HEXZA CORPORATION BERHAD (Incorporated in …HEXZA CORPORATION BERHAD (8705-K) (Incorporated in...

Annual Report 2012

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

CONTENTS

Notice of Annual General Meeting

Corporate Information

Corporate Structure

Five-Year Group Financial Summary

Chairman’s Statement

Directors’ Profile

Audit Committee Report

Corporate Governance Statement

Statement on Internal Control

Corporate Social Responsibility Statement

Directors’ Report

Independent Auditors’ Report to the Members of Hexza Corporation Berhad

Statements of Comprehensive Income

Statements of Financial Position

Statements of Changes in Equity

Statements of Cash Flows

Notes to the Financial Statements

Supplementary information - disclosure on realisedand unrealised profits or losses

Statement by Directors

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

Statement of Shareholdings

Properties owned by Hexza Corporation Berhad & its Subsidiaries

Appendix I

Proxy Form

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Annual Report 20122

NOTICE IS HEREBY GIVEN that the Forty-third Annual General Meeting of Hexza Corporation Berhad will be held at the Meeting Room 5 & 6, 1st Floor, Impiana Hotel, Jalan Raja Dr. Nazrin Shah, 30250 Ipoh, Perak Darul Ridzuan on Saturday, 24th November 2012 at 11.30 a.m. for the following purposes:-

A G E N D A

1. To receive the Audited Financial Statements for the financial year ended 30th June 2012 and the Reports of the Directors and Auditors thereon. (Resolution 1)

2. To approve the payment of a first and final dividend of 8% less tax plus 2% tax-exempt in respect of the financial year ended 30th June 2012. (Resolution 2)

3. To approve the payment of Directors’ fees of RM281,150 for the financial year ended 30th June 2012 (2011: RM232,500). (Resolution 3)

4. To re-elect Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany who retires in accordance with Article 78 of the Company's Articles of Association and being eligible, offers himself for re-election. (Resolution 4)

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

(i) Dr. Foong Weng Cheong (Resolution 5)

(ii) Dato' Richard Ong Guan Seng (Resolution 6)

(iii) Datuk Dr. Foong Weng Sum (Resolution 7)

6. To re-appoint Messrs. Deloitte & Touche as Auditors and to authorise the Directors to fix their remuneration. (Resolution 8)

7. As Special Business, to consider and, if thought fit, to pass the following resolutions:

(a) Ordinary Resolution Authority to issue shares pursuant to Section 132D of the Companies Act, 1965

''THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby empowered to issue shares of the Company at any time until the conclusion of the next Annual General Meeting of the Company upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued capital of the Company for the time being and that the Directors are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad." (Resolution 9)

(b) Special Resolution Proposed amendments to the Articles of Association of the Company

''THAT the proposed amendments to the Articles of Association of the Company as set out in Appendix I of the Annual Report 2012 of the Company be and are hereby approved." (Resolution 10)

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

NOTICE OF ANNUAL GENERAL MEETING


Annual Report 2012 3

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN that subject to the approval of the shareholders at the Forty-third Annual General Meeting, a first and final dividend of 8% less tax plus 2% tax-exempt in respect of the financial year ended 30th June 2012 will be paid on 3rd January 2013 to members whose names appear in the Record of Depositors on 12th December 2012.

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

a. Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 12th December 2012 in respect of ordinary transfers; and

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

By Order of the Board

CHONG YOKE SENGCompany Secretary

Ipoh30th October 2012

NOTES:

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

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

3. A member who appoints a proxy must duly execute the Form of Proxy, and if more than one (1) proxy is appointed, the number of shares to be represented by each proxy must be clearly indicated.

4. An instrument appointing a proxy, in the case of an individual, shall be signed by the appointor or his attorney duly authorised in writing or in the case of a corporation, shall be either under its Common Seal or under the hand of an officer or attorney of the corporation duly authorised.

5. The duly executed Proxy Form must be deposited at the registered office of the Company not less than forty-eight (48) hours before the time set for holding the meeting or any adjournment thereof.

6. Only members whose names appear in the Record of Depositors as at 16th November 2012 will be entitled to attend and vote at the meeting.7. Explanatory Notes on Special Business: (a) The proposed Resolution 9, if passed, will empower the Directors to issue shares in the Company up to an amount not

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

The general mandate sought for issue of shares is a renewal of the general mandate sought in the preceding year. As at the date of Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the Forty-second AGM held on 26th November 2011 and hence no proceeds were raised therefrom. The purpose of this general mandate is to allow the Company to take advantage of any strategic opportunities, including but not limited to, issuance of new shares for purpose of funding investment project(s), working capital and/or acquisitions which require new shares to be allotted and issued speedily and would also save the cost involved in convening a general meeting to approve such issuance of shares.

(b) The proposed Resolution 10, if passed, will bring the Company’s Articles of Association in line with the amendments to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, as set out in Appendix I of the Annual Report 2012 of the Company.

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING(Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad)

• Details of individuals who are standing for election as Directors No individual is seeking election as a Director at the Forty-third Annual General Meeting of the Company.

NOTICE OF ANNUAL GENERAL MEETING


Annual Report 20124

CORPORATE INFORMATION

REGISTERED OFFICE

Lot 6 & 20, Persiaran Tasek,Kawasan Perindustrian Tasek,31400 Ipoh,Perak Darul Ridzuan.Tel : 05-291 7823Fax : 05-291 8546Email : [email protected] : http://www.hexza.com.my

REGISTRARS

Symphony Share Registrars Sdn. Bhd.No. 55 Medan Ipoh 1A,Medan Ipoh Bistari,31400 Ipoh, Perak Darul Ridzuan.Tel : 05-547 4833Fax : 05-547 4363

AUDITORS

Deloitte & ToucheChartered Accountants87 Jalan Sultan Abdul Jalil,30450 Ipoh, Perak Darul Ridzuan.Tel : 05-253 1358Fax : 05-253 0090

PRINCIPAL BANKERS

AmInvestment Bank Berhad Hong Leong Bank BerhadHSBC Bank Malaysia BerhadMalayan Banking BerhadOSK Investment Bank BerhadRHB Bank Berhad

STOCK EXCHANGE LISTING

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

BOARD OF DIRECTORS

Datuk Dr. Foong Weng SumChairman & Group Chief Executive

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

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

Mr. Leong Keng Yuen Independent Non-Executive Director

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

Mr. Ooi Ying HongIndependent Non-Executive Director

AUDIT COMMITTEE

Dato' Richard Ong Guan Seng Chairman

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

REMUNERATION COMMITTEE

Mr. Leong Keng Yuen Chairman

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

NOMINATING COMMITTEE

Dato' Richard Ong Guan SengChairman

Dr. Foong Weng CheongMr. Leong Keng Yuen

COMPANY SECRETARY

Ms. Chong Yoke Seng (MIA 3672)



CORPORATE STRUCTURE AS AT 30TH JUNE 2012

Hexza Corporation Berhad and its operating subsidiaries

100%

NORSECHEM RESINS SDN. BERHAD

HEXZA CORPORATION

BERHAD

100%

NORSECHEM MARKETINGSDN. BHD.

100%

BIO-ACETIC PRODUCTS SDN. BHD.

99.91%

CHEMICAL INDUSTRIES(MALAYA) SDN. BHD.

100%

SUMMIT DEVELOPMENT CORPORATION SDN. BERHAD

80%

HEXZACHEM SARAWAK SDN. BHD.

100%

HEXZA-MATHERSDN. BHD.


Annual Report 20126

FIVE-YEAR GROUP FINANCIAL SUMMARY

Year Ended 30th June 2012RM'000

2011RM'000

2010RM'000

2009RM'000

2008RM'000

Revenue 148,616 146,786 159,744 166,433 177,064

Profit before tax 9,266 16,268 22,182 7,936 27,879

Profit after taxation attributable to shareholders of the company 6,158 12,104 15,895 6,986 22,061

Total assets 233,787 232,377 222,128 209,779 218,031

Shareholders' funds 203,156 207,814 195,169 185,286 183,510

Paid-up capital 100,190 100,190 100,190 100,190 66,001

Earnings per share (sen) 3.1 6.0 7.9 3.5 16.7

Gross dividend per share (sen)* 5.0 5.0 4.0 3.5 3.5

Net dividend proposed/paid (sen)* 4.0 4.0 3.5 3.0 3.0

Return on shareholders' funds (%) 3.0 5.8 8.1 3.8 12.0

Net assets per share (RM) 1.0 1.0 1.0 0.9 1.4

Note: * The proposed final dividend for the financial year ended 30th June 2012 is subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company.



FIVE-YEAR GROUP FINANCIAL SUMMARY

170

175

180

185

190

195

200

205

210

2008 2009 2010 2011 2012

184 185

195

208 203

RM

(mill

ion)

Shareholders' Funds

0

30

60

90

120

150

180

2008 2009 2010 2011 2012

177 166 160 147 149

RM

(mill

ion)

Revenue

0

2

4

6

8

10

12

14

16

18

2008 2009 2010 2011 2012

16.7

3.5

7.9 6.0

3.1

Earning Per Share (sen)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2008 2009 2010 2011 2012

3.5 3.5

4.0

5.0 5.0

Gross Dividend Per Share (sen)

0

5

10

15

20

25

30

2008 2009 2010 2011 2012

28

8

22 16

9

RM

(mill

ion)

Profit Before Tax

195

200

205

210

215

220

225

230

235

2008 2009 2010 2011 2012

218

210

222

232 234

RM

(mill

ion)

Total Assets


Annual Report 20128

CHAIRMAN'S STATEMENT

On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and of the Company for the financial year ended 30th June, 2012.

For the financial year ended 30th June, 2012, the Group’s revenue increased marginally by 1.2% to RM148,616,267 as compared to RM146,785,725, an increase of RM1,830,542. The Group registered a profit before tax of RM9,265,721 compared to RM16,268,485 in the previous year. Earning before interest, tax, depreciation and amortization (EBITDA) amounted to RM14,900,882 compared to RM21,862,124 in the previous year. Chemical Industries (Malaya) Sdn. Bhd. (CIM), revenue was marginally higher by RM791,635 (2.7%) compared to the previous year. However, there was a marginally bigger loss at RM646,918, an increased loss of RM88,309 (16%) compared to the previous year. Norsechem Resins’ increase of revenue by 16% resulted in a reduced loss of RM730,750, a reduction of 27% compared to the previous year. Hexzachem (Sarawak) Sdn. Bhd., was the only core subsidiary to operate profitably in the financial year ended 30th June, 2012, albeit with a reduced profit of RM5,869,922 compared to RM8,880,231 in the previous year. Hexza Corporation Berhad (Hexza) recorded a revenue of RM10,731,182 compared to RM16,988,451 in the previous year. Profit before tax for FY 2012 amounted to RM12,458,097 compared to RM25,430,756 for FY 2011. Shareholders' funds stands at RM203,156,136. Net tangible assets amounted to RM1.00 per share.

REVIEW OF OPERATIONS

The year under review was the most challenging since financial year ending June 30th, 2009 as reflected in the return on shareholders’ funds of 3.0% compared to a return on shareholders’ funds of 3.8% in FY 2009. The return on shareholders’ fund for FY 2011 was 5.8%. CIM which produces ethyl alcohol using molasses as a raw material is under tremendous pressure to comply with world class standards for the disposal of effluent water both in terms of COD (Chemical Oxygen Demand), BOD (Biological Oxygen Demand) and colour. Companies previously operating in Malaysia, have been known to move their operations to other countries with less stringent jurisprudence. CIM is spending senior executives’ time and money in its attempt to comply. However, given the level of technology and advice available in the country we should be given adequate time to comply. CIM is committed to stay in Malaysia to provide employment opportunities for Malaysians.

The performance of the Group’s Resins Division continued to mirror that of the preceding two years with substantially different financial results from the plant operating in Kuching, Sarawak compared to the plant operating in Port Klang, Selangor.



CHAIRMAN'S STATEMENT

The plant in Kuching recorded a profit before tax of RM5,869,922 for FY 2012, albeit lower than the profit before tax of RM8,880,231 of the previous year. Competitors’ profits were also lower as a reflection of the gloomy macro global economy highlighted by the austerity drive in Portugal, Italy, Greece and Spain. Norsechem Resins Sdn. Bhd., located in Port Klang, recorded a loss of RM730,750 albeit a smaller loss compared to the loss of RM1,005,567 in the previous year.

OUTLOOK AND PROSPECTS

Hexza, as a group, have instituted a cost cutting exercise in areas wherever possible. However, at CIM, it is difficult to increase productivity and yield to keep our cost low because of the frequent stoppages in production forced upon us by the effluent disposal problem. In spite of all these problems, management have managed to maintain losses within manageable levels. Therefore, it is hoped that once we have tackled the effluent issues and CIM is able to run production without undue interruptions, CIM will be able to contribute meaningful profits. The coming implementation of the government’s minimum wage policy, while strictly applied, affects a relatively small number of employees. We are concerned that its implementation may have unintended consequences resulting in significantly higher operational costs. The extension of retirement age from 55 to 60 will belabour factories with workers earning higher wages as a result of their length of service. While Hexza is happy to extend the employment of good workers beyond their retirement age on a year to year basis, we are also having to harbour workers who are not computer literate for another 5 years. Computer or digital literacy is a required and necessary skill in the increasingly digital manufacturing environment.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The statement on Corporate Social Responsibility which I wrote last year has “inspired” me to reproduce it in full again this year. Our ideals and endeavours have not changed and for a relatively small company like Hexza I cannot improve the statement any better.

“Charity begins at home. During the frequent recent factory stoppages, no employee has been retrenched and there has been no reduction of basic pay resulting in a pre-tax loss for the current financial year at CIM. On the contrary, competent employees are given the opportunity to develop their knowledge and skill through training and education. Hexza recognizes that without being socially and environmentally responsible, it is impossible to have economically sustainable operations in the long term. Corporate Social Responsibility and sustainability are important components of long term business success. For Hexza, Corporate Social Responsibility is about having a sustainable business strategy in the face of local and global challenges. It is also about conducting business with a conscience, caring for its employees, the community, the environment, its customers, its shareholders and all stakeholders. Hexza’s Corporate Social Responsibility mission is for all our Directors, Senior Executives, Management and staff to be community players in the promotion of a caring, learning and civil society.”

