CONTENT TOWARDS BUILDING A STRONGER FUTURE CORPORATE INFORMATION 2 FINANCIAL HIGHLIGHTS 3 HISTORY, PRINCIPAL ACTIVITIES AND GROUP STRUCTURE 4

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2 CONTENT CORPORATE INFORMATION 2 FINANCIAL HIGHLIGHTS 3 HISTORY, PRINCIPAL ACTIVITIES AND GROUP STRUCTURE 4 MANAGEMENT DISCUSSION AND ANALYSIS 5 STATEMENT ON CORPORATE SOCIAL RESPONSIBILITY 7 PROFILE OF DIRECTORS 8 PROFILE OF KEY SENIOR MANAGEMENT 10 CORPORATE GOVERNANCE OVERVIEW STATEMENT 11 ADDITIONAL INFORMATION 19 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 20 AUDIT COMMITTEE REPORT 22 DIRECTORS REPORT 24 DIRECTORS STATEMENT AND STATUTORY DECLARATION 29 INDEPENDENT AUDITORS REPORT TO THE MEMBERS 30 STATEMENTS OF FINANCIAL POSITION 34 STATEMENTS OF COMPREHENSIVE INCOME 35 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 36 STATEMENT OF CHANGES IN EQUITY 38 STATEMENTS OF CASH FLOW 39 TOWARDS BUILDING A STRONGER FUTURE Scope Industries Berhad focuses on two major industries that provide long-term sustainability to its businesses, which consist of Electronics Manufacturing Division and Plantation Division. The Company continues to strive for the betterment of their clients as the talents of Scope Industries Berhad work for greater improvements on the Company s products and services. Focusing to rise to a new height each year, Scope Industries Berhad offers full efforts and dedications towards product innovation and sustainability. NOTES TO THE FINANCIAL STATEMENTS 41 NOTICE OF ANNUAL GENERAL MEETING 84 STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING 87 LIST OF PROPERTIES 88 ANALYSIS OF SHAREHOLDINGS 89 ANALYSIS OF WARRANT HOLDINGS 92 PROXY FORM Enclosed

3 CORPORATE INFORMATION Directors Chew Kong Yoon (Chairman, Non-Independent Non-Executive Director) Lim Chiow Hoo (Managing Director) Lee Min Huat (Executive Director) Tan Poh Heng (Senior Independent Non-Executive Director) Yong Loong Chen (Independent Non-Executive Director) Lim Ee Tatt (Non-Independent Non-Executive Director) Yvonne Chew Siok Fong (Alternate Director to Chew Kong Yoon) Company Secretaries Chee Wai Hong (BC/C/1470) Foo Li Ling (MAICSA ) Tan She Chia (MAICSA ) Audit Committee Tan Poh Heng (Chairman, Senior Independent Non-Executive Director) Yong Loong Chen (Member, Independent Non-Executive Director) Lim Ee Tatt (Member, Non Independent Non-Executive Director) Share Registrar Symphony Share Registrars Sdn. Bhd. Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/ Petaling Jaya Selangor Tel: Fax: Auditors Grant Thornton Chartered Accountants 51-8-A, Menara BHL Bank Jalan Sultan Ahmad Shah Georgetown, Penang Tel: Fax: Principal Bankers AmBank (M) Berhad AmInvestment Bank Berhad Hong Leong Bank Berhad Stock Exchange Listing ACE Market of Bursa Malaysia Securities Berhad Stock Name for Ordinary Shares: SCOPE (Stock Code: 0028) Stock Name for Warrants: SCOPE-WA (Stock Code: 0028WA) Website Registered Office A Menara BHL Bank Jalan Sultan Ahmad Shah Georgetown, Penang Tel: Fax: Business Address Lot 6181 Jalan Perusahaan 2 Kawasan Perindustrian Parit Buntar Parit Buntar, Perak Tel: Fax: Scope Industries Berhad

4 FINANCIAL HIGHLIGHTS FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018 Revenue 22,602,706 18,768,954 23,889,805 26,106,409 22,291,018 Profit / (Loss) before tax (2,702,355) (3,211,369) 1,855,488 5,395,290 1,792,536 Equity 109,617, ,518, ,461, ,249, ,225,263 Net assets per share (sen) Number of Shares in issue 505,484, ,484, ,484, ,484, ,484,430 REVENUE PROFIT/(LOSS) BEFORE TAX 30,000,000 25,000,000 20,000,000 15,000,000 15,000,000 10,000,000 5,000,000 6,000,000 4,000,000 2,000,000 0 (2,000,000) (4,000,000) FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018 FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018 EQUITY NET ASSETS PER SHARE (SEN) ,000, ,000, ,000, ,000, ,000, FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018 FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018 Annual Report

5 HISTORY, PRINCIPAL ACTIVITIES AND GROUP STRUCTURE Scope Industries Berhad ( Scope ) was incorporated in Malaysia on 2 September 2002 under the Companies Act, 1965 as a public limited company under its present name. Scope is principally an investment holding company with two (2) wholly-owned subsidiaries, namely Scope Manufacturers (M) Sdn. Bhd. ( SMSB ) and Benua Mutiara Sdn. Bhd. ( BMSB ). Besides that, Scope has a seventy percent (70%) owned subsidiary namely Pioneer Glow Sdn. Bhd. ( PGSB ). The core business of Scope Group are manufacturing of electronic components and products as well as oil palm plantation. The current group structure is as follows: SMSB 100% PGSB 70% BMSB 100% The principal activities of its subsidiaries are as follow: Companies Date and Place of Incorporation Principal activities Subsidiaries Scope Manufacturers (M) Sdn. Bhd. (SMSB) 20 November 1991 Malaysia Manufacturing and assembling of electronic components and products. Benua Mutiara Sdn. Bhd. (BMSB) 28 September 1990 Malaysia Cultivation of oil palm. Pioneer Glow Sdn. Bhd. (PGSB) 20 August 1997 Malaysia Cultivation of oil palm. 4 Scope Industries Berhad

6 MANAGEMENT DISCUSSION AND ANALYSIS OVERVIEW OF OUR GROUP S BUSINESS Scope Industries Berhad ( Scope ) was incorporated in Malaysia on 2 September 2002 under the Companies Act, 1965 as a public limited company and has assumed its present name. Today, Scope Group is involved in the following business divisions: Manufacturing - manufacture and assembly of electronic components and products; Plantation - cultivation of oil palms. Manufacturing Division This division operates the largest business of the Group. Scope group is one of the established companies specializing in printed circuit board ( PCB ) assembly. This business has been in operation for more than 25 years. Our operations have expanded into completed electronics product assembly for reputable original equipment manufacturer ( OEM ) and multinational companies. The subsidiary company included in this division is Scope Manufacturers (M) Sdn. Bhd. Plantation Division This division is principally involved in cultivation of oil palms. As at 30 June 2018, the division has a land bank of approximately 1,773 hectare in Sabah, Malaysia. The subsidiaries included in this division include Pioneer Glow Sdn. Bhd. and Benua Mutiara Sdn. Bhd. REVIEW OF FINANCIAL RESULTS AND OPERATING ACTIVITIES The Group recorded revenue of RM22.3 million and profit before tax of RM1.79 million in current financial year ended 30 June 2018 ( FYE2018 ) as compared to RM26.11 million and RM5.40 million respectively in previous financial year ended 30 June 2017 ( FYE2017 ). Profit attributable to owners of the Company was RM1.44 million in FYE2018 compared to RM4.49 million in FYE2017. The basic earnings per share has decreased to 0.26 sen for FYE2018 compared to 0.81 sen in FYE2017. Manufacturing Division This division experienced challenging operating environment in FYE2018. Revenue from manufacturing division decreased by 20.3% to RM12.50 million in FYE2018 mainly due to lower orders from a major customer. This has caused the level of capacity utilisation in FYE2018 dropped to a level much lower than our planned schedules despite the operation generated higher revenue from other customers. This division has turned into loss before tax of RM0.02 million from profit before tax of RM2.79 million a year ago. This was mainly due to lower revenue recorded while maintaining the same level of fixed production overhead. Our current strategy is to focus on total customer satisfaction while operating in current competitive environment and make continuous efforts in marketing strategies to secure new customers. In addition, the Group will continue to improve operational efficiency and keep a tight rein on costs to ensure price competitiveness on its products. The operation is monitoring the capacity utilisation in view of the expected lower orders from the major customer that caused us tough situation in FYE2018. Efforts have been taken in our plan to allocate the unutilised capacity to existing customers as well as potential new customers. We are currently in negotiation with new potential customers to bring in new orders that complement our existing operations. Plantation Division For FYE2018, this division recorded a revenue of RM9.57 million compared to RM10.18 million in FYE2017 representing a decrease of 5.9%. The decrease in revenue was mainly due to the decrease in average selling price of fresh fruit bunches ( FFB ) as stated below: Production volume and Price FYE2018 FYE2017 Changes in Percentage FFB Production (MT) 18,903 17, % Average FFB price (RM) % Segmental profit before tax decreased to RM2.02 million in FYE2018 compared to RM2.91 million in FYE2017, representing a decrease of RM0.89 million. Annual Report

7 MANAGEMENT DISCUSSION AND ANALYSIS (cont d) Plantation Division (cont d) The effect of El Nino dry weather had slowly tapered off and as a result, the FFB production recorded an increase of 8.8% to 18,903 metric tonnes (MT) in FYE2018. Despite higher FFB production, this division registered a drop in segment profit of RM0.89 million from RM2.91 million in FYE2017 to RM2.02 million in FYE2018 mainly due to lower average FFB price by 13.7%. As at 30 June 2018, total plantation land stands at approximately 1,772 hectare of which 85.6% or 1,516 hectare are planted with oil palms. Of this total planted area, approximately 72.2% or 1,094 hectares are mature while the remaining 27.8% or 422 hectares of the area are immature. The average yield per hectare for FYE2018 was slightly lower at 17.27MT/hectare as compared to 17.29MT/hectare in FYE2017. For productivity improvement, the Group will enhance the human capital development and the mechanization of processes on the estates especially on crop evacuation. The age profile of the developed area is shown below: Particulars Hectare % 0-3 years % 4-7 years % 8-18 years % > 19 years % 1, % PROSPECT Manufacturing Division There are uncertainties surrounding the stability of the economy. The Management strives to monitor and control the operational costs as well as expanding customer base to improve financial performance. The Management expects the results of this division to improve in the next financial year ending 30 June Plantation Division The performance of this division will be fundamentally contingent on the movement of crude palm oil ( CPO ) price and FFB production. The Group will continue to face challenges from fluctuating prices, increasing costs, manpower shortage and unpredictable weather conditions. Nevertheless the Management will continue to improve yield and cost management in order to deliver satisfactory performance. 6 Scope Industries Berhad

8 STATEMENT ON CORPORATE SOCIAL RESPONSIBILITY Scope Group s Corporate Social Responsibility (CSR) principle emphasizes on achieving commercial success in a balanced and responsible manner by addressing the interests of all stakeholders. The Group not only increases the stakeholder value through its core business but also bearing in mind of its responsibilities for the betterment of the community and the environment. This simple guiding principle ensures that CSR, as we see it, is part and parcel of how we do business. The key initiatives currently undertaken by the Group are: (a) Stakeholder Relations We are committed to timely and meaningful dialogues with all stakeholders, including shareholders, customers, employees, regulators, etc. (b) Employees The Group recognises that its employees are important assets. It takes good care of the welfare of its employees and employs them under fair and equitable terms besides offering equal opportunity for career advancement based on performance and academic qualification. Training on industrial safety is regularly conducted to ensure high level of awareness on safety requirement at all levels. The Company has conducted the following safety training for its employees: Firefighting and emergency response by Bomba During the year, the Company has organized the following programme for its employees: Eye care programme inclusive of free eye consultant, free eye test, spectacles services and obtained a special discount from the merchandises (c) Community Strengthening our contribution to the community in our township and helping to foster better community care and goodwill with a target in place to employ 50% of local workforce. We have been conducting industrial training programmes to students from various universities and polytechnics for a period of 3 months with objective of equipping the students with the necessary working skills and knowledge. The Company organized a blood donation campaign at its premises for the blood bank of Parit Buntar General Hospital. The objective of this campaign is to impart a sense of responsibility among employees in saving lives. (d) Environment The Group is committed to environmental awareness and preservation throughout our business. Waste and sludge from production are treated before being discharged. Employees are encouraged to reduce the use of paper, recycle any recyclable items and reduce wastages. Efforts have also been made to conserve energy by ensuring that all lights and air-conditioning are operating only when there is a need. Annual Report

9 PROFILE OF DIRECTORS Lim Chiow Hoo, a Malaysian, male, aged 55, was appointed as the Managing Director of Scope on 15 July He is a businessman by profession and is the founder of the Group. After completing his Higher School Certificate, he started his career as a Treasurer at Hup Hin Chan Rice Mill Sdn. Bhd. from 1984 to In 1990, he became a sole-proprietor when he set up his business of assembling printed circuit board ( PCB ) for office equipments. In 1991, he founded Scope Manufacturers (M) Sdn Bhd ( SMSB ) and his business in the sole proprietorship was subsequently transferred to SMSB. SMSB s operations expanded to include the assembly of PCB for telecommunication products. Being the founder, he is directly involved in the growth and development of SMSB since its inception in Under his stewardship, SMSB s operations have since expanded to include the assembly of PCB for various electronic products with specialisation in audio and telecommunication equipments. Backed by more than 25 years of experience in the electronics industry, Mr. Lim Chiow Hoo possesses in-depth knowledge on the overall operations of SMSB. His functional roles in the Group include the overall management of sales and marketing of the Group. Lee Min Huat, a Malaysian, male, aged 61, was appointed as the Executive Director of Scope on 15 July He graduated with a Diploma in Aircraft Maintenance Engineering from Confederation College, Canada in Upon graduation, he worked as a Manager at Kalayaan Sdn. Bhd., a property developer, from 1980 to For the past 20 years, he has been involved in property development and commodity trading. In addition to his directorship in Scope, he currently holds directorships in other private limited companies. He is currently responsible for the formulation of corporate strategies, plans for the Group and oversee the Group finance and operations. Mr. Lee Min Huat is a member of the Remuneration Committee. He has no family relationship with any Director or major shareholders of the Company. He does not hold any directorships in any other public companies and listed issuers. He has no family relationship with any Director or major shareholders of the Company. He does not hold any directorships in any other public companies and listed issuers. Chew Kong Yoon, a Malaysian, male, aged 76, is our Non- Independent Non-Executive Chairman. He was appointed to the board on 20 February 2014 as Executive Director and subsequently on 16 April 2015 redesignated as Non- Independent Non-Executive Chairman. He obtained his Diploma of the Associate of Incorporated Society of Planters in 1966, Diploma in Management (MIM) in 1977 and Bachelor of Business in Accounting (Australia) in He started his career as a cadet planter in 1961 with Ko Rubber Plantation in Johor. In 1966, he joined Seafield Amalgamated Rubber Co. as a Senior Assistant Manager and later Sime Darby Berhad as an Estate Manager. He was promoted to Planting Adviser in Mr. Chew joined Dynamic Management Sdn Bhd, the plantation subsidiary of IOI Corporation Berhad, in 1983 as an Executive Director acquiring established plantations and developing oil palm plantations from initial purchase of jungle land, establishment of palm oil mills and marketing of produce. He retired from IOI Corporation Berhad in 1997 as a Plantation Director (Sabah Division) and started his own plantation management advisory. He also undertakes project feasibility studies in Malaysia, Indonesia, Papua New Guinea and the Philippines. Mr. Chew is father of Ms. Yvonne Chew Siok Fong (his Alternate Director). Save from above, he has no family relationship with any other Director or major shareholders of the Company. He does not hold any directorships in any other public companies and listed issuers. Lim Ee Tatt, a Malaysian, male, aged 48, was appointed as the Non-Independent Non-Executive Director of Scope on 2 December Mr. Lim is a graduate of University of South Australia where he holds his bachelor s degree in Mechanical Engineer majoring in Thermodynamics. He furthered his studies in business and management where he completed a post graduate diploma in Business Administration at the same university. He is also a member of the Australian Institute of Engineers. Mr. Lim Ee Tatt has worked as an engineer in Australia and Malaysia where he has acquired his expertise in solid materials handling. He designed, and commissioned automated delivery and handling systems for powder and granular materials for various industries in Malaysia as well as overseas. After 5 years working in this spelicialized field, he entered the business in oil palm development and investment with Wah Len Enterprise Sdn Bhd. Mr. Lim is now actively involved in Wah Len Enterprise Sdn Bhd, an established oil palm plantation base company in which he holds the position as Managing Director. Mr. Lim Ee Tatt is a member of the Audit Committee. He is also the Managing Director and major shareholder of Wah Len Enterprise Sdn Bhd, which is a major shareholder of the Company. Save for the disclosed relationship, he has no any family relationship with any Director or major shareholders of the Company. He does not hold any directorships in any other public companies and listed issuers. 8 Scope Industries Berhad

