cover kotra ar2011 op - 1301282419247...we act with integrity we deliver on commitment we are...

KOTRA INDUSTRIES BERHAD(497632-P)

No. 1,2 & 3 Jalan TTC 12Cheng Industrial Estate

75250 MelakaMalaysia

Tel : 06-336 2222Fax : 06-336 6122

www.kotrapharma.com www.appeton.com

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Health is our passion

We act with integrity

We deliver on commitment

We are customer oriented

We work with passion & team spirit

We believe everything is possible

Humanising Health – Because we believe everyone deserves a healthier tomorrow

To be the center of excellence for pharmaceutical industry

Vision

Mission

Core Values

ContentsCorporate Information

Directors’ Profile

Chairman’s Statement

Corporate Governance Statement

Statement on Internal Control

Report of the Audit Committee

Financial Statements

Directors’ Report

Statement by Directors

Statutory Declaration

Independent Auditors’ Report

Statements of Comprehensive Income

Statements of Financial Position

Statements of Changes in Equity

Statements of Cash Flows

Notes to the Financial Statements

List of Properties

Notice of Annual General Meeting

Analysis of Shareholdings

Form of Proxy

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Kotra Industries Berhad2

Corporate Information

Company Secretaries

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

Audit Committee

P’ng Beng Hoe, BKT, PJK, JP (Chairman)Azhar bin HussainPiong Teck Min

Remuneration Committee

Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman JSM, JMN, DMSM, PSM (Chairman)Omar bin Md. KhirPiong Teck MinPiong Teck Onn

Nomination Committee

Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul RahmanJSM, JMN, DMSM, PSM (Chairman)Omar bin Md. KhirPiong Teck Min

ESOS Committee

Azhar bin Hussain (Chairman)P’ng Beng Hoe, BKT, PJK, JPPiong Teck Onn

Board of Directors

Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman, JSM, JMN, DMSM, PSM (Independent Non-Executive Chairman)

Piong Teck Onn (Managing Director)

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

Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP (Executive Director)

Chin Swee Chang (Executive Director)

Omar bin Md. Khir (Independent Non-Executive Director)

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

Azhar bin Hussain (Independent Non-Executive Director)

Piong Chee Kien (Alternate Director to Piong Teck Min)

Registered Office

Lot 1A, 6th Floor, Menara PertamJalan BBP 2Taman Batu Berendam Putra75350 Batu BerendamMelaka, MalaysiaTel : 06-335 5210Fax : 06-335 5570

Business Office

No. 1, 2 & 3 Jalan TTC 12Cheng Industrial Estate75250 Melaka, MalaysiaTel : 06-336 2222Fax : 06-336 6122

Registrar

Mega Corporate Services Sdn Bhd (187984-H)Level 15-2, Sheraton Imperial Court Jalan Sultan Ismail50250 Kuala Lumpur, MalaysiaTel : 03-2692 4271Fax : 03-2732 5388

Auditors

Crowe Horwath (AF: 1018)52, Jalan Kota Laksamana 2/15Taman Kota Laksamana, Seksyen 275200 Melaka, MalaysiaTel : 06-282 5995Fax : 06-283 6449

Legal Advisors

Chee Siah Le Kee & PartnersAdvocates & Solicitors105, Taman Melaka Raya75000 Melaka, MalaysiaTel : 06-283 3423Fax : 06-284 7251

Stock Exchange Listing

Bursa Malaysia Securities BerhadMain Market

Annual Report 2011 3

Directors’ Profile

Y. BHG. TAN SRI DATUK DR. OMAR BIN ABDUL RAHMANIndependent Non-Executive Chairman79, MalaysianDate appointed: 5 June 2000

Board Committee memberships:• Chairman, Nomination Committee • Chairman, Remuneration Committee

Academic qualification and honours:• Bachelor of Veterinary Science (Sydney

University)• Certificate of Pathology (University of

Queensland)• Doctor of Philosophy (Cambridge

University)• Honorary Doctorates (Universities of

Sterling, Melbourne, Guelph, Bristol and Queensland, Universiti Teknologi Malaysia, Universiti Kebangsaan Malaysia and Universiti Putra Malaysia)

• Professor Emeritus, Universiti Putra Malaysia

Experience and career path:• Veterinary Research Officer of Veterinary

Research Institute, Ipoh in 1960• Deputy Director of Veterinary Research

Institute, Ipoh in 1971• Professor of Animal Pathology and

Founding Dean of the Faculty of Veterinary Medicine and Animal Science of Universiti Putra Malaysia (UPM), and Deputy Vice-Chancellor of Academic Affairs of UPM from 1972 – 1987

• Science Advisor in the Prime Minister’s Department from 1984 – 2001

• Founding Chairman of Technology Park Malaysia Corporation

• Founding Joint Chairman of the Malaysian Industry-Government Group for High Technology (MIGHT)

• Founding Chairman of Composite Technology (Research) Malaysia Sdn Bhd (CTRM)

• Founding Chairman of the Malaysian Technology Development Corporation (MTDC)

• Founding and Executive Chairman of Kumpulan Modal Perdana Sdn Bhd from 2001 – 2007

• Founding and current Chairman of London-based Commonwealth Partnership for Technology Management Ltd (CPTM)

• President and CEO of Malaysia University of Science and Technology (MUST) from 2007 - 2009

Directorships in other companies:• OSK Ventures International Berhad• Green Packet Berhad• BCT Technology Berhad• GW Plastics Holdings Berhad Group

Awards:• JSM, JMN, DMSM, PSM• Asean Achievement Award (Science),

1993• Fook Ying Tung South-East Asia Prize, 1998• Tun Abdul Razak Award (International

Category), 2000

Committees served:• Ministry of International Trade Industry’s

(MITI) Consultative Panel on Trade and Industry

• National Council for Scientific Research and Development

• National Development Planning Committee• National Information Technology Council• National Telecommunication Council• Malaysian Veterinary Council• United Nation’s Council for Science and

Technology for Development (UNCSTD)• Organisation of Islamic Cooperation

(OIC) Ministerial Standing Committee on Scientific and Technological Cooperation (COMSTECH)

• Joint Convener of the Langkawi International Smart Partnership Dialogues (LID)

• Current Chairman of Joint-Executive Group for the Southern Africa International Dialogues (SAID)

• Current member of UNESCO’s World Commission on Ethics in Scientific Knowledge and Technology (COMEST)

• Current member of the Malaysian Innovation Foundation

• Current member of Malaysian Toray Science Foundation

Associations and affiliations:• Senior Fellow and First President,

Academy of Sciences Malaysia • Board Member, Past President, Fellow and

Advisor, Malaysian Scientific Association• Past President, Association of Veterinary

Surgeons Malaysia• Fellow, Academy of Sciences for the

Developing World (TWAS)• Founding Fellow, Islamic World Academy

of Sciences• Honorary Fellow, National Academy of

Science Republic of Kyrgyzstan• Past President, Science Council of Asia• Past President, Third World Network of

Scientific Organisations, Asia Region• Immediate Past President, Federation

of Asian Scientific Academies and Associations (FASAs)

PIONG TECK ONNManaging Director53, MalaysianDate appointed: 5 June 2000

Board Committee memberships:• Remuneration Committee• Employees’ Share Option Scheme

Committee

Academic qualification:• Bachelor of Science in Pharmacy

(University of Wales, United Kingdom)

Experience and career path:• Began his career in retail and wholesale

pharmaceutical business at City Chemist & Asia Pharmacy

• Instrumental in starting and developing the manufacturing, research and development and marketing departments of Kotra Pharma (M) Sdn Bhd (KPM)

• Responsible for introducing various conventional dosage forms ranging from tablets, capsules, creams and ointments, wet and dry syrups and injectables, both aseptically and terminally filled from 1985 – 1995

• Managing Director responsible for the Group’s overall operations, business strategic directions and driving the Group’s initiatives towards achieving its various set goals

Committee served:• Chairman of the ASEAN Pharmaceutical

Industry Club (APC) (2008-2009)

Association and affiliation:• Past President (2008-2009) and

Executive Council Member (1998-2011) of the Malaysian Organisation of Pharmaceutical Industries (MOPI)

Relationships with other Directors/Substantial Shareholders:• Brother to Piong Teck Min and Y.Bhg.

Datuk Piong Teck Yen• Married to Chin Swee Chang


Directors’ Profile continued

PIONG TECK MINNon-Independent Non-Executive Director59, MalaysianDate appointed: 5 June 2000

Board Committee memberships:• Audit Committee• Nomination Committee• Remuneration Committee

Academic qualification:• Malaysian Certificate of Education

Experience and career path: • Handled the pharmaceutical wholesale

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

specializing in broad range traditional medicine

• Well-versed with the intricacies of the local pharmaceutical trade

• Built a good business network with Malaysian wholesalers in the pharmaceutical trade

Relationships with other Directors/Substantial Shareholders:• Brother of Piong Teck Onn and Y.Bhg.

Datuk Piong Teck Yen• Brother-in-law of Chin Swee Chang• Father of Piong Chee Kien

Y. BHG. DATUK PIONG TECK YENExecutive Director44, MalaysianDate appointed: 5 June 2000

Academic qualification:• Lewisham College, United Kingdom

Experience and career path:• Responsible for marketing and sales

activities of KOT in 1989• Sales Manager of KPM in 1989 • Marketing Manager of KPM in 1995

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

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

Awards:• DMSM, DSM, PJK, JP

Relationships with other Directors/Substantial Shareholders:• Brother of Piong Teck Min and Piong Teck

Onn• Brother-in-law of Chin Swee Chang

CHIN SWEE CHANGExecutive Director54, MalaysianDate appointed: 5 June 2000

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

Processing (University of Leeds, United Kingdom)

Experience and career path: • Programmer at Systems Automation Sdn

Bhd in 1982, involved in development, implementation, user-training and maintenance of insurance software sub-systems

• Analyst Programmer at Eastern Systems Design Sdn Bhd in 1984, responsible in the development and maintenance for general accounting, insurance broking, hire purchase/leasing software

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

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

• Was promoted to the current position, Chief Information Officer responsible for overseeing the operations and development of Management Information Systems, Order Processing and Administration departments

• Was the Project Manager for the SAP project implementation which started in

November 2008 and went live as scheduled in July 2009. Modules of SD, MM, FICO, and partial PP were implemented together to replace the legacy Infor ERP Syteline system

Relationships with other Directors/Substantial Shareholders:• Sister-in-law of Piong Teck Min and Y.Bhg.

Datuk Piong Teck Yen• Married to Piong Teck Onn

OMAR BIN MD. KHIRIndependent Non-Executive Director74, MalaysianDate appointed: 5 June 2000

Board Committee memberships:• Nomination Committee• Remuneration Committee

Academic qualification:• Cambridge School Certificate• Completed an Estate Management Course

Experience and career path:• Assistant Estate Manager in Socfin

Plantations in 1958, devoted attention on various rubber and palm oil estates

• Acting Manager of Socfin Plantations in 1973

• Experience in Human Resources Management & Public Relations from 1977 – 1981

• Upon retirement as Manager 1 (Senior Group Manager) in 1992, was in charged of approximately 10,000 acres of rubber and palm oil estates in Batang Berjuntai, Selangor

Associations and affiliations:• Former Committee Member, Malaysian

Employers Federation• Former Member, Employers Panel

(Industrial Court)• Former Chairman, Selangor State

Malaysian Agriculture Producers Association Advisory Panel

• Former Chairman, Selangor Planters Association

• Former Council Member, Zoo Negara• Former Committee Member, United

Planting Association of Malaysia


Directors’ Profile continued

P’NG BENG HOEIndependent Non-Executive Director66, MalaysianDate appointed: 22 August 2007

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

Committee

Professional qualification:• Chartered Accountant

Experience and career path:• Former Partner of PricewaterhouseCoopers• Chartered Accountant with accumulated

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

Awards:• BKT, PJK, JP

Associations and affiliations:• Member of the Institute of Chartered

Accountants in Australia• Member of CPA Australia• Member of the Malaysian Institute of

Accountants (MIA)• Member of the Malaysian Institute of

Certified Public Accountants (MICPA)

AZHAR BIN HUSSAINIndependent Non-Executive Director58, MalaysianDate appointed: 12 November 2007

Board Committee memberships:• Audit Committee• Employees’ Share Option Scheme

Committee

Academic qualification:• Bachelor of Pharmacy (Hons)

(University of Wales, United Kingdom)

Experience and career path:• House Pharmacist, Glaxo Malaysia in

1976• Production Executive, Glaxo Malaysia

in 1977 • Assistant Manager, Glaxo Malaysia in

1981 • Production Manager, Glaxo Malaysia

in 1983• Technical Manager, Glaxo Malaysia,

Glaxo Pakistan in 1989• Technical Director, Glaxo Malaysia in

1993• Board of Director, Glaxo Malaysia in

1993• Executive Director, Intercircle

Holdings Sdn Bhd in 1994• Managing Director, Pharmaniaga

Manufacturing Berhad and later Executive Director, Pharmaniaga Berhad from 1994 - 2003

• Managing Director, Pharmaniaga Berhad from 2003 – 2006

• Senior Director, UEM Group in 2007• Business Development Consultant,

Technology Park Malaysia in 2008• Head, TPM Biotech Sdn Bhd from 2008

– 2010• Director and Senior Principal

Consultant, Neoconsult Sdn Bhd from 2010 - present

Associations and affiliations:• Past President of the Malaysian

Organisation of Pharmaceutical Industries (MOPI)

• Associate Member of the Harvard Business School Alumni Club of Malaysia

• Member of the Malaysian Pharmaceutical Society (MPS)

PIONG CHEE KIENAlternate Director to PIONG TECK MIN32, MalaysianDate appointed: 25 November 2010

Academic qualification:• BSc in Telecommunications Engineering

(London)• MSc in e-Commerce Engineering

(London)

Experience and career path: • Experienced as a IT Account

Executive at Plato Solutions Sdn Bhd from January 2005 to November 2005

• Brand Executive at KPM from November 2005 to October 2006 and was actively involved in planning and implementing brand marketing and trade strategies aimed at increasing brand performance

• Current General Manager of Lonnix (M) Sdn Bhd, specializing in broad range of traditional medicine, food supplement and effervescent products

Relationships with other Directors/Substantial Shareholders:• Son of Piong Teck Min• Nephew to Piong Teck Onn, Y. Bhg.

Datuk Piong Teck Yen and Chin Swee Chan

Notes:

1. Relationship The Directors do not have any family

relationship with any Director and/or major shareholders of the Company except otherwise stated in individual profiles

2. Conflict of Interest None of the Directors have any conflict

of interest with the Company

3. Conviction for Offences None of the Directors have any

conviction for offences (other than traffic offences) within the past 10 years

4. Other Directorship The Directors do not hold any other

directorship of public companies except otherwise stated in individual profiles


Chairman’s Statement

Y. BHG. TAN SRI DATUK DR. OMAR BIN ABDUL RAHMANIndependent Non-Executive Chairman

Dear Shareholders,

It has been an eventful year for Kotra Industries Berhad (Kotra) highlighted with the achievement of several significant milestones. On 1 September 2010, Phase 1 of our new manufacturing and technology centre was completed and our manufacturing license was approved by the Drug Control Authority of Ministry of Health, Malaysia on 19 May 2011. In the same financial year, we were privileged to be the recipient of the 2011 Malaysian Pharmaceutical Company of the Year Award in the generic drugs category by Frost and Sullivan. The selection was based on four stringent criteria: 1) growth strategy

and implementation, 2) degree of innovation in business process, 3) revenue growth and 4) leadership in customer value and market penetration. These four criteria coincided with our four focus areas of excellence.

We are confident that the four focus areas of excellence will guide us in positioning ourselves as one of the leaders in the pharmaceutical landscape. As Chairman of the Board, it is my honour to report that our performance in the financial year ended 30 June 2011 has shown a continued growth momentum despite the various challenges we faced.

Our new manufacturing facility is in compliance with the international pharmaceutical manufacturing standards. With the addition of Kotra Pharma Technology Centre (KPTC), we are now equipped with a highly sophisticated pharmaceutical manufacturing technology facility. The automation technologies embedded in the concept of Quality by Design (QbD) have enabled us to achieve our mission of making quality medicines accessible to everyone.

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Centre of Pharmaceutical

Excellence

The four focus areas of pharmaceutical excellence


Chairman’s Statement continued

FINANCIAL UPDATES

For the financial year ending June 2011, we have accumulated a total sales revenue of RM112.8 million representing a 10.2% growth as compared to the previous financial year ending June 2010. The total sales revenue of RM112.8 million comprises the domestic sales revenue of RM74.2 million (65.8%) and the overseas sales revenue of RM38.6 million (35.2%). However, we incurred a loss before tax of RM2.1 million as compared to a profit before tax of RM12.5 million in the last financial year ended 2010.

OPERATIONAL UPDATES

Domestic operations Our domestic sales reported a positive increase of RM11.7 million or 18.7% compared to previous year. The growth came from the introduction of new products, strong marketing activities and the establishment of an additional sales team to enhance the position of our health supplements and nutritional range of products among the medical practitioners.