The above is our template and DNA. It is Hexza’s social responsibility genetics.


Annual Report 201210

CHAIRMAN'S STATEMENT (continued)

DIVIDEND

Hexza’s balance sheet is strong. It has very little debt. The Board of Directors have recommended a first and final dividend for the current year of 8% less tax and a tax exempt dividend of 2% which total RM8,015,201 or 4.0 sen per share, the same dividend paid in FY 2011. On behalf of my fellow Directors, I would like to extend my appreciation to all our stakeholders – valued customers, business associates, loyal shareholders, the authorities and financiers for their continuous support and understanding. Last but not least, I would like to extend my appreciation to my fellow Board members for their invaluable advice and contributions.

I would also like to extend my sincere appreciation to the managers, executives and employees for their contribution, dedication and commitment to the Group, under the most challenging conditions.

Datuk Dr. Foong Weng SumChairman & Group Chief Executive

3rd October 2012



DATUK DR. FOONG WENG SUMChairman & Group Chief Executive

Datuk Dr. Foong Weng Sum, aged 73, was appointed to the Board on 7th May 1982 as Vice Chairman. On 23rd

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

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

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

Dato’ Richard Ong, aged 74, was appointed to the Board on 25th March 1994 and he was appointed as the Deputy Chairman of the Board on 8th November 2011. He is also the Chairman of the Audit Committee and Nominating Committee and a member of the Remuneration Committee.

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

DR. FOONG WENG CHEONGNon-Independent Non-Executive Director

Dr. Foong Weng Cheong, aged 79, was appointed to the Board on 7th May 1982. He is also a member of the Audit Committee, Remuneration Committee and Nominating Committee.

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

MR. LEONG KENG YUENIndependent Non-Executive Director

Mr. Leong Keng Yuen, aged 62, was appointed to the Board on 15th September 2000. He is also the Chairman of the Remuneration Committee and a member of the Audit Committee and Nominating Committee.

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

DIRECTORS’ PROFILE



TUAN HAJI MOHD JALI @ MOHD JALIL BIN SANYNon-Independent Non-Executive Director

Tuan Haji Mohd Jalil Sany, aged 65 was appointed to the Board on 20th November 2000.

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

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

MR. OOI YING HONGIndependent Non-Executive Director

Mr. Ooi Ying Hong, aged 46 was appointed to the Board on 12th July 2011. He is also a member of the Audit Committee.

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

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

OTHER INFORMATION

NationalityAll the Directors are Malaysians.

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

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

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

DIRECTORS’ PROFILE (continued)



AUDIT COMMITTEE REPORT

The Board of Directors of Hexza Corporation Berhad is pleased to present the Audit Committee Report for the financial year ended 30th June 2012.

This Audit Committee Report is prepared in accordance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad which complies with the Malaysian Code of Corporate Governance.

The Audit Committee (“the Committee”) was established by the Board of Directors since April 1994 to serve as a Committee of the Board. The following are members of the Audit Committee:

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

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

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

Mr. Ooi Ying Hong (Member, Independent Non-Executive Director)(Appointed on 25th November 2011)

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

The terms of reference which spells out its authorities and duties in accordance with Paragraph 15.11 of the Listing Requirements are as follows:

Membership

(a) The Committee shall be appointed by the Board from amongst the Non-Executive Directors of the Company and shall consist of not less than three members of whom all the members must be Non-Executive Directors, with a majority of them being Independent Directors. At least one member of the Committee must be a member of the Malaysian Institute of Accountants or eligible for membership.

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

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

Authority

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

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

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

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

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

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

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

Responsibilities and Duties

The functions of the Audit Committee shall be to:

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

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

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



AUDIT COMMITTEE REPORT (continued)

(d) review the assistance given by the Company’s employees to the external auditors;

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

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

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

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

(ii) significant and unusual events; and

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

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

(i) recommend the appointment of external auditors, audit fee and any question of resignation or dismissal;

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

(k) report its findings to the Board of Directors.

Meetings

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

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

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

Reporting Procedures

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

Attendance

During the financial year ended 30th June 2012, four (4) Audit Committee meetings were held and the details of the attendance were as follows:

No. of Meetings Attended

Dato' Richard Ong Guan Seng 4/4Mr. Leong Keng Yuen 4/4Dr. Foong Weng Cheong 4/4Mr. Ooi Ying Hong 3/3

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

Documentation Procedures

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



AUDIT COMMITTEE REPORT

Summary of Activities During the Financial Year

During the financial year ended 30th June 2012, in line with the terms of reference, the Audit Committee carried out the following activities in discharge of its functions and duties:

(a) Reviewed the Groups’ quarterly results announcement to Bursa Malaysia Securities Berhad before recommending them to the Board of Directors for approval.

(b) Reviewed the scope of work and the audit plan of the external auditors in respect of the financial year ended 30th June 2012.

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

(d) Reviewed and discussed major audit findings reported by the external auditors and management’s responses, including issues highlighted in the previous audit.

(e) Reviewed and approved the internal audit plan.

(f) Reviewed and deliberated on the reports from the internal audit unit and management’s response to the recommendations and presented the reports to the Board of Directors.

(g) Reviewed and deliberated on the risk assessment reports from the operating companies of the Group with request for further actions where appropriate.

(h) The Audit Chairman reported to the Board on significant issues discussed during the Audit Committee meetings and conveyed the Audit Committee’s recommendations, if any. The minutes of the Audit Committee meetings were distributed to all Board members.

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

(j) Reviewed the performance of the Internal Audit Unit against the annual audit plan for the financial year ended 30th June 2012 and the cost incurred in connection with the performance of the audit.

Internal Audit Function

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

During the financial year under review, the Internal Audit Unit conducted audits on operating subsidiaries based on the internal audit plan approved by the Audit Committee. The total cost incurred by the Internal Audit Unit during the financial year ended 30th June 2012 amounted to approximately RM85,000. The following were the activities carried out by the Internal Audit Unit:

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

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

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

(d) Prepared internal audit reports on audit findings and recommendation for improvements to the existing system of internal control and work procedures/processes.

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

(f) Performed review of processes upon the request of management.

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



CORPORATE GOVERNANCE STATEMENT

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

The Board is pleased to report as follows on the extent to which the principles and best practices of the Code and the Listing Requirements were applied throughout the financial year ended 30th June 2012. This statement is made in accordance with a resolution of the Board of Directors dated 3rd October 2012.

A. BOARD OF DIRECTORS

Board Composition and Balance The Board currently has six (6) members, comprising three (3) Independent Non-Executive Directors, two (2) Non-Independent Non-Executive Directors and one (1) Executive Director. This complies with the Listing Requirements of Bursa Malaysia Securities Berhad that one third of its Board consists of independent directors.

The Board is of the view that its composition fairly reflects the composition of its shareholders. The presence of three (3) Independent Non-Executive Directors fulfills an important role in corporate accountability. The role of the Independent Non-Executive Directors is particularly important as they provide an independent and unbiased views, advice and judgment in Board deliberations.

Duties and Responsibilities

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

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

A brief write-up of the background of the Board members as at the date of this statement is represented under Directors’ profile of the Annual Report.

Board and Board Committee Meetings The Board meets at least four (4) times a year at quarterly intervals, with additional meetings convened as necessary. There were four (4) meetings held during the financial year ended 30th June 2012 and details of the attendance of the Directors were as follows:

No. of Meetings Attended

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



At each Board Meeting, the Board considers the quarterly financial reports, the year to date financial performance of the Group, operations reports of the major business divisions, new business venture proposals and strategic issues affecting the Group’s business. The Chairman of the Audit Committee reports to the Board on the internal control issues based on the internal audit unit’s findings and the results of review of the risk assessment report.

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

• Audit Committee

• Nominating Committee

• Remuneration Committee

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

Independent Professional Advice

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

Appointment to the Board

The Nominating Committee is responsible for establishing a formal and transparent selection process for the appointment of new directors to the Board. The Committee will review the required mix of skills and experience of the Directors of the Board, and determine the appropriate Board balance and number of Non-Executive Directors. The Committee has established the procedures and processes towards an annual assessment of the effectiveness of the Board as a whole, the Committees of the Board and for assessing the contribution of each individual Director. The Board is satisfied that the current composition of the Board brings the required mix of skills and experience required for the Board to function effectively.

Directors’ Training

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

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




A. BOARD OF DIRECTORS (continued)

The following were the details of training attended by the Directors during the financial year ended 30th June 2012:

Name of Directors Training AttendedDatuk Dr. Foong Weng Sum 2012 Budget Seminar

Directors’ Rights, Duties, Powers and Accountability

Dato' Richard Ong Guan Seng 2012 Budget Seminar Bursa Malaysia Corporate Governance Week 2011

– Sustainability: Taking Corporate Governance a step further

Dr. Foong Weng Cheong CAEs Forum: Current updates on Governance

Mr. Leong Keng Yuen Financial Institution Director's Education optional program,Nomination and Remuneration Committee by Bank Negara Malaysia

Financial Institution Director's Education optional program,Corporate Finance by Bank Negara Malaysia

Financial Institution Director's Education core program,Module B by Bank Negara Malaysia

Hedging Strategies with Futures and Options Accounting for MFRS: Simplifying the Approach Personal Data Protection Act 2010 Competition Act 2010

Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany

Bursa Malaysia Corporate Governance Week 2011– Sustainability: Taking Corporate Governance a step further

Malaysian FRS –Recent Development & Update

Ooi Ying Hong Mandatory Accreditation Programme for Directors of Public Listed Companies

Bursa Malaysia – Business Sustainability:Making a Difference in Performance

Re-election

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

B. DIRECTORS’ REMUNERATION

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

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

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

CORPORATE GOVERNANCE STATEMENT (continued)



The details of the Directors’ remuneration (including benefits-in-kind) for the financial year ended 30th June 2012 are as follows:

RM’000

Salary Fees BonusOther

EmolumentsBenefits-in-kind Total

Executive Director

Datuk Dr. Foong Weng Sum 900 79 114 61 14 1,168

Non-Executive Directors

Dr. Foong Weng Cheong - 69 - 17 - 86Dato’ Richard Ong Guan Seng - 53 - 17 - 70Mr. Leong Keng Yuen - 64 - 17 - 81Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany* 19 66 - 12 4 101Mr. Ooi Ying Hong** - 44 - 9 - 53

Total 919 375 114 133 18 1,559

Notes:* ceased as executive director on 21-8-2011** Appointed on 12-7-2011

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

BandExecutive

DirectorNon-Executive

DirectorsRM50,000 to RM100,000 - 4RM100,001 to RM150,000 - 1RM1,150,001 to RM1,200,000 1 -

The fees payable to the Directors will be recommended by the Board for approval by shareholders at the forthcoming Annual General Meeting scheduled to be held on 24th November 2012.

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

C. SHAREHOLDERS

Shareholders communication and investors relationship policy

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

The annual reports and the quarterly announcements are the primary modes of communication to report on the Group’s business, activities and financial performance to all its shareholders. The Company has established a website www.hexza.com.my to improve the channel of communication between its shareholders and interested public.

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




D. ACCOUNTABILITY AND AUDIT

Financial Reporting

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

Relationship with the Auditors

The Company has established a transparent and appropriate relationship with the Group’s internal and external auditors through the Audit Committee. The Audit Committee meets with the external auditors without the presence of any executives of the Group at least twice a year.

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

Internal Control

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

E. COMPLIANCE WITH THE BEST PRACTICES

The Group has taken various steps to ensure compliance with the Principles and Best Practices of the Code during the financial year ended 30th June 2012 save as follows:

Division of Responsibilities

The roles of the Chairman and the Group Chief Executive are combined and are currently held by Datuk Dr. Foong Weng Sum. The Board is mindful of the combined roles but is of the view that there are sufficient Independent Directors who are professionals of credibility and repute who demonstrate independence of judgment and objectivity in the Board’s deliberations and provide the necessary check and balance. All related party transactions, which arose in the normal course of business involving him, have been disclosed in the notes to the financial statements.

F. DIRECTORS’ RESPONSIBILITY STATEMENT

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

The Directors also have a general responsibility for taking such steps as are reasonably available to them to control and safeguard the assets of the Group and to prevent and detect fraud and other irregularities. In the opinion of the Directors, the Group has applied the appropriate accounting policies and standards consistently in the preparation of the financial statements for the financial year ended 30th June 2012.

CORPORATE GOVERNANCE STATEMENT (continued)




G. ADDITIONAL COMPLIANCE INFORMATION

Utilisation of Proceeds

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

Share Buy-Back

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

Options, Warrants or Convertible Securities

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

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

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

Imposition of Sanctions / Penalties

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

Non-Audit Fees

During the financial year ended 30th June 2012, the non-audit fees payable to the external auditors amounted to approximately RM3,000.

Profit Estimate, Forecast or Projection

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

Profit Guarantee

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

Material Contracts and Contracts Relating to Loans

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

Recurrent Related Party Transactions of Revenue Nature

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



STATEMENT ON INTERNAL CONTROL

Introduction

The Board of Directors of Hexza Corporation Berhad ("Board") is pleased to present the following Statement on Internal Control of the Group for the financial year ended 30th June 2012 pursuant to Paragraph 15.26 (b) of the Listing Requirements of the Bursa Malaysia Securities Berhad (Bursa Securities) and the guidelines provided by Bursa Securities on Internal Control – Guidance for Directors of Public Listed Companies.

Board Responsibility

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

The Board’s primary objective and strategic direction in managing the Group’s business risks are to enhance its ability to achieve its business objectives.

The role of management is to implement the Board’s policies, procedures and guidelines on risk and control by identifying and evaluating the risks faced and implemented action plans and time frame to manage the risks identified.

The Board through its Audit Committee reviews the management of the principal risks areas and the evaluation of the adequacy and effectiveness of internal control system and integrity of the financial information. The Nominating and Remuneration Committees review issues within their terms of reference and report to the Board for decision making.

Enterprise Risk Management Framework

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

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

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

Internal Audit Function

The internal audit function has the primary objective of carrying out a review of the internal control system to determine if the internal control procedures have been complied with and to make recommendations to strengthen the internal control system.

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

The Internal Audit Unit also checks to ensure that the risk management strategy, framework and methodology implemented are consistently applied by the major operating subsidiaries.



