STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

Transcription

1 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Paragraph 15.26(b) of the Main Market Listing Requirements ( Main Market LR ) of Bursa Malaysia Securities Berhad calls for the Board of Directors ( Board ) to issue a statement with regard to the internal control of the Company in the Annual Report. At the same time, the Malaysian Code on Corporate Governance 2012 requires all listed companies to establish a sound risk management framework and internal control system to safeguard shareholders interests and assets of the Group. The Board recognises that good governance practices are processes that should be continuously reviewed, monitored and implemented for the benefit of the Group. Accordingly, the Board is pleased to present the Statement on Risk Management and Internal Control ( Statement ) that is prepared in accordance with the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers. Accountability and Responsibility The Board acknowledges its overall responsibility for the Group s internal control system which includes the establishment of an appropriate control framework and the review of its adequacy and efficacy. In view of the limitations that are inherent in any system of internal control, the Board noted that the internal control system is designed to manage or mitigate rather than eliminate risks that may impede the achievement of the Group s business objectives. It can only provide reasonable but not absolute assurance against material misstatements or losses. This concept of reasonable assurance also recognises that cost of controls should not exceed the expected benefits. The process of identifying, evaluating and managing risks is a focused undertaking which is regularly reviewed by the Board with the assistance and support of management. Risk Management The Group has implemented a risk management framework to identify, evaluate and manage the significant risks affecting the Group s business and policies. The management is responsible for the identification and evaluation of significant risks affecting their business together with the design and implementation of suitable internal controls. These risks may be associated with a variety of internal or external factors including control breakdowns, disruption in information systems, competition, natural catastrophe and regulatory requirements. For the purpose of risk management, they are classified into two categories; namely those that are catastrophic in nature and those that hinder the achievement of the short-term objectives of the Group. To foster effective risk management, the respective department head is primarily responsible for the identification and management of major risks affecting their own business units including the design and implementation of suitable risk control. Review and update of the system of internal controls are made after considering pertinent changes in the regulatory and business environment. Key Elements of Internal Control The existing systems of internal control of the Group encompass overall risk management and compliance controls in finance, management information systems, and business operations. Key elements in the Group s system of internal controls and procedures are as follows: Well defined organisational structure with clear lines of accountability and responsibility to enable the Group s vision, mission, strategies and operational objectives to be achieved. Board Charter that outlines the roles and responsibilities of the Board, division of responsibilities and powers between the Board and management, the different committees established by the Board, and between the Independent Chairman and the Group Managing Director. 22

2 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont d) Board Code of Conducts that provides guidance to the Directors for ethical standards which the Directors shall adhere to as a way of providing tangible evidence of their commitment to diligence, probity and fairness in exercising their duties and responsibilities. An organisational chart that delineates reporting lines with delegation of authority to the various levels along functional lines thus ensuring an adequate system of checks and balances. Limits of Authority manual that defines authorisation limits to ensure proper accountability, segregation of duties and minimisation of unauthorised transactions risks. Duly documented internal policies including standards and procedures that focus on professionalism at work, integrity, and avoidance of conflicts of interests. Regular updates are made to reflect changing risks and to resolve operational deficiencies. All policies and standards are approved by the Board. Cases of non-compliance are reported to the Board via the internal audit function. Comprehensive human resource internal control policies with procedures and best practices to guide and instil integrity, accountability and professionalism in employee conduct. Detailed annual budgets and business plans detailing targets for each business area. Group management reviews and approves the annual budget. Regular meetings for all business operations are convened to consider financial performance, business development, management and corporate issues and to rectify areas of discrepancies. Periodic and comprehensive information is provided by management for monitoring of performance against budget. Such monitoring ensures that exceptions and variations are disclosed, fully discussed with appropriate actions taken in a timely and effective manner. Key operational processes are guided by the operations manual detailed in Standard Operating Procedures, the ISO 9001:2008 edition Quality Management System, the Global Security Verification Program as well as the requirements of Chain of Custody Certification issued by Forest Stewardship Council and also the Programme for the Endorsement of Forest Certification. The management regularly reviews, monitors, and follows up on the status of actions on recommendations made on internal control issues that have been identified in reports prepared by the internal auditor. Regular independent audits are carried out by internal auditor on areas of concern and those with high risk impact and incidence of occurrence. The internal auditor is tasked to highlight significant risks that may impact the Group through the assessment of the adequacy and integrity of the existing system of internal control and the implementation of field audits. Such audits also include a review of IT general controls of the Group s information technology systems. Following the audit, a report of shortcomings and recommendations will be submitted to the Audit Committee for discussion and review and thereafter referred to the Board for their consideration and decision. The scope and frequency of audit activities are reviewed and endorsed by the Audit Committee through the Annual Audit Plan based on principles of risk-based audit and regulatory requirements. The Audit Committee meets regularly to ensure effective discharge of the internal audit functions. Review and update of the internal control system is made after considering pertinent changes in the regulatory and business environment on an ongoing basis. The controls have been in place during the financial year under review up to the date of this Statement. 23

