Humanising Health - KOTRA PHARMAkotrapharma.com/pdf/2016_annual_report.pdf · • Was the Project Manager for the SAP project implementation which started in November 2008 and went

KOTRA

IND

USTRIES BERHA

D (497632-P)

A

nnual Rep

ort 2016

ANNUAL REPORT 2016

Health for Life

KOTRA INDUSTRIES BERHAD (497632-P) No. 1, 2 & 3, Jalan TTC 12,Cheng Industrial Estate, 75250 MelakaTel : 606-336 2222 Fax : 606-336 6122

www.kotrapharma.com www.appeton.com

We act with integrityWe deliver on commitmentWe are customer orientedWe work with passion and strong team spiritWe believe everything is possible

COREVALUES

VISION MISSION

Humanising Health

Everyone deserves ahealthier tomorrow

To be the centreof excellence for

the pharmaceuticalindustry

Corporate Information Directors’ Profile Chief Executives’ Profile Financial Highlights Chairman’s Statement Corporate Governance Statement Statement on Risk Management and Internal Control Report of the Audit Committee Financial Statements Directors’ Report Statement by Directors Statutory Declaration Independent Auditors’ Report Statements of Profit or Loss and Other Comprehensive Income Statements of Financial Position Statements of Changes in Equity Statements of Cash Flows Notes to the Financial Statements Supplementary Information List of Properties Notice of Annual General Meeting Analysis of Shareholdings Form of Proxy

CONTENTS

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KOTRA INDUSTRIES BERHAD

6


Board of directors

azhar bin Hussain(Independent Non-Executive Chairman)

Piong teck onn(Managing Director)

Piong teck Min(Non-Independent Non-Executive Director)

Y. Bhg. datuk Piong teck YendMsM, dsM, PJK, JP(Executive Director)

chin swee chang(Executive Director)

P’ng Beng HoeBKt, PJK, JP(Independent Non-Executive Director)

Piong chee Kien(Alternate Director to Piong Teck Min)

coMPanY secretaries

Chua Siew Chuan (MAICSA 0777689)Mak Chooi Peng (MAICSA 7017931)Sean Ne Teo (LS 0008058)

audit coMMittee

P’ng Beng Hoe (Chairman)Azhar bin HussainPiong Teck Min

reMuneration coMMittee

Azhar bin Hussain (Chairman)P’ng Beng HoePiong Teck MinPiong Teck Onn

noMination coMMittee

Azhar bin Hussain (Chairman)P’ng Beng HoePiong Teck Min

esos coMMittee

Azhar bin Hussain (Chairman)P’ng Beng HoePiong Teck Onn

CORPORATE INFORMATION

LegaL advisors

Chee Siah Le Kee & PartnersAdvocates & SolicitorsNo. 2B, Jalan KLJ 4,Taman Kota Laksamana Jaya,75200 Melaka.Tel : 06-283 3423Fax : 06-284 7251

registered office

No. 60-1, Jalan Lagenda 5,Taman 1 Lagenda,75400 Melaka, Malaysia.Tel : 06-288 0210Fax : 06-288 0570

Business office

No. 1, 2 & 3, Jalan TTC 12,Cheng Industrial Estate,75250 Melaka, Malaysia.Tel : 06-336 2222Fax : 06-336 6122

registrar

Mega Corporate Services Sdn. Bhd. (187984-H)Level 15-2, Sheraton Imperial Court,Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia.Tel : 03-2692 4271Fax : 03-2732 5388

auditors

Crowe Horwath (AF: 1018)52, Jalan Kota Laksamana 2/15,Taman Kota Laksamana, Seksyen 2,75200 Melaka, Malaysia.Tel : 06-282 5995Fax : 06-283 6449

PrinciPaL BanKer

Malayan Banking Berhad (Maybank)

stocK excHange Listing

Bursa Malaysia Securities BerhadMain Market


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ANNUAl REpORT 2016

aZHar Bin Hussainindependent non-executive chairman63, Malaysian, Maledate appointed: 12 november 2007

Board committee memberships:• AuditCommittee• Chairman,Employees’ShareOptionScheme Committee• Chairman,RemunerationCommittee• Chairman,NominationCommittee

academic qualification and honours:• BachelorofPharmacy(Hons)(UniversityofWales, UnitedKingdom)

experience and career path:• HousePharmacist,GlaxoMalaysiain1976• ProductionExecutive,GlaxoMalaysiain1977• AssistantManager,GlaxoMalaysiain1981• ProductionManager,GlaxoMalaysiain1983• TechnicalManager,GlaxoMalaysia,Glaxo Pakistan in 1989• TechnicalDirector,GlaxoMalaysiain1993• BoardofDirector,GlaxoMalaysiain1993• ExecutiveDirector,IntercircleHoldingsSdn.Bhd.in 1994• ManagingDirector,PharmaniagaManufacturing BerhadandlaterExecutiveDirector,Pharmaniaga Berhad from 1994 - 2003• ManagingDirector,PharmaniagaBerhadfrom 2003 – 2006• SeniorDirector,UEMGroupin2007• BusinessDevelopmentConsultant,Technology Park Malaysia in 2008• Head,TPMBiotechSdn.Bhd.from2008–2010• DirectorandSeniorPrincipalConsultant, Neoconsult Sdn. Bhd. from 2010 – Present• Director,IKOPSdn.Bhd.from2013–August2015

associations and affiliations:• PastPresidentoftheMalaysianOrganisationof Pharmaceutical Industries (MOPI) • AssociateMemberoftheHarvardBusiness School Alumni Club of Malaysia• MemberoftheMalaysianPharmaceuticalSociety (MPS)• President,InternationalSocietyofPharmaceutical Engineers, Malaysia Affiliate (ISPE Malaysia)

relationships with other directors/substantial shareholders:• Norelationship

DIRECTORS’ PROFILE

Piong tecK onn Managing director59, Malaysian, Maledate appointed: 5 June 2000

Board committee memberships:• RemunerationCommittee• Employees’ShareOptionSchemeCommittee

academic qualification:• BachelorofScienceinPharmacy(Universityof Wales,UnitedKingdom)

experience and career path:• Beganhiscareerinretailandwholesale pharmaceutical business at City Chemist & Asia Pharmacy• Pioneeringthedevelopmentofmanufacturing, research and development and marketing departments of Kotra Pharma (M) Sdn. Bhd.• Responsibleforintroducingvariousconventional dosage forms ranging from tablets, capsules, creams and ointments, wet and dry syrups and injectables, both aseptically and terminally sterilised• ManagingDirectorresponsiblefortheGroup’s overall operations, business strategic directions anddrivingtheGroup’sinitiativestowards achieving its various set goals

committee served:• ChairmanoftheASEANPharmaceuticalIndustry Club (APC) (2008-2009)

association and affiliation:• PastPresident(2008-2009)andExecutiveCouncil Member (1998-2013) of the Malaysian Organisation of Pharmaceutical Industries (MOPI) relationships with other directors/substantial shareholders:• BrothertoPiongTeckMinandY.Bhg.Datuk PiongTeckYen• MarriedtoChinSweeChang


8


Piong tecK Minnon-independent non-executive director64, Malaysian, Maledate appointed: 5 June 2000

Board committee memberships:• AuditCommittee• NominationCommittee• RemunerationCommittee

academic qualification:• MalaysianCertificateofEducation

experience and career path:• Handledthepharmaceuticalwholesalebusinessof

KOT in 1970• Managing Director of Lonnix (M) Sdn. Bhd.,

specialising in broad range traditional medicine• Well-versed with the intricacies of the local

pharmaceutical trade• Built a good business network with Malaysian

wholesalers in the pharmaceutical trade

relationships with other directors/substantial shareholders:• BrotherofPiongTeckOnnandY.Bhg.DatukPiong

TeckYen• Brother-in-lawofChinSweeChang• FatherofPiongCheeKien

Directors’ Profile (Cont’d)

Y. BHg. datuK Piong tecK Yenexecutive director49, Malaysian, Maledate appointed: 5 June 2000

academic qualification:• LewishamCollege,UnitedKingdom

experience and career path:• Responsible for marketing and sales activities of KOT in 1989• SalesManagerofKPMin1989• MarketingManagerofKPMin1995andwas instrumental in formulating and implementing promotions aimed at creating brand awareness • CurrentBusinessDirectorresponsibleforthe development of exports and international marketing activitiesoftheGroup

awards:• DMSM,DSM,PJK,JP

relationships with other directors/substantial shareholders:• BrotherofPiongTeckMinandPiongTeckOnn• Brother-in-lawofChinSweeChang


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cHin sWee cHangexecutive director59, Malaysian, femaledate appointed: 5 June 2000

academic qualification:• Bachelor of Science (Hons) in Data Processing

(UniversityofLeeds,UnitedKingdom)

experience and career path:• ProgrammeratSystemsAutomationSdn.Bhd.in1982,

involved in development, implementation, user-training and maintenance of insurance software

• Analyst Programmer at EasternSystemsDesignSdn.Bhd. in 1984, responsible in the development and maintenance for general accounting, insurance broking, hire purchase/leasing software

• Head of the Electronic Data Processing Departmentat Robert Bosch (South East Asia) Pte. Ltd. in 1987,responsible for user support system coordination; coordination/liaison of system information with regional office and headquarters in Germany. Helped tocoordinate, convert, transfer data and system migration from Nixdorf to IBM AS/400 system in 1991

• IT Manager of KPM in 1993. Transformed thecomputerisation of the entire business from a stand-alone personal computer (PC) environment to a local area network PC multi-user system, with fully integrated material requirements planning, financial and distribution software. Coordinated and implemented a new, fully integrated Symix MRP (US) package on PROGRESSdatabase platform in 1997. Set-up an in-house IT team to support the growing number of users and computer systems in 2001. Since then, Symix system has gone through two rounds of upgrades. Symix was renamed as Syteline where the database was converted to MS SQL. Was also responsible for setting up ShippingDepartment and ensuring the smooth operations oforder processing and administration departments

• Waspromotedtothecurrentposition,ChiefInformationOfficer responsible for overseeing the operations, development and enhancement of Management Information Systems, Order Processing and Administration departments

• Was the Project Manager for the SAP projectimplementation which started in November 2008 and went live as scheduled in July 2009.Modules of SD,MM, FICO, and partial PP were implemented together to replacethelegacyInforERPSytelinesystem

• With the stabilisation of the SAP core modules,embarked on “Leverage on IT” projects to automate management information and reporting to support decisions making

• RolloutMobileSalesOrderingusingiPadsforsalesteamduring last financial year. All information on customers are available on the palm of the sales representatives.

relationships with other directors/substantial shareholders:• Sister-in-lawofPiongTeckMinandY.Bhg.Datuk

PiongTeckYen• MarriedtoPiongTeckOnn

P’ng Beng Hoeindependent non-executive director71, Malaysian, Maledate appointed: 22 august 2007

Board committee memberships:• Chairman,AuditCommittee• Employees’ShareOptionSchemeCommittee• RemunerationCommittee• NominationCommittee

Professional qualification:• CharteredAccountant

experience and career path:• FormerPartnerofPricewaterhouseCoopers• Chartered Accountant with accumulated and

extensive experience in audit, taxation, public listing of companies, management consultancy, corporate restructuring for a wide range of industrial and commercial companies in the public and private sectors including multinational corporations and government corporate bodies

awards:• BKT,PJK,JP

associations and affiliations:• Memberof the InstituteofCharteredAccountants

in Australia and New Zealand• MemberofCPAAustralia• Memberof theMalaysian InstituteofAccountants

(MIA)• Member of the Malaysian Institute of Certified

Public Accountants (MICPA)

relationships with other directors/substantial shareholders:• Norelationship


10



Piong cHee Kienalternate director to Piong tecK Min37, Malaysian, Maledate appointed: 25 november 2010

academic qualification:• BScinTelecommunicationsEngineering(London)• MScine-CommerceEngineering(London)

experience and career path:• Brand Executive at KPM fromNovember 2005 to

October 2006 and was actively involved in planning and implementing brand marketing and trade strategies aimed at increasing brand performance

• CurrentGeneralManagerofLonnix(M)Sdn.Bhd.,specialising in broad range of traditional medicine, food supplement and effervescent products

relationships with other directors/substantial shareholders:• SonofPiongTeckMin• Nephew toPiongTeckOnn,Y.Bhg.DatukPiong

TeckYenandChinSweeChang

notes:-

1. None of the directors has other directorships in other public companies and listed issuers.

2. None of the directors has any conflict of interest with Kotra Industries Berhad.

3. Other than traffic offences, none of the directors has any conviction for offences, public sanction or penalty imposed by the relevant regulatory bodies within the past five (5) years.


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ChIEF ExECuTIvES’ PROFILE

danieL cHua cHong Liangchief financial officer42, Malaysian, Maledate appointed: 1 July 2003

academic qualification:• Bachelor of Business (Accounting) (University of

Technology Sydney)

experience and career path:• Morethan20yearsofworkingexperienceand13

years of experience in the pharmaceutical industry• Worked inthebigsix (6) international accounting

firm with experience in the areas of audit and taxation

• Currently,responsibleforthefinancialmanagementof the Kotra Industries Berhad and Kotra Pharma (M) Sdn. Bhd.

associations and affiliations:• Member of Malaysian Institute of Accountants

(MIA)

cHeaH Ming Loongchief operating officer45, Malaysian, Maledate appointed: 1 november 2005

academic qualification:• Bachelor of Science in Pharmacy (Liverpool John

MooresUniversity,UnitedKingdom)• MBA in Marketing (University of Southern

Queensland, Australia)

experience and career path:• More than20yearsofpharmaceuticalexperience

in both the patent and generic drugs industry• Currently,responsibleforthedailyoperationsand

the strategic development of Kotra Pharma (M) Sdn. Bhd. for Malaysia and international market

• Has keen involvement and consultation with theMinistry of Health, Malaysia

• Participated in the Malaysian PharmaceuticalPricing Policies and Regulations Workshop 2009and 2012

• Was a committee member in the PerformanceManagement and Delivery Unit (PEMANDU) –Pharmaceutical Mini-lab 2013

• Was consulted for the Malaysian National DrugDonationGuideline2010

• Workedcloselywith theMinistryofHealthon theGeneric Medicine Awareness Program (GMAP)roadshows across the country in the year 2013 & 2014

• Co-authored an article for the Japan Journal ofPharmaceutical Machinery & Engineering 2014 with the title “Malaysia Pharmaceutical Industry – Collaboration and Investment Opportunities”

associations and affiliations:• Member of Malaysian Pharmaceutical Society

(MPS) • Member of Malaysian Organisation of

Pharmaceutical Industry (MOPI)


12


HieW Mein foongchief Brand officer55, Malaysian, Maledate appointed: 15 february 2000

academic qualification:• B.A. (Mass Communications) Hons. (Universiti

Kebangsaan Malaysia)

experience and career path:• Began his career in advertising, spending more

than 10 years in the advertising industry• 16 years in the pharmaceutical industry since

joining Kotra Pharma (M) Sdn. Bhd. in 2000• Initiated Kotra Pharma’s Customer Satisfaction

andCRMprogrammes• Developed Kotra Pharma’s Corporate Identity

Manual• Responsible for developing Kotra Pharma’s new

logo, Axcel & Vaxcel• Secured MATRADE’s promotion grant for Kotra

Pharma• ManagementCommitteeforRiskManagementand

ISO 9001• Setting up and headed the International Markets

(OTCDivision)• Represented Kotra Pharma (OTC) in the

PharmaceuticalMini-Lab(PEMANDU),2013• Involvesinstrategicplanning(Local&International)

focusing on branding, advertising, marketing, sales, overseas market expansion, distributor management, new product development, positioning, target market and segmentation

• “Development of business” best practices forpotential duplication to ensure standardised processes and success

• Responsible for appointing and managingadvertising, creative and media agencies

notes:

Chief Executives’ Profile (Cont’d)

Notes:-

1. None of the chief executives has family relationships with any Directors/Substantial Shareholders of theCompany.

2. None of the chief executives has directorships in other public companies and listed issuers.

3. None of the chief executives has any conflict of interest with Kotra Industries Berhad.

4. Other than traffic offences, none of the chief executives has any conviction for offences, public sanction or penalty imposed by the relevant regulatory bodies within the past five (5) years.


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ANNUAl REpORT 2016

FINANCIAL hIGhLIGhTS

2012 2013 2014 2015 2016 (rM’000) (rM’000) (rM’000) (rM’000) (rM’000)

revenue 126,943 131,294 147,371 145,174 160,230 Revenue Growth (%) 12.5% 3.4% 12.2% -1.5% 10.4%

Profit before tax 1,178 3,829 5,765 1,178 7,865Profit after tax 1,122 3,687 5,660 1,060 7,761Shareholder’s equity 102,135 107,979 119,063 121,742 131,214 Per share Basic earnings (sen) 0.91 2.89 4.29 0.80 5.86 Netassets(RM) 0.82 0.85 0.90 0.92 0.99

financial ratio Gearingratio 1.23 1.17 1.02 0.86 0.74Returnonassets(%) 0.44% 1.40% 2.08% 0.42% 3.06%Returnonequity(%) 1.10% 3.41% 4.75% 0.87% 5.91%

REVENUE(RM MILLIONS)

160

140

120

100

80

60

40

20

-2012 2013 2014 2015 2016

PROFIT AFTER TAX(RM MILLIONS)

SHAREHOLDERS’ EQUITY(RM MILLIONS)

NET ASSETS PER SHARE(RM MILLIONS)

127 131

147 145

16015

12

9

6

3

-2012 2013 2014 2015 2016

1

4

6

1

8

140

120

100

80

60

40

20

-2012 2013 2014 2015 2016

102 108119

122131

1.00

0.80

0.60

0.40

0.20

-2012 2013 2014 2015 2016

0.850.82

0.900.92

0.99


14


To My EsTEEMEdsharEholdErs,

2016 has been a demanding yet noteworthy and rewarding year for Kotra. The Group has delivered a significantimprovement in performance despite a challenging year in the economy and regulatory changes in the pharmaceutical sector.

TherehasbeenagrowthintheGroup’srevenueof10.4%fromRM145.2million in the preceding year toRM160.2million in this financial year ended 30 June 2016. The growthinsaleshasledtheGrouptoahigherProfitBeforeTaxofRM7.87millionincomparisontotheProfitBeforeTaxofRM1.18millionintheprecedingfinancialyear.Themajor contributing factor to the growth is the increase in sales to the Government sector and a higher salesderived from our overseas market. Our profitability has recovered mainly attributed to our effective advertising and promotional activities.

In the financial year, the export sales continued to grow from RM57.9 million in the previous year to RM72.8million.Thisrepresentsagrowthof25.7%,consequenttothe investment made in advertising and promotions in the preceding year.

Manufacturing exceLLence

Our commitment to focus on increasing our manufacturing capability continues.Wearepresentlyon-trackwithourmanufacturing expansion plans. The Pre-filled Syringe Manufacturing Line (PFS Line) is ready for the Ministry of Health (MOH) inspection and approval. Once the approval has been obtained for the PFS Line, we will be expecting PFS product approval from MOH and commercialisation of the product thereafter.

The Metered Dose Inhaler (MDI) line is currently at itsfinal phase of commissioning. TheseMDI products thusfar have been initiated and manufactured for R&D pilotbatches and stability studies which will be submitted to MOH for evaluation.

ChAIRMAN’S STATEMENT


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Chairman’s Statement (Cont’d)

With both PFS and MDI technology, we are hoping toenhance our profile in the Malaysian pharmaceutical sector by being the first to locally manufacture products of these lines. Moving forward, we will continue to enhance our presence in the overseas market with our increasing capabilities in the manufacturing area, whereby we believe there are plenty of opportunities to grow and thrive in both overseas and local pharmaceutical industry.

researcH and deveLoPMent exceLLence

Our in-house R&D Department is constantly working todevelop, innovate and commercialise products to sustain our future growth which is also in line with our approach to address and fulfill the medical needs across the globe and tomeet their respectivemarketneeds.We firmlybelieveboth innovation and new products are essential for our future growth.

