Contents. 76 Appendix 1 77 List of Properties Analysis of Shareholdings 83 Proxy Form. Scope Industries Berhad. Notice of Annual General Meeting

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2 Contents 02 Corporate Information 03 History, Principal Activities and Group Structure 04 Chairman's Statement 05 Statement on Corporate Social Responsibility Directors' Profiles Corporate Governance Statement 14 Statement on Risk Management and Internal Control Audit Committee's Report Directors' Report 21 Directors' Statement and Statutory Declaration Independent Auditors' Report to the Members of Scope Industries Berhad 24 Statements of Financial Position 25 Statements of Comprehensive Income 26 Consolidated Statement of Changes in Equity 27 Statement of Changes in Equity Statements of Cash Flows Notes to the Financial Statements 72 Supplementary Information Notice of Annual General Meeting 75 Statement Accompanying Notice of Annual General Meeting 76 Appendix 1 77 List of Properties Analysis of Shareholdings 83 Proxy Form

3 CORPORATE INFOATION DIRECTORS Dato Philip Chan Hon Keong (Independent Non-Executive Chairman) Lim Chiow Hoo (Managing Director) Lee Min Huat (Executive Director) Tan Poh Heng (Independent Non-Executive Director) Yong Loong Chen (Independent Non-Executive Director) COMPANY SECRETARIES Chee Wai Hong (MIA 17181) Foo Li Ling (MAICSA ) AUDIT COMMITTEE Tan Poh Heng (Chairman) Dato Philip Chan Hon Keong Yong Loong Chen NOMINATION COMMITTEE Dato Philip Chan Hon Keong (Chairman) Tan Poh Heng Yong Loong Chen REMUNERATION COMMITTEE Tan Poh Heng (Chairman) Dato Philip Chan Hon Keong Lee Min Huat REGISTERED OFFICE A Menara BHL Bank Jalan Sultan Ahmad Shah Penang Tel: Fax: BUSINESS ADDRESS SHARE REGISTRAR Symphony Share Registrars Sdn. Bhd. Level 6, Symphony House Block D13, 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 Penang Tel: Fax: PRINCIPAL BANKERS AmBank (M) Berhad Hong Leong Bank Berhad HSBC Bank Malaysia 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 : Lot 6181 Jalan Perusahaan 2 Kawasan Perindustrian Parit Buntar Parit Buntar Perak Tel: Fax: ANNUAL REPORT 2013

4 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 four (4) wholly-owned subsidiaries, namely Scope Manufacturers (M) Sdn. Bhd. ( SMSB ), Benua Mutiara Sdn. Bhd. ( BMSB ), Scope Sales & Services Sdn. Bhd. ( SSSSB ) and Trans Industry Sdn Bhd ( TISB ). Besides that, Scope has a seventy percent (70%) owned subsidiary namely Pioneer Glow Sdn. Bhd. ( PGSB ). The core business of Scope Group are trading and manufacturing of electronic components and products as well as oil palm plantation business. The current group structure is as follows:- SMSB 100% Scope Industries Berhad TISB* 100% BMSB 100% PGSB 70% SSSSB 100% The principal activities of its subsidiaries are as follow:- Companies Date and Place of Incorporation Issued and Paid-up Share Capital Principal activities Subsidiaries Scope Manufacturers (M) Sdn. Bhd. (SMSB) 20 November 1991 Malaysia 3,220,000 Manufacturing and assembling of electronic components and products. Benua Mutiara Sdn. Bhd. (BMSB) 28 September 1990 Malaysia 500,000 Cultivation of oil palm. Scope Sales & Services Sdn. Bhd. (SSSSB) 18 December 2002 Malaysia 2 Trading of electrical products. Pioneer Glow Sdn. Bhd. (PGSB) 20 August 1997 Malaysia Trans Industry Sdn. Bhd. (TISB) 18 February 2000 Malaysia 10,600,000 Cultivation of oil palm. 500,000 Strike off during the year. Note: * TISB had on 30 November 2012 submitted an application to Companies Commission of Malaysia to strike off the name of TISB from the register pursuant to Section 308 of the Companies Act, ANNUAL REPORT

5 CHAIAN S STATEMENT On behalf of the Board of Directors, I am pleased to present to you the Annual Report and Audited Financial Statements of the Group and the Company for the financial year ended 30 June INDUSTRY TRENDS AND DEVELOPMENT Global growth continued at a moderate pace in the second quarter of 2013 supported by a mild expansion in the US and Japan, while the euro area improved with a smaller contraction. The US growth was backed by higher business investment as well as improved labour and housing markets. In Japan, economic growth was contributed by exports and private consumption. The euro zone gained from higher growth in Germany and France. Growth moderated in China due to declining exports and softening investment amid policy reforms to shift from rapid expansion to higher quality growth. The Malaysian economy continued to expand 4.3% in the second quarter of 2013 as compared to 4.1% in the previous quarter, underpinned by the services sector and a rebound in the manufacturing sector. The manufacturing sector recorded a higher growth of 3.3% (Q1 2013: 0.3%) following strong expansion in domestic-oriented industries. The E&E subsector continued to grow 1.3% on account of stabilized export demand. However, the agriculture sector only grew 0.4% (Q1 2013: 6%) which was weighed down by a sharp reduction in natural rubber output and slower growth in crude palm oil production. The oil palm subsector registered a growth of 1.2% (Q1 2013: 14.6%) which was affected by seasonal down trend of oil palm production during the first half of the year. OPERATION REVIEW Manufacturing division The manufacturing division recorded revenue of million and net profit of 3.06 million which represents a corresponding increase of 16.39% in revenue and increase of % in net profit respectively. The increase in the profit was mainly due to continuing cost saving exercise and economies of scale arising from better utilisation of fixed factory overheads following the increase in revenue. Plantation division Revenue derived from the plantation division for the year to date was 3.81 million and total production in fresh fruit bunches ( FFB ) for the year to date was 9,490 metric tonnes ( MT ). The plantation division is loss-making due to the on-going efforts and expenses invested to improve the infrastructure and other facilities of the plantation. PROSPECT Manufacturing division The Group will continue to improve the efficiency and cost reduction measures in manufacturing operations to achieve the necessary competitive edge in the market. Barring any unforeseen circumstances, the Board is optimistic of achieving better performance in the next financial year. Plantation division On 20 June 2013, the total palm oil plantation land bank of the Company increased from 3,496 acres to 4,289 acres. The Group will continue to manage its costs effectively through sharing of common resources, group procurement of plantation materials and equipment as well as the consolidation of estate management best practices. However, in view of the costs associated with the ongoing improvement exercise and new development on unplanted area, the plantation division is not expected to contribute positive results to the Group in the next financial year. DIVIDEND No dividend has been recommended for the financial year ended 30 June APPRECIATION On behalf of the Boards of Directors, I wish to convey my gratitude to our shareholders, affiliates, partners and esteemed customers for their support and confidence in our Group. I would like to extend my heartfelt gratitude to all of our employees for your patience, dedication, hard work and the spirit of excellence that you have all exhibited. These attributes will definitely help the Group to ride through the future challenges amidst the expected difficult business environment in the year ahead. Last but not least, my sincere thanks to my Board Members for your expert guidance and insight. I look forward to your support and commitment to secure the future growth of the Group. Dato Philip Chan Hon Keong Chairman 04 ANNUAL REPORT 2013

6 STATEMENT ON CORPORATE SOCIAL RESPONSIBILITY (CSR) Scope Group s Corporate Social Responsibility (CSR) principle emphasises 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:- ü Stakeholder Relations We are committed to timely and meaningful dialogues with all stakeholders, including shareholders, customers, employees, regulators, etc. ü 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 frequently conducted to ensure high level of awareness on safety requirement at all levels. The Company has conducted the following safety training for its employee : Firefighting and emergency response by Bomba First aid and CPR courses by Ahli Persekutuan Antarabangsa Persatuan-persatuan Palang Merah dan Bulan Sabit Merah During the year, the Company has organized the following programmes for its employees : Eye care programme inclusive of free eye consultant, free eye test, free spectacles services and obtained of a special discount from the merchandises Employees were provided special discount rate of up to 60% on the healthcare services by BP Healthcare Group. ü 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. In January 2013, in line with the theme of Save a Life Campaign, 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 life and also helping people live longer. The campaign received a very good response from our employees. ü 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

7 DIRECTORS PROFILE Dato Philip Chan Hon Keong, a Malaysian, aged 48, was appointed as an Independent Non-Executive Chairman of Scope on 17 April He graduated with a Bachelor of Economics and a Bachelor of Laws from The University of Sydney in Upon admission to the Malaysian Bar in June 1990, he practiced in Messrs Azalina, Chan & Chia and was a partner of the firm until He then joined Messrs Skrine as a partner in the Corporate Division in January Currently, he is the co-head of the Banking and Property Unit in Messrs Skrine. In addition to his directorship in Scope, he currently sits on the board of several private limited companies and two public companies, JF Technology Berhad and Eksons Corporation Berhad. Dato Philip Chan Hon Keong is the Chairman of the Nomination Committee and a member of the Audit Committee and Remuneration Committee. Lim Chiow Hoo, a Malaysian, aged 50 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 PCB for office equipments. In 1991, he founded 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 10 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, aged 56, 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. 06 ANNUAL REPORT 2013

8 DIRECTORS PROFILE (cont d) Tan Poh Heng, a Malaysian, aged 56 was appointed as the Independent Non-Executive Director of Scope on 13 May After completing his High School Certificate in 1977, 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 the same year he was admitted as a member of the Malaysian Institute of Certified Public Accountants and later a member of the Malaysian Institute of Accountants in year On April 1983, Mr. Tan Poh Heng joined Messrs Peat, Marwick, Mitchell & Co. as a Qualified Assistant and was subsequently promoted as an Audit Supervisor in January He left Messrs Peat, Marwick, Mitchell & Co. in August 1985 to join South Island Garment Sdn. Bhd. as a Chief Accountant. Mr. Tan left South Island Garment Sdn. Bhd. in March 2002 when he held the position of Senior General Manager and was subsequently employed by Messrs JB Lau & Associates (now known as Grant Thornton) in June 2002 as the Senior Audit Manager, a position he held until September He re-joined the workforce in December 2004 as the Chief Financial Officer of GPS Tech Solutions Sdn. Bhd., an associated company of a public listed entity, Magni-Tech Industries Berhad, a position he held until his retirement in August Currently he is the Financial Controller of Panther Precision Tools Sdn Bhd. Mr. Tan Poh Heng is also the Chairman of the Audit Committee and Remuneration Committee and a member of the Nomination Committee. Yong Loong Chen, a Malaysian, aged 47, 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 and a member of the Nomination Committee. Notes: None of the Directors of the Company have any family relationship with any Director or major shareholders of the Company. All the Directors do not have any conflict of interest with the Company and they also had not been convicted of any offence within the past ten (10) years, other than traffic offences, if any. The Directors shareholdings are as disclosed in page 78 of this Annual Report. ANNUAL REPORT

9 CORPORATE GOVERNANCE STATEMENT The Board of Directors of Scope recognises that exercise of good corporate governance in conducting the business and affairs of the Company with integrity, transparency and professionalism are key components for the Company s continued progress and success. These will not only safeguard and enhance shareholders investment and value but will at the same time ensure that the interests of other stakeholders are protected. The Board is pleased to report on the application of the principles of the Malaysian Code on Corporate Governance 2012 ( MCCG 2012 or Code ) and extent of compliance with the Recommendations of the MCCG 2012 as required under MCCG 2012 during the financial year ended 30 June A. BOARD OF DIRECTORS 1. Board Composition and Balance Scope is led and managed by the Board who has a wide range of competencies and experiences ranging from the accounting, business, engineering and law. Presently, the Board has five (5) Directors comprising two (2) Executive Directors and three (3) Independent Non-Executive Directors. The Chairman of the Board is an Independent Non- Executive Director. The number of Independent Directors is in compliance with the Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) for the ACE Market which requires the Board to have at least two (2) Independent Directors or 1/3 of the Board of Directors, whichever is the higher, to be Independent Directors. The tenure of all the Independent Non-Executive Directors do not exceed a cumulative term of nine (9) years as recommended by the MCCG The Nomination Committee and the Board had reviewed and assessed their Independent Non- Executive Directors after the financial year ended 30 June 2013 and is satisfied with the level of independence demonstrated by the present Independent Non-Executive Directors. The profiles of the Directors are presented on pages 6 to 7 of this Annual Report. 2. Duties and Responsibilities of the Board The Group acknowledges the pivotal role played by the Board of Directors in the stewardships of its direction and operations. To fulfil this role, the Board is responsible for the following: 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. The role of the Independent Non-Executive Chairman, Managing Director and Executive Director are distinct and separate to ensure that there is a balance of power and authority. The Independent Non-Executive Chairman is responsible for the leadership, effectiveness, conduct and governance of the Board. The Managing Director and Executive Director have overall responsibility for the day-to-day management of the business and implementation of the Board s policies and decisions. The Managing Director and Executive Director are responsible to ensure due execution of strategic goals, effective operations within the Group, and to explain, clarify and inform the Board on key matters pertaining to the Group. All decisions of the Board are based on the 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 Board's decision-making process. The Board Charter is currently being drafted and will be ready by end of the year 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. 08 ANNUAL REPORT 2013

10 CORPORATE GOVERNANCE STATEMENT (cont d) A. BOARD OF DIRECTORS (cont'd) 4. Code of Ethics The Directors observed the code in accordance with the Company Directors Code of Ethics established by the Companies Commission of Malaysia. 5. Appointments of Directors The Board has established the Nomination Committee for the purpose of making recommendations on suitable candidates for appointment to the Board and for assessing Directors on an ongoing basis. Candidates recommended must be approved and appointed by the Board. The Nomination Committee is responsible for recommending the right candidates with the required skills, experience and attributes to the Board for appointment. Further details on the Nomination Committee are set out on page 11 of this Annual Report. 6. Re-election of Directors Any Director appointed during the year is required under the Company s Articles of Association, to retire and is eligible to seek re-election by shareholders at the forthcoming Annual General Meeting ( AGM ). The Articles of Association of the Company also requires that Directors shall retire from office at least once every three years at the forthcoming AGM and shall be eligible for re-election. The Director who is seeking for re-election at the forthcoming Eleventh AGM is set out in the Notice of the AGM on pages 73 to 74 in this Annual Report. 7. Board Meetings Board Meetings are held every quarter and additional meetings are held as and when necessary. Besides Board meetings, the Board also exercises control on matters that require Board s approval through Directors Circular Resolutions. Key matters reserved for Board s approval include quarterly results, financial statements, major acquisitions and disposals, major capital expenditure, corporate proposal on fund raising and any other significant business direction. The Board met five (5) times in the financial year ended 30 June The Board is satisfied with the time commitment given by the Directors of the Company in discharging their duties for financial year ended 30 June 2013 as evidenced by the attendance record of the Directors at the Board meeting. The composition of the Board and the individual Directors attendance of meetings during the financial year ended 30 June 2013 were as follows:- Attendance Dato Philip Chan Hon Keong Chairman/Independent Non-Executive Director 5/5 Mr. Lim Chiow Hoo Managing Director 5/5 Mr. Lee Min Huat Executive Director 5/5 Mr. Tan Poh Heng Independent Non-Executive Director 5/5 Mr. Yong Loong Chen Independent Non-Executive Director 5/5 The Company Secretary ensures there is a quorum for all meetings and that such meetings are convened in accordance with the Articles of Association of the Company. The minutes prepared by the Company Secretary record the proceedings of all meetings including pertinent issues, the substance of inquiries and responses, members suggestions and the decisions made. This reflects the fulfilment of the Board s fiduciary duties and the significant oversight role performed by the respective Board Committees. 8. Internal Corporate Disclosure Policies and Procedures Along with good corporate governance practices, the Company is committed to providing 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 an Internal Corporate Disclosure Policies and Procedures to facilitate the handling and disclosure of material information in a timely and accurate manner. ANNUAL REPORT

