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Annual Report

HEXZA CORPORATION BERHAD (8705-K)(Incorporated in Malaysia)

ANNUAL REPORT 2014

CONTENTS

Notice of Annual General Meeting

Corporate Information

Five-Year Group Financial Summary

Corporate Structure

Chairman’s Statement

Directors’ Profile

Audit Committee Report

Corporate Governance Statement

Additional Compliance Information

Statement on Risk Managementand Internal Control

Directors’ Report

Independent Auditors’ Report to the Members of Hexza Corporation Berhad

Statements of Profit or Lossand Other Comprehensive Income

Statements of Financial Position

Statements of Changes in Equity

Statements of Cash Flows

Notes to the Financial Statements

Supplementary Information - disclosure on realised and unrealised profits or losses

Statement by Directors

Declaration by the Officer Primarily Responsible for the Financial Management of the Company

Statement of Shareholdings

Properties owned by Hexza Corporation Berhad & its Subsidiaries

Proxy Form

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Annual Report 20142

NOTICE IS HEREBY GIVEN that the Forty-fifth Annual General Meeting of Hexza Corporation Berhad will be held at Gopeng Hall, Level 3, Kinta Riverfront Hotel & Suites, Jalan Lim Bo Seng, 30000 Ipoh, Perak Darul Ridzuan on Saturday, 22nd November 2014 at 11.30 a.m. for the following purposes:

A G E N D A

1. To receive the Audited Financial Statements for the financial year ended 30th June 2014 and the Reports of the Directors and Auditors thereon.

(Please referExplanatory Note A)

2. To approve the payment of a first and final single-tier dividend of 8% in respect of the financial year ended 30th June 2014. (Resolution 1)

3. To approve the payment of Directors’ fees of RM282,500 for the financial year ended 30th June 2014. (Resolution 2)

4. To re-elect Mr. Ooi Ying Hong who retires in accordance with Article 78 of the Company's Articles of Association and being eligible, offers himself for re-election as a Director of the Company. (Resolution 3)

5. To re-appoint the following Directors who retire pursuant to Section 129(6) of the Companies Act, 1965 and to hold office until the conclusion of the next Annual General Meeting:

(i) Dr. Foong Weng Cheong (Resolution 4)

(ii) Dato' Richard Ong Guan Seng (Resolution 5)

(iii) Datuk Dr. Foong Weng Sum (Resolution 6)

6. To re-appoint Messrs. Deloitte & Touche as Auditors and to authorise the Directors to fix their remuneration. (Resolution 7)

7. As Special Business:

Continuing in office as Independent Directors

(a) Subject to the passing of Ordinary Resolution 5(ii), to re-appoint Dato’ Richard Ong Guan Seng to continue to act as an Independent Director of the Company. (Resolution 8)

(b) To re-appoint the following Directors to continue to act as Independent Directors of the Company:

(i) Mr. Leong Keng Yuen (Resolution 9)

(ii) Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany (Resolution 10)

NOTICE OF ANNUAL GENERAL MEETING


Annual Report 2014 3

8. To consider and, if thought fit, to pass the following ordinary resolution:

Authority to issue shares pursuant to Section 132D of the Companies Act, 1965

''THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby empowered to issue shares of the Company at any time until the conclusion of the next Annual General Meeting of the Company upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued capital of the Company for the time being and that the Directors are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad." (Resolution 11)

9. To transact any other business of which due notice shall have been given.

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN that the first and final single-tier dividend of 8% in respect of the financial year ended 30th June 2014, if approved by the shareholders, will be paid on 10th December 2014 to depositors who are registered in the Record of Depositors at the close of business on 26th November 2014.

A depositor shall qualify for entitlement to the dividend only in respect of:

a. Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 26th November 2014 in respect of ordinary transfers; and

b. Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad.

By Order of the BoardCHONG YOKE SENGCompany Secretary

Ipoh28th October 2014

Notes:1. A member, other than an exempt authorised nominee is entitled to appoint not more than two (2) proxies. A proxy may but need not be a

member of the Company. 2. A member who is an authorised nominee may appoint not more than two (2) proxies in respect of each securities account held; whereas an

exempt authorised nominee may appoint multiple proxies in respect of each omnibus account held.3. A member who appoints a proxy must duly execute the Form of Proxy, and if more than one (1) proxy is appointed, the number of shares to

be represented by each proxy must be clearly indicated.4. An instrument appointing a proxy, in the case of an individual, shall be signed by the appointor or his attorney duly authorised in writing or in

the case of a corporation, shall be either under its Common Seal or under the hand of an officer or attorney of the corporation duly authorised.5. The duly executed Form of Proxy must be deposited at the registered office of the Company not less than forty-eight (48) hours before the

time set for holding the meeting or any adjournment thereof.6. Only members whose names appear in the Record of Depositors as at 17th November 2014 will be entitled to attend and vote at the meeting.

NOTICE OF ANNUAL GENERAL MEETING NOTICE OF ANNUAL GENERAL MEETING


Annual Report 20144

NOTICE OF ANNUAL GENERAL MEETING (continued)

Explanatory Note AThis Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval by the shareholders and hence, is not put forward for voting.

Explanatory Notes on Special Business:1. Resolutions 8, 9 & 10 The proposed Resolutions 8, 9 & 10, if passed, will enable the named Driectors to continue to hold office until the next Annual General

Meeting of the Company as Independent Directors notwithstanding that they have served a cumulative term of more than nine years. In line with the recommendation 3.2 of the Malaysian Code on Corporate Governance 2012, the Board on the recommendation of

the Nominating Committee, after the annual assessment of the Directors’ independence have recommended that Dato’ Richard Ong Guan Seng, Mr. Leong Keng Yuen and Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany who have served as Directors of the Company for a cumulative term of more than nine years, be re-appointed as Independent Directors of the Company based on the following justifications:

(i) they have fulfilled the criteria under the definition of Independent Director as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and therefore would be able to function as a check and balance and bring an element of objectivity to the Board.

(ii) they each remain independent and actively participate in board discussions and provide an independent and objective voice on the Board.

(iii) they act in the best interests of all shareholders and their re-appointment as Independent Directors will provide a check and balance to operational management.

2. Resolution 11 The proposed Resolution 11, if passed, will empower the Directors to issue shares in the Company up to an amount not exceeding in

total 10% of the issued share capital of the Company for the time being for such purposes as the Directors consider would be in the interests of the Company. This authority, unless revoked or varied by the Company in a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company.

The general mandate sought for issue of shares is a renewal of the general mandate sought in the preceding year. As at the date of Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the Forty-fourth AGM held on 23rd November 2013 and hence no proceeds were raised therefrom. The general mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares for purpose of funding future investment project(s), working capital and/or acquisitions.

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

The details of Directors standing for re-election and re-appointment are set out in the Profile of Directors and the details of their interests in the securities of the Company are disclosed in this Annual Report.



CORPORATE INFORMATION

BOARD OF DIRECTORS

Datuk Dr. Foong Weng SumChairman & Group Chief Executive

Dato' Richard Ong Guan Seng Deputy Chairman/Independent Non-Executive Director

Dr. Foong Weng Cheong Non-Independent Non-Executive Director

Mr. Leong Keng Yuen Independent Non-Executive Director

Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany Independent Non-Executive Director

Mr. Ooi Ying Hong Independent Non-Executive Director

NOTICE OF ANNUAL GENERAL MEETING (continued)

AUDIT COMMITTEE

Dato' Richard Ong Guan Seng Chairman

Dr. Foong Weng CheongMr. Leong Keng YuenMr. Ooi Ying Hong

REMUNERATION COMMITTEE

Mr. Leong Keng Yuen Chairman

Datuk Dr. Foong Weng SumDr. Foong Weng CheongDato' Richard Ong Guan Seng

NOMINATING COMMITTEE

Dato' Richard Ong Guan SengChairman

Dr. Foong Weng CheongMr. Leong Keng Yuen

REGISTERED OFFICE

Lot 6 & 20, Persiaran Tasek,Kawasan Perindustrian Tasek,31400 Ipoh,Perak Darul Ridzuan.Tel : 605-291 7823Fax : 605-291 8546Email : [email protected] : http://www.hexza.com.my

COMPANY SECRETARY

Ms. Chong Yoke Seng (MIA 3672)

REGISTRARS

Symphony Share Registrars Sdn. Bhd.Level 6, Symphony House,Pusat Dagangan Dana 1, Jalan PJU 1A/46,47301 Petaling Jaya, Selangor Darul Ehsan.Tel : 603-7841 8000Fax : 603-7841 8151

AUDITORS

Deloitte & ToucheChartered Accountants87 Jalan Sultan Abdul Jalil,30450 Ipoh, Perak Darul Ridzuan.Tel : 605-253 1358Fax : 605-253 0090

PRINCIPAL BANKERS

AmInvestment Bank Berhad Hong Leong Bank BerhadHSBC Bank Malaysia BerhadMalayan Banking BerhadRHB Bank BerhadRHB Investment Bank Berhad United Overseas Bank (Malaysia) Bhd.

STOCK EXCHANGE LISTING

Main Market of Bursa Malaysia Securities BerhadStock Code : 3298Stock Short Name : hexza


Annual Report 20146

FIVE-YEAR GROUP FINANCIAL SUMMARY

Year Ended 30th June 2014RM'000

2013RM'000

2012RM'000

(restated)

2011RM'000

2010RM'000

StatEMEnt of PRofit oR LoSS and othER CoMPREhEnSivE inCoME

Revenue 145,341 124,557 148,616 146,786 159,744Profit before tax 10,748 10,073 8,979 16,268 22,182Income Tax (2,164) (1,191) (2,176) (2,833) (5,028)Profit After Tax 8,584 8,882 6,802 13,436 17,155Profit After Tax attributable to

shareholders of the company 8,079 8,475 5,962 12,104 15,895

StatEMEnt of finanCiaL PoSition

Total non-current assets 122,378 125,546 132,291 122,872 104,795Total current assets 129,077 115,250 116,964 109,505 117,333Total assets 251,455 240,796 249,255 232,377 222,128Shareholders' fund 215,444 213,499 213,982 207,814 195,169Total non-current liabilities 9,304 9,889 10,397 7,093 7,800Total current liabilities 20,141 10,533 17,394 10,405 11,802

ShaRE infoRMationPer ordinary Share

Earnings per share (sen) 4.0 4.2 3.0 6.0 7.9Gross dividend (sen)* 4.0 5.0 5.0 5.0 4.0Net dividend proposed/paid (sen)* 4.0 4.0 4.0 4.0 3.5Net assets (RM) 1.1 1.1 1.0 1.0 1.0

finanCiaL Ratio

Return on shareholders' funds (%) 3.8 4.0 2.8 5.8 8.1

Note:* The proposed final dividend for the financial year ended 30th June 2014 is subject to approval by the shareholders at the

forthcoming Annual General Meeting of the Company.



FIVE-YEAR GROUP FINANCIAL SUMMARY

185

190

195

200

205

210

215

220

2010 2011 2012 2013 2014

195

208

214 213

215

RM

(mill

ion)

Year

Shareholders' funds

0

30

60

90

120

150

180

2010 2011 2012 2013 2014

160 147 149

125 145

RM

(mill

ion)

Year

Revenue

0

2

4

6

8

2010 2011 2012 2013 2014

7.9

6.0

3.0

4.2 4.0 sen

Year

Earnings Per Share (sen)

0

1

2

3

4

5

6

2010 2011 2012 2013 2014

4.0

5.0 5.0 5.0 4.0

sen

Year

Gross dividend Per Share (sen)

0

5

10

15

20

25

2010 2011 2012 2013 2014

22

16

9 10 11

RM

(mill

ion)

Year

Profit Before Tax

200

210

220

230

240

250

260

2010 2011 2012 2013 2014

222

232

249

241

251

RM

(mill

ion)

Year

total assets


Annual Report 20148

CORPORATE STRUCTURE AS AT 30TH JUNE 2014

HEXZACORPORATION

BERHAD



CHAIRMAN'S STATEMENT

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present you the Annual Report and Financial Statements of the Group and of the Company for the financial year ended 30 June 2014.

One of the key responsibilities of a board of directors is to set a strategy. As I will outline in this statement, and as we strive to demonstrate throughout the Annual Report, your Board has chosen a clear strategic route to follow. This is rooted in our heritage to deliver high quality products and sets out our ambition to continuously improve.

As your Directors review our strategy and carry out our other responsibilities, it is my role as Chairman to lead the Board effectively. Good governance is at the core of that, and with good governance comes transparent reporting.

The Group manufactures formaldehyde based adhesives and resins, premium quality ethanol and organically fermented vinegar. Our products are used by customers in a variety of industries. Formaldehyde based adhesives and resins are used in the manufacture of plywood, particle boards and medium density fibre boards. Ethanol is used by the pharmaceutical, cosmetics as well as the food and beverage industries. In addition, it is also used as a solvent for industrial applications. In addition to manufacturing, the Group also has a property development arm.

While not immune to the challenging economic conditions which are evident across the markets in which we operate, our performance remained robust.

FINANCIAL PERFORMANCE

The Group registered a turnover of RM145.34 million in 2014 compared to RM124.56 million in 2013, an increase of RM20.78 million or 16.7%. Profit before tax was also higher at RM10.75 million in 2014 compared to RM10.07 million in 2013, an increase of RM0.68 million or 6.7%.

The lower incremental profit before tax of RM10.75 million on revenue of RM145.34 million in 2014 compared to 2013 is primarily due to capital gains of RM4.19 million recognised in the 2013 profit before tax.

Group EBITDA in 2014 increased to RM16.26 million from RM15.77 million in 2013, an increase of RM0.49 million or by 3.1%.

Group Earnings Per Share dropped slightly, that is from 4.2 sen (per ordinary share of 50 sen) in 2013 to 4.0 sen (per ordinary share of 50 sen) this year.

The Company registered weaker revenue, a decrease of RM0.07 million or 0.7%. Revenue fell to RM9.20 million in 2014 from RM9.27 million in 2013. Profit before tax of RM10.27 million in 2014 was significantly lower by RM4.2 million compared to 2013, this is primarily due to capital gains of RM4.19 million recognised in 2013.

OPERATIONAL PERFORMANCE

The manufacturing segment registered improved revenue, an increase of RM21.68 million or 18.2%. Revenue grew to RM140.54 million in 2014 from RM118.86 million in 2013. Profit before tax increased by RM5.40 million. The significant improvement was contributed mainly by the substantial increase in sales of the ethanol and resins divisions, by 37.4% and 9.7% respectively.

The trading segment registered weaker revenue, a decrease of RM0.16 million or 5.8%. Revenue fell to RM2.59 million in 2014 from RM2.75 million in 2013. However, profit before tax was higher at RM0.54 million primarily due to lower operating expenses in 2014.


Annual Report 201410

CHAIRMAN'S STATEMENT (continued)

OPERATIONS

The manufacturing division comprise the manufacture of formaldehyde based adhesives and resins, ethanol and bio-fermented vinegar. The manufacture of formaldehyde based adhesives and resins and the manufacture of ethanol represent the core activity of the Group.

The performance of the Resins division continues to reflect the distinctly different macro economies in which they operate. Hexzachem Sarawak Sdn. Bhd., which operates out of Kuching and serves East Malaysia, manufactures adhesives which are used in the production of export quality plywood, particle boards and medium density fibre boards; while Norsechem Resins Sdn. Bhd., which operates out of Port Klang and serves Peninsular Malaysia, manufactures adhesives which are used in the wood panels industry.

Hexzachem Sarawak Sdn. Bhd. appears to have turned the corner in terms of production and sales volume, and can be expected to continue its current growth path. Hexzachem Sarawak Sdn. Bhd. continues to work diligently towards improving its products and to satisfy its customers’ requirements’, an example is the development of emission free formaldehyde resins. In this endeavour, it works closely with its world class technology partner.

In spite of the very competitive environment in which it operates, Norsechem Resins Sdn. Bhd. was able to report an improved performance this year with a lower loss.

Chemical Industries (Malaya) Sdn. Bhd. considers itself a premium quality manufacturer focussing on producing high quality potable industrial and pharmaceutical grade ethanol with low impurities which conform to British Pharmacopoeia 1993. We also produce absolute alcohol through the utilisation of “Membrane Separation” technology. We are proud to be a qualified global stockist for a multinational pharmaceutical company. In the financial year ended 30th June 2014, we were awarded the “Overall Best Licence Holder” and the “Best Excise Duty Licence Holder” by the Perak Royal Customs Department. We continue to work closely with our customers taking cognisance of their needs and ensuring on time deliveries.

The manufacture of organically fermented vinegar by Bio-Acetic Products Sdn. Bhd. has just started to see growth and is showing signs of achieving its potential. While there are many types of food grade vinegar in the market, naturally derived organic fermented vinegar provides consumers a healthier and better choice.

Summit Development Corporation Sdn. Bhd. the property development arm, continues to seek and review potential development opportunities that come its way, particularly that of boutique and mix development projects. As with all our undertakings, we adopt a prudent approach bearing in mind the financial viability of the project.

OUTLOOK AND PROSPECTS

Any review of the Group will have to reflect the environment in which it operates. The economic uncertainties I touched on in previous Annual Reports remain. The market for our products continue to grow and the underlying demographics remain positive towards long term growth, nevertheless many of the raw materials required are under pressure.

We face an ongoing productivity challenge. Costs have risen significantly in the past decade and this is expected to continue. In addition, we also face increasingly stringent environmental regulations as well as the volatility of foreign exchange between the Ringgit Malaysia vis-a-vis the U.S. Dollar. Added to this is the introduction of the Goods and Services Tax (“GST”) in Malaysia next year. With its implementation the overall cost of living is expected to increase.

Fortunately, we fare better on the demand side. Despite the many uncertainties, we believe that our emphasis on quality, supply chain management, financial and budgetary improvements have served us well and allowed our products to remain competitive.

Your Board has been quite conservative in its approach to expansion and diversification and will henceforth adopt a more aggressive but studied approach in growing its top and bottom lines.