10 PROFILE OF DIRECTORS (cont d) Tan Poh Heng, a Malaysian, male, aged 61, was appointed as the Independent Non-Executive Director of Scope on 13 May 2008 and designated as Senior Independent Non- Executive Director on 16 April He is a member of both the Malaysian Institute of Certified Public Accountants and Malaysian Institute of Accountants. He joined Messrs. Price Waterhouse & Co. as an Audit Assistant in May 1978 until March 1983 when he completed his professional examination and qualified as an accountant. In April 1983, he joined Messrs. Peat, Marwick, Mitchell & Co. as a Qualified Assistant. In January 1985, he left the accounting firm as an Audit Supervisor to join South Island Garment Sdn. Bhd ( SIG ) as a Chief Accountant. He left SIG in March 2002 when he held the position of Senior General Manager. He was attached to Messrs. JB Lau & Associates as the Senior Audit Manager from June 2002 to September He was the Chief Financial Officer of GPS Tech Solutions Sdn Bhd. He was the Financial Controller of Punch Industry Malaysia Sdn Bhd, which is a wholly owned subsidiary of a listed company in Japan, Punch Industry Co. Ltd. from September 2012 until he attained his statutory retirement age in September Yong Loong Chen, a Malaysian, male, aged 52, was appointed as the Independent Non-Executive Director of Scope on 1 December He is a Chartered Accountant by profession as well as a member of the Malaysian Institute of Certified Public Accountants and also member of the Malaysian Institute of Accountants. He joined Messrs KMPG Peat Marwick as audit senior in year 1990 until Subsequently, he was attached with Paul Chuah & Co as Audit Manager from year 1994 to From year 1995 to 2010, he was a dealer representative with Affin Investment Bank Berhad. Currently he is the Chairman and Executive Director of Cittasukha Berhad. Mr. Yong Loong Chen is a member of the Audit Committee, Nomination Committee and Remuneration Committee. He has no family relationship with any Director or major shareholders of the Company. Currently, he is an Independent Non-Executive Director of Magni-Tech Industries Berhad. Mr. Tan Poh Heng is also the Chairman of the Audit Committee, Nomination Committee and Remuneration Committee at Scope. He has no family relationship with any Director or major shareholders of the Company. Yvonne Chew Siok Fong, a Malaysian, female, aged 46, was appointed as an Alternate Director to Mr. Chew Kong Yoon of Scope on 21 May A graduate from Australia with a Bachelor of Business from Northern Territory University in 1993 and Master of International Tourism Management from Southern Cross University in Since 1999, she has been involved in the plantation and investment holdings of her family business and presently sits on the board of several private limited companies. She is a member of the Incorporated Society of Planters for over a decade and has attended numerous courses in relation to the oil palm industry. Notes: 1. All the above Directors do not have any conflict of interest with the Company. 2. Other than traffic offences, none of the Directors of the Company have any convictions for offences within the past 5 years or any public sanction or penalty imposed by the relevant regulatory bodies during the financial year. 3. The Directors shareholdings are as disclosed in this Annual Report. She takes particular interest in social responsibility work in particular animal welfare, she is a founding member of the Society for the Prevention of Cruelty to Animal in Lahad Datu and Funding for Animals and Independent Rescues (FAIR). She has also been on the board for two other non-for-profit organisations, including serving as president and assistant governor for one of them. She has also served as councilor in the Lahad Datu Town Council. She is a daughter of Mr. Chew Kong Yoon (Non-Independent Non-Executive Chairman and major shareholder of the Company). Save from above, she has no family relationship with any other Director or major shareholders of the Company. She does not hold any directorships in any other public companies and listed issuers. Annual Report

11 PROFILE OF KEY SENIOR MANAGEMENT Ong Lai Choon, a Malaysian, female, aged 46, was appointed as Chief Operating Officer of Scope Manufacturers (M) Sdn Bhd on 16 March In her current position, she is responsible for the planning, coordination and control of manufacturing processes in the factory as well as purchasing and human resources department. She has 20 years of working experience in manufacturing environment of which 17 years was with electronic manufacturing service companies. Ms. Ong holds a Diploma in Management from Malaysian Institute of Management. She joined Scope Manufacturers (M) Sdn Bhd in 2006 as production planner and was promoted to Head of Purchasing cum Planning Department in 2009 and was subsequently taking the position as Chief Operating Officer. Ms. Ong has no family relationship with any Directors and/or major shareholders of the Company. She does not hold any directorships in any other public companies and listed issuers. Han Siew King, a Malaysian, male, aged 71, was appointed as Managing Director of Pioneer Glow Sdn Bhd, a subsidiary company of the Group on 30 April He graduated from the University of Malaya in 1972 with a Bachelor of Agricultural Science degree. In 1978, he completed a course leading to a Certificate in Plant Protection, in the International Agricultural Centre, Wageningan, The Netherlands. On graduation in 1972, he started his career as an Agricultural Officer in the University of Malaya Faculty of Agriculture s farm in Puchong before joining Sime Darby Plantations as an Agronomist in September of the same year. Here he worked as an Agronomist for rubber, oil palms and cocoa. In January, 1980, he moved on to join Eastern Plantations Agency (J) Sdn. Bhd., a Management company of Kulim Malaysia Bhd as Senior Agronomist to start the advisory and research division for the Company. There he stayed for only one and half years before moving on to set up his own consultancy services and plantation contracting business in May He has since 2005 retired from the contracting business and now only does consultancy services as and when requested for. He is a member of several professional bodies, namely Malaysian Society of Soil Science, International Society of Oil Palm Agronomists and Society of Agricultural Scientist, Sabah. He has no family relationship with any Director or major shareholders of the Company. He does not hold any directorships in any other public companies and listed issuers. Notes: 1. All the above Key Senior Management do not have any conflict of interest with the Company. 2. Other than traffic offences, none of the Key Senior Management of the Company have any convictions for offences within the past 5 years or any public sanction or penalty imposed by the relevant regulatory bodies during the financial year. 10 Scope Industries Berhad

12 CORPORATE GOVERNANCE OVERVIEW STATEMENT The Board of Directors of Scope Industries Berhad ( Scope or the Company ) ( the Board ) is committed to maintain high standards of corporate governance within the Group as a fundamental part of its responsibilities in managing the business and affairs of the Group. The Board operates within the Company s governance framework towards enhancing integrity, transparency and corporate accountability to protect the interests of its shareholders and stakeholders. Scope has complied substantially with the relevant principles and recommendation of Malaysian Code on Corporate Governance which took effect on 26 April 2017 ( MCCG or the Code ) so far as applicable and described herein. This Statement is prepared in compliance with the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( AMLR ) and it is to be read together with the Corporate Governance Report 2018 of the Company which is available on the Company s website at PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS I) Board Responsibility The Board recognises the key role it plays in charting the strategic direction of the Company and has assumed the following principal responsibilities in discharging its fiduciary and leadership functions:- Reviewing and adopting strategic plans for the Group which will enhance the future growth of the Group while addressing sustainability of the Group s business; Overseeing the conduct of the Group s businesses to evaluate whether the business are being properly managed; Identifying principal risks of the business and ensuring the implementation of appropriate systems to manage these risks; Reviewing the adequacy and integrity of the Group s internal control systems and management information systems; To consider and implement plans for effective appointments to senior management positions and Board members which includes appropriate and adequate training and ensuring orderly succession of senior management. To assist in the discharge of its stewardship role, the Board has established Board Committees, namely the Audit Committee, Nomination Committee and Remuneration Committee, to examine specific issues within their respective terms of reference as approved by the Board and report to the Board with their recommendations. The ultimate responsibility for decision making, however, lies with the Board. Non-Independent Non-Executive Chairman is responsible for leadership, governance and effectiveness of the Board in discharging its duties and responsibilities. The Managing Director and Executive Director have overall responsibility for the day-to-day management of the business, implementation of the Board s policies and decisions, and execution of strategic goals. The positions of Chairman and Managing Director are held by two different individuals. Separation of these positions promotes accountability and facilitates division of responsibilities between them. All decisions of the Board are made based on decision of the majority and no single Board member can make any decision on behalf of the Board, unless duly authorised by the Board. As such, no single individual or a group of individuals dominates the decision-making process. Board Charter The Board has overall responsibility for the proper conduct of the Group. Scope adopted a Board Charter that clearly sets out the respective roles and responsibilities of the Board to ensure accountability. The Board Charter will be reviewed periodically to ensure it remains consistent with the Board s objective and to take into consideration any development in rules and regulations that may have an impact on the discharge of the Board s duties and responsibilities. The Board Charter is made publicly available on the Company s website at in line with Practice 2.1 of the Code. Code of Ethics The Directors observed the code in accordance with the Company Directors Code of Ethics established by the Companies Commission of Malaysia. The Code of Ethics is made publicly available on the Company s website at in line with Practice 3.1 of the Code. Annual Report

13 CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont d) PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS (cont d) I) Board Responsibility (cont d) Code of Conduct In order to enhance the standard of corporate governance and behaviour, the Board observed the Company s code of conduct which set out the standards of business and ethical conduct for all Directors and employees in the conduct of their business. Whistle Blowing Policy The Board recognises the importance to put in place a Whistle Blowing Policy, which provides an avenue for employees to make good-faith disclosure and report instances of unethical, unlawful or undesirable conduct without fear of reprisal. The Board will take necessary steps to formalize its Whistle Blowing Policy. Sustainability The Group recognises the environmental, social and governance aspects of sustainability as key elements in formulation of its objectives and strategies. The Group also recognises the need to safeguard and develop the workforce, strengthen stakeholders relationship and protect the interest of shareholders. A corporate social responsibility statement is set out in this Annual Report. Supply of, and Access to Information The Board members have full and unrestricted access to information on the Group s business and affairs in discharging their duties. Prior to the meetings, all Directors are provided with sufficient and timely reports and supporting documents which are circulated in advance of each meeting to ensure sufficient time is given to understand the key issues and contents. In addition, the Board is kept informed of the updates and requirements issued by Bursa Securities and various regulatory authorities Where necessary, the Directors may obtain independent professional advice at the Company s expense on specific issues to enable the Board to discharge their duties on the matters being deliberated. Company Secretaries The Board is of the view that current Company Secretaries are suitably qualified, competent and can support the Board in carrying out its roles and responsibilities. The Board obtained appropriate advice and services, if necessary, from Company Secretaries to ensure adherence to Board meeting procedures and compliance with regulatory requirements. Functions of the Board and Management The Board is responsible for the overall corporate governance of the Group, including the strategic direction, risk management and establishes the vision and strategic objectives of the Group for development which includes management development, succession planning and policies to ensure all procedures within the Group are to be carried out in a systematic and orderly manner to ease the decision-making process. The Senior Management carries out the role of managing the business of the Group under the direction and delegations of the Managing Director and Executive Director. Board Meetings and Time Commitment Board Meetings are held every quarter and additional meetings are convened as and when required. Key matters reserved for Board s approval include quarterly results, financial statements, major acquisitions and disposals, major capital expenditure, and corporate proposal on fund raising. The Board met four (4) times during the financial year ended 30 June The Board is satisfied with the time commitment expected of all Directors in discharging their duties. All Directors devote sufficient time to carry out their responsibilities. 12 Scope Industries Berhad

14 CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont d) PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS (cont d) I) Board Responsibility (cont d) Board Meetings and Time Commitment (cont d) Any proposals for new appointments to the Board are reviewed by the Nomination Committee and presented to the Board for approval. The Nomination Committee is responsible for recommending the right candidates with required skills, experience and attributes to the Board for appointment. The Directors attendance at Board Meetings held during the financial year is as follows: Directors Attendance Mr. Chew Kong Yoon 4/4 Mr. Lim Chiow Hoo 3/4 Mr. Lee Min Huat 4/4 Mr. Tan Poh Heng 4/4 Mr. Yong Loong Chen 4/4 Mr. Lim Ee Tatt 4/4 The Directors are in compliance with the provision of the AMLR on the restriction of not holding more than five directorships in listed issuers. Directors Training All the Directors had attended the Mandatory Accreditation Programme prescribed by Bursa Securities. In addition, the Directors are encouraged to attend other relevant training programmes, courses and seminars to enhance their knowledge and professionalism in discharging their duties. Details of training attended by the Directors during the financial year 2018 are as follow: No. Director Seminar/Training Course Attended No. of days 1. Mr. Chew Kong Yoon Forum on Malaysian Sustainable Palm Oil (MSPO) Talk on Malaysian Sustainable Palm Oil (MSPO) The benefits and advantage of RSPO & MSPO certification to the smallholder Half day Half day Half day 2. Mr. Lim Chiow Hoo Global Electronics Outlook Half day 3. Mr. Lee Min Huat Board Excellence: How to Engage and enthuse Beyond Half day Compliance with Sustainability Sustainability Reporting Workshop Half day 4. Mr. Tan Poh Heng Malaysian Budget 2018 Seminar 1 day Half day 5. Mr. Yong Loong Chen Board Excellence: How to Engage and enthuse Beyond Compliance with Sustainability Women: Changing The Global Economy Half day Corporate Governance Series: Leading Change Half day 6. Mr. Lim Ee Tatt Corporate Governance Series: Leading Change Half day 7. Yvonne Chew Siok Fong Forum on Malaysian Sustainable Palm Oil (MSPO) Talk on Malaysian Sustainable Palm Oil (MSPO) The benefits and advantage of RSPO & MSPO certification to the smallholder Half day Half day Half day Annual Report

15 CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont d) PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS (cont d) II) Board Composition The Board currently consists of six (6) members, comprising two (2) Executive Directors, two (2) Non-Independent Non- Executive Directors and two (2) Independent Non-Executive Directors The Board is led by a Non-Independent Non-Executive Chairman. Further, the complementary role of Non-Executive Directors is to ensure an effective Board with a mix of industry-specific knowledge, skill, expertise and commercial experience. There is a clear division of responsibilities among directors to ensure a balance of power and authority. The number of Independent Directors is in compliance with the AMLR of Bursa Securities which requires the Board to have at least two (2) Independent Directors or 1/3 of the Board of Directors, whichever is higher, to be Independent Directors. The Nomination Committee and the Board assesses the independence of the Independent Non-Executive Directors annually, taking into account the individual Director s ability to exercise independent judgement at all times and to contribute to the effective functioning of the Board. The Nomination Committee had reviewed and assessed independence of Independent Non-Executive Directors during the financial year and is satisfied with the level of independence demonstrated by the respective Directors. Presently, Mr Tan Poh Heng and Mr. Yong Loong Chen have served the Company as Independent Non-Executive Directors for a cumulative term of more than nine (9) years, the Board recommended them to continue to act as the Independent Non-Executive Directors of the Company. The relevant motion on the subject matter will be presented to the shareholders for approval at forthcoming Annual General Meeting. The brief profile of each Board member is presented under Directors Profile of this Annual Report. Nomination Committee The Nomination Committee of Scope was set up on 19 November Details of the members of the Committee are as follow: Nomination Committee Members Position in Nomination Committee Directorate Attendance Mr. Tan Poh Heng Chairman Senior Independent Non-Executive Director 1/1 Mr. Yong Loong Chen Member Independent Non-Executive Director 1/1 The duties and responsibilities of the Nomination Committee are guided by its terms of reference, which is available on the Company s website at The main responsibilities of the Nomination Committee included the following: Nominate the right candidates with the required skills, knowledge and experience in relation to new appointment of Board member. Regularly review the structure, size and composition (including the skills, knowledge and experience) required of the Board compared to its current position and make recommendations to the Board with regard to any changes. Review and recommend the membership of the Audit and Remuneration Committees, in consultation with the chairmen of those committees. Assess and review the effectiveness of the Board and the contribution of each individual director and the independence of Independent Directors. To develop, maintain and review the criteria to be used in the annual assessment of directors and recruitment process. The Nomination Committee has developed criteria to assess the effectiveness of the Board, the Board committees and individual Director. The evaluation on the Board s effectiveness is divided into four sections on the following key areas: Adding value Conformance Stakeholder Relationship Performance management The process also assesses the competencies of each Director in the areas of integrity and ethics, governance, strategic perspective, business acumen, judgement and decision making, teamwork, communication and leadership. 14 Scope Industries Berhad

16 CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont d) PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS (cont d) II) Board Composition (cont d) Nomination Committee (cont d) The Nomination Committee also undertakes annual assessment of the independence of its independent directors based on required mix skills, criteria of independence as per AMLR, meeting attendance, ability to ensure effective checks and balances on the Board s decision making process, constructively challenge business propositions and contributes to the development of business strategy and direction of the Company, ensures that adequate systems and controls to safeguard the interests of the Company are in place and continuous updating of knowledge and enhancing of skills through attendance of business related trainings. When considering new appointment, the Nomination Committee shall evaluate the balance of skills, knowledge and experience on the board, and, in the light of this evaluation prepare a description of the role and capabilities required for a particular appointment. In identifying suitable candidates the Committee shall consider candidates from a wide range of backgrounds and consider candidates on merit and against objective criteria, taking care that appointees have sufficient time available to devote to the position. The Nomination Committee meets at least once a year and as and when necessary. The Nomination Committee had met once during the financial year and the activities of the Nomination Committee are summarized as follows: (a) Assessed the effectiveness of the Board as a whole, the committees of the Board and the contribution of each individual director, including Independent Non-Executive Directors. (b) Reviewed and recommended the re-election/re-appointment of Directors who were retiring and seeking for re-election/ re-appointment at Fifteenth Annual General Meeting. (c) Assessed the performance of Independent Non-Executive Directors. (d) Reviewed the term of office and performance of an Audit Committee and each of its members. Gender, Ethnicity and Age Diversity Policy The Board does not set any target on gender diversity and has no immediate plan to implement gender, ethnicity and age diversity policy for its Board of Directors. In considering Board member appointment, the Board provides equal opportunity to candidates who have the necessary skills, experience, competencies and other attributes regardless of gender, ethnicity and age. The Group also has no immediate plans to implement workforce diversity policy or target as it is of the view that employment is dependent on each candidate s skills, experience, core competencies and other qualities, regardless of gender, ethnicity and age. The Group will provide equal opportunity to candidates with merit. Remuneration Committee The Remuneration Committee was formed on 19 November The Committee comprises mainly of Non-Executive Directors and the members and their attendance of meetings during the financial year 2018 are as follows: Remuneration Committee Members Position in Remuneration Committee Directorate Attendance Mr. Tan Poh Heng Chairman Senior Independent Non-Executive Director 1/1 Mr. Lee Min Huat Member Executive Director 1/1 Mr. Yong Loong Chen Member Independent Non-Executive Director 1/1 The Remuneration Committee is governed by its terms of reference and its primary function is responsible for recommending to the Board from time to time, the remuneration framework and package of the Executive Directors in all forms to commensurate with the respective contributions of the Executive Directors. The Executive Directors are to abstain from deliberations and voting on the decision in respect of their own remuneration packages. The Board as a whole decides on the remuneration of the Non-Executive Directors, including the Non-Executive Chairman. The individual concerned should abstain from deliberations of their own remuneration packages. Directors fees are subject to shareholders approval at the forthcoming AGM. Annual Report

