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LEN CHEONGHOLDING

BERHAD(339810-A)

ANNUAL REPORT 2013

CONTENTS01020305060710

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Chairman’s Statements5-Year Financial HighlightsProfile of Board of DirectorsCorporate InformationCorporate StructureNotice of Annual General MeetingStatement of Accompanying Notice of Annual General MeetingAudit Committee Report Statement of Corporate Governance Statement on Risk Management and Internal Control Financial Statements List of Properties Analysis of Shareholdings Appendix AForm of Proxy

LEN CHEONG HOLDING BERHAD ANNUAL REPORT 20131

CHAIRMAN’S STATEMENTDear Shareholders,

On behalf of the Board of Directors, it is my pleasure to present the Annual Report and Financial Statements of Len Cheong Holding Berhad and its subsidiary companies for the financial year ended 31 December 2013.

FINANCIAL PERFORMANCE

The Group’s total revenue for the financial year ended 31 December 2013 was RM 25.7 million as compared to RM25.5 million during the previous financial year. The Group’s revenue has remained fairly consistent throughout given the sustained demand for the Group’s “Farm house” furniture product line.

However, the Group recorded a loss before taxation of RM 1.2 million during the current financial year as compared to a loss before tax of RM 556,000.00 during the previous financial year, primarily due to overall increase in costs and expenditures during the year under review.

Despite the challenging business environment, our management team will continue to expand its sales volume, enhance its product competitiveness, improve efficiency and manage its overall costs and expenditures.

PROSPECT

The business operating environment for the furniture and wood industries continues to be challenging. As such, the Group will be mindful of the challenges and difficulties ahead. Our management team will strive harder in taking various measures and strategies to improve our financial performance with an objective of maximising shareholder’s value.

During the year our management team has explored various new business opportunities such as resource mining, plantation, etc. However these remain exploratory. Our management team will continue to evaluate new businesses as and when the opportunity arises.

DIVIDEND

No dividend has been proposed for the financial year ended 31 December 2013.

ACKNOWLEDGEMENT AND APPRECIATION

On behalf of the Board, I would like to express my sincere gratitude and appreciation to fellow Board members, the management team and the Group’s employees for their dedication, strong commitment and contribution, especially during these challenging times. We would also like to extend our utmost appreciation to our shareholders, financiers, business partners, consultants and the relevant public authorities for their continuous support to the Group.

YBHG. DATUK DR. SOW CHIN CHUANChairman

5-YEAR FINANCIAL HIGHLIGHTSAS AT 31 DECEMBER

Year 2009 2010 2011 2012 2013RM'000 RM'000 RM'000 RM'000 RM'000

Financial ResultsRevenue 24,140 24,993 22,018 25,465 25,700 Profit/(Loss) before Taxation 148 256 97 (556) (1,243) Profit/(Loss) after Taxation 163 287 113 (453) (1,207) Profit/(Loss) attributable to owner 163 287 113 (453) (1,207) Financed byShareholder's fund 20,908 21,195 21,308 20,855 19,648 Net assets 20,908 21,195 21,308 20,855 19,648 StatisticsEarnings/(Loss) per Share (sen) 0.27 0.48 0.19 -0.75 -2.01Gross Dividend per Share (sen) 0 0 0 0 0Net Assets per Share (RM) 34.85 35.33 35.51 34.76 32.75

24,140

24,993

22,018

25,465

25,700

2009

2010

2011

2012

2013

Revenue (RM'000)

148

256

97

(556)

(1,243)

2009

2010

2011

2012

2013

Profit/(Loss) Before Taxation (RM'000)

20,908

21,195

21,308

20,855

19,648

2009

2010

2011

2012

2013

Net Assets (RM'000)

0.27

0.48

0.19

-0.75

-2.01

2009

2010

2011

2012

2013

Earnings/(Loss) Per Share (Sen)


PROFILE OF BOARD OF DIRECTORS

DR. FONG HUI FONG, a Malaysian aged 47, is the Managing Director for the Len Cheong Holding Berhad. She was appointed to the Board on 19 May 2007. She has in-depth knowledge and experience of the furniture industry via her involvement in the industry for the past 19 years.

As the Managing Director of LCHB, she is responsible for setting up the company goals and objectives, reviewing the operations, business strategy succession plans, managing the risk, monitoring the performance/ goals of the Company. Under the vision and mission, the LCHB Group has grown into a reputable furniture exporter and manufacturer in Malaysia.

Presently, she is the chairman of the Remuneration Committee of the Company.

She does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. She has no convictions for any offences over the past 10 years.

YBHG. DATUK (DR) SOW CHIN CHUAN, a Malaysian, aged 54, appointed on 19 May 2007, is the Chairman and Non-Independent & Non-Executive Director of Len Cheong Holding Berhad. He holds a Master of Business Administration and awarded a Doctor of Philosophy (Honoris Causa) in Business Emphasis Entrepreneurship from United States of America. He is also the Executive Chairman & Group Managing Director of DPS Resources Berhad. He has more than 20 years of experience in the construction and wood based industry.

Ybhg. Datuk (Dr) Sow Chin Chuan is also actively involved in social, cultural and charitable activities as follows:

He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company; save he is the spouse of the Non-Independent Non-Executive Director, Datin Chu Kim Guek and the father of the Non Independent Non-Executive Director, Eric Sow Yong Shing and Emily Sow Mei Chet. He has no convictions for any offences over the past 10 years.

Presently, he is the chairman of the Nomination Committee and a member of the Remuneration Committee of the Company.

• Majlis Usahawan Satu Malaysia - President • Federation Of Public Listed Companies Bhd - Exco Member• Majlis Datuk-Datuk Negeri Melaka - Committee Advisor• Majlis Jaksa Pendamai Negeri Melaka - Advisor• World Saw Clan Association - World Vice President • Malaysia Volleyball Association - Vice President • M’sia Furniture Entrepreneur Assoc - Vice President (MFEA) • S.R.J.K (C) Lih Jen, Melaka - LPS Committee/Chairman• Sekolah Menengah Katholik Melaka - Director of LPS • Lions Club of Malacca - Advisor (Presidnet 1992); and• Young Entrepreneur’s Association of Malaysia - Hon. Chairman

YBHG. DATIN CHU KIM GUEK, a Malaysian aged 56, was appointed to the Board on 19 May 2007 as Non-Independent & Non-Executive Director of Len Cheong Holding Bhd. YBhg. Datin Chu has been involved in the wood-based industry since 1984 when she assisted her spouse, YBhg. Datuk (Dr) Sow Chin Chuan in the daily operations of Shing Huat Sawmill Sdn Bhd (now known as DPS Realty Sdn Bhd). She also became involved in running the daily operations of Shantawood Manufacturing Sdn Bhd and DPS Industries Sdn Bhd.

She was also appointed as Executive Director of DPS Resources Berhad, a Company listed on the Main Board of Bursa Malaysia Securities Berhad. She does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company; save she is the spouse of the Chairman and Non-Independent & Non-Executive Director, Datuk (Dr) Sow Chin Chuan and the mother of the Non-Independent Non-Executive Director, Eric Sow Yong Shing and Emily Sow Mei Chet. She has no convictions for any offences over the past 10 years.

, a Malaysian aged 47, is the

for setting up the company goals and objectives,

save he is the spouse of the Non-Independent Non-Executive Director, Datin Chu Kim Guek and the father of the Non

ABD. RAUF BIN ABD RAHIM, a Malaysian aged 66, was appointed to the Board on 17 January 2002 as Independent & Non-Executive Director of Len Cheong Holding Berhad. He is a member of the Audit Committee of the Company since 17 January 2002. He holds a Bachelor Degree of Arts (Hons) from the University of Malaya and a Master of Science in Criminology, from the California State University, Fresno, USA. He is a retired Senior Police Officer and while serving the Polis Diraja Malaysia, he held the commanding position as the officer-in-charge in several districts, such as Seremban, Kuala Muda and Mersing. He was also the Officer-in-Charge of Criminal Investigation for the State of Sabah and Administrative Officer in Sarawak. Prior to retirement, he held the post of Deputy Director of Narcotics Department at Bukit Aman. Presently, he is a member of Audit Committee of the Company.

He does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences over the past 10 years.


PROFILE OF BOARD OF DIRECTORSMOHD ISA BIN ISMAIL, a Malaysian aged 51, was appointed to the Board on 17 January 2002 as the Independent & Non-Executive Director of Len Cheong Holding Berhad. He became the Chairman of the Audit Committee on 16 March 2006 and he was re-appointed as the chairman of the Audit Committee of the Company w.e.f 22 February 2012. He holds a Diploma in Accountancy from the University Technology MARA (1984). From 1986 to 1993, he was a Financial Analyst and Cost Analyst of Motorola Semiconductor Sdn Bhd then became a Dealer’s Reprsentative in Capital Corp Securities Sdn Bhd and K&N Kenanga Berhad for two (2) years. In 1996, he was appointed as Director of Greatwall Plastic Industries Bhd until 1997. Presently, he is also a Director of WMG Advisory Services Sdn Bhd, which involved in the provision of consultancy services. Apart from the company, Encik Mohd Isa is an Independent and Non-Executive Director of Willowglen Berhad.


MR TEO CHEE KOK, a Malaysian aged 46, was appointed to the Board on 1 April 2014 as an Independent & Non-Executive Director. Simultaneously he was also appointed as the member of our Audit Committee. Subsequently on 23 April 2014, he was appointed as the Chairman of our Nomination Committee. He is a member of Malaysian Institute of Accountants and fellow member of the Association of Chartered Certified Accountants.

Mr. Teo started his career in 1989 with an international public accounting firm in Kuala Lumpur until 1993. Thereafter, he served a public listed group of companies based in Kuala Lumpur with diverse business activities ranging from plantation to financial services until 1999. He has over 15 years experience in corporate finance and related activities. Presently, he is a director of Tecnic Group Berhad, EKA Noodles Berhad and Perduren (M) Berhad.


ERIC SOW YONG SHING, a Malaysian aged 33, was appointed to the Board on 18 March 2008 as Non-Independent & Executive Director of Len Cheong Holding Berhad. He joined Shantawood Manufacturing Sdn Bhd as Assistant Supervisor after completing his studies in 1998. He was subsequently promoted to the post of Assistant to Production Director in 2005. He is the son to YBhg. Datuk (Dr) Sow Chin Chuan and YBhg. Datin Chu Kim Guek.

Apart from the company, Mr. Eric Sow is an Executive Director of DPS Resources Berhad, a Company listed on the Main Board of Bursa Malaysia Securities Berhad.

He does not have any onflict of interest with the Company; save he is the son of the Chairman;Datuk (Dr) Sow Chin Chuan and Non-Independent & Non-Executive Director, Datin Chu Kim Guek. He has no convictions for any offences over the past 10 years.

EMILY SOW MET CHET, a Malaysian aged 30, was appointed to the Board on 3 August 2009 as Non-Independent & Non-Executive Director of Len Cheong Holding Berhad. She was graduated in March 2007 from the Auckland University of Technology in New Zealand with a Bachelor of Business. She joined Shantawood Manufacturing Sdn Bhd as Marketing Executive in April 2007 and was subsequently promoted to Marketing Director in 2009. She is the daughter to YBhg. Datuk (Dr) Sow Chin Chuan and YBhg. Datin Chu Kim Guek.

Apart from the company, Miss Emily Sow is an Executive Director of DPS Resources Berhad, a Company listed on the Main Board of Bursa Malaysia Securities Berhad.

She does not have any family relationship with any director and/or major shareholder, nor any conflict of interest with the Company; save she is the daughter of the Chairman; Datuk (Dr) Sow Chin Chuan and Non-Independent & Non-Execu-


CORPORATE INFORMATIONBoard of Directors

YBhg. Datuk (Dr) Sow Chin Chuan Chairman, Non-Independent & Non-Executive DirectorDr Fong Hui Fong Managing Director / DirectorYBhg. Datin Chu Kim Guek Non-Independent & Non-Executive DirectorMohd Isa Bin Ismail Independent & Non-Executive DirectorAbd Rauf Bin Abd Rahim Independent & Non-Executive DirectorYee Yit Yang (Resigned w.e.f 6 March 2014) Independent & Non-Executive DirectorTeo Chee Kok (Appointed w.e.f 1 April 2014) Independent & Non-Executive DirectorEric Sow Yong Shing Non-Independent & Executive DirectorEmily Sow Mei Chet Non-Independent & Non-Executive Director

Audit Committee

Mohd Isa Bin Ismail (Chairman) Independent & Non-Executive DirectorAbd Rauf Bin Abd Rahim Independent & Non-Executive DirectorYee Yit Yang (Resigned w.e.f 6 March 2014) Independent & Non-Executive DirectorTeo Chee Kok (Appointed w.e.f 1 April 2014) Independent & Non-Executive Director

Company Secretary Auditor

Lim Li Fang (MAICSA 7012923) Messrs. McMillan Woods Mea (AF 001995) 305 (Suite 2), Block E, Phileo Damansara 1, 9 Jalan 16/11, Off Jalan Damansara, 46350 Petaling Jaya, Selangor Darul Ehsan Tel: 603-76651872 Fax: 603-79558626

Registered /Correspondence Address Share Registrar

c/o KLCA Corporate Services Sdn. Bhd. Bina Management (M) Sdn Bhd50-1, 52-1 & 54-1, Jalan BPM 2 Lot 10, The Highway Centre, Jalan 51/205Taman Bukit Piatu Mutiara 46050 Petaling Jaya, Selangor Darul Ehsan75150 Melaka Tel: 603-7784 3922 Fax: 603-7784 1988Tel: 606-283 2398 Fax: 606-283 0202

Head Office Principal Bankers

PBR 2, Lot 4, Kawasan Perindustrian HSBC Bank Malaysia BerhadBukit Rambai Malayan Banking Berhad75250 MelakaTel: 606-3514911 Fax: 606-3531090

Remuneration Committee Nomination Committee

Teo Chee Kok (Chairman) (W.e.f 23 April 2014) Teo Chee Kok (Chairman) (W.e.f 23 April 2014)Mohd Isa Bin Ismail (W.e.f 23 April 2014) Mohd Isa Bin Ismail (W.e.f 23 April 2014)Abd Rauf Bin Abd Rahim (W.e.f 23 April 2014) Abd Rauf Bin Abd Rahim (W.e.f 23 April 2014) Datuk Dr Sow Chin Chuan


CORPORATE STRUCTURELEN CHEONG HOLDING BERHAD

(339810-A)

100% 100% 100% 100%

Len Cheong Manufacturing Len Cheong Industries Len Cheong Furniture Len Cheong ResourcesSdn. Bhd. (10089-H) Sdn. Bhd. (194474-V) Sdn. Bhd. (45462-W) Sdn. Bhd. (264846-V)

PRINCIPAL ACTIVITIESLEN CHEONG HOLDING BERHAD (Holding Company)

• Investment holding company and provision of management services to its subsidiary companies.