CHAIRMAN'S STATEMENT

CORPORATE SOCIAL RESPONSIBILITY

Over the years, our conduct has been characterised by high ethical standards and respect for our stakeholders. Since we started operations close to fifty years ago, Corporate Social Responsibility has been part of our way of doing business and it goes beyond financial donations and sponsorship.

Last year, I had stated that it may be ad-tedium for me to repeat our Corporate Social Responsibility Statement in full except to re-emphasise our Corporate Social Responsibility mission. This year, I would like to highlight certain events that underscore how Corporate Social Responsibility has been practised in Hexza.

A few years back, we had to persevere with recurrent factory and operational stoppages which resulted in financial losses for the Group. During these difficult times, we did not downsize our work force nor was there any reduction in pay. Instead, competent employees were sent to undergo additional training and education to further develop their skills and knowledge as well as to improve working efficiency. We maintain our commitment to our employees and remain steadfast in our responsibility to provide them with sustainable employment opportunities.

Your Company appreciates that without being socially and environmentally responsible, it is impossible to have economically sustainable operations in the long term. Corporate Social Responsibility and sustainability are the template of that strategy. For Hexza, Corporate Social Responsibility is about having a sustainable business plan in the face of local and global challenges. It is also about conducting business with a conscience, caring for its employees, the community, the environment, its customers, its shareholders and all stakeholders.

Our Corporate Social Responsibility mission is for all our Directors, Senior Executives, Management and staff to be participants in the advancement of a caring, learning and civil community.

Our ideals and endeavours remain consistent, and, Corporate Social Responsibility is in our social responsibility genetics.

DIVIDEND

Your Board has recommended a first and final dividend of 4.0 sen net per ordinary share of 50 sen each comprising a single tier dividend of 8.0% in respect of the financial year ended 30 June 2014.

This is subject to the approval of the shareholders at the forthcoming Annual General Meeting.

APPRECIATION

On behalf of the Board of Directors, I would like to extend my appreciation to all our stakeholders, valued customers, business associates, loyal shareholders, the authorities and financiers for their continuous support.

Last but not least, I would like to extend my appreciation to my fellow Board members for their invaluable advice and contributions.

I would also like to extend my sincerest appreciation to the managers, executives and employees for their contribution, dedication and commitment in achieving our objectives.

Datuk Dr. Foong Weng SumChairman & Group Chief Executive

30th September 2014



DIRECTORS’ PROFILE

DATUK DR. FOONG WENG SUMChairman & Group Chief Executive

Datuk Dr. Foong Weng Sum, aged 75, was appointed to the Board on 7th May 1982 as Vice Chairman. On 23rd

October 1986, he also assumed the position of Group Chief Executive. He took over as Chairman of the Board on 1st December 2000. He is also a member of the Remuneration Committee.

Datuk Dr. Foong Weng Sum is a graduate in medicine from University of London’s Guy’s Hospital Medical School. He has considerable business experience in various business sectors, including manufacturing, property development, financial management and investment.

DATO’ RICHARD ONG GUAN SENGDeputy Chairman/Independent Non-Executive Director

Dato’ Richard Ong, aged 76, was appointed to the Board on 25th March 1994 and he was appointed as the Deputy Chairman of the Board on 8th November 2011. He is also the Chairman of the Audit Committee and Nominating Committee and a member of the Remuneration Committee.

Dato’ Richard Ong is a member of the Malaysian Institute of Accountants, the Malaysian Institute of Certified Public Accountants, the Institute of Chartered Accountants in Australia and the Institute of Chartered Secretaries and Administrators. He became a Partner of Peat Marwick (now known as KPMG), Malaysia in 1971 and was appointed Deputy Senior Partner in 1989 until he retired in 1993. He is also on the Board of The Tan Sri Tan Foundation and holds directorships in several private limited companies.

DR. FOONG WENG CHEONGNon-Independent Non-Executive Director

Dr. Foong Weng Cheong, aged 81, was appointed to the Board on 7th May 1982. He is also a member of the Audit Committee, Remuneration Committee and Nominating Committee.

Dr. Foong Weng Cheong is a graduate in medicine from the University of Melbourne, Australia and is a Fellow of the Royal College of Surgeons of Edinburgh and also a Fellow of the Royal College of Surgeons of England. He was appointed Senior Lecturer (1971-1972), Associate Professor (1973 -1980) and Professor & Head of Department of Surgery (1981-1988) at the National University of Singapore and Chief of University Department of Surgery at Singapore General Hospital and National University Hospital until he retired in 1988. Since 1988 he is a Consultant Surgeon at Mount Elizabeth Medical Centre, Singapore.

MR. LEONG KENG YUENIndependent Non-Executive Director

Mr. Leong Keng Yuen, aged 64, was appointed to the Board on 15th September 2000. He is also the Chairman of the Remuneration Committee and a member of the Audit Committee and Nominating Committee.

Mr. Leong Keng Yuen was a partner of Ernst & Young Malaysia before retiring at the end of 2005. He is a member of the Malaysian Institute of Accountants and a Fellow of the Association of Chartered Certified Accountants. He also holds a Master of Science in Management from the Massachusetts Institute of Technology U.S.A. and a Bachelor of Engineering (First Class Honours) from University of Queensland, Australia. He is also a Non-Executive Director of OSK Ventures International Berhad, company listed on Bursa Malaysia. He is also on the Board of Datin Seri Ting Sui Ngit Foundation and The Perak Chinese Welfare Association.



DIRECTORS’ PROFILE

TUAN HAjI MOHD jALI @ MOHD jALIL BIN SANYIndependent Non-Executive Director

Tuan Haji Mohd Jalil Sany, aged 67, was appointed to the Board on 20th November 2000.

He is a member of the Malaysian Institute of Accountants and a Fellow of the Association of Chartered Certified Accountants. In 1987 he attended an advanced Management Programme at Insead, Fontainebleu, France.

He has over 40 years of working experience in diversified industries which includes unit trust and investment holdings, properties and hotels, banking and insurance, plantation, film distribution and exhibition, commercial agriculture, animal husbandry and book publication and distribution. In that 40 years period, he has contributed over more than 20 years in the industrial development of both the states of Sabah and Sarawak through holding various key positions as Chief Financial Officer, Chief Operating Officer and directors in investment and business organizations. He now holds directorships in several private limited companies.

MR. OOI YING HONGIndependent Non-Executive Director

Mr. Ooi Ying Hong, aged 48, was appointed to the Board on 12th July 2011. He is also a member of the Audit Committee.

He holds a Bachelor of Business (Accounting) degree from University of Southern Queensland, Australia.

He started his career in auditing with KPMG and subsequently joined Matsushita Television Co. (M) Sdn. Bhd. He has many years of experience in various industries, including logistics, international trading, information technology, service and automotive. He also sits on the Board of Directors of various private limited companies.

OTHER INFORMATION

NationalityAll the Directors are Malaysians.

Family relationship with any Director and/or substantial shareholderDr. Foong Weng Cheong and Datuk Dr. Foong Weng Sum are brothers. Apart from this, none of the Directors has any family relationship with the other Directors or substantial shareholders of the Company.

Conflict of interestSave as disclosed in Note 21 under Notes to the Financial Statements, none of the Directors has any conflict of interest with the Company.

Convictions for offencesNone of the Directors has been convicted of any offence within the past ten years.



AUDIT COMMITTEE REPORT

The Board of Directors of Hexza Corporation Berhad (“the Board”) is pleased to present the report of the Audit Committee for the financial year ended 30th June 2014.

COMPOSITION

The Audit Committee comprises 3 Independent Non-Executive Directors and 1 Non-Independent Non-Executive Director. The Chairman of the Audit Committee is a member of the Malaysian Institute of Accountants and hence the Company is in compliance with the Listing Requirements which requires at least one member of the Audit Committee to be qualified.

The Audit Committee consists of the following members:

Dato' Richard Ong Guan Seng (Chairman, Independent Non-Executive Director)

Mr. Leong Keng Yuen (Member, Independent Non-Executive Director)

Dr. Foong Weng Cheong (Member, Non-Independent Non-Executive Director)

Mr. Ooi Ying Hong (Member, Independent Non-Executive Director)

The detailed profiles of all the members of the Audit Committee are shown in the Board of Directors’ profile.

TERMS OF REFERENCE

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

1. Membership

(a) The Committee shall be appointed by the Board from amongst the Directors of the Company and shall consist of not less than three members of whom 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 eligible for membership.

(b) The members of the Committee shall select a Chairman from among their numbers who shall be an Independent Director.

(c) The term of office and performance of the Committee and each of its members should be reviewed by the Board at least once every three years to determine whether such Audit Committee and members have carried out their duties in accordance with their terms of reference.

2. Authority

The Audit Committee shall, in accordance with a procedure to be determined by the Board of Directors and at the cost of the Company:

(a) have authority to investigate any matter within its terms of reference;

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

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

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

(e) be able to obtain independent professional or other advice; and

(f) be able to convene meetings with the external auditors, internal auditors or both, excluding the attendance of the management, whenever deemed necessary.

3. Duties and Responsibilities

The functions of the Audit Committee shall be to:

(a) review with the external auditors, their audit plans;

(b) review with the external auditors, their evaluation of the system of internal controls;

(c) review with the external auditors, their audit reports;




(d) review the assistance given by the Company’s employees to the external auditors and meet the external auditors in the absence of management at least twice a year;

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

(f) review the scope and results of the internal audit procedures;

(g) review the risk management function of the Group and the Risk Management Units’ assessment reports;

(h) review the Group’s quarterly results and year end financial statements, prior to the approval by the Board of Directors, focusing particularly on:

(i) changes in or implementation of major accounting policy changes;

(ii) significant and unusual events; and

(iii) compliance with accounting standards and other legal requirements.

(i) review any related party transactions that may arise within the Company or Group;

(j) recommend the appointment of external auditors, audit fee and any question of resignation or dismissal; including a formal evaluation of the external auditors at least once a year;

(k) consider the appointment of the head of the internal audit unit and his/her remuneration;

(l) report to the Board of Directors on compliance with laws and regulations, related party transactions, code of ethics, significant results and findings from internal and external audit, internal control, corporate governance and risk management function; and

(m) undertake such other functions as may be agreed to by the Audit Committee and Board of Directors.

4. Meetings

(a) The Audit Committee shall meet not less than four (4) times a year.

(b) The quorum of the Committee shall be at least two members; the majority of members present must be independent directors.

(c) The Secretary to the Committee shall be the Company Secretary.

5. Reporting Procedures

The Secretary shall circulate the minutes of meetings of the Committee to all members of the Board.

6. Documentation Procedures

The Secretary shall be responsible, in conjunction with the Chairman, for drawing up the Agenda and the notice of meeting. The notice of meeting and the Agenda together with the relevant papers are distributed to the members at least three (3) days prior to each meeting. The minutes of the Audit Committee meetings are also distributed to all Board members. The Secretary is responsible for keeping the minutes and responsible for communicating the decisions made at the meeting to the relevant parties.

Attendance

During the financial year ended 30th June 2014, four (4) Audit Committee meetings were held and the details of the attendance were as follows:

No. of Meetings Attended

Dato' Richard Ong Guan Seng 4 out of 4Mr. Leong Keng Yuen 2 out of 4Dr. Foong Weng Cheong 4 out of 4Mr. Ooi Ying Hong 4 out of 4

The Company Secretary attended all the meetings of the Audit Committee held during the financial year. Other members of the Board and employees also attended the meetings upon the invitation of the Committee.



Summary of Activities During the Financial Year

During the financial year ended 30th June 2014, in line with the terms of reference, the Audit Committee carried out the following activities in discharge of its duties and responsibilities:

(a) financial results (i) Reviewed the Group’s quarterly results announcements to Bursa Malaysia Securities Berhad before

recommending them to the Board of Directors for approval.

(ii) Reviewed the audited financial statements of the Company and of the Group with the External Auditors to ensure compliance with the provisions of the Companies Act, 1965 and the applicable accounting standards prior to submission to the Board of Directors for consideration and approval.

(b) External Audit (i) Reviewed the scope of work and the audit plan of the External Auditors in respect of the financial year ended

30th June 2014.

(ii) Reviewed auditors’ and management’s responses, including corrective actions taken by the management on outstanding audit issues highlighted in the previous audit.

(iii) Reviewed the audit fee for the financial year.

(iv) Met twice with the External Auditors during the year without the presence of management including the Group Chief Executive and the Company Secretary.

(v) Reviewed and evaluated the performance of the External Auditors and made recommendations to the Board on their re-appointment.

(c) internal audit (i) Reviewed and approved the internal audit plan.

(ii) Reviewed and deliberated on the reports from the Internal Audit Unit and management’s response to the recommendations and presented the reports to the Board of Directors.

(iii) Reviewed the performance of the Internal Audit Unit against the annual audit plan for the financial year ended 30th June 2014 and the costs incurred in connection with the performance of the audits during the year.

(iv) Held independent meetings with the Internal Auditors without the presence of management.

(d) Risk Management (i) Reviewed and deliberated on the risk assessment reports from the operating companies of the Group with

requests for further actions where appropriate.

AUDIT COMMITTEE REPORT (continued)




Internal Audit Function

The Company has an in-house Internal Audit Unit which provides support to the Audit Committee in discharging its duties and responsibilities. The functions and responsibilities of the Internal Audit Unit are embodied in the Internal Audit Charter. The main role of the Internal Audit Unit is to undertake independent assessments of the adequacy and effectiveness of the Group’s system of internal control, compliance with operational procedures and risk management procedures. The Internal Audit Unit reports directly to the Chairman of the Audit Committee.

During the financial year under review, the Internal Audit Unit conducted audits on operating subsidiaries based on the internal audit plan approved by the Audit Committee. The total cost incurred by the Internal Audit Unit during the financial year ended 30th June 2014 amounted to approximately RM98,000. The following were the activities carried out by the Internal Audit Unit:

(i) Prepared internal audit plan for the approval of the Audit Committee.

(ii) Reviewed and appraised the adequacy, effectiveness and efficiency of internal control in the Group.

(iii) Ascertained the extent to which the companies within the Group comply with established policies, procedures and statutory requirements.

(iv) Reviewed the effectiveness of the risk management system.

(v) Prepared Internal Audit reports on audit findings and recommendations for improvements to the existing system of internal control and work procedures/processes.

(vi) Conducted follow-up reviews to assess if appropriate actions have been taken to address issues raised in the previous audit.

(vii) Performed special audit upon the request of management.

(viii) Prepared quarterly reports and update the Audit Committee on progress of internal audit work at Audit Committee meetings.



CORPORATE GOVERNANCE STATEMENT

The Board of Directors of Hexza Corporation Berhad ("Board") remains committed to ensure that good corporate governance is practised throughout the Group in enhancing shareholder value and the financial performance of the Group. The Board acknowledges its responsibility for compliance with the Bursa Malaysia Securities Berhad Main Market Listing Requirements (“Listing Requirements”), the Malaysian Code on Corporate Governance 2012 (“the Code”) and all other statutory requirements.

The following paragraphs describe the extent to which the principles and recommendations as outlined in the Code were applied throughout the financial year ended 30th June 2014. This statement is made in accordance with a resolution of the Board of Directors dated 30th September 2014.

1. ESTABLISHED CLEAR ROLES AND RESPONSIBILITIES

Principal Roles The Board is responsible for the corporate governance practices of the Group. It guides and monitors the affairs of the Group on behalf of the shareholders and retains full and effective control over the Group. The key responsibilities include the primary responsibilities recommended by the Code. These cover a review of the strategic direction for the Group, setting out short term and long term plans, overseeing the business operations of the Group, and evaluating whether these are being properly and effectively managed.

Board Composition and Balance The Board currently has six (6) members, comprising four (4) Independent Directors, one (1) Non-Independent Non-Executive Director and one (1) Executive Director. This complies with the Listing Requirements of Bursa Malaysia Securities Berhad that one third of its Board consists of Independent Directors. The presence of four (4) Independent Directors fulfills an important role in corporate accountability. The role of the Independent Directors is particularly important as they provide independent and unbiased views, advice and judgment.

The Board comprises a mixture of businessmen and professionals. The current composition of the Board brings the required mix of skills and experience required for the Board to function effectively. A brief write-up of the background of the Board members as at the date of this statement is set out in the Directors’ profile section of this Annual Report.

Roles and Responsibilities The roles of the Chairman and the Group Chief Executive are combined and are currently held by Datuk Dr. Foong Weng Sum due to his invaluable experience and knowledge of the Group businesses. The Board is mindful of the combined roles which is not in line with the recommendation of the Code but is of the view that there are a majority of Independent Directors who are professionals of credibility and repute who demonstrate independence of judgment and objectivity in the Board’s deliberations and provide the necessary check and balance.

The Board had delegated the management of the Group to the Group Chief Executive and his management team. The Group Chief Executive is responsible for implementing the policies and decisions of the Board, overseeing the day to day operations as well as coordinating the development and implementation of business and corporate strategies. The Non-Executive Directors contribute significantly in areas such as policy and strategy, performance monitoring, allocation of resources as well as improving governance and controls.

The Board of Directors regularly review the strategic direction of the Company and the progress of the Group’s operations taking into account the changes in business environment and risk factors.




Board Charter and Code of Ethics

The Board has adopted a Board Charter which sets out the role, functions, composition, operations and processes of the Board. The Charter provides guidance to the Board in relation to the Board’s role, duties and responsibilities and authority.

The Directors have also approved a Code of Conduct for Directors and employees which governs the standards of ethics and good conduct expected of Directors and employees. The Code of Conduct includes principles relating to fair dealings, confidentiality of information, conflict of interest, compliance with laws and regulations and sexual harassment. In addition, the Group’s Whistle-Blowing Policy and Procedures provide an avenue for stakeholders to report concerns about malpractices, unethical behaviour, misconduct or failure to comply with regulatory requirements without fear or reprisal.