3 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont d) Adequacy and Effectiveness of The Group s Risk Management and Internal Control System The Board has received assurance from the Group Managing Director and Group Finance Director that the Group s risk management and internal control system are operating adequately and efficiently in all material aspects. It is of the view that the Group s risk management and internal control system is satisfactory and no material internal control failure nor have any of the reported weaknesses resulted in material losses or contingencies during the financial year under review. Review of the Statement by External Auditors The external auditors have, in accordance with the Recommended Practice Guide 5 issued by the Malaysian Institute of Accountants, reviewed the Statement as required by paragraph of the Main Market LR, for inclusion in the Company s annual report for the financial year ended 30 June Based on their review, the auditors have reported to the Board that nothing has come to their attention that causes them to believe that the Statement is inconsistent with their understanding of the process adopted by the Board in reviewing and assessing the integrity and adequacy of the internal controls of the Group. This Statement is made in accordance with the resolution of the Board dated 23 September

4 AUDIT COMMITTEE REPORT FORMATION The Audit Committee was established by the Board of Directors on 17 August COMPOSITION Chairman Members Secretaries Dato Mohd. Junid Bin Mohd. Md Noor, Independent Chairman Mr. Teh Tet Siem, Independent Non-Executive Director Mr. Wong Hoong Sam, Non-Independent Non-Executive Director Mr. Ang Joo Seong and Ms. Khor Lee Nee, Company Secretaries Members of the Audit Committee The members of the Audit Committee are appointed from amongst the Company s Directors who fulfil the following requirements: 1) the Audit Committee must be composed of no fewer than 3 members; 2) all the members must be non-executive directors, with a majority of them being independent directors; and 3) at least one member of the Audit Committee: a) must be a member of the Malaysian Institute of Accountants; or b) if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years working experience and: i) he must have passed the examinations specified in Part I of the First Schedule of the Accountants Act 1967; or ii) he must be a member of one of the associations of accountants specified in Part II of the First Schedule of the Accountants Act c) fulfill such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad. Alternate Director No alternate director shall be appointed as a member of the Audit Committee. Chairman of the Committee The members of the Audit Committee shall elect a Chairman from among themselves who shall be an independent director. Term of the Audit Committee The Board of Directors will review the term of office and performance of the Audit Committee and each of its members at least once every 3 years to determine whether the Audit Committee and members have carried out their duties in accordance with their terms of reference. Vacancy In the event of any vacancy in the Audit Committee resulting in the non-compliance of having at least 3 members in the Committee, the Company must fill the vacancy within 3 months. 25

5 AUDIT COMMITTEE REPORT (cont d) SUMMARY OF THE TERMS OF REFERENCE Objective The primary objective of the Audit Committee (as a sub-committee of the Board) is to assist the Board in the effective discharge of its fiduciary responsibilities for corporate governance, financial reporting and internal control. Reporting Responsibilities The Audit Committee will report to the Board on the nature and extent of the functions performed by it and may make such recommendations to the Board on any audit and financial reporting matters as it may think fit. Rights of the Audit Committee The Company shall ensure that wherever necessary and reasonable for the performance of the Committee s duties, the Committee shall, in accordance with procedure determined by the Board of Directors and at the cost of the Company: a) have authority to investigate any matter within its terms of reference; b) have the resources which are required to perform its duties; c) have full and unrestricted access to any information pertaining to the Company; d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; e) be able to obtain independent professional or other advice; and f) be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary. Functions of the Audit Committee The functions of the Audit Committee include the following: a) to assess the performance of the external auditor annually, recommend the nomination, to consider the audit and suitability of re-appointment of the external auditor and any questions of resignation or dismissal; b) to discuss with the external auditor before the commencement of audit, their audit plan, nature and scope of the audit; c) to discuss problems and reservations (including level of assistance given by the employees) arising from the interim and final audits and any matter the external auditor may wish to discuss (in the absence of management, where necessary); d) to review the external auditor s reports, its management letter and management s response; e) to review the quarterly results and year end financial statements, prior to the approval of the Board, focusing particularly on: (i) any changes in accounting policies and practices; (ii) significant adjustments arising from the audit, significant and unusual events; (iii) the going concern assumption; and (iv) compliance with accounting standards and other legal requirements; f) to review the adequacy of the scope, functions, authority, competency and resources of the internal audit function; 26