Subsidiary Companies:-

Len Cheong Furniture Sdn. Bhd.

• Importer, exporter and manufacturer• Manufacturing and trading in furniture• Finishing/Spraying process

Len Cheong Industries Sdn. Bhd.

• Business of property holding• Processing of wood components and parts

Len Cheong Manufacturing Sdn. Bhd..

• Sawmilling & kiln drying plants• Slicing of wood veneer and veneer lamination• Manufacturing of furniture components and parts

Len Cheong Resources Sdn. Bhd. .

• Inactive

• Trading of furniture products



LEN CHEONG HOLDING BERHAD (Company No. 339810-A)

(Incorporated in Malaysia)

NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Nineteenth Annual General Meeting of the Company will be held at the Conference Room, Lot 76 & 77, Kawasan Perindustrian Bukit Rambai, Bukit Rambai, 75250 Melaka on Wednesday, 25 June 2014 at 11.00 a.m. for the following purposes: AGENDA AS ORDINARY BUSINESS 1. To receive and adopt the Audited Financial Statements for the financial year

ended 31 December 2013 together with the Reports of the Directors and the Auditors thereon.

(Please refer to explanatory Note 1)

2. To approve the payment of Directors’ fees of RM30,000 for the financial

year ended 31 December 2013. (2012: RM27,546)

(Resolution 1) 3. To re-elect the following Directors who retire by rotation in accordance with

Article 106 of the Company’s Articles of Association:

(a) Encik Mohd Isa Bin Ismail (Resolution 2) (b) Datin Chu Kim Guek (Resolution 3) 4. To re-elect Mr. Teo Chee Kok who retire in accordance with Article 113 of

the Company’s Articles of Association.

(Resolution 4) 5. To appoint Auditors and to authorise the Directors to fix their remuneration. Notice of Nomination pursuant to Section 172(11) of the Companies Act

1965, a copy of which is attached and marked as “Appendix A” had been received by the Company for the nomination of Messrs. UHY (AF 1411) of Suite 11.05, Level 11, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur as Auditors of the Company in place of the retiring Auditors, Messrs. McMillan Woods Mea (AF 1995) and to propose the following Ordinary Resolution:

“That Messrs. UHY (AF 1411) of Suite 11.05, Level 11, The Gardens South

Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur be and are hereby appointed Auditors of the Company in place of the retiring Auditors, Messrs. McMillan Woods Mea (AF 1995) and such appointment shall be until the conclusion of the next Annual General Meeting at a remuneration to be fixed by the Directors.”

(Resolution 5) AS SPECIAL BUSINESS To consider and, if thought fit, pass with or without any modification, the following Resolutions:

ORDINARY RESOLUTIONS 6. Continuation in office as Independent Non-Executive Director pursuant

to Recommendation 3.3 of the Malaysian Code on Corporate Governance 2012

(a) “That authority be and is hereby given to Encik Abd Rauf Bin Abd

Rahim who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine years, to continue to act as an Independent Non-Executive Director of the Company.”

(Resolution 6)


(b) “That authority be and is hereby given to Encik Mohd Isa Bin Ismail who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine years, to continue to act as an Independent Non-Executive Director of the Company.”

(Resolution 7)

7. Authority to Issue Shares pursuant to Section 132D of the Companies

Act, 1965

“That pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby authorised to issue new shares in the Company at any time until the conclusion of the next Annual General Meeting upon such terms and conditions, for such purposes and to such person or persons whomsoever as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued does not exceed 10% of the issued share capital of the Company for the time being, subject always to the approval of all the relevant authorities being obtained for such allotment and issue.”

(Resolution 8)

8. To transact any other business of which due notice shall have been given. By Order of the Board, Lim Li Fang (MAICSA 7012923) Company Secretary Melaka,

Date: 28 May 2014 Notes: 1. A Member entitled to attend and vote at the Meeting is entitled to appoint a proxy or proxies

to attend and vote in his stead. A proxy may but need not be a Member of the Company. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

2. Where a Member appoints more than one (1) proxy, the appointment shall be invalid unless

he specifies the proportion of his holdings to be represented by each proxy. 3. Where a Member of the Company is an authorized nominee as defined under the Securities

Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds which is credited with ordinary shares of the Company.

4. Where a Member of the Company is an exempt authorized nominee as defined under the

Securities Industry (Central Depositories) Act 1991 which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“Omnibus Account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each Omnibus Account it holds.

5. The Proxy Form must be signed by the Appointor or his Attorney duly authorized in writing,

or if the Appointor is a corporation, either under its Common Seal or under the hand of an Officer or Attorney duly authorised.

6. The Proxy form must be deposited at the registered office of the Company at 50-1, 52-1 &

54-1, Jalan BPM 2, Taman Bukit Piatu Mutiara, 75150 Melaka not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.

7. Depositors who appear in the Record of Depositors as at 18 June 2014 shall be regarded as

Member of the Company entitled to attend the Nineteenth Annual General Meeting or appoint a proxy to attend and vote on his behalf.


Explanatory Notes: Audited Financial Statements for the financial year ended 31 December 2013 Item 1 of the Agenda is meant for discussion only as the provision of Section 169(1) of the Companies Act 1965 does not require a formal approval of the shareholders for the audited financial statements. Hence, this Agenda will not be put forward for voting. Resolutions 6 and 7 Continuation in office as Independent Non-Executive Director pursuant to Recommendation 3.3 of the Malaysian Code on Corporate Governance 2012 In line with the Malaysian Code on Corporate Governance 2012, the Nomination Committee has assessed the independence of Encik Abd Rauf Bin Abd Rahim and Encik Mohd Isa Bin Ismail who served as Independent Non-Executive Directors of the Company for a cumulative term of more than nine years, and have recommended that they continue to act as Independent Non-Executive Directors based on the following justifications: (a) They understand the main drivers of the business and provide a check and balance and bring an

element of objectivity to the Board of Directors. (b) They continue to be scrupulously independent in their thinking and in their effectiveness as

constructive challengers of the Managing Director and Executive Directors. (c) They actively participated in board discussion and provided an independent voice on the Board. Resolution 8 Authority to Issue Shares pursuant to Section 132D of the Companies Act, 1965 The proposed Resolution 8 which is an Ordinary Resolution, if passed, will grant a renewed general mandate (Renewed Mandate) and give the Directors of the Company authority to issue shares of the Company up to an amount not exceeding in total 10% of the issued share capital of the Company for such purposes as the Directors consider would be in the interest of the Company. This would avoid any delay and cost involved in convening a general meeting to specifically approve such an issue of shares. This authority, unless revoked or varied at a general meeting, will expire at the next Annual General Meeting of the Company. The Renewed Mandate will provide flexibility to the Company for allotment of shares for any possible fund raising activities, including but not limited to further placing of shares, for the purpose of funding future investment(s), acquisition(s) and/or working capital. As at the date of this Notice, the Company did not issue any shares pursuant to the mandate granted to the Directors at the Eighteenth Annual General Meeting. The Company did not issue any share pursuant to the Mandate granted thereat because there was no investment, acquisition or working capital that required fund raising activity.

STATEMENT ACCOMPANYING NOTICE OF NINETEENTH ANNUAL GENERAL MEETING(Pursuant to Paragraph 8.27(2) of Bursa Malaysia Securities Berhad Main Market Listing Requirements)

The Directors who are standing for re-election at the Nineteenth Annual General Meeting are as follows:

(a) Encik Mohd Isa Bin Ismail(b) Datin Chu Kim Guek(c) Mr Teo Chee Kok

The details of the above Directors are set out in the Profile of Directors on pages 3 to 4 of this Annual Report. Their securities holdings in the Company are set out on page 88 to 89 of this Annual Report.


AUDIT COMMITTEE REPORTCOMPOSITION OF MEMBERS

There are 3 Members in the Audit Committee of the Company, and the composition of the committee are as follows:-

Mohd. Isa Bin Ismail (Chairman) Independent & Non-Executive DirectorAbd. Rauf Bin Abd. Rahim Independent & Non-Executive Director Mr Yee Yit Yang (Resigned w.e.f 6 March 2014) Independent & Non-Executive Director Mr Teo Chee Kok (Appointed w.e.f 1 April 2014) Independent & Non-Executive Director

TERMS OF REFERENCE (EXISTING)

A) Memberships

The members shall be appointed by the Board from amongst the Directors and comprises of not less than three (3) Members. A majority of whom shall be Independent Non-Executive Directors and at least one (1) member must be a Member of the Malaysian Institute of Accountants (MIA) or possess such other qualifications and/or experience as approved by Bursa Malaysia Securities Berhad.

The Chairman of the Committee shall be an Independent Non-Executive Director appointed by the Board and he will report on each of the Audit Committee Meeting to the Board of Directors.

The term of office an performance of each Audit committee Member shall be reviewed by the Board at least once in every three (3) years.

No Alternate Director shall be a Member of the Audit Committee.

In the event of any vacancy in the Committee, resulting in the number of Members being reduced to below three (3), the Board must fill the vacancy within three (3) months.

B) Authority

The Board empowered the Committee to investigate any matter / activities within its terms of reference with full access to both the External and Internal Auditors including the staff of the Group.

C) Duties and Responsibilities

• To review: i. ii. iii. iv. v. vi. vii. viii.

•

the quarterly results and year end financial statements; any related party transactions and conflict of interest situation thereon; the nature and scope of the audit plan evaluation of the system of internal controls; any matters arising from the audit; the internal audit program, and its results or investigation undertaken and whether or not, recommended appropriate action is taken on the major findings of internal investigations;matters concerning the External Auditors (appointment, fees, dismissal, resignation); Statement of Internal Control of the Group for inclusion in the Annual Report; and The Board’s Statements on compliance with the Malaysian Code of Corporate Governance for inclusion in the Annual Report.

To carry out such functions and assignments, as may be defined by the Committee and Board of Directors.


AUDIT COMMITTEE REPORT•

NEW TERMS OF REFERENCE

In addition to the existing terms of reference above, on 1 April 2008, the Board had passed a resolution to also adopt the revised Malaysian Code on Corporate Governance released by the Securities Commission on 1 October 2007, the following new terms of reference which sets out the roles and responsibilities of the Audit Committee as follows:-

Functions and Duties

(i)

(ii)

(iii)

(iv)

(v)

(vi)•

•

•

•

(vii)

(viii)

(ix)

(x)

Where the Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the Listing Requirements, the Committee must promptly report such matter to the Bursa Malaysia Securities Berhad.

To consider the appointment of the external auditors, the audit fee and any questions of resignation or dismissal;

To discuss with external auditors before the audit commences, the nature and scope of audit, and ensure co-ordination where more than one audit firm is involved;

To review the quarterly and year-end financial statements of the Group and the Company, focusing particularly on any changes in or implementation of major accounting policies and procedures, significant adjustments arising from the audit, the going concern assumption and compliance with applicable approved accounting standards and other legal and regulatory requirements;

To discuss problems and reservation arising from the interim and final audit, and any matter the auditors may wish to discuss (in absence of management where necessary);

To review external auditors’ management letters and management’s response;

To do the following in respect of the internal audit function: review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work;review the internal audit program and results of the internal audit process and where necessary ensure that appropriate action is taken on the recommendation of the internal audit function;review any appraisal or assessment of the performance of members of the internal audit function; andapprove any appointment or termination of senior staff members of the internal audit function and toprovide the opportunity for the resigning staff member to submit his reasons for resigning.

To consider any related party transactions and conflict of interest situation that may arise within the Group including any transaction, procedure or course of conduct that raises questions of management integrity;

To consider the major findings of internal investigation and the management’s response;

To have explicit authority to investigate certain matters, the resources which it needs to do so e.g. professional advice and full access to information;

To promptly report to the Bursa Malaysia Securities Berhad on matters reported by it to the Board that have not been satisfactorily resolved resulting in a breach of the Listing Requirements of Bursa Malaysia Securities Berhad; and


AUDIT COMMITTEE REPORT(xi)

Rights and Powers of the Audit Committee

The Audit Committee shall:

(a) (b) (c) (d) (e)

(f)

(g) (h)

Co-operation from Management

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

Meetings

Meetings shall be held not less than 4 times a year. One meeting shall be held prior to the annual financial statements being presented to the Board for approval. Additional meetings may be held at the discretion of the Committee or at the request of the external auditor. The external auditor has the right to appear and be heard at any meetings of the Audit Committee and shall appear before the Committee when required to do so by the Audit Committee.

The quorum for the meeting shall be 2 members, one of whom shall be the Chairman of the Audit Committee.

The Company Secretary shall be the Secretary of the Audit Committee.

The attendance details of Audit Committee Member for the Audit Committee Meetings for financial year 2013:

Audit Committee Member Attendance

Abd Rauf Bin Abd Rahim, Member 4/4Independent & Non-Executive Director

Mohd Isa Bin Ismail, Chairman 4/4Independent & Non-Executive Director

To consider other topics as defined by the Board.

Have explicit authority to investigate any matters within its terms of reference;Have the resources which it needs to perform its duties;Have full access to any information which it requires in the course of performing its duties;Have unrestricted access to the chief executive officer and the chief financial officer;Have direct communication channels with the external auditors and internal auditors (if any);Be able to obtain independent professional or other advice in the performance of its duties at the cost of the Listed Company;Be able to invite outsiders with relevant experience to attend its meetings, if necessary; andBe able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company.