Wecontinuetoexpandourproductportfoliointhefinancialyearended30June2016.Wehavecommercialisedsix(6)productsthroughtheeffortsofourR&DDepartment.Theproducts are:

i) axcel glucosatin tablets• acts to improve the constituents of synovial

fluid resulting in improvement in joint health. This product is indicated as an adjunct therapy in osteoarthritis.

ii) axcel cefuroxime 125mg suspension • contains second generation Cephalosporin

antibiotic, Cefuroxime. The indications for this product include upper respiratory tract infections, genito-urinary tract infections, skin and soft tissue infections as well as treatment of early Lyme disease to name a few.

iii) vaxcel fluconazole 2mg/ml iv infusion • an antifungal solution for infusion that is

indicated for the treatment of cryptococcal meningitis, coccidiodomycosis, mucosal candidiasis, chronic oral atrophic candidiasis and their prophylaxis.

iv) vaxcel Pantoprazole 40mg injection• containspowder forsolution for injection. It is

indicatedinconditionsofGERDsuchasrefluxoesophagitis, gastric and duodenal ulcer as well as Zollinger-Ellison Syndrome and other hypersecretory conditions.

v) vaxcel Lignocaine 1% injection • known as a local anesthetic and also as an

antiarrhythmic drug. This product is indicated for the production of topical anesthesia to intended areas of the body, particularly mucous membranes of the respiratory and genito-urinary tract.

vi) vaxcel acyclovir 25mg/ml iv infusion • anantiviraldrugproduct that isactiveagainst

herpes viruses.


16


Brand and MarKeting exceLLence

We have successfully launched our first PDE5-inhibitor,Axcel Sildenafil. The newly launched Axcel Sildenafil has brought much pride to us. This is one of the blockbuster drugs from the pharmaceutical innovators for the treatment of erectile dysfunction.

“Paediatrics in Practice (PIP)”, a jointly organised talk by the Malaysian Paediatric Association, Malaysian Medical Association and Kotra Pharma, targeting the GeneralPractitioners (GPs) and key primary care physicians.It is currently in its 6th year with expanded scope and attendance. This nationwide continuing medical education (CME) programme focuses on common illness in children thatmajorityofGPsandprimarycarephysicians’encounterin their daily practice. The objective is in line with our belief that everyone deserves a healthier tomorrow.

The Marketing team also organised offtake campaigns such as “33 Years Anniversary Campaign”, “A Gift ofHealth for your Family Campaign”, exclusive launch with Cosway for Axcel Axpain and Facebook launch of our “Appeton” brand that has gain popularity among social media users. Axcel Eviline Forte, a product for symptomatic relief of hyperacidity is on Facebook (www.facebook.com/AxcelEvilineForte) that went live on April 2016. Besides that,theteamhadalsosetupaboothduringtheNightRun2016 in Penang to highlight to the runners and the public on Appeton products.


In addition to the above and with the support from Persatuan Dermatologi Malaysia (PDM), we organised“Dermatology In Focus (DIF)”. It is the 1st Dermatologyintensive short course covering three (3) modules over a periodofone(1)yearforgeneralpractitioners(GPs)whoare keen to increase their knowledge and skills in dealing with common skin conditions.

gLoBaL PHarMaceuticaL exceLLence

In our effort, to expand our global presence, we jointly organised “Infectious Disease Forum” along with theMalaysian Medical Association and Malaysian Society of InfectiousDiseases&Chemotheraphy.Thisforumhasnotonly brought healthcare professionals from Malaysia but also from other countries.

Malaysian Dietitians’ Association (MDA) & the AmericanOverseas Dietetic Association (AODA) collaborated andorganised MDA-AODA conference which was held inMay 2016. This international conference is a prominent international convention for dietitians’ in Asia and attracted a wide audience of participants looking for cutting-edge nutritionproductsandsolutions.Wehad theprivilege tosetup a booth to establish our presence for both local and international dieticians.

Besides that, we constantly participate in global pharmaceutical events, conferences and conventions, primarily Convention on Pharmaceutical Ingredients (CPhI), held in Spain and China.


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ANNUAl REpORT 2016


industrY outLooK and ProsPect

The pharmaceutical industry is an essential part of the healthcare sector in Malaysia. For the past ten (10) years, this industry has been growing at 8% to 10% annually.The awareness of the potential of the local pharmaceutical industry by the Malaysian Government has helped theindustry to achieve this growth. Malaysia being one of the member of the Pharmaceutical Inspection Cooperation/Scheme (PIC/S) since the year 2011 has shown an ascending trend for its exports of pharmaceutical products includingourGroup.

There has been increasing global demand for Halal products especially from Islamic countries. The recognition of Malaysia’s Halal certification has been a reliable platform for promoting pharmaceutical products in these countries, henceforth presents a high potential to penetrate the market of the Organisation of Islamic Cooperation (OIC) countries. Furthermore, this also increases opportunities for local companies to capitalise on local expertise in Halal production of pharmaceuticals and health products. As we are certified Halal by JAKIM, this has subsequently provide us excellent opportunities to expand our international market into more Islamic countries across the globe.

our sustainaBiLitY and corPorate resPonsiBiLitY

The Group emphasises in two (2) major approachesof corporate responsibility namely making healthcare accessible to all and doing business responsibly. The approaches which we focus on are directly linked to our vision, mission and core values.

To help us achieve our vision of Humanising Health, the Group frequentlycontributed tonon-profitorganisations,schools, government bodies and the public especially for health related events because we believe everyone deserves a healthier tomorrow. We are aware that ourresponsibilities goes beyond our business, society and environment.

Every year within the state of Melaka, we contribute and distribute our childcare health supplements for Children’s Day to various schools. The Group has been constantlysponsoring a number of university graduate reward programmes to boost the academic excellence for the benefitofoureducationsystem.Wehadalsocollaboratedwith the Dystrophic Epidermolysis Bullosa ResearchAssociation (DEBRA) during the Paediatrics in Practice2016 conference. Epidermolysis Bullosa (EB) is a rare skin disease that carries with it a significant burden but receiving little to no attention. Through the conference, participants donated to DEBRA Malaysia with Kotramatching every ringgit donated.

Apart from that, we aim to continuously invest in research and development to recognise and develop unmet need in healthcare.With an increasing demand formedical careand healthcare, we are expanding our presence across the globe notably in Asia and Africa.

Words of aPPreciation

I wish to especially express my appreciation and gratitude to the management team and the devoted employees for their impeccable commitment, dedication and sincerity towards the Company and the Group. Our thanks alsogoes to the stakeholders, primarily our shareholders, customers, partners and to others for their continued confidence and loyalty over the years.

I am sincerely grateful to the Board for their significant role in providing inputs, guidance and outstanding leadership throughout the time. Without them, it would have beenimpossible to achieve such great milestones in Kotra.

The achievement made in this financial year will be our inspiration to progress further and emerge stronger in the industry whereby we could continue to deliver value to our shareholders, stakeholders, employees and customers.IamexcitedforthefutureoftheGroup.Let’smoveaheadand strive for another successful financial year.

aZHar Bin HussainIndependent Non-Executive Chairman


18


CORPORATE GOvERNANCE STATEMENT

TheBoardofDirectors(“theBoard”)ofKotraIndustriesBerhad(“theCompany”)iscommittedtoadoptahighstandardof corporate governance. The Board also recognises the importance of a strong corporate governance framework for the best interest of their shareholders and stakeholders and in pursuing a sustainable business.

Definedbelow is theCorporateGovernanceStatement for the financial year ended30June2016.TheBoard,herebypresent this statement which offers an outlook of its duties in consistent with the principles, recommendations and best practicesassetoutintheMalaysianCodeonCorporateGovernance2012(“theCode”).

PrinciPLe 1: estaBLisH cLear roLes and resPonsiBiLities

clear functions of the Board and Management

The Board oversees and is responsible for the general management as well as the performance of the Company and its subsidiaries(“theGroup”).

The Board entrusted some of its responsibilities to separate Committees in order for an effective implementation of its duties and responsibilities. Set out below are the three (3) principle Committees established by the Board:-

• AuditCommittee(“AC”)• NominationCommittee(“NC”)• RemunerationCommittee(“RC”)

TheBoardCommitteeareassignedtoadministerandexecutespecificresponsibilitiesoftheGroupaswellasentrustedwith an authority to act in accordance with its terms of reference approved by the Board. Even though the Board Committee are granted with certain authority, the Board continuously keep itself well-informed of any actions and decisions taken by each Board Committee, which includes crucial matters reported by every Chairman of each Board Committee, as well as the tabling of minutes of all Board Committee meetings for the Board.

The Board also monitors and reviews the Managing Director’s performance from time to time. The Board has cleardelegationof roles to theManagingDirector and itsManagement. TheManagingDirector is responsible inmanagingand assuming full accountability of day to day operations of the Group, implement comprehensive business plan tosustain profitable growth, planning cost effective operations, ensuring organisational effectiveness and directing as well asdecidingonthestrategytodrivemaximumperformance.TheManagingDirector’sroleisinadherencewiththeBoardpolicies,strategiesanddecisions.TheManagingDirectorcascadestherolestotheManagementteamwithintheGroup.TheManagingDirectorandtheManagementteamremainaccountabletotheBoardfortheauthoritydelegatedtothem.

AlthoughtherearedelegationofrolestotheManagingDirectorandtheManagementteam,allkeymattersstillliesfortheBoard’s approval which includes the annual business plan and budget, acquisition or disposal of significant assets, new issue of securities or business restructuring.

clear roles and responsibilities

TheBoardisassumedwithvariedresponsibilitiesthataredischargedinthebestinterestoftheGroupinfulfilmentofitsincorporated regulatory and commercial objectives. Amongst the responsibilities are as listed below:

• reviewing and adopting strategic plans for the Company and the Group, in which annual budget and financialforecast were presented to the Board by the Management including the action plans;

• monitoring theoverall conductof theGroup’sbusiness toevaluateon thesustainabilityandmanagementof thebusiness, by reviewing quarterly, the actual financial results against the approved budget/action plans;

• identifyingmainbusinessrisksandensuringtheimplementationofappropriatesystemstoaddresstheserisks;• ensuring successionplanningwhich includes appointing, training, fixing the remuneration of andwhere deemed

appropriate,replacingseniormanagementoftheGroup;• continueddevelopmentoftheinvestorrelationsprogrammeorshareholdercommunicationpolicyfortheCompany;

and• reviewingtheadequacyandintegrityoftheGroup’sinternalcontrolsystemsandmanagementinformationsystems

including reviewing the systems for compliance with applicable laws, regulations, rules, directives and guidelines.


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ANNUAl REpORT 2016

Corporate Governance Statement (Cont’d)

Board charter

A Board Charter was formalised to outline the Board’s roles and responsibilities. The Board Charter was reviewed and updatedregularly,whenitisrequired,inaccordancewiththeneedsoftheGroupandanynewregulationstoensurethatit remains current and appropriate.

The matters listed below are among which comprised in the Board Charter:

• Boardresponsibilities,membership,andprocedures• Director’sremuneration• Boardandmemberassessment• Director’sCodeofEthics• MeetingsandtermofreferenceofBoardCommittees• Companysecretary

TheBoardCharterisaccessibleforreferenceontheGroup’swebsiteat(www.kotrapharma.com).

code of ethics

The Board prepared its Code of Ethics which commits to the ethical values and corporate culture. The Code of Ethics serves a purpose to establish the Company’s business and operations are parallel with the standard principles set by the Code during the financial year.

The Board is committed into following the best practices set out in the Code of Ethics and uphold the highest standard of integrity and actions in activities carried out by the Company and its subsidiaries. A summary of the Code of Ethics is availableforreferenceontheGroup’swebsiteat(www.kotrapharma.com) in the Board Charter.

Whistle Blowing Policy

TheWhistleBlowingPolicyhasbeenintroducedbytheBoardasaplatformforitsemployeestoreportofimproperconductby other employees, on condition that the report is made in good faith, without fearing their action may have opposing consequences.ThisWhistleBlowingPolicyplaysanimportantcomponentfortheCompanyanditssubsidiariestoupkeeptheGroup’s integrity. TheWhistle Blowing Policy encompasses the environment of trust andmaximumprotection toencourage full cooperation. It includes procedures that will safeguard the members who report the improper conduct in good faith are provided with highest confidentiality and protected against harmful or adverse employment actions as a result of their whistle blowing.

BasicprinciplesoftheGroup’sWhistleBlowingPolicyareasfollows:

1. The person concerned shall have a choice of a number of channels for whistle blowing and communication. In certain circumstances, they are able to bypass the main channels for whistle blowing if these prove inappropriate;

2. Members of the staff are not under any circumstances be subjected to reprisals for whistle blowing;3. Members of the staff who reports allegations of wrong doing in good faith will be protected and their identity will

insofar as possible remain confidential;4. Thereportedincidentsshallbeverifiedintheappropriatemannerand,iftheyareconfirmed,theGroupshalltakeall

necessary steps to identify suitable solutions;5. The basic rights of any person implicated by the reported incidents shall be respected, whilst ensuring that the

procedures provided for are effective; and6. The Company however, does not extend these assurances to someone who maliciously raises such matters despite

knowing it is false.


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Therearea fewchannelsandcommunication thatcanbeaccessedbymembersof theGroup toensure that fairandformal channel is available to any employee. The following designated personnel listed below can be reached by any employees to raise their concerns:

A. ManagingDirectorB. GeneralManagerC. Corporate Affairs ManagerD. HumanResourceManagerE. EachHeadofDepartmentF. Group’sCompanySecretaryG. AuditCommitteemembersH. IndependentNon-ExecutiveDirector

strategies Promoting sustainability

The Board ensures the Group’s strategies were formulated to promote sustainability in environmental, social andgovernance(“ESG”)aspectsofbusiness.BalancingESGaspectswiththeinterestsofvariousstakeholdersisimportantto heighten investor perception and public trust.

IntheeffortofabidingtotheGroup’svisionof“HumanisingHealth–everyonedeservesahealthiertomorrow”,theGrouphas continuously ensured their participation in numerous academic, social and welfare programmes that are dedicated to enhance health and wellness standards. This effort can be attained by means of the availability of health supplements andmedicationsfortheseprogrammes.Besidesthat,theGroupactivelysupportslocalpharmaceuticalstudentsthrougha series of academic awards particularly to encourage the development of pharmaceutical knowledge.

access to information and advice

Everymemberof theBoardaregrantedunrestrictedaccess toall information relating to theCompanyor theGroup’sperformance inorder toeffectivelydischarge itsduties.TheDirectorsmayseekanyassistance fromtheManagementonissuesundertheirrespectivecontrol.TheDirectorsmayalsointeractdirectlywith,orrequestadditionalexplanation,information or updates on any aspect of the Company’s operations or business concerns from the Management.

The Board may also seek independent professional advice at the Company’s expense on particular issues for the effective discharge of their duties.

Qualified and competent company secretaries

The Board has the direct access to the advice and services of the Company Secretaries who are highly experienced, skilled, proficient and knowledgeable on the laws and regulations as well as directives issued by the regulatory authorities.

PrinciPLe 2: strengtHen coMPosition

The composition of the Board determines the success of fulfilling its series of responsibilities and consists of a balance of competency and business experiences into achieving its goal to deliver strong leadership and constructive decision-making. The Board comprises seven (7) members as follows:

i) one (1) Independent Non-Executive Chairman;ii) one(1)ManagingDirector;iii) one(1)Non-IndependentNon-ExecutiveDirector;iv) two(2)ExecutiveDirectors;v) one(1)IndependentNon-ExecutiveDirector;andvi) one(1)AlternateDirectortoNon-IndependentNon-ExecutiveDirector.

This complieswith theMainMarket Listing Requirements in which at least one-third (1/3) of its Boardmembers areindependent.AbriefprofileofeachDirectorispresentedonpages7to10ofthisAnnualReport.


21

ANNUAl REpORT 2016

To ensure the composition of the Board is strengthened, the Nomination and Remuneration Committees has beenassigned by the Board to implement policies and procedures with respect to selection and nomination of Board and Board Committees, review of Board’s succession plans and management of talent retention through fair remuneration policy in line with the market practice.

nomination committee

TheNCcomprisesexclusivelyofthree(3)Non-ExecutiveDirectorsofwhommajorityareindependent.

• AzharbinHussain Chairman / Independent Non-Executive Director

• P’ngBengHoe Member / Independent Non-Executive Director

• PiongTeckMin Member / Non-Independent Non-Executive Director

Duringthefinancialyearended30June2016,theNCreviewedtherequiredsetofskills,experiences,corecompetenciesandothersignificantqualitieswhichtheDirectorsshouldbringtotheBoardtoperformtheirroleseffectively.Besidesthat,anannualassessmentoftheDirectors’ independencewascarriedout.Thisassessmentwasconductedandevaluatedby theNC to consider if theDirectors can continue tobring independent andunbiased judgement to theBoard. TheChairmanoftheNCbriefedtheresultsofthepeerassessmentoftheDirectorsandtheBoardthatweredeliberatedanddiscussed. There were no adverse matters that need to be addressed by the NC to the Board. The NC had also requested on the progress of staff involved in the succession planning for the head of departments.

appointment to the Board and re-election

All appointments to the Board are recommended by the NC as in line with the NC’s terms of reference. The Board ensures that in the selection process, the interests of the shareholders and investors are not compromised. The NC is bestowedwiththeprocessesofidentifyingandnominatingnewDirectors.TheNCshallnominatethecandidate,takingintoconcerntheGroup’sbusinessesandidentifiestheGroup’sneedswiththecapabilitiesandinvolvementexpectedfor a particular appointment. The NC shall also take into account the recommendations from other Board members while choosingtheirnominationofnewBoardDirector.ThefinaldecisionintheappointmentofacandidateproposedbytheNC lies with the Board.

IfthereisanewlyappointedDirectortotheBoard,heorshewillhavetoundertakeaninductionprogrammeaspartoftheir familarisationprocessoftheGroup’sbusiness.Theprocess includesabriefingbytheManagingDirector,visit tooffices and manufacturing plants. Apart from that, a discussion with the senior members of the Management team will be conductedtoobtainknowledgeoflatestprogressandappreciationofthekeydriversbehindtheGroup’scorebusinesses.

NewlyappointedDirectorsmustalsoattendandcompletetheMandatoryAccreditationProgramme(MAP)conductedbyBursa Malaysia Securities Berhad (“Bursa Malaysia”).

Asofthefinancialyearended30June2016,therewerenonewDirectorsappointedtotheBoard.

According to theCompany’s Articles of Association, at least one-third (1/3) of theDirectors are required to retire byrotation each financial year and they can offer themselves for re-election at theAnnualGeneralMeeting (“AGM”). AllDirectorsshallsubmitthemselvesforre-electionbyshareholdersatregularintervalsatleastonceineverythree(3)years,togetherwithallnewDirectorsappointedduringthefinancialyear,subjecttore-electionattheAGM.Whereas,Section129(6)oftheCompaniesAct1965requiresthatallDirectorsoverseventy(70)yearsofagegoforwardforre-appointmenteach year.



22


UpontherecommendationbytheNCandtheBoardnotedthattheDirectorslistedbelowareduetogoforwardforre-electionattheforthcoming17thAGM:

• AzharbinHussainandPiongTeckMinshallretirepursuanttoArticle97(1)oftheCompany’sArticlesofAssociation• P’ngBengHoeretirespursuanttoSection129(6)oftheCompaniesAct,1965

EncikAzharbinHussainandMr.P’ngBengHoewhowereappointedasIndependentDirectorsoftheCompanyon12November 2007 and 22 August 2007 respectively, have served on the Board for nine (9) years, and have expressed their intentiontoretireattheconclusionoftheforthcoming17thAGMinviewoftherecommendationintheCode.Accordingly,EncikAzharbinHussainandMr.P’ngBengHoewillretainofficeuntilthecloseofthe17thAGM.

