HUMANISING HEALTH To be the centre MISSIONkotrapharma.com/pdf/2018_annual_report.pdf · • Was the Project Manager for the SAP project implementation which started in November 2008

VISION

MISSIONTo be the centreof excellence for the

pharmaceutical industry

HUMANISING HEALTHEveryone deserves a healthier tomorrow

CONTENTS

Corporate Information

Board of Directors

Directors’ Profile

Key Management’s Profile

Financial Highlights

Chairman’s Statement

Management Discussion and Analysis

Corporate Governance Overview Statement

Statement on Risk Management and Internal Control

Report of the Audit Committee

Sustainability Statement

Financial Statements

List of Properties

Notice of Annual General Meeting

Statement Accompanying Notice of Annual General Meeting

Analysis of Shareholdings

Form of Proxy

3

4

5

9

11

12

14

18

30

33

36

39

97

98

102

103

105

KOTRA INDUSTRIES BERHAD 3

BOARD OF DIRECTORS

Datuk Jamaludin bin Nasir(Independent Non-Executive Chairman)

Piong Teck Onn(Managing Director)

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

Datuk Piong Teck Yen(Executive Director)

Chin Swee Chang(Executive Director)

Lee Min On(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)Tay Seok Yin (MAICSA 7063410)

AUDIT COMMITTEE

Lee Min On (Chairman)Datuk Jamaludin bin NasirPiong Teck Min

REMUNERATION COMMITTEE

Datuk Jamaludin bin Nasir (Chairman)Lee Min OnPiong Teck MinPiong Teck Onn

NOMINATION COMMITTEE

Datuk Jamaludin bin Nasir (Chairman)Lee Min OnPiong Teck Min

ESOS COMMITTEE

Datuk Jamaludin bin Nasir (Chairman)Lee Min OnPiong Teck Onn

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, Faber Imperial Court,Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia.Tel : 03-2692 4271Fax : 03-2732 5388

AUDITORS

Crowe Malaysia (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

CORPORATE INFORMATION

4 ANNUAL REPORT 2018

BOARD OF DIRECTORS

BOARD OF DIRECTORS

1. DATUK JAMALUDIN BIN NASIR

2. PIONG TECK ONN

3. DATUK PIONG TECK YEN

4. PIONG TECK MIN

5. CHIN SWEE CHANG

6. LEE MIN ON

7. PIONG CHEE KIEN1. 5.

7.

3.

6. 2.

4.


DIRECTORS’ PROFILE

DATUK JAMALUDIN BIN NASIRIndependent Non-Executive Chairman58, Malaysian, MaleDate appointed: 2 January 2017

Board Committee memberships:• AuditCommittee• Chairman, Employees’ Share Option Scheme

Committee• Chairman,RemunerationCommittee• Chairman,NominationCommittee

Academic qualification and honours:• Masters of Business Administration (MBA) in Texas

A&M International University (formerly known as Laredo State University)

• BachelorofScience,Finance&BusinessEconomics,Southern Illinois University

• Bachelor of Arts, Economics, Southern lllinoisUniversity

Experience and career path:• Served Kwong Yik Bank (presently known as RHB

Bank) from February 1986 to February 1997. Left the Bank as the Head and Assistant General Manager, Corporate and Capital Market.

• Served Dresdner Bank AG, a commercial and institutional bank as General Manager, Labuan and theGroupPrincipalOfficerinMalaysiafromFebruary1997 to June 2005.

• Also served Dresdner Bank Group investment banking outfit, Dresdner Kleinwort Wasserstein as its ChiefOperatingOfficer,Director(GlobalBusinessServices)Malaysia and Director, Capital Markets and Syndicate in the Asia Pacific ex Japan regional teambased inSingapore from 1999 till 2005.

• Served Maybank as Executive Vice President and Chief CreditOfficerfromJuly2005toJune2006.Promotedto Senior Executive Vice President and Group Chief CreditOfficerMaybankGroupfromJuly2006tillJune2010. A member of the Group Management Committee.

• DeputyChiefExecutiveOfficerofAsianFinanceBank(now MBSB Bank) from July 2010 to May 2012.

Other Boards, associations or affiliations:• Board Member of Bank Pembangunan Malaysia

Berhad (resigned February 2018)• Rating Committee Member of Malaysian Rating

CorporationBhd(MARC)• TechnicalCommitteeMemberofFinanceAccreditation

Agency

Relationships with other Directors/Substantial Shareholders:• Norelationship

PIONG TECK ONN Managing Director61, Malaysian, MaleDate appointed: 5 June 2000

Board Committee memberships:• RemunerationCommittee• Employees’ShareOptionSchemeCommittee

Academic qualification:• BachelorofScienceinPharmacy(UniversityofWales,

United Kingdom)

Experience and career path:• Beganhiscareerinretailandwholesalepharmaceutical

business at City Chemist & Asia Pharmacy.• Pioneered the development of manufacturing,

marketing, research and development departments of Kotra Pharma (M) Sdn Bhd.

• Responsible for introducing various conventionaldosage forms ranging from tablets, capsules, creams, ointments, wet and dry syrups as well as injectables, both aseptically and terminally sterilised.

• Responsible for the Group’s overall operations,businessstrategicdirectionsanddriving theGroup’sinitiatives towards achieving its various set goals.

Committee served:• ChairmanoftheASEANPharmaceuticalIndustryClub

(APC) (2008-2009)

Associations or affiliations:• Past President (2008-2009) of the Malaysian

OrganisationofPharmaceuticalIndustries(MOPI)• Current ExecutiveCouncilMember of theMalaysian

OrganisationofPharmaceuticalIndustries(MOPI) Relationships with other Directors/Substantial Shareholders:• BrothertoPiongTeckMinandDatukPiongTeckYen• MarriedtoChinSweeChang


Directors’ Profile (Cont’d)

PIONG TECK MINNon-Independent Non-Executive Director66, Malaysian, MaleDate appointed: 5 June 2000

Board Committee memberships:• AuditCommittee• NominationCommittee• RemunerationCommittee

Academic qualification:• MalaysianCertificateofEducation

Experience and career path:• Handled the pharmaceutical wholesale business of

KOTin1970.• ManagingDirectorofLonnix(M)SdnBhd,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:• BrotherofPiongTeckOnnandDatukPiongTeckYen• Brother-in-lawofChinSweeChang• FatherofPiongCheeKien

DATUK PIONG TECK YENExecutive Director51, Malaysian, MaleDate appointed: 5 June 2000

Academic qualification:• LewishamCollege,UnitedKingdom

Experience and career path:• ResponsibleformarketingandsalesactivitiesofKOT

in 1989.• SalesManagerofKPMin1989.• Marketing Manager of KPM in 1995 and was

instrumental in formulating and implementing promotions aimed at creating brand awareness.

• Current Business Director responsible for thedevelopment of exports and international marketing activities of the Group.

Awards:• DMSM,DSM,PJK,JP

Relationships with other Directors/Substantial Shareholders:• BrotherofPiongTeckMinandPiongTeckOnn• Brother-in-lawofChinSweeChang


CHIN SWEE CHANGExecutive Director61, Malaysian, FemaleDate appointed: 5 June 2000

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

(University of Leeds, United Kingdom)

Experience and career path:• Programmer at Systems Automation Sdn Bhd in

1982, involved in development, implementation, user-training and maintenance of insurance software.

• Analyst Programmer at Eastern Systems DesignSdn 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 regionalofficeandheadquarters inGermany.Helpedto coordinate, 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 andimplementedanew,fully integratedSymixMRP(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 alsoresponsible for setting up Shipping Department and ensuring the smooth operations of order processing and administration departments.

• Was promoted to the current position, ChiefInformation Officer responsible for overseeing theoperations, development and enhancement of Management InformationSystems,OrderProcessingand 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,andpartialPPwereimplementedtogethertoreplacethelegacyInforERPSytelinesystem.

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

• Rolled outMobile Sales System using iPads for thesales team’s orders and information. All customers’information are available on the palm of the sales representatives.

Relationships with other Directors/Substantial Shareholders:• Sister-in-lawofPiongTeckMinandDatukPiongTeck

Yen• MarriedtoPiongTeckOnn

LEE MIN ONIndependent Non-Executive Director59, Malaysian, MaleDate appointed: 2 January 2017

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

Professional qualification and affiliation:• Chartered Accountant (M), Malaysian Institute of

Accountants, and Certified Public Accountant (M),MalaysianInstituteofCertifiedPublicAccountants

• Fellow Member (CFIIA), Institute of Internal AuditorsMalaysia

Experience and career path:• BeganhiscareerwithKPMGin1979andretiredasa

partnerofthefirmafterserving36years intheAuditand Consulting Divisions.

• Co-authoredofCorporateGovernanceGuide:TowardsBoardroom Excellence 1st and 2nd Editions that were published by Bursa Malaysia Securities Berhad (Bursa Securities).

• PartoftheTaskForcesetupbyBursaSecuritiesthatwas responsible for the development of the Statement onRiskManagementandInternalControl-Guidelinesfor Directors of Listed Issuers in 2012.

Directorship in public listed companies:• TanChongMotorHoldingsBerhad• APMAutomotiveHoldingsBerhad• WarisanTCHoldingsBerhad

Relationships with other Directors/Substantial Shareholders:• Norelationship



PIONG CHEE KIENAlternateDirectortoPIONGTECKMIN39, Malaysian, MaleDate appointed: 25 November 2010

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

Experience and career path:• Brand Executive at KPM from November 2005 to

October 2006 andwas actively involved in planningand implementing brand marketing and trade strategies aimed at increasing brand performance.

• Current General Manager of Lonnix (M) Sdn Bhd,specialising in broad range of traditional medicine, foodsupplementandeffervescentproducts.

Relationships with other Directors/Substantial Shareholders:• SonofPiongTeckMin• NephewtoPiongTeckOnn,DatukPiongTeckYenand

Chin Swee Chang


Notes:

1. None of the directors has other directorships in other public companies and listed issuers, save as disclosed.

2. NoneofthedirectorshasanyconflictofinterestwithKotraIndustriesBerhad.

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


KEY MANAGEMENT’S PROFILE

CHEAH MING LOONGChiefOperatingOfficer47, Malaysian, MaleDate appointed: 1 November 2005

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

Moores University, United Kingdom)• MBAinMarketing(UniversityofSouthernQueensland,

Australia)

Experience and career path:• More than20 years of pharmaceutical experience in

both the patent and generic drugs industry.• Currently, responsible for thedailyoperationandthe

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 theMalaysianPharmaceuticalPricingPoliciesandRegulationsWorkshop2009and2012.

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

• Consulted for theMalaysianNationalDrugDonationGuideline 2010.

• Worked closely with the Ministry of Health on 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 – CollaborationandInvestmentOpportunities”.

Associations and affiliations:• MemberofMalaysianPharmaceuticalSociety(MPS)• MemberofMalaysianOrganisationofPharmaceutical

Industry(MOPI)

DANIEL CHUA CHONG LIANGChiefFinancialOfficer44, Malaysian, MaleDate appointed: 1 July 2003

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

Technology Sydney)

Experience and career path:• More than 20 years of working experience with 15

years in the pharmaceutical industry.• Workedinthebigsix(6)internationalaccountingfirm

with experience in the areas of audit and taxation.• Currently, responsible for the financial management

of the Kotra Industries Berhad and Kotra Pharma (M) Sdn. Bhd.

Associations and affiliations:• MemberofMalaysianInstituteofAccountants(MIA)


Key Management’s Profile (Cont’d)

HIEW MEIN FOONGChiefBrandOfficer57, Malaysian, MaleDate appointed: 15 February 2000

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

Kebangsaan Malaysia)

Experience and career path:• Beganhiscareer inadvertising, spendingmore than

10 years in the advertising industry.• 18years in thepharmaceutical industrysince joining

Kotra Pharma (M) Sdn. Bhd. (“Kotra Pharma”) in 2000.• Initiated the Company’s Customer Satisfaction and

CRMprogrammes.• DevelopedtheCompany’sCorporateIdentityManual.• ResponsiblefordevelopingKotraPharma’snewlogo,

Axcel & Vaxcel logos.• SecuredMatrade’spromotiongrantfortheCompany.• Management Committee for Risk Management and

ISO9001.• SettingupandheadedtheInternationalMarketsOTC

Division.• RepresentedKotraPharma(OTC)inthePharmaceutical

Mini-Lab (PEMANDU), 2013.• Involves in strategic planning (Local & International)

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

• ‘Developmentofbusiness’bestpracticesforpotentialduplication to ensure standardised processes and success.

• Responsibleforappointingandmanagingadvertising,creative and media agencies.

Notes:

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

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

3. NoneofthechiefexecutiveshasanyconflictofinterestwithKotraIndustriesBerhad.

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


FINANCIAL HIGHLIGHTS

REVENUE(RM MILLIONS)

180

160

140

120

100

80

60

40

20

-2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

PROFIT AFTER TAX(RM MILLIONS)

SHAREHOLDERS’ EQUITY(RM MILLIONS)

NET ASSETS PER SHARE(RM MILLIONS)

147 145160

166 178 15

12

9

6

3

-

6

1

8

12

160

140

120

100

80

60

40

20

-

1.20

1.00

0.80

0.60

0.40

0.20

16

119 122131

142153

0.92 0.991.07

1.15

0.90

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

2014 2015 2016 2017 2018 (RM’000) (RM’000) (RM’000) (RM’000) (RM’000)

Revenue 147,371 145,174 160,230 166,368 178,476 Revenue Growth (%) 12.2% -1.5% 10.4% 3.8% 7.3%

Profit before tax 5,765 1,178 7,865 12,524 15,903Profitaftertax 5,660 1,060 7,761 12,397 15,749Shareholder’sequity 119,063 121,742 131,214 142,083 153,254

Per ShareBasic earnings (sen) 4.29 0.80 5.86 9.34 11.85Netassets(RM) 0.90 0.92 0.99 1.07 1.15

Financial RatioGearing ratio 1.02 0.86 0.74 0.52 0.38Returnonassets(%) 2.08% 0.42% 3.06% 4.92% 6.49%Returnonequity(%) 4.75% 0.87% 5.91% 8.73% 10.28%


CHAIRMAN’S STATEMENT

DEAR VALUED SHAREHOLDERS,OnbehalfoftheBoardofDirectors(“theBoard”), I am honoured to present the AnnualReportandtheauditedFinancialStatements of Kotra Industries Berhad (“the Company”) for the financial year ended 30 June 2018.


Chairman’s Statement (Cont’d)

On the financial front, theGroupchalkedupa7.3%growth in revenue, toRM178.5million fromRM166.4millionduringthefinancialyearunderreview.Thisencouragingresultwasdueto increase insalesgrowth,mainlycontributedbyhigherdemandsfromgovernmenthospitalsviatendercontracts.TheGrouprecordedaprofitbeforetaxofRM15.9millionforthefinancialyearended30June2018ascomparedtoRM12.5millionregisteredinthepreviousfinancialyear.FurtherdetailsontheGroup’sfinancialperformanceiselaboratedintheManagementDiscussionAnalysissectionofthisAnnualReport.

The Malaysian pharmaceutical industry has been growing healthily due to the increasing demand and evolving needs for productsinalldosageformsincludinggenericdrugs.WiththelocalGovernment’ssupportinprovidingfunding,incentivesandfacilitiessuchasaccreditedcertificationbodiesandtestinglaboratories,pharmaceuticalcompaniesareabletoproducehigher value-added products for patients and healthcare providers.

Since establishment, the Company and its subsidiaries (“the Group”) constantly strive to develop and manufacture top-notchpharmaceutical products. Equippedwith amanufacturing facility according to the international standards ofGoodManufacturing Practice (GMP), we have also invested heavily in a state of the art world class technology that includes automation technology to enhance our product portfolio. In adopting automation technology, we are committed to produce highqualityproductsatsustainablecost,whileatthesametime,reducewastagesandeliminatehumanerror.

Our foremostpriority is to improveourpipelineofpharmaceuticalproductswhichwebelieve iscrucial tostimulatesalesgrowth and generate revenue in the upcoming years. Therefore, backed by a highly skilled and competent team, we are driving our focus on innovation through our research and development programmes which will enable us to capitalise on the opportunitiesinthelocalandoverseaspharmaceuticalindustry,subsequentlypenetratingthenichemarket.

Inthefinancialyearunderreview,wehavelaunchedthree(3)productsinthemarketwhichareAxcelCiprofloxacinTablet,AxcelFluconazoleCapletandVaxcelFluconazoleInjection.AsforthePre-filledSyringe(PFS)andMeteredDosageInhaler(MDI) lines,wehave three (3)newproductsunderevaluationby theNationalPharmaceuticalRegulatoryAgency (NPRA).Despite being in a highly competitive and regulated industry, we are encouraged by the support given to our brands and we willredoubleoureffortstosustainacontinuousprogressforapositivegrowthmomentum.

The Board recognises and acknowledges the importance of responding to economic, environmental and social (EES) issues whileensuringsustainablesuccessoftheCompany.Eventhoughourpriorityliesinrevenueandprofitability,wearecommittedto conduct our business practices responsibly in our daily operations as disclosed in our Sustainability Statement.

As we move forward with the release of the Malaysian Code on Corporate Governance (“MCCG”), we will continue to uphold good corporate governance and its best practices as part of our commitment to cultivate a responsible organisation and a sustainablebusiness.Ourefforts inmeetingthepracticesunderthenewMCCGaresetout intheCorporateGovernanceOverviewStatementofthisAnnualReport.

Acknowledgement

I would like to conclude by conveying my profound thanks to the Board members, the Management team as well as all the employees of theGroup for their tireless effort, dedication and embracing the challengeswith great determination. I amconfidentthatwewillbeabletoattainmoremilestonesinhumanisinghealththroughendlesseffortsandcollectiveteamworkfrom everyone.

OnbehalfoftheBoard,Iwouldalsoliketoextendmyappreciationtoourshareholdersfortheircontinuoustrustandconfidencein us. My utmost gratitude goes to our bankers, vendors, distributors, customers and other stakeholders for their unwavering support.Maywecontinuetoattaingreatersuccess,prosperityandprogressinthiscomingfinancialyear.

DATUK JAMALUDIN BIN NASIRIndependent Non-Executive Chairman


Dear Shareholders,

As the Managing Director of the Group, I am honoured and pleased to present the Management Discussion and Analysis forthefinancialyearended30June2018.

Overview

The Group is one of the few local listed pharmaceutical companies in Malaysia and employs more than 700 employees. It has a manufacturing facility located inMelakawhilethesalesandmarketingofficeisbasedinKualaLumpur.Asforour export market, we have a global presence in over 35 countries, including key markets such as Vietnam, Myanmar, Indonesia and Cambodia.