STATEMENT ON INTERNAL CONTROL

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

There were a number of internal control issues identified by both the Internal Audit Unit and the external auditors. The management has taken steps to address all the issues raised. None of the weaknesses have resulted in any material losses, contingencies or uncertainties that would require disclosure in this report.

The Board reviews the minutes of the Audit Committee meeting on a quarterly basis.

Other Key Control Processes

Apart from the risk management and internal audit mentioned above, the other key control processes of the Group’s internal control include the following:

• There are proper organisational structures with well defined lines of responsibility.

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

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

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

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

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

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

The Board confirms that it has reviewed the effectiveness of the system of internal controls mentioned above and has obtained reasonable assurance that the system of internal control is adequate to achieve the Group’s business objectives.

Review of the Statement by External Auditors

The external auditors have reviewed this Statement on Internal Control in accordance with the Auditing Technical Release 5, Guidance for Auditors on the Review of Directors’ Statement on Internal Control pursuant to paragraph 15.24 of the Bursa Securities Listing Requirements and reported to the Board that the Statement appropriately reflects the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls.

This statement is reviewed and approved by the Board in accordance with a resolution of the Board of Directors dated 3rd October 2012.



CORPORATE SOCIAL RESPONSIBILITY STATEMENT

The Board of Directors is aware of its corporate social responsibility commitments to its various stakeholders and endeavors to operate ethically, financially and in a socially manner. The Group’s mission is to enhance value for all stakeholders whilst taking into consideration our social obligations remained unchanged.

We continue to support the CSR framework for Public Listed Companies which guide us on the implementation of good CSR practices in the following areas:

Environment

The Group recognises the impact that its businesses have on the environment and, as a minimum, comply with the environmental regulations and legislation. The Group continues to undertake various measures to preserve the environment through the control of effluent discharges, air emissions, scheduled waste disposal and noise. The installation of an integrated multiple effect evaporator and concentration plant to process the waste water from the ethanol plant is with the objective to operate its facilities in a responsible and sustainable manner.

The Workplace

We ensure that our working conditions are fit for the intended business purpose and are in compliance with the requirement of the Occupational Safety and Health Act 1994 (OSHA). Our major operating subsidiaries have implemented Safety and Health policy to ensure that all employees work in a safe and healthy environment. The environment, health and safety considerations are integral part in the operations of the operating subsidiary companies.

The Group provides opportunity for employees to upgrade their skill and improve their knowledge by promoting continual education programme. We carried out training analysis for employees to identify the specific training needs of our employees. We organised in-house training for our employees besides sending the employees to attend various seminars. We also encourage employees to pursue for further education in their relevant fields to enhance their skills and ability.

We also support various sports activities organised by the employees to foster better relationship and understanding among the employees.

The Community

Our Group is committed to being a responsible corporate citizen, the company from time to time made donation to charitable organisation and contributing to community projects. It has also been the Group’s practice to accept undergraduates from various institutions of higher learning for internship every year to provide hands-on experience in their study related field.

The Market Place

We are committed to ensure the interests of our stakeholders are being taken care. We shall continue to conduct investor relations in line with its policy to disclose information to stakeholders fairly and in a timely manner.

All our major subsidiaries are accredited with ISO 9001:2000 Quality Management Systems, we are committed to continual improvement in technology and services to ensure supply quality products to our customers.


Annual Report 2012

Directors' Report

Independent Auditors’ Report to the Members of Hexza Corporation Berhad

Statements of Comprehensive Income

Statements of Financial Position

Statements of Changes In Equity


Notes to the Financial Statements

Supplementary information - disclosure onrealised and unrealised profits or losses

Statement by Directors

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

––––––––––––––––––––––––––––––– 26 - 29

––––– 30 - 31

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––––––––––––––––– 36 - 37

–––––––––––––––––––––– 38 - 41

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FINANCIALSTATEMENTS



DIRECTORS’ REPORT

The directors of HEXZA CORPORATION BERHAD have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended June 30, 2012.

PRINCIPAL ACTIVITIES

The Company is principally involved in investment holding.

The principal activities of the subsidiary companies are disclosed in Note 15 to the financial statements. During the financial year, a subsidiary company, Hexza-Mather Sdn. Bhd., temporarily ceased its operations in the manufacture of alcoholic and non-alcoholic beverages.

Other than as mentioned above, there have been no significant changes in the nature of the principal activities of the Company and its subsidiary companies during the financial year.

RESULTS OF OPERATIONS

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

The GroupRM

The CompanyRM

Profit for the year 7,017,242 11,772,955

Profit attributable to:Owners of the Company 6,158,328 11,772,955Non-controlling interests 858,914 -

7,017,242 11,772,955

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

DIVIDENDS

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

The directors have proposed a first and final dividend of 8.0% less tax and a tax-exempt dividend of 2.0% in respect of the current financial year. The proposed dividends are subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company and have not been included as a liability in the financial statements.

RESERVES AND PROVISIONS

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

ISSUE OF SHARES AND DEBENTURES

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



DIRECTORS’ REPORT

SHARE OPTIONS

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

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

OTHER FINANCIAL INFORMATION

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

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

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

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

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

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

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

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

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

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

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

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

DIRECTORS

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

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

In accordance with Article 78 of the Company's Articles of Association, Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany retires by rotation and, being eligible, offers himself for re-election.



DIRECTORS (continued)

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

DIRECTORS' INTERESTS

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

No. of ordinary shares of RM0.50 each

Balance as of1.7.2011 Bought Disposed

Balance as of30.6.2012

Shares in the Company

Registered in the name of directorsDatuk Dr. Foong Weng Sum 1,083,228 - - 1,083,228Dato' Richard Ong Guan Seng 250,000 - - 250,000Dr. Foong Weng Cheong 2,662,500 - - 2,662,500Mr. Leong Keng Yuen 225,000 - - 225,000Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany 608,300 - (550,000) 58,300Mr. Ooi Ying Hong - 10,000 - 10,000

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

Datuk Dr. Foong Weng Sum 60,581,657 - - 60,581,657Dr. Foong Weng Cheong 60,581,657 - - 60,581,657

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

DIRECTORS’ BENEFITS

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

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

DIRECTORS’ REPORT



AUDITORS

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

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

DATUK DR. FOONG WENG SUM

DATO' RICHARD ONG GUAN SENG

Ipoh,3rd October 2012

DIRECTORS’ REPORT



INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HEXZA CORPORATION BERHAD

Report on the Financial Statements

We have audited the financial statements of Hexza Corporation Berhad, which comprise the statements of financial position of the Group and of the Company as of June 30, 2012 and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 32 to 84.

Directors’ Responsibility for the Financial Statements

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

Auditors’ Responsibility

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

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

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

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of June 30, 2012 and of their financial performance and cash flows for the year then ended.

Report on Other Legal and Regulatory Requirements

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

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

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

(c) our auditors' reports on the accounts of the subsidiaries were not subject to any qualification and did not include any adverse comment made under Section 174 (3) of the Act.



INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HEXZA CORPORATION BERHAD

Other Reporting Responsibilities

The supplementary information set out in Note 33 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1 "Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements" as issued by the Malaysian Institute of Accountants ("MIA Guidance") and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

Other Matters

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

DELOITTE & TOUCHEAF 0834Chartered Accountants

TAN BOON HOEPartner - 1836/07/13(J)Chartered Accountant

3rd October 2012



STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED JUNE 30, 2012

The Group The Company

Note2012

RM2011

RM2012

RM2011

RM

Revenue 5 148,616,267 146,785,725 10,731,182 16,988,451

Investment revenue 7 824,863 1,307,747 905,308 1,190,502 Other gains and losses 8 1,527,515 3,520,583 1,457,715 7,786,786Other operating income 9 1,162,911 180,852 116,200 167,400Changes in inventories of

finished goods andwork-in-progress 1,088,515 (1,174,215) - -

Trading goods and finished goods purchased (1,316,044) (2,339,856) - -

Raw materials andconsumables used (96,438,176) (88,721,565) - -

Property developmentexpenditure recognised - (444,755) - -

Directors’ remuneration 10 (1,542,448) (1,551,335) (340,560) (272,600)Employee benefits expenses 10 (7,834,481) (7,361,470) (173,482) (199,196)Depreciation of property,

plant and equipment 14 (5,498,935) (5,456,147) (2,262) (1,586)Share of (loss)/profit in

associated company 16 (1,381) 110,280 - -Finance costs 11 (136,226) (137,492) - -Other operating expenses 9 (31,186,659) (28,449,867) (236,004) (229,001)

Profit before tax 9,265,721 16,268,485 12,458,097 25,430,756Income tax expense 12 (2,248,479) (2,832,509) (685,142) (1,040,796)

Profit for the year 7,017,242 13,435,976 11,772,955 24,389,960




Note2012

RM2011

RM2012

RM2011

RM

Other comprehensive (loss)/income

Net fair value changes inavailable-for-salefinancial assets (2,054,610) 4,108,912 (2,056,890) 4,103,512

Reclassification of gainon disposal of available-for-salefinancial assets (746,493) (2,260,936) (746,493) (2,260,936)

(2,801,103) 1,847,976 (2,803,383) 1,842,576

Total comprehensive incomefor the year 4,216,139 15,283,952 8,969,572 26,232,536

Profit attributable to:Owners of the Company 6,158,328 12,104,346 11,772,955 24,389,960Non-controlling interests 858,914 1,331,630 - -

7,017,242 13,435,976 11,772,955 24,389,960

Total comprehensive incomeattributable to:

Owners of the Company 3,357,225 13,952,322 8,969,572 26,232,536Non-controlling interests 858,914 1,331,630 - -

4,216,139 15,283,952 8,969,572 26,232,536

Earnings per ordinaryshare of RM0.50 each

Basic (sen) 13 3.1 6.0

Diluted (sen) 13 3.1 6.0

The accompanying Notes form an integral part of the Financial Statements.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED JUNE 30, 2012



STATEMENTS OF FINANCIAL POSITION AS OF JUNE 30, 2012


Note2012

RM2011

RM2012

RM2011

RM

ASSETS

Non-current assetsProperty, plant and equipment 14 56,076,824 60,663,104 3,683 4,826Investment in subsidiary

companies 15 - - 68,836,412 68,820,820Investment in associated

company 16 88,247 89,628 1 1Other investments 17 57,825,670 59,078,606 57,804,470 59,059,686Goodwill arising on

consolidation 18 2,129,365 2,129,365 - -Deferred tax assets 12 702,000 911,000 - -

Total non-current assets 116,822,106 122,871,703 126,644,566 127,885,333

Current assetsInventories 19 18,696,096 16,371,558 - -Trade and other receivables 20 31,852,131 27,208,008 2,674,310 3,430,628Current tax assets 12 2,172,829 1,442,230 119,321 212,485Other assets 22 478,740 849,914 23,180 24,882Cash and cash equivalents 23 63,764,691 63,633,259 49,982,643 46,856,416

Total current assets 116,964,487 109,504,969 52,799,454 50,524,411

Total assets 233,786,593 232,376,672 179,444,020 178,409,744



STATEMENTS OF FINANCIAL POSITION AS OF JUNE 30, 2012


Note2012

RM2011

RM2012

RM2011

RM

EQUITY AND LIABILITIES

Capital and reservesShare capital 24 100,190,018 100,190,018 100,190,018 100,190,018Reserves 25 102,966,118 107,624,094 78,830,303 77,875,932

203,156,136 207,814,112 179,020,321 178,065,950Non-controlling interests 6,706,755 7,064,441 - -

Total equity 209,862,891 214,878,553 179,020,321 178,065,950

Non-current liabilitiesDeferred tax liabilities 12 6,530,000 7,093,180 - -

Current liabilitiesTrade and other payables 26 9,107,584 4,434,398 93,445 83,874Current tax liabilities 12 - 2,240 - -Accrued expenses 2,944,118 2,491,301 330,254 259,920Short-term borrowings 27 5,342,000 3,477,000 - -

Total current liabilities 17,393,702 10,404,939 423,699 343,794

Total liabilities 23,923,702 17,498,119 423,699 343,794

Total equity and liabilities 233,786,593 232,376,672 179,444,020 178,409,744

Net tangible assets per ordinary share 1.00 1.03




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

Non-Distributable

ReserveDistributable

Reserve

The Group Note

ShareCapital

RM

InvestmentsRevaluation

ReserveRM

RetainedEarnings

RMSubtotal

RM

Non-Controlling

InterestsRM

TotalEquity

RM

Balance as of July 1, 2010 100,190,018 5,705,903 94,979,169 200,875,090 7,356,831 208,231,921

Profit for the year - - 12,104,346 12,104,346 1,331,630 13,435,976Other comprehensive

income - 1,847,976 - 1,847,976 - 1,847,976

Total comprehensive income for the year - 1,847,976 12,104,346 13,952,322 1,331,630 15,283,952

Payment of dividends 28 - - (7,013,300) (7,013,300) (1,624,020) (8,637,320)

Balance as of June 30, 2011 100,190,018 7,553,879 100,070,215 207,814,112 7,064,441 214,878,553

Profit for the year - - 6,158,328 6,158,328 858,914 7,017,242Other comprehensive

loss - (2,801,103) - (2,801,103) - (2,801,103)

Total comprehensive income/(loss) for the year - (2,801,103) 6,158,328 3,357,225 858,914 4,216,139

Payment of dividends 28 - - (8,015,201) (8,015,201) (1,216,600) (9,231,801)

Balance as of June 30, 2012 100,190,018 4,752,776 98,213,342 203,156,136 6,706,755 209,862,891

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2012



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

Distributable Reserve

Distributable Reserve

The Company Note

ShareCapital

RM

InvestmentsRevaluation

ReserveRM

RetainedEarnings

RM

TotalEquity

RM

Balance as of July 1, 2011 100,190,018 5,705,903 52,950,793 158,846,714

Profit for the year - - 24,389,960 24,389,960Other comprehensive income - 1,842,576 - 1,842,576

Total comprehensive incomefor the year - 1,842,576 24,389,960 26,232,536

Payment of dividends 28 - - (7,013,300) (7,013,300)

Balance as of June 30, 2011 100,190,018 7,548,479 70,327,453 178,065,950

Profit for the year - - 11,772,955 11,772,955Other comprehensive loss - (2,803,383) - (2,803,383)

Total comprehensive income/(loss) for the year - (2,803,383) 11,772,955 8,969,572