11 CORPORATE GOVERNANCE STATEMENT (cont d) A. BOARD OF DIRECTORS (cont'd) 9. Sustainability The Group identified the environment conservation and social contribution as key elements in formulation of its objectives and strategies. The Group recognise the need to safeguarding and developing the workforce, strengthening stakeholders relationship and protecting the interest of shareholders. A corporate social responsibility statement is also set out in the relevant section of this Annual Report. 10. Board Gender Diversity Policy Corporate Governance Blueprint 2011 stated that the Board should ensure women participation on board to reach 30% by The Company does not have a policy on gender diversity. The Company will provide equal opportunity to candidates with merit. Nonetheless, the Board will give consideration to the gender diversity objectives. 11. Supply 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. All Directors also have full access to the advice and service of the Company Secretaries in furtherance of their duties. 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. 12. Directors Training All the Directors of Scope have attended and successfully completed the Mandatory Accreditation Programme as required by the Bursa Securities. In addition, the Directors are encouraged to attend other relevant training programmes, courses and seminars relevant in enhancing the Directors in discharging their duties. During the year, the Directors have also attended and participated at other seminars and conferences for the continuing enhancement of their knowledge and to keep abreast of developments in the market place. Among the training programmes attended by the Directors are as listed : No. Name of Director Seminar/Training Course Attended No of days 1. Dato Philip Chan Hon Keong Introduction to Asia Pacific Loan Market Association Documents. (28 January 2013) EPF - Global Private Equity Summit (25 & 26 March 2013) Extra Territoriality in International Derivatives Regulation & Australia s Changing Regulatory Landscape for OTC Derivatives. (21 May 2013) Global Transaction Reporting Conference. (22 May 2013) 2. Mr. Lim Chiow Hoo Connecting the Dots, Leading Towards the Future (16 & 17 June 2013) 1 day 2 days 1 day 1 day 2 days 3. Mr. Lee Min Huat Advocacy Sessions on Corporate Disclosure for Directors (20 June 2013) Half day 4. Mr. Tan Poh Heng Tax Audit Framework and Findings. (8 October 2012) 1 day 5. Mr. Yong Loong Chen International Trade and Industry as the Drivers of Growth (19 March 2013) Prospect of Long Haul Budget Airlines (3 April 2013) Advocacy Sessions on Corporate Disclosure for Directors (20 June 2013) Half day Half day Half day 10 ANNUAL REPORT 2013

12 CORPORATE GOVERNANCE STATEMENT (cont d) B. COMMITTEES OF THE BOARD To assist the Board in the discharge of their duties effectively, the Board has delegated specific functions to certain committees, namely Nomination Committee, Remuneration Committee and Audit Committee. Each committee will operate within its clearly defined terms of reference. The Chairman of the various committees will report to the Board on the outcome of the committee meetings. 1. Audit Committee The terms of reference of the Company s Audit Committee and its activities during the financial year are set out under the Audit Committee Report on pages 15 to 17 of this Annual Report. 2. Nomination Committee The Nomination Committee which was formed on 19 November 2003 comprises of the following members and the individual Directors attendance of meetings during the financial year ended 30 June 2013 were as follows:- Attendance Dato Philip Chan Hon Keong (Chairman) Independent Non-Executive Chairman 1/1 Mr. Tan Poh Heng Independent Non-Executive Director 1/1 Mr. Yong Loong Chen Independent Non-Executive Director 1/1 The Nomination Committee is empowered by its terms of reference and its primary function is to identify and recommend to the Board, technically competent persons of integrity and a strong sense professionalism to be appointed to the Board. The Committee will assess the suitability of an individual to be appointed to the Board by taking into consideration of the individual s resources, other commitments and time available for input to the Board before recommendation is made for the Board s approval. The Committee will also review annually, if necessary, the required mix of skill and experience and other qualities and competencies of its Directors and shall review the composition, structure and size of the Board. The Nomination Committee meets at least once a year and as and when necessary. During the financial year, the Committee has assessed the effectiveness of the Board, the committees of the Board and the contribution of each individual director, including Independent Non-Executive Directors as well as reviewing re-election of the retiring Directors of the Company. The Nomination Committee has also reviewed and assessed the Independent Non-Executive Directors after financial year ended 30 June Remuneration Committee The Remuneration Committee which was formed on 19 November 2003 comprises of the following members and the individual Directors attendance of meetings during the financial year ended 30 June 2013 were as follows:- Attendance Mr. Tan Poh Heng (Chairman) Independent Non-Executive Director 1/1 Dato Philip Chan Hon Keong Independent Non-Executive Chairman 1/1 Mr. Lee Min Huat Executive Director 1/1 The Remuneration Committee is governed by its terms of reference and its primary function is to be 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. 3.1 Remuneration 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, expertise and level of responsibilities undertaken by the particular Non-Executive Directors concerned. ANNUAL REPORT

13 CORPORATE GOVERNANCE STATEMENT (cont d) B. COMMITTEES OF THE BOARD (cont'd) 3. Remuneration Committee (cont'd) 3.1 Remuneration (cont'd) The details of the nature and amount of remuneration paid or payable to the Directors of the Company for the financial year ended 30 June 2013 are as follows : Executive Non-Executive Total Salaries and bonuses 443, ,580 Fees 34,000 36,000 70,000 EPF 44,352-44,352 Allowance 7,000 10,500 17, ,932 46, ,432 The number of Directors whose remuneration falls into the following bands for the financial year ended 30 June 2013 are as follows : Number of Directors Range of Remuneration Executive Non-Executive C. SHAREHOLDERS Below 50, ,001 to 100, ,001 to 150, ,001 to 200, ,001 to 250, ,001 to 300, The Board recognises the value of investor relations and endeavours to maintain constant and effective communication with shareholders through timely and comprehensive announcements. The AGM is the principal forum dialogue with all shareholders. The participation of shareholders and investors, both individual and institutional, at general meetings is encouraged whilst requests for briefings from the press and investment analysts are usually met as a matter of course. Notice of Annual General Meeting and the annual report are sent to shareholders at least 21 days before the date of the meeting. Information of the Group is also accessible through the Company s website at ( which is updated on a regular basis. Information available in the website includes among others the Group Annual Report, quarterly financial announcements, major and significant announcements, press release and latest corporate developments of the Group. D. ACCOUNTABILITY AND AUDIT 1. Financial Reporting The Board has a responsibility to present a true and fair assessment of the Group s position and prospects primarily through the quarterly reports to the Bursa Securities and the Annual Report to shareholders. The Audit Committee assists the Board in scrutinising information for disclosure to ensure accuracy and adequacy. 2. Statement of Directors Responsibility for Annual Audited Financial Statements The Directors are responsible for the preparation of financial statements each financial year in accordance with the requirements of the Companies Act, 1965 and Financial Reporting Standards in Malaysia. Central to those requirements is the need to ensure that these financial statements present a true and fair view of the state of affairs of the Group and the Company, the results, cash flows and statement of changes in equity. In the preparation of these financial statements for the year under review, appropriate accounting policies have been selected and they have been applied in a consistent manner. The Directors have the general responsibility of taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. 12 ANNUAL REPORT 2013

14 CORPORATE GOVERNANCE STATEMENT (cont d) D. ACCOUNTABILITY AND AUDIT (cont'd) 3. Internal Control The Group s Statement on Risk Management And Internal Control is laid out on page 14 of this Annual Report. 4. Relationship with the Auditors The role of the Audit Committee in relation to the External Auditors may be found in the Report of the Audit Committee set out in pages 15 to 17. The Group has always maintained a close and transparent relationship with its auditors in seeking professional advice and ensuring compliance with the appropriate accounting standards. 5. Statement on the Compliance with the best practices of the Code Save for the exceptions set out above, the Group is in substantial compliance through the financial year with the principles and recommendations of the Code. E. OTHER INFOATION 1. Share Buybacks During the financial year, the Company did not enter into any share buyback transactions. 2. Options, Warrants or Convertible Securities The Company had on 19 July 2012 issued 118,596,363 warrants, further details of the warrants issued are described in page 50 of this Annual Report.There was no exercise of warrants during the financial year. Other than the above, there was no issuance of convertible securities during the financial year. 3. Depository Receipt (DR) During the financial year, the Company did not sponsor any DR programme. 4. Imposition of Sanctions and/or Penalties There was no public imposition of sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by the regulatory bodies during the financial year. 5. Profit Guarantee The Company did not receive any profit guarantee from any parties during the financial year. 6. Material Contracts There were no material contracts entered into by the Company and its subsidiaries involving Directors and major shareholders interests either still subsisting as at 30 June 2013 or entered into since the end of the previous financial year. 7. 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 Variation in Results There were no material variations between the audited results for the financial year ended 30 June 2013 and the unaudited results released for the financial quarter ended 30 June Utilisation of Proceeds The Company has on financial year ended 30 June 2012 fully utilised the proceeds raised from the private placement exercise undertaken by the Company during the said financial year. During the financial year ended 30 June 2013, there were no cash proceeds raised by the Company from any corporate exercise. 10. Non-Audit Fees During the financial year, the non-audit fees paid to the external auditors of the Group or a company affiliated to the auditors firm amounted to 61,000. ANNUAL REPORT

15 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL The Board is committed to nurture and preserve throughout the Group a sound system of risk management and internal controls in accordance with the Statement on Risk Management and Internal Control: Guidance for Directors of Listed Issuers issued by the Institute of Internal Auditors Malaysia and as adopted by Bursa Malaysia Securities Berhad. Board Responsibility The Board has overall responsibility for internal control and risk management, and for reviewing the adequacy and integrity of those systems. The Board fully understands its responsibility to maintain a sound system of internal control to safeguard the interest of shareholders. The systems in place are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable but not absolute assurance against material misstatement or loss. Risk Management The Board recognises the importance of establishing a structured risk management framework to sustain and enhance good corporate governance practices. The Board has a structured Risk Management framework that undertakes the Group s desires to identify evaluate and manage significant business risks. The framework includes examining of business risks, assessing impact and likelihood of risks and taking management action plans to mitigate and minimise risks exposure. Key Elements of the Group s Risk Management and Internal Control System The Board maintains an organisational structure with clearly defined levels of responsibility and authority and appropriate reporting procedures. The following outlines the main elements of the Group s control system:- (a) (b) (c) Supplying comprehensive financial and management reports to the Audit Committee and the Board on a quarterly basis for review. Stringent recruitment policy is set to ensure only capable and competent staff are employed which in turn ensure each operating unit is functioning effectively. The Group s performance is monitored through management and operational meeting attended by senior management. The Managing Director and Executive Directors are involved in the day to day operations of the Group. Internal Audit Function During the financial year, the Group has appointed an independent internal audit service provider to carry out internal audit reviews on assessing the adequacy and integrity of the internal control systems of the business units within the Group. The internal audit team highlights to the executive and operational management on areas for improvement and subsequently reviews the extent to which its recommendations have been implemented. The reports are submitted to the Audit Committee, who reviews the findings with management at its quarterly meetings. In addition, the management s response to the control recommendations on deficiencies found during the internal audits in order to provide an added assurances that control procedures are in place, and being followed. The cost incurred for the internal audit function in respect of the financial year ended 30 June 2013 was 5,500. Conclusion The Board has received assurance from the Managing Director and Executive Director that the Group s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group. Overall, the Board and Management are satisfied that the process of identifying, evaluating and managing significant risks that may affect achievement of the Group s business objectives are in place. There are continuing efforts to strengthen the internal control environment taking into consideration the recommendations from the internal auditors. 14 ANNUAL REPORT 2013

16 AUDIT COMMITTEE S REPORT MEMBERS POSITION Mr. Tan Poh Heng Chairman (Independent Non-Executive Director) Dato Philip Chan Hon Keong Member (Chairman/Independent Non-Executive Director) Mr. Yong Loong Chen Member (Independent Non-Executive Director) The Terms of Reference of the Committee are as follows: - 1. MEMBERSHIP The Board should establish an audit committee of at least three directors, a majority of whom must be independent Non- Executive Directors with written terms of reference which deal clearly with its authority and duties. All members of the Committee should be Non-Executive Directors of the Company and all members of the Committee should be financially literate. At least one member of the Committee:- must be member of the Malaysian Institute of Accountants; or if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years of working experience and - he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967; or - he must be a member of one of the associations of accountants specified in Part II of the 1st Schedules of the Accountants Act, 1967; or - fulfills such other requirements as prescribed or approved by the Exchange. The members of the Committee shall elect the Chairman from among their number who shall be an Independent Nonexecutive Director. The alternate director shall not be a member of the Audit Committee. If a Member of the Committee for any reason ceases to be a Member of the Committee with the result that the number of Member is reduced below (3), the Board shall within three (3) months of that event, appoint such number of new Member as may be required to make up the minimum number of three (3) Members. 2. ATTENDANCE AT MEETINGS The Financial Controller, representatives of the internal auditor and external auditors will be invited to some of the Audit Committee Meetings. Other board members and employees may attend any particular Audit Committee meeting only at the Audit committee s invitation, specific to the relevant meeting. At least twice a year, the Committee shall meet with the external auditors without the presence of the Executive Directors. The Company Secretary shall be the secretary of the Committee. 3. FREQUENCY AT MEETINGS Meetings will be held not less than four times a year. Additional meetings may be held at the discretion of the Committee or at the request of external auditors. The external auditors may request a meeting if they consider that one is necessary. The quorum for any meeting shall be two and the majority members of the Committee present must be Independent Non- Executive Directors. The Chairman of the Audit Committee should engage on a continuous basis with senior management, such as the Chairman, the Managing Director, the Financial Controller, the head of the internal audit and the external auditors in order to be kept informed of matters affecting the Company. 4. RETIREMENT AND RESIGNATION In the event of any vacancy in an audit committee resulting in the non-compliance of sub-rule 15.09(1) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, a listed company must fill the vacancy within 3 months. ANNUAL REPORT