BeingaGoodManufacturingPractice(GMP)facilityequippedwithastate-of-arttechnology,weaimtoputforwardourutmostfocusandeffortstowardsinnovationto develop and produce quality pharmaceutical products to fulfil the needs intoday’smarketinlinewithourvisionofhumanisinghealth.Ourstrategyistobeabletoprovidehighquality,safeandaccessibleproductstoallourcustomersfromeverystageoflifeaswefirmlybelieveeveryonedeservesahealthiertomorrow.

Financial Review

Despite a challenging and competitive environment for this financial year, theGroup registered a satisfactory revenue ofRM178.5millionagainstRM166.4millionrecordedintheprecedingfinancialyearended30June2017withanoverallincreaseof 7.3%.

Thetablebelowprovidesasummaryofourresultsforboththefinancialyears,includingvariancearisingtherefrom:

FY2018 FY2017 Variance RM’000 RM’000 RM’000

Revenue 178,476 166,368 12,108OperatingExpenses (160,834) (152,250) (8,584)OperatingIncome 3,103 4,354 (1,251)

ProfitfromOperations 20,745 18,472 2,273Finance Cost (4,842) (5,948) (1,106)

ProfitbeforeTax 15,903 12,524 3,379

The improvement in revenue of the Group was mainly contributed by an increased demand for our range of over-the-counter (OTC)productsandprescribedproducts,bothlocallyandinternationally.Wewereawardedwithanothertenderviaoff-takeagreement programme for a period of three (3) years to supply an injectable product to all Government hospitals and clinics. The continuous demand for other products under other Government tenders as well as a substantial growth in contract manufacturingalsocontributedinpropellingourrevenue.Furthermore,ourinvestmentinaggressiveyeteffectivemarketingand promotional activities, especially through billboard advertisements nationwide, has thriven to drive sales revenue. TheGroup’sprofitbeforetaxsawanimprovementofRM3.4million,increasedfromRM12.5millioninthelastfinancialyeartoRM15.9millionduringthefinancialyearinreview.Thegrowthwasattributedtoanincreaseinsales,lowerfinancecostsdueto lower term loan interest as well as rationalisation of sales and administrative expenses.

MANAGEMENT DISCUSSION AND ANALYSIS


Management Discussion and Analysis (Cont’d)

TheGroupincurredamarginalforeignexchangelossforthefinancialyearended30June2018comparedtoagainachievedinthelastfinancialyear.Thislosswasmainlytriggeredbytheadversefluctuationofmajorforeigncurrencies,particularlytheUnitedStatesDollar(“USD”)againsttheMalaysianRinggit(“MYR”).

As of 30 June 2018, theGroup’s total assets decreased byRM9.3million, fromRM252.1million as at 30 June 2017 toRM242.8millionattheendoffinancialyear2018.Thedecreasewasmainlyduetodepreciationchargefortheyear,lesserinventoriesheldandotherreceivables.Asforthetotal liabilitiesoftheGroup,therewasasignificantdecreaseofRM20.4millionrecorded.Thetotalliabilitiesfortheasat30June2018amountedtoRM89.6millionincomparisontoRM110.0millionasattheendoftheprecedingfinancialyear.Thisdecreasewasduetoreductioninlong-termandshort-termborrowingsbythe Group, largely culminating from repayment. Operations Review

A. Manufacturing (Manufacturing Excellence)

TheGroupisaGMPcertifiedmanufacturer,accreditedbyourMinistryofHealthforourcompliancewiththecurrentPharmaceuticalInspectionCo-OperationScheme(PIC/S)GMPGuide.Webelievetechnologicaladvancementsistheanswertofundamentalperformanceadvancementsinourfacility.Therefore,wehaveembracedautomationforspecificprocesses in product development to achieve optimised production, regulatory compliance and flexibility.With thepharmaceuticalindustrybecomingincreasinglychallenging,especiallywithstringentregulatoryrequirements,thereisanecessitytoimplementaleanandflexiblepracticethatwillenableustoremainrelevantinthemarketthroughfosteringimprovement in product manufacturing process.

Wehaveinvestedintwo(2)keyprojects,whicharetheMeteredDosageInhalerLine(MDILine)andthePre-filledSyringeManufacturing Line (PFS Line). These lines as announced previously are pioneer initiatives in Malaysia as the products have never been produced locally by any pharmaceutical players to-date. Both the lines have undergone pre-approval lineinspectionauditbyNPRA.Asthesearenewlypioneeredtechnology,weneedtomakeslightimprovementsinthelinesbeforeweundertakeanotherauditfromNPRA.

UnderPFS line,wehavetwo(2)productsunderNPRA’sevaluation.Asfor theMDI line,wehavean inhalerproductcurrentlybeingevaluatedbyNPRA.Withmoreproductapprovals,wewillbeabletobuildadiverseproductportfoliothat will further enhance our standing as a competitor in the emerging pharmaceutical industry.

B. New Product Development (Research and Development Excellence)

TheGroupfirmlybelieves thatR&Dplaysacrucial role inensuring the long-termsuccess in thehighlycompetitivepharmaceuticalindustryinMalaysia.Moreover,itisourintentiontoincreaseourshareholders’valuethroughproductinnovation.Our dedicated in-houseR&D team is constantlyworking ondeveloping and formulating newaswell asexisting pharmaceutical products to support the growing demand and to treat the hitherto unmet medical needs.

Asofthefinancialyearended30June2018,wehavesuccessfullylaunchedthree(3)productstothemarket,whichareAxcelCiprofloxacinTablet,anantibiotictotreatbacterial infectionsandstopthebacterialgrowth,AxcelFluconazoleCapsulewhich isanantifungalagenteffective intreatingfungal infectionsandVaxcelFluconazole Injection,asterileantifungalagentusedforsystemictreatmentoffungalinfections.Ourtargetforthisupcomingfinancialyearistoexpandour product base by launching impactful new products that will enable us to sustain our competitive advantage in this industry.

C. New Market (Global Pharmaceutical Excellence) During the financial year in review, the Group embarked on widening its reach internationally. In this attempt, we

managedtopenetratetwo(2)newmarkets,namelySamoaandZimbabwe,forthefinancialyearinreview.Wewelcomedinternational delegates consisting of healthcare professionals from Nigeria, Laos, Myanmar, Cambodia and Vietnam for a plant tour at our facility which enabled them to obtain deeper insight as well as greater understanding on the processes involved in pharmaceutical manufacturing.

Ourdirection for theupcomingfinancialyear is tocontinue toexpandourpresencedespite thechallengeswe faceintermsoftightregulatoryenvironment,tradebarriers,culturebarriersandmarketstability.Weareanticipatingmoreproduct registrations in our export markets that will enable us to expand our product range to introduce more products, making us accessible to a larger number of consumers in these markets.

16 ANNUAL REPORT 2018 KOTRA INDUSTRIES BERHAD 17

D. Brand and Marketing (Brand and Marketing Excellence)

We believe it is critical to market our business successfully and convert our customers into our brand advocates. During the financial year ended 30 June 2018, we had various marketing initiatives lined up. Some of our market initiatives include collaborating with Datuk Dr. Sheikh Muszaphar for our Appeton Dream Big campaign where we launched our repackaged Appeton A-Z Kid’s Vitamin C to the public as well as partnering with Parenthood magazine in conjunction with their cover baby contest which enabled us to promote our vitamin range to parents of young children.

We continued organising our much-recognised programs, namely the Paediatrics In Practice Specialist’s Workshop (PIPSW), Dermatology In Focus (DIF) and Infectious Disease Forum where we received tremendous support and constant demand among the healthcare professionals. As for the previous financial year under review, we were able to attain a new milestone by the successful launch of Paediatrics in Practice 1st ASEAN Scientific Meeting 2018 that was held in Hanoi, Vietnam and which comprised speakers from several ASEAN countries. In this event, we also unveiled “Atlas of Skin Infections – Beyond National Borders”, an atlas that illustrates cases of skin diseases. The Group had also invested substantially on outdoor advertising, specifically billboards, which is an effective and impactful way to reach the masses. We have harvested the fruits of our investment as we saw a healthy growth in sales for the products advertised.

E. Employees (People Excellence)

Without the commitment of our employees, we will not be able to experience the growth or create a winning business organisation. Through Kotra Institute of Talent Excellence (KITE), a structured training programme for personal development and career growth, we are able to improve competencies and skills of our employees to enhance their effectiveness in the organisation as well as retaining our best employees.

The Group, as a responsible organisation, safeguards our employees’ interests by providing a positive working climate, competitive remuneration package, maintaining workplace safety standards as well as training, promotion and welfare schemes in return for their work and effort towards the organisation.

Anticipated Risks

a) Fluctuation in Foreign Currency Exchange Having business operations internationally, the Group is exposed to foreign exchange risk, mainly from USD fluctuations.

The constant fluctuation will impact the Group’s profitability as well as cash flow movements. To mitigate this risk, the Group’s Management has taken few measures such as constantly monitoring our exposure to foreign exchange risk, improvising the financial forecasting and producing a realistic budgeting mechanism.

b) Increase of Raw Materials’ Prices The increase of raw material prices, particularly the imported raw materials, impacts the profitability of the Group. In

reducing the risk of constant price increase, the Group with the assistance of the Material Management Department, has taken measures to negotiate better trading terms with suppliers and at same time closely monitor the prices of raw materials. To ensure our product quality at all times, the Group is resolute in not compromising the materials’ quality by purchasing materials only from reliable suppliers. We have also taken another measure which is by applying quality management systems and quality assurance procedures accredited by ISO to safeguard our strict control on quality.

c) Regulatory Change and Compliance Risk

Being in a heavily regulated industry, the Group faces strict and continual regulatory changes that often introduce compliance risk to our organisation as well as causing a distraction to deliver our products to the market in a timely manner. To manage this challenge, we have a holistic approach towards this risk by addressing the issue promptly by setting up internal control via an effective compliance management team to conform to the constantly evolving regulatory guidelines. We have made regulatory compliance as part of our organisation’s strategy. Conducting periodic reviews, continuous training and effective communication with the regulatory bodies enable us to sustain our commitment towards regulatory compliance.




d) Competitive Environment

The Group faces stiff competition from local and international competitors. This competitive environment may reduce our revenue and profit margin. We are also at risk of losing customers due to the emergence of many new brands mushrooming in the market. There is no assurance that we will be able to overcome or compete successfully with existing and future competitors. In our attempt to remain competitive, we have invested in machineries equipped with high-end technology to launch competing and innovative new products.

Outlook and Prospect

Over the last decade, the Malaysian pharmaceutical industry has been experiencing a robust growth in response to the growing demand for pharmaceutical products in all dosage forms. The Malaysian government, especially the Health Ministry, has been playing a pivotal role in developing the health and pharmaceutical sector by laying policies and the direction of healthcare services in the country. We are looking forward to provide higher value-added products at affordable and accessible prices, considering the best interests of patients as well as healthcare providers.

In addition to that, with the ever-growing healthcare spending in Malaysia and other international markets, we believe there is a growth prospect and healthy demand for pharmaceutical products, including generic drugs. To meet this demand, we believe innovation is the key to achieve a long-term growth in the organisation and to remain competitive in the marketplace. As such, we are dedicated in our pursuit to expand our product base through innovation via R&D in the approaching years.


CORPORATE GOVERNANCE OVERVIEW STATEMENT

The Board of Directors (“the Board”) of Kotra Industries Berhad (“the Company”) is committed to uphold a high standard of corporate governance at all times. The Board recognises the importance of good governance to be applied, observed and practised throughout the Group as a fundamental activity in honing a sustainable business and improving the Group’s financial performance and shareholder value, whilst safeguarding the interest of shareholders and other stakeholders. In striving for long term success, the Group conducts its business with integrity, transparency and accountability. The Board will continue its efforts to monitor and evaluate the current corporate governance practices to remain relevant with developments in regulations and market practices.

This Corporate Governance Overview Statement (“CG Overview Statement”) provides an outline of the principles enumerated in the Malaysian Code on Corporate Governance (“MCCG”) and Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”). Details on the Group’s application of each Practice of the MCCG are disclosed in the Corporate Governance Report (“CG Report”) which is available on the Group’s website at www.kotrapharma.com

PRINCIPLE A: BOARD LEADERSHIP AND RESPONSIBILITIES

PART I: BOARD RESPONSIBILITIES

1.1 Strategic aims, values and standards

The Board is responsible for the overall business conduct of the Group, with priorities given on strategic management, risk management, internal control, succession planning and monitoring Management’s performance. The Board also undertakes full responsibility on issues concerning the Group’s financials, strategies, compliance, governance and other operational matters while protecting the interests of the Group’s stakeholders.

Whilst decision-making for the day-to-day business operations of the Group is delegated to the Managing Director, the Non-Executive Directors provide independent advice and views so as to provide a check and balance in the Board decision making process.

Accordingly, the Board confers some of its authority and responsibilities to the Managing Director towards achieving the Group’s goals as well as executing the strategies and business plans approved by the Board.

The Board has also entrusted specific responsibilities through the establishment of Board Committees, namely the Audit Committee (“AC”), Nomination Committee (“NC”), Remuneration Committee (“RC”) and ESOS Committee (“EC”), with specific remit under their respective terms of reference. The Board Committees discuss, report and recommend to the Board on matters relevant to their roles and responsibilities before a final decision is made by the Board.

1.2 Chairman

The principal role of the Board Chairman is to provide leadership to the Board as well as promote and oversee the highest standards of corporate governance across the Company. The Chairman helms the Board and is responsible for ensuring Board members fulfil their obligations and perform their duties efficiently as well as monitoring the implementation of decisions made by the Board. The Chairman also assumes a pivotal role as the facilitator in chairing all Board meetings and the Annual General Meeting (“AGM”), ensuring such meetings are conducted in an orderly manner to promote constructive communication whereby Directors and shareholders, as the case may be, are able to express their views or opinions openly.

1.3 Separation of Positions between the Chairman and the Managing Director

There is a clear division that distinguishes between the roles and responsibilities of the Board Chairman and the Managing Director which are set out in the Board Charter of the Company. This ensures a balance of power and authority with no one person having unfettered powers in decision making. The Board Chairman is an Independent Non-Executive Director who is primarily responsible for leading the Board. The Managing Director is responsible for helming the Group’s business and operating units as well as daily management of the Group’s business, in line with the policy, strategy and long-term objectives set by the Board.


Corporate Governance Overview Statement (Cont’d)

1.4 Qualified and Competent Company Secretary The Company has three (3) named Company Secretaries to asist the Board. The Directors have unrestricted

access to the Company Secretaries to enable them to discharge their duties effectively. The Company Secretaries are qualified professionals, being members of one of the prescribed bodies in the Companies Act 2016 and are responsible on advising the Board on regulatory as well as governance matters and directives from time to time. The Company Secretaries attend all meetings and ensure the meetings are convened properly. Furthermore, the Company Secretaries ensure accurate and proper records of the proceedings as well as resolutions passed are recorded and maintained in the statutory register of the Company.

1.5 Access to Information and Advice At all times, the Board is given full access to all information without any restrictions on the Group’s business and

affairs. All members of the Board have access to the advice and services of the Company Secretaries and may choose to seek external professional advice, if necessary, at the expense of the Company.

The schedule of all Board meetings and Committee meetings is set in advance at the beginning of every year. Prior to the Board and Board Committee meetings, the Company Secretary disseminates the agenda together with the Board papers that contain previous meeting minutes, appropriate reports, financial reports and other relevant information to the Board members. The documents are provided at least five (5) days before the meeting to ensure sufficient time for Directors to review and consider the matters that will be tabled at the meeting and may request for clarification from the Management, if needed.

The Company Secretaries are entrusted to record the minutes of meeting on the Board’s and Board Committees’ deliberation and ensure the deliberations are adequately documented. The minutes of meeting are then circulated to the Board and Board Committee members in a timely manner for further actions.

2. Demarcation of Responsibilities

2.1 Board Charter

To facilitate an effective discharge of its duties, the Board is guided by the Board Charter which details the duties, responsibilities and functions of the Board in accordance with principles of good governance and is made available on the Group’s website at www.kotrapharma.com. The Board Charter serves as a guide that sets out the respective responsibilities of the Board members, Board Committee members and Management.

The Board Charter is periodically reviewed and updated according to the needs of the Company or whenever a new regulation is implemented that may have an impact on the Board at discharging its responsibilities. The Board Charter was last revised in October 2018.

3. Promoting Good Business Conduct and Corporate Culture

3.1 Code of Conduct and Ethics

The Board is committed to maintaining and practising ethical values and corporate culture in carrying out its duties, with such practices formalised through the Company’s Code of Ethics which is uploaded on the Group’s website at www.kotrapharma.com. The Code of Ethics clearly establishes a high standard of ethical behaviour and business standards. The Code of Ethics is required to be observed by all Directors and Employees of the Group and are to be applied in all aspects of business.

3.2 Whistle Blowing Policy

The Board has formulated a Whistle Blowing Policy for the Group to provide a structured reporting and feedback channel to facilitate whistleblowing. The Whistle Blowing Policy outlines avenues to raise concerns or disclose in good faith of any unethical conduct such as fraud, corruption, copyright infringement and alike. The Whistle Blowing Policy also spells out how the reporting and investigation will be conducted. All reports on unethical conduct will be treated with highest confidentiality without any risks of reprisal from the Management.



PART II: BOARD COMPOSITION

4. Board’s Objectivity

4.1 Board Composition

The Board comprises seven (7) members, consisting of three (3) Executive Directors, two (2) Independent Non-Executive Directors, one (1) Non-Independent Non-Executive Director and one (1) Alternate Director (to the Non-Independent Non-Executive Director). The existing composition complies with Paragraph 15.02 of the MMLR that sets out at least two (2) Directors or one-third (1/3) of the Board, whichever is higher, must be Independent Non-Executive Directors. The profile of each Director is set out in the Profile of Directors of this Annual Report.

To encourage varied opinions and perspectives, the Company is led by a Board comprising members with diversified backgrounds and vast experience in areas of accounting, audit, banking and finance, corporate affairs, information technology, marketing, operations, research and technology. The current composition with a balanced mix of skills and relevant qualities contributes effectively in meeting the Board’s responsibilities and in leading and directing the management and affairs of the Group.