The Board Charter and the Code of Ethics are posted in our website at www. hexza.com.my

Supply of Information The Board has unrestricted access to timely and accurate information, necessary in the furtherance of their duties. The Chairman ensures that all relevant issues requiring the Board’s deliberation and approval are on the agenda and senior management is invited to the Board meetings to present the relevant issues. The Agenda and a full set of Board papers are distributed at least three (3) days prior to the Board meeting to allow Directors sufficient time to review the Board papers for effective deliberation at the meeting proper. All proceedings of Board meetings are minuted and signed by the Chairman. All Directors have access to the advice and services of the Company Secretary and senior management in carrying out their duties.

There is a formal procedure sanctioned by the Board for Directors, whether as a full Board or in their individual capacity, to take independent professional advice at the Group’s expense, where necessary in furtherance of their duties.

Appointment to the Board The Board has established a Nominating Committee, consisting of three (3) Non-Executive Directors. The Committee is responsible for the appointment of new Directors to the Board. The Committee reviews the required mix of skills and experience of the Directors of the Board, and determines the appropriate Board balance and number of Non-Executive Directors. The Committee has established the procedures and processes towards an annual assessment of the effectiveness of the Board as a whole and the contribution of each individual Director.

The Board is supportive of gender diversity in the boardroom as recommended by the Code; the Board will ensure that gender diversity will be taken into consideration in nominating and selecting new Directors for appointment on the Board.

Corporate Social Responsibility (CSR) The Board of Directors is aware of its corporate social responsibility commitments to its various stakeholders and endeavors to operate ethically, paying attention to environmental, social and governance aspects of business. The Group’s mission is to enhance value for all stakeholders whilst taking into consideration our continued social obligations.

The Group is mindful of its social responsibilities and will continue to support its CSR activities.



CORPORATE GOVERNANCE STATEMENT (continued)

2. STRENGTHEN COMPOSITION

The Company strives to have a balanced Board comprising members with suitable qualifications, skills, expertise and exposures.

Board Committees The Board has established the following Committees to assist the Board to discharge its fiduciary duties:

(a) Audit Committee

The Audit Committee comprises three (3) Independent Directors and one (1) Non-Independent Non-Executive Director.

A full report of the Audit Committee with details of its membership, terms of reference and a summary of the activities during the financial year are set out in the Audit Committee Report of this annual report.

(b) Nominating Committee

The membership of the Nominating Committee comprises exclusively Non-Executive Directors as follows:

1. Dato’ Richard Ong Guan Seng (Independent Non-Executive Director) 2. Mr. Leong Keng Yuen (Independent Non-Executive Director) 3. Dr. Foong Weng Cheong (Non-Independent Non-Executive Director)

The role of the Nominating Committee, set out in its terms of reference, includes among others, the following:

(i) To identify, assess, consider and recommend suitable candidates for directorship.

(ii) To determine the appropriate Board balance and number of Non-Executive Directors.

(iii) To review the required mix of skills, experience and other qualities, including the contributions each of the Directors bring to the Board.

(iv) To assess annually the effectiveness of the Board as a whole, including its size, and composition and the Committees of the Board.

(v) To review the training needs of the Directors.

The Nominating Committee had two (2) meetings in the financial year under review and all the members attended the meetings.

The Nominating Committee carried out the following activities during the financial year ended 30th June 2014:

(i) Revised the Terms of Reference of the Committee to include its responsibilities under the Code.

(ii) Revised the evaluation forms which include the criteria used in the annual evaluation of individual Directors, the Board and the various Committees of the Board.

(iii) Reviewed and assessed the Board balance and composition of the Directors, the Directors’ contribution and the effectiveness of the Board as a whole.

(iv) Reviewed succession planning of the Chief Executive Officer and senior executives.

(v) Reviewed the training attended by the Directors.

(vi) Reviewed the re-election of Directors retiring at the next Annual General Meeting of the Company.

(vii) Assessed the independence of the Independent Directors.

(viii) Assessed, justified and made recommendation to the Board for the retention of Independent Directors who have exceeded a cumulative term of nine (9) years.




(c) Remuneration Committee

The Remuneration Committee comprises a majority of Non-Executive Directors as follows:

1. Mr. Leong Keng Yuen (Independent Non-Executive Director) 2. Datuk Dr. Foong Weng Sum (Executive Director) 3. Dato’ Richard Ong Guan Seng (Independent Non-Executive Director) 4. Dr. Foong Weng Cheong (Non-Independent Non-Executive Director)

The Remuneration Committee is responsible for recommending the remuneration package for all Directors. The individual Directors play no part in deciding their own remuneration.

The policy practised on Directors’ remuneration by the Remuneration Committee is to provide the remuneration packages according to the skills, level of responsibilities, experience and performance of the Directors in order to attract, retain and motivate Directors of the quality required to lead and guide the business of the Company.

The remuneration of the Non-Executive Directors is determined by the Board as a whole. In addition, Non-Executive Directors are paid a meeting allowance for each meeting attended.

The Remuneration Committee had one (1) meeting during the financial year under review and all the committee members attended the meeting.

Directors’ Remuneration

The details of the Directors’ remuneration (including benefits-in-kind) from the Group for the financial year ended 30th

June 2014 are as follows:

RM’000 Salary fees Bonusother

EmolumentsBenefits-in-kind total

Executive Director

Datuk Dr. Foong Weng Sum 900 79 75 59 10 1,123

Non-Executive Directors

Dr. Foong Weng Cheong - 69 - 17 - 86Dato’ Richard Ong Guan Seng - 54 - 17 - 71Mr. Leong Keng Yuen - 66 - 17 - 83Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany - 56 - 3 - 59Mr. Ooi Ying Hong - 45 - 11 - 56

total 900 369 75 124 10 1,478

The number of Directors whose remuneration (including benefits-in-kind) falls into the following bands is as follows:

Band Executive Director Non-Executive DirectorsRM50,000 to RM100,000 - 5RM1,100,001 to RM1,150,000 1 -

The fees payable to the Directors by the Company will be recommended by the Board for approval by shareholders at the forthcoming Annual General Meeting scheduled to be held on 22nd November 2014.

Currently, there is no contract of service between any Director and the Company or its subsidiaries.




3. REINFORCE INDEPENDENCE

The Non-Executive Directors are not employees of the Group and do not participate in the day to day management of the Group. Four of the five Non-Executive Directors are Independent Directors and they are able to express their independent views without any constraint. The Nominating Committee has reviewed the performance of the Independent Directors for the financial year ended 30th June 2014 and is satisfied that the Independent Directors have been able to discharge their responsibilities in an independent manner.

Three out of the four Independent Directors, Dato’ Richard Ong Guan Seng, Mr. Leong Keng Yuen and Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany had served the Company for a cumulative term of more than 9 years, exceeding the 9 years as per the recommendations of the Code. Based on the assessment and recommendation of the Nominating Committee and the Board, the Company will seek shareholders’ approval at the forthcoming Annual General Meeting to retain these Directors as Independent Directors of the Company in line with the recommendation of the Code. The Board has also received and reviewed the duly signed declaration forms from these Directors to confirm their independence based on the criteria in line with the definition of “Independent Directors” prescribed by the Listing Requirements.

Re-election of Directors In accordance with the Company’s Articles of Association, all newly appointed Directors are subject to re-election by shareholders at the first annual general meeting immediately after their appointment. The other Directors are subject to retire on a rotational basis once every three years and are entitled to offer themselves for re-election at the Company’s Annual General Meeting. Directors over seventy years old are required to submit themselves for re-appointment annually in accordance to Section 129(6), Companies Act, 1965. Directors standing for re-election at the Forty-fifth Annual General Meeting are detailed in the Notice of the Forty-fifth Annual General Meeting.

The Directors who are due for re-election and/or re-appointment at the Annual General Meeting are assessed by the Nominating Committee and then recommendation made to the Board for endorsement to seek shareholders’ approval for the re-election and/or appointment as Directors of the Company.

4. FOSTER COMMITMENT

Each Director does not hold more than five directorships in public listed companies to ensure that they have sufficient time to focus and discharge their duties and responsibilities. The Board is satisfied with the level of the time commitment given by the Non-Executive Directors toward fulfilling their roles and responsibilities as Directors of the Company during the financial year ended 30th June 2014.

Board meetings The Board meets at least four (4) times a year at quarterly intervals, with additional meetings convened as necessary. There were four (4) meetings held during the financial year ended 30th June 2014 and details of the attendance of the Directors were as follows:

No. of Meetings Attended

Datuk Dr. Foong Weng Sum 4/4Dato' Richard Ong Guan Seng 4/4Dr. Foong Weng Cheong 4/4Mr. Leong Keng Yuen 3/4Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany 3/4Mr. Ooi Ying Hong 4/4




Directors’ Training

All the Directors have attended the Mandatory Accreditation Programme (“MAP”) as required under the Main Market Listing Requirements issued by Bursa Securities.

The Directors continue to undergo training on an annual basis to further enhance their skills and knowledge so as to keep abreast with new regulatory developments and the Listing Requirements. The Nominating Committee will review and determine the training needs of the Directors and the Directors are encouraged to attend various training on their own and submit the certificate of attendance to the Secretary for record.

The following were the details of training attended by the Directors during the financial year ended 30th June 2014:

Name of Directors Training AttendedDatuk Dr. Foong Weng Sum 2014 Budget Seminar

Dato' Richard Ong Guan Seng Malaysian Tax Summit 2013 Risk Management & Internal Control Workshop

for Audit Committee Members Briefing Session on Corporate Governance Guide:

Towards Boardroom Excellence

Dr. Foong Weng Cheong Briefing Session on Corporate Governance Guide:Towards Boardroom Excellence

Mr. Leong Keng Yuen Advocacy Session on Corporate Disclosure for Directors Recent Development of MFRS effective 1 January 2013 Understanding of GST and Updates in Malaysia Scenario Planning

Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany

Briefing Session on Corporate Governance Guide:Towards Boardroom Excellence

Independent Directors - A Necessity, Not a Choice Failed Business: Deriving Sound Strategic Insights ACCA Futures Conference 2014

Mr. Ooi Ying Hong Briefing Session on Corporate Governance Guide:Towards Boardroom Excellence

The Company Secretary circulated from time to time the relevant guidelines on statutory and regulatory requirements to the Directors. The External Auditors also highlighted changes to the Malaysian Financial Reporting Standards and legislation that affect the Company’s financial statements during the financial year.

5. UPHOLD INTEGRITY IN FINANCIAL REPORTING

Financial Reporting

The Board aims to present a balanced and meaningful assessment of the Group’s financial performance and prospects in presenting the annual financial statements and quarterly announcement of results to shareholders as well as the Chairman’s statement and review of operations in the annual report. The Board is assisted by the Audit Committee to oversee the Group’s financial reporting processes and the quality of its financial reporting.

Internal Control

The Board continues to maintain and review its risk management system and internal control procedures to ensure that the Group is operating effectively and efficiently in accordance with its internal policies and procedures and complying with laws and regulations. The Statement on Risk Management and Internal Control which provides an overview of the state of risk management and internal controls of the Group is presented in this Annual Report.



Audit Committee

The Group’s financial reporting, risk management and internal control system is overseen by the Audit Committee. The composition, terms of reference and summary of the activities of the Audit Committee during the financial year are disclosed in the Audit Committee Report of this Annual Report.

Relationship with the Auditors

(a) Internal Audit The Group has an in-house Internal Audit Unit that assists the Audit Committee in the discharge of its duties and responsibilities. The Internal Audit Unit function includes evaluation of the processes by which significant risks are identified, assessed and managed. The audits are carried out to ensure instituted controls are appropriate, effectively applied and within acceptable risk exposures and consistent with the Group’s risk management policy. The Internal Audit Unit reports directly to the Audit Committee and audit findings and recommendations are communicated to the Board on a quarterly basis.

(b) External Audit The Company has established a transparent and appropriate relationship with the Group’s external auditors through the Audit Committee. It is the practice of the Audit Committee to meet the external auditors to discuss their audit plan, audit findings and the financial statements. The Audit Committee also meets with the external auditors without the presence of any executive of the Group at least twice a year. The Audit Committee performs evaluation and monitors the suitability and independence of the external auditors. The Company has obtained assurance from the external auditors confirming that they are and have been independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.

6. RECOGNISE AND MANAGE RISKS

The Board has established an enterprise risk management framework to manage risk. The Risk Management Unit of each operating subsidiary oversees and coordinates the overall risk management activities of the respective company. The Risk Management Units submit risk assessment reports to the Audit Committee on a half yearly basis.

The Group has an in-house Internal Audit Unit which reports directly to the Audit Committee. The Internal Audit Unit conducts regular reviews and appraisals of the effectiveness of the internal controls processes and risk management of the Group and reports the findings to the Audit Committee at the end of each quarter.

The Audit Committee reviews and evaluates the effectiveness of the internal control and risk management systems in the Group.

7. ENSURE TIMELY AND HIGH QUALITY DISCLOSURE

The Board exercises close monitoring of all price sensitive information potentially required to be released to Bursa Malaysia and makes material announcements to Bursa Malaysia in a timely manner as required. The Company Secretary is responsible to compile the information for the approval of the Board for release of such information to the market as stipulated by Bursa Malaysia.

As for the dealings in the Company’s shares, the Directors and senior management privy to price sensitive information are requested to observe the Listing Requirements on the provisions on dealing in the shares of the Company during the “closed period” as well as outside the “closed period”.




8. STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS

Shareholders communication and investors relationship policy

The Annual General Meeting is the principal forum for dialogue and interaction with the shareholders of the Company. Shareholders are encouraged to attend the Company’s Annual General Meeting and use the opportunity to actively participate in the proceedings. They are encouraged to ask questions both about the resolutions being proposed or any issues pertaining to the Company and to give their views and suggestions for the benefit of the Company. Members of the Board and the external auditors of the Company are present to answer questions raised at the meeting. Where it is not possible to provide immediate answers, the Chairman will undertake to furnish the shareholder with a written answer after the Annual General Meeting.

The annual reports and the quarterly announcements are the primary modes of communication to report on the Group’s business, activities and financial performance to all its shareholders. Corporate information of the Group is available in the Company’s website, www.hexza.com.my.

Poll voting

There will not be any substantive resolution to be put for the shareholders’ approval at the forthcoming Annual General Meeting. Nevertheless, the Company would conduct poll voting whenever it is demanded by shareholders at the Annual General Meeting.

Dato’ Richard Ong Guan Seng was appointed as the Deputy Chairman on 8th November 2011 and he is also the Senior Independent Non-Executive Director who will attend to all queries relating to the affairs of the Group.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors are responsible for ensuring that proper accounting records are kept and the accounts and other financial reports of the Company and the Group are prepared in accordance with the applicable approved accounting standards and complies with the provisions of the Companies Act, 1965.

The Directors also have a general responsibility for taking such steps as are reasonably available to them to control and safeguard the assets of the Group and to prevent and detect fraud and other irregularities. In the opinion of the Directors, the Group has applied the appropriate accounting policies and standards consistently in the preparation of the financial statements for the financial year ended 30th June 2014.

The Board is satisfied that during the financial year ended 30th June 2014, save for the exceptions highlighted, the Company is in compliance with the principles and recommendations of the Code.




Utilisation of Proceeds

No proceeds were raised by the Company from any corporate exercise during the financial year.

Share Buy-Back

There was no share buy-back during the financial year.

Options, Warrants or Convertible Securities

There was no issue of options, warrants or convertible securities during the financial year.

American Depository Receipt (ADR) / Global Depository Receipt (GDR) Programmes

The Company did not sponsor any ADR or GDR programmes during the financial year.

Imposition of Sanctions / Penalties

There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the regulatory bodies during the financial year except for the payment by a subsidiary company for inability to satisfy the requirement of the Department of Environment.

Non-Audit Fees

During the financial year ended 30th June 2014, the amount of non-audit fees payable for corporate tax compliance and other advisory services rendered to the Company and its subsidiaries by the Company’s auditors and its affiliates amounted to RM37,000.

Profit Estimate, Forecast or Projection

The Company did not release any profit estimate, forecast or projection for the financial year.

Profit Guarantee

The Company did not make any arrangement during the financial year which requires profit guarantee.

Material Contracts and Contracts Relating to Loans

There are no material contracts and contracts relating to loans entered into by the Company and its subsidiaries which involve the Directors and substantial shareholders entered into since the previous financial year.

Recurrent Related Party Transactions of Revenue Nature

The details of related party transactions of revenue or trading nature undertaken by the Company during financial year are disclosed in Note 21 to the Financial Statements.

ADDITIONAL COMPLIANCE INFORMATION



STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

The Board of Directors (“Board”) is pleased to provide the following statement, which outlines the nature and scope of risk management and internal control of the Group during the financial year ended 30th June 2014. This statement is prepared pursuant to Paragraph 15.26(b) of the Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Securities), Statement on Risk Management and Internal Control – Guidance for Directors of Public Listed Companies provided by Bursa Securities and the Malaysian Code on Corporate Governance 2012.

Board Responsibility

The Board recognizes its responsibility in maintaining a sound system of internal controls which includes not only financial controls but also operational and compliance controls as well as effective risk management. The Board has established on-going processes for identifying, evaluating and managing the significant risks that matters. Due to the limitations that are inherent in any system of internal control and risk management, the system is designed to manage rather than eliminate the risks that may impede the achievement of the Group’s business objectives. The Board continually reviews the system to ensure it provides a reasonable but not absolute assurance against material misstatement of management and financial information and records or against financial losses or fraud.

The Board is of the view that the Group’s internal control and risk management framework is in place. The key features of the internal control systems are described under the following headings:-

1. Enterprise Risk Management Framework

The Board confirms that the Group continues to implement the methodologies in accordance with the enterprise risk management framework approved by the Board. The framework ensures that there is an on going process for identifying, evaluating, monitoring and managing risks that matters and affecting the Group’s business objective.

During the financial year under review, the Risk Management Units of the operating companies continued to identify principal risks of the business, assess the likelihood and impact of the potential risk and evaluate and manage the risks by formulating action plans and time frame to mitigate those risks identified. The risk assessment reports are submitted on a half yearly basis by the respective operating companies to the Audit Committee for review and comments. The Audit Committee in turn reports to the Board its assessment and recommendations.