17 AUDIT COMMITTEE S REPORT (cont d) 5. AUTHORITY The Committee is authorised by the Board to investigate any activity within its terms of reference, the resources it needs to do so and full access to information pertaining to the Company. The Committee should have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity and be able to obtain external professional advice and to invite outsiders with relevant experience to attend, if necessary. The Committee should be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the listed company, whenever deemed necessary. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee. 6. DUTIES AND RESPONSIBILITIES The duties and responsibilities of the Committee shall include:- (a) (b) (c) (d) (e) to consider the appointment/nomination/suitability of the external auditors, their audit fees and any question of their resignation or dismissal and to recommend to the Board. to discuss with the external auditors before the audit commences, the nature and scope of their audit, their evaluation of the system of internal accounting controls and to ensure co-ordination where more than one audit firm is involved. to discuss problems and reservations arising from the interim and final audits, and any matters the external auditors may wish to discuss (in the absence of management where necessary). to keep under review the effectiveness of internal control system and, in particular, review external auditors management letter and management s response. to do the following, in relation to the internal audit function review the adequacy of the scope, functions, competency and resources of the internal audit functions, and to ensure that it has the necessary authority to carry out its work; review the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function; review any appraisal or assessment of the performance of members of the internal audit function; approve any appointment or termination of senior members of the internal audit function; and take cognizance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning. (f) to review the quarterly results and year-end financial statements of the Company and the Group, prior to the approval by the Board, whilst ensuring that they are prepared in a timely and accurate manner, focusing particularly on:- public announcements of results and dividend payment; any changes in or implementation of major accounting policies and practices; major judgmental areas; significant adjustments resulting from the audit; the going-concern assumption; compliance with accounting standards; compliance with Bursa Securities and legal requirements; and significant and unusual events. (g) (h) (i) (j) (k) (l) (m) to consider/review any related party transactions and conflict of interest situation that may arise within the Company or Group, including any transaction, procedure or course of conduct that raises questions of management integrity. to consider the major findings of internal investigations and management s response and ensure co-ordination between the internal and external auditors. to review and verify the allocation of share options granted to employees pursuant to the Employees share option scheme, transactions, procedure or course of conduct that raises questions of management integrity. to review with the external auditor, his audit report. to review with the external auditor the assistance given by the employees of the Company. to review with the Board of Directors of the Company whether there is reason (supported by grounds) to believe that the Company s external auditors is not suitable for re-appointment. to consider/carry out such other functions and consider other topics, as may be agreed upon by the Board. 16 ANNUAL REPORT 2013

18 AUDIT COMMITTEE S REPORT (cont d) 7. REPORTING PROCEDURES The Company Secretary shall circulate the minutes of meetings of the Committee to all members of the Board. ATTENDANCE AT MEETINGS A total of four (4) Audit Committee meetings were held during the financial year ended 30 June The details of attendance of the Committee members are as follows: Name of Committee Member Attendance Mr. Tan Poh Heng 4/4 Dato Philip Chan Hon Keong 4/4 Mr. Yong Loong Chen 4/4 ACTIVITIES OF THE COMMITTEE During the financial year in discharging its functions and duties, the Committee has considered, reviewed, discussed and approved the following: a. The audited financial statements for the financial year ended 30 June 2012 and made recommendations to the Board for approval; b. The financial results for the quarters ended 30 June 2012, 30 September 2012, 31 December 2012 and 31 March 2013; c. Audit reports prepared by the Internal Auditors, considered their material findings and assess the Management s responses and actions thereto; d. The nature and scope of audit plan for the financial year ended 30 June 2013 before the commencement of audit together with the External Auditors; e. Recommendation on the re-appointment of External Auditors and their fees; and f. Dialogue session with External Auditors, without the presence of Executive Directors and Management. INTERNAL AUDIT FUNCTION The Group has engaged an external independent professional services firm to carry out its internal audit functions. The internal auditors report directly to the Audit Committee and assist the Board in monitoring and reviewing the effectiveness of the risk management, internal control and governance process within the Group. 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 or 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 and its activities are set out in the Statement on Risk Management and Internal Control on page 14 of this Annual Report. 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

19 DIRECTORS REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 The directors hereby submit 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 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. RESULTS GROUP COMPANY (Loss)/Profit after taxation for the year (4,038,022) 44,771 Attributable to: Equity holders of the Company (2,561,158) 44,771 Non-controlling interests (1,476,864) - (4,038,022) 44,771 In the opinion of the directors, the results of the operations of the Group and of the Company for the financial year ended 30 June 2013 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report. DIVIDENDS No dividend have been declared or paid by the Company since the end of the previous financial year. The directors do not recommend any 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 increased its authorised share capital from 50,000,000 to 200,000,000 through the creation of an additional 1,500,000,000 ordinary shares of 0.10 each and the issued and paid-up share capital was increased from 29,498,182 to 50,048,443 through the following: Number of ordinary shares of 0.10 each Amount Issued pursuant to the acquisition of: - Pioneer Glow Sdn. Bhd. (1) 89,400,000 8,940,000 - Benua Mutiara Sdn. Bhd. (2) 116,102,612 11,610, ,502,612 20,550,261 (1) Issued at an issue price of 0.15 per share (2) Issued at an issue price of 0.25 per share Please refer to Note 35 to the financial statements for details of the acquisitions. The new ordinary shares issued ranked pari passu with the existing shares in all respects. 18 ANNUAL REPORT 2013

20 DIRECTORS REPORT (cont d) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 WARRANTS During the financial year, the Company issued 59,600,000 warrants pursuant to the acquisition of Pioneer Glow Sdn. Bhd. and 58,996,363 free warrants on the basis of two (2) free warrants for every ten (10) ordinary shares of 0.10 each held by the existing shareholders of the Company. No warrants were exercised during this financial year. The salient features of the warrants are disclosed in Note 16.2 to the financial statements. Other than the foregoing, the Company did not issue any other share or debenture and did not grant any option to anyone to take up unissued shares of the Company during the financial year. DIRECTORS The directors who served since the date of the last report are as follows: Dato Philip Chan Hon Keong Lim Chiow Hoo Lee Min Huat Tan Poh Heng Yong Loong Chen 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 of 0.10 each Balance Balance at at Bought Sold The Company Direct Interest : Dato Philip Chan Hon Keong 875,000 - (100,000) 775,000 Lim Chiow Hoo 78,249, ,000 (25,000,000) 53,449,330 Lee Min Huat 57,701, ,701,860 Tan Poh Heng 500,000 - (250,000) 250, Number of warrants Balance Balance at at Bought Sold (Date of issuance) Direct Interest: Dato Philip Chan Hon Keong 175,000 - (150,000) 25,000 Lim Chiow Hoo 10,649, ,649,866 Lee Min Huat 11,540, ,540,372 Tan Poh Heng 100, ,000 Other than as disclosed above, none of the other directors in office at the end of the financial year had any interest in ordinary shares and warrants of the Company and of 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 a benefit included in the aggregate amount of emoluments received or due and receivable by the directors as shown in the financial statements) 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 interest, other than those related party transactions disclosed in the 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. ANNUAL REPORT

21 DIRECTORS REPORT (cont d) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 OTHER STATUTORY INFOATION Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps: (i) (ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance 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 to realise. At the date of this report, the directors are not aware of any circumstances: (i) (ii) (iii) (iv) that would render the amount written off for bad debts or the amount of the allowance 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 that would render any amount stated in the financial statements of the Group and of the Company misleading, and 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. No contingent liability or other liability of the Group and of 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 of the Company to meet their obligations as and when they fall due. SIGNIFICANT EVENTS Details of significant events are disclosed in Note 35 to the financial statements. AUDITORS The auditors, Grant Thornton, have expressed their willingness to continue in office. Signed in accordance with a resolution of the Board of Directors: Lim Chiow Hoo Lee Min Huat Managing Director Executive Director Penang, Date: 28 October ANNUAL REPORT 2013

22 DIRECTORS STATEMENT We, Lim Chiow Hoo and Lee Min Huat, being two of the directors of Scope Industries Berhad state that in the opinion of the directors, the financial statements set out on pages 24 to 71 are properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2013 and of their financial performance and cash flows for the financial year then ended. In the opinion of the Directors, the information set out on Note 36 on page 72 to the financial statements has been complied in accordance with the 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, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad. Signed in accordance with a resolution of the Board of Directors: Lim Chiow Hoo Lee Min Huat Date: 28 October 2013 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 24 to 72 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 28th ) day of October ) Before me,... Lee Min Huat... Commissioner for Oaths ANNUAL REPORT

23 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF SCOPE INDUSTRIES BERHAD Report on the Financial Statements We have audited the financial statements of Scope Industries Berhad, which comprise the statements of financial position as at 30 June 2013 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 24 to 71. Directors Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with 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 the 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 of the Company as at 30 June 2013 and of its financial performance and cash flows for the financial year then ended in accordance with 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: (a) (b) (c) (d) 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, We have considered the accounts and the auditors report of a subsidiary of which we have not acted as auditors, which are indicated in Note 6 to the financial statements, We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes, and The auditors reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act. 22 ANNUAL REPORT 2013

24 Other Reporting Responsibilities INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF SCOPE INDUSTRIES BERHAD (cont d) The supplementary information set out in Note 36, on page 72 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ( MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Grant Thornton No. AF: 0042 Chartered Accountants Yap Soon Hin No. 947/03/15 (J) Chartered Accountant Penang Date: 28 October 2013 ANNUAL REPORT

25 STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2013 GROUP COMPANY NOTE ASSETS Non-current assets Property, plant and equipment 4 89,188,362 22,305,803 31,571 16,171 Biological assets 5 8,161, Investment in subsidiaries ,790,182 18,882,884 Investment in associates 7-1,654, Other investments 8 536, , , ,400 Goodwill 9 34,965, ,852,951 24,849,300 66,358,636 19,788,455 Current assets Inventories 10 1,993,008 1,512, Trade receivables 11 2,373,132 1,880, Other receivables, deposits and prepayments ,852 2,269,555 29,312 2,025,380 Amount due from subsidiaries ,426,899 13,340,135 Tax recoverable 55,073-2,762 - Cash and cash equivalents 14 4,781,844 7,129,245 3,775,296 6,005,905 9,636,909 12,792,177 28,234,269 21,371,420 TOTAL ASSETS 142,489,860 37,641,477 94,592,905 41,159,875 EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Share capital 15 50,048,443 29,498,182 50,048,443 29,498,182 Reserves 16 60,095,152 9,702,894 32,092,771 9,702,894 (Accumulated losses)/retained profits 17 (5,498,391) (2,937,233) 1,620,965 1,576, ,645,204 36,263,843 83,762,179 40,777,270 Non-controlling interests 6,780, Total equity 111,425,493 36,263,843 83,762,179 40,777,270 Non-current liabilities Borrowings , Deferred tax liabilities 19 15,434, Other payable 21 10,612,862-10,612,862-26,773,703-10,612,862 - Current liabilities Trade payables 20 2,716, , Other payables and accruals , , ,864 75,427 Amount due to a subsidiary ,190 Borrowings , , Provision for taxation 109, ,042-11,988 4,290,664 1,377, , ,605 Total liabilities 31,064,367 1,377,634 10,830, ,605 TOTAL EQUITY AND LIABILITIES 142,489,860 37,641,477 94,592,905 41,159,875 The notes set out on pages 30 to 71 form an integral part of these financial statements. 24 ANNUAL REPORT 2013

26 STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 GROUP COMPANY NOTE Revenue 22 25,234,452 18,386,948 3,089,258 8,706,684 Cost of sales (24,412,089) (15,440,879) - - Gross profit 822,363 2,946,069 3,089,258 8,706,684 Other income 112,681 96, Administrative expenses (4,627,867) (2,078,940) (2,623,720) (272,370) Operating (loss)/ profit (3,692,823) 963, ,538 8,434,314 Finance costs (94,243) (70,056) - - Share of results of associates - (148,052) - - (Loss)/Profit before taxation 23 (3,787,066) 745, ,538 8,434,314 Taxation 24 (250,956) (155,984) (420,767) (862,488) (Loss)/Profit for the year (4,038,022) 589,138 44,771 7,571,826 Other comprehensive income/(loss), net of tax: Fair value adjustment on available-for-sale financial assets 504,485 (405,800) 504,485 (405,800) Total comprehensive (loss)/income for the year (3,533,537) 183, ,256 7,166,026 Net (loss)/profit attributable to: Equity holders of the Company (2,561,158) 589,138 44,771 7,571,826 Non-controlling interests (1,476,864) (4,038,022) 589,138 44,771 7,571,826 Total comprehensive (loss)/income attributable to: Equity holders of the Company (2,056,673) 183, ,256 7,166,026 Non-controlling interests (1,476,864) (3,533,537) 183, ,256 7,166,026 (Loss)/Earnings per share attributable to equity holders of the Company (sen) - Basic 25 (0.67) Diluted 25 (0.57) 0.21 The notes set out on pages 30 to 71 form an integral part of these financial statements. ANNUAL REPORT

27 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE Attributable to Equity Holders of the Company Non-distributable Share Share Warrants Discount on Fair Value Capital Accumulated Non-Controlling Total Capital Premium Reserve Shares Reserve Reserve Losses Total Interests Equity NOTE Balance at beginning 29,498,182 10,214, (511,570) - (2,937,233) 36,263,843-36,263,843 Transactions with owners: Issuance of shares pursuant to acquisition of subsidiaries 16 20,550,261 21,885, ,002,381-70,438,034-70,438,034 Issuance of warrants ,234,878 (4,234,878) Acquisition of a subsidiary ,257,153 8,257,153 Total transactions with owners 20,550,261 21,885,392 4,234,878 (4,234,878) - 28,002,381-70,438,034 8,257,153 78,695,187 Total comprehensive loss for the year ,485 - (2,561,158) (2,056,673) (1,476,864) (3,533,537) Balance at end 50,048,443 32,099,856 4,234,878 (4,234,878) (7,085) 28,002,381 (5,498,391) 104,645,204 6,780, ,425, Balance at beginning 26,818,182 9,363, (105,770) - (2,185,462) 33,890,884-33,890,884 Transactions with owners: Issuance of shares pursuant to private placement 16 2,680, , ,618,000-3,618,000 Share issuance expenses 16 - (87,470) (87,470) - (87,470) Dividend (1,340,909) (1,340,909) - (1,340,909) Total transactions with owners 2,680, , (1,340,909) 2,189,621-2,189,621 Total comprehensive income for the year (405,800) - 589, , ,338 Balance at end 29,498,182 10,214, (511,570) - (2,937,233) 36,263,843-36,263,843 The notes set out on pages 30 to 71 form an integral part of these financial statements. 26 ANNUAL REPORT 2013