4.2 & 4.3 Tenure of Independent Director and Policy on the Tenure of Independent Non-Executive Director

The Board has adopted a nine - (9) year tenure policy for Independent Non-Executive Directors. In the event the Board wishes to retain the Independent Non-Executive Director beyond the nine (9) year tenure limit, he/she shall be re-designated as a Non-Independent Non-Executive Director.

4.4 Board Diversity and Senior Management Team

The Board acknowledges the importance of having a diverse Board and Senior Management. The Company is led and guided by a competent Board with a mix of skills, specialisations and professional backgrounds that collectively foster diversity within its composition. The Board has formalised a Board Diversity Policy which is published on the Group’s website at www.kotrapharma.com

The NC is responsible for reviewing and assessing the core competencies and capabilities required to support the strategic directions and needs of the Company. In selecting Board members, including the Senior Management, their appointments are based on objective criteria and merits, with due regard for skills, age, cultural background and gender.

Brief descriptions of the background of Directors and Key Management are presented in Directors’ Profile and Key Management’s Profile respectively in this Annual Report.

4.5 Gender Diversity

Whilst the Board has a diversity policy on how it onboards Directors, the policy does not discriminate against gender nor does it specify a pre-set gender target to be met. The Board is of the view that quantitative targets on gender, age and ethnicity diversity should not be prescribed in appointing a Director. To select the best candidate available, the selection criteria are primarily based on the candidate’s merit, experience, knowledge, time commitment, skills set and other qualities deemed suitable for the Board – these factors are included in the Company’s Board Diversity Policy.


4.6 Directors Appointment and Reappointment Process

The NC is entrusted by the Board to consider, review and propose the appointment of new nominees for the Board and Board Committees. For new appointments, the NC assesses the suitability of potential candidates by considering their knowledge, skills, character, integrity, experience, time commitment, professionalism and other required criteria, before recommending to the Board for approval. The candidate is identified upon recommendation from shareholders, the Board, Management or other sources such as independent recruitment firms. The Company Secretary ensures the appointments are properly made and in compliance with all regulatory requirements.

4.7 The NC

The NC has three (3) members, comprising exclusively Non-Executive Directors with a majority of Independent Non-Executive Directors as follows:

• Datuk Jamaludin bin Nasir – Chairman Independent Non-Executive Director• Lee Min On – Member Independent Non-Executive Director• Piong Teck Min – Member Non-Independent Non-Executive Director

The NC meets at least once a year or more frequently, if deemed necessary by the Chairman, having regard to the Company’s requirements. The NC has discretion to invite other members of the Board or Management as or when required. As of the financial year ended 30 June 2018, the NC met once with full attendance by the members.

Annually, the NC assesses the effectiveness of the Board as a whole, contribution of each Director and Board Committees by way of a self and peer evaluation, with reference to the Corporate Governance Guide issued by Bursa Securities.

The activities undertaken by the NC during the financial year under review are as follows:

a) For Directors who would be retiring by rotation at the forthcoming Annual General Meeting, reviewed their suitability for re-election for the Board’s consideration;

b) Reviewed and assessed the effectiveness of the Audit Committee and its composition to ensure their duties have been carried out according to its Terms of Reference;

c) Reviewed the progress of succession planning with the Managing Director, considering the challenges and opportunities faced by the Group;

d) Reviewed the NC’s Terms of Reference to ensure their continuing relevance and recommend revisions to the Board for approval; and

e) Reviewed the results of the Board performance evaluation and peer assessment evaluation.

The NC’s Terms of Reference are available on the Group’s website at www.kotrapharma.com

5. Overall Effectiveness of the Board and its Individual Directors

5.1 Annual Evaluation

The Board undertakes an assessment on the performance of the Board as a whole, Board Committees and each individual Director on an annual basis. The evaluation involves individual Director completing a set of questions regarding the process, composition, accountability and effectiveness of the Board as well as Board Committees. As for the assessment of individual Director, peer performance evaluation is carried out using questionnaire based on key performance indicators tailored to evaluate each Director’s performance at carrying out their duties effectively and identify the areas for further improvements. These assessments and comments are collated from all Directors and the results are discussed during the NC meeting.



Upon reviewing the results of assessments for the financial year under review, there were no major concerns and the NC is satisfied with the existing Board composition as well as the mix of experience, expertise and qualification of its Board members. In addition, the independence of Independent Non-Executive Directors was assessed by the NC annually to ensure they are able to exercise and maintain their independent judgement at all times.

The NC concluded all Directors have demonstrated their commitment, responsibilities and effectiveness towards the Company in terms of time and participation during the financial year ended 30 June 2018 and subsequently recommended to the Board on the re-election of the retiring Directors at the upcoming AGM.

Time Commitment The Board has committed to meet five (5) times each financial year to discuss and deliberate on various matters

concerning the Group. Additional meetings are convened as needed when urgent and important decisions need to be made in between scheduled meetings. As a requirement to focus and fulfil their roles and responsibilities effectively, the Directors must not hold more than five (5) directorship at public listed companies and shall notify the Company prior to accepting any new directorship. An indication of time that will be spent on the new appointment is also required to be included in the notification. As of the date of this CG Overview Statement, none of the Directors held directorship in more than five (5) public listed companies.

During the financial year ended 30 June 2018, the attendance record of the Board and its Board Committees is

tabulated as follows:

Number of meetings attended for the financial year ended 30 June 2018

Director Board AC NC RC

1. Datuk Jamaludin bin Nasir 5/5 5/5 1/1 2/22. Piong Teck Onn 5/5 - - 2/23. Datuk Piong Teck Yen 5/5 - - -4. Chin Swee Chang 4/5 - - -5. Piong Teck Min *3/5 *2/5 1/1 *1/26 Lee Min On 5/5 5/5 1/1 2/27 Piong Chee Kien 1 1 - 1 (Alternate Director to Piong Teck Min)

* Piong Chee Kien, Alternate Director to Piong Teck Min attended

Directors’ Training

All the Directors had attended the Mandatory Accreditation Programme. The Directors are aware of the importance of continuous education to keep abreast with corporate and regulatory development and, accordingly, the Directors attend seminars, conferences and training courses to suit their individual needs in enhancing their knowledge and professionalism to discharge their roles effectively in the Board.

The Board, through NC, continuously assesses and determines the training needs of its individual members and ensure that they receive relevant updates and training to hone individual Directors’ knowledge and enhance their skills towards discharging the responsibilities.



During the financial year under review, training programmes attended by the Directors are listed below:


Name of Directors

Datuk Jamaludin bin Nasir

Piong Teck Onn

Datuk Piong Teck Yen

Chin Swee Chang

Piong Teck Min

Lee Min On

Piong Chee Kien

Training/Course Attended • Directors & Officers Commercial Management Liability• KPMG - Basel I, II And III and the impact to Financial

Institutions• Global Symposium on Development Financial

Institutions• MINDA Directors Talk - Boardroom Language - A

Guide To Surviving The Boardroom• CG Breakfast Talk - Integrating an Innovation Mindset

with Effective Governance• Training on Islamic Finance• Financial Institutions Directors’ Education Programme

- Core Programme Module • Quality by Design (QbD)• Directors & Officers Commercial Management Liability• Certified Life Science Intellectual Property Specialist• Laboratory Quality Manual

• Directors & Officers Commercial Management Liability

• Directors & Officers Commercial Management Liability• KITE: Training Need Analysis & Return of Investment• Training Hour Analysis• Recruitment Procedure Briefing • Executive PDA Sparing Workshop • Managing Master Class (MMC) • The New PDA Briefing

• Directors & Officers Commercial Management Liability

• Fraud Risk Management Workshop• Sustainability Reporting – “What and how to report”• Corporate Governance – Kuching Conference • The New Malaysian Code on Corporate Governance –

“Unpacking it for practical application”• Directors & Officers Commercial Management Liability• Improving Financial Savviness for Directors: “Financial

Reporting – Timeliness and Accuracy”• Related Party Transactions – “Implications to the Board,

Audit Committee & Management”• Sustainability Reporting – “Rising up to meet the

challenges” • Updates on the Malaysian Code of Corporate

Governance & New Listing Requirements• The Corporate Governance Guide 3rd Edition - “Moving

from Aspiration to Actualization”• Corporate Governance Briefing Sessions: MCCG

Reporting & CG Guide @ Bursa Malaysia • KPMG ACI Breakfast Roundtable • Overview of Malaysian Financial Reporting Standards

(MFRS) 9, 15 and 16• The Malaysian Anti- Corruption Commission

(Amendment) Act 2018 – Corporate Liability Provision

• Latihan Untuk Industri: ASEAN Guideline on Good Manufacturing Practice (GMP) for Traditional Medicine and Health Supplements

Date

23/08/201706/09/2017

19/09/2017 to 20/09/2017

03/11/2017

07/11/2017

15/12/2017 to 16/12/201705/02/2018 to 08/02/2018

10/07/2017 to 12/07/201723/08/201725/09/2017 to 29/09/201715/01/2018

23/08/2017

23/08/201728/08/201720/09/201713/03/201815/03/2018 to 16/03/201808/04/2018 to 09/04/201826/06/2018

23/08/2017

13/07/201717/07/201724/07/201710/08/2017

23/08/201712/09/2017

28/09/2017

05/10/2017

29/11/2017

25/01/2018

02/03/2018

19/03/201803/04/2018

27/06/2018

24/10/2017 to 26/10/2017


PART III: REMUNERATION

6. Level and Composition of Remuneration

6.1 Remuneration Policies and Procedures

The Board is of view that setting a fair and competitive remuneration package is essential to attract, motivate and retain high calibre Directors and Senior Management in steering the Group to achieve its long-term goals. Accordingly, a remuneration policy has been formalised to determine the remuneration package of Directors and Senior Management. This policy focuses on ensuring such compensation and benefits packages are commensurate with the experience, performance, knowledge and responsibilities of the individuals concerned as well as corporate performance.

For Non-Executive Directors, the remuneration package consists of Director’s fees and other benefits like meeting and travelling allowances for attending Board and Board Committee meetings. For the Executive Directors and the Senior Management, the components of their remuneration packages comprise fixed salary, performance based annual bonus and other emoluments.

The remuneration of Non-Executive Directors is reviewed annually by considering the responsibilities, experience and position undertaken by them. Market competitiveness, qualifications, experience, individual and the Group’s performance are among the areas considered for the remuneration package of Executive Directors and Senior Management, and is reviewed annually or when deemed necessary.

The remuneration policies and procedures are made available at the Group’s website at www.kotrapharma.com

6.2 Remuneration Committee

The Board has established a RC comprising a majority of Non-Executive Directors in determining the remuneration packages of Directors and Senior Management. The RC’s primary activity during financial year ended 30 June 2018 was to evaluate and deliberate the remuneration packages for Directors and Senior Management and recommend to the Board for approval, taking into consideration their performances, contributions and overall financial performance of the Group. The RC is guided by its Terms of Reference that are periodically reviewed and updated when necessary.

The current members of the RC are:

• Datuk Jamaludin bin Nasir - Chairman Independent Non-Executive Director• Lee Min On - Member Independent Non-Executive Director• Piong Teck Min - Member Non-Independent Non-Executive Director• Piong Teck Onn - Member Managing Director

7. Remuneration of Directors

The RC reviewed the Directors’ remuneration packages, including Non-Executive Directors for recommendation and approval by the Board or shareholders, as the case may be. The Directors’ fees and other benefits of Non-Executive Directors are tabled at the AGM for shareholders’ approval.

The Directors abstain from participating in discussion concerning their own remuneration and play no part in determining their own remuneration.



Details of remuneration of Directors of the Company during the financial year ended 30 June 2018 from the Company and Group are as shown below: -

Other Emoluments Defined & Contribution Benefits- Category Fees Salaries Bonus Plan in-kind Total (RM) (RM) (RM) (RM) (RM) (RM)

Company

Executive Directors Piong Teck Onn - - - - - - Datuk Piong Teck Yen - - - - - - Chin Swee Chang - - - - - -

Non-Executive Directors

Datuk Jamaludin bin Nasir 78,000 - - - 2,700 80,700 Lee Min On 71,400 - - - 2,700 74,100 Piong Teck Min 48,600 - - - 1,500 50,100 Piong Chee Kien - - - - 900 900

Total 198,000 - - - 7,800 205,800

Other Emoluments Defined & Contribution Benefits- Category Fees Salaries Bonus Plan in-kind Total (RM) (RM) (RM) (RM) (RM) (RM)

Group

Executive Directors Piong Teck Onn 6,000 1,106,220 168,740 153,000 5,056 1,439,016 Datuk Piong Teck Yen - 575,016 92,150 80,064 890 748,120 Chin Swee Chang - 439,920 70,500 61,254 890 572,564

Non-Executive Directors

Datuk Jamaludin bin Nasir 78,000 - - - 2,700 80,700 Lee Min On 71,400 - - - 2,700 74,100 Piong Teck Min 48,600 - - - 1,500 50,100 Piong Chee Kien - - - - 900 900

Total 204,000 2,121,156 331,390 294,318 14,636 2,965,500



PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT

PART I: AUDIT COMMITTEE

8. EFFECTIVE AND INDEPENDENT AUDIT COMMITTEE

The Board is assisted by the AC to, amongst others, oversee financial reporting, engage with external and internal auditors, review related party transactions as well as oversee compliance with the Group’s risk management and internal control framework. The Board is satisfied that the AC has discharged its duties and responsibilities effectively in accordance with the AC’s Terms of Reference.

The AC’s Terms of Reference are documented and available on the Group’s website at www.kotrapharma.com

8.1 Chairman of the AC

The AC is chaired by Lee Min On, who is an Independent Non-Executive Director and is not the Chairman of the Board. He is a member of Malaysian Institute of Accountants (“MIA”).

8.2 Former Key Audit Partner

The AC has formalised and the Board has approved a policy requiring a former key audit partner to undergo a cooling-off period of two (2) years in the event the Board wishes to on-board such a person to be part of the Audit Committee. This policy has been incorporated in the AC’s Terms of Reference.

8.3 Assessment on the Suitability, Objectivity and Independence of External Auditor

The AC is responsible for assessing the suitability and independence of the External Auditors, including amongst others, reviewing their objectivity, audit fees, audit scope, audit planning and evaluating the performance of the audit team. The effectiveness and performance of the External Auditors is reviewed annually by the AC before recommending to the Board for renewal or termination of their services.

Besides that, during the financial year under review, the AC has sought a written assurance from the External Auditors, confirming that they are, and have been independent during the conduct of audit engagement in accordance with MIA’s By-Laws on Professional Ethics, Conduct and Practice.

The AC met with the External Directors without the presence of Executive Directors and Management to enquire on any extraordinary matters or confidential comments that necessitated the AC’s attention.

Having regard to the outcome of its assessment, the AC is satisfied with the independence of Messrs. Crowe Malaysia (Formerly known as Crowe Horwath) (“Crowe Malaysia”) as the External Auditors of the Company and also on their audit and non-audit fees rendered by Crowe Malaysia and its affilitates for the financial year ended 30 June 2018. The Board will be recommending for shareholders’ approval during the AGM the re-appointment of Crowe Malaysia as the External Auditors.

8.4 Composition of the Audit Committee

The AC consists of three (3) Non-Executive Directors, two (2) of whom are Independent Non-Executive Directors. This composition complies with Paragraph 15.09(1)(a) and (b) of the MMLR. The present members of the AC are Lee Min On (Chairman – Independent Non-Executive Director), Datuk Jamaludin bin Nasir (Member – Independent Non-Executive Director) and Piong Teck Min (Member – Non-Independent Non-Executive Director).

8.5 Necessary Skills by the AC to Discharge Duties

All members of the AC collectively have the necessary skills and a wide range of experience and expertise in areas such as finance, accounting, audit and business acumen to discharge their duties and responsibilities effectively. They have participated in continuous professional development to keep themselves abreast of the relevant developments in accounting and auditing standards, practices and rules.

The profiles of the AC members are detailed in the Directors’ Profile of this Annual Report.



PART II: RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK

9. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK

The Board acknowledges its responsibility and is committed to maintain the Group’s system of risk management and internal control, including the establishment of an appropriate control environment and framework as well as reviewing its adequacy and effectiveness. The Group’s enterprise risk management framework was formalised in writing with the assistance of KPMG Management & Risk Consulting Sdn Bhd (“KPMG”), an independent professional service provider. The Group’s risk profile was formed through this framework that outlines the types of business risks and the potential effects of the risks.

The Board, through the AC, reviewed the updated risk profile for the financial year ended 30 June 2018 and ensured the principal risks were identified, evaluated, reported and managed. The comments made by the AC were taken into consideration by Management to mitigate and control the risks.

Details of the risk management and internal control framework are elaborated further in the Statement on Risk Management and Internal Control of this Annual Report.

10. EFFECTIVE GOVERNANCE, RISK MANAGEMENT AND INTERNAL CONTROL

The Board has outsourced the internal audit function of the Group to KPMG, whose principal responsibility is to undertake regular reviews on the system of internal control, so as to provide assurance to the Board that the system continues to operate effectively and efficiently. KPMG also provides recommendations for Management’s consideration to address weaknesses identified in the system.

KPMG reports directly to the AC via its internal audit report as well as risk management update report. An annual assessment has been conducted by the AC to evaluate the independence and effectiveness of KPMG for the financial year ended 30 June 2018. The AC is satisfied with the level of independence and professionalism of KPMG in carrying out their functions effectively.

An overview of the internal audit function is available in the Statement on Risk Management and Internal Control of this Annual Report.

PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

PART I: COMMUNICATION WITH STAKEHOLDERS

11. CONTINOUS COMMUNICATION BETWEEN THE COMPANY AND STAKEHOLDERS

The Board recognises the importance of an effective communication channel to ensure prompt and timely dissemination of information to shareholders, investors as well as the general public. In this regard, the Board fully adheres to the disclosure requirements as set out in the MMLR.

The Company has established Corporate Disclosure Policies and Procedures with an objective to ensure information is disclosed broadly in a complete, accurate and timely basis via Bursa LINK or the Group’s website. An Investor Relations section has been incorporated in the Group’s website www.kotrapharma.com that provides relevant and related information on the Group. The information available in this section includes announcements and disclosures made by the Company to Bursa Securities as well as Annual Reports. The e-mail address and telephone number for the designated management personnel are published in the corporate website to facilitate continuous communication with shareholders and other stakeholders.

The AGM is also an important platform for interactions between the Board and the shareholders. At such meeting, the shareholders are given the opportunity to raise issues, seek clarifications or express their concerns on matters pertaining to the Group’s performance.