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

Balance as of June 30, 2012 100,190,018 4,745,096 74,085,207 179,020,321

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2012




STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2012

The Group

Note2012

RM2011

RM

CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES

Profit for the year 7,017,242 13,435,976Adjustments for:

Depreciation of property, plant and equipment 14 5,498,935 5,456,147Income tax expense recognised in the statements of

comprehensive income 2,248,479 2,832,509Inventories written off 334,025 386,113Loss/(Gain) on disposal of other investments 278,968 (1,097,427)Finance costs 136,226 137,492Property, plant and equipment written off 35,974 52,577Share of loss/(profit) in associated company 1,381 (110,280)Dividend income (2,197,838) (2,507,836)Net gain arising from financial assets designated

as at FVTPL (1,054,593) (268,275)Recovery of doubtful debts (928,037) -Interest income (842,876) (1,307,747)Cumulative gain reclassified from equity on disposal

of available-for-sale investments (746,493) (2,260,936)Gain on disposal of property, plant and equipment (33,500) (26,506)Impairment loss on property, plant and equipment - 83,171Allowance for doubtful debts - 28,037

9,747,893 14,833,015

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

Inventories (2,658,563) 4,540,722Trade and other receivables (3,736,204) 4,874,106Other assets 371,174 (317,259)

Increase/(Decrease) in:Trade and other payables 4,673,186 (4,149,009)Accrued expenses 452,817 110,983

Cash Generated From Operations 8,850,303 19,892,558Dividends received from other investments 1,943,361 2,219,716Interest received 1,905,387 1,621,647Income tax paid (3,081,021) (4,774,959)Interest paid (136,226) (137,492)

Net Cash Generated From Operating Activities 9,481,804 18,821,470



The Group

Note2012

RM2011

RM

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES

Proceeds from disposal of other investments 2,295,878 13,196,207Proceeds from disposal of property, plant and equipment 33,500 26,508Purchase of other investments (3,376,520) (26,414,339) Purchase of property, plant and equipment (936,429) (5,561,077) Capital distribution from associated company - 5,194,000 Repayment from associated company - 1,616

Net Cash Used In Investing Activities (1,983,571) (13,557,085)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES

Proceeds from short-term borrowings 1,865,000 3,477,000Dividends paid to owners of the Company 28 (8,015,201) (7,013,300)Dividends paid to minority shareholders (1,216,600) (1,624,020)

Net Cash Used In Financing Activities (7,366,801) (5,160,320)

NET INCREASE IN CASH AND CASH EQUIVALENTS 131,432 104,065

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 63,633,259 63,529,194

CASH AND CASH EQUIVALENTS AT END OF YEAR 23 63,764,691 63,633,259





STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2012 (continued)

The Company

Note2012

RM2011

RM

CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES

Profit for the year 11,772,955 24,389,960Adjustments for:

Income tax expense recognised in the statements ofcomprehensive income 685,142 1,040,796

Loss/(Gain) on disposal of other investments 278,968 (1,020,395)Allowance for doubtful debts 11,368 46,082Depreciation of property, plant and equipment 14 2,262 1,586Property, plant and equipment written off 1 -Dividend income 5 (10,731,182) (16,988,451)Net gain arising from financial assets designated

as at FVTPL (974,599) (259,263)Interest income (905,308) (1,190,502)Cumulative gain reclassified from equity on

disposal of available-for-sale investments (746,493) (2,260,936)Allowance for diminution in value of investment in

subsidiary company no longer required (15,592) (1,614,127)Gain on capital distribution of associated company - (2,632,065)

(622,478) (487,315)

Movements in working capital:

Decrease/(Increase) in:Other receivables 281,804 (291,031)Other assets 1,702 8

Increase/(Decrease) in:Other payables 10,950 (105,776)Accrued expenses 70,334 (50,407)

Cash Used In Operations (257,688) (934,521)Dividends received from subsidiary companies 8,517,373 13,828,024Dividends received from other investments 1,943,041 2,219,716Interest received 1,885,569 1,493,669Income tax paid (321,210) (148,500)

Net Cash Generated From Operating Activities 11,767,085 16,458,388



The Company

Note2012

RM2011

RM

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES

Proceeds from disposal of other investments 2,295,878 12,917,575Repayment by subsidiary companies 457,484 611,896Purchase of other investments (3,376,520) (26,199,219)Purchase of property, plant and equipment (1,120) (4,250)Capital distribution from associated company - 5,194,000Repayment from associated company 1,616

Net Cash Used In Investing Activities (624,278) (7,478,382)

CASH FLOWS USED IN FINANCING ACTIVITIES

Dividend paid to owners of the Company 28 (8,015,201) (7,013,300)Repayment to a subsidiary company (1,379) (1,147)

Net Cash Used In Financing Activities (8,016,580) (7,014,447)

NET INCREASE IN CASH AND CASH EQUIVALENTS 3,126,227 1,965,559

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 46,856,416 44,890,857

CASH AND CASH EQUIVALENTS AT END OF YEAR 23 49,982,643 46,856,416





NOTES TO THE FINANCIAL STATEMENTS

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

Board of Bursa Malaysia Securities Berhad.

The Company is principally involved in investment holding.

The principal activities of the subsidiary companies are disclosed in Note 15. During the financial year, a subsidiary company, Hexza-Mather Sdn. Bhd., temporarily ceased its operations in the manufacture of alcoholic and non-alcoholic beverages.

Other than as mentioned above, there have been no significant changes in the nature of the principal activities of the Company and its subsidiary companies during the financial year.

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

The financial statements of the Group and of the Company were authorised for issue by the Board of Directors in accordance with a resolution of the directors on October 3, 2012.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ADOPTION OF NEW AND REVISED FINANCIAL REPORTING STANDARDS ("FRSs")

The financial statements of the Group and of the Company have been prepared in accordance with Financial

Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia. Adoption of new and revised Financial Reporting Standards ("FRSs") and IC Interpretations ("IC Int.")

During the financial year, the Group and the Company adopted all new and revised FRSs and IC Int. issued by the Malaysian Accounting Standards Board ("MASB") that are relevant to their operations and effective for accounting periods beginning on or after July 1, 2011. The adoption of these new and revised FRSs and IC Int. has not resulted in material changes to the Group's and the Company's accounting policies.

In addition, on November 19, 2011, the MASB issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards Framework ("MFRS Framework") in conjunction with its planned convergence of FRSs with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") on January 1, 2012.

The MFRS Framework is a fully IFRS-compliant framework, equivalent to IFRSs which is mandatory for adoption by all Entities Other than Private Entities for annual periods beginning on or after January 1, 2012, with the exception for Transitioning Entities. Transitioning Entities, being entities which are subject to the application of MFRS 141 Agriculture and/or IC Interpretation 15 Agreements for the Construction of Real Estate are given an option to defer adoption of the MFRS Framework for an additional one year. Transitioning Entities also include those entities that consolidate, equity account or proportionately consolidate an entity that has chosen to continue to apply the FRS Framework for annual periods beginning on or after January 1, 2012. However, on June 30, 2012, the MASB decided to extend the aforementioned transitional period for another one year. Thus, Transitioning Entities are given an additional option to continue to apply the FRS Framework for annual periods beginning on or after January 1, 2013. Consequently, the MFRS Framework will be mandatory for application by Transitioning Entities for annual periods beginning on or after January 1, 2014.

Accordingly, the Group and the Company which are not Transitioning Entities will be required to apply MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards ("MFRS 1") in their financial statements for the financial year ending June 30, 2013, being the first set of financial statements prepared in accordance with the new MFRS Framework. Further, an explicit and unreserved statement of compliance with IFRSs will be made in these financial statements.

The Group and the Company are currently assessing the impact of adoption of MFRS 1, including identification of the differences in existing accounting policies as compared to the new MFRSs and the use of optional exemptions as provided for in MFRS 1. As at the date of authorisation of issue of the financial statements, accounting policy decisions or elections have not been finalised. Thus, the impact of adopting the new MFRS Framework on the Group's and the Company's first set of financial statements prepared in accordance with the MFRS Framework cannot be determined and estimated reliably until the process is complete.



3. SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting The financial statements of the Group and of the Company have been prepared on the historical cost basis

except for certain non-current assets and financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The principal accounting policies are set out below: Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and of the subsidiary companies controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

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

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

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

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

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

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under FRS 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

Business Combinations The acquisitions of subsidiary companies are accounted for using the purchase method. The cost of the business

combination is measured as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 3 Business Combinations are recognised at their fair values at the acquisition date.

Associated Company An associated company is an entity in which the Group or the Company has significant influence and that is

neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.





3. SIGNIFICANT ACCOUNTING POLICIES (continued)

The Group's investment in associated company is accounted for under the equity method of accounting based on the latest management financial statements of the associated company made up to June 30, 2012, except when the investment is classified as held for sale, in which case it is accounted for in accordance with FRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investment in associate is carried in the consolidated statement of financial position at cost as adjusted for post acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group's interest in that associate are not recognised, unless the Group has legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Unrealised gains and losses arising on transactions between the Group and its associated company are eliminated to the extent of the Group's equity interest in the associated company.

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

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

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

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

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

Foreign Currencies The individual financial statements of each group entity are presented in Ringgit Malaysia, the currency of

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

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

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

The closing rates per unit of Ringgit Malaysia used in the translation of foreign monetary items are as follows:

Currency 2012 2011

Singapore Dollar 0.4082 0.4167US Dollar - 0.3249




Employee Benefits

Short-term employee benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group and of the Company. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

Defined contribution plan

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

Taxation

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

Current tax

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

Deferred tax

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

The tax effects of unutilised reinvestment allowance are only recognised upon actual realisation.

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

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

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





Current and deferred tax for the year Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to

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

Property, Plant and Equipment

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

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

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

Freehold land is not depreciated. Long-term leasehold land is amortised evenly over the lease period of 57 ½ to 97 years. The years of commencing of the amortisation range from 1985 to 2006.

Short-term leasehold land are amortised evenly over the lease period of 58 ½ years commencing from 1994.

The annual depreciation rates are as follows:

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

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

The Group does not have a policy on revaluation of property, plant and equipment at regular intervals. The land under long-term lease and buildings of the Group have not been revalued since they were first revalued in 1988 based on a revaluation carried out in 1985 by a firm of professional valuers. As permitted under the transitional provisions of International Accounting Standard ("IAS") 16 (Revised): Property, Plant and Equipment adopted by the Malaysian Accounting Standards Board ("MASB") before the coming into effect of Financial Reporting Standard ("FRS") 116: Property, Plant and Equipment, these assets continue to be stated at their 1985 valuation less accumulated depreciation.

Investments

Investment in subsidiary companies and investment in an associated company are stated at cost less accumulated impairment losses in the Company's separate financial statements.




Goodwill

Goodwill acquired in a business combination is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill arising on consolidation represents the excess of cost of acquisition over the Group's interest in the net fair values of the identifiable assets, liabilities and contingent liabilities of a subsidiary company at the date of acquisition.

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

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

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

Impairment of Assets Excluding Goodwill At the end of each reporting period, the Group and the Company review the carrying amounts of their assets

(other than inventories and financial assets which are dealt with in their respective policies) to determine if there is any indication that those assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimated.

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

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

Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset. An impairment loss is reversed if there has been a change in the estimate used to determine the recoverable amount.

An impairment loss is only reversed to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for the asset in prior years. A reversal is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined on the "Weighted Average"method. Cost of raw materials and consumables comprises the original purchase price plus cost incurred in bringing the inventories to their present location. The cost of finished goods and work-in-progress comprises the cost of raw materials, direct labour and a proportion of the production overheads. Net realisable value represents the estimated selling price in the ordinary course of business less selling and distribution costs and all other estimated costs to completion.

Inventories of unsold completed development units are stated at the lower of cost and net realisable value. Cost includes the relevant cost of land, development expenditure and related interest cost incurred during the development year. Net realisable value represents the estimated selling price in the ordinary course of business less all other estimated costs to completion.





Borrowing Costs

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

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

Provisions

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

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

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

Financial Instruments

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

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

Financial instruments are initially measured at fair value, plus transaction costs, except for those financial assets and financial liabilities classified as at fair value through profit or loss ("FVTPL"), which are initially measured at fair value.

Effective interest method

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

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




(a) Financial assets

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

(i) Financial assets at FVTPL

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

A financial asset is classified as held for trading if:

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

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

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

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

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

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

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

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the "other gains and losses" line item in the statements of comprehensive income. Fair value is determined in the manner described in Note 32.

(ii) AFS financial assets

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

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

(iii) Loans and receivables

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





(iv) Impairment of financial assets

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

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

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

• significant financial difficulty of the issuer or counterparty; or

• default or delinquency in interest or principal payments; or

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

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

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

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

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

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

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

(v) Derecognition of financial assets

The Group and the Company derecognise a financial asset only when the contractual rights to the

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




(b) Financial liabilities and equity instruments

(i) Classification as debt or equity

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

(ii) Equity instruments

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

(iii) Financial liabilities

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

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

(iv) Derecognition of financial liabilities

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


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

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

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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




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

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

(a) Impairment of Goodwill

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

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

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

(b) Impairment of Property, Plant and Equipment

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

Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in- use. The value-in-use is the net present value of the projected future cash flow derived from that asset discounted at an appropriate discount rate. The discount rate used in measuring value in use was 8.0% per annum. Projected future cash flows are based on the Group's estimates calculated based on historical, sector and industry trends, general market and economic conditions, changes in technology and other available information.