6 AUDIT COMMITTEE REPORT (cont d) g) to review the internal audit program and results of the internal audit process, ensuring that appropriate actions are taken on the recommendations of the internal auditors; h) to approve any appointments or termination of internal auditors; i) to consider related party transactions and review the procedures to ensure appropriateness and adequacy; j) to consider the major findings of internal investigations and management s response; and k) to consider other topics as defined by the Board from time to time. ATTENDANCE AT MEETINGS The Audit Committee met four times during the financial year ended 30 June All its members attended the four meetings. The meetings were also attended by the internal auditors, external auditors, other directors who are not members of the Audit Committee and key management personnel upon invitation of the Audit Committee. SUMMARY OF ACTIVITIES During the financial year 2014, the Audit Committee in the discharge of its duties and functions carried out the following activities: a) reviewed the quarterly and yearly results/announcements of the Company and ensured compliance with the applicable Financial Reporting Standards in Malaysia and adherence to other legal and regulatory requirements as well as making relevant recommendations to the Board of Directors for approval; b) reviewed and discussed the Group s related party transactions; c) discussed the external audit plan with the external auditors; d) reviewed the findings of the external auditors and their reports; e) conducted an assessment of the performance and independence of the external auditors, recommended the nomination of external auditors for the Board s consideration and onward recommendation to the shareholders for re-appointment at the annual general meeting; f) reviewed and considered the assistance given by the Company s officers and staffs to the external auditors; g) evaluated the audit planning memorandum of the internal auditors; h) reviewed and appraised the audit reports prepared by the internal auditors and the various internal control systems in place; i) discussed issues with the internal and external auditors in the absence of the management in two meetings held during the financial year 2014; j) reviewed the internal audit functions in respect of the adequacy of its scope, functions, competency, resources and necessary authority to carry out its work; k) reviewed the Audit Committee Report and Statement on Risk Management and Internal Control disclosed in the Annual Report for the financial year ended 30 June

7 AUDIT COMMITTEE REPORT (cont d) INTERNAL AUDIT FUNCTION Chee Wah has engaged an external professional consultant company as its internal auditors for the financial year ended 30 June The IA 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 annual audit plan proposed by the internal auditors was reviewed and approved by the Audit Committee before the commencement of the audit. IA function has carried out audits in accordance with the risk based approved annual audit plan. Substantive and analytical tests were performed by the IA function on the key activities of the business units and operational components of the Group. At every quarterly Audit Committee meeting, the internal auditors highlighted their audit findings, recommendations and management action plans to improve the system of internal controls. Follow-up audits were also conducted to ensure proper and timely implementation of the agreed action plans. The regular monitoring by IA function enables the Group to maintain good corporate governance and enhance the integrity and effectiveness of the Group s system of internal control. The total costs of the IA function comprising audit fee and all incidental costs incurred on conducting the audit during the financial year ended 30 June 2014 amounted to RM24,

8 ANALYSIS OF SHAREHOLDINGS as at 23 September 2014 Share Capital Authorised Issued and fully paid up Class of Shares Voting Rights RM100,000,000 RM42,096,700 Ordinary shares of RM1.00 each One vote per ordinary share Distribution of Shareholdings Size of Holdings No. of Holders % of Holders No. of Shares % of Shareholding # 100-1, , ,001-10,000 1, ,359, , , ,265, ,001-2,104,834 (*) ,956, ,104,835 and above (* *) ,364, Total 2, ,096, Remarks: * Less than 5% of issued shares * * 5% and above of issued shares # Negligible 29

9 ANALYSIS OF SHAREHOLDINGS (cont d) as at 23 September 2014 Substantial Shareholders Holding 5% or More In The Share Capital Direct Interest Indirect Interest Name No. of Shares % No. of Shares % ANB Equity Sdn. Bhd. 6,041, Khor Say Beng 5,984, (a) 1,319, Khor Say Khai Holdings Sdn. Bhd. 4,338, Khor Wan Tat 64, (b) 4,346, Khor Lay Hong 41, (c) 4,338, Khor Lay Wei 31, (c) 4,338, Khor Lay Boon 2,000 # (c) 4,338, (a) Deemed interest in 1,319,742 ordinary shares held by Say Beng Holdings Sdn. Bhd. by virtue of Section 6A of the Companies Act, 1965 ( the Act ). (b) (c) Deemed interest in 4,346,856 ordinary shares included 4,338,856 ordinary shares beneficially owned by Khor Say Khai Holdings Sdn. Bhd. by virtue of Section 6A of the Act and 8,000 ordinary shares held by his spouse by virtue of Section 134(12)(c) of the Act. Deemed interest in 4,338,856 ordinary shares beneficially owned by Khor Say Khai Holdings Sdn. Bhd. by virtue of Section 6A of the Act. # Negligible Directors Interests In The Ordinary Shares of The Company and Related Companies The Company Direct Interest Indirect Interest Name No. of Shares % No. of Shares % Khor Say Beng 5,984, (a) 1,319, Khor Wan Keong 225, Lee Eng Sheng 48, Koay Kah Kheng 22, (a) Deemed interest in 1,319,742 ordinary shares held by Say Beng Holdings Sdn. Bhd. by virtue of Section 6A of the Act. By virtue of his interests in shares in the Company, Mr. Khor Say Beng is also deemed to have interests in shares in the subsidiaries to the extent of the Company s interests, pursuant to Section 6A of the Act. Save as disclosed above, none of the other directors in office as at 23 September 2014 held any interest in shares in the Company or in its related corporations. 30