The R&D personnel was increased by two-fold compared to previous financial year. The team has now specialised functions based on their expertise such as analytical and formulation. As a result, we have

This loss was due to lower profit margins arising from the depreciation of the US Dollar, higher interest expense on increased borrowings as well as the depreciation charges on the newly completed manufacturing and technology centre. The growth and development of export markets for the Group has also incurred additional advertising and promotion expenses.

successfully launched six over-the-counter health supplements and two generic drugs in the local market. One of the notable products launched was the Axcel Valacyclovir which is the first off-patent drug launched in the market. In addition, we have also launched Vaxcel Ceftriaxone - Malaysia’s first bioavailable tested cephalosporin injectable equivalent to Rochepin. In the nutritional division, a new range of products were introduced - Appeton Wellness 60+, the only diabetes and kidney-friendly formulated product based on the physiological and biological needs of seniors aged 60 and above.

International compliance, up-to-date technology with embedded Quality by Design (QbD) concept

Continuous investment in the research team & strategic focus on research activities

Manufacturing Excellence

R&D Excellence

We have executed high impact marketing strategies through close partnerships with local authorities and the media. In collaboration with Malaysian Medical Association (MMA) and Ministry of Health (MOH), Kotra participated in the Health Education and Health Awareness (HEHA) 2011 to create health awareness amongst the public.



Healthcare and pharmaceuticals have been identified as one of the 12 National Key Economic Areas (NKEA), under Economic Transformation Program (ETP), launched in October 2010. As part of the Government’s aim to develop and promote the pharmaceutical industry as well as to ensure that healthcare remains accessible and affordable for all, the Government has recognised the importance of the manufacturers of generic drugs. Currently, the local generic pharmaceutical manufacturers’ revenue only account for 33% value of the domestic market. Therefore, there is huge potential for growth. With this market growth potential, coupled with the Government’s support, the local pharmaceutical industry is well placed for a healthy growth. This expansion will be further aided by the patent loss of a minimum of 15 blockbuster drugs over the next two to three years. Business Monitor International’s (BMI) recent report also indicated that the Malaysian pharmaceutical market is forecasted to expand by 8% on a yearly basis from 2009 to 2014.

Export operationsThe depreciation of US Dollar by approximately 7% and the global slowdown have affected our international sales growth. Nevertheless, our brands have grown, spanning over 28 countries and the Group received our first order from Laos, Kenya, Yemen, Macau and Kuwait.

INDUSTRY OUTLOOK AND PROSPECT

LocalUnder the Tenth Malaysia Plan, the local pharmaceutical and biotechnology sector was selected as one of the main deliverables to strategically transform the nation into a developed and high income economy. In the first two years of this initiative, the Government is expected to develop four new hospitals and 41 community health clinics to provide efficient health services to the public. This includes 156 clinics, mobile clinics, flying doctor services and village health promoters to be stationed in rural and remote areas, thus increasing the accessibility to healthcare. As a result of these improvements in healthcare infrastructures, the local demand for pharmaceutical products and services both in public and private sectors is expected to increase, presenting new opportunities for Kotra.

Our participation in Paediatrics in Practice 2011 event by the Malaysia Paediatric Association held in Selangor, Penang and Johor received record attendance. It was a campaign specifically designed to bring Continuous Medical Education (CME) to primary care doctors.

Our marketing campaign was further enhanced through the partnership with LiteFM radio. An Appeton Wellness 60+ Spot The Con campaign was launched in the Klang Valley, has also received encouraging response.

As a result of our continuous effort in registering our products overseas, we are pleased to report that an additional 79 new registrations were approved by the relevant regulatory bodies in 14 countries including Brunei Darussalam, Kuwait, Macau, Mongolia, Oman and Yemen.

Consistent high impact marketing strategies for stronger presence of Kotra’s brands

Proactively developing our brands in new markets

Marketing Excellence

Export Excellence


WORDS OF APPRECIATION

I would like to extend my sincere appreciation to our shareholders, customers and business partners. To our shareholders, my special commendation for your patience and continued faith in our company during this challenging time of our expansion phase and its journey towards long term growth and profitability. On behalf of the Directors, I would like to extend a big thank you to management team, executives and staff at all levels for your commitment and passion. I look forward to receiving more of your valued contribution in the years to come.

To my fellow Board members, I wish to express my heartfelt gratitude for your professionalism and dedication in strengthening our capabilities.

On behalf of the Board of Directors and Management, I would also like to show our appreciation to the Malaysian Government and its agencies, the Ministry of Health and the State Government of Melaka for their continuous support.

Y. BHG. TAN SRI DATUK DR. OMAR BIN ABDUL RAHMANIndependent Non-Executive Chairman


InternationalThe two key differentiators for Malaysian generics in the international scene is its Halal certification which is recognised in all Muslim markets and Malaysia’s strong Good Manufacturing Practice (GMP) regulations based on its PIC/S membership. This presents ample opportunities for Malaysian pharmaceutical producers to be at the forefront of the international generic markets, in the ASEAN Economic Community and the Middle East and North African countries. The global Muslim population is fast approaching 1.57 billion, presenting a US$2.3 trillion market to global pharmaceutical producers.

Furthermore, with our new KPTC which conforms to the international pharmaceutical manufacturing standards has provided the necessary export expansion opportunities for the years to come.

CORPORATE RESPONSIBILITY (CR)

As a responsible corporate citizen, Kotra has continuously supported our community in cash and in kind. Under our CR banner, we have supported our local talent especially in pharmaceutical related studies through book prizes and best graduate sponsorships. Local universities that have benefited from our efforts are Universiti Putra Malaysia, Universiti Malaya and International Medical University Malaysia.

At Kotra, we have also initiated an internship programme where undergraduates of various disciplines will receive firsthand experience of the working environment. As part of our community out reach, we have supported various local charities such as the Yayasan Bina Ilmu (YBI) Welfare Clinic, sponsored products and donated medicinal items. In 2010, we provided medical supplies to flood victims in Pakistan through our MOH.


Corporate Governance Statement

CORPORATE GOVERNANCE STATEMENT 2011

The Board of Directors (“Board”) reaffirms its commitment to upholding the principles and best practices as recommended by the Malaysia Code on Corporate Governance (Revised 2007) (“Code”). Moreover, when executing their duties and responsibilities, the Board continues to perform beyond mere compliance of the Code with reasonable care, skill and diligence. The Board follows a vigorous sustainable corporate governance framework while discharging their duties and responsibilities in managing the business and affairs of the Group to ensure that all stakeholders’ interest is protected and value enhanced. Hence, the Board is pleased to report to the shareholders that it has continued to apply the principles and complies with the best practices of good governance to the extent practical as laid down in Part 1 and Part 2 of the Code respectively.

THE BOARD

Duties and Responsibilities

The Board assumes the following principal responsibilities as described by the Code and acts proactively in:• setting long term strategic direction• reviewing performance against the adopted strategy• providing strategic direction and approving corporate plans and targets• monitoring and reviewing corporate performance• ensuring adequate and integrity of good internal control systems and functions• overall responsibilities for risk management • approval of financial statements which involves the Audit Committee in the process

Meanwhile, the Board monitors the performance of the Managing Director and the Management. The Managing Director oversees the day-to-day operations including the implementation of policies and strategies adopted by the Board while the Chairman’s duties are to ensure the Board’s effectiveness and that it has properly carried out its duties and responsibilities.

The Board continues to provide stewardship to the Group’s affairs in the best interest of its shareholders throughout the financial year ended 30 June 2011.

Composition

The Board, as at 30 June 2011 comprises four (4) Independent Non-Executive Directors (including the Chairman), one (1) Non-Independent Non-Executive Director, three (3) Executive Directors and one (1) Alternate Director. The Alternate Director was appointed on 25 November 2010. The current composition of the Board is in compliance with the Listing Requirements whereby more than one-third (1/3) of its Board members are independent. The composition of the Board comprises a blend of competency and business experience which is essential to achieve a balanced Board to deliver clear leadership and supply constructive decision-making.

A brief description of each Director’s background is presented in pages 3 to 5 of this year’s Annual Report.


Corporate Governance Statementcontinued

Meetings

There were five (5) Board meetings which were organised on a quarterly basis during the reporting financial year. All the Directors have complied with the minimum 50% attendance as required by the Listing Requirements.

The attendance of the Directors at the Board meetings is presented in the table below:

AttendanceofBoardMeetingsinfinancialyearended30June2011

26 27 25 23 25 Director Aug Oct Nov Feb May Total 2010 2010 2010 2011 2011

1. Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman √ √ √ √ √ 5/5

2. Piong Teck Onn √ √ √ √ √ 5/5

3. Piong Teck Min √ √ X √ X 3/5

4. Y. Bhg. Datuk Piong Teck Yen √ X √ X √ 3/5

5. Chin Swee Chang √ X X √ √ 3/5

6. Omar bin Md. Khir √ √ √ √ √ 5/5

7. P’ng Beng Hoe √ √ √ √ √ 5/5

8. Azhar bin Hussain √ √ √ √ √ 5/5

9. Piong Chee Kien - - - X √ 1/2 (appointed as Alternate Director to Piong Teck Min on 25 November 2010)

During the meetings, the Directors confirmed the minutes of the previous Board meeting, considered matters arising from the previous Board meeting, reviewed financial performance and results of the quarterly financial reports and reviewed and approved the financial results after taking into consideration the recommendation from the Audit Committee, among other periodical matters during the Board meeting.

The Chairman received adequate secretarial supports from the Company Secretaries in planning and organising the meeting. The Directors were also provided with unrestricted access to information and services of the Company Secretaries and the Senior Management staff of the Group. Prior to the scheduled meetings, the Company Secretaries will furnish the agenda and all relevant reports to the Directors in advance to allow the Directors sufficient time to review and to enhance the Board’s productivity. During the meeting, the Company Secretaries have provided assistance to the Chairman to ensure that the meeting is conducted in an orderly manner, ensured all items in the agenda are conveyed and minutes are properly recorded. The Directors are also encouraged to seek independent professional advice pertaining to the Group’s affair at the Company’s expense if deemed necessary in order to discharge their duties effectively.



Appointment

All appointments to the Board require recommendation from the Nomination Committee (NC). In the selection process, the Board ensures that shareholders and investors’ interests in the Group are not compromised. The processes of identifying, nominating and orientating new Directors are vested in the NC. The final selection decision is determined by the Board.

The Board ensures that all newly appointed Directors must attend and successfully complete the Mandatory Accreditation Programme (MAP) conducted by Bursa Malaysia Securities Berhad (" Bursa Malaysia"). The Board has assessed and considered the training programmes attended by them and that the trainings were appropriate and sufficient.

An internal induction programme, which includes a briefing by the Managing Director, is a prerequisite to becoming a member of the Board. The aim is to facilitate understanding of the Group’s operations and expose them to its corporate culture. A new Director will have the opportunity to participate in the Group’s offices and manufacturing plants tour and participate in discussions with the senior members of the Management team during the orientation.

In the reporting financial year, the Board has appointed an Alternate Director on 25 November 2010.

Re-election

The Code requires that all Directors to submit themselves for re-election at regular intervals and at least once in every three (3) years, together with all new Directors appointed since the previous Annual General Meeting (AGM). Whereas, Section 129 (6) of the Companies Act 1965 requires that all Directors over seventy (70) years of age go forward for re-appointment each year. Retiring Directors may also offer themselves for re-election or re-appointment.

The Directors listed below are due to go forward for re-election or re-appointment at the AGM in 2011:• Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman (Chairman) pursuant to Section 129 (6) of the Companies Act 1965• Omar bin Md. Khir pursuant to Section 129 (6) of the Companies Act 1965• Y. Bhg. Datuk Piong Teck Yen in accordance to Article 97 (1) of the Company's Articles of Association• Piong Teck Min in accordance to Article 97 (1) of the Company's Articles of Association

Training

The Board acknowledges the importance of continuous learning and development for its members where Directors are encouraged to review their own training needs on a regular basis, to keep abreast of regulatory changes and the changes and developments of business trends in the pharmaceutical industry.

The following table discloses the relevant trainings and seminars the Directors have attended in the review period:

Director Trainingandseminar DatesAttended

Y. Bhg. Tan Sri 6th Science and Technology Management Training Course for 4 – 16 July 2010Datuk Dr. Omar Researchers in OIC Countriesbin Abdul Rahman Malaysia’s New Economic Model (NEM): Enhancing and Accelerating 22 September 2010 the National Innovation System Istic-Mongolia Training Workshop for policy makers, Ulaan Baatar

Funding for Innovation - The Malaysian Experience Istic-Mongolia Training 22 September 2010 Workshop for policy makers, Ulaan Baatar

Technology Intelligence - Foresight and Prospecting an Overview 1 – 2 November 2010 (IMU-Minds Workshop-from Bench to Commercialization, KL)

STI Policy Imperatives (With Special Reference To the Malaysia Experience) 7 – 11 November 2010 2010 Istic-Kistep R&D Management programme for high level policy makers


Director Trainingandseminar DatesAttended

Piong Teck Onn ICH-GCG Asean Training Workshop on ICH Guidelines Q8, Q9 and Q10 26 – 28 July 2010

Audit Committee Expanded Governance Oversight Role-Are you equipped? By KPMG 25 August 2010

In-house training: Creating a Trusted Brand – Generics 21 June 2011

In-house training: Understanding of Pharmaceutical Manufacturing 21 June 2011

Y. Bhg. Datuk The Director was not present at the in-house training as he was out of the country. Piong Teck Yen The Director has been spending most of his time overseas to develop the Group’s export business in China. Nonetheless, a copy of the in-house training material had been extended to the Director.

Chin Swee Chang In-house training: Creating a Trusted Brand – Generics 21 June 2011 In-house training: Understanding of Pharmaceutical Manufacturing 21 June 2011

P’ng Beng Hoe Audit Committee Expanded Governance Oversight Role-Are you equipped? By KPMG 25 August 2010

Seminar Percukaian Kebangsaan 2010 by Kesatuan Pegawai-Pegawai Hasil 26 October 2010 Dalam Negeri (Inland Revenue Officers’ Union)



Omar bin Md. Khir In-house training: Creating a Trusted Brand – Generics 21 June 2011


Azhar bin Hussain Audit Committee Expanded Governance Oversight Role-Are you equipped? By KPMG 25 August 2010



Piong Teck Min Audit Committee Expanded Governance Oversight Role-Are you equipped? By KPMG 25 August 2010



Piong Chee Kien Mandatory Accreditation Programme 23 – 24 February 2011

BOARDCOMMITTEES

There are three (3) principle Committees established to assist the Board in discharging its responsibilities effectively. Each committee has its own terms of reference and operating procedures which are clearly defined and written.

The Committees are:• Audit Committee• Nomination Committee• Remuneration Committee

Each of these Committees possesses specific authority to examine particular issues and report to the Board on the outcomes of their proceedings together with their recommendations. The Board derives final decision on matters raised by the Committees.



1. AuditCommittee

The composition, terms of reference and detailed activities of the Audit Committee are clearly demonstrated in the Report of the Audit Committee in pages 23 to 27 of this Annual Report.

2. NominationCommittee

The Nomination Committee (NC) consists of three (3) Non-Executive Directors of whom majority are independent. The table below shows the NC members’ attendance for meeting held on 25 November 2010:

AttendanceatNominationCommitteeMeetingforfinancialyearended30June2011

25 Director Nov Total 2010

1. Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman √ 1/1 2. Omar bin Md. Khir √ 1/1 3. Piong Teck Min X 0/1

SalientTermsofReferencefortheNominationCommittee

The salient terms of reference of the NC are as follows:

i. Composition The NC shall be headed by a Non-Executive Chairman and its members shall comprise exclusively of Non-Executive Directors, a

majority of whom are independent.

ii. FunctionsoftheNC Without prejudice to the generality of the foregoing, the NC shall:

a. Determine the core competencies and skills required of Board members to best serve the business and operations of the Group as a whole and the optimum size of the Board to reflect the desired skills and competencies;

b. Review the size of Non-Executive participation, Board balance and determine if additional Board members are required and also to ensure that at least 1/3 of the Board is independent;

c. Undertake an annual review of the required mix of skills and experience and other qualities of Directors, including core competencies which Non-Executive Directors should bring to the Board and to disclose this forthwith in every Annual Report; and

d. Assist the Board to introduce criteria and to formulate and implement a procedure to be carried out by the NC annually for assessing the effectiveness of the Board as a whole, the Board Committees and for assessing the contributions of each individual Director.

ActivitiesoftheNominationCommittee

i. The NC reviewed and amended the performance evaluation sheet to ensure a better assessment of the effectiveness of the Board as a whole.

ii. The NC also reviewed the required mix of skills and experience and core competencies of the existing Directors and is satisfied that the existing Board is well balanced with its mix of skills and experience.

iii. The NC also assessed the effectiveness of the Board as a whole and the contribution of each individual Director.



3. RemunerationCommittee

The Remuneration Committee (RC) is entrusted with the responsibility to assist the Board in reviewing and recommending appropriate and competitive remuneration packages, share options and other benefits applicable to the Directors, taking into account the Company’s and individual Director’s performances as well as market factors.