17 CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont d) PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS (cont d) II) Board Composition (cont d) Remuneration Committee (cont d) The Committee held one meeting during the financial year 2018 to review remuneration package for Executive Directors and directors fee for all Directors. The Directors are satisfied with the current levels of remuneration, which are in line with the responsibilities expected by the Company. In general, the remuneration is structured so as to link reward to corporate and individual performance, as in the case of the Executive Directors and senior management. As for the Non-Executive Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by the particular Non- Executive Directors concerned. The remuneration of the Directors of the Company for the financial year 2018, received from the Company as well as received on a group basis are as follows: Salaries and Other Fees Emoluments * Allowance Total RM RM RM RM Group Executive Director Lim Chiow Hoo Lee Min Huat 35,000 50, , ,860 52,000 52, , ,860 Non-Executive Director Chew Kong Yoon Tan Poh Heng Yong Loong Chen Lim Ee Tatt 150,000 25,000 25,000 40, ,000 2,000 2,000 2, ,000 27,000 27,000 42,000 Total 325, , ,000 1,309,200 Salaries and Other Fees Emoluments * Allowance Total RM RM RM RM Company Executive Director Lim Chiow Hoo Lee Min Huat 25,000 25, ,000 52,000 77,000 77,000 Non-Executive Director Chew Kong Yoon Tan Poh Heng Yong Loong Chen Lim Ee Tatt 25,000 25,000 25,000 25, ,000 2,000 2,000 2,000 27,000 27,000 27,000 27,000 Total 150, , ,000 Note: * This includes bonus as well as statutory contributions. 16 Scope Industries Berhad

18 CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont d) PRINCIPLE B - EFFECTIVE AUDIT AND RISK MANAGEMENT In assisting the Board to discharge its duties on financial reporting, the Board has established an Audit Committee, comprising majority Independent Non-Executive Directors, with Mr. Tan Poh Heng as the Committee Chairman. The composition of the Audit Committee, including its roles and responsibilities, and a summary of the activities during the financial year are set out in the Audit Committee Report of this Annual Report. The Group maintains a close and transparent relationship with its auditors in seeking professional advice and ensuring compliance with appropriate accounting standards. The Audit Committee discusses the nature and scope of audit and reporting obligations with the external auditors before commencement of audit engagement. It is also the practice of the Audit Committee to respond to auditors enquiries and recommendations, if any, to ensure compliance with various approved accounting standards in the preparation of the Group s financial statements. The Audit Committee is empowered by the Board to review all issues in relation to appointment and re-appointment, resignation or dismissal of external auditors. The Audit Committee has also assessed the suitability and independence of the external auditors. The external auditors have confirmed that they are independent throughout the conduct of audit engagement in accordance with terms of professional and regulatory requirements. Directors Responsibility Statement in relation to the compliance with applicable Financial Reporting Standards The Board aims to present a true and fair assessment of the Group s position and prospects primarily through the annual and quarterly financial statements to shareholders as well as Management Discussion and Analysis in the Annual Report. The Audit Committee assists the Board to oversee the Group s financial reporting process, ensures its compliance with applicable financial reporting standards and regulatory requirements as well as the quality of financial reporting. The Directors are responsible for the preparation of financial statements in accordance with Financial Reporting Standards and the provisions of the Companies Act 2016 in Malaysia. The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2018 and of their financial performance and cash flows for the financial year then ended. In preparing the financial statements, the Directors have selected and applied appropriate accounting policies, and made reasonable and prudent judgment and estimates. The Directors also have a general responsibility for taking reasonable steps to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Sound framework to manage risks An overview of the state of internal controls and risk management within the Group is set out in this Annual Report under the Statement on Risk Management and Internal Control. Internal audit function The Board has an overall responsibility in maintaining a sound internal control system that provides reasonable assurance of effective and efficient operations and compliance with the internal procedures and guidelines. Details of the Company s internal control framework are set out under the Statement on Risk Management and Internal Control and Audit Committee Report in this Annual Report. PRINCIPLE C - INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS Corporate Disclosure Policies and Procedures Along with good corporate governance practices, the Company is committed to provide the investors and public with comprehensive, accurate and material information on a timely basis. In line with this commitment and in order to enhance transparency and accountability, the Board has adopted a Corporate Disclosure Policies and Procedures to facilitate the handling and disclosure of material information in a timely and accurate manner. The Corporate Disclosure Policies and Procedures is published on the Company s website at Annual Report

19 CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont d) PRINCIPLE C - INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS (cont d) Effective Dissemination of Information The Board recognises the value of investor relations and endeavours to maintain constant and effective communication with shareholders through timely and comprehensive announcements Information of the Group is also accessible through the Company s website ( which is updated on a regular basis. Information available in the website includes among others the Group s annual report, quarterly financial announcements, circulars, major and significant announcements, press release and latest corporate developments of the Group. Conduct of General Meeting The Annual General Meeting ( AGM ) is the principal forum dialogue with all shareholders. The participation of shareholders and investors, both individual and institutional, at general meeting is encouraged whilst requests for briefings from the press and investment analysts are usually a matter of course. Notice of AGM and the Annual Report are sent to shareholders at least 21 days before the date of the meeting. Whilst the Annual Report provides comprehensive source of information, the Board members readily avail themselves to answer any questions that may arise as shareholders may seek more information. In compliance with the AMLR of Bursa Securities, all resolutions set out in the notice of any general meeting or notice of resolution will be voted by poll. It also stipulates that an independent scrutineer shall be appointed to validate the votes cast during polling process. COMPLIANCE STATEMENT The Board recognises that there are always opportunities for improvement in its corporate governance activities in order for the Group to continue to create trust and confidence amongst stakeholders. The Board is satisfied that this Corporate Governance Overview Statement provides the information necessary to enable shareholders to evaluate how the Code has been applied and obligation are fulfilled under the Code and AMLR of Bursa Securities. The Board will continue to strive for sound standards of corporate governance throughout the Group. This Corporate Governance Overview Statement is made in accordance with a resolution of the Board of Directors dated 8 October Scope Industries Berhad

20 ADDITIONAL INFORMATION To comply with the Listing Requirements of Bursa Securities, the following information is provided. 1. Material Contracts Involving Directors, Chief Executive or Major Shareholders Interest There were no material contracts entered into by the Company and its subsidiaries involving interests of the Directors, chief executive who is not a director or major shareholders, either still subsisting at the end of the financial year or entered into since the end of the previous financial year. 2. Recurrent Related Party Transactions of a Revenue or Trading Nature There was no recurrent related party transaction of a revenue or trading nature during the financial year ended 30 June Audit and Non-Audit Fees During the financial year, the amount of audit and non-audit fees paid and payable to the external auditors and its affiliates by the Company and the Group respectively are as follows: Audit Fee (RM) Non-Audit Fee (RM) Company 20,000 3,000 Group 68,000 3, Utilisation of Proceeds During the financial year, there was no proceeds raised by the Company from any corporate exercise. Annual Report

21 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL The Malaysian Code on Corporate Governance ( MCCG or Code ) stipulates that listed companies should maintain a sound system of risk management and internal control to safeguard shareholders investment and the Group s assets. Guided by the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers, the Board is pleased to provide the Statement on Risk Management and Internal Control which is prepared in compliance with Rule 15.26(b) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad. Board Responsibility The Board affirms its overall responsibility for the Group s system of risk management and internal control which includes the establishment of appropriate control framework, and for reviewing the adequacy and integrity of the system. Because of the limitations that are inherent in any system of internal control, those systems are designed to manage rather than eliminate the risk that may impede the achievement of the Group s business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. The process of identifying, evaluating and managing risks has been continuously reviewed by the Board with the assistance and support from management. Risk Management Framework The Group has developed and put in practice the risk management system to identify, evaluate, and manage significant risks associated with business units within the Group as well as non-compliance with applicable laws, rules and regulations in order to ensure the business operations are operated within the acceptable risk appetite of the Group. Risk profiles of major business units addressing the risks to the achievement of financial, operational and other business objectives, were prepared and scored for likelihood of risks occurring and the magnitude of its impact and as such controls are put in place to manage and mitigate the risks. The senior management, head of department and key personnel from the major business units are responsible for the risk management system. They have been entrusted to prepare action plans with implementation time-scales to address the risk and any control issues identified. The key findings were discussed during the management meeting and were brought to the attention of Executive Directors. As and when necessary, summary of the key findings would be presented to the Audit Committee. Key Elements of Internal Control and Risk Management The Group has established internal control structure to ensure effective control over the business operations and to safeguard the Group s assets. Key elements in the system of internal controls and procedures are as follow: (a) An organisation structure with clear lines of accountability and responsibility. (b) An organisation chart that delineates reporting lines with delegation of authority to the various levels, thus ensuring an adequate system of checks and balance. (c) Documented standard operating policies and procedures to ensure compliance with internal controls, law and regulations which are subjected to regular reviews, have been communicated to all levels. (d) Regular and comprehensive information are provided to the management, covering finance, operations and key business indicators for effective monitoring and decision making. (e) Meetings for all business units are conducted regularly to consider business development, financial and operational performance, and to rectify area of discrepancies. (f) Annual budget for each business area are reviewed and approved by directors. (g) The Board is briefed on any exceptions or deviation to the Group s policies, and the weakness on internal control system. (h) Limits of authorities are implemented for capital expenditure for all operating units to keep potential exposure under control. Internal Audit Function The Group outsourced its internal audit function to an independent firm of consultants in assessing the adequacy and integrity of the internal control systems of the business units within the Group. Regular internal audits are carried out yearly to review the internal control system in the key activities of business units based on the internal audit plan reviewed and approved by the Audit Committee. The internal audit team recommends to the executive and operational management on areas of improvement and subsequently initiates follow-up review to determine the extent of implementation of those recommendations by the management. The findings arising from internal audits and the management s responses were reported by the internal auditors at the Audit Committee meeting. 20 Scope Industries Berhad

22 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont d) Conclusion The Board has received assurance from the Managing Director and Executive Director that the Group s risk management and internal control system are operating adequately and effectively in all material aspects. The Board has reviewed the risk management and internal control system and is of the view that those systems in place for the year under review were adequate and effective to safeguard shareholders interest and assets of the Group. The Board is of the view that there were no significant weaknesses in internal control which resulted in material loss, contingencies or uncertainties during the financial year. This Statement is made in accordance with a resolution of the Board of Directors dated 8 October Annual Report

23 AUDIT COMMITTEE REPORT The primary objective of the Audit Committee is to assist the Board in the effective discharge of its fiduciary responsibilities for corporate governance, financial reporting and internal control. COMPOSITION OF AUDIT COMMITTEE Chairman : Mr. Tan Poh Heng, Senior Independent Non-Executive Director Members : Mr. Yong Loong Chen, Independent Non-Executive Director Mr. Lim Ee Tatt, Non-Independent Non-Executive Director There were four (4) Audit Committee meetings held during the financial year ended 30 June The record of attendance is as follow: Name of Committee Member Attendance Mr. Tan Poh Heng 4/4 Mr. Yong Loong Chen 4/4 Mr. Lim Ee Tatt 4/4 In carrying out its duties, the Audit Committee reported to and updated the Board on significant issues and concerns discussed during the Committee s meetings and where appropriate, made necessary recommendations to the Board. The Secretary was responsible to record all proceedings and minutes of all meetings of the Audit Committee. SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE In line with the terms and reference of the Audit Committee ( AC ), the following activities were carried out by AC during the financial year ended 30 June 2018 ( FYE2018 ) in discharging its functions and duties: (i) Financial Reporting Oversight a) Reviewed the quarterly unaudited financial results with the finance team and thereafter recommended to the Board for approval, for announcement to Bursa Malaysia Securities Berhad. b) Reviewed the annual audited financial statements with the external auditors and finance team, focusing particularly on significant changes to accounting policies and practices, going concern assumptions, adjustments arising from the audits, compliance with the relevant accounting standards and other legal requirements to ensure compliance with the provisions of the Companies Act 2016 and the ACE Market Listing Requirements. (ii) Oversee Activities of External Auditors in dealing with the Group a) Discussed and reviewed the external auditors audit planning report outlining key contact of the audit team, audit timeline, recent development of the Group, key areas of audit focus, fraud risk, communication of other significant audit matters, proposed audit fees, other updates such as accounting standards and amendments to the listing requirements. b) The AC deliberated on the external auditors report at its meeting with regard to the relevant disclosures in the annual audited financial statements for financial year ended 30 June c) The AC reviewed the external auditors findings arising from audits, focusing on management s comment in response to the audits in order to be satisfied that appropriate action is being taken. d) The AC also discussed and reviewed with external auditors the applicability of the new accounting standards and new financial reporting regime issued by the Malaysian Accounting Standards Board. e) The AC reviewed the external auditors audit findings report in respect of the audit for financial year ended 30 June f) The AC met twice with the external auditors without the presence of the Executive Directors and management staff to discuss any issues of concern to the External Auditors arising from the annual statutory audit. g) The AC reviewed the performance and independence of the external auditors, considered and recommended their reappointment to the Board. 22 Scope Industries Berhad

24 AUDIT COMMITTEE REPORT (cont d) SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE (cont d) (iii) Internal Audit ( IA ) a) Reviewed and approved the IA plan for the financial year 2018 as tabled by the internal auditors. b) Reviewed IA report from internal auditors and assessed the internal auditors findings, recommendations together with the management s comments. INTERNAL AUDIT FUNCTION The Group outsourced its internal audit function to a third party professional firm to assist the Audit Committee in discharging their responsibilities and duties. The internal audit function is primarily responsible to undertake regular and systematic reviews of the business units, processes and procedures so as to provide reasonable assurance that the system of internal control continues to operate adequately and effectively. The Audit Committee approved the internal audit plan presented by the external consultant. The internal audit plan is derived based on the risk-based assessment of all units and operations of the Group. The internal audit reports highlight any deficiencies of findings which were discussed with the management and relevant action plans agreed to be implemented. Significant findings are presented in Audit Committee Meetings for consideration and reported to the Board and audit review is also conducted to determine whether the recommendations made by internal auditor are implemented. Further details on the internal audit function are set out in the Statement on Risk Management and Internal Control in this Annual Report. The total costs of the internal audit functions incurred in respect of the financial year ended 30 June 2018 amounted to RM9,000. The Board is of the view that there is no significant breakdown or weakness in the systems of internal controls of the Group that may result in material losses incurred by the Group for the financial year ended 30 June Annual Report

25 DIRECTORS REPORT for the Financial Year Ended 30 June 2018 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 30 June PRINCIPAL ACTIVITIES The principal activity of the Company is investment holding. The principal activities of the subsidiaries are disclosed in Note 7 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. GROUP RM COMPANY RM Profit for the financial year 1,777,751 1,087,068 Attributable to: Owners of the Company 1,442,699 1,087,068 Non-controlling interests 335,052-1,777,751 1,087,068 DIVIDENDS Since the end of the previous financial year, the Company has declared a single tier dividend of 0.5 sen per share amounting to RM2,802,422 in respect of the financial year ended 30 June 2018 paid on 18 July The directors do not recommend any final dividend payment for the financial year. RESERVES AND PROVISIONS All material transfers to or from reserves or provisions during the financial year are disclosed in the notes to the financial statements. SHARE CAPITAL AND DEBENTURE Share Capital During the financial year, the Company did not issue any other share or debenture and did not grant any option to anyone. Warrants The movement of the warrants during the financial year is as follows: Balance at Number of units Exercised Balance at Warrants 2012/ ,596, ,596,361 The salient features of the warrants are disclosed in Note 16.1 to the financial statements. 24 Scope Industries Berhad

26 DIRECTORS REPORT for the Financial Year Ended 30 June 2018 (cont d) DIRECTORS The directors who served since the date of the last report are as follows: Directors of the Company: Chew Kong Yoon Lim Chiow Hoo Lee Min Huat Tan Poh Heng Yong Loong Chen Lim Ee Tatt Yvonne Chew Siok Fong (Alternate to Chew Kong Yoon) Directors of the Subsidiaries: Pursuant to Section 253 of the Companies Act 2016, the list of Directors of the subsidiaries (excluding Directors who are also Directors of the Company) in office during the financial year and during the period from the end of the financial year to the date of the Report are as follows: Han Siew King Tan Eng Siang DIRECTORS INTERESTS IN SHARES According to the register of directors shareholdings, the interests of directors in office at the end of the financial year in shares and warrants of the Company and its related corporations during the financial year are as follows: Number of ordinary shares Balance at Bought Sold Balance at The Company Direct Interest: Tan Poh Heng 350, ,000 Lim Chiow Hoo 61,449, ,449,330 Lee Min Huat 61,671, ,671,860 Chew Kong Yoon 80,854, ,400-81,120,296 Yong Loong Chen 3,013, ,013,000 Lim Ee Tatt 3,013, ,013,000 Yvonne Chew Siok Fong 2,191, ,191,900 Deemed Interest: Lim Ee Tatt 93,300, ,300,000 Yvonne Chew Siok Fong 10,565,800 50,000 (6,900,000) 3,715,800 Director of a subsidiary of the Company Number of ordinary shares Balance at Bought Sold Balance at The Company Direct Interest: Tan Eng Siang 1,900,000* - - 1,900,000 Annual Report

27 DIRECTORS REPORT for the Financial Year Ended 30 June 2018 (cont d) DIRECTORS INTERESTS IN SHARES Director of a subsidiary of the Company (cont d) Balance at Bought Number of warrants Sold/ Exercised Balance at The Company Direct Interest: Lim Chiow Hoo 10,649, ,649,866 Lee Min Huat 11,540, ,540,372 Chew Kong Yoon 2,084,800 - (17,000) 2,067,800 Yvonne Chew Siok Fong 410, ,000 Deemed Interest: Yvonne Chew Siok Fong 30, ,000 Director of a subsidiary of the Company Balance at Bought Number of Warrants Sold/ Exercised Balance at Direct Interest: Tan Eng Siang 380, ,000 DIRECTORS FEES AND BENEFITS During the financial year, the fees and other benefits received and receivable by the directors of the Company are as follows: COMPANY SUBSIDIARIES GROUP RM RM RM Salaries, bonus and allowances 112, , ,750 Defined contribution plan - 93,450 93,450 Fees 150, , ,000 Indemnity given to or insurance effected for any director ,000 1,047,200 1,309,200 Since the end of the previous financial year, no director of the Company has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the directors shown above) by reason of a contract made by the Company or a related corporation with a director or with a firm of which the director is a member or with a company in which the director has a substantial financial interests, other than those related party transactions disclosed in notes to the financial statements. During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the objects of enabling directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. 26 Scope Industries Berhad