(c) Recognition of Deferred Tax Assets

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

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

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

(e) Recoverability of Receivables

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




5. REVENUE

The Group The Company2012

RM2011

RM2012

RM2011

RM

Manufacturing 141,361,289 137,148,769 - -Trading 5,057,460 6,619,120 - -Dividend income:

Shares quoted in Malaysia 1,976,911 1,923,357 1,976,911 1,923,357Unquoted shares 194,040 582,120 194,040 582,120Shares quoted outside Malaysia 26,567 2,359 26,567 2,359Subsidiary companies - - 8,533,664 14,480,615

Sales of development properties - 510,000 - -

148,616,267 146,785,725 10,731,182 16,988,451

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


RM2011

RM2012

RM2011

RM

Revenue for financial assets not designated as at fair value through profit or loss - available-for-salefinancial assets 2,197,518 2,507,836 2,197,518 2,507,836

Revenue earned on non-financial assets 146,418,749 144,277,889 8,533,664 14,480,615

148,616,267 146,785,725 10,731,182 16,988,451

6. SEGMENT INFORMATION

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

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

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

- Investment holding

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

- Trading

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




6. SEGMENT INFORMATION (continued)

The GroupYear Ended 30.6.2012

Investmentholding

RMManufacturing

RMTrading

RMOthers

RMEliminations

RMConsolidated

RM

RevenueExternal customers 2,197,518 141,361,289 5,057,460 - - 148,616,267Inter-segment 8,533,664 3,048,741 32,645,728 - (44,228,133) -

10,731,182 144,410,030 37,703,188 - (44,228,133) 148,616,267

ResultsInterest income 905,308 53,479 - - (133,924) 824,863Finance costs - (164,419) (105,731) - 133,924 (136,226)Depreciation of

property, plantand equipment (2,262) (5,448,752) (47,677) (244) - (5,498,935)

Non-cash expenses other than depreciation (11,369) (369,998) - - 11,368 (369,999)

Share of loss in associated company (1,381) - - - - (1,381)

Segment profit 11,551,408 4,455,435 931,372 70,886 (8,432,017) 8,577,084Interest income 905,308 53,479 - - (133,924) 824,863Finance costs - (164,419) (105,731) - 133,924 (136,226)

Profit before tax 12,456,716 4,344,495 825,641 70,886 (8,432,017) 9,265,721

AssetsReportable

segment assets 108,000,442 117,363,735 2,765,148 2,782,439 - 230,911,764Unallocated

corporate assets 2,874,829

Consolidated total assets 233,786,593

LiabilitiesReportable

segment liabilities (348,632) (16,823,577) (33,041) (188,452) - (17,393,702)Unallocated

corporate liabilities (6,530,000)

Consolidated total liabilities (23,923,702)

Other informationInvestment in

associated company 88,247 - - - - 88,247Capital additions 1,120 945,200 2,000 309 - 948,629




The GroupYear Ended 30.6.2011

Investmentholding

RMManufacturing

RMTrading

RMOthers

RMEliminations

RMConsolidated

RM

RevenueExternal customers 2,507,836 137,148,769 6,619,120 510,000 - 146,785,725Inter-segment 14,480,615 3,084,168 49,804,268 - (67,369,051) -

16,988,451 140,232,937 56,423,388 510,000 (67,369,051) 146,785,725

ResultsInterest income 1,190,502 132,412 - 61,904 (77,071) 1,307,747Finance costs - (92,777) (121,786) - 77,071 (137,492)Depreciation of

property, plant and equipment (1,586) (5,406,162) (48,250) (149) - (5,456,147)

Non-cash expenses other than depreciation (46,082) (466,492) (235) - 46,082 (466,727)

Share of profit in associated company 110,280 - - - - 110,280

Segment profit 24,350,534 7,267,935 2,141,637 48,647 (18,710,523) 15,098,230Interest income 1,190,502 132,412 - 61,904 (77,071) 1,307,747Finance costs - (92,777) (121,786) - 77,071 (137,492)

Profit before tax 25,541,036 7,307,570 2,019,851 110,551 (18,710,523) 16,268,485

AssetsReportable

segment assets 106,421,123 114,875,286 5,964,725 2,762,308 - 230,023,442Unallocated

corporate assets 2,353,230

Consolidated total assets 232,376,672

LiabilitiesReportable

segment liabilities (267,348) (9,903,288) (38,986) (193,077) - (10,402,699)Unallocated

corporate liabilities (7,095,420)

Consolidated total liabilities (17,498,119)

Other informationInvestment in

associated company 89,628 - - - - 89,628Capital additions 4,250 5,549,501 7,326 - - 5,561,077




6. SEGMENT INFORMATION (continued)

The accounting policies of the reportable segments are the same as the Group's accounting policies as disclosed in Note 3. Segment profit represents the profit earned by each segment before interest revenue, finance costs and income tax. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

For the purpose of monitoring segment performance and allocating resources:

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

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

The directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from that obtainable in transactions with unrelated parties.

Revenue from major products

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

2012RM

2011RM

Formaldehyde based resins and ethanol 145,271,379 141,022,014

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

Revenue from 3 (2011: 2) customers of the manufacturing segment represents approximately RM53,586,000 (2011: RM46,575,000) of the Group's total revenue.

7. INVESTMENT REVENUE


RM2011

RM2012

RM2011

RM

Interest income from:Fixed deposits 461,050 945,247 407,891 750,931Medium term note 363,493 362,500 363,493 362,500Subsidiary companies - - 133,924 77,071

824,543 1,307,747 905,308 1,190,502Dividend income 320 - - -

824,863 1,307,747 905,308 1,190,502

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


RM2011

RM2012

RM2011

RM

Available-for-sale financial assets 363,813 362,500 363,493 362,500Loans and receivables (including

cash and cash equivalents) 461,050 945,247 541,815 828,002

824,863 1,307,747 905,308 1,190,502




8. OTHER GAINS AND LOSSES

Included in other gains and losses are the following:


RM2011

RM2012

RM2011

RM

Net gain arising on financial assets designated as at FVTPL 1,054,593 268,275 974,599 259,263

Cumulative gain reclassified from equity on disposal of available-for-sale investments 746,493 2,260,936 746,493 2,260,936

Gain on disposal of property, plant and equipment 33,500 26,506 - -

Realised gain on foreign exchange 7,871 3,187 - -Gain on capital distribution

of associated company (Note 16) - - - 2,632,065(Loss)/Gain on disposal of other

investments (278,968) 1,097,427 (278,968) 1,020,395Property, plant and equipment

written off (35,974) (52,577) (1) -Impairment loss of property, plant

and equipment - (83,171) - -Allowance for diminution in value of

investment in subsidiary companies no longer required - - 15,592 1,614,127

1,527,515 3,520,583 1,457,715 7,786,786

9. OTHER OPERATING INCOME/(EXPENSES)

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


RM2011

RM2012

RM2011

RM

Recovery of doubtful debts (Note 20) 928,037 - - -Interest received on late payments 18,333 - - -Fees paid/payable to external

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

Inventories written off (10,429) - - -Rental of:

Premises (6,800) (7,680) - -Equipment (5,160) (5,850) - -

Allowance for doubtful debts (Note 20):Trade receivables - (28,037) - -

Amount owing bysubsidiary companies - - (11,368) (46,082)




10. DIRECTORS’ REMUNERATION AND EMPLOYEE BENEFITS EXPENSES


RM2011

RM2012

RM2011

RM

Directors of the CompanyExecutive directors:

Fees - current year 78,500 144,875 52,500 52,500Under provision in prior year - 17,000 - -Other emoluments 1,076,133 1,163,710 1,000 -

1,154,633 1,325,585 53,500 52,500

Non-executive directors:Fees - current year 296,480 185,500 228,650 180,000Under provision in prior year - 8,000 - -Other emoluments 91,335 32,250 58,410 40,100

387,815 225,750 287,060 220,100

1,542,448 1,551,335 340,560 272,600

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


RM2011

RM2012

RM2011

RM

Contributions to EPF:Employee benefits expenses 761,065 695,983 18,133 20,317Directors' remuneration 62,017 64,860 - -

The estimated monetary value of benefits-in-kind received and receivable by directors otherwise than in cash from the Group and the Company amounted to RM17,300 (2011: RM13,500).

11. FINANCE COSTS

The Group2012

RM2011

RM

Interest on:Bankers' acceptances 103,367 87,340Bank overdrafts 389 413LC charges 32,470 49,739

136,226 137,492




12. INCOME TAX EXPENSE


RM2011

RM2012

RM2011

RM

Tax expense comprises:Current income tax expense 2,418,709 3,025,909 500,000 1,041,000

Deferred tax relating to:Origination and reversal of

temporary differences (348,180) (141,746) - -

2,070,529 2,884,163 500,000 1,041,000

Under/(Over) provision in prior years:Income tax 183,950 3,947 185,142 (204)Deferred tax (6,000) (55,601) - -

2,248,479 2,832,509 685,142 1,040,796

The Group's and the Company's income tax rate is 25% for the year of assessment 2012. As of June 30, 2012, the Company has a tax-exempt account arising from tax-exempt dividend received and

a special tax-exempt account arising from chargeable income waived in 1999 in accordance with the Income Tax (Amendment) Act, 1999 of approximately RM20,480,000 (2011: RM22,422,000) and RM1,142,000 (2011: RM1,142,000) respectively. These tax-exempt accounts are available for distribution as tax-exempt dividends to the equity holders of the Company.

As of June 30, 2012, certain subsidiary companies have tax-exempt accounts arising from reinvestment

allowances claimed under Schedule 7A of the Income Tax Act, 1967 and a special tax-exempt account arising from waiver of chargeable income in 1999 of approximately RM19,601,000 (2011: RM19,601,000).

As of June 30, 2012, certain subsidiary companies also have unutilised investment tax allowance of RM910,000

(2011: RM910,000) and unutilised tax losses and unabsorbed capital allowances amounting to RM19,933,000 (2011: RM20,855,000), which are available for set-off against future taxable profit.




12. INCOME TAX EXPENSE (continued)

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


RM2011

RM2012

RM2011

RM

Profit before tax 9,265,721 16,268,485 12,458,097 25,430,756

Tax at the applicable tax rate of 25% (2011: 25%) 2,316,000 4,067,000 3,115,000 6,358,000

Tax effects of:Expenses that are not deductible

in determining taxable profit 407,529 181,063 161,000 42,000Unutilised tax losses and

unabsorbed capital allowances not recognised as deferred tax asset 35,000 5,100 - -

Income that is not taxable in determining taxable profit (688,000) (1,344,000) (2,776,000) (5,359,000)

Utilisation of brought forward unabsorbed capital allowancesand unutilised tax losses previously not recognised as deferred tax asset - (25,000) - -

2,070,529 2,884,163 500,000 1,041,000

Under/(Over) provision in prior years:Income tax 183,950 3,947 185,142 (204)Deferred tax (6,000) (55,601) - -

Income tax expense recognised inprofit or loss 2,248,479 2,832,509 685,142 1,040,796

Current tax assets and liabilities


RM2011

RM2012

RM2011

RM

Current tax assetsTax refundable 2,172,829 1,442,230 119,321 212,485

Current tax liabilitiesIncome tax payable - 2,240 - -




Deferred tax balances

The Group2012

RM2011

RM

Deferred tax liabilitiesAt beginning of year (7,093,180) (7,799,527)Recognised in profit or loss 563,180 706,347

At end of year (6,530,000) (7,093,180)

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

2012RM

2011RM

Tax effects of:Temporary differences arising from:

Property, plant and equipment (6,219,000) (6,808,218)Revaluation surplus on long-term leasehold land and building (602,000) (613,912)Inventories 23,000 7,000Receivables 3,000 3,000

Unabsorbed capital allowances and unutilised tax losses 265,000 318,950

(6,530,000) (7,093,180)

The Group2012

RM2011

RM

Deferred tax assetsAt beginning of year 911,000 1,420,000Recognised in profit or loss (209,000) (509,000)

At end of year 702,000 911,000




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

The Group2012

RM2011

RM

Tax effects of:Unabsorbed capital allowances and unutilised tax losses 768,000 984,000Temporary differences arising from property, plant and equipment (66,000) (73,000)

702,000 911,000

Unrecognised deferred tax assets

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

The Group2012

RM2011

RM

Tax effect of unabsorbed capital allowances and unutilised tax losses 3,949,000 3,910,000

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

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

2012 2011

Profit for the year attributable to owners of the Company RM6,158,328 RM12,104,346

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

Basic and fully diluted

Earnings per ordinary share of RM0.50 each (sen) 3.1 6.0




14. PROPERTY, PLANT AND EQUIPMENT

The Group

Land and buildings

RM

Plant, machinery

and equipment

RM

Furniture, fixtures

and office equipment

RM

Motor vehicles

and forkliftsRM

Capital work-in-

progressRM

TotalRM

As of June 30, 2012

Cost or valuationAs of July 1, 2011 35,113,880 98,230,579 2,022,201 2,107,323 7,801,799 145,275,782Additions 16,300 313,769 209,538 272,755 136,267 948,629Disposals - - - (206,791) - (206,791)Write offs (6,983) (425,218) (91,033) - - (523,234)

As of June 30, 2012 35,123,197 98,119,130 2,140,706 2,173,287 7,938,066 145,494,386

Accumulated depreciation

As of July 1, 2011 11,219,779 67,057,774 1,629,152 1,568,272 - 81,474,977Depreciation charge

for the year 708,974 4,390,720 187,974 211,267 - 5,498,935Disposals - - - (206,791) - (206,791)Write offs (1,923) (396,848) (88,489) - - (487,260)

As of June 30, 2012 11,926,830 71,051,646 1,728,637 1,572,748 - 86,279,861

Accumulated impairment loss

As of July 1, 2011 - 3,137,701 - - - 3,137,701Charge for the year - - - - - -

As of June 30, 2012 - 3,137,701 - - - 3,137,701

Carrying amountsAs of June 30, 2012 23,196,367 23,929,783 412,069 600,539 7,938,066 56,076,824




14. PROPERTY, PLANT AND EQUIPMENT (continued)

The Group

Land and buildings

RM

Plant, machinery

and equipment

RM

Furniture, fixtures

and office equipment

RM

Motor vehicles

and forkliftsRM

Capital work-in-

progressRM

TotalRM

As of June 30, 2011

Cost or valuationAs of July 1, 2010 35,113,975 96,566,268 2,012,705 2,059,551 4,854,803 140,607,302Additions - 1,152,599 68,966 175,736 4,163,776 5,561,077Disposals - (86,630) - (75,000) - (161,630)Write offs (95) (192,138) (55,970) (52,964) - (301,167)Reclassification - 790,480 (3,500) - (1,216,780) (429,800)

As of June 30, 2011 35,113,880 98,230,579 2,022,201 2,107,323 7,801,799 145,275,782


As of July 1, 2010 10,512,162 62,927,948 1,511,953 1,476,985 - 76,429,048Depreciation charge

for the year 707,643 4,362,906 166,348 219,250 - 5,456,147Disposals - (86,628) - (75,000) - (161,628)Write offs (26) (147,524) (48,077) (52,963) - (248,590)Reclassification - 1,072 (1,072) - - -