In line with the calls for transparency and integrity, the Board periodically reviews the Company’s remuneration policy to ensure fairness and alignment with current market best practices.

The following are the RC members and the recorded attendance:

AttendanceatRemunerationCommitteeMeetingforfinancialyearended30June2011

25 Director Nov Total 2010

1. Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman √ 1/1 2. Omar bin Md. Khir √ 1/1 3. Piong Teck Min X 0/1 4. Piong Teck Onn √ 1/1

SalientTermsofReferencefortheRemunerationCommittee

The salient terms of reference for the RC are as follows:

i. Composition The RC shall be headed by a Non-Executive Chairman and its members shall comprise wholly or mainly of Non-Executive Directors.

ii. FunctionsoftheRC Without prejudice to the generality of the foregoing, the RC shall:

a. Review, recommend and advise on all forms of Directors’ remuneration, for example:• Basic Salary• Profit-Sharing Schemes• Share Options• Any other benefits;

b. Structure the component parts of the Executive Directors’ remuneration so as to link rewards to corporate and individual performance; whereas, in the case of Non-Executive Directors, the level of remuneration should reflect the experience and level of responsibilities undertaken by the particular Non-Executive Director concerned;

c. Conduct continued assessment of individual Executive Directors to ensure that remuneration is directly related to performance over time. In this regard, the review of Non-Executive Directors’ fees may take place at a different time of the year from the review of Executive Directors’ salaries;

d. Provide an objective and independent assessment of the benefits granted to Executive Directors; and

e. Consider what other details of Executive Directors’ remuneration to be reported in addition to the existing legal requirements, and how these details should be presented in the Annual Report.



ActivitiesoftheRemunerationCommittee

The RC met once during the year in which Committee members abstained from participating in the discussion of their individual remuneration. In the meeting conducted in the year under review, the RC deliberated and made recommendations of bonus payout to all Executive Directors and increment of remuneration to the Executive Directors with effect from 1 January 2011.

Directors’Remuneration

Diligent steps were taken to ensure each Director is fairly rewarded for their individual contribution to the Group taken into consideration of the financial position of the Group. Details of remuneration of each Director paid by the Group for the financial year ended 30 June 2011 are as follows:

Othershorttermemployee benefitsincludingestimated Fees Emoluments monetaryvalueofbenefitsinkind Total (RM’000) (RM’000) (RM’000) (RM’000)

ExecutiveDirectors - 1,487 234 1,721

Non-ExecutiveDirectors 197 - 5 202

Total 197 1,487 239 1,923

The number of Directors of the Group whose remuneration fall within the respective bands are as follows:

TheGroup TheCompany 2011 2010 2011 2010

Non-ExecutiveDirectorsBelow RM50,000 4 5 4 5RM50,001 – RM100,000 1 - 1 -

ExecutiveDirectorsRM50,001 – RM100,000 - 1 - -RM300,001 – RM350,000 - 1 - -RM350,001 – RM400,000 1 - - -RM400,001 – RM450,000 - 1 - -RM450,001 – RM500,000 1 - - -RM700,001 – RM750,000 - 1 - -RM850,001 – RM900,000 1 - - -

SHAREHOLDERSCOMMUNICATION

InvestorRelations

The Group is transparent in all of its communication with shareholders and investors. The Group’s quarterly and interim reports, announcements and annual reports can be downloaded from Bursa Malaysia’s website (www.bursamalaysia.com) and the Kotra Pharma (M) Sdn Bhd’s website (www.kotrapharma.com) to ensure shareholders are well-informed about the Group’s performance and operations.

Investors may also contact the Corporate Affairs Department if they require further information regarding the Group and its activities.



The Board has also appointed Mr. P’ng Beng Hoe as the Independent Non-Executive Director who will handle the concerns raised by shareholders which are conveyed to the Group through the Company Secretary.

AnnualGeneralMeetingandAnnualReport

The Group values face-to-face dialogue as an opportunity to respond directly to shareholder queries through the AGM and to undertake sufficient clarification on issues raised. Notice of the meeting together with a copy of the Annual Report is sent to shareholders at least twenty one (21) days prior to the AGM.

The Board ensures that all Directors and the external auditors are present to attend to any issues raised by the shareholders and investors. The Managing Director presents to the audience, the Group’s performance and progress and welcomes questions from shareholders.

At the AGM, the Directors are present and will attend to any issues raised. The Board further encourages dialogue participation whereby shareholders can opt to leave written questions through the Company Secretary for the Board to respond.

ACCOUNTABILITYANDAUDIT

FinancialReporting

The Board continually strives to present a balanced and comprehensive assessment of the Group’s financial performance and prospects primarily through the audited financial statements, annual reports and quarterly announcements of results to the shareholders.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group to enable them to ensure that the financial statements comply with the Companies Act 1965 and approved accounting standards in Malaysia. The Directors are also responsible for the safeguarding the assets of the Group and for taking reasonable steps to prevent and detect fraud and other irregularities.

This is achieved with the assistance of the Audit Committee which review and report the financial results in clarity and quality. The Report of the Audit Committee is outlined from pages 23 to 27 of this Annual Report.

InternalControl

The Group’s internal audit function is currently outsourced to KPMG Business Advisory Sdn Bhd. The internal auditors meet with the Audit Committee several times a year to report their findings.

Key developments and important information in the Group’s internal control system during the year is presented in the Director’s Statement on Internal Control presented in pages 21 to 22 of this Annual Report.

WhistleBlowingPolicy

The Board had introduced the Whistle Blowing Policy to encourage employees to report any misconduct or malpractice within the Group. The policy ensures that any employee who reports any misconduct or malpractice can do so without fear of being victimised or discriminated against. It is a formal channel of communication that is expected to benefit the Group in the long run.

RelationshipwithExternalAuditors

The Board has established and maintained a professional and transparent relationship with the external auditors, in seeking professional advice and ensuring compliance with the accounting standards in Malaysia. The Group’s external auditors, Crowe Horwath, continue to highlight to the Audit Committee on matters that require the Board’s attention. The external auditors will meet with the Audit Committee twice a year without the presence of any Executive Directors.



DIRECTORS’RESPONSIBILITYFORPREPARINGTHEANNUALFINANCIALSTATEMENTS

According to the Companies Act 1965, the Directors are mandated to prepare financial statements, results and cash flows which illustrate an accurate and impartial view of the Group’s state of affairs at the end of each financial year.

In preparing these financial statements, the Directors have:• adopted appropriate accounting policies and applied them consistently;• made reasonable and prudent judgements and estimates;• ensured all applicable accounting standards have been followed, subject to any material departures disclosed and explained in the

financial statements; and• prepared the financial statements on on-going concern basis, unless it is inappropriate to presume that the Group and the Company will

continue in business.

The Board of Directors are also responsible to ensure that the Company and its subsidiaries keep proper accounting records which disclose with reasonable accuracy of the Group’s and Company’s financial positions at any time and which enable them to ensure that the financial statements comply with the Companies Act 1965. The Directors have overall accountability for taking such steps that are reasonably open to them to safeguard the assets of the Group and the Company, in order to detect and prevent fraud and other irregularities.

COMPLIANCESTATEMENT

As at the end of the financial year, the Board is of the opinion that the following Principles and Best Practices of the Code have not been complied with:

SummaryoftheReferencetotheCode Principle/BestPractice BoardComments

Part 1 BIII Disclosure of each Director’s Remuneration

Part 2 AAXVII Provision of non-quantitative information


Details of the remuneration of each Director are not disclosed in the Annual Report as the Board is of the opinion this infringes on the privacy of the individual Director. Nevertheless, the Annual Report discloses the annual remuneration of Directors in bands of RM50,000 and the number of Executive/Non-Executive Directors receiving annual remuneration in each particular band as well as the total remuneration received by the Executive and Non-Executive Directors in separate categories.

At present the Group’s information system generates information which is predominantly financial based. The Board is aware of the increasing importance of having non-financial based information, represented as Key Performance Indicators (KPIs), as the Group expands. The Board is presently looking into identifying the most meaningful non-financial based KPIs and expects to have these KPIs in use by the financial year commencing 1 July 2012.


ADDITIONALCOMPLIANCEINFORMATION

RecurrentRelatedPartyTransactions

The details of the Recurrent Related Party Transactions (RRPT) of a revenue and trading nature conducted pursuant to the Shareholders’ Mandate during the financial year ended 30 June 2011 are as follows:

NameofMandatedRelatedParty RelationshipwiththeGroup NatureofTransactions RM’000

Kwong Onn Tong A company in which Piong Teck They, who is • Sales of goods 777Sdn Bhd (36327-U) brother to Piong Teck Min, Piong Teck Onn and • Rental of premises - Y. Bhg. Datuk Piong Teck Yen (Directors of the received/receivable Company), is a Director and has direct interest

Lonnix (M) Sdn Bhd A company, in which Piong Teck Min, who is a • Contract manufacturing 13(269246-T) Director of the Company, is a Director and has costs paid/ payable direct interest • Distribution fee received/ - receivable

Appeton Laboratory A company in which Y. Bhg. Datuk Piong Teck Yen • Rental of premises paid/payable 6Sdn Bhd (67336-V) and Piong Teck Onn, who are Directors of the Company, are Directors and have direct interests

Estate of Piong Nam Kim @ An estate in which Piong Teck Min, Piong Teck Onn • Rental of premises paid/payable 26Piong Pak Kim and Y. Bhg. Datuk Piong Teck Yen who are Directors of the Company, have beneficial interest

Thames Bioscience (M) A company in which Piong Teck Onn and • Royalty paid/payable 24Sdn Bhd (464698-X) Y. Bhg. Datuk Piong Teck Yen who are Directors of the Company are Directors. Piong Teck Onn has direct interest

Piong Teck Onn A Director of the Company • Rental of premises paid/payable 14

Y. Bhg. Datuk Piong Teck Yen A Director of the Company • Rental of premises paid/payable 50

N’Care International A related party by virtue of Piong Chee Keong and • Rental of premises received/ 29Sdn Bhd (878365-M) Piong Chee Kien both being sons of Piong Teck Min receivable who is a Director of the Company

AggregateValueofRelatedPartyTransactions 939

The Company is seeking shareholders’ approval on RRPT of a revenue or trading nature to be entered by the Company’s subsidiary with related parties in the ordinary course of business in the forthcoming AGM. Details of the transactions are furnished in the Circular, which is distributed together with the Annual Report.

ShareBuy-back

There was no share buy-back activity during the financial year ended 30 June 2011.



Options,WarrantsorConvertibleSecurities

There were no options, warrants or convertible securities exercised during the financial year ended 30 June 2011.

DepositoryReceiptProgramme

The Company has not sponsored any depository receipt programme during the financial year under review.

Sanctionsand/orPenaltiesImposed

The Company is not aware of any sanctions/penalties imposed on the Company, its subsidiaries, Directors or management by the relevant regulatory bodies that have been made public.

Non-auditFeesPaidtoExternalAuditors

During the financial year ended 30 June 2011, non-audit fees paid or payable to the external auditors and affiliated firms amounted to RM71,000.

VariationinResults

There was no significant variance between the results for the financial year ended 30 June 2011 as per the audited financial statements and the unaudited results previously announced. The Company did not make any release on profit estimate, forecast or projections for the financial year.

ProfitGuarantee

There was no profit guarantee given by the Company in respect of the financial year.

MaterialContractsInvolvingDirectors’andMajorShareholders’Interests

Other than RRPT of a revenue in nature as disclosed, there were no material contracts entered into by the Company and its subsidiaries involving Directors’, Major Shareholders’ or connected persons which were still subsisting as at the end of the financial year under review or which were entered into since the end of the previous financial year except as disclosed in the financial statements.

RevaluationofLandedProperties

The Company did not revalue its property, plant and equipment during the financial year ended 30 June 2011, as these assets are carried in the Company’s financial statements at historical cost less accumulated depreciation.



Statement On Internal Control

Introduction

The Board is pleased to present herewith the Statement on Internal Control (“Statement”) which outlines the nature and scope of internal controls of the Group during the financial year ended 30 June 2011. This Statement is prepared pursuant to paragraph 15.26 (b) of the Main Market Listing Requirements of Bursa Malaysia.

BoardResponsibilities

The Board affirms its overall responsibility for the Group’s system of internal control to safeguard shareholders’ investment and the Group’s assets, which also includes reviewing on the adequacy and integrity of that system. The system of internal control covers not only financial controls but operational and compliance controls. In view of the inherent limitations in any system of internal controls, the system is designed to manage rather than eliminate the likelihood of fraud, error or failure to achieve business objectives. Accordingly, the system of internal control can provide only reasonable and not absolute assurance against material misstatement or loss. RiskManagementFramework

The Group’s enterprise risk management framework was formalised with the assistance of a professional firm of consultants. The formalisation involved developing the risk profile of the Group and appropriate control systems to manage and control the risks identified.

An ongoing process has been carried out in terms of identifying, evaluating, monitoring and managing the significant risks affecting the achievement of its business objectives throughout the year. This process is regularly reviewed by the Board.

InternalAuditFunction

The Group has outsourced its Internal Audit Function to a firm of professionals which assist both the Board and the Audit Committee by conducting appropriate independent assessments of the adequacy, efficiency and effectiveness of the Group’s internal control system. To ensure independence from Management, the internal auditor has direct reporting lines to the Audit Committee.

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

During the financial year under review, two cycles of internal audit were being carried out for Kotra Pharma (M) Sdn Bhd. The costs incurred for the internal audit function for the financial year ended 30 June 2011 amounted to approximately RM59,350.

OtherRiskandControlProcesses

Apart from risk management and internal audit, the Board has initiated the following processes to provide assurance to the Board on the proper conduct of the Group’s business operations:• A defined organizational structure within the Group, with clear lines of responsibility, authority and accountability, to ensure that

Management acts in the best interest of shareholders• Detailed budgeting process where key business divisions prepare budgets for the coming year• Regular monitoring of results against budget with major variances being followed up and Management action taken, where necessary• Financial reports, progress reports, key variances and analysis of financial data of the Group’s businesses are provided regularly to the

Senior Management and the Board• Regular Management meetings are conducted to review and discuss financial and operational reports and matters• Clear delegation of responsibilities and appropriate level of empowerment and authority limits to various committees of the Board,

Executive Directors and members of Senior Management


Statement On Internal Controlcontinued

WeaknessesinInternalControlsthatResultInMaterialLosses

All in all, the Board remains committed and resilient towards establishing a robust system of internal control and is of the opinion that there were no material losses incurred during the year resulting from weaknesses in internal control. Management continues to take measures to strengthen the control environment.

This Statement is issued in accordance with the resolution of the Directors dated 19 October 2011.

Conclusion

Pursuant to paragraph 15.23 of the Listing Requirements of Bursa Malaysia, the external auditor has reviewed this Statement for inclusion in the Annual Report of the Group for the year ended 30 June 2011 and reported to the Board that nothing has come to their attention that causes them to believe that the Statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls.


Report Of The Audit Committee

The Audit Committee was established by the Board primarily to ensure the Group applies and maintains high and appropriate standards of responsibility, integrity and accountability to its stakeholders while complying with the Code beside other terms set out in the terms of reference.

1. MembersoftheAuditCommittee

The present members of the Audit Committee comprises: • P’ng Beng Hoe (Chairman) – Independent Non-Executive Director • Azhar bin Hussain – Independent Non-Executive Director • Piong Teck Min – Non-Independent Non-Executive Director

The Chairman, Mr. P’ng Beng Hoe is a former Partner of PricewaterhouseCoopers and a Chartered Accountant in Malaysia and Australia. All the members of the Audit Committee fulfil the requirements as prescribed or approved by Bursa Malaysia and possesses working knowledge of finance and accountings.

2. AttendanceoftheAuditCommitteeMeetings

During the financial year ended 30 June 2011, the Audit Committee held five (5) meetings and the following table presents details of the members’ attendance during the financial year:

AttendanceofAuditCommitteeMeetingsinfinancialyearended30June2011

Director 25 27 24 22 24 Aug Oct Nov Feb May Total 2010 2010 2010 2011 2011

1. P’ng Beng Hoe √ √ √ √ √ 5/5

2. Azhar bin Hussain √ √ √ √ √ 5/5

3. Piong Teck Min √ √ X √ X 3/5

Invitation was extended to other Board members, the Chief Financial Officer, Senior Finance Manager, Senior Management staff as well as the internal and external auditors.

3. TermsofReferenceoftheAuditCommittee

A. CompositionofAuditCommittee

The Audit Committee will be composed of no fewer than three (3) members all of whom are Non-Executive Directors and majority of whom shall be Independent Directors. All members of the Audit Committee should be financially literate.

At least one (1) member of the Audit Committee must be a member of the Malaysian Institute of Accountants or if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years working experience and;

i. he/she must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or

ii. he/she must be a member of one of the associations of accountants as specified in Part II of the 1st Schedule of the Accountants Act 1967; or

fulfills such other requirements as prescribed or approved by Bursa Malaysia.


Report Of The Audit Committeecontinued

Subject to endorsement by the Board, the Audit Committee shall elect a Chairman amongst themselves who is an Independent Director.