28 DIRECTORS REPORT for the Financial Year Ended 30 June 2018 (cont d) OTHER STATUTORY INFORMATION 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 provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts, and to ensure that any current assets which were unlikely to realise their value 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. At the date of this report, the directors are not aware of any circumstances: (i) (ii) that would render the amount written off for bad debts or the amount of the provision for doubtful debts in the Group and in the Company inadequate to any substantial extent, and that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, and (iii) that would render any amount stated in the financial statements of the Group and of the Company misleading, and (iv) which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. At the date of this report, there does not exist: (i) (ii) any charge on the assets of the Group and of the Company that 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 that has arisen since the end of the financial year. In the opinion of the directors: (i) (ii) no contingent liability 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 its obligations as and when they fall due, the results of 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, and (iii) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the current financial year in which this report is made. There was no indemnity given to or insurance effected for the officers of the Company. Annual Report

29 DIRECTORS REPORT for the Financial Year Ended 30 June 2018 (cont d) AUDITORS The total amount of fees receivable by the auditors, Grant Thornton, as remuneration for their services as auditors of the Group and of the Company for the financial year ended 30 June 2018 were RM68,000 and RM20,000 respectively. There was no indemnity given to or insurance effected for the auditors of the Group and of the Company. The auditors, Grant Thornton, have expressed their willingness to continue in office. Signed in accordance with a resolution of the directors: Lim Chiow Hoo Lee Min Huat Managing Director Executive Director Penang, Date: 8 October Scope Industries Berhad

30 DIRECTORS STATEMENT In the opinion of the directors, the financial statements set out on pages 34 to 83 are properly drawn up in accordance with Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2018 and of their financial performance and cash flows for the financial year then ended. Signed in accordance with a resolution of the directors: Lim Chiow Hoo Lee Min Huat Date: 8 October 2018 STATUTORY DECLARATION I, Lee Min Huat, the director primarily responsible for the financial management of Scope Industries Berhad, do solemnly and sincerely declare that the financial statements set out on pages 34 to 83 are to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by ) the abovenamed at Penang, this 8 th ) day of October )... Lee Min Huat (I/C No ) Before me,... Liew Juan Leng (P162) Commissioner for Oaths Annual Report

31 INDEPENDENT AUDITORS REPORT TO THE MEMBERS of Scope Industries Berhad Report on the Financial Statements Opinion We have audited the financial statements of Scope Industries Berhad, which comprise the statements of financial position as at 30 June 2018 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and notes to the financial statements, including significant accounting policies, as set out on pages 34 to 83. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 30 June 2018, and of their financial performance and their cash flows for the financial year then ended in accordance with Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter Goodwill (Note 8 to the financial statements) How our audit addressed the Key Audit Matter As at 30 June 2018, the Group has goodwill amounting to RM35 million which has been allocated to its plantation operation as the cash-generating unit (CGU). The Group performs an annual impairment assessment for its goodwill. This requires management to estimate the recoverable amount for the CGU and this involves significant assumptions that are inherently judgemental. Our audit procedures in relation to assessment of impairment of the goodwill included: Evaluating the model used in determining the value in use of the CGU as well as assessing the discount rate used. Challenging the reasonableness of key assumptions based on our knowledge of the business and industry. Comparing actual performance of the CGU to assumptions applied in prior years model, to assess accuracy of management s estimates. Performing sensitivity analysis on the key assumptions inputed to the model and understand the impact on the overall carrying value of goodwill with the alterations to the key assumptions. Assessing the adequacy of disclosures in the financial statements. 30 Scope Industries Berhad

32 INDEPENDENT AUDITORS REPORT TO THE MEMBERS of Scope Industries Berhad (cont d) Key Audit Matters (cont d) Key Audit Matter Impairment of non-current assets - Property, plant and equipment - Biological Assets How our audit addressed the Key Audit Matter (Note 4 and 5 to the financial statements) We identified the carrying amount of the above non-current assets as a key audit matter due to their materiality to the overall balance sheet of the Group and significant management judgement is required when determining the recoverable amount of these assets as and when an impairment indicator exists. Our audit procedures in relation to these assets included: Assess if there are any indication of impairment to these assets in accordance with the guidance as stipulated in FRS 136 Impairment of Assets. For assets where an indication of impairment exist, management has relied on provided external valuation reports and budgeted discounted cash flow forecast and projections to determine the recoverable amount of these assets. We have performed the following in relation to aforementioned: Obtaining and reviewing the independent valuation report and assessing the appropriateness of the qualification and recent experience of the valuer in the valuation of properties in the relevant locations. We have also enquired the basis of how the independent valuers derived key assumptions in their valuation model and the methodology applied. Discussing and challenging management s assumptions made in developing the cash flow forecast and projections. Performing sensitivity analysis on the key assumptions inputed to the cash flow forecast and projections model and understand the impact on the overall carrying value of property, plant and equipment with the alterations to these key assumptions. There are no key audit matters in relation to the financial statements of the Company. Information Other than the Financial Statements and Auditors Report Thereon The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Annual Report

33 INDEPENDENT AUDITORS REPORT TO THE MEMBERS of Scope Industries Berhad (cont d) Directors Responsibilities for the Financial Statements The directors of the Company are responsible for the preparation of the financial statements of the Group and of the Company so as to give a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Company, the directors are responsible for assessing the Group s and the Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s and the Company s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s or the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 32 Scope Industries Berhad

34 INDEPENDENT AUDITORS REPORT TO THE MEMBERS of Scope Industries Berhad (cont d) Auditors Responsibilities for the Audit of the Financial Statements (cont d) From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current financial year and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Grant Thornton No. AF: 0042 Chartered Accountants Terence Lau Han Wen No /04/2019 J Chartered Accountant Penang Date: 8 October 2018 Annual Report

35 STATEMENTS OF FINANCIAL POSITION as at 30 June 2018 GROUP COMPANY NOTE RM RM RM RM ASSETS Non-current assets Property, plant and equipment 4 78,357,303 80,264,521 15,294 19,015 Biological assets 5 9,057,357 9,536, Prepaid land lease payment 6 1,458,000 1,512, Investment in subsidiaries ,790,180 65,790,180 Goodwill 8 34,965,796 34,965, Amount due from subsidiaries ,881, ,838, ,278,859 83,686,691 65,809,195 Current assets Inventories 10 1,456,726 1,858, Trade receivables 11 1,597,196 2,810, Other receivables, deposits and prepayments , ,409 20,047 72,350 Amount due from subsidiaries ,760,735 25,854,854 Current tax assets 100,900 13,502-13,502 Other investments , , , ,000 Cash and cash equivalents 14 8,224,622 6,859,080 7,892,500 5,770,889 12,219,345 12,518,912 12,114,282 32,135,595 TOTAL ASSETS 136,057, ,797,771 95,800,973 97,944,790 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 15 91,648,299 91,648,299 91,648,299 91,648,299 Reserves 16 28,002,381 28,002, (Accumulated losses)/retained profits 17 (9,011,773) (7,652,050) 872,129 2,587, ,638, ,998,630 92,520,428 94,235,782 Non-controlling interests 6,586,356 6,251, Total equity 117,225, ,249,934 92,520,428 94,235,782 Non-current liabilities Deferred tax liabilities 18 14,321,983 14,541, Current liabilities Trade payables ,270 1,346, Other payables and accruals ,623 4,473, ,750 3,294,912 Amount due to a subsidiary , ,096 Dividend payable 2,802,422-2,802,422 - Current tax liabilities 70, , ,510,555 6,006,472 3,280,545 3,709,008 Total liabilities 18,832,538 20,547,837 3,280,545 3,709,008 TOTAL EQUITY AND LIABILITIES 136,057, ,797,771 95,800,973 97,944,790 The notes set out on pages 41 to 83 form an integral part of these financial statements. 34 Scope Industries Berhad

36 STATEMENTS OF COMPREHENSIVE INCOME for the Financial Year Ended 30 June 2018 GROUP COMPANY NOTE RM RM RM RM Revenue 21 22,291,018 26,106,409 1,521,932 1,732,545 Cost of sales (17,095,703) (17,140,533) - - Gross profit 5,195,315 8,965,876 1,521,932 1,732,545 Other income 415, ,898 17,000 70,736 Administrative expenses (3,818,581) (3,734,328) (446,609) (293,829) Operating profit 1,792,623 5,703,446 1,092,323 1,509,452 Finance costs (87) (308,156) - (307,143) Profit before tax 22 1,792,536 5,395,290 1,092,323 1,202,309 Tax expense 23 (14,785) (554,436) (5,255) (4,060) Profit for the financial year, representing total comprehensive income 1,777,751 4,840,854 1,087,068 1,198,249 Profit for the financial year, representing total comprehensive income attibutable to: Owners of the Company 1,442,699 4,487,154 1,087,068 1,198,249 Non-controlling interests 335, , ,777,751 4,840,854 1,087,068 1,198,249 Earnings per share attributable to Owners of the Company (sen) - Basic Diluted The notes set out on pages 41 to 83 form an integral part of these financial statements. Annual Report

37 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the Financial Year Ended 30 June 2018 Share Capital Share Premium Attributable to Owners of the Company Warrants Reserve Non-distributable Discount on Shares Capital Reserve Accumulated Losses Total Non- Controlling Interests NOTE RM RM RM RM RM RM RM RM RM Total Equity 2018 Balance at beginning 91,648,299-3,877,794 (3,877,794) 28,002,381 (7,652,050) 111,998,630 6,251, ,249,934 Transaction with owners: Dividends (2,802,422) (2,802,422) - (2,802,422) Total comprehensive income for the financial year ,442,699 1,442, ,052 1,777,751 Balance at end 91,648,299-3,877,794 (3,877,794) 28,002,381 (9,011,773) 110,638,907 6,586, ,225,263 The notes set out on pages 41 to 83 form an integral part of these financial statements. 36 Scope Industries Berhad

38 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the Financial Year Ended 30 June 2018 (cont d) Share Capital Share Premium Attributable to Owners of the Company Warrants Reserve Non-distributable Discount on Shares Capital Reserve Accumulated Losses Total Non- Controlling Interests NOTE RM RM RM RM RM RM RM RM RM Total Equity 2017 Balance at beginning 55,548,443 35,349,856 4,056,336 (4,056,336) 28,002,381 (9,336,782) 109,563,898 5,897, ,461,502 Transaction with owners: Exercise of warrant to shares 15/16 750,000 - (178,542) 178, , ,000 Transition to no-par value regime on 31 January ,349,856 (35,349,856) Dividends (2,802,422) (2,802,422) - (2,802,422) 36,099,856 (35,349,856) (178,542) 178,542 - (2,802,422) (2,052,422) - (2,052,422) Total comprehensive income for the financial year ,487,154 4,487, ,700 4,840,854 Balance at end 91,648,299-3,877,794 (3,877,794) 28,002,381 (7,652,050) 111,998,630 6,251, ,249,934 The notes set out on pages 41 to 83 form an integral part of these financial statements. Annual Report

39 STATEMENT OF CHANGES IN EQUITY for the Financial Year Ended 30 June 2018 Share Capital Share Premium Non-distributable Warrants Reserve Discount on Shares Distributable Retained Profits Total Equity NOTE RM RM RM RM RM RM 2018 Balance at beginning 91,648,299-3,877,794 (3,877,794) 2,587,483 94,235,782 Transactions with owners: Dividends (2,802,422) (2,802,422) Total comprehensive income for the financial year ,087,068 1,087,068 Balance at end 91,648,299-3,877,794 (3,877,794) 872,129 92,520, Balance at beginning 55,548,443 35,349,856 4,056,336 (4,056,336) 4,191,656 95,089,955 Transactions with owners: Issuance of shares 15/16 750,000 - (178,542) 178, ,000 Transition to no-par value regime on 31 January ,349,856 (35,349,856) Dividends (2,802,422) (2,802,422) 36,099,856 (35,349,856) (178,542) 178,542 (2,802,422) (2,052,422) Total comprehensive income for the financial year ,198,249 1,198,249 Balance at end 91,648,299-3,877,794 (3,877,794) 2,587,483 94,235,782 The notes set out on pages 41 to 83 form an integral part of these financial statements. 38 Scope Industries Berhad

40 STATEMENTS OF CASH FLOW for the Financial Year Ended 30 June 2018 GROUP COMPANY RM RM RM RM CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 1,792,536 5,395,290 1,092,323 1,202,309 Adjustments for: Amortisation of biological assets 669, , Amortisation of prepaid land lease payment 54,000 54, Depreciation 2,694,560 2,782,922 3,721 3,721 Dividend income (7,400) (6,800) (1,307,400) (1,506,800) Gain on disposal of property, plant and equipment (27,624) Gain on fair value changes on other investments (17,000) (54,987) (17,000) (54,987) Interest expense , ,143 Interest income (221,990) (233,540) (214,524) (225,745) Property, plant and equipment written off 1, Reversal of allowance for slow moving inventories (3,333) (9,635) - - Unrealised loss/(gain)on foreign exchange 1,239 (2,032) - - Operating profit/(loss) before working capital changes 4,935,478 8,784,482 (442,880) (274,359) Decrease/(Increase) in inventories 405,258 (654,772) - - Decrease/(Increase) in receivables 1,367, ,676 52,303 (329) (Decrease)/Increase in payables (4,183,378) 364,112 (3,115,162) 309,463 Cash generated from/(used in) operations 2,524,940 8,594,498 (3,505,739) 34,775 Dividend received 7,400 6,800 1,307,400 1,506,800 Income tax paid (547,897) (710,792) (5,255) (4,800) Income tax refunded 110,132 19,274 13,502 - Interest paid (87) (308,156) - (307,143) Net cash from/(used in) operating activities 2,094,488 7,601,624 (2,190,092) 1,229,632 CASH FLOWS FROM INVESTING ACTIVITIES Interest received 221, , , ,745 Proceeds from disposal of property, plant and equipment 27, Purchase of other investments - (369,013) - (369,013) Purchase of biological assets (190,108) (574,395) - - Purchase of property, plant and equipment (788,460) (2,346,996) - - Net cash (used in)/from investing activities (728,946) (3,056,864) 214,524 (143,268) Balance carried forward 1,365,542 4,544,760 (1,975,568) 1,086,364 The notes set out on pages 41 to 83 form an integral part of these financial statements. Annual Report

41 STATEMENTS OF CASH FLOW for the Financial Year Ended 30 June 2018 (cont d) GROUP COMPANY RM RM RM RM Balance brought forward 1,365,542 4,544,760 (1,975,568) 1,086,364 CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid - (2,802,422) - (2,802,422) Payment of finance lease - (47,713) - - Proceeds from exercise of warrant - 750, ,000 Repayment by subsidiaries - - 4,097,179 3,543,966 Net cash (used in)/from financing activities - (2,100,135) 4,097,179 1,491,544 NET INCREASE IN CASH AND CASH EQUIVALENTS 1,365,542 2,444,625 2,121,611 2,577,908 CASH AND CASH EQUIVALENTS AT BEGINNING 6,859,080 4,414,455 5,770,889 3,192,981 CASH AND CASH EQUIVALENTS AT END 8,224,622 6,859,080 7,892,500 5,770,889 Represented by: Short term funds with licensed financial institutions 7,686,535 4,287,241 7,686,535 4,287,241 Cash and bank balances 538,087 2,571, ,965 1,483,648 8,224,622 6,859,080 7,892,500 5,770,889 The notes set out on pages 41 to 83 form an integral part of these financial statements. 40 Scope Industries Berhad

42 NOTES TO THE FINANCIAL STATEMENTS - 30 June CORPORATE INFORMATION General The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the ACE Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at A, Menara BHL Bank, Jalan Sultan Ahmad Shah, Georgetown, Penang. The principal place of business of the Company is located at 6 th Floor, Menara Hap Seng, Jalan P. Ramlee, Kuala Lumpur. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 8 October Principal Activities The principal activity of the Company is investment holding. The principal activities of the subsidiaries are disclosed in Note 7 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. 2. BASIS OF PREPARATION 2.1 Statement of Compliance The financial statements of the Group and of the Company have been prepared in accordance with applicable Financial Reporting Standards ( FRS ) and the requirements of the Companies Act 2016 in Malaysia. 2.2 Basis of Measurement The financial statements of the Group and of the Company are prepared under the historical cost convention unless otherwise indicated in the summary of accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to by the Group and the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest. A fair value measurement of a non-financial asset takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group and the Company use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to their fair value measurement as a whole: - Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities. - Level 2 - Valuation techniques for which the lowest level input that is significant to their fair value measurement is directly or indirectly observable. - Level 3 - Valuation techniques for which the lowest level input that is significant to their fair value measurement is unobservable. Annual Report

