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CONTENTSGroup Corporate Structure 2

Corporate Information 3

Directors’ Profile 4

Chairman’s Statement 6

Corporate Social Responsibility 10

Financial Highlights 14

Share Performance 16

Corporate Governance Statement 17

Audit Committee Report 23

Statement On Risk Management 25And Internal Control

Statement Of Directors’ Responsibility 28

Financial Statements 29

Analysis Of Shareholdings 108

List Of Properties 112

Notice Of Annual General Meeting 113

Form Of Proxy

2 MIECO CHIPBOARD BERHAD • ANNUAL REPORT 2015

GROUP CORPORATE STRUCTUREAS AT 31 MARCH 2016

* Listed on Bursa Malaysia Securities Berhad

3ANNUAL REPORT 2015 • MIECO CHIPBOARD BERHAD

CORPORATE INFORMATION

BOARD OF DIRECTORS

Dato’ Mohd Hanif bin Sher MohamedIndependent Non-Executive Chairman

Mr Kajendra a/l PathmanathanExecutive Director

Lt. Gen. (R) Dato’ Seri Mohamed Daud bin Abu BakarIndependent Non-Executive Director

Dato’ Dr Amarjit Singh a/l Santokh Singh Independent Non-Executive Director

Puan Rozi binti BaharudinIndependent Non-Executive Director

Mr Krishnan a/l PeriyasamyNon-Independent Non-Executive Director

Mr Low Kim SengNon-Independent Non-Executive Director

REGISTERED OFFICE

Level 11 Menara BRDB285 Jalan MaarofBukit Bandaraya59000 Kuala Lumpur, MalaysiaTel : 603 - 2688 2888Fax : 603 - 2284 3988

BURSA MALAYSIA STOCK NUMBER

MIECO 5001

INTERNATIONAL SECURITIESIDENTIFICATION NUMBER (ISIN)

MIECO MYL5001OO002

REUTERS CODE

MIEC. KL

SECRETARIES

Ho Swee LingMAICSA No. 7009936

Yap Choon FonMAICSA No. 7049679

REGISTRARS

Metra Management Sdn Bhd30.02, 30th Floor, Menara Multi-PurposeCapital SquareNo. 8 Jalan Munshi Abdullah50100 Kuala Lumpur, MalaysiaTel : 603 - 2698 3232Fax : 603 - 2698 0313

AUDITORS

Messrs Deloitte

BANKERS

Alliance Bank Malaysia BerhadAmBank (M) BerhadOCBC Bank (Malaysia) BerhadMalayan Banking Berhad


DATO’ MOHD HANIF BIN SHER MOHAMED Independent Non-Executive Chairman

Dato’ Mohd Hanif, a Malaysian, aged 64, was appointedto the Board on 4 November 2013 and as Chairman on21 February 2014. He graduated in Banking,Management and Marketing and holds a Master inBusiness Administration. He is a member of AustralianManagement College and British Institute ofManagement.

Dato’ Mohd Hanif has over thirty years of experience incorporate and consumer banking including strategicplanning, risk management, rehabilitation andrestructuring debts.

He was previously the Chief Executive Officer of CreditCorporation (Malaysia) Berhad and Chairman ofEntrepreneur Rehabilitation Fund (Tabung PemulihanUsahawan). He was also previously a Director of CreditGuarantee Corporation, Danajamin Nasional Berhad andAgro Bank.

Currently, Dato’ Mohd Hanif is the Chairman of CreditCounselling and Debt Management Agency. He is also amember of the Small Debt Resolution Committee of BankNegara Malaysia, a Board member of Protasco Berhad,and few other private companies in Malaysia andAustralia.

MR KAJENDRA A/L PATHMANATHANExecutive Director

Mr Kajendra, a Malaysian, aged 42, was appointed asExecutive Director on 25 February 2016. He holds aBachelor of Commerce degree and a Bachelor of Lawdegree, both from University of Melbourne. He is also amember of the Institute of Chartered Accountants,Australia.

Mr Kajendra started his career with Ernst & Young, KualaLumpur in 1999 in the Corporate Recovery & Insolvencydepartment and moved to Ernst & Young, London in2008. While with Ernst & Young, he has had a very broadrange of experience on a wide variety of clients acrossvarious industries in Asia and Europe. He has extensiveexperience in leading strategic independent businessreviews and in advising stakeholders on significantrestructuring of public and private companies. In October2013, Mr Kajendra joined BRDB Developments Sdn Bhdas General Manager, Compliance and on 1 June 2014,he took up the position of Chief Operating Officer ofMieco Chipboard Berhad.

Mr Kajendra also sits on the boards of severalsubsidiaries in the Mieco Chipboard Berhad Group.

LT. GEN. (R) DATO’ SERI MOHAMED DAUD BIN ABU BAKARIndependent Non-Executive Director

Dato’ Seri Mohamed Daud, a Malaysian, aged 80, wasappointed to the Board on 24 March 1997. He graduatedfrom the world-renowned Royal Military Academy,Sandhurst, United Kingdom in December 1956, the ArmyStaff College, Camberley, United Kingdom and the RoyalCollege of Defence Studies, United Kingdom and hasserved the Malaysian Army with distinction for 36 years.During his military career, he was appointed to variouskey command and staff appointments both in the fieldheadquarters and in the Ministry of Defence and has alsoserved in various military committees at national andinternational levels.

Currently, Dato’ Seri Mohamed Daud is the Chairman ofthe Audit Committee and a member of the RemunerationCommittee and Nomination Committee of the Company.

DATO’ DR AMARJIT SINGH A/L SANTOKH SINGHIndependent Non-Executive Director

Dato’ Dr Amarjit, a Malaysian, aged 66, was appointed tothe Board on 3 April 1997. He graduated as a Doctor witha degree in Bachelor of Medicine and Bachelor ofSurgery, from Bombay University, India in 1973. He alsoobtained post-graduate certificates in Sports Medicineand Genito-Urinary Medicine from the College of GeneralPractitioners of Malaysia in 1988 and 1989, respectively.In addition, he is a Fellow of the Royal Society of Health,United Kingdom. In 1990 he established his own practicein Kuala Lumpur. He has been the Chief TournamentPhysician to the WTA Malaysian Tennis Open since 2010.

He was a former National Cricket Captain and DeputyPresident of the Malaysian Cricket Association. He wasalso the past President of the Malaysian Association ofSports Medicine as well as the past Chairman of theSociety of Sports Medicine of the Malaysian MedicalAssociation. At present, he is the Honorary Treasurer ofthe Persatuan Pegawai Veteran Kor Kesihatan KualaLumpur dan Selangor.

Dato’ Dr Amarjit is currently a member of the AuditCommittee, Remuneration Committee and NominationCommittee of the Company.

DIRECTORS’ PROFILE


PUAN ROZI BINTI BAHARUDINIndependent Non-Executive Director

Puan Rozi, a Malaysian, aged 58, was appointed to theBoard on 25 February 2016. She graduated with a degreein Bachelor of Business Administration (major inManagement) and holds a Master of Arts (major in SocialScience), both from Eastern Michigan University, USA.

A well-known Human Resources specialist, Puan Rozibegan her career at KPMG Peat Marwick, initially asConsultant in the Human Resource ConsultingDepartment and subsequently, as the DepartmentalManager. By the end of her 5-year tenure, she washeading the Human Resource Consulting arm of PeatMarwick Consultants Sdn Bhd.

Puan Rozi also worked for PA Consulting Group, first asthe Head of Human Resource Consulting and later asActing Chief Executive and a partner with the WorldwidePA Consulting Group. During her 2½-year tenure asshareholder in ASPAC, she also served as CEO ofASPAC Human Resource Consulting Sdn Bhd.

At present, Puan Rozi is the General Manager, HumanResource Department for Indah Water Konsortium SdnBhd, the national sewerage company, managing allaspects of Human Resource for a staff force of over3,000.

MR KRISHNAN A/L PERIYASAMYNon-Independent Non-Executive Director

Mr Krishnan, a Malaysian, aged 64, was appointed to theBoard on 4 November 2013. He graduated with aBachelor of Economics (Accounting) degree fromUniversity of Malaya and is a member of the Institute ofChartered Accountants in England and Wales.

Mr Krishnan has more than 30 years of experience infinance, accounting and general management. He waswith an international audit firm for seven years beforejoining the commercial sector. He has worked overseas,including in the United Kingdom and the United States ofAmerica for several years.

Currently, Mr Krishnan is the Chief Executive Officer ofBRDB Developments Sdn Bhd’s (BRDB) PropertyDevelopment in Permas Jaya and Emerald Bay.

He also sits on the boards of BRDB and several otherprivate limited companies.

MR LOW KIM SENGNon-Independent Non-Executive Director

Mr Low, a Malaysian, aged 61, was appointed to theBoard on 25 April 1991. He is a member of the MalaysianInstitute of Accountants. Mr Low qualified as aManagement Accountant in 1978 and has more than 30years of experience in accounting, corporate finance andgeneral management.

Mr Low is also a member of the Audit Committee,Remuneration Committee and Nomination Committee ofthe Company.

Notes:1) Save as disclosed above, none of the Directors has any

family relationship with any director and/or major shareholderof the Company.

2) None of the Directors has:• any conflict of interest with the Company.• any conviction for offences within the past ten years.

DIRECTORS’ PROFILE (Cont’d)


CHAIRMAN’S STATEMENT

Particleboard prices rose steadily, driven by increaseddemand from local furniture exporters, as a result ofgrowing demand and recovery in global export markets.

In MIECO, we continued to build on our positiveperformance of 2014 – focusing on growing profitabilityand strengthening our cashflow to ensure a healthyfinancial position. The Group diligently reduced its bankloans in 2015 and the proposed final settlement of theCompany’s syndicated term loans in 2016 will be asignificant milestone for the Group.

We also continued with our efforts in the important areasof product design, research and development, marketingemphasis on domestic and South Asian markets, greeninitiatives and green labels.

Moving forward into 2016, we continue to face challenges,but we believe MIECO stands in good stead given ourbest efforts and the strength of our brand reputation forquality and excellent customer service.

It is therefore with confidence that I present to you, onbehalf of the Board of Directors, the Annual Report andAudited Financial Statements of the Group for thefinancial year ended 31 December 2015 (FY 2015).

FINANCIAL HIGHLIGHTSSecond consecutive year of profitability

For FY 2015, the Group revenue rose a marginal 3%,from RM344.8 million in 2014 to RM355.0 million, onsales volume of 516,000 m³, driven mainly by thedomestic market demand for value-added products andhigher plainboard prices.

The Group achieved a pre-tax profit of RM18.6 million in2015, compared to the pre-tax profit of RM19.4 millionposted in 2014. It is however pertinent to note that the2014 pre-tax profit included an exceptional gain ofRM16.1 million from the disposal of the land and buildingsin Semambu, Pahang, which housed the Group’s firstplant.

The 2015 results are significant in that they mark asecond consecutive year of profitability for the Group afterseveral years of losses.

This improved financial performance in 2015 can beattributed to several factors – sustained demand, higherplainboard selling prices combined with lower wood andfuel prices, as well as increased sales volume of value-added products. These resulted in improved profitabilityand cash flow, which led to the reduction of the term loansfrom RM46.7 million in 2014 to RM28.1 million in 2015.

This achievement, under challenging businessconditions, was the result of stringent control over costs,working capital and capital expenditure. I am pleased toinform you that with the improved performance in 2015,MIECO has now met all financial covenant provisionsunder the term loan agreements.

The global wood-based manufacturing industry is seeinga modest turnaround, but with prevailing concerns overthe global and Malaysian economies, management is notresting on its laurels and will continue to keep a closewatch on the situation.

Dear Shareholders,

I am pleased to advise that 2015 was a good year for the globalparticleboard industry. The gradual turnaround we started to see in2014 continued to gain momentum with the overall industry doingbetter in 2015.


CHAIRMAN’S STATEMENT (Cont’d)

For FY2013, the Group reported that it had recognised anon-cash impairment of RM45.8 million in relation to theKuala Lipis plant, as a result of the plant’s poor operatingresults then.

Based on the management’s assessment in FY2013using the parameters applicable then, the estimatedrecoverable amount for the plant based on a value-in-usecalculation was RM287.3 million, which was lower byRM45.8 million than its carrying value of RM333.1 million,necessitating the provision for an impairment loss ofRM45.8 million.

In FY2014, the performance of the Kuala Lipis plantimproved marginally compared to that in FY2013. Thevalue-in-use of RM297.9 million calculated in FY2014exceeded the net carrying value by RM13.6 million.Although at the end of FY2014 the Directors could havewritten back this excess, they chose not to, waitinginstead for a more sustained recovery of the Kuala Lipisplant.

In FY2015, the Kuala Lipis plant continued to registerimproved performance, resulting in the calculated value-in-use for FY2015 increasing further to RM28.7 million.This excess demonstrates that the Kuala Lipis plant isgetting better year on year. Again, on grounds ofprudence the Directors have decided not to write back theexcess for FY2015.

As you may already know, on 25 September 2015,MIECO entered into a conditional Sale and PurchaseAgreement with Anjakan Kekal Sdn Bhd for the proposedsale of its wholly-owned subsidiary, Mieco Wood ProductsSdn Bhd (MWP), for a cash consideration of RM35.0million. MWP has forest management rights only onapproximately 10,000 acres in Kemasul, Pahang for aperiod not exceeding 60 years with an initial approvedperiod of 30 years. The sale was completed on 15 March2016.

REVIEW OF OPERATIONSSteady progress in challenging conditions

The past decade has been a challenging one for wood-based manufacturing industries, which have beenplagued by overcapacity and the consequent highproduction in the early 2000’s, followed by a period ofproduction contraction in later years.

This production contraction, coupled with the recovery inthe US economy and growing demand from Indonesiaand India, led to selling prices increasing marginally in2014 and more steadily in early 2015.

These circumstances saw MIECO making a concertedeffort to refocus its effort and operations in areas wherewe could make a significant difference to our resultswhich included the following:

The relocation exercise of the Semambu operations toGebeng following the sale of the Semambu land andbuildings. The first phase of the exercise involving therelocation of Melamine Impregnation Line to Gebeng wascompleted in December 2015. In January 2016, the newwarehouse building was completed and is now pendingthe Certificate of Completion and Compliance. Thesecond phase entailing the relocation of Short CyclePress 2 is expected to be completed in the secondquarter of 2016. This relocation rationalises theoperations of the Group and is expected to offer cost andoperational efficiencies.

We had two scheduled shutdowns of the Gebeng plantduring 2015 for major repair and maintenance to continueimproving and prolonging the performance of the plantthat produces higher margin value-added products for theGroup.

We streamlined and improved product quality, stepped upmarketing domestically and in growing overseas market,while enhancing customer service and the overallcustomer experience. We also capitalised on currentmarket conditions to negotiate for better wood and glueprices for better cost management.

On the product front, we launched 14 new MelamineFaced Chipboard (MFC) colour designs in 2015 tosupport our strategy of always offering customers abreadth of product choices and finishes.

As a result of these efforts, domestic demand grew,supported by higher pricing levels, and in turncontributing to overall growth in revenue. Almost allexisting MFC production capacity was taken up by themarketplace, while demand for particleboard exceededsupply.


The export market was relatively competitive in 2015, asthe rise in the US dollar affected our export sales,particularly in the South-East Asian region. The exportMFC market did well, registering an increase in ordersfrom Pakistan, Indonesia and Myanmar. Theparticleboard markets were mixed – poorer in Indonesiaespecially towards the 2nd half of 2015, but stronger inthe growing markets of South Asia.

To strengthen our export market advantage, we improvedon our after-sales service, executing export documentsand facilitating payments promptly, and improvedcustomer relationships to enhance their confidence andtrust in the MIECO brand.

As has been our practice in the past, we pushed forglobal recognition of our products through theachievement of recognised standards. In 2015, MIECOproducts achieved the coveted Malaysian GreenTechMyHijau Mark, further strengthening our appeal amongsta growing eco-sensitive domestic market.

We strongly believe that a well-trained and skilledworkforce is essential to any manufacturing company. As such, MIECO made significant progress in areas ofstaff training and development, increasing training hoursfrom 5 hours per person per annum in 2014 to 9.25 hoursper person per annum in 2015; an almost two foldincrease. Our concerted efforts also ensured wecompleted more than 90% of our 2015 Training Plan.

Beyond technical training to bring staff up to date with thelatest technologies, current standards, as well as Health,Safety and Environment (HSE) practices, our focus wasalso to build future leaders, with training focused on self-development, communication, crisis management andrisk analysis.

Our focus in 2016 will be to build on our progress thus far,especially improving product quality and customerservice, which will help us protect and strengthen our leadposition in this competitive market.

DIVIDENDS

Your Directors are of the opinion that the Group shouldcontinue to conserve cash to meet its loan repaymentobligations, for working capital and plant maintenance,and therefore are not recommending the payment ofdividends for FY2015. It is the Board’s intention to resumethe payment of dividends as soon as circumstancespermit.

OUTLOOK AND PROSPECTSIncreasingly challenging

The second half of 2015 saw the Malaysian economyfacing a contraction, as the country grappled with severeheadwinds on the economic front following unanticipatedglobal commodity and currency shocks, financial marketturbulence and the sudden reversal of capital flows.

While still of concern, the country’s outlook, based onratings by international rating agencies, remains stable,though tough challenges are expected. Real GDP growthfor 2016 is estimated to register between 4%-5%, arespectable growth rate considering the weak and unevenglobal economic outlook.

The official forecast indicates that ringgit exchange rateis expected to remain stable at the average level ofRM4.20 per US dollar this year (2015: RM3.91; 2014:RM3.27; 2013: RM3.15 per US dollar).

Under such circumstances, interest rates may rise, albeitfrom a low base, leading to subdued private domesticconsumption. On a contrary but positive note, we expectthe weaker ringgit to possibly drive stronger furnitureexports and hence domestic demand for particleboard.

Moving forward, we expect the uncertainty of theMalaysian currency and the economic contraction beingfelt in emerging markets to put pressure on prices andmargins. We are also seeing increased competition, withexisting competitors adding new lines, which will increasesupply, and other new competitors entering the market,all vying for the lucrative South Asian market.

Amid patchy recovery in the US and the UK, possibleslowdown in the emerging markets of China, Russia andBrazil, with Japan and the Eurozone at risk of stagnationand overall sluggish global growth, the Group iscautiously optimistic of sustaining its performance byincreasing sales of higher margin products andmanagement of key input costs, whilst improvingproductivity, quality and enhancing customer service. We expect to see some boost in demand, albeit a smallone.

Prices of raw materials – primarily wood and glue – areexpected to remain steady, and possibly even improve asthe market is seeing the entry of new suppliers. Lowercrude oil prices are expected to give us some savings intransportation and operational costs, to offset highercosts of utilities as a result of TNB tariff increases in 2015.



Under such circumstances, we must continue to exercisecaution, keeping a tight lid on costs and capitalexpenditure while trying to grow our sales and revenue inFY2016.

Our strategy to drive this growth will be four-fold:

The first will be to develop and launch non-load bearingMFC for use in humid conditions. We are also working ondeveloping two new types of surfaces and designs whichare the latest in western markets and hope to roll theseout to the domestic market in 2016. MIECO has built areputation for continuously creating new products thatmeet market demand and trends and we will continue tofocus our efforts on research, development and productdesign, while incorporating international green standards.

The second area of focus will be talent development –building our staff leadership bench strength and ensuringa strong succession plan. Evidenced by our experienceof recent years, it is very important that MIECO has ateam well-versed in the nuances of the global wood-manufacturing marketplace, and with the knowledge andagility to adapt quickly to market changes. Our focus incoming years will be on building a team sound inknowledge, with a depth of experience and marketinsights.

Though we did well in 2015, we have to do better in 2016and beyond to protect our leadership position in Malaysia.Our third strategy will therefore be to continue ourstringent focus on operations – minimising costs,increasing productivity, reducing defects and ensuring on-time delivery to customers.

Our fourth strategy will be to improve our training anddevelopment, with particular focus on upgradingknowledge and certification in the areas of HSE, as wellas risk analysis and crisis management.

As I mentioned earlier, 2015 was a good year. We stayedon track and focused on the right things, achieving astrong set of results and more importantly, positioningourselves well for the future.

We have to continue to work as a team, building on ourmarket knowledge and technical skills and translatingthese into products that will continue to capture theattention of the marketplace. We have to hone our survivalskills and keep a close eye on growing competition, whilstdelivering a consistent profit to shareholders and givingfair value to all our stakeholders.

The MIECO brand has become a global leader with aloyal following by staying on the twin tracks of greatproducts backed by excellent customer service – our aimin the coming years will be to closely guard and protectour enviable position.

On behalf of the Board of Directors of MIECO, I would liketo thank the MIECO team, shareholders, businesspartners and customers for their passion andcommitment to the business and brand.

I would also like to welcome two new Directors, MrKajendra a/l Pathmanathan and Puan Rozi bintiBaharudin, who joined our Board on 25 February 2016as Executive Director and Independent Non-ExecutiveDirector respectively. Mr Kajendra has been our ChiefOperating Officer since 1 June 2014. He is a member ofthe Institute of Chartered Accountants, Australia with in-depth experience in corporate advisory and corporaterestructuring. Puan Rozi is a well-known human resourcespecialist with vast experience in both consulting andcorporate environments. I am confident that their valuableexperience and market knowledge will be a valuableasset to the Group moving forward.

I would also like to thank my fellow Board members fortheir wise counsel. Lastly, I would like to record myappreciation to Lt. Gen. (R) Dato’ Seri Mohamed Daud binAbu Bakar and Dato’ Dr Amarjit Singh a/l Santokh Singh,both of whom have decided to retire and do not wish toseek re-appointment. They have served the Board ofMIECO for 19 years. On behalf of the Board,management and staff, we thank them for their invaluableservices and contributions to the Group and wish themthe very best in their future endeavours.

DATO’ MOHD HANIF BIN SHER MOHAMEDCHAIRMAN

28 March 2016


10

Corporate Social Responsibility is an important aspect of MIECO’s business. We recognise that it is our duty and responsibility to operate in a sustainable manner,to ensure the continued growth and success of our employees and the communities inwhich we operate. It is our culture to look for meaningful opportunities to improve thelives of our internal and external key stakeholders.