28 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE Non-distributable Share Share Warrants Discount on Fair Value Retained Total Capital Premium Reserve Shares Reserve Profits Equity NOTE 2013 Balance at beginning 29,498,182 10,214, (511,570) 1,576,194 40,777,270 Transactions with owners: Issuance of shares 16 20,550,261 21,885, ,435,653 Issuance of warrants ,234,878 (4,234,878) Total transactions with owners 20,550,261 21,885,392 4,234,878 (4,234,878) ,435,653 Total comprehensive income for the year ,485 44, ,256 Balance at end 50,048,443 32,099,856 4,234,878 (4,234,878) (7,085) 1,620,965 83,762, Balance at beginning 26,818,182 9,363, (105,770) (4,654,723) 31,421,623 Transactions with owners: Issuance of shares pursuant to private placement 16 2,680, , ,618,000 Share issuance expenses 16 - (87,470) (87,470) Dividend (1,340,909) (1,340,909) Total transactions with owners 2,680, , (1,340,909) 2,189,621 Total comprehensive income for the year (405,800) 7,571,826 7,166,026 Balance at end 29,498,182 10,214, (511,570) 1,576,194 40,777,270 The notes set out on pages 30 to 71 form an integral part of these financial statements. ANNUAL REPORT

29 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 GROUP COMPANY CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/ Profit before taxation (3,787,066) 745, ,538 8,434,314 Adjustments for: Addition/(Reversal) of allowance for slow moving inventories 1,997 (13,277) - - Amortisation of biological assets 466, Bad debts - 5, Depreciation 4,502,413 3,810,494 3,508 - Dividend income (30,025) (20,800) (2,928,025) (8,553,800) (Gain)/Loss on disposal of property, plant and equipment (13,292) 123, Impairment loss on investment in a subsidiary ,000 - Interest expense 94,243 70, Interest income (185,402) (155,065) (161,233) (152,884) Investment in an associate written off - 59, Loss on disposal of investment in an associate 34, Loss on disposal of other investments 321, ,564 - Property, plant and equipment written off 1, Share of results of associates - 148, Surplus arising from liquidation of an associate - (51,000) - - Unrealised (gain)/loss on foreign exchange (1,214) 1, Operating profit/(loss) before working capital changes 1,404,815 4,723,011 (2,003,648) (272,370) Increase in inventories (446,672) (25,333) - - (Increase)/Decrease in receivables (72,970) (1,373,170) 1,996,068 (2,025,380) Increase/(Decrease) in payables 1,616,156 (895,292) 142,437 (38,177) Cash generated from/(used in) operations 2,501,329 2,429, ,857 (2,335,927) Dividend received 30,025 20,800 2,525,525 7,708,550 Income tax paid (368,583) (50,696) (33,017) - Income tax refund - 335,807-14,349 Interest paid (94,243) (70,056) - - Net cash from operating activities 2,068,528 2,665,071 2,627,365 5,386,972 CASH FLOWS FROM INVESTING ACTIVITIES Interest received 185, , , ,884 Proceeds from disposal of investment in an associate 1,620, Proceeds from disposal of other investments 860, ,242 - Proceeds from disposal of property, plant and equipment 35, , Purchase of other investments (324,804) - (324,804) - Purchase of investment in subsidiaries - - (3,290,000) - (1) Net cash outflow on acquisition of subsidiaries (3,195,112) Purchase of biological assets (1,346,738) (2) Purchase of property, plant and equipment (1,278,332) (595,207) (18,908) (16,171) Net cash (used in)/from investing activities (3,443,687) (279,214) (2,612,237) 136,713 Balance carried forward (1,375,159) 2,385,857 15,128 5,523,685 The notes set out on pages 30 to 71 form an integral part of these financial statements. 28 ANNUAL REPORT 2013

30 STATEMENTS OF CASH FLOWS (cont d) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 GROUP COMPANY Balance brought forward (1,375,159) 2,385,857 15,128 5,523,685 CASH FLOWS FROM FINANCING ACTIVITIES Advance to subsidiaries' account - - (2,245,737) (5,438,300) Dividend paid - (1,340,909) - (1,340,909) Payment of finance lease (933,476) (664,244) - - Payment of private placement expenses - (87,470) - (87,470) Proceeds from issuance of shares pursuant to private placement - 3,618,000-3,618,000 Repayment to a director (300) Repayment of term loans (111,104) (666,672) - - Net cash (used in)/from financing activities (1,044,880) 858,705 (2,245,737) (3,248,679) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (2,420,039) 3,244,562 (2,230,609) 2,275,006 CASH AND CASH EQUIVALENTS AT BEGINNING 7,129,245 3,884,683 6,005,905 3,730,899 CASH AND CASH EQUIVALENTS AT END 4,709,206 7,129,245 3,775,296 6,005,905 Represented by: Short term money market deposit with a licensed bank 500, Fixed deposits with licensed banks 3,005,148 5,981,105 3,005,148 5,481,105 Cash and bank balances 1,204,058 1,148, , ,800 4,709,206 7,129,245 3,775,296 6,005, Pioneer Glow Benua Mutiara Sdn. Bhd. Sdn. Bhd. Total (1) Cash flows on acquisition of subsidiaries Adjusted net assets of acquired subsidiaries (Note 35) 27,523,844 20,972,193 48,496,037 Add: Goodwill (Note 9) 32,136,954 2,828,842 34,965,796 Less: Non-controlling interests (8,257,153) - (8,257,153) Total consideration paid 51,403,645 23,801,035 75,204,680 Add: Deed of assignment (Note 35) 9,136,217-9,136,217 Less: Cash and cash equivalents (52,775) (42,114) (94,889) Deferred consideration (Note 21) (10,612,861) - (10,612,861) Satisfied by way of issuance of Company's shares (Note 35) (46,637,000) (23,801,035) (70,438,035) Net cash outflow on acquisition of subsidiaries 3,237,226 (42,114) 3,195,112 GROUP COMPANY (2) Purchase of property,plant and equipment Total acquisition cost 2,449, ,207 18,908 16,171 Acquired under finance lease (1,171,200) Total cash acquisition 1,278, ,207 18,908 16,171 The notes set out on pages 30 to 71 form an integral part of these financial statements. ANNUAL REPORT

31 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE CORPORATE INFOATION 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, Penang. The principal place of business of the Company is located at Lot 6181, Jalan Perusahaan 2, Kawasan Perindustrian Parit Buntar, Parit Buntar, Perak. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 28 October Principal Activities The principal activity of the Company is investment holding. The principal activities of the subsidiaries are disclosed in Note 6 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 ( FRSs ) and the Companies Act, 1965 in Malaysia. 2.2 Basis of Measurement The financial statements have been prepared on the historical cost basis other than as set out in the Note Functional and Presentation Currency The financial statements are presented in Ringgit Malaysia ( ), which is also the Group s and the Company s functional currency. 2.4 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 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 lives of the plant and machinery is 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 10 to 20 years. The useful lives is within the commercial life span of oil palm trees. Technological developments 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. 30 ANNUAL REPORT 2013

32 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE BASIS OF PREPARATION (cont d) 2.4 Significant Accounting Estimates and Judgements (cont d) Key sources of estimation uncertainty (cont d) (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. (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 estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In 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. Further details of the carrying value, the key assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes in the assumptions are in Note 9 to the financial statements. (v) Inventories The management reviews for damage, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuations of inventories. (vi) Impairment of receivables The Group assesses at the end of each reporting period whether there is any objective evidence that a receivables 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. 2.5 Adoption of Revision/Amendments to FRS On 1 July 2012, the Group and the Company adopted the following revised and amendments to FRSs: FRS 124 Amendments to FRS 1 Amendments to FRS 101 Amendments to FRS 112 Related Party Disclosures Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters Presentation of Items of Other Comprehensive Income Deferred Tax: Recovery of Underlying Assets Adoption of the above standards did not have any significant effect on the financial statements of the Group and of the Company. ANNUAL REPORT

33 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE BASIS OF PREPARATION (cont d) 2.6 Standards Issued But Not Yet Effective FRSs, Amendments/Improvements to FRSs Issued and IC Interpretations Issued But Not Yet Effective The following are accounting standards and amendments that have been issued by the MASB but have not been early adopted by the Group and by the Company: Effective for financial periods beginning on or after 1 January 2013 FRSs FRS 10 Consolidated Financial Statements FRS 11 Joint Arrangements FRS 12 Disclosure of Interests in Other Entities FRS 13 Fair Value Measurement FRS 119 Employee Benefits FRS 127 Separate Financial Statements FRS 128 Investments in Associates and Joint Ventures Amendments/Improvements to FRS 1 First-time Adoption of Financial Reporting Standards Government Loans FRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities FRS 101 Presentation of Financial Statements FRS 116 Property, Plant and Equipment FRS 132 Financial Instruments: Presentation FRS 134 Interim Financial Reporting Amendments to IC Int IC Int 20 Stripping Costs in the Production Phase of a Surface Mine Effective for financial periods beginning on or after 1 January 2014 Amendments to FRS 10, FRS 12 and FRS 127 Investment Entities Amendments to FRS 132 Offsetting Financial Assets and Liabilities Amendments to FRS 136 Impairment of Assets Amendments to FRS 139 Financial Instruments: Recognition and Measurement Effective for financial periods beginning on or after 1 January 2015 FRS 9 Financial Instruments Unless otherwise described below, the new FRSs, IC Interpretations and Amendments to FRSs above are expected to have no significant impact on the financial statements of the Group and of the Company upon their initial application except for the changes in presentation and disclosures of financial information arising from the adoption of certain FRSs, IC Interpretations and Amendments to FRSs. The Group and the Company are currently assessing the impact that the adoption of the standards below will have on their financial position and performance. FRS 9 Financial Instruments FRS 9 addresses the classification and measurement of financial instruments. FRS 9 defines criteria for financial assets that can be measured at amortised costs subsequent to its initial recognition and also requires changes of fair value attributable to credit risk change for financial liabilities to be presented in statement of other comprehensive income. FRS 13 Fair Value Measurement FRS 13 established a single source of guidance under FRS for all fair value measurements. FRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS when fair value is required or permitted Malaysian Financial Reporting Standards Framework On 19 November 2011, the Malaysian Accounting Standards Board ( MASB ) issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards ( MFRS Framework ). 32 ANNUAL REPORT 2013

34 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE BASIS OF PREPARATION (cont d) 2.6 Standards Issued But Not Yet Effective (cont d) Malaysian Financial Reporting Standards Framework (cont d) 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 MFRS 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 scope of Transitioning Entities and have opted to defer the adoption of MFRS Framework. However for subsidiaries whose financial statements are prepared in accordance with MFRS, were converted to FRSs for the purpose 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 Group and the Company have not completed their quantification of the financial effects of the differences between FRSs and accounting standards under the MFRS Framework and are in the process of assessing the financial effects of the differences. Accordingly, the financial performance and financial position as disclosed in these financial statements for the financial year ended 30 June 2013 could be different if prepared under the MFRS Framework. The Group and the Company expect to be in a position to fully comply with the requirements of the MFRS Framework for the financial year ending 30 June SIGNIFICANT ACCOUNTING POLICIES 3.1 Basis of Consolidation (i) Subsidiaries Subsidiaries are entities, including unincorporated 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. Control exists when the Company has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. 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. (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. Acquisition on or after 1 July 2011 For acquisitions on or after 1 July 2011, 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 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. ANNUAL REPORT

35 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.1 Basis of Consolidation (cont d) (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 Group 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. (vi) Transactions eliminated on consolidation Intra-group balances and transactions, and 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: Long leasehold land Amortised over lease period of 67 to 87 years Short leasehold land Amortised over lease period of 30 to 40 years Buildings 2% -10% Plant and machinery 10% Renovation and electrical installation 10% Air conditioners 10% Office equipment, furniture and fittings 10% Motor vehicles 10% - 20% Long leasehold land refers to land with remaining lease period in excess of fifty years whilst short leasehold land refers to land with remaining lease period of less than fifty years determined as at the end of the reporting period. Depreciation on capital work in progress commences when the assets are ready for their intended 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. 34 ANNUAL REPORT 2013

36 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.3 Biological assets New planting and replanting expenditure incurred on land clearing, development and upkeep of immature oil palms (including interest incurred) during the pre-maturity period (pre-cropping costs) is capitalised under biological assets and is not amortised. Upon maturity, all subsequent maintenance expenditure is charged to profit or loss and the capitalised expenditure is amortised on a straight line basis over 10 to 20 years. 3.4 Investment in Associates An associate is an entity, including unincorporated entity, in which the Group has significant influence, but not control, over the financial and operating policies. Investments in associates are accounted for in the consolidated financial statements using the equity method less any impairment losses, unless it is classified as held for sale or distribution. The cost of the investment includes transaction costs. The consolidated financial statements include the Group s share of the profit or loss and other comprehensive income of the associates, after adjustments if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group s share of losses exceeds its interest in an associate, the carrying amount of that interest including any long-term investments is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group s interest in the associates. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Investment in associates are 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. The cost of investment includes transaction costs. 3.5 Leases Finance Lease In accordance with FRS 117 Leases, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is then recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any. A corresponding amount is recognised as a finance leasing liability, irrespective of whether some of these lease payments are payable up-front at the date of inception of the lease. Leases of land and buildings are classified separately and are split into a land and a building element, in accordance with the relative fair values of the leasehold interests at the date the asset is recognised initially. Depreciation methods and useful lives for assets held under finance lease agreements correspond to those applied to comparable assets which are legally owned by the Group. The corresponding finance leasing liability is reduced by lease payments less finance charges, which are expensed as part of finance costs. The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to profit or loss over the period of the lease. Operating Lease NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE 2013 All other leases are treated as operating leases. Payments on operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred. ANNUAL REPORT

37 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.6 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. 3.7 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. 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 except for assets that were previously revalued where the revaluation surplus was taken to other comprehensive income. In this case the impairment loss is also recognised in other comprehensive income up to the amount of any previous revaluation surplus. 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 unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. 3.8 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. 3.9 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. 36 ANNUAL REPORT 2013