B. ExternalAudit

The following are the tasks and functions of the Audit Committee concerning external audit:

1. Consider the appointment of external auditors, the audit fees and any question of resignation or dismissal;

2. Review the adequacy of external audit arrangements, with particular emphasis on the scope and quality of the audit;

3. Review the assistance given by the Company and/or the Group’s officers to the external auditors;

4. Review the quarterly and annual financial statements of the Company and its subsidiaries as well as the consolidated financial statements of the Group with management (and the external auditors in respect of the annual financial statements), including the following:• Any change in accounting policies and practices• Significant adjustments arising from the audit• The going concern assumption• Compliance with accounting standards and other legal requirements;

5. Review the external auditors’ audit report;

6. Review any management letter sent by the Company’s or any of its subsidiaries’ external auditors and management’s response to such letter;

7. Review any letter of resignation from the external auditors of the Company or any of its subsidiaries; and

8. Discuss problems and reservations arising from the interim and final audits, and any matters the auditor may wish to discuss in the absence of management where necessary.

C. InternalAudit

The following are the roles and responsibilities of the Audit Committee concerning internal audit:

1. Review the adequacy of the scope, functions and resources, competency of the internal audit function and that it has the authority to carry out the work;

2. Review the internal audit programme and results of the internal audit process and where necessary ensure that appropriate actions are taken on the recommendations of the internal audit function;

3. Review any appraisal or assessment of the performance of members of the internal audit function;

4. Approve any appointment or termination of senior staff members of the internal audit function; and

5. Take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning.



D. RelatedPartyTransactions

The Audit Committee shall review all related party transactions and potential conflict of interests situations that may arise within the Company or Group.

E. RiskManagementandInternalControl

The following are the responsibilities of the Audit Committee concerning risk management and internal control:

1. Review all areas of significant business and financial risk and the arrangements in place to contain those risks to acceptable levels;

2. Review the effectiveness of the system of internal control and management information system within the Company and the Group;

3. Consider the major findings of internal investigations and management’s response; and

4. Consider other topics as defined by the Board.

F. RightsandPowersoftheAuditCommittee

The Audit Committee shall:

1. Have explicit authority to investigate any matters within its terms of reference;

2. Have the resources which it needs to perform its duties;

3. Have full access to any information which it requires in the course of performing its duties;

4. Have unrestricted access to the Managing Director and the Chief Financial Officer;

5. Have direct communication channels with the external auditors and internal auditors;

6. Be able to obtain independent professional or other advice in the performance of its duties at the cost of the Company;

7. Be able to invite outsiders with relevant experience to attend its meetings, if necessary; and

8. Be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other Directors and employees of the Company and/or the Group, whenever deemed necessary.

G. CooperationfromManagement

The Company and every subsidiary’s management shall provide the fullest co-operation in providing information and resources to the Audit Committee, and in implementing or carrying out all requests made by the Audit Committee.

H. Meetings

The Committee shall meet at least four (4) times in each financial year. The quorum shall be two (2) members, the majority of members present must be Independent Directors.

The Senior Finance Manager, the Head of Internal Audit and the external auditors (or their representative) are to be invited to attend the committee meetings. Other Board members may also be present upon invitation. However, the Committee shall meet with the external auditors without the presence of any Executive Directors, at least twice a year.



The Company Secretary shall be the Secretary for the Committee and will be responsible for co-ordination of administrative details including calling the meeting, voting and keeping of minutes.

The Chairman shall convene a meeting of the Audit Committee if a request is made by any committee member, the Company’s Managing Director, the internal auditors or external auditors.

The external auditors have the right to appear and to be heard at any meeting of the Audit Committee from time to time and shall appear if so required by the Committee.

Motions put forward to the Audit Committee shall be decided on a majority of votes. Each member shall be entitled to only one vote.

The Chairman shall be entitled to a casting vote in the event of an equality in the voting except for a meeting attended by only two members in which the decision must be unanimous in order for the motion to be put through.

I. ReviewoftheAuditCommittee

The Board must review the terms of office and performance of the Audit Committee and each of its members at least once every three (3) years to determine whether the Audit Committee and the members have carried out their duties with the terms of reference.

4. ActivitiesoftheAuditCommittee

During the reporting financial year, the Audit Committee performed the duties as set out in its terms of reference. The main activities during the financial year are as follows:

• Reviewed the Annual Report and the Company’s Audited Financial Statements prior to submission for Board consideration and approval. The review was to ensure that the audited financial statements were drawn up in accordance with the provisions of the Companies Act 1965 and the applicable accounting standards approved by the Malaysian Accounting Standard Board ("MASB");

• Reviewed the quarterly and year end financial statements to ensure the Company’s compliance with the Listing Requirements of Bursa Malaysia, MASB and other relevant legal and regulatory requirements;

• Reviewed the Company’s Risk Management report and the management process for identifying, evaluating and managing the significant risks which has high impact on financials of the Company;

• Reviewed the external auditor’s scope of work and the audit plan, their audit fees, the results of their examination and management letters for the Company and its subsidiary, and recommended their re-appointment to the Board after evaluating the performance of the external auditors;

• Reviewed and approved the internal audit plan, scope of work and the internal auditors’ fees based on the risk management profile of the Group and final review of all internal audit findings including recommendations made by the internal auditor and follow-up actions taken by the Management;

• Reviewed the related party transactions entered into by the Company and its subsidiary as well as the disclosure of such transactions in the Annual Report of the Group and the Circular to Shareholders relating to Shareholders’ Mandate for Recurrent Related Party Transactions prior to recommending it to the Board for approval;

• Review the nomination of new Company Secretary;



• Reviewed the Statement on Internal Control of the Group in respect of the financial year and recommended to the Board the extent of the Group’s compliance with the provisions set out under the Code and in accordance with the Listing Requirements of Bursa Malaysia; and

• Reviewed the report on Corporate Governance in respect of the financial year and recommended to the Board the extent of the Group’s compliance with the provisions set out under the Code and in accordance with the Listing Requirements of Bursa Malaysia.

5. InternalAuditFunction

The Company has outsourced the internal audit function to external independent internal auditor, KPMG Business Advisory Sdn Bhd to carry out the Company’s internal audit functions effectively and professionally. The external independent internal auditor reports directly to the Audit Committee.

The internal auditor’s core responsibility is to undertake independent reasonable and systematic reviews of the Group’s system of internal controls to provide sound assurance that such systems continue to operate effectively and efficiently.

The internal audit function is elaborated further in the Statement on Internal Control in pages 21 to 22 of this Annual Report.

6. StatementonEmployees’ShareOptionScheme(“ESOS”)

The Audit Committee and the Management had reviewed the allocation of options granted to employees during the reporting financial year with relation to ESOS scheme and Section 8.17 of the Listing Requirements.

There was no allocation or grant of new share options to the eligible Executive Directors and employees of the Group during the financial year under review.

There were no allocation or grant of new share options to the Non-Executive Directors since the ESOS took effect.

29 Directors’ Report

34 Statement by Directors

34 Statutory Declaration

35 Independent Auditors’ Report

37 Statements of Comprehensive Income

38 Statements of Financial Position

39 Statements of Changes in Equity

40 Statements of Cash Flows

42 Notes to the Financial Statements

83 Supplementary Information

Financial Statements


Directors’ Report

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 30 June 2011. Principalactivities The Company is principally involved in investment holding and the provision of management services. The principal activities of its subsidiaries are set out in Note 16 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. Results Group Company RM’000 RM’000

(Loss)/profit after taxation for the year (2,139) 221

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. Dividends No dividend was paid since the end of previous financial year and the directors do not recommend any final dividend in respect of the current financial year. Directors The names of the directors of the Company in office since the date of the last report and at the date of this report are: Y. Bhg. Tan Sri Datuk Dr. Omar Bin Abdul Rahman, JSM, JMN, DMSM, PSM Piong Teck Onn Piong Teck Min Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP Chin Swee Chang Omar Bin Md. Khir P’ng Beng Hoe, BKT, PJK, JP Azhar Bin Hussain Piong Chee Kien (Alternate to Piong Teck Min) (Appointed on 25 November 2010)


Directors’ Report continued

Directors’interests According to the register of directors’ shareholdings, the interests of directors holding office at the end of the financial year in shares and options under the ESOS in the Company and its related corporations during the financial year were as follows:- NumberofordinarysharesofRM1each 1.7.2010 Acquired Sold 30.6.2011

Holdingcompany Direct interest Piong Teck Min 10,000 - - 10,000 Piong Teck Onn 51,000 - - 51,000 Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 10,000 - - 10,000 Deemed interest Chin Swee Chang 51,000 - - 51,000 NumberofordinarysharesofRM0.50each 1.7.2010 Acquired Sold 30.6.2011

TheCompany Direct interest Piong Teck Min 1,276,220 - - 1,276,220 Omar Bin Md. Khir 918,060 - 50,000 868,060 Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 2,200 - - 2,200 Y. Bhg. Tan Sri Datuk Dr. Omar Bin Abdul Rahman, JSM, JMN, DMSM, PSM 4,840 - - 4,840 Indirect interest Piong Teck Min 64,624,362 - - 64,624,362 Piong Teck Onn 64,624,362 - - 64,624,362 Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 64,624,362 - - 64,624,362 Deemed indirect interest Chin Swee Chang 64,624,362 - - 64,624,362



Directors’interests(continued)

NumberofoptionsoverordinarysharesofRM0.50each 1.7.2010 Granted Exercised 30.6.2011

TheCompany

Chin Swee Chang 1,800,000 - - 1,800,000 Piong Teck Onn 1,800,000 - - 1,800,000 Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 1,800,000 - - 1,800,000 By virtue of their interests in the holding company, namely Piong Nam Kim Holdings Sdn. Bhd., Chin Swee Chang, Piong Teck Min, Piong Teck Onn and Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP are deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest. None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year. Employees’shareoptionsscheme An Employees’ Share Option Scheme (“ESOS”) was approved by the Securities Commission on 22 April 2003 and the shareholders at an Extraordinary General Meeting held on 10 July 2003. The principal features of the ESOS are disclosed in Note 23 to the financial statements. The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the list of option holders holding share options of less than 440,000 shares. The eligible employees who have been granted share options of 440,000 or more are as follows:- No. NameofOptionsHolders NumberofShareOptions 1. Chin Swee Chang 1,800,000 2. Piong Teck Onn 1,800,000 3. Y. Bhg. Datuk Piong Teck Yen, DMSM, DSM, PJK, JP 1,800,000 4. Alan Martin Lewis 550,000 5. Hiew Mein Foong 440,000 6. Daniel Chua Chong Liang 440,000



Directors’benefits Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate, other than those arising from the share options granted to the directors under the Employees’ Share Option Scheme. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown in Note 30(d) to the financial statements) by reason of a contract made by the Company with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest other than as disclosed in Note 30 to the financial statements. Otherstatutoryinformation (a) Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps:

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

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

course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances which would render:

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

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

(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the

existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. (d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements

of the Group and of the Company which would render any amount stated in the financial statements misleading. (e) As at the date of this report, there does not exist:

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

(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year. (f) In the opinion of the directors:

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

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

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



Auditors The auditors, Messrs. Crowe Horwath, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the directors dated 27 October 2011. Piong Teck Onn

Piong Teck Min


We, Piong Teck Onn and Piong Teck Min, being two of the directors of Kotra Industries Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 37 to 82 are 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 at 30 June 2011 and of the results and the cash flows of the Group and of the Company for the year then ended. The supplementary information set out in Note 36, which is not part of the financial statements have been prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad. Signed on behalf of the Board in accordance with a resolution of the directors dated 27 October 2011. Piong Teck Onn Piong Teck Min

I, Daniel Chua Chong Liang, being the officer primarily responsible for the financial management of Kotra Industries Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 37 to 82 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. Subscribed and solemnly declared by the abovenamed Daniel Chua Chong Liang, at Melaka in the State of Melakaon 27 October 2011. Daniel Chua Chong Liang Before me,

Ong San KeePesuruhjaya SumpahCommissioner for Oaths349-B & 351BJalan Ong Kim Wee75300 Melaka

Statement By Directorspursuant to section 169 (15) of the companies act 1965

Statutory Declarationpursuant to section 169 (16) of the companies act 1965


Independent Auditors’ Reportto the members of kotra industries berhad (incorporated in malaysia) company no: 497632-p

Reportonthefinancialstatements We have audited the financial statements of Kotra Industries Berhad, which comprise the statements of financial position as at 30 June 2011 of the Group and of the Company, 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 financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 37 to 82. 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 is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the Company’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 Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements 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 the Company as of 30 June 2011 and of their financial performance and cash flows for the financial year then ended.


Independent Auditors’ Report continuedto the members of kotra industries berhad (incorporated in malaysia) company no: 497632-p

Reportonotherlegalandregulatoryrequirements In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following:- (a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have

been properly kept in accordance with the provisions of the Act; (b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements

are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes; and

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

Section 174(3) of the Act. The supplementary information set out in Note 36 on page 83 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. Othermatters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. CroweHorwath OnnKienHoeFirm No.: AF 1018 1772/11/12(J/PH)Chartered Accountants Chartered Accountant Date: 27 October 2011 Melaka


Statements Of Comprehensive Incomefor the financial year ended 30 june 2011

Group Company Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Revenue 4 112,841 102,357 720 300 Other operating income 5 1,552 2,506 - 21 Raw materials and consumables used (33,978) (36,492) - - Changes in inventories of finished goods and work in progress (4,565) 3,081 - - Employee benefits expenses 6 (26,708) (23,648) (252) (226) Selling and distribution expenses (27,081) (21,554) - - Depreciation and amortisation (5,730) (2,952) - - Other operating expenses (13,727) (9,985) (187) (332) Finance costs 7 (4,683) (847) - (1) (Loss)/profit before taxation 8 (2,079) 12,466 281 (238) Income tax expense 9 (60) (745) (60) - (Loss)/profit after taxation (2,139) 11,721 221 (238) Other comprehensive income, net of tax: - Fair value changes of available-for-sale financial asset - - 7,813 11,961 Total comprehensive (expenses)/ income for the year (2,139) 11,721 8,034 11,723 (Loss)/earningspershareattributabletoequityholders oftheCompany(sen):- Basic 10 (1.73) 9.47 - Diluted 10 (1.72) 9.47

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


Statements Of Financial Positionas at 30 june 2011


Group Company Note 30.06.2011 30.06.2010 01.07.2009 30.06.2011 30.06.2010 RM’000 RM’000 RM’000 RM’000 RM’000 (restated) (restated)

AssetsNon-currentassetsProperty, plant and equipment 11 172,127 163,776 124,942 - - Investment properties 12 1,623 1,649 1,675 - - Development expenditure 14 - 906 671 - - Deferred tax assets 15 - - 750 - - Investment in subsidiaries 16 - - - 110,256 90,443 173,750 166,331 128,038 110,256 90,443 CurrentassetsInventories 17 23,584 28,227 21,111 - - Trade receivables 18 35,306 37,629 30,464 - - Other receivables 19 2,704 2,278 8,385 1 15 Amounts due from subsidiaries 20 - - - 398 12,445 Derivative assets 21 51 - - - - Cash and bank balances 22 11,823 8,132 8,562 300 28 73,468 76,266 68,522 699 12,488 Totalassets 247,218 242,597 196,560 110,955 102,931 EquityandliabilitiesEquityattributabletoequityholderof theCompanyShare capital 23 61,903 61,903 61,903 61,903 61,903 Retained earnings 24 38,471 40,610 28,886 4,351 4,130 Other reserves 25 320 314 317 44,615 36,796 Totalequity 100,694 102,827 91,106 110,869 102,829 Non-currentliabilitiesDeferred income 26 - 20 46 - - Borrowings 27 87,896 85,194 63,045 - - 87,896 85,214 63,091 - - CurrentliabilitiesBorrowings 27 30,628 29,561 13,289 - - Trade payables 28 15,214 15,852 18,868 - - Other payables 29 12,786 9,143 10,206 86 102 58,628 54,556 42,363 86 102 Totalliabilities 146,524 139,770 105,454 86 102 Totalequityandliabilities 247,218 242,597 196,560 110,955 102,931


Statements Of Changes In Equity for the financial year ended 30 june 2011

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

Group At 1 July 2009 61,903 3 314 28,886 91,106 Profit after taxation, representing total comprehensive income for the year - - - 11,721 11,721 Share options lapsed - - (3) 3 - At 30 June 2010 61,903 3 311 40,610 102,827 Loss after taxation, representing total comprehensive expenses for the year - - - (2,139) (2,139) Share options granted under ESOS - - 6 - 6 At 30 June 2011 61,903 3 317 38,471 100,694

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

Company At 1 July 2009 61,903 3 314 24,521 4,365 91,106 Total comprehensive income for the year - - - 11,961 (238) 11,723 Share options lapsed - - (3) - 3 - At 30 June 2010 61,903 3 311 36,482 4,130 102,829 Total comprehensive income for the year - - - 7,813 221 8,034 Share options granted under ESOS - - 6 - - 6 At 30 June 2011 61,903 3 317 44,295 4,351 110,869