COMMUNITYElevating and enriching communities

MIECO has a firm commitment to the communities in whichwe operate. We continuously promote our community effortsthrough events organised between our employees andwelfare organisations. We place particular emphasis on theneeds of the younger generation in our community-buildinginitiatives.

In 2015, a total of 23 community outreach activities werecarried out. These included providing aid to flood victims inKuantan and Kuala Lipis, donations to surau in Taman KgPadang Perdana, career talks and job fair participations inKuantan, Kuala Lipis and Raub, as well as blood donationdrives at the Gebeng and Kuala Lipis plants, Kuantan andRaub district hospitals.

MIECO also sponsored the building of a bicycle park atSekolah Kebangsaan Padang Tengku, participated in anadvocacy programme for prevention of accidents organisedby SOCSO Bentong and an awareness talk on prudentfinancial management by Pahang Agensi Kaunseling danPengurusan Kredit.

These initiatives were led by MIECO’s Human ResourcesDepartment and carried out in collaboration with KelabSukan dan Sosial MIECO and Badan Kebajikan PekerjaIslam MIECO, giving our employees the opportunity toparticipate actively in giving back to their own communities.

MIECO also has a long-standing practice of providingMalaysian tertiary institutions with relevant on-the-jobindustrial and practical training to equip their students forfuture employment in the manufacturing sector. In theprocess, we contributed to the nation’s talent development.

In 2015, we accepted 35 undergraduate students fromvarious institutions of higher learning such as UniversitiMalaysia Pahang (UMP), Universiti Sains Malaysia,Universiti Putra Malaysia, Universiti Malaysia Sarawak,

CORPORATE SOCIAL RESPONSIBILITY

Donation to Surau Taman Kg Padang Perdana, Kuantan,4 Feb 2015

Handover Bicycle Park to Sek. Keb. Padang Tengku,14 May 2015

Blood Donation Drive at Lipis Plant, 27 May 2015

MIECO CHIPBOARD BERHAD • ANNUAL REPORT 2015


Universiti Teknologi MARA Shah Alam, Universiti Teknologi MARA Pulau Pinang, Universiti Teknologi MARA Jengka,Universiti Tenaga Nasional, Kolej Poly-Tech MARA Kuantan, SIRIM Training Services Sdn Bhd, Pahang StateDevelopment Corporation College and Politeknik Kota Bahru for training.

The 2 to 6 months training encompassed different aspects of plant operations ranging from engineering, production,quality control and research, warehousing to finance and administration. The knowledge they gained will help thementer the working world more easily and make them more valuable to their future employers. Since this programmestarted 6 years ago, MIECO has provided more than 200 students with such training opportunities.

Even though the Memorandum of Understanding signed with UMP ended in 2014, MIECO continued to accept 2students in 2015 for the industrial attachment programme and hopes to continue offering placements annually in thefuture.

ENVIRONMENTRespecting and protecting the planet

We are committed to minimising the impact of ouroperations on the environment. As a responsibleparticleboard manufacturer, we monitor our operationalcarbon footprint and continue to undertake variousmeasures to reduce the impact of our operational activitieson the environment with proper management of waste interms of handling, packaging, labelling, storage anddisposal.

MIECO also places great emphasis on keeping up withcurrent quality management standards. The integration ofthe Environmental Management System ISO 14001:2004and OHSAS 18001:2007 in 2005 proved MIECO’scommitment to being a responsible manufacturer andemployer by providing MIECO with one comprehensivemanagement system to deliver on its commitment toHealth, Safety and Environment. We enforce strictprocedures for chemical handling, requiring all employeesto wear personal protective equipment when handlinghazardous chemicals.

MIECO adopts safe practices for disposal of wastewater and sludge. Wastewater is treated and reused formanufacturing process. The sludge are then collected for disposal in accordance with the requirements of theDepartment of Environment.

MIECO also embraces the green philosophy in its products as evidenced by us continuously maintaining the ISO14001Environmental Management Systems and Standards, Programme for the Endorsement of Forest Certification (PEFC)and achieving MyHijau certification in 2015. Our R&D team is now researching and pursuing certifications underGreenguard and Forest Stewardship Council - a certification similar to PEFC.

CORPORATE SOCIAL RESPONSIBILITY (Cont’d)

Wastewater Treatment System, Gebeng Plant


WORKPLACECreating a conducive environment in which employees strive

MIECO believes in creating a workplace that is fair and supports the efforts of a diverse range of employees. MIECOlooks beyond ethnicity and focuses on relevant capabilities and expertise in its hiring processes to ensure employeescan contribute to the success of the Group and at the same time grow in their careers.

The Group employs more than 800 staffs in our operations. Of these, 90% are Malaysians with female employeescomprising 21% of the total workforce. About 38% of our workforce are members of Timber Employees UnionPeninsular Malaysia (TEUPM). MIECO management team holds quarterly meetings with TEUPM committee membersto enhance communication between MIECO and union members. Ad hoc meetings with TEUPM committee membersare also held when warranted.

A key thrust of our human resource efforts in 2015 was employee engagement, a critical component of our talentmanagement strategy. MIECO management worked hard to create opportunities for employees to foster ties andstrengthen the spirit of camaraderie and belonging for a more conducive work environment.

During the year, we held a suite of employee festive and sport-related activities such as:• Yee Sang Dinner for MIECO staff, vendors and customers• MIECO Management Buka Puasa at the Gebeng and Kuala Lipis plants• Badminton Competition in Indera Mahkota, Kuantan• Fishing Competitions in Tasik Selimbang, Kuala Lipis & Kolam Ikan Peramu, Kuantan• Futsal Competitions at Kg Gua Futsal Court, Kuala Lipis• Sepak Takraw Tournament at Gelanggang Serbaguna Kg Banjir, Kuala Lipis• Zakat Counters at the Gebeng and Kuala Lipis plants• Tazkirah (religious and motivational talks) at the Gebeng and Kuala Lipis plants • Donations to needy families of MIECO employees

In 2015, all MIECO staff were rewarded with a RM50 supermarket cash voucher each in recognition of their effortsfor achieving a target production volume for 3 consecutive months as well as a mid-year bonus to motivate them tosustain the good production momentum for the rest of 2015. Bonuses were paid despite the concern of a slowdownin the economy.

These activities helped strengthen staff commitment toMIECO, built esprit de corps and job satisfaction, leadingto a happy and productive work environment.

MIECO also made significant progress in areas of stafftraining and development, increasing training hours from5 hours per person per annum in 2014 to 9.25 hours perperson per annum in 2015; an almost two-fold increase.Our concerted efforts also ensured we completed morethan 90% of our 2015 Training Plan.

Training programmes were focused on equipping ourfuture managers with the soft skills they need to lead moreeffectively, improving communication skills, inculcatingteamwork and risk analysis management.


MIECO Management Leadership Programme, 9 – 11 January 2015, Cameron Highlands


For the broader spectrum of our staff, we placed emphasison skills development, conducting programmes tofamiliarise our teams with the latest technology and currentstandards in the areas of Health, Safety and Environment.Key programmes conducted were automation training foroperating upstream plant and machinery, productionmanagement, financial software training and warehouseoperations & productivity. Other programmes includedContinuous Improvement Programme for Six Sigma, forklifttruck handling and proficiency as well as basic first aid &CPR training.

MIECO’s success in no small measure is the result of the skills,knowledge and experience of its talent pool and our focus willcontinue to enhance our employees’ skills and knowledge in areascritical to both their personal development as well as the growth andevolution of the Group’s overall business objectives.

MARKETPLACEPromoting ethical marketplace practices

MIECO places great importance in providing high standard ofproducts and services to our customers.

Recognising the importance of building and maintaining positiverelationships with our business partners, we hold regular networkingevents with them as part of our relationship building initiatives.

The Group continually conducts customer satisfaction surveys to testcustomers’ views on our product delivery and quality, producttechnological advantages as well as technical and customer service. The responses from these surveys are thencompiled and circulated to management and operational teams for improvement of our processes and products.

MOVING FORWARD

The Group remains committed to our corporate social responsibility and will continue to engage and bring benefits toour employees and local communities and in the process, strive to continue being a respected and reputable Malaysianbrand.


Warehouse Operation & Productivity Programme, 21 November 2015, Gebeng Plant

Basic First Aid & CPR Training, 2 – 3 April 2015, Gebeng Plant


FINANCIAL HIGHLIGHTSFINANCIAL STATISTICS 2011-2015

2015 2014 2013 2012 2011 RM'000 RM'000 RM'000 RM'000 RM'000

ASSETSNon Current assets

Property, plant and equipment 402,018 400,868 412,258 477,423 480,533Deferred tax assets – – 386 517 542

402,018 400,868 412,644 477,940 481,075

Current assets 134,402 111,527 104,764 118,569 117,104Non-current assets held for sale – – 6,405 – 220

TOTAL ASSETS 536,420 512,395 523,813 596,509 598,399

EQUITY AND LIABILITIESEquity attributable to equity holders of the Company

Share capital 210,000 210,000 210,000 210,000 210,000Reserves 82,209 63,567 44,842 108,466 116,483

Total equity 292,209 273,567 254,842 318,466 326,483

Non-current liabilities 58,738 56,210 54,504 57,649 157,532Current liabilities 185,473 182,618 214,467 220,394 114,384

Total liabilities 244,211 238,828 268,971 278,043 271,916

TOTAL EQUITY AND LIABILITIES 536,420 512,395 523,813 596,509 598,399

GROUP RESULTSRevenue* 354,988 344,820 318,327 330,871 319,179

Profit/(Loss) before taxation 18,643 19,441 (70,164) (9,190) 6,508Tax credit/(expense) – (1,564) 6,539 2,189 (36)

Profit/(Loss) after taxation 18,643 17,877 (63,625) (7,001) 6,472Dividend paid – – – – –

Retained profit/(loss) 18,643 17,877 (63,625) (7,001) 6,472

SELECTED RATIOSBasic earnings/(loss) per share 8.88 8.51 (30.30) (3.33) 3.08Proposed dividend per share (sen) – – – – –Net tangible assets per share (RM) 1.39 1.30 1.21 1.52 1.55

* The 2011 to 2014 Revenue have been reclassified to conform with 2015 presentation.


FINANCIAL HIGHLIGHTS (Cont’d)FINANCIAL STATISTICS 2011-2015

0

100,000

200,000

300,000

400,000

500,000

600,000598,399 596,509

523,813 512,395536,420

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000326,483

318,466

254,842

273,567292,209

0

100,000

200,000

300,000

350,000

400,000

319,179330,871

318,327

344,820 354,988


SHARE PERFORMANCE


CORPORATE GOVERNANCE STATEMENT

The Board of Directors of MIECO (the Board) iscommitted to maintaining an appropriate and soundsystem of good corporate governance throughout theGroup with the fundamental objective of protecting andenhancing shareholders’ value and the financialperformance of the Group as well the interests ofstakeholders.

The Board is pleased to outline below the key aspectshow the Group has applied the principles andrecommendations set out in the Malaysian Code onCorporate Governance 2012 (Code).

PRINCIPLE 1 – ESTABLISH CLEAR ROLES ANDRESPONSIBILITIES

Functions of the Board and ManagementThe Board is overall responsible for the direction andcontrol of the Group as it formulates policies, setsstrategic directions and oversees the investments andoperations of the Group.

The Board has delegated certain functions to thecommittees it established to assist in the execution of itsresponsibilities. These committees operate under clearlydefined terms of reference and have authority to examineparticular issues and report back to the Board with theirrecommendations. These Board committees include theAudit Committee, Nomination Committee andRemuneration Committee.

Roles and ResponsibilitiesThe Board assumes the following principal roles andresponsibilities:• formulating the business direction and objectives of

the Group;• reviewing, adopting and approving the Group’s

annual budgets, strategic plans, key operationalinitiatives, major investments and funding decisions;

• overseeing the conduct of business of the Group;• reviewing the risk management process within the

Group;• assuming responsibility in succession planning

within the Group; and• reviewing and ensuring the adequacy and

effectiveness of management information andinternal control systems to ensure compliance withapplicable standards, laws and regulations.

Management is accountable for the execution of theexpressed policies and attainment of the Group’scorporate objectives. The demarcation complements andreinforces the supervisory role of the Board.

Ethical Codes and StandardsThe Board has adopted a Board Charter which sets outthe principal roles and responsibilities of the Board and a Code of Conduct and Ethics for Directors that sets outthe principles and standards of business ethics andconducts of the Group. The Group has also put in placea Whistle Blowing Policy which enables any employeeand/or management of the Group to seek guidance andexpress concerns on the reporting of suspected and/orknown misconduct, wrongdoings, corruption andinstances of fraud, waste and/or abuse involvingresources of the Group.

Strategies Promoting SustainabilityThe Board is mindful of the importance of businesssustainability and, in developing the corporate strategy ofthe Group, its impact on the environmental, social andgovernance aspects is taken into consideration. TheCompany’s activities on corporate social responsibility forthe financial year ended 31 December 2015 are disclosedon pages 10 - 13 of this Annual Report.

Access to Information and AdviceThe Directors are given adequate notice of Boardmeetings. Board papers together with the agenda arecirculated in a timely manner. This is to ensure that theDirectors are given sufficient time to read the Boardpapers and seek any clarification or further details on thematters to be deliberated before the Board meetings.

The Board papers include reports on the Group’sfinancial, operational, corporate developments andproposals. Senior management staff are invited to attendBoard meetings to report on matters relating to theirrespective areas of responsibility and also to providedetails or clarification on issues that may be raised by anyDirector. All Directors have full and unrestricted access tosenior management for advice and information, andsupport services of the Company Secretaries in ensuringthe effective functioning of the Board. The Directors mayalso seek independent professional advice in thefurtherance of their duties at the Company’s expense, ifrequired, subject to the approval of the Board, anddepending on the quantum of the fees involved.


Qualified Company SecretariesBoth the Company Secretaries are associate membersof the Malaysian Institute of Chartered Secretaries andAdministrators. The Company Secretaries ensure that theBoard procedures are adhered to at all times duringmeetings and advise the Board on matters includingcorporate governance issues and Directors’responsibilities in complying with relevant legislation andregulations. On an ongoing basis, the Directors haveseparate and independent access to the CompanySecretaries.

PRINCIPLE 2 – STRENGTHEN COMPOSITION

Board CompositionAs at the date of this statement, the Board has sevenmembers, comprising the Independent Non-ExecutiveChairman, one Executive Director (ED) and five Non-Executive Directors, of whom three are Independent Non-Executive Directors. Mr Kajendra a/l Pathmanathan wasappointed as ED on 25 February 2016. On the same day,Puan Rozi binti Baharudin was appointed as IndependentNon-Executive Director. The Company is in compliancewith the Main Market Listing Requirements of BursaMalaysia Securities Berhad (Bursa Securities) whichstipulates that at least one third of the Board membersmust be independent. The Board has a female Director,reflecting the Board’s efforts towards achieving a moregender diversified Board. The composition of the Boardrepresents a balanced mix of experienced professionalsin the fields of business, finance and generalmanagement. Together, the Directors bring a wide rangeof expertise and skills necessary for the continuedsuccessful direction of the Group. A brief profile of eachDirector is set out on pages 4 and 5 of this Annual Report.

Nomination CommitteeThe Nomination Committee (NC) comprises three Non-Executive Directors. The members of the NC are:

Lt. Gen. (R) Dato’ Seri Mohamed Daud bin Abu Bakar(Independent Non-Executive Director) Dato’ Dr Amarjit Singh a/l Santokh Singh (Independent Non-Executive Director) Mr Low Kim Seng(Non-Independent Non-Executive Director)

The NC is primarily responsible for the following:

(i) to oversee the overall composition of the Board interms of appropriate size, required mix of skills,experience and core competencies;

(ii) to consider, evaluate and recommend suitablecandidates for appointment to the Board;

(iii) to assess the performance and effectiveness of theBoard and the contributions of each Director towardsthe effectiveness of the Board’s decision makingprocess. The assessment includes assessment ofindependence of the Independent Directors.

During the financial year under review, the NC hasundertaken the following activities:

• assessed the Board’s performance andeffectiveness as a whole;

• assessed the performance of each individualDirector;

• reviewed the overall composition of the Board interms of the appropriate size, mix of skills,experience, core competencies and board balance;

• assessed the independence of its IndependentDirectors.

Board Membership CriteriaIn selecting a suitable candidate, the NC considers,among others, the candidate’s qualification, experienceand accomplishments, with the objective of having aBoard with diverse backgrounds and experience inbusiness. All Directors are expected to be individuals withintegrity, high personal and professional ethics, soundbusiness judgement, and the ability and willingness tocommit sufficient time to the duties of the Board. The finaldecision on the appointment of a candidate nominated bythe NC rests with the whole Board. The NC has reviewedthe appointment of Mr Kajendra a/l Pathmanathan as EDand Puan Rozi binti Baharudin as Independent Directorbefore recommending their appointments to the Board forapproval.

CORPORATE GOVERNANCE STATEMENT (Cont’d)


Board AssessmentThe NC has a formal assessment in place to assess theeffectiveness of the Board as a whole and the contributionof each individual Director. The assessment comprisesthe Board Assessment and Individual Self-Assessment.The assessment of the Board is based on specific criteriacovering areas such as board structure, board operations,board roles and responsibilities and board chairman’sroles and responsibilities. For individual assessment,criteria covering contribution to interaction, quality ofinput, understanding of role and board chairman’s rolewere used.

Evaluations on the contribution of the Directors and theeffectiveness of the Board were conducted by the NC forthe financial year under review. The Board was satisfiedwith the performance and effectiveness of the Board aswell as the performance and contribution of eachindividual Director.

Remuneration PoliciesThe Remuneration Committee (RC) comprises threeNon-Executive Directors: Lt. Gen. (R) Dato’ SeriMohamed Daud bin Abu Bakar (Independent Non-Executive Director), Dato’ Dr Amarjit Singh a/l SantokhSingh (Independent Non-Executive Director) and Mr LowKim Seng (Non-Independent Non-Executive Director).The RC is responsible for reviewing the performance ofthe Executive Directors and furnishing recommendationsto the Board the remuneration packages and terms ofemployment of the Executive Directors. The determinationof the remuneration of the Non-Executive Directors is amatter to be decided by the Board as a whole. A fixedsitting allowance is also paid to Non-Executive Directorsfor each Board or committee meeting they attend. All feespayable to the Directors are subject to shareholders’approval at the annual general meeting (AGM). For thefinancial year ended 31 December 2015, the Board hasdecided to only recommend the payment of Directors’ feesto the Independent Directors for shareholders’ approval atthe forthcoming AGM.

In addition, the Directors have the benefit of Directors &Officers liability insurance in respect of any liabilitiesarising from their acts committed in their capacities asDirectors and Officers of the Company. However, the saidinsurance policy does not indemnify a Director or Officerif he is proven to have acted fraudulently, or dishonestly,or in breach of his duty or trust. Details of the Directors’remuneration for the financial year ended 31 December

2015 are set out in the Annual Financial Statements ofthis Annual Report. The number of Directors whoseremuneration falls within the following bands is as follows:

Range of Executive Non-ExecutiveRemuneration Directors* Directors

Below RM50,000 – 4

RM50,001 - RM100,000 – 1

* no details on remuneration as the executive director post wasvacant during the financial year.

PRINCIPLE 3 – REINFORCE INDEPENDENCE

Assessment of Independent DirectorsThe presence of the Independent Directors helps inproviding independent and constructive views, advice andopinions to the benefits of the investors, customers, andother stakeholders. They also represent the element ofobjectivity, impartiality and independent judgement of theBoard. This ensures there is adequate check and balanceat the Board level.

Independent Directors are subject to an independenceassessment prior to their appointments and annuallythereafter. In this respect, the Board, through the NC,assesses the independence of its Independent Directorsbased on the criteria set out in the Main Market ListingRequirements of Bursa Securities. All the IndependentDirectors in office as at end of 2015 have reaffirmed theirindependence. The independence status of Puan Rozibinti Baharudin has been reviewed by the NC prior to herappointment as Independent Director on 25 February2016.

Tenure of Independent DirectorsThe Board has two long serving Independent Directors,Lt. Gen. (R) Dato’ Seri Mohamed Daud bin Abu Bakar andDato’ Dr Amarjit Singh a/l Santokh Singh, whose tenureare more than nine years. Taking cognizance of theCode’s recommendation that the tenure of anIndependent Director should not exceed a cumulativeterm of nine years, Lt. Gen. (R) Dato’ Seri Mohamed Daudbin Abu Bakar and Dato’ Dr Amarjit Singh a/l SantokhSingh have both decided to retire from the Board and notto seek re-appointment at the forthcoming AGM.



Position of Chairman and Executive DirectorThe roles of the Non-Executive Chairman and the ED aredistinct and separate to ensure there is proper balance ofpower and authority. The Chairman is responsible forleadership, effectiveness, conduct and governance of theBoard whilst the ED is responsible for the day-to-daymanagement of the Group business and implementationof strategies and policies.

PRINCIPLE 4 – FOSTER COMMITMENT

Time Commitment and Board MeetingsThe Directors are expected to give sufficient time andattention to carry out their responsibilities. Under theBoard Charter, a Director is required to notify theChairman before accepting any new directorship in anyother company and the notification shall explain theexpectation and an indication of the time commitment thatwill be spent on the new appointment. All the Directorshold not more than five directorships in public listedcompanies.

The Board meets at least five times a year. Boardmeetings are scheduled in advance at the beginning ofeach new financial year to facilitate and foster theDirectors’ time planning and commitment to the Company.Additional board meetings may be convened as andwhen necessary for highly critical matters that requireexpeditious direction from the Board. Seven Boardmeetings were held during the financial year underreview. All the Directors have complied with the minimumrequirement of 50% attendance of the Board meetingsheld as per the Board Charter. The Board is satisfied withthe level of time commitment given by the Directorstowards fulfilling their roles and responsibilities. Thedetails of attendance of the Directors at the BoardMeetings held in 2015 are as follows:

Total Numberof Meetings

Name of Director Attended

Dato’ Mohd Hanif bin Sher Mohamed 7/7

Lt. Gen. (R) Dato’ Seri Mohamed Daud bin Abu Bakar 7/7

Dato’ Dr Amarjit Singh a/l Santokh Singh 7/7

Mr Krishnan a/l Periyasamy 7/7

Mr Low Kim Seng 7/7

Mr Kajendra a/l Pathmanathan and Puan Rozi binti Baharudindid not attend the Board Meetings as they were appointed tothe Board on 25 February 2016

Directors’ TrainingThe Directors are mindful that they shall receiveappropriate training to broaden their knowledge and tokeep abreast with the various changes in laws,regulations and business environment in order toeffectively discharge their duties. The Directors areencouraged to determine the areas of training that theymay require for personal development as Directors. TheCompany Secretaries arrange for the Directors’attendance at these training programmes. The CompanySecretaries keep a complete record of the trainingsreceived or attended by the Directors. The CompanySecretaries also provide the Board updates on therelevant guidelines on statutory and regulatoryrequirements from time to time. The external auditors alsobrief the Board members on any changes to theMalaysian Financial Reporting Standards that affect theGroup’s financial statements.