10 ANALYSIS OF SHAREHOLDINGS (cont d) as at 23 September 2014 Thirty Largest Shareholders No. Name No. of Shares % 1 ANB EQUITY SDN. BHD. 6,041, KHOR SAY BENG 5,984, PUBLIC NOMINEES (TEMPATAN) SDN. BHD. 4,338, PLEDGED SECURITIES ACCOUNT FOR KHOR SAY KHAI HOLDINGS SDN. BHD. (E-PPG) 4 KWONG AH HOO 1,811, KHOR SAY KAI 1,662, KHAI CAPITAL SDN. BHD. 1,611, CIMSEC NOMINEES (TEMPATAN) SDN. BHD. 1,600, CIMB FOR CHU SOONG TAU (PB) 8 SAY BENG HOLDINGS SDN. BHD. 1,319, LIM CHEE SONG 1,163, CHOK KWONG MING 742, TEH BEE LOON 500, RHB NOMINEES (TEMPATAN) SDN. BHD. 497, PLEDGED SECURITIES ACCOUNT FOR TAN HUI LUN 13 RHB CAPITAL NOMINEES (TEMPATAN) SDN. BHD. 334, PLEDGED SECURITIES ACCOUNT FOR LIM KAM SENG (IPH) 14 PUBLIC NOMINEES (TEMPATAN) SDN. BHD. 308, PLEDGED SECURITIES ACCOUNT FOR PHNUAH FARN FARN (E-BMM) 15 LIM SOON HUAT 295, LIM HUI LIM HOOI CHANG 270, SERM JUTHAMONGKHON 187, OOI LENG HWA 177, KHOR WAN KEONG 146, LIEW MEE KIEN 140, LYE HA LAI CHOW MOOI 137, TEH GOOI PHIN 132, LEE BOON KOON 128, IMPIAN SUKSES HOLDINGS SDN. BHD. 123, YAP SIEW MUN 122, AFFIN HWANG NOMINEES (TEMPATAN) SDN. BHD. 113, PLEDGED SECURITIES ACCOUNT FOR HON KWONG YEW (M09) 27 MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN. BHD. 110, PLEDGED SECURITIES ACCOUNT FOR TING YUET MAY (REM 825) 28 LEE JOOI SENG 109, AMSEC NOMINEES (TEMPATAN) SDN. BHD. 109, PLEDGED SECURITIES ACCOUNT - AMBANK (M) BERHAD FOR TAN KING TAN KHOON HAI (SMART) 30 SIM KOK LIONG 105,

11 DIRECTORS REPORT AND AUDITED FINANCIAL STATEMENTS 30 June 2014 CONTENTS Directors Report Statement by Directors 36 Statutory Declaration 36 Independent Auditors Report Consolidated Statement of Financial Position 39 Consolidated Statement of Comprehensive Income 40 Consolidated Statement of Changes in Equity 41 Consolidated Statement of Cash Flows 42 Statement of Financial Position 43 Statement of Comprehensive Income 44 Statement of Changes in Equity 45 Statement of Cash Flows 46 Notes to the Financial Statements Supplementary Information - Realised and Unrealised Profits or Losses 74

12 DIRECTORS REPORT The directors hereby submit their report and the audited financial statements of the Group and the Company for the financial year ended 30 June PRINCIPAL ACTIVITIES The principal activities of the Company are those of investment holding, manufacture and sale of stationery and printing materials. The principal activities of the subsidiaries are disclosed in Note 5 to the financial statements. There have been no significant changes in the nature of the principal activities of the Group and the Company during the financial year. RESULTS The Group The Company RM RM Profit/(Loss) for the financial year 135,235 (289,805) DIVIDENDS No dividends were proposed, declared or paid by the Company since the end of the previous financial year. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year apart from those disclosed in the financial statements. ISSUE OF SHARES OR DEBENTURES There was no issue of shares or debentures by the Company during the financial year. OPTIONS GRANTED OVER UNISSUED SHARES No share options were granted by the Company during the financial year. BAD AND DOUBTFUL DEBTS Before the financial statements of the Group and the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances which would render the amount written off for bad debts or the amount of the allowance made for doubtful debts inadequate to any substantial extent. 33