43 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 2.3 Functional and Presentation Currency The financial statements are presented in Ringgit Malaysia ( RM ) which is also the Company s functional currency. 2.4 Adoption of Amendments/Improvements to FRS The accounting policies adopted by the Group and by the Company are consistent with those of the previous financial years except for the adoption of the following standards that are mandatory for the current financial year: Effective for annual periods beginning on or after 1 January 2017 Amendments to FRS 12 Disclosure of Interest in Other Entities (under Annual Improvements to MFRS Cycle) Amendments to FRS 107 Disclosure Initiative Amendments to FRS 112 Recognition of Deferred Tax Assets for Unrealised Losses Initial application of the above standards did not have any material impact to the financial statements of the Group and of the Company. Amendments to FRS 107 Statement of Cash Flows: Disclosure Initiatives The Company has applied these amendments for the first time in the current financial year. The amendments require the Company to disclose a reconciliation between the opening and closing balances for liabilities arising from financing activities, including changes arising from both cash flows and non-cash changes, which is disclosed in Note 29.8 to the financial statements. 2.5 Standards Issued But Not Yet Effective Malaysian Financial Reporting Standards On 19 November 2011, the Malaysian Accounting Standards Board ( MASB ) issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards ( MFRS Framework ). The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual period beginning on or after 1 January 2012, with the exception of entities that are within the scope of FRS 141 Agriculture and IC Interpretation 15 Agreements for Construction of Real Estate, including its parent, significant investor and venturer ( Transitioning Entities ). Transitioning Entities will be allowed to defer adoption of the new MFRS Framework. Consequently, adoption of the MFRS Framework by Transitioning Entities will be mandatory for annual periods beginning on or after 1 January The Company and certain subsidiaries fall within the definition of Transitioning Entities have opted to defer the adoption of MFRS Framework. However, for subsidiaries which financial statements are prepared in accordance with MFRS, their financial statements were converted to FRS for the purposes of the preparation of the Group financial statements. In presenting its first MFRS financial statements, the Group and the Company will be required to restate the comparative financial statements to amounts reflecting the application of the MFRS Framework. The majority of the adjustments required on transition will be made, retrospectively, against opening retained profits. The initial adoption of MFRS will have the following impact to the financial statements of the Group and of the Company. 42 Scope Industries Berhad

44 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 2. BASIS OF PREPARATION (cont d) 2.5 Standards Issued But Not Yet Effective (cont d) Malaysian Financial Reporting Standards (cont d) MFRS 116 Property, Plant and Equipment and MFRS 141 Agriculture The amendments to MFRS 116 Property, Plant and Equipment and MFRS 141 Agriculture introduce a new category of biological asset, i.e. the bearer plants. A bearer plant is a living plant that is used in the production and supply of agricultural produce, is expected to bear produce for more than one period, and has remote likelihood of being sold as agricultural produce (except for incidental scrap sales). Bearer plants are seen as similar to an item of machinery in a manufacturing plant, and therefore are treated the same way under MFRS 116 Property, Plant and Equipment. Therefore, bearer plants are measured either at cost or revalued amounts, less accumulated depreciation and impairment losses. Agricultural produce growing on bearer plants are measured at fair value less costs to sell, with fair value changes recognised in profit or loss as the produce grows. However, there are two occasions where the standard permits departure from fair value: at the early stage of an asset s life; and when fair value cannot be measured reliably on initial recognition. The Group expects that the adoption of these standards will have a material financial impact to its financial statements especially on the valuation of the agricultural produce growing a bearer plant from its oil palm plantation. The Group is currently evaluating the valuation of these agricultural produce. MFRS 9 Financial Instruments MFRS 9 replaces the guidance in MFRS 139 Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets and financial liabilities, impairment of financial assets, and on hedge accounting. MFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics. The new standard contains three principle classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL), and eliminates the existing MFRS 139 categories of held to maturity, loans and receivables and available for sale. The Group expects that the adoption of the new standard will have no significant impact on its statement of financial position and equity except for the effect of applying the impairment requirements of MFRS 9. MFRS 9 replaces the incurred loss model in MFRS 139 with a forward looking expected credit loss model. The Group has performed an assessment and expects to apply the simplified approach and record lifetime expected losses on all its trade receivables using a provision matrix based on historical observed default rates which are adjusted for forward-looking estimates established. The Group is in the progress of tabulating the provision matrix and it is expected that additional provision for impairment loss will be recognised upon adoption of MFRS 9. MFRS 15 Revenue from Contracts with Customers The core principle of MFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Annual Report

45 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 2. BASIS OF PREPARATION (cont d) 2.5 Standards Issued But Not Yet Effective (cont d) Malaysian Financial Reporting Standards (cont d) MFRS 15 Revenue from Contracts with Customers (cont d) Under MFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. Depending on the substance of the contract, revenue is recognised when the performance obligation is satisfied, which may be at a point in time or over time. The standard identifies three (3) situations where control of the promised goods or services is regarded as being transferred over time: (i) (ii) (iii) When the customer simultaneously receives and consumes the benefits provided by the entity s performance, as the entity performs; When the entity s performance creates or enhances an asset (for example work in progress) that the customer controls as the asset is created or enhanced; When the entity s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. Under the manufacturing segment, the Group enters into manufacturing contracts with its customers to produce customised products. Customised products are specifically manufactured according to customer specification. The Group will have no alternative use for such products once production work commences. However, existing contract clauses does not provide the Group with an enforceable right to payment for performance completed to date. As such, the Group expects to continue recognising revenue from such customised products at a point in time. Future manufacturing contracts entered by the Group may contain elements which will trigger revenue from sale of such goods to be recognised over time. MFRS 16 Leases The scope of MFRS 16 includes leases of all assets, with certain exceptions. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. MFRS 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under MFRS 117. The standard includes two recognition exemptions for lessees - leases of low-value assets (e.g., personal computers) and short-term leases (e.g., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (e.g., the lease liability) and an asset representing the right to use the underlying asset during the lease term (e.g., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessees will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting is substantially unchanged from today s accounting under MFRS 117. Lessors will continue to classify all leases using the same classification principle in MFRS 117 and distinguish between two types of leases: operating and finance leases. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2019 with early adoption permitted. The Group is currently assessing the financial impact of adopting MFRS Scope Industries Berhad

46 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 2. BASIS OF PREPARATION (cont d) 2.6 Significant Accounting Estimates and Judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected Judgements made in applying accounting policies There are no significant areas of critical judgement in applying accounting policies that have any significant effect on the amount recognised in the financial statements except as discussed below: Deferred tax assets The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group s latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised to the extent of the future taxable income forecasted Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Useful lives of depreciable assets Plant and machinery are depreciated on a straight-line basis over their estimated useful lives. Management estimates that the useful live of the plant and machinery to be between 8 to 10 years. Changes in the expected level of usage and technological developments could impact the economic useful lives and residual values of the plant and equipment. Therefore, the future depreciation charges could be revised. (ii) Useful lives of biological assets The costs of oil palm plantation development expenditure are amortised on a straight line basis over the assets estimated economic useful lives of 20 to 25 years. The useful lives are within the commercial life span of oil palms. Changes in the conditions of the biological assets could impact the productivity of the produce which could ultimately impact the economic useful lives and residual value of the biological assets. Therefore, the future amortisation charges could be revised. (iii) Impairment of plant and equipment and biological assets The Group and the Company perform an impairment review as and when there are impairment indicators to ensure that the carrying value of the plant and equipment and biological assets does not exceed its recoverable amount. The recoverable amount represents the present value of the estimated future cash flows expected to arise from continuing operations. Therefore, in arriving at the recoverable amount, management exercises judgement in estimating the future cash flows, growth rate and discount rate. Annual Report

47 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 2. BASIS OF PREPARATION (cont d) 2.6 Significant Accounting Estimates and Judgements (cont d) Key sources of estimation uncertainty (cont d) (iv) Impairment of goodwill An impairment loss is recognised for the amount by which the asset s or cash-generating unit s carrying amount exceeds its recoverable amount. To determine the recoverable amount, management assess the higher of the fair value less costs of disposal and value in use. The value in use is determined by estimating expected future cash flows from each cash-generating unit using a suitable interest rate in order to calculate the present value of those cash flows. During the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary, and may cause significant adjustments to the Group s assets within the next financial year. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors. Details of the carrying value, key assumptions applied in the impairment assessment and sensitivity analysis to changes in the assumptions are disclosed in Note 8 to the financial statements. (v) Inventories The Group provides allowance for slow moving or obsolete inventories based on an assessment of the net realisable value of the inventories. When estimating the net realisable value of inventories, management considers all of the facts relating to the inventories including the operating environment at the time the estimates are made. Where the expectation is different from the original estimate, such difference will impact the net realisable value of the inventories in the period in which such estimate has changed. (vi) Impairment of receivables The Group assesses at the end of each reporting period whether there is any objective evidence that a receivable is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience of assets with similar credit risk characteristics. 3. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies adopted by the Group and by the Company are consistent with those adopted in the previous financial years unless otherwise indicated below. 3.1 Basis of Consolidation (i) Subsidiaries Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee s return. 46 Scope Industries Berhad

48 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.1 Basis of Consolidation (cont d) (i) Subsidiaries (cont d) Investment in subsidiaries is measured in the Company s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. Upon disposal of investment in a subsidiary, the difference between the net disposal proceeds and its carrying amount is recognised in profit or loss. (ii) Business combination Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. For new acquisitions, the Group measures the cost of goodwill at the acquisition date as: the fair value of the consideration transferred, plus the recognised amount of any non-controlling interest in the acquiree, plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree, less the net recognised amount at fair value of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised in profit or loss. For each business combination, the Group elects whether to recognise non-controlling interest in the acquiree either at fair value, or at the proportionate share of the acquiree s identifiable net assets at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. (iii) Acquisitions of non-controlling interests The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against the Group s reserve. (iv) Loss of control Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for -sale financial asset depending on the level of influence retained. (v) Non-controlling interests Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. Annual Report

49 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.1 Basis of Consolidation (cont d) (vi) Transactions eliminated on consolidation Intra-group balances and transactions, any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. 3.2 Property, Plant and Equipment Property, plant and equipment are initially stated at cost less accumulated depreciation and accumulated impairment losses. Property, plant and equipment are depreciated on the straight-line method to write off the cost of each asset to its residual value over its estimated useful life at the following annual rates: Leasehold land Amortise over lease period of 37 to 87 years Buildings 2%-10% Plant and machinery 10%-12.5% Renovation and electrical installation 10% Air conditioners 10% Office equipment, furniture and fittings 10% Motor vehicles 10%-20% Capital expenditure in progress represents assets under construction, and which are not ready for commercial use at the end of the reporting period. Capital expenditure in progress is stated at cost and is transferred to the relevant category of assets and depreciated accordingly when the assets are completed and ready for commercial use. The residual value, useful life and depreciation method are reviewed 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 property, plant and equipment. Upon the disposal of an item of property, plant and equipment, the difference between the net disposal proceeds and its carrying amount is recognised in profit or loss. 3.3 Biological Assets Biological assets are stated at cost less accumulated amortisation and any accumulated impairment losses. Biological assets comprise plantation development expenditure. New planting and replanting expenditure which include land clearing, planting, field upkeep and maintenance of oil palm plantings to maturity are capitalised under plantation development expenditure. Upon maturity, all subsequent maintenance expenditure is charged to profit and loss. The oil palm is considered matured after 3 years from the month of planting. Plantation development expenditure is amortised on a straight line basis over 20 to 25 years being the current expected useful lives of oil palm trees. The useful lives of oil palms would be subject to review in the future and may be adjusted as considered appropriate. Amortisation commences upon maturity of the oil palm plantings. 48 Scope Industries Berhad

50 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.4 Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or asset or the arrangement conveys a right to use the asset, even if that right is not explicitly specific in an arrangement. Finance lease A finance lease which includes hire purchase arrangement, is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. Title may or may not eventually be transferred. Minimum lease payments made under finance leases are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the profit or loss. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Leasehold land which in substance is a finance lease is classified as property, plant and equipment. Operating leases Leases where the Group does not assume substantially all the risks and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred. Leasehold land which in substance is an operating lease is classified as prepaid land lease payments. 3.5 Intangible Assets Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business combination over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Goodwill is stated at cost less accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. 3.6 Impairment of Non-Financial Assets The Group and the Company assess at the end of each reporting period whether there is an indication that an asset may be impaired. For the purpose of impairment testing, recoverable amount (i.e. the higher of the fair value less cost to sell and value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the cashgenerating units ( CGU ) to which the asset belongs. Annual Report

51 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.6 Impairment of Non-Financial Assets (cont d) If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. The difference between the carrying amount and recoverable amount is recognised as an impairment loss in the profit or loss. An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset is recognised in profit or loss. 3.7 Inventories Inventories are stated at the lower of cost and net realisable value. Costs of all inventories are determined on the first-in, first-out basis. The cost of inventories includes expenditure incurred in acquiring the inventories and other costs incurred in bringing them to their existing location and condition. In the case of finished goods and work-in-progress, cost includes direct labour and attributable production overheads. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. 3.8 Financial Instruments Initial recognition and measurement A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the instrument. 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, transactions costs that are directly attributable to the acquisition or issue of the financial instrument. An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract Financial instrument categories and subsequent measurement The Group and the Company categorise financial instruments as follows: Financial assets (i) Loans and receivables Loans and receivables category comprises debt instruments that are not quoted in an active market. Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method. Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the end of the reporting period which are classified as non-current. 50 Scope Industries Berhad

52 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.8 Financial Instruments (cont d) Financial instrument categories and subsequent measurement (cont d) (i) Available-for-sale financial assets Available-for-sale category comprises investment in equity and debt securities instruments that are not held for trading. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-sale are subsequently measured at their fair values with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses arising from monetary items and gains and losses of hedged items attributable to hedge risks of fair value hedges which are recognised in profit or loss. On derecognition, the cumulative gain or loss recognised in other comprehensive income 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. (ii) Financial assets at fair value through profit or loss Fair value through profit or loss category comprises financial assets that are held for trading or financial assets that are specifically designated into this category upon initial recognition. These financial assets are subsequently measured at their fair values with the gain or loss recognised in profit or loss. All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment. Financial liabilities All financial liabilities are subsequently measured at amortised cost. Financial liabilities are classified as current liabilities, except for those having maturity dates later than 12 months after the end of the reporting period which are classified as non-current Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due. Financial guarantee contracts are classified as deferred income and are amortised to profit or loss using a straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate of the obligation is made. If the carrying value of the financial guarantee contract is lower than the obligation, the carrying value is adjusted to the obligation amount and accounted for as a provision Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Annual Report

53 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.8 Financial Instruments (cont d) Derecognition A financial asset or part of it is derecognised, when and only when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss. A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expired. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. 3.9 Impairment of Financial Assets All financial assets (except for financial assets categorised as 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. Losses expected as a result of future events, no matter how likely, are not recognised. For an investment in an equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment. An impairment loss in respect of loans and receivables and held-to-maturity investments 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 asset s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is measured as the difference between the asset s acquisition cost (net of any principal repayment and amortisation) and the asset s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity to profit or loss. An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or loss and is measured as the difference between the financial asset s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-forsale is not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss Cash and Cash Equivalents Cash comprises cash in hand, cash at bank and demand deposits. Cash equivalents are short term and highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value, against which bank overdraft balances, if any, are deducted. 52 Scope Industries Berhad

54 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.11 Provisions Provisions are recognised when the Group and the Company have a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount can be made. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as finance cost expense Income Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and to the Company and when the revenue can be reliably measured on the following bases: Sale of goods Revenue from sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of discount and returns. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer. Dividend income Dividend income is recognised when the right to receive payment is established. Rental income Rental income is accounted for on straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis. Interest income Interest income is recognised on an accrual basis using the effective interest method Employee Benefits Short term benefits Wages, salaries, bonuses and social security contributions are recognised as expenses in the year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. Defined contribution plans As required by law, companies in Malaysia make contributions to the national pension scheme, the Employees Provident Fund ( EPF ). Such contributions are recognised as expenses as incurred Income Tax Income tax expense comprises current tax and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years. Annual Report

55 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.14 Income Tax (cont d) Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Unutilised reinvestment allowance and investment tax allowance, being tax incentives that is not a tax base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits will be available against which the unutilised tax incentive can be utilised Goods and Services Tax Goods and Services Tax ( GST ) is a consumption tax based on the value-added concept. GST is imposed on goods and services at every production and distribution stage in the supply chain including importation of goods and services, at the applicable tax rate of 6%. Input tax that a company pays on business purchases is offset against output tax. Revenue, expenses and assets are recognised net of GST except: - where the GST incurred in a purchase of asset or service is not recoverable from the authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and - receivables and payables that are stated with GST inclusive. The net GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. The Finance Ministry has zero rated the GST effective from 1 June The government will replace the GST with Sales and Service Tax which it is currently working on the details for its implementation Foreign Currency Translation Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are translated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities measured at historical cost in a foreign currency at the end of the reporting period are translated to the functional currency at the exchange rate at the date of the transaction except for those measured at fair value shall be translated at the exchange rate at the date when the fair value was determined. Exchange differences arising from the settlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilities are recognised in profit or loss. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains or losses are recognised directly in other comprehensive income. 54 Scope Industries Berhad

56 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.17 Equity Instruments Warrants Warrants are classified as equity instruments and its value is allocated based on the Black-Scholes model upon issuance. The issuance of the ordinary shares upon exercise of warrants is treated as new subscription of ordinary shares for the consideration equivalent to the exercise price of the warrants. Upon exercise of warrants, the proceeds are credited to share capital. The warrants reserve in relation to the unexercised warrants at the expiry of the warrants will be reversed Share Capital, Share Issuance Expenses and Dividends Classification Ordinary shares are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular instrument. Share issuance costs Prior to Companies Act 2016 which came into operation on 31 January 2017, incremental external costs directly attributable to the issuance of new shares are deducted against the share premium account. Effective on 31 January 2017 and subsequent period, incremental external costs directly attributable to the issuance of new shares are deducted against equity. Dividends Dividends on ordinary shares are accounted for in shareholder s equity as an appropriation of retained profits and recognised as a liability in the period in which they are declared Segment Reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the Group s other components. An operating segment s operating results are reviewed regularly by the chief operating decision maker, who in this case are the Executive Directors of the Group, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available Contingencies Where it is not probable that an inflow or an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the asset or the obligation is not recognised in the statements of financial position but is disclosed as a contingent asset or contingent liability, unless the probability of inflow or outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent assets or contingent liabilities unless the probability of inflow or outflow of economic benefits is remote. Annual Report