The Board reviewed and monitored the significant risks that have an impact on the achievement of the Group’s business objectives through its assessment of the internal control system.

2. Internal Audit Function

The Group has an in-house Internal Audit Unit which reports directly to the Audit Committee. The Internal Audit Unit is responsible to review and assess the internal control system to determine if the internal control procedures have been complied with and make recommendations to strengthen the internal control system.

During the financial year under review, the Internal Audit Unit has carried out regular and systematic reviews on major business operating units of the Group to assess the effectiveness and adequacy of internal control and also on risk management and highlight areas for improvement. The annual audit plan has been reviewed and approved by the Audit Committee prior to the commencement of audit. Internal audit reports are issued upon completion of each audit which includes details on the audit objectives, scope, audit findings and recommendations and management’s response to the recommendations of the Internal Audit Unit. The Internal Audit Unit prepares quarterly reports to update the Audit Committee on the status of audit performed.

The Audit Committee ensures that control issues highlighted by both the Internal Audit Unit and the external auditors are appropriately addressed by the respective management of the operating subsidiaries on a timely basis.

The Board reviews the minutes of the Audit Committee meeting and is briefed by the Audit Committee Chairman on a quarterly basis.



STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (continued)

3. Key Internal Control Processes

(a) Organisation Structure

• There is an appropriate organizational structure with well defined lines of responsibility and authority limits.

(b) Group Policies and Procedures

• Standard operational procedures, policies, guidelines and limits of approving authorities are documented in the Group Manual. The Group uses the same accounting system for all companies within the Group to ensure consistency in the financial reporting processes.

(c) Operational Monitoring and Controls

• The operating units hold regular management meetings to review the financial and operational performance and risk management issues.

• Annual business plans and budgets are prepared by the operating units and submitted to the Board for approval. The performance is compared against budget on a monthly basis with explanation of variances. The Board reviews the performance of the Group on a quarterly basis.

• Management reports, both financial and operational performance reviews which encompass review of key performance indicators, variance analysis and compliance to policies and guidelines are generated and submitted to the Group Chief Executive on a monthly basis.

• Yearly review of insurance coverage and its adequacy are carried out by senior management to ensure the assets are sufficiently covered against any mishap that may result in material losses to the Group.

• The Board meets at least on a quarterly basis and there is a formal agenda on matters for discussion at every meeting. The Group Chief Executive leads the presentation of board papers and provides comprehensive explanation of pertinent matters. The Board is updated on the performance of the operating units together with any significant matters by either the Group Chief Executive and/or the General Managers of the respective operating units at Board Meetings.

Review of the Statement by External Auditors

The external auditors have reviewed this Statement in accordance with the Recommended Practice Guide (RPG) 5 (Revised) issued by the Malaysia Institute of Accountants on the Review of Directors’ Statement on Risk Management and Internal Control pursuant to paragraph 15.23 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in the review of the integrity of the system of risk management and internal control of the Group.

Conclusion

The Board has received assurance from the Group Chief Executive and Chief Financial Officer that to the best of their knowledge the risk management and internal control of the Group are operating effectively and adequately in all material respects, for the year under review up to the date of approval of this statement. The Board has appraised and confirmed the risk management and internal control system is satisfactory and the control issues highlighted have not resulted in any material losses, contingencies or uncertainties that would require disclosure in this report.

This statement was reviewed and approved by the Board in accordance with a resolution of the Board of Directors dated 30th September 2014.

ANNUAL REPORT 2014


Directors' Report

Independent Auditors’ Report

Statements of Profit or Lossand Other Comprehensive Income

Statements of Financial Position

Statements of Changes In Equity


Notes to the Financial Statements

Supplementary Information - disclosure on realised and unrealised profits or losses

Statement by Directors

Declaration by the Officer Primarily Responsiblefor the Financial Management of the Company

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FINANCIALSTATEMENTS



DIRECTORS’ REPORT

The directors of HEXZA CORPORATION BERHAD have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended June 30, 2014.

PRINCIPAL ACTIVITIES

The Company is principally involved in investment holding.

The principal activities of the subsidiary companies are disclosed in Note 15 to the financial statements.

There have been no significant changes in the nature of the principal activities of the Company and its subsidiary companies during the financial year.

RESULTS OF OPERATIONS

The results of operations of the Group and of the Company for the financial year are as follows:

the GroupRM

the CompanyRM

Profit for the year 8,583,689 10,027,499

Profit attributable to:Owners of the Company 8,079,200 10,027,499Non-controlling interests 504,489 -

8,583,689 10,027,499

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

DIVIDENDS

A first and final dividend of 8.0% less tax and a tax-exempt dividend of 2.0% in respect of 200,380,036 ordinary shares proposed in the previous financial year and dealt with in the previous directors’ report were paid by the Company during the financial year.

The directors have proposed a first and final single-tier dividend of 8.0% in respect of the current financial year. The proposed dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company and has not been included as a liability in the financial statements.

RESERVES AND PROVISIONS

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

ISSUE OF SHARES AND DEBENTURES

The Company has not issued any new shares or debentures during the financial year.



DIRECTORS’ REPORT

SHARE OPTIONS

No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company.

No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As of the end of the financial year, there were no unissued shares of the Company under options.

OTHER STATUTORY INFORMATION

Before the statements of profit or loss and other comprehensive income and the statements of financial position of the Group and of the Company were made out, the directors took reasonable steps:

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

(b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business had been written down to their estimated realisable values.

At the date of this report, the directors are not aware of any circumstances:

(a) which would render the amount written off as bad debts or the amount of allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or

(b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or

(d) not otherwise dealt with in this report or financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading.

At the date of this report, there does not exist:

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

(b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year. No contingent or other liability has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

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

DIRECTORS

The following directors served on the Board of the Company since the date of the last report:

Datuk Dr. Foong Weng SumDato' Richard Ong Guan SengDr. Foong Weng CheongMr. Leong Keng YuenTuan Haji Mohd Jali @ Mohd Jalil Bin SanyMr. Ooi Ying Hong

In accordance with Article 78 of the Company’s Articles of Association, Mr. Ooi Ying Hong retires by rotation and, being eligible, offers himself for re-election.



DIRECTORS (continued)

In accordance with Section 129 (6) of the Companies Act, 1965, Datuk Dr. Foong Weng Sum, Dr. Foong Weng Cheong and Dato’ Richard Ong Guan Seng retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment.

DIRECTORS' INTERESTS

The shareholdings in the Company of those who were directors at the end of the financial year, as recorded in the Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965, are as follows:

No. of ordinary shares of RM0.50 each

Balance as of1.7.2013 Bought disposed

Balance as of30.6.2014

Shares in the Company

Registered in the name of directorsDatuk Dr. Foong Weng Sum 1,083,228 - - 1,083,228Dato' Richard Ong Guan Seng 250,000 - - 250,000Dr. Foong Weng Cheong 2,662,500 - - 2,662,500Mr. Leong Keng Yuen 225,000 - - 225,000Mr. Ooi Ying Hong 10,000 70,000 - 80,000

Indirect interest by virtue of shares held by a company in which the directors have interest

Datuk Dr. Foong Weng Sum 60,581,657 1,650,000 - 62,231,657Dr. Foong Weng Cheong 60,581,657 1,650,000 - 62,231,657Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany 60,000 - - 60,000

By virtue of their interests in the shares of the Company, Datuk Dr. Foong Weng Sum and Dr. Foong Weng Cheong are also deemed to have an interest in the shares of all the subsidiary companies to the extent that the Company has interests.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, none of the directors of the Company has received or become entitled to receive any benefit (other than the benefit included in the aggregate amount of emoluments received or due and receivable by directors as disclosed in the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except for any benefit which may be deemed to have arisen by virtue of the transactions between the Company and certain companies in which certain directors of the Company are also directors and/or shareholders as disclosed in Note 21 to the financial statements.

During and at the end of the financial year, no arrangement subsisted to which the Company was a party whereby directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

DIRECTORS’ REPORT



AUDITORS

The auditors, Messrs. Deloitte & Touche, have indicated their willingness to continue in office.

Signed on behalf of the Boardin accordance with a resolution of the Directors,

DATUK DR. FOONG WENG SUM

DATO' RICHARD ONG GUAN SENG

Ipoh,30th September 2014

DIRECTORS’ REPORT



INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HEXZA CORPORATION BERHAD

Report on the Financial Statements

We have audited the financial statements of Hexza Corporation Berhad, which comprise the statements of financial position of the Group and of the Company as of June 30, 2014 and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 36 to 87.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation of these financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of June 30, 2014 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that:

(a) in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiaries have been properly kept in accordance with the provisions of the Act;

(b) we are satisfied that the accounts of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group, and we have received satisfactory information and explanations as required by us for these purposes; and

(c) our auditors’ reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174 (3) of the Act.



INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HEXZA CORPORATION BERHAD

Other Reporting Responsibilities

The supplementary information set out in Note 31 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1 “Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements” as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility towards any other person for the contents of this report.

dELoittE & toUChEaf 0834Chartered accountants

LiM KEnG PEoPartner - 2939/01/16(J/PH)Chartered accountant

30th September 2014



STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED JUNE 30, 2014

the Group the Company

note2014RM

2013RM

2014RM

2013RM

Revenue 5 145,341,031 124,557,099 9,202,170 9,266,214

Investment revenue 7 734,101 787,793 812,180 743,535Other gains and (losses) 8 1,174,028 5,034,337 1,073,456 5,239,032Other operating income 9 204,801 423,216 58,793 66,700Changes in inventories of

finished goods, trading goods and work-in-progress 735,000 1,052,835 - -

Trading goods and finished goods purchased - (416,110) - -

Raw materials andconsumables used (82,209,509) (72,450,280) - -

Directors’ remuneration 10 (1,469,250) (1,485,845) (342,500) (349,500)Employee benefits expenses 10 (7,029,631) (7,455,473) (329,177) (304,227)Depreciation of property,

plant and equipment 14 (5,448,367) (5,657,130) (4,667) (3,137)Share of loss in

associated company 16 - (7,397) - -Finance costs 11 (62,297) (36,975) - -Other operating expenses 9 (41,222,260) (34,273,206) (207,709) (186,677)

Profit before tax 10,747,647 10,072,864 10,262,546 14,471,940Income tax expense 12 (2,163,958) (1,191,215) (235,047) (434,101)

Profit for the year 8,583,689 8,881,649 10,027,499 14,037,839




note2014RM

2013RM

2014RM

2013RM

other comprehensiveincome/(loss)

Items that may be reclassifiedsubsequently to profit or loss:Net fair value changes in

available-for-salefinancial assets 1,881,055 1,708,739 1,881,535 1,709,859

Reclassification of gain ondisposal of available-for-salefinancial assets - (2,651,347) - (2,651,347)

1,881,055 (942,608) 1,881,535 (941,488)

total comprehensive incomefor the year 10,464,744 7,939,041 11,909,034 13,096,351

Profit attributable to:Owners of the Company 8,079,200 8,474,633 10,027,499 14,037,839Non-controlling interests 504,489 407,016 - -

8,583,689 8,881,649 10,027,499 14,037,839

total comprehensive incomeattributable to:

Owners of the Company 9,960,255 7,532,025 11,909,034 13,096,351Non-controlling interests 504,489 407,016 - -

10,464,744 7,939,041 11,909,034 13,096,351

Earnings per ordinaryshare of RM0.50 each

Basic (sen) 13 4.0 4.2

Diluted (sen) 13 4.0 4.2

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED JUNE 30, 2014

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




note2014RM

2013RM

2014RM

2013RM

aSSEtS

Non-current assetsProperty, plant and equipment 14 62,509,334 66,958,734 6,605 7,144Investment in subsidiary

companies 15 - - 68,858,748 68,850,220Other investments 17 57,308,378 55,885,900 57,288,778 55,865,820Goodwill arising on

consolidation 18 2,129,365 2,129,365 - -Deferred tax assets 12 431,000 572,000 - -

Total non-current assets 122,378,077 125,545,999 126,154,131 124,723,184

Current assetsInventories 19 20,097,283 17,367,207 - -Trade and other receivables 20 35,336,009 23,447,113 5,772,081 231,579Current tax assets 12 52,399 593,409 - 74,778Other assets 22 326,754 438,188 20,776 13,952Cash and cash equivalents 23 73,264,971 73,404,415 56,514,471 59,500,772

total current assets 129,077,416 115,250,332 62,307,328 59,821,081

total assets 251,455,493 240,796,331 188,461,459 184,544,265

STATEMENTS OF FINANCIAL POSITIONAS OF JUNE 30, 2014




note2014RM

2013RM

2014RM

2013RM

EQUITY AND LIABILITIES

Capital and reservesShare capital 24 100,190,018 100,190,018 100,190,018 100,190,018Reserves 25 115,253,587 113,308,533 87,805,286 83,911,453

215,443,605 213,498,551 187,995,304 184,101,471Non-controlling interests 15 6,567,272 6,875,983 - -

total equity 222,010,877 220,374,534 187,995,304 184,101,471

Non-current liabilitiesDeferred tax liabilities 12 9,304,025 9,888,725 - -

Current liabilitiesTrade and other payables 26 12,588,690 7,622,218 80,417 117,422Current tax liabilities 12 681,704 - 41,204 -Accrued expenses 3,270,197 2,910,854 344,534 325,372Short-term borrowings 27 3,600,000 - - -

total current liabilities 20,140,591 10,533,072 466,155 442,794

total liabilities 29,444,616 20,421,797 466,155 442,794

total equity and liabilities 251,455,493 240,796,331 188,461,459 184,544,265

net tangible assets per ordinary share 1.06 1.05






<--------- Attributable to the Owners of the Company --------->

the Group note

ShareCapital

RM

investmentsRevaluation

ReserveRM

RetainedEarnings

RMSubtotal

RM

Non-Controlling

interestsRM

totalEquity

RM

Balance as of July 1, 2012 100,190,018 4,752,776 109,038,933 213,981,727 7,483,067 221,464,794

Profit for the year - - 8,474,633 8,474,633 407,016 8,881,649Other comprehensive

loss - (942,608) - (942,608) - (942,608)

Total comprehensiveincome/(loss) forthe year - (942,608) 8,474,633 7,532,025 407,016 7,939,041

Payment of dividends 28 - - (8,015,201) (8,015,201) (1,014,100) (9,029,301)

Balance as of June 30, 2013 100,190,018 3,810,168 109,498,365 213,498,551 6,875,983 220,374,534

Profit for the year - - 8,079,200 8,079,200 504,489 8,583,689Other comprehensive

income - 1,881,055 - 1,881,055 - 1,881,055

Total comprehensive income for the year - 1,881,055 8,079,200 9,960,255 504,489 10,464,744

Payment of dividends 28 - - (8,015,201) (8,015,201) (813,200) (8,828,401)

Balance as of June 30, 2014 100,190,018 5,691,223 109,562,364 215,443,605 6,567,272 222,010,877


STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED JUNE 30, 2014



<---------------------- Attributable to the Owners of the Company ---------------------->Non-

distributable Reserve

distributable Reserve

the Company note

ShareCapital

RM

investmentsRevaluation

ReserveRM

RetainedEarnings

RM

totalEquity

RM

Balance as of July 1, 2012 100,190,018 4,745,096 74,085,207 179,020,321

Profit for the year - - 14,037,839 14,037,839Other comprehensive loss - (941,488) - (941,488)

Total comprehensive income/(loss) for the year - (941,488) 14,037,839 13,096,351

Payment of dividends 28 - - (8,015,201) (8,015,201)

Balance as of June 30, 2013 100,190,018 3,803,608 80,107,845 184,101,471

Profit for the year - - 10,027,499 10,027,499Other comprehensive income - 1,881,535 - 1,881,535

Total comprehensive income for the year - 1,881,535 10,027,499 11,909,034

Payment of dividends 28 - - (8,015,201) (8,015,201)

Balance as of June 30, 2014 100,190,018 5,685,143 82,120,143 187,995,304






the Group

note2014RM

2013RM

CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES

Profit for the year 8,583,689 8,881,649Adjustments for:

Depreciation of property, plant and equipment 5,448,367 5,657,130Income tax expense recognised in the statements of

profit or loss and other comprehensive income 2,163,958 1,191,215Inventories written off 204,666 242,889Finance costs 62,297 36,975Property, plant and equipment written off 6,583 59,996Dividend income (2,205,570) (2,944,405)Net gain arising from financial assets designated

as at FVTPL (1,147,421) (1,033,680)Interest income (812,112) (968,485)Allowance for doubtful debts - 378,169Bad debts written off - 131,348Share of loss in associated company - 7,397Cumulative gain reclassified from equity on

disposal of available-for-sale investments - (2,651,347)Gain on disposal of available-for-sale investments - (1,537,827)

12,304,457 7,451,024

Movements in working capital:(Increase)/Decrease in:

Inventories (2,934,742) 1,086,000Trade and other receivables (11,898,913) 7,920,780Other assets 111,434 40,552

Increase/(Decrease) in:Trade and other payables 4,966,472 (1,485,366)Accrued expenses 359,343 (33,264)

Cash Generated From Operations 2,908,051 14,979,726

Dividends received from available-for-sale investments 2,188,070 2,702,408Interest received 1,969,550 1,976,886Income tax refunded 679,330 2,357,670Income tax paid (2,046,774) (2,105,468)Interest paid (62,297) (36,975)

Net Cash Generated From Operating Activities 5,635,930 19,874,247

STATEMENT OF CASH FLOWSFOR THE YEAR ENDED JUNE 30, 2014



the Group

note2014RM

2013RM

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES

Capital distribution/proceeds from disposal ofavailable-for-sale investments 975,955 10,533,234

Purchase of property, plant and equipment (1,005,550) (1,130,408)Purchase of available-for-sale investments (517,378) (5,346,898)Capital distribution from associated company - 80,850

Net Cash (Used In)/From Investing Activities (546,973) 4,136,778

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES

Proceeds from/(Repayment of) short-term borrowings 3,600,000 (5,342,000)Dividends paid to owners of the Company (8,015,201) (8,015,201)Dividends paid to non-controlling interests (813,200) (1,014,100)