The training programmes and seminars attended by theDirectors in 2015 are as follows:

Name of Director Programme/Seminar

Dato’ Mohd Hanif • Audit Oversight bin Sher Mohamed Board Conversation

with Audit Committees• Lead the Change : Getting

Women on Boards• The Global Sustainability

and Impact Investing Forum

• Bursa Malaysia CG Breakfast Series with Directors - How to Maximise Internal Audit

• Corporate Governance Statement Reporting Workshop

• Bursa Malaysia CG Breakfast Series with Directors - Board Reward &Recognition



Name of Director Programme/Seminar

Lt. Gen. (R) Dato’ Seri • Cooking the Books - TheMohamed Daud bin Malaysian Recipe on Abu Bakar Financial Fraud

Dato’ Dr Amarjit Singh • A Guide for Audit a/l Santokh Singh Committees and

Independent Directors-Corporate Governance, Updates on Bursa Listing Requirements and Current Issues in Financial Reporting

Mr Krishnan • Cooking the Books - The a/l Periyasamy Malaysian Recipe on

Financial Fraud

Mr Low Kim Seng • Bursa Malaysia CG Breakfast Series with Directors – How to Maximise Internal Audit

PRINCIPLE 5 – UPHOLDING INTEGRITY INFINANCIAL REPORTING

Compliance with Applicable Accounting StandardsIn presenting the annual financial statements andquarterly announcements to shareholders, the Boardtakes responsibility to present a balanced andunderstandable assessment of the Group’s and theCompany’s position and prospects. The Audit Committee(AC) assists the Board in reviewing all the informationdisclosed to ensure adequacy, accuracy and integrityprior to recommending to the Board for approval. TheDirectors’ Responsibility Statement in respect of thepreparation of the Annual Audited Financial Statementsis set out on page 29 of this Annual Report.

Independence of External AuditorsThe Board maintains a transparent and professionalrelationship with the external auditors through the AC.The AC invites the external auditors to attend its meetingsas and when required. From time to time, the externalauditors have highlighted to the AC matters that requirethe AC’s attention. At the last AGM held on 25 June 2015,Messrs Deloitte were appointed as auditors of theCompany in place of Messrs PricewaterhouseCooperswho did not seek re-appointment. Messrs Deloitte have

confirmed to the AC that they are, and have been,independent through the conduct of the auditengagement in accordance with the By-Laws issued bythe Malaysian Institute of Accountants.

PRINCIPLE 6 – RECOGNISE AND MANAGE RISKS

Risk Management Framework The Board acknowledges its overall responsibility formaintaining a sound system of internal control tosafeguard the investment of its shareholders and theGroup’s assets. The key features of the Group’s systemof risk management are set out in the Statement on RiskManagement and Internal Control of this Annual Report.

Internal Audit FunctionThe Board has established an independent internal auditfunction that reports directly to the AC. This internal auditfunction is outsourced to an independent professionalfirm, Lefis Consulting Sdn Bhd. Details of the Group’sinternal control system and framework are set out in theStatement on Risk Management and Internal Control andthe AC Report of this Annual Report.

PRINCIPLE 7 – TIMELY AND HIGH QUALITYDISCLOSURE

The Board recognises the need for and the importanceof clear and effective communication with shareholders,institutional investors and the investing public. The Groupcommunicates with its shareholders and stakeholdersregularly through timely release of financial results on aquarterly basis, press releases and announcementswhich provide an overview of the Group’s performanceand operations and disclosure of material information. Inaddition, shareholders and public can access to corporateinformation, financial statements, news/events relating tothe Group through the Group’s website atwww.mieco.com.my. Shareholders can also direct queriesto the Company through the contact persons or the emailcontact provided in the website.


• Cooking the Books -The Malaysian Recipeon Financial Fraud

• A Guide for Audit Committees andIndependent Directors -Corporate Governance,Updates on BursaListing Requirements andCurrent Issues inFinancial Reporting

• Cooking the Books -The Malaysian Recipeon Financial Fraud

• Bursa Malaysia CGBreakfast Series withDirectors - How toMaximise Internal Audit


PRINCIPLE 8 – STRENGTHEN RELATIONSHIPBETWEEN COMPANY AND SHAREHOLDERS

The AGM represents the principal forum for dialogue andinteraction with all shareholders. At the AGM of theCompany, a review of the progress and performance ofthe Group’s business together with an overview of theGroup’s activities is presented to shareholders.Shareholders are given the opportunity to participate inthe question and answer session on the Group’soperations and proposed resolutions. The Directors,senior management and the external auditors areavailable to respond to shareholders’ queries during theAGM.

ADDITIONAL CORPORATE DISCLOSURE

Share BuybacksThe Company did not buy back any of its shares duringthe financial year ended 31 December 2015.

Exercise of Options, Warrants or ConvertibleSecurities The Company has not granted any options or issued anywarrants or convertible securities during the financial yearended 31 December 2015.

Depository Receipt ProgrammeThe Company did not sponsor any depository receiptprogramme during the financial year ended 31 December2015.

Sanctions or PenaltiesThere were no sanctions and/or penalties imposed on theCompany and its subsidiaries, Directors or managementby the relevant regulatory bodies during the financial yearended 31 December 2015.

Non-Audit FeesNon-audit fees paid/payable to the external auditors bythe Group for the financial year ended 31 December 2015amounted to RM75,000.

Variation in ResultsThere were no variances of 10% or more between theaudited results for the financial year ended 31 December2015 and the unaudited results previously announced.

Profit GuaranteeThere were no profit guarantees given by the Companyduring the financial year ended 31 December 2015.

Material Contracts involving Directors’ and MajorShareholders’ InterestsSave as disclosed in the Audited Financial Statements ofthe Group and the Company for the financial year ended31 December 2015, there were no material contractsentered into by the Company and its subsidiariesinvolving Directors’ and major shareholders’ interestseither subsisting as at 31 December 2015 or entered intosince the end of the previous financial year.

This statement was approved by the Board at its meetingheld on 28 March 2016



AUDIT COMMITTEE REPORT

COMPOSITION OF AUDIT COMMITTEE

The Audit Committee (AC) comprises the followingmembers:

Lt. Gen. (R) Dato’ Seri Mohamed Daud bin Abu Bakar(Chairman/Independent Non-Executive Director)

Dato’ Dr Amarjit Singh a/l Santokh Singh(Member/Independent Non-Executive Director)

Mr Low Kim Seng (Member/Non-Independent Non-Executive Director)

AUTHORITY AND DUTIES

The details of the terms of reference of the AC areavailable for reference at www.mieco.com.my.

MEETING ATTENDANCE

During the financial year ended 31 December 2015, fiveAC meetings were held. The Chief Operating Officer,Financial Controller and representatives of seniormanagement attended all the AC meetings by invitationto brief the AC on specific issues. Internal auditorsattended four of the AC meetings to present their internalaudit reports. The external auditors were present at twoof the AC meetings where matters relating to the audit ofthe statutory financial statements were discussed. TheAC held two private discussions with the external auditorswithout the presence of the executive management.

Details of attendance of the AC members are as follows:

Number of AC Meetings

Name of AC Member Attended

Lt. Gen. (R) Dato’ Seri Mohamed 5/5Daud bin Abu Bakar

Dato’ Dr Amarjit Singh a/l Santokh Singh 5/5

Mr Low Kim Seng 5/5

The AC Chairman has conveyed to the Board matters ofsignificant concern raised by the external auditors andinternal auditors. Confirmed minutes of AC meetings werealso circulated to the Board for information.

SUMMARY OF ACTIVITIES

The AC has carried out its duties in accordance with itsterms of reference during the financial year ended 31December 2015. The activities carried out by the ACincluded the following:

(a) reviewed the quarterly unaudited financial results ofthe Group before recommending them to the Boardfor approval and subsequent release of the resultsto Bursa Malaysia Securities Berhad;

(b) reviewed the annual audited financial statements ofthe Group with the external auditors beforerecommending to the Board for approval. There wasfocus on changes on adjustments/issues affectingthe audit. The external auditors’ report on thesignificant audit and accounting issues arising fromtheir audit as well as the accompanyingmanagement responses/resolutions were alsoreviewed by the AC;

(c) reviewed the audit plan with the external auditors, interms of the key areas of audit emphasis, significantaccounting and auditing issues, as well as theimpact of the new or proposed changes in theaccounting standards and regulatory requirements;

(d) reviewed the proposed appointment of MessrsDeloitte as auditors in place of MessrsPricewaterhouseCoopers who had decided not toseek re-appointment;

(e) met with the external auditors twice without thepresence of any executive board members ormanagement, to discuss issues arising from theiraudit including management cooperation in the auditprocess, financial reporting issues, operations andfor sharing of information;

(f) reviewed the annual risk-based internal audit planproposed by the internal auditors to ensureadequate scope and coverage of their activities andkey risk areas are adequately identified and covered;

(g) reviewed internal audit reports presented by internalauditors, especially with regard to the issues raised,audit recommendations and management’sresponses. Where necessary, the AC has directedaction to be taken by management to rectify andimprove the system of internal controls andprocedures;


SUMMARY OF ACTIVITIES (Cont’d)

(h) reviewed recurrent related party transactions of theGroup; and

(i) reviewed and approved the Audit Committee Reportfor inclusion in the Company’s Annual Report.

INTERNAL AUDIT FUNCTION

The AC is supported by an internal audit (IA) functionwhich is outsourced to an independent consulting firm,Lefis Consulting Sdn Bhd (Lefis). Lefis adopts theInternational Standards for the Professional Practice ofInternal Auditing issued by the Institute of InternalAuditors as well as other established auditing guidelinesin discharging its function to enhance its competency andproficiency. The IA function provides independent andobjective review on the state of internal control andcompliance with the Group’s policies and procedures inaccordance with the annual risk-based internal audit planapproved by the AC. The IA function assists the AC inaccomplishing its objectives by bringing a systematic,disciplined approach to evaluate and improve theeffectiveness of risk management, internal control andgovernance process.

During the financial year ended 31 December 2015, IAfunction tabled the Annual Internal Audit Plan for AC’sreview, and carried out audit review on internal control,policy and procedures of the Group. Areas of auditincluded Repair and Maintenance for Lipis Plant,

Warehouse Inventory Despatch for Gebeng & LipisPlants, Review of Standard Cost for Plain Board, Follow-Up Audits on Customer Complaints and Repair &Maintenance for Gebeng Plant. The resulting reports ofthe audits undertaken, incorporating auditrecommendations and management’s responses werepresented at the quarterly AC meetings for the AC’sdeliberation and issued to the management of therespective operating units concerned for appropriateremedial actions to be taken to improve the relevantsystems and procedures within the agreed timelines. TheChief Operating Officer and the Financial Controller werepresent in the AC meetings to explain and clarify on theactions taken to rectify the audit issues highlighted. Inaddition, the IA function reviewed the year-end physicalinventory count process at Gebeng and Lipis Plants inDecember 2015.

There were no material losses incurred during thefinancial year as a result of weaknesses in the system ofinternal control and management continues to takeappropriate measures to strengthen and enhance theadequacy and effectiveness of the control environment.

Total costs incurred for the IA function of the Group forthe financial year ended 31 December 2015 amounted toRM95,290.

This statement was approved by the Board at its meetingheld on 28 March 2016

AUDIT COMMITTEE REPORT (Cont’d)


STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

RESPONSIBILITY

The Board affirms its overall responsibility for maintainingan adequate and sound risk management and internalcontrol system within the Group and for reviewing itsadequacy and integrity of such system on a regular basisto safeguard shareholders’ investment and the Group’sassets. However, in view of the inherent limitations in anysuch system, the risk management and internal controlsystem is designed to manage rather than to eliminatethe risk of failure to achieve business objectives. Hence,the risk management and internal control system can onlyprovide a reasonable combination of preventive, detectiveand corrective measures but not absolute assuranceagainst material misstatement of management andfinancial information or against financial losses and fraud.

Whilst the Board maintains responsibility over risk andcontrol issues, management is responsible forimplementing policies, procedures and guidelines on riskand control by identifying and evaluating the risks facedand design, operate and monitor a suitable system ofinternal control to manage these risks.

RISK MANAGEMENT

The Board recognises that risk management is anintegral part of the Group’s business operations and thatthe identification and management of such risks areimportant to ensure the achievement of the Group’scorporate objectives.

Regular meetings of the Board, Board committees andmanagement represent the main platform by which theGroup’s performance and conduct are monitored. Thesenior management teams are empowered with theresponsibility of managing their respective operations.Through regular operational meetings, the seniormanagement teams identify, discuss and deal withoperational, financial and key management issues.Significant risks identified are escalated to the attentionof the Board. The Board is responsible for setting thebusiness directions and overseeing the conduct of theGroup’s operations. With the assistance of the internalaudit (IA) function, the Board, through the AuditCommittee (AC), continually reviews the adequacy,effectiveness and integrity of the risk managementprocesses in place within the various operatingbusinesses. The AC also reviews and deliberates on anymatters relating to internal controls highlighted by the

external auditors in the course of their statutory financialaudit of the Group. Through these mechanisms, theBoard is informed of all major control issues pertaining tointernal controls, regulatory compliance and risk taking.

INTERNAL AUDIT FUNCTION

The Group’s IA function is carried out by Lefis ConsultingSdn Bhd (Lefis), an independent professional servicefirm. The principal duty and responsibility of Lefis is toexamine and evaluate the adequacy and effectiveness ofthe Group’s system of internal control, risk managementprocess and compliance framework on behalf of theBoard.

The outsourced IA function adopts a risk-based approachin developing its audit plan which addresses all the coreauditable areas of the Group based on their risk profile.The IA function provides the AC on a quarterly basis, theresults of the internal audit reviews together with IA’srecommendations for improvement, management’sresponse and corrective actions taken or to be taken bymanagement with regard to the weaknesses highlighted.Follow ups will be carried out by the IA function shouldthere be unresolved findings and the status of actionstaken by management will be reported to the AC. Basedon the internal audit reviews carried out, none of theweaknesses noted by the IA function have resulted in anymaterial losses, contingency or uncertainties that wouldrequire disclosure in this Annual Report.

KEY ELEMENTS OF RISK MANAGEMENT ANDINTERNAL CONTROL SYSTEM

The Group has adopted an ongoing risk managementprocess for identifying, evaluating, monitoring andmanaging significant risks affecting the achievements ofits business objectives.

The key elements of the Group’s risk management andinternal control system are set out below:

• The Board is supported with several establishedBoard committees in the execution of itsresponsibilities namely the AC, Nomination andRemuneration Committees. Each Committee hasclearly defined terms of reference. Thesecommittees have the authority to examine all matterswithin their scope and report to the Board with theirrecommendations.


• There is an organisational structure with formallydefined lines of responsibility and delegation ofauthority to ensure proper identification ofaccountabilities and segregation of duties.

• The Group has clear and formally defined approvingauthority limits and authorisation procedures, whichis the primary instrument that governs and managesthe business decisions making process within theGroup. It also ensures that a system of internalcontrol and checks and balances are incorporatedtherein. The Authority Chart is periodically reviewedand updated to reflect changes in the business,operational and organisational environment.

• There are documented standard operating policiesand procedures covering the critical and significantfacets of the Group’s business processes and theyform an integral part of the internal controlframework to safeguard shareholders’ investmentand the Group’s assets against material loss. Theseareas include manufacturing, human resource,information technology, sales, financial and creditmanagement as well as occupational safety, healthand environment. These policies and procedures arereviewed and updated from time to time to meet theoperational needs.

• Common Group policies are available on MIECO’sintranet for easy access by staff. The intranet is usedas an effective means of communication andknowledge sharing at all levels.

• Human resource policies and guidelines areestablished to provide support to the Group’s vision.These policies provide guidance to employees onareas such as discipline, employee performanceappraisals and other related matters. On goingtraining and development programmes areconducted to improve and enhance employees’competencies and skills.

• The Group adopts a strategic planning, annualbudgeting and target setting process that includesforecasts for each area of business. The Boardreviews and approves the Annual Management Planand Budget. The Board’s evaluation includesassessment of risks and opportunities identified bymanagement in the course of the annual budgetingprocess. Management monitors closely actualperformances against budget and provides the

Board with updates on the Group’s performanceperiodically.

• The Group continues to maintain MIECO QualityManagement System, Environmental ManagementSystem and Occupational Health and SafetyManagement System certifications. Such qualitymanagement systems provide the Group with animproved control of key processes and a foundationfor improving quality, customer service andcustomer satisfaction. The business operations ofthe Group are also governed by various regulationsand laws applicable to wood industry. Complianceaudits are regularly conducted by variousindependent bodies for the various certifications andlicences obtained from the local governmentalauthorities and certain multinational certificationbodies.

• There are adequate insurance coverage andphysical safeguards on major assets to ensure thatthe assets of the Group are sufficiently coveredagainst any mishap that could result in a materialloss. A yearly policy renewal exercise is undertakenby management to review the relevance andadequacy of the insurance coverage. There is alsoa Directors & Officers insurance coverage for theDirectors and Officers of the Group.

• The Group operates an Enterprise ResourcePlanning system which enables transactions to becaptured, compiled and reported in a timely andaccurate manner. Information systems in the Groupprovide management with data, analyses, variations,exceptions and other inputs relevant to the Group’sperformance. Internal control requirements are alsoembedded in the Group’s computerised systems aswell.

WEAKNESSES IN INTERNAL CONTROLS THATRESULT IN MATERIAL LOSSES

During the financial year under review, some areas forimprovement in the risk management and internal controlsystem were detected. Management has been responsiveto the issues raised and has taken appropriate measuresto address the areas for improvement that have beenhighlighted. The issues raised were mainly operationaland have negligible impact on the operational results ofthe Group.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (Cont’d)


The monitoring, review and reporting arrangements inplace provide reasonable assurance that the structure ofcontrol and its operations are appropriate to the Group’soperations and that risks are at an acceptable levelthroughout the Group’s businesses. Such arrangements,however, do not eliminate the possibility of human error,deliberate circumvention of control procedures byemployees and others or the occurrence of unforeseencircumstances.

The Board recognises the need for the risk managementand internal control system to be subject to periodicreview in line with the growth and dynamics of the Group.To this end, the Board remains committed towards strivingfor continuous improvement to put in place appropriateaction plans where necessary, to further enhance the riskmanagement and internal control system of the Group.

REVIEW OF THE STATEMENT BY EXTERNALAUDITORS

As required by Paragraph 15.23 of the Main MarketListing Requirements of Bursa Malaysia SecuritiesBerhad, the external auditors have reviewed thisStatement on Risk Management and Internal Control.Their limited assurance review was performed inaccordance with Recommended Practice Guide (RPG) 5 (Revised) issued by the Malaysian Institute of

Accountants. RPG 5 (Revised) does not require theexternal auditors to form an opinion on the adequacy andeffectiveness of the risk management and internal controlsystems of the Group. Based on the review, the externalauditors have reported to the Board that nothing hascome to their attention that causes them to believe thatthe statement is inconsistent with their understanding ofthe processes adopted by the Board in reviewing theadequacy and integrity of the risk management andinternal control system within the Group.

CONCLUSION

The Board has received assurance from the seniormanagement that the Group’s risk management andinternal control system is operating adequately andsatisfactorily, in all material aspects, based on the riskmanagement and internal control system of the Group.The Board is of the view that the risk management andinternal control system in place for the year under reviewand up to the date of the issuance of the financialstatements is adequate and effective to safeguard theshareholders’ investment, the interests of customers,regulators and employees, and the Group’s assets.

This statement was approved by the Board at its meetingheld on 28 March 2016.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (Cont’d)

STATEMENT OF DIRECTORS’ RESPONSIBILITY IN RESPECT OF THE ANNUAL AUDITED FINANCIAL STATEMENTS

The Directors are required by the Companies Act 1965 (CA) to prepare financial statements for each financial yearwhich have been made out in accordance with the requirements of the applicable approved Malaysian FinancialReporting Standards, International Financial Reporting Standards, the provisions of the CA and the Main MarketListing Requirements of Bursa Malaysia Securities Berhad.

The Directors are responsible for ensuring that the annual audited financial statements of the Group and the Companyare prepared with reasonable accuracy from the accounting records of the Group and the Company so as to give atrue and fair view of the state of affairs of the Group and the Company at the end of the financial year, and of theresults and cash flows of the Group and the Company for the financial year.

In preparing the annual audited financial statements, the Directors have:• adopted appropriate and relevant accounting policies which are consistently applied;• made judgements and estimates that are reasonable and prudent; and• prepared the audited financial statements on a going concern basis.

The Directors are also responsible for taking such steps as are reasonably open to them to safeguard the assets ofthe Group and the Company to prevent and detect fraud and other irregularities.


FINANCIALSTATEMENTSDirectors’ Report 30

Statements Of Financial Position 34

Statements Of Profit Or Loss And Other Comprehensive Income 36

Consolidated Statement Of Changes In Equity 38

Company Statement Of Changes In Equity 39

Statements Of Cash Flows 40

Notes To The Financial Statements 42

Supplementary Information 102

Statement By Directors 103

Statutory Declaration 104

Independent Auditors’ Report 105


The Directors have pleasure in submitting their annual report together with the audited financial statements of theGroup and of the Company for the financial year ended 31 December 2015.

PRINCIPAL ACTIVITIES

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

The principal activities of the subsidiaries are disclosed in Note 7 to the financial statements.

There have been no significant changes in the nature of these principal activities during the financial year.