13 DIRECTORS REPORT (cont d) CURRENT ASSETS Before the financial statements of the Group and the Company were made out, the directors took reasonable steps to ascertain whether any current assets, other than debts, were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and the Company and to the extent so ascertained were written down to an amount that they might be expected to realise. At the date of this report, the directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and the Company misleading. VALUATION METHODS At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and the Company misleading or inappropriate. CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist:- (i) any charge on the assets of the Group or the Company that has arisen since the end of the financial year which secures the liabilities of any other person; or (ii) any contingent liability in respect of the Group or the Company that has arisen since the end of the financial year. No contingent liability or other liability of the Group or the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and the Company to meet their obligations as and when they fall due. CHANGE OF CIRCUMSTANCES At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report or in the financial statements of the Group and the Company that would render any amount stated in the respective financial statements misleading. ITEMS OF AN UNUSUAL NATURE The results of the operations of the Group and the Company for the financial year were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature. 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, in the opinion of the directors, to affect substantially the results of the operations of the Group or the Company for the financial year in which this report is made. 34

14 DIRECTORS REPORT (cont d) DIRECTORS OF THE COMPANY The directors who served since the date of the last report are:- Dato Mohd. Junid Bin Mohd. Md Noor Lee Eng Sheng Teh Tet Siem Khor Say Beng Khor Wan Keong Wong Hoong Sam Koay Kah Kheng Particulars of the interests in shares in the Company of the directors in office at the end of the financial year, as shown in the Register of Directors' Shareholdings, are as follows:- Number of Ordinary Shares of RM1 Each Direct Interest Deemed Interest Balance at Balance at Balance at Balance at Name of Director 1 July 2013 Bought (Sold) 30 June July June 2014 Khor Say Beng 5,984, ,984,000 1,319,742 1,319,742 Koay Kah Kheng 22, , Lee Eng Sheng 173,800 0 (47,000) 126, Khor Wan Keong 225, , By virtue of his interests in shares in the Company, Khor Say Beng is also deemed to have interests in shares in the subsidiaries to the extent of the Company s interests, pursuant to Section 6A of the Companies Act Save as disclosed above, none of the other directors in office at the end of the financial year held any interests in shares in the Company or its related corporations during the financial year. DIRECTORS BENEFITS Since the end of the previous financial year, no director of the Company has received or become entitled to receive any benefit (other than the directors remuneration disclosed in the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest except for any benefits which may be deemed to have arisen by virtue of those related party transactions as disclosed in Note 21 to the financial statements. Neither during nor at the end of the financial year, was the Company a party to any arrangement whose object is to enable the directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. AUDITORS The auditors, Messrs. Crowe Horwath, have expressed their willingness to continue in office. SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORS DATED 23 SEPTEMBER 2014 Khor Say Beng Dato Mohd. Junid Bin Mohd. Md Noor 35

15 STATEMENT BY DIRECTORS We, Khor Say Beng and Lee Eng Sheng, being two of the directors of Chee Wah Corporation Berhad, do hereby state that in the opinion of the directors, the financial statements set out on pages 39 to 73 give a true and fair view of the financial position of the Group and the Company as at 30 June 2014 and of their financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. In the opinion of the directors, the supplementary information set out on page 74 is prepared, in all material respects, in accordance with Guidance on Special Matter No. 1 Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad. SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORS DATED 23 SEPTEMBER 2014 Khor Say Beng Lee Eng Sheng STATUTORY DECLARATION I, Lee Eng Sheng, being the director primarily responsible for the financial management of Chee Wah Corporation Berhad, do solemnly and sincerely declare that the financial statements set out on pages 39 to 73 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 Lee Eng Sheng at Georgetown in the State of Penang on this 23 SEPTEMBER 2014 Lee Eng Sheng Before me Nachatar Singh A/L Bhag Singh, PJK No. P 126 Commissioner for Oaths 36

16 INDEPENDENT AUDITORS REPORT To The Members Of Chee Wah Corporation Berhad (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of Chee Wah Corporation Berhad, which comprise the statements of financial position as at 30 June 2014 of the Group and the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 39 to 73. Directors Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and the Company as at 30 June 2014 and of their financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following:- (i) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. (ii) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. 37

17 INDEPENDENT AUDITORS REPORT To The Members Of Chee Wah Corporation Berhad (cont d) (Incorporated in Malaysia) Report on Other Legal and Regulatory Requirements (cont d) (iii) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act. The supplementary information set out on page 74 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1 Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ( the MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Crowe Horwath Firm No: AF 1018 Chartered Accountants Eddy Chan Wai Hun Approval No: 2182/10/15 (J) Chartered Accountant Date: 23 September 2014 Penang 38

