportionate and independent

investigation of such matters and appropriate follow up action.

Summary Of The Activities Of The Audit Committee For The Financial Year Ended 31

December 2011

The Audit Committee has carried out the following activities during the financial year under

review.

Reviewed and recommended actions on the quarterly and annual financial results and

performance of the Company and the Group prior to submission to the Board for

consideration and approval.

Reviewed related party transactions entered into by the Company and the Group, and

reported the same to the Board of Directors.

Reviewed and discussed with the external auditors the nature and scope of their audit

before reporting the same to the Board.

Reviewed the issues as per the management letters from the external auditors.

Reviewed audit plans for the year for the Company and the Group, prepared and

reported by the internal auditors.

Reviewed the internal audit reports and to discuss findings or issues that highlighted.

Internal Audit Function

The Group has an in-house Internal Audit Department that reports directly to the Audit

Committee. The Committee is aware of the fact that an independent and adequately

resourced internal audit function is essential to assist in obtaining the assurance it requires

regarding the effectiveness of the system of internal controls. The activities of the Internal

Audit during the financial year ended 31 December 2011 were as follows:

Prepared, presented and sought the Audit Committee’s approval of the annual audit

plan for the Group.

Performed annual risk profiling on all the departments within the Group, and based

on available resources, formed the basis of the annual audit plan for the Group.

Reviewed the compliance of the Company’s Standard Operating Procedure,

Discretionary Authority Limit (DAL) and other statutory and regulatory

requirements.

Identified, reviewed and evaluated the adequacy and effectiveness of the Company’s

Policies and Procedures and the DAL.

Evaluated the efficiency of processes, functions and current practices, and provided

suitable recommendations to the Audit Committee.

Prepared audit reports and sought management response on the issues found and

highlighted in the report. Upon incorporating the response of Management into the

final reports, the same were circulated to the Audit Committee.

Presented the audit reports to the Audit Committee during the Audit Committee

meetings held throughout the financial year.

Carried out follow-up reviews on audit reports, and reported to the Audit Committee

the status of implementation of agreed actions in the audit reports.

Undertook additional tasks as directed by the Audit Committee or Management, such

as investigations of complaints received.

During the financial year, the internal audit activities have been carried out according to the

internal audit plans which have been approved by the Audit Committee. Six (6) audit reports

and one (1) special audit report were issued during the financial year incorporating findings

and recommendations with regard to system and control, weaknesses noted in the course of

audit, the management’s responses and the remedial actions on the implementation of all

findings and recommendations in its review process. In the course of auditing, the Internal

Auditors have identified some internal control weaknesses, which have been or are being

addressed and status of implementation were being monitored. None of the weaknesses have

resulted in any material losses, contingencies or uncertainties that would require disclosure in

the Company’s Annual Report. The cost incurred for the Internal Audit Department for the

financial year ended 31 December 2011 was RM98,602.

5.3 Malton Berhad

Internal Audit Function

The Group has an internal audit department which reports directly to the Committee. During

the financial year ended 30 June 2011, the internal audit department carried out its audit

duties covering business audit, system audit, operational and financial audits for reporting to

the Committee. The Committee together with the internal auditors reviewed the quarterly

results for recommendation to the Board of Directors.

Terms Of Reference

Objectives of Audit Committee. The primary objectives of the Committee are to:-

1) Maintain, through regularly scheduled meetings, an open line of communication

between the Board, Management, external auditors and internal auditors;

2) Oversee and appraise the quality of the audits conducted by the external auditors and

the internal auditors; and

3) Provide assistance to the Board in fulfilling its fiduciary responsibilities relating to

the Company’s administrative, operating and accounting controls.

Terms Of Reference

Members of the Audit Committee

1) The Company shall appoint an Audit Committee from amongst its directors and shall

consist of not less than three in numbers, all of whom shall be non-executive directors

with a majority of them being independent directors.