FINANCIAL RESULTSGroup Company

RM'000 RM'000

Net profit/(loss) for the financial year 18,643 (33)

DIVIDENDS

No dividend had been paid or declared by the Company since 31 December 2014.

The Directors do not recommend the payment of any dividend for the financial year ended 31 December 2015.

RESERVES AND PROVISIONS

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

DIRECTORS

The Directors who have held office since the date of the last report are as follows:

Dato’ Mohd Hanif Bin Sher MohamedLt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu BakarDato’ Dr. Amarjit Singh A/L Santokh SinghKrishnan A/L PeriyasamyLow Kim SengKajendra A/L Pathmanathan (appointed on 25.02.2016)Rozi Binti Baharudin (appointed on 25.02.2016)

DIRECTORS’ REPORT


DIRECTORS (CONTINUED)

In accordance with Article 81 of the Company’s Articles of Association, Dato’ Mohd Hanif Bin Sher Mohamed retiresby rotation and being eligible, offers himself for re-election at the forthcoming Annual General Meeting.

In accordance with Article 88 of the Company’s Articles of Association, Kajendra A/L Pathmanathan and Rozi BintiBaharudin, who were appointed during the period, retire and being eligible, offer themsleves for re-election at theforthcoming Annual General Meeting.

Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar and Dato’ Dr Amarjit Singh A/L Santokh Singh have both decidedto retire from the Board and do not wish to seek re-appointment at the forthcoming annual general meeting.

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangement subsisted to which the Company is a party, beingarrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of theacquisition of shares in, or debentures of, the Company or any other body corporate.

Since the end of the previous financial year, none of the Directors of the Company has received or become entitledto receive any benefit (other than the benefit included in the aggregate of emoluments received or due and receivableby Directors as disclosed in the financial statements or the fixed salary of a full-time employee of the Company) byreason of a contract made by the Company or a related corporation with the Director or with a firm of which he or sheis a member, or with a company in which he or she has a substantial financial interest.

DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings, the interests of Directors in office at the end of the financialyear in shares in the Company during the financial year were as follows:

Shares Held in the CompanyNumber of ordinary shares of RM1 each

At At1.1.2015 Bought Sold 31.12.2015

Direct interest

Low Kim Seng 10,000 0 0 10,000Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar 16,000 0 0 16,000Dato’ Dr. Amarjit Singh A/L Santokh Singh 100,000 0 0 100,000

Indirect interest

Dato’ Dr. Amarjit Singh A/L Santokh Singh1 70,000 0 0 70,000

1 Indirect interest held through spouse

Other than as disclosed above, none of the other Directors in office at the end of the financial year had any interestin shares in the Company or its related corporations during the financial year.

DIRECTORS’ REPORT (Cont’d)


STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps:

(a) to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance fordoubtful debts and satisfied themselves that, no known bad debts need to be written off and that adequateallowance had been made for doubtful debts; and

(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course ofbusiness, their values as shown in the accounting records of the Group and of the Company, had been writtendown to an amount which they might be expected to realise.

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

(a) which would require the writing off of bad debts or render the amount of the allowance for doubtful debts in thefinancial 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 theCompany misleading; or

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

No contingent or other liability has become enforceable, or is likely to become enforceable, within the period of twelvemonths after the end of the financial year which, in the opinion of the Directors, will or may substantially affect theability of the Group and of the Company to meet their obligations when they fall due.

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 yearwhich 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.

OTHER STATUTORY INFORMATION

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report orthe financial statements which would render any amount stated in the financial statements of the Group and of theCompany misleading.

In the opinion of the Directors:

(a) the results of the Group’s and of the Company’s operations during the financial year were not substantiallyaffected by any item, transaction or event of a material and unusual nature; and

(b) there has not arisen in the interval between the end of the financial year and the date of this report any item,transaction or event of a material and unusual nature likely to affect substantially the results of the Group’s andof the Company’s operations for the financial year in which this report is made.



HOLDING COMPANIES

The immediate holding company is BRDB Developments Sdn. Bhd. and the ultimate holding company is AmbangSehati Sdn. Bhd., both of which are incorporated in Malaysia.

SIGNIFICANT AND SUBSEQUENT EVENTS

Significant and subsequent events during the financial year are disclosed in Note 33 to the financial statements.

AUDITORS

The auditors, Messrs. Deloitte, have expressed their willingness to continue in office.

Signed on behalf of the Board of Directors in accordance with a resolution dated 28 March 2016.

KAJENDRA A/L PATHMANATHAN KRISHNAN A/L PERIYASAMYDIRECTOR DIRECTOR



Group Company Note 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 6 402,018 400,868 65 135Investment in subsidiaries 7 0 0 5,066 5,066Amount due from a subsidiary 8 0 0 343,976 364,503

402,018 400,868 349,107 369,704

CURRENT ASSETS

Inventories 10 52,251 47,143 0 0Receivables, deposits and prepayments 11 69,717 57,586 78 98Amount due from subsidiaries 8 0 0 33,130 25,499Tax recoverable 823 479 317 319Cash and bank balances 11,611 6,319 216 215

134,402 111,527 33,741 26,131

TOTAL ASSETS 536,420 512,395 382,848 395,835

STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2015



EQUITY AND LIABILITIES

CAPITAL AND RESERVESATTRIBUTABLETO OWNERSOF THE COMPANY

Share capital 13 210,000 210,000 210,000 210,000Reserves 14 82,209 63,567 85,349 85,382

TOTAL EQUITY 292,209 273,567 295,349 295,382

NON-CURRENT LIABILITIES

Employee defined benefit plan 15 12,044 10,956 418 389Borrowings 16 0 380 0 30Amount due to immediate holding company 17 46,694 44,874 46,694 44,874

58,738 56,210 47,112 45,293

CURRENT LIABILITIES

Trade and other payables 18 100,764 76,517 4,517 1,149Amount due to subsidiaries 8 0 0 3,426 3,426Amount due to immediate holding company 17 4,311 3,893 4,311 3,893Derivative financial instruments 19 79 1,328 0 0Borrowings 16 80,319 100,880 28,133 46,692

185,473 182,618 40,387 55,160

TOTAL LIABILITIES 244,211 238,828 87,499 100,453

TOTAL EQUITY AND LIABILITIES 536,420 512,395 382,848 395,835

STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2015 (Cont’d)



Revenue 20 354,988 344,820 2,955 3,358Changes in inventories of finished goods and

work-in-progress 490 541 0 0Raw materials and consumables used (194,576) (205,272) 0 0Purchase of packing materials (3,975) (4,697) 0 0Staff costs 21 (33,806) (30,513) (2,025) (2,272)Hiring of vehicles and equipment (4,031) (4,557) 0 (138)Depreciation of property, plant and equipment (14,961) (14,937) (70) (33)Shipping and handling expenses (21,525) (22,931) 0 0Upkeep, repairs and maintenance of assets (15,645) (12,670) (78) (93)Loss on disposal of property, plant and equipment (3) (127) 0 0Write off of property, plant and equipment (1,089) 0 0 0Utilities (27,340) (28,845) 0 0Research and development expenses (28) (33) 0 0Insurance claims 1,337 35 0 0Rental income 60 60 0 0Other operating income 248 245 0 0Realised gain on foreign exchange 1,089 1,680 214 121Unrealised (loss)/gain on foreign exchange (2,343) (680) 63 24Fair value gain/(loss) on derivative financial instruments 1,249 (1,083) 0 0Other operating expenses (14,398) (8,830) (1,062) (2,559)Net gain on disposal of non-current assets held for sale 0 16,134 0 0Impairment loss on subsidiaries 0 0 0 (1,071)

Profit/(Loss) from operations 22 25,741 28,340 (3) (2,663)

Finance costs 23 (7,104) (8,901) (34) (48)Finance income 23 6 2 4 0

Profit/(Loss) before taxation 18,643 19,441 (33) (2,711)

Tax expense 24 0 (1,564) 0 (331)

Net profit/(loss) for the financial year 18,643 17,877 (33) (3,042)

STATEMENTS OF PROFIT OR LOSS ANDOTHER COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015



Other comprehensive income/(loss)

Items that will not be reclassifiedto profit or loss:

Actuarial gain on employeedefined benefit plan 15 0 848 0 53

Items that may be reclassifiedsubsequently to profit or loss:

Exchange differences ontranslating foreign subsidiary (1) 0 0 0

Other comprehensive (loss)/incomefor the financial year (1) 848 0 53

Total comprehensive income/(loss)for the financial year 18,642 18,725 (33) (2,989)

Net profit/(loss) attributable toowners of the Company 18,643 17,877 (33) (3,042)

Total comprehensive income/(loss)attributable to owners ofthe Company 18,642 18,725 (33) (2,989)

Basic earnings per share (sen) 25 8.88 8.51

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 (Cont’d)


Attributable to owners of the Company Issued and fully paid ordinary shares of RM1 each Non-distributable Distributable

ForeignNumber Nominal Share currency Retained Total

of shares value premium reserve earnings equity’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2014 210,000 210,000 5,866 (43) 39,019 254,842

Total comprehensive income:- Net profit for the financial year 0 0 0 0 17,877 17,877- Actuarial gain on employee

defined benefit plan 0 0 0 0 848 848

At 31 December 2014 210,000 210,000 5,866 (43) 57,744 273,567

At 1 January 2015 210,000 210,000 5,866 (43) 57,744 273,567

Total comprehensive Income/(loss):

- Net profit for the financial year 0 0 0 0 18,643 18,643- Exchange difference on

translating foreign subsidiary 0 0 0 (1) 0 (1)

At 31 December 2015 210,000 210,000 5,866 (44) 76,387 292,209

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015


Issued and fully paidordinary shares of Non-

RM1 each distributable DistributableNumber Nominal Share Retained Total

of shares value premium earnings equity’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2014 210,000 210,000 5,866 82,505 298,371

Total comprehensive(loss)/income:- Net loss for the financial year 0 0 0 (3,042) (3,042)- Actuarial gain on employee

defined benefit plan 0 0 0 53 53

At 31 December 2014 210,000 210,000 5,866 79,516 295,382

At 1 January 2015 210,000 210,000 5,866 79,516 295,382

Total comprehensive loss:- Net loss for the financial year 0 0 0 (33) (33)

At 31 December 2015 210,000 210,000 5,866 79,483 295,349

COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015


Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM/(USED IN)OPERATING ACTIVITIES

Net profit/(loss) for the financial year 18,643 17,877 (33) (3,042)Adjustments for:Depreciation of property, plant and equipment 14,961 14,937 70 33Loss on disposal of property,

plant and equipment 3 127 0 0Write off of:- property, plant and equipment 1,089 0 0 0- inventories 87 44 0 0Write back of allowance for inventories obsolescence (633) (155) 0 0Finance costs 7,104 8,901 34 48Finance income (6) (2) (4) 0Provision for employee defined benefit plan 1,450 1,425 78 88Fair value (gain)/loss on derivative financial instruments (1,249) 1,083 0 0Unrealised loss/(gain) on foreign exchange 2,343 680 (63) (24)Tax expense 0 1,564 0 331Gain on disposal of non-current assets held for sale 0 (16,595) 0 0Allowance for doubtful debts 0 0 0 1,454Impairment loss on subsidiaries 0 0 0 1,071

43,792 29,886 82 (41)Changes in working capital:Increase in inventories (4,562) (1,401) 0 0(Increase)/Decrease in receivables (12,535) (2,235) 20 (1,528)Increase/(Decrease) in payables 22,308 (10,182) 3,779 (2)

49,003 16,068 3,881 (1,571)Employee defined benefit paid (362) (137) (49) 0Tax (paid)/refund (344) (1,539) 2 1

Net cash flows generated from/(used in) operating activities 48,297 14,392 3,834 (1,570)

STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015



CASH FLOWS (USED IN)/FROMINVESTING ACTIVITIES

Purchase of property, plantand equipment 6 (17,205) (3,637) 0 (43)

Interest received 6 2 4 0Proceeds from repayment

from a subsidiary 0 0 17,454 33,016Proceeds from disposal of property,

plant and equipment 2 36 0 0Proceeds from disposal of

non-current assets held for sale 0 23,000 0 0

Net cash flows (used in)/generated from investing activities (17,197) 19,401 17,458 32,973

CASH FLOWS (USED IN)/FROMFINANCING ACTIVITIES

Repayment of:- hire purchase obligations (36) (6) (36) (6)- term loans (19,153) (28,552) (18,552) (27,258)Interest paid (5,284) (7,065) (2,709) (4,114)Net repayment of bankers’ acceptances (5,238) (1,316) 0 0Proceeds from/(Repayment of):- overdraft facility 3,689 (4,861) 0 0- foreign currency trade financing (201) 295 0 0Advances from a related company 0 10,000 0 0

Net cash flows used in financing activities (26,223) (31,505) (21,297) (31,378)

NET INCREASE/(DECREASE) INCASH AND CASH EQUIVALENTS 4,877 2,288 (5) 25

CASH AND CASH EQUIVALENTSAT BEGINNING OF THEFINANCIAL YEAR 5,799 3,465 43 18

EFFECTS OF EXCHANGE RATECHANGES 6 46 0 0

CASH AND CASH EQUIVALENTSAT END OF THE FINANCIAL YEAR 12 10,682 5,799 38 43

STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 (Cont’d)


1 GENERAL INFORMATION

The Company is a public limited liability company, which is incorporated and domiciled in Malaysia, and listedon the Main Market of Bursa Malaysia Securities Berhad.

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

The principal activities of the subsidiaries are disclosed in Note 7.

There have been no significant changes in the nature of these principal activities during the financial year.

The address of the registered office is Level 11 Menara BRDB, 285 Jalan Maarof, Bukit Bandaraya, 59000 KualaLumpur.

The addresses of the principal place of business are as follows:

(a) Level 9 Menara BRDB, 285 Jalan Maarof, Bukit Bandaraya, 59000 Kuala Lumpur;(b) Lot 77-83, Kawasan Perindustrian Semambu, P.O. Box 169, 25720 Kuantan, Pahang Darul Makmur;(c) Lot 74, Kawasan Perindustrian Gebeng, 26080 Kuantan, Pahang Darul Makmur; and(d) Lot 3, Kawasan Perindustrian Kechau Tui, 27100 Padang Tengku, Pahang Darul Makmur.

The financial statements have been approved for issue in accordance with a resolution of the Board of Directorson 28 March 2016.

2 BASIS OF PREPARATION

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

The financial statements have been prepared under historical cost basis except as disclosed in the accountingpolicies in Note 3. The Directors have considered the following matters in preparing the financial statements ofthe Group and the Company on a going concern basis.

As at 31 December 2015, the Group and the Company had net current liabilities of RM51.1 million (2014: RM71.1million) and RM6.6 million (2014: RM29.0 million) respectively. This may indicate the existence of a materialuncertainty about the ability of the Group and the Company to meet their financial obligation as and when theyfall due.

Subsequent to the end of the financial year, the immediate holding company, a related company and a relatedparty had issued letters of undertaking to the Group and the Company not to recall the current portion of theamount due to immediate holding company, amount due to a related company and amount due to a related partyfor the next twelve months from the reporting date as disclosed in Note 17 and Note 18 respectively. The non-current portion of the amount due to the immediate holding company is subordinated to the prior repayment ofthe borrowings of the Company.

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015


2 BASIS OF PREPARATION (CONTINUED)

As at 31 December 2015, the Company has complied with all the financial covenants under the term loanagreements.

In view of the need to improve the Group’s working capital, management has taken initiatives to improve sellingprices of the Group’s core products and carry out certain cost saving plans and improvement in productionefficiency.

Based on its cash flow forecast, the Directors are of the view that the Group will have sufficient cash flows tomeet the Group’s working capital needs for the next twelve months from 31 December 2015. Accordingly, theBoard of Directors believes that it is appropriate to prepare the financial statements of the Group in a goingconcern basis.

The preparation of financial statements in conformity with MFRS requires the use of certain critical accountingestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements, and the reported amounts of revenues and expensesduring the reported period. It also requires Directors to exercise their judgement in the process of applying theaccounting policies. Although these estimates and judgement are based on the Directors’ best knowledge ofcurrent events and actions, actual results may differ. The areas involving a higher degree of judgement orcomplexity, or area where assumptions and estimates are significant to the financial statements, are disclosedin Note 4.

2.1 Adoption of New and Revised Malaysian Financial Reporting Standards

In the current financial year, the Group and the Company adopted all the new and revised MFRSs andIssues Committee Interpretations (“IC Interpretations”) and amendments to MFRSs issued by MalaysianAccounting Standards Board (“MASB”) that are effective for annual financial periods beginning on or after1 January 2015.

Amendments to MFRS 119 Defined Benefit Plans (Amendments relating to Employee Contributions)

Annual Improvements to MFRSs 2010 - 2012 cycleAnnual Improvements to MFRSs 2011 - 2013 cycle

The adoption of these new and revised MFRSs and IC Interpretation did not result in significant changesin the accounting policies of the Group and of the Company and had no significant effect on the financialperformance or position of the Group and of the Company.

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 (Cont’d)


2 BASIS OF PREPARATION (CONTINUED)

2.2 Standards and Amendments in Issue but Not Yet Effective

At the date of authorisation for issue of these financial statements, the new and revised Standards andAmendments which were in issue but not yet effective and not early adopted by the Group and the Companyare as listed below:

MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014)2

MFRS 14 Regulatory Deferral Accounts1

MFRS 15 Revenue from Contracts with Customers2

Amendments to MFRS 10, Investment Entities: Applying the Consolidation Exception1

MFRS 12 and MFRS 128Amendments to MFRS 10 and Sale or Contribution of Assets between an Investor and its

MFRS 128 Associate or Joint Venture3

Amendments to MFRS 11 Accounting for Acquisitions of Interests in Joint Operations1

Amendments to MFRS 101 Disclosure Initiative1

Amendments to MFRS 116 Clarification of Acceptable Methods of Depreciationand MFRS 138 and Amortisation1

Amendments to MFRS 116 Agriculture: Bearer Plants1

and MFRS 141Amendments to MFRS 127 Equity Method in Separate Financial Statements1

Annual Improvements to MFRSs 2012 - 2014 cycle1

1 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.2 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.3 Effective date deferred to a date to be determine and announced, with earlier applications still

permitted.

The Directors anticipate that the abovementioned Standards and Amendments will be adopted in the annualfinancial statements of the Group and of the Company when they become effective and that the adoptionof these Standards will have no material impact on the financial statements of the Group and of theCompany for the period of initial application.



3 SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The financial statements of the Group and of the Company have been prepared under the historical costconvention except as disclosed in the significant accounting policies. Historical cost is generally based on thefair 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 transactionbetween market participants at the measurement date, regardless of whether that price is directly observable orestimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group andthe Company take into account the characteristics of the asset or liability at the measurement date. Fair valuefor measurement and/or disclosure purposes in these financial statements is determined on such a basis, exceptfor share-based payment transactions that are within the scope of MFRS 2, leasing transaction that are withinthe scope of MFRS 117, and measurements that have some similarities to fair value but are not fair value, suchas net realisable value in MFRS 102 Inventories or value in use in MFRS 136 Impairment of Assets.

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

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

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

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

Unless otherwise stated, the following accounting policies have been applied consistently in dealing with itemsthat are considered material in relation to the financial statements.

3.1 Economic Entities in the Group

(a) Subsidiaries and Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and all itssubsidiaries controlled by the Group. Control is achieved when the Group:

• 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 Group reassesses whether or not it controls an investee if facts and circumstances indicate thatthere are changes to one or more of the three elements of control listed above.



3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1 Economic Entities in the Group (continued)

(a) Subsidiaries and Basis of Consolidation (continued)

When the Group has less than a majority of the voting rights of an investee, it has power over theinvestee when the voting rights are sufficient to give it the practical ability to direct the relevant activitiesof the investee unilaterally. The Group considers all relevant facts and circumstances in assessingwhether or not the Group’s voting rights in an investee are sufficient to give it power, including:

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

• potential voting rights held by the Group, other vote holders or other parties;

• rights arising from other contractual arrangements; and

• any additional facts and circumstances that indicate that the Group has, or does not have, thecurrent ability to direct the relevant activities at the time that decisions need to be made, includingvoting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceaseswhen the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiaryacquired or disposed of during the year are included in the consolidated statement of profit or lossand other comprehensive income from the date the Group gains control until the date when the Groupceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of theGroup and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed tothe owners of the Group and to the non-controlling interests even if this results in the non-controllinginterests having a deficit balance.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring theiraccounting policies into line with those used by other members of the Group.

All intra-group assets and liabilities, equity, income and expenses and cash flows relating totransactions between members of the Group are eliminated in full on consolidation.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing controlare 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 subsidiaries.Any difference between the amount by which the non-controlling interests are adjusted at the fair valueof the consideration paid or received is recognised directly in equity and attributed to owners of theparent.





(a) Subsidiaries and Basis of Consolidation (continued)

When the Group loses control of a subsidiary, a gain or loss is recognised and is calculated as thedifference between:

• the aggregate of the fair value of the consideration received and the fair value of any retainedinterest; and

• the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiariesand any non-controlling interests. All amounts previously recognised in other comprehensiveincome in relation to the subsidiary are accounted for as if the Group had directly disposed of therelevant assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred toanother category of equity as specified/permitted by applicable MFRSs). The fair value of anyinvestment retained in the former subsidiary at the date when control is lost is regarded as thefair 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 investmentin an associate or joint venture.

In the Company’s separate financial statements, investments in subsidiaries are stated at cost lessaccumulated impairment losses. On disposal of such investments, the difference between net disposalproceeds and their carrying amounts is included in profit or loss.

(b) Business Combination

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. Theconsideration transferred in a business combination is measured at fair value, which is calculated asthe sum of the acquisition date fair values of assets transferred by the Group, liabilities incurred by theGroup to the former owners of the acquiree and equity instruments issued by the Group in exchangefor control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

At acquisition date, the identifiable assets acquired and liabilities assumed are recognised at their fairvalue, except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangementsare recognised and measured in accordance with MFRS 112 Income Taxes and MFRS 119Employee Benefits respectively;

• liabilities or equity instruments related to the share-based payment arrangements of the acquireeor share-based payment arrangements of the Group entered into to replace share-based paymentarrangements of the acquiree are measured in accordance with MFRS 2 Share-based Paymentat the acquisition date; and

• assets (or disposal groups) that are classified as held for sale in accordance with MFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with thatStandard.