18 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As At 30 June Note RM RM RM (Restated) (Restated) NON-CURRENT ASSETS Property, plant and equipment 4 33,052,071 34,200,346 36,306,934 CURRENT ASSETS Inventories 6 31,117,696 25,522,851 30,395,875 Trade and other receivables 7 13,484,108 14,673,425 13,362,678 Financial assets at fair value through profit or loss 8 11, ,812 4,074 Prepayments 456, , ,396 Current tax assets 0 77,139 26,397 Cash and bank balances 9 1,486,094 1,658,355 1,990,700 46,555,659 42,437,973 46,073,120 CURRENT LIABILITIES Trade and other payables 10 8,648,979 8,590,811 10,207,915 Loans and borrowings 11 22,884,666 22,342,209 25,596,650 Retirement benefits ,343 13,998 Advance payments from customers 1,453, , ,414 Current tax liabilities 90, ,500 33,077,408 31,759,009 36,794,477 NET CURRENT ASSETS 13,478,251 10,678,964 9,278,643 NON-CURRENT LIABILITIES Loans and borrowings 11 1,948, , ,777 Retirement benefits , , ,173 Deferred tax liabilities 13 2,076,836 1,985,716 2,444,860 4,387,087 2,853,766 3,212,810 NET ASSETS 42,143,235 42,025,544 42,372,767 EQUITY Share capital 14 42,096,700 42,096,700 42,096,700 Share premium 164, , ,037 (Accumulated losses)/retained profits (117,502) (235,193) 112,030 TOTAL EQUITY 42,143,235 42,025,544 42,372,767 The annexed notes form an integral part of these financial statements 39

19 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Note RM RM (Restated) Revenue 15 88,901,296) 86,223,921) Cost of sales (71,892,190) (71,271,525) Gross profit 17,009,106) 14,952,396) Other income 532,069) 1,319,511) Administrative and general expenses (7,671,213) (7,157,333) Selling and distribution expenses (7,945,746) (8,312,358) Finance costs (1,558,123) (1,634,952) Profit/(Loss) before tax ,093) (832,736) Tax (expense)/income 18 (230,858) 485,513) Profit/(Loss) for the financial year 135,235) (347,223) Other comprehensive income:- Items that will not be reclassified to profit or loss:- - Remeasurements of defined benefit liability (23,544) 0) - Deferred tax effects thereof 6,000) 0) Other comprehensive income for the financial year (17,544) 0 Total comprehensive income for the financial year 117,691) (347,223) Earnings/(Loss) per share: Basic (sen) 0.32) (0.82) - Diluted (sen) 0.32) (0.82) The annexed notes form an integral part of these financial statements 40

20 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Non-distributable Retained profits/ Share Share (Accumulated Total capital premium losses) equity RM RM RM RM Balance at 1 July As previously reported 42,096, , ,361) 42,433,098) - Effects of adopting MFRS (60,331) (60,331) - As restated 42,096, , ,030) 42,372,767) Loss (representing total comprehensive income) for the financial year 0 0 (347,223) (347,223) Balance at 30 June ,096, ,037 (235,193) 42,025,544) Balance at 1 July As previously reported 42,096, ,037 (178,427) 42,082,310) - Effects of adopting MFRS (56,766) (56,766) - As restated 42,096, ,037 (235,193) 42,025,544) Remeasurements of defined benefit liability 0 0 (23,544) (23,544) Deferred tax effects thereof 0 0 6,000) 6,000) Other comprehensive income for the financial year 0 0 (17,544) (17,544) Profit for the financial year ,235) 135,235) Total comprehensive income for the financial year ,691) 117,691) Balance at 30 June ,096, ,037 (117,502) 42,143,235) The annexed notes form an integral part of these financial statements 41

21 CONSOLIDATED STATEMENT OF CASH FLOWS Note RM RM (Restated) CASH FLOWS FROM OPERATING ACTIVITIES Profit/(Loss) before tax 366,093) (832,736) Adjustments for:- Depreciation of property, plant and equipment 2,861,474) 2,899,579) Impairment loss on loans and receivables 58,990) 5,840) Interest expense 1,558,123) 1,634,952) Inventories written down 20,303) 133,200) Loss/(Gain) on disposal of property, plant and equipment 591,459) (92,496) Property, plant and equipment written off 1,032) 0) Provision for retirement benefits (857) 36,114) Unrealised gain on financial instruments at fair value through profit or loss (11,613) (123,812) Unrealised loss/(gain) on foreign exchange 201,208) (332,630) Operating profit before working capital changes 5,646,212) 3,328,011) Changes in:- Inventories (5,615,148) 4,739,824) Receivables and prepayments 751,455) (1,070,310) Payables and advance payments 723,669) (1,800,137) Financial instruments at fair value through profit or loss 123,812) 4,074) Cash generated from operations 1,630,000) 5,201,462) Retirement benefits paid 0) (5,684) Tax paid (48,059) (51,029) Tax refunded 82,076) 21,156) Net cash from operating activities 1,664,017) 5,165,905) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment 1,030,009) 119,431) Purchase of property, plant and equipment 20 (862,386) (249,048) Net cash from/(used in) investing activities 167,623) (129,617) CASH FLOWS FROM FINANCING ACTIVITIES Interest paid (1,562,721) (1,642,927) Net increase/(decrease) in short-term loans and borrowings 356,871) (438,288) Repayment of hire purchase obligations (823,319) (468,695) Net cash used in financing activities (2,029,169) (2,549,910) Net (decrease)/increase in cash and cash equivalents (197,529) 2,486,378) Cash and cash equivalents brought forward (1,822,496) (4,308,874) Cash and cash equivalents carried forward 20 (2,020,025) (1,822,496) The annexed notes form an integral part of these financial statements 42