38 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.9 Financial Instruments (cont d) Financial instrument categories and subsequent measurement The Group and the Company categorise financial instruments as follows: Financial assets NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE 2013 (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. (ii) 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. 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 in accordance with the original or modified terms of a debt instrument. 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. ANNUAL REPORT

39 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.9 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 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-forsale 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-for-sale 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 Provisions Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation. 38 ANNUAL REPORT 2013

40 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.13 Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. Other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that the Company incurred in connection with the borrowing of funds Income Recognition 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. 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 an expense 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 an expense in the profit or loss as incurred Income Tax NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE 2013 Income tax expense comprises current and deferred tax. Current tax and deferred tax is 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. 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. ANNUAL REPORT

41 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.16 Income Tax (cont d) 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 the unutilised tax incentive can be utilised Foreign Currency Translations Assets and liabilities in foreign currencies at the end of reporting period are translated into Ringgit Malaysia at the rates of exchange ruling on that date. Transactions in foreign currencies during the financial year have been translated into Ringgit Malaysia at the rates of exchange ruling on transaction dates. Gains and losses on foreign exchange are included in profit or loss 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 and share premium. The warrants reserve in relation to the unexercised warrants at the expiry of the warrants will be reversed Share Capital and Share Issuance Expenses An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Share capital represents the nominal value of shares that have been issued. Dividends on ordinary shares are accounted for in shareholder s equity as an appropriation of unappropriated profits and recognised as a liability in the period in which they are declared. Share premium includes any premiums received upon issuance of share capital. Any transaction costs associated with the issuing shares are deducted from share premium, net of any related income tax benefits 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 A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events not wholly within the control of the Group and of the Company. Contingent liabilities and assets are not recognised in the statements of financial position of the Group and of the Company. 40 ANNUAL REPORT 2013

42 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE PROPERTY, PLANT AND EQUIPMENT Long leasehold land Short leasehold land Buildings Plant and machinery Renovation and electrical installation Air conditioners Off ice equipment, furniture and fittings Motor vehicles Capital expenditure in progress Total GROUP 2013 At cost Balance at beginning - 1,419,550 11,655,782 40,057,870 1,987,259 1,485, , ,645-57,982,499 Arising from acquisition of subsidiaries 67,038, , ,857 10,180-65,452 1,304,000-68,959,073 Additions , , ,997 1,189, ,000 2,449,532 Disposals (5,200) (94,560) - (99,760) Written off (266,237) - - (5,050) - (271,287) Balance at end 67,038,133 1,419,550 12,515,359 40,195,885 1,997,819 1,486,189 1,445,903 2,801, , ,020,057 Accumulated depreciation Balance at beginning - 353,572 2,212,270 29,605,479 1,373,224 1,130, , ,969-35,676,696 Current charge 455,556 34, ,303 2,905, , ,460 88, ,045-4,502,413 Disposals (3,380) (74,072) - (77,452) Written off (265,331) - - (4,631) - - (269,962) Balance at end 455, ,704 2,527,573 32,241,803 1,540,351 1,258, , ,942-39,831,695 Carrying amount 66,582,577 1,031,846 9,987,786 7,954, , , ,109 2,251, ,000 89,188, At cost Balance at beginning - 1,419,550 11,655,782 40,602,958 1,957,548 1,485, , ,150-58,461,142 Additions ,762 29,711-2,239 84, ,207 Disposals (723,555) (50,000) - (773,555) Written off (300,295) (300,295) Balance at end - 1,419,550 11,655,782 40,057,870 1,987,259 1,485, , ,645-57,982,499 Accumulated depreciation Balance at beginning - 319,440 1,979,154 27,205,766 1,208,615 1,002, , ,790-32,655,790 Current charge - 34, ,116 3,145, , ,430 79,727 24,929-3,810,494 Disposals (445,760) (43,750) - (489,510) Written off (300,078) (300,078) Balance at end - 353,572 2,212,270 29,605,479 1,373,224 1,130, , ,969-35,676,696 Carrying amount - 1,065,978 9,443,512 10,452, , , , ,676-22,305,803 ANNUAL REPORT

43 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE PROPERTY, PLANT AND EQUIPMENT (cont'd) Renovation Air conditioners Off ice equipment, furniture and fittings Total COMPANY 2013 At cost Balance at beginning 16, ,171 Additions ,228 18,908 Balance at end 16, ,228 35,079 Accumulated depreciation Current charge 1, ,823 3,508 Carrying amount 14, ,405 31, Additions/ Carrying amount 16, ,171 GROUP (i) (ii) The carrying amount of plant and machinery charged to a licensed bank as security for banking facilities granted to the Group was 928,000. The carrying amount of property, plant and equipment acquired under finance lease liabilities are as follows: Plant and machinery 37,125 1,481,256 Motor vehicles 1,988,238 - The leased assets are pledged as security for the related finance lease liability (Note 18). 2,025,363 1,481, ANNUAL REPORT 2013

44 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE BIOLOGICAL ASSETS GROUP At cost Arising from acquisition of subsidiaries 7,281,402 - Additions 1,346,738 - Balance at end 8,628,140 - Amortisation charge 466,230 - Carrying amount 8,161,910 - Biological assets represent plantation development expenditure. 6. INVESTMENT IN SUBSIDIARIES COMPANY Unquoted shares, at cost 71,790,182 24,587,884 Less: Accumulated impairment loss Balance at beginning 5,705,000 5,705,000 Additions 295,000 - Balance at end (6,000,000) (5,705,000) Details of the subsidiaries which are all incorporated in Malaysia are as follows: 65,790,182 18,882,884 Name of Company Effective Equity Interest Principal Activities Direct Scope Manufacturers (M) Sdn. Bhd. 100% 100% Manufacturing and assembling of electronic components and products. Scope Sales & Services Sdn. Bhd. 100% 100% Investment holding and trading of electrical products. Trans Industry Sdn. Bhd. ^ 100% 100% Strike off during the year. Pioneer Glow Sdn. Bhd. 70% - Cultivation of oil palm. Benua Mutiara Sdn. Bhd. # 100% - Cultivation of oil palm. ANNUAL REPORT

45 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE INVESTMENT IN SUBSIDIARIES (cont d) 2013 On 19 July 2012, the Company acquired 7,420,000 ordinary shares of 1 each which represent 70% equity interest in Pioneer Glow Sdn. Bhd. for a total consideration of 28,700,000. Refer to Note 35 to the financial statements for details of the acquisition. On 20 June 2013, the Company acquired 500,000 ordinary shares of 1 each which represent 100% equity interest in Benua Mutiara Sdn. Bhd. for a total consideration of 29,025,653. Refer to Note 35 to the financial statements for details of the acquisition. ^ Not required for audit as the company is in the process of striking-off. # Not audited by Grant Thornton. 7. INVESTMENT IN ASSOCIATES GROUP Unquoted shares, at cost - 2,329,149 Share of post-acquisition reserves - (675,052) Details of the associates are as follows: Place of Effective Name of Company Incorporation Equity Interest Principal Activity ,654,097 Paramit Scope Sdn. Bhd. Malaysia % Under members voluntary winding up. Dien Quang - Scope Joint Stock Company Vietnam % Manufacturing and assembling of electronic components and products. The summarised financial information of the associates is as follow: GROUP Assets and Liabilities Total assets Total liabilities Results Revenue Profit for the year - 6,496,281-2,961,511-3,636,757-15,260 The above summarised financial information is based on the unaudited financial statements of the associates for the financial period ended 30 June The financial year end of Paramit Scope Sdn. Bhd. and Dien Quang-Scope Joint Stock Company are 30 September and 31 December respectively to conform with their holding company s financial year end. 44 ANNUAL REPORT 2013

46 7. INVESTMENT IN ASSOCIATES (cont d) 2013 Dien Quang-Scope Joint Stock Company On 21 February 2013, a subsidiary of the Company, Scope Sales & Services Sdn. Bhd. ( SSSB ) entered into a Stock Transfer Agreement ( the Agreement ) with Dien Quang Lamp Joint Stock Company ( The Purchaser ) to dispose of 46.80% equity interest in Dien Quang-Scope Joint Stock Company comprising 1,182,603 ordinary shares of VND 10,000 each for a total cash consideration of VND 10,872,851,982 (1,620,055). Under the terms of the Agreement, SSSB shall procure its holding company, Scope Industries Berhad ( Scope ) to reinvest the entire proceeds received from the disposal in shares of the Purchaser by way of acquisition from the open market. The Purchaser is listed on the Ho Chi Minh Stock Exchange. The shares purchased must be held for a period of 5 years from the date of the Agreement. Should Scope decide to dispose of the shares after the 5 year period, the Purchaser shall have the right of first refusal to buy back its own shares within 7 days after the expiry of the 5 year period. In the event the Purchaser does not buy back its own shares, then Scope shall have the right to sell the shares to any third party provided the disposal price must not be lower than the price offered to the Purchaser. Paramit Scope Sdn. Bhd. Paramit Scope Sdn. Bhd. was dissolved on 23 October NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE OTHER INVESTMENTS GROUP AND COMPANY Available-for-sale financial assets Shares quoted in Malaysia Balance at beginning 889,400 1,295,200 Fair value adjustment 449,406 (405,800) Disposals (1,181,806) - Balance at end 157, ,400 Shares quoted outside Malaysia Additions 324,804 - Fair value adjustment 55,079 - Balance at end 379, , ,400 Market value of shares quoted: In Malaysia 157, ,400 Outside Malaysia 379, , ,400 Analysis by currencies: Ringgit Malaysia 157, ,400 Vietnamese Dong 379, , ,400 ANNUAL REPORT

47 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE GOODWILL GROUP Arising from acquisition of the following subsidiaries : - Pioneer Glow Sdn Bhd (Note 35(i)) 32,136, Benua Mutiara Sdn Bhd (Note 35(ii)) 2,828,842-34,965,796 - Goodwill on consolidation arose from the acquisition of certain subsidiaries and has been allocated to its plantation operation as the cash-generating unit ( CGU ). For annual impairment testing purposes, the recoverable amount of the CGU is determined based on its value-in-use, which applies a discounted cash flow model using cash flow projections based on financial budget and projections approved by management. No impairment loss was required for the goodwill as its recoverable amount is in excess of its carrying amount. The key assumptions on which the management has based on for the computation of value-in-use are as follows: (i) Cash flow projections and growth rate Management uses fifteen (15) year cash flow projections to derive the expected cash flows. The projection was determined based on past-experience, actual operating results and projected production of fresh fruit bunches ( FFB ) over the 15 year period. The 15 year projection used by the management is justified considering the expected life cycle of an oil palm tree of between 10 to 20 years. Selling price of FFB was estimated to be between 480 to 600 per metric tonne over the 15 year period. The estimated selling price was derived based on past historical market price and management s assessment of future trends in the industry. (ii) Discount rate The discount rate of 5% is applied to the cash flow projections. The discount rate was estimated based on the Group s effective borrowing rate. Sensitivity 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 by 7,884,000 and 1,023,000 respectively. 10. INVENTORIES GROUP Raw materials 1,806,000 1,334,538 Less: Allowance for slow moving inventories Balance at beginning (30,172) (30,290) (Current year)/reversal (2,312) 118 Written off 21,141 - Balance at end (11,343) (30,172) Balance carried forward 1,794,657 1,304, ANNUAL REPORT 2013

48 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE INVENTORIES (cont d) GROUP Balance brought forward 1,794,657 1,304,366 Work-in-progress - 7,018 Finished goods 154, ,092 Less: Allowance for slow moving inventories Balance at beginning (31,978) (45,137) Reversal ,159 Balance at end (31,663) (31,978) 122, ,114 Consumables 75,598-1,993,008 1,512,498 Recognised in profit or loss: Allowance for slow moving inventories 1,997 (13,277) Inventories recognised as cost of sales 16,288,357 15,447, TRADE RECEIVABLES GROUP The trade receivables are non-interest bearing and are generally on 30 to 60 days (2012: 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 GROUP COMPANY Other receivables 117,583 20,376 8,425 - Refundable deposits 181, ,577 20,887 19,887 * Non-refundable deposits 39,800 2,000,000-2,000,000 Prepayments 95,362 76,602-5, ,852 2,269,555 29,312 2,025,380 Analysis by currencies: Ringgit Malaysia 421,703 2,265,831 20,887 2,025,380 US Dollar 3,724 3, Vietnamese Dong 8,425-8, ,852 2,269,555 29,312 2,025,380 * Included herein is an amount of Nil (2012: 2,000,000) paid to a third party as deposit for the acquisition of 70% equity interest in Pioneer Glow Sdn. Bhd. Please refer to Note 35 (i) to the financial statements. ANNUAL REPORT

49 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE AMOUNT DUE FROM/TO SUBSIDIARIES COMPANY The amount due from/to subsidiaries is non-trade related, unsecured, non-interest bearing and is repayable on demand. 14. CASH AND CASH EQUIVALENTS GROUP COMPANY Short term money market deposits with a licensed bank 500, Fixed deposits with licensed banks 3,077,786 5,981,105 3,005,148 5,481,105 Cash and bank balances 1,204,058 1,148, , ,800 4,781,844 7,129,245 3,775,296 6,005,905 Analysis by currencies: Ringgit Malaysia 4,308,987 7,118,266 3,319,795 6,005,905 US Dollar 17,692 10, Vietnamese Dong 455, ,165-4,781,844 7,129,245 3,775,296 6,005,905 Included in the fixed deposits is an amount of 72,638 (2012: Nil) which are held on lien for banking facilities extended to a subsidiary. Included in the cash and cash equivalents is an amount of 1,295,251 (2012: Nil) representing the balance of the uninvested proceeds from the disposal of Dien-Quang Scope Joint Stock Company as disclosed in Note 7 to the financial statements. The effective interest rates per annum and maturities as at the end of the reporting period are as follows: GROUP COMPANY Short term money market deposits with a licensed bank - % per annum 2.05 to Days 7 to Fixed deposits with licensed banks - % per annum 3.00 to to to Days 30 to to to to ANNUAL REPORT 2013