57 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.20 Related Parties A related party is a person or entity that is related to the Group. A related party transaction is a transfer of resources, services or obligations between the Group and its related party, regardless of whether a price is charged. (a) A person or a close member of that person s family is related to the Group if that person: (i) (ii) (iii) Has control or joint control over the Group; Has significant influence over the Group; or Is a member of the key management personnel of the Group. (b) An entity is related to the Group if any of the following conditions applies: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) The entity and the Group are members of the same group. The entity is an associate or joint venture of the Group. Both the Group and the entity are joint ventures of the same third party. The Group is a joint venture of a third entity and the other entity is an associate of the same third entity. The entity is a post-employment benefit plan for the benefits of employees of either the Group or an entity related to the Group. The entity is controlled or jointly-controlled by a person identified in (a) above. A person identified in (a)(i) above has significant influence over the entity or is a member of the key management personnel of the entity. The entity, or any member of a group when it is a part, provides key management personnel services to the Group. 56 Scope Industries Berhad

58 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 4. PROPERTIES, PLANT AND EQUIPMENT Leasehold land Buildings Plant and machinery Renovation and electrical installation Air conditioners Office equipment, furniture and fittings Motor vehicles Capital expenditure in progress Total RM RM RM RM RM RM RM RM RM GROUP 2018 At cost Balance at beginning 68,457,683 13,753,926 33,173,210 1,912,472 1,352,403 1,523,764 3,117,158 14, ,304,922 Additions ,917 2,420-13, ,577 15, ,460 Disposals - - (1,857,319) (92,478) - (1,949,797) Written off - - (14,131) - - (3,046) - - (17,177) Reclassification - 14, ,775 - (26,924) - Balance at end 68,457,683 13,768,075 31,861,677 1,914,892 1,352,403 1,547,200 3,221,257 3, ,126,408 Accumulated depreciation Balance at beginning 4,536,363 4,213,105 27,378,370 1,878,997 1,281, ,933 2,817,972-43,040,401 Current charge 923, ,336 1,014,589 6,595 8,001 94, ,821-2,694,560 Disposals - - (1,857,314) (92,475) - (1,949,789) Written off - - (13,023) - - (3,044) - - (16,067) Balance at end 5,459,640 4,652,441 26,522,622 1,885,592 1,289,662 1,025,830 2,933,318-43,769,105 Carrying amount 62,998,043 9,115,634 5,339,055 29,300 62, , ,939 3,221 78,357,303 Annual Report

59 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 4. PROPERTIES, PLANT AND EQUIPMENT (cont d) Leasehold land Buildings Plant and machinery Renovation and electrical installation Air conditioners Office equipment, furniture and fittings Motor vehicles Capital expenditure in progress Total RM RM RM RM RM RM RM RM RM 2017 At cost Balance at beginning 68,457,683 13,752,013 30,944,935 1,903,952 1,312,073 1,470,112 3,117, ,957,926 Additions - 1,913 2,228,275 8,520 40,330 53,652-14,306 2,346,996 Balance at end 68,457,683 13,753,926 33,173,210 1,912,472 1,352,403 1,523,764 3,117,158 14, ,304,922 Accumulated depreciation Balance at beginning 3,613,086 3,771,174 26,616,123 1,870,837 1,277, ,842 2,268,061-40,257,479 Current charge 923, , ,247 8,160 4,305 93, ,911-2,782,922 Balance at end 4,536,363 4,213,105 27,378,370 1,878,997 1,281, ,933 2,817,972-43,040,401 Carrying amount 63,921,320 9,540,821 5,794,840 33,475 70, , ,186 14,306 80,264, Scope Industries Berhad

60 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 4. PROPERTIES, PLANT AND EQUIPMENT (cont d) Renovation Air conditioners Office equipment, furniture and fittings Total RM RM RM RM COMPANY 2018 At cost 16, ,354 37,205 Accumulated depreciation Balance at beginning 8, ,765 18,190 Current charge 1, ,036 3,721 Balance at end 9, ,801 21,911 Carrying amount 6, ,553 15, At cost 16, ,354 37,205 Accumulated depreciation Balance at beginning 6, ,729 14,469 Current charge 1, ,036 3,721 Balance at end 8, ,765 18,190 Carrying amount 8, ,589 19,015 Annual Report

61 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 5. BIOLOGICAL ASSETS GROUP RM RM At cost Balance at beginning 12,121,233 11,546,838 Additions 190, ,395 Balance at end 12,311,341 12,121,233 Accumulated amortisation Balance at beginning 2,584,691 2,033,583 Current charge 669, ,108 Balance at end 3,253,984 2,584,691 Net assets 9,057,357 9,536,542 Biological assets represent plantation development expenditure. 6. PREPAID LAND LEASE PAYMENT GROUP RM RM Cost 1,690,000 1,690,000 Less: Accumulated amortisation (232,000) (178,000) Carrying amount 1,458,000 1,512,000 The prepaid land lease payment represents a 30-years sub-lease of agriculture land and is recognised in profit or loss on a straight-line basis over the term of the lease. 7. INVESTMENT IN SUBSIDIARIES COMPANY RM RM Unquoted shares, at cost 65,790,180 65,790, Scope Industries Berhad

62 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 7. INVESTMENT IN SUBSIDIARIES (cont d) Details of the subsidiaries which are all incorporated in Malaysia are as follows: Name of Company Effective Equity Interest Principal Activities Direct Scope Manufacturers (M) Sdn. Bhd. 100% 100% Manufacturing and assembling of electronic components and products. Pioneer Glow Sdn. Bhd. 70% 70% Cultivation of oil palm. Benua Mutiara Sdn. Bhd. 100% 100% Cultivation of oil palm. Non-controlling interests in subsidiary The Group s subsidiary that have material non-controlling interests are as follows: Pioneer Glow Sdn. Bhd Percentage of ownership interest and voting interest 30% 30% Carrying amount of non-controlling interests (RM) 6,586,356 6,251,304 Profit allocated to non-controlling interests (RM) 335, ,700 The summarised of financial information before intra-group elimination for the Group s subsidiary that have material noncontrolling interests is as below: RM RM Financial position as at 30 June Non-current assets 49,496,230 50,906,586 Current assets 761,822 1,053,386 Non-current liabilities (8,454,740) (8,562,140) Current liabilities (19,848,790) (22,560,151) Net assets 21,954,522 20,837,681 Financial performance for the financial year ended 30 June Profit for the year 1,116,841 1,179,000 Cash flows for the financial year ended 30 June Net cash inflow from operating activities 2,835,463 2,679,801 Net cash outflow from investing activities (206,497) (612,384) Net cash outflow from financing activities (2,780,000) (2,047,713) Net cash (outflow)/inflow (151,034) 19,704 Annual Report

63 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 8. GOODWILL Goodwill has been allocated to the respective cash-generating unit ( CGU ), which represents the following subsidiaries in the plantation segment: GROUP RM RM Pioneer Glow Sdn. Bhd. ( PGSB ) 32,136,954 32,136,954 Benua Mutiara Sdn. Bhd. ( BMSB ) 2,828,842 2,828,842 34,965,796 34,965,796 The recoverable amount of the CGUs has been determined based on value-in-use calculations using cash flow forecast and projections using the following key assumptions: (i) Projection period 10 years (ii) Terminal value Based on discounted present fair value of the estate (iii) FFB Price RM480 to RM600/MT (iv) Average yield over projection period 13.05MT/HA (PGSB) 14.33MT/HA (BMSB) (v) Pre-tax discount rate 5.95% The FFB price is forecasted based on current market outlook of future CPO prices taking into consideration past historical trend. The yield depends on the age of the palm oil tree. The pre-tax discount rate reflects the weighted average cost of capital of the Group. No impairment loss was required for the goodwill as its recoverable amount is in excess of its carrying amount. Sensitivity analysis to changes in assumptions A 10% decrease in the future planned revenues and an increase of 1% in the discount rate used would require an impairment loss on goodwill of approximately RM2,389,000 (2017: RM3,767,000) and RM3,126,000 (2017: RM822,000) respectively. 9. AMOUNT DUE FROM/TO SUBSIDIARIES COMPANY The amount due from/to subsidiaries is non-trade related, unsecured, non-interest bearing and classified based on the expected timing of realisation. 62 Scope Industries Berhad

64 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 10. INVENTORIES GROUP RM RM Raw materials 1,078,826 1,534,306 Less: Allowance for slow moving inventories Less: Balance at beginning (122,660) (132,295) Less: Reversal 3,333 9,635 (119,327) (122,660) 959,499 1,411,646 Work-in-progress 2,312 10,258 Finished goods 3,798 - Consumables 491, ,747 1,456,726 1,858,651 The reversal of allowance for slow moving inventories was made during the financial year when the related inventories were used for production. 11. TRADE RECEIVABLES GROUP The trade receivables are non-interest bearing and are generally on 30 to 60 days (2017: 30 to 60 days) credit terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition. 12. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS RM RM RM RM Other receivables 65, , ,003 Refundable deposits 183, ,641 19,230 21,881 Prepayments 109, , GST claimable 40,113 39, , ,409 20,047 72, OTHER INVESTMENTS GROUP AND COMPANY RM RM Shares quoted in Malaysia, at fair value Balance at beginning 424,000 - Additions - 369,013 Fair value adjustment 17,000 54,987 Balance at end 441, ,000 Annual Report

65 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 14. CASH AND CASH EQUIVALENTS GROUP COMPANY RM RM RM RM Short-term funds with licensed financial institutions 7,686,535 4,287,241 7,686,535 4,287,241 Cash and bank balances 538,087 2,571, ,965 1,483,648 8,224,622 6,859,080 7,892,500 5,770,889 (i) The currency profile of cash and cash equivalents is as follows: GROUP COMPANY RM RM RM RM Analysis by currencies: Ringgit Malaysia 8,100,161 6,607,602 7,774,272 5,588,898 US Dollar 124, , , ,742 Vietnamese Dong ,224,622 6,859,080 7,892,500 5,770,889 (ii) The effective interest rates per annum as at the end of the reporting period are as follows: GROUP COMPANY % % % % Short-term funds with licensed financial institutions (iii) The short-term funds with licensed financial institutions can be redeemed at any point in time upon one day prior notice given. 15. SHARE CAPITAL Number of ordinary shares Amount RM RM Issued and fully paid: Balance at beginning 560,484, ,484,430 91,648,229 55,548,443 Exercise of warrant - 5,000, ,000 Transition to no-par value regime on 31 January ,349, ,484, ,484,430 91,648,229 91,648, Scope Industries Berhad

66 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 15. SHARE CAPITAL (cont d) 2017 During the financial year, the issued and paid-up ordinary share capital of the Company was increased from RM55,548,443 to RM56,298,443 pursuant to exercise of warrants involving the issuance of 5,000,000 new ordinary shares at an exercise price of RM0.15 per ordinary share. The new Companies Act 2016 (the Act ), which came into operation on 31 January 2017, abolished the concept of authorised share capital and par value of share capital. Consequently, the amount standing to the credit of the share premium becomes part of the Company s share capital pursuant to the transitional provisions set out in Section 618(2) of the Act. Notwithstanding this provision, the Company may within 24 months from the commencement of the Act, use the amount standing to the credit of its share premium account of RM35,349,856 for purposes as set out in Section 618(3) of the Act. There is no impact on the number of ordinary shares in issue or the relative entitlement of any of the members as a result of this transition. 16. RESERVES GROUP COMPANY RM RM RM RM Non-distributable: Warrants reserve (Note 16.1) 3,877,794 3,877,794 3,877,794 3,877,794 Discount on shares (Note 16.1) (3,877,794) (3,877,794) (3,877,794) (3,877,794) Capital reserve (Note 16.2) 28,002,381 28,002, ,002,381 28,002, Warrants reserve and Discount on shares The warrants reserve is in respect of the allocated fair value of the 118,596,361 warrants issued in the following manner: (i) (ii) Issuance of 89,400,000 new ordinary shares at issue price of RM0.15 per share together with 59,600,000 free warrants for acquisition of a subsidiary. Issuance of 58,996,361 free warrants on the basis of two free warrants for every ten ordinary shares held by the existing shareholders of the Company. The fair value allocated to the warrants reserve is derived by adjusting the proceeds of the above issuance to the fair value of the shares and warrants on a proportionate basis. The discount on shares is a reserve account that is created to preserve the par value of the ordinary shares. Each registered warrant holder is entitled to subscribe for one new ordinary share in the Company at any time on or after 23 July 2012 up to the date of expiry on 22 July 2020, at an exercise price of RM0.15 per share or such adjusted price in accordance with the provisions in the Deed Poll date 13 June (iii) Outstanding warrants Number of units Balance at beginning 108,596, ,596,361 Exercised - (5,000,000) Balance at end 108,596, ,596,361 As a result of the exercise above, RM Nil (2017: RM178,542) was reversed from warrant reserve and discount on shares accounts respectively. Annual Report

67 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 16. RESERVES (cont d) 16.2 Capital reserve Capital reserve relates to fair value adjustment to the shares issued for the acquisition of subsidiaries. 17. RETAINED PROFITS COMPANY Under the single tier system, there are no restrictions on the Company to frank the payment of dividends out of its entire retained profits and all dividends paid are tax exempted in the hands of the shareholders. 18. DEFERRED TAX LIABILITIES GROUP RM RM Revaluation surplus Balance at beginning 14,379,223 14,575,706 Recognised in profit or loss (196,483) (196,483) Balance at end 14,182,740 14,379,223 Excess of capital and agricultural allowances over depreciation/amortisation Balance at beginning 162, ,975 Recognised in profit or loss (22,899) (25,651) Under provision in prior year Balance at end 139, ,142 14,321,983 14,541, TRADE PAYABLES GROUP RM RM Analysis by currencies: Ringgit Malaysia 699,268 1,289,085 US Dollar 45,002 57, ,270 1,346,726 The trade payables are non-interest bearing and are normally settled on 30 to 90 days (2017: 30 to 90 days) credit terms. 66 Scope Industries Berhad

68 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 20. OTHER PAYABLES AND ACCRUALS GROUP COMPANY RM RM RM RM Other payables 145,284 3,367,900 5,150 3,153,312 Accruals 668, , , ,600 Refundable deposits 59,000 59, GST payable 20,651 82, ,623 4,473, ,750 3,294,912 The interest and non-interest bearing portion of the other payables and accruals are analysed as follows: Interest 5% per annum - 3,150,000-3,150,000 Non-interest bearing 893,623 1,323, , , ,623 4,473, ,750 3,294,912 Included in other payables was an amount of RM3,150,000 being deferred cash consideration that arose as part of the purchase consideration to satisfy the acquisition of a subsidiary. It is measured and recorded at the present value of the consideration determined as at the end of the reporting period. The amount outstanding as at 30 June 2017 represents the final payment due to the vendor and was paid on 22 July REVENUE GROUP COMPANY RM RM RM RM Gross dividend income from subsidiaries - - 1,300,000 1,500,000 Gross dividend income from investment quoted in Malaysia 7,400 6,800 7,400 6,800 Interest income 214, , , ,745 Invoiced value of goods sold less returns and discounts 22,069,086 25,873, ,291,018 26,106,409 1,521,932 1,732,545 Annual Report

69 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 22. PROFIT BEFORE TAX This is arrived at: GROUP COMPANY RM RM RM RM After charging: Amortisation - Biological assets 669, , Prepaid land lease payment 54,000 54, Auditors remuneration - Statutory audit 68,000 64,000 20,000 17,000 - Other services 3,000 3,000 3,000 3,000 Depreciation 2,694,560 2,782,922 3,721 3,721 (i) Directors remuneration for non-executive directors 248, , ,000 88,000 (ii) Interest expense , ,143 Property, plant and equipment written off 1, Realised loss on foreign exchange 8,485-8,485 - Rental of machinery 36,639-53,257 - Rental of premises 98, , (iii) Staff costs 7,389,163 7,637, ,000 44,000 Unrealised loss on foreign exchange 1, And crediting: Gain on disposal of property, plant and equipment 27, Gain on fair value changes of other investments - 54,987-54,987 Gross dividend income from: - a subsidiary - - 1,300,000 1,500,000 - investments quoted in Malaysia 7,400 6,800 7,400 6,800 Interest income 221, , , ,745 Realised gain on foreign exchange - 23,513-15,749 Rental income 288, , Reversal of allowance for slow moving inventories 3,333 9, Unrealised gain on foreign exchange - 2, Scope Industries Berhad

70 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 22. PROFIT BEFORE TAX (cont d) This is arrived at: (cont d) GROUP COMPANY RM RM RM RM (i) Directors remuneration for non-executive directors: - Directors emoluments 8,000 18,000 8,000 8,000 - Directors fee 240, , ,000 80, , , ,000 88,000 (ii) Interest expense - Bank overdrafts Finance lease Interest on deferred cash consideration - 307, , , ,143 (iii) Staff costs - Fee, salaries, allowance, bonus and wages 6,763,061 7,018, ,000 44,000 - EPF 552, , SOCSO 73,586 71, ,389,163 7,637, ,000 44,000 Directors remuneration Included in the staff costs of the Group and of the Company are directors emoluments as shown below: GROUP COMPANY RM RM RM RM Executive directors of the Company: - Salaries, bonus and allowance 882, , ,000 4,000 - EPF 93,450 86, , , ,000 4,000 Directors fee 85, ,000 50,000 40,000 Balance carried forward 1,061, , ,000 44,000 Annual Report

71 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 22. PROFIT BEFORE TAX (cont d) This is arrived at: (cont d) Directors remuneration (cont d) GROUP COMPANY RM RM RM RM Balance brought forward 1,061, , ,000 44,000 Executive directors of subsidiaries: - Salaries, bonus and allowance 222, , EPF 9,905 7, , , Directors fee 25,000 55, , , Total executive directors remuneration 1,318,815 1,196, ,000 44, TAX EXPENSE GROUP COMPANY RM RM RM RM Malaysia income tax: Based on results for the financial year - Current tax (376,680) (798,680) (4,800) (4,800) - Deferred tax Relating to origination and reversal of temporary differences 22,899 25, Crystallisation of revaluation reserve 196, , , , (157,298) (576,546) (4,800) (4,800) Over/(Under) provision in prior year - Current tax 142,513 22,928 (455) Deferred tax - (818) ,513 22,110 (455) 740 (14,785) (554,436) (5,255) (4,060) 70 Scope Industries Berhad