TheretiringDirector,Mr.PiongTeckMin,hasofferedhimselfforre-election.

Board assessment

The Board’s effectiveness is assessed through evaluation by the NC. The whole evaluation process is overseen by theChairman.Theassessmentcriteriaof theNC involves thecompetencyeachDirectorbrings to theBoardand theassessmentofindependentdecisionthateachDirectorcouldoffertotheBoard.

The Board is assessed by the NC annually. The assessment and review are conducted after the end of financial year ended30Juneorwhichevertimethatisdeemedappropriate.Duringtheassessmentdoneforthefinancialyear,theBoardand its Committees resolved that they were satisfied with the Board’s duties and responsibilities that were discharged effectively and efficiently.

gender diversity

The Board encourages and supports the effort of promoting gender diversity in the boardroom as recommended by theCode.Atthemoment,thereisone(1)femaleDirectorontheBoardoftheCompany.TheCompanywillappointanindependentwomanDirectorwhentheopportunityarises.

remuneration committee

TheremunerationofDirectorsisdeterminedatlevelswhichenabletheGrouptodrawandmaintainDirectorswithsuitableexperienceandexpertisetomanagetheGroupsuccessfully.

The RC is responsible to assist the Board in reviewing, analysing and recommending appropriate, at the same timecompetitiveandattractiveremunerationpackageswhichincludesbenefitsapplicabletotheDirectors.TheRCwillconsidertheperformanceof theCompany and individualDirectors aswell asmarket factorswhile reviewing the remunerationpackages.TheRCanalysestheCompany’sremunerationpolicy,proposeachangeifrequiredtoensurethepolicyisfairand justified with the current market practices.

TheRCcomprisesthree(3)Non-ExecutiveDirectorsofwhommajorityareIndependentandone(1)ExecutiveDirector.

• AzharbinHussain Chairman / Independent Non-Executive Director

• P’ngBengHoe Member / Independent Non-Executive Director

• PiongTeckMin Member / Non-Independent Non-Executive Director

• PiongTeckOnn Member / Managing Director



23

ANNUAl REpORT 2016

During the financial year, theRC reviewed the remuneration packages formembers of theBoard andproposed theirrecommendationsbasedon theperformanceof theGroupand theDirectors.The reviewprocess includes theannualincrementandbonuspackagesforExecutiveDirectorsaswellastheDirectors’feeforallIndependentandNon-ExecutiveDirectors.TheCommitteemembersareabstainedinparticipatinginthediscussionoftheirindividualremunerationduringthis process.

directors’ remuneration

MeticulousstepsweretakentoensureeachDirector isfairlyrewardedfortheir individualcontributiontotheGroupbytakingconsiderationofthefinancialpositionoftheGroup.DetailsofremunerationoftheDirectorspaidbytheGroupforthe financial year ended 30 June 2016 are as shown below:

other short term employee benefits including estimated monetary value of fees emoluments benefits in kind total (rM’000) (rM’000) (rM’000) (rM’000)

company

ExecutiveDirectors - - - -Non-ExecutiveDirectors 164 - - 164

Total 164 - - 164

group

ExecutiveDirectors - 1,863 193 2,056Non-ExecutiveDirectors 164 - - 164

Total 164 1,863 193 2,220

ThenumbersofDirectorsoftheGroupwhoseremunerationfallwithintherespectivebandsareasfollows:

the group the companyrange of remuneration 2016 2015 2016 2015

non-executive directorsBelowRM50,000 1 1 1 1RM50,001–RM100,000 2 2 2 2

executive directors RM400,001–RM450,000 1 1 - -RM450,001–RM500,000 - - - -RM500,001–RM550,000 - - - -RM550,001–RM600,000 1 1 - -RM600,001–RM750,000 - - - -RM750,001–RM900,000 - - - -RM900,001-RM950,000 - - - -RM950,001-RM1,000,000 - - - -RM1,000,001-RM1,050,000 - 1 - -RM1,050,001–RM1,100,000 1 - - -



24


DetailsoftheremunerationofeachDirectorarenotrevealedinthisAnnualReportastheBoardexpressedtheiropinionontheinfringementofprivacyofeachindividualDirector.However,forthebetterdisclosureofannualremunerationofDirectors,itwillbestatedinbandsofRM50,000togetherwiththenumberofExecutive/Non-ExecutiveDirectorsintheirrelevantbands.Furthermore,thetotalremunerationofDirectorsisalsodisclosedwithpropersegregationofcategory.

PrinciPLe 3: reinforce indePendence

annual assessment of independence

TheNCreviewsthe independencyofDirectorannuallywith referenceto thecriteriasetout in theMainMarketListingRequirements (“MMLR”), andPracticeNotes on independencybyBursaMalaysia. TheCompany’s IndependentNon-ExecutiveDirectorsalsosubmitanannualdeclarationwithregardtotheirindependency.

Based on the assessment done by the NC this financial year ended 30 June 2016, the Board is pleased with the level of independencepresentedbyalltheNon-ExecutiveDirectors.TheyhaveshownaptunderstandingonmattersdiscussedinBoard meetings and are objective in dealing with matters that came up during the financial year. This demonstrated their capabilitiesinbeingakeymembertotheBoardasIndependentDirectors.

tenure of independent director

TheBoardisawareoftherecommendationfromtheCodeonthelimitationofthetenureofeachIndependentDirectorwhichislimitedtonine(9)yearsofservice.AnIndependentDirectorwhohasservedmorethannine(9)yearsofservicemaybere-appointedasanIndependentDirectorbutwiththeapprovalfromtheshareholders.Else,thesaidDirectorwillbere-designatedasaNon-IndependentDirector.

separation of Positions of the chairman and Managing director

TheChairmanroleoftheBoardandtheManagingDirectorpositionareheldbytwo(2)differentindividualswithclearlydefinedroles,dutiesandresponsibilities.Withthissegregationofrolesbetweentwo(2)individuals,abalanceofpowerand authority within the Company is ensured.

The Chairman provides leadership to the Board with key focus to the governance and compliance set out by Bursa Malaysia.Withrespecttoitsrole,theBoardisresponsibleinoverseeingthefunctionoftheManagementandotherBoardCommittees in the discharge of their respective term of references to ensure the effectiveness of the Board.

TheManagingDirectorassiststheChairmanontheexecutionofBoardpolicies,managestheday-to-dayactivitiesofthebusiness and operational decisions for the business.

PrinciPLe 4: foster coMMitMent

time commitment

InrespecttodischargingtheirrolesandresponsibilitiesbytheDirectors,theBoardissatisfiedwiththeDirectors’timecommitmentgivenintofulfillingit.ThisisevidentbytheattendanceofeachDirectorintheirrespectiveBoardmeetingforthe financial year ended 30 June 2016 as set out in the table below:

number of meetings attended in the financial year ended 30 June 2016 director Board ac nc rc

1. Azhar bin Hussain 5/5 5/5 1/1 1/1

2. Piong Teck Onn 5/5 - - 1/1

3. DatukPiongTeckYen 5/5 - - -

4. Chin Swee Chang 5/5 - - -

5. Piong Teck Min 5/5 4/5 1/1 1/1

6. P’ng Beng Hoe 5/5 5/5 1/1 1/1



25

ANNUAl REpORT 2016

TheCompanySecretariescirculatesthemeetingschedulesinadvancefortheDirectorstoplantheirtiming.

The Directors have the rights to accept any other Board appointments outside the Group’s commitment, with anunderstandingthattheappointmentisnotinconflictwiththebusinessoftheCompanyandGrouporinanywaycausesanegativeeffectontheDirector’sperformanceasaBoardmember.Allappointmentsofthisnatureshallbediscussedandapproved by the Chairman or the Board.

IncompliancetotheMMLRofBursaMalaysia,theBoardadheredtotherequirementsthatdirectorsshouldnothavemorethan five (5) directorships in listed companies. This measure is taken to ensure the effective discharge of their duties as well as to encourage time commitment to the companies in which they are directors. The Board meetings are scheduled a year ahead to enable full attendance.

director’s training

Every year, the pharmaceutical industry develops and grows which also means that there are constant changes or new statutory and regulatory requirements. In order to keep themselves abreast with latest developments, the Board members attend relevant trainings.

Duringthefinancialyearended30June2016,theDirectorshaveconsistentlykeptthemselveswell informedwithlocalandinternationalaffairsbyself-reading,advisoriesfromregulatorybodiesaswellastheManagement.TheDirectorshavekeptthemselvesupdatedwithchangesregardingregulationaffectingtheindustryandtheGroup.

Duringtheyearunderreview,alltheDirectorshaveattendedtrainings.Thelistoftrainingsattendedare:

training/course title date

Assertive Skills 23-24 July 2015PerformanceManagementWorkshop 25September2015Seminar Percukaian Antarabangsa 2015 5 November 2015IndividualTeamCoaching 1-2December2015CGBreakfastSeriesforDirectors:ImprovingBoardRiskOversightEffectiveness 26February2016Six Thinking Hats 8 March 2016In-HouseTraining-PharmaceuticalRegulatoryLandscape 25May2016

PrinciPLe 5: uPHoLd integritY in financiaL rePorting

compliance with applicable financial reporting standards

TheBoardensures that a reliable assessmentof theCompany’s and theGroup’s financial performance,positionandfuture prospect through the Annual Audited Financial Statements and quarterly financial reports which are to be provided to all shareholders. The Board trusts the effectiveness of the Audit Committee in ensuring the financial statement’s adherence to the financial reporting standards and appropriate accounting policies had been applied consistently with support of rational judgement.

Directorsareobligedtopreparefinancialstatements,resultsandcashflowsthatrepresentanaccurateandunbiasedviewoftheGroup’spresentstateofaffairattheendofeachfinancialyearinaccordancetotheCompaniesAct1965.

Inpreparingthesefinancialstatements,theDirectorshave:

• adoptedappropriateaccountingpoliciesandappliedthemconsistently;• madereasonableandprudentjudgementsandestimates;• ensuredallapplicableaccountingstandardshavebeenfollowed,subjecttoanymaterialdeparturesdisclosedand

explained in the financial statements; and • preparedthefinancialstatementsonon-goingconcernbasis,unlessitisinappropriatetopresumethattheGroup

and the Company will continue in business.



26


TheBoardare toensure that theGroupmaintainappropriateaccounting recordswhichcanbedisclosedatany timewithareasonableaccuracyof theGroup’sandtheCompany’s financialpositionapart fromensuringthat the financialstatementscompliestotheCompaniesAct1965.TheDirectorshavetheultimatedutyfortakingmeasurestoidentifyandpreventfuturefraudorotherirregularitiestosafeguardofassetsoftheGroupandtheCompany.

The Audit Committee Chairman, Mr. P’ng Beng Hoe is a Chartered Accountant and former partner of a professional accounting firm. The AC Chairman with other AC members reviewed the Company’s financial statements in the presence of the external auditors before recommending the same to the Board for approval and issuance to the stakeholders. The Audit Committee ensures that the Company’s financial statements comply with the requirements of the Companies Act 1965aswellastheaccordanceofthefinancial reportingstandards inMalaysia.TheReportof theAuditCommittee isoutlinedinthisAnnualReport.

assessment of suitability and independence of external auditors

The Audit Committee carry out an annual assessment of the suitability and independence of the external auditors as recommended by Bursa Malaysia. Being the external auditors of the Company and all its subsidiaries, Messrs. Crowe Horwath is assessed by the Audit Committee for their independence and suitability of as well as reviewing the level of non-audit services to be rendered by the external auditors. Assessment for suitability and independence are conducted in terms of evaluating their performance as well as comparing it to the performance from prior years. The Audit Committee was satisfied with the technical competency and audit independence of Messrs. Crowe Horwath. Henceforth, recommended theircontinuousservicetotheBoardwherebyshareholders’approvalwillbesoughtattheforthcoming17thAGM.

PrinciPLe 6: recognise and Manage risKs

sound framework to Manage risks

The Group adopts the Enterprise Risk Management (“ERM”) framework that was formalised with the help of KPMGBusinessAdvisorySdn.Bhd.This framework linkstheGroup’sstrategicobjectivestoprincipal risks;andtheprincipalrisks to control measures and opportunities which are then translated into actions. Periodic testing and maintenance are done for the effectiveness and efficiency of these internal controls, procedures and processes are conducted to ensure that the system is feasible and robust.

internal audit function

The Group has outsourced its Internal Audit Function to KPMG Business Advisory Sdn. Bhd., a firm of professionalconsultants to assist the Board as well as the Audit Committee to ensure its internal control system are operating as designed. The internal auditors are assigned with conducting independent assessments to prove the adequacy, efficiency andeffectivenessoftheGroup’sriskmanagementandinternalcontrolsystemswhichareinplace.

The internal auditor has direct reporting lines to the Audit Committee to ensure independence from the Management.

Details of theGroup’s internal control system and framework are set out in the Statement onRiskManagement andInternalControlofthisAnnualReport.



27

ANNUAl REpORT 2016

PrinciPLe 7: ensure tiMeLY and HigH QuaLitY discLosure

The Board reviews and approves all quarterly announcements as well as other corporate announcements before circulation. The Company announces its quarterly and yearly results within the mandatory period. The financial statements and press release information are publicly released through Bursa LINK on a timely basis to ensure the effective dissemination of informationregardingtheGroup.

Leverage on information technology for effective dissemination of information

TheGrouphas incorporatedan InvestorRelationssectionto theircorporatewebsiteat (www.kotrapharma.com) which aimsforabettercommunicationbetweentheGroupanditsshareholders.

TheBoardemphasisesinkeepingaconstructiverelationshipwithitsshareholders.TheGroup’sperformanceandoperationsare announced viaBursaMalaysia’swebsite at (www.bursamalaysia.com) aswell as theGroup’s corporatewebsite at(www.kotrapharma.com). This is done to ensure that shareholders are updated and has more avenue to gain information.

TheGroup’scorporatewebsiteprovidescorporateinformation,financialresults,annualreports,boardcharter,producthistory as well as the Group’s history and any important announcements. For further enquiries or any request forinformation,shareholdersandinvestorsarewelcomedtocontacttheGroup’sCorporateAffairsDepartment.

PrinciPLe 8: strengtHen reLationsHiP BetWeen coMPanY and sHareHoLders

encourage shareholder Participation at general Meetings

Generalmeetingsareheldannuallyforshareholderstoexercisetheirrightsandvoiceouttheirenquiriesthatmayarise.The notice of the meeting will be distributed to each shareholder in a timely manner together with a copy of the Annual Reportatleasttwentyone(21)daysbeforetheAGM.AllpertinentinformationtoshareholderswhichenablesthemtofullyexercisetheirrightsisdisclosedwithintheAnnualReport.

AGMisaplatformfortheGrouptoenablebetterrespondtoandfromtheirshareholdersaswellassolvinganyconfusionorissuesthatmayarise.TheManagingDirectoroftheGroupwillpresenttheGroup’sperformanceandprogressduringtheAGM.AllDirectorsandtheExternalAuditorsarepresentduringtheAGMtoattendtoanyissuesraisedbyshareholdersand investors. The Chairman ensures that the Board is accessible to all shareholders.

IndependentNon-ExecutiveDirector,Mr.P’ngBengHoewasappointedbytheBoardaswellastheCompanySecretariesas the contact person for the shareholders to convey their views and feedback to the Board effectively.

Poll voting

In adherence to the recommendation set in the Code, the Board will ensure that all resolutions set out in the notice of general meetings or in any notice of resolution which may properly be moved and is intended to be moved at general meetings, is voted by poll.

TheBoardwillappointone(1)independentscrutineertovalidatevotescastduringtheAGM.Thescrutineerappointedisindependent and is not an officer of the Board or its related corporation. effective communication and Proactive engagement

Inordertomaintaincontinuouscommunicationwiththeshareholders,theGrouphasapracticeoftimelyandmeaningfuldisclosures of information to shareholders as well as the general investing public. The practices complies with the requirementsoftheMMLRofBursaMalaysiaandtofacilitatestrengtheningengagementaswellasbettercommunicationwithitsshareholders.Additionalinformationcanbedisclosedonavoluntarybasisifaneedarises.TheGroupbelievesthat a high level of disclosure and effective communication with its shareholders is important to shareholders and investors for an informed investment decisions.



28


additionaL coMPLiance inforMation

recurrent related Party transactions ThedetailsoftheRecurrentRelatedPartyTransactions(RRPT)ofarevenueortradingnatureconductedpursuanttotheShareholders’ Mandate during the financial year ended 30 June 2016 are as follows:

name of Mandated related Party relationship with the group nature of transactions rM ’000

KwongOnnTongSdn.Bhd. AcompanyinwhichPiongTeckThey, • Salesofgoods 241(36327-U) whoisbrothertoPiongTeckMin, PiongTeckOnnandDatukPiong TeckYen(DirectorsoftheCompany),isa Directorandhasdirectinterest

Lonnix(M)Sdn.Bhd. AcompanyinwhichPiongTeckMin,whoisa • Contractmanufacturing 84(269246-T) directDirectoroftheCompany,isaDirectorand costspaid/payable has interest

AppetonLaboratory AcompanyinwhichDatukPiongTeckYenand • Rentalofpremises 6Sdn.Bhd.(67336-V) PiongTeckOnn,whoareDirectorsofthe paid/payable Company,areDirectorsandhavedirectinterests

EstateofPiong AnestateinwhichPiongTeckMin,PiongTeck • Rentalofpremises 6NamKim@PiongPakKim OnnandDatukPiongTeckYenwhoareDirectors paid/payable of the Company, have beneficial interest

ThamesBioscience(M) AcompanyinwhichPiongTeckOnnand • Royaltypaid/payable 16Sdn.Bhd.(464698-X) DatukPiongTeckYenwhoareDirectorsofthe CompanyareDirectors.PiongTeckOnnhas direct interest

PiongTeckOnn ADirectoroftheCompany • Rentalofpremises 14 paid/payable

DatukPiongTeckYen ADirectoroftheCompany • Rentalofpremises 46 paid/payable

N’CareInternational ArelatedpartybyvirtueofPiongCheeKeong • Rentalofpremises 57Sdn. Bhd. (878365-M) and Piong Chee Kien both being sons of Piong received/receivable TeckMinwhoisaDirectoroftheCompany

YongSoonMoi ArelatedpartybyvirtueofMadamYongSoonMoi • Rentalofpremises 6 being a mother to Piong Teck Min, Piong Teck Onn, paid/payable DatukPiongTeckYenwhoareDirectorsofthe Company.MadamYongSoonMoiisalsodeemed to be a major shareholder of the Company QuanweiliSdn.Bhd. ArelatedpartybyvirtueofPiongTeckTheybeing • Salesofgoods 229(1112034-H) a brother to Piong Teck Min, Piong Teck Onn and DatukPiongTeckYenwhoareDirectorsofthe Company. Piong Teck They is also deemed to be a major shareholder of the Company



29

ANNUAl REpORT 2016

name of Mandated related Party relationship with the group nature of transactions rM ’000

CoxinetAsset AcompanyinwhichPiongTeckOnn,whoisa • Rentalofpremises 902Sdn.Bhd.(939273-D) DirectoroftheCompany,isaDirectoranda paid/payable shareholder.ARelatedPartybyvirtueof PiongCheeWeibeingsonofPiongTeckOnn whoisaDirectoroftheCompanyhasinterest

aggregate value of related party transactions 1,607

TheCompanyisseekingshareholders’approvalonRRPTofarevenueortradingnaturetobeenteredbytheCompany’ssubsidiarywithrelatedpartiesintheordinarycourseofbusinessintheforthcomingAGM.DetailsofthetransactionsarefurnishedintheCirculartoShareholders,whichisdistributedtogetherwiththeAnnualReport.

audit and non-audit fees Paid to external auditors

Duringthefinancialyearended30June2016,theauditandnon-auditfeespaidorpayabletotheexternalauditorsandaffiliated firms are as stated in the table below:

group companytype of fees (rM) (rM)

Audit 63,000 19,000Non-audit 65,900 6,300

Material contracts involving directors’ and Major shareholders’ interests

Other thanRRPTof a revenue in nature asdisclosed, therewerenomaterial contracts entered intoby theCompanyanditssubsidiariesinvolvingtheinterestsoftheDirectors,ChiefExecutivewhoisnotadirector,majorshareholdersorconnected persons which were still subsisting as at the end of the financial year under review or which were entered into since the end of the previous financial year except as disclosed in the financial statements.