Yee Yit Yang, Member 4/4Independent & Non-Executive Director(Resigned w.e.f 6 March 2014)

Mr Teo Chee Kok , Member 0/0Independent & Non-Executive Director (Appointed w.e.f 1 April 2014)


AUDIT COMMITTEE REPORTAt least once a year, the Committee shall meet with the External Auditors without the Executive Board Members present. The presence of the External Auditor will be requested, if required.

The Committee also could convene meeting with the External Auditor without the presence of an Executive Director, whenever necessary.

The meetings are normally attended by the Head of Finance. Attendance of other Board Members and Employees shall be by invitation of the Committee only.

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

During the financial year, the Committee:-

•

•

•

•

•

INTERNAL AUDIT FUNCTION

The Internal Audit Department which reports directly to the Audit Committee provides an independent and objective assurance on risk management and internal controls.

It ensures the management policies and directives are adhered to by the Group and its management.

The Internal Audit activities carried out for the financial year under review focused on Marketing (revenue) and Production (costs) Departments because in view of present competitive market and global economic crisis, prudence should be focused on these two (2) key areas which will have a material impact to the Group.

The Internal Audit Department also ensured that strict compliance by the Group with the Listing Requirements and all relevant legislations, guidelines and regulations issued by regulatory authorities.

Reviewed the unaudited quarterly reports and audited financial statements of the Group prior to recommendations to the Board of Directors for approval;

Discussed and review the External Auditors’ scope of work and the audit planning, report and any significant changes in the accounting and auditing issues arises from the audit, reviewed the management letter and management’s response including on the accounting standards issued by the Malaysian Accounting Standards Board;

Discussed the internal control issues, risk management and internal audit plan to carry out regular reviews of the adequacy and effectiveness of key controls and procedures;

Monitoring the implementation of the risk management; and

Discussed with the External Auditors, excluding the attendance of the Executive Member of the Committee.


CORPORATE GOVERNANCEThe Board of Directors of Len Cheong Holding Berhad (LCHB) is fully committed and emphasizes on good corporate governance and practice throughout the whole Group as to enhance and protect the shareholders’ interest and financial performance of the Group. The Board adheres to the Principles and Best Practices as set out in the Malaysian Code of Corporate Governance, except in respect of the following:-

Disclosure of Directors’ Remuneration

Contrary to the disclosure requirements as indicated in the best practices of the Malaysian Code on Corporate Governance, the Board would not be providing details of remuneration awarded to each Director. However, in compliance with the Bursa Malaysia Securities Berhad’s Listing Requirements, the remuneration paid to Directors are disclosed in aggregation and analysed into bands as set out in this Annual Report and the Financial Statements under Note 21.

DIRECTORS

The competent knowledge and specialized skills of each individual Directors reflects a mixture of financial, technical and business experiences that is importance and crucial to the Group’s performance and business.

Composition and Balance

Since the Board is primarily responsible for the conduct and performance of the Group, the Directors have met to discuss the financial status, operations policies and other corporate proposals for the whole Group during the financial year under review.

Name Position Attendance

Dr Fong Hui Fong Managing Director 4/4YBhg. Datuk (Dr) Sow Chin Chuan Non-Independent & Non-Exec. Director 4/4 YBhg. Datin Chu Kim Guek Non-Independent & Non-Exec. Director 4/4

Abd. Rauf Bin Abd. Rahim Independent & Non-Exec. Director 4/4 Mohd Isa Bin Ismail Independent & Non-Exec. Director 4/4

Eric Sow Yong Shing Non-Independent & Exec. Director 4/4Emily Sow Mei Chet Non-Independent & Non-Exec. Director 4/4

Directors’ Training

Presently, the Board has Eight (8) Members, of which comprising of one (1) Executive Director, three (3) Non-independent & Non-Executive Directors, one (1) Non-independent & Executive Director and three (3) Independent & Non-Executive Directors. The profiles of the current Directors are as per “Profile of Board of Directors” in this Annual Report. The Directors’ meeting attendance are as follows:-

Yee Yit Yang (Resigned w.e.f 6 March 2014) Independent & Non-Exec. Director 4/4Teo Chee Kok (Appointed w.e.f 1 April 2014) Independent & Non-Exec. Director 0/0

All Directors have attended and successfully completed the Mandatory Accreditation Programme conducted by the Bursa Malaysia Securities Berhad. The Board fully supports the need for its members to continuously enhance their skills and knowledge, to keep abreast of the developments in the economy, industry and technology, to effectively carry out their duties and responsibilities as directors in compliance with the Listing Requirements of Bursa (“LR”).

The Board is regularly updated on new statutory and regulatory requirements relating to their duties and responsibilities as Directors.


CORPORATE GOVERNANCE

Supply of Information

The Board has full unrestricted access to the information of the Group to discharge their duties on the Group’s business and affairs. Beside that, the Board has also direct access to the Internal Audit Department and Company Secretary. The Directors and the Management were advised from time to time on statutory regulatory and corporate developments. At the same time, the Directors also obtain other independent professional advisers in furtherance of their duties.

Appointment to the Board

Audit Committee

The composition, terms of reference and summary of the activities of the Audit Committee are set out separately in the Audit Committee Report.

Remuneration Committee

The Remuneration Committee’s duties include assessing and recommending on all its remuneration to Directors to the Board of Directors.

Nomination Committee (NC)

Re-election

DIRECTORS’ REMUNERATION

Basis

The Board believes that the Directors’ remuneration packages and its levels should be sufficient to attract, retain and incentivize the Directors to manage a successful Group. For Non-Executive Directors, the recommendations will be based on their experience and level of responsibilities.

In accordance with the Articles of Association of the Company, any Director appointed during the year is required to retire and seek election by shareholders at the following Annual General Meeting (“AGM”) immediately after their appointment and that one third of the Board members are required to retire at every AGM and be subject to re-election by shareholders. All directors, including the Managing Director shall retire from office at least once in every three years but shall be eligible for re-election.

Directors’ Training (Continued)

All Directors have attended the Mandatory Accreditation Program (“MAP”) prescribed by Bursa. The Board will continue to evaluate and determine the training needs of its Directors on an on-going basis. During the financial year under review, the Directors have attended various seminars and briefings covering areas which they have collectively or individually considered as useful in discharging their stewardship responsibilities. Among the seminars and courses attended by one or more Directors during the year are:-• Cost Reduction Program• Transformational Leadership• Professionalism in engagement

The Nomination Committee’s duties include assessing and recommending on all its appointments of Directors to the Board of Directors. The NC shall comprise exclusively non-executive directors with a majority of independent directors. At the compliance of the NC, the quorum shall be two non-executive directors or the majority of members present must be independent non-executive directors. The responsibilities of the NC are to identify skill and expertise that are relevant to the effective functioning of the Board, to review the Board structure and composition, and to select and propose suitable candidates for appointment to the Board and review its required mix of skills and experience, including core competencies which non-executive directors should bring to the Board.


CORPORATE GOVERNANCE

Disclosure

The details of the remuneration of the Directors for the year ended 31 December 2013 is summarised as follows:-

Directors Fees Emoluments Defined Total ContributionPlan

Executive NIL RM 354,000 RM 48,860 RM 402,860 Non-Executive RM 30,000 NIL NIL RM 30,000

Range of Remuneration

Range Executive Non-Executive

Below RM50,000 1 3 RM50,001 – RM100,000 NIL NIL

SHAREHOLDERS

Dialogue Between Companies And Investors

The Board recognises the importance of effective communication between the Board, Investors and Shareholders of the Company. Information on the performance of the business and corporate developments including financial performance were disseminated to the Investors and Shareholders of the Company through its Quarterly Reports and Annual Reports.

Annual General Meeting

The Annual General Meeting (“AGM”) of the Company which is held once every year is an opportunity for dialogues and interaction with the Shareholders. The Shareholders are encouraged to participate in the AGM and are given sufficient opportunity to enquire about the Company’s financial status and business activities.

ACCOUNTABILITY

Financial Reporting

The Board ensures the compliance of the accounting standards in the financial reporting to the Shareholders are being adhered to. The Directors’ Responsibilities Statement for preparing the Financial Statements is set out thereunder the Statement on Directors’ Responsibility of this Annual Report.

Internal Control

The Statement of Internal Control for the Group which provides an overview of the internal controls within the Group is set out in this Annual Report as well.

Relationships with Auditors

The role of the Audit Committee with the External Auditors are set out under the Audit Committee Report of this Annual Report.

Utilisation of Proceeds

There were no utilisation of proceeds by the Company as the Company did not exercise any public issues for the year ended 31 December 2013.

Procedure

The Board as a whole, will approve the remuneration of all the Directors of the Company.

DIRECTORS’ REMUNERATION (Continued)


CORPORATE GOVERNANCEShare Buyback

There was no share buyback by the Company during the financial year ended 31 December 2013.

Options, Warrants or Convertible Securities

There were no options, warrants or convertible securities issued by the Company during the financial year.

American Depository Receipt (ADR)

There were no American Depository Receipt sponsored by the Company during the financial year.

Global Depository Receipt (GDR)

There were no Global Depository Receipt sponsored by the Company during the financial year.

Sanctions and / or Penalties

Non-Audit Fees

Variation of Results

There is no material variance between the financial results and the profit estimate or unaudited results previously made for the financial year ended 31 December 2013.

Profit Guarantee

There was no profit guarantee given by the Company during the financial year.

Material Contracts

There were no material contracts outside the ordinary course of business, entered into by the Company and its subsidiary companies, involving Directors’ and/or major shareholders’ interests and/or related parties for the financial year 2013.

Recurrent Related Party Transactions

There were recurrent related party transactions entered into by the Company and/or its subsidiary companies whether of a revenue or trading nature, for the financial ended 31 December 2013 which were disclosed in the Financial Statements under Note 22.

Revaluation Policy on Landed Properties

The Company does not adopt policy of regular revaluation.

There was no non-audit fees paid to external auditors during the financial year.

There were no sanctions and/or penalties imposed on the Company and its subsidiary companies, Directors, or management by the relevant regulatory bodies.


STATEMENT OF RISK MANAGEMENT AND INTERNAL CONTROLIn compliance with Bursa Malaysia Securities Berhad Listing Requirements, paragraph 15.26(b) and the Practice Note no. 9 and as guided by the Statement on Internal Control: Guidance for Directors of Public Listed Companies, the Board is pleased to set out the following statement for the financial year ended 31 December 2012.

Board Responsibility

The Directors acknowledges its stewardship responsibility for the Group’s system of internal control that covers all aspects of its business. While acknowledging their responsibility for the system of internal control, however, it should be noted that such a system is to designed to manage, it cannot totally eliminate risks and therefore cannot provide absolute assurance against the Group failing to achieve its objectives or making material losses. The system can however provide reasonable assurance against material misstatement or loss.

Internal Control Systems and Risk Management Framework

The key elements that the Directors have established in reviewing the adequacy of the system of internal control are as follows:

Some of the key elements of the Group’s internal control system are as follows:-

• Clear organisation structure with delineated reporting lines, authority limits are defined for board members and senior management within an appropriate organization structure;• Scheduled operational and management meetings;• Staff recruitment goes through a process and there is a performance appraisal system as well as training and development programmes in place to achieve the objective of ensuring staff are competent to carry out their duties and responsibilities; and• The Audit Committee and the Board monitor and review the Group performance and financial results at their quarterly meeting.

The Group’s internal control and monitoring procedures include:-

• Clearly defined systems and procedures for key operational and financial departments, including maintenance of good operational and financial records and controls and the production of accurate and timely management information;• Detailed reporting of trading results, balance sheets and cash flows, with regular review by the management; • Control of key financial risks through clearly laid down authorization levels and proper segregation of accounting; and• Regular information provided to the management, covering financial performance and key business indicators and cash flow performance.

The above elements serve to ensure that there is on going compliance with polices, procedures, Standards and legislations whilst identifying, evaluating, assessing the effectiveness of the Group’s system of financial, Compliance, operational controls and management of significant risks affecting the business.


STATEMENT OF RISK MANAGEMENT AND INTERNAL CONTROLRisk Management

The Board recognizes the importance of risk management, as such the control processes are reviewed by the Board on an ongoing basis for identification and mitigation of the major risks within the Group. Besides this, the participation of the executive directors in the daily activities has also reduced the business and operational risks of the Group. The executive directors and senior management regularly organised informal meetings for purpose of identifying and managing the business risk of the Group.

Fire protection systems at the facilities undergo routine inspection and maintenance under the oversight of the occupational safety and health committee. These include periodic training of the fire fighting squad and security team as well as emergency response procedures.

Apart from fire protection measures, the Board also ensures that appropriate insurance cover is procured to safeguard most of the assets.

Internal Audit Function

The scope of internal audit function includes operational, financial and compliance review. The scope of these reviews is based on management’s assessment of operational, financial and compliance risk.

During the year, the internal auditors reviewed the inventory control of a subsidiary, Len Cheong Furniture Sdn. Bhd. Where weaknesses were identified, recommended procedures have been or are being put in place to strengthen controls.

Weaknesses in Internal Control that Result in Material Losses

There were no material losses incurred during the financial year under review as a result of weaknesses in internal control. The Board and management will continue its efforts to strengthen and enhance the control environment.


Directors’ report for the financial year ended 31 December 2013

The Directors are pleased to submit their Annual Report to the members together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2013.

Principal activities

The principal activities of the Company consist of that of an investment holding company and provision of management services to its subsidiaries. The principal activities of its subsidiaries are set out in Note 14 to the financial statements. There are no significant changes in the nature of these activities during the financial year.

Financial results

Dividends There is no unappropriated profit available for distribution as dividend for the financial year under review.

Reserves and provisions

All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.

Bad and doubtful debts

Before the statements of profit and loss and other comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and no allowance for doubtful debts is required to be made and satisfied themselves that all known bad debts had been written off and no allowance had been made for doubtful debts.

