Corporate Information

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2 Corporate Information Corporate Structure Financial Highlights Directors Profile Chairman s Statement Statement on Corporate Governance Audit Committee Report Statement on Risk Management and Internal Control Additional Compliance Information Financial Statements List of Properties Analysis of Shareholdings Notice of Annual General Meeting Appendix I Proxy Form Contents

3 2 LUXCHEM CORPORATION BERHAD (Company No: D) Corporate Information BOARD OF DIRECTORS Dato Haji Mokhtar Bin Haji Samad Independent Non-Executive Chairman Tang Ying See Managing Director/Chief Executive Officer Chin Song Mooi Executive Director Chen Moi Kew Executive Director/Chief Financial Officer Chan Wan Siew Senior Independent Non-Executive Director Au Chun Choong Independent Non-Executive Director COMPANY SECRETARIES Wong Wai Foong (MAICSA ) Tan Ai Peng (MAICSA ) AUDIT COMMITTEE Au Chun Choong Chairman Dato Haji Mokhtar Bin Haji Samad Member Chan Wan Siew Member NOMINATION COMMITTEE Chan Wan Siew Chairman Dato Haji Mokhtar Bin Haji Samad Member Au Chun Choong Member REMUNERATION COMMITTEE Dato Haji Mokhtar Bin Haji Samad Chairman Tang Ying See Member Au Chun Choong Member SHARE REGISTRAR Tricor Investor Services Sdn. Bhd. ( V) Level 17, The Gardens North Tower Mid Valley City Lingkaran Syed Putra Kuala Lumpur Telephone No. : (03) Facsimile No. : (03) CORPORATE OFFICE No. 6, Jalan SS21/58 Damansara Utama Petaling Jaya Selangor Darul Ehsan Telephone No. : (03) Facsimile No. : (03) Website : PRINCIPAL BANKERS AmBank (M) Berhad (8515-D) AmIslamic Bank Berhad ( U) CIMB Bank Berhad (13491-P) Citibank Berhad ( M) HSBC Bank Malaysia Berhad ( V) Malayan Banking Berhad (3813-K) United Overseas Bank (Malaysia) Berhad ( K) REGISTERED OFFICE Level 18, The Gardens North Tower Mid Valley City Lingkaran Syed Putra Kuala Lumpur Telephone No. : (03) Facsimile No. : (03) AUDITORS Folks DFK & Co (AF 0502) 12th Floor, Wisma Tun Sambanthan No. 2, Jalan Sultan Sulaiman Kuala Lumpur Telephone No. : (03) Facsimile No. : (03) STOCK EXCHANGE LISTING The Main Market of Bursa Malaysia Securities Berhad Stock Name : LUXCHEM Stock Code : 5143 Date of listing : 27 June 2008

4 ANNUAL REPORT Corporate Structure 100% Luxchem Trading Sdn. Bhd. 100% Luxchem Polymer Industries Sdn. Bhd. 100% Luxchem Trading (S) Pte. Ltd. 100% Chemplex Composite Industries (M) Sdn. Bhd. 70% PT Luxchem Indonesia

5 4 LUXCHEM CORPORATION BERHAD (Company No: D) Financial Highlights REVENUE ( 000) EBITDA ( 000) 331, , , , ,918 25,897 26,792 29,416 32,025 31, PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY ( 000) EARNINGS PER SHARE (sen) 17,973 19,133 20,478 22,705 22, Revenue 331, , , , ,918 Earnings before interest, tax, depreciation and amortisation ( EBITDA ) 25,897 26,792 29,416 32,025 31,157 Profit Before Taxation ( PBT ) 23,580 25,764 27,860 30,216 29,243 Profit Attributable to Owners of the Company 17,973 19,133 20,478 22,705 22,037 Earnings Per Share (sen) * * FYE 2008 : Computed based on the PAT and divided by the weighted average number of shares in issue during the financial year of 120,655,738. * FYE : Computed based on the PAT and divided by the number of shares in issue during the financial year of 130,000,000. * FYE : Computed based on the PBT and Profit Attributable to Owners of the Company and divided by the number of shares in issue during the financial year of 130,000,000.