72 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 23. TAX EXPENSE The reconciliation of tax expense of the Group and of the Company is as follows: GROUP COMPANY RM RM RM RM Profit before tax 1,792,536 5,395,290 1,092,323 1,202,309 Income tax at Malaysian statutory tax rate of 24% (430,209) (1,294,869) (262,158) (288,554) Income not subject to tax 53,351 77, , ,864 Expenses not deductible for tax purposes (221,730) (352,838) (107,193) (143,110) Deferred tax assets not recognised 93, , Utilisation of unabsorbed tax losses and capital allowance 348, Utilisation of unabsorbed reinvestment allowance - 363, (157,298) (576,546) (4,800) (4,800) Over/(Under) provision in prior year 142,513 22,110 (455) 740 GROUP (14,785) (554,436) (5,255) (4,060) The deferred tax (assets)/liabilities which have not been recognised are represented by gross temporary differences arising from: RM RM Property, plant and equipment 5,679,225 5,543,574 Biological assets 4,040,276 4,178,832 Unabsorbed tax losses and capital allowance (9,938,930) (9,870,304) Unabsorbed capital and agricultural allowances (11,725,228) (13,635,469) Unabsorbed reinvestment allowance (15,167,642) (15,167,642) (27,112,299) (28,951,009) The unabsorbed tax losses, capital and agricultural allowances and reinvestment allowance are available to be carried forward for set-off against assessable income of a nature and amount sufficient for them to be utilised. Annual Report

73 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 24. EARNINGS PER SHARE GROUP (a) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the financial year as follows: RM RM Profit for the year attributable to owners of the Company (RM) 1,442,699 4,487,154 Weighted average number of shares 560,484, ,059,772 Basic earnings per share (sen) The weighted average number of shares takes into account the weighted average effect of additional shares issued pursuant to the exercise of warrants during the financial year. (b) Diluted earnings per share The calculation of diluted earnings per share was based on profit attributed to equity holders of the Company and on the weighted average number of shares outstanding after adjustment for the effects of all dilutive potential ordinary shares as follows: RM RM Profit for the year attributable to owners of the Company (RM) 1,442,699 4,487,154 Weighted average number of ordinary share as per above 560,484, ,059,772 Effects of warrants outstanding 37,542,572 34,815,327 Weighted average number of shares assumed to be issue at 30 June 598,027, ,875,099 Diluted earnings per share (sen) DIVIDENDS GROUP RM RM In respect of financial year ended 30 June 2018: - Single tier interim dividend of 0.5 sen per share 2,802,422 - In respect of financial year ended 30 June 2017: - Single tier interim dividend of 0.5 sen per share - 2,802, Scope Industries Berhad

74 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 26. CAPITAL COMMITMENT GROUP RM RM Contracted but not provided for: - Property, plant and equipment - 152, SEGMENTAL INFORMATION Segmental information is presented in respect of the Group s business segments. The business segment is based on the Group s management and internal reporting structure. Business Segment For management purposes, the Group is organised into manufacturing, plantation and investment holding divisions. Intersegment pricing is determined based on negotiated terms. Annual Report

75 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 27. SEGMENTAL INFORMATION (cont d) Business Segment (cont d) By business segments Investment 2018 Manufacturing Plantation holding Elimination Total RM RM RM RM Note RM Revenue from external customers 12,499,894 9,569, ,932-22,291,018 Inter-segment revenue - - 1,300,000 (1,300,000) A - Total revenue 12,499,894 9,569,192 1,521,932 (1,300,000) 22,291,018 Segment results (28,928) 2,021,762 (422,209) - 1,570,625 Interest expense (87) (87) Interest income 7, , ,998 (Loss)/Profit before tax (21,549) 2,021,762 (207,677) - 1,792,536 Tax income/(expense) 96,830 (106,360) (5,255) - (14,785) Profit/(Loss) for the financial year 75,281 1,915,402 (212,932) - 1,777,751 Assets Segment assets 17,153,438 75,136,704 35,442, ,732,279 Current tax assets 100, ,900 Cash and cash equivalents 87, ,129 7,892,500-8,224,622 Total assets 17,342,331 75,380,833 43,334, ,057,801 Liabilities Segment liabilities 764,954 15,015,170 2,982,174-18,762,298 Current tax liabilities - 70, ,240 Total liabilities 764,954 15,085,410 2,982,174-18,832,538 Other information Capital expenditure 772, ,497 - B 978,568 Amortisation of biological assets - 669, ,293 Amortisation of prepaid land lease payment - 54,000-54,000 Depreciation 1,305,091 1,385,748 3,721 2,694,560 Other non-cash expenses (28,608) - (17,000) C (45,608) 74 Scope Industries Berhad

76 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 27. SEGMENTAL INFORMATION (cont d) Business Segment (cont d) By business segments (cont d) Investment 2017 Manufacturing Plantation holding Elimination Total RM RM RM RM Note RM Revenue from external customers 15,692,446 10,181, ,545-26,106,409 Inter-segment revenue - - 1,500,000 (1,500,000) A - Total revenue 15,692,446 10,181,418 1,732,545 (1,500,000) 26,106,409 Segment results 2,778,082 2,908,117 1,283,707 (1,500,000) 5,469,906 Interest expense (221) (792) (307,143) - (308,156) Interest income 7, , ,540 Profit before tax 2,785,656 2,907,325 1,202,309 (1,500,000) 5,395,290 Tax expense (210,246) (340,130) (4,060) - (554,436) Profit for the financial year 2,575,410 2,567,195 1,198,249 (1,500,000) 4,840,854 Assets Segment assets 19,202,546 77,655,578 92,160,399 (57,093,334) 131,925,189 Current tax assets ,502-13,502 Cash and cash equivalents 678, ,900 5,770,889-6,859,080 Total assets 19,880,837 78,065,478 97,944,790 (57,093,334) 138,797,771 Liabilities Segment liabilities 5,630,276 37,042,373 3,709,008 (26,020,260) 20,361,397 Current tax liabilities 9, , ,440 Total liabilities 5,639,476 37,219,613 3,709,008 (26,020,260) 20,547,837 Other information Capital expenditure 2,309, , B 2,921,391 Amortisation of biological assets - 551, ,108 Amortisation of prepaid land lease payment - 54, ,000 Depreciation 1,027,381 1,751,820 3,721-2,782,922 Other non-cash income (11,667) - (54,987) - C (66,654) Annual Report

77 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 27. SEGMENTAL INFORMATION (cont d) Business Segment (cont d) Notes to segment information: A B Inter-segment revenue are eliminated on consolidation. Additions to non-current assets consist of: RM RM Property, plant and equipment 788,460 2,346,996 Biological assets 190, , ,568 2,921,391 C Other material non-cash (income)/expenses consist of the following items: RM RM Gain on disposal of property, plant and equipment (27,624) - Gain on fair value changes of other investments (17,000) (54,987) Property, plant and equipment written off 1,110 Reversal of allowance for slow moving inventories (3,333) (9,635) Unrealised loss/(gain) on foreign exchange 1,239 (2,032) (45,608) (66,654) Geographical segments Geographical segment information has not been prepared as the Group s operations are all confined to Malaysia. Information about major customer The following are major customers with revenue equal or more than 10% of the Group s total revenue: Revenue RM RM Segments - Customer A 9,427,565 13,046,035 Manufacturing - Customer B 5,745,858 5,649,706 Plantation - Customer C 2,677,596 - Plantation 17,851,019 18,695, Scope Industries Berhad

78 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 28. RELATED PARTY DISCLOSURES (i) Related party transactions COMPANY RM RM Gross dividend income from a subsidiary 1,300,000 1,500,000 (ii) Compensation of key management personnel The Group and the Company have no other members of key management personnel apart from the Board of Directors which compensation has been disclosed in Note 22. Key management personnel are those persons including directors having authority and responsibility for planning, directing and controlling the activities of the Group and of the Company, directly or indirectly. 29. FINANCIAL INSTRUMENTS 29.1 Categories of financial instruments The table below provides an analysis of financial instruments categorised as loans and receivables ( L&R ), financial liabilities measured at amortised cost ( FL ) and fair value through profit or loss ( FVTPL ). Carrying Amount L&R FL FVTPL RM RM RM RM GROUP 2018 Financial assets Other investments 441, ,000 Trade receivables 1,597,196 1,597, Other receivables and refundable deposits 248, , Cash and cash equivalents 8,224,622 8,224, ,511,770 10,070, ,000 Financial liabilities Trade payables 744, ,270 - Other payables and accruals 872, ,972-1,617,242-1,617,242 - Annual Report

79 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 29. FINANCIAL INSTRUMENTS (cont d) 29.1 Categories of financial instruments (cont d) GROUP Carrying Amount L&R FL FVTPL RM RM RM RM 2017 Financial assets Other investments 424, ,000 Trade receivables 2,810,270 2,810, Other receivables and refundable deposits 360, , Cash and cash equivalents 6,859,080 6,859, ,454,124 10,030, ,000 Financial liabilities Trade payables 1,346,726-1,346,726 - Other payables and accruals 4,390,354-4,390,354-5,737,080-5,737,080 - COMPANY 2018 Financial assets Other investments 441, ,000 Other receivables and refundable deposits 19,241 19, Amount due from subsidiaries 21,641,952 21,641, Cash and cash equivalents 7,892,500 7,892, ,994,693 29,553, ,000 Financial liabilities Other payables and accruals 179, ,750 - Amount due to a subsidiary 298, , , , Scope Industries Berhad

80 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 29. FINANCIAL INSTRUMENTS (cont d) 29.1 Categories of financial instruments (cont d) Carrying Amount L&R FL FVTPL RM RM RM RM COMPANY 2017 Financial assets Other investments 424, ,000 Other receivables and refundable deposits 71,884 71, Amount due from subsidiaries 25,854,854 25,854, Cash and cash equivalents 5,770,889 5,770, ,121,627 31,697, ,000 Financial liabilities Other payables and accruals 3,294,912-3,294,912 - Amount due to a subsidiary 414, , Financial risk management 3,709,008-3,709,008 - The Group and the Company are exposed to a variety of financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency exchange risk. The Group operates within clearly defined guidelines that are approved by the Board and the Group s policy is not to engage in speculative activities Credit risk Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group and to the Company. The Group s exposure to credit risk arises principally from its trade receivables whilst the Company s exposure to credit risk arises principally from advances to its subsidiaries and financial guarantees provided to financial institutions in respect of credit facilities granted to the subsidiaries Trade receivables The Group extends to existing customers credit terms that range between 30 to 60 days. In deciding whether credit terms shall be extended, the Group will take into consideration factors such as the relationship with the customer, its payment history and credit worthiness. The Group subjects new customers to credit verification procedures. In addition, debt monitoring procedures are performed on an on-going basis with the result that the Group s exposure to bad debts is not significant. The maximum exposure to credit risk arising from trade receivables is represented by their carrying amount in the statement of financial position. Annual Report

81 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 29. FINANCIAL INSTRUMENTS (cont d) 29.3 Credit risk (cont d) Trade receivables (cont d) The ageing of trade receivables of the Group is as follows: RM RM Not past due 1,247,252 2,655,113 1 to 30 days past due 349, , to 60 days past due 3 16, , ,157 1,597,196 2,810,270 Trade receivables that are neither past due nor impaired are creditworthy customers with good payment record with the Group. None of the Group s trade receivables that are neither past due nor impaired have been renegotiated during the financial year. The Group has trade receivables amounting to RM349,944 (2017: RM155,157) that are past due as at the end of the reporting period but not impaired as the management is of the view that these past due amounts will be collected in due course. The Group has concentration of credit risk on 4 customers (2017: 2 customer) which represent 72% (2017: 73%) of total trade receivables Intercompany balances The Company provides advances to its subsidiaries and monitors the result of the subsidiaries regularly. The maximum exposure to credit risk is represented by their carrying amount in the statement of financial position. As at the end of the reporting period, there was no indication that the advances to its subsidiaries are not recoverable. The Company does not specifically monitor the ageing of the advances to its subsidiaries Financial guarantees 29.4 Liquidity risk The Company provides unsecured corporate guarantees to financial institutions in respect of credit facilities granted to its subsidiary up to a limit of RM2,000,000 (2017: RM2,000,000) of which RM Nil (2017: RM Nil) of the said credit facilities have been utilised as at the end of the reporting period. The corporate guarantee does not have a determinable effect on the terms of the credit facilities due to the financial institutions requiring parent guarantee as a pre-condition for approving the credit facilities granted to the subsidiaries. Further the Company has not received any consideration for the issuance of the corporate guarantee. As such, there is no value on the corporate guarantee to be recognised in the financial statements. Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The Group actively manages its debt maturity profile, operating cash flows and availability of funding so as to ensure that all repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient level of cash and cash equivalents to meet its working capital requirements. The financial liabilities of the Group and of the Company as at the end of the reporting period will mature in less than one year based on the carrying amounts reflected in the financial statements. 80 Scope Industries Berhad

82 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 29. FINANCIAL INSTRUMENTS (cont d) 29.5 Interest rate risk The Group s and the Company s fixed rate deposits and deferred cash consideration are exposed to a risk of change in their fair value due to changes in interest rates. The Group does not have any floating rate financial instruments. The interest rate profile of the Group s and the Company s interest-bearing financial instruments based on the carrying amount as at the end of the reporting period is as follows: GROUP COMPANY RM RM RM RM Fixed rate instruments Financial assets 7,686,535 4,287,241 7,686,535 4,287,241 Financial liabilities - 3,150,000-3,150,000 Fair value sensitivity analysis for fixed rate instruments The Group and the Company do not account for any fixed rate financial assets and financial liabilities at fair value through profit or loss, and the Group and the Company do not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss Foreign currency risk The Group is exposed to foreign currency risk on purchases that are denominated in currencies other than the functional currency of the Group entities. The Group also holds cash and bank balances denominated in foreign currency for working capital purposes. The currency principally giving rise to this risk is US Dollar ( USD ). The Group s exposure to the USD risk, based on carrying amounts as at the end of the reporting period is as follows: RM RM GROUP Cash and bank balances 124, ,229 Trade payables (45,002) (57,641) 79, ,588 COMPANY Cash and bank balances 117, ,742 Annual Report

83 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 29. FINANCIAL INSTRUMENTS (cont d) 29.6 Foreign currency risk (cont d) Sensitivity analysis for foreign currency risk Below demonstrates the sensitivity to a reasonably possible change in the foreign currencies exchange rates (against Ringgit Malaysia), with all other variables held constant, of the Group s and the Company s results. A 10% strengthening of the RM against the USD at the end of the reporting period would have decreased profit before tax by the amount shown below and a corresponding weakening would have an equal but opposite effect. GROUP COMPANY RM RM RM RM Reduction in profit before tax (7,922) (19,359) (11,799) (18,174) 29.7 Fair value information GROUP AND COMPANY The carrying amounts of financial assets (other than investment in a quoted equity instrument) and financial liabilities of the Group and of the Company approximate their fair values due to their short-term nature Fair value hierarchy The table below analyses financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable (refer to Note 2.2 for definition of Level 1 to 3 fair value hierarchy). Level 1 Level 2 Level 3 Total RM RM RM RM Financial assets at fair value through profit or loss 2018 Investment in a quoted equity instruments 441, , Investment in a quoted equity instruments 424, ,000 The investment in a quoted equity investments which are quoted in an active market are carried at fair value by reference to their quoted closing bid price at the end of the reporting period. 82 Scope Industries Berhad

84 NOTES TO THE FINANCIAL STATEMENTS - 30 June 2018 (cont d) 29. FINANCIAL INSTRUMENTS (cont d) 29.8 Reconciliation of liabilities arising from financing activities Balance at Cash Flows Balance at RM RM RM COMPANY Amount due from subsidiaries (25,440,758) 4,097,179 (21,343,579) 30. CAPITAL MANAGEMENT The primary objective of the Group s capital management policy remains unchanged and is to maintain a strong capital base to support its businesses and maximise shareholders value. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions or expansion of the Group. The Group may adjust the capital structure by issuing new shares, returning capital to shareholders or adjusting the amount of dividends to be paid to shareholders or sell assets to reduce debts. The Group is not subject to any externally imposed capital requirements by its lenders. Annual Report

85 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the Sixteenth Annual General Meeting of the Company will be held at Bamboo Room, Scope Manufacturers (M) Sdn. Bhd., Lot 6181 Jalan Perusahaan 2, Kawasan Perindustrian Parit Buntar, Parit Buntar, Perak on Thursday, 15 November 2018 at 2:00 p.m. for the following purposes: AGENDA AS ORDINARY BUSINESS: 1. To receive the Audited Financial Statements of the Company for the financial year ended 30 June 2018 together with the Reports of the Directors and Auditors thereon. Please refer to the Explanatory Notes 2. To approve the payment of additional Directors fees of RM50, for financial year ended 30 June Resolution 1 3. To approve the payment of Directors fees and Directors benefits of RM387, for the financial year ending 30 June Resolution 2 4. To re-elect Mr Yong Loong Chen as a Director who retires in accordance with the Company s Constitution (Article 127 of the Company s Articles of Association as adopted before the commencement of the Companies Act 2016). Resolution 3 5. To re-appoint Messrs Grant Thornton as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration. Resolution 4 AS SPECIAL BUSINESS: 6. To consider and if thought fit, to pass with or without modifications the following resolutions: (i) (ii) ORDINARY RESOLUTION AUTHORITY TO ISSUE SHARES That pursuant to Sections 75 and 76 of the Companies Act 2016, and subject to the approvals of the relevant Governmental and/or regulatory authorities, the Directors be and are hereby empowered to issue shares in the Company, at such time 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 in any one financial year does not exceed 10% of the total number of issued shares (excluding treasury shares) of the Company for the time being and that the Directors be and are also empowered to obtain the approval from Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares so issued and that such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company. Resolution 5 ORDINARY RESOLUTION MANDATE FOR MR TAN POH HENG TO CONTINUE TO ACT AS AN INDEPENDENT NON-EXECUTIVE DIRECTOR That approval be and is hereby given to Mr Tan Poh Heng who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, to continue to act as an Independent Non-Executive Director of the Company. Resolution 6 (iii) ORDINARY RESOLUTION MANDATE FOR MR YONG LOONG CHEN TO CONTINUE TO ACT AS AN INDEPENDENT NON-EXECUTIVE DIRECTOR That approval be and is hereby given to Mr Yong Loong Chen who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, to continue to act as an Independent Non-Executive Director of the Company. Resolution 7 7. To transact any other business of which due notices shall have been given in accordance with the Companies Act Scope Industries Berhad