Statements Of Cash Flowsfor the financial year ended 30 june 2011

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 (restated) Cashflowsfrom/(for)operatingactivities (Loss)/profit before taxation (2,079) 12,466 281 (238) Adjustments for : Bad debts written off 4 1 - - Bad and doubtful debts recovered (184) (213) - - Depreciation and amortisation: - property, plant and equipment 5,703 2,927 - - - investment properties 26 26 - - - deferred income (20) (26) - - - development expenditure 20 17 - - Fair value gain on derivatives assets (51) - - - Gain on disposal of property, plant and equipment (53) (33) - - Interest expense 4,683 781 - - Interest income (49) (47) - - Inventories written down 1,436 933 - - Impairment loss on: - development expenditure 1,057 - - - - trade receivables 1,920 294 - - Property, plant and equipment written off 101 - - - Rental income from investment properties (58) (33) - - Share-based payment under ESOS 6 - 6 - Unrealised loss on foreign exchange 245 1,031 - -

Operating profit/(loss) before working capital changes 12,707 18,124 287 (238)Decrease/(increase) in inventories 3,206 (8,049) - - Increase in receivables (21) (1,950) - - Increase/(decrease) in payables 231 (4,079) (45) 69

Cash generated from/(used in) operations 16,123 4,046 242 (169)Interest paid (1,281) (781) - - Tax paid (17) (101) (17) (3)

Net cash generated from/(used in) operating activities 14,825 3,164 225 (172)


Statements Of Cash Flowscontinuedfor the financial year ended 30 june 2011


Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 (restated) Cashflowsforinvestingactivities Interest received 49 47 - - Proceeds from disposal of property, plant and equipment 132 36 - - Rental received 58 33 - - Development expenditure paid (171) (252) - - Purchase of property, plant and equipment (9,188) (37,490) - -

Net cash used in investing activities (9,120) (37,626) - -

Cashflowsfromfinancingactivities Drawdown of term loans 7,969 26,388 - - Proceeds from other short term borrowings 5,710 7,422 - - Interest paid (5,723) (4,274) - - Repayment of hire purchase payable - (15) - - Repayment of term loans (3,519) - - - Repayment from a subsidiary - - 47 131

Net cash generated from financing activities 4,437 29,521 47 131

Netincrease/(decrease)incashandcashequivalents 10,142 (4,941) 272 (41) Effectsofexchangeratechangesoncashandcashequivalents (60) (115) - - Cashandcashequivalentsatbeginningofthefinancialyear (286) 4,770 28 69

Cashandcashequivalentsatendofthefinancialyear(Note22) 9,796 (286) 300 28


Notes To The Financial Statements30 june 2011

1. CORPORATEINFORMATION The Company is a public limited liability company incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa

Malaysia Securities Berhad. The principal place of business is located at No. 1, 2 & 3, Jalan TTC 12, Cheng Industrial Estate, 75250 Melaka.

The Company is principally involved in investment holding and the provision of management services. The principal activities of its

subsidiaries are set out in Note 16 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

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

ultimate holding company. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 27

October 2011. 2. BASISOFPREPARATION The financial statements of the Group are prepared under the historical cost convention and modified to include other bases of valuation

as disclosed in other sections under significant accounting policies, and in compliance with Financial Reporting Standards (“FRSs”) and the Companies Act 1965 in Malaysia.

The accounting policies adopted are consistent with those of the previous financial year except for the adoption of the following new and

revised FRSs, IC Interpretations, Amendments to FRSs and IC Interpretations which are mandatory for financial periods beginning on or after 1 July 2010 as described fully in Note 2(a) below:

(a) On 1 July 2010, the Group adopted the following new and amended FRSs and IC Interpretations (including the consequential

amendments) :

• FRS 4: Insurance Contracts • FRS 7: Financial Instruments: Disclosures • FRS 139: Financial Instruments: Recognition and Measurement • Revised FRS 101 (2009): Presentation of Financial Statements • Revised FRS 1 (2010): First-time Adoption of Financial Reporting Standards • Revised FRS 3 (2010): Business Combinations • Revised FRS 127 (2010): Consolidated and Separate Financial Statements • Amendments to Revised FRS 1 and Revised FRS 127: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or

Associate• Amendments to FRS 2: Vesting Conditions and Cancellations • Amendments to FRS 2: Scope of FRS 2 and Revised FRS 3 • Amendments to FRS 5: Plan to Sell the Controlling Interest in a Subsidiary • Amendments to FRS 7, FRS 139 and IC Interpretation 9 • Amendments to Revised FRS 101 and FRS 132: Puttable Financial Instruments and Obligations Arising on Liquidation • Amendments to FRS 132: Classification of Rights Issues and the Transitional Provision In Relation To Compound Instruments• Amendments to FRS 138: Consequential Amendments Arising from Revised FRS 3 • IC Interpretation 9: Reassessment of Embedded Derivatives • IC Interpretation 10: Interim Financial Reporting and Impairment • IC Interpretation 11: FRS 2 - Group and Treasury Share Transactions • IC Interpretation 12: Service Concession Arrangement • IC Interpretation 13: Customer Loyalty Programmes • IC Interpretation 14: FRS 119 - The Limit on a Defined Benefits Asset, Minimum Funding Requirements and their Interaction• IC Interpretation 16: Hedges of Net Investment in a Foreign Operation • IC Interpretation 17: Distributions of Non-cash Assets to Owners • Amendment to IC Interpretation 9: Scope of IC Interpretation 9 and Revised FRS 3 • Annual Improvements to FRSs (2009)


Notes To The Financial Statementscontinued30 june 2011

2. BASISOFPREPARATION(continued)

(a) (continued):

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

(i) FRS 7 requires additional disclosures about the financial instruments of the Group. Prior to 1 July 2010, information about

financial instruments was disclosed in accordance with the requirements of FRS 132 - Financial Instruments: Disclosures and Presentation. FRS 7 requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk.

The Group has applied FRS 7 prospectively in accordance with the transitional provisions. Accordingly, the new disclosures have not been applied to the comparatives and are included throughout the financial statements for the current financial year.

(ii) FRS 101 (Revised) introduces the statement of comprehensive income, with all items of income and expense recognised in

profit or loss, together with all other items of recognised income and expense recognised directly in equity, either in one single statement, or in two linked statements. The Group has elected to present this statement as one single statement.

The revised standard also separates owner and non-owner changes in equity. The statement of changes in equity includes

only details of transactions with owners, with all non-owner changes in equity presented in the statement of comprehensive income as other comprehensive income.

In addition, a statement of financial position is required at the beginning of the earliest comparative period following a

change in accounting policy, the correction of an error or the classification of items in the statement. FRS 101 (Revised) also requires the Group to make new disclosures to enable users of the financial statements to evaluate the

Group’s objectives, policies and processes for managing capital. This new disclosure is made in Note 34(b) to the financial statements.

Comparative information has been re-presented so that it is in conformity with the requirements of this revised standard. (iii) The adoption of FRS 139 (including the consequential amendments) has resulted in several changes to accounting policies

relating to recognition and measurements of financial instruments as further discussed below. However, this adoption does not have any material financial impact to the opening balance of retained profits or financial statements for the current financial year.

Prior to the adoption of FRS 139, all derivative financial instruments were recognised in the financial statements only upon settlement. These instruments do not qualify for hedge accounting and hence, upon adoption of this standard, all derivatives held by the Group as at 1 July 2010 are recognised at their fair values and are classified as financial assets at fair value through profit or loss.

Prior to 1 July 2010, allowance for doubtful debts was recognised when it was considered uncollectible. With the adoption of

FRS 139, an impairment loss is recognised when there is objective evidence that an impairment loss has been incurred. The amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.

Prior to 1 July 2010, inter-company loans or advances were recorded at cost. With the adoption of FRS 139, inter-company

loans and advances are now recognised initially at their fair values, which are estimated by discounting the expected cash flows using the current market interest rate of a loan with similar risk and tenure. Subsequent to initial recognition, the loans and advances are measured at amortised cost.


Notes To The Financial Statementscontinued

30 june 2011

2. BASISOFPREPARATION(continued)

(a) (iv) The Group has adopted the amendments made to FRS 117 - Leases pursuant to the Annual Improvements to FRSs (2009). The Group has reassessed and determined that the leasehold land of the Group is in substance a finance lease and has been reclassified as property, plant and equipment. This change in accounting policy has been made retrospectively in accordance with the transitional provisions of the amendments.

(b) The Group has not applied in advance the following accounting standards and interpretations that have been issued by the Malaysian Accounting Standards Board (MASB) but not yet effective for the current financial year:-

FRSs/ICInterpretations(includingtheconsequentialamendments) Effectivedate • Revised FRS 124 (2010): Related Party Disclosures 1 January 2012 • Amendments to Revised FRS 1: Limited Exemption from Comparative FRS 7 Disclosures for 1 January 2011 First-time Adopters • Amendments to Revised FRS 1: Additional Exemptions for First-time Adopters 1 January 2011 • Amendments to FRS 2: Group Cash-settled Share-based Payment Transactions 1 January 2011 • Amendments to FRS 7: Improving Disclosures about Financial Instruments 1 January 2011 • IC Interpretation 4: Determining Whether An Arrangement Contains a Lease 1 January 2011 • IC Interpretation 15: Agreements for the Construction of Real Estate 1 January 2012 • IC Interpretation 18: Transfers of Assets from Customers 1 January 2011 • IC Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments 1 July 2011 • Amendments to IC Interpretation 14: Prepayments of a Minimum Funding Requirement 1 July 2011 • Annual Improvements to FRSs (2010) 1 January 2011

The above accounting standards and interpretations (including the consequential amendments) are expected to have no material impact on the financial statements of the Group and of the Company upon their initial application.

3. SIGNIFICANTACCOUNTINGPOLICIES

(a) Criticalaccountingestimatesandjudgements

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



3. SIGNIFICANTACCOUNTINGPOLICIES(continued)

(a) Criticalaccountingestimatesandjudgements (continued)

(i) Depreciation of property, plant and equipment The estimates for the residual values, useful lives and related depreciation charges for the property, plant and equipment

are based on commercial and production factors which could change significantly as a result of technical innovations and competitors’ actions in response to the market conditions.

The Group anticipates that the residual values of its property, plant and equipment will be insignificant. As a result, residual

values are not being taken into consideration for the computation of the depreciable amount. Changes in the expected level of usage and technological development could impact the economic useful lives and/or the

residual values of these assets, therefore future depreciation charges could be revised.

(ii) Income taxes There are certain transactions and computations for which the ultimate tax determination may be different from the initial

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

(iii) Impairment of non-financial assets When the recoverable amount of an asset is determined based on the estimate of the value-in-use of the cash-generating

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

(iv) Amortisation of development costs Changes in the expected level of usage and technological development could impact the economic useful lives and therefore,

future amortisation charges could be revised. (v) Allowance for inventories Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require

judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories. (vi) Impairment of trade and other receivables An impairment loss is recognised when there is objective evidence that a financial asset is impaired. Management specifically

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



30 june 2011


(a) Criticalaccountingestimatesandjudgements (continued)

(vii) Classification of leasehold land The classification of leasehold land as a finance lease or an operating lease requires the use of judgement in determining the

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

(viii) Fair values estimates for certain financial assets and liabilities The Group carries certain financial assets and liabilities at fair value, which requires extensive use of accounting estimates

and judgement. While significant components of fair value measurement were determined using verifiable objective evidence, the amount of changes in fair value would differ if the Group uses different valuation methodologies. Any changes in fair value of these assets and liabilities would affect profit and/or equity.

(ix) Share-based payments The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity

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

(b) Basisofconsolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 30 June

2011. A subsidiary is defined as a company in which the parent company has the power, directly or indirectly, to exercise control over its

financial and operating policies so as to obtain benefits from its activities. All the subsidiaries are consolidated using the purchase method. Under the purchase method, the results of subsidiaries acquired

or disposed off are included from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries’ net assets are determined and these values are reflected in the consolidated financial statements. The cost of acquisition is measured at 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, plus any costs directly attributable to the business combination.

Intragroup transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also eliminated

unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.




(c) Functionalandforeigncurrency

(i) Functional and presentation currency The individual financial statements of each entity in the Group are presented in the currency of the primary economic

environment in which the entity operates, which is the functional currency. The financial statements are presented in Ringgit Malaysia (“RM”) which is the Group’s functional and presentation

currency. All values are rounded to the nearest thousand (RM’000) except when otherwise indicated. (ii) Transactions and balances Transactions in foreign currencies are converted into the respective functional currencies on initial recognition, using

the exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. All exchange differences are recognised in profit or loss.

(d) Financialinstruments Financial instruments are recognised in the statements of financial position when the Group has become a party to the contractual

provisions of the instruments. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement.

Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as an expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity.

Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis

or to realise the asset and settle the liability simultaneously. A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit

or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. Financial instruments recognised in the statements of financial position are disclosed in the individual policy statement associated

with each item.

(i) Financial assets On initial recognition, financial assets are classified as either financial assets at fair value through profit or loss, loans and

receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate.

• Financial Assets at Fair Value Through Profit or Loss Financial assets are classified as financial assets at fair value through profit or loss when the financial asset is either

held for trading or is designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on

remeasurement recognised in profit or loss. Dividend income from this category of financial assets is recognised in profit or loss when the Group’s right to receive payment is established.



30 june 2011


(d) Financialinstruments(continued)

(i) Financial assets (continued)

• Held-to-maturity Investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed

maturities that the management has the positive intention and ability to hold to maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment loss, with revenue recognised on an effective yield basis.

• Loans and Receivables Financial Assets Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active

market are classified as loans and receivables financial assets. Loans and receivables financial assets are measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

• Available-for-sale Financial Assets Available-for-sale financial assets are non-derivative financial assets that are designated in this category or are not

classified in any of the other categories. After initial recognition, available-for-sale financial assets are remeasured to their fair values at the end of each

reporting period. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the fair value reserve, with the exception of impairment losses. On derecognition, the cumulative gain or loss previously accumulated in the fair value reserve is reclassified from equity into profit or loss. Interest calculated for a debt instrument using the effective interest method is recognised in profit or loss.

Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group’s right to receive

payments is established. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less accumulated

impairment losses, if any.

(ii) Financial Liabilities All financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently

measured at amortised cost using the effective interest method other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are either held for trading or are designated to

eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges.

(iii) Equity Instruments Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are

shown in equity as a deduction, net of tax, from proceeds. Dividends on ordinary shares are recognised as liabilities when approved for appropriation.




(e) Investmentsinsubsidiaries Investments in subsidiaries are stated at fair value in accordance with FRS 139 Financial Instrument: Recognition and Measurement.

Gains and losses arising from changes in fair value of the investment are recognised directly in other comprehensive income and accumulated in the fair value reserve. When the investments are disposed of, the fair value reserve is reclassified from equity to profit or loss.

The Group establishes the fair value of investment annually by using discounted future cash flow analysis refined to reflect the

issuer’s specific circumstances and others, where appropriate. (f) Property,plantandequipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is calculated under the straight-line method to write off the depreciable amount of the assets over their estimated

useful lives. Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal annual rates used for this purpose are:-

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

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

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when the

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

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from

its use. Any gain or loss arising from derecognition of the asset is recognised in profit or loss. In the previous financial year, leasehold land that normally had an indefinite economic life and title was not expected to pass to the

lessee by the end of the lease term was treated as an operating lease. The payment made on entering into or acquiring leasehold land that was accounted for as an operating lease represents prepaid lease payments.

During the financial year, the Group adopted the amendments made to FRS 117 - Leases in relation to the classification of lease

of land. The Group’s leasehold land which in substance is a finance lease has been reclassified as property and equipment and measured as such retrospectively.



30 june 2011


(g) Borrowingcosts

Borrowing costs, directly attributable to the acquisition and construction of property, plant and equipment are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use or sale.

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

(h) Investmentproperties

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

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

Investment properties are derecognised when they have either been disposed off or when the investment property is permanently

withdrawn from use and no future benefit is expected from its disposal. On the derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount is

recognised in profit or loss. (i) Researchanddevelopmentexpenditure Research expenditure is recognised as an expense when it is incurred. Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as

long-term assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised if, and only if an entity can demonstrate all of the following:-

(i) its ability to measure reliably the expenditure attributable to the asset under development; (ii) the product or process is technically and commercially feasible; (iii) its future economic benefits are probable; (iv) its ability to use or sell the developed asset; and (v) the availability of adequate technical, financial and other resources to complete the asset under development.

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development

expenditure initially recognised as an expense is not recognised as assets in the subsequent period. The development expenditure is amortised on a straight-line method over a period of not exceeding 5 years when the products

are ready for sale or use. In the event that the expected future economic benefits are no longer probable of being recovered, the development expenditure is written down to its recoverable amount.




(j) Impairment

(i) Impairment of financial assets All financial assets (other than those categorised at fair value through profit or loss), are assessed at the end of each

reporting period whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. For an equity instrument, a significant or prolonged decline in the fair value below its cost is considered to be objective evidence of impairment.

An impairment loss in respect of held-to-maturity investments and loans and receivables financial assets is recognised in

profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is measured as the

difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the fair value reserve. In addition, the cumulative loss recognised in other comprehensive income and accumulated in equity under fair value reserve, is reclassified from equity to profit or loss.