6 ANNUAL REPORT Directors Profile DATO HAJI MOKHTAR BIN HAJI SAMAD Independent Non-Executive Chairman Dato Haji Mokhtar Bin Haji Samad, a Malaysian aged 65, was appointed as an Independent Non-Executive Director of the Company on 15 May He is currently the Chairman of the Remuneration Committee and a member of the Audit Committee and Nomination Committee. He is the Non-Executive Chairman of Kossan Rubber Industries Berhad, the Executive Chairman of the Malay Contractor Consortium Wilayah Persekutuan, a Director of the Malay Contractor Consortium Malaysia and the Executive Chairman of Minat Megah Sdn. Bhd., a company principally involved in construction. He is also the President of the Malay Contractor Organisation Malaysia, the Yang DiPertua of the Malay Contractor Organization Wilayah Persekutuan, the Vice President of the Entrepreneur Development Agency Wilayah Persekutuan, a member of the Advisory Committee of Dewan Perniagaan Melayu Kuala Lumpur and a committee member of the Ministry of Domestic Trade and Consumer Affairs, Wilayah Persekutuan. He does not have any family relationship with any Director or substantial shareholder of the Company, nor does he have any conflict of interest with the Group. He has not been convicted of any offences within the past ten (10) years. He attended all the five (5) Board meetings of the Company held during the financial year ended 31 December TANG YING SEE Managing Director/Chief Executive Officer Tang Ying See, a Malaysian aged 61, is the Managing Director/Chief Executive Officer of the Company. He is one of the First Directors appointed to the Board of the Company on 4 September He is currently a member of the Remuneration Committee. As the founder of the Company, he has been instrumental in our development, growth and success. He brings with him approximately 35 years of experience in the industrial chemicals industry and is mainly responsible for the overall strategic business direction of the Group. He obtained a Bachelor of Science Degree majoring in Physics from Nanyang University, Singapore in 1975 and has been a member of the Malaysian Institute of Management since Upon graduation, he joined a chemical trading company as a Sales Representative and was promoted to Senior Manager in In 1984, he left and established Lux Trading, a sole proprietorship, which business was taken over by Luxchem Trading Sdn Bhd in He currently holds several directorships in a number of private limited companies but does not hold any other directorships in other listed entities. He is the husband of Chin Song Mooi. He does not have any conflict of interest with the Group. He has not been convicted of any offences within the past ten (10) years. He attended all the five (5) Board meetings of the Company held during the financial year ended 31 December 2012.

7 6 LUXCHEM CORPORATION BERHAD (Company No: D) Directors Profile CHIN SONG MOOI Executive Director Chin Song Mooi, a Malaysian aged 61, is an Executive Director of the Company. She is one of the First Directors appointed to the Board of the Company on 4 September She graduated in 1976 with a Bachelor of Commerce Degree in Accountancy from Nanyang University, Singapore. Her career began upon her graduation in 1976 when she joined Khoo, Junus & Co., an accounting firm located in Kuala Lumpur as an Auditor. In 1978, she left and joined Universal Cable (M) Bhd as an Accountant in the Johor Bahru branch. In 1979, she left and joined Syarikat Pembinaan Beng Teck Sdn Bhd, a building and construction company, as an Accountant. In 1988, she left to take up the position as Director of Finance and Administration with Luxchem Trading Sdn Bhd. She is mainly responsible for overseeing all aspects of finance and administration functions of the Group. She currently holds several directorships in a number of private limited companies but does not hold any other directorships in other listed entities. She is the wife of Tang Ying See. She does not have any conflict of interest with the Group. She has not been convicted of any offences within the past ten (10) years. She attended all the five (5) Board meetings held during the financial year ended 31 December CHEN MOI KEW Executive Director/Chief Financial Officer Chen Moi Kew, a Malaysian aged 50, was appointed as an Executive Director/Chief Financial Officer of the Company on 2 January She obtained her Bachelor of Accounting Degree with First-Class Honours from the University of Malaya, Kuala Lumpur in She has been a member of both the Malaysian Institute of Accountants and the Malaysian Institute of Certified Public Accountants since 1990 and a Member of the Financial Planning Association of Malaysia since She began her career in 1987 when she joined Arthur Andersen & Co as an Audit Staff Assistant. In 1991, she left and joined United Malayan Banking Corporation Berhad as an Assistant Manager. In 1993, she left and took up the position as Deputy Manager in Southern Bank Berhad. In 1996, she left and was appointed as Financial Controller at the Weld Centre (M) Sdn Bhd. She left in 1997 to join Luxchem Trading Sdn Bhd. She is currently mainly responsible for overseeing the accounting and finance functions as well as formulating financial strategies for the Group. She does not have any family relationship with any Director or substantial shareholder of the Company, nor does she have any conflict of interest with the Group. She does not hold any other directorships in other listed entities and has not been convicted of any offences within the past ten (10) years. She attended all the five (5) Board meetings held during the financial year ended 31 December 2012.