(b) Business Combination (continued)

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

Where the consideration transferred by the Group in a business combination includes assets orliabilities resulting from a contingent consideration arrangement, the contingent consideration ismeasured at its acquisition date fair value. Changes in the fair value of the contingent considerationthat qualify as measurement period adjustments are adjusted retrospectively, with correspondingadjustments against goodwill. Measurement period adjustments are adjustments that arise fromadditional information obtained during the ‘measurement period’ (which cannot exceed one year fromthe acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of contingent consideration that do not qualifyas measurement period adjustments depends on how the contingent consideration is classified.Contingent consideration that is classified as equity is not remeasured at subsequent reporting datesand its subsequent settlement is accounted for within equity. Contingent consideration that is classifiedas an asset or liability is remeasured at subsequent reporting dates in accordance with MFRS 139Financial Instruments: Recognition and Measurement or MFRS 137 Provisions, Contingent Liabilitiesand Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profitor loss.

Where a business combination is achieved in stages, the Group’s previously held interests in theacquired entity are remeasured to fair value at the acquisition date and the resulting gain or loss, ifany, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisitiondate that have previously been recognised in other comprehensive income are reclassified to profit orloss, where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by end of the reporting period in whichthe combination occurs, the Group reports provisional amounts for the items of which the accountingis incomplete. Those provisional amounts are adjusted during the measurement period, or additionalassets or liabilities are recognised, to reflect new information obtained about facts and circumstancesthat existed as of the acquisition date that, if known, would have affected the amounts recognised atthat date.




3.2 Foreign Currencies

(a) Functional and Presentation Currency

Items included in the financial statements of each of the Group’s entities are measured using thecurrency of the primary economic environment in which the Group’s entities operate (the “functionalcurrency”). The financial statements are presented in Ringgit Malaysia, which is the Company’sfunctional currency and the presentation currency of the financial statements.

(b) Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange ratesprevailing at the dates of the transactions. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation at year-end exchange rates of monetary assetsand liabilities denominated in foreign currencies are recognised in profit or loss.

(c) Group Companies

Assets and liabilities of foreign subsidiaries are translated to Ringgit Malaysia at rates of exchangeruling at the reporting date and the results of foreign subsidiaries are translated at the average rate ofexchange for the financial year. Exchange differences arising from the translation are recognised as aseparate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreignoperations are recognised in other comprehensive income and accumulated in equity. When a foreignoperation is partially disposed of or sold, exchange differences that were recorded in equity arerecognised in profit or loss as part of the gain or loss on sale.

3.3 Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses.The cost of an item of property, plant and equipment initially recognised includes its purchase price andany cost that is directly attributable to bringing the asset to the location and condition necessary for it to becapable of operating in the manner intended by management.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow to theGroup and the Company and the cost of the item can be measured reliably. The carrying amount of thereplaced part is de-recognised. All other repairs and maintenance are charged to profit or loss during thefinancial year in which they are incurred.

Leasehold land classified as finance lease is amortised in equal instalments over the period of the respectiveleases that range from 49 to 102 years. Capital work-in-progress included in property, plant and equipmentare not depreciated as these assets are not yet available for use. Depreciation of these assets, on the samebasis of other property, plant and equipment, commences when the assets are ready for their intendedused.




3.3 Property, Plant and Equipment (continued)

Property, plant and equipment are depreciated on the straight-line basis to write off the costs of the assetsto their estimated residual values over their estimated useful lives. The annual depreciation rates are asfollows:

%Buildings 2.0 - 5.0Plant and machinery 3.0 - 33.3Furniture, fittings, office renovation and equipment 10.0 - 33.3Motor vehicles 20.0

At the end of each reporting period, the useful lives and depreciation method of an asset are reviewed andthe effects of any changes are recognised prospectively.

A gain or loss arising from the disposal of an asset is determined as the difference between the estimatednet disposal proceeds and the carrying amount of the asset, and is recognised in profit or loss.

3.4 Assets under Hire-Purchase Arrangements

Assets acquired under hire-purchase arrangements are capitalised in the financial statements and thecorresponding obligations treated as liabilities. Finance charges are allocated to profit or loss to give aconstant periodic rate of interest on the remaining hire-purchase liabilities.

3.5 Inventories

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

The cost of raw materials, work-in-progress, finished goods and spares and consumables are determinedusing the weighted average method. The cost of raw materials and spares and consumables comprise theoriginal purchase price plus the cost incurred in bringing the inventories to their present location andcondition. The costs of finished goods and work-in-progress comprise raw materials, direct labour, otherdirect costs and an appropriate proportion of production overheads.

Net realisable value is the estimated selling price in the ordinary course of business less the costs ofcompletion and applicable variable selling expenses.

3.6 Non-current Assets Held for Sale

Non-current assets are classified as assets held for sale when their carrying amount is to be recoveredprincipally through a sale transaction and a sale is considered highly probable. They are stated at the lowerof carrying amount and fair value less costs to sell.




3.7 Financial Guarantee Contracts

Financial guarantee contracts are contracts that require the Group or Company to make specified paymentsto reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, inaccordance with the terms of a debt instrument.

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. Theliability is initially measured at fair value and subsequently at the higher of the amount determined inaccordance with MFRS 137 “Provisions, contingent liabilities and contingent assets” and the amount initiallyrecognised less cumulative amortisation, where appropriate.

The fair value of financial guarantees is determined as the present value of the difference in net cash flowsbetween the contractual payments under the debt instrument and the payments that would be requiredwithout the guarantee, or the estimated amount that would be payable to a third party for assuming theobligations.

3.8 Provisions

Provisions for liabilities are recognised when the Group and the Company have a present legal orconstructive obligation as a result of a past event and it is probable that an outflow of resources embodyingeconomic benefits will be required to settle the obligation, and a reliable estimate of the amount can bemade. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current bestestimate. Where the effect of the time value of money is material, the amount of a provision is the presentvalue of the expenditure expected to be required to settle the obligation.

3.9 Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, whichare assets that necessarily take a substantial period of time to get them ready for their intended use orsale, are capitalised as part of the cost of those assets, until such time as the assets are substantially readyfor their intended use or sale.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extentthat it is probable that some or all of the facilities will be drawn down. In this case, the fee is deferred untilthe draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facilitywill be drawn down, the fee is capitalised as pre-payment for liquidity services and amortised over theperiod of the facility to which it relates.

The amount of borrowing costs eligible for capitalisation is determined based on actual interest incurred onborrowings made specifically for the purpose of obtaining a qualifying asset and less any investment incomeon the temporary investment of that borrowing.

All other borrowing costs are recognised as finance costs in profit or loss in the financial year in which theyare incurred.




3.10 Leases

Finance Lease - The Group as Lessee

Assets acquired under leases which transfer substantially all of the risks and rewards incident to ownershipof the assets are capitalised under property, plant and equipment. The assets and corresponding leaseobligations are recorded at their fair values or, if lower, at the present value of the minimum lease paymentsof the leased assets at the inception of the respective leases.

Finance costs, which represent the differences between the total lease commitments and the fair values ofthe assets acquired, are charged to profit or loss over the term of the relevant lease periods so as to givea constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

Operating Lease - The Group as Lessee

All other leases which do not meet such criteria are classified as operating lease. Lease payments underoperating leases are recognised as an expense in profit or loss on the straight-line basis over the term ofthe relevant lease.

3.11 Contingencies

A contingent liability or asset is a possible obligation or asset that arises from past events and whoseexistence will be confirmed only by the occurrence or non-occurrence of uncertain future events not whollywithin the control of the Group and of the Company.

Contingent liabilities and assets are not recognised in the statements of financial position of the Group andof the Company except for contingent liabilities assumed in a business combination of which the fair valuecan be reliably measured.

3.12 Revenue Recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods orrendering of services in the ordinary course of business.

(a) Sales of Goods

Sales of goods are recognised upon delivery of products and where the risks and rewards of ownershiphave been passed to the customers, net of goods and service tax and discounts.

(b) Interest Income

Interest income is recognised on a time proportion basis, taking into account the principal outstandingand the effective rate over the period to maturity.

(c) Rental Income

Revenue from rental of properties are recognised on an accrual basis unless collection is in doubt, inwhich case it is recognised on receipt basis.

(d) Management Fees from Subsidiaries

Management fees from subsidiaries are recognised on an accrual basis.




3.13 Income Tax

Income tax for the year comprises current and deferred tax. Current tax is the expected amount of incometax payable in respect of the taxable profit for the financial year and is measured using the tax rates thathave been enacted or substantively enacted at the end of the reporting period.

Deferred tax is recognised on temporary differences at the end of the reporting period between the taxbases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferredtax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognisedfor all deductible temporary differences, unused tax losses and unused tax credits to the extent that it isprobable that future taxable profits will be available against which the deductible temporary differences,unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporarydifference arises from goodwill or from the initial recognition of an asset or liability in a transaction which isnot a business combination and at the time of the transaction, affects neither the accounting profit nortaxable profits.

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

Deferred tax is measured at the tax rates that are expected to apply in the year when the asset is realisedor the liability is settled, based on tax rates that have been enacted or substantively enacted at the end ofthe reporting period. Deferred tax is recognised in profit or loss, except when it arises from a transactionwhich is recognised outside profit or loss (either in other comprehensive income or directly in equity), inwhich case the deferred tax is also recognised outside profit or loss, or when it arises from a businesscombination that is an acquisition, in which case the deferred tax is included in the resulting goodwill.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current taxassets against current tax liabilities and when they relate to income taxes levied by the same taxationauthority and the Group and the Company intend to settle the current tax assets and liabilities on a netbasis.

3.14 Goods and Service Tax (“GST”)

The output and input GST, payable to or recoverable from the authorities at reporting date is included aspart of receivables or payables in the statements of financial position.

3.15 Employee Benefits

(a) Short-term Employee Benefits

The Group and the Company recognise a liability and an expense for bonus provisions wherecontractually obliged or where there is a past practice that has created a constructive obligation.

Wages, salaries, paid annual leave, sick leave, bonuses, and non-monetary benefits are accrued inthe financial year in which the associated services are rendered by employees of the Group and ofthe Company.




3.15 Employee Benefits (continued)

(b) Post-employment Benefits

The Group and the Company have two post-employment benefit schemes in accordance with localconditions and practices in the country in which they operate. These benefits plans are either definedcontribution or defined benefit plans.

A defined contribution plan is a pension plan under which the Group and the Company pay fixedcontributions into a separate entity (a fund) and will have no legal or constructive obligations to payfurther contributions if the fund does not hold sufficient assets to pay all employees benefits relatingto employee service in the current and prior periods.

Defined benefit plan is a pension plan that is not a defined contribution plan. Defined benefit plandefines an amount of pension benefit that an employee will receive on retirement, usually dependenton one or more factors such as age, years of service and compensation.

Defined contribution plan

The Group and the Company contribute to the Employees Provident Fund (“EPF”), the national definedcontribution plan. Contributions made to this defined contribution plan are charged to profit or loss inthe financial year to which they relate. Once the contributions have been paid, the Group and theCompany have no further payment obligations. Prepaid contributions are recognised as an asset tothe extent that a cash refund or a reduction in the future payments is available.

Defined benefit plan - unfunded

The liability recognised in the statements of financial position in respect of defined benefit plan is thepresent value of the defined benefit obligation at the end of the reporting period. The defined benefitobligation is calculated annually by independent actuaries using the projected unit credit method. Thepresent value of the defined benefit obligation is determined by discounting the estimated future cashoutflows using interest rates of high-quality corporate bonds that are denominated in Ringgit Malaysia,and that have terms to maturity approximating to the terms of the related pension obligation.

The current service cost of the defined benefit plan reflects the increase in the defined benefit obligationresulting from employee service in the current year. It is recognised in profit or loss in employee benefitexpense, except when included in the cost of an asset. Actuarial gains and losses arising fromexperience adjustments and changes in actuarial assumptions are charged or credited to othercomprehensive income in the period in which they arise.

Past service costs are recognised immediately in profit or loss.




3.16 Impairment of Non-Financial Assets

The carrying amounts of assets are reviewed at each reporting period to determine whether there is anyindication of impairment. If such an indication exists, the asset’s recoverable amount is estimated. Animpairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceedsits recoverable amount.

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 thatreflects current market assessments of the time value of money and the risks specific to the asset for whichthe estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carryingamount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount.An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generatingunit) is increased to the revised estimate of its recoverable amount, but so that the increased carryingamount does not exceed the carrying amount that would have been determined had no impairment lossbeen recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss isrecognised immediately in profit or loss.

3.17 Financial Instruments

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

(a) Financial Assets

Financial assets are classified into the following specified categories: financial assets at ‘fair valuethrough profit or loss’ (“FVTPL”), ‘held-to-maturity’ investments, ‘available-for-sale’ (“AFS”) financialassets and ‘loans and receivables’. The classification depends on the nature and purpose of thefinancial assets and is determined at the time of initial recognition.

(i) Effective Interest Method

The effective interest method is a method of calculating the amortised cost of a financial assetand of allocating interest income over the relevant period. The effective interest rate is the ratethat exactly discounts estimated future cash receipts (including all transaction costs and otherpremiums or discounts) through the expected life of the financial asset, or (where appropriate) ashorter period, to the net carrying amount on initial recognition.




3.17 Financial Instruments (continued)

(a) Financial Assets (continued)

(ii) Financial Assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for trading orit 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 Groupand the Company manage together and have 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 FVTPLupon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognitioninconsistency 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 withthe Group’s and the Company’s documented risk management or investment strategy, andinformation about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and MFRS 139Financial 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 onremeasurement recognised in profit or loss. The net gain or loss recognised in profit or lossincorporates any dividend or interest earned on the financial asset.

(iii) Loans and Receivables

Loans and receivables that have fixed or determinable payments that are not quoted in an activemarket are classified as ‘loans and receivables’. Loans and receivables are measured at amortisedcost using the effective interest method, less any impairment. Interest income is recognised byapplying the effective interest rate, except for short-term receivables when the recognition ofinterest would be immaterial.





(a) Financial Assets (continued)

(iv) Impairment of Financial Assets

Trade and other receivables and other financial assets carried at amortised cost

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

Receivables assessed not to be impaired individually are, in addition, assessed for impairmenton a collective basis. Objective evidence of impairment for a portfolio of receivables could includethe Group’s and the Company’s past experience of collecting payments, an increase in thenumber of delayed payments in the portfolio past the average credit period, as well as observablechanges in the national or global economic conditions that correlate with default on receivables.

In respect of receivables carried at amortised cost, the amount of impairment loss recognised isthe difference between the asset’s carrying amount and the present value of estimated futurecash 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 allfinancial assets with the exception of trade receivables, where the carrying amount is reducedthrough the use of an allowance account. When a trade receivable is considered uncollectible, itis written off against the allowance account. Subsequent recoveries of amounts previously writtenoff are credited against the allowance account. Changes in the carrying amount of the allowanceaccount are recognised in profit or loss.

(v) Derecognition of Financial Assets

The Group and the Company derecognise a financial asset only when the contractual rights tothe cash flows from the asset expire, or when they transfer the financial asset and substantiallyall the risks and rewards of ownership of the asset to another entity. If the Group and the Companyneither transfer nor retain substantially all the risks and rewards of ownership and continue tocontrol the transferred asset, the Group and the Company recognise their retained interest in theasset and an associated liability for amounts they may have to pay. If the Group and the Companyretain substantially all the risks and rewards of ownership of a transferred financial asset, theGroup and the Company continue to recognise the financial asset and also recognise acollateralised borrowing for the proceeds received.





(b) Financial Liabilities and Equity Instruments

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

(i) Equity Instruments

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

(ii) Financial Liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

(iii) Financial Liabilities at Fair Value through Profit or Loss

Financial liabilities at fair value through profit or loss include financial liabilities held for tradingand financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities held for trading include derivatives entered into by the Group and the Companythat do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fairvalue and subsequently stated at fair value with any resultant gains or losses recognised in profitor loss. Net gains or losses on derivatives include exchange differences.

(iv) Other Financial Liabilities

Other financial liabilities are initially measured at fair value and subsequently measured atamortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liabilityand of allocating interest expense over the relevant period. The effective interest rate is the ratethat exactly discounts estimated future cash payments through the expected life of the financialliability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

(v) Derecognition of Financial Liabilities

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

On derecognition of a financial liability, the difference between the carrying amount of the financialliability extinguished or transferred to another party and the consideration paid, including anynon-cash assets transferred or liabilities assumed, is recognised in profit or loss.





(c) Derivative Financial Instruments

The Group enters into derivative financial instruments such as foreign exchange forward contracts tomanage its exposure to foreign currency risk.

Derivatives are initially recognised at fair value at the date the derivative contract is entered into andare subsequently remeasured to fair value at the end of each reporting period. The resulting gain orloss is recognised in profit or loss unless the derivative is designated and effective as a hedginginstrument, in which event the timing of the recognition in profit or loss depends on the nature of thehedge relationship.

A derivative with a positive fair value is recognised as a financial asset; a derivative with a negativefair value is recognised as a financial liability. A derivative is presented as a non-current asset or anon-current liability if the remaining maturity of the instrument is more than 12 months and it is notexpected to be realised or settled within 12 months. Other derivatives are presented as current assetsor current liabilities

3.18 Cash and Cash Equivalents

The Group and the Company adopt the indirect method in the preparation of the statements of cash flows.Cash and cash equivalents are short-term, highly liquid investments with maturities of three months or lessfrom the date of acquisition and are readily convertible to cash with insignificant risk of changes in value.In the statements of financial position, bank overdrafts are shown within borrowings in current liabilities.Bank overdrafts do not form an integral part of the Group’s and the Company’s cash management.

3.19 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Boardof Directors, who is responsible for allocating resources and assessing performance of the operatingsegments to make strategic decisions.

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable under the circumstances. The Groupmakes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,seldom equal the related actual results. To enhance the information content of the estimates, certain key variablesthat are anticipated to have material impact to the Group’s results and financial positions are tested for sensitivityto changes in the underlying parameters. The estimates and assumptions that have a significant risk of causingmaterial adjustments to the carrying amounts of assets and liabilities within the next financial year are outlinedbelow:



4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

(a) Impairment of Property, Plant and Equipment

The Group assesses impairment of property, plant and equipment whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable, i.e. the carrying amountof the asset is higher than the recoverable amount. Recoverable amount is measured at the higher of thefair value less cost to sell for that asset and its value-in-use.

Projected future cash flows used in impairment testing of property, plant and equipment are based onGroup’s estimates calculated based on historical, sector and industry trends, general market and economicconditions and other available information.

(b) Impairment Assessment of Investments in Subsidiaries

The Company assesses impairment of investments in subsidiaries whenever the events or changes incircumstances indicate the carrying amounts of these investments may not be recovered, i.e. the carryingamounts of these investments are more than the recoverable amounts. The assessments are subject tochanges such as market performance, economic and political situation of the country. Recoverable amountis 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 flow derived from that asset discounted at anappropriate discount rate.

Significant judgement is required in the estimation of the present value of future cash flows generated bythese investments, which involve uncertainties and are significantly affected by assumptions used andjudgements made regarding estimates of future cash flows and discount rates.

(c) Recognition of Deferred Tax Asset

Deferred tax asset is recognised to the extent that it is probable that future taxable profits will be availableagainst which the temporary differences can be utilised. This involves judgement regarding the futurefinancial performance of the Group and the Company in which the deferred tax asset has been recognised.

As at 31 December 2015, the Group and the Company had deductible temporary differences, unused capitalallowances, unused tax losses and unused investment tax allowances totalling of RM435.0 million (2014:RM457.2 million) and RM7.5 million (2014: RM7.7 million), for which no deferred tax asset has beenrecognised in the statements of financial position. The fluctuation in profit/(loss) before taxation indicatethat there are no strong earning history to support that it is probable that taxable profits will be available toutilise against the unused investment tax allowances, unused tax losses and unabsorbed capital allowancesin the foreseeable future.

(d) Income Taxes

Significant judgement is required in determining the capital allowances, deductibility of certain expensesand the chargeability of certain income during the estimation of the provision for income taxes. The Grouprecognises liabilities for tax based on estimates of assessment of the tax liability due. When the final taxoutcome is different from the amount that were initially recorded, such differences will impact the incometax and deferred tax provisions, where applicable, in the period in which such determination is made.



4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

(e) Defined Benefit Plan

The present value of the pension obligations depends on a number of factors that are determined on anactuarial basis using a number of assumptions. The assumptions used in determining the net cost/(income)for pensions include the discount rate. Any changes in these assumptions will impact the carrying amountof pension obligations.

The Group determines the appropriate discount rate at the end of each financial year. This is the interestrate that should be used to determine the present value of estimated future cash outflows expected to berequired to settle the pension obligations. In determining the appropriate discount rate, the Group considersthe interest rates of high-quality corporate bonds that are denominated in the currency in which the benefitswill be paid and that have terms to maturity approximating the terms of the related pension obligation.

Other key assumptions for pension obligations are based in part on current market conditions.

5 CAPITAL RISK MANAGEMENT AND FINANCIAL RISK

5.1 Capital Management

The primary objective of the Group’s and of the Company’s capital management is to ensure that a strongcredit rating and healthy capital ratios are maintained in order to support the business and maximiseshareholders’ value.

The Group and the Company define capital as the share capital and certain borrowings of the Group andof the Company. The Group and the Company manage the capital structure and make adjustments to it, inlight of changes in economic condition. To maintain or adjust the capital structure, the Group and theCompany may adjust the dividend payment to shareholders, return capital to shareholders, issue new sharesor share buy-backs. The Group’s and the Company’s approach in managing capital are based on definedguidelines that are approved by the Board of Directors.

There were no changes in the Group’s and the Company’s approach to capital management during thefinancial year.

5.2 Financial Risk Management Objectives and Policies

The Group’s financial risk management objectives and policies seek to ensure that adequate financialresources are available for the development of the Group’s businesses whilst managing its foreign currencyexchange risk, interest rate risk, credit risk, liquidity and cash flow risk. The Group operates within clearlydefined authority limits that have been approved by the Board of Directors. Further financial riskmanagement is carried out through risk reviews, internal control systems and insurance programmes.