With the exception of available-for-sale 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 investment 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 available-for-sale equity instruments, 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 made is recognised in other comprehensive income.

(ii) Impairment of non-financial assets The carrying values of assets, other than those to which FRS 136 - Impairment of Assets does not apply, are reviewed at

the end of each reporting period for impairment when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The recoverable amount of the assets is the higher of the assets’ fair value less costs to sell and their value-in-use, which is measured by reference to discounted future cash flow.

An impairment loss is recognised in profit or loss immediately. In respect of assets other than goodwill, and when there is a change in the estimates used to determine the recoverable

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

(k) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis, and comprises the purchase price and incidentals incurred in bringing the inventories to their present location and condition.

Net realisable value represents the estimated selling price less the estimated costs necessary to make the sale. Where necessary,

due allowance is made for all damaged, obsolete and slow-moving items.



30 june 2011


(l) Incometaxes

Income taxes for the year comprise current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the

tax rates that have been enacted or substantively enacted at the end of the reporting period. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and

liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from goodwill or excess of

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

Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent

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

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

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

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

tax liabilities and when the deferred income taxes relate to the same taxation authority. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised

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

(m) Cashandcashequivalents

Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, bank overdrafts and short-term highly liquid

investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(n) Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of

resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount can be made. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the provision is the present value of the estimated expenditure required to settle the obligation.




(o) Employeebenefits

(i) Short term benefits Wages, salaries, paid annual leave, bonuses and non-monetary benefits are accrued in the period in which the associated

services are rendered by employees of the Group. (ii) Defined contribution plans The Group’s contributions to defined contribution plans are recognised in profit or loss in the period to which they relate.

Once the contributions have been paid, the Group has no further liability in respect of the defined contribution plans. (iii) Share-based payment transactions At grant date, the fair value of options granted to employees is recognised as an employee expense, with a corresponding

increase in equity, over the period in which the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual number of share options that are expected to vest.

(p) Relatedparties

A party is related to an entity if:-

(i) directly, or indirectly through one or more intermediaries, the party:-

• controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);

• has an interest in the entity that gives it significant influence over the entity; or • has joint control over the entity;

(ii) the party is an associate of the entity; (iii) the party is a joint venture in which the entity is venturer; (iv) the party is a member of the key management personnel of the entity or its parent; (v) the party is a close member of the family of any individual referred to in (i) or (iv); (vi) the party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power

in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or (vii) the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is related party of

the entity.

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



30 june 2011


(q) Contingentliabilities

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

A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of

an outflow occurs so that the outflow is probable, it will then be recognised as a provision. (r) Governmentgrants Grants from the government are recognised initially as deferred income at their fair value where there is a reasonable assurance

that the grant will be received and the Group will comply with all attached conditions. Grants that compensate the Group for expenses incurred are recognised in profit or loss over the periods necessary to match the

grants with the related costs which they are intended to compensate on a systematic basis. Grants that compensate the Group for the cost of an asset are recognised in profit or loss over the expected useful life of the

relevant asset on a systematic basis. (s) SegmentalInformation Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses

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

Most segment assets can be directly attributed to the segments on a reasonable basis. Segment assets do not include income tax

assets, whilst segment liabilities do not include income tax liabilities and borrowings from financial institutions. Segment revenue, expenses and results include transfers between segments. The prices charged on intersegment transactions

are based on normal commercial terms. These transfers are eliminated on consolidation.

(t) Revenuerecognition

(i) Sale of goods Revenue is recognised upon delivery of goods and customers’ acceptance and where applicable, net of returns and trade

discounts. (ii) Interest income Interest income is recognised on an accrual basis. (iii) Management fee Management fee is recognised on an accrual basis. (iv) Rental income

Rental income is recognised on an accrual basis.



4. REVENUE

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Sale of goods 112,841 102,357 - - Management fees - - 720 300 112,841 102,357 720 300

5. OTHEROPERATINGINCOME

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Amortisation of deferred income 20 26 - - Bad and doubtful debts recovered 184 213 - - Fair value gain on derivatives assets 51 - - - Gain on foreign currency exchange -realised 1,034 2,032 - - Gain on disposal of property, plant and equipment 53 33 - - Interest income 49 47 - - Rental income from investment properties 58 33 - - Miscellaneous 103 122 - 21 1,552 2,506 - 21

6. EMPLOYEEBENEFITSEXPENSES

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Short term employee benefits 23,248 20,760 240 221 Contributions to defined contribution plan 2,065 1,873 5 5 Share options granted under ESOS 6 - 6 - Other personnel expenses 1,389 1,015 1 - 26,708 23,648 252 226

Included in employee benefits expenses are key management personnel compensation as disclosed in Note 30(d) to the financial

statements.



30 june 2011

7. FINANCECOSTS

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Interest expense on: - Term loans 5,723 4,311 - - - Other bank borrowings 1,281 810 - 1 7,004 5,121 - 1 Less: Interest expense capitalised in property, plant and equipment (2,321) (4,274) - -

Interest expense recognised in the income statement 4,683 847 - 1

8. (LOSS)/PROFITBEFORETAXATION The following amounts have been included in arriving at (loss)/profit before taxation: Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Auditors’ remuneration: - statutory audit 47 43 13 12 - other services 71 110 10 66 Bad debts written off 4 1 - - Depreciation and amortisation: - property, plant and equipment 5,703 2,927 - - - investment properties 26 26 - - - development expenditure 20 17 - - Direct operating expenses arising from investment properties: - rental generating properties 94 10 - - - non-rental generating properties 4 4 - - Directors’ remuneration: - fees 197 182 197 182 - emoluments 1,537 1,408 - - - other short term employee benefits 184 162 - - Inventories written down 1,436 933 - - Loss on foreign exchange: - realised 1,667 1,084 - - - unrealised 245 1,031 - - Impairment loss on development expenditure 1,057 - - - Impairment loss on trade receivables 1,920 294 - - Property, plant and equipment written off 101 - - - Rental of equipment 63 39 - - Rental of premises 248 231 - - Research and development expenses 681 425 - -



9. INCOMETAXEXPENSE

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Current income tax: Tax expense for the year 60 6 60 - Over provision in prior years - (11) - - 60 (5) 60 - Deferred tax (Note 15): Reversal of deferred tax asset - 750 - - Total income tax expense 60 745 60 -

A reconciliation of income tax expense applicable to (loss)/profit before taxation at the statutory tax rate to income tax expense at the

effective tax rate of the Group and of the Company is as follows: 2011 2010 RM’000 RM’000

Group (Loss)/profit before taxation (2,079) 12,466 Taxation at Malaysian statutory tax rate of 25% (520) 3,117 Effect of expenses not deductible for tax purposes 178 192 Effect of double deduction tax incentives (3,279) (3,303) Effect of utilisation of previously unrecognised unutilised tax losses (41) - Deferred tax assets not recognised on current year unutilised business losses and unabsorbed capital allowances 3,722 - Over provision of income tax in prior years - (11) Reversal of deferred tax assets - 750

Income tax expense 60 745 Company Profit/(loss) before taxation 281 (238) Taxation at Malaysian statutory tax rate of 25% 70 (60) Effect of expenses not deductible for tax purposes 31 60 Effect of utilisation of previously unrecognised unutilised tax losses (41) - Income tax expense 60 -



30 june 2011

10. (LOSS)/EARNINGSPERSHARE (i) Basic

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

2011 2010

(Loss)/profit after taxation (RM’000) (2,139) 11,721 Weighted average number of ordinary shares in issue (‘000) 123,806 123,806 Basic (loss)/earnings per share (sen) (1.73) 9.47

(ii) Diluted

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

2011 2010

(Loss)/profit after taxation (RM’000) (2,139) 11,721 Weighted average number of ordinary shares in issue (‘000) 123,806 123,806 Adjustment for ESOS (‘000) 252 - 124,058 123,806 Diluted (loss)/earnings per share (sen) (1.72) 9.47

The effect on the diluted earnings per share for the preceding financial year arising from the assumed conversion of the existing ESOS was anti-dilutive. Accordingly, the diluted earnings per share for the preceding financial year was presented as equal to basic earnings per share.



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11. PROPERTY,PLANTANDEQUIPMENT(continued) Accumulated Carrying Cost depreciation amount RM’000 RM’000 RM’000

At30June2011 Industrial buildings and installations 56,280 (4,472) 51,808 Leasehold land 4,892 (547) 4,345 Machinery and equipment 127,838 (15,833) 112,005 Motor vehicles 1,978 (1,372) 606 Office equipment 360 (164) 196 Computer equipment 2,573 (1,254) 1,319 Furniture and fittings 2,109 (356) 1,753 Renovation 142 (47) 95 Total at 30 June 2011 196,172 (24,045) 172,127 At30June2010(restated) Industrial buildings and installations 14,455 (3,598) 10,857 Leasehold land 4,892 (495) 4,397 Machinery and equipment 21,216 (13,737) 7,479 Motor vehicles 2,089 (1,357) 732 Office equipment 625 (438) 187 Computer equipment 3,883 (2,025) 1,858 Furniture and fittings 969 (702) 267 Renovation 130 (35) 95 Building and machinery under construction 137,904 - 137,904 Total at 30 June 2010 186,163 (22,387) 163,776

(a) The Group’s property, plant and equipment include borrowing costs arising from bank loans borrowed specifically for the purpose of the construction of the building and machinery. During the financial year, the borrowing costs capitalised as property, plant and equipment amounted to RM2,321,000 (2010: RM4,274,000).

(b) The carrying amount of property, plant and equipment pledged to secure borrowings as referred to in Note 27(i) are as follows:- Group 2011 2010 RM’000 RM’000 Industrial buildings and installations 51,808 10,857 Leasehold land 4,345 4,397 Machinery and equipment 100,120 - Furniture and fittings 1,030 - Building and machinery under construction - 137,904 157,303 153,158



30 june 2011

12. INVESTMENTPROPERTIES

Group 2011 2010 RM’000 RM’000 Cost At 1 July/30 June 2,105 2,105 Accumulateddepreciation At 1 July 456 430 Depreciation charge for the year 26 26 At 30 June 482 456 Netcarryingamount 1,623 1,649

The investment properties comprise freehold land and buildings, which are charged as securities for borrowings granted to the Group as referred to in Note 27(i).

The fair value as at end of the reporting period has been arrived at on the basis of the Directors’ best estimate, by reference to a valuation

report carried out at the end of the prior reporting period and market evidence of transaction prices for similar properties. Valuations at the end of the prior reporting period were performed by accredited independent valuers based on comparison method. The directors are of their opinion that the fair value of the investment properties as at the end of the reporting period approximates its fair value as at the end of the prior reporting period, which amounted to RM2,540,000.

13. PREPAIDLANDLEASEPAYMENTS

Group 2010 RM’000

Leasehold land, at cost - Previously reported as at 30 June 4,892 - Effects of FRS 117 (4,892)

- Restated as at 30 June -

Accumulated amortisation - Previously reported as at 30 June (495) - Effects of FRS 117 495

- Restated as at 30 June -

The Group has adopted the amendments made to FRS 117 - Leases during the financial year. The Group has reassessed and determined

that the leasehold land of the Group is in substance a finance lease and has been reclassified as property, plant and equipment. This change in accounting policy has been made retrospectively in accordance with the transitional provisions of the amendments.



14. DEVELOPMENTEXPENDITURE

Group 2011 2010 RM’000 RM’000 Cost 1,835 1,664 Accumulated amortisation and impairment (1,835) (758) Net carrying amount - 906 At 1 July 906 671 Additional development expenditure capitalised 171 252 Amortisation (20) (17) Impairment loss (1,057) - At 30 June - 906

During the financial year, an impairment loss was recognised to write-off the carrying amount of development expenditure, following a review of the recoverable amounts of the development expenditure.

15. DEFERREDTAXASSETS

Group 2011 2010 RM’000 RM’000 At 1 July - 750 Recognised in the income statement (Note 9) - (750) At 30 June - - Presented after appropriate offsetting as follows: Deferred tax liabilities (13,118) (3,765) Deferred tax assets 13,118 3,765 - -



30 june 2011

15. DEFERREDTAXASSETS(continued)

The component and movement of deferred tax liabilities and assets during the financial year are as follows: Deferredtaxliabilities:-

Development Accelerated expenditure capital capitalised allowance Total RM’000 RM’000 RM’000

At 1 July 2009 (168) (2,643) (2,811) Recognised in the income statement (58) (896) (954)

At 30 June 2010 (226) (3,539) (3,765) Recognised in the income statement 226 (9,579) (9,353)

At 30 June 2011 - (13,118) (13,118) Deferredtaxassets:- Unutilised capitaland industrial Unabsorbed building Provision Payables taxlosses allowances Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 July 2009 281 1,810 1,190 231 49 3,561 Recognised in the income statement - (729) 373 (231) 791 204 At 30 June 2010 281 1,081 1,563 - 840 3,765 Recognised in the income statement - (18) (1,563) 10,662 272 9,353 At 30 June 2011 281 1,063 - 10,662 1,112 13,118 At the end of the reporting period, the Group has unutilised tax losses and unabsorbed capital allowances of approximately RM14,854,000

and RM2,108,000 respectively (2010: RM2,076,000 and RM Nil respectively) that are available for offset against future taxable profits of the Group, for which no deferred tax asset is recognised due to uncertainty of its recoverability in view of the expected availability of additional tax incentives.



16. INVESTMENTINSUBSIDIARIES

Company 2011 2010 RM’000 RM’000 Unquoted shares, at valuation 110,256 90,443

Subsidiaries Details of the subsidiaries are as follows: Countryof Effectiveequity Nameofsubsidiaries incorporation interest Principalactivities 2011 2010 % % Kotra Pharma (M) Sdn. Bhd. Malaysia 100 100 Development, manufacture and trading of pharmaceutical and healthcare products Appeton Healthcare Sdn. Bhd. Malaysia 100 100 Dormant The fair value of the investment in subsidiaries was determined using the discounted cash flow approach. These calculations use 10

years’ post-tax cash flow projections approved by the Board of Directors. Cash flows beyond financial year 2012 are extrapolated using the estimated growth rates stated below.

Fair value was determined by discounting the future cash flows expected from the operations of the subsidiaries over the next 10 years

based on the following key assumptions:

(i) The subsidiaries will continue in operations over the next 10 years; (ii) Sales are expected to grow at rates ranging between 12.5% to 17.9% for financial year (“FY”) 2012 to FY 2016, and a declining

growth rate thereafter from FY 2017 to FY 2021; (iii) Gross profit margin is expected to remain constant; and (iv) Discount rate is based on the weighted average cost of capital at 8.0% per annum.

The values assigned to the key assumptions represent management’s assessment of future trends in the industry in which the subsidiary

operates and is based on both external sources and internal sources (historical data). The above estimates are particularly sensitive in the following areas:

(i) a 1% increase or decrease in gross profit margin would have resulted in an increase or decrease in the fair values of the investment in subsidiaries of RM12,797,000.

(ii) a 1% increase or decrease in the cost of capital used would have resulted in a decrease or increase in the fair values of the

investment in subsidiaries of RM2,378,000.



30 june 2011

17. INVENTORIES

Group 2011 2010 RM’000 RM’000 At cost: Raw materials 11,549 11,627 Work-in-progress 918 98 Finished goods 11,117 15,381 23,584 27,106 At net realisable value: Finished goods - 1,121 23,584 28,227

18. TRADERECEIVABLES

Group 2011 2010 RM’000 RM’000 Trade receivables 37,392 38,397 Less: Allowance for impairment losses (2,086) (768) 35,306 37,629 Allowance for impairment losses:- At 1 July 768 716 Charge for the year 1,920 294 Written off (418) (29) Reversal of impairment losses (184) (213) At 30 June 2,086 768 The Group’s normal trade credit terms range from 60 to 120 days. Other credit terms are assessed and approved on a case-by-case

basis. Included in trade receivables are amounts due from related parties as disclosed in Note 30(c) to the financial statements. The Group has

no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of debtors.



19. OTHERRECEIVABLES

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Deposits 250 140 1 1 Other receivables 1,161 936 - - Advances to suppliers of property, plant and equipment 911 890 - - Prepayments 172 87 - - Tax recoverable 210 225 - 14 2,704 2,278 1 15

20. AMOUNTSDUEFROMSUBSIDIARIES The amounts due from subsidiaries are non-trade in nature, unsecured, interest-free and repayable on demand. 21. DERIVATIVEASSETS Derivative assets are forward foreign currency contracts to sell United States Dollar (USD). These forward foreign exchange sale

contracts were entered into to hedge against fluctuations of exchange rates in foreign currencies. The contract/notional amount at the end of the reporting period was RM5,515,000. The settlement dates of these contracts range between 1 to 12 months after the end of the reporting period.

During the financial year, the Group recognised a gain of RM51,000 arising from fair value changes of derivative assets. The fair value

changes are attributable to changes in foreign exchange spot and forward rate. The method and assumptions applied in determining the fair value of derivative are disclosed in Note 34(d)(iii) to the financial statements.