PART II: CONDUCT OF GENERAL MEETINGS

The Board believes the AGM is an important and effective forum for dialogue that provides a direct communication with the shareholders. The Board encourages the participation of the shareholders at the Company’s AGM. The notice of AGM and related circulars are issued to shareholders at least twenty-one (21) days before the meeting. The Board took cognisance of the MCCG’s recommendation and decided to comply with the recommendation of providing the notice of AGM at least twenty-eight (28) days before the forthcoming and future AGMs.

All the Directors are normally present during the AGM for shareholders to engage directly and effectively with each Director. The main proceeding of the AGM includes a Q&A session by which the Chairman will invite shareholders or proxy holders to speak at the meeting, allowing them to raise questions or concerns pertaining to the Group’s financial statements or other related matters. The Directors endeavour to provide feedback and clarification on the queries raised.

Resolutions at the AGM are determined via poll voting. An independent scrutineer who is not an officer of the Company or its related company, is appointed to validate the votes cast at the AGM. The AGM is normally held in the Company which is easily and readily accessible by all shareholders.

This Corporate Governance Overview Statement is approved by the Board on 7 October 2018.

ADDITIONAL COMPLIANCE INFORMATION

Utilisation Proceeds from Corporate Proposal

The Company did not raise funds through any corporate proposal during the financial year.

Recurrent Related Party Transactions of a Revenue or Trading Nature (“RRPT”)

The information on RRPT for the financial year under review is disclosed in Note 27 of the Audited Financial Statements in this Annual Report.

Audit and Non-audit Fees Paid to External Auditors

The audit and non-audit fees paid or payable to the external auditors and their affiliated firms during the financial year under review are set out below:

Group CompanyType of Fees (RM) (RM) Audit 74,000 25,000 Non-auditTax Filing 44,250 3,650Review of the Statement on Risk Management Internal Control 3,500 3,500 Fee for Verification of Training and R&D Grant 8,000 - Total Non-audit fees 55,750 7,150

Material Contracts Involving Directors’ and Major Shareholders’ Interests

During the financial year ended 30 June 2018, except for RRPT of a revenue in nature as disclosed, there were no material contracts entered into by the Company and its subsidiaries involving the interests of the Directors, Senior Management who is not a director, major shareholders or connected persons which were still subsisting as at the end of the financial year under review or since the end of the previous financial year except as disclosed in the financial statements.




ESOS

FOR THE PERIOD FROM 29 JULY 2013 TO 30 JUNE 2017

Number of Options granted Number of Options exercised Number of Options lapsed Number of Options outstanding as at 30 June 2017

Total

16,969,1201,162,880

791,80015,014,440

Directors

7,920,000--

7,920,000

Senior Management

1,800,000150,000

-1,650,000

Other Entitled Employees

7,249,1201,012,880

791,8005,444,440

ESOS

FOR THE PERIOD FROM 1 JULY 2017 TO 30 JUNE 2018

Number of Options outstanding as at 1 July 2017Number of Options grantedNumber of Options exercised Number of Options lapsedNumber of Options outstanding as at 30 June 2018

Total

15,014,440-

331,640119,800

14,563,000

Directors

7,920,000---

7,920,000

Senior Management

1,650,000---

1,650,000

Other Entitled Employees

5,444,440-

331,640119,800

4,993,000

There were no option shares granted to the Non-Executive Directors during the financial year ended 30 June 2018.

The cumulative option shares granted to the Non-Executive Director is as follows:-

No. of Options

Expired/Name of Director Granted Exercised Forfeited Outstanding

Piong Teck Min 1,980,000 - - 1,980,000

Maximum Allowable Allocation of the ESOS

Based on the ESOS By-Laws, the aggerate number of Shares to be awarded to the selected person shall be determined at the discretion of the ESOS Committee subject to the following:-

i. The total number of new shares made available under the ESOS shall not exceed fifteen per cent (15%) of the issued and paid-up share capital of the Company at the point in time when the ESOS is offered; and

ii. Not more than ten per cent (10%) of the total new shares is to be issued under the ESOS at the point in time when the ESOS is offered or allocated to any individual Selected Person, who, either singly or collectively through persons connected with him, holds twenty per cent (20%) or more in the issued and paid-up share capital of the Company.

During the financial year ended 30 June 2018, there were no options granted to the Executive Directors and Senior Management. A total of fifty-seven per cent (57%) of the shares granted pursuant to the ESOS (excluding number of shares lapsed) has been granted to the Executive Directors and Senior Management since the commencement of the ESOS.

Employee Share Scheme

The Company had granted options under the Employee Share Option Scheme (“ESOS”) prior to the financial year ended 30 June 2018. Further information on the ESOS is set out in the Directors’ Report and Note 19 to the Annual Audited Financial Statements for the financial year ended 30 June 2018.

Brief details on the number of shares and option granted, vested and outstanding since the commencement of the ESOS on 29 July 2013 and during this financial year 2018 are set out in the tables below:


STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

INTRODUCTION

The Statement on Risk Management and Internal Control (“Statement”) set out below has been prepared in accordance with Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. Moreover, the Malaysian Code on Corporate Governance (“MCCG”) requires the Board to establish an effective risk management and internal control framework. The Board should disclose the features of its risk management and internal control framework, and the adequacy and effectiveness of this framework.

In view of that, the Board is pleased to provide the following Statement which outlines the nature and scope of risk management and internal controls of the Group during the financial year ended 30 June 2018.

BOARD’S RESPONSIBILITY

The Board recognises the importance of maintaining the Group’s systems of risk management and internal control to safeguard shareholders’ investment and the Group’s assets. The Board also upholds its overall responsibility in the establishment of an appropriate control environment and framework as well as reviewing its adequacy and operating effectiveness of that system. The system of internal control covers financial controls, operational and compliance controls and risk management procedures. However, due to its inherent limitations, the system can only manage and reduce, rather than completely eliminating, risks such as fraud, error or failure to achieve the Group’s business and corporate objectives. Therefore, the system only provides reasonable, but not absolute, assurance against material misstatement or loss.

The Board acknowledges that identifying, evaluating and managing the significant risks encountered by the Group is a continuous process. On a periodic basis, the Board, via the Audit Committee, evaluates the adequacy and operating effectiveness of the system of risk management and internal control and, where appropriate, requires the Management to implement pertinent controls to address emerging issues or areas of control deficiencies. The process has been in place for the financial year under review and up to the date of approval of this Statement for inclusion in the Annual Report of the Company.

RISK MANAGEMENT FRAMEWORK

The Board fully supports the contents of Practices 9.1 and 9.2 of the MCCG which calls for the establishment of an effective risk management and internal control framework and the disclosure thereof.

The Group’s enterprise risk management framework, which was formalised in writing with the assistance of an independent professional firm of consultants, entailed the development of the Group’s risk profile, risk register and appropriate internal controls to manage the risks to acceptable levels in line with the Australian and New Zealand risk management standard AS/NZS 4360:2004. The Board has also adopted a Risk Management Policy and Procedures document to streamline the Group’s risk management activities.

In December 2017, a risk update, which involved input by Directors, Senior Management as well as other Management personnel, was carried out with assistance from the same independent professional firm of consultants. This resulted in the Group risk profile being updated and action plans formulated focusing on the principal business risks. The outcome of the risk update was tabled before the Audit Committee in February 2018.

The Board believes that maintaining a sound system of risk management is founded on a clear understanding and appreciation of the following key elements of the Group’s risk management framework:

- A risk management structure which outlines the lines of reporting and establishes the responsibility of personnel at different levels, i.e. the Board, Audit Committee and Management; and

- On-going identification of principal business risks (present and potential) faced by the Group and formalisation of Management’s action plans to mitigate these risks to acceptable levels, considering the established risk appetite and parameters (qualitative and quantitative) of the Group


Statement on Risk Management and Internal Control (Cont’d)

INTERNAL AUDIT FUNCTION

The Group outsourced its Internal Audit Function to an independent professional firm, namely KPMG Management & Risk Consulting Sdn Bhd (“KPMG”), which assists both the Board and Audit Committee by conducting independent assessment of the adequacy and operating effectiveness of the Group’s internal control system. To ensure independence from Management, the Internal Audit function reports directly to the Audit Committee.

The Audit Plan, which articulates the methodology of internal audit adopted by the professional firm, sets out the areas of coverage and rationale for their selection and is presented to the Audit Committee for comments and subsequent approval before actual internal audit work is carried out. The internal audit deliverables, which comprised Internal Audit reports on observations raised, recommendations suggested as well as Management’s comments thereto, are issued and reported directly to the Audit Committee. At relevant Audit Committee meetings, representatives from KPMG table its report and deliberate with the Audit Committee the salient issues noted, recommendations by KPMG to address the issues as well as Management’s comments on the issues highlighted. The Managing Director and Chief Financial Officer, who are normally invited to the Audit Committee meeting, provide clarification to the Audit Committee on the matters highlighted, including the action plans to address the concerns highlighted by the Internal Audit function.

During the financial year under review, one cycle of internal audit was carried out to assess the internal control system. The key internal controls relating to the Sales and Marketing process were addressed in the audit. The Group’s application of MCCG was also addressed in the audit. The observations from the internal audit were reported in August 2018.

The Internal Audit function also conducted follow-ups on the status of Management action plans to address issues highlighted in preceding cycles of internal audit before reporting to the Audit Committee. The costs incurred for the Internal Audit function for the financial year ended 30 June 2018 amounted to RM70,855.

Additionally, ongoing reviews and deliberation of financial reports during Board and Audit Committee meetings are carried out to ensure the effectiveness and adequacy of the Groups’ internal control system in safeguarding the shareholders’ investment and the Group’s assets.

INTERNAL CONTROL FRAMEWORK:

- A clearly defined organisational structure within the Group, with respective levels of responsibility, authority and accountability, to ensure that the Management performs its functions and that such functions are appropriately segregated;

- Detailed outline of the budgeting process for key business divisions to prepare budgets for the forthcoming year;- Continuous monitoring of results against budget with major variances and actions carried out by the Management, when

required;- Documentation and communication to staff members on operating procedures that set out the policies, procedures and

practices adopted in the Group to ensure clear accountabilities. The design of internal control procedures is reviewed and revised, whenever necessary;

- Regular reporting to the Senior Management and the Board on the financial reports, progress reports, key variances and analysis of financial data of the Group’s businesses;

- Management meetings are scheduled on a timely basis to review and deliberate financial and operational reports and matters;

- Establishment of management information systems with documented processes, comprising change request to computer programmes and access to data files; and

- Ensuring adequate insurance and safety measures over major assets of the Group against any mishap that may result in material losses to the Group.


CONCLUSION ON THE ADEQUACY AND EFFECTIVENESS OF THE GROUP’S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

The Board has received assurance in writing from the Managing Director and Chief Financial Officer that the Group’s risk management 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 input from relevant parties like the Internal Audit function and feedback from the External Auditors on any control failings, the Board is of the view that the system of risk management and internal control is adequate and operating effectively to achieve objectives and has not resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group’s Annual Report. The Board remains committed and resilient towards establishing a robust system of internal control and risk management, where improvements are made as considered appropriate.

The External Auditors have reviewed this Statement, pursuant to the scope set out in the Audit and Assurance Practice Guide 3 (“AAPG 3”), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants, for inclusion in the Annual Report for the year ended 30 June 2018 and reported to the Board that nothing has come to their attention that caused them to believe that the Statement intended to be included in the Annual Report, in all material respects, has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management & Internal Control: Guidelines for Directors of Listed Issuers, or is factually inaccurate.

AAPG 3 does not require the External Auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system, including the assessment and views by the Board of Directors and Management thereon. The External Auditors are also not required to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the Annual Report will, in fact, remedy the problems.

This Statement is approved by the Board on 7 October 2018.

Statement on Risk Management and Internal Control (Cont’d)


REPORT OF THE AUDIT COMMITTEE

The Board of Directors (“the Board”) of Kotra Industries Berhad (“the Company”) is pleased to present the Audit Committee Report for the financial year ended 30 June 2018.

The Audit Committee (“the AC”) was established by the Board to assist in discharging its fiduciary responsibilities in accordance with the AC’s Terms of Reference.

1. Composition

The AC, appointed by the Board amongst themselves, consists of three (3) members who are all Non-Executive Directors, with a majority of them being Independent Non-Executive Directors. The AC members comprise the following:

• Lee Min On - Chairman Independent Non-Executive Director

• Datuk Jamaludin bin Nasir - Member Independent Non-Executive Director

• Piong Teck Min - Member Non-Independent Non-Executive Director

In compliance with paragraph 15.09(1)(c) of the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”), the AC Chairman is a member of the Malaysian Institute of Accountants while the other two (2) members of the AC are financial literate and understand matters under the purview of the AC, including the financial reporting process and the key areas of coverage.

2. Attendance at the AC Meetings

During the financial year ended 30 June 2018, the AC held a total of five (5) meetings and the attendance at all meetings met the obligatory quorum by which the majority of members present during the meetings were Independent Non-Executive Directors. The Managing Director, Chief Financial Officer and Senior Finance Manager attended all the meetings at the AC’s invitation to brief and clarify, if necessary, to the AC on matters that were incorporated in the meeting agenda, which covered financial reporting, related party transactions, risk management and other operational matters. At the request of the AC, representatives of the External Auditors and Internal Auditors also attended the AC meetings to present their reports to the AC as well as discuss any findings on the financial statements of the Group, risk management or system of internal control.

The Company Secretary, Ms. Tay Seok Yin, acts as the Secretary of the AC. Ms. Tay is responsible for preparing the meeting agenda and ensures the same is circulated with adequate notice prior to each meeting. Her role also includes taking the minutes of meeting, keeping and disseminating the minutes to the AC as well as advising the AC, particularly on issues pertaining to compliance with related laws and regulations.

As of the financial year ended 30 June 2018, the attendance of AC members is set out below:

Members Aug 2017 Oct 2017 Nov 2017 Feb 2018 April 2018 Total

1. Lee Min On √ √ √ √ √ 5/5 2. Datuk Jamaludin Bin Nasir √ √ √ √ √ 5/5 3. Piong Teck Min X √ O √ X 2/5 4. Piong Chee Kien N/A N/A √ N/A N/A 1

O – Piong Chee Kien, Alternate Director to Piong Teck Min attended N/A – Not Applicable

The Terms of Reference of the AC are made available in the Group’s website at www.kotrapharma.com


Report Of The Audit Committee (Cont’d)

3. Review of the AC Through an annual evaluation, the Nomination Committee (“the NC”) reviewed the term of office and performance of the

AC for the financial year ended 30 June 2018 to assess their effectiveness at fulfilling their duties pursuant to the AC’s Terms of Reference.

Upon being briefed by the NC on the evaluation results, the Board was satisfied with the AC members at discharging their duties and responsibilities in accordance with the AC’s Terms of Reference.

4. Summary of Work Done During the Financial Year

The activities of the AC during the financial year ended 30 June 2018 and up to the date of this report comprise the following:

A) Financial Reporting

• On a quarterly basis, the AC reviewed the financial results and unaudited annual financial statements of the Group, including announcements, before recommending the same to the Board for approval;

• Reviewed the Group’s annual audited financial statements before recommending to the Board for approval and release to Bursa Securities;

• Confirmed with the Management and External Auditors that the Group’s financial statements complied with the Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and other pertinent legal and regulatory requirements; and

• Ensured any changes in implementation of major accounting policies were reflected in the quarterly financial reports and the annual audited financial statements.

The above activities were conducted with a primary purpose of ensuring compliance of financial reporting and its accompanying disclosures with:

• MMLR;• Relevant provisions of the Companies Act 2016;• Applicable approved accounting standards as adopted by the Malaysian Accounting Standards Board; and• Other relevant regulatory requirements.

B) Internal Audit

• Reviewed and approved the annual Internal Audit Plan, including the adequacy of scope, functions, strategy as well as the methodology adopted by the outsourced Internal Auditors, namely KPMG Management & Risk Consulting Sdn Bhd;

• Reviewed the Internal Audit Report for the financial year ended 30 June 2018 presented by Internal Auditors on their significant findings and recommendations that were tabled for considerations. The recommendations, together with responses from the Management, were deliberated by the AC, including the action plans agreed by Management to be implemented to address the issues highlighted by the Internal Auditors;

• Evaluated the Internal Auditors’ independence, work performance, functions, competence and their timeliness of reporting; and

• Follow-up reviews were performed by the Internal Auditors on previous cycles’ internal audit observations to determine the status of Management’s corrective measures taken to address and rectify the highlighted findings. Based on the latest follow-up review report presented to the AC by the Internal Auditors in August 2018, action plans that were in the process of being implemented by Management were not deemed significant.

C) External Audit

• Reviewed the re-appointment of the external auditors, namely Messrs. Crowe Malaysia (formerly known as Messrs. Crowe Horwarth) and their audit fees before recommending to the Board to table as a resolution to the shareholders at the forthcoming Annual General Meeting;

• Reviewed the audit plan and scope of work prepared by the External Auditors for the financial year ended 30 June 2018;

• Reviewed the audit review memorandum for the financial year ended 30 June 2018;


Report Of The Audit Committee (Cont’d)

• Reviewed the audit results and report by the External Auditors, together with the Management’s response to the findings, including the Key Audit Matters and other significant findings in accounting and audit matters;

• Evaluated the External Auditors’ objectivity, professionalism and independence by acquiring a written declaration on their adherence to the By-Laws (on professional ethics, conduct and practice) of the Malaysian Institute of Accountants and auditor independence of the International Ethics Standards Board for Accountants;

• Reviewed the effectiveness of the External Auditors’ performance through an annual assessment and made recommendation to the Board for re-appointment;

• Reviewed and approved the provision of non-audit services by the External Auditors that also included their fees prior to commencement of work. The amount of non-audit fees incurred for the financial year under review is disclosed in the Corporate Governance Overview Statement of this Annual Report; and

• Met with the External Auditors once during the financial year ended 30 June 2018 in the absence of Management to discuss any concerns or disclose confidential comments that they may have on the annual audit.

D) Related Party Transactions

• Reviewed quarterly on all related party transactions entered into by the Group and disclosures of such transactions to ensure the transactions complied with the shareholders’ mandate on recurrent related party transactions, MMLR, Companies Act 2016 and applicable approved financial reporting standards; and

• Reviewed the Circular to Shareholders related to shareholders’ mandate on Recurrent Related Party Transactions of a revenue or trading nature prior to recommending the same to the Board for a resolution to be tabled for shareholders’ approval at the forthcoming Annual General Meeting of the Company.