Len Cheong Holding Berhad (Incorporated in Malaysia)


Group CompanyRM RM

Loss before taxation (1,243,417) (251,050) Taxation 36,785 2,464 Net loss for the financial year (1,206,632) (248,586) Other comprehensive loss - - Total comprehensive loss for the financial year (1,206,632) (248,586)


Directors’ report

for the financial year ended 31 December 2013 (continued)

Bad and doubtful debts (continued)

At the date of this report, the Directors are not aware of any circumstances which would render the amounts written off for bad debts in the financial statements inadequate to any substantial extent or require any allowance for doubtful debts to be made. Current assets

Before the statements of financial position and statements of profit and loss and other comprehensive income of the Group and of the Company were made out, the Directors took reasonable steps to ensure that any current assets, other than debts, which were unlikely to be realised in the ordinary course of business, their values as shown in the accounting records of the Group and of the Company had been written down to an amount that they might be expected to be realised. At the date of this report, the Directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

Valuation method

At the date of this report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

Contingent and other liabilities

At the date of this report, there does not exist: (i) any charge on the assets of the Group and of the Company which has arisen since the

end of the financial year which secures the liabilities of any other person; or (ii) any contingent liabilities in respect of the Group and of the Company that has arisen

since the end of the financial year other than as disclosed in Note 25 to the financial statements.

In the opinion of the Directors, no contingent liabilities or other liabilities of the Group and of the Company have become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.



Directors’ report for the financial year ended 31 December 2013 (continued)

Change of circumstances

At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and of the Company that would render any amount stated in the financial statements misleading.

Items of an unusual nature

The results of the operations of the Group and of the Company for the financial year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature. No item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.

Issue of shares or debentures

There were no issue of shares and debentures during the financial year.

Options granted over unissued shares

No option were granted to any person to take up unissued shares of the Company during the financial year.

Warrants 2003/2013

On 15 December 2003, the Company issued 8,000,000 warrants in conjunction with the right issue on the basis of one free warrant attached to every two right shares subscribed. Each warrant entitles the registered holder to subscribe for one (1) new ordinary share of RM1.00 each at the exercise price of RM1.00 per share at any time during the exercise period. The duration and exercise period of the warrants is from 15 December 2003 to 14 December 2013.

The warrants are constituted by a Deed Poll dated 16 October 2003.

The registered holders have no right to participate by virtue of the warrants in any other share issue of the Company and its subsidiaries.



Directors’ report

for the financial year ended 31 December 2013 (continued)

Warrants 2003/2013 (continued)

Upon expiry of the exercise period, any warrants which have not been exercised will lapse and cease to be valid for any purpose. As at the end of the current financial year, no exercise of warrants had taken place and the outstanding warrants in the Company remains at 8,000,000. The above warrants had expired on 13 December 2013 and were removed from the official list of Bursa Malaysia Securities Berhad on 16 December 2013. Directors The names of the Directors of the Company in office since the date of the last report and at the date of this report are: Datuk Sow Chin Chuan Datin Chu Kim Guek Ms. Fong Hui Fong En. Abd Rauf Bin Abd Rahim En. Mohd Isa Bin Ismail Mr. Eric Sow Yong Shing Ms. Emily Sow Mei Chet Mr. Teo Chee Kok (Appointed on 1 April 2014) Mr. Yee Yit Yang (Resigned on 6 March 2014) Directors’ benefits During and at the end of the year, no arrangements subsisted to which the Company is a party, being arrangements with the object or 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. Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than Directors’ remunerations disclosed in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except as disclosed in Notes 23 and 24 to the financial statements.



Directors’ report for the financial year ended 31 December 2013 (continued)

Directors’ interests in shares

According to the Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965, the interests of those Directors who held office at the end of the financial year in the shares of the Company during the financial year ended are as follows: Number of ordinary shares of RM1.00 each 1.1.2013 Bought Sold 31.12.2013 Direct interest Datuk Sow Chin Chuan* 19,379,400 - - 19,379,400 En. Mohd Isa Bin Ismail* 200 - - 200 Deemed Interests Datin Chu Kim Guek* *119,379,400 - - 19,379,400 * By virtue of their substantial interest in shares of the Company, Datuk Sow Chin Chuan, Datin Chu Kim Guek, Mr.

Eric Sow Yong Shing and Ms. Emily Sow Mei Chet are also deemed to be interested in the shares of the subsidiaries to the extent the Company has an interest.

*1 This is her spouse’s interest in the ordinary shares of the Company which shall be treated as her in the ordinary

shares of the Company pursuant to Section 134(12)(c) of the Companies Act, 1965. Other than as disclosed above, none of the other Directors in office at the end of the financial year had any interest in the shares of the Company and its related corporations or hold any interest in the options and warrants of the Company during the financial year ended.

Auditors

The auditors, McMillan Woods Mea, have indicated that they do not wish to seek re-appointment. In accordance with a resolution of the Board of Directors dated 23 April 2014. Datuk Sow Chin Chuan Director Fong Hui Fong

Director LEN CHEONG HOLDING BERHAD ANNUAL REPORT 201325



Note 2013 2012 2013 2012RM RM RM RM

Revenue 5 25,699,985 25,465,361 - - Cost of sales (24,766,436) (24,135,438) - - Gross profit 933,549 1,329,923 - - Other operating income 6 1,553,194 439,921 - - Administrative and general expenses (1,743,255) (1,625,770) (251,050) (253,432) Other expenses (1,287,264) (130,525) - Distribution costs (206,493) (241,448) - - Results from operating activities (750,269) (227,899) (251,050) (253,432) Finance costs 7 (493,148) (327,928) - - Loss before taxation 8 (1,243,417) (555,827) (251,050) (253,432) Taxation 9 36,785 103,139 2,464 664 Loss for the financial year (1,206,632) (452,688) (248,586) (252,768) Other comprehensive loss - - - - Total comprehensive loss for the financial year (1,206,632) (452,688) (248,586) (252,768)

Loss and total comprehensive loss attributable to:Owners of the Company (1,206,632) (452,688)

Loss per share attributable to the owners of the Company (sen per share)

Basic 10 (2.01) (0.75)

Diluted 10 (2.01) (0.75)

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

Group Company

Statements of Profit and Loss and Other Comprehensive Incomefor the financial year ended 31 December 2013



Note 2013 2012RM RM

Non-current assetsProperty, plant and equipment 11 13,564,561 14,133,250 Investment properties 12 - 6,267,596

13,564,561 20,400,846 Current assetsAssets held for sale 13 6,267,596 - Inventories 15 8,800,666 8,699,016 Trade and other receivables 16 7,004,238 7,921,493 Cash and bank balances 207,407 281,930 Total current assets 22,279,907 16,902,439 Total assets 35,844,468 37,303,285

Equity and Liabilities

Capital and reservesShare capital 17 60,000,000 60,000,000 Reserves 18 (40,351,621) (39,144,989) Total equity 19,648,379 20,855,011

Non-current liabilitiesLong term borrowings 19 51,614 171,584 Other payables 20 4,291,514 4,291,514 Deferred taxation 21 838,609 872,930

5,181,737 5,336,028 Current liabilitiesShort term borrowings 19 9,202,699 9,226,727 Trade and other payables 20 1,809,634 1,883,500 Provision for taxation 2,019 2,019 Total current liabilities 11,014,352 11,112,246 Total liabilities 16,196,089 16,448,274 Total equity and liabilities 35,844,468 37,303,285


Statements of Financial Position as at 31 December 2013

Group



Note 2013 2012RM RM

Non-current assetsInvestment in subsidiaries 14 23,801,016 23,801,016

23,801,016 23,801,016 Current assetsOther receivables 16 1,526,854 1,526,854 Cash and bank balances 3,153 735 Total current assets 1,530,007 1,527,589 Total assets 25,331,023 25,328,605

Equity and Liabilities

Capital and reservesShare capital 17 60,000,000 60,000,000 Reserves 18 (37,816,216) (37,567,630) Total equity 22,183,784 22,432,370 Current liabilitiesOther payables 20 3,147,239 2,896,235 Total liabilities 3,147,239 2,896,235 Total equity and liabilities 25,331,023 25,328,605


Statements of Financial Position as at 31 December 2013 (continued)

Company



Distributable

Share Accumulated Group Share capital premium losses Total

RM RM RM RM

At 1 January 2012 60,000,000 856,213 (39,548,514) 21,307,699 Total comprehensive lossfor the financial year - - (452,688) (452,688) At 31 December 2012 60,000,000 856,213 (40,001,202) 20,855,011 Total comprehensive lossfor the financial year - - (1,206,632) (1,206,632) At 31 December 2013 60,000,000 856,213 (41,207,834) 19,648,379

Share Accumulated Company Share capital premium losses Total

RM RM RM RM

At 1 January 2012 60,000,000 856,213 (38,171,075) 22,685,138 Total comprehensive lossfor the financial period - - (252,768) (252,768) At 31 December 2012 60,000,000 856,213 (38,423,843) 22,432,370 Total comprehensive lossfor the financial year - - (248,586) (248,586) At 31 December 2013 60,000,000 856,213 (38,672,429) 22,183,784

Attributable to owners of the CompanyNon-distributable

Statements of Changes in Equityfor the financial year ended 31 December 2013




Note 2013 2012RM RM

Cash flows from operating activitiesLoss before taxation (1,243,417) (555,827)

Adjustments for: Depreciation of property, plant and equipment 1,227,036 1,114,283 Interest expenses 493,148 327,928 Inventories written off - 496,457 Insurance claim receivable written off 1,253,216 130,525 Impairment of trade receivables 34,048 - Gain on disposal of property, plant and equipment (5,682) (29,797) Unrealised gain on foreign exchange (192,549) (30,978) Operating profit before working capital changes 1,565,800 1,452,591 (Increase)/decrease in inventories (101,650) 156,465 (Increase) in trade and other receivables (177,460) (124,809) (Decrease) in trade and other payables (73,867) (676,627) Cash generated from operations 1,212,823 807,620 Interest paid (493,148) (327,928) Taxation refunded 2,464 88,164

Net cash generated from operating activities 722,139 567,856

Cash flows from investing activitiesPurchase of property, plant and equipment 22 (666,665) (2,038,000) Proceeds from disposal of property, plant and equipment 14,000 29,800

Net cash (used in) investing activities (652,665) (2,008,200)

Cash flows from financing activitiesPayments to finance lease payables (144,383) (133,112) Net changes in bankers’ accceptance 5,000 50,000

Net cash (used in) financing activities (139,383) (83,112)


Statements of Cash Flows for the financial year ended 31 December 2013

Group



Note 2013 2012RM RM

Net (decrease) in cash and cash equivalents (69,909) (1,523,456)

Cash and cash equivalentsat beginning of financial year (1,569,553) (46,097)

Cash and cash equivalents at end of financial year (1,639,462) (1,569,553)

Analysis of cash and cash equivalents:Cash and bank balances 207,407 281,930 Bank overdrafts 19 (1,846,869) (1,851,483)

(1,639,462) (1,569,553)

Cash flows from operating activitiesLoss before taxation (251,050) (253,432)

Changes in working capital Increase in other payables 1,851 19,541

Cash (used in) operating activities (249,199) (233,891)

Taxation refunded 2,464 664

Net cash (used in) operating activities (246,735) (233,227)

Cash flows from financing activitiesAdvances to subsidiaries 249,153 233,921

Net cash generated from financing activities 249,153 233,921

Net increasein cash and cash equivalents 2,418 694

Cash and cash equivalentsat beginning of financial year 735 41

Cash and cash equivalents at end of financial year 3,153 735

Represented by:Cash at banks 3,153 735


Group

Statements of Cash Flows for the financial year ended 31 December 2013


Notes to the financial statements for the financial year ended 31 December 2013

1 General information

The principal activities of the Company consist of that of an investment holding company and provision of management services to its subsidiaries. The principal activities of its subsidiaries are set out in Note 14. There are no significant changes in the nature of these activities during the financial year. The Company is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Main Board of the Bursa Malaysia Securities Berhad. The address of the registered office and principal place of business of the Company is 50-1, 52-1 & 54-1, Jalan BPM 2, Taman Bukit Piatu Mutiara, 75150 Melaka. The principal place of business of the Company is located at Lot 4, 9556, Kawasan Perindustrian Bukit Rambai, 75250 Melaka. The financial statements are presented in Ringgit Malaysia, which is its functional currency.

2 Basis of preparation of financial statements

The financial statements of the Group and of the Company have been prepared under the historical cost basis unless otherwise indicated in the individual policy statements in Note 3 to the financial statements and comply with Malaysian Financial Reporting Standards, Financial Reporting Standards and the requirements of the Companies Act, 1965.

3 Summary of significant accounting policies

(a) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Acquisitions of subsidiaries are accounted for by applying the purchase method identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in other comprehensive income. The cost of a busi-ness combination is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the business combination



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 3 Summary of significant accounting policies (continued)

(a) Basis of consolidation (continued) Any excess of the cost of business combination over the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill on the statement of financial position. Any excess of the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised as income in profit or loss on the date of acquisition. When the Group acquires a business, embedded derivatives separated from the host contract by the acquiree are reassessed on acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

(b) Subsidiaries Subsidiaries are entities when the Group has rights to variable return from its involvement with the entity and has ability to affect those returns through its power over the entity. Besides that, potential voting rights are also considered when assessing control and it must be presently exercisable and substantial. However, if the Group does not have majority voting rights, it is considered to have de facto power if it is able to significantly affect the investee’s return by directing their activities.

In the Company’s separate financial statements, the Company’s investments in subsidiaries are stated at cost less impairment losses; if any.

(c) Property, plant and equipment and depreciation

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and to the Company and the cost of the item can be measured reliably.

Subsequent to recognition, plant and equipment and furniture and fixtures are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group and the Company recognise such parts as individual assets with specific useful lives and depreciation, respectively.



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 3 Summary of significant accounting policies (continued) (c) Property, plant and equipment and depreciation (continued)

Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. Depreciation of the assets is computed on a straight line basis over the estimated useful lives as follows: Long leasehold land Remaining lease periods

of 56 – 73 years Buildings 2% - 3% Plant and machinery 8% - 10% Furniture, fittings and equipment 4% - 10% Motor vehicles 10% - 20%

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate. Fully depreciated assets are retained in the accounts until they are no longer in use. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

(d) Leases

Assets financed by finance leases arrangements which transfer substantially all the risks and rewards of ownership to the Company are capitalised as property, plant and equipment, and the corresponding obligations are treated as liabilities. The assets so capitalised are depreciated in accordance with the accounting policy on property, plant and equipment.