22 STATEMENT OF FINANCIAL POSITION As At 30 June Note RM RM RM (Restated) (Restated) NON-CURRENT ASSETS Property, plant and equipment 4 33,029,854 34,168,650 36,295,576 Investments in subsidiaries 5 373, , ,022 33,402,875 34,541,671 36,668,598 CURRENT ASSETS Inventories 6 31,088,075 24,949,471 29,436,030 Trade and other receivables 7 15,015,334 16,623,006 15,721,955 Financial assets at fair value through profit or loss 8 11, ,812 4,074 Prepayments 453, , ,419 Current tax assets 0 50,742 0 Cash and bank balances 9 1,169,094 1,140,238 1,668,634 47,737,242 43,267,802 47,120,112 CURRENT LIABILITIES Trade and other payables 10 9,641,322 8,852,711 11,518,998 Loans and borrowings 11 22,719,666 22,124,181 25,345,856 Retirement benefits ,343 13,998 Advance payments from customers 1,453, , ,414 Current tax liabilities 90, ,500 33,904,751 31,802,881 37,854,766 NET CURRENT ASSETS 13,832,491 11,464,921 9,265,346 NON-CURRENT LIABILITIES Loans and borrowings 11 1,948, , ,749 Retirement benefits , , ,173 Deferred tax liabilities 13 1,792,000 1,698,078 2,147,995 4,102,251 2,566,128 2,911,917 NET ASSETS 43,133,115 43,440,464 43,022,027 EQUITY Share capital 14 42,096,700 42,096,700 42,096,700 Share premium 164, , ,037 Retained profits 872,378 1,179, ,290 TOTAL EQUITY 43,133,115 43,440,464 43,022,027 The annexed notes form an integral part of these financial statements 43

23 STATEMENT OF COMPREHENSIVE INCOME Note RM RM (Restated) Revenue 15 85,764,446) 81,494,524) Cost of sales (71,684,136) (70,326,068) Gross profit 14,080,310) 11,168,456) Other income 529,226) 2,627,359) Administrative and general expenses (6,852,251) (6,119,426) Selling and distribution expenses (6,267,932) (6,109,111) Finance costs (1,545,524) (1,625,127) Loss before tax 16 (56,171) (57,849) Tax (expense)/income 18 (233,634) 476,286) (Loss)/Profit for the financial year (289,805) 418,437) Other comprehensive income:- Items that will not be reclassified to profit or loss:- - Remeasurements of defined benefit liability (23,544) 0) - Deferred tax effects thereof 6,000) 0) ) Other comprehensive income for the financial year (17,544) 0) Total comprehensive income for the financial year (307,349) (418,437) The annexed notes form an integral part of these financial statements 44

24 STATEMENT OF CHANGES IN EQUITY Non-distributable Share Share Retained Total capital premium profits equity RM RM RM RM Balance at 1 July As previously reported 42,096, , ,621) 43,082,358) - Effects of adopting MFRS (60,331) (60,331) - As restated 42,096, , ,290) 43,022,027) Profit (representing total comprehensive income) for the financial year ,437) 418,437) Balance at 30 June ,096, ,037 1,179,727) 43,440,464) Balance at 1 July As previously reported 42,096, ,037 1,236,493) 43,497,230) - Effects of adopting MFRS (56,766) (56,766) - As restated 42,096, ,037 1,179,727) 43,440,464) Remeasurements of defined benefit liability 0 0 (23,544) (23,544) Deferred tax effects thereof 0 0 6,000) 6,000) Other comprehensive income for the financial year 0 0 (17,544) (17,544) Loss for the financial year 0 0 (289,805) (289,805) Total comprehensive income for the financial year 0 0 (307,349) (307,349) Balance at 30 June ,096, , ,378) 43,133,115) The annexed notes form an integral part of these financial statements 45