8 ANNUAL REPORT Directors Profile PAUL CHAN WAN SIEW Senior Independent Non-Executive Director Paul Chan Wan Siew, a Malaysian aged 62, was appointed as an Independent Non-Executive Director of the Company on 15 May He is currently a member of the Audit Committee, the Chairman of the Nomination Committee and a Senior Independent Director. He is also an Independent Non-Executive Director of Prudential Assurance Malaysia Berhad, Integrax Berhad and Prestariang Berhad. He is a Chartered Accountant, Certified Financial Planner, Chartered Financial Consultant (US), a Fellow Member of the Association of Chartered Certified Accountants (UK), CPA Australia, Chartered Secretaries (UK) and Chartered Tax Institute of Malaysia. He is the President of Business Transitions Asia Sdn Bhd, offering business and financial advisory services, serving the business-owners community and selected market segments. He has been in public accounting, corporate and financial advisory practice for over 35 years. He is the Deputy President and Founding Board Member of MACD (Malaysian Alliance of Corporate Directors), an EXCO Member of, respectively, FPLC (Federations of Public Listed Companies), MIA (Malaysian Institute of Accountants), and GNDI (Global Network of Director Institutes), a Board Governance Fellow of NACD (National Association of Corporate Directors, USA) and a Member of the International Corporate Governance Network, UK (ICGN). He had served as the former President of MAICSA (Malaysian Institute of Chartered Secretaries and Administrators), the President of ACCA Malaysia (Association of Chartered Certified Accountants), a Founding Board Member and Vice President of Financial Planning Association of Malaysia (FPAM), and a Global Advisory Council Member of Financial Planning Association, USA. He does not have any family relationship with any Director or substantial shareholder of the Company, nor does he have any conflict of interest with the Group. He has not been convicted of any offences within the past ten (10) years. AU CHUN CHOONG Independent Non-Executive Director Au Chun Choong, a Malaysian aged 61, was appointed as an Independent Non-Executive Director of the Company on 15 May He is currently the Chairman of the Audit Committee, a member of the Remuneration Committee and Nomination Committee. He obtained his Diploma in Commerce from Tunku Abdul Rahman College in He is a Fellow of the Association of Chartered Certified Accountants since 1985, an Associate Member of the Institute of Chartered Secretaries and Administrators, London, UK since 1979, and a member of the Malaysian Institute of Accountants since He has vast experience in tax and finance in public accounting firms. He was attached to the Inland Revenue Department in Perak for several years. He left public service in 1980 and joined several public accounting firms as tax manager and financial consultant. He is an Independent Non-Executive Director of PJ Development Holdings Berhad, a company principally involved in property investment and development, construction, manufacturing and trading, and hotels and leisure operations. He does not have any family relationship with any Director or substantial shareholder of the Company, nor does he has any conflict of interest with the Group. He has not been convicted of any offences within the past ten (10) years. He attended all the five (5) Board meetings held during the financial year ended 31 December He attended four (4) Board meetings out of total 5 Board meetings held during the financial year ended 31 December 2012.

9 8 LUXCHEM CORPORATION BERHAD (Company No: D) Chairman s Statement Dear valued Shareholders, On behalf of the Board of Directors, it gives me great pleasure to present to you the Annual Report of Luxchem Corporation Berhad ( LCB ) for the financial year ended ( FYE ) 31 December Financial year 2012 continues to be a challenging year, with fluctuating crude oil and raw material prices, as well as volatility of the USD/ exchange rate. There was a slight dropped in Revenue and Profit After Tax in FYE 2012 mainly due to downward price trend as well as uncertainty of market in Europe and China. FINANCIAL PERFOANCE For FYE 31 December 2012, we achieved revenue of million. There was a slight dropped in the revenue of 0.4% compared to FYE 31 December Profit After Tax decreased by 3.22% to million in FYE BALANCE SHEET Our financial position remains strong despite the slight drop in the Revenue and Profit After Tax. Our cash stood at million as compared with million as at 31 December LOOKING AHEAD For 2013, we will continue to expand our product range as well as develop more high quality products. Since the setting up of our subsidiary in Indonesia in FYE 2011, we are expanding our customer base in Indonesia. This continues to enhance our group s performance. Our Unsaturated Polyester Resin Plant in Melaka will increase production capacity by 50% by end of This is to support the growing demand of our product. We remain dedicated, focused and committed towards delivering positive results to our shareholders. DIVIDENDS To reward shareholders loyalty, LCB has paid an interim dividend of 3 sen per share on 28 September In view of the satisfactory performance during FYE 2012, the Directors are recommending a single tier final dividend of 5.5 sen per share. If approved by shareholders, the total dividend for the year would be 8.5 sen per share. This would amount to million representing 50.32% of our Profit After Tax. CORPORATE SOCIAL RESPONSIBILITY The Group is mindful of its contribution to society and will continue to contribute to charitable organisations. APPRECIATION On behalf of the Board, I would like to thank our employees, shareholders, business associates and stakeholders for their continued support and confidence in LCB. DATO HAJI MOKHTAR BIN HAJI SAMAD Chairman