50 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SHARE CAPITAL Number of ordinary shares of 0.10 each Amount Authorised: Balance at beginning 500,000, ,000,000 50,000,000 50,000,000 Creation 1,500,000, ,000,000 - Balance at end 2,000,000, ,000, ,000,000 50,000,000 Issued and fully paid: Balance at beginning 294,981, ,181,818 29,498,182 26,818,182 Issuance pursuant to private placement - 26,800,000-2,680,000 Issuance pursuant to acquisition of subsidiaries 205,502,612-20,550,261 - Balance at end 500,484, ,981,818 50,048,443 29,498, RESERVES GROUP COMPANY Non-distributable: Share premium (Note 16.1) 32,099,856 10,214,464 32,099,856 10,214,464 Warrant reserve (Note 16.2) 4,234,878-4,234,878 - Discount on shares (Note 16.2) (4,234,878) - (4,234,878) - Fair value reserve (Note 16.3) (7,085) (511,570) (7,085) (511,570) Capital reserve (Note 16.4) 28,002, Share premium 60,095,152 9,702,894 32,092,771 9,702, Balance at beginning 10,214,464 9,363,934 Add: Issue of 26,800,000 ordinary shares at a premium of sen per share - 938,000 Issue of 89,400,000 ordinary shares at a premium of 0.05 sen per shares 4,470,000 - Issue of 116,102,612 ordinary shares at a premium of 0.15 sen per shares 17,415,392 - Less: Share issuance expenses - (87,470) Balance at end 32,099,856 10,214,464 ANNUAL REPORT

51 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE RESERVES (cont d) 16.2 Warrants reserve and Discount on shares The warrants reserve is in respect of the allocated fair value of the 118,596,363 warrants issued in the following manner: (i) Issuance of 89,400,000 new ordinary shares of 0.10 each at issue price of 0.15 together with 59,600,000 warrants for acquisition of a subsidiary. (ii) Issuance of 58,996,363 free warrants on the basis of two free warrants for every ten ordinary shares of 0.10 each 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 warrant entitles the registered holder of warrant 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 0.15 per share or such adjusted price in accordance with the provisions in the Deed Poll dated 13 June As at the end of the financial year ended 30 June 2013, no warrants were exercised Fair value reserve Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale financial assets until they are disposed of or impaired Capital reserve Capital reserve relates to fair value adjustment to the shares issued for the acquisition of subsidiaries. 17. RETAINED PROFITS The Company has made an irrevocable election to move to a single tier system for the purpose of dividend distribution. As a result, there are no longer any restrictions on the Company to frank the payment of dividends out of its entire retained profit as at end of the reporting period. 18. BORROWINGS GROUP Non-current liabilities Finance lease liabilities 726,778 - Current liabilities Finance lease liabilities 751, ,276 Term loan - 111, , ,380 Total borrowings 1,478, ,380 The borrowings (except for finance lease liabilities) were secured by way of: (i) (ii) Fixed charge on certain plant and machinery of a subsidiary; and Corporate guarantee of the Company. 50 ANNUAL REPORT 2013

52 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE BORROWINGS (cont d) A summary of the effective interest rates and the maturities of the borrowings are as follows: GROUP Average effective More than one interest rate Within year and less per annum Total one year than two years (%) 2013 Finance lease liabilities 2.68 to ,478, , , Finance lease liability , ,276 - Term loan , , DEFERRED TAX LIABILITIES GROUP Arising from acquisition of subsidiaries 15,545,928 - Transfer to profit or loss (111,865) - 15,434,063 - The deferred tax liabilities are represented by taxable temporary differences arising from: Property, plant and equipment 15,176,020 - Excess of capital allowances over depreciation 258, TRADE PAYABLES 15,434,063 - GROUP Analysis by currencies: Ringgit Malaysia 2,665, ,783 US Dollar 9,654 24,688 Singapore Dollar 41, ,498 2,716, ,969 The trade payables are non-interest bearing and are normally settled on 30 to 90 days (2012: 30 to 60 days) credit terms. ANNUAL REPORT

53 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE OTHER PAYABLES AND ACCRUALS GROUP COMPANY Non-current liabilities Other payable (1) Deferred cash consideration Later than 1 year but not less than 2 years 2,469,357-2,469,357 - Later than 2 years but not less than 5 years 8,143,505-8,143,505-10,612,862-10,612,862 - Current liabilities (2) Other payables 327,784 68, ,677 2,827 Accruals 385, ,451 78,187 72,600 GROUP 712, , ,864 75,427 (1) Deferred cash consideration arose as part of the purchase consideration to satisfy the acquisition of a subsidiary (Note 35 (i)). It is measured and recorded at the present value of the consideration determined at 10,612,862 as at the end of the reporting period. The deferred cash consideration shall be paid to the vendors subsequent to the completion date of the sale and purchase agreement ( SPA ) in the following manner: Payment timeframe (from completion date of SPA) Deferred Cash Consideration Present Value At the end of 24 months 3,000,000 2,469,357 At the end of 36 months 3,450,000 2,892,825 At the end of 48 months 3,300,000 2,714,966 At the end of 60 months 3,150,000 2,535,714 Total *12,900,000 10,612,862 * Inclusive of interest payment of 5% per annum on the outstanding deferred cash consideration after the first repayment in accordance with the terms and conditions of the SPA. (2) Included herein was an amount of 660 due to an associate of a subsidiary. 52 ANNUAL REPORT 2013

54 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE REVENUE GROUP COMPANY Gross dividend income from a subsidiary - - 2,898,000 8,533,000 Gross dividend income from investments quoted in Malaysia 21,600 20,800 21,600 20,800 Gross dividend income from investments quoted outside Malaysia 8,425-8,425 - Interest income 161, , , ,884 Invoiced value of goods sold less returns and discounts 25,043,194 18,213, ,234,452 18,386,948 3,089,258 8,706, (LOSS)/PROFIT BEFORE TAXATION This is arrived at: After charging: GROUP COMPANY Allowance for slow moving inventories 1, Amortisation of biological assets 466, Auditors remuneration - Statutory audit 44,200 29,000 15,000 11,000 - Other services 61,000-61,000 - Bad debts - 5, Depreciation 4,502,413 3,810,494 3,508 - * Directors remuneration for nonexecutive directors 46,500 42,000 46,500 42,000 Interest expense 94,243 70, Impairment loss on investment in a subsidiary ,000 - Investment in an associate written off - 59, Loss on disposal of investment in an associate 34, Loss on disposal of other investments 321, ,564 - Loss on disposal of property, plant and equipment 1, , Property, plant and equipment written off 1, Realised loss on foreign exchange 922 2, Rental of machinery 33,337 31, Rental of premises 102,486 40,120 65,911 - ** Staff costs 7,090,191 5,905,152 31,000 28,000 Unrealised loss on foreign exchange - 1, ANNUAL REPORT

55 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE (LOSS)/PROFIT BEFORE TAXATION (cont d) And crediting: GROUP COMPANY Gain on disposal of property plant and equipment 14, Gross dividend income from - a subsidiary - - 2,898,000 8,533,000 - investments quoted in Malaysia 21,600 20,800 21,600 20,800 - investments quoted outside Malaysia 8,425-8,425 - Interest income 185, , , ,884 Realised gain on foreign exchange 15, Reversal of allowance for slow moving inventories - 13, Surplus arising from liquidation of an associate - 51, Unrealised gain on foreign exchange 1, * Directors remuneration for nonexecutive directors of the Company Directors emoluments 10,500 6,000 10,500 6,000 Directors fee 36,000 36,000 36,000 36,000 46,500 42,000 46,500 42,000 ** Staff costs - Salaries, allowance, bonus and wages 6,641,660 5,526,822 31,000 28,000 - EPF 391, , SOCSO 57,404 49, Directors remuneration 7,090,191 5,905,152 31,000 28,000 Included in the staff costs of the Group and of the Company is directors emoluments as shown below: GROUP COMPANY Executive directors of the Company: - Salary and allowance 450, ,080 7,000 4,000 - EPF 44,352 43, , ,280 7,000 4,000 Directors fee 34,000 24,000 24,000 24, , ,280 31,000 28,000 Executive directors of subsidiaries: - Salary and allowance 84,800 83, EPF 8,856 8, ,656 91, Directors fee 15, ,656 91, Total executive directors remuneration 637, ,180 31,000 28, ANNUAL REPORT 2013

56 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE TAXATION GROUP COMPANY Malaysian income tax: Based on results for the year - Current tax (384,000) (164,750) (416,500) (870,000) - Deferred tax 111, (272,135) (164,750) (416,500) (870,000) Over/(Under) provision of current tax in prior years 21,179 8,766 (4,267) 7,512 The reconciliation of tax expense of the Group and of the Company is as follows: (250,956) (155,984) (420,767) (862,488) GROUP COMPANY (Loss)/Profit before taxation (3,787,066) 745, ,538 8,434,314 Less: Share of results of associates - 148, (3,787,066) 893, ,538 8,434,314 Income tax at Malaysian statutory tax rate of 25% 946,767 (223,294) (116,385) (2,108,579) Income not subject to tax 8,216 12, ,216 1,293,200 Expenses not deductible for tax purposes (505,383) (44,470) (630,331) (54,621) Deferred tax assets not recognised (781,223) (130,253) - - Utilisation of unabsorbed tax losses and capital allowances 3,685 58, Current year unabsorbed reinvestment allowance 55, , (272,135) (164,750) (416,500) (870,000) Over/(Under) provision in prior years 21,179 8,766 (4,267) 7,512 (250,956) (155,984) (420,767) (862,488) ANNUAL REPORT

57 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE TAXATION (cont d) GROUP The net deferred tax (assets)/liabilities which have not been recognised are represented by temporary differences arising from: Property, plant and equipment (244,149) (294,134) Biological assets 34,381 - Unabsorbed tax losses (993,234) (334) Unabsorbed capital allowances (358,740) 58,342 Unabsorbed reinvestment allowance 784, ,215 (777,538) (71,911) The amount and future availability of unabsorbed tax losses, capital allowances and reinvestment allowance for which the related tax effects have not been accounted for at the end of the reporting period are as follows: Unabsorbed tax losses 8,353,000 4,380,000 Unabsorbed capital allowances 12,795,000 1,360,000 Unabsorbed reinvestment allowance 16,374,000 19,502,000 The unabsorbed tax losses, capital 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. 25. (LOSS)/EARNINGS PER SHARE GROUP (a) Basic (loss)/earnings per share Basic (loss)/earnings per share is calculated by dividing the loss attributable to owners of the parent by the weighted average number of ordinary shares in issue during the financial year as follows: (Loss)/Profit for the year attributable to equity holders of the Company () (2,561,158) 589,138 Weighted average number of ordinary shares of 0.10 each issued shares at 1 July 276,111, ,181,818 Effect of shares issued pursuant to private placement - 7,929,863 Effect of shares issued pursuant to acquisition of subsidiaries 107,360,353 - Weighted average number of shares at 30 June 383,472, ,111,681 Basic (loss)/earnings per share (sen) (0.67) ANNUAL REPORT 2013

58 25. (LOSS)/EARNINGS PER SHARE (cont d) NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE 2013 (b) Diluted (loss)/earnings per share The calculation of diluted (loss)/earnings per share was based on (loss)/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: (Loss)/Profit for the year attributable to equity holders of the Company () (2,561,158) 589,138 Weighted average number of ordinary shares above 383,472, ,111,681 Effects on conversion of warrants 68,045, ,517, ,111,681 Diluted (loss)/earnings per share (sen) (0.57) 0.21 * * There is no diluted earnings per share in previous financial year as the Company did not have any convertible financial instruments as at 30 June DIVIDEND GROUP AND COMPANY In respect of the financial year ended 30 June A final single tier dividend of 0.5 sen - 1,340, FINANCIAL GUARANTEE (UNSECURED) Corporate guarantee extended by the Company to financial institutions for credit facilities granted to a subsidiary as at the end of the reporting period are as follows: COMPANY Limit 19,550,000 19,550,000 - Utilised - 111,104 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 a subsidiary. The actual terms of the credit facilities are likely to be the best indicator of at market terms and hence the fair value of the credit facilities are equal to the credit facilities amount received by the subsidiary. As such, there is no value on the corporate guarantee to be recognised in the financial statements. ANNUAL REPORT

59 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SEGMENTAL INFOATION 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, trading and investment holding divisions. Inter-segment pricing is determined based on negotiated terms. By business segments Investment 2013 Manufacturing Plantation Trading holding Elimination Total Note Revenue from external customers 21,178,945 3,805,004 59, ,258-25,234,452 Inter-segment revenue ,685 2,898,000 (2,933,685) A - Total revenue 21,178,945 3,805,004 94,930 3,089,258 (2,933,685) 25,234,452 Segment results 3,403,537 (4,961,865) (20,202) 304,305 (2,603,000) (3,878,225) Interest expense (12,175) (82,068) (94,243) Interest income 14,980 9, , ,402 Profit/(Loss) before taxation 3,405,342 (5,034,744) (20,202) 465,538 (2,603,000) (3,787,066) Taxation (344,554) 111,865 - (420,767) 402,500 (250,956) Profit/(Loss) for the year 3,060,788 (4,922,879) (20,202) 44,771 (2,200,500) (4,038,022) Assets Segment assets 22,881,316 79,085, ,219 90,814,847 (55,251,843) 137,652,943 Tax recoverable - 55, ,073 Cash and cash equivalents 564, ,281 4,609 3,775,296-4,781,844 Total assets 23,445,974 79,577, ,828 94,590,143 (55,251,843) 142,489,860 Liabilities Segment liabilities 8,208,741 34,526, ,475 10,830,726 (24,427,455) 29,476,621 Borrowings - 1,478, ,478,466 Provision for taxation 98, , ,280 Total liabilities 8,307,033 36,004, ,475 10,841,714 (24,427,455) 31,064,367 Other information Capital expenditure 141,299 3,636,621-18,908 (558) B 3,796,270 Amortisation of biological assets - 466, ,230 Depreciation 3,095,386 1,403,519-3,508-4,502,413 Non-cash expenses/(income) other than depreciation 296,207 (14,512) (258,837) 616,564 (295,000) C 344, ANNUAL REPORT 2013

60 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SEGMENTAL INFOATION (cont d) By business segments Investment 2012 Manufacturing Trading holding Elimination Total Note Revenue from external customers 18,195,610 17, ,684-18,386,948 Inter-segment revenue - 6,642 8,533,000 (8,539,642) A - Total revenue 18,195,610 24,296 8,706,684 (8,539,642) 18,386,948 Segment results 1,069,479 (157,796) 8,429,482 (8,533,000) 808,165 Interest expense (70,056) (70,056) Interest income 2, , ,065 Share of results of associates - - (148,052) - (148,052) Profit/(Loss) before taxation 1,001,604 (157,796) 8,434,314 (8,533,000) 745,122 Taxation (139,783) 1,037 (862,488) 845,250 (155,984) Profit/(Loss) for the year 861,821 (156,759) 7,571,826 (7,687,750) 589,138 Assets Segment assets 26,013,446 1,863,025 33,499,873 (32,518,209) 28,858,135 Investment in associates - - 1,654,097-1,654,097 Cash and cash equivalents 1,122, ,005,905-7,129,245 Total assets 27,136,001 1,863,810 41,159,875 (32,518,209) 37,641,477 Liabilities Segment liabilities 11,774,036 2,347, ,617 (13,621,575) 870,212 Borrowings 392, ,380 Provision for taxation 103,054-11, ,042 Total liabilities 12,269,470 2,347, ,605 (13,621,575) 1,377,634 Other information Capital expenditure 579,036-16,171 - B 595,207 Depreciation 3,810, ,810,494 Non-cash expenses other than depreciation 117, ,170 - C 273,204 ANNUAL REPORT