E) Risk Management and Internal Control

• Reviewed and engaged with Management concerning the adequacy and operating effectiveness of the Group’s risk management framework, system of internal control, updated risk profile of the Group and the related internal controls undertaken by the Management to address the identified risks. This activity was carried out in line with the AC’s review of the reports furnished by the Internal Auditors, Management Letter provided by the External Auditors, key risks that were reflected in the Group’s updated risk profile along with the written assurance provided by the Managing Director and the Chief Financial Officer on the adequacy as well as effectiveness of the Group’s system of risk management and internal control; and

• Reviewed the Statement on Risk Management and Internal Control to ensure the Group’s compliance with the Statement on Risk Management and Internal Control – Guidelines for Directors of Listed Issuers, a publication of Bursa Securities before recommending the same to the Board for approval and insertion in the Annual Report.

F) Annual Disclosures

For the financial year ended 30 June 2018, the AC reviewed and recommended the Corporate Governance Overview Statement, Report of the Audit Committee, the Statement on Risk Management and Internal Control and Circular to Shareholders on Recurrent Related Party Transactions to the Board for approval to be included in the Annual Report. The Audit Committee also reviewed the Corporate Governance Report for the financial year ended 30 June 2018, prepared seperately as required by the MMLR for the Board’s approval to be forwarded to Bursa Securities.

5. Directors’ training

The AC members attended a number of training programmes, seminars and conferences during the financial year under review that provided professional development opportunities to discharge their duties effectively. The list of trainings attended by them is tabled in the Corporate Governance Overview Statement in this Annual Report.

This Report is approved by the Board of Directors on 7 October 2018 for disclosure in the Annual Report 2018.


SUSTAINABILITY STATEMENT

This General Sustainability Statement (“Statement”), which is prepared in accordance with the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), sets out what the Board considers as material sustainability risks and opportunities, collectively known as Material Sustainability Matters, that impact the way the Group’s operations are carried out as well as how such Material Sustainability Matters are managed during the financial year under review.

The contents of this Statement encompass the Group’s key business operations, which comprise developing, manufacturing and trading of pharmaceutical and healthcare products. In preparing this Statement, the Board of Directors (“Board”) has considered the Sustainability Reporting Guide and its accompanying Toolkits, issued by Bursa Securities.

This Statement underlines the Group’s commitment towards ensuring that its business operations are carried out sustainably and responsibly, taking cognizance of the economic, social and environmental implications it is exposed to. The Group believes that in order to remain as a successful organisation, its business should not only focus on generating revenue and profitability but also consider the best interests of all stakeholders.

Sustainability Governance Structure

Whilst the Board is primarily responsible for the sustainability performance of the Group, it has delegated the task of managing sustainability related matters to the Management Team which is helmed by the Managing Director, assisted by his fellow Executive Directors. Going forward, this Team will report to the Board sustainability matters and status of initiatives deployed via the Audit Committee together with risk management matters.

Material Sustainability Matters and how they are managed

During the financial year and up to the date of this Statement, the Management Team has identified via internal discussion Material Sustainability Matters that affect the Group. The following paragraphs highlight how such Matters identified are being managed by the Group.

Economic

• Research and Development (“R&D”)

R&D is an indispensable activity that helps the Group keep pace with robust demand for its products and sustain business growth, as a whole. Since its inception, the Group has been constantly investing in R&D as well as latest technology to develop new competitive advantages and to meet productivity expectations. Our in-house R&D team started off with only two (2) employees and within a span of 15 years, the team’s headcount has multiplied to 53 employees. In line with our R&D efforts, we have implemented Quality by Design (QbD), a holistic approach towards improving efficiency, achieving successful product development, enhancing validation methods and obtaining prompt regulatory approval. Via QbD, we are able to reduce the overall cost of manufacturing, produce better product design with fewer manufacturing issues, with approval processes being shortened and ability to continuously progress in product developments as well as manufacturing processes. We have over 240 products consisting of various forms registered with the National Pharmaceutical Regulatory Agency (NPRA) and anticipate obtaining more product approvals in this coming financial year, especially from our two (2) new lines, namely Metered Dosage Inhaler Line (MDI Line) and the Pre-filled Syringe Manufacturing Line (PFS Line). We believe by manufacturing these products locally, we will be able to reduce the country’s dependency on imported generic products, offer affordable quality products for patients and enable us to build our product portfolio among our competitors in Malaysia and abroad.


• Quality control and quality assurance of products

Due to the importance in maintaining health, well-being and treating illness, we pay great heed towards quality control (“QC”) and quality assurance (“QA”) in our pharmaceutical production. We have a strong team of 112 QC and QA employees which comprise 16% of our Group’s headcount who plays a pivotal role in the product quality and compliance processes. We apply strict quality control at all stages of product development from raw materials to finished product so as to meet quality, safety and consistency in our products. Our internal QC testing is mostly based on the international standards of United States, British and European Pharmacopeia. These standards are consistent with our adherence to the guidelines of Good Manufacturing Practice (“GMP”). Through the accreditation of ISO 9001:2015 Quality Management Systems and ISO 13485:2016 Quality Management for Medical Devices, we are able to create room for profit, growth and expansion by delivering quality product in a cost and resource efficient manner as well as complying with regulatory requirements.

Environmental

• Resource conservation and minimisation of carbon footprint

The Group recognises the impact to its day to day operations to the environment. In today’s world where concerted efforts are taken to conserve the environment, the Group is committed to create and spread environmental awareness as part of their strategy towards sustainability. In order to minimise our impact to the environment, we have taken efforts to reduce the carbon footprints. We have taken initiatives to implement energy savings measures such as turning off lights when not in use, enabling power management functions on computers or laptops, activating sleep mode for photocopy machines when not in use, perform regular checks or cleaning on HVAC filters, conducting scheduled preventive maintenance for equipment and machines.

Our internal vehicles such as vans and trucks have undergone timely maintenance and computerised vehicle inspection by PUSPAKOM for safety and road worthiness certification. We also ensure that the smoke emissions for our vehicles are within the defined limits set by the authority.

To prevent or reduce impact to the environment, we chose to practise 3R which is reduce, reuse and recycle. Throughout our facility, we have provided designated bins to discard paper, plastic items, food waste, tins and cans. We have also initiated an effort to reduce the usage of paper by using thinner papers, avoid printing unnecessary documents, conducting internal communication online as well as encouraging the practice of using both sides of the paper.

Social

• Ethical and legal compliance

The Group embraces a strong culture of doing business ethically. To perform better as a responsible organisation, all dealings or trading with stakeholders are conducted with the highest level of transparency, integrity and accountability. We expect the Management and employees of the Group to adhere to the Code of Conduct, the guiding principles in place to ensure highest ethical standards are maintained in carrying out our business dealings. In tandem with this, we expect our supply chain partners to adopt and engage in similar commitment on legal compliance and business integrity. The Group has a zero-tolerance policy towards unethical business such as corruption, bribery, unfair labour practices and harmful raw materials.

Sustainability Statement (Cont’d)

38 ANNUAL REPORT 2018 KOTRA INDUSTRIES BERHAD PB

Sustainability Statement (Cont’d)

• Human capital development and retention

In sustaining long-term success in an organisation, one of the major elements in accomplishing it depends on human capital. Our employees are our valuable assets, our driving force in achieving our vision and mission. The Group places great importance in employee welfare, retaining talents as well as occupational safety and health.

The Group fully complies and strictly adheres to the employment laws, labour regulations and other relevant applicable laws. We offer remuneration packages to all our employees based on their position, education, knowledge and job scope, regardless of their gender. On an annual basis, we conduct performance appraisal between superiors and employees to evaluate their work performance and their potential for development within the organisation. In our effort to attract, motivate and retain our employees, we provide continuous training to enhance their knowledge and skills, grooming potential employees to take on senior roles and offering competitive remuneration packages after evaluating their expertise, competency, skills and professionalism.

Throughout the financial year under review, we have organised an array of training programs for our employees via Kotra Institute of Talent Excellence or commonly known as KITE. Under KITE, training programs are organised periodically and are designed to enable us to hone skillsets as well as enhance personal and professional development of new employees, new managers and other existing employees. Moreover, we encourage the practice of organising team gatherings, company trips and dinner to foster bonding, communication, sense of belonging and as a token of appreciation for our employees’ unwavering efforts and dedication to the Group.

• Safety and health of employees

To promote workplace safety, the Group has established a Safety and Health Committee (“Committee”). The Committee is mainly responsible for monitoring, managing and ensuring best practices of safety and health are observed in the Group by all employees. In addition, the Group ensures that the rules and regulations set by the Department of Environment (“DOE”), Department of Safety and Health (“DOSH”) and other relevant regulatory bodies are adhered to.

• Contribution to the community The Group is mindful of its need to fulfil its corporate responsibility towards the community. As a practice, we provide

sponsorships in the form of vitamins to schools in Melaka annually during Children’s Day. We have also contributed in-kind for charity runs which we believe enable us to reach out to society at large.

Building a sustainable future

The Board will continue pursuing efforts and initiatives in committing towards long-term sustainability of our businesses. We are aware that sustainability is a continuous process and there will always be areas for improvement within our Group. We will seek to adopt and apply effective sustainable practices in the economic, environment and social spheres to augment existing practices throughout the business operations of the Group on an ongoing basis.

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

40

44

44

45

49

50

51

53

55


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 2018.

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.

results

Group Company rM’000 rM’000

Profit after taxation for the financial year 15,749 4,697

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

The Company paid a final single tier dividend of 2 sen per ordinary share amounting to RM2,672,022 for the financial year ended 30 June 2017 on 18 January 2018.

The Company paid an interim single tier dividend of 2 sen per ordinary share amounting to RM2,672,022 for the financial year ended 30 June 2018 on 15 March 2018.

At the forthcoming Annual General Meeting, a final dividend of 3 sen per ordinary share in respect of the current financial year will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect the proposed dividend. Such dividend, if approved by the shareholders, will be accounted for as a liability in the financial year ending 30 June 2019.

Holding Company

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. Directors The names of directors of the Company who served during the financial year and up to the date of this report are as follows:

Datuk Jamaludin Bin Nasir Piong Teck Onn Lee Min On Piong Teck Min Datuk Piong Teck Yen Chin Swee Chang Piong Chee Kien (Alternate to Piong Teck Min)


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 1.7.2017 Acquired Sold 30.6.2018

Holding company Direct interest Piong Teck Onn 51,000 - - 51,000 Datuk Piong Teck Yen 6,298 - - 6,298 Indirect interest Piong Teck Min 14,641 - - 14,641 Number of ordinary shares 1.7.2017 Acquired Sold 30.6.2018

The Company

Direct interest Chin Swee Chang 1,800,000 - - 1,800,000 Piong Teck Min 3,026,220 - - 3,026,220 Piong Teck Onn 6,201,224 - - 6,201,224 Datuk Piong Teck Yen 6,316,564 - - 6,316,564

Number of ordinary shares 1.7.2017 Acquired Sold 30.6.2018

The Company Indirect interest Chin Swee Chang 3,464,060 120,000 - 3,584,060 Piong Teck Min 373,850 - - 373,850 Piong Teck Onn 68,088,422 120,000 - 68,208,422

Number of options over ordinary shares 1.7.2017 Granted Exercised 30.6.2018

The Company Chin Swee Chang 1,980,000 - - 1,980,000 Piong Teck Onn 1,980,000 - - 1,980,000 Datuk Piong Teck Yen 1,980,000 - - 1,980,000 Piong Teck Min 1,980,000 - - 1,980,000

By virtue of his interests in the holding company, namely Piong Nam Kim Holdings Sdn. Bhd., Piong Teck Onn is deemed to have interests in shares of all the Company’s subsidiaries to the extent of the Company’s interests, in accordance with Section 8 of the Companies Act 2016.

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

Directors’ report (Cont’d)


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 details of the new ESOS are disclosed in Note 19 to the financial statements.

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 any benefit (other than benefits included in the aggregate amount of remuneration received or due and receivable by the directors or the fixed salary of a full-time employee of the Company or related corporations as shown in Note 27(d) to the financial statements) by reason of a contract made by the Company or a related corporation 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 27 to the financial statements.

Indemnity and insurance cost

During the financial year, the total amount of indemnity coverage and insurance premium paid for the directors of the Company were RM12,000,000 and RM12,760 respectively.

Issue of shares and debentures

During the financial year, the Company increased its issued and paid-up share capital from RM68,293,216 to RM68,659,883 by way of issuance of 331,640 new ordinary shares pursuant to the Company’s employee share option scheme at the exercise prices as disclosed in Note 19 to the financial statements. The new ordinary shares were issued for cash consideration and they rank pari passu in all respects with the existing ordinary shares of the Company.

There were no issues of debentures by the Company.

Subsidiaries

Details of the Company’s subsidiaries are disclosed in Note 13 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.



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 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) The contingent liabilities are disclosed on Note 30 to the financial statements. As at the date of this report, there does not exist:

(i) any charge on the assets of the Group or of the Company that 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 Malaysia (formerly known as Crowe Horwath), have expressed their willingness to continue in office. The auditors’ remuneration are disclosed in Note 8 to the financial statements. Signed in accordance with a resolution of the directors dated 9 October 2018.

piong Teck onn piong Teck Min



STATEMENT by DIrECTorSPursuant to Section 251(2) of the Companies Act 2016

We, Piong Teck Onn and Piong Teck Min, being two of the directors of Kotra Industries Berhad, state that, in the opinion of the directors, the financial statements set out on pages 49 to 96 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 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 2018 and of their financial performance and cash flows for the financial year ended on that date. Signed in accordance with a resolution of the directors dated 9 October 2018.

piong Teck onn piong Teck Min

STATuTory DECLArATIoNPursuant to Section 251(1)(b) of the Companies Act 2016

I, Daniel Chua Chong Liang, MIA membership number: CA18092 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 49 to 96 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the declaration to be true and by virtue of the Statutory Declarations Act 1960.

Subscribed and solemnly declared by abovementioned Daniel Chua Chong Liang, at Melaka in the State of Melakaon 9 October 2018 Daniel Chua Chong Liang Before me,

Sharizah Binti YahyaPesuruhjaya SumpahCommissioner of OathsNo.9-1, Jalan TMR 34,Taman Melaka Raya,75000 Melaka.


report on the audit of the financial statements

opinion

We have audited the financial statements of Kotra Industries Berhad, which comprise the statements of financial position as at 30 June 2018 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 notes to the financial statements, including a summary of significant accounting policies, as set out on pages 49 to 96.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 30 June 2018, and of their financial performance and their 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 2016 in Malaysia.

basis for opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and other ethical responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

INDEpENDENT AuDITorS’ rEporTto the members of KOTRA INDUSTRIES BERHAD (Incorporated in Malaysia) Company No: 497632-P


Key Audit Matters (continued)

We have determined the matters described below to be the key audit matters to be communicated in our report.

Recoverability of Trade ReceivablesRefer to Page 77, Note 15 to the financial statements

Key Audit Matter How our audit addressed the key audit matter

Information other than the financial statements and auditors’ report thereon The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon.

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

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

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

responsibilities of the directors for the financial statements

The directors of the Company are responsible for the preparation of the financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

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

Independent auditors’ report (Cont’d)to the members of KOTRA INDUSTRIES BERHAD (Incorporated in Malaysia) Company No: 497632-P

The Group carries significant receivables as disclosed in Note 15 to the financial statements and is subject to major credit risk exposures. The assessment of recoverability of trade receivables involved judgements and estimation uncertainty in analysing historical bad debts, customer concentration, customer credit worthiness, current economic trends, customer payment trend, etc.

Our procedures included, amongst others:

∙ Testing the Group’s controls over the receivables collection process;

∙ Considering subsequent receipts after year end; and

∙ Check the adequacy of the impairment loss against Group’s policy, taking account of our own knowledge on the historical payment trend of the customer.


Auditors’ responsibilities for the audit of financial statements

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

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

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

∙ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control.