10 ANNUAL REPORT Statement on Corporate Governance The Securities Commission Malaysia released the latest Malaysian Code on Corporate Governance ( the 2012 Code ) in March Public listed companies with financial year ended 31st December 2012 are expected to make their annual statement on corporate governance based on the principles and recommendations of the 2012 Code. The key focus of the 2012 Code is on the strengthening of the board structure and composition. There are 8 principles and 26 recommendations. The Board has conducted a review of its current practices and proceedings against the principles and recommendations on the 2012 Code. The result of this review was used as the basis of the Board in reporting its applications of the principles in the Code and the actions the Board would take to strengthen its present governance practices. PRINCIPLE 1: Clear Roles and Responsibilities The objective of this principle is to set out the fundamental structures for effective functioning of the board. As it is, the Board has: i. Defined the function of the Board and those to be delegated to management; ii. Addressed and deliberated the various fiduciary duties and its agenda in the board meetings; iii. Defined the terms of reference of each Board Committee in order to ensure the direction and control of the Group is firmly within the Board; iv. Noted the Group s employees code of ethic and briefing procedures to employees; and v. Access to information and advice and the support of a competent and qualified company secretary. Going forward, the Board intends to strengthen its roles and responsibilities in due course by: i. Implementing whistle blowing policy and procedure to provide employee with a mechanism to monitor the compliance of code of ethic; ii. Setting out clearly the code of conduct on ethical behaviours that stakeholders could expect from the Group; iii. Incorporating further areas of the directors fiduciary duties in board meeting agenda and obtaining adequate information needed for the discussion of these agenda; and iv. Defining its business sustainability policy and ensuring its current business decision making process incorporate the elements of Environment, Social and Governance ( ESG ) within its value chain in the business processes. The Board will formalise these actions in its board charter and will create a new page on corporate governance in the present corporate website in order to keep the public and shareholder informed of its progress and status of the above actions. PRINCIPLE 2: Strengthening Board Composition Similar with the previous code, the 2012 Code continues to emphasize the important of right board composition in bringing value to the board deliberation and transparency of policies and procedures in selection and evaluation of board members. The Company continues to be led and controlled by the same board members with professional and business experiences. The Board has six (6) directors, three (3) of them being the Independent Non-Executive Directors and one third being female directors. The Board reviews the composition of the board members annually and ensures that the current composition of the board functions competently. In addition, with the presence of the independent non-executive directors constituting half of the board size, the Board ensures that the broader views and objectivity are brought into the Board s deliberation and decision making processes.

11 10 LUXCHEM CORPORATION BERHAD (Company No: D) Statement on Corporate Governance PRINCIPLE 2: Strengthening Board Composition Descriptions of the background of each director presented previously remain substantially unchanged. Therefore, pursuant to Para 9.25 of the Listing Requirements, such information is now published on the corporate website for shareholders reference. In order to ensure that the selection and evaluation of board members are done objectively, the Nomination Committee members are solely made up of independent board members and the Committee is chaired by a senior independent director. Functionally, the Nomination Committee is responsible for reviewing and making recommendation of any appointments to the Board based on size of the Board, the mix of skills and experience and other qualities director should bring to the Board. New nomination is assessed and recommended to the full Board for appointment. There was no nomination and appointment of new director during the financial year. One (1) meeting was held during the financial period and the appraisals on director, Board Committees and the Board were documented. Executive director is remunerated based on the Group s performance whilst the remuneration of the non-executive directors is determined in accordance with their experience and the level of responsibilities assumed. The number of Directors whose income falls within the following bands is set out as follows: Remuneration Bands Executive Directors Non-Executive 50,000 and below , , , , , , The aggregate remuneration paid or payable to all Directors of the Company are further categorised into the following components: Fees* Salaries and other emoluments Bonuses Benefit-inkind EPF and SOCSO Total () () () () () () Executive Directors 8,333 1,025, ,598 22, ,634 1,513,904 Non-Executive Directors 75,000 7, ,500 86,500 * Subject to the approval by shareholders at the AGM.

12 ANNUAL REPORT Statement on Corporate Governance PRINCIPLE 3: Enforcement of Independence Independence is important for ensuring objectivity and fairness in board s decision making. The roles and responsibilities of the Chairman and Managing Director continue to be separated and the Chairman of the Board is an independent director. The Board had identified Mr. Chan Wan Siew to act as the Senior Independent Director to provide shareholders with an alternative to convey their concerns and seek clarifications from the Board. Mr. Chan Wan Siew s address can be contacted at PWChan@luxchem.com.my. Going forward, in order to uphold independence of independent directors, the Board has adopted the following recommendation of the Code as Board s policies: i. Subject to Board justification and shareholders approval, tenure of independent directors should not exceed a cummulative nine (9) years; and ii. Board to undertake an annual assessment of independence of its independent directors focusing on events that would affect the ability of independent directors to continue bringing independent and objective judgment to board deliberation and the regulatory definition of independent directors. As the Company was listed on 27 June 2008, none of the Independent Directors were appointed more than 9 years as of todate. PRINCIPLE 4: Foster Commitment The underlying factors of directors commitment to the Group are devotion of time and continuous improvement of knowledge and skillsets. During the financial year, five (5) Board meetings were held and these meetings were fully attended by all the directors. Effective 1st June 2013, the maximum directorships in public listed companies is reduced from 10 to 5 under the amended listing requirements. In order to further strenghten the directors commitement, internally, the Board sets the maximum executive directorship of each members in public listed companies shall not be more than two (2). Directors recognise the needs to attend trainings to enable the directors to discharge their duties effectively. The training needs of each director would be identified and proposed by the individual directors and Nomination Committee annually upon completion of director performance appraisals. During the year, the Directors have participated in various relevant training programmes to enhance their skills and knowledge and to keep abreast with the relevant change in laws, regulations and business environment. Additionally, the Directors continue to broaden their industry and professional knowledge continuously through their association with their business and corporate stakeholders and participation in the events conducted by them.