Assets acquired by way of hire purchase are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the statement of financial position as borrowings.



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 3 Summary of significant accounting policies (continued) (d) Leases (continued)

In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets. Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

(e) Investment properties

Investment properties are properties which are held either to earn long-term rental yields or for capital appreciation or for both. Freehold land is not depreciated as it has an indefinite life. On disposal of an investment property, or when it is permanent withdrawn from use and no future economic benefits are expected from its disposal, it shall be derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds and the carrying amount is recognised in the profit or loss in the financial year of the retirement or disposal.

(f) Inventories Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and conditions are accounted for as follows:

- Raw materials: purchase costs on a first-in first-out basis.

- Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads. These costs are assigned on a first-in first-out basis.

Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.



Notes to the financial statements for the financial year ended 31 December 2013 (continued)

3 Summary of significant accounting policies (continued) (g) Assets held for sale

Current assets are as held for sale if there has been a change in management intentions in respect of the future use of the asset or disposal group, and hence the carrying amount will be recovered principally through a sale transaction rather than through continuing use.

On the initial classification as held for sale, current assets are measured at the lower of their carrying amount and fair value less cost to sell. Immediately before the initial classification as held for sale, the carrying amount of current assets is measured in accordance with the applicable MFRSs.

An impairment loss is recognised for any initial or subsequent write down of the assets to fair value less costs to sell. Any subsequent increase in fair value less costs to sell is recognised as a gain in profit and loss, to the extent of the cumulative impairment loss that had previously recognised.

(h) Cash and cash equivalents The Group and the Company adopt the indirect method in the preparation of the statements of cash flows. For the purpose of statements of cash flows, cash and cash equivalents comprise cash in hand and bank balances, that are readily convertible to known amounts of cash and which are subject to insignificant risks of changes in value, net of bank overdrafts.

(i) Financial assets Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. When financial assets recognised initially, they are measures at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets.



(iii)Held-to-maturity investments

Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity.



3 Summary of significant accounting policies (continued)

(i) Financial assets

(i) Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income.

Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date.

(ii) Loan and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

Loan and receivables are classified as current assets, except for those having maturity dates later than twelve (12) months after the reporting date which are classified as non-current.




3 Summary of significant accounting policies (continued) (i) Financial assets (continued)

(iii) Held-to-maturity investments (continued)

Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.

Held-to-maturity investments are classified as non-current assets, except for those having maturity within twelve (12) months after the reporting date which are classified as current.

(iv) Available-for-sale financial assets

Available-for-sale are financial assets that are designated as available for sale or are not classified in any of the three preceding categories.

After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within twelve (12) months after the reporting date.

A financial asset is derecognised where the contractual right to receive cash flows from the assets has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.



3 Summary of significant accounting policies (continued) (i) Financial assets (continued)

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised and derecognised on the trade date i.e. the date that the Group and the Company commit to purchase or sell the asset.

(j) Impairment

(i) Impairment of financial assets

All financial assets (except for financial assets categorised as fair value through profit or loss, investment in subsidiaries and associates) are assessed at each reporting date 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 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. With the exception of receivables, the carrying amount is reduced through the use of an allowance account.

An impairment loss in respect of available-for-sale financial assets is recognised in the profit or loss and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in the other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity and recognised 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 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 recongised in profit or loss for an investment in an equity instrument is not reversed through the profit or loss.



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 3 Summary of significant accounting policies (continued)

(j) Impairment (continued) (i) Impairment of financial assets (continued)

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 the profit or loss.

(ii) Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or Cash Generating Unit (CGU’s) fair value less cost to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the asset. Where the carrying amounts of an asset exceed its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

An impairment loss is recognised in the profit or loss in the period in which it arises.

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 was recognised. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed its carrying amount that would have been determined (net of 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 the profit or loss.





(k) Provisions

Provision are recognised when the Group has present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

(l) Equity instruments

Ordinary shares are recorded at the nominal value and the consideration in excess of nominal value of shares issued, if any, is accounted for as share premium. Both ordinary shares and share premium are classified as equity.

Dividends on ordinary shares are recognised as liabilities when proposed or declared before the financial year end. A dividend proposed or declared after the reporting date, but before the financial statements are authorised for issue, is not recognised as a liability at the reporting date.

Cost incurred directly attributable to the issuance of the shares are accounted for as a deduction from share premium, if any, otherwise it is charged to the profit or loss. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided.

(m) Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139, are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. (i) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.






(m) Financial liabilities (continued)

(i) Financial liabilities at fair value through profit or loss (continued)

Financial liabilities held for trading include derivatives entered into by the Group and by the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resulted gains or losses recognised in profit or loss. Net gains or losses on derivatives include exchange differences.

The Group and the Company have not designated any financial liabilities as at fair value through profit or loss.

(ii) Other financial liabilities

The Group’s and the Company’s other financial liabilities include trade payables, other payables and loans and borrowings.

Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date.

For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.




(n) Fair value measurement

From 1 January 2013, the Group and the Company adopted MFRS 13, Fair Value Measurement which prescribed that fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in absence of a principal market, in the most advantages market.

For non-financial asset, the fair value measurement takes account a market participant’s ability to generate economic benefits by using the assets in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. In accordance with the transitional provision of MFRS 13, the Group and the Company applied the new fair value measurement guidance prospectively, and have not provided any comparative fair value information for new disclosures. The adoption of MFRS 13 has not significantly affected the measurements of the Group’s and of the Company’s assets and liabilities.

(o) Revenue

Revenue is measured at the fair value of the consideration received or receivable. (i) Sales of goods

Revenue from sales of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyers. Sales represent gross invoiced value of goods sold net of sales tax and discounts.

(ii) Rental income

Rental income is recognised in profit or loss on a straight line basis over the term of the lease.

(iii)Interest Income

Interest income is recognised on an accrual basis using the effective interest method.





(p) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset when the expenditures for the asset and borrowing costs are being incurred, and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended during any extended periods in which active development is interrupted and ceased when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are completed. All other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group incurred in connection with the borrowing of funds.

(q) Income tax

The tax expense for the period comprises current and the deferred tax. Tax is recognised in profit or loss, except to the extent that is relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.

(i) Current tax

Current tax liabilities are measured based on the amounts expected to be paid, using the tax rates that have been enacted or substantially enacted by the reporting date.

(ii) Deferred tax

Deferred tax is provided in full, using the liability method, on temporary differences which are the differences between the carrying amount in the financial statements and the corresponding tax base of an asset or liability at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax liabilities and assets are not recognised if the temporary differences arise from goodwill and for initial recognition of assets or liabilities that affect neither accounting profit nor taxable profit.





(q) Income tax (continued)

(ii) Deferred tax (continued)

Deferred tax liabilities and assets reflect the tax consequences that would follow from the manner in which the entity expects to recover or settle the carrying amounts of its assets and liabilities and are measured using the tax rates that have been enacted or substantially enacted by the reporting date.

The carrying amount of the deferred tax assets is reviewed at each reporting date, and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future foreseeable profit will allow the deferred tax assets to be utilised.

(r) Employee benefits

(i) Short term benefits

Employees’ emoluments are recognised as an expense in the year in which the associated services are rendered by employees of the Group and of the Company. 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.

(ii) Defined contribution plan

The Group and the Company contribute to the Employees Provident Fund, the national defined contribution plan. Such contributions are charged to profit or loss in the period to which they relate. Once the contributions have been paid, the Group and the Company have no further payment obligations.

(s) 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 events not wholly within the control of the Group and the Company.

Contingent liabilities and assets are not recognised in the statements of financial position.





(t) Foreign currencies (i) Functional and presentation currency

The individual financial statements of each entity in the Group are measure using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in RM, which is also the Group’s functional currency.

(ii) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(u) Earnings per ordinary share

The Group presents basic and diluted earnings per share (“EPS”) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.






(v) Segment reporting

For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Group who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 26, including the factors used to identify the reportable segments and the measurement basis of segment information.

4 Significant accounting estimates and judgements

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

4.1 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. (a) Income taxes

Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.



4 Significant accounting estimates and judgements (continued)

4.1 Key sources of estimation uncertainty (continued)

(b) Useful lives of property, plant and equipment (continued)

The estimated useful lives of property, plant and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of property, plant and equipment are based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amount and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the property, plant and equipment would increase the recorded expenses and decrease the non-current assets.

(c) Valuation of investment properties

The Group carries its investment property at fair value, with changes in fair value being recognised in the profit or loss. The investment property of the Group is held to earn rental income or for capital appreciation or both. The fair value was determined primarily using the comparison method of valuation, which entails comparing recorded transactions of similar properties in the vicinity.

(d) Impairment of trade receivables

The Group makes allowances for doubtful debts based on an assessment of the recoverability of receivables. Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management specifically analysed historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the allowance for doubtful debts of receivables. Where the expectation is different from the original estimate, such difference will impact the carrying value of receivables.




4 Significant accounting estimates and judgements (continued)

4.1 Key sources of estimation uncertainty (continued)

(e) Impairment of investment in subsidiaries and recoverability of amount owing by subsidiaries

The Company tests investment in subsidiaries for impairment annually in accordance with its accounting policy. More regular reviews are performed if events indicate that this is necessary. The assessment of the net tangible assets of the subsidiaries affects the result of the impairment test. Costs of investments in subsidiaries which have ceased operations were impaired up to net assets of the subsidiaries. The impairment made on investment in subsidiaries entails an allowance for doubtful debts to be made to the amount owing by these subsidiaries.

Significant judgement is required in the estimation of the present value of future cash flows generated by the subsidiaries, which involve uncertainties and are significantly affected by assumptions used and judgement made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the Group’s tests for impairment of investment in subsidiaries.

(f) Allowance for inventories

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.

(g) Impairment of non-financial assets

When the recoverable amount of an asset is determined based on the estimate of the value in use of the cash generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash generating unit and also to apply suitable discount rate in order to determine the present value of those cash flows.

(h) Recognition of deferred tax assets

Deferred tax assets are recognised for all unutilised credits , unutilised tax losses and unutilised capital allowances to the extent that it is probable that taxable profits will be available to set off against which the credits, losses and capital allowances can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and the level of future taxable profits together with future tax planning strategies.



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 5 Revenue

Revenue represents the sales of RM25,699,985 based on net invoiced prices. 6 Other operating income

7 Finance costs


2013 2012 2013 2012RM RM RM RM

Gain on disposal of property, plant and equipment 5,682 29,797 - - Insurance compensation received 709,363 - - - Realised gain on foreign exchange 435,600 204,146 - - Rental income 210,000 175,000 - - Unrealised gain on foreign exchange 192,549 30,978 - -

1,553,194 439,921 - -

Group Company

2013 2012 2013 2012RM RM RM RM

Interest expenses - bank overdrafts 152,077 92,348 - - - bankers acceptance 329,765 222,694 - - - finance lease 11,306 12,886 - -

493,148 327,928 - -

Group Company


Notes to the financial statements for the financial year ended 31 December 2013 (continued) 8 Loss before taxation

9 Taxation


2013 2012 2013 2012RM RM RM RM

Loss before taxationis arrived atafter charging:Auditors’ remuneration- current year 55,000 59,000 10,000 10,000 - (over)/under provided in prior year (3,000) 5,000 1,000 5,000 - other audit - 8,000 - 8,000 Depreciation of property, plant and equipment 1,227,036 1,114,283 - - Directors’ remuneration- fees 30,000 27,546 30,000 27,546 - other emoluments 354,000 191,000 - - - defined contribution plan 48,860 24,260 - - Hire of equipment 1,510 1,448 - - Impairment loss on trade receivables 34,048 - - - Insurance claim receivable written off 1,253,216 130,525 - - Inventories written off - 496,457 - - Rental of machineries - 830 - -

Group Company

2013 2012 2013 2012RM RM RM RM

Current financial year- Deferred tax (34,321) (34,321) - -

Previous financial year- Over provision of Malaysian income tax (2,464) (68,818) (2,464) (664)

(36,785) (103,139) (2,464) (664)

Group Company



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 9 Taxation (continued)

The income tax is calculated at the statutory rate of 25% (2012: 25%) of the estimated assessable profit for the financial year. The computation of deferred tax as at 31 December 2013 has reflected these changes.

The explanation on the difference in the tax on the Group and Company’s loss before taxation and the theoretical amount that would arise using the statutory income tax rate of Malaysia is as follows:

2013 2012RM RM

Loss before tax from: (1,243,417) (555,827)

Taxation at statutory tax rate (310,854) (138,957)

Tax effects arising from:- Expenses disallowed for tax purposes 692,843 239,951 - Over accrual of Malaysian income tax (2,464) (68,818) - Utilisation of unrecognised deferred tax assets brought forward (416,310) (135,315)

Income tax benefit for the financial year (36,785) (103,139)

2013 2012RM RM

Loss before tax (251,050) (253,432)

Taxation at statutory tax rate (62,763) (63,358)

Tax effects arising from:- Expenses disallowed for tax purposes 62,763 63,358 - Over provision in prior financial year (2,464) (664) Income tax benefit for the financial year (2,464) (664)

Group

Company



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 9 Taxation (continued)

At the reporting date, the Group has the following deductible temporary differences that are available for offset against future taxable profits of the companies in which the losses arose, for which no deferred tax assets are recognised due to uncertainty of their recoverability. The availability of unutilised deductible temporary difference for offsetting against future taxable profits of the respective subsidiaries in Malaysia are subject to no substantial changes in shareholdings of those subsidiaries under the Income Tax Act, 1967 and guidelines issued by the tax authority.

2013 2012RM RM

Deferred tax assets not recognised in the financial statements

Taxable temporary difference- Excess of carrying amount over tax written down value of property, plant and equipment (590,717) (1,975,279) - Unrealised gain on foreign exchange (192,549) (30,978)

(783,266) (2,006,257)

Deductible temporary differences - Unutilised tax losses 12,088,136 12,473,425 - Unutilised capital allowances 5,308,854 7,041,161 - Unutilised reinvestment allowances 129,517 900,150

17,526,507 20,414,736 16,743,241 18,408,479

Deferred tax assets at statutory tax rate 4,185,810 4,602,120

Group



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 10 Loss per share

2013 2012RM RM

Loss, net of tax attributable to owners of the Company (1,206,632) (452,688)

2013 2012Number of Number of

shares shares

Number of ordinary shares in issue 60,000,000 60,000,000

2013 2012sen sen

Loss per share for the financial yearDiluted (2.01) (0.75)

Group

Group

Group

There are no effects on the diluted loss per share as the warrants have a dilutive effect only when the average market price of ordinary shares during the year exceeds the exercise price of the warrants.