22. CASHANDCASHEQUIVALENTS

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Cash and bank balances 11,823 8,132 300 28 Less: Bank overdrafts (Note 27) (2,027) (8,418) - - Cash and cash equivalents 9,796 (286) 300 28



30 june 2011

23. SHARECAPITAL

Numberofordinary sharesofRM0.50each Amount 2011 2010 2011 2010 ‘000 ‘000 RM’000 RM’000 Authorised 200,000 200,000 100,000 100,000 Issued and fully paid 123,806 123,806 61,903 61,903

An Employees’ Share Option Scheme (“ESOS”) was approved by the Securities Commission on 22 April 2003 and the shareholders at an Extraordinary General Meeting held on 10 July 2003.

The principal features of the ESOS are as follows:-

(a) The maximum number of new ordinary shares of RM0.50 each to be offered shall not exceed 15% of the issued and paid-up share capital of the Company at any point of time during the existence of the ESOS.

(b) Eligible directors or employees of the Group are directors or employees of the Group who have been confirmed in the service of the

Group prior to the offer or, if the employee is employed under contract basis, the contract should be for a duration of at least one (1) year.

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

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

(d) An Option is personal to the grantee. Save and except as provided in Clause 20.1 of the Bye-Laws, an Option shall be non-assignable

and non-transferable. (e) The ESOS is in force for a period of 10 years from 24 July 2003 and expires on 23 July 2013.



23. SHARECAPITAL(continued)

The movements in the share options during the financial year were as follows: Exercise priceper Exercise ordinary Balanceat Duringtheyear Balanceat Dateofoffer period share 1.7.2010 Granted Lapsed 30.6.2011 RM 24.7.2003 24.7.2004 0.58 1,533,640 - (27,720) 1,505,920 24.7.2003 24.7.2006 0.58 3,067,720 - (55,440) 3,012,280 24.7.2003 24.7.2009 0.58 3,081,360 - (55,440) 3,025,920 15.6.2004 15.6.2005 0.51 218,680 - (3,960) 214,720 15.6.2004 15.6.2007 0.51 437,360 - (7,920) 429,440 15.6.2004 15.6.2010 0.51 437,360 - (7,920) 429,440 12.7.2005 12.7.2006 0.53 167,000 - (110,000) 57,000 12.7.2005 12.7.2008 0.53 419,600 - (220,000) 199,600 12.7.2005 12.7.2011 0.53 419,600 - (220,000) 199,600 21.7.2006 21.7.2007 0.53 179,200 - - 179,200 21.7.2006 21.7.2009 0.53 378,400 - - 378,400 21.7.2006 21.7.2012 0.53 378,400 - - 378,400 2.7.2007 2.7.2008 0.78 112,200 - (22,000) 90,200 2.7.2007 2.7.2010 0.78 224,400 - (44,000) 180,400 2.7.2007 2.7.2012 0.78 224,400 - (44,000) 180,400 11,279,320 - (818,400) 10,460,920

Options exercisable in a particular year but not exercised can be carried forward to the subsequent years provided they are exercised prior to the expiry date of the ESOS on 23 July 2013.

24. RETAINEDEARNINGS Subject to the agreement of the tax authorities, at the end of the reporting period, the Company has:-

(a) tax-exempt income of approximately RM5,296,000 (2010: RM5,296,000) available for the purpose of paying tax-exempt dividends; and

(b) tax credits under Section 108 of the Income Tax Act, 1967 to frank the payment of dividends of approximately RM942,000 (2010:

RM942,000) out of its retained earnings. The balance of the retained earnings, if distributed as dividends, will be taxed at the statutory tax rate. At the end of the reporting period, the Company has not elected for the single tier tax system. When the tax credit balance is fully utilised,

or by 31 December 2013 at the latest, the Company will automatically move to the single tier tax system. Under the single tier tax system, tax on the Company’s profit is a final tax, and dividends distributed to the shareholders will be exempted from tax.



30 june 2011

25. OTHERRESERVES

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Share premium reserve (a) 3 3 3 3 Share options reserve (b) 317 311 317 311 Other reserve (c) - - 44,295 36,482 320 314 44,615 36,796

(a) Share premium reserve

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

(b) Share options reserve

GroupandCompany 2011 2010 RM’000 RM’000 Share options granted under ESOS: At 1 July 311 314 Addition during the year 6 - Share options lapsed - (3) At 30 June 317 311

The share option reserve represents the equity-settled share options granted to employees. This reserve is made up of the cumulative value of services received from employees recorded on grant of share options.

(c) Other reserve

Other reserve of the Company represents the changes in the fair value of the investment in subsidiary less amount utilised for bonus share issue.



26. DEFERREDINCOME

Group 2011 2010 RM’000 RM’000 Cost 261 261 Less: Deferred income recognised to date (261) (241) - 20 At 1 July 20 46 Recognised as income during the financial year (20) (26) At 30 June - 20

Deferred income relates to government grant received by the Group in respect of purchase of plant and equipment. 27. BORROWINGS

Group 2011 2010 RM’000 RM’000 Shorttermborrowings Unsecured: Bank overdraft 2,027 8,418 Bankers’ acceptances 8,459 8,286 Revolving credit 9,000 - 19,486 16,704 Secured: Bankers’ acceptances 4,838 8,301 Term loans 6,304 4,556 30,628 29,561 Longtermborrowings Secured: Term loans 87,896 85,194 Totalborrowings Bank overdraft (Note 22) 2,027 8,418 Bankers’ acceptances 13,297 16,587 Revolving credit 9,000 - Term loans 94,200 89,750 118,524 114,755



30 june 2011

27. BORROWINGS(continued)

Group 2011 2010 RM’000 RM’000 Maturityofborrowings Within one year 30,628 29,561 More than 1 year and less than 2 years 8,386 8,442 More than 2 years and less than 5 years 19,798 16,955 Five years or more 59,712 59,797 118,524 114,755

The weighted average effective interest rates per annum at the end of the reporting period of borrowings, excluding finance lease

payables, were as follows: Group 2011 2010 % % Bank overdrafts 7.40 6.24 Bankers’ acceptances 4.44 2.89 Revolving credit 7.13 - Term loans 6.51 5.59

The unsecured short term borrowings of the Group are guaranteed by the Company. The secured short term borrowings and term loans are secured by: (i) fixed charges over certain assets of the Group as disclosed in Note 11 and Note 12 to the financial statements; (ii) specific debenture for RM25,000,000 over a subsidiary’s machineries; (iii) debentures over a subsidiary’s all fixed and floating assets both present and future; and (iv) corporate guarantee from the Company. 28. TRADEPAYABLES The normal trade credit terms granted to the Group range from 60 to 90 days. Included in trade payables are amounts due to related

parties as disclosed in Note 30(c) to the financial statements.



29. OTHERPAYABLES

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Accruals 1,966 2,334 57 102 Payroll liabilities 3,229 3,427 - - Due to suppliers of property, plant and equipment 4,884 2,139 - - Other payables 2,678 1,243 - - Provision for taxation 29 - 29 - 12,786 9,143 86 102 30. RELATEDPARTYDISCLOSURES (a) For the purpose of the financial statements, the Group and the Company have related party relationships with:-

(i) its subsidiaries and directors; (ii) the directors who are key management personnel; (iii) companies in which key management personnel have significant financial interests; and (iv) a company in which a close member of the family of certain key management personnel has significant financial interests.

(b) In addition to the information disclosed elsewhere in the financial statements, the Group and the Company carried out the following

transactions with its related parties during the financial year:- 2011 2010 RM’000 RM’000 Group Companies in which key management personnel have significant financial interests: - contract manufacturing cost paid/payable 13 - - rental of premises paid/payable 96 95 - royalty paid/payable 24 32 A company in which a close member of the family of certain key management personnel has significant financial interests: - rental of premises received/receivable 29 - - sales of goods 777 590 Company A subsidiary - management fee received/receivable 720 300



30 june 2011

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

Group 2011 2010 RM’000 RM’000 Companies in which key management personnel have significant financial interests: - trade receivables - 16 - trade payables 98 100 A company in which close members of the family of certain key management personnel have significant financial interests: - trade receivables 259 188 - trade payables 24 32

(d) Compensation of key management personnel

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Directors’ remuneration - fees 197 182 197 182 - emoluments 1,537 1,408 - - - other short term employee benefits (including estimated monetary value of benefits-in-kind) 189 167 4 4 1,923 1,757 201 186

Executive directors of the Group and Company have been granted the following number of options under the ESOS: GroupandCompany 2011 2010 ’000 ’000 At 1 July 5,400 7,200 Lapsed - (1,800) At 30 June 5,400 5,400

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



31. CAPITALCOMMITMENTS

Group 2011 2010 RM’000 RM’000 For property, plant and equipment: - approved and contracted for 6,389 18,710 - approved but not contracted for 9,098 11,272

15,487 29,982 32. SEGMENTALREPORTING The segment information in respect of the Group’s operating segments for the year ended 30 June 2011 are as follows:- Local Export Total 2011 2010 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 External revenue 74,210 62,539 38,631 39,818 112,841 102,357 Profit/(loss) from operations 13,781 12,712 (760) 6,233 13,021 18,945

A reconciliation of total profit from operations to total consolidated (loss)/profit before tax is provided as follows:- Total 2011 2010 RM’000 RM’000 Profit from operations for reportable segments 13,021 18,945 Expenses managed on a central basis (11,969) (8,138) Other operating income 1,552 2,506

Consolidated profit from operations 2,604 13,313 Finance cost (4,683) (847)

Consolidated (loss)/profit before tax (2,079) 12,466 33. CONTINGENTLIABILITIES

Company 2011 2010 RM’000 RM’000 Corporate guarantee given to licensed banks for credit facilities granted to a subsidiary 118,524 114,755



30 june 2011

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

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

(a) Financialriskmanagementpolicies

The Group’s policies in respect of the major areas of treasury activity are as follows:-

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

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

The net unhedged financial assets/(financial liabilities) for the Group that are not denominated in their functional currencies

are as follows:- USD Euro SGD Total RM’000 RM’000 RM’000 RM’000

30.06.2011 Trade receivables 8,695 115 212 9,022 Other receivables 768 56 168 992 Cash and bank balances 3,365 1 229 3,595 Bankers’ acceptances (1,609) (746) - (2,355) Trade payables (568) (2,168) (38) (2,774) Other payables (472) (194) (1) (667) Net exposure 10,179 (2,936) 570 7,813 30.06.2010 Trade receivables 20,851 - 263 21,114 Other receivables 628 247 - 875 Cash and bank balances 2,715 31 126 2,872 Bankers’ acceptances (5,314) (1,347) - (6,661) Trade payables (1,029) (1,525) (6) (2,560) Other payables (328) - - (328) Net exposure 17,523 (2,594) 383 15,312



34. FINANCIALINSTRUMENTS(continued)

(a) Financialriskmanagementpolicies(continued)

(i) Foreign currency risk (continued)

Foreign currency risk sensitivity analysis The following table details the sensitivity analysis to a reasonably possible change in the foreign currencies as at the end of

the reporting period, with all other variables held constant:- Group 2011 Increase/ (decrease) RM’000

Effectsonprofitaftertaxation United States Dollar - strengthened by 5% 383 - weakened by 5% (383) Euro Dollar - strengthened by 5% (111) - weakened by 5% 111 Singapore Dollar - strengthened by 5% 23 - weakened by 5% (23)

(ii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes

in market interest rates. The Group’s exposure to interest rate risk arises mainly from interest-bearing financial assets and liabilities. The Group’s policy is to obtain the most favourable interest rates available. Any surplus funds of the Group will be placed with licensed financial institutions to generate interest income.

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

constant, the Group’s profit after taxation would have been RM889,000 lower/higher, arising mainly as a result of higher/lower interest expense on floating rate bank borrowings. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.



30 june 2011



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

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

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of the trade

and other receivables as appropriate. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. Impairment is estimated by management based on prior experience and the current economic environment.

The Group has no significant concentration of credit risk that may arise from exposure to a single debtor or to groups of

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

Ageing analysis The ageing analysis of the Group’s trade receivables as at 30 June are as follows:-

Gross Individual Carrying amount Impairment amount RM’000 RM’000 RM’000

30June2011 Not past due 28,938 (127) 28,811 Past due:- - less than 3 months 5,728 (20) 5,708 - 3 to 6 months 979 (192) 787 - more than 6 months 1,747 (1,747) - 37,392 (2,086) 35,306

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

Trade receivables that are past due but not impaired The Group believes that no impairment allowance is necessary in respect of these trade receivables. They are substantially

companies with good collection track record and no recent history of default.





(iii) Credit risk (continued) Trade receivables that are neither past due nor impaired A significant portion of trade receivables that are neither past due nor impaired 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 120 days, which are deemed to have higher credit risk, are monitored individually.

(iv) Liquidity risk Liquidity risk arises mainly from general funding and business activities. The Group practises prudent risk management by

maintaining sufficient cash balances and the availability of funding through certain committed credit facilities.

The following table sets out the maturity profile of the financial liabilities as at the end of the reporting period based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on the rates at the end of the reporting period):-

Weighted Contractual average undiscounted Within 1to5 Over effective cashflows 1year years 5years rate(%) RM’000 RM’000 RM’000 RM’000 2011 Group Bankers’ acceptances 4.44 13,297 13,297 - - Revolving credit 7.13 9,000 9,000 - - Term loans 6.51 178,598 11,458 51,636 115,504 Bank overdrafts 7.40 2,027 2,027 - - Trade payables - 15,214 15,214 - - Other payables - 12,786 12,786 - - 230,922 63,782 51,636 115,504 Company Other payables - 86 86 - -



30 june 2011



(iv) Liquidity risk (continued)

Weighted Contractual average undiscounted Within 1to5 Over effective cashflows 1year years 5years rate(%) RM’000 RM’000 RM’000 RM’000 2010 Group Bankers’ acceptances 2.89 16,587 16,587 - - Term loans 5.59 178,379 10,934 47,543 119,902 Bank overdrafts 6.24 8,418 8,418 - - Trade payables - 15,852 15,852 - - Other payables - 9,143 9,143 - - 228,379 60,934 47,543 119,902 Company Other payables - 102 102 - -

(b) Capitalriskmanagement

The Group manages its capital to ensure that entities within the Group will be able to maintain an optimal capital structure so as to support their businesses and maximise shareholder(s) value. To achieve this objective, the Group may make adjustments to the capital structure in view of changes in economic conditions, such as adjusting the amount of dividend payment, returning of capital to shareholders or issuing new shares.

The Group manages its capital based on debt-to-equity ratio. The Group’s strategies were unchanged from the previous financial

year. The debt-to-equity ratio is calculated as net debt divided by total equity. Net debt is calculated as borrowings plus trade and other payables less cash and cash equivalents.




(b) Capitalriskmanagement(continued)

The debt-to-equity ratio of the Group as at the end of the reporting period was as follows:- Group 2011 2010 RM’000 RM’000 Borrowings 118,524 114,755 Trade payables 15,214 15,852 Other payables 12,786 9,143 146,524 139,750 Less: Cash and bank balances (11,823) (8,132)

Net debt 134,701 131,618 Total equity 100,694 102,827 Debt-to-equity ratio 1.34 1.28

Under the requirement of Bursa Malaysia Practice Note No. 17/2005, the Company is required to maintain a consolidated shareholders’ equity (total equity attributable to owners of the Company) equal to or not less than the 25% of the issued and paid-up share capital (excluding treasury shares) and such shareholders’ equity is not less than RM40 million. The Company has complied with this requirement.

The Group did not breach any gearing requirement during the financial years ended 30 June 2010 and 30 June 2011.

(c) Classificationoffinancialinstruments

Group Company 2011 2011 RM’000 RM’000 Financialassets Loans and receivables financial assets Trade receivables 35,306 - Other receivables 1,161 - Amounts due from subsidiaries - 398 Cash and bank balances 11,823 300

48,290 698 Fair value through profit or loss Derivative assets 51 - Available-for-sale financial asset Investment in subsidiaries - 110,256



30 june 2011


(c) Classificationoffinancialinstruments(continued) Group Company 2011 2011 RM’000 RM’000 Financialliabilities Other financial liabilities Bankers’ acceptances 13,297 - Revolving credit 9,000 - Term loans 94,200 - Bank overdrafts 2,027 - Trade payables 15,214 - Other payables 9,528 57 143,266 57

(d) Fairvaluesoffinancialinstruments

The carrying amounts of the financial assets and financial liabilities reported in the financial statements approximated their fair values.

The following summarises the methods used to determine the fair values of the financial instruments:-

(i) The financial assets and financial liabilities maturing within the next 12 months approximated their fair values due to the

relatively short-term maturity of the financial instruments.

(ii) The carrying amounts of the term loans approximated their fair values as these instruments bear interest at variable rates.