13 12 LUXCHEM CORPORATION BERHAD (Company No: D) Statement on Corporate Governance PRINCIPLE 4: Foster Commitment The trainings attended by Directors during the financial year are as below: Director Chin Song Mooi Chen Moi Kew Au Chun Choong Chan Wan Siew Training Attended Annual Seminar on the 2013 National Tax Annual Seminar on the 2013 National Tax CPE Course - Essentials of Structured Warrants & ETFs CPE Course - Managing Risks in Investment Bank Improving Your Organisation s Bottom-line Through Leadership Driven High Performance CPE Course - An Overview of the Domestic Bond Market Bursa Malaysia s Half Day Governance Programme Series Role of the Audit Committee in Assuring Audit Quality The Winning Mindset Programme CPE Course - Introduction to Islamic Banking and Finance CPE Course - Achieving Financial Independence Through Effective Financial Planning The Case for Diversity in the Boardroom IFAC Small & Medium Practices Forum 2012 Accountants in Business Symposium IFRS Conference Professionalism in Directorship Programme Institute of Directors Conference 2012 Charting Blue Ocean Strategy Workshop Directors Summit 2012 Malaysian Code on Corporate Governance 2012 MAICSA Annual Conference th Malaysian Banking Summit 2012 SID Annual Conference 2012 OECD Asian Roundtable on Corporate Governance ACGA 12th Annual Conference 2012 MIA Annual Conference 2012 The Nomination Committee would assist the Board to undertake an assessment of the training needs of each director in 2013.

14 ANNUAL REPORT Statement on Corporate Governance PRINCIPLE 5: Uphold of Integrity in Financial Reporting The Audit Committee has the responsibility to ensure the Group s financial statements comply with applicable financial reporting standards. In order to do so, the Audit Committee has obtained written assurance from: i. External auditors confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements; and ii. CFO confirming that the preparation of the financial statements, all relevant approved accounting standards and policies have been adopted, applied and followed in the financial statement with reasonable and prudent judgments and estimates. Annually, the Audit Committee also reviews the appointment, performance and remuneration of the External Auditors before recommending them to the shareholders for re-appointment in the AGM. The Audit Committee would convene meeting with the External Auditors and Internal Auditors without the presence of the Executive Directors and employees of the Group as and when necessary. During the financial year, the Audit Committee conducted one (1) meeting with the External Auditors without the presence of the Executive Directors and employees of the Company. PRINCIPLE 6: Risk Recognition and Management LCB acknowledges that risk management is an integral part of good management practice. Risk is inherent in all business activities. But, it is not the Group s objective to eliminate risk totally. Instead, it is to provide structural means to identify, prioritize and manage the risks involved in all the Group s activities and to balance between the cost of managing and treating risks, and the anticipated benefits that will be derived. In order to further strengthening the present risk management and internal control systems in the Group, the Board would work with the management in: i. Approving the Group s policy and framework in Risk Management; ii. Determining and approving the board risk tolerance; iii. Ensuring the risk management framework is embedded into key functions in the Group; iv. Identifying principal risks, emerging and changes of risks impacting the Group s objectives and strategies; and v. Reviewing risk management actions and management risk report and assessing the effectiveness of the risk management and internal control system in managing risks in accordance with the Group s risk appetite and policies The Board has established an internal audit function which is currently outsourced to a professional firm. Functionally, the internal auditors report to the Audit Committee directly and they are responsible for conducting regular reviews and appraisals of the effectiveness of the governance, risk management and internal controls processes within the Group. Further details of the Group s state of risk management and internal control systems are reported in the Statement on Risk Management and Internal Control on pages 17 to 18.

15 14 LUXCHEM CORPORATION BERHAD (Company No: D) Statement on Corporate Governance PRINCIPLE 7: Timely and High Quality Disclosure Corporate disclosure and information are important for investors and shareholders. The Board is advised by the management, the Company Secretary and the External and Internal Auditors on the contents and timing of disclosure requirements of the Bursa Malaysia Listing Requirements on the financial result and various announcements. The management is invited to attend the Board and Audit Committee meetings and to provide explanations to the Board on the operations of the Group. The Board would leverage on its corporate website to communicate, disseminate and add depth to the governance reporting. Those principal governance information such as board charter, board committees terms of reference, would be separately published in the website to avoid dilution of issues in the annual report or various announcements. PRINCIPLE 8: Exercise of Shareholders Right General meetings are an important avenue through which shareholder can exercise their rights. Shareholders are reminded that they have the right to demand a poll vote at general meetings. Also, effective 1st June 2013, poll voting is mandated for related party transactions that require specific shareholders approval. In order to encourage shareholders participation in the general meetings, LCB would: i. Take into consideration of the traffic condition, public, festive and school holidays, accessibility and parking facilities in selecting the location for conducting shareholders meetings; and ii. Obtain the mobile numbers and addresses of those shareholders who wish to receive general meeting reminders from the management.