5 CAPITAL RISK MANAGEMENT AND FINANCIAL RISK (CONTINUED)

5.2 Financial Risk Management Objectives and Policies (continued)

Foreign currency exchange risk management

The Group’s and the Company’s exposure to foreign currency exchange risk is mainly as a result of foreigncurrency transactions. Foreign exchange exposures originated from foreign currency receivables, payablesand cash flows generated from transactions denominated in foreign currencies.

The Group and the Company assess controls and monitor foreign exchange risk via regular review of foreignexchange movements and foreign exchange exposure for foreign transactions. Where necessary, foreigncurrency forward contracts are entered into to cover specific transactions to mitigate foreign currencyexchange risk.

The Group’s and the Company’s exposure to foreign currencies are as follows:

US Singapore Dollar Dollar Euro Others*

RM’000 RM’000 RM’000 RM’000

As at 31 December 2015

Group

Trade and other receivables 10,052 152 419 28Cash and cash equivalents 3,599 0 0 0Borrowings (8,660) 0 (352) 0Trade and other payables (3,917) (39) (1,999) (248)

Gross currency exposure 1,074 113 (1,932) (220)Less: Trade receivables hedged using

foreign exchange forward contracts (5,107) 0 0 0

Net currency exposure (4,033) 113 (1,932) (220)

Company

Borrowings (8,597) 0 0 0Trade and other payables (65) 0 0 0

Net currency exposure (8,662) 0 0 0





Foreign currency exchange risk management (continued)

The Group’s and the Company’s exposure to foreign currencies are as follows: (continued)

US Singapore Dollar Dollar Euro Others*

RM’000 RM’000 RM’000 RM’000


Group

Trade and other receivables 9,709 295 160 83Cash and cash equivalents 124 0 0 0Borrowings (12,299) 0 (618) 0Trade and other payables (6,189) (41) (1,648) (17)

Gross currency exposure (8,655) 254 (2,106) 66Less: Trade receivables hedged using

foreign exchange forward contracts (10,534) 0 0 0

Net currency exposure (19,189) 254 (2,106) 66

Company

Borrowings (12,299) 0 0 0Trade and other payables (82) 0 0 0

Net currency exposure (12,381) 0 0 0

* Other currencies comprise Swiss Franc, Australian Dollar and British Pound.

If functional currency of the Group and of the Company weaken/strengthen against the above currenciesby 5% (2014: 5%), with all other variables held constant, the Group’s and Company’s profit or loss for thefinancial year would increase/decrease by RM0.3 million (2014: RM1.0 million) and RM0.4 million (2014:RM0.6 million).





Interest rate risk management

The Group’s and the Company’s exposure to interest rates risk are through the impact of rate changes onshort-term and long-term borrowings. The Group and the Company do not make other placement in interestbearing deposits, non-guaranteed, fluctuating commercial papers and the like.

The carrying amounts, the range of applicable interest rate during the financial year and the remainingmaturity of the Group’s and of the Company’s financial instruments that are exposed to the interest raterisk are disclosed in the respective notes.

Interest rate sensitivity analysis

The sensitivity analysis has been determined based on the exposure to interest rates for financial liabilitiesat the end of the reporting period. A 1% increase or decrease is used when reporting interest rate riskinternally to key management personnel and represents management’s assessment of the reasonablypossible change in interest rates.

At the end of reporting period, if interests rates had been 1% higher/lower and all other variables were heldconstant, the Group’s and the Company’s profit or loss for the year would increase or decrease by RM0.8million (2014: RM1 million) and RM0.3 million (2014: RM0.5 million) respectively. This is mainly attributableto the Group’s and the Company’s exposure to interest rates on borrowings.

Credit risk management

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterpartydefault on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from cashand cash equivalents and receivables. The Group and the Company seek to control credit risk by having inplace policies for credit control which cover, inter-alia, credit evaluation on all customer credit over a certainamount, imposition of collateral or security and strict adherence to credit approval limits. Regular reviewsand monitoring of credit risk exposure and management of delinquent debtors form part of the operationalcontrols implemented by the Group and the Company to reduce such risk.

Apart from the concentration risk of the major customers as disclosed in Note 11, the Group and theCompany do not have significant credit risk exposure to any single counterparty or any group ofcounterparties having similar characteristics. The Group’s and the Company’s historical experience incollection of accounts receivable falls within the recorded allowances. Due to these factors, managementbelieves that no additional credit risk beyond amounts provided for collection losses is inherent in theGroup’s and the Company’s receivables.

At the end of the reporting period, the Group’s and the Company’s maximum exposure to credit risk is thecarrying amount of financial assets which are mainly trade and other receivables. The Group’s and theCompany’s credit risks on cash and bank balances are limited as the Group and the Company place theirfunds with reputable financial institutions with high credit ratings.





Liquidity and cash flow risks managements

The Group’s and the Company’s policy on liquidity risk management is to maintain sufficient cash to meetoperational needs and the availability of funding through adequate amounts of committed credit facilitiesand credit lines for working capital requirements. Daily monitoring of funds also minimises unexpectedshortfall in funds

As at 31 December 2015, the Group and the Company have net current liability of RM51.1 million(2014:RM71.1 million) and RM6.6 million (2014: RM29.0 million) respectively. In managing the Group’sliquidity risk, the Group has taken initiatives to manage its working capital by improving selling prices of theGroup’s core products, improving production efficiency and carrying out costs saving plans to further reduceexpenses incurred.

The following are the maturity profile of the Group’s and the Company’s financial liabilities based oncontractual undiscounted cash flows:

Contractual/Forecasted cash flows Carrying Within Between After

amount Total 1 year 1-5 years 5 years RM’000 RM’000 RM’000 RM’000 RM’000


Group

Trade and other payables1 100,102 100,102 100,102 0 0Amount due to immediate

holding company 51,005 63,682 4,311 59,371 0Derivative financial instruments 79 79 79 0 0Borrowings 80,319 82,607 82,607 0 0

231,505 246,470 187,099 59,371 0

Company

Trade and other payables1 4,475 4,475 4,475 0 0Amount due to subsidiaries 3,426 3,426 3,426 0 0Amount due to immediate

holding company 51,005 63,682 4,311 59,371 0Borrowings 28,133 29,088 29,088 0 0

87,039 100,671 41,300 59,371 0

Financial guarantee contracts (Note 32) 0 66,431 66,431 0 0





Liquidity and cash flow risks managements (continued)

Contractual/Forecasted cash flows Carrying Within Between After amount Total 1 year 1-5 years 5 years RM’000 RM’000 RM’000 RM’000 RM’000


Group

Trade and other payables1 75,998 75,998 75,998 0 0Amount due to immediate

holding company 48,767 56,046 3,893 52,153 0Derivative financial instruments 1,328 1,328 1,328 0 0Borrowings 101,260 105,721 105,329 392 0

227,353 239,093 186,548 52,545 0

Company

Trade and other payables1 1,113 1,113 1,113 0 0Amount due to subsidiaries 3,426 3,426 3,426 0 0Amount due to immediate

holding company 48,767 56,046 3,893 52,153 0Borrowings 46,722 49,906 49,874 32 0

100,028 110,491 58,306 52,185 0

Financial guarantee contracts (Note 32) 0 44,999 44,999 0 0

1 The maturity analysis applies to financial instruments only and therefore non-financial liabilities arenot included.




5.3 Fair value of financial instruments

The table below analyses financial instruments carried at fair value analysed by level within the fair valuehierarchy:

Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000

Group


Derivative financial liabilities 0 79 0 79


Derivative financial liabilities 0 1,328 0 1,328

The fair value of the Group’s foreign exchange forward contracts at the end of the reporting period asdisclosed in Note 19 is determined by reference to the differences between the contract rates and quotedforward exchange rates of contract with similar quantum and maturity profile at the end of the reportingperiod.

The Group’s and the Company’s non-current receivables and other financial liabilities are measured usingexpected future cash flows of forecasted payments discounted at current prevailing rates offered for similartypes of credit or lending arrangements. The estimated fair value for the non-current receivables and otherfinancial liabilities approximate their carrying value as at the reporting date.

Other than disclosed above, the carrying amounts of the financial assets and liabilities approximate theirfair values due to the relatively short term maturity of these financial instruments which mainly consists ofdeposits, cash and bank balances, receivables, and payables.



6 PROPERTY, PLANT AND EQUIPMENT

Furniture, fittings, office renovation Capital

Leasehold Plant and and Motor work-lands Buildings machinery equipment vehicles in-progress Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000Group

Net book value

At 1 January 2015 15,773 95,362 285,832 1,717 2,184 0 400,868Additions 0 667 6,983 524 150 8,881 17,205Disposals 0 0 0 (5) 0 0 (5)Write offs 0 0 (1,089) 0 0 0 (1,089)Reclassification 0 553 1,628 0 0 (2,181) 0Depreciation charge

for the financial year (230) (1,139) (12,092) (711) (794) 0 (14,961)

At 31 December 2015 15,543 95,443 281,262 1,530 1,540 6,700 402,018

At 31 December 2015

Cost 19,211 123,418 580,119 13,887 9,531 6,700 752,866Accumulated

depreciation (3,668) (17,181) (263,085) (12,357) (7,991) 0 (304,282)Accumulated

impairment losses 0 (10,794) (35,772) 0 0 0 (46,566)

Net book value 15,543 95,443 281,262 1,530 1,540 6,700 402,018



6 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Furniture, fittings, office renovation

Leasehold Plant and and Motorlands Buildings machinery equipment vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000Group

Net book value

As at 1 January 2014 16,002 96,497 295,438 1,155 3,166 412,258Additions 0 0 2,708 1,002 0 3,710Disposals 0 0 0 0 (163) (163)Depreciation charge

for the financial year (229) (1,135) (12,314) (440) (819) (14,937)

At 31 December 2014 15,773 95,362 285,832 1,717 2,184 400,868

At 31 December 2014

Cost 19,212 122,197 575,020 14,390 9,582 740,401Accumulated

depreciation (3,439) (16,041) (253,416) (12,673) (7,398) (292,967)Accumulated

impairment losses 0 (10,794) (35,772) 0 0 (46,566)

Net book value 15,773 95,362 285,832 1,717 2,184 400,868




Furniture,fittings, office

renovation andequipment Total

RM’000 RM’000Company

Net book valueAt 1 January 2015 135 135Depreciation charge for the financial year (70) (70)

At 31 December 2015 65 65

At 31 December 2015Cost 5,073 5,073Accumulated depreciation (5,008) (5,008)

Net book value 65 65

Net book valueAt 1 January 2014 52 52Additions 116 116Depreciation charge for the financial year (33) (33)

At 31 December 2014 135 135

At 31 December 2014Cost 5,073 5,073Accumulated depreciation (4,938) (4,938)

Net book value 135 135

(a) In prior year, the Company purchased an equipment amounting to RM0.1 million via a hire-purchasearrangement.

(b) Included in property, plant and equipment of the Group and the Company are asset held under hire-purchase agreement with net book value as at reporting date amounting to RM30,680 (2014:RM87,000).

(c) The leasehold lands in Gebeng and Kuala Lipis held by a subsidiary and all of its plant and machinery,both present and future, affixed to or on the said lands are charged for the outstanding amount of certainterm loans of the Company.

(d) During the financial year, a second fixed charge over the leasehold lands in Gebeng and Kuala Lipis heldby a subsidiary and all of its plant and machinery, both present and future, affixed to or on the said landsare charged as security for certain bankers’ acceptances and revolving credit facilities as disclosed in Note 16.




(e) Impairment assessment for property, plant and equipment

A plant of a subsidiary (“Plant 3”) which recommenced operation in January 2011 after it was closedtemporarily since November 2008 had shown an indication of impairment based on the operating resultsof the plant for the financial year ended 31 December 2013. Consequently, management performed animpairment assessment of Plant 3 on an annual basis. Based on management’s assessment, therecoverable amount of Plant 3 as at 31 December 2015, based on value-in-use (“VIU”) calculation isRM298.5 million, which is higher than its carrying value of RM269.8 million by RM28.7 million.

Accordingly, no impairment loss with respect to Plant 3 was recognised.

(a) Key assumptions used in the VIU calculation

The VIU calculation applied a discounted cash flow model using cash flow projections based on anapproved 5-year budget and projections covering the remaining useful life of Plant 3 of 20 years. Theseprojections reflect management’s best estimate of the future results of Plant 3 based on pastexperience and future outlook.

The key estimates used in the cash flow projections are the selling prices of the products, keycomponents of the raw material prices and the weighted average cost of capital specific to the Group’sindustry. The key assumptions of the projections are as follows:

• Selling prices are increased by 1.00% (2014: increased by 1.00%) year-on-year for the first 5 yearsof projection and beyond the fifth year are extrapolated to the end of the useful life based on a1.25% (2014: 3.00%) year-on-year increase.

• Cost of major raw materials prices are increased by approximately 1.00% (2014: maintained forthe first 5 years of projection) year-on-year and beyond the fifth year are extrapolated to the endof the useful life based on a 1.50% (2014: 2.75%) year-on-year increase.

• Sales and production volumes are projected to increase year-on-year at rates ranging from 1.50%to 2.30% (2014: 10%) until it achieves optimum capacity and are subsequently assumed to remainconstant.

• A pre-tax discount rate of 10.61% (2014: 10.61%) has been applied to the cash flow projections.




(e) Impairment assessment for property, plant and equipment (continued)

(b) Impact of possible change in key assumptions

The Group’s impairment assessment includes an assessment of changes in key assumptions thatwould impact the financial statements, as set out below:

• If the discount rate increases by 1%, the recoverable amount would be lower by RM19.29 million,the property, plant and equipment will not be impaired.

• If the selling price decreases by 1%, the recoverable amount would be lower by RM14.91 million,the property, plant and equipment will not be impaired.

• If the prices of key components of raw materials increases by 5%, the recoverable amount wouldbe lower by RM18.26 million, the property, plant and equipment will not be impaired.

• If the sales volume decreases by 5%, the recoverable amount would be lower by RM21.84 million,the property, plant and equipment will not be impaired.



7 INVESTMENT IN SUBSIDIARIES

Company 2015 2014 RM’000 RM’000

Unquoted shares, at cost 52,495 52,495Less: Impairment loss (47,429) (47,429)

Unquoted shares, at carrying value 5,066 5,066

The shares in subsidiaries are held directly by the Company unless otherwise stated. Details of the subsidiariesare as follows:

Propotion ofOwnership interests

Name of company 2015 2014 Principal activities% %

Mieco Manufacturing Sdn. Bhd. 100 100 Manufacturing and marketing ofchipboards and related products

Mieco Marketing Sdn. Bhd. 100 100 Dormant

Mieco Marketing (S) Pte. Ltd.1 100 100 Dormant

Mieco Chemicals Sdn. Bhd. 100 100 Dormant

Mieco Wood Products Sdn. Bhd. 100 100 Dormant

Mieco Wood Resources Sdn. Bhd. 100 100 Dormant

Mieco International (HK) Limited 2 100 100 Dormant

Tudor Capital Sdn. Bhd. 100 100 Dormant

Aspire Benchmark Sdn. Bhd. 100 100 Dormant

Subsidiary of Mieco WoodResources Sdn. Bhd.

Mieco Reforestation Sdn. Bhd. 100 100 Dormant

All the subsidiaries are incorporated in Malaysia, except for Mieco Marketing (S) Pte. Ltd. and Mieco International(HK) Limited, which are incorporated in Singapore and Hong Kong respectively.

1 Audited by a firm other than Messrs. Deloitte, Malaysia.

2 The company is dormant. As such no statutory audit is required under Hong Kong Companies Ordinance.



7 INVESTMENT IN SUBSIDIARIES (CONTINUED)

Impairment assessment for investment in a subsidiary

As at 31 December 2015, a major subsidiary of the Group is in a net current liability and a net liability position.Consequently, management performed an impairment assessment of the subsidiary. Based on management’sassessment, the recoverable amount of the subsidiary as at 31 December 2015, based on value-in-use (“VIU”)calculation is RM450.5 million, which is higher than its carrying value of RM385.9 million by RM64.6 million.Accordingly, no impairment loss with respect to the subsidiary was recognised.

(a) Key assumptions used in the VIU calculation

The VIU calculation applied a discounted cash flow model using cash flow projections based on an approved5-year budget and projections to perpetuity. These projections reflect management’s best estimate of thefuture results of the subsidiary based on past experience and future outlook. Management have alsoconsidered the timing of the dividend inflow.

The key estimates used in the cash flow projections are as follows:

• Selling prices are increased by 1.00% (2014: 1.00%) year-on-year for the first 5 years of projection.

• Cost of major raw materials prices are increased by 1.00% year-on-year (2014: maintained for the first5 years of projection).

• Sales and production volumes are projected to increase by 1.00% year-on-year for Plant 2 (2014:5.00%) and 1.50% to 2.30% for Plant 3 (2014: 10.00%) until it achieves optimum capacity and aresubsequently assumed to remain constant.

• A constant growth rate to perpetuity of 3.00% (2014: 3.00%) per annum.

• A pre-tax discount rate of 10.61% (2014: 10.61%) has been applied to the cash flow projections.

(b) Impact of possible change in key assumptions

The Company’s impairment assessment includes an assessment of changes in key assumptions that wouldimpact the financial statements, as set out below:

• If the selling price decreases by 1%, the recoverable amount would be lower by RM36.4 million, thecost of investment will not be impaired.

• If the prices of key components of raw materials increases by 5%, the recoverable amount would belower by RM48.5 million, the cost of investment will not be impaired.

• If the discount rate increases by 1%, the recoverable amount would be lower by RM18.3 million, thecost of investment will not be impaired.

• If the projected growth rate to perpetuity decreases by 1% from management’s estimates, therecoverable amount will be lower by RM43 million, the cost of investment will not be impaired.



7 INVESTMENT IN SUBSIDIARIES (CONTINUED)

Impairment for investment in other subsidiaries

In the prior financial year, the Company recorded an allowance for impairment loss amounting to RM1.1 millionfor investments in several subsidiaries as the investments were deemed to be irrecoverable as the entitiesremained dormant.

The change in the accumulated impairment loss in respect of interest in subsidiaries during the financial year isas follows:

Company 2015 2014 RM’000 RM’000

At 1 January 47,429 46,358Charge during the financial year 0 1,071

At 31 December 47,429 47,429

8 AMOUNT DUE FROM/(TO) SUBSIDIARIES

Amount due to subsidiaries is unsecured, interest free and repayable on demand.

Amount due from subsidiaries is classified as follows:

Company 2015 2014 RM’000 RM’000

Current - unsecuredInterest bearing at effective interest rate of 6.79% (2014: 6.43%) 27,564 20,153Interest free 7,703 7,483

35,267 27,636Less: allowance for doubtful debts (2,137) (2,137)

33,130 25,499



8 AMOUNT DUE FROM/(TO) SUBSIDIARIES (CONTINUED)

Amount due from subsidiaries is classified as follows: (continued)

Company 2015 2014 RM’000 RM’000

Non-current - unsecuredInterest bearing at effective interest rate of 5.35% (2014: 5.82%) 34,537 60,502Interest free 309,439 304,001

343,976 364,503

377,106 390,002

The interest expense incurred by the Company on the external borrowings during the financial year amountingto RM4.5 million (2014: RM5.9 million) is fully re-charged to a subsidiary.

As at 31 December 2015, amounts due from several subsidiaries amounting to RM2.13 million (2014: RM2.13million) were impaired by the Company as the amounts were deemed to be irrecoverable as the entities remaineddormant as at the financial year end.

The change in the allowance for doubtful debts in respect of amounts due from subsidiaries during the financialyear is as follows:

Company 2015 2014 RM’000 RM’000

At beginning of financial year 2,137 683Charge during the financial year 0 1,454

At end of financial year 2,137 2,137



9 DEFERRED TAXATION


At beginning of financial year 0 386 0 331(Charged)/Credited to profit or loss (Note 24):

- Property, plant and equipment 0 326 0 (21)- Provisions for employee defined benefit plan 0 27 0 (139)- Inventories 0 (489) 0 0- Receivables 0 (171) 0 (171)- Others 0 (79) 0 0

0 (386) 0 (331)

At end of financial year 0 0 0 0

The movements in deferred tax assets and liabilities during the financial year (prior to offsetting of balances)comprise the following:

Deferred tax assets (before offsetting)

Provisions for employee defined benefit plan 3,147 2,922 158 153Inventories 748 937 0 0Receivables 524 547 513 534Unused tax losses 3,910 4,100 1,162 1,237Unused investment tax allowances 103,847 108,174 0 0Unabsorbed capital allowances 67,143 77,130 0 23Others 448 0 0 0

179,767 193,810 1,833 1,947Deferred tax assets not recognised (104,399) (114,292) (1,804) (1,915)

75,368 79,518 29 32Offsetting (75,368) (79,518) (29) (32)

Deferred tax assets (after offsetting) 0 0 0 0



9 DEFERRED TAXATION (CONTINUED)


Deferred tax liabilities (before offsetting)

Property, plant and equipment (75,353) (79,303) (14) (26)Others (15) (215) (15) (6)

(75,368) (79,518) (29) (32)Offsetting 75,368 79,518 29 32

Deferred tax liabilities (after offsetting) 0 0 0 0

As mentioned in Note 3, the tax effects of deductible temporary differences, unused tax losses and unused taxcredits which would give rise to net deferred tax assets are recognised to the extent that it is probable that futuretaxable profits will be available against which the deductible temporary differences, unused tax losses and unusedtax credits can be utilised. At the end of the reporting period, the estimated amount of deductible temporarydifferences, unused tax losses, unused investment tax allowances and unabsorbed capital allowances, for whichno deferred tax asset has been recognised in the financial statements due to uncertainty of realisation, is asfollows:


Deductible temporary differences 2,672 2,618 2,672 2,618Unused tax losses 5,488 16,398 4,842 4,948Unused investment tax allowances 426,840 432,789 0 93Unabsorbed capital allowances 0 5,362 0 0

435,000 457,167 7,514 7,659

The Finance (No.2) Act 2014 gazetted on 30 December 2014 enacts the reduction of corporate income tax ratefrom 25% to 24% with effect from year of assessment 2016. Accordingly, the applicable tax rates to be used forthe measurement of any applicable deferred tax for entities in Malaysia will be the expected rates.