The average market price for the financial year was at RM0.15 each and is below the exercise of RM1.00 per warrant.



11 Property, plant and equipment

Long Furniture, leasehold Plant and fittings and Motor

land Buildings machinery equipment vehicles Total Group RM RM RM RM RM RM Cost/Deemed costAt 1 January 2013: 6,830,000 10,815,873 33,233,102 3,334,858 1,435,493 55,649,326 Additions - - 663,415 3,250 666,665 Disposals - - - (136,610) (136,610) At 31 December 2013 6,830,000 10,815,873 33,896,517 3,201,498 1,435,493 56,179,381

Accumulated depreciationAt 1 January 2013: 1,484,523 4,618,302 31,631,005 2,981,706 800,540 41,516,076 Charges for the financial year 191,345 205,723 527,755 111,631 190,582 1,227,036 Disposals - - - (128,292) - (128,292) At 31 December 2013 1,675,868 4,824,025 32,158,760 2,965,045 991,122 42,614,820

Carrying amountAt 31 December 2013 5,154,132 5,991,848 1,737,757 236,453 444,371 13,564,561

LEN CHEONG HOLDING BERHAD ANNUAL REPORT 2013 55



11 Property, plant and equipment (continued)

LEN CHEONG HOLDING BERHAD ANNUAL REPORT 2013 56

Long Furniture, leasehold Plant and fittings and Motor

land Buildings machinery equipment vehicles Total Group RM RM RM RM RM RM Cost/Deemed costAt 1 January 2012: 6,830,000 10,815,873 31,333,102 3,336,729 1,101,559 53,417,263 Additions - - 1,900,000 - 488,000 2,388,000 Disposals - - - (1,871) (154,066) (155,937) At 31 December 2012 6,830,000 10,815,873 33,233,102 3,334,858 1,435,493 55,649,326

Accumulated depreciationAt 1 January 2012: 1,388,863 4,316,890 31,250,633 2,826,879 773,965 40,557,230 Charges for the financial year 95,660 301,412 380,372 156,199 180,640 1,114,283 Disposals - - - (1,372) (154,065) (155,437) At 31 December 2012 1,484,523 4,618,302 31,631,005 2,981,706 800,540 41,516,076

Carrying amountAt 31 December 2012 5,345,477 6,197,571 1,602,097 353,152 634,953 14,133,250




11 Property, plant and equipment (continued)

Included in the property, plant and equipment is a motor vehicle with carrying amount of RM2,777 (2012: N/A) which is registered in the name of a director who holds it in trust for the subsidiary. The carrying amount of the property, plant and equipment of the Group includes the following assets acquired under finance lease agreements:

Certain long leasehold land with carrying amount totaling RM5,703,758 (2012 : RM3,944,034) are charged as securities for bank borrowings as disclosed in Note 19.

12 Investment properties

2013 2012RM RM

Motor vehicles 325,285 567,687

Group

2013 2012RM RM

Freehold landCost/deemed costAt 1 January 6,267,596 6,267,596 Reclassified as assets held for sale (Note 13) (6,267,596) - At 31 December - 6,267,596 Fair value - 6,430,312

Group

The fair value of the investment properties are determined based on information available through interest research and Directors’ best estimate. All the investment properties of the Group are charged as securities for bank borrowings granted to a subsidiary as disclosed in Note 19.




13 Assets held for sale

2013 2012RM RM

Freehold landCost/deemed costAt 1 January - - Reclassified from investment properties (Note 12) 6,267,596 - At 31 December 6,267,596 -

Group

On 6 September 2013, the Group entered in a sales and purchase agreement to dispose the freehold land at a consideration of RM8,550,000. This transaction has not been recognised in the current year as the significant risks and rewards of ownership thereto have not been transferred to the purchaser as at the balance sheet date. The assets held for sale with carrying amount of RM6,267,596 (2012 : RMNil) are charged as securities for bank borrowings granted to a subsidiary as disclosed in Note 19.

14 Investment in subsidiaries

2013 2012RM RM

Unquoted shares, at cost

Balance at beginning of financial year 47,906,198 47,906,198 Additions during the financial year - - Impairment loss (24,105,182) (24,105,182) Balance at end of financial year 23,801,016 23,801,016

Company




14 Investment in subsidiaries (continued)

The subsidiaries, which are all incorporated in Malaysia, are as follows:

Percentage holding Name of subsidiaries Principal activities 2013 2012 % % Subsidiaries of the Company Len Cheong Industries Sdn. Bhd.

Business of property holding and processing of wood product

100

100 Len Cheong Manufacturing Sdn. Bhd.

Sawmilling 100

100

Len Cheong Furniture Sendirian Berhad

Manufacturing of and trading in furniture

100

100

Len Cheong Resources Sdn. Bhd.

Inactive 100 100

All the subsidiaries of the Company are audited by Messrs. McMillan Woods Mea. 15 Inventories

2013 2012RM RM

At cost:Raw materials 1,724,543 1,664,305 Work-in-progress 4,678,156 4,399,743 Finished goods 2,397,967 2,634,968

8,800,666 8,699,016

Group




16 Trade and other receivables

2013 2012 2013 2012RM RM RM RM

CurrentTrade receivables 5,994,674 5,286,447 - -

Other receivablesAmount due from a subsidiaries - - 1,525,850 1,525,850 Other receivables 151,171 404,920 4 4 Insurance claims receivables - 1,413,328 - - Deposits and prepayments 858,393 816,798 1,000 1,000

1,009,564 2,635,046 1,526,854 1,526,854 Trade and other receivables 7,004,238 7,921,493 1,526,854 1,526,854

2013 2012 2013 2012RM RM RM RM

Total trade and other receivables 7,004,238 7,921,493 1,526,854 1,526,854 Add: Cash, and bank balances 207,407 281,930 3,153 735

Total loans and receivables 7,211,645 8,203,423 1,530,007 1,527,589

Group Company

Group Company

(a) Trade receivables

Trade receivables are non-interest bearing and normal credit terms offered by the Group range from 30 to 90 days (2012: 30 to 90 days). Other credit terms are assessed and approved on a case by case basis. They are recognised at their original invoice amounts which represents their fair values on initial recognition.




16 Trade and other receivables (continued)

(a) Trade receivables

Ageing analysis of trade receivables

The ageing analysis of the Group’s trade receivables is as follows:

2013 2012RM RM

Neither past due nor impaired 4,780,034 3,811,674 1 to 30 days past due not impaired 632,454 160,081 31 to 60 days past due not impaired 313,329 1,314,692 61 to 90 days past due not impaired 175,557 - 91 to 120 days past due not impaired - - More than 121 days past due not impaired 127,348 -

1,248,688 1,474,773 Impaired (34,048) -

5,994,674 5,286,447

Group

Receivables that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. The Group’s trade receivables arise from customers with more than five years of experience with the Group and losses have incurred infrequently amounting to RM912,335 (2012 : RM3,461,668).

None of the Group’s trade receivables that are neither pass due nor impaired have been renegotiated during the financial year.

Receivables that are past due but not impaired

The Group has trade receivables amounted to RM1,248,688 (2012: RM1,474,773) that are past due at the reporting date but not impaired. The trade receivables that are past due but not impaired are unsecured in nature and had been partially collected by the Group subsequent to the reporting date.




16 Trade and other receivables (continued) (a) Trade receivables (continued)

Receivables that are impaired

The Group’s trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows:

2013 2012RM RM

Trade receivables - nominal amounts 34,048 - Less: Impairment of trade receivables (34,048) -

- -

Group

(b) Amount due from a subsidiary

The amount due from a subsidiary is unsecured, interest-free and repayable on demand.

(c) Other receivables

Other receivables are unsecured, interest-free and repayable on demand.

(d) Deposits

Included in the deposits amounting to RM600,000 (2012 : RM500,000) is in relation to deposits paid for securing the purchase contracts.

17 Share capital

Number of Number ofshares RM shares RM

Ordinary shares of RM1.00 each

Authorised 100,000,000 100,000,000 100,000,000 100,000,000

Issued and fully paid 60,000,000 60,000,000 60,000,000 60,000,000

Group and Company2013 2012

Notes to the financial statements for the financial year ended 31 December 2013 (continued) 17 Share capital (continued)

Warrants The Company issued 8,000,000 warrants which were listed on the Bursa Securities on 15 December 2003 in conjunction with the right issue on the basis of one free warrant attached to every two right share subscribed. The warrants are constituted by a Deed Poll dated 16 October 2003 executed by the Company.

The salient features of the warrants are as follows:

(i) Each warrant entitles the registered holder during the exercise period to subscribe for one new ordinary share at the exercise price of RM1.00 per share, subject to adjustment in accordance with the provisions of the Deed Poll.

(ii) The warrants may be exercised at any time on or before the expiry date of ten years from the issue date of the warrants on 15 December 2003. The warrants not exercised during the exercise period will thereafter become lapse and void.

(iii) All the new ordinary shares in the Company to be issued upon the exercise of the warrants shall, on allotment and issue, rank pari passu in all respects with the then existing ordinary shares of the Company except that they shall not be entitled to any dividends, that may be declared prior to the date of allotment and issue of the new shares, nor shall they be entitled to any distributions or entitlements for which the record date is prior to the date of exercise of the warrants.

The above warrants expired on 13 December 2013 and were removed from the official list of Bursa Malaysia Securities Berhad on 16 December 2013.



18 Reserves

2013 2012 2013 2012RM RM RM RM

Distributable

Accumulatedlosses (41,207,834) (40,001,202) (38,672,429) (38,423,843)

Non-distributable

Share premium 856,213 856,213 856,213 856,213 (40,351,621) (39,144,989) (37,816,216) (37,567,630)

Group Company




(a) Bank overdrafts and bankers acceptances

The bank overdrafts and bankers acceptances are secured by ways of:

(i) fixed charges over certain land and buildings as disclosed in Note 11, Note 12 and Note 13; and

The effective interest rates of the bank overdrafts, bankers acceptances, foreign exchange contracts and receivables financing are disclosed in Note 27(c).

(ii) a corporate guarantee from the Company.

19 Borrowings

2013 2012RM RM

Current liabilitiesSecuredFinance lease payables 119,830 144,244 Bank overdrafts 1,846,869 1,851,483 Bankers acceptance 7,236,000 7,231,000

9,202,699 9,226,727

Non-current liabilitiesSecuredFinance lease payables 51,614 171,584

Total borrowingsBank overdrafts 1,846,869 1,851,483 Bankers acceptance 7,236,000 7,231,000 Finance lease payables 171,444 315,828

9,254,313 9,398,311

Group




19 Borrowings (continued)

(b) Finance lease payables

2013 2012RM RM

Amount payable within twelve months 125,352 155,689 Less: Unexpired term charges (5,522) (11,445)

119,830 144,244

Amount payable after twelve monthsbut not exceeding twenty four months 52,214 125,352 Less:Unexpired term charges (600) (5,396)

51,614 119,956

Amount payable after twenty four monthsbut not exceeding sixty months - 52,214 Less:Unexpired term charges - (586)

- 51,628 51,614 171,584

171,444 315,828

Group

The effective interest rate of the finance lease payables is disclosed in Note27(c).



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 20 Trade and other payables

2013 2012 2013 2012RM RM RM RM

Non-current

A former director 4,291,514 4,291,514 - - Total non-current payables 4,291,514 4,291,514 - -

Current

TradeTrade payables 1,012,074 1,036,198 - -

Non-tradeAmount due to subsidiaries - - 3,016,924 2,767,771 Other payables, deposits and accruals 797,560 847,302 130,315 128,464

Total current payables 1,809,634 1,883,500 3,147,239 2,896,235

Total trade and other payables 6,101,148 6,175,014 3,147,239 2,896,235

Group Company

2013 2012 2013 2012RM RM RM RM

Trade payables and other payables 6,101,148 6,175,014 3,147,239 2,896,235 Add: Loan and borrowings (Note 19) 9,254,313 9,398,311 - -

Total financial liabilities carried at amortised cost 15,355,461 15,573,325 3,147,239 2,896,235

Group Company




20 Trade and other payables (continued)

(a) A former director

The amount due to a former director of the Company, Mr. Loh Siow Chan @ Loo Su Cheong, is brought forward from previous years claimed to be unsecured advances and payments made on behalf of a subsidiary, Len Cheong Furniture Sendirian Berhad. According to the terms then agreed, it is repayable annually until the amount is fully settled by a sum calculated at an amount of 15% of net profit after taxation of the Group as reported in the financial years subsequent to 31 December 2003.

The Directors had been advised by legal counsel to contest any claim for repayment of the amount alleged owing. Notwithstanding the legal advice, the amount is left outstanding in the books for prudence reasons.

(b) Trade payables

Trade payables are non-interest bearing and the credit terms granted by suppliers of the Group normally range from 30 days to 150 days.

(c) Amount due to subsidiaries

The amount due to subsidiaries is unsecured, interest free and repayable on demand.

(d) Other payables and accruals

Other payables and accruals are non-interest bearing and the credit terms granted by other suppliers of the Group and of the Company normally range from 30 days to 120 days while certain other payables are repayable on demand.