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

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

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

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

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

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

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



other matters

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

Crowe Malaysia Tan Lin ChunFirm No.: AF 1018 Approval No: 02839/10/2019 JChartered Accountants Chartered Accountant 9 October 2018 Melaka



Group Company Note 2018 2017 2018 2017 rM’000 rM’000 rM’000 rM’000

Revenue 4 178,476 166,368 5,314 1,470 Other operating income 5 3,103 4,354 9 - Raw materials and consumables used (48,248) (50,838) - - Changes in inventories of finished goods and work in progress (4,123) 4,617 - - Employee benefits expenses 6 (42,300) (41,306) (354) (313) Selling and distribution expenses (33,815) (34,238) - - Depreciation and amortisation (13,523) (13,446) - - Other operating expenses (18,825) (17,039) (214) (211) Finance costs 7 (4,842) (5,948) - - Profit before taxation 8 15,903 12,524 4,755 946

Income tax expense 9 (154) (127) (58) (86) Profit after taxation 15,749 12,397 4,697 860 Other comprehensive income - - - -

Total comprehensive income for the financial year 15,749 12,397 4,697 860

Earnings per share attributable to equity holders of the Company (sen): - Basic 10 11.85 9.34 - Diluted 10 11.10 8.81

STATEMENTS oF proFIT or LoSSAND oTHEr CoMprEHENSIvE INCoME

For the financial year ended 30 June 2018

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


STATEMENTS oF FINANCIAL poSITIoN As at 30 June 2018


Group Company Note 2018 2017 2018 2017 rM’000 rM’000 rM’000 rM’000

Assets Non-current assets Property, plant and equipment 11 144,489 151,318 - - Investment properties 12 1,441 1,467 - - Investment in subsidiaries 13 - - 121,248 120,772

145,930 152,785 121,248 120,772

Current assets Inventories 14 35,717 40,902 - -Trade receivables 15 37,632 37,272 - - Other receivables 16 2,671 4,268 1 1 Amounts owing by subsidiaries 17 - - 111 102Fixed deposits with licensed bank 18 12,800 - - -Cash and bank balances 8,076 16,898 274 667 Current tax assets - - 6 -

96,896 99,340 392 770

Total assets 242,826 252,125 121,640 121,542

Equity and liabilities Equity attributable to equity holder of the Company Share capital 19 68,660 68,293 68,660 68,293 Retained earnings 20 78,022 67,617 46,354 47,001 Other reserves 21 6,572 6,173 6,572 6,173

Total equity 153,254 142,083 121,586 121,467

Non-current liabilities Borrowings 22 45,893 57,300 - - Deferred income 23 2,297 2,205 - -

48,190 59,505 - -

Current liabilities Borrowings 22 11,809 16,445 - - Trade payables 24 19,529 21,712 - - Other payables 25 10,015 12,346 54 57 Current tax liabilities 29 34 - 18

41,382 50,537 54 75

Total liabilities 89,572 110,042 54 75

Total equity and liabilities 242,826 252,125 121,640 121,542


Non-distributable Distributable

Share Share Share option retained Total capital premium reserve earnings equity Note rM’000 rM’000 rM’000 rM’000 rM’000

Group

At 1 July 2016 66,227 1,165 5,944 57,878 131,214 Issuance of shares 500 30 - - 530 Share-based payment transactions - Share options exercised 279 92 (371) - - - Share options granted under new ESOS - - 600 - 600

279 92 229 - 600 Transfer to share capital upon implementation of the Companies Act 2016 1,287 (1,287) - - - Dividend paid 26 - - - (2,658) (2,658)Profit after taxation, representing total comprehensive income for the financial year - - - 12,397 12,397

At 30 June 2017 68,293 - 6,173 67,617 142,083 Issuance of shares 216 - - - 216 Share-based payment transactions - Share options exercised 151 - (151) - - - Share options granted under new ESOS - - 550 - 550

151 - 399 - 550 Dividend paid 26 - - - (5,344) (5,344)Profit after taxation, representing total comprehensive income for the financial year - - - 15,749 15,749

At 30 June 2018 68,660 - 6,572 78,022 153,254

STATEMENTS oF CHANGES IN EquITyFor the financial year ended 30 June 2018


Statements of changes in equity (Cont’d)For the financial year ended 30 June 2018

Non-distributable Distributable

Share Share Share option retained Total capital premium reserve earnings equity Note rM’000 rM’000 rM’000 rM’000 rM’000

Company

At 1 July 2016 66,227 1,165 5,944 48,799 122,135 Issuance of shares 500 30 - - 530 Share-based payment transactions - Share options exercised 279 92 (371) - - - Share options granted under new ESOS - - 600 - 600

279 92 229 - 600

Transfer to share capital upon implementation of the Companies Act 2016 1,287 (1,287) - - - Dividend paid 26 - - - (2,658) (2,658)Profit after taxation, representing total comprehensive income for the financial year - - - 860 860

At 30 June 2017 68,293 - 6,173 47,001 121,467

Issuance of shares 216 - - - 216 Share-based payment transactions - Share options exercised 151 - (151) - - - Share options granted under new ESOS - - 550 - 550

151 - 399 - 550

Dividend paid 26 - - - (5,344) (5,344)Profit after taxation, representing total comprehensive income for the financial year - - - 4,697 4,697

At 30 June 2018 68,660 - 6,572 46,354 121,586



Group Company 2018 2017 2018 2017 Note rM’000 rM’000 rM’000 rM’000

Cash flows from operating activities

Profit before taxation 15,903 12,524 4,755 946 Adjustments for: Amortisation of deferred income (282) (240) - - Bad debts written off 3 3 - - Depreciation: - investment properties 26 26 - - - property, plant and equipment 13,497 13,420 - - Fair value loss on derivative financial instrument - 15 - - Gain on disposal of property, plant and equipment (49) (2) - - Government grant received (117) (370) - - Impairment loss on trade receivables 209 586 - - Interest expense 4,842 5,948 - - Inventories written down 233 588 - - Property, plant and equipment written off 12 49 - - Interest income (330) (100) (9) - Rental income from investment properties (89) (89) - - Reversal of impairment loss on trade receivables (562) (672) - - Share-based payment under ESOS 550 600 74 73 Unrealised (gain)/loss on foreign exchange (677) 382 - -

Operating profit before working capital changes 33,169 32,668 4,820 1,019 Decrease/(Increase) in inventories 4,952 (7,135) - - Decrease/(Increase) in receivables 2,191 (1,919) - - (Decrease)/Increase in payables (4,484) 10,308 (3) -

Cash from operations 35,828 33,922 4,817 1,019 Tax paid (159) (137) (82) (96) Tax refund - 14 - -

Net cash from operating activities 35,669 33,799 4,735 923

STATEMENTS oF CASH FLowSFor the financial year ended 30 June 2018


Group Company 2018 2017 2018 2017 Note rM’000 rM’000 rM’000 rM’000

Cash flows (for)/from investing activities Interest received 330 100 9 - Rental received from investment properties 89 89 - - Purchase of property, plant and equipment 32(a) (6,388) (3,048) - - Proceeds from disposal of property, plant and equipment 57 6 - -

Net cash (for)/from investing activities (5,912) (2,853) 9 -

Cash flows for financing activities Government grant received 491 970 - - Dividend paid (5,344) (2,658) (5,344) (2,658)Repayment of other short term borrowings 32(b) (6,678) (14,127) - - Proceeds from issuance of shares 216 530 216 530 Interest paid (4,842) (5,948) - - Repayment of term loans 32(b) (9,027) (8,550) - - Repayment of hire purchase 32(b) (638) (545) - - (Advances to)/Repayment from a subsidiary - - (9) 184

Net cash for financing activities (25,822) (30,328) (5,137) (1,944)

Net increase/(decrease) in cash and cash equivalents 3,935 618 (393) (1,021) Effects of exchange rate changes on cash and cash equivalents 43 4 - - Cash and cash equivalents at beginning of the financial year 16,898 16,276 667 1,688

Cash and cash equivalents at end of the financial year 32(c) 20,876 16,898 274 667

Statements of cash flows (Cont’d)For the financial year ended 30 June 2018



1. Corporate information

The Company is a public limited liability company and is incorporated and domiciled in Malaysia. The Company 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.

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 9 October 2018.

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 2016 in Malaysia.

(a) During the current financial year, the Group has adopted the following new accounting standards and interpretations (including the consquential amendments, if any):-

MFrSs and IC Interpretations (Including The Consequential Amendments)

Amendments to MFRS 107: Disclosure Initiative

Amendments to MFRS 112: Recognition of Deferred Tax Assets for Unrealised Losses

Annual Improvements to MFRSs 2014 - 2016 Cycles: Amendments to MFRS 12: Clarification of the Scope of the Standard

The adoption of the above accounting standards and interpretations (including the consequential amendments, if any) did not have any material impact on the Group’s and the Company’s financial statements.

NoTES To THE FINANCIAL STATEMENTS30 June 2018

Notes To The Financial Statements (Cont’d)30 June 2018


2. basis of preparation (cont’d)

(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

• MFRS9FinancialInstruments(IFRS9asissuedbyIASBinJuly2014) 1January2018 • MFRS15RevenuefromContractswithCustomers 1January2018 • MFRS16Leases 1January2019 • MFRS17InsuranceContracts 1January2021 • ICInterpretation22ForeignCurrencyTransactionsandAdvanceConsideration 1January2018 • ICInterpretation23UncertaintyoverIncomeTaxTreatments 1January2019 • AmendmentstoMFRS2:ClassificationandMeasurementofShare-basedPayment Transactions 1 January 2018 • AmendmentstoMFRS4:ApplyingMFRS9FinancialInstrumentswith MFRS 4 Insurance Contracts 1 January 2018 • AmendmentstoMFRS9:PrepaymentFeatureswithNegativeCompensation 1January2019 • AmendmentstoMFRS15:EffectiveDateofMFRS15 1January2018 • AmendmentstoMFRS15:ClarificationstoMFRS15‘RevenuefromContractswith Customers’ 1 January 2018 • AmendmentstoMFRS119:PlanAmendments,CurtailmentorSettlement 1January2019 • AmendmentstoMFRS140-TransfersofInvestmentProperty 1January2018 • AmendmentstoReferencestotheConceptualFrameworkinMFRSStandards 1January2020 Annual Improvements to MFRS Standards 2014 - 2016 Cycles:

• AmendmentstoMFRS1:DeletionofShort-termExemptionsforFirst-timeAdopters 1January2018 • AnnualImprovementstoMFRSStandard2015-2017Cycles 1January2019

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 and the Company’s financial statements upon their initial application, except as follows:-

MFRS 9 Financial Instruments

MFRS 9 (IFRS 9 issued by IASB in July 2014) replaces the guidance in MFRS 139 on the classification and measurement of financial assets and financial liabilities, impairment of financial assets and on hedge accounting.

The initial application of MFRS 9 is not expected to have any material impact to the financial statements of the Group for the current financial year and prior periods as the Group will apply the standard retrospectively from 1 July 2018 with the practical expedients permitted under the standard, and that the comparatives (i.e. current period financial information) will not be restated.

Based on the assessments undertaken to date, the Group has determined the impact of its initial application of MFRS 9 as follows:-

Impairment of financial assets

MFRS9replacesthe‘incurredloss’modelinMFRS139withan‘expectedcreditloss’(“ECL”)model.Thisnewimpairment model is forward-looking and eliminates the need for a trigger event to have occured before credit losses are recognised. The Group will apply the simplified approach prescribed by MFRS 9, which require expected lifetime losses to be recognised on the receivables.



2. basis of preparation (cont’d)

(b) The following table is the reclassification of the Group’s statement of financial position from MFRS 139 to MFRS 9 as at 1 July 2018:-

MFrS 139 MFrS 9 Carrying Carrying amount as at amount as at 30 June 2018 remeasurement 1 July 2018 rM’000 rM’000 rM’000

Trade receivables 37,632 (1,414) 36,218 Retained profits (78,022) 1,414 (76,608)

The analysis above are based on the assessments undertaken to date and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Group in the future.

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 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, and competitors’ actions in response to the market conditions.

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.



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 period in which such determination is made.

(iii) 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.

(iv) 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.

(v) 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 trade and other receivables and analyses their ageing profiles, historical bad debts, customer concentrations, 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.

(vi) 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.




(a) Critical accounting estimates and judgements (cont’d)

(vii) 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 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. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

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 statements. 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.

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.




(b) basis of consolidation (cont’d)

(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.

(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 off (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 joint venture.

(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) Foreign currency 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 exchange 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

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

• Held-to-maturityinvestments


• 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.

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

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.




(d) Financial instruments (cont’d)

(i) Financial assets (continued)

• Available-for-salefinancialassets


(ii) Financial liabilities

• Financialliabilitiesatfairvaluethroughprofitorloss

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.

• Otherfinancialliabilities

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

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

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.

(iii) Equity instruments

Ordinary shares are classified as equity which are measured initially at cost and are not remeasured subsequently. Ordinary shares are recorded at the proceeds received, net of directly attributable transaction cost.

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 share options granted to employees of the subsidiary 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

All items of property, plant and equipment are initially measured at cost. Cost includes expenditures that are directly attributable to the acquisition of the assets and other costs directly attributable to bringing the asset to working condition for its intended use.

Subsequent to initial recognition, all property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses.

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.

Depreciation on property, plant and equipment is charged to profit or loss (unless it is included in the carrying amount of another asset) on a 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%

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. Any changes are accounted for as a change in estimate.

Machinery under construction represents assets which are not ready for commercial use at the end of the reporting period. Machinery under construction are stated at cost, and are depreciated accordingly when the assets are completed and ready for commercial use.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

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 recognised in profit or loss using the effective interest method.

(h) Investment properties

Investment properties are properties which are owned or held under a leasehold interest to earn rental income or for capital appreciation or for both, but not for sale in ordinary course of business, use in production or supply of goods or services or for administrative purposes.

Investment properties are initially measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the investment property.

Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and impairment losses, if any.

Freehold land is not depreciated. Depreciation on other investment properties is charged to profit and loss on a straight-line method over the estimated useful lives of the investment properties. The estimated useful lives of the investment properties are 50 years.

Investment properties are derecognised when they have either been disposed off 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.

(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.




(i) Impairment (cont’d)

(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 an asset is the higher of the asset’s fair value less costs to sell and its value in use, which is measured by reference to discounted future cash flows using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where it is not possible to estimate the recoverable amount of an individual asset, the Group determines the recoverable amount of the cash-generating unit to which the asset belongs.

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) Leased assets

Finance assets

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. The corresponding liability is included in the statement of financial position as hire purchase payables.

Minimum lease payments made under finance leases are apportioned between the finance costs and the reduction of the outstanding liability. The finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss and allocated over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each accounting period.

Leasehold land which in substance is a finance lease is classified as property, plant and equipment.

(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, conversion costs 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

(i) Current tax

Current tax assets and liabilities are expected amount of income tax recoverable or payable to the taxation authorities.

Current taxes are measured using tax rates and tax laws that have been enacted or substantively enacted at the end of the reporting period and are recognised in profit and loss except to the extent that the tax relates to items recognised outside profit or loss (either in other comprehensive income or directly in equity).

(ii) Deferred tax

Deferred tax are recognised using the liability method for temporary differences other than those that arise 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 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 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 the related tax benefits will be realised.

Current and deferred tax items are recognised in correlation to the underlying transactions either in profit or loss, other comprehensive income or directly in equity.

Current tax assets and liabilities or 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 taxes relate to the same taxable entity (or in different tax entities but they intend to settle current tax assets and liabilities on a net basis) and the same taxation authority.

(iii) Goods and services tax (“GST”)

Revenues, expenses and assets are recognised net of GST except for the GST in a purchase of assets or services which are not recoverable from the taxation authorities, the GST are included as part of the costs of the assets acquired or as part of the expense item whichever is applicable.

In addition, receivables and payables are also stated with the amount of GST included (where applicable).

The net amount of the GST recoverable from or payable to the taxation authorities at the end of the reporting period is included in other receivables or other payables.

(m) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, bank balances and demand deposits 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 (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 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) Employee benefits

(i) Short term benefits

Wages, salaries, paid annual leave and bonuses 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 (known as “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.

In the Company’s separate financial statements, the grant of the share options to the subsidiary’s 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 if new ordinary shares are issued.

(p) 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, unless the probability of outflow of economic benefits is remote. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.




(q) operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

(r) 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, adjusted for own shares held for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

(s) 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.

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 liabilities that the entity can access at the measurement date;

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

Level 3: Inputs are unobservable inputs for the asset or liability.

The transfer of fair value between levels is determined as of the date of the event or change in circumstances that caused the transfer.




(t) revenue and other income

Revenue is measured at the fair value of the consideration received or receivable, net of returns, goods and services tax, cash and trade discounts and volume rebates.

(i) Sale of goods

Revenue from sale of goods is recognised when significant risk and reward of ownership of the goods has been transferred to the buyer and where the Company does not have continuing managerial involvement and effective control over the goods sold.

(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) Dividend income

Dividend income from investment is recognised when the right to receive dividend payment is established.

(vi) 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.

4. revenue

Group Company 2018 2017 2018 2017 rM’000 rM’000 rM’000 rM’000

Sale of goods 178,476 166,368 - - Dividend income - - 4,774 750 Management fees - - 540 720

178,476 166,368 5,314 1,470



5. other operating income


Amortisation of deferred income 282 240 - - Gain on foreign currency exchange - realised - 2,283 - - Gain on foreign currency exchange - unrealised 677 - - - Gain on disposal of property, plant and equipment 49 2 - - Government grant received 117 370 - - Rental income from investment properties 89 89 - - Interest income on financial assets that are not at fair value through profit or loss 330 100 9 - Reversal of impairment loss on trade receivables 562 672 - - Reversal of provision of penalty claim 500 - - - Miscellaneous 497 598 - -

3,103 4,354 9 -

6. Employee benefits expenses


Short term employee benefits 35,991 35,074 269 227 Contributions to defined contribution plan 3,629 3,248 8 7 Share options expenses 551 600 74 74 Other personnel expenses 2,129 2,384 3 5

42,300 41,306 354 313

Included in employee benefits expenses are key management personnel compensation as disclosed in Note 27(d) to the financial statements.

7. Finance costs

Group 2018 2017 rM’000 rM’000

Interest expense on financial liabilities that are not at fair value through profit or loss: - Term loans 4,608 5,124 - Other bank borrowings 234 824

4,842 5,948



8. profit before taxation

Profit before taxation is arrived at after charging:-


Auditors’ remuneration: - audit fee 74 73 25 25 - non-audit fee 12 10 4 4 Bad debts written off 3 3 - - Depreciation: - investment properties 26 26 - - - property, plant and equipment 13,497 13,420 - - Direct operating expenses arising from investment properties: - non-rental generating properties 5 5 - - - rental generating properties 14 14 - - Directors’ remuneration: - fees 204 169 198 163 - emoluments 2,461 2,075 8 7 - contribution to defined contribution plan 294 249 - - Fair value loss on derivative financial instrument - 15 - - Impairment loss on trade receivables 209 586 - - Inventories written down 233 588 - - Loss on foreign exchange - unrealised - 382 - - Property, plant and equipment written off 12 49 - - Research and development expenses 414 407 - -

9. Income tax expense


Income tax: - Current year 144 130 49 89 - Under/(Over) provision in previous financial year 10 (3) 9 (3)

154 127 58 86



9. Income tax expense (cont’d)

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:-

2018 2017 Group rM’000 rM’000

Profit before taxation 15,903 12,524

Taxation at Malaysian statutory tax rate of 24% 3,817 3,006 Effect of expenses not deductible for tax purposes 382 495 Effect of double deduction tax incentives (3,493) (2,992) Reversal of deferred tax assets not recognised in prior years (562) (379) Under/(Over) provision of income tax expense in previous financial year 10 (3)

Income tax expense 154 127

2018 2017 Company rM’000 rM’000

Profit before taxation 4,755 946

Taxation at Malaysian statutory tax rate of 24% 1,141 227 Non-taxable income (1,146) (180) Effect of expenses not deductible for tax purposes 54 42 Under/(Over) provision of income tax expense in previous financial year 9 (3)

Income tax expense 58 86

Domestic income tax is calculated at the Malaysian statutory tax rate of 24% (2017 - 24%) of the estimated assessable profit for the financial year.

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-forwards 24,755 24,755 - - Other deductible temporary differences 36,240 36,803 - -

60,995 61,558 - -



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.

Group 2018 2017

Profit after taxation (RM’000) 15,749 12,397

Weightedaveragenumberofordinarysharesinissue(‘000) 132,943 132,670

Basic earnings per ordinary share (sen) 11.85 9.34

(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.