(iii) The fair value of forward foreign currency contracts is estimated by discounting the difference between the contractual

forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate. 35. COMPARATIVEFIGURES The following figures have been reclassified to conform with the adoption of the amendments to FRS 117 - Leases as disclosed in Note

2(a)(iv) to the financial statements:- As As previously restated reported RM’000 RM’000

Consolidated Statement of Financial Position (Extract):- Property, plant and equipment 163,776 159,379 Prepaid land lease payments - 4,397


36. SUPPLEMENTARYINFORMATION-DISCLOSUREOFREALISEDANDUNREALISEDPROFITS/LOSSES The breakdown of the retained profits/(accumulated losses) of the Group and of the Company as at the end of the reporting period into

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

Group Company 2011 2011 RM’000 RM’000 Total retained profit/(accumulated losses): - realised 38,666 4,351 - unrealised (195) - Total Group retained earnings as at 30 June 38,471 4,351

Supplementary Information30 june 2011


List Of Properties

Title/ Description LandArea/ Built-Up Approximate NetBookValueLocation &Usage ExistingUse Tenure Area(sq.m.) Ageof asat Building 30.06.11 (RM)

H.S.(D) 35311 & H.S. (D) 35312. Two joined plots of 17,611 sq.m./ Leasehold 5,120.04 14 years 12,209,851Lot Nos. PT4239 & PT4240, land with a single pharmaceutical expiring onMukim of Cheng, storey factory and manufacturing 14.8.2096District of Melaka Tengah, two storey plantMelaka office block Warehouse and Warehouse and 6,613.00 11 years production area production area

GPP 7972 & GPP 5156, Two plots of land 2,252.10 sq.m./ Freehold 1,539.31 Office & Store 1,285,106Lot Nos. 43 & 45, with a 2 ½ storey office, store & - 19 yearsTown Area III (3), office building, a warehouse WarehouseDistrict of Melaka Tengah, store and a -15 yearsMelaka warehouse

Geran 4612, Lot No. 42, Commercial site 636.2 sq.m./ Freehold 488.9 36 to 40 years 338,000Town Area III (3), erected with a double double storeyDistrict of Melaka Tengah, storey shophouse shophouseMelaka cum storehouse

PN 46842. Lot 9262, Two plot of land 23,614 sq.m./ Leasehold 22,808 1 year 43,945,182Mukim of Cheng, amalgamated into pharmaceutical expiring onDistrict of Melaka Tengah, one plot with a manufacturing 15.8.2096Melaka three storey plant pharmaceutical factory

57,778,139


Notice Of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Twelfth Annual General Meeting (AGM) of the Company will be held at the Bendahara 1, Level 2, Renaissance Hotel Melaka, Jalan Bendahara, 75100 Melaka on Friday, 2 December 2011 at 10.00 a.m. for the following purposes:-

AGENDA

(Resolution1)

(Resolution2)

(Resolution3)

(Resolution4)

(Resolution5)(Resolution6)

(Resolution7)

(Resolution8)

1. To receive the Audited Financial Statements for the financial year ended 30 June 2011 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ fees for the financial year ended 30 June 2011. 3. To consider and, if thought fit, to pass the following ordinary resolutions pursuant to Section 129(6) of the Companies

Act, 1965:-

i. That pursuant to Section 129(6) of the Companies Act, 1965, Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman, who has exceeded the age of 70 years be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting.

ii. That pursuant to Section 129(6) of the Companies Act, 1965, Omar bin Md. Khir, who has exceeded the age of 70 years be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting.

4. To re-elect the following Directors who retire pursuant to Article 97(1) of the Company’s Articles of Association, who

being eligible, offered themselves for re-election:-

(a) Y. Bhg. Datuk Piong Teck Yen (b) Piong Teck Min 5. To re-appoint Crowe Horwath as Auditors of the Company until the conclusion of the next AGM and to authorise the

Directors to fix their remuneration. 6. AsSpecialBusiness

To consider and if thought fit, with or without modification, to pass the following resolutions as Ordinary Resolutions:-

OrdinaryResolutionI- AuthoritytoissuesharespursuanttoSection132DoftheCompaniesAct,1965

That subject to Section 132D of the Companies Act, 1965 and approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered to issue and allot shares in the Company, at any time to such persons and 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 ten per centum (10%) of the issued and paid-up share capital of the Company for the time being and the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad; AND THAT such authority shall commence immediately upon the passing of this resolution and continue to be in force until the conclusion of the next AGM of the Company.


Notice Of Annual General Meetingcontinued

OrdinaryResolutionII-Proposed Renewal of the Existing Shareholders’ Mandate for Recurrent Related PartyTransactionsofaRevenueorTradingNature

That subject to the Companies Act, 1965, the Memorandum and Articles of Association of the Company and Main Market Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to Kotra Industries Berhad and its subsidiary companies (the Group) to enter into any of the category of recurrent related party transactions of a revenue or trading nature as set out in Section 2.3 of the Circular to Shareholders dated 10 November 2011 with the related party mentioned therein which are necessary for its day-to-day operations subject further to the following:-

(a) the transactions are in the ordinary course of business and are on normal commercial terms which are not more favourable to the related party involved than those generally available to the public and on terms not to the detriment of the minority shareholders; and

(b) annual renewal and disclosure is made in the annual report of the aggregate value of transactions conducted pursuant to the shareholders’ mandate during the financial year based on the following information:

(i) the types of recurrent related party transactions made; and

(ii) the names of the related parties involved in each type of the recurrent related party transactions made and their relationship with the Company.

That such approval shall continue to be in force until:-

(i) the conclusion of the next AGM of the Company following the general meeting at which such Proposed Renewal of Shareholders’ Mandate was passed, at which time it will lapse, unless by resolution passed at the general meeting, the authority is renewed;

(ii) the expiration of the period within which the next AGM of the Company subsequent to the date it is required to be held pursuant to the provisions of the Companies Act, 1965; or

(iii) revoked or varied by resolution passed by the shareholders in an AGM or Extraordinary General Meeting,

whichever is earlier;

And that the Directors and/or any of them be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) to give effect to the transactions contemplated and/or authorised by this Ordinary Resolution.

7. To transact any other ordinary business of which due notice has been given.

By Order of the Board

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

Melaka10 November 2011

(Resolution9)


Notice Of Annual General Meetingcontinued

ExplanatoryNotesToSpecialBusiness:-

1. Authority to issue and allot shares pursuant to Section 132D of the Companies Act, 1965

The above Ordinary Resolution I, if passed, will empower the Directors of the Company to issue and allot shares at any time to such persons in their absolute discretion without convening a general meeting provided that the aggregate number of the shares issued does not exceed 10% of the issued share capital of the Company for the time being (hereinafter referred to as the ‘General Mandate’).

The new general mandate will enable the Directors to take swift action for allotment of shares for any possible fund raising activities, including but not limited to further placing of shares, for the purpose of funding future investment project(s), working capital and/or acquisition(s) and to avoid delay and cost in convening general meetings to approve such issue of shares.

The Company did not table any proposal for new allotment of shares pursuant to Section 132D of the Companies Act, 1965 at the Eleventh Annual General Meeting of the Company held on 22 December 2010.

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

The proposed adoption of the Ordinary Resolution II is intended to renew the Shareholders’ Mandate granted by the Shareholders of the Company at the Eleventh Annual General Meeting held on 22 December 2010. The Proposed Renewal of the Existing Shareholders’ Mandate will enable the Company to enter into recurrent related party transactions to facilitate transactions in the normal course of business of the Company which are transacted from time to time with the specified classes of related parties, provided that they are carried out on an arm’s length basis and on normal commercial terms and are not prejudicial to the shareholders on terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.

Notes:

(i) In respect of deposited security, only members whose names appear in the Record of Depositors on 24 November 2011 (“General Meeting Record of Depositors”) shall be eligible to attend the Meeting.

(ii) A member entitled to attend and vote at this Meeting is entitled to appoint more than two (2) proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation. If the proxy is not a member of the Company, he need not be an advocate, an approved company auditor or a person approved by the Registrar of Companies.

(iii) Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy.

(iv) The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under the corporation’s seal or under the hand of an officer or attorney duly authorised.

(v) The instrument appointing a proxy must be deposited at the Registered Office of the Company at Lot 1A, 6th Floor, Menara Pertam, Jalan BBP 2, Taman Batu Berendam Putra, 75350 Batu Berendam, Melaka not less than 48 hours before the time for holding the Meeting or at any adjournment thereof.


Analysis Of Shareholdingsas at 30 september 2011

Authorised Share Capital : RM100,000,000.00Issued and Paid Up Capital : RM61,902,781.50Class of Shares : Ordinary shares of RM0.50 eachVoting rights on show of hands : 1 voteVoting rights on a poll : 1 vote per ordinary share held

DISTRIBUTIONOFSHAREHOLDINGS

SizeofShareholdings No.ofShareholders % No.ofSharesHeld %Less than 100 shares 41 3.48 1,354 0.00100 to 1,000 shares 129 10.96 56,643 0.051,001 to 10,000 shares 672 57.09 2,989,100 2.4110,001 to 100,000 shares 274 23.28 7,747,672 6.26100,001 to less than 5% of issued shares 60 5.10 48,386,432 39.085% and above of issued shares 1 0.09 64,624,362 52.20Total 1,177 100.00 123,805,563 100.00

SUBSTANTIALSHAREHOLDERS

No.ofSharesHeldShareholder Direct % Indirect %Piong Nam Kim Holdings Sdn Bhd 64,624,362 52.20 0 0.00Estate of Piong Nam Kim @ Piong Pak Kim* 0 0.00 64,624,362 52.20Piong Teck Onn* 0 0.00 64,624,362 52.20Piong Teck Min** 1,276,220 1.03 64,998,212 52.50Y. Bhg. Datuk Piong Teck Yen* 2,200 0.00 64,624,362 52.20Chin Swee Chang^ 0 0.00 64,624,362 52.20Piong Teck They* 1,113,186 0.90 64,624,362 52.20Yong Soon Moi* 4,514,364 3.65 64,624,362 52.20

Notes:* Deemed interested by virtue of their interest in Piong Nam Kim Holdings Sdn Bhd pursuant to Section 6A of the Companies Act, 1965** Deemed interested by virtue of his interests in Piong Nam Kim Holdings Sdn Bhd and his wife (Tan Yeak Yan) and son (Piong Chee Keong) pursuant to Section 6A of the Companies

Act, 1965^ Deemed interested by virtue of her husband’s (Piong Teck Onn) interests in Piong Nam Kim Holdings Sdn Bhd pursuant to Section 6A of the Companies Act, 1965

DIRECTORS’SHAREHOLDINGS

No.ofSharesHeldShareholder Direct % Indirect %Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman 4,840 0.00 0 0.00Piong Teck Onn* 0 0.00 64,624,362 52.20Piong Teck Min** 1,276,220 1.03 64,998,212 52.50Y. Bhg. Datuk Piong Teck Yen* 2,200 0.00 64,624,362 52.20Chin Swee Chang^ 0 0.00 64,624,362 52.20Omar bin Md. Khir 868,060 0.70 0 0.00P’ng Beng Hoe 0 0.00 0 0.00Azhar bin Hussain 0 0.00 0 0.00Piong Chee Kien (Alternate Director) 0 0.00 0 0.00

Notes:* Deemed interested by virtue of their interest in Piong Nam Kim Holdings Sdn Bhd pursuant to Section 6A of the Companies Act, 1965** Deemed interested by virtue of his interests in Piong Nam Kim Holdings Sdn Bhd and his wife (Tan Yeak Yan) and son (Piong Chee Keong) pursuant to Section 6A of the Companies

Act, 1965^ Deemed interested by virtue of her husband’s (Piong Teck Onn) interests in Piong Nam Kim Holdings Sdn Bhd pursuant to Section 6A of the Companies Act, 1965


Analysis Of Shareholdingscontinuedas at 30 september 2011

THIRTY(30)LARGESTSHAREHOLDERS

No. Shareholders No.ofShares %

1. Piong Nam Kim Holdings Sdn Bhd 64,624,362 52.20

2. Amsec Nominees (Asing) Sdn Bhd Amtrustee Berhad for Galleon Asset Limited (CS-GALLEON) 6,125,402 4.95

3. Yong Soon Moi 4,514,364 3.65

4. JF Apex Nominees (Tempatan) Sdn Bhd Pledged securities account for Teo Kwee Hock (MARGIN) 4,029,600 3.25

5. Malaysian Technology Development Corporation Sdn Bhd 3,631,423 2.93

6. Chin Ai Mei 2,819,801 2.28

7. Platinum Essence Sdn Bhd 2,040,540 1.65

8. Lin Ah Lan 1,825,360 1.47

9. Seah Tin Kim 1,675,320 1.35

10. Cresdel Holdings Sdn Bhd 1,660,760 1.34

11. JF Apex Nominees (Tempatan) Sdn Bhd Pledged securities account for Teo Siew Lai (MARGIN) 1,616,900 1.31

12. Lok Suet Leng 1,456,000 1.18

13. Piong Teck Min 1,276,220 1.03

14. Ho Jonathan Lep Kee 1,210,000 0.98

15. Alliancegroup Nominees (Tempatan) Sdn Bhd Pledged securities account for Shanmugam A/L Thoppalan (8069535) 1,000,000 0.81

16. Omar Bin Md. Khir 868,060 0.70

17. Piong Teck They 808,280 0.65

18. Piong Teck Wah 627,220 0.51

19. Vijay Kanchan 607,300 0.49

20. Kok Hon Seng 592,960 0.48

21. TA Nominees (Tempatan) Sdn Bhd Pledged securities account for Ting Leong Hua 523,900 0.42

22. Chin Kee Kwong 514,800 0.42

23. Chin Chee Keong 512,600 0.41

24. Chin Chee Min 512,600 0.41

25. Piong Teck Fong 461,560 0.37

26. Lembaga Tabung Amanah Warisan Negeri Terengganu 460,164 0.37

27. Koay Hooi Lian 440,060 0.36

28. Tan Yeak Yan 364,650 0.29

29. Ching Siew Thin 352,000 0.28

30. Ooi Lee Peng 342,700 0.28

The page was intentionally left blank

FORMOFPROXY

No. Resolutions For Against1. To receive the Audited Financial Statements for the financial year ended 30 June 2011 together

with the Reports of the Directors and the Auditors thereon. 2. To approve the payment of Directors’ fees for the financial year ended 30 June 2011. 3. To re-appoint Y. Bhg. Tan Sri Datuk Dr. Omar bin Abdul Rahman pursuant to Section 129(6) of

the Companies Act, 1965. 4. To re-appoint Omar bin Md. Khir pursuant to Section 129(6) of the Companies Act, 1965. 5. To re-elect Y. Bhg. Datuk Piong Teck Yen who retires pursuant to Article 97(1) of the Company’s

Articles of Association. 6. To re-elect Piong Teck Min who retires pursuant to Article 97(1) of the Company’s Articles of

Association. 7. To re-appoint Crowe Horwath as Auditors of the Company until the conclusion of the next

Annual General Meeting and to authorise the Directors to fix their remuneration. 8. Special Business Ordinary Resolution - Authority to issue shares pursuant to Section 132D of the Companies Act, 1965. 9. Special Business Ordinary Resolution

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

*I/We NRIC No./Company No.

of (full address)

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

NRIC No. of

or failing *him/her, NRIC No. of

or failing *him/her, the CHAIRMAN OF THE MEETING as *my/our proxy to vote for *me/us and on *my/our behalf at the Twelfth Annual General Meeting of the Company to be held at the Bendahara 1, Level 2, Renaissance Hotel Melaka, Jalan Bendahara, 75100 Melaka on Friday, 2 December 2011 at 10.00 a.m. or at any adjournment thereof.

CDS ACCOUNT NO.

NUMBER OF SHARES HELD(Company No. 497632-P)

(Incorporated in Malaysia)

1. In respect of deposited security, only members whose names appear in the Record of Depositors on 24 November 2011 (“General Meeting Record of Depositors”) shall be eligible to attend the Meeting.

2. A member entitled to attend and vote at this Meeting is entitled to appoint more than two (2) proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation. If the proxy is not a member of the Company, he need not be an advocate, an approved company auditor or a person approved by the Registrar of Companies.

3. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or if the appointer is a corporation, either under its seal or under the hand of an officer or attorney duly authorised.

5. The instrument appointing a proxy must be deposited at the Registered Office of the Company at Lot 1A, 6th Floor, Menara Pertam, Jalan BBP 2, Taman Batu Berendam Putra, 75350 Batu Berendam, Melaka not less than 48 hours before the time for holding the Meeting or at any adjournment thereof.

* Strike out whichever not applicable

Please indicate with an “X” in the space provided above how you wish your votes to be casted. If no specific direction as to voting is given, the proxy will vote or abstain from voting at his/her discretion.

As witness my/our hand(s) this day of 2011.

Signature of Member/Common SealNotes:

Then fold here

Fold this flap for sealing

1st fold here

KOTRAINDUSTRIESBERHAD(497632-P)

Lot 1A, 6th Floor, Menara PertamJalan BBP 2

Taman Batu Berendam Putra75350 Batu Berendam

MelakaMalaysia

affixstamp

KOTRA INDUSTRIES BERHAD(497632-P)

No. 1,2 & 3 Jalan TTC 12Cheng Industrial Estate

75250 MelakaMalaysia

Tel : 06-336 2222Fax : 06-336 6122

www.kotrapharma.com www.appeton.com

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