Net Cash Used In Financing Activities (5,228,401) (14,371,301)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (139,444) 9,639,724

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 73,404,415 63,764,691

CaSh and CaSh EQUivaLEntS at End of YEaR 23 73,264,971 73,404,415






the Company

note2014RM

2013RM

CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES

Profit for the year 10,027,499 14,037,839Adjustments for:

Income tax expense recognised in the statement ofprofit or loss and other comprehensive income 235,047 434,101

Allowance for doubtful debts 13,593 6,408Depreciation of property, plant and equipment 4,667 3,137Property, plant and equipment written off 2 -Dividend income (9,202,170) (9,266,214)Net gain arising from financial assets designated

as at FVTPL (1,064,930) (955,201)Interest income (812,180) (743,535)Allowance for diminution in value of investment in

subsidiary company no longer required (8,528) (13,808)Cumulative gain reclassified from equity on

disposal of available-for-sale investments - (2,651,347)Gain on disposal of available-for-sale investments - (1,537,827)Gain on capital distribution of associated company - (80,849)

(807,000) (767,296)

Movements in working capital:

(Increase)/Decrease in:Other receivables (9,943) (60,531)Other assets (6,824) 9,228

(Decrease)/Increase in:Other payables (35,582) 25,404Accrued expenses 19,162 (4,882)

Cash Used In Operations (840,187) (798,077)Dividends received from subsidiary companies 6,997,000 6,305,632Dividends received from available-for-sale investments 2,187,670 2,701,208Interest received 1,886,867 1,673,457Income tax refunded 166,647 133,196Income tax paid (198,375) (263,380)

Net Cash Generated From Operating Activities 10,199,622 9,752,036




the Company

note2014RM

2013RM

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES

Capital distribution from available-for-sale investments 975,955 -(Advances to)/Repayment by subsidiary companies (5,623,746) 2,522,133Purchase of available-for-sale investments (517,378) (5,346,898)Purchase of property, plant and equipment (4,130) (6,598)Proceeds from disposal of available-for-sale investments - 10,533,234Capital distribution from associated company - 80,850

Net Cash (Used In)/From Investing Activities (5,169,299) 7,782,721

CaSh fLoWS USEd in finanCinG aCtivitiES

Dividend paid to owners of the Company (8,015,201) (8,015,201)Repayment to a subsidiary company (1,423) (1,427)

Net Cash Used In Financing Activities (8,016,624) (8,016,628)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (2,986,301) 9,518,129

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 59,500,772 49,982,643

CaSh and CaSh EQUivaLEntS at End of YEaR 23 56,514,471 59,500,772






NOTES TO THE FINANCIAL STATEMENTS

1. GENERAL INFORMATION The Company is a public limited company, incorporated and domiciled in Malaysia and is listed on the Main

Board of Bursa Malaysia Securities Berhad.

The Company is principally involved in investment holding.

The principal activities of the subsidiary companies are disclosed in Note 15.

There have been no significant changes in the nature of the principal activities of the Company and its subsidiary companies during the financial year.

The registered office and principal place of business of the Company are located at Lot 6 & 20, Persiaran Tasek, Kawasan Perindustrian Tasek, 31400 Ipoh, Perak Darul Ridzuan.

The financial statements of the Group and of the Company were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 30th September 2014.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements of the Group and of the Company have been prepared in accordance with Malaysian

Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”) and the provisions of the Companies Act, 1965 in Malaysia.

2.1 Adoption of new and revised MFRSs

New and revised MFRSs affecting amounts reported and/or disclosures in the financial statements In the current year, the Group and the Company have applied a number of new and revised MFRSs issued

by the Malaysian Accounting Standards Board (“MASB”) that are mandatorily effective for an accounting period that begins on or after January 1, 2013.

The application of new and revised MFRSs has had no material impact on the disclosures or on the amounts recognised in the financial statements, except as follows:

MFRS 13 Fair Value Measurement

The Group and the Company have applied MFRS 13 for the first time in the current year. MFRS 13 establishes a single source of guidance for fair value measurements and disclosures about the fair value measurements. The scope of MFRS 13 is broad; the fair value measurement requirements of MFRS 13 apply to both financial instrument items and non-financial instrument items for which other MFRSs require or permit fair value measurements and disclosures about fair value measurements, and measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment assessment purposes).

MFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under MFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, MFRS 13 includes extensive disclosure requirements.

MFRS 13 requires prospective application from January 1, 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. In accordance with these transitional provisions, the Company has not made any new disclosures required by MFRS 13 for the 2013 comparative period (please see Note 30 for the 2014 disclosures). Other than the additional disclosures, the application of MFRS 13 has not had any material impact on the amounts recognised in these financial statements.



2.2 Standards and IC Interpretations (“IC Int.”) in issue but not yet effective The Group and the Company have not elected for early adoption of the relevant new and revised MFRSs and

IC Int. and amendments to MFRSs and IC Int. which have been issued but not yet effective until future periods at the date of authorisation for issue of these financial statements. The directors anticipate that the adoption of these Standards and IC Int. when they become effective will have no material impact on the financial statements of the Group and of the Company in the period of initial application except as discussed below:

MFRS 15 Revenue from Contracts with Customers

MFRS 15 provides a single revenue recognition model for all entities to apply in accounting for revenue arising from contract with customers. It also includes new guidance as to whether revenue should be recognised at a point in time or over time, which replace the current distinction between goods and services.

The core principle of MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

MFRS 15 also includes new quantitative and/or qualitative disclosure requirements on the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers.

MFRS 15 is effective for annual periods beginning on or after January 1, 2017, with earlier application being permitted. An entity may choose to adopt MFRS 15 retrospectively or retrospectively with a cumulative effect adjustment as of date of initial application of this Standard.

The Group and the Company is currently assessing the impact of adoption of MFRS 15, including identification of the differences in existing accounting policies as compared to MFRS 15. Thus, as at the date of authorisation of issue of the financial statements of the Group and of the Company, the impact of adopting MFRS 15 cannot be reasonably determined and estimated reliably yet until such assessment is completed.

3. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of the Group and of the Company have been prepared on the historical cost basis except

for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of MFRS 2, leasing transactions that are within the scope of MFRS 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in MFRS 102 or value in use in MFRS 136.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.





3. SIGNIFICANT ACCOUNTING POLICIES (continued)

The principal accounting policies are set out below. Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and of the subsidiary

companies controlled by the Company. Control is achieved where the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The results of subsidiary companies acquired or disposed of during the financial year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiary companies to bring their accounting policies in line with those used by other members of the Group.

All significant intragroup transactions, balances and income and expenses are eliminated in full on consolidation. Unrealised losses are eliminated on consolidation unless costs cannot be recovered.

Non-controlling interests in subsidiary companies are identified separately from the Group’s equity therein. The interests of non-controlling shareholders may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiary companies that do not result in the Group losing control are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary companies. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary company, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary company and any non-controlling interests. When assets of the subsidiary company are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income are accounted for as if the Group had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under MFRS 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

Business Combinations Acquisitions of subsidiary companies and businesses are accounted for using the acquisition method. The

consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Segment Reporting

For management purposes, the Group is organised into operating segments that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that related to transactions with any of the Group’s other components. The Group’s reporting segments were identified based on internal reports that are regularly reviewed by the Group’s chief operating decision maker in order to allocate resources to the segment and to assess its performance. The Group’s reportable segments are strategic business operations that are managed separately based on the Group’s management and internal reporting structure.




Revenue Recognition Sale of goods are recognised upon delivery of products and when the risks and rewards of ownership have

passed to the customers. Sales are measured at the fair value of the consideration received or receivable and represent gross invoiced value of goods sold net of sales tax, trade discounts and allowances.

Income relating to property development projects is recognised upon signing of the individual sale and purchase agreements, and risks and rewards of ownership of the properties are transferred.

Dividend income represents gross dividends from subsidiary companies and from quoted and unquoted investments and is recognised when the shareholders’ right to receive payment is established.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rates applicable.

Foreign Currencies

The individual financial statements of each group entity are presented in Ringgit Malaysia, the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Ringgit Malaysia, which is the functional currency of the Company, and also the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded in Ringgit Malaysia at the rates of exchange prevailing on the date of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated into Ringgit Malaysia at the exchange rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the year in which they arise except for exchange differences arising on the retranslation of non-monetary items carried at fair value in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, the exchange component of that gain or loss is also recognised in other comprehensive income.

Employee Benefits

Short-term employee benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which

the associated services are rendered by employees of the Group and of the Company. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

Defined contribution plan

The Group makes statutory contributions to approved provident funds and the contributions are charged to profit or loss as incurred. The approved provident funds are defined contribution plans. Once the contributions have been paid, there are no further payment obligations.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible pertaining to previous years and it further excludes items that are never taxable or deductible. The liability of the Group and of the Company for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.





Deferred tax

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences, unused tax losses and unused tax credits can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the year

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss; or when they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the interest of the acquirer in the net fair value of the identifiable assets, liabilities and contingent liabilities over cost of the acquiree.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is charged so as to write off the cost of property, plant and equipment, other than freehold land, properties under construction and other capital work-in-progress, over their estimated useful lives, after taking into account their estimated residual value, using the straight-line method. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

Capital work-in-progress including properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Freehold land is not depreciated. Long-term leasehold land is amortised evenly over the lease period of 57½ to 97 years. The years of commencing of the amortisation range from 1985 to 2006.

Short-term leasehold land are amortised evenly over the lease period of 58½ years commencing from 1994.




The annual depreciation rates are as follows:

Buildings and improvements 2% to 10%Plant, machinery and equipment 5% to 20%Furniture, fixtures and office equipment 10% to 331/3%Motor vehicles and forklifts 20%

The estimated useful lives, residual values and depreciation method of property, plant and equipment are reviewed at each year end, with the effect of any changes in estimates accounted for prospectively.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss.

Investment in subsidiary companies

Investment in subsidiary companies which are eliminated on consolidation, are stated at cost less accumulated impairment losses, if any, in the Company’s separate financial statements.

Goodwill

Goodwill acquired in a business combination is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Goodwill is not amortised. Instead, it is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired.

For the purpose of impairment testing, goodwill is allocated to each of the cash-generating units of the Group expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Any impairment loss is recognised immediately in the consolidated profit or loss and any impairment loss recognised for goodwill is not subsequently reversed.

On disposal of an entity or operation, the goodwill associated with the entity or operation disposed of is included in the carrying amount of the entity or operation when determining the gain or loss on disposal.

Impairment of Assets Excluding Goodwill

At the end of each reporting period, the Group and the Company review the carrying amounts of their assets (other than inventories and financial assets which are dealt with in their respective policies) to determine if there is any indication that those assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimated.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.





Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in profit or loss. An impairment loss is reversed if there has been a change in the estimate used to determine the recoverable amount.

An impairment loss is only reversed to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for the asset in prior years. A reversal is recognised immediately in profit or loss.

Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined principally on the “Weighted Average” method. Cost of raw materials and consumables, and goods-in-transit comprise the original purchase price plus cost incurred in bringing the inventories to their present location. The cost of finished goods and work-in-progress comprises the cost of raw materials, direct labour and a proportion of the production overheads.

Inventories of unsold completed development units are stated at the lower of cost and net realisable value. Cost includes the relevant cost of land, development expenditure and related interest cost incurred during the development year.

Net realisable value represents the estimated selling price in the ordinary course of business less all other estimated costs to completion.

Borrowing Costs

Borrowing costs directly attributable to construction of assets which require a substantial period of time to get them ready for their intended use are capitalised and included as part of the related assets. Capitalisation of borrowing costs will cease when the assets are ready for their intended use.

All other borrowing costs are recognised as an expense in the year in which they are incurred.

Provisions

Provisions are recognised when the Group and the Company have present obligation (legal or constructive) as a result of past event and it is probable that the Group and the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Financial Instruments

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

Where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, such financial assets are recognised and derecognised on trade date.

Financial instruments are initially measured at fair value, plus transaction costs, except for those financial assets and financial liabilities classified as at fair value through profit or loss (“FVTPL”), which are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.




Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Income and expense are recognised on an effective interest basis for debt instruments other than those financial assets and financial liabilities classified as at FVTPL.

(a) Financial assets

Financial assets of the Group and of the Company are classified into at FVTPL, ‘available-for-sale’ (“AFS”) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

(i) Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL.

A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling it in the near term; or

• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and MFRS 139 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the “other gains and losses” line item. Fair value is determined in the manner described in Note 30.

(ii) AFS financial assets

AFS financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at FVTPL. All AFS financial assets with the exception of unquoted shares which are measured at cost less impairment, are measured at fair value at the end of the reporting period. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve, with the exception of impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets, which are recognised in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss.

Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established.





(iii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

(iv) Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For equity investments classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

• the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off and changes in the carrying amount of the allowance account are recognised in profit or loss.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.

With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.




(v) Derecognition of financial assets

The Group and the Company derecognise a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group and the Company neither transfer nor retain substantially all the risks and rewards of ownership and continue to control the transferred asset, the Group and the Company recognise their retained interest in the asset and an associated liability for amounts they may have to pay. If the Group and the Company retain substantially all the risks and rewards of ownership of a transferred financial asset, the Group and the Company continue to recognise the financial asset and also recognise a collateralised borrowing for the proceeds received.

(b) Financial liabilities and equity instruments

(i) Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

(ii) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group and the Company are recognised at the proceeds received, net of direct issue costs.

(iii) Financial liabilities

Financial liabilities of the Group and of the Company, including borrowings, are classified into “other financial liabilities” category, and are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

(iv) Derecognition of financial liabilities

The Group and the Company derecognise financial liabilities when, and only when, the Group’s and the Company’s obligations are discharged, cancelled or they expire.


The Group and the Company adopt the indirect method in the preparation of the statements of cash flows.

Cash equivalents are short-term, highly liquid investments with maturities of three months or less from the date of acquisition and are readily convertible to cash with insignificant risks of changes in value.

4. CRITICAL ACCOUNTING jUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the process of applying the Group’s and the Company’s accounting policies, the directors are of the opinion that there are no instances of application of judgement which are expected to have a significant effect on the amounts recognised in the financial statements.

In the application of the accounting policies of the Group and of the Company, the directors are required to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.




4. CRITICAL ACCOUNTING jUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

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

(a) Impairment of Goodwill

The Group tests goodwill for impairment annually in accordance with its accounting policy. More regular reviews are performed if events indicate that this is necessary.

For the purpose of assessing impairment, goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose.

Significant judgement is required in the estimation of the present value of future cash flows generated by the cash-generating units, which involve uncertainties and are significantly affected by assumptions used and judgement made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the tests for impairment of goodwill.

(b) Impairment of Property, Plant and Equipment and Other Non-current Assets

The Group assesses impairment of assets whenever the events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, i.e. the carrying amount of the asset is more than the recoverable amount.

Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in-use. The value-in-use is the net present value of the projected future cash flows derived from that asset discounted at an appropriate discount rate. Projected future cash flows are based on Group’s estimates, approved by the management covering a period of five years and calculated based on historical, sector and industry trends, general market and economic conditions, changes in technology and other available information. The terminal value is calculated based on the projected residual value of the asset at the end of the fifth year.

Management of the Group have carried out an impairment review on their property, plant and equipment, and concluded that there is no indication of impairment.

(c) Recognition of Deferred Tax Assets

The Group recognises deferred tax assets arising from unabsorbed capital allowances and unutilised tax losses to the extent that it is probable that taxable profits will be available against which the unabsorbed capital allowances and unutilised tax losses can be utilised. The estimation of taxable profits requires use of judgement and assumptions about the Group’s future financial results.

(d) Estimated Useful Lives of Property, Plant and Equipment

The Group regularly reviews the estimated useful lives of property, plant and equipment based on factors such as business plan and strategies, expected level of usage and future technological developments. Future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned above. A reduction in the estimated useful lives of property, plant and equipment would increase the recorded depreciation and decrease the value of property, plant and equipment.

(e) Recoverability of Receivables

The Group makes allowance for doubtful receivables based on an assessment of the recoverability of trade and other receivables. An allowance is established for trade or other receivable when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of transactions. The identification of doubtful receivables requires use of judgement and estimates with reference to the ageing profile and collection patterns. Where the expectation is different from the original estimate, such difference will impact the carrying value of the trade and other receivables and doubtful receivables expenses in the period in which such estimate has been changed.




5. REVENUE

the Group the Company2014RM

2013RM

2014RM

2013RM

Manufacturing 140,543,041 118,861,331 - -Trading 2,592,820 2,752,563 - -Dividend income:

Shares quoted in Malaysia 1,526,537 2,363,041 1,526,537 2,363,041Unquoted shares 426,888 465,696 426,888 465,696Shares quoted outside Malaysia 25,521 24,559 25,521 24,559Subsidiary companies - - 6,997,000 6,323,009Investment funds 226,224 89,909 226,224 89,909

145,341,031 124,557,099 9,202,170 9,266,214

The following is an analysis of revenue earned on financial assets and non-financial assets:


2013RM

2014RM

2013RM

Revenue earned on:Financial assets designatedas FVTPL 226,224 89,909 226,224 89,909Available-for-sale financial assets 1,978,946 2,853,296 1,978,946 2,853,296Non-financial assets 143,135,861 121,613,894 6,997,000 6,323,009

145,341,031 124,557,099 9,202,170 9,266,214

6. SEGMENT INFORMATION

The Group’s reporting segments were identified based on internal reports that are regularly reviewed by the Group’s chief operating decision maker in order to allocate resources to the segment and to assess its performance.

The Group’s reportable segments are strategic business operations that are managed separately based on the Group’s management and internal reporting structure.