2) At least one member of the Audit Committee:-

must be a member of the Malaysian Institute of Accountants; or

if he is not a member of the Malaysian Institute of Accountants, he must have

at least 3 years’ working experience and:-

he must have passed the examinations specified in Part I of the 1st

Schedule of the Accountants Act 1967; or

he must be a member of one of the associations of accountants

specified in Part II of the 1st Schedule of the Accountants Act 1967.

fulfils such other requirements as prescribed by Bursa Malaysia Securities

Berhad.

3) No alternate director shall be appointed as a member of the Committee.

4) If a member of the Committee for any reason ceases to be a member with the result

that the number is reduced to below 3, the Board of Directors shall, within 3 months

of that event, appoint such number of new members as maybe required to make up

the minimum number of 3 members.

5) The Board of Directors must review the term of office and performance of the

Committee and each of its members at least once every 3 years to determine whether

the Committee and its members have carried out their duties in accordance with their

terms of reference.

Chairman of Audit Committee

The members of the Committee shall elect a Chairman from among their number who shall

be an independent director subject to endorsement by the Board.

Meetings and Reporting of Audit Committee

1) The quorum in respect of a meeting of the Committee shall be a majority of

independent directors.

2) The Committee shall meet at least each quarter of a financial year and such additional

meetings as the Chairman shall decide in order to fulfil its duties.

3) The Company Secretary or any person appointed by the Audit Committee shall act as

the Secretary of the Audit Committee and shall be responsible, in conjunction with

the Chairman, for drawing up the agenda and other supporting explanatory

documentation for circulation to the Committee Members prior to each meeting. The

Secretary will also be responsible for keeping the minutes of the meetings of the

Committee, and circulating them to the members and to other members of the Board

of Directors. The Chairman shall convene a meeting of the Committee to consider

any matter the external auditors believe should be brought to the attention of the

directors or shareholders.

4) The Company must ensure that other directors and employees attend any particular

Committee meeting only at the Committee’s invitation, specific to the relevant

meeting.

5) All or any of the members of the Committee may participate in a meeting of the

Committee by means of a telephone conference, video conferencing or any

communication equipment that allows all persons participating in the meeting to hear

each other. A person so participating shall be deemed to be present in person at the

meeting and shall be entitled to vote or be counted in a quorum accordingly.

Terms Of Reference

Authority

The Committee shall, in accordance with a procedure to be determined by the Board of

Directors and at the cost of the Company:-

Have authority to investigate any matter within its terms of reference;

Have the resources which are required to perform its duties;

Have full and unrestricted access to any information pertaining to the

Company;

Have direct communication channels with the external auditors and person(s)

carrying out the internal audit function or activity;

Be able to obtain independent professional or other advice; and

Be able to convene meetings with the external auditors, the internal auditors

or both, excluding the attendance of other directors and employees, whenever

deemed necessary.

The Chairman of the Committee shall engage on a continuous basis with senior management

on matters affecting the Company. Where the Committee is of the view that a matter reported

by it to the Board of Directors of the Company has not been satisfactorily resolved resulting

in a breach of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad,

the Audit Committee shall promptly report such matter to Bursa Malaysia Securities Berhad.

Functions and Responsibilities

The primary functions of the Committee are to review the following and report the same to

the Board of Directors:-

1) The audit plan, audit report and evaluation of the system of internal controls with the

external auditors and assistance given by the employees of the Company to the

external auditors;

2) The adequacy of scope, functions and resources of the internal audit function and the

necessary authority to carry out its duties;

3) The internal audit programme, processes, the results of the internal audit programme,

processes or investigation undertaken and whether or not appropriate actions are

taken on the recommendation of the internal audit function

4) The quarterly results and year end financial statements; prior to approval by the

Board of Directors, focusing particularly on:-

changes in or implementation of major accounting policy changes;

significant and unusual events; and

compliance with accounting standards and other legal requirements.

5) Any related party transaction and conflict of interest situation that may arise within

the Group including any transaction,procedure or course of conduct that raises

questions of management integrity;

6) Any letter of resignation from the external auditors of the Company;

7) Whether there is reason (supported by grounds) to believe that the Company’s

external auditor is not suitable for reappointment; and Recommend the nomination of

a person or persons as external auditors.

Documents

Proposal Final Year Project