30


introduction

TheBoardispleasedtopresentherewiththeStatementonRiskManagementandInternalControl(“Statement”)whichoutlines the nature and scope of internal controls of the Group during the financial year ended 30 June 2016. Thisstatementispreparedpursuanttoparagraph15.26(b)oftheMainMarketListingRequirementsofBursaMalaysia.

Board’s resPonsiBiLitY

TheBoardacknowledges itsoverall responsibility for theGroup’ssystemsof internalcontroland riskmanagement tosafeguardshareholders’investmentandtheGroup’sassets,whichincludestheestablishmentofanappropriatecontrolenvironment and framework as well as reviewing its adequacy and integrity of that system. The system of internal control covers not only financial controls but operational and compliance controls and risk management procedures. In view of the limitations inherent in any system of internal controls, the system is designed to manage, rather than to eliminate, the likelihoodoffraud,errororfailuretoachievetheGroup’sbusinessandcorporateobjectives.Thesystemcanthereforeonly provide reasonable, but not absolute assurance, against material misstatement or loss.

FollowingthepublicationoftheStatementonRiskManagementandInternalControl:GuidelinesforDirectorsofListedIssuers(the“Guidelines”)inJanuary2013,theBoardconfirmsthatthereisanon-goingprocessforidentifying,evaluatingandmanagingthesignificantrisksencounteredbytheGroup.TheBoard,throughitsAuditCommittee,regularlyreviewsthe adequacy and integrity of the system of internal controls and risk management, including mitigating measures taken by Management, to address the areas of key risks as identified. The process has been in place for the financial year under reviewanduptothedateofapprovalofthisStatementforinclusionintheAnnualReportoftheCompany.

risK ManageMent fraMeWorK

TheBoardfullysupportsthecontentsoftheGuidelinesandalsoRecommendation6.1oftheMalaysianCodeonCorporateGovernance(“MCCG2012”)whichrecommendstheestablishmentofasoundframeworktomanagerisks.

TheGroup’senterpriseriskmanagementframeworkwasformalisedwiththeassistanceofaprofessionalfirmofconsultantsinvolvingthedevelopmentof theGroup’sriskprofileandappropriatecontrolsystemstomanageandcontrol therisksidentified.

InJune2016,anEnterpriseRiskManagementUpdatehadbeencarriedoutwiththefacilitationfromaprofessionalfirmofconsultantsinvolvingtheDirectors,SeniorManagementaswellasManagement.TheriskprofileoftheGrouphasbeenupdated and action plans were formulated focusing on the principal risks.

The Board believes that maintaining a sound system of risk management is founded on a clear understanding and appreciationofthefollowingkeyelementsoftheGroup’sriskmanagementframework:

• A riskmanagementstructurewhichoutlines the linesof reportingandestablishes the responsibilitiesatdifferentlevels, i.e. the Board, Audit Committee and Management; and

• On-goingidentificationofprincipalrisks(presentandpotential)facedbytheGroupandformalisationofManagement’saction plans to mitigate and manage these risks considering the established risk appetite and parameters (qualitative andquantitative)fortheGroup.

internaL audit function

TheGrouphasoutsourceditsInternalAuditFunctiontoafirmofprofessionalswhichassistboththeBoardandtheAuditCommitteebyconductingindependentassessmentsoftheadequacy,efficiencyandeffectivenessoftheGroup’sinternalcontrol system. To ensure independence from Management, the internal auditor has direct reporting lines to the Audit Committee.

STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTROL


31

ANNUAl REpORT 2016

The Audit Plan is approved by the Audit Committee and audit reports and the status of the audit plan are presented to the Audit Committee. Significant findings and recommendations for improvements are highlighted to the Audit Committee, with periodic follow up and reviews of action plans.

Duringthefinancialyearunderreview, internalauditwascarriedoutoncontroloverproductionandmaterialplanning,covering (i) research and development; (ii) material planning; (iii) production scheduling; (iv) review and analysis on production output, yield and capital utilization; and (v) review on repair and maintenance incurred and timeliness of preventive maintenance for Kotra Pharma (M) Sdn. Bhd. The internal audit function also follows up and reports to the Audit Committee the status of implementation by Management on the recommendations highlighted in the previous internal audit reports. The findings from the audit were reported in February 2016. The costs incurred for the internal audit function forthefinancialyearended30June2016amountedtoRM53,764.

Additionally, ongoing reviews and deliberation of financial and operational reports during Board and Audit Committee meetingsarecarriedouttoensuretheeffectivenessandadequacyoftheGroups’internalcontrolsysteminsafeguardingtheshareholders’investmentandtheGroup’sassets.

otHer risK and controL Processes:

• AdefinedorganisationalstructurewithintheGroup,withclearlinesofresponsibility,authorityandaccountability,toensure that Management acts in the best interest of shareholders;

• Detailedbudgetingprocesswherekeybusinessdivisionspreparebudgetsforthecomingyear;• RegularmonitoringofresultsagainstbudgetwithmajorvariancesbeingfollowedupandManagementactiontaken,

where necessary;• Operating procedures that set out the policies, procedures and practices adopted in the Group are properly

documented and communicated to staff members so as to ensure clear accountabilities. The effectiveness of internal control procedures are subject to continuous assessments, reviews and improvements;

• Financial reports, progress reports, key variances and analysis of financial data of the Group’s businesses areprovided regularly to the Senior Management and the Board;

• RegularManagementmeetingsareconductedtoreviewanddiscussfinancialandoperationalreportsandmatters;• Clear delegation of responsibilities and appropriate level of empowerment to various committees of the Board,

ExecutiveDirectorsandmembersofSeniorManagement;• Establishedmanagementinformationsystemswithdocumentedprocesses,includingchangerequesttocomputer

programmes and access to data files; and• SufficientinsuranceandphysicalsafeguardsovermajorassetsareinplacetoensurethattheassetsoftheGroup

areadequatelycoveredagainstanymishapthatmayresultinmateriallossestotheGroup.

adeQuacY and effectiveness of tHe grouP’s risK ManageMent and internaL controL sYsteMs

TheBoardhasreceivedassuranceinwritingfromtheManagingDirectorandChiefFinancialOfficerthattheGroup’sriskmanagement and internal control systems have been operating adequately and effectively, in all material aspects, during the financial year under review and up to the date of this Statement. Taking this assurance into consideration and the input from relevant parties, the Board is of the view that the systems of risk management and internal control is satisfactory andhavenotresultedinanymateriallosses,contingenciesoruncertaintiesthatwouldrequiredisclosureintheGroup’sannual report. The Board remains committed and resilient towards establishing a robust system of internal control and risk management.

Pursuant to paragraph 15.23 of theMainMarket Listing Requirements of BursaMalaysia, the external auditors havereviewedthisStatementforinclusionintheAnnualReportoftheGroupfortheyearended30June2016andreportedto the Board that nothing has come to their attention that caused them to believe that the statement is inconsistent with their understanding of the processes adopted by the Board in reviewing the adequacy and integrity of the systems of risk management internal controls.

Statement On Risk ManagementAnd Internal Control (Cont’d)


32


The Audit Committee of Kotra Industries Berhad is pleased to present the following Audit Committee report and its activities during the financial year ended 30 June 2016.

1. Members of the audit committee

All the members of the Audit Committee fulfill the requirements as prescribed or approved by Bursa Malaysia. The AuditCommitteememberswere appointedby theBoardofDirectors and theCommittee comprisedof three (3)membersallofwhomareNon-ExecutiveDirectorsandmajorityofwhomareIndependentDirectors.

The Audit Committee involves of the following members:

• P’ngBengHoe Chairman / Independent Non-Executive Director • AzharbinHussain Member / Independent Non-Executive Director • PiongTeckMin Member / Non-Independent Non-Executive Director

By recommendation of the Board, the Audit Committee selected a Chairman amongst them who is an Independent Director. The Chairman, Mr. P’ng Beng Hoe is a former Partner of PricewaterhouseCoopers and a CharteredAccountant. All the members of the Audit Committee are financially literate.

2. attendance of the audit committee Meetings

A total of five (5) Audit Committee meetings were held during the financial year ended 30 June 2016. The attendance details of each member at the Audit Committee meetings held during the year are as follows:

Members aug oct nov feb May 2015 2015 2015 2016 2016 total

1. P’ng Beng Hoe √ √ √ √ √ 5/5

2. Azhar bin Hussain √ √ √ √ √ 5/5

3. Piong Teck Min X √ √ √ √ 4/5

TheManagingDirector,ChiefFinancialOfficerandSeniorFinanceManagerwereinvitedtoattendallAuditCommitteemeetings to facilitate deliberations and discussion as well as to provide further insights on the operational matters. The external auditors were invited to discuss their management letters, audit plan and other matters deemed relevant by the Audit Committee.

The Audit Committee also met to discuss and review the quarterly unaudited financial results and the annual audited financialstatementsoftheGroup.

The Company Secretary, Ms. Sean Ne Teo, was the Secretary of the Audit Committee and responsible for the co-ordination of administrative details including calling of meetings and keeping of minutes.

Further readings on the term of reference of the Audit Committee can be found on theGroup’swebsite (www.kotrapharma.com).

REPORT OF ThE AuDIT COMMITTEE


33

ANNUAl REpORT 2016

Report Of The Audit Committee (Cont’d)

3. review of the audit committee

The Board is presently satisfied with the Audit Committee and its members in executing their duties. The Nomination Committee will review the terms of office as well as the performance of the Audit Committee and each of its members, andwillcontinuetodosoannuallyinaccordancewithParagraph15.20oftheListingRequirements.Thenextreviewwill be done on November 2016.

4. summary of Work of the audit committee

Duringthefinancialyear,theAuditCommitteehasdischargeditsdutiesassetoutinitstermsofreference.Summaryof work performed by the Audit Committee during the financial year are as follows:

a) financial reporting

• Reviewed the Group’s Financial Reporting, the quarterly results and unaudited year-end financialstatementsoftheGrouppriortosubmissiontotheBoardofDirectorsforapproval.

• ReviewedtheannualauditedfinancialstatementsoftheCompanyandGroupwiththeexternalauditorsbeforerecommendingforapprovaltotheBoardofDirectors.

• Duringthereview,theAuditCommitteediscussedwiththeManagementandexternalauditorsfocusingon any significant or unusual matters in the areas of financial reporting issues, judgments made by the Management or any rare transactions that may affect the financial statements and the Audit Committee noted there were none as such concerns raised.

The review was to ensure compliance with the principles and practices of:

i. MMLRofBursaMalaysiaii. Provisions of the Companies Act 1965iii. Accepted accounting standards of Malaysiaiv. Other legal and regulatory requirements which are deemed relevant.

B) external audit

• Reviewedthefollowingwiththeexternalauditors:-

- audit plans with particular emphasis on the scope and quality of the audit- auditors’ report- theauditor’sevaluationoftheGroup’sandtheCompany’sinternalcontrolsviatheirmanagement

letters, and- theassistancegivenbytheGroup’sofficertotheexternalauditors.

• TheAuditCommitteehasmetwiththeexternalauditorswithoutthepresenceoftheManagementon25May 2016 to discuss on the issues and concerns arising from the interim and final audits as well as other matters.

• Evaluatedtheexternalauditors’performances,efficacyandtheircompetencethenmaderecommendationsfor their re-appointment to the Board attributable to satisfactory audit services provided by the external auditors. In this evaluation, the Committee took into consideration as prescribed in Paragraph 15.21 of the MainMarketingListingRequirementbesidestheabilityoftheexternalauditorstomeetthedeliverablesas per the timeline presented and approved by the Committee.

• Accessed the independence and objectivity of the external auditors from the provision of non-auditservices and tenure of the engagement partners of the firm for the Group of no longer than five (5)consecutiveyears.Thenon-auditfeesaredisclosedintheCorporateGovernanceStatement.


34


c) internal audit

• Reviewed the internal audit programmeby the internal auditors to ensure theadequacyof scopeandcomprehensiveness of the activities and coverage on the auditable areas with high risk.

• Evaluatedandapprovedtheinternalauditors’remunerationpackagetoensureitcommensuratewiththeresources allocation to discharge their duties as internal auditors.

• ReviewedtheadequacyandeffectivenessofcorrectiveactionstakenbytheManagementonallmattersdeemed significant on recommendations of the internal auditors to ensure all the key risks and control are in place.

• DeliberatedandapprovedthefuturecyclesoftheinternalauditfieldworkthatweredevelopedbasedontheRiskManagementFramework.

d) related Party transactions

• DesignatedSeniorFinanceManagertooverseedailytransactions,toensurethatthesetransactionswereapproved in theshareholders’mandate,andwerebasedonnormal termsconsistentwith theGroup’susual business practices and policies, and having the Senior Finance Manager to brief the AC on a quarterly basis.

• Reviewed the related party transactions entered into by the Group on quarterly basis as well as thedisclosureof such transactionsandconflictof interest situation in theAnnualReportof theGroupasprepared by the Senior Financial Manager.

• Reviewed the Circular to Shareholders relating to shareholders’ mandate for recurrent related partytransactions of a revenue or trading nature prior to recommending it for the Board’s approval.

e) risk Management

• TheAuditCommitteereviewedanddiscussedwiththeManagementtheoverallriskprofileoftheGroup’srisk, the significant risks and provided guidance on the action plans to address the identified risks and further reported to the Board thereon.

f) annual reporting

• ReviewedandrecommendedtotheBoardforapprovalfordisclosuresintheAnnualReport,theStatementonCorporateGovernance,theStatementonRiskManagementandInternalControl,theReportofAuditCommitteeforfinancialyearended30June2016andCirculartoShareholdersonRecurrentRelatedPartyTransactions.



35

ANNUAl REpORT 2016

5. internal audit function

The internal audit function of the Group is outsourced to KPMG Business Advisory Sdn. Bhd., an externalindependent internal auditor. Themain responsibilityofKPMG is toexecute theGroup’s internal audit functionseffectively and professionally in accomplishing its goal by bringing an efficient and independent approach to improve theeffectivenessofcontrolandgovernanceprocesswithintheGroup.Thecriticalroleoftheinternalauditoristoprovideinternalauditplan,auditpolicyandscopeofworktotheGroup.Besidesthat,theauditoralsoreportsontheir assessment of the internal control for the financial year to the Audit Committee.

KPMGreportsdirectlytotheAuditCommitteeontheoutcomesoftheauditconductedandmakerecommendationsasappropriatebyadoptingthestandardsandprinciplesoutlinedinthepracticesofCorporateGovernance.

The internal audit function is explainedmore in the Statement onRiskManagement and InternalControl in thisAnnualReport.

6. directors’ training

In order to effectively discharge its duty, the Committee has regularly kept abreast with the latest regulatory requirements and industry development via trainings and in-house briefing. The related Committee members have attended a number of trainings for the financial year of 2016 and one (1) in-house briefing. The particulars of the trainingattendedbythemarestatedundertheStatementonCorporateGovernanceinpage25.


Directors’ ReportStatement by DirectorsStatutory DeclarationIndependent Auditors’ ReportStatements of Profit or Loss and Other Comprehensive IncomeStatements of Financial PositionStatements of Changes in EquityStatements of Cash FlowsNotes to the Financial StatementsSupplementary Information

37414142444546474990

FINANCIAL STATEMENT


37

ANNUAl REpORT 2016

Directors’ report

The directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 30 June 2016.

Principal activities

The Company is principally involved in investment holding and the provision of management services. The principal activities of its subsidiaries are set out in Note 13 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

Results Group Company RM’000 RM’000 Profit after taxation for the financial year 7,761 10

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

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

Dividends No dividend was paid since the end of previous financial year and the directors do not recommend any final dividend in respect of the current financial year.

Holding Companies

The holding company is Piong Nam Kim Holdings Sdn. Bhd., a company incorporated in Malaysia which the director also regard as the ultimate holding company.

Directors

The names of the directors of the Company in office since the date of the last report and at the date of this report are: Piong Teck Onn Piong Teck Min Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP Chin Swee Chang P’ng Beng Hoe, BKT, PJK, JP Azhar Bin Hussain Piong Chee Kien (Alternate to Piong Teck Min)


38


Directors’ interests According to the register of directors’ shareholdings, the interests of directors holding office at the end of the financial year in shares and options under the Employees’ Share Option Scheme (“ESOS”) in the Company and its related corporations during the financial year were as follows:-

Number of ordinary shares of RM1 each 1.7.2015 Acquired Sold 30.6.2016

Holding company Direct interest Piong Teck Min 10,000 - - 10,000 Piong Teck Onn 51,000 - - 51,000 Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 10,000 - - 10,000 Indirect interest Piong Teck Min - 1,547 - 1,547

Number of ordinary shares of RM0.50 each 1.7.2015 Acquired Sold 30.6.2016

The Company Direct interestChin Swee Chang 1,800,000 - - 1,800,000 Piong Teck Min 2,776,220 - - 2,776,220 Piong Teck Onn 1,800,000 - - 1,800,000 Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 1,802,200 - - 1,802,200 Indirect interest Chin Swee Chang - 1,664,060 - 1,664,060 Piong Teck Min 64,998,212 - - 64,998,212 Piong Teck Onn 64,624,362 1,664,060 - 66,288,422 Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 64,624,362 - - 64,624,362

Number of options over ordinary shares of RM0.50 each 1.7.2015 Granted Exercised 30.6.2016

The Company Chin Swee Chang 1,980,000 - - 1,980,000 Piong Teck Onn 1,980,000 - - 1,980,000 Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 1,980,000 - - 1,980,000 Piong Teck Min 1,980,000 - - 1,980,000

By virtue of their interests in the holding company, namely Piong Nam Kim Holdings Sdn. Bhd., Piong Teck Min, Piong Teck Onn and Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP are deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest.

None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.

Directors’ report (Cont’d)


39

ANNUAl REpORT 2016

Employees’ share options scheme At an extraordinary general meeting held on 29 July 2013, the Company’s shareholders approved the establishment of an Employee Share Option Scheme (“ESOS”) of not more than 15% of the total issued and paid-up ordinary shares of the Company to eligible Directors and employees of the Group (herein referred to as “new ESOS”).

The principal features of the new ESOS are disclosed in Note 19 to the financial statements.

The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the list of option holders holding share options of less than 250,000 shares.

The eligible employees who have been granted and have unexercised share options of 250,000 or more as at the end of the financial year are as follows:-

No. Name of Options Holders Number of Share Options 1. Chin Swee Chang 1,980,000 2. Piong Chee Wei 1,980,000 3. Piong Teck Min 1,980,000 4. Piong Teck Onn 1,980,000 5. Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 1,980,000 6. Cheah Ming Loong 600,000 7. Hiew Mein Foong 600,000 8. Daniel Chua Chong Liang 550,000 9. Wong Huey Ling 300,000 10. Gan Ching Ching 250,000 11. Piong Teck Fong 250,000 12. Victor A/L George Philips 250,000 13. Shelvan A/L Sinniah 250,000

Directors’ benefits Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate, other than those arising from the share options granted to the directors under the ESOS.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown in Note 26(d) to the financial statements) by reason of a contract made by the Company with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest other than as disclosed in Note 26 to the financial statements.