61 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SEGMENTAL INFOATION (cont d) Notes to segment information: A B Inter-segment revenue are eliminated on consolidation. Additions to non-current assets consist of: Property, plant and equipment 2,449, ,207 Biological assets 1,346,738-3,796, ,207 C Other material non-cash expenses/(income) consist of the following items: Addition/(Reversal) of allowance for slow moving inventories 1,997 (13,277) Bad debts - 5,404 (Gain)/Loss on disposal of property, plant and equipment (13,292) 123,117 Investment in an associate written off - 59,118 Loss on disposal of investment in an associate 34,042 - Loss on disposal of other investments 321,564 - Property, plant and equipment written off 1, Share of results of associates - 148,052 Surplus arising from liquidation of an associate - (51,000) Unrealised (gain)/loss on foreign exchange (1,214) 1,573 Geographical segments 344, ,204 Revenue and non-current assets information based on the geographical location of customers are as follows: Revenue Malaysia 25,141,489 18,240,567 Singapore 92, ,381 The Group s non-current assets are maintained entirely in Malaysia. Information about major customer 25,234,452 18,386,948 The Group has a major customer under the manufacturing segment which contributed 17,641,962 (2012: 15,593,285) of the Group s total revenue. 60 ANNUAL REPORT 2013

62 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE RELATED PARTY DISCLOSURES (i) Related party transactions GROUP COMPANY Gross dividend income from a subsidiary - - 2,898,000 8,533,000 Sales of property, plant and equipment to certain directors of the Company - 27, (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 shown in Note 23. 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. 30. CAPITAL COMMITMENT GROUP Authorised and contracted for: - Acquisition of a subsidiary - 26,700,000 Please refer to Note 35 for mode of payments Authorised but not provided for: - Acquisition of property, plant and equipment 164,150 - ANNUAL REPORT

63 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE CATEGORIES OF FINANCIAL INSTRUMENTS The table below provides an analysis of financial instruments categorised as loans and receivables ( L&R ), available-for-sale financial assets ( AFS ) and financial liabilities measured at amortised cost ( FL ). Carrying amount L&R AFS FL GROUP 2013 Financial assets Other investments (Note 8) 536, ,883 - Trade receivables (Note 11) 2,373,132 2,373, Other receivables and refundable deposits (Note 12) 298, , Cash and cash equivalents (Note 14) 4,781,844 4,781, ,990,549 7,453, ,883 - Financial liabilities Borrowings (Note 18) 1,478, ,478,466 Trade payables (Note 20) 2,716, ,716,782 Other payables and accruals (Note 21) 11,325, ,325,776 15,521, ,521, Financial assets Other investments (Note 8) 889, ,400 - Trade receivables (Note 11) 1,880,879 1,880, Other receivables and refundable deposits (Note 12) 192, , Cash and cash equivalents (Note 14) 7,129,245 7,129, ,092,477 9,203, ,400 - Financial liabilities Borrowings (Note 18) 392, ,380 Trade payables (Note 20) 505, ,969 Other payables and accruals (Note 21) 364, ,243 1,262, ,262,592 COMPANY 2013 Financial assets Other investments (Note 8) 536, ,883 - Other receivables and refundable deposits (Note 12) 29,312 29, Amount due from subsidiaries (Note 13) 24,426,899 24,426, Cash and cash equivalents (Note 14) 3,775,296 3,775, ,768,390 28,231, ,883 - Financial liabilities Other payables and accruals (Note 21) 10,830, ,830, ANNUAL REPORT 2013

64 31. CATEGORIES OF FINANCIAL INSTRUMENTS (cont d) NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE 2013 Carrying amount L&R AFS FL COMPANY 2012 Financial assets Other investments (Note 8) 889, ,400 - Other receivables and refundable deposits (Note 12) 19,887 19, Amount due from subsidiaries (Note 13) 13,340,135 13,340, Cash and cash equivalents (Note 14) 6,005,905 6,005, ,255,327 19,365, ,400 - Financial liabilities Other payables and accruals (Note 21) 75, ,427 Amount due to a subsidiary (Note 13) 295, , , , FINANCIAL RISK MANAGEMENT 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 a subsidiary 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

65 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE FINANCIAL RISK MANAGEMENT (cont d) 32.1 Credit risk (cont d) Trade receivables (cont d) The ageing of trade receivables of the Group is as follows: Not past due 2,346,828 1,877,019 1 to 30 days past due 25,459 2, to 60 days past due to 90 days past due Past due more than 91 days ,304 3,860 2,373,132 1,880,879 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 26,304 (2012: 3,860) 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 1 customer which represents 75% (2012: 77%) of total trade receivables Intercompany balances The Company obtains and 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 The Company provides unsecured corporate guarantee to financial institutions in respect of credit facilities granted to a subsidiary. The maximum exposure to credit risk is disclosed in Note 27, representing the outstanding credit facilities of the said subsidiary as at the end of the reporting period. The Company monitors on an ongoing basis the results of the subsidiary and repayments made by the subsidiary. 64 ANNUAL REPORT 2013

66 32. FINANCIAL RISK MANAGEMENT (cont d) 32.2 Liquidity risk NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE 2013 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 table below summarises the maturity profile of the Group s and the Company s financial liabilities as at the end of the reporting period based on the undiscounted contractual payments: GROUP Carrying amount Contractual cash flows Within one year More than one year and less than two years More than two years and less than five years 2013 Interest bearing borrowings 1,478,466 1,581, , ,427 - Trade payables 2,716,782 2,716,782 2,716, Other payables and accruals 11,325,776 13,612, ,914 3,000,000 9,900, ,521,024 17,911,590 4,252,163 3,759,427 9,900,000 Interest bearing borrowings 392, , , Trade payables 505, , , Other payables and accruals 364, , , ,262,592 1,274,791 1,274, COMPANY 2013 Other payables and accruals 10,830,726 13,117, ,864 3,000,000 9,900, Other payables and accruals 75,427 75,427 75, Intercompany balances 295, , , , , , ANNUAL REPORT

67 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE FINANCIAL RISK MANAGEMENT (cont d) 32.3 Interest rate risk The Group s and the Company s fixed rate deposits, borrowings and deferred cash consideration are exposed to a risk of change in their fair value due to changes in interest rates whilst the Group s and the Company s floating rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. 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 Fixed rate instruments Financial assets 3,577,786 5,981,105 3,005,148 5,481,105 Financial liabilities 12,091, ,276 10,612,862 - Floating rate instruments Financial liabilities - 111, 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. Cash flow sensitivity analysis for variable rate instruments Assuming all the variables remain constant, an increase of 25 basis point will not have a material impact on the financial results of the Company Foreign currency risk The Group is exposed to foreign currency risk on sales and 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 currencies giving rise to this risk is US Dollar ( USD ), Singapore Dollar ( SGD ) and Vietnamese Dong ( VND ). The Group s exposure to foreign currency risk, based on carrying amounts as at the end of the reporting period is as follows: GROUP USD VND SGD USD SGD Other receivables 3,724 8,425-3,724 - Cash and bank balances 17, ,165-10,979 - Trade payables (9,654) - (41,471) (24,688) (148,498) Net exposure 11, ,590 (41,471) (9,985) (148,498) COMPANY Other receivables - 8, Cash and bank balances , Net exposure , ANNUAL REPORT 2013

68 32. FINANCIAL RISK MANAGEMENT (cont d) 32.4 Foreign currency risk (cont d) Sensitivity analysis for foreign currency risk NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE 2013 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 against the following currencies at the end of the reporting period would have increased (loss)/profit before taxation by the amount shown below and a corresponding decrease would have an equal but opposite effect. GROUP USD (1,176) 999 VND (46,359) - SGD 4,147 14,850 Increase in (loss)/profit before taxation (43,388) 15,849 COMPANY USD VND (34) - (46,359) - Decrease in profit before taxation (46,393) 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. 34. FAIR VALUE OF FINANCIAL INSTRUMENTS GROUP AND COMPANY The carrying amounts of financial assets (other than investments in quoted equity instruments) and financial liabilities of the Group and of the Company approximation their fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the end of the reporting period. The fair value of investments in quoted equity instruments is its quoted market price at 30 June The fair value of the investments is disclosed in Note 8. ANNUAL REPORT

69 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE FAIR VALUE OF FINANCIAL INSTRUMENTS (cont d) 34.1 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. Level 1 Level 2 Level 3 Quoted prices (unadjusted) in active markets for identical assets and liabilities. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Inputs for the asset and liability that are not based on observable market data (unobservable inputs). Level 1 Level 2 Level 3 Total 2013 Available-for-sale financial assets Investment in quoted equity instruments 536, , Available-for-sale financial assets Investment in quoted equity instruments 889, , SIGNIFICANT EVENTS (i) Pioneer Glow Sdn. Bhd. ( Pioneer ) On 19 July 2012, the Company acquired 7,420,000 ordinary shares of 1 each in Pioneer, representing 70% of the issued and paid-up share capital of Pioneer, for a total purchase consideration of 28,700,000 satisfied in the following manner: No. Consideration 1. Cash 2,000, Issuance of 89,400,000 new shares in the Company at an issue price of 0.15 per share ( Consideration Shares ) together with 59,600,000 warrants in the Company ( Consideration Warrants ) 13,410, Deferred cash payment over a period of 5 years 13,290,000 28,700,000 The above proposals were approved by the shareholders in an extraordinary general meeting of the Company held on 28 June 2012 and the issuance of the Consideration Shares and Consideration Warrants were completed, listed and quoted on the ACE Market of Bursa Malaysia Securities Berhad on 23 July The fair value of the purchase consideration is derived based on the following: Cash consideration 3,290,000 Deferred cash consideration (1) 10,612,862 Satisfied by way of issuance of Company s shares (2) 46,637,000 Deed of assignment (3) (9,136,217) Total fair value of consideration transferred 51,403, ANNUAL REPORT 2013

70 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SIGNIFICANT EVENTS (cont d) (i) Pioneer Glow Sdn. Bhd. ( Pioneer ) (cont d) (1) Refer to Note 21 to the financial statements for details of the deferred cash consideration. (2) For the purpose of computing the fair value of the purchase consideration, a fair value of per share and per warrant (being the published price of the shares at the date of exchange to the vendor on 23 July 2012) is allocated to the Consideration Shares and Consideration Warrants. (3) Under the terms of the sale and purchase agreement, a deed of assignment is executed whereby the debts owing by Pioneer to the vendor is assigned to the Company. The following are the carrying amount of the assets and liabilities which is also the fair value on acquisition date: Assets Property, plant and equipment 42,572,472 Biological assets 6,436,675 Inventories 35,835 Receivables 375,103 Cash and cash equivalents 52,775 49,472,860 Liabilities Borrowings 933,385 Deferred tax liabilities 9,117,000 Payables 762,114 Amount due to a director 300 Amount due to holding company 11,136,217 21,949,016 Net identifiable assets 27,523,844 Goodwill arising from acquisition: Total fair value of consideration transferred 51,403,645 Non-controlling interests 8,257,153 Recognised amount at fair value of net identifiable assets acquired (27,523,844) Goodwill (Note 9) 32,136,954 ANNUAL REPORT

71 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SIGNIFICANT EVENTS (cont d) (ii) Benua Mutiara Sdn. Bhd. ( Benua ) On 20 June 2013, the Company acquired 500,000 ordinary shares of 1 each in Benua, representing 100% of the issued and paid-up share capital of Benua, for a total purchase consideration of 29,025,653 satisfied by issuance of 116,102,612 new ordinary shares in the Company at an issue price of 0.25 per share ( Consideration Shares ). The issuance of Consideration Shares were completed, listed and quoted on the ACE Market of Bursa Malaysia Securities Berhad on 1 July Total fair value of consideration transferred The Company issued 116,102,612 new ordinary shares of 0.10 each to the vendor at an issue price of For the purpose of computing the fair value of purchase consideration, a fair value of per share (being the published price of the shares at the date of exchange to the vendor on 1 July 2013) is allocated to the 116,102,612 ordinary shares issued. The following are the carrying amount of the assets and liabilities which is also the fair value on acquisition date: Assets Property, plant and equipment 26,386,601 Biological assets 844,727 Receivables 208,477 Tax recoverable 55,073 Cash and cash equivalents 114,752 27,609,630 Liabilities Borrowings 26,081 Deferred tax liabilities 6,428,928 Payables 182,428 6,637,437 Net identifiable assets 20,972,193 Goodwill arising from acquisition: Total fair value of consideration transferred 23,801,035 Recognised amount at fair value of net identifiable assets acquired (20,972,193) Goodwill (Note 9) 2,828, ANNUAL REPORT 2013

72 NOTES TO THE FINANCIAL STATEMENTS (cont d) 30 JUNE SIGNIFICANT EVENTS (cont d) (iii) Matang Holdings Berhad ( Matang ) On 19 November 2012, the Company announced the following : (a) (b) (c) the Company entered into a business merger agreement ( BMA ) with Matang Holdings Berhad ( Matang ) for the transfer of the entire business and undertakings, including all assets and liabilities of Matang to the Company for a total consideration of 145,000,000 ( Proposed Merger ). Proposed exemption under Para 16 PN9 of the Malaysian Code on Takeover and Mergers, 2010 to Matang and Parties Acting in concert with Matang from the obligation to extend a take-over offer for all the remaining ordinary shares of the Company of 0.10 each not already held by them pursuant to the Proposed Merger; and Proposed change of name of Scope Industries Berhad to Matang Scope Berhad. The Company and Matang had mutually agreed on 17 August 2013 to extend the time period of the BMA dated 19 November 2012 for a further period of 9 months from 19 August As at the date of this report, the deal is still ongoing and the extension period was to facilitate further discussions and re-negotiation of the terms of the Proposed Merger. During the extension period, Matang shall have the right to negotiate and to explore with other parties to realise the value of its assets/shares. ANNUAL REPORT