10 INVENTORIES Group 2015 2014 RM’000 RM’000

At cost:Raw materials 16,624 16,523Work-in-progress 527 710Finished goods 18,285 17,612Spares and consumables 16,815 12,298

52,251 47,143

11 RECEIVABLES, DEPOSITS AND PREPAYMENTS


Trade receivables 61,239 54,776 0 0Less: allowance for doubtful debts (49) (49) 0 0

61,190 54,727 0 0

Other receivables 15,874 10,106 118 140Less: allowance for doubtful debts (7,815) (7,815) (54) (54)

8,059 2,291 64 86Deposits 269 266 7 5Prepayments 199 302 7 7

8,527 2,859 78 98

Total 69,717 57,586 78 98

Trade receivables

The credit terms of the trade receivables ranging from 1 to 90 days (2014: 1 to 90 days).

The maximum exposure to credit risk for trade receivables as at the reporting date is the carrying amount ofeach class of receivable mentioned above.

Of the total trade receivables balance of the Group at the end of the reporting period, 63% (2014: 65%) are duefrom ten customers. There are no other customers which individually represents more than 10% of the total tradereceivable balance.

Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment record withthe Group.



11 RECEIVABLES, DEPOSITS AND PREPAYMENTS (continued)

The ageing analysis of the Group’s trade receivables is as follows: Allowance Gross for doubful Net of amount debts allowances RM’000 RM’000 RM’000


Not past due 59,769 0 59,769Past due 1 - 30 days 1,315 0 1,315Past due 31 - 90 days 35 0 35More than 90 days 120 (49) 71

61,239 (49) 61,190


Not past due 53,833 0 53,833Past due 1 - 30 days 42 0 42Past due 31 - 90 days 592 0 592More than 90 days 309 (49) 260

54,776 (49) 54,727

As at 31 December 2015, the Group’s trade receivables amounting to RM1.4 million (2014: RM0.9 million) werepast due but not impaired. The Group believes that, no additional impairment of trade receivables is necessaryas these trade receivables mainly arose from sales to customers that have good records of payment in the past.

The change in the allowance for doubtful debts in respect of trade receivables during the financial year is asfollows:

Group 2015 2014 RM’000 RM’000

At beginning/At end of the financial year 49 49



11 RECEIVABLES, DEPOSITS AND PREPAYMENTS (continued)

Other receivables

Included in other receivables of the Group and of the Company amounting to RM7.8 million (2014: RM7.8 million)and RM0.1 million (2014: RM0.1 million) respectively was impaired and no longer recoverable.

The change in the allowance for doubtful debts in respect of other receivables during the financial year is asfollows:


At beginning/At end of the financial year 7,815 7,815 54 54

Other than as disclosed above, other receivables which are not impaired are neither past due nor impaired asthe Group and the Company are of the view that these balances are recoverable and will be settled within thenext financial year.

12 CASH AND CASH EQUIVALENTS


Cash and bank balances 11,611 6,319 216 215Less: Deposits with licensed financial institutions (929) (520) (178) (172)

10,682 5,799 38 43

Bank balances with licensed banks held on call are non-interest bearing. Included in deposits with licensedfinancial institutions are bank deposit placements with tenure of 366 days (2014: 365 days). The deposits of theGroup and of the Company held with licensed financial institutions are restricted in usage and do not form partof cash and cash equivalents.



12 CASH AND CASH EQUIVALENTS (continued)

The weighted average interest rates that were effective at the reporting date are as follows:

Group Company 2015 2014 2015 2014 % per % per % per % per annum annum annum annum

Deposits with licensed financial institutions 3.59 3.15 3.35 3.15

13 SHARE CAPITAL

Group and Company 2015 2014 RM’000 RM’000

Authorised:1,000,000,000 ordinary shares of RM1 each 1,000,000 1,000,000

Issued and fully paid:210,000,000 ordinary shares of RM1 each 210,000 210,000

14 RESERVES


Non-distributable:Share premium 5,866 5,866 5,866 5,866Foreign currency reserve (44) (43) 0 0

5,822 5,823 5,866 5,866

Distributable:Retained earnings 76,387 57,744 79,483 79,516

82,209 63,567 85,349 85,382



15 EMPLOYEE DEFINED BENEFIT PLAN

The Group and the Company operate an unfunded retirement benefit for those employees who are eligible underthe Group and the Company employment policy. The latest actuarial valuation of the plan was carried out on 16January 2015.

The amount recognised in the Group’s and the Company’s statements of financial position are analysed asfollows:


Present value of defined benefit obligations 12,044 10,956 418 389

The movements during the financial year in the amounts recognised in the Group’s and the Company’s statementof financial position are as follows:


At beginning of financial year 10,956 10,516 389 354

Charged to profit or loss (Note 21) 1,450 1,425 78 88Remeasurements (recognised in other

comprehensive income):- Gain due to experience of the scheme 0 (194) 0 (6)- Gain due to change in actuarial assumptions 0 (654) 0 (47)Benefit paid (362) (137) (49) 0

At end of financial year 12,044 10,956 418 389

The principal actuarial assumptions used in respect of the Group’s and the Company’s defined benefit plan areas follows: 2015 2014 % %

Discount rate 5.50 5.50Expected rate of salary increases 6.20 6.20



15 EMPLOYEE DEFINED BENEFIT PLAN (CONTINUED)

The expenses recognised in the profit or loss are analysed as follows:


Current service cost 867 856 58 69Interest cost 583 569 20 19

1,450 1,425 78 88

The sensitivity of the defined benefit plan as at 31 December 2015 to changes in the principal assumptions isas follows:

Change in assumption Impact on defined benefit obligation

GroupDiscount rate Increase by 1% Decrease by RM1,047,085

Decrease by 1% Increase by RM1,203,006Expected rate of salary increases Increase by 1% Increase by RM1,191,630

Decrease by 1% Decrease by RM1,057,254

CompanyDiscount rate Increase by 1% Decrease by RM34,910

Decrease by 1% Increase by RM30,423Expected rate of salary increases Increase by 1% Increase by RM34,912

Decrease by 1% Decrease by RM30,997

The above sensitivity analyses are based on a change in an assumption while holding all other assumptionsconstant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. Whencalculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method(present value of the defined benefit obligation calculated with the projected unit credit method at the end of thereporting period) has been applied as when calculating the pension liability recognised in the statement offinancial position.



15 EMPLOYEE DEFINED BENEFIT PLAN (CONTINUED)

As at 31 December 2015, the Group’s and the Company’s weighted average duration of the defined benefitobligation are 10 years (2014: 10 years) and 8 years (2014: 8 years) respectively.

Expected maturity analysis of undiscounted pension obligation as at the reporting dates:

Less than Between Between Overa year 1 - 2 years 2 - 5 years 5 years Total

RM’000 RM’000 RM’000 RM’000 RM’000

Group

At 31 December 2015 453 1,387 3,022 39,461 44,323At 31 December 2014 714 1,180 2,305 40,836 45,035

Company

At 31 December 2015 12 145 267 1,545 1,969At 31 December 2014 42 146 34 1,789 2,011



16 BORROWINGS


Current

Secured:Term loan 28,103 46,655 28,103 46,655Bankers’ acceptances 8,998 0 0 0Revolving credit 5,000 0 0 0

Unsecured:Term loan 350 600 0 0Bankers’ acceptances 33,734 47,970 0 0Foreign currency trade financing 415 618 0 0Revolving credit 0 5,000 0 0Hire-purchase obligations 30 37 30 37Bank overdraft 3,689 0 0 0

80,319 100,880 28,133 46,692

Non-current

Unsecured:Term loan 0 350 0 0Hire-purchase obligations 0 30 0 30

0 380 0 30

Total

Secured:Term loan 28,103 46,655 28,103 46,655Bankers’ acceptances 8,998 0 0 0Revolving credit 5,000 0 0 0

Unsecured:Term loan 350 950 0 0Bankers’ acceptances 33,734 47,970 0 0Foreign currency trade financing 415 618 0 0Revolving credit 0 5,000 0 0Hire-purchase obligations 30 67 30 67Bank overdraft 3,689 0 0 0

80,319 101,260 28,133 46,722



16 BORROWINGS (CONTINUED)

Contractual terms of borrowings are as follows:

Effective interest Total rate at reporting date carrying (per anum) amount Maturity profile <1 year 1-2 years RM’000 RM’000 RM’000

Group2015Term loans 4.30-7.91 28,453 28,453 0Bankers’ acceptances 4.44-5.25 42,732 42,732 0Foreign currency trade financing 1.55-2.10 415 415 0Revolving credit 5.85 5,000 5,000 0Hire-purchase obligation 5.06 30 30 0Bank overdraft 7.60 3,689 3,689 0

80,319 80,319 0

2014Term loans 3.90-7.62 47,605 47,255 350Bankers’ acceptances 4.05-5.35 47,970 47,970 0Foreign currency trade financing 1.50-1.85 618 618 0Revolving credit 5.50-5.85 5,000 5,000 0Hire-purchase obligation 5.06 67 37 30

101,260 100,880 380

Company2015Term loans 4.30-7.91 28,103 28,103 0Hire-purchase obligations 5.06 30 30 0

28,133 28,133 0

2014Term loans 3.90-7.62 46,655 46,655 0Hire-purchase obligations 5.06 67 37 30

46,722 46,692 30

The carrying amounts of the borrowings approximate their fair value at 31 December 2015.



16 BORROWINGS (CONTINUED)

Bank overdraft, bankers’ acceptances, term loans and revolving credit facilities are utilised to finance the purchaseof raw materials and working capital.

As at the reporting date, the Group’s and the Company’s certain term loans, bankers’ acceptances and revolvingcredit facilities amounting to RM42.1 million (2014: RM46.7 million) and RM28.1 million (2014: RM46.7million)respectively are secured against the property, plant and equipment of the Group and the Company as disclosedin Note 6.

In the prior year, the Company had a secured term loan with an outstanding amount of RM46.7 million. RM26.5million of this term loan had been reclassified from non-current liabilities to current liabilities as at the reportingdate. The reclassification arose as a result of a breach in one of the financial covenant provisions under the termloan agreements (i.e. the debt service coverage ratio), in accordance with MFRS 101 ‘Presentation of FinancialStatements’.

As at 31 December 2015, the Company has complied with all the financial covenants for the borrowings and didnot default in any repayment of principals and interests in respect of this term loans as at the reporting date.

17 AMOUNT DUE TO IMMEDIATE HOLDING COMPANY

The immediate holding company is BRDB Developments Sdn. Bhd. and the ultimate holding company is AmbangSehati Sdn. Bhd., both of which are incorporated in Malaysia.

Amount due to immediate holding company is as follows:

Company 2015 2014 RM’000 RM’000

Current - unsecuredInterest free 4,311 3,893

Non-current - unsecuredInterest bearing at effective interest rate of 5.35% (2014: 5.35%) 34,000 34,000Interest free 12,694 10,874

46,694 44,874

51,005 48,767

Subsequent to the end of financial year, the immediate holding company has issued a letter of undertaking tothe Company not to recall the current portion of the amount due to the immediate holding company for the nexttwelve months from the reporting date. The non-current portion of the amount due to the immediate holdingcompany is subordinated to the prior repayment of the borrowings of the Company.



18 TRADE AND OTHER PAYABLES


Trade payables 60,273 45,366 0 0Accrued expenses 3,141 2,445 169 80Other payables 26,406 17,762 4,348 1,069Amount due to a related company (Note 29) 1,281 1,281 0 0Amount due to a related party (Note 29) 9,663 9,663 0 0

100,764 76,517 4,517 1,149

The credit terms of trade and other payables ranging from 1 to 90 days (2014: 1 to 90 days).

Amount due to a related company is unsecured, interest free and repayable on demand.

Amount due to a related party, a company in which a Director of subsidiaries has financial interest, is unsecured,interest free and repayable on demand.

Subsequent to end of financial year, the related company and the related party have issued letters of undertakingto the Group not to recall the current portion of the amounts due to a related company and amount due to arelated party for the next twelve months from the reporting date.

19 DERIVATIVE FINANCIAL INSTRUMENTS

The Group’s derivatives comprise solely foreign exchange forward contracts incepted to hedge its currencyexposures arising from future sales of goods and trade receivables after netting of the purchases of raw materialsin United States Dollar (“USD”). The foreign exchange forward contracts generally have a maturity period between1 to 6 months.

Details of the Group’s derivative financial instruments are outlined below: Group 2015 2014 RM’000 RM’000

Fair value of remeasured foreign forward exchange contracts 79 1,328



19 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

At 31 December 2015, the Group’s foreign exchange forward contracts entered into are as follows:

2015 Currency Average to be RM’000 contractualHedged items received equivalent rate

Trade receivables US Dollar 1.196 million 5,107 4.2714

2014 Currency Average to be RM’000 contractualHedged items received equivalent rate

Trade receivables US Dollar 2.991 million 10,534 3.5215

Future sales of goods US Dollar 2.023 million 7,124 3.5215

17,658

Foreign exchange forward contracts are entered into with licensed banks to hedge the Group’s exposure toforeign exchange risk in respect of its export sales by establishing the rate at which foreign currency assets orliabilities will be settled.

These contracts are executed with credit worthy/reputable financial institutions in Malaysia. As such, credit riskand liquidity risk in respect of non-performance by counterparties to these contracts are minimal.

20 REVENUE


Sale of goods 354,988 344,820 0 0Management fee receivable from subsidiaries 0 0 2,955 3,358

354,988 344,820 2,955 3,358



21 STAFF COSTS


Wages, salaries and bonuses 20,187 17,817 1,555 1,787Defined contribution plan 2,742 2,408 206 236Employee defined benefit plan (Note 15) 1,450 1,425 78 88Other employee benefits 9,427 8,863 186 161

33,806 30,513 2,025 2,272

Details of the defined benefit plan for the Group and the Company are set out in Note 15.

In the prior financial year, included in the staff costs above were the Group’s and the Company’s former ExecutiveDirector’s remuneration, excluding fees and estimated money value of benefits-in-kind, as disclosed in Note 26.

22 PROFIT/(LOSS) FROM OPERATIONS

The following items have been charged/(credited) in arriving at profit/(loss) before taxation:


Auditors’ remuneration:- current financial year 246 291 60 80- (over)/underprovision in prior financial year (88) 25 (1) 0General insurance 2,740 1,188 42 39Unrealised loss/(gain) on foreign exchange- borrowings 2,303 670 0 670- amount due from a subsidiary 0 0 63 (670)- others 40 10 0 24Write off of inventories 87 44Rental of building 995 360 0 0Management fees 400 400 400 400Write back of allowance for inventories obsolescence (633) (155) 0 0Disposal of non-current assets held for sale:- gain on disposal 0 (16,595) 0 0- legal and professional fees 0 461 0 0Allowance for doubtful debts 0 0 0 1,454



23 FINANCE COSTS AND FINANCE INCOME


Finance costs

Interest expense on:- Bank overdraft 85 127 0 0- Bankers’ acceptances 2,156 2,464 0 0- Hire purchase liabilities 4 1 4 1- Term loans 2,712 4,151 2,675 4,082- Amount due to immediate holding company 1,820 1,837 1,820 1,837- Revolving credit 292 282 0 0- Foreign currency trade financing 5 9 0 0Loan facility fees 30 30 30 30

7,104 8,901 4,529 5,950Less: offsetting 0 0 (4,495) (5,902)

7,104 8,901 34 48

Finance income

Recovery of interest from a subsidiaryin respect of term loan 0 0 (2,675) (4,082)

Recovery of interest from a subsidiaryin respect of borrowings fromimmediate holding company 0 0 (1,820) (1,820)

Interest income (6) (2) (4) 0

(6) (2) (4,499) (5,902)Less: offsetting 0 0 4,495 5,902

(6) (2) (4) 0



24 TAX EXPENSE


Tax expense for the financial year:

In respect of the current year:- Malaysian income tax 0 (647) 0 0- Real property gain tax 0 (532) 0 0- Deferred tax (Note 9) 0 (386) 0 (331)

0 (1,565) 0 (331)Overprovision prior year- Malaysian income tax 0 1 0 0

0 (1,564) 0 (331)

The effective tax rates of the Group’s and the Company’s profit/(loss) before taxation differ from the statutoryincome tax rate of 25% (2014: 25%) and is reconciled as below:

Group Company 2015 2014 2015 2014 % % % %

Statutory income tax rate of Malaysia 25 25 (25) (25)Tax effects of:- Income not subjected to tax 0 (21) 0 0- Expenses not deductible 4 2 131 24- Utilisation of deferred tax assets previously not recognised (28) (3) (105) 0- Deferred tax assets not recognised 0 0 0 1- Real property gain tax 0 3 0 0- Reversal of deferred tax asset recognised in prior financial year 0 2 0 12- Change in tax rate (1) 0 (1) 0

Effective tax rate 0 8 0 12



25 EARNINGS PER SHARE

The earnings per share of the Group is calculated based on the profit attributable to owners of the Company ofRM18.6 million (2014: RM17.9 million) divided by the weighted average number of 210.0 million (2014: 210.0million) ordinary shares in issue during the financial year.

The weighted average number of ordinary shares in issue has not been adjusted to assume dilution as the Groupdoes not issue any financial instruments or other contract that may entitle its holders to ordinary shares.Accordingly, the diluted earnings per share is the same as the basic earnings per share.

26 DIRECTORS’ REMUNERATION


Directors of the CompanyNon-executive Directors:- fees 180 75 180 75- allowances and other emoluments 55 39 55 39

235 114 235 114

Executive Director:- fees - overprovision of prior year’s fees 0 (36) 0 (36)- salaries and bonus 0 412 0 412- defined contribution plan 0 50 0 50- other employee benefits 0 15 0 15- estimated money value of benefits-in-kind 0 9 0 9

0 450 0 450

Sub-total 235 564 235 564

Directors of subsidiariesNon-executive Directors:- fees 8 6 0 0

Sub-total 8 6 0 0

Total 243 570 235 564

Total (excluding estimated moneyvalue of benefits-in-kind) 243 561 235 555

In prior financial year, the Group’s and the Company’s former Executive Directors’ remuneration (excluding feesand estimated money value of benefits-in-kind) had been included as part of staff costs as disclosed in Note 21.



27 CAPITAL COMMITMENTS

Group 2015 2014 RM’000 RM’000

Capital expenditure:- approved and contracted for 1,865 0- approved but not contracted for 11,184 13,270

13,049 13,270

Analysed as follows:- property, plant and equipment 13,049 13,270

28 NON-CANCELLABLE OPERATING LEASE COMMITMENTS

The Group leases an office space under a non-cancellable operating lease agreement and the lease agreementis renewable at the end of the lease period at market rate.

The future aggregate minimum lease payments under non-cancellable operating lease are as follows:

Group 2015 2014 RM’000 RM’000

No later than 1 year 211 211Later than 1 year and no later than 5 years 0 211

211 422



29 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES

In addition to related party disclosures disclosed elsewhere in the financial statements, set out below are othersignificant related party transactions and balances. The related party transactions described below were carriedout on terms and conditions negotiated between the Group and the related parties.

(a) Relationship with related parties

Related parties Relationship

Ambang Sehati Sdn. Bhd. Ultimate holding companyBRDB Developments Sdn. Bhd. Immediate holding companyBR Property Holdings Sdn. Bhd. Related companySierra Gardens Sdn. Bhd. A company in which a Director of

subsidiaries has financial interestMieco Manufacturing Sdn. Bhd. Wholly-owned subsidiaryMieco Marketing Sdn. Bhd. Wholly-owned subsidiary

(b) Significant transactions with related parties


BRDB Developments Sdn. Bhd.

- Management fee payable to immediate holding company 400 400 400 400

- Interest expense on borrowings from immediate holding company 1,820 1,837 1,820 1,837

BR Property Holdings Sdn. Bhd.

- Rental of office building 275 272 0 0

Mieco Manufacturing Sdn. Bhd.

- Interest income on borrowings to a subsidiary 0 0 4,495 5,902

- Management fee receivable from a subsidiary 0 0 2,955 2,749

Mieco Marketing Sdn. Bhd.

- Management fee receivable from a subsidiary 0 0 0 588



29 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(c) Significant balances with related parties

Group Company 2015 2014 2015 2014

RM’000 RM’000 RM’000 RM’000

Amount due to immediate holding company

BRDB Developments Sdn. Bhd. 51,005 48,767 51,005 48,767

Amount due to a related company

BR Property Holdings Sdn. Bhd. 1,281 1,281 0 0

Amount due from/(to) subsidiaries

Mieco Manufacturing Sdn. Bhd. 0 0 371,540 384,656Mieco Marketing Sdn. Bhd. 0 0 5,494 5,337Tudor Capital Sdn. Bhd. 0 0 (3,411) (3,411)

Amount due to a related party

Sierra Gardens Sdn. Bhd. 9,6631 9,6631 0 0

1 Amount due to Sierra Gardens Sdn. Bhd. arose from a transaction prior to the entity becoming arelated party of the Group.

(d) Compensation of key management personnel

Key management personnel are those persons having authority and responsibility for planning, directingand controlling the activities of the entity, directly or indirectly, including Directors of the Company.

The remuneration of key management personnel during the financial year are as follows:

Group Company 2015 2014 2015 2014

RM’000 RM’000 RM’000 RM’000

Remuneration and benefits 1,258 1,594 875 1,245Post-employment benefits 149 185 107 148

1,407 1,779 982 1,393



30 OPERATING SEGMENT

The Group operates principally within one segment, that is, manufacturing and sales of wood based products.Other operation of the Group comprises investment holding which is not of sufficient size to be reportedseparately. This is consistent with the internally generated reports reviewed by Board of Directors to makestrategic decisions.

The Group operates in the following geographical areas.

Revenue 2015 2014 RM’000 RM’000

Malaysia 283,270 253,224Hong Kong and China 12,307 21,848Others 59,411 69,748

354,988 344,820

Total assets Capital expenditure 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Malaysia 536,419 512,394 17,205 3,710Others 1 1 0 0

536,420 512,395 17,205 3,710

The carrying value of non-current assets located in foreign countries is not material as at the reporting date.



31 FINANCIAL INSTRUMENTS BY CATEGORY

The table below provides an analysis of the financial instruments by category.