For management purposes, the Group is organised into the following operating divisions:

- Investment holding

- Manufacture and sales of formaldehyde based adhesives and resins for timber related industries, ethyl alcohol, natural vinegar, cooler, liquefied carbon dioxide and kaoliang wine

- Trading

- Others (property development, dormant and pre-operating companies)




6. SEGMENT INFORMATION (continued)

the Group2014

investmentholding

RMManufacturing

RMtrading

RMothers

RMEliminations

RMConsolidated

RM

RevenueExternal customers 2,205,170 140,543,041 2,592,820 - - 145,341,031Inter-segment 6,997,000 1,987,340 19,540,465 - (28,524,805) -

9,202,170 142,530,381 22,133,285 - (28,524,805) 145,341,031

ResultsInterest income 812,180 122,539 - - (122,607) 812,112Finance costs - (170,467) (14,437) - 122,607 (62,297)Depreciation of

property, plantand equipment (4,667) (5,414,791) (28,806) (103) - (5,448,367)

Non-cash expenses other than depreciation 13,595 210,944 302 1 (13,595) 211,247

Segment profit 9,450,366 6,934,837 552,672 54,865 (6,994,908) 9,997,832Interest income 812,180 122,539 - - (122,607) 812,112Finance costs - (170,467) (14,437) - 122,607 (62,297)

Profit before tax 10,262,546 6,886,909 538,235 54,865 (6,994,908) 10,747,647Income tax expense (2,163,958)

Profit for the year 8,583,689

assetsReportable

segment assets 113,945,008 130,447,726 3,776,945 2,802,415 - 250,972,094Unallocated

corporate assets 483,399

Consolidated total assets 251,455,493

LiabilitiesReportable

segment liabilities (352,734) (18,880,344) (36,837) (188,972) - (19,458,887)Unallocated

corporate liabilities (9,985,729)

Consolidated total liabilities (29,444,616)

Other informationCapital additions 4,130 995,782 5,638 - - 1,005,550




the Group2013

investmentholding

RMManufacturing

RMtrading

RMothers

RMEliminations

RMConsolidated

RM

RevenueExternal customers 2,943,205 118,861,331 2,752,563 - - 124,557,099Inter-segment 6,323,009 2,057,061 17,458,322 - (25,838,392) -

9,266,214 120,918,392 20,210,885 - (25,838,392) 124,557,099

ResultsInterest income 743,535 62,115 - - (19,057) 786,593Finance costs - (24,459) (31,573) - 19,057 (36,975)Depreciation of

property, plant and equipment (3,137) (5,619,211) (34,679) (103) - (5,657,130)

Non-cash expenses other than depreciation (6,409) (812,401) (1) - 6,409 (812,402)Share of loss in associated company (7,397) - - - - (7,397)

Segment profit 13,721,008 1,447,622 473,813 54,097 (6,373,294) 9,323,246Interest income 743,535 62,115 - - (19,057) 786,593Finance costs - (24,459) (31,573) - 19,057 (36,975)

Profit before tax 14,464,543 1,485,278 442,240 54,097 (6,373,294) 10,072,864Income tax expense (1,191,215)

Profit for the year 8,881,649

assetsReportable

segment assets 115,571,717 119,070,689 2,187,390 2,801,126 - 239,630,922Unallocated

corporate assets 1,165,409

Consolidated total assets 240,796,331

LiabilitiesReportable

segment liabilities (369,154) (9,622,081) (352,911) (188,926) - (10,533,072)Unallocated

corporate liabilities (9,888,725)

Consolidated total liabilities (20,421,797)

Other informationCapital additions 6,598 1,121,735 2,075 - - 1,130,408




6. SEGMENT INFORMATION (continued)

Segment profit represents the profit earned by each segment before interest revenue, finance costs and income tax. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

For the purpose of monitoring segment performance and allocating resources:

• All assets are allocated to the reportable segments other than current and deferred tax assets. Goodwill is allocated to the manufacturing segment as disclosed in Note 18.

• All liabilities are allocated to the reportable segments other than current and deferred tax liabilities.

The directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business and have been established on terms and conditions agreed by the parties.

Revenue from major products

The following is an analysis of the Group’s revenue from its major products:

2014RM

2013RM

Formaldehyde based resins and ethanol 142,726,635 121,535,154

Information on the Group’s operations by geographical segment has not been provided as the Group operates predominantly in Malaysia. Accordingly, the information about geographical areas as required by the standard is not disclosed.

7. INVESTMENT REVENUE


2013RM

2014RM

2013RM

Interest income from:Fixed deposits 378,153 417,141 334,025 355,026Medium term note 355,548 369,452 355,548 369,452Subsidiary companies - - 122,607 19,057

733,701 786,593 812,180 743,535Dividend income 400 1,200 - -

734,101 787,793 812,180 743,535

The following is an analysis of investment revenue earned on financial assets by category of asset:


2013RM

2014RM

2013RM

Available-for-sale financial assets 355,948 370,652 355,548 369,452Loans and receivables (including

cash and cash equivalents) 378,153 417,141 456,632 374,083

734,101 787,793 812,180 743,535




8. OTHER GAINS AND (LOSSES)

Included in other gains and (losses) are the following:


2013RM

2014RM

2013RM

Cumulative gain reclassified from equity on disposal of available-for-sale investments - 2,651,347 - 2,651,347

Gain on disposal ofavailable-for-sale investments - 1,537,827 - 1,537,827

Insurance claims received 19,977 - - -Net gain arising on financial assets

designated as at FVTPL 1,147,341 1,033,680 1,064,930 955,201Realised gain on foreign exchange 13,293 2,827 - -Bad debts written off - (131,348) - -Property, plant and equipment

written off (6,583) (59,996) (2) -Gain on capital distribution of

associated company (Note 16) - - - 80,849Allowance for diminution in value

of investment in subsidiary companies no longer required - - 8,528 13,808

1,174,028 5,034,337 1,073,456 5,239,032

9. OTHER OPERATING INCOME/(EXPENSES)

Included in other operating income/(expenses) are the following:


2013RM

2014RM

2013RM

Interest received on late payments 78,411 181,892 - -Fees paid/payable to external

auditors:Statutory audit (147,500) (143,000) (27,000) (27,000)Non-audit services (3,000) (3,000) (3,000) (3,000)

Rental of equipment (5,040) (5,040) - -Allowance for doubtful debts (Note 20):

Trade receivables - (378,169) - -Amount owing by subsidiary companies - - (13,593) (6,408)




10. DIRECTORS’ REMUNERATION AND EMPLOYEE BENEFITS EXPENSES


2013RM

2014RM

2013RM

Directors of the CompanyExecutive director:

Fees 78,500 78,500 52,500 52,500Other emoluments 1,034,500 1,027,095 1,000 1,000

1,113,000 1,105,595 53,500 53,500

Non-executive directors:Fees 290,250 300,250 230,000 230,000Other emoluments 66,000 80,000 59,000 66,000

356,250 380,250 289,000 296,000

1,469,250 1,485,845 342,500 349,500

Included in employee benefits expenses and directors’ remuneration are the following:


2013RM

2014RM

2013RM

Contributions to EPF:Employee benefits expenses 695,055 659,925 34,992 31,995Directors' remuneration 58,500 58,095 - -

Rental paid 6,600 23,600 - -

The estimated monetary value of benefits-in-kind received and receivable by a director otherwise than in cash from the Group amounted to RM9,900 (2013: RM9,900).

11. FINANCE COSTS

the Group2014RM

2013RM

Interest on:Bankers' acceptances 38,000 20,844Bank overdrafts - 1,167

LC charges 24,297 14,964

Total interest expense for financial liabilitiesnot classified as at FVTPL 62,297 36,975




12. INCOME TAX EXPENSE AND DEFERRED TAX LIABILITIES


2013RM

2014RM

2013RM

Tax expense comprises:Current income tax expense 2,623,221 1,571,532 218,000 425,000Deferred tax relating to

origination and reversal of temporary differences (432,300) (445,265) - -

2,190,921 1,126,267 218,000 425,000

(Over)/under provision in prior years:Income tax (15,563) (2,317) 17,047 9,101Deferred tax (11,400) 67,265 - -

2,163,958 1,191,215 235,047 434,101

The Group’s and the Company’s income tax rate is 25% for the year of assessment 2014. The Malaysian Budget 2014 announced on October 25, 2013 the reduction of the corporate income tax rate from

25% to 24% with effect from year of assessment 2016. The Real Property Gains Tax (“RPGT”) is also revised to 30% for disposal within the first three years, 20% in the fourth year, 15% in the fifth year and 5% from the sixth year onwards on gains from the disposal of real property effective January 1, 2014. Following these changes, the applicable tax rates to be used for the measurement of any applicable deferred tax will be the abovementioned expected rates.

As of June 30, 2014, certain subsidiary companies have unutilised investment tax allowance of RM910,000

(2013: RM910,000) and unutilised tax losses and unabsorbed capital allowances amounting to RM19,444,000 (2013: RM20,524,000), which are available for set-off against future taxable profit.




12. INCOME TAX EXPENSE AND DEFERRED TAX LIABILITIES (continued)

The total income tax expense for the year can be reconciled to the accounting profit as follows:


2013RM

2014RM

2013RM

Profit before tax 10,747,647 10,072,864 10,262,546 14,471,940

Tax at the applicable tax rateof 25% (2013: 25%) 2,687,000 2,518,000 2,566,000 3,618,000

Tax effects of:Expenses that are not deductible

in determining taxable profit 354,921 405,267 203,000 179,000Unutilised tax losses and

unabsorbed capital allowances not recognised as deferred tax asset 7,000 9,000 - -

Income that is not taxable in determining taxable profit (820,000) (1,806,000) (2,551,000) (3,372,000)

Utilisation of tax losses andunabsorbed capital allowance previously not recognised as deferred tax assets (38,000) - - -

2,190,921 1,126,267 218,000 425,000

(Over)/under provision in prior years:Income tax (15,563) (2,317) 17,047 9,101Deferred tax (11,400) 67,265 - -

Income tax expense recognised inprofit or loss 2,163,958 1,191,215 235,047 434,101

Current tax assets and liabilities


2013RM

2014RM

2013RM

Current tax assetsTax recoverable 52,399 593,409 - 74,778

Current tax liabilitiesIncome tax payable 681,704 - 41,204 -




Deferred tax balances

the Group2014RM

2013RM

Deferred tax liabilitiesAt beginning of year (9,888,725) (10,396,725)Recognised in profit or loss 584,700 508,000

At end of year (9,304,025) (9,888,725)

The deferred tax liabilities are in respect of the following:the Group

2014RM

2013RM

Tax effects of:Temporary differences arising from:

Property, plant and equipment (9,783,025) (10,440,725)Inventories 14,000 13,000

Unabsorbed capital allowances and unutilised tax losses 465,000 539,000

(9,304,025) (9,888,725)

the Group2014RM

2013RM

Deferred tax assetsAt beginning of year 572,000 702,000Recognised in profit or loss (141,000) (130,000)

At end of year 431,000 572,000




12. INCOME TAX EXPENSE AND DEFERRED TAX LIABILITIES (continued) The deferred tax assets are in respect of the following:

the Group2014RM

2013RM

Tax effects of:Unabsorbed capital allowances and unutilised tax losses 434,000 636,000Temporary differences arising from property, plant and equipment (3,000) (64,000)

431,000 572,000

Unrecognised deferred tax assets

The following deferred tax assets have not been recognised at the end of the reporting period:

the Group2014RM

2013RM

Tax effects of:Unabsorbed capital allowances and unutilised tax losses 3,924,000 3,955,000Investment tax allowances 228,000 228,000

4,152,000 4,183,000

13. EARNINGS PER ORDINARY SHARE OF RM0.50 EACH - GROUP

The basic and diluted earnings per ordinary share of RM0.50 each are calculated as follows:

2014 2013

Profit for the year attributable to owners of the Company RM 8,079,200 RM 8,474,633

Weighted average number of ordinary sharesof RM0.50 each in issue at beginning and end of year 200,380,036 200,380,036

Basic and fully diluted

Earnings per ordinary share of RM0.50 each (sen) 4.0 4.2




14. PROPERTY, PLANT AND EQUIPMENT

the Group

Land and buildings

RM

Plant, machinery

and equipment

RM

furniture, fixtures

and office equipment

RM

Motor vehicles

and forkliftsRM

Capital work-in-progress

RMtotalRM

CostAs of July 1, 2012 48,799,487 98,119,130 2,140,706 2,173,287 7,938,066 159,170,676Additions - 902,220 67,120 - 161,068 1,130,408Write offs - (17,229) (36,590) - (57,235) (111,054)Reclassification - 7,787,831 - - (7,787,831) -

As of June 30, 2013 48,799,487 106,791,952 2,171,236 2,173,287 254,068 160,190,030Additions - 86,289 62,418 368,000 488,843 1,005,550Write offs - (15,888) (2,699) - - (18,587)Reclassification - 462,593 - - (462,593) -

As of June 30, 2014 48,799,487 107,324,946 2,230,955 2,541,287 280,318 161,176,993

accumulated depreciation

As of July 1, 2012 10,134,492 71,051,646 1,728,637 1,572,748 - 84,487,523Depreciation charge

for the year 995,919 4,278,767 176,100 206,344 - 5,657,130Write offs - (15,034) (36,024) - - (51,058)

As of June 30, 2013 11,130,411 75,315,379 1,868,713 1,779,092 - 90,093,595Depreciation charge

for the year 995,718 4,108,108 132,668 211,873 - 5,448,367Write offs - (9,610) (2,394) - - (12,004)

As of June 30, 2014 12,126,129 79,413,877 1,998,987 1,990,965 - 95,529,958

accumulated impairment loss

As of July 1, 2012/June 30, 2013/June 30, 2014 - 3,137,701 - - - 3,137,701

Carrying amountsAs of June 30, 2014 36,673,358 24,773,368 231,968 550,322 280,318 62,509,334

As of June 30, 2013 37,669,076 28,338,872 302,523 394,195 254,068 66,958,734




14. PROPERTY, PLANT AND EQUIPMENT (continued)

Land and buildings of the Group consist of:

the Group

freeholdlandRM

Long-term Lease Land

RM

Short-termLease Land

RM

Buildings and improvements

RMtotalRM

CostAs of July 1, 2012 15,385 18,848,900 4,626,500 25,308,702 48,799,487Additions - - - - -Write offs - - - - -Reclassification - (3,459,900) 3,459,900 - -

As of June 30, 2013 15,385 15,389,000 8,086,400 25,308,702 48,799,487Additions - - - - -Write offs - - - - -

As of June 30, 2014 15,385 15,389,000 8,086,400 25,308,702 48,799,487

accumulated depreciationAs of July 1, 2012 - 314,724 113,205 9,706,563 10,134,492Depreciation charge

for the year - 314,403 113,301 568,215 995,919Reclassification - (133,015) 133,015 - -

As of June 30, 2013 - 496,112 359,521 10,274,778 11,130,411Depreciation charge

for the year - 247,724 179,780 568,214 995,718

As of June 30, 2014 - 743,836 539,301 10,842,992 12,126,129

Carrying amountsAs of June 30, 2014 15,385 14,645,164 7,547,099 14,465,710 36,673,358

As of June 30, 2013 15,385 14,892,888 7,726,879 15,033,924 37,669,076




Furniture, fixtures andoffice equipment

the Company2014RM

2013RM

CostAs of July 1, 2013/July 1, 2012 45,017 38,419Additions 4,130 6,598Write offs (755) -

As of June 30, 2014/June 30, 2013 48,392 45,017

accumulated depreciationAs of July 1, 2013/July 1, 2012 37,873 34,736Depreciation charge for the year 4,667 3,137Write offs (753) -

As of June 30, 2014/June 30, 2013 41,787 37,873

Carrying amount 6,605 7,144

Leasehold land and buildings of the Group with carrying values of RM13,876,990 (2013: RM14,254,311) have been charged to a licensed bank to secure the banking facilities of certain subsidiary companies as disclosed in Note 27.

During the financial year, one of the subsidiary companies carried out a review of the recoverable amount of its manufacturing plant and equipment used in the production of alcoholic beverages. The recoverable amounts of the relevant assets have been determined on the basis of their net disposal values. No impairment loss was recognised during the financial year as the recoverable amounts of the assets exceed their carrying amounts.

In the prior year, the Group carried out a review of the recoverable amounts of its manufacturing plants used in the production of vinegar. The recoverable amounts of the relevant assets had been determined on the basis of their value in use, and the discount rate used in measuring value in use was 8.00% per annum. No impairment loss was recognised in the prior year as the recoverable amounts of the assets exceeded their carrying amounts.

15. INVESTMENT IN SUBSIDIARY COMPANIES

the Company2014RM

2013RM

Unquoted shares - at cost 84,659,442 84,659,442Less: Accumulated impairment losses (15,800,694) (15,809,222)

68,858,748 68,850,220




15. INVESTMENT IN SUBSIDIARY COMPANIES (continued)

The subsidiary companies, all of which are incorporated in Malaysia are as follows:

EffectiveEquity interest

Name of Company2014

%2013

% Principal activities

Bio-Acetic Products Sdn. Bhd. #99.91 #99.91 Manufacture of natural vinegar.

Chemical Industries (Malaya) Sdn. Bhd. 99.91 99.91 Manufacture and sale of ethyl alcohol, liquefied carbon dioxide and kaoliang wine.

Hexza-Mather Sdn. Bhd. 100.00 100.00 Manufacture of alcoholic and non-alcoholic beverages. Temporarily ceased operations in financial year 2012.

Hexzachem Sarawak Sdn. Bhd. 80.00 80.00 Manufacture and sale of formaldehyde and formaldehyde based adhesive and resins for timber related industries.

Norsechem Marketing Sdn. Bhd. 100.00 100.00 Marketing and distribution of consumer products and industrial chemicals.

Norsechem Resins Sdn. Berhad 100.00 100.00 Manufacture and sale of formaldehyde and formaldehyde based adhesive and resins for timber related industries.

Summit Development Corporation Sdn. Berhad 100.00 100.00 Property development.

Synthetic Bakelites (Malaysia) Sdn. Bhd. 96.92 96.92 Dormant.

Trizenith Sdn. Bhd. 100.00 100.00 Dormant.