73 SUPPLEMENTARY INFOATION 30 JUNE SUPPLEMENTARY INFOATION DISCLOSED PURSUANT TO BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS With the purpose of improving transparency, Bursa Malaysia Securities Berhad has on 25 March 2010, and subsequently on 20 December 2010, issued directives which require all listed corporations to disclose the breakdown of unappropriated profits or accumulated losses into realised and unrealised on group and company basis in the annual audited financial statements. The breakdown of (accumulated losses)/retained profits as at the end of the reporting period has been prepared by the directors in accordance with the directives from Bursa Malaysia Securities Berhad stated above and the Guidance on Special Matter No. 1 - Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants are as follows: GROUP COMPANY Total (accumulated losses)/retained profits of the Company and its subsidiaries: - Realised (2,405,564) 10,481,624 1,620,965 1,576,194 - Unrealised (256,839) (1,573) - - (2,662,403) 10,480,051 1,620,965 1,576,194 Less: Consolidation adjustments (2,835,988) (12,742,232) - - (5,498,391) (2,262,181) 1,620,965 1,576,194 Total share of results of associates - Realised - (675,052) - - Total (accumulated losses)/retained profits as per statements of financial position (5,498,391) (2,937,233) 1,620,965 1,576, ANNUAL REPORT 2013

74 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the Eleventh 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, 21 November 2013 at 11:30 am 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 2013 together with the Reports of the Directors and Auditors thereon. 2. To approve the payment of Directors fee of 60, for the financial year ended 30 June Resolution 1 3. To re-elect Mr Lim Chiow Hoo as a Director who retires in accordance with Article 127 of the Company s Articles of Association. Resolution 2 4. To re-elect Mr Tan Poh Heng as a Director who retires in accordance with Article 127 of the Company s Articles of Association. Resolution 3 5. To re-appoint Messrs Grant Thornton as Auditors of the Company for the ensuing year 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 Section 132D of the Companies Act, 1965, 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 issued share capital 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 SPECIAL RESOLUTION PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION OF THE COMPANY That the amendments to the Articles of Association of the Company contained in Appendix I be and are hereby approved. Resolution 6 7. To transact any other business of which due notices shall have been given in accordance with the Companies Act, By Order of the Board, CHEE WAI HONG (MIA 17181) FOO LI LING (MAICSA ) Company Secretaries Penang Date : 30 October 2013 ANNUAL REPORT

75 NOTICE OF ANNUAL GENERAL MEETING (cont d) Notes : 1. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. 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, 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 Article 77 of the Articles of Association of the Company and Paragraph 7.16(2) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, a Record of Depositors ( ROD ) as at 15 November 2013 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. Explanatory Notes on Special Business Resolution 5 Authority to issue shares The Ordinary Resolution proposed under item 6(i) above, 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 issued capital 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 Section 132D of the Companies Act, 1965 under the general authority which was approved at the Tenth Annual General Meeting held on 28 November 2012 and which will lapse at the conclusion of the Eleventh Annual General Meeting to be held on 21 November A renewal of this authority is being sought at the Eleventh 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 Proposed Amendments to the Articles of Association of the Company The Special Resolution proposed under item 6(ii) above, if passed, will give authority for the Company to amend its Articles of Association to be in line with the amendments to the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad. 74 ANNUAL REPORT 2013

76 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. ANNUAL REPORT

77 APPENDIX I PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION OF THE COMPANY The existing Articles of Association of the Company is proposed to be amended in order to be in line with the Listing Requirements (for which the proposed amendments are highlighted in bold and the portion struck through are text deleted) as follows: - Article No. Existing Articles Amended Articles To amend the definition of Article 2 To amend Article 49(2) To amend Article 55 Approved Market Place : means a stock exchange which is specified to be an approved market place in the Securities Industry (Central Depositories) Exemption Order 1998 Closure of register give notice of such intended closure to the KLSE at least 12 clear Market Days before the intended date of such closure including in such notice, such date, the reason for such closure and the address of the share registry at which documents will be accepted for registration; Transmission (1) Where: Deleted. Closure of register give notice of such intended closure to the KLSE at least clear Market Days before the intended date of such closure including in such notice, such date, the reason for such closure and the address of the share registry at which documents will be accepted for registration; Transmission (1) Where: (a) the securities of the Company are listed on an Approved Market Place; and (b) the Company is exempted from compliance with Section 14 of the Central Depositories Act or Section 29 of the Securities Industry (Central Depositories) (Amendment) (No.2) Act 1998, as the case may be, under the Rules in respect of such securities, (a) (b) the securities of the Company are listed on another stock exchange an Approved Market Place; and the Company is exempted from compliance with Section 14 of the Central Depositories Act or Section 29 of the Securities Industry (Central Depositories) (Amendment) (No.2) Act 1998, as the case may be, under the Rules in respect of such securities, the Company shall, upon request of a securities holder, permit a transmission of securities held by such securities holder from the register of holders maintained by the registrar of the Company in the jurisdiction of the Approved Market Place ( Foreign Register ), to the register of holders maintained by the registrar of the Company in Malaysia ( Malaysian Register ) subject to the following conditions: the Company shall, upon request of a securities holder, permit a transmission of securities held by such securities holder from the register of holders maintained by the registrar of the Company in the jurisdiction of the other stock exchange Approved Market Place ( Foreign Register ), to the register of holders maintained by the registrar of the Company in Malaysia ( Malaysian Register ) and vice versa subject to the following conditions: (i) there shall be no change in the ownership of such securities; and (i) there shall be no change in the ownership of such securities; and (ii) the transmission shall be executed by causing such securities to be credited directly into the Securities Account of such securities holder. (ii) the transmission shall be executed by causing such securities to be credited directly into the Securities Account of such securities holder. (2) For the avoidance of doubt, the Company where it fulfils the requirements of paragraphs (a) and (b) of Article 55(1) shall not allow any transmission of securities from the Malaysian Register into the Foreign Register. (2) For the avoidance of doubt, the Company where it fulfils the requirements of paragraphs (a) and (b) of Article 55(1) shall not allow any transmission of securities from the Malaysian Register into the Foreign Register. 76 ANNUAL REPORT 2013

78 LIST OF PROPERTIES Registered Owner / Location Date of Acquisition Description Tenure Age of building Land Area Built up Area Existing Use Audited Carrying Amount as at 30 June 2013 (Years) '000 1 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 ) 13 65,340 Sq. ft 58,040 Sq. ft Double storey office with annexed single storey factory building for use as office and factory 4,134 2 Scope Manufacturers (M) Sdn. Bhd. HS(D) 2841, PT 1803, Lot 6181 Jalan Perusahaan 2 Kawasan Perindustrian Parit Buntar Parit Buntar Perak, Malaysia Industrial Land & Building Leasehold for 60 years (expiring on ) 7 87,120 Sq. ft 66,000 Sq. ft Double storey office with annexed single storey factory building for use as head office and factory 6,109 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 40,503 4 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 26,079 ANNUAL REPORT

79 ANALYSIS OF SHAREHOLDINGS AS AT 3 OCTOBER 2013 A. Authorised Share Capital : 200,000, Issued and fully paid-up Share Capital : 50,048, Class of Shares : Ordinary Shares of 0.10 each 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, ,620, , , ,424, ,001 25,024,220 (*) ,118, ,024,221 and above (**) ,106, Total 1, ,484, Remark : * - Less than 5% of Issued Holdings ** - 5% and above of Issued Holdings C. SUBSTANTIAL SHAREHOLDERS Name Number of Ordinary Shares of 0.10 each Direct % Indirect % Lim Chiow Hoo 61,449, Lee Min Huat 57,701, Chew Kong Yoon 60,854, Wah Len Enterprise Sdn. Bhd. 81,200, Dato Lim Chee Wah ,200,000* Lim Ee Tatt 13, ,200,000* Lim Ee Keong ,200,000* Lim Saw Khim ,200,000* Agriculturists Incorporated Development Sdn. Bhd. 33,100, Han Siew King ,100,716 # 6.61 Han Kim Leng ,100,716 # 6.61 Notes: * Deemed interested by virtue of his/her shareholdings of not less than 15% in Wah Len Enterprise Sdn. Bhd. pursuant to Section 6A of the Companies Act, # Deemed interested by virtue of his shareholdings of not less than 15% in Agriculturists Incorporated Development Sdn. Bhd. pursuant to section 6A of the Companies Act, D. DIRECTORS SHAREHOLDINGS Name Number of Ordinary Shares of 0.10 each Direct % Indirect % Lim Chiow Hoo 61,449, Lee Min Huat 57,701, Dato Philip Chan Hon Keong 775, Tan Poh Heng 250, Yong Loong Chen ANNUAL REPORT 2013

80 ANALYSIS OF SHAREHOLDINGS (cont d) AS AT 3 OCTOBER 2013 E. THIRTY LARGEST SHAREHOLDERS Name of Shareholders No. of Shares % of total issued capital 1. Wah Len Enterprise Sdn. Bhd. 81,200, Chew Kong Yoon 50,854, Lee Min Huat 42,701, Lim Chiow Hoo 41,249, Agriculturists Incorporated Development Sdn. Bhd. 33,100, Public Nominees (Tempatan) Sdn. Bhd. 20,312, Pledged Securities Account For Leong KokVvi (E-TWU/LDU) 7. Lim Chiow Hoo 20,200, Lee Min Huat 15,000, Ngan Mee Ling 11,734, Gan Sook Peng 10,014, HLIB Nominees (Tempatan) Sdn. Bhd. 10,000, Pledged Securities Account For Chew Kong Yoon 12. Lee Tack Chong 8,500, Lok Huey Ming 7,849, AIBB Nominees (Tempatan) Sdn. Bhd. 7,708, Pledged Securities Account For Tan Siew Booy (D18) 15. Siew Lee Siew Lee Yong 7,112, Yap Pei Pei 7,045, Wong Lee Peng 6,000, Khor It Kwang 5,966, Lim Jhy Torng 5,555, Lim Seng Chong 3,925, Ong Lai Choon 3,325, Mohammed Ab Halim Bin Ab Rahman 2,700, Lee Meow Lee Meow Yee 2,600, Tee Ah Leck 2,557, Lee Choon Guek 2,520, Wong Jee Yai 2,173, Christina Lay-See Cheah 2,110, Tan Eng Kim 2,058, AIBB Nominees (Tempatan) Sdn. Bhd. 2,027, Pledged Securities Account For Syabas Permai Sdn. Bhd. 30. Getaria Realty Sdn. Bhd. 2,000, ANNUAL REPORT

81 ANALYSIS OF WARRANT HOLDINGS AS AT 3 OCTOBER 2013 A. Total Number of Warrants 2012/2020 ( Warrants ) issued : 118,596,361 Total Number of Warrants outstanding : 118,596,361 Exercise Price Per Warrant : 0.15 each B. ANALYSIS BY SIZE OF WARRANT HOLDINGS Size of holdings No. of holders % No. of Warrants % , , ,001 10, , , , ,222, ,001 5,929,817 (*) ,575, ,929,818 and above (**) ,582, 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, Dato Philip Chan Hon Keong 25, Tan Poh Heng 100, Yong Loong Chen ANNUAL REPORT 2013

82 ANALYSIS OF WARRANT HOLDINGS (cont d) AS AT 3 OCTOBER 2013 D. THIRTY LARGEST WARRANT HOLDERS Name of Warrant holders No. ofwarrants % of total issued Warrants 1. Yap Wah Yup Hong 11,265, Tong Moi Chai 10,000, Wah Len Enterprise Sdn. Bhd. 10,000, Gan Sook Peng 9,840, Siew Lee Siew Lee Yong 9,798, Ngan Mee Ling 9,488, Lee Min Huat 8,540, 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 12. Lee Min Huat 3,000, AIBB Nominees (Tempatan) Sdn. Bhd. 2,244, Pledged Securities Account For Tan Siew Booy (D18) 14. Wong Lee Peng 1,658, Yap Pei Pei 1,621, HLIB Nominees (Tempatan) Sdn. Bhd. 1,600, Pledged Securities Account For Chew Kong Yoon 17. Lok Huey Ming 1,284, Tee Ah Leck 1,110, Chew Kong Yoon 960, Lim Seng Chong 785, Ong Lai Choon 769, RHB Nominees (Tempatan) Sdn. Bhd. 741, Pledged Securities Account For Wong Lee Peng 23. Lim Ee Tatt 700, HLIB Nominees (Tempatan) Sdn. Bhd. 667, Pledged Securities Account For Chan Swee Booi 25. Mohammed Ab Halim Bin Ab Rahman 600, Lee Choon Guek 520, Lee Meow Lee Meow Yee 500, Lee Tack Chong 450, Wong Jee Yai 438, Christina Lay-See Cheah 420, ANNUAL REPORT

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84 PROXY FO No. of ordinary shares held *I / We... of... (Full Name in Block Letters)... being a *Member/Members of Scope (Full Address) Industries Berhad hereby appoint * the Chairman of the meeting or... (Full Name in Block Letters) of... (Full Address) or failing him/her,... of... (Full Name in Block Letters)... as *my/our proxy/proxies to (Full Address) attend and vote for *me/ us and on *my/ our behalf at the Eleventh Annual General Meeting of the Company to be held at Bamboo Room, Scope Manufacturers (M) Sdn. Bhd., Lot 6181 Jalan Perusahaan 2, Kawasan Perindustrian Parit Buntar, Parit Buntar, Perak on Thursday, 21 November 2013 at 11:30 am, and at any adjournment thereof to vote as indicated below: No. of Resolution Resolutions For Against 1 Approval of payment of Directors fees for the financial year ended 30 June Re-election of Mr Lim Chiow Hoo as Director 3 Re-election of Mr Tan Poh Heng as Director 4 Re-appointment of Messrs Grant Thornton as Auditors and to authorise the Directors to fix Auditor s remuneration. 5 Authority under Section 132D of the Companies Act, 1965 for the Directors to issue shares 6 Proposed Amendments to the Articles of Association of the Company (Please indicate with an X in the spaces provided above to how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his/ her discretion) The proportion of my holdings to be represented by my *proxy/ proxies are as follows:- First named Proxy % Second named Proxy % 100% In case of a vote taken by a show of hands, the First Proxy shall vote on *my/ our behalf. As witness my hand this... day of Signature of Member(s)/Common Seal * Strike out whichever is not desired Notes : 1. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. 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, 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 Article 77 of the Articles of Association of the Company and Paragraph 7.16(2) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, a Record of Depositors ( ROD ) as at 15 November 2013 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. ANNUAL REPORT

85 Please fold across the line and close Affix Stamp The Company Secretaries A Menara BHL Bank Jalan Sultan Ahmad Shah Penang Please fold across the line and close

86 (Incorporated In Malaysia) 6th Floor, Menara Hap Seng, Jalan P. Ramlee, Kuala Lumpur. Tel : (60) Fax : (60) sales@scope.com.my, account@scope.com.my Website :