Loan and receivables

Non-currentAmount due from a subsidiary 0 0 343,976 364,503

Current

Receivables and deposits 69,518 57,284 71 91Amount due from subsidiaries 0 0 33,130 25,499Cash and bank balances 11,611 6,319 216 215

81,129 63,603 33,417 25,805

Other financial liabilities at amortised cost

Non-currentAmount due to immediate holding company 46,694 44,874 46,694 44,874Borrowings 0 380 0 30

46,694 45,254 46,694 44,904

Current

Trade and other payables1 100,102 75,998 4,475 1,113Amount due to subsidiaries 0 0 3,426 3,426Amount due to immediate holding company 4,311 3,893 4,311 3,893Borrowings 80,319 100,880 28,133 46,692

184,732 180,771 40,345 55,124

Financial liabilities at fair value through profit or loss

Derivative financial instruments 79 1,328 0 0

1 Non-financial liabilities are excluded from the trade and other payables balances as this analysis is requiredonly for financial instruments.



32 FINANCIAL GUARANTEE CONTRACTS

Company 2015 2014 RM’000 RM’000

Financial guarantees (unsecured) issued by the Company to licensed financial institutions for banking facilities granted to a subsidiary 66,431 44,999

33 SIGNIFICANT AND SUBSEQUENT EVENTS

(a) Proposed disposal by BRDB Developments Sdn. Bhd. (“BRDB”) of shares in the Company

On 21 January 2015, BRDB, the immediate holding company, entered into a Conditional Letter of Agreementwith Purnama Kuantum Sdn. Bhd. (“PKSB”) [“Agreement’] for the proposed disposal of 119,193,971 ordinaryshares of RM1.00 each in the Company (“MIECO Shares”) to PKSB. The proposed disposal is conditionalupon:

(i) the approval of the Securities Commission Malaysia (“SC”) under paragraph 21.1 of the Practice Note9 of the Malaysian Code on Take-overs and Mergers 2010 for PKSB to be exempted from the obligationto undertake a mandatory offer to acquire all the remaining ordinary shares of RM1.00 each in theCompany which are not already held by PKSB arising from its proposed purchase of the MIECOShares (“Proposed Exemption”); and

(ii) the relevant consents of the banks of the Group and BRDB.

On 25 February 2015, PKSB obtained approval from the SC for the Proposed Exemption.

However, the Group and BRDB were unable to obtain unconditional approvals from the relevant banklenders on the proposed sale and purchase of the MIECO Shares. Consequently, the Agreement wasmutually terminated on 20 July 2015.

(b) Proposed sale of the entire issued and paid-up share capital of Mieco Wood Products Sdn Bhd("MWP")

On 25 September 2015, the Company entered into a conditional Sale and Purchase Agreement with AnjakanKekal Sdn. Bhd. (“AKSB”) for the proposed sale by the Company of 500,000 ordinary shares of RM1 eachin MWP, representing the entire issued and paid-up share capital of MWP to AKSB, for a cash considerationof RM35 million (“Proposed Sale of MWP”). 50% of the total net proceeds from the sale will be utilised toprepay the outstanding term loan and the balance will be utilised for working capital purposes.

The Proposed Sale of MWP has been completed on 15 March 2016. Consequently, MWP has ceased to bea subsidiary of the Company.



34 COMPARATIVE FIGURES

In prior financial years, shipping and handling expenses of the Group were net off against revenue. Effective2015, such expenses are included under cost of sales. Accordingly, certain comparative figures in the statementsof profit or loss and other comprehensive income have been reclassified to conform with current year’spresentation as follows:

As previously reported Reclassification As reclassified RM’000 RM’000 RM’000

2014Statements of Profit or Loss and Other

Comprehensive Income

Revenue 321,889 22,931 344,820Shipping and handling expenses 0 (22,931) (22,931)



BREAKDOWN OF RETAINED EARNINGS INTO REALISED AND UNREALISED

The breakdown of the retained earnings of the Group and of the Company as at 31 December 2015 into realised andunrealised profits is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25March 2010 and prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised andUnrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad ListingRequirements, as issued by the Malaysian Institute of Accountants.


Total retained earnings of the Companyand its subsidiaries

- Realised 72,446 52,641 77,012 74,944- Unrealised 5,136 6,288 2,471 4,572

77,582 58,929 79,483 79,516Add: Consolidation adjustments (1,195) (1,185) 0 0

Retained earnings as per financial statements 76,387 57,744 79,483 79,516

The disclosure of realised and unrealised profits above is solely for compliance with the directive issued by BursaMalaysia Securities Berhad and should not be used for any other purpose.

SUPPLEMENTARY INFORMATION


We, Kajendra A/L Pathmanathan and Krishnan A/L Periyasamy, being two of the Directors of Mieco Chipboard Berhad,state that, in the opinion of the Directors, the accompanying financial statements are drawn up so as to give a trueand fair view of the state of affairs of the Group and of the Company as at 31 December 2015 and of the results andcash flows for the financial year ended on that date in accordance with Malaysian Financial Reporting Standards,International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

The information set out on page 102 to the financial statements have been prepared in accordance with the Guidanceon Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of DisclosurePursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute ofAccountants.

Signed on behalf of the Board of Directors in accordance with their resolution dated 28 March 2016.

KAJENDRA A/L PATHMANATHAN KRISHNAN A/L PERIYASAMYDIRECTOR DIRECTOR

STATEMENT BY DIRECTORSPURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965


I, Wong Weng Kwong, the officer primarily responsible for the financial management of Mieco Chipboard Berhad, dosolemnly and sincerely declare that to the best of my knowledge and belief, the accompanying financial statementsare correct.

And, I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions ofthe Statutory Declarations Act, 1960.

WONG WENG KWONG

Subscribed and solemnly declared by the above named Wong Weng Kwong at Kuala Lumpur on 28 March 2016.

Before me,

COMMISSIONER FOR OATHS

STATUTORY DECLARATIONPURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965


Report on the Financial Statements

We have audited the financial statements of MIECO CHIPBOARD BERHAD, which comprise the statements offinancial position of the Group and of the Company as at 31 December 2015, and the statements of profit or loss andother comprehensive income, statements of changes in equity and statements of cash flows of the Group and of theCompany for the financial year then ended, and a summary of significant accounting policies and other explanatoryinformation, as set out on pages 34 to 101.

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 trueand fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standardsand the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internalcontrol as the Directors determine is necessary to enable the preparation of financial statements that are free frommaterial 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 auditin accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks ofmaterial 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 andfair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors,as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of theCompany as of 31 December 2015 and of their financial performance and cash flows for the financial year then endedin accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and therequirements of the Companies Act, 1965 in Malaysia.

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF MIECO CHIPBOARD BERHAD

(Incorporated in Malaysia)


Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 2 to the financial statements. The Group’s and the Company’scurrent liabilities exceeded current assets by RM51.1 million and RM6.6 million respectively. However, the financialstatements of the Group and of the Company have been prepared on the basis of accounting principles applicable toa going-concern. This going-concern basis presumes that the Group and the Company will be able to operate profitablyin the foreseeable future and the realisation of assets and the settlement of liabilities will occur in the ordinary courseof business. Should these assumptions be negated, the preparation of the financial statements on the going concernbasis may no longer be appropriate.

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 Companyand by the subsidiaries of which we have acted as auditors, have been properly kept in accordance with the Act;

(b) we have considered the accounts and auditors’ report of the subsidiary, of which we have not acted as auditors,as disclosed in Note 7 to the Financial Statements, being accounts that have been included in the financialstatements of the Group;

(c) we are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financialstatements are in form and content appropriate and proper for the purposes of the preparation of the financialstatements of the Group, and we have received satisfactory information and explanations as required by us forthose purposes; and

(d) the auditors’ reports on the accounts of the subsidiaries were not subject to any qualification and did not includeany adverse comment made under Section 174(3) of the Act.

Other Reporting Responsibilities

The supplementary information set out on page 102 is disclosed to meet the requirement of Bursa Malaysia SecuritiesBerhad and is not part of the financial statements. The Directors are responsible for the preparation of thesupplementary information in accordance with the Guidance on Special Matter No. 1, “Determination of Realised andUnrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad ListingRequirements”, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of BursaMalaysia Securities Berhad. In our opinion, the supplementary information is prepared in all material respects, inaccordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MIECO CHIPBOARD BERHAD (Cont’d)(Incorporated in Malaysia)


Other Matters

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

(b) The financial statements of the Group and of the Company for the preceding financial year ended 31 December2014 were audited by another firm of auditors and are presented here merely for comparative purpose. The reportissued by the predecessor auditors, which was dated 24 April 2015, expressed an unmodified opinion with anemphasis of matter on those financial statements.

DELOITTEAF 0080Chartered Accountants

TEO SWEE CHUAPartner - 2846/01/18 (J)Chartered Accountant

28 March 2016

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MIECO CHIPBOARD BERHAD (Cont’d)



ANALYSIS OF SHAREHOLDINGSAS AT 31 MARCH 2016

Authorised Capital : RM1,000,000,000Issued and Fully Paid-Up Capital : RM210,000,000Class of Shares : Ordinary Shares of RM1.00 eachVoting Rights : 1 vote per ordinary share

DISTRIBUTION OF SHAREHOLDINGS

No. of Holders % of Holders No. of Shares % of Shares

Largest Shareholders 30 0.46 143,088,898 68.14

Size of HoldingsLess than 100 930 14.40 30,270 0.01100 - 1,000 1,373 21.26 1,285,450 0.611,001 - 10,000 2,944 45.59 14,739,851 7.0210,001 - 100,000 1,079 16.71 34,687,831 16.52100,001 - less than 5% of issued shares 130 2.01 40,062,627 19.085% and above of issued shares 1 0.02 119,193,971 56.76

Total 6,457 100.00 210,000,000 100.00

DIRECTORS' INTERESTS IN SHARES BASED ON THE REGISTER OF DIRECTORS' SHAREHOLDINGS

Direct Interest Indirect InterestNo. of Shares % No. of Shares %

In the Company

Lt. Gen. (R) Dato' Seri Mohamed Daud

bin Abu Bakar 16,000 0.01 – –

Dato' Dr Amarjit Singh a/l Santokh Singh 100,000 0.05 70,000 ** 0.03 **

Low Kim Seng 10,000 0.00 * – –

* Neglible percentage** Indirect interest held through spouse


THIRTY (30) MAJOR SHAREHOLDERS BASED ON THE RECORD OF DEPOSITORS

Name Shareholding %

1) BRDB Developments Sdn Bhd 119,193,971 56.76

2) HSBC Nominees (Asing) Sdn Bhd 7,498,900 3.57[Exempt AN for Coutts & Co Ltd (SG Branch)]

3) Ooi Chin Hock 1,953,200 0.93

4) Maybank Nominees (Tempatan) Sdn Bhd 1,655,000 0.79[Pledged Securities Account for Too Boon Siong]

5) Lim Pei Tiam @ Liam Ahat Kiat 1,531,000 0.73

6) Lim Pay Kaon 1,000,000 0.48

7) Kenanga Nominees (Tempatan) Sdn Bhd 800,000 0.38[Pledged Securities Account for Tan Yong Ming]

8) Kumpulan Wang Simpanan Guru-Guru 657,900 0.31

9) HLB Nominees (Tempatan) Sdn Bhd 650,000 0.31[Pledged Securities Account for Lim Hik Wah]

10) Kenanga Nominees (Tempatan) Sdn Bhd 600,000 0.29[Pledged Securities Account for Ng Yew Lee (MGN)]

11) Maybank Securities Nominees (Tempatan) Sdn Bhd 528,800 0.25[Pledged Securities Account for Ting Yuet May (REM 825)]

12) Tan Yong Ming 508,500 0.24

13) Poh Huat Resources Holdings Berhad 500,000 0.24

14) Maybank Securities Nominees (Tempatan) Sdn Bhd 474,000 0.23[Pledged Securities Account for Nyiam Seng Kwee (REM 825)]

15) Lee Thian Fook @ Lee Tian Fook 421,000 0.20

ANALYSIS OF SHAREHOLDINGS AS AT 31 March 2016 (Cont’d)


THIRTY (30) MAJOR SHAREHOLDERS BASED ON THE RECORD OF DEPOSITORS (CONTINUED)

Name Shareholding %

16) Lim Lee Ling 420,000 0.20

17) Tey Yee Yee 394,400 0.19

18) Maybank Securities Nominees (Tempatan) Sdn Bhd 370,000 0.18[Pleged Securities Account for Soh Tong Hwa (STF)]

19) Anand A/L Vijayan 350,000 0.17

20) Jeremy Kho Hui Jaq 350,000 0.17

21) Yong Chau Chin 350,000 0.17

22) Bo Eng Chee 341,500 0.16

23) Maybank Nominees (Tempatan) Sdn Bhd 337,000 0.16[Pledged Securities Account for Siu Hee Kheng]

24) Maybank Nominees (Tempatan) Sdn Bhd 335,000 0.16[Pledged Securities Account for Hoo Yeek Foo]

25) Tan Kim Eng 328,027 0.16

26) Tey Yee Yee 325,000 0.15

27) Cimsec Nominees (Tempatan) Sdn Bhd 315,000 0.15[CIMB for Cheah Seng Chye (PB)]

28) Citigroup Nominees (Tempatan) Sdn Bhd 300,700 0.14[Pledged Securities Account for Ng Ching Soong (470478)]

29) Amsec Nominees (Tempatan) Sdn Bhd 300,000 0.14

[Pledged Securities Account - AmBank (M) Berhad for Lim Pei Tiam @ Liam Ahat Kiat (SMART)]

30) Haw Yeu Hin 300,000 0.14

Total 143,088,898 68.14




SUBSTANTIAL SHAREHOLDERS BASED ON THE REGISTER OF SUBSTANTIAL SHAREHOLDERS

Direct Interest Indirect InterestNo. of Shares % No. of Shares %

BRDB Developments Sdn Bhd (BRDB) 119,193,971 56.76 – –

Ambang Sehati Sdn Bhd (ASSB) – – 119,193,971 56.76(a)

Dato Sri Akbar Khan Trust Company Limited (DSAKTCL) – – 119,193,971 56.76(b)

Dato' Sri Akbar Khan bin Hj Mohamed Khan – – 119,193,971 56.76(c)

(DSAK)

Notes:

(a) Deemed interest in the 119,193,971 ordinary shares of RM1.00 each in Mieco Chipboard Berhad (MIECO Shares) by virtue ofSection 6A(4) of the Companies Act, 1965 held through BRDB.

(b) Deemed interest in the MIECO Shares by virtue of DSAKTCL holding 100% equity interest in ASSB. DSAKTCL is the trusteeof a discretionary trust of which the beneficiaries are members of the family of DSAK. Although DSAKTCL is deemed to havean interest in such MIECO Shares, it does not have any economic or beneficial interest in such MIECO Shares, as such interestis held subject to the terms of the discretionary trust.

(c) Deemed interest by virtue of DSAKTCL's deemed interest of the MIECO Shares are held directly by BRDB. Although DSAK isdeemed to have an interest in such MIECO Shares, he does not have any economic or beneficial interest in such MIECO Shares,as such interest is held subject to the terms of the discretionary trust referred to in Note (b) above.


Approximate Net age of book Balance building value Acquisition of leaseLocation Tenure Land area Description (Years) RM’000 date by Year

PAHANG

Lot 73, Gebeng Lease 653,670 Warehouse 5,521 26.10.1999 33Industrial Area expiring sq.ft. construction26080 Kuantan 18.08.2048 in progress &Pahang Darul Makmur Industrial Land

Lot 74, Gebeng Lease 1,254,528 Chipboard <1-21 36,536 24.08.1995 82Industrial Area expiring sq.ft. factory &26080 Kuantan 22.02.2097 Industrial LandPahang Darul Makmur

Lot 3, Kawasan Lease 2,178,000 Chipboard 11 67,509 05.12.2004 89Perindustrian Kechau Tui, expiring sq.ft. factory &27100 Lipis 2104 Industrial Land Pahang Darul Makmur

Lot 27, Kawasan Lease 158,253 Industrial land 215 20.12.2006 90Perindustrian Kechau Tui, expiring sq.ft.Lipis, Pahang Darul Makmur 20.12.2105

Lot 28, Kawasan Lease 299,257 Industrial land 407 20.12.2006 90Kechau Tui, Lipis expiring sq.ft.Pahang Darul Makmur 20.12.2105



LIST OF PROPERTIESAS AT 31 DECEMBER 2015


NOTICE IS HEREBY GIVEN that the Forty-Third Annual General Meeting (43rd AGM) of Mieco Chipboard Berhad(MIECO or Company) will be held at Dewan Berjaya, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, OffJalan Damansara, 60000 Kuala Lumpur on Thursday, 26 May 2016 at 10.00 a.m.

AGENDA

(1) To receive the Audited Financial Statements for the financial year ended 31December 2015 and the Reports of the Directors and Auditors thereon.

(2) To approve the payment of Directors’ fees of RM108,000.00 for the financial yearended 31 December 2015 (2014 : RM108,000.00).

(3) To re-elect the following Directors retiring in accordance with the Company’s Articlesof Association:

Article 81(a) Dato’ Mohd Hanif bin Sher Mohamed

Article 88(b) Mr Kajendra a/l Pathmanathan(c) Puan Rozi binti Baharudin

(4) To re-appoint Messrs Deloitte as auditors of the Company and to authorise theDirectors to fix their remuneration.

(5) To transact any other business for which due notice shall have been given inaccordance with the Company’s Articles of Association and the Companies Act1965.

BY ORDER OF THE BOARDHO SWEE LINGYAP CHOON FONCompany SecretariesKuala Lumpur29 April 2016

(Resolution 1)

(Resolution 2)

(Resolution 3)

(Resolution 4)(Resolution 5)

(Resolution 6)

NOTICE OF ANNUAL GENERAL MEETING


Notes:

(a) Only depositors whose names appear in the Record of Depositors on 16 May 2016 (General Meeting Record ofDepositors) be regarded as members and entitled to attend, speak and vote at this 43rd AGM.

(b) A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of theCompanies Act 1965 shall not apply to the Company.

(c) A member who is an authorised nominee may appoint one (1) proxy in respect of each securities account itholds with ordinary shares of the Company standing to the credit of the said securities account. Where a memberof the Company is an exempt authorised nominee as defined under the Securities Industry (Central Depositories)Act 1991 which holds ordinary shares in the Company for multiple beneficial owners in one securities account(omnibus account), there is no limit to the number of proxies which the exempt authorised nominee may appointin respect of each omnibus account it holds. A member other than an authorised nominee shall be entitled toappoint not more than two (2) proxies to attend and vote at the same meeting.

(d) Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies theproportions of his holdings to be represented by each proxy.

(e) If the appointor is a corporation, the form of proxy must be executed under its Common Seal or under the handof an officer or attorney duly authorised.

(f) To be valid, the duly completed original form of proxy must be deposited at the office of the Share Registrar,Metra Management Sdn Bhd at 30.02, 30th Floor, Menara Multi-Purpose, Capital Square, No. 8 Jalan MunshiAbdullah, 50100 Kuala Lumpur, not less than 48 hours before the time for holding the meeting. Fax copies of theduly executed form of proxy are not acceptable.

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

Details of the Directors who are standing for re-election are set out in the Directors’ Profile appearing on pages 4 and5 of this Annual Report. The details of the directors’ securities holding in the Company and its subsidiaries are set outin page 108 of this Annual Report.

NOTICE OF ANNUAL GENERAL MEETING (Cont’d)

FORM OF PROXY

I/We Tel. No.

(FULL NAME IN BLOCK CAPITALS)

NRIC No./Company No. of

(ADDRESS)

being a Member of MIECO CHIPBOARD BERHAD, hereby appoint

NRIC No.


of

(ADDRESS)

or failing him, NRIC No.


of

(ADDRESS)

the CHAIRMAN OF THE MEETING as my/our proxy to vote on my/our behalf at the Forty-Third Annual General Meeting of theCompany to be held at Dewan Berjaya, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000Kuala Lumpur on Thursday, 26 May 2016 at 10.00 a.m. and at any adjournment thereof.

RESOLUTIONS *FOR *AGAINST

(1) To receive the audited financial statements

(2) To approve the payment of Directors’ fees

(3) To re-elect Dato’ Mohd Hanif bin Sher Mohamed as Director

(4) To re-elect Mr Kajendra a/l Pathmanathan as Director

(5) To re-elect Puan Rozi binti Baharudin as Director

(6) To re-appoint Messrs Deloitte as auditors of the Company

* Please indicate with an “X” how you wish your vote to be cast. If no specific direction as to voting is given, the proxy willvote or abstain at his discretion.

As witness my/our hand(s) this _______ day of ______________, 2016.

______________________________Signature of Member

For appointment of two (2) proxies, percentage ofshareholdings to be represented by the two (2)proxies

Number of Shares Percentage

Proxy 1

Proxy 2

Total 100

Number of Shares Held

Notes:(a) A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act 1965 shall not apply to the Company.(b) A member who is an authorised nominee may appoint one (1) proxy in respect of each securities account it holds with ordinary shares of the Company

standing to the credit of the said securities account. Where a member of the Company is an exempt authorised nominee as defined under the SecuritiesIndustry (Central Depositories) Act 1991 which holds ordinary shares in the Company for multiple beneficial owners in one securities account (omnibusaccount), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. A memberother than an authorised nominee shall be entitled to appoint not more than two (2) proxies to attend and vote at the same meeting.

(c) Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented byeach proxy.

(d) If the appointor is a corporation, the form of proxy must be executed under its Common Seal or under the hand of an officer or attorney duly authorised.(e) Any alteration made in the form of proxy must be initialled.(f) To be valid, the duly completed original form of proxy must be deposited at the office of the Share Registrar, Metra Management Sdn Bhd at 30.02,

30th Floor, Menara Multi-Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than 48 hours before the time for holdingthe meeting. Fax copies of the duly executed form of proxy are not acceptable.

CDS ACCOUNT NO.

or failing him,

MIECO CHIPBOARD BERHAD (12849-K)


Please fold here

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Stamp

To: Share RegistarMetra Management Sdn Bhd30.02, 30th FloorMenara Multi-Purpose, Capital SquareNo. 8 Jalan Munshi Abdullah50100 Kuala Lumpur

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