As of June 30, 2011 11,219,779 67,057,774 1,629,152 1,568,272 - 81,474,977

Accumulated impairment loss

As of July 1, 2010 - 3,054,530 - - - 3,054,530Charge for the year - 83,171 - - - 83,171

As of June 30, 2011 - 3,137,701 - - - 3,137,701

Carrying amountsAs of June 30, 2011 23,894,101 28,035,104 393,049 539,051 7,801,799 60,663,104




Land and buildings of the Group consist of:

The Group

Freeholdland

(At Cost)RM

Long-term Lease Land

(At 1985 Valuation)

RM

Long-term Lease Land

(At Cost) RM

Short-termLease Land

(At Cost) RM

Buildings and improvements

(At 1985 Valuation)

RM

Buildings and improvements

(At Cost)RM

TotalRM

As of June 30, 2012

Cost or valuationAs of July 1, 2011 15,385 3,267,001 6,012,171 519,938 1,342,653 23,956,732 35,113,880Additions - - - - - 16,300 16,300Write offs - - - - - (6,983) (6,983)

As of June 30, 2012 15,385 3,267,001 6,012,171 519,938 1,342,653 23,966,049 35,123,197


As of July 1, 2011 - 1,112,833 765,153 201,511 813,492 8,326,790 11,219,779Depreciation charge

for the year - 42,177 88,195 10,399 23,175 545,028 708,974Write offs - - - - - (1,923) (1,923)

As of June 30, 2012 - 1,155,010 853,348 211,910 836,667 8,869,895 11,926,830

Carrying amountsAs of June 30, 2012 15,385 2,111,991 5,158,823 308,028 505,986 15,096,154 23,196,367

As of June 30, 2011

Cost or valuationAs of July 1, 2010 15,385 3,267,001 6,012,171 519,938 1,342,653 23,956,827 35,113,975Write offs - - - - - (95) (95)

As of June 30, 2011 15,385 3,267,001 6,012,171 519,938 1,342,653 23,956,732 35,113,880


As of July 1, 2010 - 1,070,656 677,769 191,112 790,317 7,782,308 10,512,162Depreciation charge

for the year - 42,177 87,384 10,399 23,175 544,508 707,643Write offs - - - - - (26) (26)

As of June 30, 2011 - 1,112,833 765,153 201,511 813,492 8,326,790 11,219,779

Carrying amountsAs of June 30, 2011 15,385 2,154,168 5,247,018 318,427 529,161 15,629,942 23,894,101




14. PROPERTY, PLANT AND EQUIPMENT (continued)

Furniture, fixtures andoffice equipment

The Company2012

RM2011

RM

CostAs of July 1 38,249 33,999Additions 1,120 4,250Write offs (950) -

As of June 30 38,419 38,249

Accumulated depreciationAs of July 1 33,423 31,837Depreciation charge for the year 2,262 1,586Write offs (949) -

As of June 30 34,736 33,423

Carrying amountAs of June 30 3,683 4,826

The long-term leasehold land and buildings of the Group were revalued by the directors in 1988 based on a valuation carried out in 1985 by a firm of professional valuers. The revalued amounts were based on open market values.

The historical costs and carrying values of the long-term leasehold land and buildings are as follows:

The Group2012

RM2011

RM

CostBuilding 696,395 696,395Long-term leasehold land 320,711 320,711

1,017,106 1,017,106

Accumulated DepreciationBuilding (560,652) (546,724)Long-term leasehold land (157,690) (154,450)

(718,342) (701,174)

Carrying value at end of year 298,764 315,932

Long-term leasehold land and buildings of the Group with carrying values of RM7,720,039 (2011: RM7,997,186) have been charged to a licensed bank to secure the banking facilities of certain subsidiary companies as disclosed in Note 27.

Property, plant and equipment of the Group and of the Company include fully depreciated assets which are still in use, with costs of approximately RM12,600,535 (2011: RM10,084,160) and RM31,350 (2011: RM32,300) respectively.




During the financial year, the Group carried out a review of the recoverable amounts of its manufacturing plants used in the production of alcoholic and non-alcoholic beverages and vinegar. The recoverable amounts of the relevant assets have been determined on the basis of their value in use, and the discount rate used in measuring value in use was 8.00% (2011: 7.00%) per annum. No impairment loss was recognised in respect of these plants, as the recoverable amounts of the assets exceed their carrying amounts.

Impairment losses of RM83,171 recognised in 2011 in respect of property, plant and equipment were attributable to the anticipated loss on disposal of one unit of plant and machinery from the Group's formox plant.

15. INVESTMENT IN SUBSIDIARY COMPANIES

The Company2012

RM2011

RM

Unquoted shares - at cost 84,659,442 84,659,442Less: Allowance for diminution in value (15,823,030) (15,838,622)

68,836,412 68,820,820

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

EffectiveEquity Interest

Name of Company2012

%2011

% Principal Activities

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

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

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

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

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

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

Summit Development Corporation Sdn. Berhad 100.00 100.00 Property development.

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

Trizenith Sdn. Bhd. 100.00 100.00 Dormant.

Hexza World Trade Sdn. Bhd. 70.00 70.00 Dormant.

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

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

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

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




16. INVESTMENT IN ASSOCIATED COMPANY


RM2011

RM2012

RM2011

RM

Share of post acquisition results,net of dividends received and tax 88,246 2,721,692 - -

Gain on capital distribution (Note 8) - - - 2,632,065

Unquoted shares - at cost 1 2,561,936 1 2,561,936Less: Capital distribution - (5,194,000) - (5,194,000)

1 (2,632,064) 1 (2,632,064)

88,247 89,628 1 1

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

2012RM

2011RM

Total assets 184,601 197,668Total liabilities (4,505) (14,753)

Net assets 180,096 182,915

Group's share of associated company's net assets 88,247 89,628

2012RM

2011RM

Rental and other income 83 394,496

Total (loss)/profit for the year (2,819) 225,061

Share of associated company's (loss)/profit for the year (1,381) 110,280

The associated company is Summit Imaging Technologies Sdn. Bhd., a company incorporated in Malaysia, in which the Company has an equity interest of 49.00% (2011: 49.00%). The associated company was principally involved in the manufacture of imaging products and its financial year end was October 31.

On February 24, 2006, the associated company was placed under Members' Voluntary Liquidation. The investment has still been equity accounted for as the Company retains significant influence over the associated company. The associated company will be liquidated after the final meeting to be held in October 2012.




17. OTHER INVESTMENTS


RM2011

RM2012

RM2011

RM

At fair value/cost:Shares quoted in Malaysia 44,958,233 44,990,045 44,937,033 44,971,125Warrants quoted in Malaysia 21,948 28,404 21,948 28,404Shares quoted outside Malaysia 3,563,189 4,771,857 3,563,189 4,771,857Medium term note - unquoted 5,401,500 5,407,500 5,401,500 5,407,500

53,944,870 55,197,806 53,923,670 55,178,886

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

57,825,670 59,078,606 57,804,470 59,059,686

Market value of quoted investments:Within Malaysia 44,980,181 45,018,449 44,958,981 44,999,529Outside Malaysia 3,563,189 4,771,857 3,563,189 4,771,857

48,543,370 49,790,306 48,522,170 49,771,386

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

18. GOODWILL ARISING ON CONSOLIDATION

The Group2012

RM2011

RM

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

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

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

During the year, the Group carried out a review of the recoverable amount of the CGUs containing goodwill. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on a financial forecast, approved by management, covering a period of five years from the financial years 2013 to 2017. The following key assumptions were used to generate the financial forecast:

Sales volume growth rate 3.0% to 5.0% per annumInflation rate 5.0% per annumDiscount rate 8.0%

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

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

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




19. INVENTORIES

The Group2012

RM2011

RM

At cost:Raw materials and consumables 15,087,397 13,851,374Finished goods 3,520,372 2,436,188Completed development units for sale 77,397 77,397Work-in-progress 4,328 6,599

At net realisable value:Finished goods 6,602 -

18,696,096 16,371,558

The cost of inventories recognised as an expense during the year for the Group was RM125,352,783 (2011: RM117,674,703).

The Group2012

RM2011

RM

Changes in inventories of finished goods and work-in-progress include:Inventories written off 267,636 218,929

Raw materials and consumables used include:Inventories written off 55,960 167,184

20. TRADE AND OTHER RECEIVABLES


RM2011

RM2012

RM2011

RM

Trade receivables 31,237,082 27,947,650 - -Less: Allowance for doubtful debts - (1,707,930) - -

Net receivables from third parties 31,237,082 26,239,720 - -

Other receivables 627,118 980,357 98,219 385,685Less: Allowance for doubtful debts (12,069) (12,069) - -

615,049 968,288 98,219 385,685

Net amount owing by subsidiary companies (Note 21) - - 2,576,091 3,044,943

31,852,131 27,208,008 2,674,310 3,430,628




Trade receivables comprise amounts receivable for sale of goods. The credit periods granted on sales of goods ranged from 30 to 150 days (2011: 15 to 90 days). Allowances have been made for estimated irrecoverable amounts from sale of goods of the Group of Nil (2011: RM1,707,930), and have been determined based on estimates of possible losses which may arise from non-collection of certain receivable accounts.

Movements in allowance for doubtful debts are as follows:

The Group2012

RM2011

RM

Trade receivablesBalance at beginning of year 1,707,930 1,679,893Impairment losses recognised:

Allowannce for doubtful debt (Note 9) - 28,037Recovery of doubtful debts (Note 9) (928,037) -Allowance for doubtful debts written off (779,893) -

Balance at end of year - 1,707,930

Other receivablesBalance at beginning and at end of year 12,069 12,069

The Company2012

RM2011

RM

Amount owing by subsidiary companiesBalance at beginning of year 9,715,604 9,669,522Impairment losses recognised (Note 9) 11,368 46,082

Balance at end of year (Note 21) 9,726,972 9,715,604

Included in allowance for doubtful debts are individually impaired receivables amounting to Nil (2011: RM1,707,930) and RM12,069 (2011: RM12,069) relating to trade and other receivables respectively for the Group, and RM9,726,972 (2011: RM9,715,604) relating to amount owing by subsidiary companies for the Company. The impairment recognised represents the difference between the carrying amount of these receivables and the present value of expected collections. The Group and the Company do not hold any collateral over these balances.

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

The currency profile of trade receivables is as follows:

The Group2012

RM2011

RM

Ringgit Malaysia 31,121,877 27,923,894Singapore Dollar 115,205 23,756

31,237,082 27,947,650




20. TRADE AND OTHER RECEIVABLES (continued)

Included in trade and other receivables of the Group are receivables with total carrying amounts of RM2,497,661 and RM513,872 (2011: RM2,621,814 and RM577,972) respectively which are past due at the end of the reporting period for which the Group has not provided for impairment loss. The Group does not hold any collateral over these balances nor does it have a legal right to offset against any amounts owed by the Group to the counterparties.

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

The Group2012

RM2011

RM

Trade receivablesNumber of days past due:1 - 30 days 1,639,892 20,97731 - 60 days 271,412 114,82561 - 90 days 88,102 913,63191 - 120 days 101,664 739,821More than 120 days 396,591 832,560

2,497,661 2,621,814

The Group2012

RM2011

RM

Other receivablesNumber of days past due:1 - 30 days - 5,01031 - 60 days 2,000 5,30691 - 120 days - 429,860More than 120 days 511,872 137,796

513,872 577,972

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

Transactions with related parties are disclosed in Note 21.




21. RELATED COMPANIES AND RELATED PARTY TRANSACTIONS

Subsidiary companies

The Company2012

RM2011

RM

Amounts owing by subsidiary companies (Note 20) consist of:Current accounts 9,803,063 10,260,547Loan accounts 2,500,000 2,500,000

12,303,063 12,760,547Allowance for doubtful debts (Note 20) (9,726,972) (9,715,604)

2,576,091 3,044,943

Amount owing to a subsidiary company (Note 26) consists of:Current account 75,067 76,446

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

The amount owing by subsidiary companies under loan accounts bears interest at rates ranging from 3.00% to 6.30% (2011: 3.00% to 6.30%) per annum.

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

The Company2012

RM2011

RM

Dividends (gross) received/receivable 8,533,664 14,480,615Loan advanced 8,305,000 1,500,000Professional services rendered 106,200 70,400Interest received 133,924 77,071

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

Associated company

During the financial year, transaction undertaken by the Company with its associated company is as follows:

The Group andThe Company2012

RM2011

RM

Professional services rendered - 89,000




21. RELATED COMPANIES AND RELATED PARTY TRANSACTIONS (continued)

Related party transactions

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

Names of related parties Relationship

Summit Holdings Sdn. Bhd. ))

A company in which certain directors of the Company have substantial financial interests.

SP&G Insurance Brokers Sdn. Bhd. ))

A company in which certain directors of the Company have substantial financial interests, and where a director of the Company is also a director.

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


RM2011

RM2012

RM2011

RM

Insurance premium paid/payableSP&G Insurance Brokers Sdn. Bhd. 974,976 925,817 39,688 39,219

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

The Group2012

RM2011

RM

Other liabilities

Included in accrued expenses 2,811 34,237

Directors' remuneration are as disclosed in Note 10.

Compensation of key management personnel

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

The Group2012

RM2011

RM

Short-term employee benefits 1,471,849 1,255,633

The estimated monetary value of benefits-in-kind received and receivable by the key management personnel otherwise than in cash from the Group amounted to RM61,813 (2011: RM40,412).




22. OTHER ASSETS


RM2011

RM2012

RM2011

RM

Refundable deposits 168,118 149,630 2,030 3,780Prepaid expenses 310,622 700,284 21,150 21,102

478,740 849,914 23,180 24,882

23. CASH AND CASH EQUIVALENTS


RM2011

RM2012

RM2011

RM

Investment funds 39,093,066 35,588,474 36,454,061 32,979,462Fixed and short-term deposits with

licensed banks 15,638,454 15,798,514 13,138,454 12,798,514Cash and bank balances 9,033,171 12,246,271 390,128 1,078,440

63,764,691 63,633,259 49,982,643 46,856,416

The above balances represent cash and cash equivalents of the Group and of the Company respectively.

The interest rates are as follows:


%2011

%2012

%2011

%

Fixed deposits 2.00 - 3.20 2.15 - 3.20 2.75 - 3.20 2.15 - 3.20Investment funds 2.71 - 3.55 2.48 - 3.18 2.71 - 3.55 2.56 - 3.18

The maturity period of the deposits of the Group and of the Company is 30 days (2011: 30 days).