21 Deferred taxation

2013 2012RM RM

Movement of deferred tax liability

Balance at beginning of financial year 872,930 907,251 Transfer to profit or loss (34,321) (34,321) Balance at end of financial year 838,609 872,930



Notes to the financial statements

for the financial year ended 31 December 2013 (continued) 21 Deferred taxation (continued)

2013 2012RM RM

Deferred tax liability arises as a result of

Taxable temporary difference- Net carrying amount over tax written down value of property, plant and equipment 3,354,431 3,491,716

Deferred tax liability at statutory tax rate 838,609 872,930

22 Purchase of property, plant and equipment

During the financial year, the Group purchased property, plant andequipment by means of:

2013 2012RM RM

Cash payments 666,665 2,038,000 Finance lease - 350,000

666,665 2,388,000

Group

23 Employees information

The details of the costs of employees are as follows:

2013 2012 2013 2012RM RM RM RM

Directors’ remuneration 432,860 242,806 30,000 27,546 Other employees- emoluments 3,206,392 2,917,110 - - - defined contribution plan 120,460 158,809 - - Other related costs 87,398 261,142 - -

Group Company




23 Employees information (continued)

The remuneration of executive and non-executive Directors of the Company in the Group and in the Company is as follows:

2013 2012 2013 2012RM RM RM RM

Executive:- other emoluments 354,000 191,000 - - - defined contribution plan 48,860 24,260 - -

402,860 215,260 - - Non-Executive:- fees 30,000 27,546 30,000 27,546

432,860 242,806 30,000 27,546

Group Company

The number of directors of the Company whose total remuneration fall within the following bands is as follows:

2013 2012 2013 2012No. No. No. No.

Directors of the CompanyExecutive: Below RM50,000 1 3 - - RM100,001 - RM150,000 1 - - - RM200,001 - RM250,000 1 - - -

Non-Executive: Below RM50,000 3 4 3 3

6 7 3 3

Group Company




24 Related party disclosures

For the purpose of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial or operational decisions, or vice versa, or where the Group or the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. In addition to the related party disclosures mentioned elsewhere in the financial statements, set out below are the other related party disclosures: Key management personnel Key management personnel includes the Group’s and the Company’s Executive and Non-Executive Directors and are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group or the Company either directly or indirectly. The Group’s and the Company’s key management personnel do not receive any compensation other than the short-term employee benefits as disclosed in Note 23. Entities in which a key management personnel has substantial financial interest These are entities in which significant voting power in such entities resides with, directly or indirectly, certain key management personnel of the Group and of the Company. These entities are as follows:

Shantawood Sdn. Bhd. (formerly known as Shantawood Manufacturing Sdn. Bhd.)

An entity in which the directors, Datuk Sow Chin Chuan and Datin Chu Kim Guek together hold 51% financial interest as at 31 December 2013

2013 2012RM RM

Shantawood Sdn. Bhd.(formerly known as Shantawood Manufacturing Sdn. Bhd.)Purchases of goods (1,348,866) (2,257,130) Sales of goods 528,213 1,018,110

Group




25 Contingent liabilities

(a) Group

The Labour Court had on 8 February 2010 made a decision against a subsidiary of the Company, Len Cheong Furniture Sendirian Berhad (“LCF”), by awarding RM588,965 as compensation to Amirtham A/P Kollanda Veloo and 52 others (“AKV and 52 others”) (under Negeri Sembilan Labour Court Case No. KBR1050120090139) and RM26,416 as compensation to Mak Fook Man and Kok Yit Long ("MFM and KYL") (under Negeri Sembilan Labour Court Case No. KBR1050120090140) to be paid within 14 days from the date of award with 8% per annum as penalty for late payment commencing from the 31st day of award.

LCF has through its solicitors, appealed to the High Court against the decision of the Labour Officer as the Board of Directors are of the view that the transfer of AKV and 52 others, though from Nilai to Melaka but with accommodation and subsidy of petrol for travelling provided, is within the power of LCF as the employer under the Employment Act 1955 and that MFM and KYL, being a manager and a supervisor, are not entitled to claim in the Labour Court.

The High Court had on 29 September 2010 allowed the appeal against MFM and KYL in favour of LCF with cost of RM1,500 to be paid to LCF by KYL and had on 26 October 2010 allowed the appeal against AKV and 52 others in favour of LCF with compensation in lieu of notice of RM38,380 to be paid to LCF by AKV and 52 others.

AKV and 52 others had filed an appeal to the Court of Appeal against the decision of the High Court. The appeal to the Court of Appeal filed by AKV and 52 others has no financial impact to the Group and to LCF because after seeking for legal opinion, the Directors are of the view that the compensations as awarded by the Negeri Sembilan Labour Court are baseless.

Other than that stated in the preceding paragraph, neither LCH nor any of its subsidiaries are engaged in any material litigation, claims or arbitration either as plaintiff or defendant and the Directors do not have any knowledge of any proceedings pending or threatened against the Group or of any facts likely to give rise to any proceedings which may materially affect the position or business of the Group.




25 Contingent liabilities (continued)

26 Segment reporting

(a) Business segments

(i) The Group’s operations are principally the manufacturing of and trading in furniture. The other activities of the Group i.e. the property investment activities do not generate any rental income. Accordingly, information by business segments on the Group operations is not presented.

(b) Geographical segments

The Group’s operations are principally carried out in Malaysia. In determining the geographical segments of the Group, sales of goods and services rendered are based on the country in which the customer is located.

2013 2012RM RM

Unsecured

Corporate guarantees given to certain licensedbanks for banking facilities granted to thesubsidiaries 12,000,000 12,000,000

(b) Company

At the end of the reporting period, it was not probable that the counterparty to the financial guarantee contract will claim under the contract. Consequently, the fair value for the corporate guarantees is Nil.

2013 2012RM RM

Malaysia 13,948,199 10,815,829 United States 6,324,537 7,956,068 Central/South America 766,800 446,424 United Kingdom 329,349 443,007 Europe 896,349 1,186,038 Asia Pacific 2,532,787 3,766,182 Middle East 694,890 276,861 Africa 207,074 574,952

25,699,985 25,465,361

GroupThe Group’s revenue by geographical market is as follows:



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 27 Financial risk management objectives and policies

The following sections provide details regarding the Group’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

(a) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counter party default on its obligation. The Group’s exposure to credit risk arises primarily from trade and other receivables. It is the Group’s and the Company’s policy to monitor the financial standing of these receivables on an ongoing basis to ensure that the Group is exposed to minimal credit risk.

Cash deposits and trade receivables may give rise to credit risk which requires the loss to be recognised if a counter party fails to perform as contracted. It is the Group’s policy to monitor the financial standing of these receivables on an ongoing basis to ensure that the Group is exposed to minimal credit risk.

Exposure to credit risk

At the end of the reporting year, the Group’s maximum exposure to credit risk is represented by the carrying amounts of each class of financial assets recognised in the statements of financial position.

Information regarding credit enhancements for trade and other receivables is disclosed in Note 16.

Credit risk concentration profile

RM % RM %By country:

Malaysia 3,705,407 62 3,653,141 69Other countries 2,289,267 38 1,633,306 31

5,994,674 100 5,286,447 100

Group2013 2012

The Group determines concentrations of credit risk by monitoring the country and industry sector profile of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the reporting date are as follows:



Notes to the financial statements

for the financial year ended 31 December 2013 (continued) 27 Financial risk management objectives and policies (continued) (a) Credit risk (continued)

Financial assets that are neither past due nor impaired

Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 16. Deposits with banks and other financial institutions, investment securities and derivatives are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.

Financial assets that are either past due or impaired

Information regarding financial assets that are past due or impaired is disclosed in Note 16.

(b) Liquidity risk (continued)

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

Maturity analysis

The table below summarises the maturity profile of the Group’s liabilities at the reporting date based on contractual undiscounted repayment obligations.

Within 1 - 5 More than1 year years 5 years Total

RM RM RM RM2013GroupFinancial liabilitiesTrade and other payables 1,809,634 - 4,291,514 6,101,148 Bank overdrafts 1,846,869 - - 1,846,869 Bankers acceptance 7,236,000 - - 7,236,000 Finance lease payables 119,830 51,614 - 171,444

Total undiscounted financial liabilities 11,012,333 51,614 4,291,514 15,355,461

2013CompanyFinancial liabilitiesOther payables 3,147,239 - - 3,147,239

Total undiscounted financial liabilities 3,147,239 - - 3,147,239




27 Financial risk management objectives and policies (continued)

(b) Liquidity risk (continued) Maturity analysis (continued)

Within 1 - 5 More than 1 Year Years 5 Years Total

RM RM RM RM2012GroupFinancial liabilitiesTrade and other payables 1,883,500 - 4,291,514 6,175,014 Bank overdrafts 1,851,483 - - 1,851,483 Bankers acceptance 7,231,000 - - 7,231,000 Finance lease payables 144,244 171,584 - 315,828

Total undiscounted financial liabilities 11,110,227 171,584 4,291,514 15,573,325

2012CompanyFinancial liabilitiesOther payables 2,896,235 - - 2,896,235

Total undiscounted financial liabilities 2,896,235 - - 2,896,235

(c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates.

Interest rate exposure arises from the Group’s borrowings and is managed through the use of fixed and floating rate debts. The Group does not use derivative financial instruments to hedge its risk.

The Group manages the net exposure to interest rate risks by maintaining sufficient lines of credit to obtain acceptable lending costs and by monitoring the exposure to such risks on an ongoing basis. Management does not enter into interest rate hedging transactions since it considers that the cost of such instruments outweigh the potential risk of interest rate fluctuation.



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 27 Financial risk management objectives and policies (continued)

The interest rate profile of the Group’s significant interest bearing financial instruments, based on the carrying amounts as at the end of the reporting year were as below:

Weighted WeightedAverage AverageEffective EffectiveInterest Interest

Rate Rate% RM % RM

Fixed rateFinancial liabilitiesFinancelease payables 5.29 171,444 9.10 315,828

Floating rateFinancial LiabilitiesBank overdrafts 8.82 1,846,869 9.34 1,851,483 Bankers acceptance 5.11 7,236,000 4.68 7,231,000

9,082,869 9,082,483

2013 2012

Sensitivity analysis for interest rate risk

(i) Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets at fair value through profit or loss and equity. Therefore a change in interest rates at the reporting date would not affect profit or loss and equity.

A change of 100 basis points in interest rates at the reporting date would has increased/(decreased) equity and profit or loss by the amounts of RM92,543 (2012: RM68,119). This analysis assumes that all other variables remain constant.



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 27 Financial risk management objectives and policies (continued) (d) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of Group entities, primarily Ringgit Malaysia (“RM”). The foreign currencies in which these transactions are denominated are mainly United States Dollars (“USD”).

The Group ensures that the net exposure to this risk is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances. Management does not enter into currency hedging transactions since it considers that the cost of such instruments outweight the potential risk of exchange rate fluctuations.

The unhedged financial assets and liabilities of the Group that are not denominated in their functional currencies are as follows:

2013 2012

Ringgit Malaysia Ringgit MalaysiaRM RM

Financial assets and liabilities not held in functional currency

Trade and other receivablesUS Dollar 2,289,267 1,633,306

Cash and bank balancesEuro Dollar 205 205 US Dollar 194,343 232,446

194,548 232,651

Functional currencies




27 Financial risk management objectives and policies (continued) (d) Foreign currency risk (continued)

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s loss net of tax to a reasonably possible change in the USD exchange rate against the respective functional currencies of the Group, with all other variables held constant.

2013 2012RM RM

Profit/loss Profit/lossfor the year for the year

USD/RM - strengthened 1% (2012 : 1%) 24,836 13,993 - weakened 1% (2012 : 1%) (24,836) (13,993)

28 Capital management

The primary objective of the Group’s and of the Company’s capital management is to ensure that it maintains a strong capital base and safeguard the Group’s and the Company’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group and the Company manage its capital structure by monitoring the capital and net debt on an ongoing basis. To maintain the capital structure, the Group and the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

Note 2013 2012 2013 2012RM RM RM RM

Loans and borrowings 19 9,254,313 9,398,311 - - Trade and other payables 20 6,101,148 6,175,014 3,147,239 2,896,235 Less: Cash and bank balances (207,407) (281,930) (3,153) (735) Net debt 15,148,054 15,291,395 3,144,086 2,895,500

Total equity 19,648,379 20,855,011 22,183,784 22,432,370

Debt-to-equity ratio 0.77 0.73 0.14 0.13

Group Company



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 28 Capital management (continued)

There were no changes in the Group’s and the Company’s approach to capital management during the financial year.

The Group is also required to comply with the disclosure and necessary capital requirements as prescribed in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

29 Comparative figures

The comparative figures have been audited by another firm of chartered accountants other than McMillan Woods Mea.

30 Standards issued but not yet effective

As at the date of authorisation of these financial statements, the following Standards, Amendments and Issue Committee (“IC”) Interpretations have been issued by the Malaysian Accounting Board (MASB) but are not yet effective and have not been adopted by the Group and by the Company.

Effective for financial period beginning on

or after Amendments to MFRS 10

Consolidated Financial Statements: Investment Entities

1 January 2014

Amendments to MFRS 12

Disclosure of Interest in Other Entities

1 January 2014


Separate Financial Statements (2012): Investment Entities

1 January 2014


Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities

1 January 2014


Impairment of Assets – Recoverable Amount Disclosure for Non-Financial Assets

1 January 2014


Financial Instruments: Recognition and Measurement – Novation of Derivatives and Continuation of Hedge Accounting

1 January 2014



Notes to the financial statements for the financial year ended 31 December 2013 (continued) 30 Standards issued but not yet effective (continued)

Effective for financial period beginning on

or after IC Interpretation 21

Levies 1 January 2014


Share-based Payment (Annual Improvements to MFRSs 2010 – 2012 Cycle)

1 July 2014


Business Combinations (Annual Improvements to MFRSs 2010 – 2012 Cycle)

1 July 2014


Business Combinations (Annual Improvements to MFRSs 2011 – 2013 Cycle)

1 July 2014


Operating Segments (Annual Improvements to MFRSs 2010 – 2012 Cycle)

1 July 2014


Fair Value Measurement (Annual Improvements to MFRSs 2011 – 2013 Cycle)

1 July 2014


Property, Plant and Equipment (Annual Improvements to MFRSs 2010 – 2012 Cycle)

1 July 2014


Defined Benefit Plans: Employee Contributions

1 July 2014


Related Party Disclosures (Annual Improvements to MFRSs 2010 – 2012 Cycle)

1 July 2014


Intangible Assets (Annual Improvements to MFRSs 2010 – 2012 Cycle)

1 July 2014


Investment Property (Annual Improvements to MFRSs 2011 – 2013 Cycle)

1 July 2014

The Group and the Company will adopt the above pronouncements when they become effective in the respective financial periods. These pronouncements are not expected to have any effect to the financial statements of the Group and of the Company upon their initial application.