Hexza World Trade Sdn. Bhd. 70.00 70.00 Dormant.

NC Management Services Sdn. Bhd. 100.00 100.00 Pre-operating.

Norse-Med Devices Sdn. Bhd. 100.00 100.00 Pre-operating.

Norsechem Polymer Sdn. Bhd. 100.00 100.00 Pre-operating.

# Indirect interest via the Company’s investment in Chemical Industries (Malaya) Sdn. Bhd.




Composition of the Group

Information about composition of the Group at the end of the reporting period is as follows:

Principal activity

Place of incorporation and operation

Number of wholly-owned subsidiaries

2014 2013

Marketing and distribution of consumer productsand industrial chemicals. Malaysia 1 1

Manufacture and sale of formaldehyde andformaldehyde based adhesive and resins fortimber related industries. Malaysia 1 1

Property development. Malaysia 1 1Dormant/Pre-operating. Malaysia 5 5

8 8

Principal activity

Place of incorporation and operation

Number of non-wholly-owned subsidiaries

2014 2013

Manufacture of natural vinegar. Malaysia 1 1Manufacture and sale of ethyl alcohol,

liquefied carbon dioxide and kaoliang wine. Malaysia 1 1Manufacture and sale of formaldehyde and

formaldehyde based adhesive and resinsfor timber related industries. Malaysia 1 1

Dormant. Malaysia 2 2

5 5

Details of non-wholly owned subsidiaries that have material non-controlling interests are as follows:

Name of subsidiary

Place of incorporation and principal

place of business

Proportion of ownership

interest and voting rights held by

non-controlling interests

Profit allocated tonon-controlling

interests

accumulatednon-controlling

interests2014

%2013

%2014

RM2013

RM2014

RM2013

RM

Hexzachem Sarawak Sdn. Bhd.(“HCSSB”) Malaysia 20 20 501,380 406,166 6,530,275 6,838,895

Individually immaterial subsidiary with non-controlling interests 36,997 37,088

6,567,272 6,875,983




15. INVESTMENT IN SUBSIDIARY COMPANIES (continued)

Summarised financial information in respect of the Group’s subsidiary, that has material non-controlling interests, HCSSB, is set out below. The summarised financial information below represents amounts before intragroup eliminations.

HCSSB 2014RM

2013RM

Current assets 27,583,539 22,295,527Non-current assets 20,011,805 21,833,260Current liabilities (11,903,380) (6,573,023)Non-current liabilities (3,040,593) (3,361,293)Equity attributable to owners of the Company (26,121,096) (27,355,576)Non-controlling interests (6,530,275) (6,838,895)

2014RM

2013RM

Revenue 67,283,632 69,329,568Income 80,586 220,998Expenses (64,857,318) (67,519,736)

Profit and total comprehensive income for the year 2,506,900 2,030,830

Profit and total comprehensive incomeattributable to owners of the Company 2,005,520 1,624,664

Profit and total comprehensive incomeattributable to non-controlling interests 501,380 406,166

Profit and total comprehensive income for the year 2,506,900 2,030,830

Dividends paid to non-controlling interests 810,000 1,012,500

Net cash (used in)/generated from operating activities (163,699) 9,499,761Net cash used in investing activities (35,475) (782,040)Net cash used in financing activities (450,000) (10,404,500)

Net cash outflow (649,174) (1,686,779)



16. INVESTMENT IN ASSOCIATED COMPANY

the Company2014RM

2013RM

Gain on capital distribution (Note 8) - 80,849Unquoted shares - at cost - 1Less: Capital distribution - (80,850)

- (80,849)

- -

The summarised financial information of the associated company is as follows:

the Group2014RM

2013RM

Total loss for the year - (15,096)

Share of associated company’s loss for the year - (7,397)

17. OTHER INVESTMENTS


2013RM

2014RM

2013RM

At fair value:Shares quoted in Malaysia 44,604,661 43,339,043 44,585,061 43,318,963Warrants quoted in Malaysia 249,585 72,063 249,585 72,063Shares quoted outside Malaysia 3,442,832 3,306,994 3,442,832 3,306,994Medium term note - unquoted 5,130,500 5,287,000 5,130,500 5,287,000

53,427,578 52,005,100 53,407,978 51,985,020

At cost:Unquoted shares 3,880,800 3,880,800 3,880,800 3,880,800

57,308,378 55,885,900 57,288,778 55,865,820

The medium term note has a term of 10 years (non-call 5 years) and bears interest at a rate of 7.25% per annum for the first to fifth years, and 8.25% per annum for the sixth to tenth years if not called. Interest is paid on half-yearly basis.





18. GOODWILL ARISING ON CONSOLIDATION

the Group2014RM

2013RM

Goodwill arising on consolidation 2,129,365 2,129,365

Impairment tests for cash-generating units (“CGU”) containing goodwill The carrying amount of goodwill is allocated to the manufacturing and related sales functions of Chemical

Industries (Malaya) Sdn. Bhd. and Hexzachem Sarawak Sdn. Bhd..

During the financial year, the Group carried out a review of the recoverable amount of the CGUs containing goodwill. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on a financial forecast, approved by management, covering a period of five years from the financial years 2015 to 2019. The following key assumptions were used to generate the financial forecast:

Sales volume growth rate 5.0% to 10.0% per annumInflation rate 5.0% per annumDiscount rate 8.0%

Receivables and payables turnover periods were estimated to be consistent with the current financial year.

The above key assumptions were determined based on past business performances and management’s expectations of future market development.

No impairment loss was recognised during the financial year as the recoverable amounts of the CGUs exceed their carrying amounts, including the goodwill allocated.

19. INVENTORIES

the Group2014RM

2013RM

Raw materials and consumables 11,564,904 12,705,673Finished goods 5,116,411 4,244,934Goods-in-transit 3,318,672 323,088Completed development units for sale 77,397 77,397Work-in-progress 19,899 16,115

20,097,283 17,367,207

The cost of inventories recognised as an expense during the financial year for the Group was RM121,517,029 (2013: RM104,654,255).

Raw materials and consumables used in the Group includes inventories written off of RM204,666 (2013: RM242,889).



20. TRADE AND OTHER RECEIVABLES


2013RM

2014RM

2013RM

Trade receivables 35,570,472 23,490,254 - -Less: Allowance for doubtful debts (378,169) (378,169) - -

Net receivables from third parties 35,192,303 23,112,085 - -Other receivables 143,706 335,028 114,378 184,029Net amount owing by subsidiary

companies (Note 21) - - 5,657,703 47,550

35,336,009 23,447,113 5,772,081 231,579

Trade receivables comprise amounts receivable for sale of goods. The credit periods granted on sale of goods ranged from 30 to 150 days (2013: 30 to 150 days). Allowances have been made for estimated irrecoverable amounts from sale of goods of the Group of Nil (2013: RM378,169), and have been determined based on estimates of possible losses which may arise from non-collection of certain receivable accounts.

Movements in allowance for doubtful debts are as follows:

the Group2014RM

2013RM

Trade receivablesBalance at beginning of year 378,169 -Allowance for doubtful debts (Note 9) - 378,169

Balance at end of year 378,169 378,169

the Company2014RM

2013RM

Amount owing by subsidiary companiesBalance at beginning of year 9,733,380 9,726,972Allowance for doubtful debts (Note 9) 13,593 6,408

Balance at end of year (Note 21) 9,746,973 9,733,380

Included in allowance for doubtful debts are individually impaired receivables amounting to RM378,169 (2013: RM378,169) relating to trade receivables for the Group, and RM9,746,973 (2013: RM9,733,380) relating to amount owing by subsidiary companies for the Company. The impairment recognised represents the difference between the carrying amount of these receivables and the present value of expected collections.

The ageing of the impaired receivables as mentioned above is more than one year.





20. TRADE AND OTHER RECEIVABLES (continued)

The currency profile of trade receivables is as follows:

the Group2014RM

2013RM

Ringgit Malaysia 35,023,906 23,030,199Singapore Dollar 546,566 460,055

35,570,472 23,490,254

Included in trade and other receivables of the Group are receivables with total carrying amounts of RM5,081,037 and RM204 (2013: RM5,932,063 and RM137,071) respectively which are past due at the end of the reporting period for which the Group has not provided for impairment loss. The Group does not hold any collateral over these balances nor does it have a legal right to offset against any amounts owed by the Group to the counterparties.

Ageing of trade and other receivables which are past due but not impaired as at the end of the reporting period is as follows:

the Group2014RM

2013RM

Trade receivablesNumber of days past due:

1 - 30 days 3,374,544 4,124,49931 - 60 days 1,321,117 1,153,24961 - 90 days 60,383 29,44191 - 120 days 35,824 152,331More than 120 days 289,169 472,543

5,081,037 5,932,063

Other receivablesNumber of days past due:

1 - 30 days - 200More than 120 days 204 136,871

204 137,071

The Group seeks to maintain strict control over its outstanding trade receivables and has a credit period policy to minimise credit risk. Overdue balances are reviewed regularly by management. The Group has not provided for impairment loss on these trade receivable accounts that are past due as there has not been any significant change in credit quality and the amounts are still considered recoverable.

Transactions with related parties are disclosed in Note 21.




21. RELATED COMPANIES AND RELATED PARTY TRANSACTIONS

Subsidiary companies

the Company2014RM

2013RM

Amounts owing by subsidiary companies (Note 20) consist of:Current accounts 9,904,676 9,780,930Loan accounts 5,500,000 -

15,404,676 9,780,930Allowance for doubtful debts (Note 20) (9,746,973) (9,733,380)

5,657,703 47,550

Amount owing to a subsidiary company (Note 26) consists of:Current account 72,217 73,640

The amounts owing by/(to) subsidiary companies classified under current accounts arose mainly from expenses paid on behalf and advances which are unsecured, interest-free and are repayable on demand.

The amounts owing by subsidiary companies under loan accounts bear interest rate at 6.60% per annum.

During the financial year, transactions undertaken by the Company with its subsidiary companies are as follows:

the Company2014RM

2013RM

Gross dividends received/receivable 6,997,000 6,323,009Interest received 122,607 19,057Professional services rendered 50,650 58,700

The transactions with subsidiary companies are aggregated as these transactions are similar in nature and also no single transaction is significant enough to be disclosed separately in the financial statements.

Related party transactions

Other than as disclosed elsewhere in the financial statements, the related party and its relationship with the Company and its subsidiary companies are as follows:

Name of related party Relationship

SP&G Insurance Brokers Sdn. Bhd.(ceased to be a related party in January 2014)

)))

A company in which certain directors of the Company had substantial financial interests, and where a director of theCompany was also a director.




21. RELATED COMPANIES AND RELATED PARTY TRANSACTIONS (continued)

During the financial year, related party transactions are as follows:


2013RM

2014RM

2013RM

Insurance premium paid/payableSP&G Insurance Brokers Sdn. Bhd. 870,242 816,842 65,109 44,864

Outstanding balances arising from the above transactions at the end of the financial year are as follows:

the Group2014RM

2013RM

Included in accrued expenses - 6,213

Included in other payables - (44,206)

Compensation of key management personnel

Directors’ remuneration are as disclosed in Note 10.

The remuneration of the management personnel other than the directors are as follows:

the Group2014RM

2013RM

Short-term employee benefits 1,617,441 1,862,465

The estimated monetary value of benefits-in-kind received and receivable by the key management personnel otherwise than in cash from the Group amounted to RM42,073 (2013: RM55,830).




22. OTHER ASSETS


2013RM

2014RM

2013RM

Refundable deposits 144,358 146,208 2,030 2,030Prepaid expenses 182,396 291,980 18,746 11,922

326,754 438,188 20,776 13,952

23. CASH AND CASH EQUIVALENTS


2013RM

2014RM

2013RM

Investment funds 45,870,220 49,266,655 43,190,325 46,599,171Fixed and short-term deposits with

licensed banks 17,406,200 14,942,863 12,906,200 10,442,863Cash and bank balances 9,988,551 9,194,897 417,946 2,458,738

73,264,971 73,404,415 56,514,471 59,500,772

The above balances represent cash and cash equivalents of the Group and of the Company.

The interest rates and return of investment are as follows:

the Group the Company2014

%2013

%2014

%2013

%

Fixed deposits 2.00 - 3.60 2.00 - 3.20 2.95 - 3.60 2.75 - 3.15Investment funds 2.34 - 3.44 2.34 - 3.92 2.63 - 3.44 2.72 - 3.92

The maturity period of the deposits of the Group and of the Company is 1 day to 6 months (2013: 3 to 30 days).

24. SHARE CAPITAL

<--------------------------- The Group and The Company --------------------------->2014

Number of ordinary shares

2013Number of ordinary shares

2014RM

2013RM

Authorised:Ordinary shares of RM0.50 each 400,000,000 400,000,000 200,000,000 200,000,000

Issued and fully paid:Ordinary shares of RM0.50 each 200,380,036 200,380,036 100,190,018 100,190,018




25. RESERVES


2013RM

2014RM

2013RM

Non-distributable reserve:Investments revaluation reserve 5,691,223 3,810,168 5,685,143 3,803,608

Distributable reserve:Retained earnings 109,562,364 109,498,365 82,120,143 80,107,845

115,253,587 113,308,533 87,805,286 83,911,453

Please refer to the statements of changes in equity on pages 40 to 41 for movement in the investments revaluation reserve.

The Company has moved to a single tier tax system upon expiry of the transitional period on December 31, 2013. Any remaining balance in the Section 108 tax credit was disregarded. The entire retained earnings of the Company is available for distributions as single tier tax-exempt dividend to the shareholders of the Company.

26. TRADE AND OTHER PAYABLES


2013RM

2014RM

2013RM

Trade payables 10,852,582 6,035,233 - -Other payables 1,736,108 1,586,985 8,200 43,782

12,588,690 7,622,218 8,200 43,782

Amount owing to a subsidiary company (Note 21) - - 72,217 73,640

12,588,690 7,622,218 80,417 117,422

Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs respectively. The credit periods granted to the Group for trade purchases ranged from 1 to 90 days (2013: 1 to 90 days).

Transactions with related parties are as disclosed in Note 21.

27. SHORT-TERM BORROWINGS

the Group2014RM

2013RM

Bankers' acceptances 3,600,000 -

The Group has bank overdraft and other credit facilities obtained from licensed banks to the extent of RM31,500,000 (2013: RM31,800,000) which are secured by pledges over the leasehold land and buildings of the Group as disclosed in Note 14, a negative pledge on the assets of the subsidiary companies and guaranteed by the Company. The bank overdraft facilities bear interest at rate 7.85% (2013: 7.85%) per annum. The other credit facilities bear interest at rates ranging from 4.30% to 8.10% (2013: 4.23% to 9.10%) per annum.




28. DIVIDENDS

<------------------------ The Group and The Company ------------------------>net dividend per share

2014RM

2013RM

2014Sen

2013Sen

Recognised during the year:First and final dividend paid:

8.0% less tax and 2.0% tax exempt for 2013 (2012: 8.0% less tax and

2.0% tax exempt) 8,015,201 8,015,201 4.00 4.00

The directors have proposed a first and final single-tier dividend of 8.0% in respect of the current financial year. The proposed dividends are subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company and have not been included as a liability in the financial statements.

29. CAPITAL COMMITMENTS

As of June 30, 2014, the Group has the following commitments on capital expenditure in respect of property, plant and equipment:

the Group2014RM

2013RM

Contracted but not provided for 151,932 151,932Approved but not contracted for 483,000 725,000

634,932 876,932




30. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

Categories of financial instruments


2013RM

2014RM

2013RM

Financial assetsLoans and receivables:

Trade and other receivables 35,336,009 23,447,113 114,378 184,029Refundable deposits 144,358 146,208 2,030 2,030Amount owing by subsidiary

companies - - 5,657,703 47,550Cash and bank balances and

fixed and short-term deposits 27,394,751 24,137,760 13,324,146 12,901,601Available-for-sale:

Other investments 57,308,378 55,885,900 57,288,778 55,865,820At fair value through profit or loss:

Investment funds 45,870,220 49,266,655 43,190,325 46,599,171

Financial liabilitiesOther financial liabilities:

Trade and other payables 12,588,690 7,622,218 8,200 43,782Amount owing to a subsidiary

company - - 72,217 73,640Accrued expenses 3,270,197 2,910,854 344,534 325,372Short-term borrowings 3,600,000 - - -

(a) Financial Risk Management Objectives and Policies

Risk management is integral to the whole business of the Group and of the Company. Management continually monitors the Group’s and the Company’s risk management processes to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in the market conditions and the Group’s and the Company’s activities.

There have been no changes to the Group’s and the Company’s exposure to these financial risks or the manner in which they manage and measure the risk.

Foreign currency risk management

The Group and the Company have minimal foreign currency transactions. As such, management considers the exposure to foreign currency risk to be minimal and has no significant impact to the financial results of the Group and of the Company.




Market risk management The Group has in place policies to manage the Group’s exposure to fluctuations in prices of key raw materials

and consumables used in operations through management’s constant survey on market prices and its awareness of market trends. For marketable securities, the Group uses an investment committee to monitor fluctuations in market prices and to establish suitable cut loss procedures.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and the Company.

The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations at the end of the reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the statements of financial position. The Group and the Company do not hold any collateral on the balance outstanding.

The Group and the Company established policies on credit control which involves comprehensive credit evaluations, setting up appropriate credit limits, ensuring the sales are made to customers with good credit history and regular review of customers’ outstanding balances and payment trends. The Group and the Company consider the risk of material loss in the event of non-performance by the customers to be unlikely.

Concentration of credit risk of the Group relates to amounts owing by 3 (2013: 4) major customers which constituted approximately 35% (2013: 37%) of the total trade receivables of the Group at the end of the reporting period. These trade receivables are regular customers that have been transacting with the Group. The Group uses ageing analysis to monitor the credit quality of the trade receivables. Any receivables having significant balances past due or more than 90 days, which are deemed to have higher credit risk, are monitored individually.

The credit risk on liquid funds is limited because the counterparties are licensed financial institutions with high credit standings.