Other statutory information (a) Before the financial statements of the Group and of the Company were made out, the directors took reasonable

steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for impairment losses on receivables, and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for impairment losses on receivables; and

(ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records

in the ordinary course of business had been written down to an amount which they might be expected so to realise.



40


Other statutory information (cont’d)

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

(i) the amount written off for bad debts or allowance for impairment losses on receivables in the financial statements of the Group and of the Company inadequate to any substantial extent; and

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

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

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

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

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

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

(f) In the opinion of the directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may substantially affect the ability of the Group or of the Company to meet their obligations when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the

financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.

Auditors The auditors, Messrs. Crowe Horwath, have expressed their willingness to continue in office. Signed in accordance with a resolution of the directors dated 10 October 2016.

Piong Teck Onn Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP



41

ANNUAl REpORT 2016

We, Piong Teck Onn and Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP, being two of the directors of Kotra Industries Berhad, state that, in the opinion of the directors, the financial statements set out on pages 44 to 89 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 30 June 2016 and of their financial performance and the cash flows for the financial year ended on that date.

The supplementary information set out in Note 32, which is not part of the financial statements have been prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad.

Signed in accordance with a resolution of the directors dated 10 October 2016.

Piong Teck Onn Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP

I, Daniel Chua Chong Liang, being the officer primarily responsible for the financial management of Kotra Industries Berhad, do solemnly and sincerely declare that the financial statements set out on pages 44 to 89 are, to the best of my knowledge and belief, correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act 1960.

Subscribed and solemnly declared byabovenamed Daniel Chua Chong Liang,at Melaka in the State of Melakaon 10 October 2016

Daniel Chua Chong Liang Before me,

Sharizah Binti YahyaPesuruhjaya SumpahCommissioner of Oaths81-1 Jalan Melaka Raya 25Taman Melaka Raya75000 Melaka

stAteMeNt BY DirectorsPursuant to Section 169 (15) of the Companies Act 1965

stAtUtorY DecLArAtioNPursuant to Section 169 (16) of the Companies Act 1965


42


Report on the financial statements We have audited the financial statements of Kotra Industries Berhad, which comprise the statements of financial position as at 30 June 2016 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 44 to 89. Directors’ responsibility for the financial statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

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

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

Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 30 June 2016 and of their financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia.

iNDepeNDeNt AUDitors’ reportto the members of Kotra Industries Berhad

(Incorporated in Malaysia) Company No: 497632-P


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ANNUAl REpORT 2016

independent Auditors’ report (Cont’d)to the members of Kotra Industries Berhad

(Incorporated in Malaysia) Company No: 497632-P

Report on other legal and regulatory requirements In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following:-

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(c) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse

comment made under Section 174(3) of the Act.

Other reporting responsibilities The supplementary information set out in Note 32 on page 90 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

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

Crowe Horwath Onn Kien HoeFirm No.: AF 1018 Approval No: 1772/11/16 (J/PH)Chartered Accountants Chartered Accountant

Date: 10 October 2016 Melaka


44


Group Company Note 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Revenue 4 160,230 145,174 720 720 Other operating income 5 3,248 5,761 - - Raw materials and consumables used (42,976) (36,595) - - Changes in inventories of finished goods and work in progress (4,486) (4,001) - - Employee benefits expenses 6 (40,696) (37,277) (421) (421) Selling and distribution expenses (30,468) (37,041) - - Depreciation and amortisation (13,291) (12,305) - - Other operating expenses (16,722) (14,820) (184) (194) Finance costs 7 (6,974) (7,718) - - Profit before taxation 8 7,865 1,178 115 105 Income tax expense 9 (104) (118) (105) (98) Profit after taxation 7,761 1,060 10 7 Other comprehensive income - - - - Total comprehensive income for the financial year 7,761 1,060 10 7

Earnings per share attributable to equity holders of the Company (sen): - Basic 10 5.86 0.80 - Diluted 10 5.62 0.76

stAteMeNts oF proFit or LossAND otHer coMpreHeNsiVe iNcoMe

For the financial year ended 30 June 2016

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


45

ANNUAl REpORT 2016


Group Company Note 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Assets Non-current assets Property, plant and equipment 11 161,743 162,905 - - Investment properties 12 1,493 1,519 - - Investment in subsidiaries 13 - - 120,245 118,821

163,236 164,424 120,245 118,821

Current assets Inventories 14 34,355 36,509 - - Trade receivables 15 37,647 35,735 - - Other receivables 16 2,136 5,614 1 1 Amounts owing by subsidiaries 17 - - 286 282 Derivative assets 18 15 - - - Cash and bank balances 16,276 11,711 1,688 1,371

90,429 89,569 1,975 1,654

Total assets 253,665 253,993 122,220 120,475

Equity and liabilities Equity attributable to equity holder of the Company Share capital 19 66,227 66,158 66,227 66,158 Retained earnings 20 57,878 50,117 48,799 48,789 Other reserves 21 7,109 5,467 7,109 5,467

Total equity 131,214 121,742 122,135 120,414

Non-current liabilities Borrowings 22 66,548 75,621 - - Deferred income 23 1,845 372 - -

68,393 75,993 - -

Current liabilities Borrowings 22 30,381 29,055 - - Trade payables 24 13,383 18,383 - - Other payables 25 10,294 8,818 85 61 Derivative liabilities 18 - 2 - -

54,058 56,258 85 61

Total liabilities 122,451 132,251 85 61

Total equity and liabilities 253,665 253,993 122,220 120,475

stAteMeNts oF FiNANciAL positioNAs at 30 June 2016


46


Non-distributable Distributable Share Share Share option Retained Total capital premium reserve earnings equity RM’000 RM’000 RM’000 RM’000 RM’000

Group At 1 July 2014 66,053 912 3,041 49,057 119,063 Issuance of shares 105 32 - - 137 Share-based payment transactions

- Share options exercised - 137 (137) - - - Share options granted under new ESOS - - 1,482 - 1,482

- 137 1,345 - 1,482 Profit after taxation, representing total comprehensive income for the financial year - - - 1,060 1,060

At 30 June 2015 66,158 1,081 4,386 50,117 121,742 Issuance of shares 69 21 - - 90 Share-based payment transactions


- 63 1,558 - 1,621 Profit after taxation, representing total comprehensive income for the financial year - - - 7,761 7,761

At 30 June 2016 66,227 1,165 5,944 57,878 131,214

Company At 1 July 2014 66,053 912 3,041 48,782 118,788 Issuance of shares 105 32 - - 137 Share-based payment transactions


- 137 1,345 - 1,482 Profit after taxation, representing total comprehensive income for the financial year - - - 7 7

At 30 June 2015 66,158 1,081 4,386 48,789 120,414 Issuance of shares 69 21 - - 90 Share-based payment transactions


- 63 1,558 - 1,621 Profit after taxation, representing total comprehensive income for the financial year - - - 10 10

At 30 June 2016 66,227 1,165 5,944 48,799 122,135

stAteMeNts oF cHANGes iN eQUitYFor the financial year ended 30 June 2016



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Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Cash flows from operating activities Profit before taxation 7,865 1,178 115 105 Adjustments for: Amortisation of deferred income (69) (40) - - Bad debts written off 1 103 - - Depreciation: - investment properties 26 26 - - - property, plant and equipment 13,266 12,279 - - Fair value (gain)/loss on derivative financial instrument (17) 89 - - Loss/(gain) on disposal of property, plant and equipment 11 (2) - - Impairment loss on trade receivables 761 452 - - Interest expense 6,974 7,718 - - Inventories written off 1,146 - - - Property, plant and equipment written off 41 1 - - Rental income from investment properties (89) (89) - - Reversal of impairment loss on trade receivables (307) (246) - - Share-based payment under ESOS 1,621 1,482 197 197 Unrealised loss/(gain) on foreign exchange 650 (937) - -

Operating profit before working capital changes 31,880 22,014 312 302 Decrease in inventories 1,008 2,352 - - (Increase)/decrease in receivables (2,277) 9,892 - - (Decrease)/Increase in payables (3,315) (3,543) 23 (15)

Cash from operations 27,296 30,715 335 287 Interest paid (1,286) (1,668) - - Tax paid (120) (137) (104) (114) Tax refund 20 - - -

Net cash from operating activities 25,910 28,910 231 173

stAteMeNts oF cAsH FLoWsFor the financial year ended 30 June 2016


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Cash flows for investing activities Rental received from investment properties 89 89 - - Purchase of property, plant and equipment (Note 28) (9,672) (7,739) - - Proceeds from disposal of property, plant and equipment 10 34 - -

Net cash for investing activities (9,573) (7,616) - -

Cash flows (for)/from financing activities Government grant received 1,542 102 - - Drawdown/(repayment) of other short term borrowings 884 (6,797) - - Proceeds from issuance of shares 90 137 90 137 Interest paid (5,688) (6,050) - - Repayment of term loans (7,985) (7,624) - - Repayment of hire purchase (509) (474) - - Advances to a subsidiary - - (4) (13)

Net cash (for)/from financing activities (11,666) (20,706) 86 124

Net increase in cash and bank balances 4,671 588 317 297 Effects of exchange rate changes on cash and bank balances (106) 84 - - Cash and bank balances at beginning of the financial year 11,711 11,039 1,371 1,074 Cash and bank balances at end of the financial year 16,276 11,711 1,688 1,371

statements of cash Flows (Cont’d)For the financial year ended 30 June 2016



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1. Corporate information

The Company is a public company limited by shares and is incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The principal place of business is located at No. 1, 2 & 3, Jalan TTC 12, Cheng Industrial Estate, 75250 Melaka.

The Company is principally involved in investment holding and the provision of management services. The principal activities of its subsidiaries are set out in Note 13 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

The holding company is Piong Nam Kim Holdings Sdn. Bhd., a company incorporated in Malaysia, which the directors also regard as the ultimate holding company.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 10 October 2016.

2. Basis of preparation

The financial statements of the Group are prepared under the historical cost convention and modified to include other bases of valuation as disclosed in other sections under significant accounting policies, and in compliance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia.

(a) No new accounting standard and interpretation (including the consequential amendments) have been adopted by the Group during the current financial year.

(b) The Group has not applied in advance the following accounting standards and interpretations (including the consequential amendments, if any) that have been issued by the Malaysian Accounting Standards Board (“MASB”) but are not yet effective for the current financial year:-

MFRSs and IC Interpretations (Including The Consequential Amendments) Effective Date

• MFRS14RegulatoryDeferralAccounts 1January2016 • MFRS9FinancialInstruments(IFRS9issuedbyIASBinJuly2014) 1January2018 • MFRS15RevenuefromContractswithCustomers 1January2018 • MFRS16Leases 1January2019 • AmendmentstoMFRS2:ClassificationandmeasurementofShare 1January2018 Based Payment Transactions • AmendmentstoMFRS10andMFRS128:SaleorContributionof Deferreduntil Assets between an Investor and its Associate or Joint Venture further notice • AmendmentstoMFRS11:AccountingforAcquisitionsofInterests 1January2016 in Joint Operations

• AmendmentstoMFRS10,MFRS12andMFRS128:Investment 1January2016 Entities - Applying the Consolidation Exception

• AmendmentstoMFRS15:EffectiveDateofMFRS15 1January2018

Notes to tHe FiNANciAL stAteMeNts30 June 2016


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Notes to the Financial statements (Cont’d)30 June 2016

2. Basis of preparation (cont’d) (b) (cont’d) MFRSs and IC Interpretations (Including The Consequential Amendments) Effective Date • AmendmentstoMFRS15:ClarificationstoMFRS15‘Revenue 1January2018 from Contract with Customers’ • AmendmentstoMFRS101:DisclosureInitiative 1January2016 • AmendmentstoMFRS107:DisclosureInitiative 1January2017 • AmendmentstoMFRS112:RecognitionofDeferredTaxAssets 1January2017 for unrealised losses • AmendmentstoMFRS116andMFRS138:Clarificationof 1January2016 Acceptable Methods of Depreciation and Amortisation • AmendmentstoMFRS116andMFRS141:Agriculture-BearerPlants 1January2016 • AmendmentstoMFRS127(2011):EquityMethodinSeparate 1January2016 Financial Statements • AnnualImprovementstoMFRSs2012–2014Cycle 1January2016

The adoption of the above accounting standards and interpretations (including the consequential amendments, if any) is expected to have no material impact on the Group’s financial statements upon their initial application.

3. Significant accounting policies

(a) Critical accounting estimates and judgements

Estimates and judgements are continually evaluated by the directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that affect the application of the Group’s accounting policies and disclosures, and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed as below:-

(i) Depreciation of property, plant and equipment

The estimates for the residual values, useful lives and related depreciation charges for the property, plant and equipment are based on commercial and production factors which could change significantly as a result of technical innovations, competitors’ actions in response to the market conditions and regulatory requirements.

The Group anticipates that the residual values of its property, plant and equipment will be insignificant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount.

Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.


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3. Significant accounting policies (cont’d) (a) Critical accounting estimates and judgements (cont’d)

(ii) Income taxes

There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group recognises tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax balance in the year in which such determination is made.

(iii) Impairment of non-financial assets

When the recoverable amount of an asset is determined based on the estimate of the value in use of the cash-generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash-generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows.

(iv) Write-down of inventories

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.

(v) Classification between Investment Properties and Owner-occupied Properties

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes.

Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.

(vi) Impairment of trade and other receivables

An impairment loss is recognised when there is objective evidence that a financial asset is impaired. Management specifically reviews its loans and receivables financial assets and analyses historical bad debts, customer creditworthiness, current economic trends and changes in the customer payment terms when making a judgement to evaluate the adequacy of the allowance for impairment losses. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. If the expectation is different from the estimation, such difference will impact the carrying value of receivables.

(vii) Classification of leasehold land

The classification of leasehold land as a finance lease or an operating lease requires the use of judgement in determining the extent to which risks and rewards incidental to its ownership lie. Despite the fact that there will be no transfer of ownership by the end of the lease term and that the lease term does not constitute the major part of the indefinite economic life of the land, management considered that the present value of the minimum lease payments approximated to the fair value of the land at the inception of the lease. Accordingly, management judged that the Group has acquired substantially all the risks and rewards incidental to the ownership of the land through a finance lease.


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3. Significant accounting policies (cont’d) (a) Critical accounting estimates and judgements (cont’d)

(viii) Fair values estimates for certain financial assets and financial liabilities

The Group carries certain financial assets and financial liabilities at fair value, which requires extensive use of accounting estimates and judgement. While significant components of fair value measurement were determined using verifiable objective evidence, the amount of changes in fair value would differ if the Group uses different valuation methodologies. Any changes in fair value of these assets and liabilities would affect profit and/or equity.

(ix) Share-based payments

The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity investments at the date at which they are granted. The estimating of the fair value requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model including the expected life of the option volatility and dividend yield and making assumptions about them.

(b) Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to the end of the reporting period.

Subsidiaries are entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Subsidiaries are consolidated from the date on which control is transferred to the Group up to the effective date

on which control ceases, as appropriate. Intragroup transactions, balances, income and expenses are eliminated on consolidation. Intragroup losses

may indicate an impairment that requires recognition in the consolidated financial statement. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

(i) Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Under the acquisition method, the consideration transferred for acquisition of a subsidiary is the fair value of the assets transferred, liabilities incurred and the equity interests issued by the Group at the acquisition date. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs, other than the costs to issue debt or equity securities, are recognised in profit or loss when incurred.

In a business combination achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.


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3. Significant accounting policies (cont’d)

(b) Basis of consolidation (cont’d) (i) Business combinations (cont’d)

Non-controlling interests in the acquiree may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets at the date of acquisition. The choice of measurement basis is made on a transaction-by-transaction basis.

(ii) Non-controlling interests

Non-controlling interests are presented within equity in the consolidated statement of financial position, separately from the equity attributable to owners of the Company. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

At the end of each reporting period, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity.

(iii) Changes in ownership interests in subsidiaries without change of control

All changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of consideration paid or received is recognised directly in equity of the Group.

(iv) Loss of control

Upon the loss of control of a subsidiary, the Group recognises any gain or loss on disposal in profit or loss which is calculated as the difference between:-

- the aggregate of the fair value of the consideration received and the fair value of any retained interest in the former subsidiary; and

- the previous carrying amount of the assets (including goodwill), and liabilities of the former subsidiary and any non-controlling interests.

Amounts previously recognised in other comprehensive income in relation to the former subsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities were disposed of (i.e. reclassified to profit or loss or transferred directly to retained profits). The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under MFRS 139 or, when applicable, the cost on initial recognition of an investment in an associate or a jointly venture.


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3. Significant accounting policies (cont’d) (c) Functional and foreign currency

(i) Functional and presentation currency

The individual financial statements of each entity in the Group are presented in the currency of the primary economic environment in which the entity operates, which is the functional currency.

The consolidated financial statements are presented in Ringgit Malaysia (“RM”) which is the Company’s functional and presentation currency. All values are rounded to the nearest thousand (RM’000) except when otherwise indicated.

(ii) Transactions and balances

Transactions in foreign currencies are converted into RM on initial recognition, using the exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. All exchange differences are recognised in profit or loss.

(d) Financial instruments

Financial assets and financial liabilities are recognised in the statements of financial position when the Group has become a party to the contractual provisions of the instruments.

Financial instruments are classified as financial assets, financial liabilities or equity instruments in accordance with the substance of the contractual arrangement and their definitions in MFRS 132. Interest, dividends, gains and losses relating to a financial instrument classified as a liability are reported as an expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity.

Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

A financial instrument is recognised initially at its fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial instrument (other than a financial instrument at fair value through profit or loss) are added to/deducted from the fair value on initial recognition, as appropriate. Transaction costs on the financial instrument at fair value through profit or loss are recognised immediately in profit or loss.

Financial instruments recognised in the statements of financial position are disclosed in the individual policy statement associated with each item.

(i) Financial assets

On initial recognition, financial assets are classified as either financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate.

• Financialassetsatfairvaluethroughprofitorloss

Financial assets are classified as financial assets at fair value through profit or loss when the financial asset is either held for trading or is designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges.


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(d) Financial instruments (cont’d)

(i) Financial assets (cont’d)

• Financialassetsatfairvaluethroughprofitorloss(cont’d)

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. Dividend income from this category of financial assets is recognised in profit or loss when the Group’s right to receive payment is established.

Financial assets at fair value through profit or loss could be presented as current or non-current assets. Financial assets that are held primarily for trading purposes are presented as current assets whereas financial assets that are not held primarily for trading purposes are presented as current or non-current assets based on the settlement date.

• Held-to-maturityinvestments

As at the end of the reporting period, there were no financial assets classified under this category.

• Loansandreceivablesfinancialassets

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

Loans and receivables financial assets are classified as current assets, except for those having settlement dates later than 12 months after the reporting date which are classified as non-current assets.

• Available-for-salefinancialassets

As at the end of the reporting period, there were no financial assets classified under this category.

(ii) Financial liabilities

All financial liabilities are initially measured at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are either held for trading or are designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges.

Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.


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3. Significant accounting policies (cont’d) (d) Financial instruments (cont’d) (iii) Equity instruments

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from proceeds.

Dividends on ordinary shares are recognised as liabilities when approved for appropriation.

(iv) Derecognition A financial asset or part of it is derecognised when, and only when, the contractual rights to the cash

flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

(e) Investments in subsidiaries

Investments in subsidiaries including the fair value adjustments on inter-company loans at inception date (and the share options granted to employees of the subsidiaries) are stated at cost in the statement of financial position of the Company, and are reviewed for impairment at the end of the reporting period if events or changes in circumstances indicate that the carrying values may not be recoverable. The cost of the investments includes transaction costs.

On the disposal of the investments in subsidiaries, the difference between the net disposal proceeds and the carrying amount of the investments is recognised in profit or loss.

(f) Property, plant and equipment

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

any.