Group 2018 2017

Profit after taxation (RM’000) 15,749 12,397 Weightedaveragenumberofordinarysharesinissue(‘000) 132,943 132,670 Sharesdeemedtobeissuedfornoconsideration-ESOS(‘000) 8,939 8,013

141,882 140,683

Diluted earnings per ordinary share (sen) 11.10 8.81



11. property, plant and equipment

As at Additions Depreciation As at 1.7.2017 (Note 32a) Disposal written off charges 30.6.2018 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Group

Net carrying amount Industrial buildings and installations 46,724 385 - - (1,220) 45,889 Leasehold land 4,034 - - - (52) 3,982 Machinery and equipment 89,223 4,121 (6) (12) (11,191) 82,135 Motor vehicles 394 691 - - (123) 962 Office equipment 187 - - - (35) 152 Computer equipment 696 159 (2) - (242) 611 Furniture and fittings 2,258 147 - - (412) 1,993 Renovation 1,812 15 - - (222) 1,605 Machinery under construction 5,990 1,170 - - - 7,160

Total 151,318 6,688 (8) (12) (13,497) 144,489

As at Additions Depreciation As at 1.7.2016 (Note 32a) Disposal written off charges 30.6.2017 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Group

Net carrying amount Industrial buildings and installations 47,819 110 - - (1,205) 46,724 Leasehold land 4,086 - - - (52) 4,034 Machinery and equipment 98,080 2,241 - (47) (11,051) 89,223 Motor vehicles 275 235 - - (116) 394 Office equipment 228 - - (2) (39) 187 Computer equipment 951 79 - - (334) 696 Furniture and fittings 2,572 93 (4) - (403) 2,258 Renovation 2,017 15 - - (220) 1,812 Machinery under construction 5,715 275 - - - 5,990

Total 161,743 3,048 (4) (49) (13,420) 151,318



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

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

At 30 June 2018 Industrial buildings and installations 58,643 (12,754) 45,889 Leasehold land 4,892 (910) 3,982 Machinery and equipment 165,649 (83,514) 82,135 Motor vehicles 2,626 (1,664) 962 Office equipment 545 (393) 152 Computer equipment 4,477 (3,866) 611 Furniture and fittings 4,532 (2,539) 1,993 Renovation 2,234 (629) 1,605 Machinery under construction 7,160 - 7,160

Balance at 30 June 2018 250,758 (106,269) 144,489

At 30 June 2017 Industrial buildings and installations 58,259 (11,535) 46,724 Leasehold land 4,892 (858) 4,034 Machinery and equipment 161,710 (72,487) 89,223 Motor vehicles 2,393 (1,999) 394 Office equipment 545 (358) 187 Computer equipment 4,321 (3,625) 696 Furniture and fittings 4,385 (2,127) 2,258 Renovation 2,219 (407) 1,812 Machinery under construction 5,990 - 5,990

Balance at 30 June 2017 244,714 (93,396) 151,318

Included in the property, plant and equipment of the Group at the end of the reporting period were machinery and equipment and motor vehicle with carrying amounts of RM1,052,722 and RM514,528 (2017: RM1,470,888 and RM Nil) respectively, which are acquired under hire purchase terms. These leased assets have been pledged as securities for the related finance lease liabilities of the Group as disclosed in Note 22 to the financial statements.

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

Group 2018 2017 rM’000 rM’000

Industrial buildings and installations 45,889 46,724 Leasehold land 3,982 4,034 Machinery and equipment 54,730 61,593 Furniture and fittings 268 378

104,869 112,729



12. Investment properties

Group 2018 2017 rM’000 rM’000

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

Accumulated depreciation At 1 July 638 612 Depreciation during the financial year 26 26

At 30 June 664 638

Net carrying amount 1,441 1,467

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 hierarchy 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 most significant input into this valuation approach is the price per square foot of comparable properties. The fair value of the investment properties as at the end of reporting period amounted to RM2,840,000 (2017: RM2,760,000).

13. Investment in subsidiaries

Company 2018 2017 rM’000 rM’000

Unquoted share, at deemed cost 114,756 114,756 Share options granted to employees of subsidiary 6,492 6,016

121,248 120,772



13. Investment in subsidiaries (cont’d)

The details of the subsidiaries are as follows:

principal place of business percentage of issued Name of /Country of share capital held by subsidiaries incorporation parent principal activities 2018 2017 % %

Kotra Pharma (M) Malaysia 100 100 Developing, manufacturing and Sdn. Bhd. trading of pharmaceutical and healthcare products

Appeton Healthcare Malaysia 100 100 Dormant Sdn. Bhd. Biglink Rewards Malaysia 100 - Dormant Sdn. Bhd.

14. Inventories

Group 2018 2017 rM’000 rM’000

Raw materials 14,937 17,339 Work-in-progress 1,290 353 Finished goods 18,151 23,210 Goods in transit 1,339 -

35,717 40,902

Recognised in profit or loss:- Inventories recognised as cost of sales 52,138 45,633 Amount written down 233 588

15. Trade receivables

Group 2018 2017 rM’000 rM’000

Trade receivables 39,415 39,413 Less: Allowance for impairment losses (1,783) (2,141)

37,632 37,272



15. Trade receivables (cont’d)

Group 2018 2017 rM’000 rM’000

Allowance for impairment losses:- At 1 July 2,141 2,293 Addition during the financial year 209 586 Reversal during the financial year (562) (672) Written off during the financial year (5) (66)

At 30 June 1,783 2,141

The Group’s normal trade credit terms range from 60 to 120 days (2017: 60 to 120 days).

Included in trade receivables are amounts due from related parties as disclosed in Note 27(c) to the financial statements.

16. other receivables


Other receivables:- Third parties 1,173 2,752 - - Advances to suppliers of property, plant and equipment 729 526 - -

1,902 3,278 - - Deposits 433 401 1 1 GST input tax 111 323 - - Prepayments 225 266 - -

2,671 4,268 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 owing by subsidiaries are non-trade in nature, unsecured, interest-free and repayable on demand. The

amounts owing are to be settled in cash.

18. Fixed deposits with licensed bank

The fixed deposits with licensed bank for the Group at the end of the reporting period bore effective interest rates ranging from 2.62% to 2.70% (2017 - Nil) per annum. The fixed deposits have maturity periods ranging from 7 days to 32 days for the Group.



19. Share capital

Company Number of shares Amount 2018 2017 2018 2017 ‘000 ‘000 rM’000 rM’000

Issued and fully paid-up: Ordinary shares with no par value At 1 July 133,270 132,455 68,293 66,227 New shares issued under the employees share option scheme 331 815 367 779 Transfer from share premium account - - - 1,287

At 30 June 133,601 133,270 68,660 68,293

(i) In the previous financial year, included in share capital is share premium RM1,286,840 that is available to be utilised in accordance with Section 618(3) of the Companies Act 2016 on or before 30 January 2019 (twenty-four (24) months from the commencement of Section 74 of the Companies Act 2016).

(ii) 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 new ESOS is governed by the ESOS By-Laws.

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 has been 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.

(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 ESOS Committee.

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



19. Share capital (cont’d) The option prices and the details in the movement of the options granted are as follows:-

Exercise price per Date Exercise ordinary balance at balance at of offer period share 1.7.2017 Lapsed Exercised 30.6.2018 rM

31.7.2013 31.7.2014 0.65 2,769,512 (3,960) (104,680) 2,660,872 31.7.2013 31.7.2016 0.65 5,629,904 (7,920) (226,960) 5,395,024 31.7.2013 31.7.2018 0.65 6,115,024 (107,920) - 6,007,104 22.5.2017 31.7.2018 1.40 100,000 - - 100,000 22.5.2017 31.7.2019 1.40 200,000 - - 200,000 22.5.2017 31.7.2020 1.40 200,000 - - 200,000

15,014,440 (119,800) (331,640) 14,563,000

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

Exercise price per Date Exercise ordinary balance at balance at of offer period share 1.7.2016 Granted Lapsed Exercised 30.6.2017 rM

31.7.2013 31.7.2014 0.65 2,993,912 - (14,400) (210,000) 2,769,512 31.7.2013 31.7.2016 0.65 6,263,824 - (28,800) (605,120) 5,629,904 31.7.2013 31.7.2018 0.65 6,263,824 - (148,800) - 6,115,024 22.5.2017 31.7.2018 1.40 - 100,000 - - 100,000 22.5.2017 31.7.2019 1.40 - 200,000 - - 200,000 22.5.2017 31.7.2020 1.40 - 200,000 - - 200,000

15,521,560 500,000 (192,000) (815,120) 15,014,440

Person to whom the share option has been granted above has right to participate by virtue of the option in any share issue of the other company.



19. Share capital (cont’d)

In the previous financial year, the Company has granted 500,000 shares option under the new ESOS. Options exercisable in a particular year but not exercised can be carried forward to the subsequent years provided they are exercised prior to the expiry date of the new ESOS on 30 July 2023.

The fair values of the share options granted were estimated using a Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The fair value of the share options measured at grant date and the assumptions used are as follows:

Group and Company 2018 2017

Fair value of share options at grant date (RM) - 0.32

Weighted average share price (RM) - 1.29 Exercise price of share option (RM) - 1.40 Expected volatility (%) - 35.31 Expected life (years) - 3.00 Risk free rate (%) - 3.30

There were no options granted during financial year. 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


Share options reserve 6,572 6,173 6,572 6,173

Group and Company 2018 2017 rM’000 rM’000

Share options under ESOS: At 1 July 6,173 5,944 Movement during the year 399 229

At 30 June 6,572 6,173



21. other reserves (cont’d)

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.

22. borrowings

Group 2018 2017 rM’000 rM’000

Short term borrowings Unsecured: Bankers’ acceptances 287 294

Secured: Bankers’ acceptances - 6,671 Hire purchase 305 581 Term loans 11,217 8,899

11,809 16,445

Long term borrowings Secured: Hire purchase 146 208 Term loans 45,747 57,092

45,893 57,300

Total borrowings Bankers’ acceptances 287 6,965 Hire purchase 451 789 Term loans 56,964 65,991

57,702 73,745

Hire purchase payables

Group 2018 2017 rM’000 rM’000

Minimum hire purchase payments: - not later than one year 317 613 - later than one year and not later than five years 151 210

468 823 Less: Future finance charges (17) (34)

Present value of hire purchase payables 451 789



22. borrowings (cont’d)

The hire purchase payable of the Group are secured by the Group’s motor vehicle and machinery and equipment under finance leases as disclosed in Note 11 to the financial statements.

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

Group 2018 2017 % % Bankers’ acceptances 4.29 4.00 Hire purchase 5.26 6.54 Term loans 4.46 6.76

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. 23. Deferred income

Group 2018 2017 rM’000 rM’000

Non-current Government grant 2,297 2,205

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, RM282,296 (2017: RM239,856) 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 (2017: 60 to 90 days). Included in trade payables are amounts due to related parties as disclosed in Note 27(c) to the financial statements.



25. other payables


Accruals 562 2,171 54 57 GST output tax - 171 - - Payroll liabilities 5,649 6,037 - - Due to suppliers of property, plant and equipment 2,083 1,245 - - Other payables 1,721 2,722 - -

10,015 12,346 54 57

26. Dividends

Company 2018 2017 rM’000 rM’000

Final single tier dividend of 2 (2017: Nil) sen ordinary shares in respect of the previous financial year 2,672 - Interim single tier dividend of 2 (2017: 2) sen ordinary shares in respect of the current financial year 2,672 2,658

5,344 2,658

27. 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.



27. Significant related party disclosures (cont’d)

(b) Significant related party transactions

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 (the terms of which were entered into a negotiated basis):-

2018 2017 Group rM’000 rM’000

Companies in which certain directors have significant financial interests: - contract manufacturing cost paid/payable 10 19 - rental of premises paid/payable 1,047 1,045 - royalty paid/payable 14 18

A company in which close members of the family of certain directors have significant financial interests: - rental of premises received/receivable (57) (57) - rental of premises paid/payable 7 7 - sales of goods (668) (703)

Company A subsidiary - management fee received/receivable (540) (720) - dividend received (4,774) (750)

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

Group 2018 2017 rM’000 rM’000

Companies in which certain directors have significant financial interests: - trade payables (14) (18)

A company in which close members of the family of certain directors have significant financial interests: - trade receivables 69 204



27. Significant related party disclosures (cont’d)

(d) Key management personnel compensation

The key management personnel of the Group and of the Company include executive directors and non-executive directors of the Group and of the Company.

(i) The key management personnel compensation during the financial year are as follows:


Directors of the Company

Short-term employee benefits: - fees 204 169 198 163 - emoluments 2,461 2,075 8 7 Defined contribution plan 294 249 - -

2,959 2,493 206 170

The estimated monetary value of benefits-in-kind provided by the Group to the directors of the Group and of the Company was RM6,836 and RM5,946 respectively (2017: RM1,998 and RM1,998 respectively).

28. Capital commitments

Group 2018 2017 rM’000 rM’000

Purchase of plant and equipment 2,000 2,009



29. Segmental reporting The segment information in respect of the Group’s operating segments for the year ended 30 June 2018 are as follows:-

Local Export Total 2018 2017 2018 2017 2018 2017 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

External revenue 106,234 91,162 72,242 75,206 178,476 166,368

Profit from operations 17,366 9,911 10,374 14,000 27,740 23,911

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

Total 2018 2017 rM’000 rM’000

Profit from operations for reportable segments 27,740 23,911 Expenses managed on a central basis (10,098) (9,793) Other operating income 3,103 4,354

Consolidated profit from operations 20,745 18,472 Finance cost (4,842) (5,948)

Consolidated profit before taxation 15,903 12,524

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 RM26,938,739 (2017:RM30,087,530) arising from export sales.



30. Contingent liabilities No provisions are recognised on the following matters as it is not probable that a future sacrifice of economic benefits

will be required or the amount is not capable of reliable measurements. The Company has granted corporate guarantees to licenced banks amounting to approximately RM154,100,000

(2017: RM169,200,000) for credit facilities extended to a subsidiary of which RM57,249,629 (2017: RM72,956,265) was outstanding as at the end of the financial period.

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. The Group also holds cash and cash equivalents denominated in foreign currencies for working capital purposes.

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:-

Foreign currency exposure uSD Euro SGD Total rM’000 rM’000 rM’000 rM’000

30.6.2018 Trade receivables 11,081 (20) 673 11,734 Other receivables 1,291 21 35 1,347 Cash and bank balances 2,613 6 697 3,316 Trade payables (752) - (16) (768) Other payables (80) (19) (5) (104)

Net exposure 14,153 (12) 1,384 15,525

30.6.2017 Trade receivables 13,814 - 776 14,590 Other receivables 2,138 231 2 2,371 Cash and bank balances 4,017 3 1,504 5,524 Bankers’ acceptances - (294) - (294) Trade payables (1,190) (2,129) (17) (3,336) Other payables (35) (13) (3) (51)

Net exposure 18,744 (2,202) 2,262 18,804



31. Financial instruments (cont’d)

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

(i) Foreign currency risk (cont’d)

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 2018 2017 rM’000 rM’000

Effects on profit after taxation USD/RM - strengthened by 5% (2017:5%) 538 712 - weakened by 5% (2017:5%) (538) (712) EUR/RM - strengthened by 5% (2017:5%) (1) (84) - weakened by 5% (2017:5%) 1 84 SGD/RM - strengthened by 5% (2017:5%) 53 86 - weakened by 5% (2017:5%) (53) (86)

(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.

The Group’s fixed rate receivables and borrowings are carried at amortised cost. Therefore, they are not subject to interest rate risk as defined in MFRS 7 since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

The Group’s exposure to interest rate risk based on the carrying amounts of the financial instruments at the end of the reporting period is disclosed in Note 22 to the financial statements.

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 RM435,097 lower/higher (2017 - RM554,468 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), 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 provides financial guarantee to financial institutions 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) (2017: one (1)) customer

who has been actively trading with the Group for the past 16 years (2017: 18 years) which constituted approximately 16% (2017: 19%) of its trade receivables as at the end of the reporting period.

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 2018 2017 rM’000 rM’000

Local 25,693 22,329 Export 11,939 14,943

37,632 37,272

Exposure to credit risk

At the end of the reporting period, the maximum exposure to credit risk is presented by the carrying amount of each class of financial assets recognised in the statement of financial position of the Group after deducting any allowance for impairment losses (where applicable).





(iii) Credit risk (cont’d)

Ageing analysis

The ageing analysis of the Group’s trade receivables (including amount owing by related parties) are as follows:-

Gross Individual Carrying amount impairment amount rM’000 rM’000 rM’000

30.6.2018 Not past due 24,848 - 24,848 Past due:- - less than 3 months 11,468 - 11,468 - 3 to 6 months 694 - 694 - more than 6 months 2,405 (1,783) 622

39,415 (1,783) 37,632

30.6.2017 Not past due 31,693 - 31,693 Past due:- - less than 3 months 4,912 (1) 4,911 - 3 to 6 months 536 (10) 526 - more than 6 months 2,272 (2,130) 142

39,413 (2,141) 37,272

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 interest cash flows 1 year years 5 years rate (%) rM’000 rM’000 rM’000 rM’000

2018

Group Non-derivative financial liabilities

Bankers’ acceptances 4.29 287 287 - - Hire purchase 5.26 468 317 151 - Term loans 4.46 63,497 13,530 45,870 4,097 Trade payables - 19,529 19,529 - - Other payables - 10,015 10,015 - -

93,796 43,678 46,021 4,097

Company Non-derivative financial liabilities Other payables - 54 54 - -

2017 Group Non-derivative financial liabilities Bankers’ acceptances 4.00 6,965 6,965 - - Hire purchase 6.54 823 613 210 - Term loans 6.76 87,965 13,087 43,678 31,200 Trade payables - 21,712 21,712 - - Other payables - 12,175 12,175 - -

129,640 54,552 43,888 31,200

Company Non-derivative financial liabilities Other payables - 57 57 - -



31. Financial instruments (cont’d) (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 its 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. The debt-to-equity ratio is calculated as net debts divided by total equity. The Group includes within net debt, loans and borrowings from financial institutions less cash and cash equivalents.

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

Group 2018 2017 rM’000 rM’000 Bankers’ acceptances 287 6,965 Hire purchase 451 789 Term loans 56,964 65,991 57,702 73,745 Less: Cash and bank balances (8,076) (16,898) Fixed deposits with licensed bank (12,800) - Net debt 36,826 56,847

Total equity 153,254 142,083

Debt-to-equity ratio 0.24 0.40

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

The Group did not breach any gearing requirement during the financial years ended 30 June 2017 and 30 June 2018.