Interest rate risk management

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and of the Company’s financial instruments will fluctuate because of changes in market interest rates. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings.

Sensitivity analysis for interest rate risk

At the end of the reporting period, if interest rates increase/decrease by 50 (2013: 50) basis points with all other variables held constant, the Group’s profit net of tax would have been RM13,500 (2013: Nil) lower/ higher arising mainly as a result of higher/lower interest expense on floating rate borrowings. The assumed movement in the interest rates for interest rate sensitivity analysis is based on the currently observable market environment.

Other price risks

The Group and the Company are exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading purposes. The Group and the Company do not actively trade these investments.

Equity price sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to equity price risks at the end of the reporting period.




30. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (continued)

If equity prices had been 5% (2013: 5%) higher/lower, the Group’s and the Company’s:

• net profit for the year ended June 30, 2014 would have been unaffected as the equity investments are classified as available-for-sale and no investments are expected to be impaired; and

• investments revaluation reserve would increase/decrease by RM2,671,379 and RM2,670,399 (2013: RM2,593,197 and RM2,592,193) respectively as a result of the changes in fair value of available-for-sale investments.

The Group’s and the Company’s sensitivity to equity prices have not changed significantly from the prior year.

Liquidity and cash flow risks management

The Group practises prudent liquidity risk management to minimise the mismatch of financial assets and financial liabilities and to maintain sufficient credit facilities for contingent funding requirement of working capital.

The Group’s and the Company’s principal source of liquidity have historically been cash flows from operations and funds obtained from long and short-term borrowings.

The Group and the Company expect that the cash generated from their operations, their existing credit facilities and the trade terms provided by their suppliers will be sufficient to meet the Group’s and the Company’s currently anticipated capital expenditure and working capital needs for at least the next 12 months.

The Group has credit facilities of approximately RM31,500,000 (2013: RM31,800,000), of which only RM14,317,000 (2013: RM5,735,700) has been utilised for bank guarantees and trade facilities at the end of the reporting period. The Group and the Company expect to meet their financial obligations from their operating cash flows and proceeds from maturing financial assets.

All non-derivative financial assets and financial liabilities are repayable on demand or due within one year from the end of the reporting period.

Capital risk management

The Group and the Company manage their capital to ensure the Group and the Company will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of debt and equity balance. The Group’s and the Company’s overall strategy remain unchanged from 2013.

The capital structure of the Group and of the Company consists of net debt and equity of the Group and of the Company. The Group and the Company are not subject to any externally imposed capital requirements.




(b) Fair Values of Financial Assets and Financial Liabilities ThecarryingamountsandtheestimatedfairvaluesoftheGroup’sandoftheCompany’sfinancialinstruments

are as follows:

The Group The Company

Note

CarryingAmount

RM

FairValue RM

CarryingAmount

RM

FairValue RM

As of June 30, 2014Financial assets at FVTPLInvestment funds 23 45,870,220 45,870,220 43,190,325 43,190,325

Available-for-sale ("AFS")

financial assetsOther investments

- unquoted shares 17 3,880,800 * 3,880,800 *- quoted shares and

warrants 17 48,297,078 48,297,078 48,277,478 48,277,478- medium term note 17 5,130,500 5,130,500 5,130,500 5,130,500

As of June 30, 2013Financial assets at FVTPLInvestment funds 23 49,266,655 49,266,655 46,599,171 46,599,171

Available-for-sale(“AFS”)

financial assetsOther investments

- unquoted shares 17 3,880,800 * 3,880,800 *- quoted shares and

warrants 17 46,718,100 46,718,100 46,698,020 46,698,020- medium term note 17 5,287,000 5,287,000 5,287,000 5,287,000

The fair values of quoted shares and warrants are determined based on open market prices as at the end of the reporting period and approximate their carrying amounts.

The fair value of the medium term note is determined using its Mark-to-Market price as at the end of the reporting period.

The fair value of investment funds is determined using the investment funds’ net asset value per unit as at the end of the reporting period.

* It is not practical to estimate the fair values of unquoted investments. As of year end, based on the management financial statements, the Group’s and the Company’s share of the net tangible assets of the unquoted investments amounted to approximately RM4,121,000 (2013: RM4,076,000).

Thecarryingamountsofothershort-termfinancialassetsandfinancialliabilitiesasreportedinthestatements offinancialpositionapproximatetheirfairvaluesduetotheshort-termmaturityoftheseinstruments.




30. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (continued)

(c) Fair value measurements recognised in the statements of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

• Level1fairvaluemeasurementsarethosederivedfromquotedprices(unadjusted)inactivemarkets for identical assets or liabilities.

• Level 2 fair valuemeasurementsare thosederived from inputsother thanquotedprices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level3fairvaluemeasurementsarethosederivedfromvaluationtechniquesthatincludeinputsfor the asset or liability that are not based on observable market data (unobservable inputs).

The Group2014

Level 1RM

Level 2RM

Level 3RM

TotalRM

Financial assets at FVTPLInvestment funds - 45,870,220 - 45,870,220

AFS financial assetsOther investments

- unquoted shares - - 3,880,800 3,880,800- quoted shares and warrants 48,297,078 - - 48,297,078- medium term note - 5,130,500 - 5,130,500

48,297,078 51,000,720 3,880,800 103,178,598

The Group2013




46,718,100 54,553,655 3,880,800 105,152,555




The Company2014

Level 1RM

Level 2RM

Level 3RM

TotalRM




48,277,478 48,320,825 3,880,800 100,479,103

The Company2013




46,698,020 51,886,171 3,880,800 102,464,991

TherewerenotransfersbetweenLevels1and2duringthefinancialyear.

Significantassumptionsusedindeterminingfairvaluesoftheabovefinancialassetsareasdisclosedin(b) above.




31. SUPPLEMENTARY INFORMATION - DISCLOSURE ON REALISED AND UNREALISED PROFITS OR LOSSES

The breakdown of the retained earnings of the Group and of the Company as of June 30, 2014 into realised and unrealised profits or losses, pursuant to the directive issued by Bursa Malaysia Securities Berhad on March 25, 2010, is as follows:


2013RM

2014RM

2013RM

Total retained earnings ofthe Company andits subsidiary companies

Realised 103,546,807 103,637,407 82,120,143 80,107,845Unrealised 6,015,557 5,860,958 - -

total retained earnings as per statements of financial position 109,562,364 109,498,365 82,120,143 80,107,845

The determination of realised and unrealised profits or losses is based on Guidance of Special Matter No. 1 “Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Securities Listing Requirements” as issued by the Malaysian Institute of Accountants on December 20, 2010.

This supplementary information has been made solely for complying with the disclosure requirements as stipulated in the directives of Bursa Malaysia and is not made for any other purposes.



The directors of HEXZA CORPORATION BERHAD state that, in their opinion, the accompanying financial statements are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of June 30, 2014 and of the financial performance and the cash flows of the Group and of the Company for the year ended on that date.

The supplementary information set out in Note 31, which is not part of the financial statements, is prepared in all material respects, in accordance with Guidance on Special Matter No. 1 “Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements” as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad.

Signed in accordance with a resolution of the Directors,

DATUK DR. FOONG WENG SUM

DATO' RICHARD ONG GUAN SENG

Ipoh,30th September 2014

DECLARATION BY THE OFFICER PRIMARILY RESPONSIBLE FOR THE FINANCIAL MANAGEMENT OF THE COMPANY

STATEMENT BY DIRECTORS

I, ChonG YoKE SEnG, the officer primarily responsible for the financial management of hEXZa CoRPoRation BERHAD, do solemnly and sincerely declare that the accompanying financial statements are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

ChonG YoKE SEnG

Subscribed and solemnly declared by the abovenamedChonG YoKE SEnG at iPoh this 30th September 2014.

Before me,

ChoW Min YEECommissioner for oathsipoh



STATEMENT OF SHAREHOLDINGS AS AT 26TH SEPTEMBER 2014

Authorised Capital : RM200,000,000Issued & Fully Paid-Up Capital : RM100,190,018Class of Shares : Ordinary Shares of 50 sen eachVoting Rights : One vote per Ordinary Share

DISTRIBUTION OF SHAREHOLDINGS

Range of ShareholdingsNo. of

holders% of

holdersNo. of 50 Sen

Shares% of Issued

Capital

Less than 100 118 1.40 5,559 0.00100 – 1,000 344 4.09 210,675 0.111,001 – 10,000 5,882 69.87 23,948,313 11.9510,001 – 100,000 1,882 22.36 54,010,768 26.96100,001 to less than 5% of issued shares 191 2.27 61,623,064 30.755% and above of issued shares 1 0.01 60,581,657 30.23totaL 8,418 100.00 200,380,036 100.00

SUBSTANTIAL SHAREHOLDERS AS PER THE REGISTER OF SUBSTANTIAL SHAREHOLDERS

direct interest deemed interest

Substantial ShareholdersNo. of

Shares held% of Issued

CapitalNo. of


Capital

Summit Holdings Sdn. Bhd. 60,581,657 30.23 - -Datuk Dr. Foong Weng Sum 1,083,228 0.54 62,231,657 * 31.05Dr. Foong Weng Cheong 2,662,500 1.33 62,231,657 * 31.05

Note:

* Deemed interested by virtue of their shareholdings in Summit Holdings Sdn. Bhd. and Sumivest Holdings Sdn. Bhd. pursuant to Section 6A of the Companies Act,1965.

diRECtoRS’ ShaREhoLdinGS aS PER thE REGiStER of diRECtoRS’ ShaREhoLdinGS

direct interest deemed interest

directorsNo. of


CapitalNo. of


Capital

Datuk Dr. Foong Weng Sum 1,083,228 0.54 62,231,657 * 31.05Dr. Foong Weng Cheong 2,662,500 1.33 62,231,657 * 31.05Dato' Richard Ong Guan Seng 250,000 0.12 - -Mr. Leong Keng Yuen 225,000 0.11 - -Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany - - 60,000 ^ 0.03Mr. Ooi Ying Hong 80,000 0.04 - -

Notes:

* Deemed interested by virtue of their shareholdings in Summit Holdings Sdn. Bhd. and Sumivest Holdings Sdn. Bhd. pursuant to Section 6A of the Companies Act,1965.^ Deemed interested by virtue of his shareholding in MJS Maju Jaya Sdn. Bhd. pursuant to Section 6A of the Companies Act,1965.



STATEMENT OF SHAREHOLDINGS AS AT 26TH SEPTEMBER 2014

thiRtY LaRGESt ShaREhoLdERS aS PER thE RECoRd of dEPoSitoRS

Shareholders No. of Shares% of Issued

Capital

1. Summit Holdings Sdn. Bhd. 60,581,657 30.232. HLB Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Chee Sai Mun3,232,400 1.61

3. Dr. Foong Weng Cheong 2,662,500 1.334. Citigroup Nominees (Asing) Sdn. Bhd.

Exempt An for OCBC Securities Private Limited (Client A/C-NR)2,246,875 1.12

5. UOB Kay Hian Nominees (Asing) Sdn. Bhd.Exempt An for UOB Kay Hian Pte. Ltd. (A/C Clients)

2,191,850 1.09

6. Lim Tai Soon 1,697,450 0.857. Sumivest Holdings Sdn. Bhd. 1,650,000 0.828. Lim Seng Chee 1,609,400 0.809. Maybank Nominees (Asing) Sdn. Bhd.

Exempt An for DBS Bank Limited (Client A/C)1,339,900 0.67

10. CIMSEC Nominees (Asing) Sdn. Bhd.Exempt An for CIMB Securities (Singapore) Pte. Ltd. (Retail Clients)

1,201,375 0.60

11. Datuk Dr. Foong Weng Sum 1,083,228 0.5412. Xiang Ling Capital Sendirian Berhad 1,049,700 0.5213. Lew Yuen Kee @ Lew Ah Kee 1,000,000 0.5014. Chong Cheong Leong 938,200 0.4715. Kenanga Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Seraya Makmur Sdn. Bhd.810,000 0.40

16. Kenanga Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Chin Kiam Hsung

795,400 0.40

17. Lim Khuan Eng 780,000 0.3918. HLB Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Surinder Singh a/l Wassan Singh765,000 0.38

19. Public Nominees(Tempatan) Sdn. Bhd.Pledged Securities Account for Chee Sai Mun (E-KLC)

729,000 0.36

20. RHB Capital Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Teh Kian Lang (CEB)

709,500 0.36

21. Cheong Mei Yik 640,000 0.3222. Triple Boutique Sdn. Bhd. 621,900 0.3123. Chong Yoke Seng 590,000 0.2924. Lim Hong Liang 552,000 0.2825. Maybank Securities Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Lee Weng Hung (RH1 Margin)545,000 0.27

26. Chong Wei Yong 520,000 0.2627. CIMSEC Nominees (Tempatan) Sdn. Bhd.

CIMB Bank for Leong Kin Mun (MY1539)519,000 0.26

28. Lim Lu Bee 501,050 0.2529. Sing Kong Hum 415,500 0.2130. Maybank Securities Nominees (Asing) Sdn. Bhd.

Maybank Kim Eng Securities Pte. Ltd. for Tan Ban Kau392,250 0.20

totaL 92,370,135 46.09



PROPERTIES OWNED BY HEXZA CORPORATION BERHAD & ITS SUBSIDIARIES AS AT 30TH JUNE 2014

Location tenure

Approximate area

in sq. meter

Approximate Age of

Buildings in years

Net Book value

30.6.2014RM’000

Year ofAcquisition(A)/Completion(C)/

LastRevaluation(R)

Existing Usage

Lot 6, Tasek Industrial Estate, Tasek Drive, Ipoh, Perak Darul Ridzuan.

Leasehold Expiry 2062 28,328

54 5,588 R:2012 Factory11 2,056 C:2004 Office9 1,705 C:2006 Factory

Lot 20, Tasek Industrial Estate, Tasek Drive, Ipoh, Perak Darul Ridzuan.

Leasehold Expiry 2064 12,141 - 1,788 R:2012 Factory

Lot 70071, Tasek Industrial Estate, Tasek Drive, Ipoh,Perak Darul Ridzuan.

Leasehold Expiry 2069 12,245 - 1,812 R:2012

Vacant industrial

land

Lot 5, North Klang Straits Industrial Area, Port Klang, Selangor Darul Ehsan.

Leasehold Expiry 2086 28,317 20 10,617 R:2012 Factory

Lot 799, Block 7, Sejingkat Industrial Estate, Muara Tebas Land District,Kuching, Sarawak.

Leasehold Expiry 2052 38,970 20 9,832 R:2012 Factory

Lot 3057, Block 26,Kemena Land District,Bintulu, Sarawak.

Leasehold Expiry 2063 20,235 - 3,260 R:2012

Vacant industrial

land

I/We ............................................................................................................ NRIC No. ..........................................................

of ...........................................................................................................................................................................................

being a member/members of HEXZA CORPORATION BERHAD, hereby appoint:

1) Name of Proxy: ....................................................................................... NRIC No. .........................................................

Address: ...........................................................................................................................................................................

................................................................................................... No. of Shares Represented: .......................................... *and/or

2) Name of Proxy: ....................................................................................... NRIC No. .........................................................

Address: ...........................................................................................................................................................................

................................................................................................... No. of Shares Represented: ..........................................

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Forty-fifth AnnualGeneral Meeting of the Company to be held at Gopeng Hall, Level 3, Kinta Riverfront Hotel & Suites, Jalan Lim Bo Seng, 30000 lpoh, Perak Darul Ridzuan on Saturday, 22nd November 2014 at 11.30 a.m. and at any adjournment thereof, in the manner indicated below:

no. RESoLUtionS foR aGainSt1. To approve the payment of a first and final single-tier dividend of 8% for the

financial year ended 30th June 20142. To approve the payment of Directors' fees3. To re-elect Mr. Ooi Ying Hong as Director

To re-appoint the following Directors pursuant to Section 129(6) of theCompanies Act, 1965:

4. (i) Dr. Foong Weng Cheong5. (ii) Dato’ Richard Ong Guan Seng6. (iii) Datuk Dr. Foong Weng Sum7. To re-appoint Messrs. Deloitte & Touche as Auditors and to authorise the

Directors to fix their remuneration8. To re-appoint Dato' Richard Ong Guan Seng to act as Independent Director

To re-appoint the following Directors to act as Independent Directors:9. (i) Mr. Leong Keng Yuan10. (ii) Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany11. To authorise the issuance of up to 10% of the issued share capital of the Company

(Please indicate with an ''X" in the spaces provided above how you wish your vote to be cast. In the absence of specific directions, your proxy will vote or abstain from voting at his discretion)

...................................................................................Signature of Shareholder/Common Seal Date: ..................................................

* Delete if not applicable

Notes:1. A member, other than an exempt authorised nominee is entitled to appoint not more than two (2) proxies. A proxy may but need not be a member of the Company. 2. A member who is an authorised nominee may appoint not more than two (2) proxies in respect of each securities account held; whereas an exempt authorised nominee may appoint multiple proxies in respect of each omnibus account held.3. A member who appoints a proxy must duly execute the Form of Proxy, and if more than one (1) proxy is appointed, the number of shares to be represented by each proxy must be clearly indicated.4. An instrument appointing a proxy, in the case of an individual, shall be signed by the appointor or his attorney duly authorised in writing or in the case of a corporation, shall be either under its Common Seal or under the hand of an officer or attorney of the corporation duly authorised.5. The duly executed Form of Proxy must be deposited at the registered office of the Company not less than forty-eight (48) hours before the time set for holding the meeting or any adjournment thereof.6. Only members whose names appear in the Record of Depositors as at 17th November 2014 will be entitled to attend and vote at the meeting.

No. of Shares Held

CdS account no.

Proxy Form

fold here

THE COMPANY SECRETARY

HEXZA CORPORATION BERHADLot 6 & 20, Persiaran Tasek,Kawasan Perindustrian Tasek,31400 Ipoh,Perak Darul Ridzuan,Malaysia.

Affix Stamp

fold here

annual report - hexza annual report 2014 ... rhb bank berhad rhb investment bank berhad ... total...

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