Depreciation is charged to profit or loss (unless it is included in the carrying amount of another asset) on the straight-line method to write off the depreciable amount of the assets over their estimated useful lives. Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal annual rates used for this purpose are:-

Industrial buildings and installations 2% -10% Leasehold land Over the lease period of 91 or 99 years Machinery and equipment 5% -20% Motor vehicles 10% Office equipment 10% Computer equipment 20% Furniture and fittings 10% Renovation 10%


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

The depreciation method, useful lives and residual values are reviewed, and adjusted if appropriate, at the end of each reporting period to ensure that the amount, method and periods of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of the property, plant and equipment.

Building and machinery under construction represents assets which are not ready for commercial use at the

end of the reporting period. Building and machinery under construction are stated at cost, and are depreciated accordingly when the assets are completed and ready for commercial use.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when the cost is incurred and it is probable that the future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which the Group is obligated to incur when the asset is acquired, if applicable.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from derecognition of the asset being the difference between the net disposal proceeds and the carrying amount, is recognised in profit or loss.

(g) Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset

are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss as expenses in the period in which they are incurred.

(h) Investment properties Investment properties are properties held either to earn rental income or for capital appreciation or for both.

Investment properties are stated at cost less accumulated depreciation and impairment losses, if any, consistent with the accounting policy for property, plant and equipment as stated in Note 3(f) to the financial statements.

Investment properties are derecognised when they have either been disposed of or when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal.

On the derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount is recognised in profit or loss.

Transfers are made to or from investment property only when there is a change in use. All transfers do not change the carrying amount of the property reclassified.


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3. Significant accounting policies (cont’d) (i) Impairment (i) Impairment of financial assets

All financial assets (other than those categorised at fair value through profit or loss and investments in subsidiaries), are assessed at the end of each reporting period whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. For an equity instrument, a significant or prolonged decline in the fair value below its cost is considered to be objective evidence of impairment.

An impairment loss in respect of loans and receivables financial assets is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

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

(ii) Impairment of non-financial assets

The carrying values of assets, other than those to which MFRS 136 - Impairment of Assets does not apply, are reviewed at the end of each reporting period for impairment when an annual impairment assessment is compulsory or there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts when the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount and an impairment loss shall be recognised. The recoverable amount of the assets is the higher of the assets’ fair value less costs to sell and their value in use, which is measured by reference to discounted future cash flow using a pre-tax discount rate. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belong.

An impairment loss is recognised in profit or loss.

When there is a change in the estimates used to determine the recoverable amount, a subsequent

increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in profit or loss immediately.

(j) Assets under hire purchase

Assets acquired under hire purchase are capitalised in the financial statements as property, plant and equipment and the corresponding obligations are treated as hire purchase payables. The assets capitalised are measured at the lower of the fair value of the leased assets and the present value of the minimum lease payments and, are depreciated in accordance with the policy set out in Note 3(f) above. Each hire purchase payment is allocated between liability and finance charges so as to achieve a constant rate on the finance balance outstanding. Finance charges are recognised in profit or loss over the period of the respective hire purchase agreements.


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3. Significant accounting policies (cont’d) (k) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average

basis, and comprises the purchase price and incidentals incurred in bringing the inventories to their present location and condition. Cost of finished goods and work-in-progress includes the cost of materials, labour and appropriate proportion of production overhead.

Net realisable value represents the estimated selling price less the estimated costs of completion and the

estimated costs necessary to make the sale. Where necessary, write-down is made for all damaged, obsolete and slow-moving items.

(l) Income taxes Income taxes for the reporting period comprise current tax and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the reporting

period and is measured using the tax rates that have been enacted or substantively enacted at the end of the reporting period.

Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from

goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination costs or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

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

credits to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. The carrying amounts of deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred tax assets to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when

the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the end of the reporting period.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets

against current tax liabilities and when the deferred tax relate to the same taxable entity and the same taxation authority.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred

tax items are recognised in correlation to the underlying transactions either in other comprehensive income or directly in equity and deferred tax arising from a business combination is included in the resulting goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination costs.


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3. Significant accounting policies (cont’d) (m) Cash and cash equivalents Cash and cash equivalents comprise cash in hand and bank balances that are readily convertible to known

amounts of cash and which are subject to an insignificant risk of changes in value with original maturity periods of three months or less.

(n) Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount can be made. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the provision is the present value of the estimated expenditure required to settle the obligation. The unwinding of the discount is recognised as interest expense in profit or loss.

(o) Financial Guarantee Contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse

the holder for a loss it incurs because a specific debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

The Group designates corporate guarantees given to financial institutions for credit facilities granted to subsidiaries and related parties as insurance contracts as defined in MFRS 4 Insurance Contracts. The Group recognises these corporate guarantees as liabilities when there is a present obligation, legal or constructive, as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

(p) Employee benefits

(i) Short term benefits

Wages, salaries, bonuses and non-monetary benefits are measured on an undiscounted basis and are recognised in profit or loss in the period in which the associated services are rendered by employees of the Group.

(ii) Defined contribution plans

The Group’s contributions to defined contribution plans are recognised in profit or loss in the period to

which they relate. Once the contributions have been paid, the Group has no further liability in respect of the defined contribution plans.

(iii) Share-based payment transactions The Group operates an equity-settled share-based compensation plan, under which the Group receives

services from employees as consideration for equity instruments of the Company (share options).

At grant date, the fair value of the share options is recognised as an expense on a straight-line method over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding credit to employee share option reserve in equity. The amount recognised as an expense is adjusted to reflect the actual number of the share options that are expected to vest. Service and non-market performance conditions attached to the transaction are not taken into account in determining the fair value.


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(p) Employee benefits (cont’d)

(iii) Share-based payment transactions (cont’d)

In the Company’s separate financial statements, the grant of the share options to the subsidiaries’ employees is not recognised as an expense. Instead, the fair value of the share options measured at the grant date is accounted for as an increase to the investment in subsidiary undertaking with a corresponding credit to the employee share option reserve.

Upon expiry of the share option, the employee share option reserve is transferred to retained profits.

When the share options are exercised, the employee share option reserve is transferred to share capital or share premium if new ordinary shares are issued, (or to treasury shares if the share options are satisfied by the reissuance of treasury shares).

(q) Related parties Apartyisrelatedtoanentity(referredtoasthe‘reportingentity’)if:-

(a) A person or a close member of that person’s family is related to a reporting entity if that person:-

(i) has control or joint control over the reporting entity;

(ii) has significant influence over the reporting entity; or

(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting

entity.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

(b) An entity is related to a reporting entity if any of the following conditions applies:- (i) The entity and the reporting entity are members of the same group (which means that each parent,

subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identified in (a) above.

(vii) A person identified in (a)(i) above has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to parent of the reporting entity.


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(q) Related parties (cont’d)

Related parties also include key management personnel defined as those persons having authority and resposibility for planning, directing and controlling the activities of the reporting either directly or indirectly, including any director (whether executive or otherwise) of that entity.

(r) Contingent liabilities

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that an outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.

(s) Segmental information Segment revenue and expenses are those directly attributable to the segments and include any joint revenue

and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of property, plant and equipment (net of accumulated depreciation, where applicable), other investments, inventories, receivables, and cash and bank balances.

Most segment assets can be directly attributed to the segments on a reasonable basis. Segment assets do not include income tax assets, whilst segment liabilities do not include income tax liabilities and borrowings from financial institutions.

Segment revenue, expenses and results include transfers between segments. The prices charged on intersegment transactions are based on normal commercial terms. These transfers are eliminated on consolidation.

(t) Earning per ordinary share

Basic earnings per ordinary share is calculated by dividing the consolidated profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the reporting period, adjusted for own shares held.

Diluted earnings per ordinary share is determined by adjusting the consolidated profit or loss attributable to

ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

(u) Fair value measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using a valuation technique. The measurement assumes that the transaction takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. However, this basis does not apply to share-based payment transactions.


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(u) Fair value measurements (cont’d) For financial reporting purposes, the fair value measurements are analysed into level 1 to level 3 as follows:-

Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liability that the entity

can access at the measurement date; Level 2: Inputs are inputs, other than quoted prices included within level 1, that are observable for the asset

or liability, either directly or indirectly; and Level 3: Inputs are unobservable inputs for the asset or liability. The transfer of fair value between levels is determined as of the date of the event or change in circumstances

that caused the transfer. (v) Revenue and other income (i) Sale of goods

Revenue is measured at fair value of the consideration received or receivable and is recognised upon the execution of sales order and delivery of goods and where applicable, net of returns and trade discounts.

(ii) Interest income Interest income is recognised on an accrual basis.

(iii) Management fee Management fee is recognised on an accrual basis.

(iv) Rental income Rental income is recognised on an accrual basis.

(v) Government grants

Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis over the period necessary to match them with the related costs which they are intended to compensate for. These grants are presented as other income in profit or loss.

Grants that compensate the Group for the cost of an asset are recognised as deferred grant income in the statement of financial position and are amortised to profit or loss on a systematic basis over the expected useful life of the relevant asset.


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4. Revenue Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Sale of goods 160,230 145,174 - - Management fees - - 720 720

160,230 145,174 720 720

5. Other operating income Group 2016 2015 RM’000 RM’000

Amortisation of deferred income 69 40 Fair value gain on derivative financial instrument 17 - Gain on foreign currency exchange -realised 2,029 4,121 -unrealised - 937 Gain on disposal of property, plant and equipment - 2 Rental income from investment properties 89 89 Reversal of impairment loss on trade receivables 307 246 Miscellaneous 737 326

3,248 5,761

6. Employee benefits expenses Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Short term employee benefits 33,919 30,260 216 216 Contributions to defined contribution plan 3,153 3,133 6 6 Share options expenses 1,621 1,482 197 197 Other personnel expenses 2,003 2,402 2 2

40,696 37,277 421 421

Included in employee benefits expenses are key management personnel compensation as disclosed in Note 26(d) to

the financial statements.


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7. Finance costs

Group 2016 2015 RM’000 RM’000

Interest expense on: - Term loans 5,688 6,050 - Other bank borrowings 1,286 1,668

6,974 7,718

8. Profit before taxation Profit before taxation is arrived at after charging:- Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Auditors’ remuneration: - statutory audit - current year 63 63 19 19 - under provision in prior year - 6 - 3 - other services 3 3 3 3 Bad debts written off 1 103 - - Depreciation: - investment properties 26 26 - - - property, plant and equipment 13,266 12,279 - - Direct operating expenses arising from investment properties: - non-rental generating properties 5 4 - - - rental generating properties 12 12 - - Directors’ remuneration: - fees 164 166 164 166 - emoluments 1,863 1,817 - - - other short term employee benefits 191 217 - - Fair value loss on derivative financial instrument - 89 - - Impairment loss on trade receivables 761 452 - - Inventories written off 1,146 - - - Loss on disposal of property, plant and equipment 11 - - - Loss on foreign exchange - unrealised 650 - - - Property, plant and equipment written off 41 1 - - Rental of equipment 153 126 - - Rental of premises 1,237 393 - - Research and development expenses 641 895 - -


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9. Income tax expense


Income tax: - Current year 118 117 100 98 - (Over)/under provision in previous financial years (14) 1 5 -

104 118 105 98

A reconciliation of income tax expense applicable to the profit before taxation at the statutory tax rate to income tax expense at the effective tax rate of the Group and of the Company is as follows:-

2016 2015 RM’000 RM’000

Group Profit before taxation 7,865 1,178

Taxation at Malaysian statutory tax rate of 24% (2015 - 25%) 1,888 295 Effect of expenses not deductible for tax purposes 764 273 Effect of double deduction tax incentives (2,965) (4,609) Deferred tax assets not recognised on current year unutilised business losses and other deductible temporary differences 431 3,991 Effect of proposed changed in corporate income tax rate from 25% to 24% on deferred tax - 167 (Over)/Under provision of income tax expense in previous financial year (14) 1

Income tax expense 104 118

2016 2015 RM’000 RM’000

Company

Profit before taxation 115 105

Taxation at Malaysian statutory tax rate of 24% (2015 - 25%) 28 26 Effect of expenses not deductible for tax purposes 72 72 Overprovision of income tax expense in previous financial year 5 -

Income tax expense 105 98


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9. Income tax expense (cont’d)

Deferred tax assets have not been recognised in respect of the following items (stated at gross) due to uncertainty of their recoverability in view of the expected availability of additional tax incentives:


Tax loss carry-forward 24,755 19,524 - - Other deductible temporary differences 32,864 47,011 - -

57,619 66,535 - -

10. Earnings per share

(i) Basic

The basic earnings per share of the Group is calculated by dividing the profit after taxation for the financial year by the weighted average number of ordinary shares in issue during the financial year.

2016 2015

Profit after taxation (RM’000) 7,761 1,060 Weightedaveragenumberofordinarysharesinissue(‘000) 132,376 132,058 Basic earnings per ordinary share (sen) 5.86 0.80

(ii) Diluted

The diluted earnings per share of the Group is calculated by dividing the profit after taxation for the financial year by the weighted average number of ordinary shares in issue during the financial year after adjusted for the dilutive effects of share options granted to employees.

2016 2015

Profit after taxation (RM’000) 7,761 1,060 Weightedaveragenumberofordinarysharesinissue(‘000) 132,376 132,058 AdjustmentforESOS(‘000) 5,767 7,324

138,143 139,382

Diluted earnings per ordinary share (sen) 5.62 0.76


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11. Property, plant and equipment

As at Depreciation As at 1.7.2015 Additions Reclassification Disposal Written off charges 30.6.2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group Net carrying amount

Industrial buildings and installations 48,259 741 - - - (1,181) 47,819 Leasehold land 4,138 - - - - (52) 4,086 Machinery and equipment 103,339 4,855 983 (12) - (11,085) 98,080 Motor vehicles 386 - - - - (111) 275 Office equipment 186 98 - (7) (11) (38) 228 Computer equipment 582 608 - - (2) (237) 951 Furniture and fittings 1,883 1,078 - (1) - (388) 2,572 Renovation 103 364 1,752 - (28) (174) 2,017 Machinery under construction 4,029 4,421 (2,735) - - - 5,715

Total 162,905 12,165 - (20) (41) (13,266) 161,743

As at Depreciation As at 1.7.2014 Additions Reclassification Disposal Written off charges 30.6.2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group Net carrying amount

Industrial buildings and installations 49,096 326 - - - (1,163) 48,259 Leasehold land 4,190 - - - - (52) 4,138 Machinery and equipment 100,015 4,717 9,009 (32) (1) (10,369) 103,339 Motor vehicles 502 - - - - (116) 386 Office equipment 189 35 - - - (38) 186 Computer equipment 619 181 - (1) - (217) 582 Furniture and fittings 1,882 307 - - - (306) 1,883 Renovation 68 53 - - - (18) 103 Machinery under construction 13,038 - (9,009) - - - 4,029

Total 169,599 5,619 - (33) (1) (12,279) 162,905


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

Accumulated Carrying Cost depreciation amount Group RM’000 RM’000 RM’000

At 30 June 2016 Industrial buildings and installations 58,149 (10,330) 47,819 Leasehold land 4,892 (806) 4,086 Machinery and equipment 159,585 (61,505) 98,080 Motor vehicles 2,183 (1,908) 275 Office equipment 548 (320) 228 Computer equipment 4,242 (3,291) 951 Furniture and fittings 4,312 (1,740) 2,572 Renovation 2,204 (187) 2,017 Machinery under construction 5,715 - 5,715

Balance at 30 June 2016 241,830 (80,087) 161,743

At 30 June 2015 Industrial buildings and installations 57,408 (9,149) 48,259 Leasehold land 4,892 (754) 4,138 Machinery and equipment 154,192 (50,853) 103,339 Motor vehicles 2,221 (1,835) 386 Office equipment 510 (324) 186 Computer equipment 3,638 (3,056) 582 Furniture and fittings 3,347 (1,464) 1,883 Renovation 211 (108) 103 Machinery under construction 4,029 - 4,029

Balance at 30 June 2015 230,448 (67,543) 162,905

Included in the assets of the Group at the end of the reporting period were machinery and equipment with a total net book value of RM1,902,676 (2015: RM2,334,500), which were acquired under hire purchase terms.

The carrying amount of property, plant and equipment pledged to secure borrowings as referred to in Note 22(i) are as follows:-

Group 2016 2015 RM’000 RM’000

Industrial buildings and installations 47,819 48,259 Leasehold land 4,086 4,138 Machinery and equipment 68,549 75,467 Furniture and fittings 487 595

120,941 128,459


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12. Investment properties

Group 2016 2015 RM’000 RM’000

Cost At 1 July/30 June 2,105 2,105

Accumulated depreciation At 1 July 586 560 Depreciation during the financial year 26 26

At 30 June 612 586

Net carrying amount 1,493 1,519

The investment properties comprising freehold land and building have been pledged to a licensed bank as security for banking facilities granted to the Group as referred to Note 22(i).

The fair value of the investment properties are within level 2 of the fair value hierachy and are arrived at by reference to the market evidence of transaction prices for similar properties and are performed by registered valuers having appropriate recognised professional qualification and recent experience in the locations and category of properties being valued. The fair value of the investment properties as at the end of reporting period amounted to RM2,760,000 (2015: RM2,540,000).

13. Investment in subsidiaries

Company 2016 2015 RM’000 RM’000

Unquoted share, at deemed cost 114,756 114,756 Share options granted to employees of subsidiary 5,489 4,065 120,245 118,821


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13. Investment in subsidiaries (cont’d)

The details of the subsidiaries are as follows:

Country of Effective equity Name of subsidiaries incorporation interest Principal activities 2016 2015 % %

Kotra Pharma (M) Malaysia 100 100 Developing, manufacturing and trading Sdn. Bhd. of pharmaceutical and healthcare products Appeton Healthcare Malaysia 100 100 Dormant Sdn. Bhd. 14. Inventories

Group 2016 2015 RM’000 RM’000

Raw materials 15,409 13,077 Work-in-progress 748 1,915 Finished goods 18,198 21,517

34,355 36,509

Recognised in profit or loss:- Inventories recognised as cost of sales 46,316 40,596 Amount written off 1,146 -

15. Trade receivables

Group 2016 2015 RM’000 RM’000

Trade receivables 39,940 37,602 Less: Allowance for impairment losses (2,293) (1,867)

37,647 35,735


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15. Trade receivables (cont’d)

Group 2016 2015 RM’000 RM’000

Allowance for impairment losses:- At 1 July 1,867 1,661 Addition during the financial year 761 452 Reversal during the financial year (307) (246) Written off during the financial year (28) -

At 30 June 2,293 1,867

The Group’s normal trade credit terms range from 60 to 120 days (2015: 60 to 120 days). Included in trade receivables are amounts due from related parties as disclosed in Note 26(c) to the financial

statements.

16. Other receivables


Other receivables:- Third parties 480 2,070 - - Advances to suppliers of property, plant and equipment 489 3,069 - -

969 5,139 - - Tax recoverable - 1 - - Deposits 493 320 1 1 GST input tax 523 - - - Prepayments 151 154 - -

2,136 5,614 1 1

The advances to suppliers of property, plant and equipment are unsecured and interest-free. The amount owing will be offset against future billing from suppliers upon completion.

17. Amounts owing by subsidiaries

The amounts due from subsidiaries are non-trade in nature, unsecured, interest-free and repayable on demand. The amount owing is to be settled in cash.


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18. Derivative assets/(liabilities)

Contract/ Notional Group Amount 2016 2015 RM’000 RM’000 RM’000

Derivative assets/(liabilities) Forward foreign currency contracts 1,227 15 (2)

Forward foreign currency contracts are used to hedge the Group’s sales denominated in United States Dollar (USD) for which firm commitments existed at the end of the reporting period. The settlement dates on forward foreign exchange currency contracts range between 2 and 3 months (2015: 1 and 2 months) after the end of the reporting period.