(c) Classification of financial instruments Group Company 2018 2017 2018 2017 rM’000 rM’000 rM’000 rM’000

Financial assets Loans and receivables financial assets Trade receivables 37,632 37,272 - - Other receivables 2,335 3,679 - - Amounts owing by subsidiaries - - 111 102 Cash and bank balances 8,076 16,898 274 667 Fixed deposits with licensed bank 12,800 - - -

60,843 57,849 385 769




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


Financial liabilities Other financial liabilities Bankers’ acceptances 287 6,965 - - Hire purchase 451 789 - - Term loans 56,964 65,991 - - Trade payables 19,529 21,712 - - Other payables 10,015 12,175 54 57

87,246 107,632 54 57 (d) Gains or losses arising from financial instruments Group Company 2018 2017 2018 2017 rM’000 rM’000 rM’000 rM’000

Financial assets Loans and receivables financial assets Net (losses)/gains recognised in profit or loss (269) 2,066 9 -

Fair value through profit or loss Net loss recognised in profit or loss - (15) - -

Financial liabilities Financial liabilities measured at amortised cost Net gains/(losses) recognised in profit or loss 738 (79) - -

(e) Fair value information

The fair values of the financial assets and financial liabilties of the Group which are maturing within the next 12 months approximated their carrying amounts due to the relatively short-term maturity of the financial instruments or repayable on demand terms.




(e) Fair value information (cont’d)

The following table sets out the fair value profile of financial instruments that are carried at fair value and those not carried at fair value at the end of the reporting period:-

Fair value of Fair value of financial financial instruments instruments carried at not carried Total fair value at fair value Total carrying Level 2 Level 2 fair value amount rM’000 rM’000 rM’000 rM’000

2018 Financial liabilities Hire purchase - 451 451 451 Term loans - 56,964 56,964 56,964

2017 Financial liabilities Hire purchase - 781 781 789 Term loans - 65,991 65,991 65,991

Fair value of financial instruments not carried at fair value The fair value, which are for disclosure purposes have been determined using the following basis:-

(i) The fair value of the Group’s term loan that carrying floating interest rates approximated their carrying amounts as they are repriced to market interest rates on or near the reporting date.

(ii) The fair value of hire purchase payables that carry fixed interest rates is determined by discounting the relevant future contractual cash flows using current market interest rates for similar instruments at the end of the reporting period. The interest rates used to discount the estimated cash flows are as follows:-

2018 2017 % %

Hire purchase 3.80 - 4.17 4.05

32. Cash flow information (a) The cash disbursed for the purchase of property, plant and equipment are as follows:- Group 2018 2017 rM’000 rM’000 Cost of property, plant and equipment purchased (Note 11) 6,688 3,048 Amount financed through hire purchase (Note (b) below) (300) -

Cost disbursed for purchase of property, plant and equipment 6,388 3,048



32. Cash flow information (cont’d)

(b) The reconciliations of liabilities arising from financing activities are as follows:- The Group bank Hire Short-term overdrafts Term Loan purchase borrowing Total rM’000 rM’000 rM’000 rM’000 rM’000

2018 At 1 July - 65,991 789 6,965 73,745 Changes in financing cash flowRepayment of borrowing principal * (9,027) (638) (6,678) (16,343)Repayment of borrowing interests (51) (4,608) (38) (145) (4,842)

Non-cash changes New hire purchase (Note (a) above) - - 300 - 300 Finance charges recognised in profit or loss 51 4,608 38 145 4,842

At 30 June - 56,964 451 287 57,702

* Bank overdrafts form part of the cash and cash equivalents, therefore, no movement is presented.

Comparative information is not presented by virtue of the exemption given in MFRS 107.

(c) The cash and cash equivalents comprise the following:-


Cash and bank balances 8,076 16,898 274 667 Fixed deposits with licensed bank 12,800 - - -

20,876 16,898 274 667


LIST oF propErTIES

Title/Location

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

21 years

18 years

Office & Store- 26 years

Warehouse-22 years

43 to 47 years

8 years

Net Book Valueas at30 June 2018RM

9,995,052

1,124,834

317,000

39,876,280

51,313,166


NoTICE oF ANNuAL GENErAL MEETING

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 30 June 2018 together with the Reports of the Directors and the Auditors thereon.

2. To approve the payment of a Single Tier Final Dividend of 3 sen per ordinary share for the

financial year ended 30 June 2018. 3. To approve the payment of Directors’ Fees and Benefits payable up to an amount of RM300,000

from 23 November 2018 up to the date of the 20th AGM in 2019. 4. To re-elect the following Directors, who are retiring pursuant to Article 97(1) of the Company’s

Constitution, being eligible, have offered themselves for re-election:-

(a) Piong Teck Onn (b) Chin Swee Chang 5. To re-appoint Messrs. Crowe Malaysia (formerly known as 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 To consider and if thought fit, with or without any modification, to pass the following resolutions

as ORDINARY RESOLUTIONS: 6. Authority to Issue Shares pursuant to the Companies Act 2016

“THAT subject always to the Companies Act 2016 (“the Act”), the Constitution of the Company, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“MMLr”) (“bursa Securities”) and the approvals of any other relevant governmental and/or regulatory authorities, where such approval is required, the Directors be and are hereby empowered pursuant to Sections 75 and 76 of the Act, to issue and allot shares in the Company, at any time, at such price, to such persons and upon such terms and conditions, for such purposes and to such person or persons whomsoever the Directors may in their absolute discretion, deem fit provided always that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the total number of issued shares of the Company for the time being;

AND THAT the Directors be and also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Securities; AND FURTHER THAT such authority shall commence immediately upon the passing of this resolution and continue to be in force until the conclusion of the next AGM of the Company.”

(Please refer to Note 6)

(Resolution 1)

(Resolution 2)

(Resolution 3)(Resolution 4)

(Resolution 5)

(Resolution 6)

NOTICE IS HEREBY GIVEN that the 19th 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 Thursday, 22 November 2018 at 10:30 a.m. for the following purposes:-


7. Proposed Renewal of Shareholders’ Mandate for Existing Recurrent Related Party Transactions of a Revenue or Trading Nature

“THAT subject to the provisions of the MMLR, approval be and is hereby given for the Proposed Renewal of Shareholders’ Mandate for Existing Recurrent Related Party Transactions of a Revenue or Trading Nature for the Company and/or its subsidiaries to enter into and give effect to the category of the recurrent related party transactions of a revenue or trading nature from time to time with the Related Party as specified in Section 2.3.2(a) of the Circular to Shareholders dated 24 October 2018 provided that such transactions are:-

(i) recurrent transactions of a revenue or trading nature;(ii) necessary for the Company’s day-to-day operations;(iii) carried out in the ordinary course of business on normal commercial terms which are not more

favourable to the Related Parties than those generally available to the public; and(iv) not to the detriment of minority shareholders(“proposed Shareholders’ Mandate”).

THAT the authority for the Proposed Shareholders’ Mandate shall continue to be in force until the earlier of:-

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

(ii) the expiration of the period within which the next AGM is to be held pursuant to Section 340(2) of the Act but must not extend to such extension as may be allowed pursuant to Section 340(4) of the Act; or

(iii) revoked or varied by resolution passed by the shareholders in a general meeting.

whichever is earlier.

AND THAT the Directors of the Company be authorised to complete and do such acts and things (including executing all such documents as may be required), as they may consider expedient in the best interest of the Company to give full effect to the Proposed Shareholders’ Mandate.”

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

(Resolution 7)

NoTICE oF DIvIDEND ENTITLEMENT

NoTICE IS HErEby GIvEN THAT a Single Tier Final Dividend of 3 sen net per ordinary share in respect of the financial year ended 30 June 2018 will be payable on 18 December 2018 to depositors who are registered in the Record of Depositors at the close of business on 3 December 2018, if approved by shareholders at the forthcoming 19th AGM on Thursday, 22 November 2018.

A Depositor shall qualify for entitlement only in respect of:-(a) Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 3 December 2018 in respect of ordinary

transfers; and(b) Shares bought on Bursa Securities on a cum entitlement basis according to the Rules of the Bursa Securities.

By Order of the BoardCHuA SIEw CHuAN (MAICSA 0777689)MAK CHooI pENG (MAICSA 7017931)TAy SEoK yIN (MAICSA 7063410)Company Secretaries

Melaka24 October 2018

Notice of Annual General Meeting (Cont’d)



Notes: proxy

1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 14 November 2018 (“General Meeting record of Depositors”) shall be eligible to attend, speak and vote at the Meeting.

2. A member entitled to attend and vote at the Meeting is entitled to appoint more than one (1) proxy to attend and vote in his stead. A proxy may but does not need to be a member of the Company. Where a member appoints more than one (1) 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.

3. 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.

4. Where a member of the Company is an exempt authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991 (“SICDA”) 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. Where a shareholder is an authorised nominee as defined under SICDA, it may appoint at least one (1) proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.

5. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or a duly notarised certified copy of that power or authority, shall 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. All resolutions set out in the Notice of the Meeting are to be voted by poll.

Note:

6. Audited Financial Statements for the financial year ended 30 June 2018 Item 1 of the Agenda is meant for discussion only, as the provision of Section 340(1)(a) of the Act does not require a

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

Explanatory Notes to ordinary Special business:

7. payment of Directors’ fees and benefits Section 230(1) of the Act provides amongst others, that the fees of the directors and any benefits payable to the directors

of a listed company and its subsidiaries shall be approved at a general meeting. In this respect, the Board wishes to seek shareholders’ approval at the 19th AGM on the proposed Resolution 2 on

payment of Directors’ Fees and Benefits for the Non-Executive Directors of RM300,000.00 for the period from 23 November 2018 up to the date of the 20th AGM in 2019. The Directors’ benefits comprise meeting allowances payable to the Non-Executive Directors at RM300.00 for each meeting.


8. Authority to Issue Shares pursuant to the Act The proposed Resolution 6 is intended to renew the authority granted to the Directors of the Company at the 18th AGM

of the Company held on 23 November 2017 to issue and allot shares at any time to such persons in their absolute discretion without convening a general meeting provided that the aggregate number of the shares issued does not exceed 10% of the total number of issued shares of the Company for the time being (hereinafter referred to as the “General Mandate”).

The General Mandate granted by the shareholders at the 18th AGM had not been utilised and hence no proceed was raised therefrom.

The new General Mandate will enable the Directors to take swift action for allotment of shares for any possible fund

raising activities, including but not limited to further placing of shares, for the purpose of funding future investment project(s), working capital and/or acquisition(s) and to avoid delay and cost in convening general meetings to approve such issue of shares.

9. proposed Shareholders’ Mandate The proposed Resolution 7 is intended to enable the Company and its affiliated companies to enter into recurrent

related party transactions of a revenue or trading nature which are necessary for the Company’s day-to-day operations to facilitate transactions in the normal course of business of the Company with the specified classes of related parties, provided that they are carried out on arms’ length basis and on normal commercial terms and are not prejudicial to the shareholders on terms not more favorable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.

Please refer to the Circular to Shareholders dated 24 October 2018 for further Information.



Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad

Authority for Directors To Allot Shares Pursuant To Sections 75 and 76 Of the Companies Act 2016.

Kindly refer to item (8) of Explanatory Notes on Ordinary Special Business at page 101 of the Annual Report.

STATEMENT ACCoMpANyING NoTICE oF ANNuAL GENErAL MEETING


ANALySIS oF SHArEHoLDINGSAS AT 28 SEPTEMBER 2018

Total number of issued shares : 134,149,563 Class of Share : Ordinary sharesVoting rights on show of hands : 1 voteVoting rights on a poll : 1 vote

DISTRIBUTION OF SHAREHOLDINGS No. of % of No. of % ofSize of Shareholdings Shareholders Shareholders Shares Held Shares Held LESS THAN 100 SHARES 111 11.01 2,739 0.00100 TO 1,000 SHARES 130 12.90 57,235 0.041,001 TO 10,000 SHARES 505 50.10 2,275,680 1.7010,001 TO 100,000 SHARES 184 18.25 5,725,781 4.27100,001 TO LESS THAN 5% OF ISSUED SHARES 77 7.64 61,463,766 45.825% AND ABOVE OF ISSUED SHARES 1 0.10 64,624,362 48.17

TOTAL 1,008 100.00 134,149,563 100.00

LIST OF SUBSTANTIAL AS AT 28 SEPTEMBER 2018

No. of Shares HeldName Direct % Indirect % PIONG NAM KIM HOLDINGS SDN BHD 64,624,362 48.17 - -

DIRECTORS’ SHAREHOLDINGS

No. of Shares HeldName Direct % Indirect % PIONG TECK ONN 6,201,224 4.62 68,208,422* 50.85PIONG TECK MIN 3,026,220 2.26 373,850^ 0.28PIONG TECK YEN 6,316,564 4.71 - - CHIN SWEE CHANG 1,800,000 1.34 3,584,060o 2.67

Notes:-* Deemed interested by virtue of his interests in Piong Nam Kim Holdings Sdn. Bhd. and Cresdel Holdings Sdn. Bhd.

pursuant to Section 8 of the Act and his son, Piong Chee Wei’s interest pursuant to Section 221(9) of the Act.

^ Deemed interested by virtue of his wife, Tan Yeak Yan’s interest and son, Piong Chee Keong’s interest pursuant to Section 221(9) of the Act.

o Deemed interested by virtue of her husband, Piong Teck Onn’s interests in Cresdel Holdings Sdn. Bhd. pursuant to Section 8 of the Act and her son, Piong Chee Wei’s interest pursuant to Section 221(9) of the Act.


TOP 30 DEPOSITORS AS AT 28 SEPTEMBER 2018 No. of No Shareholder Shares %

1 PIONG NAM KIM HOLDINGS SDN BHD 64,624,362 48.17 2 PIONG TECK YEN 6,316,564 4.71 3 GALLEON ASSET LIMITED 6,125,402 4.57 4 KENANGA NOMINEES (TEMPATAN) SDN BHD 4,401,224 3.28 PLEDGED SECURITIES ACCOUNT FOR PIONG TECK ONN 5 PLATINUM ESSENCE SDN. BHD. 4,283,740 3.19 6 PIONG TECK MIN 3,026,220 2.26 7 KOK HON SENG 2,381,060 1.77 8 SEAH TIN KIM 1,844,440 1.37 9 CHIN SWEE CHANG 1,800,000 1.34 10 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,800,000 1.34 PLEDGED SECURITIES ACCOUNT FOR PIONG TECK ONN (7002831) 11 CRESDEL HOLDINGS SDN BHD 1,664,060 1.24 12 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,500,000 1.12 PLEDGED SECURITIES ACCOUNT FOR LIM KIAN TIAK (8039574) 13 JI YEH MING 1,300,000 0.97 14 HO JONATHAN LEP KEE 1,210,000 0.90 15 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,000,000 0.75 PLEDGED SECURITIES ACCOUNT FOR PIONG CHEE WEI (7002905) 16 LIN AH LAN 960,260 0.72 17 OOI LEE PENG 959,500 0.72 18 TRIPLE BOUTIQUE SDN BHD 843,000 0.63 19 CHAI PIN KOON 800,000 0.60 20 PIONG CHEE WEI 800,000 0.60 21 PIONG TECK WAH 770,220 0.57 22 HSBC NOMINEES (ASING) SDN BHD 742,800 0.55 EXEMPT AN FOR SKANDINAVISKA ENSKILDA BANKEN AB (UCITS V SWEDISH) 23 RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD 699,800 0.52 PLEDGED SECURITIES ACCOUNT FOR OOI LEE PENG (MLK/SS) 24 OMAR BIN MD KHIR 600,160 0.45 25 CHEAH MING LOONG 577,900 0.43 26 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 546,300 0.41 PLEDGED SECURITIES ACCOUNT FOR PHARMEX SDN BHD (8082917) 27 PIONG TECK FONG 538,560 0.40 28 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 514,900 0.38 PLEDGED SECURITIES ACCOUNT FOR LIM KIAN TIAK (7000491) 29 CHIN KEE KWONG 514,800 0.38 30 CHIN CHEE MIN 512,600 0.38

113,657,872 84.72

Analysis of Shareholdings (Cont’d)As at 28 September 2018

CDS ACCOUNT NO.

NUMBER OF SHARES HELD

*I/We _________________________________________________________________NRIC No./Company No.______________________________

being a Member/Members of KOTRA INDUSTRIES BERHAD, hereby appoint:-

And/or failing *him/her,

PROXY “A”

FULL NAME (IN BLOCK)

FULL ADDRESS

NRIC/PASSPORT NO.NO. OF SHARES %

PROPORTION OF SHAREHOLDINGS

RESOLUTION

RESOLUTIONS NO. FOR AGAINST

* Strike out whichever not applicable.

_________ day of ___________________ 2018. _______________________________________

FORM OF PROXY

(Incorporated in Malaysia)

Notes:1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 14 November 2018 (“General Meeting Record of Depositors”) shall be eligible to attend, speak and vote

at the Meeting.2. A member entitled to attend and vote at the Meeting is entitled to appoint more than one (1) proxy to attend and vote in his stead. A proxy may but does not need to be a member of the Company. Where a

member appoints more than one (1) 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.

3. 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 authorized4. Where a member of the Company is an exempt authorised nominee as de�ned under the Securities Industry (Central Depositories) Act 1991 (“SICDA”) 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. Where a shareholder is an authorised nominee as de�ned under SICDA, it may appoint at least one (1) proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.

5. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or a duly notarised certi�ed copy of that power or authority, shall 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. All resolutions set out in the Notice of the Meeting are to be voted by poll.

KOTRA INDUSTRIES BERHAD (Company No. 497632-P)

To receive the Audited Financial Statements for the �nancial year ended 30 June 2018 together with the Reports of the Directors andthe Auditors thereon.

To approve the payment of a single tier �nal dividend for the �nancial year ended 30 June 2018

To approve the payment of Directors’ Fees and Bene�ts payable up to an of RM300,000.00 from 23 November 2018 up to the date of 20th AGM in 2019.

To re-elect Piong Teck Onn as Director of the Company

To re-elect Chin Swee Chang as Director of the Company

To re-appoint Messrs. Crowe Malaysia (formerly known as Crowe Horwath) as Auditors of the Company

SPECIAL BUSINESS:

Authority to Issue Shares pursuant to the Companies Act 2016

Proposed Renewal of Shareholders’ Mandate for Existing Recurrent Related Party Transactions

1

2

3

4

5

6

7

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) thisSignature of Member/Common Seal

PROXY “B”

FULL NAME (IN BLOCK)

FULL ADDRESS

NRIC/PASSPORT NO.NO. OF SHARES %

PROPORTION OF SHAREHOLDINGS

or failing him/her, the Chairman of the Meeting as *my/our proxy to attend and vote for *me/us and on *my/ our behalf at the 19th 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 Thursday, 22 November 2018 at 10:30 a.m. or any adjournment thereof.

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

HUMANISING HEALTH To be the centre MISSIONkotrapharma.com/pdf/2018_annual_report.pdf · • Was the Project Manager for the SAP project implementation which started in November 2008

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