31 Approval of financial statements

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 23 April 2014.

32 Supplementary information on the disclosure of realised and unrealised profits or losses

On 25 March 2010, Bursa Malaysia Securities Berhad (“Bursa Malaysia”) issued a directive to all listed issuers pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements. The directive requires all listed issuers to disclose the breakdown of the retained profits or accumulated losses as at the end of the reporting period, into realised and unrealised profits and losses.

On 20 December 2010, Bursa Malaysia further issued guidance on the disclosure and the format required.

Pursuant to the directive, the amounts of realised and unrealised profits or losses included in the accumulated losses of the Group and the Company as at 31 December 2013 are as follows:

2013 2012 2013 2012RM RM RM RM

Total accumulated losses- Realised losses (65,973,874) (64,571,350) (38,672,429) (38,423,843) - Unrealised losses (646,060) (841,952) - -

(66,619,934) (65,413,302) (38,672,429) (38,423,843) Less: Consolidation adjustments 25,412,100 25,412,100 - - At end of financial year (41,207,834) (40,001,202) (38,672,429) (38,423,843)

Group Company

The determination of realised and unrealised profits or losses is based on Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits and Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.

The disclosure of realised and unrealised profits or losses above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Malaysia and should not be applied for any other purposes.




33 Subsequent event

At the Extra Ordinary General Meeting held on 8 January 2014 the shareholders approved the following resolutions:

1. The reduction of the issued and paid-up capital of the Company via the cancellation of 90sen par value of the RM1 par value of the existing shares subject to sanction from the High Court and approvals from relevant authorities that the credit arising be utilised to write off accumulated losses of the Company and any surplus be credited to other reserves.

2. The authorised share capital of the Company be changed to RM100,000,000 divided in 1,000,000,000 shares of RM0.10 each.

3. Three parcels of industrial land belonging to a subsidiary be disposed off at a total consideration of

RM8,550,000 subject to approval from the relevant authorities and parties.


Independent Auditors’ Report to the Members of Len Cheong Holding Berhad Company No: 339810 - A (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of Len Cheong Holding Berhad, which comprise the statements of financial position as at 31 December 2013 of the Group and of the Company, and the statements of profit and loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 7 to 69. 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 Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

McMillan Woods Mea (AF 1995)

CHARTERED ACCOUNTANTS 305, (Suite 2) Block E, Phileo Damansara 1, 9 Jalan 16/11, Off Jalan Damansara, 46350 Petaling Jaya, Selangor. Tel: 03-76651872 Fax: 03-79558626


Independent Auditors’ Report to the Members of Len Cheong Holding Berhad (continued) Company No: 339810 - A (Incorporated in Malaysia) 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 of 31 December 2013 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: (a) In our opinion, the accounting and other records and the registers required by the

Act, to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act.

(b) We are satisfied that the 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.

(c) Our audit reports on the accounts of the subsidiaries did not contain any

qualification or any adverse comment made under Section 174(3) of the Act. Other reporting responsibilities

McMillan Woods Mea (AF 1995)

CHARTERED ACCOUNTANTS 305, (Suite 2) Block E, Phileo Damansara 1, 9 Jalan 16/11, Off Jalan Damansara, 46350 Petaling Jaya, Selangor. Tel: 03-76651872 Fax: 03-79558626

The supplementary information set out in Note 32 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.

LIST OF PROPERTIES Date of No. Address Description / Approximate Tenure/ Net Book Value Revaluation / Existing Use Size Age of Building 31.12.2013 Acquisition LEN CHEONG FURNITURE SDN BHD 1 L.O. No. 49, Plot 71, Q.T.(M) Detached factory Land Area Leasehold 99 RM2,231,315.00 29.03.1996 Lease 90 with double- 9,848 sq m years - expires on 71, Senawang Industrial Area, storey office / 7.5.2067 / 70450 Seremban, Negeri Sembilan Furniture workshop Built-up Area 38 years linked to 5,752 sq m showroom cum office block

2 Lot 306, PM 417 End unit detached Land Area Leasehold 99 years - 29.03.1996 72 Senawang Industrial Area factory with single 20,069 sq m expires 10.10.2084/ 70450 Seremban, Negeri Sembilan storey-office / 20 years furniture factory RM5,142,889.00 Lot 4518, PM 799 Built-up Area Leasehold 99 years - 29.03.1996 72, Senawang Industrial Area 12,323 sq m expires on 70450 Seremban, Negeri Sembilan 19.05.2069/20 years

3 P.T. 17825, H.S. (M) 4469 Vacant Land Land Area Freehold / 23 years RM6,267,596.00 29.03.1996 P.T. 17826, H.S. (D) 89513 91,907 sq m P.T. 17827, H.S. (D) 89514 8KM Seremban Kuala Klawang Road Negeri Sembilan

LEN CHEONG INDUSTRIESSDN BHD

LEN CHEONG MANUFACTURING SDN. BHD.

4 PT 140 (Plot 96), HSM 5190 Intermediate Land Area Leasehold 99 years 96, Senawang Industrial Area detached factory 19,653 sq m - expires on 70450 Seremban, Negeri Sembilan with double-storey 17.06.2074 office

Plot 97, HSM 845, Sawmill Built-up Area Leasehold 99 years RM3,771,776.00 29.03.1996 Plot 98, HSM 846 10, 198 sq m expires on Plot 99, HSM 5076 10.11.2069 97 - 99, Senawang Industrial Area 23 years 70450 Seremban, Negeri Sembilan

TOTAL NET BOOK VALUE OF PROPERTIES RM17,413,576.00


ANALYSIS OF SHAREHOLDINGS

7

Authorised Share Capital : RM100,000,000.00Issued & Paid up Share Capital : RM60,000,000.00Class of Shares : Ordinary Shares at RM1.00 EachVoting Rights : One (1) Vote Per Share

LIST OF SUBSTANTIAL SHAREHOLDERS

SUBSTANTIAL SHAREHOLERS (5% & Above)

Shareholders Direct % Indirect %

YBhg Datuk (Dr) Sow Chin Chuan 19,379,400 32.30 - -

DIRECTORS’ SHAREHOLDINGS

Directors Direct % Indirect %

YBhg Datuk (Dr) Sow Chin Chuan* 19,379,400 32.30 - - Ybhg Datin Chu Kim Guek* - - 19,379,400 32.30Dr Fong Hui Fong - - - -Eric Sow Yong Shing - - - -Emily Sow Mei Chet - - - -Abd Rauf Bin Abd Rahim - - - - Mohd Isa Bin Ismail 200 0.00 - -Lee Fook Cheong - - - -Yee Yit Yang - - - -

*Notes: deemed interest through his/her spouse and/or child

DISTRIBUTION OF SHAREHOLDERS

Size of Shareholdings No. of Shareholders % No. of Shares %

1 - 99 19 0.87 937 0.00100 - 1000 683 31.40 639,000 1.071001 - 10000 1,080 49.67 4,131,863 6.8810001 - 100000 318 14.62 9,515,300 15.86100001 - 1000000 66 3.03 18,610,800 31.02Over 1000000 9 0.41 27,102,100 45.17

2,175 100.00 60,000,000 100.00


ANALYSIS OF SHAREHOLDINGSNO. SHAREHOLDERS NO. OF SHARES %

1. RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD 10,379,400 17.30 PLEDGED SECURITIES ACCOUNT FOR SOW CHIN CHUAN (MLK)

2. ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 4,000,000 6.67 PLEDGED SECURITIES ACCOUNT FOR SOW CHIN CHUAN (8093287)

3. AFFIN NOMINEES (TEMPATAN) SDN BHD 3,000,000 5.00 PLEDGED SECURITIES ACCOUNT FOR SOW CHIN CHUAN

4. MERCSEC NOMINEES (TEMPATAN) SDN BHD 2,173,700 3.62 PLEDGED SECURITIES ACCOUNT FOR INSTANT PROCEEDS SDN BHD

5. WEE HIANG KIANG 2,099,800 3.50

6. MERCSEC NOMINEES (TEMPATAN) SDN BHD 1,821,900 3.04 PLEDGED SECURITIES ACCOUNT FOR LAPANGAN DESIRAN SDN BHD

7. CHENG SOK HUANG 1,241,800 2.07

8. MAYBANK NOMINEES (TEMPATAN) SDN BHD 1,239,500 2.07 LEE YU YONG @ LEE YUEN YING

9. LEE SIEW ING 1,146,000 1.91

10. CIMSEC NOMINEES (TEMPATAN) SDN BHD 1,000,000 1.67 CIMB BANK FOR SOW CHIN CHUAN (M73077)

11. HLB NOMINEES (TEMPATAN) SDN BHD 1,000,000 1.67 PLEDGED SECURITIES ACCOUNT FOR SOW CHIN CHUAN

12. EMIN ROSLENA BINTI ROHANI 868,500 1.45

13. LIM KAH CHUAN 811,800 1.35

14. LEE YU YONG @ LEE YUEN YING 741,300 1.24

15. LOH CHEE KEONG 699,500 1.17

16. LEE FUAN PEAN 630,000 1.05

17. AFFIN NOMINEES (TEMPATAN) SDN BHD 533,900 0.89 PLEDGED SECURITIES ACCOUNT FOR LEE KENG CHYE (LEE3993M)

18. LAPANGAN DESIRAN SDN. BHD. 443,300 0.74

20. LEE HOON LIEN 423,800 0.71

21. TAN SIEW HOON 398,200 0.66

22. LEE PICK CHIN @ LEE PICK HOON 359,600 0.60

23. LIM SIEW KHEONG 346,500 0.58

24. KENANGA NOMINEES (TEMPATAN) SDN BHD 336,900 0.56 PLEDGED SECURITIES ACCOUNT FOR DATO' LIM SENG ONG (04LJ188Q-004)

25. LEE KAH WOH 306,500 0.51

26. NG TIOW MIN 300,000 0.50

27. TAN KOOI KIM 300,000 0.50

28. LAI WENG CHEE @ LAI KOK CHYE 299,100 0.50

29. INSTANT PROCEEDS SDN. BHD. 293,700 0.49

30. BURSA MALAYSIA BERHAD 290,000 0.48

81


LEN CHEONG HOLDING BERHAD (Company No. 339810-A) (Incorporated in Malaysia)

PROXY FORM

*I/We, _________________________________________ NRIC No./Company No ________________________________________________ (Full Name in Capital Letters) of___________________________________________________________________________________________________________________

being a *member/members of the LEN CHEONG HOLDING BERHAD, hereby appoint ___________________________________________

_______________________________________________ NRIC No. ____________________________________________________________

of______________________________________________________________________________________________or failing *him/her, the Chairman of the Meeting as *my /our proxy to vote for *me/us on *my/our behalf at the Nineteenth Annual General Meeting of the Company to be held at the Conference Room, Lot 76 & 77, Kawasan Perindustrian Bukit Rambai, Bukit Rambai, 75250 Melaka on Wednesday, 25 June 2014 at 11.00 a.m. and at any adjournment thereof. The proportion of *my/our holding to be represented by *my/our proxy are as follows: (The next paragraph must be completed if two proxies are appointed) No. of Shares Held

First Proxy ________________ % Second Proxy ________________%

*My/Our proxy is to vote as indicated below:

No. Resolutions For Against

ORDINARY BUSINESS 1. To approve the payment of Directors’ fees of RM30,000

2. To re-elect Encik Mohd Isa Bin Ismail as Director

3. To re-elect Datin Chu Kim Guek as Director

4. To re-elect Mr. Teo Chee Kok as Director

5. To appoint Messrs. UHY (AF 1411) as Auditors of the Company in place of the retiring Auditors, Messrs. McMillan Woods Mea (AF 1995) and to authorise the Directors to fix their remuneration

SPECIAL BUSINESS

6. To approve the continuation in office of Encik Abd Rauf Bin Abd Rahim as Independent Non-Executive Director

7. To approve the continuation in office of Encik Mohd Isa Bin Ismail as Independent Non-Executive Director

8. Authority to Issue Shares pursuant to Section 132D of the Companies Act, 1965

(Please indicate with ‘X’ how you wish to cast your vote) Dated this day of 2014 ..…………….……….………………………. Signature/Common Seal of Shareholder(s) Notes: 1. A Member entitled to attend and vote at the Meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy

may but need not be a Member of the Company. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

2. Where a Member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportion of his holdings

to be represented by each proxy. 3. Where a Member of the Company is an authorized nominee as defined under the Securities Industry (Central Depositories) Act 1991, it

may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds which is credited with ordinary shares of the Company.

4. Where a Member of the Company is an exempt authorized nominee as defined under the Securities Industry (Central Depositories) Act

1991 which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“Omnibus Account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each Omnibus Account it holds.

5. The Proxy Form must be signed by the Appointor or his Attorney duly authorized in writing, or if the Appointor is a corporation, either

under its Common Seal or under the hand of an Officer or Attorney duly authorised. 6. The Proxy form must be deposited at the registered office of the Company at 50-1, 52-1 & 54-1, Jalan BPM 2, Taman Bukit Piatu

Mutiara, 75150 Melaka not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof. 7. Depositors who appear in the Record of Depositors as at 18 June 2014 shall be regarded as Member of the Company entitled to attend

the Nineteenth Annual General Meeting or appoint a proxy to attend and vote on his behalf.

THE COMPANY SECRETARYLEN CHEONG HOLDING BERHAD (339810-A)50-1, 52-1 & 54-1, JALAN BPM 2,TAMAN BUKIT PIATU MUTIARA,75150 MELAKA.

STAMP

PLEASE FOLD HERE

PLEASE FOLD HERE

_______________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________

LEN CHEONG HOLDING BERHAD (339810-A)PBR 2, LOT 4, 9556, KAWASAN PERINDUSTRIAN BUKIT RAMBAI,

75250 MELAKA, MALAYSIA.Tel: +606-351 4911 / 351 4912

Fax: +606-353 1090Website: www.lcfurniture.com

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