16 ANNUAL REPORT Audit Committee Report 1. COMPOSITION OF AUDIT COMMITTEE Au Chun Choong Chairman (Independent Non-Executive Director) Chan Wan Siew Member (Senior Independent Non-Executive Director) Dato Haji Mokhtar Bin Haji Samad Member (Independent Non-Executive Director) 2. TES OF REFERENCE The terms of reference of the Audit Committee presented previously remain substantially unchanged. Therefore, pursuant to Para 9.25 of the Listing Requirements, such information is published on the corporate website for shareholders reference and viewing. 3. AUDIT COMMITTEE MEETING ATTENDANCE During the financial year, the Audit Committee conducted five (5) meetings and one (1) separate meeting with the External Auditors without the presence of the Executive Directors and employees of the Company and the subsidiaries. The details of attendance by the members are as below. Director No. of Meetings Attended/ No of Meeting Held Au Chun Choong 5/5 Chan Wan Siew 4/5 Dato Haji Mokhtar Bin Haji Samad 5/5 4. ACTIVITIES OF THE AUDIT COMMITTEE The principal activities undertaken by the Audit Committee during the financial period were summarised as follows:- a) Review of unaudited quarterly financial results, cash flows and financial positions for each financial quarter prior to submission to the Board for consideration and approval for announcement to the public; b) Review of annual audited financial statement, Directors and Auditors Reports and other significant accounting issues arising from the financial year ended 31 December 2011 audit; c) Review of external auditors plan for the year ended 31 December 2012; d) Review of internal audit reports and status presented by the Internal Auditors; e) Meeting with the External Auditors without the presence of the Executive Directors and employees of the Group;

17 16 LUXCHEM CORPORATION BERHAD (Company No: D) Audit Committee Report 4. ACTIVITIES OF THE AUDIT COMMITTEE The principal activities undertaken by the Audit Committee during the financial period were summarised as follows:- f) Review of Corporate Governance Statement, Audit Committee Report and Statement on Internal Control prior to submission to the Board for consideration and approval for inclusion in the 2011 annual report; and g) Review of quarterly status of recurrent related party transactions. 5. INTERNAL AUDIT FUNCTION The internal audit function is essential in assisting the Audit Committee in reviewing the state of the systems of internal control maintained by the management. The Group s internal audit function is currently outsourced to an internal audit services company. Functionally, the internal audit manager reports to the Committee directly. The Committee reviews and approves the annual internal audit plan before the Internal Auditors carry out their functions. All audit findings are reported to the Committee and areas of improvement and audit recommendations identified are communicated to the management for further action. The fee incurred for the internal audit function in respect of the financial year ended 31 December 2012 was 66,000 (2011:66,000).

18 ANNUAL REPORT Statement on Risk Management and Internal Control Pursuant to paragraph 15.26(b) of the Main Market Listing Requirements, the Board of Directors of Luxchem Corporation Berhad is pleased to provide the following statement on the state of internal control and risk management of the Company and its subsidiaries ( the Group ). In producing this Statement, the Board has considered and was guided by the latest Statement on Risk Management and Internal Control Guideline for Directors of Listed Issuers issued by the Task Force on Internal Control with the support and endorsement of the Exchange. RISK MANAGEMENT AND INTERNAL CONTROL The Group has continuously embedded the risk management processes in identifying, evaluating and managing significant risks facing the organization as part of its operating and business processes. Functionally, these processes also form the responsibility of all Executive Directors and the management team members. Apart from the above, the fundamental elements of internal controls that were practised perpetually in the Group remain unchanged. These controls are: i. Organisation structure defining the management responsibilities and hierarchy structure of reporting lines and accountability; ii. iii. iv. Limit of authority and approval facilitating delegation of authority and management succession; Performance reporting covering periodic reporting from the heads of management to the Executive Directors. This management reporting is intended to assure that business operations are progressed in accordance with the desirable objectives and targets; Monthly management and credit meetings attended by Head of Managements. These meetings enable the management to share, monitor and decide on the business development, changes and actions to ensure businesses are under control; v. Provision of continuous staff training and development to enhance the competitiveness and capability of our organisation as part of the Group s business control; and vi. ISO 9001:2008 Quality Management System in Luxchem Trading (S) Pte. Ltd. and Luxchem Trading Sdn. Bhd. and ISO 9001:2008, ISO14001:2004 and OHSAS18001:2007 management systems in Luxchem Polymer Industries Sdn Bhd forming the basis of production, operational and management procedures. THE REVIEW MECHANISM There are two aspects of review of system of internal control in the organisation. The first aspect of the review is undertaken by the management while the second aspect constitutes the independent review performed by the Audit Committee. The presence of the internal audit function supports this review mechanism by reviewing and reporting the status of management control procedures to the Audit Committee. Besides reviewing the systems of internal control, the Audit Committee also reviews the financial information and reports produced by the management. In this case, the Audit Committee in consultation with the management deliberates the integrity of the financial results, annual report and audited financial statements before recommending to the Board.