24. SHARE CAPITAL

<--------------------------- The Group and The Company --------------------------->2012

Number of shares

2011Number of

shares

2012RM

2011RM

Authorised:Ordinary shares of RM0.50 each 400,000,000 400,000,000 200,000,000 200,000,000

Issued and fully paid:Ordinary shares of RM0.50 each 200,380,036 200,380,036 100,190,018 100,190,018




25. RESERVES


RM2011

RM2012

RM2011

RM

Non-distributable reserve:Investments revaluation reserve 4,752,776 7,553,879 4,745,096 7,548,479

Distributable reserve:Retained earnings 98,213,342 100,070,215 74,085,207 70,327,453

102,966,118 107,624,094 78,830,303 77,875,932

Please refer to the statements of changes in equity on pages 36 and 37 for movement in the investments revaluation reserve.

The Company has not opted to disregard the Section 108 tax credit balance in accordance with the Finance Act, 2007. The Company may utilise the Section 108 tax credit balance which has been frozen as of December 31, 2007 to frank dividend payments during the six-year transitional period. Based on the prevailing tax rate applicable to dividend, the Company has sufficient Section 108 tax credits and tax-exempt accounts balances to frank dividends amounting to RM64,106,000 (2011: RM66,000,000) out of its retained earnings as of June 30, 2012. If the balance of the retained earnings of RM9,979,207 (2011: RM6,588,388) were to be distributed as dividends, the Company would switch to a single tier tax system and the balance of the dividends would be single tier dividends.

26. TRADE AND OTHER PAYABLES


RM2011

RM2012

RM2011

RM

Trade payables 7,637,077 2,343,544 - -Other payables 1,470,507 2,090,854 18,378 7,428Amount owing to a subsidiary

company (Note 21) - - 75,067 76,446

9,107,584 4,434,398 93,445 83,874

Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs respectively. The credit periods granted to the Group for trade purchases ranged from 1 to 90 days (2011: 1 to 90 days).

Transactions with related parties are as disclosed in Note 21.

27. SHORT-TERM BORROWINGS

The Group2012

RM2011

RM

Bankers' acceptances 5,342,000 3,477,000

The Group has bank overdraft and other credit facilities obtained from licensed banks to the extent of RM35,500,000 (2011: RM38,200,000) which are secured by pledges over the leasehold land and buildings of the Group as disclosed in Note 14, a negative pledge on the assets of the subsidiary companies and guaranteed by the Company. The bank overdraft facilities bear interest at rates ranging from 7.85% to 9.10% (2011: 6.00% to 8.55%) per annum. The other credit facilities bear interest at rates ranging from 1.05% to 9.10% (2011: 1.05% to 7.65%) per annum.




28. DIVIDENDS

The Group and The Company2012

RM2011

RM

Recognised during the year:First and final dividend paid:

8.0% less tax and 2.0% tax exempt for 2011(4.0% less tax and 4.0% tax exempt for 2010) 8,015,201 7,013,300

The directors have proposed a first and final dividend of 8.0% less tax and a tax-exempt dividend of 2.0% in respect of the current financial year. The proposed dividends are subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company and have not been included as a liability in the financial statements.

29. MATERIAL LITIGATION

During the financial year, a subsidiary company has settled a claim against a trade debtor for the principal sum of RM1,679,893 (2011: RM1,679,893) and the amount recovered was RM900,000.

30. CAPITAL COMMITMENT

As of June 30, 2012, the Group has the following commitments on capital expenditure in respect of property, plant and equipment:

The Group2012

RM2011

RM

Contracted but not provided for 1,030,735 1,025,600Approved but not contracted for 1,689,030 2,361,000

2,719,765 3,386,600

31. OPERATING LEASE ARRANGEMENTS

At the end of the reporting period, a subsidiary company has outstanding commitments under non-cancellable operating leases amounting to RM3,600 (2011: Nil) which fall due within one year.




32. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

Categories of financial instruments


RM2011

RM2012

RM2011

RM

Financial assetsLoans and receivables:

Trade and other receivables 31,852,131 27,208,008 98,219 385,685Refundable deposits 168,118 149,630 2,030 3,780Amount owing by subsidiary

companies - - 2,576,091 3,044,943Cash and cash equivalents 24,671,625 28,044,785 13,528,582 13,876,954

Available-for-sale:Other investments 57,825,670 59,078,606 57,804,470 59,059,686

At fair value through profit or loss:Investment funds 39,093,066 35,588,474 36,454,061 32,979,462

Financial liabilitiesOther financial liabilities

held at amortised cost:Trade and other payables 9,107,584 4,434,398 18,378 7,428Amount owing to a subsidiary

company - - 75,067 76,446Accrued expenses 2,944,118 2,491,301 330,254 259,920Short-term borrowings 5,342,000 3,477,000 - -

(a) Financial Risk Management Objectives and Policies

Risk management is integral to the whole business of the Group and of the Company. Management continually monitors the Group's and the Company's risk management processes to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in the market conditions and the Group's and the Company's activities.

There have been no changes to the Group's and the Company's exposure to these financial risks or the manner in which they manage and measure the risk.

Foreign currency risk management

The Group and the Company have minimal foreign currency transactions. As such, management considers the exposure to foreign currency risk to be minimal and has no significant impact to the financial results of the Group and of the Company.




Market risk management The Group has in place policies to manage the Group's exposure to fluctuations in prices of key raw materials

used in operations. For marketable securities, the Group uses an investment committee to monitor fluctuations in market prices and to establish suitable cut loss procedures.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and the Company.

The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations at the end of the reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the statements of financial position. The Group and the Company do not hold any collateral on the balance outstanding.

The Group and the Company established policies on credit control which involves comprehensive credit evaluations, setting up appropriate credit limits, ensuring the sales are made to customers with good credit history and regular review of customers' outstanding balances and payment trends. The Group and the Company consider the risk of material loss in the event of non-performance by the customers to be unlikely.

Concentration of credit risk of the Group relates to amounts owing by three major customers which constituted approximately 37% of the total trade receivables of the Group at the end of the reporting period. These trade receivables are regular customers that have been transacting with the Group. The Group uses ageing analysis to monitor the credit quality of the trade receivables. Any receivables having significant balances past due or more than 90 days, which are deemed to have higher credit risk, are monitored individually.

The credit risk on liquid funds is limited because the counterparties are licensed financial institutions with high credit standings.

Interest rate risk management

Interest rate risk is the risk that the fair value or future cash flows of the Group's and of the Company's financial instruments will fluctuate because of changes in market interest rates. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings.

Sensitivity analysis for interest rate risk

At the end of the reporting period, if interest rates increase/decrease by 50 basis points with all other variables held constant, the Group's profit net of tax would have been RM20,033 lower/higher arising mainly as a result of lower/higher interest expense on floating rate borrowings. The assumed movement in the interest rates for interest rate sensitivity analysis is based on the currently observable market environment.

Other price risks

The Group and the Company are exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading purposes. The Group and the Company do not actively trade these investments.

Equity price sensitivity analysis

The sensitivity analysis below have been determined based on the exposure to equity price risks at the end of the reporting period.




32. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (continued)

If equity prices had been 5% higher/lower, the Group's:

• net profit for the year ended June 30, 2012 would have been unaffected as the equity investments are classified as available-for-sale and no investments were impaired; and

• investments revaluation reserve would increase/decrease by RM2,696,193 (2011: RM2,791,661) as a result of the changes in fair value of available-for-sale investments.

If equity prices had been 5% higher/lower, the Company's:

• net profit for the year ended June 30, 2012 would have been unaffected as the equity investments are classified as available-for-sale and no investments were impaired; and

• investments revaluation reserve would increase/decrease by RM2,695,133 (2011: RM2,790,715) as a result of the changes in fair value of available-for-sale investments.

The Group's and the Company's sensitivity to equity prices has not changed significantly from the prior year.

Liquidity and cash flow risks management

The Group practises prudent liquidity risk management to minimise the mismatch of financial assets and financial liabilities and to maintain sufficient credit facilities for contingent funding requirement of working capital.

The Group's and the Company's principal source of liquidity have historically been cash flows from operations and funds obtained from long and short-term borrowings.

The Group and the Company expect that the cash generated from their operations, their existing credit facilities and the trade terms provided by their suppliers will be sufficient to meet the Group's and the Company's currently anticipated capital expenditure and working capital needs for at least the next 12 months.

The Group has credit facilities of approximately RM35,500,000, of which only RM9,511,815 has been utilised for bank guarantees and trade facilities at the end of the reporting period. The Group and the Company expect to meet their financial obligations from their operating cash flows and proceeds from maturing financial assets.

The maturity profile of the Group's and of the Company's non-derivative financial assets and financial liabilities at the end of the reporting period based on contractual undiscounted repayment obligations is as follows:

The Group2012

On demandor withinone year

RM

One year tofive years

RM

Over fiveyears

RMTotal

RM

Non-derivative financial assets: Trade and other receivables 31,852,131 - - 31,852,131Refundable deposits 168,118 - - 168,118Cash and cash equivalents 63,764,691 - - 63,764,691

Total undiscounted non-derivativefinancial assets 95,784,940 - - 95,784,940

Non-derivative financial liabilities:Trade and other payables (9,107,584) - - (9,107,584)Short-term borrowings (5,342,000) - - (5,342,000)Accrued expenses (2,944,118) - - (2,944,118)

Total undiscounted non-derivativefinancial liabilities (17,393,702) - - (17,393,702)

Total net undiscountednon-derivative financial assets 78,391,238 - - 78,391,238




The Group2011


RM


RM

Over fiveyears

RMTotal

RM

Non-derivative financial assets: Trade and other receivables 27,208,008 - - 27,208,008Refundable deposits 149,630 - - 149,630Cash and cash equivalents 63,633,259 - - 63,633,259


Non-derivative financial liabilities:Trade and other payables (4,434,398) - - (4,434,398)Short-term borrowings (3,477,000) - - (3,477,000)Accrued expenses (2,491,301) - - (2,491,301)

Total undiscounted non-derivativefinancial liabilities (10,402,699) - - (10,402,699)


The Company2012

Non-derivative financial assets: Trade and other receivables 98,219 - - 98,219Refundable deposits 2,030 - - 2,030Amount owing by related companies 2,576,091 - - 2,576,091Cash and cash equivalents 49,982,643 - - 49,982,643


Non-derivative financial liabilities:Trade and other payables (18,378) - - (18,378)Amount owing to a subsidiary

company (75,067) - - (75,067)Accrued expenses (330,254) - - (330,254)

Total undiscounted non-derivativefinancial liabilities (423,699) - - (423,699)






The Company2011


RM


RM

Over fiveyears

RMTotal

RM

Non-derivative financial assets: Trade and other receivables 385,685 - - 385,685Refundable deposits 3,780 - - 3,780Amount owing by related companies 3,044,943 - - 3,044,943Cash and cash equivalents 46,856,416 - - 46,856,416


Non-derivative financial liabilities:Trade and other payables (7,428) - - (7,428)Amount owing to a subsidiary

company (76,446) - - (76,446)Accrued expenses (259,920) - - (259,920)

Total undiscounted non-derivativefinancial liabilities (343,794) - - (343,794)


Capital risk management

The Group and the Company manage their capital to ensure the Group and the Company will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of debt and equity balance. The Group's and the Company's overall strategy remain unchanged from 2011.

The capital structure of the Group and of the Company consists of net debt and equity of the Group and of the Company. The Group and the Company are not subject to any externally imposed capital requirements.

(b) Fair Values of Financial Assets and Financial Liabilities The Group's and the Company's principal financial assets are cash and cash equivalents, trade and other

receivables and other investments.

Significant financial liabilities of the Group and of the Company include trade and other payables, accrued expenses and short-term borrowings.



The carrying amounts and the estimated fair values of the Group's and of the Company's financial instruments are as follows:


Note

CarryingAmount

RM

FairValue

RM

CarryingAmount

RM

FairValue

RM

As of June 30, 2012Financial assets at FVTPLInvestment funds 39,093,066 39,093,066 36,454,061 36,454,061

Available-for-sale ("AFS") financial assets

Other investments- unquoted shares 17 3,880,800 * 3,880,800 *- quoted shares and

warrants 17 48,543,370 48,543,370 48,522,170 48,522,170- medium term note 17 5,401,500 5,401,500 5,401,500 5,401,500

As of June 30, 2011Financial assets at FVTPLInvestment funds 35,588,474 35,588,474 32,979,462 32,979,462

AFS financial assetsOther investments

- unquoted shares 17 3,880,800 * 3,880,800 *- quoted shares and

warrants 17 49,790,306 49,790,306 49,771,386 49,771,386 - medium term note 17 5,407,500 5,407,500 5,407,500 5,407,500

The fair values of quoted shares are determined based on open market prices as at the end of the reporting period and approximate their fair values.

The fair value of the medium term note is determined using its Mark to Market price as at the end of the reporting period.

The fair value of investment funds is determined using the "investment funds" net asset value per unit as at the end of the reporting period.

* It is not practical to estimate the fair values of unquoted investments. As of year end, based on the management financial statements, the Group's and the Company's share of the net tangible assets of the unquoted investments amounted to approximately RM4,250,000 (2011: RM3,983,000).

The carrying amounts of other short-term financial assets and financial liabilities such as cash and cash equivalents, trade and other receivables, and trade and other payables approximate their fair values due to the short-term maturity of these instruments.

(c) Fair value measurements recognised in the statements of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).






The Group2012

Level 1RM

Level 2RM

Level 3RM

TotalRM

Financial assets at FVTPLInvestment funds - 39,093,066 - 39,093,066


- unquoted shares - - 3,880,800 3,880,800- quoted shares and warrants 48,543,370 - - 48,543,370- medium term note - 5,401,500 - 5,401,500

48,543,370 44,494,566 3,880,800 96,918,736

The Company2012

Financial assets at FVTPLInvestment funds - 36,454,061 - 36,454,061


- unquoted shares - - 3,880,800 3,880,800- quoted shares and warrants 48,522,170 - - 48,522,170- medium term note - 5,401,500 - 5,401,500

48,522,170 41,855,561 3,880,800 94,258,531

There were no transfers between Levels 1 and 2 during the financial year. Significant assumptions used in determining fair values of the above financial assets are as disclosed in (b) above.