86 NOTICE OF ANNUAL GENERAL MEETING (cont d) By Order of the Board, CHEE WAI HONG (BC/C/1470) TAN SHE CHIA (MAICSA ) FOO LI LING (MAICSA ) Company Secretaries Penang Date: 24 October 2018 Notes: 1. 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. 2. The proxy form must be duly completed and deposited at the Registered Office of the Company, A Menara BHL Bank, Jalan Sultan Ahmad Shah, Georgetown, Penang not less than forty-eight (48) hours before the time for holding the meeting. 3. A member shall be entitled to appoint more than one (1) proxy to attend and vote at the same meeting. 4. Where a member appoints two (2) or more proxies, the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 5. If the appointor is a corporation, this form must be executed under its Common Seal or under the hand of its attorney. 6. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991 ( Central Depositories Act ), it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 7. Where a member of the Company is an exempt authorised nominee as defined under the Central Depositories Act which holds ordinary shares in the Company for multiple beneficial owners in one securities account ( Omnibus Account ), there shall be no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each Omnibus Account it holds. 8. For purpose of determining who shall be entitled to attend this meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd to make available to the Company pursuant to the Company s Constitution (Article 77 of the Articles of Association of the Company as adopted before the commencement of the Companies Act 2016) and Rule 7.16(2) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, a Record of Depositors ( ROD ) as at 8 November 2018 and only a Depositor whose name appears on such ROD shall be entitled to attend, speak and vote at this meeting or appoint proxy to attend and/or speak and/or vote in his/her behalf. 9. All resolutions as set out in this notice of Sixteenth Annual General Meeting are to be voted by poll. Explanatory Notes on Ordinary Business Item 1 of the Agenda To receive the Audited Financial Statements of the Company for the financial year ended 30 June 2018 together with the Reports of the Directors and Auditors thereon The item is meant for discussion only as the provision of Section 340(1)(a) of the Companies Act 2016 does not require shareholders approval for the audited financial statements. Therefore, this item will not be put forward for voting. Resolution 1 - Payment of additional Directors fees for the financial year ended 30 June 2018 Section 230(1) of the Companies Act 2016 which came into force on 31 January 2017 provides amongst others, that the fees of the Directors and any benefits payable to the Directors of a listed company and its subsidiaries shall be approved at a general meeting. The proposed Ordinary Resolution 1 is to seek shareholders approval for the payment of additional Directors fees of RM50,000 for the financial year ended 30 June 2018 to the directors of the subsidiary companies who are also Directors of the Company. Annual Report

87 NOTICE OF ANNUAL GENERAL MEETING (cont d) Explanatory Notes on Ordinary Business (cont d) Resolution 2 - Payment of Directors fees and Directors benefits for the financial year ending 30 June 2019 The proposed Ordinary Resolution 2 is to facilitate payment of Directors fees and Directors benefits on current financial year basis, calculated based on the number of scheduled Board and Committee meetings of the Company for financial year 2019 as well as the payment of Directors fees to the directors of the subsidiary companies who are also the Directors of the Company, and assuming that all Directors will hold office until the end of the financial year. In the event the Directors fees and Directors benefits proposed is insufficient (e.g. due to more meetings or enlarged Board size), approval will be sought at the next Annual General Meeting for additional fees and benefits to meet the shortfall. Explanatory Notes on Special Business Resolution 5 - Authority to issue shares The proposed Ordinary Resolution 5, if passed, primarily to renew the mandate to give authority to the Board of Directors of the Company to issue and allot shares in the Company up to an amount not exceeding 10% of the total number of issued shares (excluding treasury shares) of the Company for the time being for such purposes as the Directors consider would be in the best interest of the Company without convening a general meeting. This would avoid any delay and costs in convening a general meeting to specifically approve such an issue of shares. This authority, unless revoked or varied by the shareholders of the Company in general meeting, will expire at the conclusion of the next Annual General Meeting. As at the date of this Notice, the Company has not issued any new shares pursuant to the general authority granted to the Directors at the Fifteenth Annual General Meeting held on 23 November 2017 and which will lapse at the conclusion of the Sixteenth Annual General Meeting to be held on 15 November A renewal of this authority is being sought at the Sixteenth Annual General Meeting under proposed Resolution 5. This authority if granted will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital, acquisition(s) and/or settlement of banking facility(ies). Resolution 6 - Mandate for Mr Tan Poh Heng to continue to act as an Independent Non-Executive Director Both the Nomination Committee and Board have assessed the independence of Mr Tan Poh Heng, who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine years, and recommended him to continue to act as Independent Non-Executive Directors of the Company based on the following justifications: i. He fulfilled the criteria under the definition of Independent Director as stated in the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, and thus, he would be able to function as check and balance, and bring an element of objectivity to the Board. ii. His vast experience in the accounting and audit industry enabled him to provide the Board with a diverse set of experience, expertise and independent judgment. iii. He devotes sufficient time and attention to his professional obligations for an informed and balanced decision making. iv. He consistently challenged management in an effective and constructive manner and actively participated in board discussion. v. He has a good and thorough understanding of the main drivers of the business in a detailed manner. Resolution 7 - Mandate for Mr Yong Loong Chen to continue to act as an Independent Non-Executive Director Both the Nomination Committee and Board have assessed the independence of Mr Yong Loong Chen, who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine years, and recommended him to continue to act as Independent Non-Executive Directors of the Company based on the following justifications: i. He fulfilled the criteria under the definition of Independent Director as stated in the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, and thus, he would be able to function as check and balance, and bring an element of objectivity to the Board. ii. His vast experience in the accounting, audit and investment industry enabled him to provide the Board with a diverse set of experience, expertise and independent judgment. iii. He devotes sufficient time and attention to his professional obligations for an informed and balanced decision making. iv. He consistently challenged management in an effective and constructive manner and actively participated in board discussion. v. He has a good and thorough understanding of the main drivers of the business in a detailed manner. 86 Scope Industries Berhad

88 NOTICE OF ANNUAL GENERAL MEETING (cont d) PERSONAL DATA POLICY By submitting an instrument appointing a proxy(ies) and/or representative(s) to attend, speak and vote at the Annual General Meeting and/or any adjournment thereof, a member of the Company (i) consents to the collection, use and disclosure of the member s personal data by the Company (or its agents) for the purpose of the processing and administration by the Company (or its agents) of proxies and representatives appointed for the Annual General Meeting (including any adjournment thereof) and the preparation and compilation of the attendance list, minutes and other documents relating to the Annual General Meeting (including any adjournment thereof) and in order for the Company (or it agents) to comply with any applicable laws, listing rules, regulations and/or guidelines (collectively, the Purposes ). (ii) warrants that where the member discloses the personal data of the member s proxy(ies) and/or representative(s) to the Company (or its agents), the member has obtained the prior consent of such proxy(ies) and/or representative(s) for the collection, use and disclosure by the Company (or its agents) of the personal data of such proxy(ies) and/or representative(s) for the Purposes, and (iii) agrees that the member will indemnify the Company in respect of any penalties, liabilities, claims, demands, losses and damages as a result of the member s breach of warranty. STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING (Pursuant to Rule 8.29(2) of the Listing Requirements of Bursa Malaysia Securities Berhad) As at date of this notice, there are no individuals who are standing for election as Directors (excluding the above Directors who are standing for re-election) at this forthcoming Annual General Meeting. The Company will seek shareholders approval on the general mandate for issue of securities in accordance with the Rule 6.04(3) of the Listing Requirements of Bursa Malaysia Securities Berhad. Please refer to the proposed resolution 5 as stated in the Notice of Annual General Meeting of the Company for the details. Annual Report

89 LIST OF PROPERTIES Registered Owner/ Location Date of Acquisition Description Tenure Age of building Land Area Built up Area Existing Use Audited Net Carrying Amount as at 30 June 2018 (Years) RM Scope Manufacturers (M) Sdn Bhd HS(D) 8228 PT 4149, Lot 6181 Jalan Perusahaan 2 Kawasan Perindustrian Parit Buntar Parit Buntar Perak, Malaysia Industrial Land & Building Leasehold for 60 years (expiring on ) 18 65,340 Sq. ft 58,040 Sq. ft Double storey office with annexed single storey factory building for use as office and factory 3,567,288 2 Scope Manufacturers (M) Sdn Bhd HS(D) 2841, PT 1803, Lot Jalan Perusahaan 2 Kawasan Perindustrian Parit Buntar Parit Buntar Perak, Malaysia Industrial Land & Building Leasehold for 60 years (expiring on ) 12 87,120 Sq. ft 66,000 Sq. ft Double storey office with annexed single storey factory building for use as office and factory 5,349,060 3 Pioneer Glow Sdn Bhd Title No. CL District of Kinabatangan (Tongod) Locality of Sungai Milian Sabah Plantation land Leasehold for 99 years (expiring on ) N/A 3, acres N/A Plantation land 38,018,180 4 Pioneer Glow Sdn Bhd Title No. CL District of Kinabatangan (Tongod) Locality of Sungai Milian Sabah Estate building Leasehold for 99 years (expiring on ) N/A N/A N/A Estate office, warehouse, workshop and labour quarters 1,060,465 5 Benua Mutiara Sdn Bhd Title No. CL District of Kinabatangan Locality of Segaliud- Lokan Off KM 83 Sandakan-Lahad Datu Highway Sabah Plantation land Leasehold for 99 years (expiring on ) N/A acres N/A Plantation land 24,118,678 72,113, Scope Industries Berhad

90 ANALYSIS OF SHAREHOLDINGS as at 26 September 2018 A. Class of Shares : Ordinary Shares Voting Rights : On show of hands One vote for one person On a poll One vote for one ordinary share B. ANALYSIS BY SIZE OF SHAREHOLDINGS Size of holdings No. of holders % No. of shares % , , ,001-10, ,280, , , ,824, ,001-28,024,220 (*) ,090, ,024,221 and above (**) ,076, Total 1, ,484, Remark: * - Less than 5% of Issued Holdings ** - 5% and above of Issued Holdings C. SUBSTANTIAL SHAREHOLDERS Name Number of Ordinary Shares Direct % Indirect % Lim Chiow Hoo 61,449, Lee Min Huat 61,671, Chew Kong Yoon 81,920, Wah Len Enterprise Sdn Bhd 93,300, Dato Lim Chee Wah ,300,000* Lim Ee Tatt 3,013, ,300,000* Lim Ee Keong ,300,000* Lim Saw Khim ,300,000* Agriculturists Incorporated Development Sdn Bhd 29,000, Han Siew King ,000,716# 5.17 Han Kim Leng ,000,716# 5.17 Notes: * Deemed interested by virtue of his/her shareholdings of not less than 20% in Wah Len Enterprise Sdn Bhd pursuant to Section 8 of the Companies Act # Deemed interested by virtue of his shareholdings of not less than 20% in Agriculturists Incorporated Development Sdn Bhd pursuant to Section 8 of the Companies Act Annual Report

91 ANALYSIS OF SHAREHOLDINGS (cont d) as at 26 September 2018 D. DIRECTORS SHAREHOLDINGS Number of Ordinary Shares Name Direct % Indirect % Lim Chiow Hoo 61,449, Lee Min Huat 61,671, Chew Kong Yoon 81,920, Yvonne Chew Siok Fong (Alternate Director to Chew Kong Yoon) 2,191, ,715,800@ 0.66 Lim Ee Tatt 3,013, ,300,000* Tan Poh Heng 350, Yong Loong Chen 3,013, Notes: * Deemed interested by virtue of his shareholdings of not less than 20% in Wah Len Enterprise Sdn Bhd pursuant to Section 8 of the Companies Act Other interest held through her spouse pursuant to Section 59(11)(c) of the Companies Act E. THIRTY LARGEST SHAREHOLDERS Name of Shareholders No. of Shares % of total issued shares 1. Wah Len Enterprise Sdn Bhd 93,300, Chew Kong Yoon 70,854, Lee Min Huat 46,671, Lim Chiow Hoo 41,249, Agriculturists Incorporated Development Sdn. Bhd. 29,000, Lim Chiow Hoo 20,200, Public Nominees (Tempatan) Sdn Bhd 15,600, Pledged Securities Account For Benua Dutamas Sdn Bhd (E-TWU) 8. Lee Min Huat 15,000, Siew Lee Siew Lee Yong 11,802, Lee Tack Chong 11,550, Benua Dutamas Sdn Bhd 11,100, HLIB Nominees (Tempatan) Sdn Bhd 11,065, Pledged Securities Account For Chew Kong Yoon 13. Gan Sook Peng 10,324, RHB Capital Nominees (Tempatan) Sdn Bhd 9,023, Pledged Securities Account For Francis Chia Mong Tet (CEB) 15. Tey Kuan Sim 8,900, Yap Pei Pei 8,423, Lok Huey Ming 7,849, Alliancegroup Nominees (Tempatan) Sdn Bhd 7,708, Pledged Securities Account For Tan Siew Booy (D18) 19. Yap Pei Pei 6,008, Lee Meow Lee Meow Yee 4,066, Public Nominees (Tempatan) Sdn Bhd 3,715, Pledged Securities Account For Leong Kok Vui (E-TWU/LDU) 22. Lim Seng Chong 3,586, Ong Lai Choon 3,330, Scope Industries Berhad

92 ANALYSIS OF SHAREHOLDINGS (cont d) as at 26 September 2018 E. THIRTY LARGEST SHAREHOLDERS (cont d) Name of Shareholders No. of Shares % of total issued shares 24. Alliancegroup Nominees (Tempatan) Sdn Bhd 3,013, Pledged Securities Account For Yong Loong Chen (100306) 25. Lim Ee Tatt 3,013, HLIB Nominees (Tempatan) Sdn Bhd 2,751, Pledged Securities Account For Chan Swee Booi 27. Mohammed Ab Halim Bin Ab Rahman 2,700, Christina Lay-See Cheah 2,010, Chin Soo Kim 2,000, Getaria Realty Sdn Bhd 2,000, Annual Report

93 ANALYSIS OF WARRANT HOLDINGS as at 26 September 2018 A. Number of outstanding Warrants 2012/2020 ( Warrants ) : 108,596,361 Exercise Price Per Warrant : RM0.15 each B. ANALYSIS BY SIZE OF WARRANT HOLDINGS Size of holdings No. of holders % No. of Warrants % , , ,001 10, , , , ,082, ,001 5,429,817 (*) ,610, ,429,818 and above (**) ,882, Total ,596, Remark: * - Less than 5% of Issued Warrants ** - 5% and above of Issued Warrants C. DIRECTORS WARRANT HOLDINGS Name Number of Warrants Direct % Indirect % Lim Chiow Hoo 10,649, Lee Min Huat 11,540, Chew Kong Yoon 2,067, Yvonne Chew Siok Fong (Alternate Director to Chew Kong Yoon) 410, ,000@ 0.03 Lim Ee Tatt Tan Poh Heng Yong Loong Chen Other interest held through her spouse pursuant to Section 59(11)(c) of the Companies Act Scope Industries Berhad

94 ANALYSIS OF WARRANT HOLDINGS (cont d) as at 26 September 2018 D. THIRTY LARGEST WARRANT HOLDERS Name of Warrant holders No. of Warrants % of total issued Warrants 1. Siew Lee Siew Lee Yong 21,063, Tai Seng Hook 10,000, Gan Sook Peng 9,840, Lee Min Huat 8,540, Ngan Mee Ling 7,788, Lim Chiow Hoo 6,649, Lee Tack Chong 4,700, Lim Chiow Hoo 4,000, Cartaban Nominees (Asing) Sdn Bhd 3,025, Standard Chartered Bank Singapore For BMO Spore Branch Foreign Client 10. Lee Min Huat 3,000, Alliancegroup Nominees (Tempatan) Sdn Bhd 2,244, Pledged Securities Account For Tan Siew Booy (D18) 12. Tey Kuan Sim 1,700, Yap Pei Pei 1,621, Tan Kok Eng 1,465, HLIB Nominees (Tempatan) Sdn Bhd 1,303, Pledged Securities Account For Chan Swee Booi 16. Lok Huey Ming 1,284, Tee Ah Leck 1,110, HLIB Nominees (Tempatan) Sdn Bhd 1,107, Pledged Securities Account For Chew Kong Yoon 19. Lee Meow Lee Meow Yee 1,100, Maybank Securities Nominees (Tempatan) Sdn Bhd 1,096, Pledged Securities Account For Ho Yock Main (REM 857-Margin) 21. Chew Kong Yoon 960, Ong Lai Choon 667, Mohammed Ab Halim Bin Ab Rahman 600, Affin Hwang Nominees (Tempatan) Sdn. Bhd. 570, Pledged Securities Account For Tan Bee Hock (TAN1175C) 25. Mohd Akmal Hakim Bin Berhanuddin 470, HLIB Nominees (Tempatan) Sdn Bhd 453, Pledged Securities Account For Lee Eng Min (CCTS) 27. Lee Tack Chong 450, Christina Lay-See Cheah 400, Getaria Realty Sdn Bhd 400, Public Nominees (Tempatan) Sdn Bhd Pledged Securities Account For Foong Hon Beng (E-PTS) 400, Annual Report