19 18 LUXCHEM CORPORATION BERHAD (Company No: D) Statement on Risk Management and Internal Control MANAGEMENT RESPONSIBILITIES AND ASSURANCE In accordance to the Bursa s guidelines, management is responsible to the Board for identifying risks relevant to the business of the Group s objectives and strategies implementing, maintaining sound systems of risk management and internal control and monitoring and reporting to the Board of significant control deficiencies and changes in risks that could significantly affect the Group achievement of its objective and performance. Before producing this Statement, the Board has received assurance from the Managing Director and Chief Financial Officer that, to the best of their knowledge that the Group s risk management and internal control systems are operating adequately and effectively, in all material aspects. BOARD ASSURANCE AND LIMITATION For the financial year under review, the Board is satisfied that the existing level of systems of internal control and risk management are effective to enable the Group to achieve its business objectives and there were no material losses resulted from significant control problem that would require separate disclosure in the Annual Report. Nonetheless, the Board recognises that the systems of internal control should be continuously improved in line with the evolving business development. It should also be noted that all risk management systems and systems of internal control could only manage rather than eliminate risks of failure to achieve business objectives. Therefore, these systems of internal control and risk management in the Group can only provide reasonable but not absolute assurance against material misstatements, frauds and losses. REVIEW OF STATEMENT ON INTERNAL CONTROL BY EXTERNAL AUDITORS The External Auditors have reviewed this Statement on Internal Control for inclusion in this annual report for the year ended 31st December 2012 and have reported to the Board that nothing has come to their attention that causes them to believe that this Statement is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of the systems of internal control of the Group.

20 ANNUAL REPORT Additional Compliance Information Status of Utilisation of IPO Proceeds The Public Issue was expected to raise gross proceeds of 22.0 million, which will be utilised as follows:- Purpose Proposed Utilisation Actual Utilisation Intended Timeframe for Utilisation (i) Repayment of bank borrowings 7,000 7,000 Within 12 months (ii) Expansion of existing operations 7,000 3,179 Within 24 months (iii) Expansion of business and markets 2, Within 24 months (iv) Working capital 3,000 3,000 Within 24 months (v) Estimated listing expenses 2,500 2,257 Immediate Expansion of existing operations 22,000 16,423 As stated in the Prospectus dated 10 Sep 2008, we have intended to utilise approximately 3.0 million of the proceeds to purchase and install a new reactor and related equipment at our Unsaturated Polyester Plant in Melaka, to increase production capacity by another 50% in order to reach an output of 30,000 metric tones per annum. In addition, we intended to utilise approximately 500,000 of the proceeds to increase our warehouse storage capacity by installing improved rack systems at our manufacturing plant. We are currently preparing necessary reports to apply for regulatory approval to expand the production capacity. We expect our capacity expansion will be ready by end Expansion of business and markets As disclosed in our Prospectus dated 10 Sep 2008, we intended to utilise 2.5 million of the proceeds to set up sales and marketing offices in Indonesia, Vietnam and China to improve our services to customers in the region. The company has set up a subsidiary in Indonesia in Oct The setting up of the Representative office in Vietnam was originally scheduled to be completed by Q The company has decided that it will not proceed with the setting up of the Representative office during this financial year. The company will focus on its growth locally, as well as in Indonesia. Share Buy-Backs There was no share buy-back during the financial year ended 31 December Options, Warrants or Convertible Securities No options, warrants or convertible securities were issued by the Company during the financial year ended 31 December 2012.

21 20 LUXCHEM CORPORATION BERHAD (Company No: D) Additional Compliance Information Depository Receipt ( DR ) Programme The Company has not sponsored any DR programme for the financial year ended 31 December Sanctions and/or Penalties The Company and its subsidiaries, directors and management have not been imposed with any sanctions and/or penalties by any regulatory bodies. Non-audit Fees The amount of non-audit fees paid to the external auditors by the Company for the financial year ended 31 December 2012 amounted to 19,572. Material Variances There was no material variance between the interim financial reports previously announced on the 4th Quarterly results and the audited financial results for the financial year ended 31 December Profit Guarantees No profit guarantee was given by the Company and/or its subsidiaries in respect of the financial year ended 31 December Material Contracts involving Directors or Major Shareholders Interest There were no material contracts entered into by the Company and its subsidiaries which involved directors and major shareholders interest subsisting as at the end of the financial year ended 31 December 2012 other than those disclosed under notes to financial statements. Compliance to the Code Except for matters specifically identified, the Company was substantially in compliance with the Principles and Best Practices in Corporate Governance throughout the financial year ended 31 December Employee Share Scheme The Company does not have an Share Issuance Scheme or Employee Share Scheme.