33. SUPPLEMENTARY INFORMATION - DISCLOSURE ON REALISED AND UNREALISED PROFITS OR LOSSES

The breakdown of the retained earnings of the Group and of the Company as of June 30, 2012 into realised and unrealised profits or losses, pursuant to the directive issued by Bursa Malaysia Securities Berhad on March 25, 2010, is as follows:


RM2011

RM2012

RM2011

RM

Total retained earnings of the Company and its subsidiaries

Realised 104,041,342 106,252,395 74,085,207 70,327,453Unrealised (5,828,000) (6,182,180) - -

Total retained earnings as per statements of financial position 98,213,342 100,070,215 74,085,207 70,327,453

The determination of realised and unrealised profits or losses is based on Guidance of Special Matter No. 1 "Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Securities Listing Requirements" as issued by the Malaysian Institute of Accountants on December 20, 2010.

This supplementary information has been made solely for complying with the disclosure requirements as stipulated in the directives of Bursa Malaysia and is not made for any other purposes.



The directors of HEXZA CORPORATION BERHAD state that, in their opinion, the accompanying financial statements are drawn up in accordance with Financial Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of June 30, 2012 and of the financial performance and the cash flows of the Group and of the Company for the year ended on that date.

The supplementary information set out in Note 33, which is not part of the financial statements, is prepared in all material respects, in accordance with Guidance on Special Matter No. 1 "Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements" as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad.

Signed in accordance with a resolution of the Directors,

DATUK DR. FOONG WENG SUM

DATO' RICHARD ONG GUAN SENG

Ipoh,3rd October 2012

DECLARATION BY THE OFFICER PRIMARILY RESPONSIBLE FOR THE FINANCIAL MANAGEMENT OF THE COMPANY

STATEMENT BY DIRECTORS

I, CHONG YOKE SENG, the officer primarily responsible for the financial management of HEXZA CORPORATION BERHAD, do solemnly and sincerely declare that the accompanying financial statements are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

CHONG YOKE SENG

Subscribed and solemnly declared by the abovenamedCHONG YOKE SENG at IPOH this 3rd October 2012.

Before me,

CHOW MIN YEECommissioner For OathsIpoh



STATEMENT OF SHAREHOLDINGS AS AT 28TH SEPTEMBER 2012

1. Authorised Capital : RM200,000,000 Issued & Fully Paid-Up Capital : RM100,190,018 Class of Shares : Ordinary Shares of 50 sen each Voting Rights : One vote per Ordinary Share

2. Distribution of Shareholdings

Range of ShareholdingsNo. of

Holders% of

HoldersNo. of 50 Sen

Shares% of Issued

Capital

Less than 100 111 1.25 5,162 0.00100 – 1,000 316 3.56 184,513 0.101,001 – 10,000 6,331 71.34 25,205,594 12.5810,001 – 100,000 1,934 21.80 52,482,151 26.19100,001 – 10,019,000 * 181 2.04 61,920,959 30.9010,019,001 and above ** 1 0.01 60,581,657 30.23TOTAL 8,874 100.00 200,380,036 100.00

Notes: * Less than 5% of issued shares ** 5% and above of issued shares

3. Substantial Shareholders as per the Register of Substantial Shareholders

Direct Interest Deemed Interest

Substantial ShareholdersNo. of

Shares Held% of Issued

CapitalNo. of


Capital

Summit Holdings Sdn. Bhd. 60,581,657 30.23 - -Datuk Dr. Foong Weng Sum 1,083,228 0.54 60,581,657 30.23Dr. Foong Weng Cheong 2,662,500 1.33 60,581,657 30.23

4. Directors’ Shareholdings as per the Register of Directors’ Shareholdings

Direct Interest Deemed Interest

DirectorsNo. of


CapitalNo. of


Capital

Datuk Dr. Foong Weng Sum 1,083,228 0.54 60,581,657 30.23Dr. Foong Weng Cheong 2,662,500 1.33 60,581,657 30.23Dato' Richard Ong Guan Seng 250,000 0.12 - -Mr. Leong Keng Yuen 225,000 0.11 - -Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany 58,300 0.03 - -Mr. Ooi Ying Hong 10,000 0.01 - -



STATEMENT OF SHAREHOLDINGS AS AT 28TH SEPTEMBER 2012

5. Thirty Largest Shareholders as per the Record of Depositors

Shareholders No. of Shares% of Issued

Capital

1. Summit Holdings Sdn. Bhd. 60,581,657 30.232. Citigroup Nominees (Asing) Sdn. Bhd.

Exempt An for OCBC Securities Private Limited2,840,000 1.42

3. Dr. Foong Weng Cheong 2,662,500 1.334. Chan Mun Hon 2,486,600 1.245. Lim Tai Soon 2,106,450 1.056. HLB Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Chee Sai Mun1,800,000 0.90

7. Ronny Ng 1,589,500 0.798. Kenny Tan Keng Seng 1,583,900 0.799. Lim Seng Chee 1,573,000 0.7910. Lim Khuan Eng 1,514,800 0.7611. Vo Nghia Huu 1,472,500 0.7312. Lim Wai Yee 1,462,600 0.7313. Cimsec Nominees (Asing) Sdn. Bhd.

Exempt An for CIMB Securities (Singapore) Pte. Ltd.1,358,881 0.68

14. Chan Mun Chung 1,235,500 0.6215. Datuk Dr. Foong Weng Sum 1,083,228 0.5416. Alliancegroup Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Yong Kwee Lian1,003,000 0.50

17. ECML Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Seraya Makmur Sdn. Bhd.

960,000 0.48

18. Tay Kak Chok 879,050 0.4419. Alliancegroup Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Ong Yoong Nyock670,000 0.33

20. Kenanga Nominees (Asing) Sdn. Bhd.Pledged Securities Account for Chin Kiam Hsung

635,400 0.32

21. Xiang Ling Capital Sendirian Berhad 625,000 0.3122. Lee Chooi Keng 605,300 0.3023. Goh Kok Yong 596,700 0.3024. Chong Yoke Seng 590,000 0.2925. Ooi Say Hup 541,600 0.2726. Chai Beng Hwa 525,000 0.2627. Nyiew Teng Sia @ Yang Ting Chern 501,050 0.2528. Mercsec Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Tiong Nam Logistics Holdings Berhad500,000 0.25

29. RHB Capital Nominees (Temptatan) Sdn. Bhd.Pledged Securities Account for Teh Kian Lang

488,200 0.24

30. On Thiam Chai 455,000 0.23

TOTAL 94,926,416 47.37



PROPERTIES OWNED BY HEXZA CORPORATION BERHAD & ITS SUBSIDIARIES AS AT 30TH JUNE 2012

Location Tenure

Approximate Area

in sq. meter

Approximate Age of

Buildings in years

Net Book Value

30.6.2012RM’000

Year ofAcquisition(A)/Completion(C)/

LastRevaluation(R)

Existing Usage

Lot 6, Tasek Industrial Estate, Tasek Drive, Ipoh, Perak Darul Ridzuan.

Leasehold Expiry 2062 28,328

52 3,487 R:1988 Factory9 2,161 C:2004 Office7 1,788 C:2006 Factory

Lot 20, Tasek Industrial Estate, Tasek Drive, Ipoh, Perak Darul Ridzuan.

Leasehold Expiry 2064 12,141 - 640 R:1988 Factory

Lot 1017, Tasek Industrial Estate, Tasek Drive, Ipoh,Perak Darul Ridzuan.

Leasehold Expiry 2069 12,141 - 1,159 A:2004

Vacant industrial

land

Lot 5, North Klang Straits Industrial Area, Port Klang, Selangor Darul Ehsan.

Leasehold Expiry 2086 28,317 18 5,277 C:1993 Factory

Lot 799, Block 7, Sejingkat Industrial Estate, Muara Tebas Land District,Kuching, Sarawak.

Leasehold Expiry 2052 38,970 18 6,226 C:1993 Factory

Lot 3057, Block 26,Kemena Land District,Bintulu, Sarawak.

Leasehold Expiry 2063 20,235 - 2,443 A:2006

Vacant industrial

land



The details of the proposed amendments to the Articles of Association of the Company are as follows:

Existing Articles Proposed Amendments

Article 2 - Interpretation Article 2 - Interpretation

Market Days- the hours between 9.30 am and 5.00 pm from Mondays to Friday (other than a public holidays or any other day on which the Exchange is declared officially closed), or as amended by the Rules.

Market Days- means a day on which the stock market of the Exchange is open for trading in securities.

(New Interpretation) Omnibus Account- An Account in which securities are held for two or more beneficial owners in one securities account.

Authorised Nominee- An authorised nominee as defined under the Depositories Act.

Exempt Authorised Nominee- An authorised nominee defined under the Depositories Act which is exempted from compliance with the provisions of subsection 25A(1) of the Depositories Act.

Article 54 Article 54

Subject to any rights or restrictions for the time being attached to any class or classes of shares, every member present in person or by proxy or represented by attorney shall have one vote on a show of hands and shall have one vote for each share of which he is the holder on a poll. A proxy shall be entitled to vote on a show of hands on any question at any general meeting.

(a) Subject to any rights or restrictions for the time being attached to any class or classes of shares, every member present in person or by proxy or represented by attorney or other duly authorised representative shall have one vote on a show of hands and shall have one vote for each share of which he is the holder on a poll. A proxy shall be entitled to vote on a show of hands on any question at any general meeting.

(b) A proxy appointed to attend and vote at the meeting of the Company shall have the same rights as the member to speak at the meeting.

Article 56(4) Article 56(4 )

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

Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint not more than two (2) proxies in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION Appendix I



Existing Articles Proposed Amendments

Article 56(5) Article 56(5)

(New provision) Where a member of the Company is an Exempt Authorised Nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“Omnibus Account”), there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each Omnibus Account it holds. Where an Exempt Authorised Nominee appoints more than one (1) proxy in respect of each Omnibus Account, the appointment shall not be valid unless the Exempt Authorised Nominee specifies the proportion of the shareholding to be represented by each proxy.

Article 59 Article 59

The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or if the appointor is a corporation under the hand of an officer or attorney of the corporation. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. A proxy or an attorney need not be a member of the Company.

The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or if the appointor is a corporation, either under Common Seal or under the hand of an officer or attorney of the corporation. A proxy may but need not be a member of the Company and there shall be no restriction as to the qualification of the proxy. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.

Article 61(1) Article 61(1)

Subject to Article 61, a member may not appoint more than two (2) proxies to attend at the same meeting. Where a member appoints two (2) proxies, the member shall specify the proportion of the member’s shareholdings to be represented by each proxy.

Other than an Exempt Authorised Nominee, a member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same meeting and where a member appoints two (2) proxies to attend and vote at the same meeting, such appointment shall not be valid unless the member specifies the proportion of the shareholding to be represented by each proxy.

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION Appendix I


I/We ............................................................................................... NRIC No. ......................................................................

of ..........................................................................................................................................................................................

being a member/members of HEXZA CORPORATION BERHAD, hereby appoint:

1) Name of Proxy: .......................................................................... NRIC No. ......................................................................

Address: ...............................................................................................................................................................................

....................................................................................................... No. of Shares Represented: ..........................................

2) Name of Proxy: .......................................................................... NRIC No. ......................................................................

Address: ...............................................................................................................................................................................

....................................................................................................... No. of Shares Represented: ..........................................

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Forty-third Annual General Meeting of the Company to be held at the Meeting Room 5 & 6, 1st Floor, Impiana Hotel, Jalan Raja Dr. Nazrin Shah, 30250 Ipoh, Perak Darul Ridzuan on Saturday, 24th November 2012 at 11.30 a.m. and at any adjournment thereof, in the manner indicated below:

NO. RESOLUTIONS FOR AGAINST1. To receive the Audited Financial Statements for the financial year ended

30th June 2012 and the Reports of the Directors and Auditors thereon2. To approve the payment of a first and final dividend of 8% less tax plus 2%

tax-exempt for the financial year ended 30th June 20123. To approve the payment of Directors’ fees

4. To re-elect Tuan Haji Mohd Jali @ Mohd Jalil Bin Sany as Director

To re-appoint the following Directors in accordance with Section 129(6) of the Companies Act, 1965:

5. (i) Dr. Foong Weng Cheong

6. (ii) Dato’ Richard Ong Guan Seng

7. (iii) Datuk Dr. Foong Weng Sum

8. To re-appoint Messrs. Deloitte & Touche as Auditors and to authorise the Directors to fix their remuneration

9. To authorise the issuance of up to 10% of the issued share capital of the Company

10. Proposed amendments to the Articles of Association of the Company

(Please indicate with an ''X" in the spaces provided above how you wish your vote to be cast. In the absence of specific directions, your proxy will vote or abstain from voting at his discretion)

Date: .........................................................................

Signature/Seal: .........................................................

NOTES:1. A member, other than an exempt authorised nominee is entitled to appoint not more than two (2) proxies. A proxy may but need not be a member of the Company. 2. A member who is an authorised nominee may appoint not more than two (2) proxies in respect of each securities account held; whereas an exempt authorised nominee may appoint multiple proxies in respect of each omnibus account held.3. A member who appoints a proxy must duly execute the Form of Proxy, and if more than one (1) proxy is appointed, the number of shares to be represented by each proxy must be clearly indicated.4. An instrument appointing a proxy, in the case of an individual, shall be signed by the appointor or his attorney duly authorised in writing or in the case of a corporation, shall be either under its Common Seal or under the hand of an officer or attorney of the corporation duly authorised.5. The duly executed Proxy Form must be deposited at the registered office of the Company not less than forty-eight (48) hours before the time set for holding the meeting or any adjournment thereof.6. Only members whose names appear in the Record of Depositors as at 16th November 2012 will be entitled to attend and vote at the meeting.

(Full Name In Block Capitals)

PROXY FORM

CDS Account No.

No. of Shares held

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THE COMPANY SECRETARY

HEXZA CORPORATION BERHADLot 6 & 20, Persiaran Tasek,Kawasan Perindustrian Tasek,31400 Ipoh,Perak Darul Ridzuan,Malaysia.

Affix Stamp

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HEXZA CORPORATION BERHAD (Incorporated in …HEXZA CORPORATION BERHAD (8705-K) (Incorporated in...

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