25 STATEMENT OF CASH FLOWS Note RM RM (Restated) CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax (56,171) (57,849) Adjustments for:- Depreciation of property, plant and equipment 2,851,995) 2,872,525) Gain on winding up of subsidiary 0) (1,439,912) Impairment loss on loans and receivables 58,990) 5,840) Interest expense 1,545,524) 1,625,127) Inventories written down 20,303) 133,200) Loss/(Gain) on disposal of property, plant and equipment 591,459) (22,497) Property, plant and equipment written off 1,032) 0) Provision for retirement benefits (857) 36,114) Unrealised gain on financial instruments at fair value through profit or loss (11,613) (123,812) Unrealised loss/(gain) on foreign exchange 201,208) (332,895) Operating profit before working capital changes 5,201,870) 2,695,841) Changes in:- Inventories (6,158,907) 4,353,359) Receivables and prepayments 1,170,682) (640,643) Payables and advance payments 1,454,112) (1,409,142) Financial instruments at fair value through profit or loss 123,812) 4,074) Cash generated from operations 1,791,569) 5,003,489) Retirement benefits paid 0) (5,684) Tax paid (48,033) (51,029) Tax refunded 55,679) 21,156) Net cash from operating activities 1,799,215) 4,967,932) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment 1,030,009) 49,431) Purchase of property, plant and equipment 20 (862,386) (201,655) Net cash from/(used in) investing activities 167,623) (152,224) CASH FLOWS FROM FINANCING ACTIVITIES Interest paid (1,550,092) (1,654,536) Net increase/(decrease) in short-term loans and borrowings 406,133 (443,944) Repayment of hire purchase obligations (819,291) (426,901) Net cash used in financing activities (1,963,250) (2,525,381) Net increase in cash and cash equivalents 3,588) 2,290,327) Cash and cash equivalents brought forward (2,340,613) (4,630,940) Cash and cash equivalents carried forward 20 (2,337,025) (2,340,613) The annexed notes form an integral part of these financial statements 46

26 NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL INFORMATION The Company is a public company limited by shares, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. The principal activities of the Company are those of investment holding, manufacture and sale of stationery and printing materials. The principal activities of the subsidiaries are disclosed in Note 5. The registered office and principal place of business of the Company are located at 6428, Lorong Mak Mandin 3, Mak Mandin Industrial Estate, Butterworth, Penang. The consolidated financial statements set out on pages 39 to 42 together with the notes thereto cover the Company and its subsidiaries ( the Group ). The separate financial statements of the Company set out on pages 43 to 46 together with the notes thereto cover the Company solely. The presentation currency of the financial statements is Ringgit Malaysia ( RM ). The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors dated 23 September September SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of Preparation of Financial Statements The financial statements of the Group and the Company are prepared under the historical cost convention, modified to include other bases of measurement as disclosed in other sections of the significant accounting policies, and in accordance with Malaysian Financial Reporting Standards ( MFRSs ), International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The following MFRSs became effective for the financial year under review:- Effective for annual periods MFRS beginning on or after MFRS 10 Consolidated Financial Statements 1 January 2013 MFRS 11 Joint Arrangements 1 January 2013 MFRS 12 Disclosure of Interests in Other Entities 1 January 2013 MFRS 13 Fair Value Measurement 1 January 2013 MFRS 119 Employee Benefits (amended in 2011) 1 January 2013 MFRS 127 Separate Financial Statements (amended in 2011) 1 January 2013 MFRS 128 Investments in Associates and Joint Ventures (amended in 2011) 1 January 2013 IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013 Amendments to MFRS 1 Government Loans 1 January 2013 Amendments to MFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities 1 January

27 NOTES TO THE FINANCIAL STATEMENTS (cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.1 Basis of Preparation of Financial Statements (cont'd) Effective for annual periods MFRS beginning on or after Amendments to MFRS 10, MFRS 11 and MFRS 12 Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance 1 January 2013 Amendments to MFRSs contained in the document entitled Annual Improvements Cycle 1 January 2013 The adoption of the above MFRSs did not result in any significant changes in the accounting policies of the Group and the Company except as follows:- MFRS 10 Consolidated Financial Statements MFRS 10 replaces the consolidation guidance in MFRS 127 Consolidated and Separate Financial Statements and IC Interpretation 112 Consolidation - Special Purpose Entities by introducing a single consolidation model for all entities based on control. Under MFRS 10, control is based on whether an investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The adoption of these new control criteria did not result in any changes in the existing composition of the Group. MFRS 119 Employee Benefits (amended in 2011) MFRS 119 (amended in 2011) eliminates the use of the corridor approach in deferring the recognition of actuarial gains and losses on defined benefit plans and instead mandates all such gains and losses to be recognised in other comprehensive income. The effects of adopting this mandate were accounted for retrospectively in accordance with MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors by restating the following comparative figures:- 48