22 Directors Report Consolidated Statement of Financial Position Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Statement of Financial Position Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Statement by Directors/Statutory Declaration Independent Auditors Report Financial Statements

23 22 LUXCHEM CORPORATION BERHAD (Company No: D) Directors Report The Directors have pleasure in submitting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The principal activity of the Company is investment holding. The principal activities of the subsidiaries are set out in Note 7 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. FINANCIAL RESULTS Group Company Profit for the financial year attributable to : - Owners of the Company 22,037,451 11,804,919 - Non-controlling interests (Loss) (79,831) - 21,957,620 11,804,919 RESERVES AND PROVISIONS There were no material transfers made to or from reserves or provisions accounts during the financial year other than those disclosed in the financial statements. DIVIDENDS Dividends paid, declared or proposed since the end of the Company s previous financial year were as follows :- (i) (ii) In respect of the financial year ended 31 December 2011, as proposed in the Directors Report for that financial year, a final single tier dividend of 5 sen per ordinary share amounting to 6,500,000 and a special single tier dividend of 1 sen per ordinary share amounting to 1,300,000 was paid on 29 June In respect of the financial year ended 31 December 2012, an interim single tier dividend of 3 sen per ordinary share amounting to 3,900,000 was paid on 28 September In respect of the financial year ended 31 December 2012, the Directors recommend a final single tier dividend of 5.5 sen per ordinary share amounting to 7,150,000. The financial statements for the current financial year do not reflect the proposed dividends. If approved by the shareholders at the forthcoming Annual General Meeting, the dividends will be accounted for in the shareholders equity as an appropriation of retained profits in the next financial year ending 31 December IMMEDIATE AND ULTIMATE HOLDING COMPANY The directors regard Chemplex Resources Sdn Bhd, a company incorporated in Malaysia as the Company s immediate and ultimate holding company.

24 ANNUAL REPORT Directors Report DIRECTORS The names of the Directors in office since the date of the last directors report on 12 April 2012 are as follows :- Dato Haji Mokhtar Bin Haji Samad Tang Ying See Chin Song Mooi Chen Moi Kew Chan Wan Siew Au Chun Choong In accordance with Article 77 of the Company s Articles of Association, Chin Song Mooi and Chen Moi Kew retire by rotation at the forthcoming Annual General Meeting of the Company and being eligible, offer themselves for reelection. DIRECTORS INTERESTS According to the Register of Directors Shareholdings, the interests of the Directors in office at the end of the financial year in shares in the Company and its holding company during the financial year were as follows :- Shareholdings in the Company As at Ordinary shares of 0.50 each During the financial year Acquired Disposed As at Tang Ying See - Direct 300, ,000 - Indirect 69,080,000 2,000,800-71,080,800 Chin Song Mooi - Direct 300, ,000 - Indirect 69,080,000 2,000,800-71,080,800 Au Chun Choong - Direct 547, ,100 Dato Haji Mokhtar Bin Haji Samad - Direct 110, ,000 Chen Moi Kew - Direct 200, ,000 - Indirect Chan Wan Siew - Direct 50, ,000

25 24 LUXCHEM CORPORATION BERHAD (Company No: D) Directors Report DIRECTORS INTERESTS Shareholdings in holding company - Chemplex Resources Sdn Bhd As at Ordinary shares of 1.00 each During the financial year Acquired Disposed As at Tang Ying See - Direct Chin Song Mooi - Direct By virtue of their interests in shares in the holding company, Tang Ying See and Chin Song Mooi are deemed to be interested in shares in the Company and its subsidiaries to the extent of the interests held by the holding company. Other than as disclosed above, no other Directors in office at the end of the financial year held any interests in shares in the Company and its subsidiaries. DIRECTORS BENEFITS As at the end of the financial year and during the year, there did not subsist any arrangement to which the Company was a party, whereby the Directors or their nominees might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the end of the previous financial year, no Director has received or become entitled to receive any benefits (other than those disclosed as directors fees and other emoluments in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or his nominees or with a firm of which he is a member or with a company in which he has a substantial financial interest other than by virtue of transactions entered into in the ordinary course of business. OTHER STATUTORY INFOATION (a) Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps:- (i) (ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and adequate allowance had been made for doubtful debts; and 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 have been written down to an amount which they might be expected so to realise.

26 ANNUAL REPORT Directors Report OTHER STATUTORY INFOATION (b) As at the date of this report, the Directors are not aware of any circumstances:- (i) (ii) (iii) (iv) which would render the amount written off for bad debts and the amount of allowance made for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; which would render the values of current assets in the financial statements of the Group and of the Company misleading; which have arisen which render adherence to the existing method of valuation of assets and liabilities of the Group and of the Company misleading or inappropriate; and not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. (c) As at the date of this report, there does not exist:- (i) (ii) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; and any contingent liability in respect of the Group and of the Company which has arisen since the end of the financial year. (d) In the opinion of the Directors:- (i) (ii) (iii) 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 and of the Company to meet their obligations when they fall due; the results of the Group s and of the Company s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Group and of the Company for the financial year in which this report is made. AUDITORS The auditors, Messrs. Folks DFK & Co., have expressed their willingness to continue in office. On behalf of the Board of Directors, TANG YING SEE Director CHEN MOI KEW Director This report is made pursuant to the directors resolution passed on 12 April Date : 12 April 2013