The Group has recognised a gain of RM17,204 (a loss of RM88,685 in 2015) arising from fair value changes of

derivatives during the financial year as disclosed in Note 5 (2015: Note 8) to the financial statements. The fair value changes were attributed to changes in the foreign exchange spot and forward rates. The method and assumptions applied in determining the fair values of derivatives are disclosed in Note 31(d) to the financial statements.

19. Share capital The movements in the authorised and paid-up share capital of the Company are as follows:-

Company Number of ordinary shares of RM0.50 each Amount 2016 2015 2016 2015 ‘000 ‘000 RM’000 RM’000

Authorised: 200,000 200,000 100,000 100,000

Issued and fully paid-up: At 1 July 132,317 132,107 66,158 66,053 New shares issued under the employees share option scheme 138 210 69 105

At 30 June 132,455 132,317 66,227 66,158

At an extraordinary general meeting held on 29 July 2013, the Company’s shareholders approved the establishment of an Employee Share Option Scheme (“ESOS”) of not more than 15% of the total issued and paid-up ordinary shares of the Company to eligible Directors and employees of the Group (herein referred to as “new ESOS”).


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19. Share capital (cont’d)

The main features of the new ESOS are as follows:- (a) The maximum number of new shares of the Company, which may be available under the scheme, shall not

exceed in aggregate 15%, or any such amount or percentage as may be permitted by the relevant authorities of the issued and paid-up share capital of the Company at any one time during the existence of the ESOS.

(b) Eligible directors or employees of the Group are directors or employees of the Group who have been confirmed in the service of the Group prior to the offer or, if the employee is serving under an employment contract, the contract should be for a duration of at least two (2) years. The maximum allowable allotments for the directors have been approved by the shareholders of the Company in a general meeting.

(c) The Scheme shall be in force for a period of five (5) years from 30 July 2013 and may be extended for a further period of up to five (5) years, at the sole and absolute discretion of the Board upon the recommendation by the ESOS committee and shall not in aggregate exceed a duration of ten (10) years from the effective date.

(d) The option price may be subjected to a discount of not more than 10% of the average of the market quotation of

the shares as shown in the daily official list issued by Bursa Malaysia Securities Berhad for the five trading days immediately preceding the offer date, or at par value of the shares of the Company, whichever is higher.

(e) The option may be exercised by the grantee by notice in writing to the Company in the prescribed form during the option period in respect of all or any part of the new shares of the Company comprised in the ESOS.

(f) All new ordinary shares issued upon exercise of the options granted under the ESOS will rank pari passu in all respects with the existing ordinary shares of the Company, provided always that new ordinary shares so allotted and issued, will not be entitled to any dividends, rights, allotments and/or other distributions declared, where the entitlement date of which is prior to date of allotment and issuance of the new shares.

(g) An option holder may, in a particular year, exercise up to such maximum number of shares in the option certificate or as determined by the Board of Directors.

(h) The option granted to eligible employees will lapse when they are no longer in employment with the Group.

The option prices and the details in the movement of the options granted are as follows:-

Exercise price Balance at Balance at Date of offer Exercise period per ordinary share 1.7.2015 Lapsed Exercised 30.6.2016 RM

31.7.2013 31.7.2014 0.65 3,173,752 (41,840) (138,000) 2,993,912 31.7.2013 31.7.2016 0.65 6,347,504 (83,680) - 6,263,824 31.7.2013 31.7.2018 0.65 6,347,504 (83,680) - 6,263,824

15,868,760 (209,200) (138,000) 15,521,560

The options which lapsed during the financial year were due to resignations of employees.


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20. Retained earnings

Under the single tier tax system, tax on the Company’s profits is the final tax and accordingly, any dividends declared to the shareholders are not subject to tax.

21. Other reserves

Group Company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Share premium reserve (a) 1,165 1,081 1,165 1,081 Share options reserve (b) 5,944 4,386 5,944 4,386

7,109 5,467 7,109 5,467

(a) Share premium reserve

The share premium reserve arose from the issue of shares by way of private placement, public offer and employee share option scheme less amounts incurred for listing expenses and utilised for bonus share issue.

(b) Share options reserve

Group and Company 2016 2015 RM’000 RM’000

Share options under ESOS: At 1 July 4,386 3,041 Movement during the year 1,558 1,345

At 30 June 5,944 4,386

The share option reserve represents the equity-settled share options granted to employees. This reserve is made up of the cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled share options, and is reduced by the exercise of the share options.


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22. Borrowings

Group 2016 2015 RM’000 RM’000

Short term borrowings Unsecured: Bankers’ acceptances 4,870 2,552 Revolving credit 7,037 8,059

11,907 10,611 Secured: Bankers’ acceptances 4,647 4,696 Revolving credit 4,500 5,000 Hire purchase 546 509 Term loans 8,781 8,239

30,381 29,055

Long term borrowings Secured: Hire purchase 788 1,334 Term loans 65,760 74,287

66,548 75,621

Total borrowings Bankers’ acceptances 9,517 7,248 Revolving credit 11,537 13,059 Hire purchase 1,334 1,843 Term loans 74,541 82,526

96,929 104,676

Group

2016 2015 RM’000 RM’000

Maturity of borrowings Not later than one year 30,381 29,055 Later than one year and not later than two years 8,977 9,347 Later than two years and not later than five years 24,498 24,602 Later than five years 33,073 41,672

96,929 104,676


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22. Borrowings (cont’d)

Hire purchase payables

Group 2016 2015 RM’000 RM’000

Minimum hire purchase payments: - not later than one year 613 613 - later than one year and not later than five years 823 1,437

1,436 2,050 Less: Future finance charges (102) (207)

Present value of hire purchase payables 1,334 1,843

The weighted average effective interest rates per annum at the end of the reporting period of borrowings, were as follows:-

Group 2016 2015 % %

Bankers’ acceptances 2.24 3.48 Hire purchase 6.54 6.54 Revolving credit 5.59 5.11 Term loans 6.92 6.88

The unsecured short term borrowings of the Group are guaranteed by the Company. The secured short term borrowings and term loans are secured by: (i) fixed charges over certain assets of the Group as disclosed in Note 11 and Note 12 to the financial

statements;

(ii) specific debenture for RM25,000,000 over a subsidiary’s machineries; (iii) debentures over all of a subsidiary’s fixed and floating assets both present and future; and (iv) corporate guarantee from the Company.


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23. Deferred income Group

2016 2015 RM’000 RM’000

Non-current Government grant 1,845 372

The Group received a government grant during the financial year in respect of purchase of equipment. The grant is being amortised over the useful life of the equipment. During the financial year, RM68,818 (2015: RM40,561) has been amortised and recognised as other income in profit or loss.

24. Trade payables

The normal trade credit terms granted to the Group range from 60 to 90 days (2015: 60 to 90 days). Included in trade

payables are amounts due to related parties as disclosed in Note 26(c) to the financial statements.

25. Other payables Group Company

2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000

Accruals 1,768 1,412 57 34 GST output tax 159 - - - Payroll liabilities 3,719 1,767 - - Due to suppliers of property, plant and equipment 1,697 1,784 - - Other payables 2,921 3,828 - - Provision for taxation 30 27 28 27

10,294 8,818 85 61

26. Significant related party disclosures

(a) Identities of related parties Parties are considered to be related to the Group if the Group or the Company has the ability, directly or

indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions or vice versa, or where the Group or the Company and the party are subject to common control.

In addition to the information detailed elsewhere in the financial statements, the Group has related party relationships with its directors and entities within the same group of companies.


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26. Significant related party disclosures (cont’d)

(b) Significant related party transaction Other than those disclosed elsewhere in the financial statements, the Group and the Company also carried out

the following significant transactions with the related parties during the financial year:-

2016 2015 RM’000 RM’000

Group Companies in which certain directors have significant financial interests: - contract manufacturing cost paid/payable 84 154 - rental of premises paid/payable 980 108 - royalty paid/payable 16 25 A company in which a close members of the family of certain directors have significant financial interests: - rental of premises received/receivable (57) (57) - sales of goods (470) (286)

Company A subsidiary - management fee received/receivable (720) (720)

(c) The outstanding balances at the end of the reporting period are as follows:

Group 2016 2015 RM’000 RM’000

Companies in which certain directors have significant financial interests: - trade payables (16) (103) A company in which close members of the family of certain directors have significant financial interests: - trade receivables 44 101


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26. Significant related party disclosures (cont’d)

(d) Compensation of directors


Directors’ remuneration - fees 164 166 164 166 - emoluments 1,863 1,817 - - - other short term employee benefits 191 217 - - - benefits-in-kind 2 2 - -

2,220 2,202 164 166

Executive directors of the Group and Company have been granted the following number of options under the

ESOS:

Group and Company 2016 2015 ‘000 ‘000

At 1 July/30 June 7,920 7,920

The share options were granted on the same terms and conditions as those offered to other employees of the Group.

27. Capital commitments

Group 2016 2015 RM’000 RM’000

For property, plant and equipment: - approved and contracted for 544 3,458 - approved but not contracted for 10,550 9,410

11,094 12,868


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28. Purchase of property, plant and equipment

Group 2016 2015 RM’000 RM’000

Cost of property, plant and equipment purchased 12,165 5,619 Advance payment to supplier (2,580) 1,710 Under payables for purchase of property, plant and equipment 87 410

Cash disbursed for purchase of property, plant and equipment 9,672 7,739

29. Segmental reporting

The segment information in respect of the Group’s operating segments for the year ended 30 June 2016 are as follows:-

Local Export Total 2016 2015 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

External revenue 87,477 87,232 72,753 57,942 160,230 145,174

Profit from operations 8,535 13,657 13,025 (414) 21,560 13,243

A reconciliation of total profit from operations to total consolidated profit before taxation is provided as follows:-

Total 2016 2015 RM’000 RM’000

Profit from operations for reportable segments 21,560 13,243 Expenses managed on a central basis (9,969) (10,108) Other operating income 3,248 5,761

Consolidated profit from operations 14,839 8,896 Finance cost (6,974) (7,718)

Consolidated profit before taxation 7,865 1,178

In determining the geographical segments of the Group, sales are based on the country in which the customer is located.

No other segmental information such as segment assets, liabilities and results are presented as the Group is

principally engaged in pharmaceutical and healthcare products manufacturing and trading business and operates from Malaysia only.

Revenue from one major customer, with revenue equal to or more than 10% of Group revenue, amounts to

RM27,141,834 (2015: RM16,549,000) arising from export sales.


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30. Contingent liabilities Company

2016 2015 RM’000 RM’000

Corporate guarantee given to licensed banks for credit facilities granted to a subsidiary 96,929 104,676

31. Financial instruments

The Group’s activities are exposed to a variety of market risks (including foreign currency risk and interest rate risk),

credit risk and liquidity risk. The Group’s overall financial risk management policy focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

(a) Financial risk management policies The Group’s policies in respect of the major areas of treasury activity are as follows:-

(i) Foreign currency risk The Group is exposed to foreign currency risk on transactions and balances that are denominated in

currencies other than Ringgit Malaysia. The currencies giving rise to this risk are primarily United States Dollar (“USD”), Euro Dollar (“Euro”) and Singapore Dollar (“SGD”). Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level. On certain occasion, the Group enters into forward foreign currency contracts to hedge against its foreign currency risk. The Group also holds cash and cash equivalents denominated in foreign currencies for working capital purposes.

Foreign currency exposure

The Group’s exposure to foreign currency risk (a currency which is other than the functional currency of the entities within the Group) based on the carrying amounts of the financial instruments at the end of the reporting period is summarised below:

USD Euro SGD Total RM’000 RM’000 RM’000 RM’000

30.6.2016 Trade receivables 15,033 - 397 15,430 Other receivables 369 47 29 445 Cash and bank balances 7,790 2 1,334 9,126 Bankers’ acceptances - (5,383) - (5,383) Trade payables (3,323) (17) - (3,340) Other payables (36) (40) (3) (79)

Net exposure 19,833 (5,391) 1,757 16,199


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31. Financial instruments (cont’d) (a) Financial risk management policies (cont’d)

(i) Foreign currency risk (cont’d)

Foreign currency exposure (cont’d)

USD Euro SGD Total RM’000 RM’000 RM’000 RM’000

30.6.2015 Trade receivables 10,905 - 351 11,256 Other receivables 1,339 561 162 2,062 Cash and bank balances 5,476 6 797 6,279 Bankers’ acceptances - (1,969) - (1,969) Trade payables (737) - (242) (979) Other payables (106) (26) (3) (135)

Net exposure 16,877 (1,428) 1,065 16,514

Foreign currency risk sensitivity analysis

The following table details the sensitivity analysis to a reasonably possible change in the foreign currencies as at the end of the reporting period, with all other variables held constant:-

Group 2016 2015 RM’000 RM’000

Effects on profit after taxation USD/RM - strengthened by 5% (2015:5%) 754 633 - weakened by 5% (2015:5%) (754) (633) EUR/RM - strengthened by 5% (2015:5%) (205) (54) - weakened by 5% (2015:5%) 205 54 SGD/RM - strengthened by 5% (2015:5%) 67 40 - weakened by 5% (2015:5%) (67) (40)


84




(ii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises mainly from interest-bearing borrowings. The Group’s policy is to obtain the most favorable interest rate available and by maintaining a balanced portfolio mix of fixed and floating rate borrowing. Any surplus funds of the Group will be placed with licensed financial institutions to generate interest income.

Interest rate risk sensitivity analysis At the end of the reporting period, if interest rates had been 100 basis points higher/lower, with all

other variables held constant, the Group’s profit after taxation would have been RM726,520 lower/higher, arising mainly as a result of higher/lower interest expense on floating rate bank borrowings. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.

(iii) Credit risk The Group’s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from trade and

other receivables. The Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis. For other financial assets (including cash and bank balances and derivatives), the Group minimises credit risk by dealing exclusively with high credit rating counterparties.

The Group uses ageing analysis to monitor the credit quality of the trade receivables. Any receivables having significant balances past due or more than 365 days, which are deemed to have higher credit risk, are monitored individually.

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of the trade and other receivables as appropriate. The main components of this allowance are a specific loss component that relates to individually significant exposures. Impairment is estimated by management based on prior experience and the current economic environment.

The Company provide financial guarantee to financial instituition for credit facilities granted to a subsidiary. The Company monitors the results of the subsidiary regularly and repayments made by the subsidiary.

Credit risk concentration profile The Group’s major concentration of credit risk relates to the amounts owing by one (1) (2015: one (1))

customer who has been actively trading with the Group for the past 17 years (2015: 12 years) which constituted approximately 23% (2015: 13%) of its trade receivables as at the end of the reporting period.


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(iii) Credit risk (cont’d)

In addition, the Group also determines concentration of credit risk by monitoring the geographical region of its trade receivables on an ongoing basis. The credit risk concentration profile of trade receivables (including related parties) at the end of the reporting period is as follows:-

Group 2016 2015 RM’000 RM’000

Local 22,086 24,479 Export 15,561 11,256

37,647 35,735

Exposure to credit risk

As the Group does not hold any collateral, the maximum exposure to credit risk is represented by the carrying amount of the financial assets as at the end of the reporting period.

Ageing analysis The ageing analysis of the Group’s trade receivables as at 30 June are as follows:- Gross Individual Carrying amount impairment amount RM’000 RM’000 RM’000

30.6.2016 Not past due 31,371 - 31,371 Past due:- - less than 3 months 6,279 (195) 6,084 - 3 to 6 months 140 (121) 19 - more than 6 months 2,150 (1,977) 173

39,940 (2,293) 37,647

30.6.2015 Not past due 27,216 - 27,216 Past due:- - less than 3 months 7,000 - 7,000 - 3 to 6 months 1,278 - 1,278 - more than 6 months 2,108 (1,867) 241

37,602 (1,867) 35,735


86



31. Financial instruments (cont’d)

(a) Financial risk management policies (cont’d)

(iii) Credit risk (cont’d)

At the end of the reporting period, trade receivables that are individually impaired were those in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancement.

The Group believes that no additional impairment allowance is necessary in respect of these trade receivables that are past due but not impaired because they are companies with good collection track record and no recent history of default.

(iv) Liquidity risk

Liquidity risk arises mainly from general funding and business activities. The Group practises prudent risk management by maintaining sufficient cash balances and the availability of funding through certain committed credit facilities.

Maturity Analysis The following table sets out the maturity profile of the financial liabilities as at the end of the reporting

period based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on the rates at the end of the reporting period):-

Weighted Contractual average undiscounted Within 1 to 5 Over effective cash flows 1 year years 5 years rate (%) RM’000 RM’000 RM’000 RM’000

2016 Group Non-derivative Financial Liabilities Bankers’ acceptances 2.24 9,517 9,517 - - Revolving credit 5.59 11,537 11,537 - - Hire purchase 6.54 1,436 613 823 - Term loans 6.92 114,860 13,674 53,613 47,573 Trade payables - 13,383 13,383 - - Other payables - 10,105 10,105 - -

160,838 58,829 54,436 47,573

Company Non-derivative Financial Liabilities Other payables - 57 57 - -


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(a) Financial risk management policies (cont’d)

(iv) Liquidity risk (cont’d)

Maturity Analysis (cont’d)

Weighted Contractual average undiscounted Within 1 to 5 Over effective cash flows 1 year years 5 years rate (%) RM’000 RM’000 RM’000 RM’000

2015 Group

Non-derivative Financial Liabilities Bankers’ acceptances 3.48 7,248 7,248 - - Revolving credit 5.11 13,059 13,059 - - Hire purchase 6.54 2,050 613 1,437 - Term loans 6.88 138,803 13,674 48,910 76,219 Trade payables - 18,383 18,383 - - Other payables - 8,791 8,791 - -

188,334 61,768 50,347 76,219

Derivative Financial liabilities Derivative liabilities - 2 2 - -

Company

Non-derivative Financial liabilities Other payables - 34 34 - -

(b) Capital risk management The Group manages its capital to ensure that entities within the Group will be able to maintain an optimal capital

structure so as to support their businesses and maximise shareholder(s) value. To achieve this objective, the Group may make adjustments to the capital structure in view of changes in economic conditions, such as adjusting the amount of dividend payment, returning of capital to shareholders or issuing new shares.

The Group manages its capital based on debt-to-equity ratio that complies with debt covenants and regulatory,

if any. The debt-to-equity ratio is calculated as total net borrowings from financial institutions divided by total equity.

There was no change in the Group’s approach to capital management during the financial year.


88




(b) Capital risk management (cont’d)

The debt-to-equity ratio of the Group as at the end of the reporting period was as follows:-

Group 2016 2015 RM’000 RM’000

Bankers’ acceptances 9,517 7,248 Hire purchase 1,334 1,843 Revolving credit 11,537 13,059 Term loans 74,541 82,526

96,929 104,676 Less: Cash and bank balances (16,276) (11,711)

Net debt 80,653 92,965

Total equity 131,214 121,742

Debt-to-equity ratio 0.61 0.76

The Group did not breach any gearing requirement during the financial years ended 30 June 2015 and 30 June 2016.

(c) Classification of financial instruments


Financial assets Loans and receivables financial assets Trade receivables 37,647 35,735 - - Other receivables 480 2,070 - - Amounts owing by subsidiaries - - 286 282 Cash and bank balances 16,276 11,711 1,688 1,371

54,403 49,516 1,974 1,653

Fair value through profit or loss Derivative assets 15 - - -


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(c) Classification of financial instruments (cont’d)


Financial liabilities Other financial liabilities Bankers’ acceptances 9,517 7,248 - - Hire purchase 1,334 1,843 - - Revolving credit 11,537 13,059 - - Term loans 74,541 82,526 - - Trade payables 13,383 18,383 - - Other payables 10,105 8,791 57 34

120,417 131,850 57 34

Fair value through profit or loss Derivative liabilities - 2 - -

(d) Fair value information Other than those disclosed below, the fair values of the financial assets and financial liabilities maturing within

the next 12 months approximated their carrying amounts due to the relatively short-term maturity of the financial instruments. The fair values are included in level 2 of the fair value hierarchy.

2016 2015

Fair value of Carrying Fair value of Carrying financial amount financial amount instruments instruments carried at carried at fair value fair value Level 2 Level 2 RM’000 RM’000 RM’000 RM’000

Financial assets Derivative assets 1,212 1,227 - - Financial liabilities Derivative liabilities - - 756 754

The fair values above are for disclosure purposes and have been determined using forward exchange rates at the end of the reporting period with the resulting value discounted back to present value.


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sUppLeMeNtArY iNForMAtioN

32. Supplementary information - disclosure of realised and unrealised profits The breakdown of the retained profits of the Group and the Company as at the end of the reporting period into

realised and unrealised profits are presented in accordance with the directive issued by Bursa Malaysia Securities Berhad and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants, as follows:-

Group Company 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Total retained profit: - realised 58,511 49,180 48,799 48,789 - unrealised (633) 937 - -

Total Group retained earnings as at 30 June 57,878 50,117 48,799 48,789


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List oF properties

Title/Location

PN 24784 &PN 20043.Lot 4835 & Lot 4836,Mukim of Cheng,District of MelakaTengah, Melaka

GPP 7972 & GPP 5156, Lot Nos. 43 & 45, Town Area III (3), District of Melaka Tengah, Melaka

Geran 4612, Lot No. 42, Town Area III (3), District of Melaka Tengah, Melaka

PN46842. Lot 9262, Mukim of Cheng, District of Melaka Tengah, Melaka

Description& Usage

Two joined plots of land with a single storey factory and two storey office block

Warehouse and production area

Two plots of land with a 2 ½ storey office building, a store and a warehouse

Commercial site erected with a double storey shophouse cum storehouse

Two plots of land amalgamated into one plot with a three storey pharmaceutical factory

Land Area/Existing Use

17,611 sq.m./ pharmaceutical manufacturing plant

Warehouse and production area

2,252.10 sq.m./office, store & warehouse

636.2 sq.m./ double storey shophouse

23,614 sq.m./ pharmaceutical manufacturing plant

Tenure

Leasehold expiring on 14.8.2096

Freehold

Freehold

Leasehold expiring on 15.8.2096

Built-Up Area(sq. m.)

5,120.04

6,613.00

1,539.31

488.9

22,808

Approximate Age of Building

19 years

16 years

Office & Store- 24 years

Warehouse-20 years

41 to 45 years

6 years

Net Book Valueas at30 June 2016RM

10,587,683

1,170,626

323,000

41,317,750

53,399,059


92


Notice oF ANNUAL GeNerAL MeetiNG

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 30 June 2016 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ fees for the financial year ended 30 June 2016. 3. To re-elect the Director, Piong Teck Min who retires pursuant to Article 97(1) of the Company’s

Articles of Association, being eligible, has offered himself for re-election. 4. To re-appoint Crowe Horwath as Auditors of the Company until the conclusion of the next

AGM and to authorise the Directors to fix their remuneration. AS SPECIAL BUSINESS 5. To consider and if thought fit, to pass the following resolutions as Special/Ordinary

Resolutions of the Company:- Special Resolution - Proposed Amendments to the Articles of Association

That the following proposed amendments to the Articles of Association of the Company be hereby approved:-

Please refer to Note A

(Resolution 1)

(Resolution 2)

(Resolution 3)

(Resolution 4)

NOTICE IS HEREBY GIVEN that the 17th Annual General Meeting (AGM) of the Company will be held at the Auditorium Hall, Kotra Pharma Technology Centre, No. 2, Jalan TTC 12, Cheng Industrial Estate, 75250 Melaka on Wednesday, 23 November 2016 at 3:30p.m. for the following purposes:-

Article No.

158

Existing Provision

The directors shall from time to time in accordance with Section 169 of the Act cause to be prepared and laid before the Company in general meeting such profit and loss accounts, balance sheets and report as are referred to in the section. The interval between the close of a financial year of the Company and the issue of an annual audited accounts, the directors’ and auditors reports shall not exceed four (4) months. A copy of each such documents (including other documents required by law to be annexed thereto) shall together with the notice of the annual general meeting be sent to every member of, and to every holder of debentures of the Company under the provisions of the Act or of these Articles. The requisite number of copies of each such document as may be required by the Exchange shall at the same time be likewise sent to the Exchanged Provided that this Article shall not require a copy of these documents

Amended Provision

158(i) The directors shall from time to time in accordance with Section 169 of the Act cause to be prepared and laid before the Company in general meeting such profit and loss accounts, balance sheets and report as are referred to in the section or such period as may be prescribed by the Listing Requirements. The interval between the close of a financial year of the Company and the issue of an annual audited accounts, the directors’ and auditors reports shall not exceed four (4) months. A copy of each such documents (including other documents required by law to be annexed thereto) shall together with the notice of the annual general meeting be sent to every member of, and to every holder of debentures of the Company under the provisions of the


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AND THAT the Board of Directors of the Company be and is hereby authorised to do all such acts, deeds and things as are necessary and/or expedient in order to give full effect to the Proposed Amendment with full powers to assent to any conditions, modifications and/or amendments as may be required by any relevant authorises.

Ordinary Resolution

- Authority to Issue and Allot Shares pursuant to Section 132D of the Companies Act, 1965

That subject always to the approvals of the relevant authorities and pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby authorised to issue and allot ordinary shares in the Company at any time, upon such terms and conditions, for such purposes and to such person(s) as the Directors may in their discretion deem fit provided that the aggregate number of ordinary shares to be issued does not exceed ten per centum (10%) of the total issued share capital of the Company at the time of issue and that such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company.

Notice of Annual General Meeting (Cont’d)

Article No.

(Resolution 5)

Amended Provision

Act or of these Articles. The requisite number of copies of each such document as may be required by the Exchange shall at the same time be likewise sent to the Exchanged Provided that this Article shall not require a copy of these documents to be sent to any person of whose address the Company is not aware but any member to whom a copy of these documents has not been sent shall be entitled to receive a copy free of charge on application at the Office.

(ii) Subject to compliance with the requirements of Bursa Malaysia Securities Berhad and any other relevant laws and regulations, if any, the Company may issue its annual report in CD-ROM or in such other electronic format and if a member requires a printed form of the annual report, the Company shall send such document to the member within four (4) Market Days from the date of receipt of the member’s verbal or written request.

Existing Provision

to be sent to any person of whose address the Company is not aware but any member to whom a copy of these documents has not been sent shall be entitled to receive a copy free of charge on application at the Office.


94


Ordinary Resolution - Proposed Renewal of Shareholders’ Mandate for Existing Recurrent Related Party

Transactions of a Revenue or Trading Nature

That pursuant to paragraph 10.09 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Company and/or its subsidiary companies (the Group) be and are hereby authorised to enter into and give effect to recurrent related party transactions of a revenue or trading nature as set out in Section 2.3.2(a) of the Circular to Shareholders dated 28 October 2016, which are necessary for the Group’s day-to-day operations in the ordinary course of business, on terms not more favorable than those generally available to the public and not detrimental to the minority shareholders of the Company.

That such approval shall continue to be in force until:

(i) the conclusion of the next Annual General Meeting (AGM) of the Company, at which time it will lapse, unless authority is renewed by a resolution passed at the next AGM;

(ii) the expiration of the period within which the next AGM is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (the Act) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(iii) revoked or varied by resolution passed by the shareholders of the Company in a general meeting, before the next AGM;

whichever is the earlier.

And that the Directors of the Company be authorised to act for and on behalf of the Company, to take all such steps and execute all necessary documents as they may consider expedient or deem fit in the best interest of the Company to give effect to the transactions contemplated and/or authorised by this resolution.

6. To transact any other ordinary business of which due notice shall have been given in accordance

with the Companies Act, 1965 and the Articles of Association of the Company.

By Order of the BoardChua Siew Chuan (MAICSA 0777689)Mak Chooi Peng (MAICSA 7017931)Sean Ne Teo (LS 0008058)Company Secretaries

Melaka28 October 2016


(Resolution 6)


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NOTE:A. The Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does

not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda item is not put forward for voting.

Proxy:(i) In respect of deposited securities, only members whose names appear in the Record of Depositors on 15 November

2016 (“General Meeting Record of Depositors”) shall be eligible to attend, speak and vote at the Meeting.

(ii) A member entitled to attend and vote at the Meeting is entitled to appoint more than one proxy to attend and vote in his stead. A proxy may but does not need to be a member of the Company and the provisions of Section 149 (1)(b) of the Companies Act, 1965 need not be complied with. Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting. Notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of the member at the Meeting. There shall be no restriction as to the qualifications of the proxy.

(iii) In the case of a corporate member, the instrument appointing a proxy must be either under its common seal or under the hand of its officer or attorney duly authorised.

(iv) Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

(v) The instrument appointing a proxy must be deposited at the Registered Office of the Company at No. 60-1, Jalan Lagenda 5, Taman 1 Lagenda, 75400 Melaka not less than 48 hours before the time for holding the Meeting or at any adjournment thereof.

Retirement of Directors:(i) Encik Azhar bin Hussain and Mr. P’ng Beng Hoe have expressed their intention to retire at the conclusion of the 17th

AGM. Hence, they will retain office until the close of the 17th AGM.

Explanatory Notes:(i) Resolution 4 The Proposed Amendments to the Articles of Association of the Company (“Proposed Amendment”)

is to streamline the Company’s Articles of Association to be aligned with the amendments made to Bursa Malaysia Securities Berhad Main Market Listing Requirements, as well as to enhance administrative efficiency.

(ii) Resolution 5, if passed, will empower the Directors of the Company to issue and allot not more than 10% of the Company’s total issued share capital speedily without having to convene a general meeting. This authority will, unless revoked or varied by the Company in general meeting, expire at the conclusion of the next annual general meeting of the Company.

Instances for which the Company may issue new shares within this general mandate include but not limited to the purpose(s) of raising fund through private placement for investments, working capital and/or acquisitions.

This general mandate sought by the Company is to renew the general mandate granted to the Directors at the 16th AGM held on 26 November 2015 to issue shares pursuant to Section 132D of the Companies Act, 1965.

As at the date of this Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the last AGM held on 26 November 2015 which will lapse at the conclusion of the forthcoming 17th AGM.

(iii) Resolution 6 is to renew the Shareholders’ Mandate granted by the shareholders of the Company at the 16th AGM held on 26 November 2015. The proposed Shareholders’ Mandate will enable the Group to enter into the Recurrent Related Party Transactions of a Revenue or Trading Nature which are necessary for the Group’s day-to-day operations, subject to the transactions being in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.

Further information on the proposed Resolution 6 is set out in the Circular to Shareholders dated 28 October 2016.


96


Authorised Share Capital : RM100,000,000.00Issued and Paid Up Capital : RM66,267,161.50Class of Share : Ordinary shares of RM0.50 eachVoting rights on show of hands : 1 voteVoting rights on a poll : 1 vote per ordinary share held

DISTRIBUTION OF SHAREHOLDINGS No. of % of No. of % ofSize of Shareholdings Shareholders Shareholders Shares Held Shares Held less than 100 shares 104 10.71 2,680 0.00100 to 1,000 shares 120 12.36 49,938 0.041,001 to 10,000 shares 485 49.95 2,153,420 1.6210,001 to 100,000 shares 188 19.36 5,806,421 4.38100,001 to less than 5% of issued shares 73 7.52 59,897,502 45.195% and above of issued shares 1 0.10 64,624,362 48.76

Total 971 100.00 132,534,323 100.00

SUBSTANTIAL SHAREHOLDERS

No. of Shares held Name Direct % Indirect % Piong Nam Kim Holdings Sdn. Bhd. 64,624,362 48.76 - 0.00Piong Teck Onn 1,800,000 1.36 66,288,422 * 50.02

Note:- * Deemed interest by virtue of his interests in Piong Nam Kim Holdings Sdn. Bhd. and Cresdel Holdings Sdn. Bhd.

pursuant to Section 6A(4) of the Companies Act, 1965 (“the Act”).

DIRECTORS’ SHAREHOLDINGS

No. of Shares held Name Direct % Indirect % Piong Teck Onn 1,800,000 1.36 66,288,422 * 50.02Piong Teck Min 2,776,220 2.09 64,998,212 ̂ 49.04Datuk Piong Teck Yen 1,802,200 1.36 64,624,362 # 48.76Chin Swee Chang 1,800,000 1.36 1,664,060 ~ 1.26

Notes:- * Deemed interest by virtue of his interests in Piong Nam Kim Holdings Sdn. Bhd. and Cresdel Holdings Sdn. Bhd. pursuant

to Section 6A(4) of the Act.^ Indirect interest by virtue of his substantial shareholdings in Piong Nam Kim Holdings Sdn. Bhd. and his wife (Tan Yeak Yan)

and son (Piong Chee Keong). # Indirect interest by virtue of his substantial shareholdings in Piong Nam Kim Holdings Sdn. Bhd.~ Indirect interest by virtue of her husband (Piong Teck Onn) and son (Piong Chee Wei) substantial shareholdings in Cresdel

Holdings Sdn. Bhd.

ANALYsis oF sHAreHoLDiNGsas at 30 September 2016


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ANNUAl REpORT 2016

Analysis of shareholdings (Cont’d) as at 30 September 2016

TOP 30 DEPOSITORS AS AT 30 SEPTEMBER 2016 No. ofNo Shareholder Shares %

1 PIONG NAM KIM HOLDINGS SDN. BHD. 64,624,362 48.76 2 AMSEC NOMINEES (ASING) SDN. BHD. 6,125,402 4.62 MTRUSTEE BERHAD FOR GALLEON ASSET LIMITED (CS-GALLEON) 3 YONG SOON MOI 4,514,364 3.41 4 PLATINUM ESSENCE SDN. BHD. 3,918,640 2.96 5 MALAYSIAN TECHNOLOGY DEVELOPMENT CORPORATION SDN. BHD. 3,631,423 2.74 6 CHIN AI MEI 2,819,801 2.13 7 PIONG TECK MIN 2,776,220 2.09 8 KOK HON SENG 2,132,960 1.61 9 SEAH TIN KIM 1,874,440 1.41 10 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN. BHD. 1,860,900 1.40 PLEDGED SECURITIES ACCOUNT FOR LIM KIAN TIAK (8039574) 11 PIONG TECK YEN 1,802,200 1.36 12 PIONG TECK ONN 1,800,000 1.36 13 CHIN SWEE CHANG 1,800,000 1.36 14 CRESDEL HOLDINGS SDN. BHD. 1,664,060 1.26 15 LIN AH LAN 1,523,360 1.15 16 OOI LEE PENG 1,495,000 1.13 17 HO JONATHAN LEP KEE 1,210,000 0.91 18 TRIPLE BOUTIQUE SDN. BHD. 803,000 0.61 19 PIONG TECK WAH 770,220 0.58 20 OMAR BIN MD KHIR 683,960 0.52 21 CHAI PIN KOON 600,000 0.45 22 CHEAH MING LOONG 577,900 0.44 23 RHB CAPITAL NOMINEES (TEMPATAN) SDN. BHD. 563,100 0.42 PLEDGED SECURITIES ACCOUNT FOR OOI LEE PENG (MLK/SS) 24 PIONG TECK FONG 538,560 0.41 25 TA NOMINEES (TEMPATAN) SDN. BHD. 527,800 0.40 PLEDGED SECURITIES ACCOUNT FOR TING LEONG HUA 26 CHIN KEE KWONG 514,800 0.39 27 CHIN CHEE MIN 512,600 0.39 28 TAN LEAN GIN 512,600 0.39 29 SEE LEONG CHYE @ SZE LEONG CHYE 500,000 0.38 30 SEE EWE BENG 500,000 0.38

This page was intentionally left blank

CDS ACCOUNT NO.

NUMBER OF SHARES HELD

*I/We _________________________________________________________________NRIC No./Company No.______________________________

of (full address) ______________________________________________________________________________________________________________

being a Member/Members of KOTRA INDUSTRIES BERHAD, hereby appoint _____________________________________________________

NRIC No._________________________________________of____________________________________________________________________________

or failing *him/her, ___________________________________________ NRIC No. ____________________________of________________________

__________________________________________________________________________________________________________________________

No. Resolution

-

No. Resolutions For Against

1.

2.

3.

4.

* Strike out whichever not applicable.

_________ day of ___________________ 2016.

_______________________________________

FORM OF PROXY

(Incorporated in Malaysia)

Notes:(i) In respect of deposited securities, only members whose names appear in the Record of Depositors on 15 November 2016 (“General Meeting Record of Depositors”) shall be eligible to attend, speak and vote

at the Meeting.

(ii) A member entitled to attend and vote at the Meeting is entitled to appoint more than one proxy to attend and vote in his stead. A proxy may but does not need to be a member of the Company and the provisions of Section 149 (1)(b) of the Companies Act, 1965 need not be complied with. Where a member appoints more than one proxy, the appointments shall be invalid unless he speci�es the proportions of his shareholdings to be represented by each proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting. Notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of the member at the Meeting. There shall be no restriction as to the quali�cations of the proxy.

(iii) In the case of a corporate member, the instrument appointing a proxy must be either under its common seal or under the hand of its of�cer or attorney duly authorised.

(iv) Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple bene�cial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

(v) The instrument appointing a proxy must be deposited at the Registered Of�ce of the Company at No. 60-1, Jalan Lagenda 5, Taman 1 Lagenda, 75400 Melaka not less than 48 hours before the time for holding the Meeting or at any adjournment thereof.

KOTRA INDUSTRIES BERHAD (Company No. 497632-P)

or failing *him/her, the CHAIRMAN OF THE MEETING as *my/our proxy to vote for *me/us and on *my/our behalf at the 17th Annual General Meeting of the Company to be held at the Auditorium Hall, Kotra Pharma Technology Centre, No. 2, Jalan TTC 12, Cheng Industrial Estate, 75250 Melaka on Wednesday, 23 November 2016 at 3:30 p.m. or at any adjournment thereof.

To receive the Audited Financial Statements for the �nancial year ended 30 June 2016 together with the Reports of the Directors and the Auditors thereon

To approve the payment of Directors’ fees for the �nancial year ended 30 June 2016.

To re-elect Piong Teck Min who retires pursuant to Article 97(1) of the Company’s Articles of Association.

To re-appoint Crowe Horwath as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to �x their remuneration.

Proposed Amendments to the Articles of Association.

6. Proposed Renewal of Shareholders’ Mandate for Existing Recurrent Related Party Transactions of a Revenue or Trading Nature.

5. Authority to issue and allot shares pursuant to Section 132D of the Companies Act, 1965.

Special Business – Special Resolution

Special Business – Ordinary Resolutions

Please indicate with an “X” in the space provided above how you wish your votes to be casted. If no speci�c direction as to voting is given, the proxy will vote or abstain from voting at his/her discretion.

As witness my/our hand(s) this

Signature of Member/Common Seal

Then fold here

Fold This �ap for sealing

The Company SecretaryKOTRA INDUSTRIES BERHAD(497632-P)

No. 60-1, Jalan Lagenda 5,Taman 1 Lagenda,75400 MelakaMalaysia

1st fold here

stamp

KOTRA

IND

USTRIES BERHA

D (497632-P)

A

nnual Rep

ort 2016

ANNUAL REPORT 2016

Health for Life

KOTRA INDUSTRIES BERHAD (497632-P) No. 1, 2 & 3, Jalan TTC 12,Cheng Industrial Estate, 75250 MelakaTel : 606-336 2222 Fax : 606-336 6122

www.kotrapharma.com www.appeton.com

Documents

Humanising Health - KOTRA PHARMAkotrapharma.com/pdf/2016_annual_report.pdf · • Was the Project Manager for the SAP project implementation which started in November 2008 and went